SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-6510
MAUI LAND & PINEAPPLE COMPANY, INC.
(Exact name of registrant as specified in its charter)
HAWAII 99-0107542
(State or other jurisdiction (IRS Employer Identification
of incorporation or organization) number)
120 KANE STREET, P. O. BOX 187, KAHULUI, MAUI, HAWAII 96733-6687
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (808) 877-3351
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, without Par Value American Stock Exchange
(Title of Class) Name of Exchange on Which Registered
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value, as of February 4, 1999, of the
voting stock held by nonaffiliates of the registrant:
$43,430,000.
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at February 4, 1999
Common Stock, no par value 7,188,500 shares
Documents incorporated by reference:
Parts I, II and IV -- Portions of the 1998 Annual Report to
Security Holders.
Definitive Proxy Statement relating to the Company's 1999 Annual
Meeting of Stockholders to be filed hereafter (incorporated into
Part III hereof).
Exhibit Index--pages 19 - 22.
PART I
Item 1. Business
(a) General
Maui Land & Pineapple Company, Inc. is a Hawaii corporation,
the successor to a business organized in 1909. The Company
consists of a landholding and operating parent company as well as
its principal wholly owned subsidiaries, Maui Pineapple Company,
Ltd. and Kapalua Land Company, Ltd. The "Company," as used
herein, refers to the parent and all of its subsidiaries.
The Company participates in joint ventures that are
accounted for by the equity method. The most significant of
these ventures is Kaahumanu Center Associates, the owner and
operator of a regional shopping center.
The industry segments of the Company are as follows:
(1) Pineapple - includes growing pineapple,
canning pineapple in tinplated steel containers
fabricated by the Company, and marketing canned
pineapple products and fresh whole and fresh cut
pineapple.
(2) Resort - includes the development and sale of
resort real estate, property management and the
operation of recreational and retail facilities
and utility companies at Kapalua, Maui.
(3) Commercial & Property - includes the
Company's investment in Kaahumanu Center
Associates, the Napili Plaza shopping center, and
non-resort rentals and land sales. It includes
the Company's land entitlement and land management
activities.
(b) Financial Information About Industry Segments
The information set forth under Note 16 to Consolidated
Financial Statements on page 18 of the Maui Land & Pineapple
Company, Inc. 1998 Annual Report is incorporated herein by
reference.
(c) Narrative Description of Business
(1) Pineapple
Maui Pineapple Company, Ltd. is the operating subsidiary for
the Company's Pineapple segment. It owns and operates fully
integrated facilities for the production of pineapple products.
Pineapple is cultivated on two Company-operated plantations
on Maui that provided approximately 93% of the fruit processed in
1998. The balance of fruit processed was purchased from
independent Maui growers. Two pineapple crops are normally
harvested from each new planting. The first, or plant crop, is
harvested approximately 18 to 23 months after planting, and the
second, or ratoon crop, is harvested 12 to 14 months later.
Harvested pineapple is processed at the Company's cannery in
Kahului, Maui, where a full line of canned pineapple products is
produced, including solid pineapple in various grades and styles,
juice and juice concentrates. The cannery operates most of the
year; however, over 50% of production volume takes place during
June, July and August. The metal containers used in canning
pineapple are produced in the Company-owned can plant on Maui.
The metal is imported from manufacturers in Japan. A warehouse
is maintained at the cannery site for inventory purposes.
The Company sells canned pineapple products as store-brand
pineapple with 100% HAWAIIAN U.S.A. stamped on the can lid. Its
products are sold principally to large grocery chains, other food
processors, wholesale grocers, and to organizations offering a
complete buyers' brand program to affiliated chains and
wholesalers serving both retail and food service outlets. A
substantial volume of the Company's pineapple products is
marketed through food brokers.
The Company sells fresh whole pineapple to retail and
wholesale grocers in Hawaii and the continental United States.
Since 1996, the Company has been test marketing various fresh cut
pineapple products in Hawaii and on the U.S. West Coast. In
1999, the Company expects to introduce a new fresh cut product,
fresh cut wedges and chunks of pineapple in plastic containers in
the continental U. S.
In 1997, Royal Coast Tropical Fruit Company, Inc. (a wholly
owned subsidiary of Maui Pineapple Company, Ltd.) entered into a
joint venture with an Indonesian pineapple grower and canner.
The joint venture, Premium Tropicals International, LLC, will
market and sell Indonesian canned pineapple in the United States.
Sales through this joint venture began in 1998.
In 1998, approximately 20 domestic customers accounted for
about 59% of the Company's pineapple sales. Export sales,
primarily to Japan, Canada and Western Europe, amounted to
approximately 4.6%, 4.1% and 5.7% of total pineapple sales in
1998, 1997 and 1996, respectively. Sales to the U.S. government
amounted to approximately 10.2%, 12.9% and 12.5% of total
pineapple sales in 1998, 1997 and 1996, respectively. The
Company's pineapple sales office is in Concord, California.
As a service to its customers, the Company maintains
inventories of its products in public warehouses in the
continental U.S. The balance of its products are shipped
directly from Hawaii to its customers. The Company's canned
pineapple products are shipped from Hawaii by ocean
transportation. They are then taken by truck or rail to
customers or to public warehouses. Fresh whole and fresh cut
pineapple are shipped by air or by ocean transportation.
The Company sells its products in competition with both
foreign and U.S. companies. Its principal competitors are two
U.S. companies, Dole Food Company, Inc. and Del Monte Food Co.,
which produce substantial quantities of pineapple products, a
significant portion of which is produced in the Philippines.
Producers of pineapple products in other foreign countries,
particularly Thailand and Indonesia, also are a major source of
competition. Foreign production has the advantage of lower labor
costs. The Company's principal marketing advantages are the high
quality of its fresh and canned pineapple, the relative proximity
to the West Coast United States fresh fruit market and being the
only U.S. canner of pineapple. Other canned fruits and fruit
juices are also a source of competition. Generally, the price of
the Company's products is influenced by supply and demand of
pineapple and other fruits and juices.
For information regarding the antidumping petition and
duties currently imposed on imports of canned pineapple fruit
from Thailand, see Part I, Item 3. (A) of this report.
For further information regarding Pineapple operations see
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
(2) Resort
Kapalua Resort is a master-planned golf resort community on
Maui's northwest coast. The property encompasses 1,650 acres
bordering the ocean with three white sand beaches, and includes
two hotels, seven residential subdivisions, three championship
golf courses, two ten-court tennis facilities, a 22,000 square
foot shopping center and over ten restaurants. Water and waste
transmission utilities are included in the Resort. Approximately
650 acres are available for further development within the
Kapalua Resort.
Kapalua Land Company, Ltd. is the developing and operating
subsidiary of the Company's Resort segment. The Resort segment
also includes the following wholly owned subsidiaries of the
Company: Kapalua Water Company, Ltd. and Kapalua Waste Treatment
Company, Ltd., public utilities providing water and waste
transmission services for the Kapalua resort; Kapalua Advertising
Company, Ltd., an in-house advertising agency; Kapalua Investment
Corp., an investment holding company; and Kapalua Realty Company,
Ltd. (wholly owned by Kapalua Land Company, Ltd.), a general
brokerage real estate company located within the resort.
The Company, through subsidiaries and joint ventures,
developed the Kapalua Resort, which opened in 1975 with The Bay
Course. At Kapalua, the Company owns three golf courses (The
Bay, The Village and The Plantation Courses), one tennis facility
(The Tennis Garden), a shopping center (The Kapalua Shops), the
land under both hotels (The Ritz-Carlton, Kapalua and The Kapalua
Bay Hotel), as well as the acreage available for development and
various on-site administrative and maintenance facilities.
The Company operates the golf and tennis facilities, the
shopping center, ten retail shops, a vacation rental program (The
Kapalua Villas), and certain services to the resort, including
shuttle, security and maintenance of common areas. The Company
is the ground lessor under long-term leases for both hotels and
also receives rental income from certain other properties. The
Company manages The Kapalua Club, a membership program that
provides for certain rights and privileges of its members within
the Resort.
Joint ventures have enabled Kapalua to proceed with certain
development projects. Plantation Club Associates was an
unincorporated joint venture between Kapalua Land Company, Ltd.
and Rolfing Partners that developed The Plantation at Kapalua,
comprised of an 18-hole golf course (The Plantation Course) and
two residential development projects (Plantation Estates Phase I
and II). For further information regarding Plantation Club
Associates, see Note 3 to Consolidated Financial Statements.
Kapalua Investment Corp. (KIC) was a general partner in
Kaptel Associates, the partnership that owned The Ritz-Carlton,
Kapalua. For further information regarding Kaptel Associates,
see Note 3 to Consolidated Financial Statements.
In 1997, the Company and Lend Lease Real Estate Investment,
Inc. (Lend Lease), owner of The Kapalua Bay Hotel, formed a 50/50
joint venture, Kapalua Coconut Grove LLC, to develop the 12-acre
parcel adjacent to the hotel. Lend Lease purchased a one-half
interest in the land from the Company prior to formation of the
venture. In November 1998, the plans for 36 luxury beachfront
condominiums called Coconut Grove on Kapalua Bay received Special
Management Area approval from the Maui Planning Commission.
Presales are expected to begin in the second quarter of 1999 and
construction is scheduled to begin in the third quarter.
The Kapalua Resort faces substantial competition from
alternative visitor destinations and resort communities in Hawaii
and throughout the world. Kapalua's marketing strategies target
upscale visitors with an emphasis on golf. In 1998,
approximately 18% of the visitors to Maui were from the Eastbound
market and 82% were from the Westbound market (mostly U.S.
mainland). Kapalua's primary resort competitors on Maui are
Kaanapali, which is approximately five miles from Kapalua, and
Wailea on Maui's south coast. Kapalua's total guestroom
inventory accounts for approximately 10% of the units available
in West Maui and approximately 6% of the total inventory on Maui.
Nationally televised professional golf tournaments have been
a major marketing tool for Kapalua. In January 1999, Kapalua
successfully hosted its inaugural Mercedes Championships, the
season opening event for the PGA TOUR. The Company has four-year
agreements through the non-profit organization Kapalua Maui
Charities, Inc., with Mercedes-Benz and the PGA TOUR to host and
manage this event at Kapalua. Advertising placements in key
publications are designed to promote Kapalua through the travel
trade, consumer, golf and real estate media.
For further information regarding Resort operations, see
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
(3) Commercial & Property
Kaahumanu Center is the largest retail and entertainment
center on Maui with a gross leasable area (GLA) of approximately
573,000 square feet. On December 31, 1998, 124 tenants occupied
94% of the available GLA. Kaahumanu Center faces substantial
competition from other retail centers in Kahului and in other
areas of Maui. The Kahului area has approximately 1.7 million
square feet of retail space. The Center's primary competitors
are the Maui Mall and the Maui Marketplace, both located within
three miles of Kaahumanu Center.
In June of 1993, Kaahumanu Center Associates (KCA) was
formed to finance the expansion and renovation of and to own and
operate Kaahumanu Center. The expansion and renovation,
completed in November of 1994, expanded the Center from
approximately 315,000 to 573,000 square feet of GLA. KCA is a
50/50 partnership between the Company, as general partner, and
the Employees' Retirement System of the State of Hawaii, as a
limited partner.
Napili Plaza is a 44,000 square foot retail and commercial
office center located in West Maui. As of December 31, 1998, 19
tenants occupied 80% of the GLA. Napili Plaza faces competition
from several retail locations in the Napili area, which have
approximately 346,000 square feet of retail space.
The Company's land entitlement and management activities are
included in the Commercial & Property segment. Land entitlement
is the process of obtaining the required county, state and
federal approvals to proceed with the planned development and use
of a parcel of land, and satisfying all conditions and
restrictions imposed in connection with such governmental
approvals. The Company actively works with regulatory agencies
and legislative bodies at all levels of government to obtain
necessary entitlements.
For further information regarding Commercial & Property
operations, see Management's Discussion and Analysis of Financial
Condition and Results of Operations.
(4) Employees
In 1998, the Company employed approximately 2,030 employees.
Pineapple operations employed approximately 530 full-time and 950
seasonal or intermittent employees, of which approximately 47%
were covered by collective bargaining agreements. Resort
operations employed approximately 440 employees, of which
approximately 14% were part-time employees and approximately 28%
were covered by collective bargaining agreements. The Company's
Commercial & Property operations employed approximately 75
employees, and the balance of the employees were engaged in
administrative activities.
(5) Other Information
The Company's Pineapple segment engages in continuous
research to develop techniques to reduce costs through crop
production and processing innovations and to develop and perfect
new products. Improved production systems have resulted in
increased productivity by the labor force. Research and
development expenses approximated $815,000 in 1998, $601,000 in
1997 and $543,000 in 1996.
In 1998, the Company agreed to perform Supplemental
Environmental Projects ("SEPS") totaling $346,000. The SEPS are
designed to protect the environment and were agreed to as a
settlement for violation of permits that regulate the disposal of
processing wastewater and cooling water used by the Kahului
cannery.
The Company has reviewed its compliance with Federal, State
and local provisions that regulate the discharge of materials
into the environment or otherwise relate to the protection of the
environment. The Company does not expect any material future
financial impact as a result of compliance with these laws. For
information concerning certain pending environmental proceedings
see Part I, Item 3. (B) of this report.
(d) Financial Information About Foreign and Domestic Operations
and Export Sales
Export sales only arise in the Company's Pineapple segment.
Export sales of pineapple products are primarily to Japan,
Western Europe and Canada. For the last three years, these sales
did not exceed 10% of total consolidated revenues.
Executive Officers of Registrant
Below is a list of the names and ages of the Company's
executive officers, indicating their position with the Company
and their principal occupation during the last five years. The
current terms of the executive officers expire in May of 1999 or
at such time as their successors are elected.
Gary L. Gifford (51) President and Chief Executive Officer
since 1995; Executive Vice
President/Resort from 1987 to 1995.
Paul J. Meyer (51) Executive Vice President/Finance since
1984.
Douglas R. Schenk (46) Executive Vice President/Pineapple since
1995; Vice President/Pineapple from 1993
to 1995; Cannery Manager of Maui
Pineapple Company, Ltd. from 1989 to
1993.
Donald A. Young (51) Executive Vice President/Resort since
1995; Executive Vice
President/Operations of Kapalua Land
Company, Ltd. from 1992 to 1995;
Vice President/Operations of Kapalua
Land Company, Ltd. from 1985 to 1992.
Scott A. Crockford (43) Vice President/Retail Property since
1995; General Manager of Kaahumanu
Center from 1989 to 1995.
Warren A. Suzuki (46) Vice President/Land Management &
Development since October 1995; Vice
President/Construction & Planning of
Kapalua Land Company, Ltd. from May 1995
to October 1995; Director of Project
Coordination of Kapalua Land Company,
Ltd. from 1988 to 1995.
Item 2. PROPERTIES
The Company owns approximately 28,600 acres of land on Maui.
Approximately 8,100 acres are used directly or indirectly in the
Company's operations and the remaining land is primarily in
pasture or forest reserve. This land, most of which was acquired
from 1911 to 1932, is carried on the Company's balance sheet at
cost. The Company believes it has clear and unencumbered
marketable title to all such property, except for the following:
(1) a mortgage on the fee and leasehold interest in the 36-acre
Ritz-Carlton Kapalua Hotel site, which secures a loan to the
ground lessee for up to $65 million;
(2) a perpetual conservation easement granted to the State of
Hawaii on a 13-acre parcel at Kapalua;
(3) certain easements and rights-of-way that do not materially
affect the Company's use of its property;
(4) a mortgage on the three golf courses at Kapalua, which
secures the Company's $15 million revolving credit and $15
million development line arrangement;
(5) a permanent conservation easement granted to The Nature
Conservancy of Hawaii, a non-profit corporation, covering
approximately 8,600 acres of forest reserve land;
(6) a $4,886,000 mortgage on the fee interest in Napili Plaza
shopping center; and
(7) a small percentage of the Company's land in various
locations on which multiple claims exist and for which the
Company has initiated quiet title actions.
Approximately 22,400 acres of the Company's land are located
in West Maui, approximately 6,200 acres are located at its
Haliimaile plantation in Central Maui, and approximately 28 acres
are located in Kahului, Maui.
The 22,400 acres in West Maui comprise a largely contiguous
parcel that extends from the sea to an elevation of approximately
5,700 feet and includes nine miles of ocean frontage with
approximately 3,300 lineal feet along sandy beaches, as well as
agricultural and grazing lands, gulches and heavily forested
areas. The Haliimaile property is situated at elevations between
1,000 and 3,000 feet above sea level on the slopes of Haleakala.
Approximately 6,400 acres of Company-owned land are used
directly or indirectly in pineapple operations and approximately
1,650 acres are designated for the Kapalua Resort. The Kahului
acreage includes offices, a can manufacturing plant and a
pineapple processing cannery with interconnected warehouses at
the cannery site where finished product is stored.
Approximately 3,000 acres of leased land are used in the
Company's pineapple operations. A major operating lease covering
approximately 1,500 acres of land expires on December 31, 1999.
The lease will be renegotiated before year-end 1999. Eleven
leases expiring at various dates through 2018 cover the balance
of the leased property. The aggregate land rental for all leased
land was $568,000 in 1998.
Item 3. LEGAL PROCEEDINGS
A. Antidumping Petition
In June 1994, Maui Pineapple Company, Ltd. and the
International Longshore and Warehouse Union filed an antidumping
petition with the U.S. International Trade Commission (ITC) and
the U.S. Department of Commerce (DOC). The petition alleged that
producers of canned pineapple in Thailand were violating U.S. and
international trade laws by selling their products in the U.S. at
less than fair value, and that such sales were causing injury to
the U.S. industry producing canned pineapple.
On May 30, 1995, the DOC completed its portion of the
investigation, concluding that imports of canned pineapple from
Thailand were being sold in the U.S. at less than fair value.
Thai producers investigated included Dole Thailand, Ltd., The
Thai Pineapple Public Co., Ltd., Siam Agro Industry Pineapple and
Others Co., Ltd., and Malee Sampran Factory Public Co., Ltd.
On June 30, 1995, the ITC announced its unanimous
determination that the domestic industry producing canned
pineapple was materially injured by reason of the unfair imports
of canned pineapple from Thailand. As a result of the
affirmative findings of both the DOC and the ITC, antidumping
duties were imposed on all imports of canned pineapple fruit from
Thailand into the United States, with cash duty deposits ranging
up to 51%.
The Thai respondents appealed the dumping calculations of
DOC to the United States Court of International Trade (USCIT).
Maui Pineapple Company filed a cross appeal concerning one
element of the DOC determination. On November 8, 1996 the USCIT
remanded certain issues back to the DOC for recalculation. In
one of the issues, the USCIT ruled that the DOC reliance on the
Thai pineapple companies' normal accounting records (their
allocation ratio between juice and solid pack) was inconsistent
with a higher court's previous ruling. The Company strongly
disagrees with the USCIT decision on this issue, which could
substantially reduce the duties being imposed if the USCIT
position is upheld.
In 1997, the Company and the DOC appealed the decision by
the USCIT to the United States Court of Appeals for the Federal
Circuit. In April 1998, the Court of Appeals heard the appeals
of Maui Pineapple Company, Ltd. and the DOC. A final decision is
expected sometime in 1999.
The amount of duties on Thai imports is subject to periodic
review by the DOC. The Company or the Thai producers may
initiate these reviews. If the cost of production changes
relative to the selling price of the product in the U.S., the
duties would be adjusted. Several of the larger Thai pineapple
companies have significantly reduced their antidumping duties
through the annual review process. The DOC has begun the third
annual review and preliminary margins are expected to be
announced in April 1999 with final results in July 1999. The
antidumping duties presently in place on imports of canned
pineapple fruit from Thailand range from less than 1% up to 51%.
B. Occidental Chemical Litigation
The County of Maui has sued several chemical manufacturers
claiming that they are responsible for the presence of a
nematocide commonly known as "DBCP" in certain water wells that
the County of Maui maintains. One of those chemical
manufacturers, Occidental Chemical Corporation (OCC), has claimed
that Maui Land & Pineapple Company, Inc. (MLP) is required to
indemnify OCC against the County's claims under the terms of a
March 14, 1978 Agreement for Sale of DBCP between MLP and
Occidental Chemical Company. MLP rejected the OCC tender of this
indemnification and, on November 13, 1997, filed a lawsuit
against OCC, Maui Land & Pineapple Company, Inc. v. Occidental
Chemical Corporation, Civil No. 97-0867 (Second Circuit Court,
State of Hawaii), seeking judgment declaring that MLP has no
obligation to indemnify OCC against the County's claims. On
December 9, 1997, OCC filed a counterclaim against MLP in that
lawsuit seeking judgment (a) declaring that MLP is obligated to
indemnify OCC against the County's claims, and (b) awarding OCC
damages for MLP's alleged breach of that obligation. OCC has not
specified the amount it seeks to recover from MLP on its
counterclaim, which MLP is contesting. MLP and OCC each have
filed answers to the other's claim, but have not commenced
significant discovery. Settlement negotiations have been
initiated.
MLP tendered the defense and indemnification of OCC claims
to its insurers, including Hawaiian Insurance & Guaranty Company,
which is being liquidated by the State of Hawaii and is now known
as HUI/Unico in Liquidation, Inc. ("HUI/Unico"). HUI/Unico
agreed to defend MLP against OCC claims under a reservation of
the right to contest its obligation to do so. On September 2,
1997, HUI/Unico filed a lawsuit against MLP, Reynaldo D. Graulty,
Insurance Commissioner of the State of Hawaii, in his capacity as
Liquidator of HUI/Unico in Liquidation, Inc. v. Maui Land &
Pineapple Company, Inc., Civil No. 97-3571-09 (First Circuit
Court, State of Hawaii), seeking judgment declaring that
HUI/Unico has no obligation to defend and indemnify MLP against
OCC claims. MLP is contesting the HUI/Unico lawsuit and, on
October 13, 1997, filed a counterclaim against HUI/Unico seeking
judgment declaring that HUI/Unico is obligated to defend and
indemnify MLP against OCC claims and awarding MLP damages for
HUI/Unico's alleged breach of that obligation. MLP and HUI/Unico
have commenced initial discovery. On February 2, 1999, HUI/Unico
filed a Motion for Summary Judgment on its claim that it has no
obligation to defend or indemnify MLP against OCC claims. MLP
strongly opposes HUI/Unico's motion, which will be heard on April
23, 1999. Settlement negotiations have been initiated.
On December 23, 1998, The Dow Chemical Company ("Dow"), one
of the defendants in the County of Maui's underlying lawsuit,
Board of Water Supply of the County of Maui v. Shell Oil Company,
et al., Civil No. 96-0370 (Second Circuit Court, State of
Hawaii), filed a Third-Party Complaint in that action against MLP
and Maui Pineapple Company, Ltd. ("MPC"). In its Third-Party
Complaint, Dow claims that if it is held liable on the County of
Maui's claims, Dow is entitled to indemnification or
contribution, in whole or in part, by MLP and/or MPC, based,
apparently, on equitable theories. Dow has not specified the
amount it seeks to recover from MLP and/or MPC on its Third-Party
Complaint, which MLP and MPC contest. MLP and MPC have not yet
filed answers to Dow's claims and have not commenced discovery.
No settlement negotiations have been initiated.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information set forth under the caption "Common Stock"
on page 19 of the Maui Land & Pineapple Company, Inc. 1998 Annual
Report is incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Selected
Financial Data" on page 20 of the Maui Land & Pineapple Company,
Inc. 1998 Annual Report is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" on pages 21 through 24 of the Maui
Land & Pineapple Company, Inc. 1998 Annual Report is incorporated
herein by reference.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
"Market Risk" on page 24 of the Maui Land & Pineapple
Company, Inc. 1998 Annual Report is incorporated herein by
reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The "Independent Auditors' Report," "Consolidated Financial
Statements" and "Notes to Consolidated Financial Statements" on
pages 7 through 18 of the Maui Land & Pineapple Company, Inc.
1998 Annual Report are incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
The registrant's Proxy Statement for its 1999 Annual Meeting
of Stockholders, which when filed pursuant to Regulation 14A
under the Securities Exchange Act of 1934, will be incorporated
by reference in this Annual Report on Form 10-K pursuant to
General Instruction G(3) of Form 10-K, and will provide the
information required under Part III (Items 10, 11, 12 and 13),
except for the information with respect to the registrant's
executive officers, which is included in Part I, Item 1.
Business.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements
The following Financial Statements and Supplementary Data of
Maui Land & Pineapple Company, Inc. and subsidiaries and the
Independent Auditors' Report are included in Item 8 of this
report:
Consolidated Balance Sheets, December 31, 1998 and 1997
Consolidated Statements of Operations and Retained Earnings
for the Years
Ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
(a) 2. Financial Statement Schedules
The following Financial Statement Schedule of Maui Land &
Pineapple Company, Inc. and subsidiaries and the Independent
Auditors' Report is filed herewith:
II. Valuation and Qualifying Accounts for the Years Ended
December 31, 1998, 1997 and 1996.
(a) 3. Exhibits
Exhibits are listed in the "Index to Exhibits" found on
pages 19 to 22 of this Form 10-K.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the last
quarter of the period covered by this report.
(d) The Financial Statements of Kaahumanu Center Associates
for the Years Ended December 31, 1998, 1997 and 1996 are filed as
exhibits.
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Directors of
Maui Land & Pineapple Company, Inc.:
We have audited the consolidated financial statements of Maui
Land & Pineapple Company, Inc. and its subsidiaries as of
December 31, 1998 and 1997 and for each of the three years in the
period ended December 31, 1998, and have issued our report
thereon dated February 8, 1999; such consolidated financial
statements and report are included in your 1998 Annual Report and
are incorporated herein by reference. Our audits also included
the financial statement schedule of Maui Land & Pineapple
Company, Inc. listed in Item 14. This financial statement
schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
/S/ DELOITTE & TOUCHE LLP
Honolulu, Hawaii
February 8, 1999
SCHEDULE II
MAUI LAND & PINEAPPLE COMPANY, INC.
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
ADDITIONS
ADDITIONS CHARGED
BALANCE AT CHARGED TO TO OTHER BALANCE
BEGINNING COSTS AND ACCOUNTS DEDUCTIONS AT END
DESCRIPTION OF PERIOD EXPENSES (describe) (describe) OF PERIOD
(Dollars in Thousands) (b)
Allowance for
Doubtful Accounts
1998 $ 567 $ 191 $(a) 9 $(274) $ 493
1997 698 47 (a)13 (191) 567
1996 573 440 -- (315) 698
(a) Recoveries.
(b) Write off of uncollectible accounts.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MAUI LAND & PINEAPPLE COMPANY, INC.
March 25, 1999 By /S/ GARY L. GIFFORD
Gary L. Gifford
President & Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
By /S/ MARY C. SANFORD Date March 25, 1999
Mary C. Sanford
Chairman of the Board
By /S/ RICHARD H. CAMERON Date March 25, 1999
Richard H. Cameron
Vice Chairman of the Board
By /S/ PAUL J. MEYER Date March 25, 1999
Paul J. Meyer
Executive Vice President/Finance
(Principal Financial Officer)
By /S/ TED PROCTOR Date March 25, 1999
Ted Proctor
Controller & Assistant Treasurer
(Principal Accounting Officer)
By /S/ PETER D. BALDWIN Date March 25, 1999
Peter D. Baldwin
Director
By /S/ RANDOLPH G. MOORE Date March 25, 1999
Randolph G. Moore
Director
By /S/ FRED E. TROTTER III Date March 25, 1999
Fred E. Trotter III
Director
INDEX TO EXHIBITS
The exhibits designated by an asterisk (*) are filed herewith.
The exhibits not so designated are incorporated by reference to
the indicated filing. All previous exhibits were filed with the
Securities and Exchange Commission in Washington D. C. under file
number 0-6510.
3. Articles of Incorporation and By-laws
3 (i) Articles of Incorporation (Amended as of 4/2/98).
Exhibit 3 to Form 10-Q for the quarter ended March 31,
1998.
3 (ii) By Laws (Amended as of 2/26/88). Exhibit (3ii) to
Form 10-Q for the quarter ended September 30, 1994.
4. Instruments Defining the Rights of Security Holders.
Instruments defining the rights of holders of long-term debt have
not been filed as exhibits where the amount of debt authorized
thereunder does not exceed ten percent of the total assets of the
Company and its subsidiaries on a consolidated basis. The
Company hereby undertakes to furnish a copy of any such
instrument to the Commission upon request.
4.1 (i)* Amended and Second Restated Revolving Credit and
Term Loan Agreement, dated as of December 4, 1998.
4.2 (i)* Bridge Loan Agreement between Pacific Coast Farm
Credit Services, ACA and Maui land & Pineapple Company,
Inc., dated December 30, 1998.
10. Material Contracts
10.1 (i) Limited Partnership Agreement of Kaahumanu Center
Associates, dated June 23, 1993. Exhibit (10)A to Form
10-Q for the quarter ended June 30, 1993.
(ii) Cost Overrun Guaranty Agreement, dated June 28,
1993. Exhibit (10)B of Form 10-Q for the quarter ended
June 30, 1993.
(iii) Environmental Indemnity Agreement, dated June
28, 1993. Exhibit (10)C to Form 10-Q for the quarter
ended June 30, 1993.
(iv) Indemnity Agreement, dated June 28, 1993. Exhibit
(10)D to Form 10-Q for the quarter ended June 30, 1993.
(v) Direct Liability Agreement, dated June 28, 1993.
Exhibit (10)E to Form 10-Q for the quarter ended June
30, 1993.
(vi) Amendment No. 1 to Limited Partnership Agreement
of Kaahumanu Center Associates. Exhibit (10)B to Form
8-K, dated as of April 30, 1995.
(vii) Conversion Agreement, dated April 27, 1995.
Exhibit (10)C to Form 8-K, dated as of April 30, 1995.
(viii) Indemnity Agreement, dated April 27, 1995.
Exhibit (10)D to Form 8-K, dated as of April 30, 1995.
10.2 Exhibits 10.2(i) to 10.2(xiv) relate to The Ritz-
Carlton Kapalua Hotel
(i) Partnership Agreement; Development Agreement;
Operating Agreement; Hotel Ground Lease; Supplemental
Agreement; Construction Loan Agreement; Promissory
Note; Real Property Mortgage; Leasehold Mortgage.
Exhibit (10)A-I to Form 10-Q for the quarter ended
September 30, 1990.
(ii) Dissolution Agreement, dated October 31, 1995.
Exhibit (10)A to Form 10-Q for the quarter ended
September 30, 1995.
(iii) First Mortgage, Security Agreement, Financing
Statement and Assignment of Rentals covering the fee
simple interest and the leasehold interest, securing a
loan of $65,000,000, dated February 24, 1996. Exhibit
10.4(iii) to Form 10-K for the year ended December 31,
1995.
(iv) Subordination, Nondisturbance and Attornment
Agreement (Ground Lessor), dated February 24, 1996.
Exhibit 10.4(iv) to Form 10-K for the year ended
December 31, 1995.
(v) Hotel Ground Lease by and between Maui Land &
Pineapple Company, Inc. (Lessor) and NI Hawaii Resort,
Inc. (Lessee), effective January 1, 1996. Exhibit
10.4(v) to Form 10-K for the year ended December 31,
1995.
(vi) Amendment Relating to Off-Site Loan, dated January
9, 1996 and effective January 1, 1995. Exhibit
10.4(vi) to Form 10-K for the year ended December 31,
1995.
(vii) Letter Agreement, dated January 1, 1996, Re:
Nonrecourse Open Account For Off-Site Improvements.
Exhibit 10.4(vii) to Form 10-K for the year ended
December 31, 1995.
(viii) Agreement with NI Hawaii Resort, Inc. (Ground
Lease), dated January 9, 1996. Exhibit 10.4(viii) to
Form 10-K for the year ended December 31, 1995.
(ix) Amendment and Restatement of Tennis Operating
Agreement by and between Kapalua Land Company, Ltd.
(Operator) and NI Hawaii Resort, Inc. (Owner), dated
January 9, 1996. Exhibit 10.4(ix) to Form 10-K for the
year ended December 31, 1995.
(x) Assignment Agreement (Assignment of Amended and
Restated Tennis Operating Agreement), dated January 9,
1996. Exhibit 10.4(x) to Form 10-K for the year ended
December 31, 1995.
(xi) Golf Course Use Agreement by and between Maui Land
& Pineapple Company, Inc. and NI Hawaii Resort, Inc.,
dated January 9, 1996. Exhibit 10.4(xi) to Form 10-K
for the year ended December 31, 1995.
(xii) Memorandum of Understanding between Maui
Hotels, Kapalua Investment Corp. and NI Hawaii Resort,
Inc., effective October 31, 1995. Exhibit 10.4(xii) to
Form 10-K for the year ended December 31, 1995.
(xiii) Supplemental Agreement, entered into among
Maui Hotels, Kapalua Investment Corp. and NI Hawaii
Resort, Inc. as of February 15, 1996. Exhibit
10.4(xiii) to Form 10-K for the year ended December 31,
1995.
(xiv) Release of Real Property Mortgage, Security
Agreement and Financing Statement, dated March 12,
1996. Exhibit 10.4(xiv) to Form 10-K for the year
ended December 31, 1995.
10.3 Compensatory plans or arrangements
(i) Executive Deferred Compensation Plan (revised as
of 8/16/91). Exhibit (10)A to Form 10-Q for the
quarter ended September 30, 1994.
(ii) Executive Insurance Plan (Amended). Exhibit (10)A
to Form 10-K for the year ended December 31, 1980.
(iii) Supplemental Executive Retirement Plan (effective as of
January 1, 1988). Exhibit (10)B to Form 10-K for the year ended
December 31, 1988.
(iv)* Restated and Amended Executive Change-In-
Control Severance Agreement (Gary L. Gifford,
President/CEO), dated as of March 16, 1999.
(v)* Restated and Amended Executive Change-In-Control
Severance Agreement (Paul J. Meyer, Executive Vice
President/Finance), dated as of March 17, 1999.
(vi)* Restated and Amended Executive Change-In-
Control Severance Agreement (Donald A. Young, Executive
Vice President/Resort), dated as of March 16, 1999.
(vii)* Restated and Amended Executive Change-In-
Control Severance Agreement (Douglas R. Schenk,
Executive Vice President/Pineapple), dated as of March
23, 1999.
(viii)* Restated and Amended Change-In-Control
Severance Agreement (Warren A. Suzuki, Vice
President/Land Management), dated as of March 16, 1999.
(ix)* Restated and Amended Change-In-Control
Severance Agreement (Scott A. Crockford, Vice
President/Retail Property), dated as of March 16, 1999.
(x)* Executive Severance Plan, as amended through November 6, 1998.
10.4 (i) Hotel Ground Lease between Maui Land & Pineapple
Company, Inc. and The KBH Company. Exhibit (10)B to
Form 10-Q for the quarter ended September 30, 1985.
(ii) Third Amendment of Hotel Ground Lease, dated and
effective as of September 5, 1996. Exhibit (10)A to
Form 10-Q for the quarter ended September 30, 1996.
11. Statement re computation of per share earnings:
Net Income (Loss) divided by weighted Average Common
Shares Outstanding equals Net Income (Loss) Per Common
Share.
13.* Annual Report to Security Holders: Maui Land &
Pineapple Company, Inc. 1998 Annual Report.
21. Subsidiaries of registrant:
All of the following were incorporated in the
State of Hawaii:
Maui Pineapple Company, Ltd.
Kapalua Land Company, Ltd.
Kapalua Investment Corp.
Kapalua Water Company, Ltd.
Kapalua Waste Treatment Company, Ltd.
Honolua Plantation Land Company, Inc.
27.* Financial Data Schedule. As of December 31, 1998
and for the year then ended.
99. Additional Exhibits.
99.1* Financial Statements of Kaahumanu Center
Associates for the years ended December 31, 1998, 1997
and 1996.
AMENDED AND SECOND RESTATED REVOLVING CREDIT
AND TERM LOAN AGREEMENT
THIS AMENDED AND SECOND RESTATED REVOLVING CREDIT AND TERM
LOAN AGREEMENT (the "Amendment and Restatement"), dated as of
December 4, 1998, by and among MAUI LAND & PINEAPPLE COMPANY,
INC., a Hawaii corporation (the "Borrower"), BANK OF HAWAII, a
Hawaii banking corporation ("BOH"), FIRST HAWAIIAN BANK, a Hawaii
banking corporation ("FHB"), CENTRAL PACIFIC BANK, a Hawaii
banking corporation ("CPB") (BOH, FHB and CPB are each sometimes
called a "Lender" and collectively called the "Lenders"), and
BANK OF HAWAII, as Agent for the Lenders to the extent and in the
manner provided hereinbelow and in the Agency Agreement referred
to below (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders and Bank of America,
National Trust and Savings Association ("BOA") (the Lenders and
BOA are collectively called the "Original Lenders") and the Agent
are parties to that certain Revolving and Term Loan Agreement,
dated as of December 31, 1992, as amended by a First Loan
Modification Agreement, dated as of March 1, 1993, and
supplemented by letter agreements dated April 30, 1993 and June
24, 1993, and further amended by Second Loan Modification
Agreement, dated September 8, 1993, by a Third Loan Modification
Agreement, dated September 30, 1993, by a Fourth Loan
Modification Agreement, dated March 8, 1994, by a Fifth Loan
Modification Agreement, dated effective as of December 31, 1994,
by a Sixth Loan Modification Agreement, dated effective as of
March 31, 1995, and by a Seventh Loan Modification Agreement
dated effective as of December 31, 1995, each among the Borrower,
the Original Lenders and the Agent (as so amended and
supplemented, the "Original Loan Agreement");
WHEREAS, the Original Loan Agreement and the other "Loan
Documents" referred to therein, as respectively amended, set
forth the terms and conditions upon which the Original Lenders
(i) have made available to the Borrower the Revolving Loans in
the original aggregate principal amount of up to $40,000,000 at
any one time outstanding (subject to mandatory reduction, from
time to time, of such aggregate principal amount available) and
(ii) shall make available to the Borrower the Term Loans in an
amount up to the aggregate principal amount of the Revolving
Loans outstanding upon expiration of the Revolving Loan Period,
all as more particularly described therein;
WHEREAS, the parties hereto entered into that certain
Amended and Restated Revolving Credit and Term Loan Agreement
dated December 4, 1996, as amended by letter agreement dated
February 21, 1997, by First Loan Modification Agreement dated
December 31, 1997, and by Second Loan Modification Agreement
dated March 17, 1998 (as so amended, the "First Restatement");
WHEREAS, the Lenders having purchased the interests of BOA
under the Original Loan Agreement and the other Loan Documents
referred to therein (the "BOA Purchase"), and, contemporaneously
herewith, BOH having purchased a portion of the interest of FHB
under the Original Loan Agreement, as amended by the First
Restatement, and the other Loan Documents referred to therein,
the respective "Individual Loan Commitment Percentage" of each
Lender is now as follows:
(1) BOH's Individual Loan Commitment Percentage is equal to
53.667%;
(2) FHB's Individual Loan Commitment Percentage is equal to
33.333%; and
(3) CPB's Individual Loan Commitment Percentage is equal to
13%;
WHEREAS, the Aggregate Loan Commitment having been
permanently reduced to be equal to $15,000,000, the respective
Individual Loan Commitments of the Lenders are as follows:
(1) BOH's Individual Loan Commitment is equal to $8,050,000;
(2) FHB's Individual Loan Commitment is equal to $5,000,000; and
(3) CPB's Individual Loan Commitment is equal to $1,950,000;
WHEREAS, capitalized terms used herein and not otherwise
defined herein shall have the respective meaning assigned thereto
in the Original Loan Agreement;
WHEREAS, the parties hereto have agreed to further amend the
terms of the Original Loan Agreement to, among other things,
establish a development line (the "Village Course Facility") in
the aggregate principal amount of FIFTEEN MILLION DOLLARS
($15,000,000.00);
WHEREAS, for their mutual convenience, the parties wish to
restate the Original Loan Agreement to reflect their agreements
as of the date hereof with respect to the Revolving Loans, the
Term Loans and the Village Course Facility, subject to the
satisfaction of the conditions precedent set forth in Section 3.2
hereof, all as set forth in this Amendment and Restatement;
NOW, THEREFORE, in consideration of the premises, the mutual
covenants set forth herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower, the Lenders and the Agent hereby
agree that effective on the Effective Date (as defined below),
the terms and provisions of the Original Loan Agreement are
amended and restated to read in their entirety as follows:
I. Additional Definitions
As used in this Loan Agreement, each of the terms defined in
this Article I shall have the meaning given to it in this Article
I:
1.1 "Agency Agreement" means the Agency Agreement dated as of
March 1, 1993, among the Original Lenders and the Agent,
authorizing the Agent to act as agent in respect of the Loans, as
amended by Amended and Restated Agency Agreement dated
December 4, 1998, among the Lenders and the Agent and as
further amended from time to time.
1.2 "Additional Security Mortgage" means the Additional Security
Mortgage and Security Agreement dated March 1, 1993, made by
Kapalua Land Company, Ltd. and recorded in the Bureau of
Conveyances of the State of Hawaii as Document No. 93-036900, as
originally executed or thereafter modified.
1.3 "Advance" shall have the meaning given in Section 2.1(c).
1.4 "Aggregate Loan Commitment" means, with respect to the
Original Facility, $15,000,000, subject to further permanent
reduction in accordance with the terms hereof, and with respect
to the Village Course Facility, $15,000,000.
1.5 "Base Rate" means the primary index rate established from
time to time by Bank of Hawaii in the ordinary course of its
business and with due consideration of the money market, and
published by intrabank memoranda for the guidance of its loan
officers in pricing all of its loans which float with the Base
Rate.
1.6 "Base Rate Loan" means a Loan which bears interest
calculated on the basis of the Base Rate.
1.7 "Borrowing" means the draw down at any one time of the
proceeds of a Loan pursuant to the Loan Agreement.
1.8 "Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in Hawaii are authorized by
law to close.
1.9 "Capital Expenditures" means all expenditures that, in
accordance with GAAP, should be capitalized on the accounting
records of the Borrower and its Subsidiaries.
1.10 "Cash Flow from Operating Activities" means, at any time,
the consolidated cash flows of the Borrower and the Subsidiaries
from operating activities, determined on a basis consistent with
the basis used for the determination of the Statements of Cash
Flows from Operating Activities as presented in the Borrower's
1991 Annual Report to its stockholders.
1.11 "Collateral" means the land and improvements of the Village
Golf Course, the Plantation Golf Course and the Bay Golf Course
in Kapalua, Maui, Hawaii, which land is more particularly
described in the Mortgage and in the Additional Security
Mortgage.
1.12 "Commitment Reduction Date" means each date that the
Aggregate Loan Commitment is to be reduced pursuant to the
provisions of Section 2.6 of this Loan Agreement.
1.13 "Confirmations of Mortgage" means the confirmation of the
Mortgage of even date herewith by and between Borrower and
Lenders and the confirmation of the Additional Security Mortgage
of even date herewith by and between Kapalua Land Company, Ltd.
and Lenders.
1.14 "Consolidated Current Assets" and "Consolidated Current
Liabilities" mean, at any time, all assets or liabilities,
respectively, that, in accordance with generally accepted
accounting principles consistently applied, should be classified
as current assets or current liabilities, respectively, on a
consolidated balance sheet of the Borrower and its Subsidiaries,
except that "Consolidated Current Assets" shall not include
growing crops and that "Consolidated Current Liabilities" shall
not include the aggregate outstanding principal amount of the
Loans, together with accrued and unpaid interest thereon, at the
time of determination.
1.15 "Conversion Date" shall have the meaning provided in Section
2.7(e).
1.16 "Current Ratio" means, at any time, Consolidated Current
Assets divided by Consolidated Current Liabilities.
1.17 "Effective Date" shall have the meaning assigned thereto in
Section 3.2 hereof.
1.18 "Environmental Indemnification Agreement" means an
Environmental Indemnification Agreement in the form of Exhibit A
attached to the Original Loan Agreement, made by the Borrower in
favor of the Lenders, as amended from time to time.
1.19 "Eurodollar Day" means a Business day which is also a day
for trading by and between banks in U.S. dollar deposits in the
London interbank Eurodollar market.
1.20 "Eurodollar Reserve Requirement" means the then maximum
effective rates per annum (expressed as a percentage), as
determined solely by the Agent (which determination shall be
final, conclusive and binding on all of the parties hereto,
absent manifest error), of the reserve requirements imposed
pursuant to Regulation D by the Board of Governors of the Federal
Reserve System on $1,000,000 "Eurocurrency Liabilities" of the
Agent, having a maturity equal to the term of the applicable
LIBOR Interest Period.
1.21 "Expiry Date" means December 31, 1999.
1.22 "Financial Statements" means the consolidated balance sheets
of the Borrower and its Subsidiaries and consolidated statements
of income and retained earnings of the Borrower and its
Subsidiaries and other financial statements (a) heretofore
furnished to the Lenders, or any of them, and (b) to be furnished
to the Lenders pursuant to the provisions of this Loan Agreement.
1.23 "GAAP" means generally accepted accounting principles
consistently applied.
1.24 "Indebtedness for Borrowed Money" means any indebtedness or
obligation or liability to repay borrowed monies, whether matured
or unmatured, liquidated or unliquidated, direct or contingent,
joint or several, including, without limitation, all such
indebtedness guaranteed, directly or indirectly, in any manner,
or endorsed (other than for collection or deposit in the ordinary
course of business) or discounted with recourse.
1.25 "Individual Loan Commitment" means:
(a) In respect of Bank of Hawaii, $8,050,000 with respect to the
Original Facility, subject to further permanent reduction from
time to time in accordance with the terms of the Loan Agreement,
and $7,500,000 with respect to the Village Course Facility.
(b) In respect of First Hawaiian Bank, $5,000,000 with respect
to the Original Facility, subject to further permanent reduction
from time to time in accordance with the terms of the Loan
Agreement, and $5,000,000 with respect to the Village Course
Facility.
(c) In respect of Central Pacific Bank, $1,950,000 with respect
to the Original Facility, subject to further permanent reduction
from time to time in accordance with the terms of the Loan
Agreement, and $2,500,000 with respect to the Village Course
Facility.
1.26 "Individual Loan Commitment Percentage" means, in respect of
Bank of Hawaii, 53.667% with respect to the Original Facility and
50% with respect to the Village Course Facility; in respect of
First Hawaiian Bank 33.333% with respect to the Original Facility
and 33.333% with respect to the Village Course Facility; and in
respect of Central Pacific Bank 13% with respect to the Original
Facility and 16.667% with respect to the Village Course Facility.
1.27 "Interbank Eurodollar Index Rate" means the rate per annum
expressed as a percentage) at which leading banks, as determined
by the Agent, are offered deposits in United States Dollars in
the London interbank Eurodollar market as of 11:00 a.m., London
time, on the day three (3) Eurodollar Days prior to the beginning
of such LIBOR Interest Period; for delivery in immediately
available funds on the first day of such LIBOR Interest Period,
in an amount equal or comparable to the principal amount of the
applicable LIBOR Loan to be outstanding and for a period equal to
the term of such LIBOR Interest Period.
1.28 "Interest Period" means and includes any LIBOR Interest
Period and any period for which interest in respect of the Loans
is calculated on the basis of the Base Rate and determined in
accordance with the Loan Agreement.
1.29 "Investments" means all expenditures by the Borrower and its
Subsidiaries, not reflected as Capital Expenditures in the
Financial Statements, 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 property of any kind, and
reflected as Investments in the Financial Statements.
1.30 "KCA" means Kaahumanu Center Associates, a Hawaii limited
partnership which is organized between the Borrower, as general
partner, and the State of Hawaii Employee Retirement System, as
limited partner, for the purpose of acquiring, expanding and
operating the Kaahumanu Shopping Center complex.
1.31 "Laws" means all ordinances, statutes, rules, regulations,
orders, injunctions, writs or decrees of any government or
political subdivision or agency thereof, or any court or similar
entity established by any thereof.
1.32 "Lenders" is defined in the preamble of this Amendment and
Restatement; provided, however, that as used hereinbelow,
"Lenders" means (a) prior to the BOA Purchase, BOH, FHB, BOA and
CPB, and (b) subsequent to the BOA Purchase, BOH, FHB and CPB.
1.33 "LIBOR" means, for each LIBOR Interest Period, a rate
computed pursuant to the following formula and adjusted as of the
date of any change in the Eurodollar Reserve Requirements:
Interbank Eurodollar Index Rate X 100
100% - Eurodollar Reserve Requirement
1.34 "LIBOR Loan" means any Loan during any period during which
such Loan is bearing interest at a rate based upon LIBOR.
1.35 "LIBOR Interest Period" means, with respect to each LIBOR
Loan, an Interest Period consisting of one (1) month, two (2)
months, three (3) months or six (6) months, as designated by the
Borrower in accordance with Section 2.3 or Section 2.7 of the
Loan Agreement, as the case may be.
1.36 "Loan Agreement" means the Original Loan Agreement, as
amended and restated by the First Restatement and by this
Amendment and Restatement, and as may be further amended from
time to time, and any amendments and modifications of the
Original Loan Agreement.
1.37 "Loan Documents" means the Loan Agreement, the Notes, the
Mortgage, the Environmental Indemnity Agreement and the
Additional Security Mortgage, in each case as originally executed
and as thereafter amended, modified or restated from time to time
in accordance with the respective terms thereof.
1.38 "Loans" means all Revolving Loans, Term Loans and Advances
to be made to the Borrower pursuant to the Loan Agreement.
1.39 "Majority in Interest of the Lenders" means Lenders holding
100% of the aggregate principal amount of the Loans then
outstanding hereunder (or if no Loans are at the time
outstanding, Lenders having 100% of the Aggregate Loan
Commitment).
1.40 "Maturity Date" means December 31, 2002.
1.41 "Mortgage" means, collectively, the Mortgage and Security
Agreement dated March 1, 1993, made by the Borrower, as
Mortgagor, in favor of the Lenders, as Mortgagees, recorded in
said Bureau as Document No. 93-036896 and that certain Mortgage
and Security Agreement made by Borrower, as Mortgagor, in favor
of Lenders, as Mortgagees, recorded in said Bureau as Document
No. 93-036898, as the same were originally executed and as
thereafter amended or modified.
1.42 "Net Profits" means, for any fiscal year, the consolidated,
after-tax net profits of the Borrower and its Subsidiaries for
such year, determined in accordance with generally accepted
accounting principles consistently applied.
1.43 "Net Worth" means, at any time, on a consolidated basis for
the Borrower and the Subsidiaries, their Net Worth as shown in
the most recent Financial Statements (provided, however, that for
purposes of determining Net Worth under the Loan Agreement, the
amount of any goodwill or debt discount carried as assets on such
Financial Statements, trademarks, patents, copyrights,
organizational expense and other similar intangible items shall
be subtracted).
1.44 "Note Modification Agreements" means the Note Modification
Agreements of even date herewith by and between Borrower and Bank
of Hawaii and First Hawaiian Bank, respectively.
1.45 "Notes" means, collectively, (a) the Revolving Notes, as
respectively amended from time to time, (b) from and after the
date of the making of the Term Loans, each of the Term Notes, as
respectively amended from time to time and (c) the Village Course
Facility Notes, as respectively amended from time to time.
1.46 "Notice of Conversion" shall have the meaning provided in
Section 2.7(e) of this Amendment and Restatement.
1.47 "Obligations" means, collectively, the obligations of the
Borrower to pay the principal of and interest on the Notes in
accordance with the terms thereof and to satisfy all of the
Borrower's other indebtedness, covenants, liabilities and
obligations to the Lenders under the Loan Documents, whether now
existing or hereafter incurred, matured or unmatured, direct or
contingent, joint or several.
1.48 "Original Facility" means the revolving loan and term loan
facility established by the Original Loan Agreement, as amended
by the First Restatement and as the same may be further amended,
but excluding the Village Course Facility.
1.49 "Person" means any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated
organization, joint venture, court or government or political
subdivision or agency thereof.
1.50 "Records" means correspondence, memoranda, tapes, discs,
papers, books and other documents, or transcribed information of
any type, whether expressed in ordinary or machine language.
1.51 "Recourse Debt" means, as to the Borrower or any Subsidiary,
all items of indebtedness, obligation or liability for borrowed
funds, whether now existing or hereafter incurred, matured or
unmatured, direct or contingent, joint or several, including, but
without limitation:
(a) All indebtedness for borrowed money guaranteed, directly or
indirectly, in any manner, or endorsed (other than for collection
or deposit in the ordinary course of business) or discounted with
recourse;
(b) All indebtedness for borrowed money in effect guaranteed,
directly or indirectly, through agreements, contingent or
otherwise: (1) to purchase such indebtedness; or (2) to purchase,
sell or lease (as lessee or lessor) property, products, materials
or supplies or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such
indebtedness or to assure the owner of the indebtedness against
loss; or (3) to supply funds to or in any other manner invest in
the debtor; and
(c) All indebtedness for borrowed money secured by (or for which
the holder of such indebtedness has a right, contingent or
otherwise, to be secured by) any mortgage, deed of trust, pledge,
lien, security interest or other charge or encumbrance on
property owned or acquired subject thereto, whether or not the
liabilities secured thereby have been assumed;
provided, however, the foregoing provisions to the contrary
notwithstanding, Nonrecourse Secured Debt shall not be considered
Recourse Debt. For this purpose "Nonrecourse Secured Debt" means
all items of indebtedness incurred by the Borrower or a
Subsidiary for borrowed money, now existing or hereafter arising,
secured by real or personal collateral and in respect of which
the sole recourse of the holder of the debt instrument for
payment of the indebtedness evidenced thereby is against the
collateral for such indebtedness, and not against the obligor
individually or the obligor's other assets.
1.52 "Regulation D" means Regulation D of the Board of Governors
of the Federal Reserve System as from time to time in effect or
any successor to all or a portion thereof establishing reserve
requirements.
1.53 "Revolving Loans" means Loans requested by the Borrower
pursuant to Section 2.3, below, and granted by the Lenders during
the Revolving Loan Period (as that term is defined in Section
2.1, below).
1.54 "Revolving Notes" means, collectively (i) originally, each
of four Notes, executed by the Borrower pursuant to the Original
Loan Agreement and payable individually to the order of an
Original Lender, in each case, as amended from time to time, and
(ii) each of such Notes, as respectively amended and restated by
the three Amended and Restated Revolving Notes dated December 4,
1996, executed by the Borrower pursuant to the First Restatement,
and as the same may be further respectively amended from time to
time.
1.55 "Site 29 Project" means that certain real estate development
project intended to be built by Kapalua Coconut Grove, LLC, on
the 12.2 acre parcel of land, identified as Tax Map Key (2) 4-2-
04-26.
1.56 "Subsidiary" means any corporation of which more than 50% of
the outstanding voting securities having ordinary voting power to
elect a majority of the Board of Directors of such corporation
shall, at the time of determination, be owned directly, or
indirectly through one or more Subsidiaries, by the Borrower. A
list of the currently-existing Subsidiaries is attached hereto as
Exhibit H.
1.57 "Term Loan" has the meaning given to it in Section 2.1(b) of
the Loan Agreement.
1.58 "Term Notes" means, collectively, the three Term Notes
executed by the Borrower and payable to the order of each Lender,
individually, each in the form of Annex IV hereto, and completed
in conformity with the provisions of the Loan Agreement.
1.59 "Total Debt" means, as to the Borrower and all Subsidiaries,
on a consolidated basis, all Indebtedness for Borrowed Money,
including, without limitation, all Recourse Debt and Nonrecourse
Secured Debt, plus all lease obligations which are capitalized on
the Borrower's and/or Subsidiaries, balance sheets in accordance
with generally accepted accounting principles.
1.60 "Type" means either a Base Rate Loan or a LIBOR Loan.
1.61 "Village Course Facility Maturity Date" means December 11,
2000.
1.62 "Village Course Facility Notes" means, collectively, the
three promissory notes to be executed by the Borrower and payable
to the order of each Lender, individually, in the amount of each
such Lender's Individual Loan Commitment with respect to the
Village Course Facility, each in the form of Exhibit 1 hereto,
and completed in conformity with the provisions of this Loan
Agreement.
II. The Loans
2.1 General Terms.
(a) Revolving Loans. On the terms and provisions and subject to
the satisfaction of the conditions stated in the Loan Agreement,
each Lender hereby severally agrees to make Loans to the
Borrower, from time to time and at any time prior to the Expiry
Date (the "Revolving Loan Period"), each in a principal amount
equal to such Lender's Individual Loan Commitment Percentage with
respect to the Original Facility of the total amount to be
borrowed on any occasion; provided, however, that (1) subject to
the provisions of Section 2.6 of the Loan Agreement, the
aggregate principal amount at any one time outstanding of all
Loans under the Original Facility shall not exceed the Aggregate
Loan Commitment with respect to the Original Facility, (2) no
Lender shall be obligated to make Loans to the Borrower under the
Original Facility which shall exceed, in the aggregate principal
amount at any one time outstanding, such Lender's Individual Loan
Commitment with respect to the Original Facility, (3) each
advance of Loan proceeds under the Original Facility shall be
made by the several Lenders ratably, in a principal amount equal
to such Lender's Individual Loan Commitment Percentage with
respect to the Original Facility of the total amount to be
borrowed on any occasion, (4) no Lender shall have any obligation
or liability to the Borrower or any other Person as a result of
the failure of another of the Lenders to observe any of its
obligations under the Loan Agreement, and (5) no Lender (in its
capacity as such) shall have any obligation or liability to the
Borrower or any other Person as a result of the failure of the
Agent to observe any of its obligations under this Loan Agreement
or the Agency Agreement. During the Revolving Loan Period the
Borrower may borrow, repay without penalty or premium and
reborrow under the Original Facility, either the full amount of
the Aggregate Loan Commitment then in effect with respect to the
Original Facility or any lesser sum, provided that any borrowing
hereunder shall be in an amount not less than $500,000, and an
integral multiple of $100,000, and provided that any voluntary
prepayment of the Original Facility shall be in an amount not
less than $250,000, and an integral multiple of $50,000.
Principal of and interest on the Revolving Loans shall be paid by
the Borrower at the times and in the manner stated in the
Revolving Notes and in the Loan Agreement, including, without
limitation, Sections 2.7 and 2.8 below.
(b) Term Loans. Subject to the satisfaction of all terms and
conditions of the Loan Agreement, including, without limitation,
Section 3.3 hereof, each Lender severally agrees to make a term
loan ("Term Loan") to the Borrower on the Expiry Date, in an
amount equal to the aggregate principal amount of the Revolving
Loans then outstanding and owing by the Borrower to such Lender.
The proceeds of each Term Loan to be made by each Lender shall be
used to repay in full the Revolving Loans outstanding with
respect to such Lender on the date of the making of the Term
Loan. Term Loans may not be reborrowed. Principal of and
interest on the Term Loans shall be paid by the Borrower at the
times and in the manner stated in the Term Notes and in the Loan
Agreement, including, without limitation, Sections 2. 7 and 2.8
below.
(c) Village Course Facility. On the terms and provisions and
subject to the satisfaction of the conditions of the Loan
Agreement, the Lenders hereby establish a development line (the
"Village Course Facility") in favor of Borrower pursuant to which
the Lenders will extend credit to Borrower in the aggregate
principal amount of FIFTEEN MILLION DOLLARS ($15,000,000.00) (the
"Aggregate Loan Commitment with respect to the Village Course
Facility"); provided, however, that (1) the aggregate principal
amount at any one time outstanding of all Advances hereunder
shall not exceed the Aggregate Loan Commitment with respect to
the Village Course Facility, (2) no Lender shall be obligated to
make Advances to the Borrower which shall exceed, in the
aggregate principal amount at any one time outstanding, such
Lender's Individual Loan Commitment with respect to the Village
Course Facility, (3) each Advance shall be made by the several
Lenders ratably, in a principal amount equal to such Lender's
Individual Loan Commitment Percentage with respect to the Village
Course Facility of the total amount to be borrowed on any
occasion, (4) no Lender shall have any obligation or liability to
the Borrower or any other Person as a result of the failure of
another of the Lenders to observe any of its obligations under
the Loan Agreement, and (5) no Lender (in its capacity as such)
shall have any obligation or liability to the Borrower or any
other Person as a result of the failure of the Agent to observe
any of its obligations under the Loan Agreement or the Agency
Agreement. Borrower may draw on the Village Course Facility by
obtaining a cash advance (each such cash advance herein referred
to as an "Advance"), provided that any Advance shall be in an
amount not less than $500,000, and an integral multiple of
$100,000. Advances may not be reborrowed. Principal of and
interest on the Advances shall be paid by the Borrower at the
times and in the manner stated in the Village Course Facility
Notes and in the Loan Agreement, including, without limitation,
Sections 2.7 and 2.8 below.
2.2 Notes.
(a) Revolving Notes. The Borrower's obligation to pay the
principal of, and interest on, all Revolving Loans made by each
Lender shall be evidenced by a separate Revolving Note, executed
by the Borrower and payable to the order of such Lender. Each
Revolving Note issued to a Lender shall (1) be payable to the
order of such Lender and be dated the date of the initial
borrowing of proceeds of Revolving Loans, (2) be in the original
principal amount of the Individual Loan Commitment with respect
to the Original Facility of such Lender, (3) mature on the Expiry
Date, (4) bear interest as provided in Section 2.7 hereof, (5) be
repaid as provided in such Revolving Note and in Sections 2.7 and
2.8 hereof and (6) be entitled to the benefits of the Loan
Agreement.
(b) Term Notes. Each Term Loan made by a Lender to the Borrower
shall be evidenced by a separate Term Note, each executed by the
Borrower and payable to the order of such Lender. Each Term Note
issued to a Lender shall (1) be in the form of Annex IV hereto
with blanks appropriately completed in conformity with the Loan
Agreement, (2) be dated the Expiry Date, (3) be in the principal
amount of the aggregate unpaid principal amount of all Revolving
Loans then outstanding with respect to such Lender, (4) bear
interest as provided in Section 2.7 hereof, (5) be repaid as
provided in such Term Note and in Sections 2.7 and 2.8 hereof,
(6) mature on the Maturity Date and (7) be entitled to the
benefits of the Loan Agreement.
(c) Village Course Facility Notes. The Borrower's obligation to
pay the principal of, and interest on, all Advances made by each
Lender shall be evidenced by a separate Village Course Facility
Note executed by the Borrower and payable to the order of such
Lender. Each Village Course Facility Note issued to a Lender
shall (1) be payable to the order of such Lender and be dated the
date of this Amendment and Restatement, (2) be in the original
principal amount of the Individual Loan Commitment with respect
to the Village Course Facility of such Lender, (3) mature on the
Village Course Facility Maturity Date, (4) bear interest as
provided in Section 2.7 hereof, (5) be repaid as provided in such
Village Course Facility Note and in Sections 2.7 and 2.8 hereof
and (6) be entitled to the benefits of the Loan Agreement.
2.3 Requests for Loans.
(a) In respect of each Revolving Loan to be made pursuant to
Section 2.1(a) of the Loan Agreement, the Borrower shall give to
the Agent at least two (2) full Business Days' (or in the case of
a LIBOR Loan, three (3) Eurodollar Days') notice of the
Borrower's request therefor in writing, signed by an authorized
officer of Borrower, specifying the date of such Revolving Loan,
which shall be a Business Day, and the principal amount of such
Revolving Loan (which shall be not less than $500,000 and shall
be in an integral multiple of $100,000),
(b) In respect of each Advance, the Borrower shall give to the
Agent at least two (2) full Business Days' (or in the case of a
LIBOR Loan, three (3) Eurodollar Days') notice of the Borrower's
request therefor by a written "Notice of Borrowing/Conversion" in
the form of Exhibit 2 attached hereto, signed by an authorized
officer of Borrower. If the Advance will be a LIBOR Loan, such
written notice shall indicate the LIBOR Interest Period
applicable thereto.
2.4 Disbursements. During the Revolving Loan Period the Agent
will credit the proceeds of each Revolving Loan to the Borrower's
deposit account with Bank of Hawaii or, at the Borrower's
request, disburse the proceeds of such Revolving Loan to the
order of the Borrower. Unless otherwise directed in writing by
the Borrower, all proceeds of Advances shall be credited to the
Borrower's Deposit Account No. 61-058745, maintained with the
Agent.
2.5 Fees.
(a) Commitment Fee With Respect to the Original Facility. The
Borrower shall pay to the Agent for pro rata distribution to each
Lender, a commitment fee on the average daily unutilized
Aggregate Loan Commitment with respect to the Original Facility,
computed at the rate of one-quarter of one percent (0.25%) per an
num computed on the basis of the actual number of days elapsed
over a year of 365 or 366 days (as the actual case may be) and
payable quarterly in arrears commencing on December 31, 1996, and
thereafter, on the last day of each March, June, September and
December prior to the Expiry Date and on the Expiry Date (or such
earlier date as the Aggregate Loan Commitment with respect to the
Original Facility shall be terminated).
(b) Village Course Facility Fee. In respect of the Village
Course Facility, the Borrower shall pay to the Agent, on demand,
for distribution to the Lenders according to their Individual
Commitment Percentages with respect to the Village Course
Facility the following non-refundable fee: $56,250.00.
(c) Agent's Fee. For and in respect of the services of the Agent
to be rendered with respect to the Original Facility hereunder
and under the Agency Agreement, the Borrower agrees to pay to the
Agent the fee set forth in Section 5.1(l) hereof. Agent's
underwriting fee with respect to the Village Course Facility is
established by separate agreement between Agent and Borrower.
2.6 Reductions of Commitment.
(a) Mandatory Reduction. By the close of business on each date
the Borrower or any Subsidiary receives any net sales proceeds
(i.e., gross sales proceeds less closing costs acceptable to the
Lenders) in respect of the sale of any real estate assets of the
Borrower or any Subsidiary, the Borrower shall notify the Agent
of such sale and the Borrower's receipt of such net sale proceeds
and shall pay to the Lenders through the Agent 75% of the
after-tax net proceeds so received by the Borrower as a mandatory
payment of the outstanding principal amount of the Loans under
the Original Facility; provided, however, that such mandatory
payments of principal shall not permanently reduce the Aggregate
Loan Commitment with respect to the Original Facility.
(b) Voluntary Reduction. The Borrower shall have the right, at
any time and from time to time, upon not less than one full
calendar month's prior written notice to the Agent, to
voluntarily reduce the amount of the Aggregate Loan Commitment
with respect to the Original Facility, in any integral multiple
of $1,000,000. Contemporaneously with each such voluntary
reduction, the Borrower shall repay or prepay to the Lenders,
through the Agent, the amount, if any, by which the then
outstanding aggregate principal balance of the Loans under the
Original Facility exceeds the Aggregate Loan Commitment with
respect to the Original Facility as so reduced. Notwithstanding
any provision in the Loan Agreement to the contrary, in no event
shall any such voluntary reduction which results in a prepayment
of any LIBOR Loan occur on any day other than the last day of the
LIBOR Interest Period applicable to such LIBOR Loan.
(c) Effects of Reductions. After any such reduction, (1) the
commitment fees provided for in Section 2.5 of this Loan
Agreement shall be calculated in respect of the Aggregate Loan
Commitment with respect to the Original Facility as so reduced,
(2) the Individual Loan Commitments with respect to the Original
Facility of each Lender shall be reduced pro rata in accordance
with their respective Individual Loan Commitment Percentage with
respect to the Original Facility, which shall remain unchanged,
and (3) the notice of reduction described in subparagraph (b)
above, shall be irrevocable and the Aggregate Loan Commitment
with respect to the Original Facility may not be thereafter
increased without the written consent of all of the Lenders.
2.7 Interest Rates and Payments of Interest. Interest on the
principal balance of the Loans shall accrue and be paid at the
rates, at the times and in the manner stated in the Notes and as
follows:
(a) Revolving Loan Period. Outstanding balances of principal of
the Revolving Loans during the Revolving Loan Period shall bear
interest at either of the following interest rate options that
Borrower may select in accordance with the terms of the Loan
Agreement (i) a floating rate equal to the Base Rate in effect
from time to time or (ii) LIBOR, plus two and one-quarter
percentage points (2.25%). With respect to all LIBOR Loans in
effect during the Revolving Loan Period, the Borrower shall give
to the Agent at least three (3) Eurodollar Days prior to the last
day of the LIBOR Interest Period then applicable to such LIBOR
Loans a written notice stating whether the Borrower elects to
continue such Loan as a LIBOR Loan and the LIBOR Interest Period
to be applicable thereto or as a Base Rate Loan; provided that in
no event shall the Borrower have the right (x) to select a LIBOR
Interest Period that extends beyond the Expiry Date or (y) if at
the time of such election, an Event of Default shall have
occurred, to continue such Loan as a LIBOR Loan. Notwithstanding
any provision in the Loan Agreement to the contrary, in no event
shall the Borrower have the right to borrow, convert or continue
any Revolving Loan as a LIBOR Loan unless the aggregate principal
amount of all Revolving Loans is greater than or equal to
$500,000. No more than six (6) LIBOR Loans may be outstanding
under the Original Facility at any one time.
During the Revolving Loan Period, interest accruing on the
principal balance of the Revolving Loans at the rate(s) per annum
aforesaid shall be due and payable (i) quarterly in arrears on
the last day of each March, June, September and December, (ii) on
the Expiry Date, (iii) on the last day of each LIBOR Interest
Period and (iv) at maturity (whether by acceleration or
otherwise).
(b) Term Loan Period. In the event that the Term Loans shall be
made, then during the period (the "Term Loan Period") commencing
on the Expiry Date, to and including the date that the Term Loans
are paid in full, at the option of the Borrower initially either
(i) a floating rate per annum equal to the Base Rate in effect
from time to time, or (ii) LIBOR, plus two and one-half
percentage points (2.5%). The Borrower shall give to the Agent
no later than the date (the "Term Loan Interest Election Date")
three (3) Eurodollar Days preceding the Expiry Date, a written
notice (the "Notice of Interest Rate Election") that it elects to
have the Term Loans bear interest as Base Rate Loans or LIBOR
Loans, which Notice of Interest Rate Election shall comply in all
respects with the provisions in this Section 2.7(b).
Notwithstanding any provision in the Loan Agreement to the
contrary, if the Borrower fails to give such Notice of Interest
Rate Election to the Agent on or before the Term Loan Interest
Election Date, the Term Loans initially shall bear interest from
and after the date which the Term Loans are made as Base Rate
Loans. In the event that the Borrower, pursuant to and in
accordance with this Section 2.7(b), elects to have the Term
Loans initially bear interest as LIBOR Loans, such Notice of
Interest Rate Election must state whether the initial LIBOR
Interest Period applicable to the Term Loans shall be a period of
one month, two months, three months or six months. With respect
to all LIBOR Loans in effect during the Term Loan Period, the
Borrower shall give to the Agent at least three (3) Eurodollar
Days prior to the last day of the LIBOR Interest Period then
applicable to such LIBOR Loans a written notice stating whether
the Borrower elects to continue such Loan as a LIBOR Loan and the
LIBOR Interest Period to be applicable thereto or as a Base Rate
Loan; provided that in no event shall the Borrower have the right
(x) to select a LIBOR Interest Period that extends beyond the
Maturity Date or (y) if at the time of such election, an Event of
Default shall have occurred, to continue such Loan as LIBOR Loan.
Notwithstanding any provision in the Loan Agreement to the
contrary, in no event shall the Borrower have the right to
borrow, convert or continue any Term Loan as a LIBOR Loan, unless
the aggregate principal amount of all Term Loans is greater than
or equal to $500,000. No more than six (6) LIBOR Loans may be
outstanding under the Original Facility at any one time.
From and after the date of the making of the Term Loans,
interest accruing on the principal balance of the Term Loans at
the rate(s) per annum aforesaid shall be due and payable (i)
quarterly in arrears on the last day of each March, June,
September and December and (ii) on the last day of each LIBOR
Interest Period and (iii) at maturity (whether by acceleration or
otherwise).
(c) Village Course Facility. The Borrower agrees to pay interest
on the outstanding principal balance of the Advances pursuant to
the following interest rate options that the Borrower may select
in accordance with the provisions of the Loan Agreement: (i) a
floating rate equal to the Base Rate in effect from time to time;
or (ii) LIBOR plus two and one-half percentage (2.5%) points. Any
portion of the Village Course Facility that is not a LIBOR Loan
is a Base Rate Loan. LIBOR Loan amounts under the Village Course
Facility shall be in minimums of $500,000 and in multiples of
$100,000, with at most six (6) LIBOR Loans outstanding under the
Village Course Facility at any one time.
The Borrower agrees to make monthly payments, to the Agent
for distribution to the Lenders, of all accrued interest on the
outstanding principal balance of each Base Rate Loan under the
Village Course Facility on the first day of each month. The
Borrower agrees to pay, to the Agent for distribution to the
Lenders, interest on the unpaid principal amount of each LIBOR
Loan under the Village Course Facility on the earlier of (i) the
last day of the LIBOR Interest Period or (ii) the last day of
each three-month interval occurring during the LIBOR Interest
Period and at maturity (whether by acceleration or otherwise).
(d) General. With respect to all Loans:
(1) Any floating rate of interest will increase or decrease
during the term of this Loan Agreement if there is an increase or
decrease in the rate to which the floating rate is tied. If the
rate to which the floating rate is tied is no longer available,
the Agent will choose a new rate that is based on comparable
information.
(2) Interest shall be computed on the basis of the actual number
of days elapsed between payments and on the basis of a 365-day
year (or, in leap years, on the basis of 366-day year) with
respect to Base Rate Loans and on the basis of a 360-day year
with respect to LIBOR Loans.
(3) In computing interest on each Loan, the date of the making
of such Loan shall be included and the date of payment shall be
excluded; provided, however, that if a Loan is repaid on the same
day on which it is made, such day shall nevertheless be included
in computing interest thereon.
(4) In no event shall the Borrower be obligated to pay any
amount under this Agreement that exceeds the maximum amount
allowable by law. If any sum is collected in excess of the
applicable maximum amount allowable by law, the excess collected
shall, at the Lenders, discretion, be applied to reduce the
principal balance of the Loans or returned to the Borrower.
(5) The foregoing rates of interest shall be subject to the
provisions of Section 6.2(c) hereof relating to the Default Rate
upon the occurrence and during the continuance of an Event of
Default.
(e) Conversions. At any time and from time to time, the
Borrower may elect, subject to the condition precedent that no
Event of Default shall have occurred and is continuing, to
convert the Loans from one Type to another Type. Each time that
the Borrower elects to convert Loans from one Type to another
Type, it shall deliver to the Agent a written notice (a "Notice
of Conversion"), in the form attached hereto as Exhibit 2 at
least three (3) Business Days, if such Loans are to be converted
to Base Rate Loans, or at least three (3) Eurodollar Days, if
such Loans are to be converted to LIBOR Loans, prior to the date
on which such conversion is to be effective. Each such Notice of
Conversion shall state (i) the date (the "Conversion Date") on
which such conversion is to occur, which date shall be (1) a
Business Day, if such Loans are to be converted from LIBOR Loans
to Base Rate Loans or (2) a Eurodollar Day, if such Loans are to
be converted to LIBOR Loans, (ii) whether such Loans are to be
converted to Base Rate Loans or LIBOR Loans and (iii) with
respect to the conversion from Base Rate Loans to LIBOR Loans,
the LIBOR Interest Period which shall be applicable to the LIBOR
Loans upon such conversion. Notwithstanding any provision in the
Loan Agreement to the contrary, in no event shall the Borrower
have any right to select any LIBOR Interest Period which extends
beyond the Expiry Date, if such Loans are Revolving Loans, the
Maturity Date, if such Loans are Term Loans, or the Village
Course Facility Maturity Date if such Loans are Advances.
2.8 Payments and Prepayments of Principal.
(a) Revolving Loans. The principal of the Revolving Loans shall
be due and payable as set forth in Section 2.6 hereof with
respect to mandatory reductions of principal. In addition, on
the Expiry Date (or such earlier date on which the Aggregate Loan
Commitment with respect to the Original Facility shall be
terminated), the outstanding principal balance of all Revolving
Loans shall be due and payable.
(b) Term Loans. The principal of the Term Loans shall be due and
payable as set forth in Section 2.6 hereof with respect to
mandatory reductions of principal. In addition, the outstanding
principal balance of the Term Loans shall be repaid in six equal
semi-annual installments, each of which shall be in an amount
equal to the lesser of (1) the product of the aggregate
outstanding principal balance of the Term Loans, multiplied by
1/6, or (2) the then outstanding principal balance of the Term
Loans. On the Maturity Date, the entire principal balance of the
Term Loans shall be due and payable.
(c) Village Course Facility. All principal and accrued interest
then outstanding with respect to the Village Course Facility
shall be due and payable in full on or before the Village Course
Facility Maturity Date.
(d) General.
(1) Principal balances outstanding under the Notes shall be
paid, and may be prepaid without penalty or premium, in the
amounts, at the times and in the manner stated herein and in the
Notes. No payment or prepayment of principal under any of the
Notes for either the Original Facility or the Village Course
Facility shall be made without a concurrent payment or prepayment
of principal under the other Notes for the same facility, and all
principal amounts paid or prepaid on the Notes shall be shared
among the Lenders pro rata, in accordance with their respective
Individual Loan Commitment Percentages with respect to the
Original Facility or the Village Course Facility, as the case may
be. Payments and prepayments of principal with respect to the
Original Facility, during the Revolving Loan Period, shall be in
amounts not less than $250,000, and in integral multiples of
$50,000. Notwithstanding any provision in the Loan Agreement to
the contrary, in no event shall any prepayment of any LIBOR Loan
occur on any day other than the last day of the LIBOR Interest
Period applicable to such LIBOR Loan.
(2) If any payment under this Agreement is not made when due,
the Borrower will pay to the Agent for pro rata distribution to
the Lenders (or for the sole account of Agent to the extent
relating to a payment not to be distributed to the Lenders) a
late charge in respect of that payment, in the amount of 5% of
the overdue payment.
2.9 Sums Payable to the Lenders. The Agent shall send to the
Borrower, from time to time, statements of all amounts due under
the Notes and other Loan Documents, which statements shall be
considered correct and conclusively binding on the Borrower,
absent manifest error, unless the Borrower notifies the Agent to
the contrary within 30 Business Days of its receipt of any
statement which it deems to be incorrect. The records of the
Agent evidencing the date of disbursement and principal amount of
each Loan and the amounts of all repayments of principal and
payments of interest on each Loan shall constitute prima facie
evidence of the making and repayment of such Loans and of the
payment of such interest. However, the Agent's making of
erroneous notations in its records shall not affect the
Borrower's obligation to repay the outstanding balance of
principal under a Loan, and accrued interest thereon, as provided
in the Loan Agreement. All sums payable to the Lenders under the
Notes and other Loan Documents shall be paid directly to the
Agent, in its capacity as such, in immediately available funds.
2.10 Payment Dates. Whenever any payment of principal of, or
interest on, any Loan or of any commitment fee shall be due on a
day which is not a Business Day (or a Eurodollar Day in the case
of a LIBOR Loan), the date for payment thereof shall be extended
to the next succeeding Business Day or a Eurodollar Day as the
case may be. If the date for any payment of principal is
extended by operation of law or otherwise, interest shall be
payable for such extended time. Any payment received by the
Agent after 11:00 a.m. shall not be credited until the next
Business Day.
2.11 Funding Loss and Yield Protection Provisions.
(a) Change in Legality; Additional Costs to Lenders. If after
the date of the Loan Agreement any change in applicable law or
regulation or in the interpretation or administration thereof by
any governmental authority charged with the interpretation or
administration thereof (whether or not having the force of law)
shall, with respect to the Lenders, or any of them, (1) change
the basis of taxation of payments to the Lenders, or any of them,
or the principal or interest on the Loans under the Loan
Agreement, (2) impose, modify or hold applicable any fees,
reserve requirements, special deposits or any costs to the
Lenders, or any of them, in respect of the Loans, or (3) cause a
reduction in the amount of any sum received or receivable under
the Loan Agreement; then, and in any such event, the Borrower
shall pay to the Agent, on demand, for distribution to such
Lenders, such additional amounts as will compensate such
Lender(s) on an after-tax basis for such cost or reduction
incurred; provided, however, that the Borrower shall not be
obligated directly or indirectly to pay for federal or state
income taxes measured or levied generally upon the net income of
any Lender. The Lenders may use any reasonable method in
calculating their additional costs under this Section, which
calculation shall be conclusive absent manifest error.
(b) Capital Requirements. If the Lenders, or any of them, shall
determine that compliance with any law, regulation or any
guideline or request from any central bank or other governmental
authority (whether or not having the force of law) would result
in an increase in the amount of capital required or expected to
be maintained by such Lender(s) or any corporation controlling
such Lender(s), and that such increase is based upon the
existence of such Lender's commitment hereunder and other
commitments of this type, then, and in any such event, the
Borrower shall pay the Agent as an additional fee, from time to
time on demand, for distribution to such Lender(s), such
amount(s) as such Lender(s) shall determine to be the amount(s)
that will compensate it or them or such other corporation for any
reduction in the rate of return on such capital. A certificate
as to the amount of compensation, submitted to the Borrower by
the affected Lender(s), shall be conclusive and binding for all
purposes absent manifest error.
(c) Lack of Availability or Profitability of Eurodollar
Deposits; Illegality. In the event that any Lender shall have
reasonably determined (which determination shall be final and
conclusive and binding upon all parties) that:
(1) on any date for determining LIBOR for any LIBOR Interest
Period, by reason of any change after the date hereof affecting
the interbank market or affecting the position of such Lender in
such market, adequate and fair means do not exist for
ascertaining the applicable interest rate by reference to LIBOR;
or
(2) at any time, by reason of (i) any change after the date of
the Loan Agreement in any applicable law or governmental rule,
regulation or order (or any interpretation thereof by any
government authority or otherwise (provided that, in the case of
an interpretation not by a governmental authority, such
interpretation shall be made in good faith and shall have a
reasonable basis) and including the introduction of any new law
or governmental rule, regulation or order), to the extent not
provided for in clause (3) below, or (ii) in the case of LIBOR
Loans, other circumstances affecting such Lender or the interbank
market or the position of such Lender in such market, LIBOR shall
not represent the effective pricing to such Lender for funding or
maintaining the affected LIBOR Borrowing; or
(3) at any time, by reason of the requirements of Regulation D
or other official reserve requirements, LIBOR shall not represent
the effective pricing to such Lender for funding or maintaining
the affected LIBOR Loan; or
(4) at any time, the making or continuance of any LIBOR Loan has
become unlawful or compliance by such Lender in good faith with
any law, governmental rule, regulation, guideline or order, or
would cause severe hardship to such Lender as a result of a
contingency occurring after the date hereof which materially and
adversely affects the interbank market;
then, and in any such event, such Lender shall on such date of
determination give notice (by telephone confirmed in writing) to
the Agent and the Borrower of such determination. Thereafter, in
the case of clause (1), (2) or (3) above, (and without affecting
Borrower's obligations to pay interest on the Loans at the rates
set forth in Section 2.7 hereof) Borrower shall pay to the Agent
for payment to such Lender, upon written demand therefor, such
additional amounts deemed in good faith by such Lender to be
material (in the form of an increased rate of, or a different
method of calculating, interest or otherwise as the Agent or such
Lender in its discretion shall determine) as shall be required to
cause such Lender to receive interest with respect to its
affected LIBOR Loan at a rate per annum equal to the sum of (i)
the applicable rate per annum determined in accordance with
Section 2.7, hereinabove, plus (ii) the effective pricing to such
Lender to make or maintain such LIBOR Loan, and in the case of
clause (4), Borrower shall within five (5) Business Days prepay
all LIBOR Loans so affected, together with all accrued interest
thereon but without penalty for any costs, net losses or overhead
pursuant to Section 2.11(e), subject to the provisions of Section
2.11(d) hereinbelow. A certificate as to additional amounts owed
to any Lender, shown in reasonable detail the basis for the
calculation thereof, submitted to Borrower and the Agent by the
Lender shall, absent manifest error, be final, conclusive and
binding upon all of the parties hereto.
(d) Borrower's Right to Convert Loans. At any time that any of
its Borrowings are affected by the circumstances described in
Section 2.11(c) Borrower may (i) if a LIBOR Loan has been
requested but not implemented, cancel such Loan or conversion by
giving the Agent notice thereof by telephone (confirmed in
writing) pursuant to Section 2.11(c) or (ii) if the affected
LIBOR Loan is then outstanding, upon at least three (3) Business
Days' written notice to the Agent, require the Lenders to convert
such LIBOR Loan into a Base Rate Loan.
(e) Funding Loss Indemnification. If the Borrower shall (a) pay
or convert any LIBOR Loan on any day other than the last day of
the applicable LIBOR Interest Period (whether on account of a
scheduled payment, an optional prepayment or conversion, a
mandatory prepayment or conversion, a payment upon acceleration
or otherwise); or (b) fail to borrow any LIBOR Loan after giving
due notice thereof to the Agent pursuant to Section 2.3 or
Section 2.7, as the case may be, or (c) fail to convert any Base
Rate Loan into a LIBOR Loan after giving due notice thereof to
the Agent pursuant to Section 2.7, the Borrower shall reimburse
the Lenders and hold the Lenders harmless for all costs, net
losses or administrative overhead incurred as a result of such
repayment, prepayment or failure. The Lenders may use any
reasonable method in calculating their loss under this Section,
which calculation shall be binding and conclusive on the Borrower
absent manifest error.
III. Conditions Precedent
3.1 Documents Required. The Lenders shall have no several
obligations to make disbursements of Loans pursuant to the
provisions of the Loan Agreement, unless and until the Lenders
(through the Agent) shall have received such executed originals
or certified copies of each of the following instruments as the
Lenders (through the Agent) may have reasonably requested, in
each case in form and substance acceptable to the Lenders and
their respective legal counsel:
(a) The Loan Agreement, the Notes, the Mortgage, the Additional
Security Mortgage, UCC Financing Statements describing the
security interests created by the Mortgage and Additional
Security Mortgage, and the Environmental Indemnity Agreement;
(b) The Agency Agreement;
(c) A certificate signed by the Borrower's corporate secretary,
certifying to the Lenders and Agent: (1) as to the adoption of
Resolutions of the Borrower's Board of Directors authorizing the
execution, delivery and performance of the Loan Documents and all
other documents to be delivered by the Borrower pursuant to this
Loan Agreement; (2) as to the incumbency and signatures of the
officers of the Borrower signing the Loan Documents, and each
other document to be delivered by the Borrower pursuant to this
Loan Agreement; and (3) that the Articles of Incorporation and By-
Laws of the Borrower, true copies of which have been attached to
such certification, have not been amended since the date of such
delivery;
(d) A certificate of the Director of Commerce and Consumer
Affairs of the State of Hawaii, evidencing the good standing of
the Borrower in the State of Hawaii;
(e) A written opinion of independent counsel to the Borrower,
addressed to the Lenders, stating that:
(1) The Borrower and the Subsidiaries are corporations duly
organized, validly existing and in good standing under the Laws
of the State of Hawaii and are duly qualified and in good
standing as foreign corporations in all jurisdictions wherein the
nature of their businesses or the properties owned by them make
such qualification necessary;
(2) The Borrower has the corporate power and authority to
execute and deliver the Loan Documents, to borrow money
hereunder, and to perform the Obligations;
(3) All corporate action required to be taken by the Borrower to
enter into the transactions contemplated by the Loan Agreement
has been duly taken, and all consents and approvals of all
Persons, necessary to the validity of the Loan Documents, and
each other document to be delivered by the Borrower hereunder
have been duly obtained, and the Loan Documents and such other
documents do not conflict with any provision of the Articles of
Incorporation or By-Laws of the Borrower, or of any applicable
Laws or any other agreement binding upon the Borrower or its
property of which such counsel has knowledge and the Borrower's
execution, delivery and performance of the Loan Documents do not
require the consent or approval of any governmental body or
regulatory authority;
(4) The Loan Documents and all other documents required to be
delivered by the Borrower pursuant to the provisions of the Loan
Agreement have been duly executed by, and each is a valid and
binding obligation of, the Borrower, enforceable in accordance
with its terms;
(5) Kapalua Land Company, Ltd. ("KLC") has the corporate power
and authority to execute and deliver the Additional Security
Mortgage, all corporate action required to be taken by KLC in
respect of its execution and delivery of the Additional Security
Mortgage has been duly taken, and the Additional Security
Mortgage has been duly executed and delivered by KLC and is a
valid and binding obligation of KLC, enforceable in accordance
with its terms; and
(6) Such counsel is without any knowledge of any matters
contrary to the representations and warranties contained in
Section 4.1 of the Loan Agreement; and
(f) A certificate dated the date of the Loan Agreement and
signed by the President or an Executive Vice President of the
Borrower, certifying to the Lenders and Agent that:
(1) The representations and warranties contained in Section 4.1
of the Loan Agreement are true on and as of such date; and
(2) No Event of Default under the Loan Agreement, and no event
which, with the giving of notice or passage of time, or both,
would become such an Event of Default, has occurred on and as of
such date;
(g) Evidence that the Revolving and Term Loan Agreement dated as
of December 27, 1990, as amended by instruments dated as of
December 31, 1991 and March 31, 1992, among Bank of Hawaii, First
Hawaiian Bank and Bank of America National Trust and Savings
Association (successor-in-interest to Security Pacific National
Bank), as Lenders, Bank of Hawaii, as Agent, and the Borrower,
together with the Notes and Agency Agreement therein described,
have been terminated, and that all Loans and all other
indebtedness of the Borrower thereunder have been repaid or paid
in full (or that arrangements, acceptable to the Lenders and
Agent thereunder, the Lenders and Agent hereunder, and the
Borrower, have been made for the repayment of said Loans and the
payment of all such other indebtedness from the proceeds of the
initial Loans under this Loan Agreement); and
(h) Evidence that the Mortgage and Additional Security Mortgage
have been recorded in the Bureau of Conveyances of the State of
Hawaii (and, if appropriate, filed in the office of the Assistant
Registrar of the Land Court of Hawaii), that the related UCC
Financing Statements have been filed in said Bureau, and that the
Lenders hold a first mortgage lien on and first security interest
in all properties described in and purported to be encumbered by
the Mortgage and Additional Security Mortgage, subject to no
liens or encumbrances other than those noted in (or authorized
by) the Mortgage.
In addition to the foregoing conditions precedent, the
following conditions shall have been satisfied:
(i) At the time of the initial disbursement of Loan proceeds
under the Loan Agreement and of each subsequent disbursement of
Loan proceeds under the Loan Agreement:
(1) No Event of Default under the Loan Agreement shall have
occurred and be continuing, and no event shall have occurred and
be continuing that, with the giving of notice or passage of time,
or both, would become such an Event of Default;
(2) The Agent shall have received a request for such
disbursement pursuant to Section 2.3 of the Loan Agreement;
(3) The representations and warranties contained in Section 4.1
of the Loan Agreement shall be true on and as of the date of such
disbursement with the same force and effect as if made on and as
of such date;
(4) The Lenders shall have remitted to the Agent the Lenders,
respective pro rata shares of the disbursement then due; and
(5) All legal matters incidental to such disbursement shall be
satisfactory to the Agent's counsel.
The parties hereto acknowledge that the foregoing conditions
precedent set forth in this Section 3.1 have heretofore been
satisfied with respect to the initial disbursement of Loan
proceeds.
3.2 Conditions Precedent to Effective Date of Amendment and
Restatement. Notwithstanding anything herein to the contrary,
the effectiveness of the amendment and restatement of the
Original Loan Agreement in accordance with the terms of this
Amendment and Restatement, is subject to the satisfaction of all
of the following conditions, and on the date of the satisfaction
of such conditions (the "Effective Date"), the Original Loan
Agreement shall be deemed amended and restated as set forth
herein:
(a) Documents Required. The Agent shall have received, in each
case in form and substance satisfactory to the Agent and the
Lenders, such fully executed originals or certified copies as the
Agent and the Lenders may have requested of each of the
following, in each case as amended through the Effective Date:
(1) Loan Documents. This Amendment and Restatement and the
Village Course Facility Notes, each executed by the Borrower and
completed in conformity with the provisions of this Amendment and
Restatement, the Note Modification Agreements, the Confirmations
of Mortgage and said Amended and Restated Agency Agreement;
(2) Consents and Authority. Evidence that the Borrower has
obtained all necessary and appropriate authority, approvals and
consents to execute, deliver and perform the terms of (i) this
Amendment and Restatement, the Village Course Facility Notes, the
Note Modification Agreements and the Confirmations of Mortgage
(collectively called the "Amending Documents") and (ii) the Loan
Documents, as amended and restated by the Amending Documents,
including, without limitation, certified resolutions of the
Borrower as to such authority;
(3) BOA. An Assignment by BOA to the Lenders of BOA's
interests in the Mortgage and the Additional Security Mortgage;
and
(4) Title Insurance. An ALTA Form Lender's Title Insurance
Policy for $30,000,000.00, assuring to the Lenders the validity
and agreed-upon priority of the Mortgage and the Additional
Security Mortgage may require. Such Title Insurance Policy may
be subject to an exception for survey matters.
(b) Certain other Events. On the Effective Date:
(1) No event shall have occurred and be continuing that (i)
constitutes an Event of Default, or (ii) with the giving of
notice or passage of time, or both, would constitute such an
Event of Default (a "Default").
(2) The representations and warranties contained in Section 4.1
of the Loan Agreement shall be true on and as of the Effective
Date with the same force and effect as if made on the Effective
Date, other than as previously disclosed to the Agent with
respect to the representations and warranties set forth in
Section 4.1(f) and (k) hereof.
(3) No material adverse change shall have occurred in the
financial condition of the Borrower since the date of the most
recent of the Borrower's financial statements submitted to the
Agent.
(4) The Borrower shall have delivered to the Agent and the
Lenders a certificate dated the Effective Date, signed by the
President or an Executive Vice President of the Borrower,
certifying to the Agent and the Lenders the matters set forth in
clauses (1) and (2) of Section 3.1(f) of the Loan Agreement.
(5) All legal matters incidental to the closing shall be
satisfactory to legal counsel for the Agent and each Lender.
(c) Interest and Other Charges. On the Effective Date, the
Borrower shall have paid to the Agent (1) the fee referred to in
Section 2.5(b) hereof, and (2) all sums of accrued interest and
other fees and charges then outstanding under the Loan Documents.
On the Effective Date, subject to the satisfaction of the
foregoing conditions, the Original Loan Agreement shall be deemed
amended and restated in accordance with the provisions of this
Amendment and Restatement, with the force and effect set forth in
Section 7.18 hereof.
3.3 Conditions to Term Loans. The obligation of the Lenders to
make their respective Term Loans to the Borrower on the Expiry
Date shall be subject to the satisfaction of the following
conditions precedent:
(a) Term Notes. The Borrower shall have executed and delivered
to the Agent for distribution to the Lenders each of the Term
Notes;
(b) Defaults and Events of Default. No Default or Event of
Default under the Loan Agreement shall have occurred and be
continuing;
(c) Representations and Warranties. The representations and
warranties contained in Section 4.1 of the Loan Agreement shall
be true on and as of the Expiry Date with the same force and
effect as if made on the Expiry Date;
(d) Certificate. The Borrower shall have delivered to the Agent
and the Lenders a certificate dated the Expiry Date, signed by
the President or an Executive Vice President of the Borrower,
certifying to the Agent and the Lenders the matters set forth in
clauses (1) and (2) of Section 3.1(f) of the Loan Agreement; and
(e) Illegality. The making of the Term Loans shall not have
been rendered illegal by any of the Laws applicable thereto.
If such conditions shall not have been satisfied on Expiry
Date, all outstanding principal together with accrued and
theretofore unpaid interest on the Revolving Loans and all other
amounts due to the Lenders under the Loan Documents shall be paid
in full on the Expiry Date.
IV. Representations and Warranties
4.1 Original. To induce the Lenders to enter into this
Amendment and Restatement, the Borrower represents and warrants
to the Lenders as follows:
(a) The Borrower and the Subsidiaries are corporations duly
organized, validly existing and in good standing under the Laws
of Hawaii; the Borrower and the Subsidiaries have the lawful
corporate power and adequate authority, rights and franchises to
own or lease their respective properties and to engage in the
businesses they each conduct, and each is duly qualified and in
good standing as a foreign corporation in each jurisdiction, if
any, wherein the nature of the business transacted by it or
property owned by it makes such qualification necessary;
(b) The execution and performance of the Loan Documents will not
immediately, or with the passage of time or the giving of notice,
or both:
(1) Violate the Articles of Incorporation or By-Laws of the
Borrower, or violate any Laws or breach or result in a default
under any contract, agreement, or instrument to which the
Borrower or any Subsidiary is a party or by which the Borrower or
any Subsidiary or its property is bound, or require the consent
or approval of any governmental office or official; or
(2) Result in the creation (or an obligation to create) or
imposition of any security interest in, or lien or encumbrance
on, any of the assets of the Borrower or any Subsidiary, other
than the liens or security interests intended to be created by
the Mortgage and by the Additional Security Mortgage;
(c) The Borrower has the corporate power and authority to
execute and deliver the Loan Document and to incur and perform
the obligations, and has taken all corporate action necessary to
authorize the execution, delivery, and performance of the Loan
Documents;
(d) The Borrower's execution, delivery and performance of the
Loan Documents do not require the consent or approval of any
governmental body or other regulatory authority;
(e) The Loan Agreement is, and the remainder of the Loan
Documents when executed and delivered will be, the legal, valid
and binding obligations of the Borrower, and enforceable in
accordance with their respective terms;
(f) All Financial Statements heretofore furnished by the
Borrower to the Lenders, including any schedules and notes
pertaining thereto, were prepared in accordance with GAAP, and
fully and fairly presented the financial condition of the
Borrower and its Subsidiaries at the dates thereof and the
results of operations for the periods covered thereby, and as of
the date of this Amendment and Restatement there have been no
material adverse changes in the consolidated financial condition
or business of the Borrower and its Subsidiaries from the date of
the most recent Financial Statements furnished to the Lenders,
except as disclosed by Borrower to Agent in writing;
(g) Except as otherwise permitted by the Loan Agreement, the
Borrower and its Subsidiaries have filed all federal, state and
local tax returns and other reports they were required by Laws to
have filed prior to the date of this Amendment and Restatement
and which are material to the conduct of their respective
businesses, have paid or caused to be paid all taxes, assessments
and other governmental charges that were due and payable prior to
the date of this Amendment and Restatement, and have made
adequate provision for the payment of such taxes, assessments or
other charges accruing but not yet payable; and the Borrower has
no knowledge of any deficiency or additional assessment in a
materially important amount in connection with any taxes,
assessments or charges not provided for on its books;
(h) Except to the extent that the failure to comply would not
materially interfere with the conduct of the business of the
Borrower or any Subsidiary or have a materially adverse effect on
the financial condition of the Borrower or any Subsidiary, the
Borrower and its Subsidiaries have complied with all applicable
Laws in respect of: (1) restrictions, specifications, or other
requirements pertaining to products that the Borrower or any
Subsidiary grows, manufactures or sells or to the services each
performs; (2) the conduct of their respective businesses; and (3)
the use, maintenance, and operation of the real and personal
properties owned or leased by them in the conduct of their
respective businesses;
(i) There are no chemical substances, pollutants, contaminants
or hazardous or toxic substances, materials or wastes
(collectively, "hazardous materials") at any premises owned,
leased, operated, controlled or used by the Borrower or any of
the Subsidiaries where such could reasonably be expected to have
a materially adverse effect on the operations or financial
condition of the Borrower and the Subsidiaries or the Borrower's
ability to repay the Loans, and the Borrower and the Subsidiaries
do not manufacture, process, distribute, use, treat, store,
dispose of, transport or handle hazardous materials in such a
manner as to create expectations of such a materially adverse
effect on the operations or financial condition of the Borrower
and the Subsidiaries or the Borrower's ability to repay the
Loans;
(j) The Borrower has no Subsidiaries other than those listed in
Exhibit H, attached hereto;
(k) No litigation or other proceeding is pending or threatened
against the Borrower or any of its Subsidiaries or any of their
respective properties which if determined adversely to the
Borrower or any such Subsidiary, would have a materially adverse
effect on the Collateral or on the consolidated financial
condition or business prospects of the Borrower and its
Subsidiaries, except as disclosed by Borrower to Agent in
writing;
(l) Neither the execution of the Loan Agreement nor the
Borrower's use of proceeds of the Loans will constitute a
violation of any of Regulations G, T and U of the Board of
Governors of the Federal Reserve System or any interpretations
thereof or rulings thereunder;
(m) The Borrower and its Subsidiaries have good and marketable
title to all of their respective assets, subject only to such
exceptions or encumbrances as do not materially adversely affect
either the consolidated financial conditions of the Borrower and
its Subsidiaries as currently reflected in the Financial
Statements or the conduct of the businesses of the Borrower and
its Subsidiaries;
(n) All Defined Benefit Pension Plans, as defined in the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), of the Borrower and each Subsidiary meet the minimum
funding standards of 302 of ERISA, and no Reportable Event or
Prohibited Transaction, as defined in ERISA, has occurred in
respect of any such Plan;
(o) No representation or warranty by the Borrower contained in
the Loan Agreement or in any certificate or other document
furnished by the Borrower pursuant to the Loan Agreement contains
any untrue statement of material fact or omits to state a
material fact necessary to make such representation or warranty
not misleading in light of the circumstances under which it was
made; and
(p) Neither the Borrower nor any Subsidiary is subject to
provisions of the Investment Company Act of 1940, provisions of
the Public Utility Holding Company Act of 1935, provisions of the
Interstate Commerce Act or provisions of any other statute or
regulation which restrict the execution or performance of this
Loan Agreement or the Notes by the Borrower.
4.2 Survival. All representations and warranties stated above in
Section 4.1 shall survive until all the obligations shall have
been satisfied in full.
V. The Borrower's Covenants
The Borrower covenants to and agrees with the Lenders that,
so long as any of the Obligations shall remain unsatisfied or any
commitments hereunder remain outstanding, the Borrower will
comply, and will cause its Subsidiaries to comply, with the
following covenants:
5.1 Affirmative Covenants.
(a) The Borrower will furnish to the Lenders, through the Agent:
(1) Within 60 days after the close of each quarterly accounting
period in each fiscal year: (i) a consolidated statement of Net
Worth and a consolidated statement of cash flow of the Borrower
and its Subsidiaries for such quarterly period; (ii) a
consolidated income statement of the Borrower and Subsidiaries
for such quarterly period; (iii) a consolidated balance sheet of
the Borrower and Subsidiaries as of the end of such quarterly
period; (iv) a certification by the Borrower's chief financial
officer, in reasonable detail, evidencing the Borrower's
compliance at the end of such quarterly accounting period with
the covenants contained in Sections 5.1 and 5.2 of the Loan
Agreement; (v) summary schedules of income and cash flow for the
Borrower's resort division and pineapple division, Napili Plaza
and Kaahumanu Center, all in reasonable detail, subject to year-
end audit adjustments and certified by the Borrower's President
or chief financial officer to have been prepared in accordance
with GAAP by the Borrower and Subsidiaries, except for any
inconsistencies explained in such certificate; and (vi) a written
summary (in reasonable detail) of all projects approved by the
Borrower or any of its Subsidiaries during such quarterly period
which are reasonably expected to involve Capital Expenditures
exceeding $1,000,000;
(2) Within 90 days after the close of each fiscal year: (i) a
consolidated statement of Net Worth and a consolidated statement
of cash flow of the Borrower and its Subsidiaries for such fiscal
year; (ii) a consolidated income statement of the Borrower and
Subsidiaries for such fiscal year; (iii) a consolidated balance
sheet of the Borrower and Subsidiaries as of the end of such
fiscal year (all of the aforementioned financial statements to be
audited and certified to without qualification by independent
certified public accountants selected by the Borrower); (iv)
summary schedules of income and cash flow for the Borrower's
resort division and pineapple division, Napili Plaza and
Kaahumanu Center; (v) detailed statements of Capital Expenditures
and Investments made or incurred in such fiscal year, all of the
foregoing to be in reasonable detail, including all supporting
schedules and comments; and (vi) a certification by the chief
financial officer of the Borrower, in reasonable detail,
evidencing the Borrower's compliance at the end of such fiscal
year with the covenants contained in Sections 5.1 and 5.2 of this
Loan Agreement;
(3) By December 1 of each year, (i) copies of the Borrower's
three-to-five year, summary forecast of income and cash flow for
the Borrower's resort division and pineapple division, Napili
Plaza and Kaahumanu Center, and (ii) a Capital Expenditure and
Investment forecast for each such division;
(4) Promptly after the sending or making available or filing of
the same, copies of all reports, proxy statements and financial
statements that the Borrower sends or makes available to its
stockholders and all registration statements and reports that the
Borrower files with the Securities and Exchange Commission or any
successor Person; and
(5) Within 60 days following the close of each quarterly period,
statements of KCA's net worth at the end of such period and cash
flow for such period, KCA's income statement for such period, and
KCA's balance sheet as of the end of such period, in reasonable
detail, certified to by KCA's chief financial officer.
(b) The Borrower and its Subsidiaries will maintain their real
estate and other properties in good condition and repair (normal
wear and tear excepted), and will pay and discharge or cause to
be paid and discharged when due, the cost of repairs to or
maintenance of the same, and will pay or cause to be paid all of
their indebtedness as it becomes due, except as otherwise
permitted by Section 5.1(d) of the Loan Agreement.
(c) The Borrower and its Subsidiaries will maintain, or cause to
be maintained, public liability insurance and fire and extended
coverage insurance on all assets owned or leased by them, all in
such form and amounts as are consistent with industry practices.
The Borrower and its Subsidiaries may procure any such insurance
from any insurance company or companies authorized to do business
in Hawaii.
(d) The Borrower and its Subsidiaries will pay or cause to be
paid when due, all taxes, assessments and charges or levies
imposed upon them or on any of their property or which any of
them is required to withhold and pay over, except where contested
in good faith by appropriate proceedings with adequate reserves
therefor having been set aside on their books, and the Borrower
will pay all governmental charges or taxes (except income,
franchise or similar taxes) at any time payable or ruled to be
payable in respect of the existence, execution or delivery of the
Loan Agreement and the Notes by reason of any existing or
hereafter enacted federal or state statute.
(e) The Borrower will maintain as of the end of each fiscal
quarter and will provide evidence of the same pursuant to Section
5.1(a) hereof:
(1) A Current Ratio of not less than 1.90;
(2) A Recourse Debt/Net Worth Ratio of not more than 1.10 (for
the purposes of this covenant, any KCA debt which is nonrecourse
to the Borrower, shall be disregarded); and
(3) A Net Worth of not less than $58,300,000.00, plus 50% of the
cumulative net profits after September 30, 1997 (but not the net
losses) of Borrower.
(f) The Borrower and its Subsidiaries will, when requested so to
do, make available for inspection by the Agent's duly authorized
representatives any of their properties and Records, and will
furnish to the Lenders (through the Agent) any information
regarding their business affairs and financial condition within a
reasonable time after written request therefor.
(g) The Borrower and its Subsidiaries will take all necessary
steps to preserve their respective corporate existences and to
comply with all present and future Laws applicable to them in the
operation of their respective businesses and to comply with all
material agreements to which they are subject (the foregoing to
the contrary notwithstanding, the Borrower shall have the right
to dissolve or liquidate such of its Subsidiaries as its
management may determine to dissolve or liquidate in the exercise
of sound business judgment).
(h) The Borrower will give immediate written notice to the
Agent, in reasonable detail, of the occurrence of any event in
respect of which a report on Form 8-K should be filed by the
Borrower with the Securities and Exchange Commission.
(i) The Borrower will notify the Agent immediately if the
Borrower becomes aware of the occurrence of any Event of Default
under this Loan Agreement or of any fact, condition or event that
only with the giving of notice or passage of time, or both, could
become such an Event of Default, or of the failure of the
Borrower or any Subsidiary to observe any of their respective
undertakings under this Loan Agreement.
(j) The Borrower and its Subsidiaries will: (i) fund all their
Defined Benefit Pension Plans in accordance with no less than the
minimum funding standards of 302 of ERISA; and (ii) promptly
advise the Agent of the occurrence of any Reportable Event or
Prohibited Transaction in respect of any such Plan.
(k) If the Borrower or any of its Subsidiaries, during the Term
Loan Period, or during the continuance of an Event of Default, or
at any other time following the Agent's notification to the
Borrower that the provisions of this Section 5.1(k) shall be
operative, sell real estate assets worth more than $1,000,000, in
a single transaction or in a series of related transactions, the
Borrower will apply 75% of the net cash proceeds of the sale(s),
after applicable income taxes arising out of the sale(s), to the
repayment of the Loans promptly upon receipt of such net sales
proceeds in cash.
(l) The Borrower will pay to the Agent, on (or at the Borrower's
option before) July 1 of each year, a $15,000 Agent's Fee for
services rendered and to be rendered by the Agent with respect to
the Original Facility.
(m) With respect to any contract or job, for an amount that
exceeds $500,000, financed with the proceeds of the Village
Course Facility, or a series of contracts or jobs with any one
contractor for an amount that exceeds $500,000 in the aggregate,
financed with the proceeds of the Village Course Facility,
Borrower will obtain, maintain and deliver to the Lenders
(through the Agent) performance and payment bonds in form, amount
and issued by a surety acceptable to a Majority in Interest of
the Lenders, naming the Borrower, the Lenders and the Agent as
obligees.
(n) Borrower will use the proceeds of the Village Course
Facility exclusively to finance improvements to the Village Golf
Course at Kapalua, Maui, Hawaii, including the construction of a
new clubhouse, practice facility, golf teaching academy and
putting course, reconstruction of the 18th hole, realignment of
Village Road and construction of two commercial building pads.
(o) Borrower will retain at all times not less than a 5O%
general partnership interest in KCA.
5.2 Negative Covenants.
(a) Neither the Borrower nor any Subsidiary will enter into any
merger, consolidation, reorganization or recapitalization, or
reclassify its capital stock, or substantially change the nature
of its business as now conducted, except that (1) any wholly-
owned Subsidiary may merge with any other Subsidiary provided
said wholly-owned Subsidiary is the surviving entity, (2) any
Subsidiary may merge with the Borrower provided the Borrower is
the surviving entity, and (3) the Borrower and any wholly-owned
Subsidiary may make contributions to the capital of, and receive
dividends from, wholly-owned Subsidiaries.
(b) Neither the Borrower nor any Subsidiary will sell, transfer,
lease or otherwise dispose of all or (except in the ordinary
course of business as now conducted) any material part of its
assets unless, in respect of such sale or other disposition, the
Borrower shall have complied with all applicable requirements
stated above in Section 5.1(k) of the Loan Agreement.
(c) The Borrower will not declare or pay any dividends, or make
any other payment or distribution on account of its capital
stock, except that, subject to the satisfaction in full of the
condition precedent that the Agent and Lenders shall have
received, prior to any declaration or payment of cash dividends,
the Borrower's audited annual financial statements for the fiscal
year, the Borrower may declare and pay cash dividends for and in
respect of any fiscal year of the Borrower, in an amount not to
exceed 30% of its Net Profits for such fiscal year.
(d) Neither the Borrower nor any Subsidiary will make any
Capital Expenditure that is not approved in writing by Lenders
that causes Borrower to exceed (on an aggregated basis) the
following Capital Expenditure limits: $10,800,000 for fiscal year
1998; $11,500,000 for fiscal year 1999; and $10,000,000 for each
fiscal year thereafter. Capital Expenditures for work at the
Village Course at Kapalua (described in Section 5.1(n)) shall not
be counted towards such Capital Expenditure limits. Capital
Expenditures for the Site 29 Project of up to $1,000,000 in the
aggregate or that are approved in writing by Lenders shall not be
counted towards such Capital Expenditure limits.
(e) The Borrower will not redeem, purchase or retire any of its
capital stock, except that the Borrower may redeem, purchase or
retire shares of its capital stock with funds which could have
been, but were not, used for the payment of cash dividends
pursuant to the provisions of Section 5.2(c) of the Loan
Agreement (subject to the limitations therein set forth).
(f) Neither the Borrower nor any Subsidiary will furnish to any
of the Lenders or the Agent any certificate or other document
that will contain any untrue statement of material fact or that
will omit to state a material fact necessary to make it not
misleading in light of the circumstances under which it was
furnished.
(g) Neither the Borrower nor any Subsidiary will directly or
indirectly apply any part of the proceeds of any of the Loans to
the purchasing or carrying of any "margin stock" within the
meaning of Regulation U of the Board of Governors of the Federal
Reserve System, or any regulations, interpretations or rulings
thereunder.
(h) Neither the Borrower nor any Subsidiary, without the prior
written consent of all of the Lenders, will incur, agree to
incur, assume, or in any manner become liable in respect of any
Indebtedness for Borrowed Money (recourse or nonrecourse) other
than the indebtedness evidenced by the Notes and the Loan
Agreement and additional indebtedness which, together with the
Loan and the indebtedness evidenced by the Notes and the Loan
Agreement, shall cause Total Debt to exceed $62,000,000.00. For
the purposes of this Section 5.2(h), any KCA debt which is
nonrecourse to the Borrower, including that portion subject to
Borrower's Limited Payment Guaranty, shall not be deemed to
constitute indebtedness of the Borrower or any Subsidiary. As
used herein, "Borrower's Limited Payment Guaranty" means any
guaranty of the Borrower guarantying payment of indebtedness of
KCA relating to the Kaahumanu Shopping Center.
(i) Neither the Borrower nor any Subsidiary, without the prior
written consent of all of the Lenders, will hypothecate, pledge,
mortgage, grant a security interest in or otherwise encumber (or
permit to be encumbered) any of its assets now owned or hereafter
acquired, otherwise than in the ordinary course of the business
of the Borrower or such Subsidiary (for purposes of this Section
5.2(i), encumbrances incurred or created in the ordinary course
of business shall be deemed to include (1) liens for taxes and
governmental (or quasi-governmental) assessments or similar
charges that are not yet due and payable, (2) pledges or deposits
to secure payment of workers' compensation or to participate in
any fund established under workers' compensation, unemployment
insurance, pensions or similar social security programs, (3)
liens of mechanics, materialmen, warehousemen, carriers or other
similar liens that are not yet due and payable, (4) good faith
pledges or deposits made to secure performance of bids, tenders,
contracts (other than for the repayment of borrowed money),
leases, statutory obligations, or surety, appeal, indemnity,
performance or similar bonds required in the ordinary course of
business, not exceeding at any one time outstanding $1,000,000
for all such pledges or deposits in the aggregate for the
Borrower and its Subsidiaries, (5) retained liens or security
instruments of equipment lessors on equipment leased under
equipment leases permitted by the Loan Agreement, (6) retained
liens or security interests of equipment vendors or equipment
financing lenders with respect to equipment purchased on time by
the Borrower or its Subsidiaries, and (7) liens and security
interests held by lenders in respect of the mortgage loans
described in Exhibit I attached to the Original Loan Agreement).
VI. Default
6.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default under the
Loan Agreement and the Notes:
(a) The Borrower shall fail to pay when due any principal or
interest or fee or other charge payable under the Loan Agreement
or any of the Notes and such failure shall continue for a period
of five (5) Business Days.
(b) The Borrower or any Subsidiary shall fail to observe or
perform any other obligation to be observed or performed by it
under the Loan Agreement, any of the Notes or other Loan
Documents, and such failure shall continue for 30 days after: (1)
notice of such failure from the Agent; or (2) the Agent is
notified of such failure or should have been so notified pursuant
to the provisions of Section 5.1(i) of the Agreement, whichever
is earlier.
(c) Any financial statement, other statement, representation,
warranty or certificate made or furnished by the Borrower or any
Subsidiary to any of the Lenders or the Agent in connection with
the Loan Agreement, or as an inducement to the Lenders or the
Agent to enter into the Loan Agreement, or in any separate
statement or document delivered pursuant to the provisions of the
Loan Agreement, shall be materially false, incorrect, or
incomplete when made or delivered.
(d) The Borrower or any Subsidiary shall admit its inability to
pay its debts as they mature, or shall make an assignment for the
benefit of any of its creditors.
(e) A decree or order for relief shall be entered by a court
having jurisdiction in respect of the Borrower or any Subsidiary
in an involuntary case under the federal Bankruptcy Code or any
other applicable federal or state bankruptcy, insolvency or
similar law, or a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) shall be appointed
for the Borrower or any Subsidiary or for any substantial part of
its property, and any such decree or order shall continue
unstayed and in effect for a period of 60 consecutive days.
(f) The Borrower or any Subsidiary shall commence a voluntary
case under the federal Bankruptcy Code or any other applicable
federal or state bankruptcy, insolvency or similar law, or the
Borrower or any Subsidiary shall consent to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator (or other similar official) of the
Borrower or any Subsidiary or any substantial part of its
property.
(g) The Borrower or any Subsidiary (i) shall have failed to pay
at its stated due date any Indebtedness for Borrowed Money in
excess of $1,000,000 in the aggregate (other than indebtedness
evidenced by the Notes) and such failure shall have continued
beyond any applicable grace period, or (ii) shall have failed to
observe or perform any term, covenant or provision contained in
any agreement or instrument (other than the Loan Agreement or the
Notes) by which it is bound, evidencing or securing or otherwise
relating to any Indebtedness for Borrowed Money in excess of
$1,000,000 in the aggregate, and the effect thereof shall have
been the acceleration of the maturity of said indebtedness by the
holder or holders thereof or of any obligations issued in respect
thereof or by a trustee or trustees acting on behalf of such
holder or holders.
(h) A final judgment which alone or with other outstanding final
judgments against the Borrower or any Subsidiary exceeds
$3,000,000 in the aggregate and (i) such judgment shall not be
discharged or fully bonded against within 60 days, or (ii) within
60 days after entry of such judgment, execution shall not be
stayed pending appeal, or (iii) such judgment shall not be
discharged within 60 days after expiration of any such stay.
6.2 Rights and Remedies. If an Event of Default shall occur and
be continuing the Lenders shall have, in addition to any and all
other rights and remedies, legal or equitable, available to the
Lenders under any and all of the Loan Documents or at law, the
following additional rights and remedies:
(a) The absolute right to deny to the Borrower any further
disbursements of Loan proceeds (the Lenders, obligation to extend
any further credit to the Borrower shall immediately terminate);
(b) The right, at the option of the Lenders, to declare, without
notice, the entire principal amount and accrued interest for all
Loans outstanding under this Loan Agreement, plus any fees and
charges reasonably incurred by the Agent and/or the Lenders under
any of the Loan Documents, immediately due and payable; and
(c) The right, at the option of the Lenders, to charge interest
on any principal amount outstanding under this Agreement at a
rate per annum equal to one and one-half percentage points
(1.50%) plus the rate of interest otherwise in effect (the
"Default Rate");
(d) The right to the ex parte appointment without bond of a
receiver, without regard to the value of any collateral or
solvency of any party liable for payment, observance or
performance of any of the obligations of the Borrower or any
other obligors, owing to the Lenders under or pursuant to the
Loan Documents; and
(e) The Agent and the Lenders may exercise any and all other
rights and remedies, legal or equitable, available to the Agent
and/or the Lenders under the Notes and under any and all of the
other Loan Documents or at law or in equity.
VII. Miscellaneous
7.1 Further Assurance. From time to time, the Borrower, the
Lenders and the Agent will execute and deliver such additional
documents and provided such additional information as may be
reasonably required to carry out the intent of this Loan
Agreement. Without limitation of the foregoing, Lenders may make
reasonable requests for status reports on the progress of the
improvements to the Village Golf Course at Kapalua, Maui.
7.2 Appraisals. Although the Lenders have not required that any
appraisal of the properties encumbered by the Mortgage or
Additional Security Mortgage (collectively, the "Mortgaged
Properties") be furnished as a condition precedent to the first
disbursement of Loan proceeds, the Lenders reserve the right to
obtain at the Borrower's expense (and the Borrower agrees to pay
all costs of) appraisals of the Mortgaged Properties, from any
licensed or certified appraiser designated by the Lenders, from
time to time, whenever such appraisals may be (a) required by any
law, rule or regulation applicable to the conduct of any Lender's
business, (b) requested or directed by any governmental authority
charged with the administration of such law, rule or regulation
or any Lender's compliance therewith, whether or not such request
or direction has the force of law, or (c) when reasonably deemed
appropriate by the Lenders in their sole discretion (reappraisals
referred to in this clause (c) shall not be required more
frequently than annually).
7.3 Enforcement and Waiver by the Lenders. The Lenders, or the
Agent on behalf of the Lenders, shall have the right at all times
to enforce the provisions of the Loan Documents, as they may be
amended from time to time, in strict accordance with their
respective terms, notwithstanding any conduct or custom on the
part of any of the Lenders or the Agent in refraining from so
doing at any time or times. The failure of the Lenders or the
Agent at any time or times to enforce their rights under such pro
visions, strictly in accordance with the same, shall not be
construed as having created a custom in any way or manner
contrary to specific provisions of the Loan Documents or as
having in any way or manner modified or waived the same. No
single or partial exercise of any right by any Lender or the
Agent shall preclude the further or other exercise thereof. All
rights and remedies of the Lenders and Agent are cumulative and
concurrent and the exercise of one right or remedy shall not be
deemed a waiver or release of any other right or remedy.
7.4 Expenses of the Lenders and Agent. The Borrower will, on
demand, reimburse to the Lenders and the Agent all reasonable
expenses, including the reasonable fees and expenses of legal
counsel for the Lenders and the Agent, incurred by any of the
Lenders or the Agent in connection with the negotiation,
preparation, administration, amendment, modification, waiver,
and/or enforcement of the Loan Documents and the collection or
attempted collection of the indebtedness evidenced by the Loan
Documents, or any of them including but not limited to bankruptcy
or reorganization proceedings.
7.5 Notices. Any notices or consents required or permitted by
this Loan Agreement or the other Loan Documents shall be in
writing and may be delivered in person or sent by United States
mail or by telecopy and shall be deemed delivered when delivered
in person or when deposited in the United States mail, certified,
postage prepaid, return receipt requested, or when sent during
normal business hours at the place of receipt and the receipt of
which is confirmed in writing if by telecopy, to the address of
the parties as follows, unless such address is changed by written
notice hereunder:
(A) If to the Borrower:
MAUI LAND & PINEAPPLE COMPANY, INC.
ATTN: Mr. Paul J. Meyer
Executive Vice President/Finance
120 Kane Street
Kahului, Hawaii 96732-2232
PHONE: (808) 877-3871
FAX: (808) 871-0953
(B) If to the Lenders, in care of the Agent:
BANK OF HAWAII
ATTN: Mr. Peter S. Ho, Vice President
Corporate Banking Hawaii
130 Merchant Street, 20th Floor
Honolulu, Hawaii 96813
PHONE: (808) 537-8870
FAX: (808) 537-8943
7.6 Waiver and Release by the Borrower. To the maximum extent
permitted by applicable law, the Borrower:
(a) Waives notice and opportunity to be heard, after
acceleration of the indebtedness evidenced by the Loan Documents,
before exercise by the Agent or other Lenders of the remedy of
setoff or of any other remedy or procedure permitted by any
applicable law or by any prior agreement with the Borrower, and,
except where specifically required by this Loan Agreement or by
any applicable law, notice of any other action taken by the Agent
or any other Lender;
(b) Waives presentment, demand for payment, notice of dishonor,
and any and all other notices or demands in connection with the
delivery, acceptance, performance, or enforcement of this Loan
Agreement, and consents to any extension of time (and even
multiple extensions of time for longer than the original term),
renewals, releases of any person or organization liable for the
payment of the obligations under this Loan Agreement, and waivers
or modifications or other indulgences that may be granted or
consented to by the Agent and the Lenders in respect of the Loans
evidenced by this Loan Agreement; and
(c) Releases the Agent and the Lenders and their respective
officers, agents, and employees from all claims for loss or
damage caused by any act or omission on the part of any of them
except willful misconduct.
7.7 Disclosure of Information. The Borrower consents to the
Agent's or any Lender's disclosure to the other Lenders or the
Agent of any information held by the disclosing entity from time
to time, financial or otherwise, pertaining in any way to the
creditworthiness or other condition of the Borrower or any
Subsidiary. The Agent and Lenders agree that they shall maintain
confidentiality with regard to nonpublic information concerning
the Borrower and Subsidiaries obtained from the Borrower,
provided that the Agent and Lenders shall not be precluded from
making disclosure regarding such information: (a) on a
confidential basis, to their own respective counsel, accountants
and other professional advisors, (b) in response to a subpoena or
order of a court of governmental agency, (c) on a confidential
basis, to any entity participating or considering participating
in any credit made under this Loan Agreement, (d) on a
confidential basis to any guarantor or subordinated lender with
respect to this Loan Agreement or (e) as required by law or
applicable regulation.
7.8 Applicable Law. The substantive Laws of the State of Hawaii
shall govern the construction of this Loan Agreement and the
Notes and the rights and remedies of the parties hereto and
thereto.
7.9 Binding Effect and Entire Agreement. This Loan Agreement
shall inure to the benefit of, and shall be binding on, the
parties hereto and the respective successors and permitted
assigns of the parties hereto. This Loan Agreement, and the
remainder of the Loan Documents, together with all other
documents executed and delivered pursuant to this Loan Agreement,
constitute the entire agreement among the Lenders, the Agent and
the Borrower concerning the subject matter hereof.
7.10 Amendments; Consents. No amendment, modification,
supplement, termination, or waiver or forbearance of any
provision of this Loan Agreement or any of the other Loan
Documents, and no consent to any departure by the Borrower
therefrom, may in any event be effective unless in writing signed
by a Majority in Interest of the Lenders and the Agent, and then
only in the specific instance and for the specific purpose given;
provided, however, that no action shall be taken which has the
effect of altering any required payment of principal, interest or
fees, or releasing any collateral security for the Loans, unless
in writing signed by all of the Lenders and the Agent.
7.11 Assignments.
(a) The Borrower shall have no right to assign any of its rights
or obligations under any of the Loan Documents without the prior
written consent of the Lenders.
(b) None of the Lenders shall assign any of its rights or
obligations under the Loan Documents without the prior written
consent of the Borrower, which consent shall not be unreasonably
withheld or delayed; provided, however, the foregoing provision
to the contrary notwithstanding, (a) any of the Lenders may sell
participations in Loans made or to be made by it, to any entity
affiliated with such Lender, without Borrower's consent, so long
as such Lender remains primarily obligated to the Borrower under
this Loan Agreement and so long as the Borrower shall not be
obligated in any manner to deal directly with the affiliated
purchaser of such participation, and (b) any Lender may
negotiate, pledge, transfer or assign the Notes held by it (or
the receivable evidenced thereby) to a Federal Reserve Bank or to
any other agency or instrumentality of the United States of
America to support borrowings of Federal funds by such Lender.
(c) Subject to the foregoing restrictions, the Borrower consents
to each Lender's negotiation, offer, and sale to third parties
("Participants") of the credit facility evidenced by the Loan
Documents (the "Credit Facility") or participating interests in
the Credit Facility, to any and all discussions and agreements
heretofore or hereafter made between each Lender and any
Participant or prospective Participant regarding the interest
rate, fees, and other terms and provisions applicable to the
Credit Facility, and to each Lender's disclosure to any
Participant or prospective Participant, from time to time, of
such financial and other information pertaining to the Borrower
and the Credit Facility as any Lender and such Participant or
prospective Participant may deem appropriate (whether public or
non-public, confidential or non-confidential, and including
information relating to any insurance required to be carried by
the Borrower and any financial or other information bearing on
the Borrower's creditworthiness and the value of any collateral).
The Borrower acknowledges that the Lenders' disclosure of such
information to any Participant or prospective Participant
constitutes an ordinary and necessary part of the process of
effectuating and servicing the Credit Facility.
7.12 Release of Non-Golf Areas. In view of the fact that the
portion of the property subject to the Mortgage and the
Additional Security Mortgage, commonly known as the Bay Golf
Course (or the Bay Course) and Village Golf Course (or the
Village Course), has not been duly subdivided so as to constitute
one or more duly subdivided lots, the land descriptions of the
Bay Course and Village Course set forth or to be set forth in the
Mortgage and Additional Security Mortgage (the "Mortgages"),
include lands ("Excess Lands") in excess of the lands commonly
known to comprise the Bay Course and Village Course. The Lenders
agree that the Borrower shall have the right to subdivide the
lands initially described in the Mortgages as comprising the Bay
Course and Village Course, and to obtain releases of the Excess
Lands from the liens of the Mortgages, upon the following terms
and conditions: (a) the lot or lots to be released from the
Mortgages, comprising the Excess Lands, as well as the lot or
lots which are to remain subject to the Mortgages following the
release of the Excess Lands, shall have been designated as
specific lots approved by all governmental authorities having
jurisdiction over the subdivision thereof; (b) the costs of
subdivision and the costs of preparing the releases shall be
borne by the Borrower; (c) the form and content of each release
shall be acceptable to the Lenders; and (d) in connection with
any such release, appropriate provisions shall have been made for
access to and from, and utility and similar easements for, any
lot or lots not to be released from the Mortgages. Within
fifteen days after the Lenders' declaration of an Event of
Default and of their intention to foreclose the Mortgages, the
Borrower shall commence, and thereafter diligently pursue to
completion, any subdivision necessary to accomplish the purposes
of this Section 7.12, so as to enable the Lenders to foreclose
the Mortgages against all the Collateral, while releasing to the
Borrower the Excess Lands. In the event the Borrower shall not
commence such subdivision within said fifteen-day period, or
thereafter diligently pursue the subdivision to completion, the
Lenders shall be entitled at the Borrower's expense, and are
hereby appointed as the duly-appointed attorneys-in-fact of the
Borrower (with full power of substitution), to commence and/or
complete said subdivision. Said power of attorney is coupled
with an interest, and is irrevocable.
7.13 Right of Setoff; Security Interest in Accounts. If an Event
of Default shall have occurred and is continuing, the Agent and
each Lender may set off obligations owed by the Agent or such
Lender, as the case may be, to the Borrower (such as balances in
checking and savings accounts) against the obligations, without
first resorting to other collateral. To further secure the
Obligations, the Borrower grants to the Agent and the Lenders a
security interest in all checking, savings, and other deposit
accounts now or hereafter maintained by the Borrower with the
Agent or the Lenders.
7.14 Dispute Resolution. Any controversy or claim arising out of
or relating to the Loan Agreement or any of the other Loan
Documents shall, at the request of any party, be decided by
binding arbitration conducted in the State of Hawaii without a
judge or jury, under the auspices of the American Arbitration
Association or Dispute Prevention and Resolution, Inc. in
accordance with Chapter 658 of the Hawaii Revised Statutes and
the respective and applicable rules of the aforementioned
organizations. The arbitrator will apply any applicable statute
of limitations and will determine any controversy concerning
whether an issue is arbitrable. Judgment upon the arbitration
award may be entered in any court having jurisdiction. The
prevailing party will be entitled to recover its reasonable
attorney's fees and costs as determined by the arbitrator. This
agreement to arbitrate shall not limit or restrict the right, if
any, of any party to exercise before, during or following any
arbitration proceeding, with respect to any claim or controversy,
self-help remedies such as setoff, to foreclose a mortgage or
lien or other security interest in any collateral judicially or
by power of sale, or to obtain provisional or ancillary remedies
such as injunctive relief from a court having jurisdiction. Any
party may seek those remedies without waiving its right to submit
the controversy or claim in question to arbitration.
7.15 Severability. If any provision of any of the Loan Documents
shall be held invalid under any of the applicable Laws, such
invalidity shall not affect any other provision of any of the
Loan Documents that can be given effect without the invalid
provision, and, to this end, the provisions of the Loan Documents
are severable.
7.16 Section Headings. The titles of Sections appear herein as a
matter of convenience only, and shall not affect the construction
of the Loan Agreement or any provision hereof.
7.17 Survival of Certain Payment Obligations. The obligations of
the Borrower to indemnify the Lenders against, and pay and
reimburse to the Lenders, the costs and expenses referred to in
Section 7.4 of the Loan Agreement (a) shall survive the repayment
of the Loans and termination of the Loan Agreement to the extent
such losses, costs and expenses are specifically billed to the
Borrower within 60 days after full repayment of the Loans and
termination of this Agreement, and (b) shall not survive the
repayment of the Loans and termination of the Loan Agreement to
the extent of any such costs or expenses which are not
specifically billed to the Borrower within 60 days after full
repayment of the Loans and termination of the Loan Agreement.
7.18 Amendment and Restatement; Amendment of Loan Documents.
(a) On and as of the Effective Date, the Original Loan Agreement
shall be deemed amended and restated in its entirety by this
Amendment and Restatement, which shall supercede the terms and
provisions of the Original Loan Agreement and the First
Restatement with respect to all obligations from and after the
date of this Amendment and Restatement. The Borrower, the Lenders
and the Agent acknowledge and agree that this Amendment and
Restatement constitutes only an amendment and restatement of the
Original Loan Agreement, and in connection therewith, (1) nothing
herein is intended, nor shall it be construed, to constitute a
refinancing of the indebtedness under the Original Loan
Agreement, (2) all outstanding obligations under the Original
Loan Agreement and the "Loan Documents" referred to therein, as
amended, shall continue to be outstanding under this Amendment
and Restatement and the Loan Documents referred to herein and (3)
all Obligations owing from and after the Effective Date shall be
paid, performed and observed in accordance with the terms of this
Amendment and Restatement and the other Loan Documents, as so
amended restated and as may be further amended from time to time.
(b) The Borrower, the Lenders and the Agent agree that from and
after the Effective Date, all references to (1) the Original Loan
Agreement (including, without limitation, references to
"Revolving and Term Loan Agreement", the "Loan Agreement" or
"Agreement" or other defined terms) set forth in the Notes, the
Mortgage, the Environmental Indemnity Agreement, the Additional
Security Mortgage and any other Loan Documents, as amended, shall
mean the Original Loan Agreement, as amended and restated by the
First Restatement and by this Amendment and Restatement and as
may be further amended from time to time, (2) the Revolving
Notes, or any of them, shall mean such Revolving Note(s), as
heretofore amended, and as respectively amended by the Note
Modification Agreements and as may be further amended from time
to time and (3) any of the other Loan Documents shall mean such
Loan Documents, as heretofore amended, as amended and restated by
this Amendment and Restatement and as may be further amended from
time to time.
(c) All Exhibits, schedules and other attachments to the
Original Loan Agreement are hereby incorporated herein by
reference and, as amended hereby, shall be deemed to constitute
Exhibits, schedules and attachments to this Amendment and
Restatement.
7.19 Execution in Counterparts. This Amendment and Restatement
may be executed in any number of counterparts, each of which
shall be deemed to be an original, and all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent
have duly executed this Amendment and Restatement, the execution
of this Amendment and Restatement by the Borrower constituting
(a) the personal certification of the persons signing this
Amendment and Restatement on behalf of the Borrower that, to the
best of their knowledge, the representations and warranties made
in Article IV of this Loan Agreement are true and correct as of
the date of this Amendment and Restatement, and (b) the
undertaking of such persons and of the Borrower that each request
for a disbursement of Loan proceeds, made pursuant to Section 2.3
of the Loan Agreement, shall constitute the Borrower's
affirmation and the personal affirmation on the part of the
persons making such request that, to the best of their knowledge
at the time of the making of any such request, (i) the
representations and warranties stated in Section 4.1 of the Loan
Agreement are true and correct, (ii) no Event of Default under
the Loan Agreement has occurred and is continuing, and (iii) no
event has occurred and is continuing that, with the giving of
notice or passage of time, or both, would become such an Event of Default.
MAUI LAND & PINEAPPLE COMPANY, INC.
By: /S/ GARY L. GIFFORD
Its President
By: /S/ PAUL J. MEYER
Its Executive Vice President/Finance
BANK OF HAWAII, individually and as Agent
By: /S/ PETER HO
Its Vice President
FIRST HAWAIIAN BANK
By: /S/ ANN M. K. LEE
Its Vice President
CENTRAL PACIFIC BANK
By: /S/ ROBERT D. MURAKAMI
Its
EXHIBIT 1
PROMISSORY NOTE
$__________________ ____________________, 1998
The undersigned ("Borrower") promises to pay to the order of
________________ ("Bank") the principal amount of $____________
or so much thereof as shall have been disbursed by Bank and may
remain outstanding, together with interest on outstanding
balances of principal, in accordance with and under the terms of
that Revolving and Term Loan Agreement dated as of December 31,
1992, among Borrower, as "Borrower", Bank of America, National
Trust and Savings Association, Bank of Hawaii, First Hawaiian
Bank and Central Pacific Bank, as "Lenders", and Bank of Hawaii,
as "Agent", as amended by Amended and Second Restated Revolving
and Term Loan of even date, among Borrower, as "Borrower", Bank
of Hawaii, First Hawaiian Bank and Central Pacific Bank, as
"Lenders", and Bank of Hawaii, as "Agent", relating to, among
other things, the Village Course Facility therein described.
This Promissory Note evidences the Advances made by Bank to
Borrower under said Village Course Facility.
MAUI LAND & PINEAPPLE COMPANY,
INC.
By:
Its
By:
Its
Borrower
EXHIBIT 2
Notice of Borrowing/Conversion
DATE: , 19___
TO: Bank of Hawaii
Attn: Mr. Peter S. Ho, Vice President
130 Merchant Street, 20th Floor
Honolulu, Hawaii 96813
Telecopier No.: (808) 537-8943
SUBJECT: Revolving and Term Loan Agreement dated as of December
31, 1992, among Borrower, as "Borrower", Bank of America,
National Trust and Savings Association, Bank of Hawaii, First
Hawaiian Bank and Central Pacific Bank, as "Lenders", and Bank of
Hawaii, as "Agent", as amended by Amended and Second Restated
Revolving Credit and Term Loan dated ________________, among
Borrower, as "Borrower", Bank of Hawaii, First Hawaiian Bank and
Central Pacific Bank, as "Lenders", and Bank of Hawaii, as
"Agent" (the "Agreement")
Pursuant to Sections 2.3 and 2.7 of the Agreement, the
Borrower hereby requests that a portion of the unpaid principal
balance of the:
_____ Revolving Loans
_____ Term Loan
_____ Village Course Facility
in the amount set forth below be designated the Type of Loan set
forth below and confirms the following instructions therefor
(capitalized terms not defined herein shall have the respective
meanings assigned in the Agreement):
Requested
Date:
Principal
Amount:
Base Rate Loan LIBOR Rollover
LIBOR Loan Conversion from Base Rate to LIBOR Loan
Conversion from LIBOR to Base Rate Loan
Interest Period (LIBOR Loans): ____30 ____60 ____ 90
____ 180 Days
The Borrower hereby certifies as follows:
1. The representations and warranties set forth in Article
IV of the Agreement are true and correct on and as of the date
hereto, provided that the representations and warranties set
forth in Section 4.1(f) of the Agreement shall be deemed to be
made with respect to the financial statements most recently
delivered to the Lenders pursuant to the Agreement.
2. As of the date hereof, no event has occurred and is
continuing that (a) constitutes an Event of Default under the
Agreement, or (b) with the giving of notice or passage of time,
or both, would constitute an Event of Default. The Borrower has
observed and performed all of the Borrower's covenants and other
agreements, and satisfied every condition, contained in the
Agreement and in the other Loan Documents, to be observed,
performed or satisfied by the Borrower.
MAUI LAND & PINEAPPLE COMPANY,
INC.
By:
Authorized Signatory
Borrower
EXHIBIT H
SUBSIDIARY LISTING
Maui Pineapple Company, Ltd.
Kapalua Land Company, Ltd.
Kapalua Water Company, Ltd.
Kapalua Waste Treatment Company, Ltd.
Honolua Plantation Land Company, Inc.
Kapalua Advertising Company, Ltd.
Kapalua Investment Company, Ltd.
Napili Plaza L.L.C.
Kapalua Realty Company, Ltd.
Royal Coast Tropical Fruit Company, Inc.
ANNEX IV
PROMISSORY NOTE
$__________________ ____________________
The undersigned ("Borrower") promises to pay to the order of
________________ ("Bank") the principal amount of $____________,
together with interest on outstanding balances of principal, in
accordance with and under the terms of that Revolving and Term
Loan Agreement dated as of December 31, 1992, among Borrower, as
"Borrower", Bank of America, National Trust and Savings
Association, Bank of Hawaii, First Hawaiian Bank and Central
Pacific Bank, as "Lenders", and Bank of Hawaii, as "Agent", as
amended by Amended and Second Restated Revolving and Term Loan
Agreement dated December 4, 1998, among Borrower, as "Borrower",
Bank of Hawaii, First Hawaiian Bank and Central Pacific Bank, as
"Lenders", and Bank of Hawaii, as "Agent", and as the same may
have been further amended ("Loan Agreement").
This Promissory Note evidences the Term Loan made by Bank to
Borrower under the Loan Agreement and constitutes one of the Term
Notes referred to in the Loan Agreement.
MAUI LAND & PINEAPPLE COMPANY,
INC.
By:
Its
By:
Its
Borrower
Loan No. 5277914201
BRIDGE LOAN AGREEMENT
This BRIDGE LOAN AGREEMENT ("Agreement") is entered
into as of December 30, 1998 between PACIFIC COAST FARM CREDIT
SERVICES, ACA, ("PCFC") and MAUI LAND & PINEAPPLE COMPANY, INC.,
a Hawaii corporation ("Borrower").
1. 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.
"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.
"Calendar Quarter" shall mean a three-month period
beginning on January 1, April 1, July 1, or October 1 of any
particular year and ending on March 31, June 30, September 30, or
December 31, respectively, of that same year.
"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.
"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 Current Assets" shall mean, as at
any date of determination, the current assets of Borrower and its
Subsidiaries, determined on a consolidated basis in conformity
with GAAP.
"Consolidated Current Liabilities" shall mean, as
at any date of determination, the current liabilities of Borrower
and its Subsidiaries, determined on a consolidated basis in
conformity with GAAP, adjusted to include the Bridge Loan.
"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) Adjusted Gains on Asset Sales, and (iii) extraordinary
gains.
"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 $9,000,000 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 rolling four-quarter period ending
upon such date of determination.
"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 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.
"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 two percent (2.00%) higher than the rate otherwise applicable;
provided, that with respect to fees, costs, or expenses, or any
amount other than principal, the Default Rate applicable to such
obligations shall be the Variable Rate plus three percent
(3.00%).
"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.); and 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 which are 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.
"Fiscal Month" shall mean any of the monthly
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.
"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.
"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 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.
"Material Adverse Effect" shall mean a Material
Adverse Effect on (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 Bridge 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.
"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).
"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.
"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.
2. The Loan. On the terms and conditions set forth
in this agreement, PCFC agrees to make a bridge loan to Borrower
in a principal amount of Fifteen Million Dollars ($15,000,000)
(the "Bridge Loan"). The Bridge Loan will be available to
Borrower on the terms and conditions set forth in this Agreement
when all conditions precedent set forth in Section 3 have been
satisfied. The Bridge Loan shall be due and payable on April 30,
1999 (the "Bridge 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, then the
Bridge Loan Maturity Date shall be the date on which the
Obligations become due and payable.
3. Conditions Precedent. PCFC's obligation to make
an advance hereunder is subject to the following conditions
precedent:
(a) Required Documents. PCFC shall 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) Payment of Portion of Senior Notes. PCFC
shall have received confirmation that Borrower has paid to John
Hancock Mutual Life Insurance Company and Barnett & Co. a minimum
aggregate amount of Six Million Six Hundred Forty-Seven Thousand
Nine Hundred Twenty-Two Dollars and Twenty-Two Cents
($6,647,922.22), in partial prepayment of the 8.86% Senior Notes
held by such entities.
(c) Recordation of Mortgage and Issuance of Title
Commitment. The Mortgage, Assignment of Rents, Security
Agreement, Financing Statement and Fixture Filing executed by
Borrower in favor of PCFC shall have been duly recorded, and
Title Guaranty of Hawaii, Incorporated shall have issued its 1992
ALTA lender's policy or title insurance or commitment therefor in
favor of PCFC, each in form and substance satisfactory to PCFC.
(d) Approvals. PCFC shall have received evidence
satisfactory to it 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.
(e) Event of Default. No Default or Event of
Default shall have occurred and be continuing.
(f) Loan Fee. Borrower shall have paid to PCFC
the Bridge Loan Fee required by Section 5.
(g) 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 Bridge Loan.
(a) Repayment of Principal. Principal of the
Bridge Loan and all accrued interest, and reimbursable expenses
shall be due and payable in full on the Bridge Loan Maturity
Date.
(b) Interest.
(1) Definitions. For the purposes of this
section the following terms shall have the meanings as follows:
"Fixed Rate" means, with respect to any portion of the
Bridge Loan that Borrower elects at any time pursuant to
Section 4(b)(2) to convert to a fixed rate of interest, the
applicable LIBO Rate as of the date of such election plus a
margin of two and one-quarter percent (2.25%).
"Interest Determination Date" means the date, as
designated by Borrower, on which a portion of the Bridge Loan
shall begin to bear interest at the Fixed Rate.
"Interest Period" means (a) with respect to any portion
of the Bridge Loan that Borrower elects to have bear interest at
the Fixed Rate, a period beginning on the Interest Determination
Date and ending thirty (30) days thereafter.
"LIBO Rate" means, for any Interest Determination Date,
the rate offered from time to time for U.S. Dollar deposits for
the Interest Period selected, as quoted by Telerate News Service
as of 11:00 A.M. London setting time (or, at PCFC's option, a
comparable reference on the Reuters Screen LIBOR Page or such
other quotation service as may be chosen by PCFC) on the
Eurodollar Business Day immediately preceding the beginning of
the Interest Period; provided, that if two or more of such
offered rates appear on Telerate (or on the Reuters Screen LIBOR
Page or alternative service, as the case may be), the "LIBO Rate"
shall be highest of the two rates quoted.
"Prepayment" means a payment of principal made in
advance of the date scheduled for such payment, whether such
payment is made voluntarily or by operation of law, acceleration
of maturity or otherwise.
"Prime Rate" means, on any given day, the "Prime" rate
as published from time to time in the Eastern Edition of The Wall
Street Journal, or the highest such rate if more than one is
shown, regardless of whether such rate is actually charged by any
bank, or, in the event that The Wall Street Journal ceases
publication of such rate, in such other nationally recognized
financial publication of general circulation as PCFC may, from
time to time, designate in writing based on PCFC's reasonable
determination that the rate so published is comparable to the
"Prime" rate published in the Eastern Edition of The Wall Street
Journal.
"Variable Rate" means, on any given day, the applicable
Prime Rate as of such day, plus a margin of one-quarter percent
(0.25%).
(2) Interest on Bridge Loan.
(A) Variable Rate. The Bridge Loan
shall bear interest at the Variable Rate, unless Borrower elects
to convert the interest rate to the Fixed Rate in accordance with
the provisions of Section 4(b)(2)(B).
(B) Fixed Rate. Borrower may, from
time to time, elect to convert all or a portion of the Bridge
Loan to the Fixed Rate; provided, that (i) at least three (3)
Business Days prior to the proposed Interest Determination Date,
Borrower has provided PCFC with written notice of such election,
the requested Interest Determination Date, and the amount of the
Revolving Advances to be converted, (ii) at the time of delivery
of such written notice and upon the date of conversion, no
Default or Event of Default exists under this Agreement, (iii) at
no time shall there be more than three (3) outstanding tranches
of the Bridge Loan bearing interest at the Fixed Rate, (iv) the
last day of the Interest Period chosen by Borrower shall not
extend beyond the Bridge Loan Maturity Date, and (v) the amount
converted to the Fixed Rate at any one time shall be not less
than Five Million Dollars ($5,000,000) and any amounts in excess
thereof shall be in integral multiples of One Million Dollars
($1,000,000). Any election by Borrower pursuant to this
Section 4(b)(2)(B) shall be irrevocable during the Interest
Period selected by Borrower, and that portion of the Bridge Loan
so converted shall bear interest at the applicable Fixed Rate
until the expiration of the applicable Interest Period at which
time, unless another Fixed Rate has been duly elected by Borrower
pursuant to this Section 4(b)(2)(B), the interest rate for such
portion of the Bridge Loan will automatically convert to the
Variable Rate.
(3) No Designation Upon Occurrence of a
Default or Event of Default. If a Default or Event of Default
shall have occurred, then, during the continuance of such Default
or Event of Default, (i) Borrower shall have no right to
designate the Fixed Rate for any portion of the Bridge Loan, and
(ii) any portion of the Bridge Loan bearing interest at the Fixed
Rate shall, at the end of the relevant Interest Period, convert
to the Variable Rate. If such Default or Event of Default shall
subsequently be cured, Borrower may thereafter designate Interest
Periods in accordance with this Agreement.
(4) Interest Payment Dates. Interest shall
be due and payable, in arrears, commencing on February 1, 1999
and continuing on the first day of each calendar month
thereafter; provided, that if any Interest Period shall mature
prior to the first day of a month, then interest accrued at the
Fixed Rate during such Interest Period shall be due and payable
upon expiration of the Interest Period. Interest accrued on the
Bridge Loan but not otherwise due and payable on the Bridge Loan
Maturity Date shall become due and payable on the Bridge Loan
Maturity Date.
(5) Payments Due on Business Days. If any
installment of interest or any other amount payable 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, however, if any installment of interest at the Fixed
Rate shall become due and payable on a Saturday, the payment date
for such payment shall be the preceding Business Day.
(6) Computation of Interest. All
computations of interest at the Fixed Rate shall be made by PCFC
on the basis of a three hundred sixty (360) day year for the
actual number of days occurring in the period for which such
interest is payable. All computations of interest on at the
Variable Rate shall be made by PCFC on the basis of a three
hundred sixty five (365) day year, in each case for the actual
number of days occurring in the period for which such interest is
payable. Interest determined by reference to the Variable Rate
shall be determined on a daily basis for use in calculating the
interest that is payable for such day, and any change in the
Variable Rate shall become effective on the day such change
occurs. Each determination by PCFC of an interest rate hereunder
shall be conclusive and binding for all purposes, absent manifest
error or bad faith.
(7) Default Rate. Any overdue principal of
or interest with respect to any portion of the Bridge 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.
(8) Interest Not to Exceed Maximum Lawful
Rate. Notwithstanding anything to the contrary set forth in this
Agreement, if at any time until payment in full of all of
obligations under this Agreement, 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(b)(8)) 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(b)(8), 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(b)(8), 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 Bridge 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.
(9) 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 LIBO Rate
or any other index hereunder or the LIBO Rate or any such 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 LIBO Rate or such
other index; provided, that PCFC's determination under this
Section 4(b)(9) 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 LIBO 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 Bridge Loan with interest rates tied to the LIBO 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
LIBO Rates made available to Borrower hereunder. In determining
which costs incurred by PCFC or reductions in amounts received by
PCFC are attributable to such LIBO 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(b)(9) as to Borrower is in accordance with
its treatment of other borrowers under commercial loans
generally.
5. Loan Fee. In consideration of PCFC's entering
into this Agreement, Borrower shall pay to PCFC a Bridge Loan Fee
(the "Bridge Loan Fee") of Seventy-Five Thousand Dollars
($75,000). The Bridge Loan Fee shall be due and payable upon the
effectiveness of this Agreement. The full amount of the Bridge
Loan Fee shall be considered earned upon receipt and no portion
of the Bridge Loan Fee shall be refundable to Borrower under any
circumstances.
6. Prepayments.
(a) Prepayment in Full. Borrower shall have the
right at any time to voluntarily prepay the entire amount of the
Bridge Loan and to terminate this Agreement upon at least three
(3) Business Days notice to PCFC, without premium or penalty,
except that Borrower shall pay to PCFC a prepayment surcharge, if
any, calculated in accordance with Section 6(c). Prepayment in
full shall be accompanied by the payment of all accrued and
unpaid interest and all fees, costs, expenses, and other
obligations owed by Borrower to PCFC under this Agreement.
(b) Partial Prepayment of Fixed Rate Obligations.
Borrower shall have the right at any time to voluntarily prepay
any portion of the Bridge Loan upon at least three (3) Business
Days notice to PCFC, without premium or penalty, except that
Borrower shall pay to PCFC a prepayment surcharge, if any,
calculated in accordance with Section 6(c). All voluntary
partial prepayments shall be applied by PCFC as directed by
Borrower.
(c) Prepayment Surcharge. At the time that
Borrower makes a Prepayment, whether or not such Prepayment is
voluntary on behalf of Borrower and specifically including a
prepayment occurring as the result of an acceleration of the
Bridge Loan, Borrower shall simultaneously pay to PCFC a
prepayment surcharge for each Fixed Rate portion of the Bridge
Loan so prepaid equal any loss of earnings expense attributable
to Fixed Rate funding incurred or projected by PCFC as a result
of such prepayment.
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 # 5277914201
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,
1997 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 Bridge 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
Line.
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.
Lender 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 unsecured, except 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) 2-3-002-004, (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 (ii) 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 an advance under Bridge Loan or a conversion to
the Fixed Rate of any portion of the Bridge Loan:
(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 Lender, 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 has 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 Bridge 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
Bridge 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 their 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 June 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 prepared in reasonable detail and in comparative form;
and (iv) 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) Monthly Financial Statements. No later
than 30 days after the end of each Fiscal Month, internally
prepared monthly financial statements containing the same
information regularly generated by Borrower on its internal
monthly financial statements, 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) Modifications to Annual Budget and Cash
Flow Forecast. No later than five (5) days after issuance, all
modifications to Borrower's current capital expenditures budget
for the forthcoming Fiscal Year, and to Borrower's current
rolling five-year plan for the forthcoming five-year period, to
the extent any such modification or group of related
modifications increase such expenditures by more than Two Hundred
Thousand Dollars ($200,000).
(4) Notice of Default. Promptly after
becoming aware thereof, notice of the occurrence of a Default or
Event of Default.
(5) Tax Returns. Within 14 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 copy of the entire
tax return.
(6) 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.
(7) 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.
(8) 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 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, (iv) 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, (v) 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 (vi) 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, acquire all or substantially all of the assets of any
Person or entity, form or create any new Subsidiary or Affiliate,
or enter into any business venture, including any joint venture,
partnership, or limited liability company; 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,
(ii) transactions outside the ordinary course transactions, 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 or 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 from and after the date of this Agreement have a fair
marked value of less than One Million Dollars ($1,000,000), and
(vi) transfers to Subsidiaries of Borrower that are specifically
identified on the Disclosure Schedule; provided, that each such
transaction referred to in clauses (i) through (iv) 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 of
its properties or assets except for Permitted Encumbrances.
(e) Indebtedness. Incur any indebtedness, or
allow any of its Subsidiaries to incur any indebtedness, if after
such indebtedness is incurred the aggregate amount of all
Consolidated Indebtedness shall exceed Forty-Five Million Dollars
($45,000,000).
(f) Capital Expenditures. Make Capital
Expenditures or Investments, other than Capital Expenditures for
or Investments in Borrower's "Kaahumanu Center Associates"
Subsidiary, in excess of Twenty-Five Million Dollars
($25,000,000) during Fiscal Year 1999.
(g) Loans. Make or accrue any loan or advance of
money to any Person or entity, through the direct or indirect
holding of securities or otherwise, if doing so would cause the
aggregate of all such loans or advances, other than loans set
forth in the Disclosure Schedule referred to in Exhibit A, to
exceed One Million Dollars ($1,000,000); provided, that, in
addition to the foregoing, Borrower and each Guarantor shall be
permitted to extend purchase money financing to persons
purchasing real property from Borrower or such Guarantor so long
as (i) Borrower or such Guarantor has received at least twenty
percent (20%) of the purchase price in cash, (ii) the financing
does not exceed One Million Dollars ($1,000,000) in any
particular transaction, and (iii) all such financing extended
after December 31, 1997 does not exceed Five Million Dollars
($5,000,000) in the aggregate.
(h) 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 such Fiscal Year, shall not exceed the "Debt
Coverage Ratio Cushion" (as defined below) for such year,
(iii) the amount of the Restricted Payment, together with the
aggregate amount of all other Restricted Payments made during
such Fiscal Quarter, would not, if such amounts were to
subtracted from Borrower's Tangible Net Worth for the preceding
Fiscal Quarter, have caused Borrower's Tangible Net Worth for
such Fiscal Quarter to have been less than the minimum required
by Section 12(j)(1), (iv) the amount of the Restricted Payment,
together with the aggregate amount of all other Restricted
Payments made during such Fiscal Year, shall not exceed the
"Annual Distribution Amount" (as defined below) for such year;
provided that if in any Fiscal Year, Borrower makes Restricted
Payments that are less than the Annual Distribution Amount for
such Fiscal Year, such unused portion may be carried forward and
distributed during a subsequent year (provided that all of the
conditions set forth in this Section 12(h) have been fulfilled).
As used in this Section 12(h), the following terms
shall have the following meanings:
"Annual Distribution Amount" shall mean, for any
particular Fiscal Year, thirty percent (30%) of the lesser
of (A) Borrower's Consolidated Net Income for the preceding
Fiscal Year, and (B) the amount, if any, by which Borrower's
Consolidated Cash Flow for the preceding Fiscal Year
exceeded Borrower's Consolidated Debt Service for such
preceding Fiscal Year.
"Debt Coverage Ratio Cushion" shall mean, for any
particular year, the amount (if any) by which Borrower's
Consolidated Cash Flow for the preceding Fiscal Year
exceeded one hundred fifteen percent (115%) of Borrower's
Consolidated Debt Service for such preceding Fiscal Year.
(i) 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) except in the ordinary course of business and
upon fair and reasonable terms and that are no less favorable to
Borrower than would be obtained in a comparable arms-length
transaction with a Person not an Affiliate.
(j) Financial Covenants.
(1) Minimum Tangible Net Worth. Borrower
shall not permit its Consolidated Tangible Net Worth, as of the
last day of each Fiscal Month ending after the date hereof
through and including the Fiscal Month ending March 31, 1999 to
be less than Fifty-Seven Million Dollars ($57,000,000).
(2) Current Ratio. Borrower shall not
permit the ratio of (i) Consolidated Current Assets to
(ii) Consolidated Current Liabilities, as of the last day of each
Fiscal Month ending after the date hereof and continuing through
the Bridge Loan Maturity Date to be less than 1.90 to 1.00.
(3) Debt Coverage Ratio. Commencing with
the Fiscal Year ending December 31, 1998 and continuing for each
Fiscal Quarter through the Bridge Loan Maturity Date, Borrower
shall not permit the Consolidated Debt Coverage Ratio for such
period 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 on 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
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.
(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. Discussions Regarding Long-Term Financing.
Borrower and PCFC hereby confirm that they have discussed the
possible provision by PCFC to Borrower of long-term financing
that would replace the Bridge Loan on or before the Bridge Loan
Maturity Date, but that as of the date of this Agreement no
agreement has been reached, and no commitment or obligation of
either Borrower or PCFC exists, with respect to such long-term
financing (including identification of the nature or extent of
the collateral that might secure such long-term financing).
17. 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.
18. 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.
19. 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.
20. Notices. All notices hereunder shall be in
writing and shall be deemed to be duly given upon delivery, if
personally delivered 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
8741 Brooks Road
P.O. Box 929
Windsor, CA 94592
Attn: Account Officer -- Maui Land & Pineapple
Fax No.: (707) 838-3456
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 Bridge 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/ PAUL J. MEYER
PAUL J. MEYER
Title: EXECUTIVE VICE PRESIDENT/FINANCE
By: /S/ DARRYL Y. H. CHAI
DARRYL Y. H. CHAI
Title:_ TREASURER
PCFC:
PACIFIC COAST FARM CREDIT SERVICES, ACA
By: /S/ SEAN P. O'DAY
Sean P. O'Day, Regional Vice-President
EXHIBIT A
List of Required Documents
1. Promissory Note.
2. Loan Application
3. Interest Rate Disclosure Statement.
4. Continuing Guaranty Agreements from the
following entities:
a. Maui Pineapple Company, Ltd.
b. Kapalua Land Company, Ltd.
5. Environmental Disclosure Documents
acceptable to PCFC, certified by chief financial
officer of Borrower
6. Appraisal information with respect to
the real property collateral, certified as
accurate and complete by Borrower's CFO
7. Preliminary Title Reports
8. Mortgage
9. Instruction letter to title company and
related correspondence
10. Title Policy and Endorsements
11. Payment instructions from Borrower to PCFC
12. Corporate authority documents:
a. Certificate of corporate
secretary of Borrower.
b. Certificate of corporate
secretary of Maui Pineapple Company, Ltd.
c. Certificate of corporate
secretary of Kapalua Land Company, Ltd.
13. Opinion of counsel to Borrower and each
Guarantor.
14. Disclosure Schedule setting forth:
a. Any exceptions to
representations and warranties.
b. Existing loans made by
Borrower to third parties.
c. Permitted Encumbrances.
d. All subsidiaries owned by Borrower and all
partnerships and joint ventures in which Borrower
is engaged.
EXHIBIT B
[FORM OF COMPLIANCE CERTIFICATE
UNDER SECTION 11(g)(2)]
[Letterhead of Maui Land & Pineapple Company, Inc.]
________________, 199__
Pacific Coast Farm Credit Services, ACA
Capital Markets Group
5560 S. Broadway
Eureka, CA 95503
Attention: Sean P. O'Day, Regional Vice President
Ladies and Gentlemen:
The undersigned, as the Executive Vice
President/Finance of Maui Land & Pineapple Company, Inc., a
Hawaii corporation ("Borrower"), gives this Compliance
Certificate to Pacific Coast Farm Credit Services, ACA ("Lender")
in accordance with the requirements of Section 11(g)(2) of that
certain Bridge Loan Agreement dated as of December 30, 1998,
between Borrower and Lender (the "Bridge Loan Agreement").
Capitalized terms used in this Compliance Certificate, unless
otherwise defined herein, shall have the meanings ascribed to
them in the Bridge Loan Agreement. All references to Sections
shall, unless otherwise indicated, refer to Sections of the
Bridge Loan Agreement.
Based upon my review of the financial statements of
Borrower, on a consolidated basis, for the Fiscal Month ending
__________________, 199__, copies of which are attached hereto as
Appendix 1, I hereby certify as follows:
1. Attached hereto as Appendix 2 is a statement,
prepared by or for me, as Executive Vice President/Finance of
Borrower, showing, as of the date set forth above, the
calculations used in determining [compliance] [noncompliance]
with each financial covenant set forth in Section 13(j), as
indicated thereon.
2. The financial statements attached as Appendix 1
were prepared in accordance with the customary of Borrower in
preparing internal, monthly financial statements, and, subject to
the limitations inherent in such customary practices, present
fairly the financial position and results of operation of
Borrower and its Subsidiaries, and are true and correct in all
material respects.
3. No Default or Event of Default has occurred and is
continuing as of the date hereof [, other than:
[Describe Specifically] ].
4. Borrower has taken the following steps to cure
such Default or Event or Default: [Describe
Specifically] ].
Very truly yours,
_______________________________
Name: Paul J. Meyer
Title: Executive Vice President/Finance,
Maui Land & Pineapple Company,Inc.
APPENDIX 1
FINANCIAL STATEMENTS
APPENDIX 2
CALCULATION OF
FINANCIAL COVENANT COMPLIANCE
AMENDED AND RESTATED
MAUI LAND & PINEAPPLE COMPANY, INC.
EXECUTIVE CHANGE-IN-CONTROL SEVERANCE AGREEMENT
(President/CEO and Executive Vice Presidents)
Gary L. Gifford, President & Chief Executive Officer
ARTICLE I. ESTABLISHMENT AND PURPOSE.
1.1 Effective Date. This Amended and Restated Executive
Change-in-Control Severance Agreement (the "Agreement") is made
and entered into and is effective as of the 16th day of March,
1999 ("Effective Date"), by and between Maui Land & Pineapple
Company, Inc. ("ML&P"), a Hawaii corporation, and Gary L.
Gifford ("Executive"). This Agreement shall supersede and
replace any prior severance agreement entered into between ML&P
and the Executive.
1.2 Term of the Agreement.
a. The Agreement shall commence as of the Effective
Date written above, and shall continue until terminated in
accordance with this paragraph 1.2. This Agreement may be
terminated by the Board of Directors of ML&P (the "Board")
upon one hundred eighty (180) days advance written notice
to the Executive; provided, however, that the Board may
not terminate this Agreement (i) after the occurrence of a
Change in Control or (ii) during the respective periods
set forth in Section 1.2.c or 1.2.d below.
b. In the event that a Change in Control, as
defined in Section 2.1 herein, occurs during the term of
this Agreement, this Agreement shall remain irrevocably in
effect for the greater of thirty-six (36) months from the
date of such Change in Control, or until all benefits have
been paid to the Executive hereunder.
c. In the event that the Board has knowledge that a
third party has taken steps reasonably calculated to
effect a Change in Control, including, but not limited to
the commencement of a tender offer for the voting stock of
ML&P, or the circulation of a proxy to ML&P's
shareholders, then the Board shall not be permitted
thereafter to exercise the termination right provided by
Section 1.2.a unless and until the Board, in good faith,
has determined that such third party has fully abandoned
or terminated its effort to effect a Change in Control.
d. In the event that the Board approves in
principle one or more transactions the implementation of
which would result in a Change in Control, then the Board
shall not be permitted thereafter to exercise the
termination right provided by Section 1.2.a unless and
until the Board, in good faith, has determined to fully
abandon and terminate all efforts by ML&P or its
Subsidiaries to implement such transactions.
1.3 Purpose of the Agreement. The purpose of this Agreement
is to advance the interests of ML&P and its Subsidiaries by
assuring that ML&P and its Subsidiaries shall have the
continued employment and dedication of the Executive and the
availability of his advice and counsel in the event that an
acquisition or Change in Control occurs. This Agreement shall
also assure the Executive of equitable treatment during the
period of uncertainty that surrounds an acquisition or Change
in Control, and allow the Executive to act at all times in the
best interest of ML&P and its shareholders.
1.4 Contractual Right to Benefits. This Agreement establishes
and vests in the Executive a contractual right to the benefits
which he or she is entitled hereunder, enforceable by the
Executive against ML&P or any Successor Employer that assumes
this Agreement. However, nothing herein shall require ML&P or
any such Successor Employer to segregate, earmark, or otherwise
set aside any funds or other assets to provide for any payments
hereunder.
1.5 Legal Status. This Agreement shall be considered an
unfunded agreement to provide welfare benefits to a select
group of management or highly compensated employees and is
therefore intended to be a "top-hat" plan exempt from the
requirements of the provisions of Parts 2, 3 and 4 of Title I
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
ARTICLE II. DEFINITIONS AND CONSTRUCTION.
2.1 Definitions. Whenever used in this Agreement, the
following terms shall have the meanings set forth below and,
when the meaning is intended, the initial letter of the word is
capitalized.
a. "Base Salary" means Executive's annualized
salary, which includes all regular basic wages before
reduction for any amounts deferred on a tax-qualified or
nonqualified basis, payable in cash to Executive for
services rendered during the Year. Base Salary shall
exclude bonuses, incentive compensation, special fees or
awards, commissions, allowances, or any other form of
premium or incentive pay, or amounts properly designated
by Employer as payment toward or reimbursement of
expenses.
b. "Beneficial Owner" shall have the meaning
ascribed to such terms in Rule 13d-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
c. "Beneficiary" with respect to Executive means
the persons or entities designated or deemed designated by
the Executive pursuant to Section 8.2 herein.
d. "Board" means the Board of Directors of ML&P.
e. "Change in Control" means one or more of the
following occurrences with respect to ML&P or a
Subsidiary:
(1) Any Person, including a "group" as defined in Section 13
(d)(3) of the Exchange Act, who is not at the date of this
Agreement the beneficial owner of shares of the given entity
having 25% or more of the total number of votes that may be
cast for the election of Directors of such entity, becomes the
beneficial owner (including acquisition of beneficial ownership
resulting from formation of a "group") of shares of such entity
having 25% or more of such voting power;
(2) Any Person, including a "group" as defined in
Section 13(d)(3) of the Exchange Act, who is not at the date of
this Agreement the beneficial owner of shares of a given entity
having 50% or more of the total number of votes that may be
cast for the election of Directors of such entity, becomes the
beneficial owner (including acquisition of beneficial ownership
resulting from formation of a "group") of shares of such entity
having 50% or more of such voting power;
(3) As the result of, or in connection with any cash tender or
exchange offer, merger or other business combination, sale of
assets or contested election, or any combination of the
foregoing transactions, the Persons who were Directors of the
given entity before the transaction shall cease to constitute a
majority of the Board of Directors of such entity or any
successor to such entity;
(4) A merger or consolidation of the given entity in which the
surviving entity is neither ML&P nor a direct or indirect
wholly owned subsidiary of ML&P; or
(5) The sale, transfer, or other disposition of all or
substantially all of the assets of the given entity (and for
this purpose, the term "substantially all" shall mean assets
having a fair market value, whether or not realized in the
transaction, that is 50% or more of the aggregate fair market
value of all assets of such entity); and, in addition, in the
case of a Subsidiary, the sale, transfer or other disposition
(other than to an entity that is before and following such
transaction a direct or indirect wholly owned subsidiary of
M&LP) of securities that immediately prior to such transaction
constituted 50% or more of such Subsidiary's outstanding voting
securities.
(6) A spin-off, split-off, split-up or similar divisive
reorganization affecting ML&P and/or its Subsidiaries.
f. "Committee" means the Compensation Committee of
the Board of Directors of ML&P or any other committee
appointed by the Board to administer this Agreement;
provided that following a Change in Control "Committee"
shall mean the Persons who constituted the Committee
immediately prior to the Change in Control.
g. "Disability" means a physical or mental
condition which renders Executive unable to discharge his
normal work responsibility with Employer and which, in the
opinion of a licensed physician selected by the Executive,
subject to reasonable approval by the Committee based upon
sufficient medical evidence, can be reasonably expected to
continue for a period of at least one full calendar year.
If Executive fails to select a physician within ten (10)
business days of a written request made by Employer, then
Employer may select a physician for purposes of this
paragraph.
h. "Effective Date" has the meaning set forth in
Section 1.1.
i. "Effective Date of Termination" means the
date on which a Qualifying Termination occurs.
j. "Employer" means ML&P, or any Successor
Employer that has assumed this Agreement pursuant to
Section 8.1.a.
k. "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time, or any
successor act thereto.
l. "Expiration Date" means the date the
Agreement terminates, as provided in Section 1.2 herein.
m. "Just Cause" means the basis for a termination
of Executive's employment for which no Severance Benefits
are payable hereunder, as provided in Article IV herein.
n. "ML&P" means Maui Land & Pineapple Company,
Inc., a Hawaii corporation.
o. "Normal Retirement Date" shall mean the
date on which the Executive attains age 65.
p. "Person" shall have the meaning ascribed to such
terms in Section 3(a)(9) of the Exchange Act and used in
Sections 13(d) and 14(d) thereof, including a "group" as
defined and used in Section 13(d) and Regulation 13D
thereunder; provided that for purposes of Section 2.1(e)
"Person" shall not include any entity that is a direct or
indirect wholly owned subsidiary of ML&P.
q. "Qualifying Termination" means a termination of
the Executive's employment as described in
Section 3.2 herein.
r. "Severance Benefit" means the payment of
severance compensation as provided in Article III herein.
s. "Subsidiaries" means Maui Pineapple Company,
Ltd. and Kapalua Land Company, Ltd.
t. "Successor Employer" means an entity that
becomes Executive's employer in connection with a Change
in Control and which following such Change in Control does
not control, and is not controlled by or under common
control with, ML&P.
u. "Year" means the consecutive 12-month period
beginning each January 1 and ending December 31.
2.2 Gender and Number. Except where otherwise indicated
by the context, any masculine term used herein also shall
include the feminine, the plural shall include the singular,
and the singular shall include the plural.
2.3 Severability. In the event any provision of the
Agreement shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts
of the Agreement, and the Agreement shall be construed and
enforced as if the illegal or invalid provision had not been
included.
2.4 Modification. No express provisions of this
Agreement may be modified, waived, or discharged unless such
modification, waiver, or discharge is agreed to by the
Executive in writing and approved by Employer's board
of directors.
2.5 Applicable Law. To the extent not preempted by the
laws of the United States, the laws of the State of Hawaii
shall be the controlling law in all matters relating to the
Agreement without regard to the conflicts of law principles in
such laws.
ARTICLE III. SEVERANCE BENEFITS.
3.1 Right to Severance Benefits. The Executive shall be
entitled to receive Severance Benefits as described in Section
3.4 herein, if there has been a Change in Control as defined in
Section 2.1(e) herein, and if, within thirty-six (36) months
thereafter, the Executive's employment shall end for any reason
specified in Section 3.2 herein as being a Qualifying
Termination. The Executive shall not be entitled to receive
Severance Benefits if the Executive's employment is
involuntarily terminated for Just Cause, as provided under
Article IV herein, or if the Executive's employment terminates
due to death or Disability.
3.2 Qualifying Termination. The occurrence of any one or
more of the following events within thirty-six (36) calendar
months after a Change in Control shall entitle the Executive to
the payment of Severance Benefits, as provided under Section
3.4 herein:
a. Involuntary termination of the Executive's
employment without Just Cause (as defined in Article IV
herein) (other than a merely technical termination arising
from a good faith reassignment in connection with a Change
in Control of officers and employees of ML&P and/or its
Subsidiaries and following which Executive remains an
employee of (i) ML&P or a Subsidiary that continues
thereafter to be wholly owned by ML&P or (ii) a Successor
Employer that has assumed ML&P's obligations under this
Agreement in accordance with Section 8.1.a); or
b. The Executive's voluntary employment termination
for Good Reason (as defined by Section 3.3 herein).
3.3 Definition of Good Reason. "Good Reason" means,
without the Executive's express written consent, the occurrence
after a Change in Control of any one or more of the following:
a. The assignment of the Executive to duties
materially inconsistent with the Executive's authorities,
duties, responsibilities, and status (including offices,
titles and reporting requirements) as an executive and/or
officer of Employer, or a material reduction of the
Executive's authorities, duties, or responsibilities from
those in effect as of ninety (90) days prior to the Change
in Control, other than an act that is remedied promptly
after Employer's receipt of notice thereof given by the
Executive (provided, however, that "Good Reason" shall not
include the events described in the preceding portions of
this paragraph (a) if the changes described therein have
been approved by a majority of the Board of ML&P and also
by a number of such directors who comprised at least a
majority of the Board of ML&P 90 days prior to the Change
In Control);
b. Employer requiring the Executive to be based at
a location in excess of seventy-five (75) miles from the
location of the Executive's principal job location or
office immediately prior to the Change in Control, except
for required travel on company business to an extent
substantially consistent with the Executive's then present
business travel obligations;
c. A more than ten percent (10%) reduction of the
Executive's annual rate of Base Salary in effect as of
ninety (90) days prior to the Change in Control;
d. The failure to continue in effect any of ML&P's
or its Subsidiaries' annual incentive compensation plans,
or employee benefit or retirement plans, policies,
practices, or similar compensatory arrangements in which
the Executive participated as of the 180th day preceding
the Change in Control (unless such failure to continue the
plan, policy, practice or arrangement pertains generally
to all plan participants) or the failure to continue the
Executive's participation therein on substantially the
same basis, both in terms of the amount of benefits
provided and the level of the Executive's participation
relative to other participants; provided, however, that
this Section 3.3.d shall not apply in the case of a Change
in Control described in Section 2.1.e (6) if:
(a) Executive's employer thereafter is ML&P or a wholly
owned Subsidiary thereof, or a Successor Employer that has
in accordance with Section 8.1 expressly assumed this
Agreement; (b) a failure to continue the plan, policy,
practice or arrangement or Executive's participation
therein pertains generally to all participants employed by
such employer; and (c) the aggregate annualized value to
Executive of benefits provided under all of such
employer's incentive compensation plans, other employee
benefit or retirement plans, policies, practices, or
similar compensatory arrangements (excluding any costs
incurred in connection with this Agreement) is at least
90% of the value to Executive of benefits so provided by
ML&P and its Subsidiaries for the last Year ended prior to
the Change in Control.
e. The failure of ML&P to obtain an agreement from
any Successor Employer (as contemplated by Article VIII)
to assume this Agreement and to perform ML&P's obligations
to Executive hereunder.
f. A material breach of obligations to Executive
under this Agreement by ML&P, or by a Successor Employer
that has assumed this Agreement, if such breach has not
been cured to the reasonable satisfaction of Executive
within thirty (30) days following delivery of written
notice thereof by Executive to the breaching party.
3.4 Description of Severance Benefits. In the event that
Executive becomes entitled to receive Severance Benefits, as
provided in Section 3.1 herein, ML&P shall pay to the Executive
and provide him with the following:
a. An amount equal to 2.99 times the Executive's
annual rate of Base Salary in effect upon the Effective
Date of Termination (or, if greater, 2.99 times the
Executive's annual rate of Base Salary in effect ninety
(90) days prior to the Change in Control); and
b. A payout under the ML&P Annual Incentive Plan,
or any similar plan Employer maintains, or is obligated by
Section 3.3.d to provide, in accordance with the terms of
such plan; and
c. A continuation of all welfare benefits at normal
employee cost including medical and dental insurance, long-
term disability, group term life insurance, and accidental
death & dismemberment insurance for three (3) full years
from the Effective Date of Termination or until the
Executive reaches his Normal Retirement Date, whichever
occurs earlier. In the event that participation in any
one or more of the welfare benefits is not possible under
the terms of the governing welfare benefit provisions or
due to the modification or elimination of the welfare
benefits, Employer shall provide substantially identical
welfare benefits at the normal employee cost of the
affected welfare benefits. However, these benefits shall
be discontinued prior to the end of the three (3) years in
the event the Executive receives substantially similar
benefits from a subsequent employer, as determined by the
Committee. The right of the Executive and his spouse and
other dependents to continued group health coverage under
Section 4980B of the Internal Revenue Code of 1986, as
amended ("Code"), shall commence at the end of the
applicable Severance Benefits period. Unless otherwise
provided under this Agreement, the applicable Severance
Benefits period shall be treated as if it were a period of
employment with ML&P or its Subsidiaries (or, if Executive
so elects, with any Successor Employer) for purposes of
determining rights and benefits under any retirement plan
or other plan or program and shall be treated as a period
of covered employment under such plan or other plan or
program if the Executive was in covered employment
immediately prior to the Change in Control, provided that,
if such treatment is not possible under the terms of such
plan or other plan or program, Employer shall directly
provide substantially identical benefits attributable to
the crediting of the Severance Benefits period.
3.5 Reduction of Severance Benefits. In the event there
are fewer than thirty-six (36) whole or partial months
remaining from the Executive's Effective Date of Termination
until the Executive's Normal Retirement Date, then the amounts
provided for under Section 3.4.a above shall be reduced by a
fraction, the numerator of which shall be the number of whole
or partial months remaining until the Executive's Normal
Retirement Date, and the denominator of which shall be
thirty-six (36).
3.6 Special Retirement Benefits. The Executive shall
receive special retirement benefits as provided below, so that
the total retirement benefits that the Executive receives will
equal the retirement benefits that the Executive would have
received under the Maui Land & Pineapple Company, Inc. Pension
Plan for Non-Bargaining Unit Employees ("Retirement Plan"),
Supplemental Executive Retirement Plan, and Executive
Supplemental Insurance Plan/Executive Deferred Compensation
Plan (collectively, "Plans"), under the terms thereof that
existed ninety (90) days prior to the Change in Control, had
the Executive continued in the employ of ML&P and its
Subsidiaries for three (3) years following the Executive's
Effective Date of Termination (or until his Normal Retirement
Date, whichever is earlier) but without regard to any ancillary
benefits. The amount of special retirement benefits payable
hereunder to the Executive or his beneficiaries shall equal the
excess of the amount specified in (a) over the amount specified
in (b) below.
a. The total retirement benefits on an actuarial
equivalent single-life basis would be paid to the
Executive if the three (3) years (or the period to his
Normal Retirement Date, if less) following the Executive's
Effective Date of Termination are added to his credited
service under the Plans.
b. The total retirement benefits actually paid on
an actuarial equivalent single-life basis to the
Executive.
Such special retirement benefits shall be paid at the
same time and in the same form (e.g., actuarial equivalent
single-life or contingent annuitant basis) as was required with
respect to the Executive's retirement benefits under the Plans.
The special retirement benefits shall be paid by the Plans or,
if the terms of such Plans do not provide for such benefits,
the special retirement benefits shall be paid directly by
Employer. The actuarial equivalent of special retirement
benefits shall be determined in accordance with the factors
provided under the Retirement Plan.
3.7 Outplacement Services. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, the Executive shall be
entitled, at the expense of Employer, to receive standard
outplacement services as selected by the Executive, for a
period of up to thirty-six (36) months from the Effective Date
of Termination. However, such services shall not exceed a
maximum annual benefit of ten percent (10%) of the Executive's
annual rate of Base Salary in effect ninety (90) days prior to
the Change in Control.
3.8 Incentive Compensation. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, any deferred awards previously
granted to the Executive under ML&P's or its Subsidiaries' or
any Successor Employer's incentive compensation plans and not
previously paid to the Executive shall immediately vest on the
date of the Executive's Effective Date of Termination and shall
be paid no later than ninety (90) calendar days following that
date, and be included as compensation in the month paid.
ARTICLE IV. DISQUALIFICATION FROM RECEIPT OF BENEFITS.
No Severance Benefits shall be payable to the
Executive under this Agreement in the event the Executive is
terminated by Employer for Just Cause. For this purpose, Just
Cause shall mean willful, malicious conduct by the Executive
which is detrimental to the best interests of Employer,
including theft, embezzlement, the conviction of a criminal
act, disclosure of trade secrets, a gross dereliction of duty,
or other grave misconduct on the part of the Executive which is
substantially injurious to Employer. Just Cause also shall
include a material breach by the Executive of any of his
covenants under this Agreement, if such breach has not been
cured to the reasonable satisfaction of Employer within thirty
(30) days following written notice thereof by Employer to the
Executive.
ARTICLE V. FORM AND TIMING OF SEVERANCE BENEFITS.
5.1 Form and Timing of Severance Benefits. The
Severance Benefits described in Sections 3.4.a, 3.4.b and 3.8
herein shall be paid in cash to the Executive in a single lump
sum as soon as practicable following the Executive's Effective
Date of Termination, but in no event beyond ninety (90)
calendar days from such date.
The Severance Benefits described in Section 3.4.c
herein shall be provided to the Executive immediately upon the
Executive's Effective Date of Termination and shall continue to
be provided for three (3) full calendar years from the
Executive's Effective Date of Termination or until the
Executive reaches his Normal Retirement date, whichever occurs
earlier. However, the Severance Benefits described in Section
3.4.c herein shall be discontinued prior to the end of the
three (3) year period immediately upon the Executive receiving
substantially similar benefits from a subsequent employer, as
determined by the Committee.
5.2 Withholding of Taxes. Employer shall withhold
from any amounts payable under this Agreement all Federal,
state, city or other taxes as legally shall be required.
ARTICLE VI. PARACHUTE PAYMENTS.
6.1 Determination of Alternative Severance Benefit Limit.
Notwithstanding any other provision of this Agreement, if any
portion of the Severance Benefits or any other payment under
this Agreement, or under any other agreement with, or plan of,
Employer (in the aggregate "Total Payments") would constitute
an "excess parachute payment," then the payments to be made to
the Executive under this Agreement shall be reduced such that
the value of the aggregate Total Payments that the Executive is
entitled to receive shall be one dollar ($1) less than the
maximum amount which the Executive may receive without becoming
subject to the tax imposed by Section 4999 of the Code, or
which Employer may pay without loss of deduction under Section
280G(a) of the Code. However, such reduction in Severance
Benefits shall apply if, and only if, the resulting Severance
Benefits with such reduction is greater in value to the
Executive than the value of the Severance Benefits without a
reduction, net of any tax imposed on the Executive pursuant to
Section 4999 of the Code. For purposes of this Agreement, the
terms "excess parachute payment" and "parachute payments" shall
have the meanings assigned to such terms in Section 280G of the
Code, and such "parachute payments" shall be valued as provided
therein.
6.2 Procedure for Establishing Alternative Limitation.
Within fifteen (15) calendar days following delivery of the
notice of Qualifying Termination or notice by Employer to the
Executive of its belief that there is a payment or benefit due
the Executive which will result in an "excess parachute
payment" as defined in Section 280G of the Code, the Executive
and such Employer, at Employer's expense, shall obtain the
opinion of such Employer's principal outside law firm,
accounting firm, and/or compensation and benefits consulting
firm, which sets forth: (a) the amount of the Executive's
"annualized includible compensation for the base period" (as
defined in Section 280G(d)(1) of the Code); (b) the present
value of the Total Payments; and (c) the amount and present
value of any "excess parachute payment."
In the event that such opinion determines that there
would be an "excess parachute payment," such that a reduction
in the Severance Benefits would result in a greater net benefit
to the Executive (as provided in Section 6.1 herein), then the
Severance Benefits hereunder or any other payment determined
under the opinion to be includible in Total Payments shall be
reduced or eliminated so that, on the basis of calculations set
forth in such opinion, there will be no "excess
parachute payment". The reduction or elimination of specific
payments shall apply to such type and amount of specific
payments as may be designated by the Executive in writing
delivered to Employer within ten (10) calendar days of receipt
of the opinion, or if the Executive fails to so notify such
Employer, as may be reasonably determined by it.
The provisions of this Section 6.2, including the
calculations, notices, and opinion provided herein, shall be
based upon the conclusive presumption that the following
amounts are reasonable: (a) the compensation and benefits
provided for in Article III herein; and (b) any other
compensation earned prior to the Effective Date of Termination
by the Executive pursuant to ML&P's and any Successor
Employer's compensation programs (if such payments would have
been made in the future in any event, even though the timing of
such payment is triggered by the Change in Control).
6.3 Subsequent Imposition of Excise Tax. If,
notwithstanding compliance with the provisions of Sections 6.1
and 6.2 herein, it is ultimately determined by a court or
pursuant to a final determination by the Internal Revenue
Service that any portion of the Total Payments is considered to
be a "parachute payment", subject to excise tax under Section
4999 of the Code, which was not contemplated to be a "parachute
payment" at the time of payment (so as to accurately determine
whether a limitation should have been applied to the Total
Payments to maximize the net benefit to the Executive, as
provided in Sections 6.1 and 6.2 herein), the Executive shall
be entitled to receive a lump sum cash payment sufficient to
place the Executive in the same net after-tax position,
computed by using the "Special Tax Rate" as such term is
defined below, that the Executive would have been in had such
payment not been subject to such excise tax, and had the
Executive not incurred any interest charges or penalties with
respect to the imposition of such excise tax. For purposes of
this Agreement, the "Special Tax Rate" shall be the highest
effective Federal and state marginal tax rates applicable to
the Executive in the year in which the payment contemplated
under this Section 6.3 is made.
ARTICLE VII. OTHER RIGHTS AND BENEFITS NOT AFFECTED.
7.1 Other Benefits. Neither the provisions of this
Agreement nor the Severance Benefits provided for hereunder
shall reduce any amounts otherwise payable, or in any way
diminish the Executive's rights as an employee of ML&P or its
Subsidiaries or a Successor Employer, whether existing now or
hereafter, under any benefit, incentive, retirement, stock
option, stock bonus, stock purchase plan, or any employment
agreement, or other plan or arrangement.
7.2 Employment Status. This Agreement does not
constitute a contract of employment or impose on ML&P or its
Subsidiaries or any Successor Employer any obligation to retain
the Executive as an employee, to change the status of the
Executive's employment, or to change such entity's policies
regarding termination of employment.
ARTICLE VIII. SUCCESSORS.
8.1 Successors.
a. This Agreement shall be binding upon ML&P,
any Successor Employer that has assumed this Agreement,
and their respective successors and assigns. ML&P shall
require any Successor Employer to expressly assume and
agree to perform this Agreement and all of ML&P's
obligations hereunder. Failure of ML&P to obtain such
assumption and agreement prior to the effectiveness of any
Change in Control that results in a transfer of
Executive's employment to a Successor Employer shall
constitute Good Reason for voluntary termination of
employment by Executive, pursuant to Sections 3.2 and 3.3
hereof.
b. If in connection with and prior to the
effectiveness of a Change in Control a Successor Employer
has assumed this Agreement in accordance with
Section 8.1.a, then following such Change in Control
neither ML&P, nor any successor to it that does not
directly or indirectly control and is not directly or
indirectly controlled by or under common control with,
such Successor Employer, shall have any further liability
or obligation hereunder. For purposes of the foregoing
and the definition of "Successor Employer" in Section 2.1,
"control" (including the terms controlling, controlled by
and under common control with) shall have the meaning set
forth in Rule 405 under the Securities Act of 1933 (17 CFR
230.405).
c. This Agreement shall inure to the benefit
of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees, and legatees. If Executive
should die while any amount would still be payable to him
hereunder had he continued to live, all such amounts,
unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement, to the
Executive's devisee, legatee, or other designee, or if
there is no such designee, to the Executive's estate.
8.2 Beneficiaries. In the event of the death of the
Executive, all unpaid amounts payable to the Executive under
this Agreement shall be paid to his or her Beneficiary. The
Executive's spouse and other dependents shall continue to be
covered by all applicable welfare benefits during the remainder
of the Severance Benefits period, if any, pursuant to
Section 3.4.c (unless payments at death are specified by the
applicable welfare benefits provisions). The Beneficiary of
the Executive's Severance Benefits under this Agreement shall
be designated by the Executive in the form of a signed writing
acceptable to the Committee. The Executive may make or change
such designation at any time.
ARTICLE IX. ADMINISTRATION.
9.1 Administration. The Compensation Committee shall
administer this Agreement. The Committee is authorized, prior
to occurrence of a Change in Control, to interpret this
Agreement, to prescribe and rescind rules and regulations, to
provide conditions and assurances deemed necessary and
advisable, to protect the interest of ML&P or its Subsidiaries,
and to make all other determinations necessary or advisable for
the Agreement's administration. In fulfilling its
administrative duties hereunder, the Committee may rely on
outside counsel, independent accountants, or other consultants
to render advice or assistance.
9.2 Indemnification and Exculpation. The members of the
Board, its agents and officers, directors and employees of ML&P
and its Subsidiaries shall be indemnified and held harmless by
ML&P and its Subsidiaries against and from any and all loss,
cost, liability, or expense that may be imposed upon or
reasonably incurred by them in connection with or resulting
from any claim, action, suit or proceeding to which they may be
a party or in which they may be involved by reason of any
action taken or failure to act under this Agreement and against
and from any and all amounts paid by them in settlement (with
ML&P's written approval) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding. The foregoing
provision shall not be applicable to any person if the loss,
cost, liability or expense is due to such person's gross
negligence or willful misconduct.
9.3 Legal Fees. ML&P (or, if applicable, any Successor
Employer that has assumed the Agreement) shall pay all
reasonable legal fees, costs of litigation and other expenses
incurred in good faith by the Executive as a result of its
refusal to provide the Severance Benefits which it is obligated
to provide to Executive under this Agreement, or as a result of
ML&P or such Successor Employer contesting the validity,
enforceability or interpretation of the Agreement; provided,
however, that such payments shall not exceed the amount
permitted by law.
IN WITNESS WHEREOF, ML&P has caused this Agreement to
be executed as of the day and year first above written.
MAUI LAND & PINEAPPLE COMPANY, INC.
By /S/ ADELE H. SUMIDA
Its Secretary
/S/ GARY L. GIFFORD
Gary L. Gifford, "Executive"
ATTEST:
/S/ J. SUSAN CORLEY
AMENDED AND RESTATED
MAUI LAND & PINEAPPLE COMPANY, INC.
EXECUTIVE CHANGE-IN-CONTROL SEVERANCE AGREEMENT
(President/CEO and Executive Vice Presidents)
Paul J. Meyer, Executive Vice President/Finance
ARTICLE I. ESTABLISHMENT AND PURPOSE.
1.1 Effective Date. This Amended and Restated Executive
Change-in-Control Severance Agreement (the "Agreement") is made
and entered into and is effective as of the 17th day of March,
1999 ("Effective Date"), by and between Maui Land & Pineapple
Company, Inc. ("ML&P"), a Hawaii corporation, and Paul J. Meyer
("Executive"). This Agreement shall supersede and replace any
prior severance agreement entered into between ML&P and the
Executive.
1.2 Term of the Agreement.
a. The Agreement shall commence as of the Effective
Date written above, and shall continue until terminated in
accordance with this paragraph 1.2. This Agreement may be
terminated by the Board of Directors of ML&P (the "Board")
upon one hundred eighty (180) days advance written notice
to the Executive; provided, however, that the Board may
not terminate this Agreement (i) after the occurrence of a
Change in Control or (ii) during the respective periods
set forth in Section 1.2.c or 1.2.d below.
b. In the event that a Change in Control, as
defined in Section 2.1 herein, occurs during the term of
this Agreement, this Agreement shall remain irrevocably in
effect for the greater of thirty-six (36) months from the
date of such Change in Control, or until all benefits have
been paid to the Executive hereunder.
c. In the event that the Board has knowledge that a
third party has taken steps reasonably calculated to
effect a Change in Control, including, but not limited to
the commencement of a tender offer for the voting stock of
ML&P, or the circulation of a proxy to ML&P's
shareholders, then the Board shall not be permitted
thereafter to exercise the termination right provided by
Section 1.2.a unless and until the Board, in good faith,
has determined that such third party has fully abandoned
or terminated its effort to effect a Change in Control.
d. In the event that the Board approves in
principle one or more transactions the implementation of
which would result in a Change in Control, then the Board
shall not be permitted thereafter to exercise the
termination right provided by Section 1.2.a unless and
until the Board, in good faith, has determined to fully
abandon and terminate all efforts by ML&P or its
Subsidiaries to implement such transactions.
1.3 Purpose of the Agreement. The purpose of this Agreement
is to advance the interests of ML&P and its Subsidiaries by
assuring that ML&P and its Subsidiaries shall have the
continued employment and dedication of the Executive and the
availability of his advice and counsel in the event that an
acquisition or Change in Control occurs. This Agreement shall
also assure the Executive of equitable treatment during the
period of uncertainty that surrounds an acquisition or Change
in Control, and allow the Executive to act at all times in the
best interest of ML&P and its shareholders.
1.4 Contractual Right to Benefits. This Agreement establishes
and vests in the Executive a contractual right to the benefits
which he or she is entitled hereunder, enforceable by the
Executive against ML&P or any Successor Employer that assumes
this Agreement. However, nothing herein shall require ML&P or
any such Successor Employer to segregate, earmark, or otherwise
set aside any funds or other assets to provide for any payments
hereunder.
1.5 Legal Status. This Agreement shall be considered an
unfunded agreement to provide welfare benefits to a select
group of management or highly compensated employees and is
therefore intended to be a "top-hat" plan exempt from the
requirements of the provisions of Parts 2, 3 and 4 of Title I
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
ARTICLE II. DEFINITIONS AND CONSTRUCTION.
2.1 Definitions. Whenever used in this Agreement, the
following terms shall have the meanings set forth below and,
when the meaning is intended, the initial letter of the word is
capitalized.
a. "Base Salary" means Executive's annualized
salary, which includes all regular basic wages before
reduction for any amounts deferred on a tax-qualified or
nonqualified basis, payable in cash to Executive for
services rendered during the Year. Base Salary shall
exclude bonuses, incentive compensation, special fees or
awards, commissions, allowances, or any other form of
premium or incentive pay, or amounts properly designated
by Employer as payment toward or reimbursement of
expenses.
b. "Beneficial Owner" shall have the meaning
ascribed to such terms in Rule 13d-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
c. "Beneficiary" with respect to Executive means
the persons or entities designated or deemed designated by
the Executive pursuant to Section 8.2 herein.
d. "Board" means the Board of Directors of ML&P.
e. "Change in Control" means one or more of the
following occurrences with respect to ML&P or a
Subsidiary:
(1) Any Person, including a "group" as defined in Section 13
(d)(3) of the Exchange Act, who is not at the date of this
Agreement the beneficial owner of shares of the given entity
having 25% or more of the total number of votes that may be
cast for the election of Directors of such entity, becomes the
beneficial owner (including acquisition of beneficial ownership
resulting from formation of a "group") of shares of such entity
having 25% or more of such voting power;
(2) Any Person, including a "group" as defined in
Section 13(d)(3) of the Exchange Act, who is not at the date of
this Agreement the beneficial owner of shares of a given entity
having 50% or more of the total number of votes that may be
cast for the election of Directors of such entity, becomes the
beneficial owner (including acquisition of beneficial ownership
resulting from formation of a "group") of shares of such entity
having 50% or more of such voting power;
(3) As the result of, or in connection with any cash tender or
exchange offer, merger or other business combination, sale of
assets or contested election, or any combination of the
foregoing transactions, the Persons who were Directors of the
given entity before the transaction shall cease to constitute a
majority of the Board of Directors of such entity or any
successor to such entity;
(4) A merger or consolidation of the given entity in which the
surviving entity is neither ML&P nor a direct or indirect
wholly owned subsidiary of ML&P; or
(5) The sale, transfer, or other disposition of all or
substantially all of the assets of the given entity (and for
this purpose, the term "substantially all" shall mean assets
having a fair market value, whether or not realized in the
transaction, that is 50% or more of the aggregate fair market
value of all assets of such entity); and, in addition, in the
case of a Subsidiary, the sale, transfer or other disposition
(other than to an entity that is before and following such
transaction a direct or indirect wholly owned subsidiary of
M&LP) of securities that immediately prior to such transaction
constituted 50% or more of such Subsidiary's outstanding voting
securities.
(6) A spin-off, split-off, split-up or similar divisive
reorganization affecting ML&P and/or its Subsidiaries.
f. "Committee" means the Compensation Committee of
the Board of Directors of ML&P or any other committee
appointed by the Board to administer this Agreement;
provided that following a Change in Control "Committee"
shall mean the Persons who constituted the Committee
immediately prior to the Change in Control.
g. "Disability" means a physical or mental
condition which renders Executive unable to discharge his
normal work responsibility with Employer and which, in the
opinion of a licensed physician selected by the Executive,
subject to reasonable approval by the Committee based upon
sufficient medical evidence, can be reasonably expected to
continue for a period of at least one full calendar year.
If Executive fails to select a physician within ten (10)
business days of a written request made by Employer, then
Employer may select a physician for purposes of this
paragraph.
h. "Effective Date" has the meaning set forth in
Section 1.1.
i. "Effective Date of Termination" means the
date on which a Qualifying Termination occurs.
j. "Employer" means ML&P, or any Successor
Employer that has assumed this Agreement pursuant to
Section 8.1.a.
k. "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time, or any
successor act thereto.
l. "Expiration Date" means the date the
Agreement terminates, as provided in Section 1.2 herein.
m. "Just Cause" means the basis for a termination
of Executive's employment for which no Severance Benefits
are payable hereunder, as provided in Article IV herein.
n. "ML&P" means Maui Land & Pineapple Company,
Inc., a Hawaii corporation.
o. "Normal Retirement Date" shall mean the
date on which the Executive attains age 65.
p. "Person" shall have the meaning ascribed to such
terms in Section 3(a)(9) of the Exchange Act and used in
Sections 13(d) and 14(d) thereof, including a "group" as
defined and used in Section 13(d) and Regulation 13D
thereunder; provided that for purposes of Section 2.1(e)
"Person" shall not include any entity that is a direct or
indirect wholly owned subsidiary of ML&P.
q. "Qualifying Termination" means a termination of
the Executive's employment as described in
Section 3.2 herein.
r. "Severance Benefit" means the payment of
severance compensation as provided in Article III herein.
s. "Subsidiaries" means Maui Pineapple Company,
Ltd. and Kapalua Land Company, Ltd.
t. "Successor Employer" means an entity that
becomes Executive's employer in connection with a Change
in Control and which following such Change in Control does
not control, and is not controlled by or under common
control with, ML&P.
u. "Year" means the consecutive 12-month period
beginning each January 1 and ending December 31.
2.2 Gender and Number. Except where otherwise indicated
by the context, any masculine term used herein also shall
include the feminine, the plural shall include the singular,
and the singular shall include the plural.
2.3 Severability. In the event any provision of the
Agreement shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts
of the Agreement, and the Agreement shall be construed and
enforced as if the illegal or invalid provision had not been
included.
2.4 Modification. No express provisions of this
Agreement may be modified, waived, or discharged unless such
modification, waiver, or discharge is agreed to by the
Executive in writing and approved by Employer's board
of directors.
2.5 Applicable Law. To the extent not preempted by the
laws of the United States, the laws of the State of Hawaii
shall be the controlling law in all matters relating to the
Agreement without regard to the conflicts of law principles in
such laws.
ARTICLE III. SEVERANCE BENEFITS.
3.1 Right to Severance Benefits. The Executive shall be
entitled to receive Severance Benefits as described in Section
3.4 herein, if there has been a Change in Control as defined in
Section 2.1(e) herein, and if, within thirty-six (36) months
thereafter, the Executive's employment shall end for any reason
specified in Section 3.2 herein as being a Qualifying
Termination. The Executive shall not be entitled to receive
Severance Benefits if the Executive's employment is
involuntarily terminated for Just Cause, as provided under
Article IV herein, or if the Executive's employment terminates
due to death or Disability.
3.2 Qualifying Termination. The occurrence of any one or
more of the following events within thirty-six (36) calendar
months after a Change in Control shall entitle the Executive to
the payment of Severance Benefits, as provided under Section
3.4 herein:
a. Involuntary termination of the Executive's
employment without Just Cause (as defined in Article IV
herein) (other than a merely technical termination arising
from a good faith reassignment in connection with a Change
in Control of officers and employees of ML&P and/or its
Subsidiaries and following which Executive remains an
employee of (i) ML&P or a Subsidiary that continues
thereafter to be wholly owned by ML&P or (ii) a Successor
Employer that has assumed ML&P's obligations under this
Agreement in accordance with Section 8.1.a); or
b. The Executive's voluntary employment termination
for Good Reason (as defined by Section 3.3 herein).
3.3 Definition of Good Reason. "Good Reason" means,
without the Executive's express written consent, the occurrence
after a Change in Control of any one or more of the following:
a. The assignment of the Executive to duties
materially inconsistent with the Executive's authorities,
duties, responsibilities, and status (including offices,
titles and reporting requirements) as an executive and/or
officer of Employer, or a material reduction of the
Executive's authorities, duties, or responsibilities from
those in effect as of ninety (90) days prior to the Change
in Control, other than an act that is remedied promptly
after Employer's receipt of notice thereof given by the
Executive (provided, however, that "Good Reason" shall not
include the events described in the preceding portions of
this paragraph (a) if the changes described therein have
been approved by a majority of the Board of ML&P and also
by a number of such directors who comprised at least a
majority of the Board of ML&P 90 days prior to the Change
In Control);
b. Employer requiring the Executive to be based at
a location in excess of seventy-five (75) miles from the
location of the Executive's principal job location or
office immediately prior to the Change in Control, except
for required travel on company business to an extent
substantially consistent with the Executive's then present
business travel obligations;
c. A more than ten percent (10%) reduction of the
Executive's annual rate of Base Salary in effect as of
ninety (90) days prior to the Change in Control;
d. The failure to continue in effect any of ML&P's
or its Subsidiaries' annual incentive compensation plans,
or employee benefit or retirement plans, policies,
practices, or similar compensatory arrangements in which
the Executive participated as of the 180th day preceding
the Change in Control (unless such failure to continue the
plan, policy, practice or arrangement pertains generally
to all plan participants) or the failure to continue the
Executive's participation therein on substantially the
same basis, both in terms of the amount of benefits
provided and the level of the Executive's participation
relative to other participants; provided, however, that
this Section 3.3.d shall not apply in the case of a Change
in Control described in Section 2.1.e (6) if:
(a) Executive's employer thereafter is ML&P or a wholly
owned Subsidiary thereof, or a Successor Employer that has
in accordance with Section 8.1 expressly assumed this
Agreement; (b) a failure to continue the plan, policy,
practice or arrangement or Executive's participation
therein pertains generally to all participants employed by
such employer; and (c) the aggregate annualized value to
Executive of benefits provided under all of such
employer's incentive compensation plans, other employee
benefit or retirement plans, policies, practices, or
similar compensatory arrangements (excluding any costs
incurred in connection with this Agreement) is at least
90% of the value to Executive of benefits so provided by
ML&P and its Subsidiaries for the last Year ended prior to
the Change in Control.
e. The failure of ML&P to obtain an agreement from
any Successor Employer (as contemplated by Article VIII)
to assume this Agreement and to perform ML&P's obligations
to Executive hereunder.
f. A material breach of obligations to Executive
under this Agreement by ML&P, or by a Successor Employer
that has assumed this Agreement, if such breach has not
been cured to the reasonable satisfaction of Executive
within thirty (30) days following delivery of written
notice thereof by Executive to the breaching party.
3.4 Description of Severance Benefits. In the event that
Executive becomes entitled to receive Severance Benefits, as
provided in Section 3.1 herein, ML&P shall pay to the Executive
and provide him with the following:
a. An amount equal to 2.99 times the Executive's
annual rate of Base Salary in effect upon the Effective
Date of Termination (or, if greater, 2.99 times the
Executive's annual rate of Base Salary in effect ninety
(90) days prior to the Change in Control); and
b. A payout under the ML&P Annual Incentive Plan,
or any similar plan Employer maintains, or is obligated by
Section 3.3.d to provide, in accordance with the terms of
such plan; and
c. A continuation of all welfare benefits at normal
employee cost including medical and dental insurance, long-
term disability, group term life insurance, and accidental
death & dismemberment insurance for three (3) full years
from the Effective Date of Termination or until the
Executive reaches his Normal Retirement Date, whichever
occurs earlier. In the event that participation in any
one or more of the welfare benefits is not possible under
the terms of the governing welfare benefit provisions or
due to the modification or elimination of the welfare
benefits, Employer shall provide substantially identical
welfare benefits at the normal employee cost of the
affected welfare benefits. However, these benefits shall
be discontinued prior to the end of the three (3) years in
the event the Executive receives substantially similar
benefits from a subsequent employer, as determined by the
Committee. The right of the Executive and his spouse and
other dependents to continued group health coverage under
Section 4980B of the Internal Revenue Code of 1986, as
amended ("Code"), shall commence at the end of the
applicable Severance Benefits period. Unless otherwise
provided under this Agreement, the applicable Severance
Benefits period shall be treated as if it were a period of
employment with ML&P or its Subsidiaries (or, if Executive
so elects, with any Successor Employer) for purposes of
determining rights and benefits under any retirement plan
or other plan or program and shall be treated as a period
of covered employment under such plan or other plan or
program if the Executive was in covered employment
immediately prior to the Change in Control, provided that,
if such treatment is not possible under the terms of such
plan or other plan or program, Employer shall directly
provide substantially identical benefits attributable to
the crediting of the Severance Benefits period.
3.5 Reduction of Severance Benefits. In the event there
are fewer than thirty-six (36) whole or partial months
remaining from the Executive's Effective Date of Termination
until the Executive's Normal Retirement Date, then the amounts
provided for under Section 3.4.a above shall be reduced by a
fraction, the numerator of which shall be the number of whole
or partial months remaining until the Executive's Normal
Retirement Date, and the denominator of which shall be
thirty-six (36).
3.6 Special Retirement Benefits. The Executive shall
receive special retirement benefits as provided below, so that
the total retirement benefits that the Executive receives will
equal the retirement benefits that the Executive would have
received under the Maui Land & Pineapple Company, Inc. Pension
Plan for Non-Bargaining Unit Employees ("Retirement Plan"),
Supplemental Executive Retirement Plan, and Executive
Supplemental Insurance Plan/Executive Deferred Compensation
Plan (collectively, "Plans"), under the terms thereof that
existed ninety (90) days prior to the Change in Control, had
the Executive continued in the employ of ML&P and its
Subsidiaries for three (3) years following the Executive's
Effective Date of Termination (or until his Normal Retirement
Date, whichever is earlier) but without regard to any ancillary
benefits. The amount of special retirement benefits payable
hereunder to the Executive or his beneficiaries shall equal the
excess of the amount specified in (a) over the amount specified
in (b) below.
a. The total retirement benefits on an actuarial
equivalent single-life basis would be paid to the
Executive if the three (3) years (or the period to his
Normal Retirement Date, if less) following the Executive's
Effective Date of Termination are added to his credited
service under the Plans.
b. The total retirement benefits actually paid on
an actuarial equivalent single-life basis to the
Executive.
Such special retirement benefits shall be paid at the
same time and in the same form (e.g., actuarial equivalent
single-life or contingent annuitant basis) as was required with
respect to the Executive's retirement benefits under the Plans.
The special retirement benefits shall be paid by the Plans or,
if the terms of such Plans do not provide for such benefits,
the special retirement benefits shall be paid directly by
Employer. The actuarial equivalent of special retirement
benefits shall be determined in accordance with the factors
provided under the Retirement Plan.
3.7 Outplacement Services. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, the Executive shall be
entitled, at the expense of Employer, to receive standard
outplacement services as selected by the Executive, for a
period of up to thirty-six (36) months from the Effective Date
of Termination. However, such services shall not exceed a
maximum annual benefit of ten percent (10%) of the Executive's
annual rate of Base Salary in effect ninety (90) days prior to
the Change in Control.
3.8 Incentive Compensation. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, any deferred awards previously
granted to the Executive under ML&P's or its Subsidiaries' or
any Successor Employer's incentive compensation plans and not
previously paid to the Executive shall immediately vest on the
date of the Executive's Effective Date of Termination and shall
be paid no later than ninety (90) calendar days following that
date, and be included as compensation in the month paid.
ARTICLE IV. DISQUALIFICATION FROM RECEIPT OF BENEFITS.
No Severance Benefits shall be payable to the
Executive under this Agreement in the event the Executive is
terminated by Employer for Just Cause. For this purpose, Just
Cause shall mean willful, malicious conduct by the Executive
which is detrimental to the best interests of Employer,
including theft, embezzlement, the conviction of a criminal
act, disclosure of trade secrets, a gross dereliction of duty,
or other grave misconduct on the part of the Executive which is
substantially injurious to Employer. Just Cause also shall
include a material breach by the Executive of any of his
covenants under this Agreement, if such breach has not been
cured to the reasonable satisfaction of Employer within thirty
(30) days following written notice thereof by Employer to the
Executive.
ARTICLE V. FORM AND TIMING OF SEVERANCE BENEFITS.
5.1 Form and Timing of Severance Benefits. The
Severance Benefits described in Sections 3.4.a, 3.4.b and 3.8
herein shall be paid in cash to the Executive in a single lump
sum as soon as practicable following the Executive's Effective
Date of Termination, but in no event beyond ninety (90)
calendar days from such date.
The Severance Benefits described in Section 3.4.c
herein shall be provided to the Executive immediately upon the
Executive's Effective Date of Termination and shall continue to
be provided for three (3) full calendar years from the
Executive's Effective Date of Termination or until the
Executive reaches his Normal Retirement date, whichever occurs
earlier. However, the Severance Benefits described in Section
3.4.c herein shall be discontinued prior to the end of the
three (3) year period immediately upon the Executive receiving
substantially similar benefits from a subsequent employer, as
determined by the Committee.
5.2 Withholding of Taxes. Employer shall withhold
from any amounts payable under this Agreement all Federal,
state, city or other taxes as legally shall be required.
ARTICLE VI. PARACHUTE PAYMENTS.
6.1 Determination of Alternative Severance Benefit Limit.
Notwithstanding any other provision of this Agreement, if any
portion of the Severance Benefits or any other payment under
this Agreement, or under any other agreement with, or plan of,
Employer (in the aggregate "Total Payments") would constitute
an "excess parachute payment," then the payments to be made to
the Executive under this Agreement shall be reduced such that
the value of the aggregate Total Payments that the Executive is
entitled to receive shall be one dollar ($1) less than the
maximum amount which the Executive may receive without becoming
subject to the tax imposed by Section 4999 of the Code, or
which Employer may pay without loss of deduction under Section
280G(a) of the Code. However, such reduction in Severance
Benefits shall apply if, and only if, the resulting Severance
Benefits with such reduction is greater in value to the
Executive than the value of the Severance Benefits without a
reduction, net of any tax imposed on the Executive pursuant to
Section 4999 of the Code. For purposes of this Agreement, the
terms "excess parachute payment" and "parachute payments" shall
have the meanings assigned to such terms in Section 280G of the
Code, and such "parachute payments" shall be valued as provided
therein.
6.2 Procedure for Establishing Alternative Limitation.
Within fifteen (15) calendar days following delivery of the
notice of Qualifying Termination or notice by Employer to the
Executive of its belief that there is a payment or benefit due
the Executive which will result in an "excess parachute
payment" as defined in Section 280G of the Code, the Executive
and such Employer, at Employer's expense, shall obtain the
opinion of such Employer's principal outside law firm,
accounting firm, and/or compensation and benefits consulting
firm, which sets forth: (a) the amount of the Executive's
"annualized includible compensation for the base period" (as
defined in Section 280G(d)(1) of the Code); (b) the present
value of the Total Payments; and (c) the amount and present
value of any "excess parachute payment."
In the event that such opinion determines that there
would be an "excess parachute payment," such that a reduction
in the Severance Benefits would result in a greater net benefit
to the Executive (as provided in Section 6.1 herein), then the
Severance Benefits hereunder or any other payment determined
under the opinion to be includible in Total Payments shall be
reduced or eliminated so that, on the basis of calculations set
forth in such opinion, there will be no "excess
parachute payment". The reduction or elimination of specific
payments shall apply to such type and amount of specific
payments as may be designated by the Executive in writing
delivered to Employer within ten (10) calendar days of receipt
of the opinion, or if the Executive fails to so notify such
Employer, as may be reasonably determined by it.
The provisions of this Section 6.2, including the
calculations, notices, and opinion provided herein, shall be
based upon the conclusive presumption that the following
amounts are reasonable: (a) the compensation and benefits
provided for in Article III herein; and (b) any other
compensation earned prior to the Effective Date of Termination
by the Executive pursuant to ML&P's and any Successor
Employer's compensation programs (if such payments would have
been made in the future in any event, even though the timing of
such payment is triggered by the Change in Control).
6.3 Subsequent Imposition of Excise Tax. If,
notwithstanding compliance with the provisions of Sections 6.1
and 6.2 herein, it is ultimately determined by a court or
pursuant to a final determination by the Internal Revenue
Service that any portion of the Total Payments is considered to
be a "parachute payment", subject to excise tax under Section
4999 of the Code, which was not contemplated to be a "parachute
payment" at the time of payment (so as to accurately determine
whether a limitation should have been applied to the Total
Payments to maximize the net benefit to the Executive, as
provided in Sections 6.1 and 6.2 herein), the Executive shall
be entitled to receive a lump sum cash payment sufficient to
place the Executive in the same net after-tax position,
computed by using the "Special Tax Rate" as such term is
defined below, that the Executive would have been in had such
payment not been subject to such excise tax, and had the
Executive not incurred any interest charges or penalties with
respect to the imposition of such excise tax. For purposes of
this Agreement, the "Special Tax Rate" shall be the highest
effective Federal and state marginal tax rates applicable to
the Executive in the year in which the payment contemplated
under this Section 6.3 is made.
ARTICLE VII. OTHER RIGHTS AND BENEFITS NOT AFFECTED.
7.1 Other Benefits. Neither the provisions of this
Agreement nor the Severance Benefits provided for hereunder
shall reduce any amounts otherwise payable, or in any way
diminish the Executive's rights as an employee of ML&P or its
Subsidiaries or a Successor Employer, whether existing now or
hereafter, under any benefit, incentive, retirement, stock
option, stock bonus, stock purchase plan, or any employment
agreement, or other plan or arrangement.
7.2 Employment Status. This Agreement does not
constitute a contract of employment or impose on ML&P or its
Subsidiaries or any Successor Employer any obligation to retain
the Executive as an employee, to change the status of the
Executive's employment, or to change such entity's policies
regarding termination of employment.
ARTICLE VIII. SUCCESSORS.
8.1 Successors.
a. This Agreement shall be binding upon ML&P,
any Successor Employer that has assumed this Agreement,
and their respective successors and assigns. ML&P shall
require any Successor Employer to expressly assume and
agree to perform this Agreement and all of ML&P's
obligations hereunder. Failure of ML&P to obtain such
assumption and agreement prior to the effectiveness of any
Change in Control that results in a transfer of
Executive's employment to a Successor Employer shall
constitute Good Reason for voluntary termination of
employment by Executive, pursuant to Sections 3.2 and 3.3
hereof.
b. If in connection with and prior to the
effectiveness of a Change in Control a Successor Employer
has assumed this Agreement in accordance with
Section 8.1.a, then following such Change in Control
neither ML&P, nor any successor to it that does not
directly or indirectly control and is not directly or
indirectly controlled by or under common control with,
such Successor Employer, shall have any further liability
or obligation hereunder. For purposes of the foregoing
and the definition of "Successor Employer" in Section 2.1,
"control" (including the terms controlling, controlled by
and under common control with) shall have the meaning set
forth in Rule 405 under the Securities Act of 1933 (17 CFR
230.405).
c. This Agreement shall inure to the benefit
of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees, and legatees. If Executive
should die while any amount would still be payable to him
hereunder had he continued to live, all such amounts,
unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement, to the
Executive's devisee, legatee, or other designee, or if
there is no such designee, to the Executive's estate.
8.2 Beneficiaries. In the event of the death of the
Executive, all unpaid amounts payable to the Executive under
this Agreement shall be paid to his or her Beneficiary. The
Executive's spouse and other dependents shall continue to be
covered by all applicable welfare benefits during the remainder
of the Severance Benefits period, if any, pursuant to
Section 3.4.c (unless payments at death are specified by the
applicable welfare benefits provisions). The Beneficiary of
the Executive's Severance Benefits under this Agreement shall
be designated by the Executive in the form of a signed writing
acceptable to the Committee. The Executive may make or change
such designation at any time.
ARTICLE IX. ADMINISTRATION.
9.1 Administration. The Compensation Committee shall
administer this Agreement. The Committee is authorized, prior
to occurrence of a Change in Control, to interpret this
Agreement, to prescribe and rescind rules and regulations, to
provide conditions and assurances deemed necessary and
advisable, to protect the interest of ML&P or its Subsidiaries,
and to make all other determinations necessary or advisable for
the Agreement's administration. In fulfilling its
administrative duties hereunder, the Committee may rely on
outside counsel, independent accountants, or other consultants
to render advice or assistance.
9.2 Indemnification and Exculpation. The members of the
Board, its agents and officers, directors and employees of ML&P
and its Subsidiaries shall be indemnified and held harmless by
ML&P and its Subsidiaries against and from any and all loss,
cost, liability, or expense that may be imposed upon or
reasonably incurred by them in connection with or resulting
from any claim, action, suit or proceeding to which they may be
a party or in which they may be involved by reason of any
action taken or failure to act under this Agreement and against
and from any and all amounts paid by them in settlement (with
ML&P's written approval) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding. The foregoing
provision shall not be applicable to any person if the loss,
cost, liability or expense is due to such person's gross
negligence or willful misconduct.
9.3 Legal Fees. ML&P (or, if applicable, any Successor
Employer that has assumed the Agreement) shall pay all
reasonable legal fees, costs of litigation and other expenses
incurred in good faith by the Executive as a result of its
refusal to provide the Severance Benefits which it is obligated
to provide to Executive under this Agreement, or as a result of
ML&P or such Successor Employer contesting the validity,
enforceability or interpretation of the Agreement; provided,
however, that such payments shall not exceed the amount
permitted by law.
IN WITNESS WHEREOF, ML&P has caused this Agreement to
be executed as of the day and year first above written.
MAUI LAND & PINEAPPLE COMPANY, INC.
By /S/ GARY L. GIFFORD
Its President
/S/ PAUL J. MEYER
Paul J. Meyer, "Executive"
ATTEST:
/S/ J. SUSAN CORLEY
AMENDED AND RESTATED
MAUI LAND & PINEAPPLE COMPANY, INC.
EXECUTIVE CHANGE-IN-CONTROL SEVERANCE AGREEMENT
(President/CEO and Executive Vice Presidents)
Donald A. Young, Executive Vice President/Resort
ARTICLE I. ESTABLISHMENT AND PURPOSE.
1.1 Effective Date. This Amended and Restated Executive
Change-in-Control Severance Agreement (the "Agreement") is made
and entered into and is effective as of the 16th day of March,
1999 ("Effective Date"), by and between Maui Land & Pineapple
Company, Inc. ("ML&P"), a Hawaii corporation, and Donald A.
Young ("Executive"). This Agreement shall supersede and
replace any prior severance agreement entered into between ML&P
and the Executive.
1.2 Term of the Agreement.
a. The Agreement shall commence as of the Effective
Date written above, and shall continue until terminated in
accordance with this paragraph 1.2. This Agreement may be
terminated by the Board of Directors of ML&P (the "Board")
upon one hundred eighty (180) days advance written notice
to the Executive; provided, however, that the Board may
not terminate this Agreement (i) after the occurrence of a
Change in Control or (ii) during the respective periods
set forth in Section 1.2.c or 1.2.d below.
b. In the event that a Change in Control, as
defined in Section 2.1 herein, occurs during the term of
this Agreement, this Agreement shall remain irrevocably in
effect for the greater of thirty-six (36) months from the
date of such Change in Control, or until all benefits have
been paid to the Executive hereunder.
c. In the event that the Board has knowledge that a
third party has taken steps reasonably calculated to
effect a Change in Control, including, but not limited to
the commencement of a tender offer for the voting stock of
ML&P, or the circulation of a proxy to ML&P's
shareholders, then the Board shall not be permitted
thereafter to exercise the termination right provided by
Section 1.2.a unless and until the Board, in good faith,
has determined that such third party has fully abandoned
or terminated its effort to effect a Change in Control.
d. In the event that the Board approves in
principle one or more transactions the implementation of
which would result in a Change in Control, then the Board
shall not be permitted thereafter to exercise the
termination right provided by Section 1.2.a unless and
until the Board, in good faith, has determined to fully
abandon and terminate all efforts by ML&P or its
Subsidiaries to implement such transactions.
1.3 Purpose of the Agreement. The purpose of this Agreement
is to advance the interests of ML&P and its Subsidiaries by
assuring that ML&P and its Subsidiaries shall have the
continued employment and dedication of the Executive and the
availability of his advice and counsel in the event that an
acquisition or Change in Control occurs. This Agreement shall
also assure the Executive of equitable treatment during the
period of uncertainty that surrounds an acquisition or Change
in Control, and allow the Executive to act at all times in the
best interest of ML&P and its shareholders.
1.4 Contractual Right to Benefits. This Agreement establishes
and vests in the Executive a contractual right to the benefits
which he or she is entitled hereunder, enforceable by the
Executive against ML&P or any Successor Employer that assumes
this Agreement. However, nothing herein shall require ML&P or
any such Successor Employer to segregate, earmark, or otherwise
set aside any funds or other assets to provide for any payments
hereunder.
1.5 Legal Status. This Agreement shall be considered an
unfunded agreement to provide welfare benefits to a select
group of management or highly compensated employees and is
therefore intended to be a "top-hat" plan exempt from the
requirements of the provisions of Parts 2, 3 and 4 of Title I
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
ARTICLE II. DEFINITIONS AND CONSTRUCTION.
2.1 Definitions. Whenever used in this Agreement, the
following terms shall have the meanings set forth below and,
when the meaning is intended, the initial letter of the word is
capitalized.
a. "Base Salary" means Executive's annualized
salary, which includes all regular basic wages before
reduction for any amounts deferred on a tax-qualified or
nonqualified basis, payable in cash to Executive for
services rendered during the Year. Base Salary shall
exclude bonuses, incentive compensation, special fees or
awards, commissions, allowances, or any other form of
premium or incentive pay, or amounts properly designated
by Employer as payment toward or reimbursement of
expenses.
b. "Beneficial Owner" shall have the meaning
ascribed to such terms in Rule 13d-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
c. "Beneficiary" with respect to Executive means
the persons or entities designated or deemed designated by
the Executive pursuant to Section 8.2 herein.
d. "Board" means the Board of Directors of ML&P.
e. "Change in Control" means one or more of the
following occurrences with respect to ML&P or a
Subsidiary:
(1) Any Person, including a "group" as defined in Section 13
(d)(3) of the Exchange Act, who is not at the date of this
Agreement the beneficial owner of shares of the given entity
having 25% or more of the total number of votes that may be
cast for the election of Directors of such entity, becomes the
beneficial owner (including acquisition of beneficial ownership
resulting from formation of a "group") of shares of such entity
having 25% or more of such voting power;
(2) Any Person, including a "group" as defined in
Section 13(d)(3) of the Exchange Act, who is not at the date of
this Agreement the beneficial owner of shares of a given entity
having 50% or more of the total number of votes that may be
cast for the election of Directors of such entity, becomes the
beneficial owner (including acquisition of beneficial ownership
resulting from formation of a "group") of shares of such entity
having 50% or more of such voting power;
(3) As the result of, or in connection with any cash tender or
exchange offer, merger or other business combination, sale of
assets or contested election, or any combination of the
foregoing transactions, the Persons who were Directors of the
given entity before the transaction shall cease to constitute a
majority of the Board of Directors of such entity or any
successor to such entity;
(4) A merger or consolidation of the given entity in which the
surviving entity is neither ML&P nor a direct or indirect
wholly owned subsidiary of ML&P; or
(5) The sale, transfer, or other disposition of all or
substantially all of the assets of the given entity (and for
this purpose, the term "substantially all" shall mean assets
having a fair market value, whether or not realized in the
transaction, that is 50% or more of the aggregate fair market
value of all assets of such entity); and, in addition, in the
case of a Subsidiary, the sale, transfer or other disposition
(other than to an entity that is before and following such
transaction a direct or indirect wholly owned subsidiary of
M&LP) of securities that immediately prior to such transaction
constituted 50% or more of such Subsidiary's outstanding voting
securities.
(6) A spin-off, split-off, split-up or similar divisive
reorganization affecting ML&P and/or its Subsidiaries.
f. "Committee" means the Compensation Committee of
the Board of Directors of ML&P or any other committee
appointed by the Board to administer this Agreement;
provided that following a Change in Control "Committee"
shall mean the Persons who constituted the Committee
immediately prior to the Change in Control.
g. "Disability" means a physical or mental
condition which renders Executive unable to discharge his
normal work responsibility with Employer and which, in the
opinion of a licensed physician selected by the Executive,
subject to reasonable approval by the Committee based upon
sufficient medical evidence, can be reasonably expected to
continue for a period of at least one full calendar year.
If Executive fails to select a physician within ten (10)
business days of a written request made by Employer, then
Employer may select a physician for purposes of this
paragraph.
h. "Effective Date" has the meaning set forth in
Section 1.1.
i. "Effective Date of Termination" means the
date on which a Qualifying Termination occurs.
j. "Employer" means ML&P, or any Successor
Employer that has assumed this Agreement pursuant to
Section 8.1.a.
k. "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time, or any
successor act thereto.
l. "Expiration Date" means the date the
Agreement terminates, as provided in Section 1.2 herein.
m. "Just Cause" means the basis for a termination
of Executive's employment for which no Severance Benefits
are payable hereunder, as provided in Article IV herein.
n. "ML&P" means Maui Land & Pineapple Company,
Inc., a Hawaii corporation.
o. "Normal Retirement Date" shall mean the
date on which the Executive attains age 65.
p. "Person" shall have the meaning ascribed to such
terms in Section 3(a)(9) of the Exchange Act and used in
Sections 13(d) and 14(d) thereof, including a "group" as
defined and used in Section 13(d) and Regulation 13D
thereunder; provided that for purposes of Section 2.1(e)
"Person" shall not include any entity that is a direct or
indirect wholly owned subsidiary of ML&P.
q. "Qualifying Termination" means a termination of
the Executive's employment as described in
Section 3.2 herein.
r. "Severance Benefit" means the payment of
severance compensation as provided in Article III herein.
s. "Subsidiaries" means Maui Pineapple Company,
Ltd. and Kapalua Land Company, Ltd.
t. "Successor Employer" means an entity that
becomes Executive's employer in connection with a Change
in Control and which following such Change in Control does
not control, and is not controlled by or under common
control with, ML&P.
u. "Year" means the consecutive 12-month period
beginning each January 1 and ending December 31.
2.2 Gender and Number. Except where otherwise indicated
by the context, any masculine term used herein also shall
include the feminine, the plural shall include the singular,
and the singular shall include the plural.
2.3 Severability. In the event any provision of the
Agreement shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts
of the Agreement, and the Agreement shall be construed and
enforced as if the illegal or invalid provision had not been
included.
2.4 Modification. No express provisions of this
Agreement may be modified, waived, or discharged unless such
modification, waiver, or discharge is agreed to by the
Executive in writing and approved by Employer's board
of directors.
2.5 Applicable Law. To the extent not preempted by the
laws of the United States, the laws of the State of Hawaii
shall be the controlling law in all matters relating to the
Agreement without regard to the conflicts of law principles in
such laws.
ARTICLE III. SEVERANCE BENEFITS.
3.1 Right to Severance Benefits. The Executive shall be
entitled to receive Severance Benefits as described in Section
3.4 herein, if there has been a Change in Control as defined in
Section 2.1(e) herein, and if, within thirty-six (36) months
thereafter, the Executive's employment shall end for any reason
specified in Section 3.2 herein as being a Qualifying
Termination. The Executive shall not be entitled to receive
Severance Benefits if the Executive's employment is
involuntarily terminated for Just Cause, as provided under
Article IV herein, or if the Executive's employment terminates
due to death or Disability.
3.2 Qualifying Termination. The occurrence of any one or
more of the following events within thirty-six (36) calendar
months after a Change in Control shall entitle the Executive to
the payment of Severance Benefits, as provided under Section
3.4 herein:
a. Involuntary termination of the Executive's
employment without Just Cause (as defined in Article IV
herein) (other than a merely technical termination arising
from a good faith reassignment in connection with a Change
in Control of officers and employees of ML&P and/or its
Subsidiaries and following which Executive remains an
employee of (i) ML&P or a Subsidiary that continues
thereafter to be wholly owned by ML&P or (ii) a Successor
Employer that has assumed ML&P's obligations under this
Agreement in accordance with Section 8.1.a); or
b. The Executive's voluntary employment termination
for Good Reason (as defined by Section 3.3 herein).
3.3 Definition of Good Reason. "Good Reason" means,
without the Executive's express written consent, the occurrence
after a Change in Control of any one or more of the following:
a. The assignment of the Executive to duties
materially inconsistent with the Executive's authorities,
duties, responsibilities, and status (including offices,
titles and reporting requirements) as an executive and/or
officer of Employer, or a material reduction of the
Executive's authorities, duties, or responsibilities from
those in effect as of ninety (90) days prior to the Change
in Control, other than an act that is remedied promptly
after Employer's receipt of notice thereof given by the
Executive (provided, however, that "Good Reason" shall not
include the events described in the preceding portions of
this paragraph (a) if the changes described therein have
been approved by a majority of the Board of ML&P and also
by a number of such directors who comprised at least a
majority of the Board of ML&P 90 days prior to the Change
In Control);
b. Employer requiring the Executive to be based at
a location in excess of seventy-five (75) miles from the
location of the Executive's principal job location or
office immediately prior to the Change in Control, except
for required travel on company business to an extent
substantially consistent with the Executive's then present
business travel obligations;
c. A more than ten percent (10%) reduction of the
Executive's annual rate of Base Salary in effect as of
ninety (90) days prior to the Change in Control;
d. The failure to continue in effect any of ML&P's
or its Subsidiaries' annual incentive compensation plans,
or employee benefit or retirement plans, policies,
practices, or similar compensatory arrangements in which
the Executive participated as of the 180th day preceding
the Change in Control (unless such failure to continue the
plan, policy, practice or arrangement pertains generally
to all plan participants) or the failure to continue the
Executive's participation therein on substantially the
same basis, both in terms of the amount of benefits
provided and the level of the Executive's participation
relative to other participants; provided, however, that
this Section 3.3.d shall not apply in the case of a Change
in Control described in Section 2.1.e (6) if:
(a) Executive's employer thereafter is ML&P or a wholly
owned Subsidiary thereof, or a Successor Employer that has
in accordance with Section 8.1 expressly assumed this
Agreement; (b) a failure to continue the plan, policy,
practice or arrangement or Executive's participation
therein pertains generally to all participants employed by
such employer; and (c) the aggregate annualized value to
Executive of benefits provided under all of such
employer's incentive compensation plans, other employee
benefit or retirement plans, policies, practices, or
similar compensatory arrangements (excluding any costs
incurred in connection with this Agreement) is at least
90% of the value to Executive of benefits so provided by
ML&P and its Subsidiaries for the last Year ended prior to
the Change in Control.
e. The failure of ML&P to obtain an agreement from
any Successor Employer (as contemplated by Article VIII)
to assume this Agreement and to perform ML&P's obligations
to Executive hereunder.
f. A material breach of obligations to Executive
under this Agreement by ML&P, or by a Successor Employer
that has assumed this Agreement, if such breach has not
been cured to the reasonable satisfaction of Executive
within thirty (30) days following delivery of written
notice thereof by Executive to the breaching party.
3.4 Description of Severance Benefits. In the event that
Executive becomes entitled to receive Severance Benefits, as
provided in Section 3.1 herein, ML&P shall pay to the Executive
and provide him with the following:
a. An amount equal to 2.99 times the Executive's
annual rate of Base Salary in effect upon the Effective
Date of Termination (or, if greater, 2.99 times the
Executive's annual rate of Base Salary in effect ninety
(90) days prior to the Change in Control); and
b. A payout under the ML&P Annual Incentive Plan,
or any similar plan Employer maintains, or is obligated by
Section 3.3.d to provide, in accordance with the terms of
such plan; and
c. A continuation of all welfare benefits at normal
employee cost including medical and dental insurance, long-
term disability, group term life insurance, and accidental
death & dismemberment insurance for three (3) full years
from the Effective Date of Termination or until the
Executive reaches his Normal Retirement Date, whichever
occurs earlier. In the event that participation in any
one or more of the welfare benefits is not possible under
the terms of the governing welfare benefit provisions or
due to the modification or elimination of the welfare
benefits, Employer shall provide substantially identical
welfare benefits at the normal employee cost of the
affected welfare benefits. However, these benefits shall
be discontinued prior to the end of the three (3) years in
the event the Executive receives substantially similar
benefits from a subsequent employer, as determined by the
Committee. The right of the Executive and his spouse and
other dependents to continued group health coverage under
Section 4980B of the Internal Revenue Code of 1986, as
amended ("Code"), shall commence at the end of the
applicable Severance Benefits period. Unless otherwise
provided under this Agreement, the applicable Severance
Benefits period shall be treated as if it were a period of
employment with ML&P or its Subsidiaries (or, if Executive
so elects, with any Successor Employer) for purposes of
determining rights and benefits under any retirement plan
or other plan or program and shall be treated as a period
of covered employment under such plan or other plan or
program if the Executive was in covered employment
immediately prior to the Change in Control, provided that,
if such treatment is not possible under the terms of such
plan or other plan or program, Employer shall directly
provide substantially identical benefits attributable to
the crediting of the Severance Benefits period.
3.5 Reduction of Severance Benefits. In the event there
are fewer than thirty-six (36) whole or partial months
remaining from the Executive's Effective Date of Termination
until the Executive's Normal Retirement Date, then the amounts
provided for under Section 3.4.a above shall be reduced by a
fraction, the numerator of which shall be the number of whole
or partial months remaining until the Executive's Normal
Retirement Date, and the denominator of which shall be
thirty-six (36).
3.6 Special Retirement Benefits. The Executive shall
receive special retirement benefits as provided below, so that
the total retirement benefits that the Executive receives will
equal the retirement benefits that the Executive would have
received under the Maui Land & Pineapple Company, Inc. Pension
Plan for Non-Bargaining Unit Employees ("Retirement Plan"),
Supplemental Executive Retirement Plan, and Executive
Supplemental Insurance Plan/Executive Deferred Compensation
Plan (collectively, "Plans"), under the terms thereof that
existed ninety (90) days prior to the Change in Control, had
the Executive continued in the employ of ML&P and its
Subsidiaries for three (3) years following the Executive's
Effective Date of Termination (or until his Normal Retirement
Date, whichever is earlier) but without regard to any ancillary
benefits. The amount of special retirement benefits payable
hereunder to the Executive or his beneficiaries shall equal the
excess of the amount specified in (a) over the amount specified
in (b) below.
a. The total retirement benefits on an actuarial
equivalent single-life basis would be paid to the
Executive if the three (3) years (or the period to his
Normal Retirement Date, if less) following the Executive's
Effective Date of Termination are added to his credited
service under the Plans.
b. The total retirement benefits actually paid on
an actuarial equivalent single-life basis to the
Executive.
Such special retirement benefits shall be paid at the
same time and in the same form (e.g., actuarial equivalent
single-life or contingent annuitant basis) as was required with
respect to the Executive's retirement benefits under the Plans.
The special retirement benefits shall be paid by the Plans or,
if the terms of such Plans do not provide for such benefits,
the special retirement benefits shall be paid directly by
Employer. The actuarial equivalent of special retirement
benefits shall be determined in accordance with the factors
provided under the Retirement Plan.
3.7 Outplacement Services. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, the Executive shall be
entitled, at the expense of Employer, to receive standard
outplacement services as selected by the Executive, for a
period of up to thirty-six (36) months from the Effective Date
of Termination. However, such services shall not exceed a
maximum annual benefit of ten percent (10%) of the Executive's
annual rate of Base Salary in effect ninety (90) days prior to
the Change in Control.
3.8 Incentive Compensation. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, any deferred awards previously
granted to the Executive under ML&P's or its Subsidiaries' or
any Successor Employer's incentive compensation plans and not
previously paid to the Executive shall immediately vest on the
date of the Executive's Effective Date of Termination and shall
be paid no later than ninety (90) calendar days following that
date, and be included as compensation in the month paid.
ARTICLE IV. DISQUALIFICATION FROM RECEIPT OF BENEFITS.
No Severance Benefits shall be payable to the
Executive under this Agreement in the event the Executive is
terminated by Employer for Just Cause. For this purpose, Just
Cause shall mean willful, malicious conduct by the Executive
which is detrimental to the best interests of Employer,
including theft, embezzlement, the conviction of a criminal
act, disclosure of trade secrets, a gross dereliction of duty,
or other grave misconduct on the part of the Executive which is
substantially injurious to Employer. Just Cause also shall
include a material breach by the Executive of any of his
covenants under this Agreement, if such breach has not been
cured to the reasonable satisfaction of Employer within thirty
(30) days following written notice thereof by Employer to the
Executive.
ARTICLE V. FORM AND TIMING OF SEVERANCE BENEFITS.
5.1 Form and Timing of Severance Benefits. The
Severance Benefits described in Sections 3.4.a, 3.4.b and 3.8
herein shall be paid in cash to the Executive in a single lump
sum as soon as practicable following the Executive's Effective
Date of Termination, but in no event beyond ninety (90)
calendar days from such date.
The Severance Benefits described in Section 3.4.c
herein shall be provided to the Executive immediately upon the
Executive's Effective Date of Termination and shall continue to
be provided for three (3) full calendar years from the
Executive's Effective Date of Termination or until the
Executive reaches his Normal Retirement date, whichever occurs
earlier. However, the Severance Benefits described in Section
3.4.c herein shall be discontinued prior to the end of the
three (3) year period immediately upon the Executive receiving
substantially similar benefits from a subsequent employer, as
determined by the Committee.
5.2 Withholding of Taxes. Employer shall withhold
from any amounts payable under this Agreement all Federal,
state, city or other taxes as legally shall be required.
ARTICLE VI. PARACHUTE PAYMENTS.
6.1 Determination of Alternative Severance Benefit Limit.
Notwithstanding any other provision of this Agreement, if any
portion of the Severance Benefits or any other payment under
this Agreement, or under any other agreement with, or plan of,
Employer (in the aggregate "Total Payments") would constitute
an "excess parachute payment," then the payments to be made to
the Executive under this Agreement shall be reduced such that
the value of the aggregate Total Payments that the Executive is
entitled to receive shall be one dollar ($1) less than the
maximum amount which the Executive may receive without becoming
subject to the tax imposed by Section 4999 of the Code, or
which Employer may pay without loss of deduction under Section
280G(a) of the Code. However, such reduction in Severance
Benefits shall apply if, and only if, the resulting Severance
Benefits with such reduction is greater in value to the
Executive than the value of the Severance Benefits without a
reduction, net of any tax imposed on the Executive pursuant to
Section 4999 of the Code. For purposes of this Agreement, the
terms "excess parachute payment" and "parachute payments" shall
have the meanings assigned to such terms in Section 280G of the
Code, and such "parachute payments" shall be valued as provided
therein.
6.2 Procedure for Establishing Alternative Limitation.
Within fifteen (15) calendar days following delivery of the
notice of Qualifying Termination or notice by Employer to the
Executive of its belief that there is a payment or benefit due
the Executive which will result in an "excess parachute
payment" as defined in Section 280G of the Code, the Executive
and such Employer, at Employer's expense, shall obtain the
opinion of such Employer's principal outside law firm,
accounting firm, and/or compensation and benefits consulting
firm, which sets forth: (a) the amount of the Executive's
"annualized includible compensation for the base period" (as
defined in Section 280G(d)(1) of the Code); (b) the present
value of the Total Payments; and (c) the amount and present
value of any "excess parachute payment."
In the event that such opinion determines that there
would be an "excess parachute payment," such that a reduction
in the Severance Benefits would result in a greater net benefit
to the Executive (as provided in Section 6.1 herein), then the
Severance Benefits hereunder or any other payment determined
under the opinion to be includible in Total Payments shall be
reduced or eliminated so that, on the basis of calculations set
forth in such opinion, there will be no "excess
parachute payment". The reduction or elimination of specific
payments shall apply to such type and amount of specific
payments as may be designated by the Executive in writing
delivered to Employer within ten (10) calendar days of receipt
of the opinion, or if the Executive fails to so notify such
Employer, as may be reasonably determined by it.
The provisions of this Section 6.2, including the
calculations, notices, and opinion provided herein, shall be
based upon the conclusive presumption that the following
amounts are reasonable: (a) the compensation and benefits
provided for in Article III herein; and (b) any other
compensation earned prior to the Effective Date of Termination
by the Executive pursuant to ML&P's and any Successor
Employer's compensation programs (if such payments would have
been made in the future in any event, even though the timing of
such payment is triggered by the Change in Control).
6.3 Subsequent Imposition of Excise Tax. If,
notwithstanding compliance with the provisions of Sections 6.1
and 6.2 herein, it is ultimately determined by a court or
pursuant to a final determination by the Internal Revenue
Service that any portion of the Total Payments is considered to
be a "parachute payment", subject to excise tax under Section
4999 of the Code, which was not contemplated to be a "parachute
payment" at the time of payment (so as to accurately determine
whether a limitation should have been applied to the Total
Payments to maximize the net benefit to the Executive, as
provided in Sections 6.1 and 6.2 herein), the Executive shall
be entitled to receive a lump sum cash payment sufficient to
place the Executive in the same net after-tax position,
computed by using the "Special Tax Rate" as such term is
defined below, that the Executive would have been in had such
payment not been subject to such excise tax, and had the
Executive not incurred any interest charges or penalties with
respect to the imposition of such excise tax. For purposes of
this Agreement, the "Special Tax Rate" shall be the highest
effective Federal and state marginal tax rates applicable to
the Executive in the year in which the payment contemplated
under this Section 6.3 is made.
ARTICLE VII. OTHER RIGHTS AND BENEFITS NOT AFFECTED.
7.1 Other Benefits. Neither the provisions of this
Agreement nor the Severance Benefits provided for hereunder
shall reduce any amounts otherwise payable, or in any way
diminish the Executive's rights as an employee of ML&P or its
Subsidiaries or a Successor Employer, whether existing now or
hereafter, under any benefit, incentive, retirement, stock
option, stock bonus, stock purchase plan, or any employment
agreement, or other plan or arrangement.
7.2 Employment Status. This Agreement does not
constitute a contract of employment or impose on ML&P or its
Subsidiaries or any Successor Employer any obligation to retain
the Executive as an employee, to change the status of the
Executive's employment, or to change such entity's policies
regarding termination of employment.
ARTICLE VIII. SUCCESSORS.
8.1 Successors.
a. This Agreement shall be binding upon ML&P,
any Successor Employer that has assumed this Agreement,
and their respective successors and assigns. ML&P shall
require any Successor Employer to expressly assume and
agree to perform this Agreement and all of ML&P's
obligations hereunder. Failure of ML&P to obtain such
assumption and agreement prior to the effectiveness of any
Change in Control that results in a transfer of
Executive's employment to a Successor Employer shall
constitute Good Reason for voluntary termination of
employment by Executive, pursuant to Sections 3.2 and 3.3
hereof.
b. If in connection with and prior to the
effectiveness of a Change in Control a Successor Employer
has assumed this Agreement in accordance with
Section 8.1.a, then following such Change in Control
neither ML&P, nor any successor to it that does not
directly or indirectly control and is not directly or
indirectly controlled by or under common control with,
such Successor Employer, shall have any further liability
or obligation hereunder. For purposes of the foregoing
and the definition of "Successor Employer" in Section 2.1,
"control" (including the terms controlling, controlled by
and under common control with) shall have the meaning set
forth in Rule 405 under the Securities Act of 1933 (17 CFR
230.405).
c. This Agreement shall inure to the benefit
of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees, and legatees. If Executive
should die while any amount would still be payable to him
hereunder had he continued to live, all such amounts,
unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement, to the
Executive's devisee, legatee, or other designee, or if
there is no such designee, to the Executive's estate.
8.2 Beneficiaries. In the event of the death of the
Executive, all unpaid amounts payable to the Executive under
this Agreement shall be paid to his or her Beneficiary. The
Executive's spouse and other dependents shall continue to be
covered by all applicable welfare benefits during the remainder
of the Severance Benefits period, if any, pursuant to
Section 3.4.c (unless payments at death are specified by the
applicable welfare benefits provisions). The Beneficiary of
the Executive's Severance Benefits under this Agreement shall
be designated by the Executive in the form of a signed writing
acceptable to the Committee. The Executive may make or change
such designation at any time.
ARTICLE IX. ADMINISTRATION.
9.1 Administration. The Compensation Committee shall
administer this Agreement. The Committee is authorized, prior
to occurrence of a Change in Control, to interpret this
Agreement, to prescribe and rescind rules and regulations, to
provide conditions and assurances deemed necessary and
advisable, to protect the interest of ML&P or its Subsidiaries,
and to make all other determinations necessary or advisable for
the Agreement's administration. In fulfilling its
administrative duties hereunder, the Committee may rely on
outside counsel, independent accountants, or other consultants
to render advice or assistance.
9.2 Indemnification and Exculpation. The members of the
Board, its agents and officers, directors and employees of ML&P
and its Subsidiaries shall be indemnified and held harmless by
ML&P and its Subsidiaries against and from any and all loss,
cost, liability, or expense that may be imposed upon or
reasonably incurred by them in connection with or resulting
from any claim, action, suit or proceeding to which they may be
a party or in which they may be involved by reason of any
action taken or failure to act under this Agreement and against
and from any and all amounts paid by them in settlement (with
ML&P's written approval) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding. The foregoing
provision shall not be applicable to any person if the loss,
cost, liability or expense is due to such person's gross
negligence or willful misconduct.
9.3 Legal Fees. ML&P (or, if applicable, any Successor
Employer that has assumed the Agreement) shall pay all
reasonable legal fees, costs of litigation and other expenses
incurred in good faith by the Executive as a result of its
refusal to provide the Severance Benefits which it is obligated
to provide to Executive under this Agreement, or as a result of
ML&P or such Successor Employer contesting the validity,
enforceability or interpretation of the Agreement; provided,
however, that such payments shall not exceed the amount
permitted by law.
IN WITNESS WHEREOF, ML&P has caused this Agreement to
be executed as of the day and year first above written.
MAUI LAND & PINEAPPLE COMPANY, INC.
By /S/ GARY L. GIFFORD
Its President
/S/ DONALD A. YOUNG
Donald A. Young, "Executive"
ATTEST:
/S/ J. SUSAN CORLEY
AMENDED AND RESTATED
MAUI LAND & PINEAPPLE COMPANY, INC.
EXECUTIVE CHANGE-IN-CONTROL SEVERANCE AGREEMENT
(President/CEO and Executive Vice Presidents)
Douglas R. Schenk, Executive Vice President/Pineapple
ARTICLE I. ESTABLISHMENT AND PURPOSE.
1.1 Effective Date. This Amended and Restated Executive
Change-in-Control Severance Agreement (the "Agreement") is made
and entered into and is effective as of the 23rd day of March,
1999 ("Effective Date"), by and between Maui Land & Pineapple
Company, Inc. ("ML&P"), a Hawaii corporation, and Douglas R.
Schenk ("Executive"). This Agreement shall supersede and
replace any prior severance agreement entered into between ML&P
and the Executive.
1.2 Term of the Agreement.
a. The Agreement shall commence as of the Effective
Date written above, and shall continue until terminated in
accordance with this paragraph 1.2. This Agreement may be
terminated by the Board of Directors of ML&P (the "Board")
upon one hundred eighty (180) days advance written notice
to the Executive; provided, however, that the Board may
not terminate this Agreement (i) after the occurrence of a
Change in Control or (ii) during the respective periods
set forth in Section 1.2.c or 1.2.d below.
b. In the event that a Change in Control, as
defined in Section 2.1 herein, occurs during the term of
this Agreement, this Agreement shall remain irrevocably in
effect for the greater of thirty-six (36) months from the
date of such Change in Control, or until all benefits have
been paid to the Executive hereunder.
c. In the event that the Board has knowledge that a
third party has taken steps reasonably calculated to
effect a Change in Control, including, but not limited to
the commencement of a tender offer for the voting stock of
ML&P, or the circulation of a proxy to ML&P's
shareholders, then the Board shall not be permitted
thereafter to exercise the termination right provided by
Section 1.2.a unless and until the Board, in good faith,
has determined that such third party has fully abandoned
or terminated its effort to effect a Change in Control.
d. In the event that the Board approves in
principle one or more transactions the implementation of
which would result in a Change in Control, then the Board
shall not be permitted thereafter to exercise the
termination right provided by Section 1.2.a unless and
until the Board, in good faith, has determined to fully
abandon and terminate all efforts by ML&P or its
Subsidiaries to implement such transactions.
1.3 Purpose of the Agreement. The purpose of this Agreement
is to advance the interests of ML&P and its Subsidiaries by
assuring that ML&P and its Subsidiaries shall have the
continued employment and dedication of the Executive and the
availability of his advice and counsel in the event that an
acquisition or Change in Control occurs. This Agreement shall
also assure the Executive of equitable treatment during the
period of uncertainty that surrounds an acquisition or Change
in Control, and allow the Executive to act at all times in the
best interest of ML&P and its shareholders.
1.4 Contractual Right to Benefits. This Agreement establishes
and vests in the Executive a contractual right to the benefits
which he or she is entitled hereunder, enforceable by the
Executive against ML&P or any Successor Employer that assumes
this Agreement. However, nothing herein shall require ML&P or
any such Successor Employer to segregate, earmark, or otherwise
set aside any funds or other assets to provide for any payments
hereunder.
1.5 Legal Status. This Agreement shall be considered an
unfunded agreement to provide welfare benefits to a select
group of management or highly compensated employees and is
therefore intended to be a "top-hat" plan exempt from the
requirements of the provisions of Parts 2, 3 and 4 of Title I
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
ARTICLE II. DEFINITIONS AND CONSTRUCTION.
2.1 Definitions. Whenever used in this Agreement, the
following terms shall have the meanings set forth below and,
when the meaning is intended, the initial letter of the word is
capitalized.
a. "Base Salary" means Executive's annualized
salary, which includes all regular basic wages before
reduction for any amounts deferred on a tax-qualified or
nonqualified basis, payable in cash to Executive for
services rendered during the Year. Base Salary shall
exclude bonuses, incentive compensation, special fees or
awards, commissions, allowances, or any other form of
premium or incentive pay, or amounts properly designated
by Employer as payment toward or reimbursement of
expenses.
b. "Beneficial Owner" shall have the meaning
ascribed to such terms in Rule 13d-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
c. "Beneficiary" with respect to Executive means
the persons or entities designated or deemed designated by
the Executive pursuant to Section 8.2 herein.
d. "Board" means the Board of Directors of ML&P.
e. "Change in Control" means one or more of the
following occurrences with respect to ML&P or a
Subsidiary:
(1) Any Person, including a "group" as defined in Section 13
(d)(3) of the Exchange Act, who is not at the date of this
Agreement the beneficial owner of shares of the given entity
having 25% or more of the total number of votes that may be
cast for the election of Directors of such entity, becomes the
beneficial owner (including acquisition of beneficial ownership
resulting from formation of a "group") of shares of such entity
having 25% or more of such voting power;
(2) Any Person, including a "group" as defined in
Section 13(d)(3) of the Exchange Act, who is not at the date of
this Agreement the beneficial owner of shares of a given entity
having 50% or more of the total number of votes that may be
cast for the election of Directors of such entity, becomes the
beneficial owner (including acquisition of beneficial ownership
resulting from formation of a "group") of shares of such entity
having 50% or more of such voting power;
(3) As the result of, or in connection with any cash tender or
exchange offer, merger or other business combination, sale of
assets or contested election, or any combination of the
foregoing transactions, the Persons who were Directors of the
given entity before the transaction shall cease to constitute a
majority of the Board of Directors of such entity or any
successor to such entity;
(4) A merger or consolidation of the given entity in which the
surviving entity is neither ML&P nor a direct or indirect
wholly owned subsidiary of ML&P; or
(5) The sale, transfer, or other disposition of all or
substantially all of the assets of the given entity (and for
this purpose, the term "substantially all" shall mean assets
having a fair market value, whether or not realized in the
transaction, that is 50% or more of the aggregate fair market
value of all assets of such entity); and, in addition, in the
case of a Subsidiary, the sale, transfer or other disposition
(other than to an entity that is before and following such
transaction a direct or indirect wholly owned subsidiary of
M&LP) of securities that immediately prior to such transaction
constituted 50% or more of such Subsidiary's outstanding voting
securities.
(6) A spin-off, split-off, split-up or similar divisive
reorganization affecting ML&P and/or its Subsidiaries.
f. "Committee" means the Compensation Committee of
the Board of Directors of ML&P or any other committee
appointed by the Board to administer this Agreement;
provided that following a Change in Control "Committee"
shall mean the Persons who constituted the Committee
immediately prior to the Change in Control.
g. "Disability" means a physical or mental
condition which renders Executive unable to discharge his
normal work responsibility with Employer and which, in the
opinion of a licensed physician selected by the Executive,
subject to reasonable approval by the Committee based upon
sufficient medical evidence, can be reasonably expected to
continue for a period of at least one full calendar year.
If Executive fails to select a physician within ten (10)
business days of a written request made by Employer, then
Employer may select a physician for purposes of this
paragraph.
h. "Effective Date" has the meaning set forth in
Section 1.1.
i. "Effective Date of Termination" means the
date on which a Qualifying Termination occurs.
j. "Employer" means ML&P, or any Successor
Employer that has assumed this Agreement pursuant to
Section 8.1.a.
k. "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time, or any
successor act thereto.
l. "Expiration Date" means the date the
Agreement terminates, as provided in Section 1.2 herein.
m. "Just Cause" means the basis for a termination
of Executive's employment for which no Severance Benefits
are payable hereunder, as provided in Article IV herein.
n. "ML&P" means Maui Land & Pineapple Company,
Inc., a Hawaii corporation.
o. "Normal Retirement Date" shall mean the
date on which the Executive attains age 65.
p. "Person" shall have the meaning ascribed to such
terms in Section 3(a)(9) of the Exchange Act and used in
Sections 13(d) and 14(d) thereof, including a "group" as
defined and used in Section 13(d) and Regulation 13D
thereunder; provided that for purposes of Section 2.1(e)
"Person" shall not include any entity that is a direct or
indirect wholly owned subsidiary of ML&P.
q. "Qualifying Termination" means a termination of
the Executive's employment as described in
Section 3.2 herein.
r. "Severance Benefit" means the payment of
severance compensation as provided in Article III herein.
s. "Subsidiaries" means Maui Pineapple Company,
Ltd. and Kapalua Land Company, Ltd.
t. "Successor Employer" means an entity that
becomes Executive's employer in connection with a Change
in Control and which following such Change in Control does
not control, and is not controlled by or under common
control with, ML&P.
u. "Year" means the consecutive 12-month period
beginning each January 1 and ending December 31.
2.2 Gender and Number. Except where otherwise indicated
by the context, any masculine term used herein also shall
include the feminine, the plural shall include the singular,
and the singular shall include the plural.
2.3 Severability. In the event any provision of the
Agreement shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts
of the Agreement, and the Agreement shall be construed and
enforced as if the illegal or invalid provision had not been
included.
2.4 Modification. No express provisions of this
Agreement may be modified, waived, or discharged unless such
modification, waiver, or discharge is agreed to by the
Executive in writing and approved by Employer's board
of directors.
2.5 Applicable Law. To the extent not preempted by the
laws of the United States, the laws of the State of Hawaii
shall be the controlling law in all matters relating to the
Agreement without regard to the conflicts of law principles in
such laws.
ARTICLE III. SEVERANCE BENEFITS.
3.1 Right to Severance Benefits. The Executive shall be
entitled to receive Severance Benefits as described in Section
3.4 herein, if there has been a Change in Control as defined in
Section 2.1(e) herein, and if, within thirty-six (36) months
thereafter, the Executive's employment shall end for any reason
specified in Section 3.2 herein as being a Qualifying
Termination. The Executive shall not be entitled to receive
Severance Benefits if the Executive's employment is
involuntarily terminated for Just Cause, as provided under
Article IV herein, or if the Executive's employment terminates
due to death or Disability.
3.2 Qualifying Termination. The occurrence of any one or
more of the following events within thirty-six (36) calendar
months after a Change in Control shall entitle the Executive to
the payment of Severance Benefits, as provided under Section
3.4 herein:
a. Involuntary termination of the Executive's
employment without Just Cause (as defined in Article IV
herein) (other than a merely technical termination arising
from a good faith reassignment in connection with a Change
in Control of officers and employees of ML&P and/or its
Subsidiaries and following which Executive remains an
employee of (i) ML&P or a Subsidiary that continues
thereafter to be wholly owned by ML&P or (ii) a Successor
Employer that has assumed ML&P's obligations under this
Agreement in accordance with Section 8.1.a); or
b. The Executive's voluntary employment termination
for Good Reason (as defined by Section 3.3 herein).
3.3 Definition of Good Reason. "Good Reason" means,
without the Executive's express written consent, the occurrence
after a Change in Control of any one or more of the following:
a. The assignment of the Executive to duties
materially inconsistent with the Executive's authorities,
duties, responsibilities, and status (including offices,
titles and reporting requirements) as an executive and/or
officer of Employer, or a material reduction of the
Executive's authorities, duties, or responsibilities from
those in effect as of ninety (90) days prior to the Change
in Control, other than an act that is remedied promptly
after Employer's receipt of notice thereof given by the
Executive (provided, however, that "Good Reason" shall not
include the events described in the preceding portions of
this paragraph (a) if the changes described therein have
been approved by a majority of the Board of ML&P and also
by a number of such directors who comprised at least a
majority of the Board of ML&P 90 days prior to the Change
In Control);
b. Employer requiring the Executive to be based at
a location in excess of seventy-five (75) miles from the
location of the Executive's principal job location or
office immediately prior to the Change in Control, except
for required travel on company business to an extent
substantially consistent with the Executive's then present
business travel obligations;
c. A more than ten percent (10%) reduction of the
Executive's annual rate of Base Salary in effect as of
ninety (90) days prior to the Change in Control;
d. The failure to continue in effect any of ML&P's
or its Subsidiaries' annual incentive compensation plans,
or employee benefit or retirement plans, policies,
practices, or similar compensatory arrangements in which
the Executive participated as of the 180th day preceding
the Change in Control (unless such failure to continue the
plan, policy, practice or arrangement pertains generally
to all plan participants) or the failure to continue the
Executive's participation therein on substantially the
same basis, both in terms of the amount of benefits
provided and the level of the Executive's participation
relative to other participants; provided, however, that
this Section 3.3.d shall not apply in the case of a Change
in Control described in Section 2.1.e (6) if:
(a) Executive's employer thereafter is ML&P or a wholly
owned Subsidiary thereof, or a Successor Employer that has
in accordance with Section 8.1 expressly assumed this
Agreement; (b) a failure to continue the plan, policy,
practice or arrangement or Executive's participation
therein pertains generally to all participants employed by
such employer; and (c) the aggregate annualized value to
Executive of benefits provided under all of such
employer's incentive compensation plans, other employee
benefit or retirement plans, policies, practices, or
similar compensatory arrangements (excluding any costs
incurred in connection with this Agreement) is at least
90% of the value to Executive of benefits so provided by
ML&P and its Subsidiaries for the last Year ended prior to
the Change in Control.
e. The failure of ML&P to obtain an agreement from
any Successor Employer (as contemplated by Article VIII)
to assume this Agreement and to perform ML&P's obligations
to Executive hereunder.
f. A material breach of obligations to Executive
under this Agreement by ML&P, or by a Successor Employer
that has assumed this Agreement, if such breach has not
been cured to the reasonable satisfaction of Executive
within thirty (30) days following delivery of written
notice thereof by Executive to the breaching party.
3.4 Description of Severance Benefits. In the event that
Executive becomes entitled to receive Severance Benefits, as
provided in Section 3.1 herein, ML&P shall pay to the Executive
and provide him with the following:
a. An amount equal to 2.99 times the Executive's
annual rate of Base Salary in effect upon the Effective
Date of Termination (or, if greater, 2.99 times the
Executive's annual rate of Base Salary in effect ninety
(90) days prior to the Change in Control); and
b. A payout under the ML&P Annual Incentive Plan,
or any similar plan Employer maintains, or is obligated by
Section 3.3.d to provide, in accordance with the terms of
such plan; and
c. A continuation of all welfare benefits at normal
employee cost including medical and dental insurance, long-
term disability, group term life insurance, and accidental
death & dismemberment insurance for three (3) full years
from the Effective Date of Termination or until the
Executive reaches his Normal Retirement Date, whichever
occurs earlier. In the event that participation in any
one or more of the welfare benefits is not possible under
the terms of the governing welfare benefit provisions or
due to the modification or elimination of the welfare
benefits, Employer shall provide substantially identical
welfare benefits at the normal employee cost of the
affected welfare benefits. However, these benefits shall
be discontinued prior to the end of the three (3) years in
the event the Executive receives substantially similar
benefits from a subsequent employer, as determined by the
Committee. The right of the Executive and his spouse and
other dependents to continued group health coverage under
Section 4980B of the Internal Revenue Code of 1986, as
amended ("Code"), shall commence at the end of the
applicable Severance Benefits period. Unless otherwise
provided under this Agreement, the applicable Severance
Benefits period shall be treated as if it were a period of
employment with ML&P or its Subsidiaries (or, if Executive
so elects, with any Successor Employer) for purposes of
determining rights and benefits under any retirement plan
or other plan or program and shall be treated as a period
of covered employment under such plan or other plan or
program if the Executive was in covered employment
immediately prior to the Change in Control, provided that,
if such treatment is not possible under the terms of such
plan or other plan or program, Employer shall directly
provide substantially identical benefits attributable to
the crediting of the Severance Benefits period.
3.5 Reduction of Severance Benefits. In the event there
are fewer than thirty-six (36) whole or partial months
remaining from the Executive's Effective Date of Termination
until the Executive's Normal Retirement Date, then the amounts
provided for under Section 3.4.a above shall be reduced by a
fraction, the numerator of which shall be the number of whole
or partial months remaining until the Executive's Normal
Retirement Date, and the denominator of which shall be
thirty-six (36).
3.6 Special Retirement Benefits. The Executive shall
receive special retirement benefits as provided below, so that
the total retirement benefits that the Executive receives will
equal the retirement benefits that the Executive would have
received under the Maui Land & Pineapple Company, Inc. Pension
Plan for Non-Bargaining Unit Employees ("Retirement Plan"),
Supplemental Executive Retirement Plan, and Executive
Supplemental Insurance Plan/Executive Deferred Compensation
Plan (collectively, "Plans"), under the terms thereof that
existed ninety (90) days prior to the Change in Control, had
the Executive continued in the employ of ML&P and its
Subsidiaries for three (3) years following the Executive's
Effective Date of Termination (or until his Normal Retirement
Date, whichever is earlier) but without regard to any ancillary
benefits. The amount of special retirement benefits payable
hereunder to the Executive or his beneficiaries shall equal the
excess of the amount specified in (a) over the amount specified
in (b) below.
a. The total retirement benefits on an actuarial
equivalent single-life basis would be paid to the
Executive if the three (3) years (or the period to his
Normal Retirement Date, if less) following the Executive's
Effective Date of Termination are added to his credited
service under the Plans.
b. The total retirement benefits actually paid on
an actuarial equivalent single-life basis to the
Executive.
Such special retirement benefits shall be paid at the
same time and in the same form (e.g., actuarial equivalent
single-life or contingent annuitant basis) as was required with
respect to the Executive's retirement benefits under the Plans.
The special retirement benefits shall be paid by the Plans or,
if the terms of such Plans do not provide for such benefits,
the special retirement benefits shall be paid directly by
Employer. The actuarial equivalent of special retirement
benefits shall be determined in accordance with the factors
provided under the Retirement Plan.
3.7 Outplacement Services. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, the Executive shall be
entitled, at the expense of Employer, to receive standard
outplacement services as selected by the Executive, for a
period of up to thirty-six (36) months from the Effective Date
of Termination. However, such services shall not exceed a
maximum annual benefit of ten percent (10%) of the Executive's
annual rate of Base Salary in effect ninety (90) days prior to
the Change in Control.
3.8 Incentive Compensation. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, any deferred awards previously
granted to the Executive under ML&P's or its Subsidiaries' or
any Successor Employer's incentive compensation plans and not
previously paid to the Executive shall immediately vest on the
date of the Executive's Effective Date of Termination and shall
be paid no later than ninety (90) calendar days following that
date, and be included as compensation in the month paid.
ARTICLE IV. DISQUALIFICATION FROM RECEIPT OF BENEFITS.
No Severance Benefits shall be payable to the
Executive under this Agreement in the event the Executive is
terminated by Employer for Just Cause. For this purpose, Just
Cause shall mean willful, malicious conduct by the Executive
which is detrimental to the best interests of Employer,
including theft, embezzlement, the conviction of a criminal
act, disclosure of trade secrets, a gross dereliction of duty,
or other grave misconduct on the part of the Executive which is
substantially injurious to Employer. Just Cause also shall
include a material breach by the Executive of any of his
covenants under this Agreement, if such breach has not been
cured to the reasonable satisfaction of Employer within thirty
(30) days following written notice thereof by Employer to the
Executive.
ARTICLE V. FORM AND TIMING OF SEVERANCE BENEFITS.
5.1 Form and Timing of Severance Benefits. The
Severance Benefits described in Sections 3.4.a, 3.4.b and 3.8
herein shall be paid in cash to the Executive in a single lump
sum as soon as practicable following the Executive's Effective
Date of Termination, but in no event beyond ninety (90)
calendar days from such date.
The Severance Benefits described in Section 3.4.c
herein shall be provided to the Executive immediately upon the
Executive's Effective Date of Termination and shall continue to
be provided for three (3) full calendar years from the
Executive's Effective Date of Termination or until the
Executive reaches his Normal Retirement date, whichever occurs
earlier. However, the Severance Benefits described in Section
3.4.c herein shall be discontinued prior to the end of the
three (3) year period immediately upon the Executive receiving
substantially similar benefits from a subsequent employer, as
determined by the Committee.
5.2 Withholding of Taxes. Employer shall withhold
from any amounts payable under this Agreement all Federal,
state, city or other taxes as legally shall be required.
ARTICLE VI. PARACHUTE PAYMENTS.
6.1 Determination of Alternative Severance Benefit Limit.
Notwithstanding any other provision of this Agreement, if any
portion of the Severance Benefits or any other payment under
this Agreement, or under any other agreement with, or plan of,
Employer (in the aggregate "Total Payments") would constitute
an "excess parachute payment," then the payments to be made to
the Executive under this Agreement shall be reduced such that
the value of the aggregate Total Payments that the Executive is
entitled to receive shall be one dollar ($1) less than the
maximum amount which the Executive may receive without becoming
subject to the tax imposed by Section 4999 of the Code, or
which Employer may pay without loss of deduction under Section
280G(a) of the Code. However, such reduction in Severance
Benefits shall apply if, and only if, the resulting Severance
Benefits with such reduction is greater in value to the
Executive than the value of the Severance Benefits without a
reduction, net of any tax imposed on the Executive pursuant to
Section 4999 of the Code. For purposes of this Agreement, the
terms "excess parachute payment" and "parachute payments" shall
have the meanings assigned to such terms in Section 280G of the
Code, and such "parachute payments" shall be valued as provided
therein.
6.2 Procedure for Establishing Alternative Limitation.
Within fifteen (15) calendar days following delivery of the
notice of Qualifying Termination or notice by Employer to the
Executive of its belief that there is a payment or benefit due
the Executive which will result in an "excess parachute
payment" as defined in Section 280G of the Code, the Executive
and such Employer, at Employer's expense, shall obtain the
opinion of such Employer's principal outside law firm,
accounting firm, and/or compensation and benefits consulting
firm, which sets forth: (a) the amount of the Executive's
"annualized includible compensation for the base period" (as
defined in Section 280G(d)(1) of the Code); (b) the present
value of the Total Payments; and (c) the amount and present
value of any "excess parachute payment."
In the event that such opinion determines that there
would be an "excess parachute payment," such that a reduction
in the Severance Benefits would result in a greater net benefit
to the Executive (as provided in Section 6.1 herein), then the
Severance Benefits hereunder or any other payment determined
under the opinion to be includible in Total Payments shall be
reduced or eliminated so that, on the basis of calculations set
forth in such opinion, there will be no "excess
parachute payment". The reduction or elimination of specific
payments shall apply to such type and amount of specific
payments as may be designated by the Executive in writing
delivered to Employer within ten (10) calendar days of receipt
of the opinion, or if the Executive fails to so notify such
Employer, as may be reasonably determined by it.
The provisions of this Section 6.2, including the
calculations, notices, and opinion provided herein, shall be
based upon the conclusive presumption that the following
amounts are reasonable: (a) the compensation and benefits
provided for in Article III herein; and (b) any other
compensation earned prior to the Effective Date of Termination
by the Executive pursuant to ML&P's and any Successor
Employer's compensation programs (if such payments would have
been made in the future in any event, even though the timing of
such payment is triggered by the Change in Control).
6.3 Subsequent Imposition of Excise Tax. If,
notwithstanding compliance with the provisions of Sections 6.1
and 6.2 herein, it is ultimately determined by a court or
pursuant to a final determination by the Internal Revenue
Service that any portion of the Total Payments is considered to
be a "parachute payment", subject to excise tax under Section
4999 of the Code, which was not contemplated to be a "parachute
payment" at the time of payment (so as to accurately determine
whether a limitation should have been applied to the Total
Payments to maximize the net benefit to the Executive, as
provided in Sections 6.1 and 6.2 herein), the Executive shall
be entitled to receive a lump sum cash payment sufficient to
place the Executive in the same net after-tax position,
computed by using the "Special Tax Rate" as such term is
defined below, that the Executive would have been in had such
payment not been subject to such excise tax, and had the
Executive not incurred any interest charges or penalties with
respect to the imposition of such excise tax. For purposes of
this Agreement, the "Special Tax Rate" shall be the highest
effective Federal and state marginal tax rates applicable to
the Executive in the year in which the payment contemplated
under this Section 6.3 is made.
ARTICLE VII. OTHER RIGHTS AND BENEFITS NOT AFFECTED.
7.1 Other Benefits. Neither the provisions of this
Agreement nor the Severance Benefits provided for hereunder
shall reduce any amounts otherwise payable, or in any way
diminish the Executive's rights as an employee of ML&P or its
Subsidiaries or a Successor Employer, whether existing now or
hereafter, under any benefit, incentive, retirement, stock
option, stock bonus, stock purchase plan, or any employment
agreement, or other plan or arrangement.
7.2 Employment Status. This Agreement does not
constitute a contract of employment or impose on ML&P or its
Subsidiaries or any Successor Employer any obligation to retain
the Executive as an employee, to change the status of the
Executive's employment, or to change such entity's policies
regarding termination of employment.
ARTICLE VIII. SUCCESSORS.
8.1 Successors.
a. This Agreement shall be binding upon ML&P,
any Successor Employer that has assumed this Agreement,
and their respective successors and assigns. ML&P shall
require any Successor Employer to expressly assume and
agree to perform this Agreement and all of ML&P's
obligations hereunder. Failure of ML&P to obtain such
assumption and agreement prior to the effectiveness of any
Change in Control that results in a transfer of
Executive's employment to a Successor Employer shall
constitute Good Reason for voluntary termination of
employment by Executive, pursuant to Sections 3.2 and 3.3
hereof.
b. If in connection with and prior to the
effectiveness of a Change in Control a Successor Employer
has assumed this Agreement in accordance with
Section 8.1.a, then following such Change in Control
neither ML&P, nor any successor to it that does not
directly or indirectly control and is not directly or
indirectly controlled by or under common control with,
such Successor Employer, shall have any further liability
or obligation hereunder. For purposes of the foregoing
and the definition of "Successor Employer" in Section 2.1,
"control" (including the terms controlling, controlled by
and under common control with) shall have the meaning set
forth in Rule 405 under the Securities Act of 1933 (17 CFR
230.405).
c. This Agreement shall inure to the benefit
of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees, and legatees. If Executive
should die while any amount would still be payable to him
hereunder had he continued to live, all such amounts,
unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement, to the
Executive's devisee, legatee, or other designee, or if
there is no such designee, to the Executive's estate.
8.2 Beneficiaries. In the event of the death of the
Executive, all unpaid amounts payable to the Executive under
this Agreement shall be paid to his or her Beneficiary. The
Executive's spouse and other dependents shall continue to be
covered by all applicable welfare benefits during the remainder
of the Severance Benefits period, if any, pursuant to
Section 3.4.c (unless payments at death are specified by the
applicable welfare benefits provisions). The Beneficiary of
the Executive's Severance Benefits under this Agreement shall
be designated by the Executive in the form of a signed writing
acceptable to the Committee. The Executive may make or change
such designation at any time.
ARTICLE IX. ADMINISTRATION.
9.1 Administration. The Compensation Committee shall
administer this Agreement. The Committee is authorized, prior
to occurrence of a Change in Control, to interpret this
Agreement, to prescribe and rescind rules and regulations, to
provide conditions and assurances deemed necessary and
advisable, to protect the interest of ML&P or its Subsidiaries,
and to make all other determinations necessary or advisable for
the Agreement's administration. In fulfilling its
administrative duties hereunder, the Committee may rely on
outside counsel, independent accountants, or other consultants
to render advice or assistance.
9.2 Indemnification and Exculpation. The members of the
Board, its agents and officers, directors and employees of ML&P
and its Subsidiaries shall be indemnified and held harmless by
ML&P and its Subsidiaries against and from any and all loss,
cost, liability, or expense that may be imposed upon or
reasonably incurred by them in connection with or resulting
from any claim, action, suit or proceeding to which they may be
a party or in which they may be involved by reason of any
action taken or failure to act under this Agreement and against
and from any and all amounts paid by them in settlement (with
ML&P's written approval) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding. The foregoing
provision shall not be applicable to any person if the loss,
cost, liability or expense is due to such person's gross
negligence or willful misconduct.
9.3 Legal Fees. ML&P (or, if applicable, any Successor
Employer that has assumed the Agreement) shall pay all
reasonable legal fees, costs of litigation and other expenses
incurred in good faith by the Executive as a result of its
refusal to provide the Severance Benefits which it is obligated
to provide to Executive under this Agreement, or as a result of
ML&P or such Successor Employer contesting the validity,
enforceability or interpretation of the Agreement; provided,
however, that such payments shall not exceed the amount
permitted by law.
IN WITNESS WHEREOF, ML&P has caused this Agreement to
be executed as of the day and year first above written.
MAUI LAND & PINEAPPLE COMPANY, INC.
By /S/ GARY L. GIFFORD
Its President
/S/ DOUGLAS R. SCHENK
Douglas R. Schenk, "Executive"
ATTEST:
/S/ J. SUSAN CORLEY
AMENDED AND RESTATED
MAUI LAND & PINEAPPLE COMPANY, INC.
CHANGE-IN-CONTROL SEVERANCE AGREEMENT
(Vice Presidents)
Warren A. Suzuki, Vice President/Land Management & Development
ARTICLE I. ESTABLISHMENT AND PURPOSE.
1.1 Effective Date. This Amended and Restated Change-in-
Control Severance Agreement (the "Agreement") is made and
entered into and is effective as of the 16th day of March, 1999
("Effective Date"), by and between Maui Land & Pineapple
Company, Inc. ("ML&P"), a Hawaii corporation, and Warren A.
Suzuki ("Executive"). This Agreement shall supersede and
replace any prior severance agreement entered into between ML&P
and the Executive.
1.2 Term of the Agreement.
a. The Agreement shall commence as of the Effective Date
written above, and shall continue until terminated in
accordance with this paragraph 1.2. This Agreement may be
terminated by the Board of Directors of ML&P (the "Board") upon
one hundred eighty (180) days advance written notice to the
Executive; provided, however, that the Board may not terminate
this Agreement (i) after the occurrence of a Change in Control
or (ii) during the respective periods set forth in Section
1.2.c or 1.2.d below.
b. In the event that a Change in Control, as defined in
Section 2.1 herein, occurs during the term of this Agreement,
this Agreement shall remain irrevocably in effect for the
greater of twenty-four (24) months from the date of such Change
in Control, or until all benefits have been paid to the
Executive hereunder.
c. In the event that the Board has knowledge that a third
party has taken steps reasonably calculated to effect a Change
in Control, including, but not limited to the commencement of a
tender offer for the voting stock of ML&P, or the circulation
of a proxy to ML&P's shareholders, then the Board shall not be
permitted thereafter to exercise the termination right provided
by Section 1.2.a unless and until the Board, in good faith, has
determined that such third party has fully abandoned or
terminated its effort to effect a Change in Control.
d. In the event that the Board approves in principle one or
more transactions the implementation of which would result in a
Change in Control, then the Board shall not be permitted
thereafter to exercise the termination right provided by
Section 1.2.a unless and until the Board, in good faith, has
determined to fully abandon and terminate all efforts by ML&P
or its Subsidiaries to implement such transactions.
1.3 Purpose of the Agreement. The purpose of this
Agreement is to advance the interests of ML&P and its
Subsidiaries by assuring that ML&P and its Subsidiaries shall
have the continued employment and dedication of the Executive
and the availability of his advice and counsel in the event
that an acquisition or Change in Control occurs. This
Agreement shall also assure the Executive of equitable
treatment during the period of uncertainty that surrounds an
acquisition or Change in Control, and allow the Executive to
act at all times in the best interest of ML&P and its
shareholders.
1.4 Contractual Right to Benefits. This Agreement
establishes and vests in the Executive a contractual right to
the benefits which he or she is entitled hereunder, enforceable
by the Executive against ML&P or any Successor Employer that
assumes this Agreement. However, nothing herein shall require
ML&P or any such Successor Employer to segregate, earmark, or
otherwise set aside any funds or other assets to provide for
any payments hereunder.
1.5 Legal Status. This Agreement shall be considered an
unfunded agreement to provide welfare benefits to a select
group of management or highly compensated employees and is
therefore intended to be a "top-hat" plan exempt from the
requirements of the provisions of Parts 2, 3 and 4 of Title I
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
ARTICLE II. DEFINITIONS AND CONSTRUCTION.
2.1 Definitions. Whenever used in this Agreement, the
following terms shall have the meanings set forth below and,
when the meaning is intended, the initial letter of the word is
capitalized.
a. "Base Salary" means Executive's annualized salary, which
includes all regular basic wages before reduction for any
amounts deferred on a tax-qualified or nonqualified basis,
payable in cash to Executive for services rendered during the
Year. Base Salary shall exclude bonuses, incentive
compensation, special fees or awards, commissions, allowances,
or any other form of premium or incentive pay, or amounts
properly designated by Employer as payment toward or
reimbursement of expenses.
b. "Beneficial Owner" shall have the meaning ascribed to such
terms in Rule 13d-3 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
c. "Beneficiary" with respect to Executive means the persons
or entities designated or deemed designated by the Executive
pursuant to Section 8.2 herein.
d. "Board" means the Board of Directors of ML&P.
e. "Change in Control" means one or more of the following
occurrences with respect to ML&P or a Subsidiary:
(1) Any Person, including a "group" as defined in Section 13
(d)(3) of the Exchange Act, who is not at the date of this
Agreement the beneficial owner of shares of the given entity
having 25% or more of the total number of votes that may be
cast for the election of Directors of such entity, becomes the
beneficial owner (including acquisition of beneficial ownership
resulting from formation of a "group") of shares of such entity
having 25% or more of such voting power;
(2) Any Person, including a "group" as defined in
Section 13(d)(3) of the Exchange Act, who is not at the date of
this Agreement the beneficial owner of shares of a given entity
having 50% or more of the total number of votes that may be
cast for the election of Directors of such entity, becomes the
beneficial owner (including acquisition of beneficial ownership
resulting from formation of a "group") of shares of such entity
having 50% or more of such voting power;
(3) As the result of, or in connection with any cash tender or
exchange offer, merger or other business combination, sale of
assets or contested election, or any combination of the
foregoing transactions, the Persons who were Directors of the
given entity before the transaction shall cease to constitute a
majority of the Board of Directors of such entity or any
successor to such entity;
(4) A merger or consolidation of the given entity in which the
surviving entity is neither ML&P nor a direct or indirect
wholly owned subsidiary of ML&P; or
(5) The sale, transfer, or other disposition of all or
substantially all of the assets of the given entity (and for
this purpose, the term "substantially all" shall mean assets
having a fair market value, whether or not realized in the
transaction, that is 50% or more of the aggregate fair market
value of all assets of such entity); and, in addition, in the
case of a Subsidiary, the sale, transfer or other disposition
(other than to an entity that is before and following such
transaction a direct or indirect wholly owned subsidiary of
M&LP) of securities that immediately prior to such transaction
constituted 50% or more of such Subsidiary's outstanding voting
securities.
(6) A spin-off, split-off, split-up or similar divisive
reorganization affecting ML&P and/or its Subsidiaries.
f. "Committee" means the Compensation Committee of the Board
of Directors of ML&P or any other committee appointed by the
Board to administer this Agreement; provided that following a
Change in Control "Committee" shall mean the Persons who
constituted the Committee immediately prior to the Change in
Control.
g. "Disability" means a physical or mental condition which
renders Executive unable to discharge his normal work
responsibility with Employer and which, in the opinion of a
licensed physician selected by the Executive, subject to
reasonable approval by the Committee based upon sufficient
medical evidence, can be reasonably expected to continue for a
period of at least one full calendar year. If Executive fails
to select a physician within ten (10) business days of a
written request made by Employer, then Employer may select a
physician for purposes of this paragraph.
h. "Effective Date" has the meaning set forth in Section 1.1.
i. "Effective Date of Termination" means the date on which a
Qualifying Termination occurs.
j. "Employer" means ML&P, or any Successor Employer that has
assumed this Agreement pursuant to Section 8.1.a.
k. "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time, or any successor act
thereto.
l. "Expiration Date" means the date the Agreement terminates,
as provided in Section 1.2 herein.
m. "Just Cause" means the basis for a termination of
Executive's employment for which no Severance Benefits are
payable hereunder, as provided in Article IV herein.
n. "ML&P" means Maui Land & Pineapple Company, Inc., a Hawaii
corporation.
o. "Normal Retirement Date" shall mean the date on which the
Executive attains age 65.
p. "Person" shall have the meaning ascribed to such terms in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d)
and 14(d) thereof, including a "group" as defined and used in
Section 13(d) and Regulation 13D thereunder; provided that for
purposes of Section 2.1(e) "Person" shall not include any
entity that is a direct or indirect wholly owned subsidiary of
ML&P.
q. "Qualifying Termination" means a termination of the
Executive's employment as described in Section 3.2 herein.
r. "Severancee Benefit" means the payment of severance
compensation as provided in Article III herein.
s. "Subsidiaries" means Maui Pineapple Company, Ltd. and
Kapalua Land Company, Ltd. However, if the Executive is at the
date of this Agreement the Vice President Retail Property for
ML&P, the terms "Subsidiaries" or "Subsidiary" shall mean and
be limited to Kaahumanu Center Associates ("KCA").
t. "Successor Employer" means an entity that becomes
Executive's employer in connection with a Change in Control and
which following such Change in Control does not control, and is
not controlled by or under common control with, ML&P.
u. "Year" means the consecutive 12-month period beginning
each January 1 and ending December 31.
2.2 Gender and Number. Except where otherwise indicated
by the context, any masculine term used herein also shall
include the feminine, the plural shall include the singular,
and the singular shall include the plural.
2.3 Severability. In the event any provision of the
Agreement shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts
of the Agreement, and the Agreement shall be construed and
enforced as if the illegal or invalid provision had not been
included.
2.4 Modification. No express provisions of this
Agreement may be modified, waived, or discharged unless such
modification, waiver, or discharge is agreed to by the
Executive in writing and approved by Employer's board
of directors.
2.5 Applicable Law. To the extent not preempted by the
laws of the United States, the laws of the State of Hawaii
shall be the controlling law in all matters relating to the
Agreement without regard to the conflicts of law principles in
such laws.
ARTICLE III. SEVERANCE BENEFITS.
3.1 Right to Severance Benefits. The Executive shall be
entitled to receive Severance Benefits as described in Section
3.4 herein, if there has been a Change in Control as defined in
Section 2.1(e) herein, and if, within twenty-four (24) months
thereafter, the Executive's employment shall end for any reason
specified in Section 3.2 herein as being a Qualifying
Termination. The Executive shall not be entitled to receive
Severance Benefits if the Executive's employment is
involuntarily terminated for Just Cause, as provided under
Article IV herein, or if the Executive's employment terminates
due to death or Disability.
3.2 Qualifying Termination. The occurrence of any one or
more of the following events within twenty-four (24) calendar
months after a Change in Control shall entitle the Executive to
the payment of Severance Benefits, as provided under Section
3.4 herein:
a. Involuntary termination of the Executive's employment
without Just Cause (as defined in Article IV herein) (other
than a merely technical termination arising from a good faith
reassignment in connection with a Change in Control of officers
and employees of ML&P and/or its Subsidiaries and following
which Executive remains an employee of (i) ML&P or a Subsidiary
that continues thereafter to be wholly owned by ML&P [or in the
case Executive as of the date of this Agreement is the Vice
President Retail Property for ML&P, if following such
reassignment the Executive remains an employee (x) of ML&P or
(y) of Maui Pineapple Company, Ltd. or Kapalua Land Company,
Ltd. (provided such employer continues following such Change in
Control be wholly owned by ML&P) or (z) of KCA (provided ML&P
remains the sole general partner of KCA following such Change
In Control] or (ii) a Successor Employer that has assumed
ML&P's obligations under this Agreement in accordance with
Section 8.1.a); or
b. The Executive's voluntary employment termination for Good
Reason (as defined by Section 3.3 herein).
3.3 Definition of Good Reason. "Good Reason" means,
without the Executive's express written consent, the occurrence
after a Change in Control of any one or more of the following:
a. The assignment of the Executive to duties
materially inconsistent with the Executive's
authorities, duties, responsibilities, and status
(including offices, titles and reporting
requirements) as an executive and/or officer of
Employer, or a material reduction of the
Executive's authorities, duties, or
responsibilities from those in effect as of ninety
(90) days prior to the Change in Control, other
than an act that is remedied promptly after
Employer's receipt of notice thereof given by the
Executive (provided, however, that "Good Reason"
shall not include the events described in the
preceding portions of this paragraph (a) if the
changes described therein have been approved by a
majority of the Board of ML&P and also by a number
of such directors who comprised at least a
majority of the Board of ML&P 90 days prior to the
Change In Control);
b. Employer requiring the Executive to be based at a
location in excess of seventy-five (75) miles from
the location of the Executive's principal job
location or office immediately prior to the Change
in Control, except for required travel on company
business to an extent substantially consistent
with the Executive's then present business travel
obligations;
c. A more than ten percent (10%) reduction of the Executive's
annual rate of Base Salary in effect as of ninety (90) days
prior to the Change in Control;
d. The failure to continue in effect any of ML&P's or its
Subsidiaries' annual incentive compensation plans, or employee
benefit or retirement plans, policies, practices, or similar
compensatory arrangements in which the Executive participated
as of the 180th day preceding the Change in Control (unless
such failure to continue the plan, policy, practice or
arrangement pertains generally to all plan participants) or the
failure to continue the Executive's participation therein on
substantially the same basis, both in terms of the amount of
benefits provided and the level of the Executive's
participation relative to other participants; provided,
however, that this Section 3.3.d shall not apply in the case of
a Change in Control described in Section 2.1.e (6) if:
(a) Executive's employer thereafter is ML&P or a wholly owned
Subsidiary thereof (or, if the Executive is Vice President
Retail Property of ML&P, such employer is KCA and ML&P remains
the sole general partner of KCA), or a Successor Employer that
has in accordance with Section 8.1 expressly assumed this
Agreement; (b) a failure to continue the plan, policy, practice
or arrangement or Executive's participation therein pertains
generally to all participants employed by such employer; and
(c) the aggregate annualized value to Executive of benefits
provided under all of such employer's incentive compensation
plans, other employee benefit or retirement plans, policies,
practices, or similar compensatory arrangements (excluding any
costs incurred in connection with this Agreement) is at least
90% of the value to Executive of benefits so provided by ML&P
and its Subsidiaries for the last Year ended prior to the
Change in Control.
e. The failure of ML&P to obtain an agreement from any
Successor Employer (as contemplated by Article VIII) to assume
this Agreement and to perform ML&P's obligations to Executive
hereunder.
f. A material breach of obligations to Executive under this
Agreement by ML&P, or by a Successor Employer that has assumed
this Agreement, if such breach has not been cured to the
reasonable satisfaction of Executive within thirty (30) days
following delivery of written notice thereof by Executive to
the breaching party.
3.4 Description of Severance Benefits. In the event that
Executive becomes entitled to receive Severance Benefits, as
provided in Section 3.1 herein, ML&P shall pay to the Executive
and provide him with the following:
a. An amount equal to 2.00 times the Executive's annual rate
of Base Salary in effect upon the Effective Date of Termination
(or, if greater, 2.00 times the Executive's annual rate of Base
Salary in effect ninety (90) days prior to the Change in
Control); and
b. A payout under the ML&P Annual Incentive Plan, or any
similar plan Employer maintains, or is obligated by Section
3.3.d to provide, in accordance with the terms of such plan;
and
c. A continuation of all welfare benefits at normal employee
cost including medical and dental insurance, long-term
disability, group term life insurance, and accidental death &
dismemberment insurance for two (2) full years from the
Effective Date of Termination or until the Executive reaches
his Normal Retirement Date, whichever occurs earlier. In the
event that participation in any one or more of the welfare
benefits is not possible under the terms of the governing
welfare benefit provisions or due to the modification or
elimination of the welfare benefits, Employer shall provide
substantially identical welfare benefits at the normal employee
cost of the affected welfare benefits. However, these benefits
shall be discontinued prior to the end of the two (2) years in
the event the Executive receives substantially similar benefits
from a subsequent employer, as determined by the Committee.
The right of the Executive and his spouse and other dependents
to continued group health coverage under Section 4980B of the
Internal Revenue Code of 1986, as amended ("Code"), shall
commence at the end of the applicable Severance Benefits
period. Unless otherwise provided under this Agreement, the
applicable Severance Benefits period shall be treated as if it
were a period of employment with ML&P or its Subsidiaries (or,
if Executive so elects, with any Successor Employer) for
purposes of determining rights and benefits under any
retirement plan or other plan or program and shall be treated
as a period of covered employment under such plan or other plan
or program if the Executive was in covered employment
immediately prior to the Change in Control, provided that, if
such treatment is not possible under the terms of such plan or
other plan or program, Employer shall directly provide
substantially identical benefits attributable to the crediting
of the Severance Benefits period.
3.5 Reduction of Severance Benefits. In the event there
are fewer than twenty-four (24) whole or partial months
remaining from the Executive's Effective Date of Termination
until the Executive's Normal Retirement Date, then the amounts
provided for under Section 3.4.a above shall be reduced by a
fraction, the numerator of which shall be the number of whole
or partial months remaining until the Executive's Normal
Retirement Date, and the denominator of which shall be
twenty-four (24).
3.6 Special Retirement Benefits. The Executive shall
receive special retirement benefits as provided below, so that
the total retirement benefits that the Executive receives will
equal the retirement benefits that the Executive would have
received under the Maui Land & Pineapple Company, Inc. Pension
Plan for Non-Bargaining Unit Employees ("Retirement Plan"),
Supplemental Executive Retirement Plan, and Executive
Supplemental Insurance Plan/Executive Deferred Compensation
Plan (collectively, "Plans"), under the terms thereof that
existed ninety (90) days prior to the Change in Control, had
the Executive continued in the employ of ML&P and its
Subsidiaries for two (2) years following the Executive's
Effective Date of Termination (or until his Normal Retirement
Date, whichever is earlier) but without regard to any ancillary
benefits. The amount of special retirement benefits payable
hereunder to the Executive or his beneficiaries shall equal the
excess of the amount specified in (a) over the amount specified
in (b) below.
a. The total retirement benefits on an actuarial equivalent
single-life basis would be paid to the Executive if the two (2)
years (or the period to his Normal Retirement Date, if less)
following the Executive's Effective Date of Termination are
added to his credited service under the Plans.
b. The total retirement benefits actually paid on an
actuarial equivalent single-life basis to the Executive.
Such special retirement benefits shall be paid at
the same time and in the same form (e.g., actuarial
equivalent single-life or contingent annuitant basis) as
was required with respect to the Executive's retirement
benefits under the Plans. The special retirement benefits
shall be paid by the Plans or, if the terms of such Plans
do not provide for such benefits, the special retirement
benefits shall be paid directly by Employer. The
actuarial equivalent of special retirement benefits shall
be determined in accordance with the factors provided
under the Retirement Plan.
3.7 Outplacement Services. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, the Executive shall be
entitled, at the expense of Employer, to receive standard
outplacement services as selected by the Executive, for a
period of up to twenty-four (24) months from the Effective Date
of Termination. However, such services shall not exceed a
maximum annual benefit of ten percent (10%) of the Executive's
annual rate of Base Salary in effect ninety (90) days prior to
the Change in Control.
3.8 Incentive Compensation. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, any deferred awards previously
granted to the Executive under ML&P's or its Subsidiaries' or
any Successor Employer's incentive compensation plans and not
previously paid to the Executive shall immediately vest on the
date of the Executive's Effective Date of Termination and shall
be paid no later than ninety (90) calendar days following that
date, and be included as compensation in the month paid.
ARTICLE IV. DISQUALIFICATION FROM RECEIPT OF BENEFITS.
No Severance Benefits shall be payable to the
Executive under this Agreement in the event the Executive is
terminated by Employer for Just Cause. For this purpose, Just
Cause shall mean willful, malicious conduct by the Executive
which is detrimental to the best interests of Employer,
including theft, embezzlement, the conviction of a criminal
act, disclosure of trade secrets, a gross dereliction of duty,
or other grave misconduct on the part of the Executive which is
substantially injurious to Employer. Just Cause also shall
include a material breach by the Executive of any of his
covenants under this Agreement, if such breach has not been
cured to the reasonable satisfaction of Employer within thirty
(30) days following written notice thereof by Employer to the
Executive.
ARTICLE V. FORM AND TIMING OF SEVERANCE BENEFITS.
5.1 Form and Timing of Severance Benefits. The
Severance Benefits described in Sections 3.4.a, 3.4.b and 3.8
herein shall be paid in cash to the Executive in a single lump
sum as soon as practicable following the Executive's Effective
Date of Termination, but in no event beyond ninety (90)
calendar days from such date.
The Severance Benefits described in Section 3.4.c
herein shall be provided to the Executive immediately upon the
Executive's Effective Date of Termination and shall continue to
be provided for two (2) full calendar years from the
Executive's Effective Date of Termination or until the
Executive reaches his Normal Retirement date, whichever occurs
earlier. However, the Severance Benefits described in Section
3.4.c herein shall be discontinued prior to the end of the two
(2) year period immediately upon the Executive receiving
substantially similar benefits from a subsequent employer, as
determined by the Committee.
5.2 Withholding of Taxes. Employer shall withhold
from any amounts payable under this Agreement all Federal,
state, city or other taxes as legally shall be required.
ARTICLE VI. PARACHUTE PAYMENTS.
6.1 Determination of Alternative Severance Benefit Limit.
Notwithstanding any other provision of this Agreement, if any
portion of the Severance Benefits or any other payment under
this Agreement, or under any other agreement with, or plan of,
Employer (in the aggregate "Total Payments") would constitute
an "excess parachute payment," then the payments to be made to
the Executive under this Agreement shall be reduced such that
the value of the aggregate Total Payments that the Executive is
entitled to receive shall be one dollar ($1) less than the
maximum amount which the Executive may receive without becoming
subject to the tax imposed by Section 4999 of the Code, or
which Employer may pay without loss of deduction under Section
280G(a) of the Code. However, such reduction in Severance
Benefits shall apply if, and only if, the resulting Severance
Benefits with such reduction is greater in value to the
Executive than the value of the Severance Benefits without a
reduction, net of any tax imposed on the Executive pursuant to
Section 4999 of the Code. For purposes of this Agreement, the
terms "excess parachute payment" and "parachute payments" shall
have the meanings assigned to such terms in Section 280G of the
Code, and such "parachute payments" shall be valued as provided
therein.
6.2 Procedure for Establishing Alternative Limitation.
Within fifteen (15) calendar days following delivery of the
notice of Qualifying Termination or notice by Employer to the
Executive of its belief that there is a payment or benefit due
the Executive which will result in an "excess parachute
payment" as defined in Section 280G of the Code, the Executive
and such Employer, at Employer's expense, shall obtain the
opinion of such Employer's principal outside law firm,
accounting firm, and/or compensation and benefits consulting
firm, which sets forth: (a) the amount of the Executive's
"annualized includible compensation for the base period" (as
defined in Section 280G(d)(1) of the Code); (b) the present
value of the Total Payments; and (c) the amount and present
value of any "excess parachute payment."
In the event that such opinion determines that there
would be an "excess parachute payment," such that a reduction
in the Severance Benefits would result in a greater net benefit
to the Executive (as provided in Section 6.1 herein), then the
Severance Benefits hereunder or any other payment determined
under the opinion to be includible in Total Payments shall be
reduced or eliminated so that, on the basis of calculations set
forth in such opinion, there will be no "excess
parachute payment". The reduction or elimination of specific
payments shall apply to such type and amount of specific
payments as may be designated by the Executive in writing
delivered to Employer within ten (10) calendar days of receipt
of the opinion, or if the Executive fails to so notify such
Employer, as may be reasonably determined by it.
The provisions of this Section 6.2, including the
calculations, notices, and opinion provided herein, shall be
based upon the conclusive presumption that the following
amounts are reasonable: (a) the compensation and benefits
provided for in Article III herein; and (b) any other
compensation earned prior to the Effective Date of Termination
by the Executive pursuant to ML&P's and any Successor
Employer's compensation programs (if such payments would have
been made in the future in any event, even though the timing of
such payment is triggered by the Change in Control).
6.3 Subsequent Imposition of Excise Tax. If,
notwithstanding compliance with the provisions of Sections 6.1
and 6.2 herein, it is ultimately determined by a court or
pursuant to a final determination by the Internal Revenue
Service that any portion of the Total Payments is considered to
be a "parachute payment", subject to excise tax under Section
4999 of the Code, which was not contemplated to be a "parachute
payment" at the time of payment (so as to accurately determine
whether a limitation should have been applied to the Total
Payments to maximize the net benefit to the Executive, as
provided in Sections 6.1 and 6.2 herein), the Executive shall
be entitled to receive a lump sum cash payment sufficient to
place the Executive in the same net after-tax position,
computed by using the "Special Tax Rate" as such term is
defined below, that the Executive would have been in had such
payment not been subject to such excise tax, and had the
Executive not incurred any interest charges or penalties with
respect to the imposition of such excise tax. For purposes of
this Agreement, the "Special Tax Rate" shall be the highest
effective Federal and state marginal tax rates applicable to
the Executive in the year in which the payment contemplated
under this Section 6.3 is made.
ARTICLE VII. OTHER RIGHTS AND BENEFITS NOT AFFECTED.
7.1 Other Benefits. Neither the provisions of this
Agreement nor the Severance Benefits provided for hereunder
shall reduce any amounts otherwise payable, or in any way
diminish the Executive's rights as an employee of ML&P or its
Subsidiaries or a Successor Employer, whether existing now or
hereafter, under any benefit, incentive, retirement, stock
option, stock bonus, stock purchase plan, or any employment
agreement, or other plan or arrangement.
7.2 Employment Status. This Agreement does not
constitute a contract of employment or impose on ML&P or its
Subsidiaries or any Successor Employer any obligation to retain
the Executive as an employee, to change the status of the
Executive's employment, or to change such entity's policies
regarding termination of employment.
ARTICLE VIII. SUCCESSORS.
8.1 Successors.
a. This Agreement shall be binding upon ML&P,
any Successor Employer that has assumed this
Agreement, and their respective successors and
assigns. ML&P shall require any Successor Employer
to expressly assume and agree to perform this
Agreement and all of ML&P's obligations hereunder.
Failure of ML&P to obtain such assumption and
agreement prior to the effectiveness of any Change in
Control that results in a transfer of Executive's
employment to a Successor Employer shall constitute
Good Reason for voluntary termination of employment
by Executive, pursuant to Sections 3.2 and 3.3
hereof.
b. If in connection with and prior to the
effectiveness of a Change in Control a Successor
Employer has assumed this Agreement in accordance
with Section 8.1.a, then following such Change in
Control neither ML&P, nor any successor to it that
does not directly or indirectly control and is not
directly or indirectly controlled by or under common
control with, such Successor Employer, shall have any
further liability or obligation hereunder. For
purposes of the foregoing and the definition of
"Successor Employer" in Section 2.1, "control"
(including the terms controlling, controlled by and
under common control with) shall have the meaning set
forth in Rule 405 under the Securities Act of 1933
(17 CFR 230.405).
c. This Agreement shall inure to the benefit
of and be enforceable by the Executive's personal or
legal representatives, executors, administrators,
successors, heirs, distributees, devisees, and
legatees. If Executive should die while any amount
would still be payable to him hereunder had he
continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the
terms of this Agreement, to the Executive's devisee,
legatee, or other designee, or if there is no such
designee, to the Executive's estate.
8.2 Beneficiaries. In the event of the death of the
Executive, all unpaid amounts payable to the Executive under
this Agreement shall be paid to his or her Beneficiary. The
Executive's spouse and other dependents shall continue to be
covered by all applicable welfare benefits during the remainder
of the Severance Benefits period, if any, pursuant to
Section 3.4.c (unless payments at death are specified by the
applicable welfare benefits provisions). The Beneficiary of
the Executive's Severance Benefits under this Agreement shall
be designated by the Executive in the form of a signed writing
acceptable to the Committee. The Executive may make or change
such designation at any time.
ARTICLE IX. ADMINISTRATION.
9.1 Administration. The Compensation Committee shall
administer this Agreement. The Committee is authorized, prior
to occurrence of a Change in Control, to interpret this
Agreement, to prescribe and rescind rules and regulations, to
provide conditions and assurances deemed necessary and
advisable, to protect the interest of ML&P or its Subsidiaries,
and to make all other determinations necessary or advisable for
the Agreement's administration. In fulfilling its
administrative duties hereunder, the Committee may rely on
outside counsel, independent accountants, or other consultants
to render advice or assistance.
9.2 Indemnification and Exculpation. The members of the
Board, its agents and officers, directors and employees of ML&P
and its Subsidiaries shall be indemnified and held harmless by
ML&P and its Subsidiaries against and from any and all loss,
cost, liability, or expense that may be imposed upon or
reasonably incurred by them in connection with or resulting
from any claim, action, suit or proceeding to which they may be
a party or in which they may be involved by reason of any
action taken or failure to act under this Agreement and against
and from any and all amounts paid by them in settlement (with
ML&P's written approval) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding. The foregoing
provision shall not be applicable to any person if the loss,
cost, liability or expense is due to such person's gross
negligence or willful misconduct.
9.3 Legal Fees. ML&P (or, if applicable, any Successor
Employer that has assumed the Agreement) shall pay all
reasonable legal fees, costs of litigation and other expenses
incurred in good faith by the Executive as a result of its
refusal to provide the Severance Benefits which it is obligated
to provide to Executive under this Agreement, or as a result of
ML&P or such Successor Employer contesting the validity,
enforceability or interpretation of the Agreement; provided,
however, that such payments shall not exceed the amount
permitted by law.
IN WITNESS WHEREOF, ML&P has caused this Agreement to
be executed as of the day and year first above written.
MAUI LAND & PINEAPPLE COMPANY, INC.
By /S/ GARY L. GIFFORD
Its President
/S/ WARREN A. SUZUKI
Warren A. Suzuki, "Executive"
ATTEST:
/S/ J. SUSAN CORLEY
AMENDED AND RESTATED
MAUI LAND & PINEAPPLE COMPANY, INC.
CHANGE-IN-CONTROL SEVERANCE AGREEMENT
(Vice Presidents)
Scott A. Crockford, Vice President/Retail Property
ARTICLE I. ESTABLISHMENT AND PURPOSE.
1.1 Effective Date. This Amended and Restated Change-in-
Control Severance Agreement (the "Agreement") is made and
entered into and is effective as of the 16th day of March, 1999
("Effective Date"), by and between Maui Land & Pineapple
Company, Inc. ("ML&P"), a Hawaii corporation, and Scott A.
Crockford ("Executive"). This Agreement shall supersede and
replace any prior severance agreement entered into between ML&P
and the Executive.
1.2 Term of the Agreement.
a. The Agreement shall commence as of the Effective Date
written above, and shall continue until terminated in
accordance with this paragraph 1.2. This Agreement may be
terminated by the Board of Directors of ML&P (the "Board") upon
one hundred eighty (180) days advance written notice to the
Executive; provided, however, that the Board may not terminate
this Agreement (i) after the occurrence of a Change in Control
or (ii) during the respective periods set forth in Section
1.2.c or 1.2.d below.
b. In the event that a Change in Control, as defined in
Section 2.1 herein, occurs during the term of this Agreement,
this Agreement shall remain irrevocably in effect for the
greater of twenty-four (24) months from the date of such Change
in Control, or until all benefits have been paid to the
Executive hereunder.
c. In the event that the Board has knowledge that a third
party has taken steps reasonably calculated to effect a Change
in Control, including, but not limited to the commencement of a
tender offer for the voting stock of ML&P, or the circulation
of a proxy to ML&P's shareholders, then the Board shall not be
permitted thereafter to exercise the termination right provided
by Section 1.2.a unless and until the Board, in good faith, has
determined that such third party has fully abandoned or
terminated its effort to effect a Change in Control.
d. In the event that the Board approves in principle one or
more transactions the implementation of which would result in a
Change in Control, then the Board shall not be permitted
thereafter to exercise the termination right provided by
Section 1.2.a unless and until the Board, in good faith, has
determined to fully abandon and terminate all efforts by ML&P
or its Subsidiaries to implement such transactions.
1.3 Purpose of the Agreement. The purpose of this
Agreement is to advance the interests of ML&P and its
Subsidiaries by assuring that ML&P and its Subsidiaries shall
have the continued employment and dedication of the Executive
and the availability of his advice and counsel in the event
that an acquisition or Change in Control occurs. This
Agreement shall also assure the Executive of equitable
treatment during the period of uncertainty that surrounds an
acquisition or Change in Control, and allow the Executive to
act at all times in the best interest of ML&P and its
shareholders.
1.4 Contractual Right to Benefits. This Agreement
establishes and vests in the Executive a contractual right to
the benefits which he or she is entitled hereunder, enforceable
by the Executive against ML&P or any Successor Employer that
assumes this Agreement. However, nothing herein shall require
ML&P or any such Successor Employer to segregate, earmark, or
otherwise set aside any funds or other assets to provide for
any payments hereunder.
1.5 Legal Status. This Agreement shall be considered an
unfunded agreement to provide welfare benefits to a select
group of management or highly compensated employees and is
therefore intended to be a "top-hat" plan exempt from the
requirements of the provisions of Parts 2, 3 and 4 of Title I
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
ARTICLE II. DEFINITIONS AND CONSTRUCTION.
2.1 Definitions. Whenever used in this Agreement, the
following terms shall have the meanings set forth below and,
when the meaning is intended, the initial letter of the word is
capitalized.
a. "Base Salary" means Executive's annualized salary, which
includes all regular basic wages before reduction for any
amounts deferred on a tax-qualified or nonqualified basis,
payable in cash to Executive for services rendered during the
Year. Base Salary shall exclude bonuses, incentive
compensation, special fees or awards, commissions, allowances,
or any other form of premium or incentive pay, or amounts
properly designated by Employer as payment toward or
reimbursement of expenses.
b. "Beneficial Owner" shall have the meaning ascribed to such
terms in Rule 13d-3 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
c. "Beneficiary" with respect to Executive means the persons
or entities designated or deemed designated by the Executive
pursuant to Section 8.2 herein.
d. "Board" means the Board of Directors of ML&P.
e. "Change in Control" means one or more of the following
occurrences with respect to ML&P or a Subsidiary:
(1) Any Person, including a "group" as defined in Section 13
(d)(3) of the Exchange Act, who is not at the date of this
Agreement the beneficial owner of shares of the given entity
having 25% or more of the total number of votes that may be
cast for the election of Directors of such entity, becomes the
beneficial owner (including acquisition of beneficial ownership
resulting from formation of a "group") of shares of such entity
having 25% or more of such voting power;
(2) Any Person, including a "group" as defined in
Section 13(d)(3) of the Exchange Act, who is not at the date of
this Agreement the beneficial owner of shares of a given entity
having 50% or more of the total number of votes that may be
cast for the election of Directors of such entity, becomes the
beneficial owner (including acquisition of beneficial ownership
resulting from formation of a "group") of shares of such entity
having 50% or more of such voting power;
(3) As the result of, or in connection with any cash tender or
exchange offer, merger or other business combination, sale of
assets or contested election, or any combination of the
foregoing transactions, the Persons who were Directors of the
given entity before the transaction shall cease to constitute a
majority of the Board of Directors of such entity or any
successor to such entity;
(4) A merger or consolidation of the given entity in which the
surviving entity is neither ML&P nor a direct or indirect
wholly owned subsidiary of ML&P; or
(5) The sale, transfer, or other disposition of all or
substantially all of the assets of the given entity (and for
this purpose, the term "substantially all" shall mean assets
having a fair market value, whether or not realized in the
transaction, that is 50% or more of the aggregate fair market
value of all assets of such entity); and, in addition, in the
case of a Subsidiary, the sale, transfer or other disposition
(other than to an entity that is before and following such
transaction a direct or indirect wholly owned subsidiary of
M&LP) of securities that immediately prior to such transaction
constituted 50% or more of such Subsidiary's outstanding voting
securities.
(6) A spin-off, split-off, split-up or similar divisive
reorganization affecting ML&P and/or its Subsidiaries.
f. "Committee" means the Compensation Committee of the Board
of Directors of ML&P or any other committee appointed by the
Board to administer this Agreement; provided that following a
Change in Control "Committee" shall mean the Persons who
constituted the Committee immediately prior to the Change in
Control.
g. "Disability" means a physical or mental condition which
renders Executive unable to discharge his normal work
responsibility with Employer and which, in the opinion of a
licensed physician selected by the Executive, subject to
reasonable approval by the Committee based upon sufficient
medical evidence, can be reasonably expected to continue for a
period of at least one full calendar year. If Executive fails
to select a physician within ten (10) business days of a
written request made by Employer, then Employer may select a
physician for purposes of this paragraph.
h. "Effective Date" has the meaning set forth in Section 1.1.
i. "Effective Date of Termination" means the date on which a
Qualifying Termination occurs.
j. "Employer" means ML&P, or any Successor Employer that has
assumed this Agreement pursuant to Section 8.1.a.
k. "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time, or any successor act
thereto.
l. "Expiration Date" means the date the Agreement terminates,
as provided in Section 1.2 herein.
m. "Just Cause" means the basis for a termination of
Executive's employment for which no Severance Benefits are
payable hereunder, as provided in Article IV herein.
n. "ML&P" means Maui Land & Pineapple Company, Inc., a Hawaii
corporation.
o. "Normal Retirement Date" shall mean the date on which the
Executive attains age 65.
p. "Person" shall have the meaning ascribed to such terms in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d)
and 14(d) thereof, including a "group" as defined and used in
Section 13(d) and Regulation 13D thereunder; provided that for
purposes of Section 2.1(e) "Person" shall not include any
entity that is a direct or indirect wholly owned subsidiary of
ML&P.
q. "Qualifying Termination" means a termination of the
Executive's employment as described in Section 3.2 herein.
r. "Severancee Benefit" means the payment of severance
compensation as provided in Article III herein.
s. "Subsidiaries" means Maui Pineapple Company, Ltd. and
Kapalua Land Company, Ltd. However, if the Executive is at the
date of this Agreement the Vice President Retail Property for
ML&P, the terms "Subsidiaries" or "Subsidiary" shall mean and
be limited to Kaahumanu Center Associates ("KCA").
t. "Successor Employer" means an entity that becomes
Executive's employer in connection with a Change in Control and
which following such Change in Control does not control, and is
not controlled by or under common control with, ML&P.
u. "Year" means the consecutive 12-month period beginning
each January 1 and ending December 31.
2.2 Gender and Number. Except where otherwise indicated
by the context, any masculine term used herein also shall
include the feminine, the plural shall include the singular,
and the singular shall include the plural.
2.3 Severability. In the event any provision of the
Agreement shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts
of the Agreement, and the Agreement shall be construed and
enforced as if the illegal or invalid provision had not been
included.
2.4 Modification. No express provisions of this
Agreement may be modified, waived, or discharged unless such
modification, waiver, or discharge is agreed to by the
Executive in writing and approved by Employer's board
of directors.
2.5 Applicable Law. To the extent not preempted by the
laws of the United States, the laws of the State of Hawaii
shall be the controlling law in all matters relating to the
Agreement without regard to the conflicts of law principles in
such laws.
ARTICLE III. SEVERANCE BENEFITS.
3.1 Right to Severance Benefits. The Executive shall be
entitled to receive Severance Benefits as described in Section
3.4 herein, if there has been a Change in Control as defined in
Section 2.1(e) herein, and if, within twenty-four (24) months
thereafter, the Executive's employment shall end for any reason
specified in Section 3.2 herein as being a Qualifying
Termination. The Executive shall not be entitled to receive
Severance Benefits if the Executive's employment is
involuntarily terminated for Just Cause, as provided under
Article IV herein, or if the Executive's employment terminates
due to death or Disability.
3.2 Qualifying Termination. The occurrence of any one or
more of the following events within twenty-four (24) calendar
months after a Change in Control shall entitle the Executive to
the payment of Severance Benefits, as provided under Section
3.4 herein:
a. Involuntary termination of the Executive's employment
without Just Cause (as defined in Article IV herein) (other
than a merely technical termination arising from a good faith
reassignment in connection with a Change in Control of officers
and employees of ML&P and/or its Subsidiaries and following
which Executive remains an employee of (i) ML&P or a Subsidiary
that continues thereafter to be wholly owned by ML&P [or in the
case Executive as of the date of this Agreement is the Vice
President Retail Property for ML&P, if following such
reassignment the Executive remains an employee (x) of ML&P or
(y) of Maui Pineapple Company, Ltd. or Kapalua Land Company,
Ltd. (provided such employer continues following such Change in
Control be wholly owned by ML&P) or (z) of KCA (provided ML&P
remains the sole general partner of KCA following such Change
In Control] or (ii) a Successor Employer that has assumed
ML&P's obligations under this Agreement in accordance with
Section 8.1.a); or
b. The Executive's voluntary employment termination for Good
Reason (as defined by Section 3.3 herein).
3.3 Definition of Good Reason. "Good Reason" means,
without the Executive's express written consent, the occurrence
after a Change in Control of any one or more of the following:
a. The assignment of the Executive to duties
materially inconsistent with the Executive's
authorities, duties, responsibilities, and status
(including offices, titles and reporting
requirements) as an executive and/or officer of
Employer, or a material reduction of the
Executive's authorities, duties, or
responsibilities from those in effect as of ninety
(90) days prior to the Change in Control, other
than an act that is remedied promptly after
Employer's receipt of notice thereof given by the
Executive (provided, however, that "Good Reason"
shall not include the events described in the
preceding portions of this paragraph (a) if the
changes described therein have been approved by a
majority of the Board of ML&P and also by a number
of such directors who comprised at least a
majority of the Board of ML&P 90 days prior to the
Change In Control);
b. Employer requiring the Executive to be based at a
location in excess of seventy-five (75) miles from
the location of the Executive's principal job
location or office immediately prior to the Change
in Control, except for required travel on company
business to an extent substantially consistent
with the Executive's then present business travel
obligations;
c. A more than ten percent (10%) reduction of the Executive's
annual rate of Base Salary in effect as of ninety (90) days
prior to the Change in Control;
d. The failure to continue in effect any of ML&P's or its
Subsidiaries' annual incentive compensation plans, or employee
benefit or retirement plans, policies, practices, or similar
compensatory arrangements in which the Executive participated
as of the 180th day preceding the Change in Control (unless
such failure to continue the plan, policy, practice or
arrangement pertains generally to all plan participants) or the
failure to continue the Executive's participation therein on
substantially the same basis, both in terms of the amount of
benefits provided and the level of the Executive's
participation relative to other participants; provided,
however, that this Section 3.3.d shall not apply in the case of
a Change in Control described in Section 2.1.e (6) if:
(a) Executive's employer thereafter is ML&P or a wholly owned
Subsidiary thereof (or, if the Executive is Vice President
Retail Property of ML&P, such employer is KCA and ML&P remains
the sole general partner of KCA), or a Successor Employer that
has in accordance with Section 8.1 expressly assumed this
Agreement; (b) a failure to continue the plan, policy, practice
or arrangement or Executive's participation therein pertains
generally to all participants employed by such employer; and
(c) the aggregate annualized value to Executive of benefits
provided under all of such employer's incentive compensation
plans, other employee benefit or retirement plans, policies,
practices, or similar compensatory arrangements (excluding any
costs incurred in connection with this Agreement) is at least
90% of the value to Executive of benefits so provided by ML&P
and its Subsidiaries for the last Year ended prior to the
Change in Control.
e. The failure of ML&P to obtain an agreement from any
Successor Employer (as contemplated by Article VIII) to assume
this Agreement and to perform ML&P's obligations to Executive
hereunder.
f. A material breach of obligations to Executive under this
Agreement by ML&P, or by a Successor Employer that has assumed
this Agreement, if such breach has not been cured to the
reasonable satisfaction of Executive within thirty (30) days
following delivery of written notice thereof by Executive to
the breaching party.
3.4 Description of Severance Benefits. In the event that
Executive becomes entitled to receive Severance Benefits, as
provided in Section 3.1 herein, ML&P shall pay to the Executive
and provide him with the following:
a. An amount equal to 2.00 times the Executive's annual rate
of Base Salary in effect upon the Effective Date of Termination
(or, if greater, 2.00 times the Executive's annual rate of Base
Salary in effect ninety (90) days prior to the Change in
Control); and
b. A payout under the ML&P Annual Incentive Plan, or any
similar plan Employer maintains, or is obligated by Section
3.3.d to provide, in accordance with the terms of such plan;
and
c. A continuation of all welfare benefits at normal employee
cost including medical and dental insurance, long-term
disability, group term life insurance, and accidental death &
dismemberment insurance for two (2) full years from the
Effective Date of Termination or until the Executive reaches
his Normal Retirement Date, whichever occurs earlier. In the
event that participation in any one or more of the welfare
benefits is not possible under the terms of the governing
welfare benefit provisions or due to the modification or
elimination of the welfare benefits, Employer shall provide
substantially identical welfare benefits at the normal employee
cost of the affected welfare benefits. However, these benefits
shall be discontinued prior to the end of the two (2) years in
the event the Executive receives substantially similar benefits
from a subsequent employer, as determined by the Committee.
The right of the Executive and his spouse and other dependents
to continued group health coverage under Section 4980B of the
Internal Revenue Code of 1986, as amended ("Code"), shall
commence at the end of the applicable Severance Benefits
period. Unless otherwise provided under this Agreement, the
applicable Severance Benefits period shall be treated as if it
were a period of employment with ML&P or its Subsidiaries (or,
if Executive so elects, with any Successor Employer) for
purposes of determining rights and benefits under any
retirement plan or other plan or program and shall be treated
as a period of covered employment under such plan or other plan
or program if the Executive was in covered employment
immediately prior to the Change in Control, provided that, if
such treatment is not possible under the terms of such plan or
other plan or program, Employer shall directly provide
substantially identical benefits attributable to the crediting
of the Severance Benefits period.
3.5 Reduction of Severance Benefits. In the event there
are fewer than twenty-four (24) whole or partial months
remaining from the Executive's Effective Date of Termination
until the Executive's Normal Retirement Date, then the amounts
provided for under Section 3.4.a above shall be reduced by a
fraction, the numerator of which shall be the number of whole
or partial months remaining until the Executive's Normal
Retirement Date, and the denominator of which shall be
twenty-four (24).
3.6 Special Retirement Benefits. The Executive shall
receive special retirement benefits as provided below, so that
the total retirement benefits that the Executive receives will
equal the retirement benefits that the Executive would have
received under the Maui Land & Pineapple Company, Inc. Pension
Plan for Non-Bargaining Unit Employees ("Retirement Plan"),
Supplemental Executive Retirement Plan, and Executive
Supplemental Insurance Plan/Executive Deferred Compensation
Plan (collectively, "Plans"), under the terms thereof that
existed ninety (90) days prior to the Change in Control, had
the Executive continued in the employ of ML&P and its
Subsidiaries for two (2) years following the Executive's
Effective Date of Termination (or until his Normal Retirement
Date, whichever is earlier) but without regard to any ancillary
benefits. The amount of special retirement benefits payable
hereunder to the Executive or his beneficiaries shall equal the
excess of the amount specified in (a) over the amount specified
in (b) below.
a. The total retirement benefits on an actuarial equivalent
single-life basis would be paid to the Executive if the two (2)
years (or the period to his Normal Retirement Date, if less)
following the Executive's Effective Date of Termination are
added to his credited service under the Plans.
b. The total retirement benefits actually paid on an
actuarial equivalent single-life basis to the Executive.
Such special retirement benefits shall be paid at
the same time and in the same form (e.g., actuarial
equivalent single-life or contingent annuitant basis) as
was required with respect to the Executive's retirement
benefits under the Plans. The special retirement benefits
shall be paid by the Plans or, if the terms of such Plans
do not provide for such benefits, the special retirement
benefits shall be paid directly by Employer. The
actuarial equivalent of special retirement benefits shall
be determined in accordance with the factors provided
under the Retirement Plan.
3.7 Outplacement Services. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, the Executive shall be
entitled, at the expense of Employer, to receive standard
outplacement services as selected by the Executive, for a
period of up to twenty-four (24) months from the Effective Date
of Termination. However, such services shall not exceed a
maximum annual benefit of ten percent (10%) of the Executive's
annual rate of Base Salary in effect ninety (90) days prior to
the Change in Control.
3.8 Incentive Compensation. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, any deferred awards previously
granted to the Executive under ML&P's or its Subsidiaries' or
any Successor Employer's incentive compensation plans and not
previously paid to the Executive shall immediately vest on the
date of the Executive's Effective Date of Termination and shall
be paid no later than ninety (90) calendar days following that
date, and be included as compensation in the month paid.
ARTICLE IV. DISQUALIFICATION FROM RECEIPT OF BENEFITS.
No Severance Benefits shall be payable to the
Executive under this Agreement in the event the Executive is
terminated by Employer for Just Cause. For this purpose, Just
Cause shall mean willful, malicious conduct by the Executive
which is detrimental to the best interests of Employer,
including theft, embezzlement, the conviction of a criminal
act, disclosure of trade secrets, a gross dereliction of duty,
or other grave misconduct on the part of the Executive which is
substantially injurious to Employer. Just Cause also shall
include a material breach by the Executive of any of his
covenants under this Agreement, if such breach has not been
cured to the reasonable satisfaction of Employer within thirty
(30) days following written notice thereof by Employer to the
Executive.
ARTICLE V. FORM AND TIMING OF SEVERANCE BENEFITS.
5.1 Form and Timing of Severance Benefits. The
Severance Benefits described in Sections 3.4.a, 3.4.b and 3.8
herein shall be paid in cash to the Executive in a single lump
sum as soon as practicable following the Executive's Effective
Date of Termination, but in no event beyond ninety (90)
calendar days from such date.
The Severance Benefits described in Section 3.4.c
herein shall be provided to the Executive immediately upon the
Executive's Effective Date of Termination and shall continue to
be provided for two (2) full calendar years from the
Executive's Effective Date of Termination or until the
Executive reaches his Normal Retirement date, whichever occurs
earlier. However, the Severance Benefits described in Section
3.4.c herein shall be discontinued prior to the end of the two
(2) year period immediately upon the Executive receiving
substantially similar benefits from a subsequent employer, as
determined by the Committee.
5.2 Withholding of Taxes. Employer shall withhold
from any amounts payable under this Agreement all Federal,
state, city or other taxes as legally shall be required.
ARTICLE VI. PARACHUTE PAYMENTS.
6.1 Determination of Alternative Severance Benefit Limit.
Notwithstanding any other provision of this Agreement, if any
portion of the Severance Benefits or any other payment under
this Agreement, or under any other agreement with, or plan of,
Employer (in the aggregate "Total Payments") would constitute
an "excess parachute payment," then the payments to be made to
the Executive under this Agreement shall be reduced such that
the value of the aggregate Total Payments that the Executive is
entitled to receive shall be one dollar ($1) less than the
maximum amount which the Executive may receive without becoming
subject to the tax imposed by Section 4999 of the Code, or
which Employer may pay without loss of deduction under Section
280G(a) of the Code. However, such reduction in Severance
Benefits shall apply if, and only if, the resulting Severance
Benefits with such reduction is greater in value to the
Executive than the value of the Severance Benefits without a
reduction, net of any tax imposed on the Executive pursuant to
Section 4999 of the Code. For purposes of this Agreement, the
terms "excess parachute payment" and "parachute payments" shall
have the meanings assigned to such terms in Section 280G of the
Code, and such "parachute payments" shall be valued as provided
therein.
6.2 Procedure for Establishing Alternative Limitation.
Within fifteen (15) calendar days following delivery of the
notice of Qualifying Termination or notice by Employer to the
Executive of its belief that there is a payment or benefit due
the Executive which will result in an "excess parachute
payment" as defined in Section 280G of the Code, the Executive
and such Employer, at Employer's expense, shall obtain the
opinion of such Employer's principal outside law firm,
accounting firm, and/or compensation and benefits consulting
firm, which sets forth: (a) the amount of the Executive's
"annualized includible compensation for the base period" (as
defined in Section 280G(d)(1) of the Code); (b) the present
value of the Total Payments; and (c) the amount and present
value of any "excess parachute payment."
In the event that such opinion determines that there
would be an "excess parachute payment," such that a reduction
in the Severance Benefits would result in a greater net benefit
to the Executive (as provided in Section 6.1 herein), then the
Severance Benefits hereunder or any other payment determined
under the opinion to be includible in Total Payments shall be
reduced or eliminated so that, on the basis of calculations set
forth in such opinion, there will be no "excess
parachute payment". The reduction or elimination of specific
payments shall apply to such type and amount of specific
payments as may be designated by the Executive in writing
delivered to Employer within ten (10) calendar days of receipt
of the opinion, or if the Executive fails to so notify such
Employer, as may be reasonably determined by it.
The provisions of this Section 6.2, including the
calculations, notices, and opinion provided herein, shall be
based upon the conclusive presumption that the following
amounts are reasonable: (a) the compensation and benefits
provided for in Article III herein; and (b) any other
compensation earned prior to the Effective Date of Termination
by the Executive pursuant to ML&P's and any Successor
Employer's compensation programs (if such payments would have
been made in the future in any event, even though the timing of
such payment is triggered by the Change in Control).
6.3 Subsequent Imposition of Excise Tax. If,
notwithstanding compliance with the provisions of Sections 6.1
and 6.2 herein, it is ultimately determined by a court or
pursuant to a final determination by the Internal Revenue
Service that any portion of the Total Payments is considered to
be a "parachute payment", subject to excise tax under Section
4999 of the Code, which was not contemplated to be a "parachute
payment" at the time of payment (so as to accurately determine
whether a limitation should have been applied to the Total
Payments to maximize the net benefit to the Executive, as
provided in Sections 6.1 and 6.2 herein), the Executive shall
be entitled to receive a lump sum cash payment sufficient to
place the Executive in the same net after-tax position,
computed by using the "Special Tax Rate" as such term is
defined below, that the Executive would have been in had such
payment not been subject to such excise tax, and had the
Executive not incurred any interest charges or penalties with
respect to the imposition of such excise tax. For purposes of
this Agreement, the "Special Tax Rate" shall be the highest
effective Federal and state marginal tax rates applicable to
the Executive in the year in which the payment contemplated
under this Section 6.3 is made.
ARTICLE VII. OTHER RIGHTS AND BENEFITS NOT AFFECTED.
7.1 Other Benefits. Neither the provisions of this
Agreement nor the Severance Benefits provided for hereunder
shall reduce any amounts otherwise payable, or in any way
diminish the Executive's rights as an employee of ML&P or its
Subsidiaries or a Successor Employer, whether existing now or
hereafter, under any benefit, incentive, retirement, stock
option, stock bonus, stock purchase plan, or any employment
agreement, or other plan or arrangement.
7.2 Employment Status. This Agreement does not
constitute a contract of employment or impose on ML&P or its
Subsidiaries or any Successor Employer any obligation to retain
the Executive as an employee, to change the status of the
Executive's employment, or to change such entity's policies
regarding termination of employment.
ARTICLE VIII. SUCCESSORS.
8.1 Successors.
a. This Agreement shall be binding upon ML&P,
any Successor Employer that has assumed this
Agreement, and their respective successors and
assigns. ML&P shall require any Successor Employer
to expressly assume and agree to perform this
Agreement and all of ML&P's obligations hereunder.
Failure of ML&P to obtain such assumption and
agreement prior to the effectiveness of any Change in
Control that results in a transfer of Executive's
employment to a Successor Employer shall constitute
Good Reason for voluntary termination of employment
by Executive, pursuant to Sections 3.2 and 3.3
hereof.
b. If in connection with and prior to the
effectiveness of a Change in Control a Successor
Employer has assumed this Agreement in accordance
with Section 8.1.a, then following such Change in
Control neither ML&P, nor any successor to it that
does not directly or indirectly control and is not
directly or indirectly controlled by or under common
control with, such Successor Employer, shall have any
further liability or obligation hereunder. For
purposes of the foregoing and the definition of
"Successor Employer" in Section 2.1, "control"
(including the terms controlling, controlled by and
under common control with) shall have the meaning set
forth in Rule 405 under the Securities Act of 1933
(17 CFR 230.405).
c. This Agreement shall inure to the benefit
of and be enforceable by the Executive's personal or
legal representatives, executors, administrators,
successors, heirs, distributees, devisees, and
legatees. If Executive should die while any amount
would still be payable to him hereunder had he
continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the
terms of this Agreement, to the Executive's devisee,
legatee, or other designee, or if there is no such
designee, to the Executive's estate.
8.2 Beneficiaries. In the event of the death of the
Executive, all unpaid amounts payable to the Executive under
this Agreement shall be paid to his or her Beneficiary. The
Executive's spouse and other dependents shall continue to be
covered by all applicable welfare benefits during the remainder
of the Severance Benefits period, if any, pursuant to
Section 3.4.c (unless payments at death are specified by the
applicable welfare benefits provisions). The Beneficiary of
the Executive's Severance Benefits under this Agreement shall
be designated by the Executive in the form of a signed writing
acceptable to the Committee. The Executive may make or change
such designation at any time.
ARTICLE IX. ADMINISTRATION.
9.1 Administration. The Compensation Committee shall
administer this Agreement. The Committee is authorized, prior
to occurrence of a Change in Control, to interpret this
Agreement, to prescribe and rescind rules and regulations, to
provide conditions and assurances deemed necessary and
advisable, to protect the interest of ML&P or its Subsidiaries,
and to make all other determinations necessary or advisable for
the Agreement's administration. In fulfilling its
administrative duties hereunder, the Committee may rely on
outside counsel, independent accountants, or other consultants
to render advice or assistance.
9.2 Indemnification and Exculpation. The members of the
Board, its agents and officers, directors and employees of ML&P
and its Subsidiaries shall be indemnified and held harmless by
ML&P and its Subsidiaries against and from any and all loss,
cost, liability, or expense that may be imposed upon or
reasonably incurred by them in connection with or resulting
from any claim, action, suit or proceeding to which they may be
a party or in which they may be involved by reason of any
action taken or failure to act under this Agreement and against
and from any and all amounts paid by them in settlement (with
ML&P's written approval) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding. The foregoing
provision shall not be applicable to any person if the loss,
cost, liability or expense is due to such person's gross
negligence or willful misconduct.
9.3 Legal Fees. ML&P (or, if applicable, any Successor
Employer that has assumed the Agreement) shall pay all
reasonable legal fees, costs of litigation and other expenses
incurred in good faith by the Executive as a result of its
refusal to provide the Severance Benefits which it is obligated
to provide to Executive under this Agreement, or as a result of
ML&P or such Successor Employer contesting the validity,
enforceability or interpretation of the Agreement; provided,
however, that such payments shall not exceed the amount
permitted by law.
IN WITNESS WHEREOF, ML&P has caused this Agreement to
be executed as of the day and year first above written.
MAUI LAND & PINEAPPLE COMPANY, INC.
By /S/ GARY L. GIFFORD
Its President
/S/ SCOTT A. CROCKFORD
Scott A. Crockford, "Executive"
ATTEST:
/S/ J. SUSAN CORLEY
MAUI LAND & PINEAPPLE COMPANY, INC.
EXECUTIVE SEVERANCE PLAN
(As amended through November 6, 1998)
Article 1. Purpose. This Maui Land & Pineapple
Company, Inc. Executive Severance Plan ("Plan") is intended to
advance the interests of Maui Land & Pineapple Company, Inc.
("Company") and certain of its subsidiaries by providing
severance benefits to eligible executive employees upon
termination of employment in order to ease their transition
out of the organization and facilitate their search for
alternative employment.
Article 2. Effective Date. This Plan shall become
effective as of March 5, 1998 ("Effective Date"), upon adoption
by the Board of Directors of the Company, and shall operate on
the basis of the calendar year ("Plan Year").
Article 3. Participating Employers. This Plan
provides for certain severance benefits for eligible executive
employees of the Company and any other related entity
designated by the Company ("Participating Employers").
Participants and beneficiaries may receive from the Plan
Administrator, upon written request, information as to whether
a particular employer is a Participating Employer, and if so,
the Participating Employer's address.
Article 4. Eligibility. Any individual employed by a
Participating Employer in the position of an officer and with a
salary midpoint of 1040 of higher (or equivalent) shall be
eligible to participate in this Plan ("Eligible Executive")
upon and as of the date of written notice of his/her
designation and approval as an Eligible Executive by the
President and Chief Executive Officer of the Company.
Article 5. Severance Benefits. In the event of an
"Involuntary Termination of Employment" with a Participating
Employer, an Eligible Executive shall be entitled to the
payment of a severance benefit amount ("Severance Benefit
Amount") equal to the Eligible Executive's "Monthly Base
Salary" multiplied by his/her "Years of Service".
For purposes of determining eligibility for a
Severance Benefit Amount, the term "Involuntary Termination of
Employment" shall mean, as determined by the Plan
Administrator, a termination of employment at the initiation of
the Participating Employer due to: (a) restructuring or
downsizing of operations of the Company or its subsidiaries;
(b) discontinuance of certain business activities of the
Company or its subsidiaries; (c) elimination of a position with
no comparable position (determined with reference to Section
6.d below) with the Company or its subsidiaries offered to the
Eligible Executive.
Also, for purposes of determining a Severance Benefit
Amount, the term "Monthly Base Salary" shall be determined as
of the date of termination of employment and shall mean the
monthly base salary of the Eligible Executive in accordance
with the payroll records and procedures of the Participating
Employer, and such term shall not include bonuses and other
supplementary compensation. Further, the term "Years of
Service" shall be determined as of the date of termination of
employment and shall mean the sum of each completed whole
calendar year of continuous service since the Eligible
Executive's most recent employment commencement date in which
the Eligible Executive works 1,000 hours of service or more,
and such term shall not include any partial Year of Service for
any prorated calendar year in which less than 1,000 hours of
service is performed. In determining Years of Service, service
shall be credited for service with any Participating Employer.
Notwithstanding the above portion of this Section 5,
the maximum Severance Benefit Amount shall be equal to (a) 12
times the Monthly Base Salary in the case of an Eligible
Executive whose salary midpoint is between 1040 to 2000,
inclusive (or equivalent) and (b) 18 times the Monthly Base
Salary in the case of an Eligible Executive whose salary
midpoint is 2001 or above (or equivalent). In addition, with
respect to any Eligible Executive, the minimum Severance
Benefit Amount shall be equal to 12 times the Eligible
Executive's Monthly Base Salary.
The Severance Benefit Amount shall be paid in cash as
a stream of income, less legally required deductions, paid on
the regular payroll schedule commencing as of the date of the
Eligible Executive's termination of employment. As such, the
Severance Benefit Amount shall be paid as a continuation of the
Eligible Executive's Monthly Base Salary, at the same payroll
times and amounts that would otherwise apply but for his/her
termination of employment, over the applicable number of months
("Severance Payment Period"). Upon the written request of an
Eligible Executive, the Plan Administrator may, at its sole and
complete discretion, authorize and provide for a different
optional form of benefit payment (e.g., lump sum
distribution).
Article 6. Exclusions. Notwithstanding any provision
herein to the contrary, an Eligible Executive shall not be
entitled to the payment of any Severance Benefit Amount in the
event of any of the following:
(1) The Eligible Executive terminates
employment on a voluntary basis.
(2) The Eligible Executive terminates
employment on a voluntary or involuntary basis for just
cause. For this purpose, a voluntary or involuntary
termination for just cause shall mean termination as a
result of willful, malicious conduct by the Eligible
Executive which is detrimental to the interests of the
Company or its subsidiaries, including theft,
embezzlement, conviction of a criminal act, disclosure of
trade secrets, gross dereliction of duty, or other grave
misconduct on the part of the Eligible Executive which is
substantially injurious to the Company or its
subsidiaries.
(3) The Eligible Executive terminates
employment due to retirement and is eligible for normal
retirement benefits under the Maui Land & Pineapple
Company, Inc. Pension Plan for Non-Bargaining Unit
Employees ("Retirement Plan").
(4) The Eligible Executive refuses to accept a
"comparable" position of employment with the Company or
its subsidiaries, under which there is no reduction of
his/her annual rate of base salary, and there is no
material reduction of his/her authorities, duties, or
responsibilities, and there is no geographic job
relocation in excess of 75 miles.
(5) The Eligible Executive fails to agree to
and execute a general release and waiver of all employment-
related claims against the Company and its subsidiaries.
(6) The Eligible Executive is reemployed with
the Company or its subsidiaries in a comparable (as
determined in accordance with the provisions of Section
6.d above) or higher level position within 90 days of
his/her termination of employment.
(7) The Eligible Executive is a party to a Maui
Land & Pineapple Change-In-Control Severance Agreement and
is determined by the Compensation Committee of the Board
of Directors of the Company to be entitled to the payment
of severance benefits thereunder due to the occurrence of
a "change in control" within the meaning of such Agreement
and all applicable conditions for the payment of such
severance benefits are satisfied.
Article 7. Other Benefits.
(1) Annual Incentive Plan. In the event that
an Eligible Executive is entitled to a Severance Benefit
Amount, the Eligible Executive shall be entitled to a
payout under the Maui Land & Pineapple Company, Inc.
Annual Incentive Plan in accordance with the terms and
conditions of such plan.
(2) Welfare Benefits. In the event that an
Eligible Executive is entitled to a Severance Benefit
Amount, the Eligible Executive shall be entitled during
the Severance Payment Period to medical and dental
insurance benefits at the same coverage and normal
employee cost levels as he/she were subject as of the date
of termination of employment. In the event that
participation in the medical or dental insurance plans is
not possible under the terms of the plans or due to the
modification or elimination of the plans, the
Participating Employer shall provide substantially
identical benefits at the same level of coverage and
employee cost. However, the medical and dental insurance
benefits shall be discontinued prior to the end of the
Severance Payment Period in the event the Eligible
Executive receives substantially similar benefits from a
subsequent employer as determined by the Plan
Administrator. The Eligible Executive shall be
responsible for notifying the Plan Administrator of the
receipt of such similar benefits from any subsequent
employer.
(3) Retirement Benefits. An Eligible
Executive's service and compensation during the Severance
Payment Period shall not be considered for purposes of
determining the Eligible Executive's benefits under the
Retirement Plan. However, in the case of an Eligible
Executive who is eligible for early retirement benefits
under the Retirement Plan or other employee benefit plan
as of his/her date of termination of employment, the
Severance Payment Period shall be treated as if it were a
period of employment exclusively for purposes of
postponing any benefit payment, and the Eligible Executive
shall be entitled to benefits due him/her as an early
retiree as of the expiration of the Severance Payment
Period.
An Eligible Executive who would become first
eligible for normal retirement benefits (either pension or
post-retirement welfare benefits) during the Severance
Payment Period shall be allowed to postpone the effective
date of his/her termination of employment and to continue
on active payroll, at the sole and complete discretion of
the Plan Administrator, either on a paid administrative
leave or specified work assignment, until his/her
retirement eligibility date. During this "bridge" period,
the Eligible Executive's current base salary and benefit
level as of his/her otherwise applicable employment
termination date shall continue and shall not be subject
to merit or pay increases. As of his/her retirement
eligibility date, the Eligible Executive's employment
shall be terminated, and his/her otherwise applicable
Severance Benefit Amount and Severance Benefit Period
shall be proportionately reduced by the bridge
compensation and period.
(4) Automobile. In the event that an Eligible
Executive is entitled to a Severance Benefit Amount and is
furnished a company-owned vehicle for use as an employee,
he/she shall be allowed to purchase the assigned vehicle
for the current low Blue Book price, less $500. This
vehicle purchase option shall be available as of the date
on which the Eligible Executive terminates employment and
until the date of the agreement and execution of the
general release and waiver as described in Section 6.e.
If the Eligible Executive terminates employment and does
not exercise his/her option to purchase the vehicle,
he/she shall not be allowed to use the vehicle after such
termination and prior to his/her actual purchase of
the vehicle.
Article 8. Distribution Due to Death. In the event
that an Eligible Executive is entitled to the payment of a
Severance Benefit Amount and he/she dies before the completion
of the Severance Payment Period, the unpaid balance of any
Severance Benefit Amount as of the date of death shall be paid
in a single lump sum to his/her designated beneficiary as soon
as practicable following the date of death. The Eligible
Executive's designated beneficiary shall be designated or
changed by the Eligible Executive (without the consent of any
prior beneficiary) through written notice delivered to the
Company. If no such beneficiary is designated, or if no
designated beneficiary survives the Eligible Executive, the
amount payable due to the Eligible Executive's death shall be
payable to the Eligible Executive's estate. However, in the
event of death, Article 7 above shall not be applicable and the
other benefits described therein shall be forfeited and shall
not be provided to any person effective as of the date of
death (unless such other benefits are otherwise provided
without regard to the provisions of this Plan).
Article 9. Administration. The Plan shall be
administered by Maui Land & Pineapple Company, Inc., who shall
be the Plan Administrator for purposes of the requirements of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). The Plan Administrator shall have the exclusive
right, power, and authority, in its sole and absolute
discretion, to administer, apply, and interpret the Plan and
other Plan documents and to decide all matters arising in
connection with the operation or administration of the Plan.
Without limiting the generality of the above, the Plan
Administrator shall have the sole and absolute discretionary
authority: (a) to take all actions and make all decisions with
respect to the eligibility for, and the amount of, benefits
payable under the Plan; (b) to formulate, interpret, and apply
rules, regulations, and policies necessary to administer the
Plan in accordance with its terms; (c) to decide questions,
including legal or factual questions, relating to the
calculation and payment of benefits under the Plan; (d) to
resolve and clarify any ambiguities, inconsistencies, and
omissions arising under the Plan or other Plan documents; and
(e) except as otherwise provided herein, to process, and
approve or deny, benefit claims and rule on any benefit
exclusions. All determinations made by the Plan Administrator
with respect to any matter arising under the Plan and any other
Plan documents shall be final and binding on all parties.
Legal process may be served on the Plan Administrator.
The name and address of the Plan Administrator is:
Maui Land & Pineapple
Company, Inc.
P.O. Box 187
Kahului, Maui, HI 96733-6687
1-(808) 877-3351
EIN: 99-0107542
Article 10. Amendment or Termination. The Company
reserves the right at any time and from time to time, in its
sole and absolute discretion, to terminate or amend in whole or
in part any or all of the provisions of the Plan, by action of
the Board of Directors of the Company or an authorized
committee thereof. The identity of the members of the Board of
Directors and such authorized committee may be obtained from
the Plan Administrator.
Article 11. Claims Procedure. A claim under this Plan
may be made by the claimant in writing within 60 days of the
date of termination of employment of the claimant.
If a claim is wholly or partially denied, the Plan
Administrator shall furnish the Eligible Executive notice in
writing of the decision not later than 90 days after the date
of the filing of the claim. If notice of denial of a claim is
not furnished within such 90-day period, the claim shall be
deemed denied.
A written denial of a claim for benefits shall
(i) specify the reason or reasons for the denial, (ii) refer to
any provisions of the Severance Plan on which the denial is
based, (iii) describe any additional material or information
necessary for the Eligible Executive to perfect his/her claim
with an explanation of why such material or information is
necessary, and (iv) explain the Plan's claim procedure.
Upon a denial of a claim, the Eligible Executive or
his/her duly authorized representative may request a review by
the Plan Administrator upon written application within 60 days
after receipt of the denial of the claim. The Eligible
Executive or his/her duly authorized representative may review
pertinent documents and submit issues and comments in writing.
The Plan Administrator shall make a decision
concerning the review of the claim promptly, but not later than
60 days after receipt of request for review unless special
circumstances require a longer period of time for review. If
an extension of time for review is required, written notice of
the extension will be furnished to the Eligible Executive and a
decision shall be rendered as soon as possible, but not later
than 120 days after receipt of the request for review.
The decision on review will be in writing and include
specific reasons for the decision and specific references to
the Severance Plan provisions on which the decision is based.
If the decision on review is not furnished within the time
specified above, the claim will be deemed denied on review.
Article 12. Incapacity. If the Plan Administrator
finds that any person to whom payment is payable under this
Plan is unable to care for his affairs because of illness or
accident, or is a minor, any payment due (unless a prior claim
for such payment has been made by a duly appointed guardian,
committee, or other legal representative) may be paid to the
spouse, a child, a parent, or a brother or sister, or to any
person deemed by the Plan Administrator to have incurred
expense for such person otherwise entitled to payment.
Article 13. Funding. The amounts payable under this
Plan shall be paid in cash from the general funds of the
Company or Participating Employer, and an Eligible Executive
shall have no right, title, or interest whatsoever in or to
investments, if any, which the Company may make to aid it in
meeting its obligations under this Plan. Title to and
beneficial ownership of any such investments shall at all times
remain in the Company. Nothing contained in this Plan, and no
action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind. To the extent that
any person acquires a right to receive a payment under this
Plan, such right shall be no greater than the right of any
unsecured creditor.
Article 14. Legal Status. This Plan is intended to
constitute an employee welfare benefit plan under ERISA. As
sponsored by the Company and Participating Employer, the Plan
has been designated as Plan No. 508. Prior to the actual
payment of the benefits hereunder, there is no transfer of any
assets to an Eligible Executive or for the benefit of the
Eligible Executive under this Plan, and the Plan is intended to
confer no current benefit that would be immediately taxable to
the Eligible Executive under the constructive receipt rule or
economic benefit doctrine under the tax laws.
Article 15. Continued Service. Nothing contained in
this Plan shall be construed as conferring upon an Eligible
Executive the right to continue in the employment of the
Company or a Participating Employer in any capacity.
Article 16. Nonassignment. The interests of an
Eligible Executive hereunder may not be sold, transferred,
signed, pledged, or hypothecated. No Eligible Executive may
borrow against his interest in the Plan.
Article 17. Controlling Documents. This document
constitutes the actual Plan document and also serves as the
Summary Plan Description as required under ERISA.
Article 18. Enforceability and Controlling Law. If any
provision of this Plan is held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining
provisions shall continue in full force and effect. The
provisions of this Plan shall be construed, administered, and
enforced according to the laws of the State of Hawaii.
Article 19. Gender. Wherever any words are used under
the Plan in the masculine, feminine, or neuter gender, they
shall be construed as though they were also used in another
gender in all cases where they would so apply.
IN WITNESS WHEREOF, the Company has caused this Plan
to be executed by its duly authorized officers on this 6th day
November, 1998.
MAUI LAND & PINEAPPLE COMPANY,
INC.
By /S/ GARY L. GIFFORD
Its President
By /S/ ADELE H. SUMIDA
Its Secretary
"Company"
MAUI LAND & PINEAPPLE COMPANY, INC
ANNUAL REPORT
1998
CONTENTS
Letter to Shareholders 2
Pineapple 4
Resort 5
Commercial & Property 6
Independent Auditors' Report 7
Consolidated Balance Sheets 8
Consolidated Statements of Operations and Retained Earnings 10
Consolidated Statements of Cash Flows 11
Notes to Consolidated Financial Statements 12
Common Stock 19
Selected Financial Data 20
Management's Discussion and Analysis of
Financial Condition and Results of Operations 21
Officers and Directors inside back cover
THE COMPANY
Maui Land & Pineapple Company, Inc., a Hawaii corporation
organized in 1909, is a land-holding and operating company with
several wholly owned subsidiaries, including two major operating
companies, Maui Pineapple Company, Ltd. and Kapalua Land Company,
Ltd. The Company, as used herein, refers to the parent and its
wholly owned subsidiaries. The Company's principal business
activities are Pineapple, Resort and Commercial & Property.
The Company owns approximately 28,600 acres of land on the
island of Maui, of which about 8,100 acres are used directly or
indirectly in the Company's operations. The Company employed
approximately 2,030 people in 1998 on a year-round or seasonal
basis.
Maui Pineapple Company, Ltd. is the operating subsidiary for
Pineapple. Its canned pineapple, pineapple juice, and fresh
pineapple are found in supermarkets throughout the United States.
The canned pineapple products are sold as store-brand pineapple
with 100% HAWAIIAN U.S.A. imprinted on the can lid. In addition,
the products are sold through institutional, industrial and
export distribution channels.
Kapalua Land Company, Ltd. is the development and operating
subsidiary for the Kapalua Resort. The Kapalua Resort is a
master-planned golf resort community on Maui's northwest coast.
The property encompasses 1,650 acres bordering the ocean with
three white sand beaches.
Commercial & Property includes the operations of various
properties, including Kaahumanu Center, the largest retail and
entertainment center on Maui. It also includes the Company's
land entitlement and management activities and land sales that
are not part of the Kapalua Resort.
On the cover: Pineapple field overlooking Kapalua Resort with the
island of Molokai in the background
Printed in Hawaii
10-K REPORT
Shareholders who wish to receive, free of charge, a copy of the
Company's 10-K Report to the Securities and Exchange Commission
(excluding certain exhibits) may write to:
Corporate Secretary
Maui Land & Pineapple Company, Inc.
P. O. Box 187
Kahului, Hawaii 96733-6687
OFFICES
Corporate Offices Pineapple Marketing Office
Maui Land & Pineapple Company, Inc. Maui Pineapple Company, Ltd.
P. O. Box 187 P. O. Box 4003
Kahului, Hawaii 96733-6687 Concord, California 94524-
4003
Telephone: 808-877-3351 Telephone: 510-798-0240
Fax: 808-871-0953 Fax: 510-798-0252
www.mauiland.com
Maui Pineapple Company, Ltd.
P. O. Box 187
Kahului, Hawaii 96733-6687
Telephone: 808-877-3351
Fax: 808-871-0953
www.pineapplehawaii.com
Kapalua Land Company, Ltd.
1000 Kapalua Drive
Kapalua, Hawaii 96761-9028
Telephone: 808-669-5622
Fax: 808-669-5454
www.kapaluamaui.com
Kaahumanu Center
275 Kaahumanu Avenue
Kahului, Hawaii 96732-1612
Telephone: 808-877-3369
Fax: 808-877-5992
www.maui.net/~kcenter/
Transfer Agent & Registrar Independent Auditors
ChaseMellon Shareholder Services Deloitte & Touche LLP
85 Challenger Road 1132 Bishop Street, Suite 1200
Ridgefield Park, New Jersey 07660 Honolulu, Hawaii 96813-2870
Telephone: 800-356-2017 Telephone: 808-543-0700
<TABLE>
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
FINANCIAL HIGHLIGHTS
<CAPTION>
1998 1997 1996
(Dollars in Thousands Except Per Share Amounts)
<S> <C> <C> <C>
REVENUES
Pineapple $ 97,658 $ 90,949 $ 95,700
Resort 41,929 40,338 35,676
Commercial & Property 4,087 5,065 4,850
Corporate 37 146 109
Total 143,711 136,498 136,335
INCOME (LOSS) BEFORE
EXTRAORDINARY LOSS 4,340 863 (747)
NET INCOME (LOSS) 3,596 863 (747)
PER COMMON SHARE
Income (Loss) Before
Extraordinary Loss .60 .12 (.10)
Net Income (Loss) $ .50 $ .12 $ (.10)
AVERAGE COMMON
SHARES OUTSTANDING 7,188,500 7,188,500 7,188,500
TOTAL ASSETS $ 136,247 $ 135,507 $132,851
CURRENT RATIO 2.14 2.20 2.23
LONG-TERM DEBT and
CAPITAL LEASES $ 23,592 $ 29,435 $ 28,898
STOCKHOLDERS' EQUITY 62,492 58,896 58,033
STOCKHOLDERS' EQUITY PER
COMMON SHARE $ 8.69 $ 8.19 8.07
EMPLOYEES 2,030 2,270 2,160
</TABLE>
All references to the number of common shares and per share amounts
have been restated to reflect the May 1, 1998 four-for-one common
stock split.
TO OUR SHAREHOLDERS and EMPLOYEES:
Maui Land & Pineapple Company continued to make progress in
terms of financial results in 1998. Net profit increased from
$863,000 in 1997 to $3,596,000 in 1998. We are pleased and
gratified with the improvements made in the Company's operations
over the last five years. For the first time since 1993, the
Company has the ability to pay a reasonable dividend to
shareholders. While 1998 net profit represents a 6% return on
beginning shareholder's equity, it remains short of our goal for
the Company of 10% to 15% return on equity. Our primary focus will
remain on achieving an appropriate level of profitability for the
Company.
The 1998 net profit of $3.6 million included net income from
the sale of a 75-acre parcel in Plantation Estates Phase II at
Kapalua in December of 1998. Land sales contributed approximately
$2.9 million to net income in 1998 compared to about $3.3 million
in 1997. The increase in net income in 1998 also resulted from
higher operating profits from Pineapple and Kapalua Resort
operations, which more than offset lower results from the
Commercial & Property segment. In December of 1998, the Company
retired $20 million of 8.86% senior unsecured notes with a $15
million bridge loan and cash generated by the Company's operations.
The prepayment premium of $1.2 million has been accounted for as an
extraordinary loss of $744,000, net of an income tax credit of
$456,000.
Cash provided by operating activities increased from $3.5
million in 1997 to $17.6 million in 1998. The increase on a year-
to-year basis is attributable to improved operating results and
cash flows in the Pineapple and Resort divisions. As a result, the
Company reduced its total debt, including capital leases, by $6.2
million, from $32.5 million at year-end 1997 to $26.3 million in
1998. Taking into account the Company's $3.4 million year-end cash
position, the debt level is close to our goal for debt and
financial leverage of $20 to $22 million. The Company will benefit
from the reduced level of debt in terms of reduced interest
expense. In addition to refinancing of the $20 million 8.86% notes
mentioned above, another transaction was accomplished that will
serve to reduce the Company's interest expense. Effective January
1, 1999, the interest rate on the 8.25% mortgage note on Napili
Plaza was renegotiated to 7.25%.
The Pineapple division produced by far the bulk of the 1998
profit improvement from 1997. Operating profits rose from $2.1
million in 1997 to $5.5 million in 1998. Part of the improved
results was due to a partial liquidation of LIFO inventories in
1998, which reduced cost of sales by $1.6 million. Cost of sales
were also reduced as a result of lower per unit production costs
because of improved recoveries and cost reduction measures
implemented by the Pineapple division. Pineapple revenues of $97.7
million were up 7% from 1997 because of higher sales volume of
canned pineapple products and a firming of prices throughout the
year, resulting in an increase in average prices over 1997.
Weather-related problems in some of the major pineapple producing
areas of the world resulted in low inventories of canned pineapple
in 1998. Revenue contribution from fresh fruit sales increased by
7% in 1998 in spite of a decline in the number of visitors to
Hawaii and intense competition from local pineapple growers.
The Kapalua Resort division generated improved financial
results in 1998 with operating profits of $5.2 million, or $1.5
million higher than 1997. Reopening of The Kapalua Bay Hotel,
which was closed for part of 1997 for restoration work, contributed
to 1998 results in terms of additional ground rents and an overall
increase in visitor traffic. Lower marketing costs coupled with
increased revenue and operating profit from most of the other
departments in the Resort division also contributed to improved
1998 results. Gains from land sales contributed $1 million less to
Resort operating profit in 1998 than 1997.
We were pleased with the success of the Mercedes
Championships, the opening event of the PGA TOUR season, which we
hosted for the first time in January 1999. Television coverage was
excellent, spectator attendance was at an all-time high and many
local charities benefited from the distribution by the tournament's
non-profit host organization, Kapalua Maui Charities, Inc.
The Commercial & Property segment struggled with difficult
market conditions in 1998 related to both the Hawaii economy and an
over-built retail market. Losses attributable to Kaahumanu Center
increased by approximately $100,000 in 1998 to $1 million. Cash
flow for Kaahumanu Center just about broke even and, fortunately,
did not require cash contributions from the partners. Napili Plaza
showed improved financial results with an operating profit of
$268,000 for 1998 in spite of new competition in the Napili area.
The project to expand the Kahului Airport runway from 7,000
ft. to 9,600 ft. moved forward in 1998 through the county, state
and federal government agencies. Pending State Land Use Commission
hearings, the next step is to complete required approval processes
through the county's Planning Department and the Maui County
Council. Until this infrastructure is approved and permitted to be
constructed, sales of our mainland Jet Fresh whole pineapple, as
well as other Maui agricultural products are limited by lack of
cargo capacity. Completion of this project is also a key component
to the health of Maui's visitor and retail trades. Successful
realization and completion of the runway expansion will depend on
the community working together in 1999 to support this necessary
and important infrastructure project.
In 1998, the Company's Pineapple division continued to make
progress in new product development. Early sales results by Maui
retailers of our new fresh cut product, pineapple wedges and chunks
packaged in plastic containers, have been strong. We are expanding
test distribution to Oahu and the continental United States. The
Pineapple division has been experimenting with a variety of fresh
Hawaiian grown produce and we are pleased with the progress made in
this area. In 1998, we identified potential sources of pineapple
in Central America and, in 1999, we are negotiating long-term
alliances.
The Resort division outlook for 1999 is expected to be
positive, although the visitor industry continues to have
difficulty with reduced eastbound traffic. Coconut Grove on
Kapalua Bay, a 36-unit condominium project to be constructed on the
12-acre parcel adjacent to The Kapalua Bay Hotel, will be a major
focus of attention in 1999 as we move toward construction.
Construction of the new Village Course Clubhouse and Kapalua Golf
Academy will be underway shortly. We expect this project to
significantly enhance the golf experience Kapalua provides.
Starwood Hotels and Resorts assumed management of The Kapalua Bay
Hotel in February of 1999; we feel this change was timely and will
produce positive results for Kapalua.
Leasing activity at Kaahumanu Center continues to be strong
with several proposals pending and others in the negotiation stage.
In early 1999, an advertising contract was awarded to create a new
graphic image and appropriate media placement for the visitor
market.
In May of 1998, the Company's common stock was split four-for-
one and began trading on the American Stock Exchange under the
symbol "MLP." We believe our shareholders have benefited from the
stock split and Amex listing as it has resulted in wider public
trading of our stock, a reduced spread between the ask and bid
prices and greater reliability of information on share price and
trading.
We enter 1999 with confidence that we have made solid progress
in positioning our Pineapple and Resort businesses for improved
financial results. Our Commercial segment will be a challenge as
we work to improve performance of Kaahumanu Center. In 1999, we
will remain focused on the Company's goals and on the challenges
and opportunities ahead of us. In February of 1999, in view of our
1998 profits, the Company's Board of Director's declared a dividend
of 12.5 cents per share.
We express our gratitude to our shareholders for their support
and to our employees for their commitment and accomplishments.
/S/ MARY C. SANFORD
Mary C. Sanford
Chairman
/S/ GARY L. GIFFORD
Gary L. Gifford
President & CEO
February 12, 1999
PINEAPPLE
The Pineapple division reported an operating profit in 1998,
before allocated interest and income taxes, of $5.5 million, $3.4
million higher than 1997. This was Pineapple's third consecutive
year of profitability and the division's best financial results
since 1988.
Pineapple revenue for 1998 was $97.7 million, up 7% from 1997.
Canned pineapple provided 89% of total sales, with case sales
volume increasing 3% over 1997 levels. Pricing firmed throughout
the year, resulting in an increase in average prices over 1997.
Case sales volume of grocery fruit, the largest category
within the canned fruit product line, increased by 9%, followed by
an 8% increase in institutional fruit. Government fruit sales
declined 17%, which was offset by smaller gains in other
categories, resulting in the overall case volume increase of 4%.
Juice case volume declined slightly, while grocery juice, the
largest category, remained consistent with the 1997 level despite
downward sales trends in other types of canned fruit juices. We
expect the trend of overall sales decline in canned fruit juices to
continue and are exploring alternatives for pineapple juice.
Sales of fresh fruit increased 7% over 1997 to $8 million, due
primarily to increased volume. Sales of fresh fruit in Hawaii made
a strong financial contribution in spite of a downturn in the
visitor industry and intense competition from local pineapple
growers. The mainland Jet Fresh fruit program, while profitable,
continues to be faced with transportation problems due to limited
cargo capacity out of Kahului Airport. We expect Jet Fresh sales
volume to increase if certain governmental and environmental
hurdles are overcome and the Kahului Airport runway expansion is
completed.
The division had an excellent production year as tonnage and
unit cases per ton of fruit processed (recovery) were higher than
expected. Higher tonnage and recovery were primarily due to good
agricultural practices, efficient use of irrigation systems, and
excellent harvesting and packing control at the plantations and the
cannery. Overall, the plantations experienced a drier year than
normal. Rainfall at every key rain gauge station on both
plantations was recorded at levels below the five-year historical
average.
In 1998, the division continued to reduce its production costs
by not planting unreliable fields with a history of low yields. As
a result, we expect tonnage to be modestly lower and anticipate
achieving higher average quality fruit. In addition, we expect to
harvest more second ratoon crops in the future. Production costs
were also reduced by consolidating certain departments and by an
early retirement program. The early retirement program resulted in
a one-time charge of $320,000 to general and administrative expense
in 1998. Additional cost reductions may be made in 1999 and future
years.
We continue to monitor canned pineapple imports into the
United States. Through November 1998, the year-to-date case volume
of imported canned pineapple fruit, juice and concentrate decreased
20%, 2% and 22%, respectively, from 1997. This reduction was
primarily due to problems ranging from drought to floods in the
major pineapple producing areas of Thailand, Indonesia and the
Philippines. Imports from Thailand and Indonesia also were reduced
by problems related to the devaluation of local currencies. Many
companies in the major pineapple producing areas increased their
plantings in 1998. Therefore, we expect competition to intensify
when these plantings reach maturity. Accordingly, we expect an
increase in import case volume into the U.S. market as early as the
middle of 1999.
Antidumping duties were in effect on canned pineapple fruit
from Thailand throughout 1998. Many larger Thai pineapple
companies had their antidumping duties reduced significantly
through the annual review process. The U.S. Department of Commerce
has begun its third annual review. We anticipate the announcement
of preliminary dumping margins and tariffs to be made in April 1999
with final results expected in July 1999. We do not expect any
significant changes in the current duty structure in 1999.
We are making progress in new product and business
development. In 1998, we introduced our new fresh cut product
consisting of fresh cut wedges and chunks of pineapple in plastic
containers to the Maui grocery market. Retail trade response has
been excellent and early sales results by Maui retailers are
stronger than projected. These results are encouraging and the
knowledge gained in this test market will help us as we introduce
this new product in the continental United States in 1999.
Sales from Premium Tropicals International, a joint venture
between our subsidiary, Royal Coast Tropical Fruit Company, Inc.,
and Indonesia's P.T. Great Giant Pineapple Company, continue to be
somewhat below expectations. Weather-related problems in
Indonesia, which resulted in low fruit supply, as well as the
political and economic difficulties in that area have reduced the
volume of cases available for sale. We expect the fruit supply to
increase in 1999 and hope the political and economic environment
will improve.
Royal Coast Tropical Fruit Company imports and sells fresh
pineapple from Central America and a variety of fresh Hawaiian
produce. Although 1998 sales were somewhat below expectations, we
are pleased with the progress made in some of the smaller specialty
products, such as Hawaiian papayas. In 1998, we made progress in
positioning ourselves for long-term development in Central America
in anticipation of increasing our pineapple sales volume from this
source.
The Pineapple division's primary focus in 1999 will be to
improve competitiveness and profitability by emphasizing cost
reductions in operations, maximizing yields and improving recovery.
Significant resources will be directed toward the fresh cut
products where customer demand is growing. Sales and marketing
objectives will be to achieve the highest return from sales of 100%
HAWAIIAN U.S.A. canned pineapple and to expand sales through the
Royal Coast Tropical Fruit Company label and the Premium Tropicals
International joint venture.
We expect 1999 to be a challenging year as we continue to
expand and improve our business.
RESORT
The Resort division showed continued financial improvement in
1998 with an operating profit, before allocated interest and taxes,
of $5.2 million compared with $3.8 million in 1997. Both resort
development and resort operations contributed about equally to the
1998 operating profit.
As expected, substantially all resort development profit came
from the sale of a 75-acre parcel in Plantation Estates Phase II in
December 1998. The buyer has consolidated the original plan of two-
acre lots into a single lot for family use that may be subdivided
into a maximum of eight large ranch estate lots. Resort
development profit in 1998 also included the prepayment of a note
receivable by The Ridge Homeowners Association related to their
purchase of the fee interest underlying the condominiums in 1989.
Although it is not reflected in financial results for 1998,
there was significant progress in our resort development plans,
particularly related to two very important projects - The Village
Course Clubhouse and Kapalua Golf Academy, and Coconut Grove on
Kapalua Bay.
In January 1999, we held the formal blessing and
groundbreaking for the new clubhouse and golf academy. The $15
million development includes a new 27,000 sq.ft. clubhouse, world-
class practice facility, 18-hole putting course and two 8,000
sq.ft. commercial retail parcels. The practice facility designed
by Hale Irwin is expected to be completed by year-end while the
clubhouse should be open in mid-2000. In addition to significantly
enhancing Kapalua's golf experience, this project will provide a
foundation and anchor for a planned Town Center commercial
development.
In November 1998, we received Special Management Area approval
from the Maui Planning Commission for the 36 luxury beachfront
condominiums called Coconut Grove on Kapalua Bay. Our 50/50
partner is Lend Lease Real Estate Investment Inc., owner of The
Kapalua Bay Hotel. Presales are expected to begin in the second
quarter of this year with construction scheduled to start this
summer. Profits from the sales of condominiums are expected to be
recognized in the year 2000 when construction will be completed.
Designed by award-winning architect Mark Scheurer, Coconut Grove on
Kapalua Bay represents our first condominium development at Kapalua
in nearly 20 years and a new standard of quality for the resort
residential community.
Real estate resale activity for Kapalua followed the overall
trend for Maui resort real estate with an increase of 28% in total
dollar volume in 1998 compared to 1997. Kapalua Realty continued
to maintain a dominant market share of the resort sales volume.
Unlike the real estate trend, the visitor industry struggled
in 1998 from a significant decline in eastbound visitors caused by
the general economic crisis in Asia. This had the greatest impact
on Oahu and the Waikiki hotels that rely heavily on the Japanese
market. Maui, however, was able to offset this decline with an
increase in westbound traffic and finished 1998 with a slight
increase in full-year occupancy. Kapalua occupancy increased about
6% in 1998, mostly from The Kapalua Bay Hotel having a full year of
operation since its renovation.
As expected, profits from resort operations increased
significantly in 1998 due in part to the re-opening of The Kapalua
Bay Hotel, which had been closed for restoration work during part
of 1997, and reduced marketing costs from not having a major,
nationally televised golf tournament in 1998. Higher golf green
fees, villa rental income, real estate commissions and commercial
lease rents also contributed to improved projects.
In early January 1999, we successfully hosted our inaugural
Mercedes Championships and the start of the PGA TOUR season. This
prestigious event, featuring the 1998 PGA TOUR champions and a
total purse of $2.6 million, was won by David Duval under near-
perfect conditions at The Plantation Course. All four rounds were
covered by ESPN, telecast prime time on the East Coast, a first for
the tournament. Spectator attendance was at an all time high; the
final round alone drew a crowd of approximately 10,000 residents
and visitors. We look forward to extending our relationship with
Mercedes-Benz and the PGA TOUR beyond our initial four-year
agreement. The Mercedes Championships is a key element in our
strategic plan to position Kapalua among the world's finest golf
resort communities. The event played an important role for the
community through its impact on local charities that will receive
over $180,000 distributed through the tournament's non-profit host
organization, Kapalua Maui Charities, Inc.
In February 1999, Starwood Hotels and Resorts assumed
management responsibility for The Kapalua Bay Hotel, which will be
positioned as a "Luxury Collection" property. Starwood is one of
the world's largest hotel companies with over 650 hotels and brings
significant marketing and operational strength to Kapalua. In
response to a strong market for hotel investments, the owners of
both Kapalua hotels considered selling the properties last year,
but discontinued those efforts when the market weakened. Kapalua
continues to be well positioned with the offering of two distinctly
different luxury hotels (The Ritz-Carlton, Kapalua and The Kapalua
Bay Hotel) and a unified resort rental program of over 260 villas
and homes (The Kapalua Villas).
Overall, the outlook for the Resort division remains positive
with the resort strategically positioned for continued improvement
in both resort operations and development.
COMMERCIAL & PROPERTY
The Company's Commercial & Property business segment produced
an operating loss, before allocation of interest and income taxes,
of slightly over $1 million in 1998 compared to an operating loss
of $479,000 in 1997. Revenues decreased from $5.1 million in 1997
to $4.1 million in 1998. In 1998, contributions from land sales
were significantly lower than 1997.
The Company's share of joint venture losses from Kaahumanu
Center Associates increased from $1,155,000 in 1997 to $1,240,000
in 1998. Combined with management fee revenue and other revenue
and expenses, the Company's operating loss attributable to
Kaahumanu Center was approximately $1,000,000 in 1998 compared to
approximately $900,000 in 1997.
The losses at Kaahumanu Center, Maui's only regional mall,
were higher than the previous year and higher than anticipated for
1998 due primarily to tenant turnover and the timing of new tenant
installations. New merchants opening in 1998 included Sam Choy's
Kahului, Kids Footlocker, Shades of California and Serendipity.
Traffic was strong at the mall with vehicular traffic increasing by
10% over 1997. Tenant sales at Kaahumanu Center increased
approximately 1% in 1998 compared to 1997. However, revenues
declined by 1.5%, primarily as a result of rent concessions, while
expenses remained approximately the same as 1997.
Napili Plaza, the Company's 44,000 sq.ft. retail shopping and
commercial office center in West Maui, showed improved results.
Revenues for 1998 were approximately the same as 1997 while
expenses declined by 8% from 1997, which resulted in an operating
profit of $268,000 for 1998 compared to an operating profit of
$207,000 in 1997. While tenant occupancy for 1998 was higher than
1997, tenant sales were down approximately 7%, largely attributable
to new competition in the area.
Operating losses from other property rentals and land
management declined from $779,000 in 1997 to $574,000 in 1998.
Gains on land sales decreased in 1998 to $221,000 compared to
$1,006,000 in 1997.
In 1998, the Company obtained land use entitlement approvals
from the County of Maui for two Company-owned parcels. The first
parcel, approximately 2.5 acres in land area, is located within
Haliimaile Village and was rezoned to Country Town Business
District. The second parcel, approximately 11 acres in area, is
located in West Maui and was reclassified to State Urban and
rezoned to R-1 Residential District. Rezoning approval is the
final step in the lengthy land use entitlement process.
Land use entitlement approvals for the 11-acre parcel in West
Maui were granted pursuant to the applications submitted in
December of 1997. A Special Management Area (SMA) Permit
application for development of the subject parcel as a 45-lot Kapua
Village Employee Subdivision was made at the same time. The SMA
Permit application will be processed as a contested case hearing
due to opposition to the subdivision by neighboring landowners.
The contested case hearing proceedings will delay commencement of
work on the subdivision. It is anticipated that proceedings will
conclude sometime during mid-1999 in our favor.
The partially complete Land and Water Use and Development Plan
and Management Information System Database have provided benefits
in the daily management of the Company's land and water resources.
It is anticipated that the plan and database will be completed in
1999.
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Directors of Maui Land & Pineapple Company,
Inc.:
We have audited the accompanying consolidated balance sheets
of Maui Land & Pineapple Company, Inc. and its subsidiaries as of
December 31, 1998 and 1997, and the related consolidated statements
of operations and retained earnings and of cash flows for each of
the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Companies at December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the
period ended December 31, 1998 in conformity with generally
accepted accounting principles.
/S/ DELOITTE & TOUCHE
DELOITTE & TOUCHE LLP
Honolulu, Hawaii
February 8, 1999
(March 12, 1999, as to fifth paragraph of Note 4)
<TABLE>
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997
<CAPTION>
1998 1997
(Dollars in Thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,447 $ 1,611
Accounts and notes receivable,
less allowance of $493 and $567
for doubtful accounts 13,005 12,748
Inventories
Pineapple products 8,380 11,125
Real estate held for sale 1,083 1,349
Merchandise, materials and supplies 6,057 6,239
Prepaid expenses and other assets 3,659 4,076
Total Current Assets 35,631 37,148
NOTES RECEIVABLE--REAL ESTATE SALES -- 370
INVESTMENTS AND OTHER ASSETS 10,695 9,942
PROPERTY
Land 4,618 4,614
Land improvements 45,868 42,761
Buildings 49,708 49,285
Machinery and equipment 104,052 98,700
Construction in progress 5,721 5,144
Total Property 209,967 200,504
Less accumulated depreciation 120,046 112,457
Net Property 89,921 88,047
TOTAL $136,247 $135,507
<CAPTION>
1998 1997
(Dollars in Thousands)
<S> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 2,254 $ 2,043
Current portion of capital lease obligations 499 1,009
Trade accounts payable 6,613 6,166
Customers' deposits 1,304 950
Payroll and employee benefits 4,085 4,637
Other accrued liabilities 1,891 2,060
Total Current Liabilities 16,646 16,865
LONG-TERM LIABILITIES
Long-term debt 22,913 28,257
Capital lease obligations 679 1,178
Accrued retirement benefits 22,920 22,364
Equity in losses of joint venture 7,969 6,655
Other noncurrent liabilities 2,628 1,292
Total Long-Term Liabilities 57,109 59,746
CONTINGENCIES AND COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock--no par value, 7,200,000 shares
authorized, 7,188,500 shares issued
and outstanding 12,318 12,318
Retained earnings 50,174 46,578
Stockholders' Equity 62,492 58,896
TOTAL $136,247 $135,507
See Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Years Ended December 31, 1998, 1997 and 1996
<CAPTION>
1998 1997 1996
(Dollars in Thousands Except Per Share Amounts)
<S> <C> <C> <C>
REVENUES
Net sales $113,391 $101,421 $106,666
Operating revenue 29,123 29,058 28,062
Other income 1,197 6,019 1,607
Total Revenues 143,711 136,498 136,335
COSTS AND EXPENSES
Cost of goods sold 76,049 72,200 75,279
Operating expenses 26,168 26,027 24,030
Shipping and marketing 16,673 18,053 19,185
General and administrative 15,094 14,600 14,507
Equity in losses of joint ventures 1,160 1,211 882
Interest 3,039 3,045 3,575
Total Costs and Expenses 138,183 135,136 137,458
INCOME (LOSS) BEFORE
INCOME TAXES AND
EXTRAORDINARY LOSS 5,528 1,362 (1,123)
INCOME TAX EXPENSE (CREDIT) 1,188 499 (376)
INCOME (LOSS) BEFORE
EXTRAORDINARY LOSS 4,340 863 (747)
EXTRAORDINARY LOSS, NET OF
INCOME TAX CREDIT OF $456 (744) -- --
NET INCOME (LOSS) 3,596 863 (747)
RETAINED EARNINGS,
BEGINNING OF YEAR 46,578 45,715 46,552
CASH DIVIDENDS -- -- (90)
RETAINED EARNINGS, END OF YEAR 50,174 46,578 45,715
PER COMMON SHARE
Income (Loss) Before
Extraordinary Loss .60 .12 (.10)
Extraordinary Loss,
Net of Income Tax Credit (.10) -- --
Net Income (Loss) .50 .12 (.10)
Cash Dividends $ -- $ -- $ .01
Average Common
Shares Outstanding 7,188,500 7,188,500 7,188,500
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1998, 1997 and 1996
<CAPTION>
1998 1997 1996
(Dollars in Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 3,596 $ 863 $ (747)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities
Depreciation 8,176 8,041 8,606
Undistributed equity in
losses of joint ventures 1,194 1,211 1,010
Gain on property disposals (627) (5,254) (812)
Deferred income taxes (523) (313) (389)
(Increase) decrease in
accounts receivable (526) 1,446 (1,105)
(Increase) decrease
in inventories 5,193 (1,219) 3,191
Increase (decrease) in
trade payables (420) (1,356) 1,602
Net change in other operating assets
and liabilities 1,568 34 398
NET CASH PROVIDED BY
OPERATING ACTIVITIES 17,631 3,453 11,754
INVESTING ACTIVITIES
Purchases of property (8,230) (8,388) (5,284)
Proceeds from sale of property 634 5,882 845
Distributions from joint ventures -- 1,460 712
Contributions to joint ventures (425) (1,030) --
Payments for other investments (1,632) (1,815) (437)
Proceeds from surrender of
insurance policies -- -- 3,125
Reimbursement from Kaahumanu
Center Associates -- -- 328
NET CASH USED IN
INVESTING ACTIVITIES (9,653) (3,891) (711)
FINANCING ACTIVITIES
Proceeds from long-term debt 30,647 23,891 18,800
Payments of long-term debt (35,780) (20,991) (28,097)
Payments on capital lease
obligations (1,009) (1,304) (1,369)
Dividend paid -- -- (90)
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (6,142) 1,596 (10,756)
NET INCREASE IN CASH 1,836 1,158 287
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 1,611 453 166
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 3,447 $ 1,611 $ 453
Supplemental Disclosures of Cash Flow Information and Non-Cash
Investing and Financing Activities:
1. Cash paid during the year (in thousands):
Interest (net of
amount capitalized) $ 4,809 $ 3,235 $ 3,751
Income taxes 984 335 301
2. Capital lease obligations of $739,000 in 1997 and $1,092,000
in 1996 were incurred for new equipment.
3. Effective December 31, 1997, the Company's investment in
Plantation Club Associates (PCA) was liquidated and the Company
assumed PCA's remaining assets totaling $1.4 million (see Note 3
to Consolidated Financial Statements).
See Notes to Consolidated Financial Statements.
</TABLE>
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts
of Maui Land & Pineapple Company, Inc. and its wholly owned
subsidiaries, primarily Maui Pineapple Company, Ltd. and Kapalua
Land Company, Ltd. Significant intercompany balances and
transactions have been eliminated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, deposits in
banks and commercial paper with original maturities of three
months or less.
INVENTORIES
Inventories of tinplate, cans, ends and canned pineapple
products are stated at cost, not in excess of market value, using
the dollar value last-in, first-out (LIFO) method.
The costs of growing pineapple are charged to production in
the year incurred rather than deferred until the year of harvest.
For financial reporting purposes, each year's total cost of
growing and harvesting pineapple is allocated to products on the
basis of their respective market values; for income tax purposes,
the allocation is based upon the weight of fruit included in each
product.
Real estate held for sale is stated at the lower of cost or
fair value less cost to sell.
Merchandise, materials and supplies are stated at cost, not
in excess of market value, using retail and average cost methods.
INVESTMENTS AND OTHER ASSETS
Cash surrender value of life insurance policies are
reflected net of loans against the policies.
Investments in joint ventures are generally accounted for
using the equity method.
PROPERTY AND DEPRECIATION
Property is stated at cost. Major replacements, renewals
and betterments are capitalized while maintenance and repairs
that do not improve or extend the life of an asset are charged to
expense as incurred. When property is retired or otherwise
disposed of, the cost of the property and the related accumulated
depreciation are written off and the resulting gains or losses
are included in income. Depreciation is provided over estimated
useful lives of the respective assets using the straight-line
method.
POSTRETIREMENT BENEFITS
The Company's policy is to fund pension cost at a level at
least equal to the minimum amount required under federal law, but
not more than the maximum amount deductible for federal income
tax purposes.
Deferred compensation plans for certain management employees
provide for specified payments after retirement. The present
value of estimated payments to be made were accrued over the
period of active employment. On October 1, 1998, these plans
were terminated (see Note 5 to Consolidated Financial
Statements).
The estimated cost of providing postretirement health care
and life insurance benefits is accrued over the period employees
render the necessary services.
REVENUE RECOGNITION
Revenue from the sale of pineapple is recognized when title
to the product is transferred to the customer. The timing of the
transfer of title varies according to the shipping and delivery
terms of the sale.
Sales of real estate are recognized as revenues in the
period in which sufficient cash has been received, collection of
the balance is reasonably assured and risks of ownership have
passed to the buyer.
INTEREST CAPITALIZATION
Interest costs are capitalized during the construction
period of major capital projects.
ADVERTISING AND RESEARCH AND DEVELOPMENT
The costs of advertising and research and development
activities are expensed as incurred.
LEASES
Leases that transfer substantially all of the benefits and
risks of ownership of the property are accounted for as capital
leases. Amortization of capital leases is included in
depreciation expense. Other leases are accounted for as
operating leases.
INCOME TAXES
The Company's provision for income taxes is calculated using
the liability method. Deferred income taxes are provided for all
temporary differences between the financial statement and tax
bases of assets and liabilities using enacted tax rates.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
periods. Future actual amounts could differ from those
estimates.
EARNINGS PER COMMON SHARE
Earnings per common share is computed using the weighted
average number of shares outstanding during the period. The
Company has no dilutive potential common shares outstanding. All
references to shares outstanding and per share amounts for prior
periods have been restated to reflect the four-for-one split of
the Company's common stock that was effected on May 1, 1998.
2. INVENTORIES
Pineapple product inventories were comprised of the
following components at December 31, 1998 and 1997:
1998 1997
(Dollars in Thousands)
Finished Goods $ 5,979 $ 8,977
Work In Progress 839 823
Raw Materials 1,562 1,325
Total $ 8,380 $11,125
The replacement cost of pineapple product inventories at
year-end approximated $19 million in 1998 and $25 million in
1997. In 1998 and 1996, there were partial liquidations of LIFO
inventories; thus, cost of sales included prior years' inventory
costs, which were lower than current costs. Had current costs
been charged to cost of sales, net income for 1998 would have
decreased by $1,360,000 or $.19 per share and the net loss for
1996 would have increased by $795,000 or $.11 per share.
3. INVESTMENTS AND OTHER ASSETS
Investments and Other Assets at December 31, 1998 and 1997
consisted of the following:
1998 1997
(Dollars in Thousands)
Deferred Costs $ 6,230 $ 5,780
Cash Surrender Value of Life
Insurance Policies (net) 515 532
Prepaid pension asset 2,247 2,392
Other 1,703 1,238
Total $10,695 $ 9,942
Deferred costs are primarily intangible predevelopment costs
related to various projects at the Kapalua Resort, which will be
allocated to future development projects.
Cash surrender value of life insurance policies are stated
net of policy loans totaling $597,000 and $892,000, respectively,
at December 31, 1998 and 1997.
PLANTATION CLUB ASSOCIATES
Plantation Club Associates (PCA) was an unincorporated joint
venture in which Kapalua Land Company, Ltd. (Kapalua) was the
managing venturer. Profits and losses of the joint venture were
allocated based on estimated distributions to the partners, which
was 85% to Kapalua and 15% to the other partner. The partnership
agreement required that all major decisions receive unanimous
approval of the partners.
In 1997, the three remaining lots in Plantation Estates
Phase I were sold and the partners concluded an agreement to
liquidate PCA as of December 31, 1997. After distribution of the
joint venture's cash to the partners, Kapalua assumed PCA's
remaining assets of $1.4 million, primarily land and planning
costs for Plantation Estates Phase II.
Summarized operating information for PCA for the years ended
December 31, 1997 and 1996 follows:
1997 1996
(Dollars in Thousands)
Revenues $ 1,823 $ 560
Costs and Expenses 1,850 397
Net Income (Loss) $ (27) $ 163
Kapalua's pre-tax share of the joint venture's net income
(loss) was $(56,000) for 1997 and $128,000 for 1996. These
amounts include expenses incurred by the Company related to the
investment, primarily amortization of capitalized interest cost.
The Company received cash distributions from PCA of $1,460,000 in
1997 and $850,000 in 1996.
KAPTEL ASSOCIATES
Kapalua Investment Corp. (KIC), a wholly owned subsidiary of
Maui Land & Pineapple Company, Inc., was a 25% general partner in
Kaptel Associates, the partnership that owned The Ritz-Carlton,
Kapalua Hotel. In February of 1995, Kaptel defaulted on its $186
million non-recourse financing arrangement. NI Hawaii Resorts,
Inc. (NI), the major general partner, acquired the indebtedness
and on October 31, 1995, the partners of Kaptel concluded an
agreement to dissolve the partnership. KIC transferred its
interest in the partnership to NI.
The Company leased the 36-acre hotel site to Kaptel under a
long-term lease. In 1990, the Company borrowed $4,750,000 from
Kaptel for construction of certain off-site improvements related
to the hotel property. Principal and interest payments on the
loan were payable solely from rental income receivable by the
Company under the hotel ground lease. The lease was renegotiated
with the hotel owner, effective January 1, 1996. The
renegotiated lease subordinates the Company's fee interest to a
$65 million first mortgage and requires that ground rents be
applied against the off-site loan with any balance remaining on
the loan at January 1, 1999 to be canceled. For accounting
purposes, the off-site loan was offset against the cost of the
off-site improvements as of December 31, 1995, and the Company
will not recognize any income from the ground lease until January
1, 1999.
KAAHUMANU CENTER ASSOCIATES
In June 1993, Kaahumanu Center Associates (KCA) was formed
to finance the expansion and renovation of and to own and operate
Kaahumanu Center. KCA is a partnership between the Company as
general partner and the Employees' Retirement System of the State
of Hawaii (ERS) as a limited partner. The Company contributed
the then existing shopping center, subject to a first mortgage,
and approximately nine acres of adjacent land. ERS contributed
$312,000 and made a $30.6 million loan to the partnership.
The expansion and renovation were substantially complete by
the end of November 1994. Effective April 30, 1995, the ERS
converted its $30.6 million loan to an additional 49% ownership
in KCA. Effective with conversion of the ERS loan, the Company
and ERS each have a 50% interest in KCA and the Company has
accounted for its investment in KCA by the equity method.
The Company has a long-term agreement with KCA to manage
Kaahumanu Center. The agreement provides for certain performance
tests, which if not met, could result in termination of the
agreement. The tests were not met in 1998, but termination of
the agreement is not presently being considered. KCA does not
have any employees. As manager, the Company provides all
administrative and on-site personnel and incurs other costs and
expenses, primarily insurance, which are reimbursable by KCA.
The Company generates a portion of the electricity used by
Kaahumanu Center. In 1998, 1997 and 1996, reimbursements from
KCA for payroll and other costs and expenses totaled $2,303,000,
$2,240,000 and $2,391,000, respectively, and the Company charged
KCA $2,402,000, $2,574,000 and $2,621,000, respectively, for
electricity and management fees. At December 31, 1998 and 1997,
$333,000 and $430,000, respectively, were due to the Company from
KCA for management fees, electricity and reimbursable costs.
Summarized balance sheet information for KCA as of December
31, 1998 and 1997 and operating information for each of the three
years ended December 31, 1998 follows:
1998 1997
(Dollars in Thousands)
Current assets $ 1,039 $ 923
Property and equipment, net 73,861 76,539
Other assets, net 2,311 2,493
Total Assets 77,211 79,955
Current liabilities 2,200 1,454
Noncurrent liabilities 61,366 62,376
Total Liabilities 63,566 63,830
Partners' Capital $ 13,645 $16,125
1998 1997 1996
Revenues $ 13,625 $13,945 $ 13,677
Costs and Expenses 16,104 16,255 15,697
Net Loss $ 2,479 $ 2,310 $ 2,020
The Company's share of losses from KCA was $1,240,000,
$1,155,000 and $1,010,000, respectively, for 1998, 1997 and 1996.
ERS and the Company each have a 9% cumulative, non-compounded
priority right to cash distributions based on their net
contributions to the partnership (preferred return). For the
purpose of calculating preferred returns, each partner's capital
contribution had an agreed upon value of $30.9 million on May 1,
1995. The Company's preferred return is subordinate to the ERS
preferred return. As of December 31, 1998, the accumulated
unpaid preferred return was $8.8 million each for ERS and the
Company. Pursuant to cash calls, the partners each contributed
$830,000 to the partnership in 1997.
The Company's investment in KCA is a negative $8 million at
December 31, 1998. The negative balance is a result of recording
the Company's initial contribution in 1993 at net book value of
the assets contributed, reduced by the related debt.
4. BORROWING ARRANGEMENTS
Short-term bank lines of credit available to the Company at
December 31, 1998 were $2 million. These lines provide for
interest at the prime rate (7.75% at December 31, 1998) plus 1/4%
to 1%. There were no borrowings under these lines at December
31, 1998, but $667,000 in letters of credit were reserved against
these lines to secure the Company's deductible portion of
insurance claims administered by various insurance companies.
During 1998, 1997 and 1996, the Company had average
borrowings outstanding of $33 million, $32.8 million and $36.5
million, respectively, at average interest rates of 8.9%, 8.8%
and 8.9%, respectively.
Long-term debt at December 31, 1998 and 1997 consisted of
the following (interest rates represent the rates at December
31):
1998 1997
(Dollars in Thousands)
Bridge loan, 8% $ 15,000 $ --
Senior unsecured notes, 8.86% -- 20,000
Mortgage loan, 8.25% 4,886 4,948
Equipment loans, 7.23% to 8.24%
and 8.14% to 8.68% 3,918 4,335
Other 6.76% to 8.46% and 8.45% 1,363 1,017
Total 25,167 30,300
Less portion classified as current 2,254 2,043
Long-term debt $ 22,913 $28,257
On December 31, 1998, the $20 million of 8.86% senior
unsecured notes were retired with a $15 million bridge loan (7.3%
at January 4, 1999) and cash generated by the Company's
operations. Principal payments on the $20 million loan were due
from 1999 through 2003. A prepayment penalty of $1.2 million was
paid for early extinguishment of the 8.86% notes and has been
accounted for as an extraordinary loss of $744,000 (net of income
tax credit of $456,000).
On March 12, 1999, the Company accepted a commitment for a
senior secured term loan facility. Under the terms of the
commitment, the Company may borrow up to $15 million for periods
of five or ten years with interest rates approximating 2% to 3%
above certain comparable term U. S. Treasury issues. The
facility will contain financial maintenance covenants, at levels
to be determined, and will be collateralized by certain parcels
of the Company's real estate. The Company intends to use the
proceeds from the senior secured term loan facility to repay the
$15 million bridge loan, which is due on April 30, 1999.
Accordingly, the $15 million balance has been classified as long-
term in the December 31, 1998 balance sheet.
The Company has a revolving credit agreement with
participating banks under which it may borrow up to $15 million
in revolving loans through December 31, 1999. Amounts
outstanding at that date, at the Company's option, may be
converted to a three-year term loan payable in six equal semi-
annual installments. In December of 1998, the agreement was
amended to include a $15 million development line of credit
facility for construction of a new clubhouse and golf academy at
Kapalua. The development facility matures in December of 2000.
Commitment fees of 1/4% are payable on the unused portions
of the revolving credit line. At the Company's option, interest
on advances under both the revolving credit line and the
development facility is at the prime rate or based on a LIBOR
rate. The loan is collateralized by the Company's three golf
courses at the Kapalua Resort. The agreement contains certain
financial covenants, including the maintenance of consolidated
net worth and working capital at certain levels and limits on the
incurrence of other indebtedness and capital expenditures.
Declaration and payment of cash dividends is restricted to 30% of
prior year's net income.
The mortgage loan is collateralized by the Napili Plaza
shopping center and matures on December 31, 2005. Payments are
based on a 25-year amortization. Effective January 1, 1999, the
interest rate on the loan was amended to 7.25% until January 1,
2002. The interest rate will be adjusted to the lender's then-
prevailing rate of interest for such loans as of January 1, 2002
and January 1, 2005.
The Company has an agreement that provides for term loans
that were used to purchase assets for the Company's pineapple
operations. The loans are at fixed interest rates and mature
through October 2002. The agreement includes certain financial
covenants that are similar to those in the Company's revolving
credit agreement, plus a requirement for the maintenance of a
minimum tangible net worth and debt coverage ratio (as defined).
Maturities of long-term debt during the next five years,
from 1999 through 2003, are as follows: $2,254,000, $1,761,000,
$785,000, $695,000, $183,000.
5. POSTRETIREMENT BENEFITS
The Company has defined benefit pension plans and defined
benefit postretirement health care and life insurance plans.
Changes in benefit obligations and changes in plan assets
for 1998 and 1997 and the funded status of the plans and amounts
recognized in the balance sheets as of December 31 were as
follows:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
1998 1997 1998 1997
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Change in benefit obligations:
Benefit obligations at
beginning of year $ 31,015 $ 29,654 $ 14,140 $ 13,613
Service cost 1,240 1,030 411 325
Interest Cost 2,261 2,161 1,024 991
Actuarial (gain) loss 2,228 232 481 (38)
Special termination
benefits 314 -- 29 --
Benefits paid (1,987) (2,062) (706) (751)
Benefit obligations at
end of year 35,071 31,015 15,379 14,140
Change in plan assets:
Fair value of plan assets at
beginning of year 37,530 32,992 -- --
Actual return on plan assets6,028 5,742 -- --
Employer contributions 236 858 706 751
Benefits paid (1,987) (2,062) (706) (751)
Fair value of plan assets at
end of year 41,807 37,530 -- --
Funded status 6,736 6,515 (15,379) (14,140)
Unrecognized actuarial gain (3,935) (3,055) (3,082) (3,772)
Unrecognized net
transition asset (1,295) (1,830) -- --
Unrecognized prior
service cost 244 305 (1,324) (1,471)
Net Amounts recognized 1,750 1,935 (19,785) (19,383)
Amounts recognized in
balance sheets consist of:
Prepaid benefit cost 2,247 2,139 -- --
Accrued benefit liability (497) (457) (19,785) (19,383)
Intangible asset -- 253 -- --
Net amount recognized $ 1,750 $ 1,935 $(19,785) $(19,383)
</TABLE>
Net periodic benefit costs for 1998, 1997 and 1996 included
the following components:
<TABLE>
<CAPTION>
1998 1997 1996
(Dollars in Thousands)
<S> <C> <C> <C>
Pension benefits:
Service cost $ 1,240 $ 1,030 $ 982
Interest cost 2,261 2,161 2,190
Expected return on
plan assets (2,925) (2,576) (2,400)
Amortization of net
transition asset (535) (535) (535)
Amortization of
prior service cost 61 61 61
Recognized net
actuarial (gain) loss 3 16 15
Special termination benefits 314 -- --
Net expense 419 157 313
Other benefits:
Service cost 411 325 328
Interest cost 1,024 991 1,012
Amortization of
prior service cost (147) (147) (147)
Recognized net
actuarial (gain) loss (209) (300) (224)
Special termination benefits 29 -- --
Net expense $ 1,108 $ 869 $ 969
</TABLE>
Effective September 1, 1998, in an effort to reduce the size
of its workforce, the Company offered a voluntary, enhanced early
retirement program to employees in the Pineapple and Corporate
divisions based on age and years of service. The projected
benefit obligation for the pension plans and the net pension
expense for 1998 increased by $314,000 and the accumulated
postretirement benefit obligation for other benefits and the
corresponding net expense for 1998 increased by $29,000 as a
result of implementating this program.
The projected benefit obligation, accumulated benefit
obligation and fair value of plan assets for the pension plans
with accumulated benefits in excess of plan assets were $846,000,
$471,000 and -0-, respectively, as of December 31, 1998, and
$1,663,000, $1,309,000 and $851,000, respectively, as of December
31, 1997.
The benefit obligations for pensions and other
postretirement benefits were determined using discount rates of
7% and 7.5%, respectively, as of December 31, 1998 and 1997, and
compensation increases ranging up to 4.5%. The expected long-
term rate of return on assets was 8% for 1998 and 1997.
The accumulated postretirement benefit obligation for health
care as of December 31, 1998 and 1997 was determined using a
health care cost trend rate of 10% in 1995, decreasing by .5%
each year from 1995 through 2004 and 5% thereafter. The effect
of a 1% annual increase in these assumed cost trend rates would
increase the accrued postretirement benefit obligation by
approximately $2,345,000 as of December 31, 1998, and the
aggregate of the service and interest cost for 1998 by
approximately $203,000; a 1% annual decrease would reduce the
accrued postretirement benefit obligation by approximately
$1,351,000 as of December 31, 1998, and the aggregate of the
service and interest cost for 1998 by approximately $164,000.
On October 1, 1998, deferred compensation plans that
provided for specified payments after retirement for certain
management employees were terminated. At the termination date,
these employees were given credit for existing years of service
and future accruals were discontinued.
6. OTHER INCOME
Revenues attributable to real estate sales other than
inventory held for sale were $591,000, $5.2 million and $700,000,
respectively, in 1998, 1997 and 1996, and were included in Other
Income.
7. LEASES
LESSEE
The Company has capital leases, primarily on equipment used
in pineapple operations, which expire at various dates through
2002. At December 31, 1998 and 1997, property included capital
leases of $1,699,000 and $6,013,000, respectively (accumulated
depreciation of $684,000 and $2,403,000, respectively). Future
minimum rental payments under capital leases aggregate $1,293,000
(including $115,000 representing interest) and are payable as
follows (1999 to 2002): $562,000, $298,000, $272,000, $161,000.
The Company has various operating leases, primarily for land
used in pineapple operations, which expire at various dates
through 2012. A major operating lease covering approximately
1,500 acres used primarily for pineapple operations expires on
December 31, 1999. Total rental expense under operating leases
was $746,000 in 1998, $804,000 in 1997 and $736,000 in 1996.
Future minimum rental payments under operating leases aggregate
$2,410,000 and are payable during the next five years (1999 to
2003) as follows: $635,000, $332,000, $255,000, $246,000,
$116,000, respectively, and $826,000 thereafter.
LESSOR
The Company leases land and land improvements, primarily to
hotels at Kapalua, and buildings, primarily to retail tenants.
The leases generally provide for minimum rents and, in most
cases, percentage rentals based on tenant revenues. In addition,
the leases generally provide for reimbursement of common area
maintenance and other expenses. Total rental income under these
operating leases was as follows:
1998 1997 1996
(Dollars in Thousands)
Minimum rentals $ 1,694 $ 1,575 $ 2,370
Percentage rentals 1,279 1,140 738
Total $ 2,973 $ 2,715 $ 3,108
Property at December 31, 1998 and 1997 includes leased
property of $20,184,000 and $19,043,000, respectively
(accumulated depreciation of $9,961,000 and $8,770,000,
respectively).
Future minimum rental income aggregates $6,852,000 and is
receivable during the next five years (1999 to 2003) as follows:
$1,243,000, $1,072,000, $776,000, $543,000, $443,000,
respectively, and $2,775,000 thereafter.
8. INCOME TAXES
The components of the income tax provision (credit) were as
follows:
1998 1997 1996
(Dollars in Thousands)
Current
Federal $ 1,225 $ 931 $ 51
State 30 (119) (38)
Total 1,255 812 13
Deferred
Federal (415) (433) (379)
State (108) 120 (10)
Total (523) (313) (389)
Total provision (credit) $ 732 $ 499 $ (376)
Reconciliation between the total provision (credit) and the
amount computed using the statutory federal rate of 34% follows:
1998 1997 1996
(Dollars in Thousands)
Federal provision (credit) at
statutory rate $ 1,471 $ 463 $ (382)
Adjusted for
State income taxes,
net of effect on
federal income taxes (91) (5) (19)
Appreciated property donation (721) -- --
Other 73 41 25
Total income tax
provision (credit) $ 732 $ 499 $ (376)
Deferred tax assets and liabilities were comprised of the
following types of temporary differences as of December 31, 1998
and 1997:
1998 1997
(Dollars in Thousands)
Accrued retirement benefits $ 7,216 $ 7,358
Minimum tax credit carryforward 3,566 3,641
Accrued liabilities 1,279 1,215
Net operating loss carryforward 111 2,134
Allowance for doubtful accounts 176 211
Inventory 230 264
Total deferred tax assets 12,578 14,823
Deferred condemnation proceeds (5,998) (6,397)
Property net book value (4,333) (4,546)
Income from partnerships (881) (1,363)
Pineapple marketing costs (409) (685)
Charitable contributions -- (1,410)
Other (108) (96)
Total deferred tax liabilitie s (11,729) (14,497)
Net deferred tax asset $ 849 $ 326
At December 31, 1998, the Company had federal minimum tax
credit carryforwards of $3.6 million.
In December of 1998, issues regarding the charitable
donation of appreciated property in 1989 and 1990 were settled
with the Internal Revenue Service. Deferred tax liabilities that
will not reverse in the future as a result of the settlement were
recognized in 1998 as a credit in the income tax provision.
The Company's federal income tax returns for 1990 through
1994 are under examination by the Internal Revenue Service. The
revenue agent's report on these years has not yet been issued and
the Company presently cannot predict the outcome of these
examinations.
9. INTEREST CAPITALIZATION
Interest cost incurred in 1998, 1997 and 1996 was
$3,179,000, $3,214,000 and $3,633,000, respectively, of which
$140,000, $169,000 and $58,000, respectively, was capitalized.
10. SUBSEQUENT EVENT
On February 12, 1999, the Company's Board of Directors
declared a cash dividend of $.125 per share payable on March 24,
1999.
11. ADVERTISING AND RESEARCH AND DEVELOPMENT
Advertising expense totaled $1,397,000 in 1998, $1,592,000
in 1997 and $1,535,000 in 1996. Research and development
expenses totaled $815,000 in 1998, $601,000 in 1997 and $543,000
in 1996.
12. CONTINGENCIES AND COMMITMENTS
The County of Maui has sued several chemical manufacturers
claiming that they are responsible for the presence of a
nematocide commonly known as DBCP in certain water wells on Maui.
One of the manufacturers has claimed that the Company is required
to indemnify it under the terms of a 1978 agreement for the sale
of DBCP between the Company and the manufacturer. Another
chemical manufacturer claims that if it is liable to the County
of Maui, the manufacturer is entitled to indemnification or
contribution from the Company, as a former user of the chemical.
The Company presently is unable to estimate the range of
potential effects of this litigation, if resolved adversely to
the Company, on its financial position or its results of
operations.
There are various other claims and legal actions pending
against the Company. In the opinion of management, after
consultation with legal counsel, the resolution of these matters
will not have a material adverse effect on the Company's
financial position or results of operations.
The Company has guaranteed the payment of up to $10 million
of debt service for Kaahumanu Center Associates. The lender will
release the guaranty when Kaahumanu Center attains a defined
level of net operating income.
Premium Tropicals International, LLC (PTI) is a joint
venture between Royal Coast Tropical Fruit Company, Inc. (a
wholly owned subsidiary of Maui Pineapple Company, Ltd.) and an
Indonesian pineapple grower and canner. The joint venture
markets and sells Indonesian canned pineapple in the United
States. The Company is a guarantor of a $3 million line of
credit, which supports letters of credit to be issued on behalf
of PTI for import trading purposes.
13. CONCENTRATIONS OF CREDIT RISK
A substantial portion of the Company's trade receivables
results from sales of pineapple products, primarily to food
distribution customers in the United States. Credit is extended
after evaluating creditworthiness and no collateral generally is
required from customers. Notes receivable result principally
from sales of real estate in Hawaii and are collateralized by the
property sold.
14. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Except as indicated below, the carrying amount is considered
to be the fair value of financial instruments. The following
methods and assumptions were used to estimate the fair value of
certain financial instruments:
Notes Receivable:
The fair value of these assets was estimated based on rates
currently available for similar types of transactions.
Long-Term Debt:
The fair value of these liabilities was estimated based on
rates currently available to the Company for debt with similar
terms and remaining maturities.
The estimated fair values for these financial instruments at
December 31, 1998 and 1997 were as follows:
1998 1997
(Dollars in Thousands)
Carrying Fair Carrying Fair
Amount Value Amount Value
Notes Receivable $ 255 $ 272 $ 727 $ 688
Long-Term Debt 25,167 25,189 30,300 30,769
15. RECLASSIFICATIONS
Certain amounts for prior years have been reclassified to
conform to the presentation for the current year.
16. BUSINESS SEGMENTS
The Company's reportable segments are Pineapple, Resort and
Commercial & Property. Each segment is a line of business
requiring different technical and marketing strategies.
Pineapple includes growing pineapple, canning pineapple in
tin-plated steel containers fabricated by the Company, and
marketing canned and fresh pineapple products.
Resort includes the development and sale of real estate,
property management and the operation of recreational and retail
facilities and utility companies at Kapalua on Maui.
Commercial & Property covers non-resort real estate
activities, including the Company's investment in Kaahumanu
Center Associates, Napili Plaza shopping center, non-resort
property rentals and sales and the Company's land entitlement and
management activities.
The accounting policies of the segments are the same as
those described in Note 1, Summary of Significant Accounting
Policies.
Commercial
1998 Pineapple Resort & Property Other Consolidated
(Dollars in Thousands)
Revenues (1) $97,658 $ 41,929 $ 4,087 $ 37 $ 143,711
Operating profit
(loss) (2)(3) 5,480 5,239 (1,085) (1,067) 8,567
Interest expense (1,543) (1,089) (167) (240) (3,039)
Income (loss) before
income taxes and
extraordinary loss 3,937 4,150 (1,252) (1,307) 5,528
Depreciation 4,795 2,743 487 151 8,176
Equity in earnings (losses) of
joint ventures 79 1 (1,240) -- (1,160)
Investment in
joint ventures 145 495 (7,969) -- (7,329)
Segment assets (4) 62,384 53,323 6,780 13,760 136,247
Expenditures for
segment assets 6,433 3,930 406 997 11,766
1997
Revenues (1) 90,949 40,338 5,065 146 136,498
Operating profit
(loss) (2)(3) 2,079 3,772 (479) (965) 4,407
interest expense (1,479) (1,102) (164) (300) (3,045)
Income (loss) before
income taxes and
extraordinary loss 600 2,670 (643) (1,265) 1,362
Depreciation 4,562 2,898 415 166 8,041
Equity in losses
of joint ventures -- (56) (1,155) -- (1,211)
Investment in
joint ventures 100 112 (6,655) -- (6,443)
Segment assets (4) 64,443 52,437 6,922 11,705 135,507
Expenditures for
segment assets 6,485 4,153 1,002 822 12,462
1996
Revenues (1) 95,700 35,676 4,850 109 136,335
Operating profit
(loss)(2)(3) 2,684 1,292 (508) (1,016) 2,452
Interest expense (1,777) (1,381) (181) (236) (3,575)
Income (loss) before
income taxes and
extraordinary loss 907 (89) (689) (1,252) (1,123)
Depreciation 4,943 3,050 415 198 8,606
Equity in earnings (losses) of
joint ventures -- 128 (1,010) -- (882)
Investment in joint ventures -- 2,961 (6,256) -- (3,295)
Segment assets (4) 61,969 53,731 7,943 9,208 132,851
Expenditures for
segment assets $ 4,657 $ 2,309 $ 289 $ 707 $ 7,962
(1) Amounts are principally revenues from external customers.
Intersegment revenues and interest revenues were insignificant.
Sales to any single customer did not exceed 10% of consolidated
revenues. Revenues attributed to foreign countries were $4.3
million, $3.4 million and $5.2 million, respectively, in 1998,
1997 and 1996. Foreign sales are attributed to countries based
on the location of the customer.
(2) "Operating profit (loss)" is total revenues less all
expenses except allocated interest expenses and income taxes.
Operating profit (loss) included in "Other" is primarily
unallocated corporate expenses.
(3) Resort includes gains on land sales of $3.2 million in 1998
and $4.2 million in 1997. Commercial & Property includes gains
on land sales of $221,000 in 1998, $1 million in 1997 and
$700,000 in 1996.
(4) Segment assets are located in the United States, primarily
Maui. Other assets are corporate and non-segment assets.
COMMON STOCK
In compliance with the terms of certain borrowing
arrangements, the Company did not declare any dividends in 1998
and 1997. As of December 31, 1998, the declaration and payment
of cash dividends are restricted by the terms of borrowing
arrangements to 30% of prior year's net income.
At February 4, 1999, there were 372 shareholders of record.
On May 1, 1998, the Company effected a four-for-one split of
its common stock. All references to the number of shares of
common stock and per share amounts have been restated to reflect
the split. Also on May 1, 1998, the Company's common stock was
listed and began trading on the American Stock Exchange under the
symbol "MLP."
Prior to May 1, 1998, the stock was traded over the counter
nationally. The following chart reflects high and low sales
prices after April 1998 and high and low bid prices as supplied
by the National Quotation Bureau Incorporated for periods before
May 1998. The quotes from the National Quotation Bureau reflect
inter-dealer prices and do not include retail markup, markdown or
commission and may not necessarily represent actual transactions.
First Second Third Fourth
Quarter Quarter Quarter Quarter
1998 High $ 11 1/4 $ 21 5/8 $ 14 7/8 $ 10 3/8
Low 10 15/16 10 7/8 9 1/4 8 13/16
1997 High 10 5/8 9 1/4 10 1/8 10 15/16
Low 8 3/4 8 1/2 9 10 1/8
<TABLE>
SELECTED FINANCIAL DATA
<CAPTION>
1998 1997 1996 1995 1994
(Dollars in Thousands Except Per Share Amounts)
<S> <C> <C> <C> <C> <C>
FOR THE YEAR
Summary of Operations
Revenues $ 143,711 $ 136,498 $ 136,335 $ 125,577 $ 125,882
Cost of goods sold 76,049 72,200 75,279 69,314 67,321
Operating expenses 26,168 26,027 24,030 24,315 23,853
Shipping and marketing 16,673 18,053 19,185 16,793 16,568
General and
administrative 15,094 14,600 14,507 15,160 14,352
Equity in (earnings) losses
of joint ventures (1) 1,160 1,211 882 (4,001) 4,844
Interest expense 3,039 3,045 3,575 7,021 5,682
Income tax
expense (credit) 1,188 499 (376) (1,466) (2,829)
Income (loss) before
extraordinary loss 4,340 863 (747) (1,559) (3,909)
Extraordinary loss, net of
income tax credit (744) -- -- -- --
Net income (loss) 3,596 863 (747) (1,559) (3,909)
Per Common Share (2)
Income (loss) before
extraordinary loss .60 .12 (.10) (.22) (.54)
Extraordinary loss, net of
income tax credit (.10) -- -- -- --
Net income (loss) .50 .12 (.10) (.22) (.54)
Other Data
Cash dividends
Amount -- -- 90 -- --
Per common share (2) -- -- .01 -- --
Depreciation $ 8,176 $ 8,041 $ 8,606 $ 10,202 $ 10,851
Return on beginning
stockholders' equity 6.1% 1.5% (1.3%) (2.6%) (6.1%)
Percent of net income (loss)
to revenues 2.5% .6% (.5%) (1.2%) (3.1%)
AT YEAR END
Current assets less
current liabilities (3) $18,985 $ 20,283 $ 19,467 $ 23,428 $ (1,097)
Ratio of current assets
to current liabilities (3) 2.14 2.20 2.23 2.78 .97
Property, net of
depreciation (4) $89,921 $ 88,047 $ 86,610 $ 88,557 $ 180,194
Total assets (4) 136,247 135,507 132,851 137,085 235,411
Long-term debt and
capital leases (4) 23,592 29,435 28,898 36,227 99,180
Stockholders' equity
Amount 62,492 58,896 58,033 58,870 60,429
Per common share (2) $ 8.69 $ 8.19 $ 8.07 $ 8.19 $ 8.41
Common shares
outstandin 7,188,500 7,188,500 7,188,500 7,188,500 7,188,500
</TABLE>
(1) Equity in (earnings) losses of joint ventures for 1995
includes earnings of $4,990,000, representing the reversal of the
Company's previous equity in losses of Kaptel Associates.
(2) All references to the number of shares of common stock and
per share amounts have been restated to reflect the four-for-one
common stock split as of May 1, 1998.
(3) At December 31, 1994, current liabilities exceeded current
assets because borrowings totaling $27.8 million on a
revolving credit commitment were classified as current.
After the amendment to the commitment in July of 1995,
borrowings under this line have been classified as
noncurrent.
(4) Property, net of depreciation, total assets and long-term
debt and capital leases decreased in 1995 primarily because,
as of April 30, 1995, the Company no longer consolidated
Kaahumanu Center Associates (see Note 3 to Consolidated
Financial Statements).
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1998 vs. 1997
CONSOLIDATED
The Company reported consolidated net income of $3.6 million
for 1998 compared to $863,000 for 1997. The increase in net
income for 1998 resulted from higher operating profits from
Pineapple and Kapalua Resort operations that more than offset
lower results from the Commercial & Property segment. Included
in Resort operating profit for 1998 is the gain from the sale of
a 75-acre parcel in Plantation Estates Phase II in December of
1998. Land sales contributed approximately $2.9 million to net
income for 1998 compared to $3.3 million in 1997. In December of
1998, the Company retired $20 million of 8.86% senior unsecured
notes. The prepayment penalty of $1.2 million has been accounted
for as an extraordinary loss of $744,000 (net of income tax
credit of $456,000).
General and administrative expenses increased by 3% in 1998
compared to 1997. The increase primarily was due to higher
expense for postretirement health and life insurance benefits
because of a .5% discount rate reduction as of December 31, 1997,
accruals for incentive awards for the Company's non-bargaining
salaried personnel and charges for an enhanced early retirement
package offered to employees in the Pineapple and Corporate
divisions. The increase in expense in these categories was
partially offset by lower expenses in the land management area
and reductions in insurance costs.
Interest expense in 1998 was comparable to 1997.
PINEAPPLE
Pineapple revenues of $97.7 million in 1998 increased $6.8
million over 1997. Approximately 38% of the increase was the
result of higher case sales volume (the number of cases sold) of
canned pineapple and about 16% was due to higher average prices.
A change in the product mix sold (fruit, juice, concentrate) and
a higher volume of fresh product sales accounted for most of the
remaining revenue increase. Operating profit was $5.5 million in
1998 compared to $2.1 million in 1997.
Pineapple cost of sales increased as a result of higher
sales volume. However, the average cost per case decreased in
1998 compared to 1997. In 1998, a partial liquidation of LIFO
inventories resulted in lower costs from prior years being
included in cost of sales. Cost of sales would have been higher
by $1,636,000 based on current production costs for 1998. Per
unit production costs were slightly lower in 1998 compared to
1997 as a result of improved recoveries (the amount of saleable
product per ton of fruit processed), reduction of personnel costs
through an early retirement program, job consolidations and other
production efficiencies.
Shipping and selling costs were higher in 1998 compared to
1997 due to higher volume of cases sold and increases in
warehousing and transportation costs.
RESORT
Revenues from the Kapalua Resort were $41.9 million in 1998
compared to $40.3 million in 1997. Resort operating profit was
$5.2 million in 1998 compared to $3.8 million in 1997. Operating
profit for 1998 included $3.2 million from land sales at the
Resort. In December of 1998, a 75-acre parcel in Plantation
Estates Phase II was sold, which contributed $2.8 million to
Resort operating profit. This large parcel, originally planned
for 26 lots, was consolidated by the buyer into a single lot for
family use that may be subdivided into a maximum of eight lots.
In 1997, the sale of a 50% interest in a 12 acre beachfront
parcel at Kapalua contributed $4.2 million to Resort revenues and
operating profit.
Excluding land sales, Resort operating profit was $2 million
in 1998 compared to an operating loss of $452,000 in 1997. The
improved results are partially due to the re-opening of The
Kapalua Bay Hotel, which was closed during part of 1997. Ground
rents for the hotel were suspended until September of 1997 while
restoration work took place. In 1998, revenues from commercial
leases increased by 23%.
Revenues from Resort golf operations increased by 6% in 1998
due to an increase in the number of paid rounds and higher
average rates for green and cart fees. Gross rental income and
management fees from The Kapalua Villas rental program increased
by 12% in 1998 as a result of higher occupancies and higher
average room rates. Kapalua Realty contributed a 62% increase in
commission revenues. Merchandise sales declined in 1998 by 2%
compared to 1997.
Marketing expenses were lower in 1998 compared to 1997
primarily because Kapalua did not host a major golf tournament in
1998. Cost of sales was lower in 1998 as a result of the lower
volume of merchandise sales. Increases in other operating and
administrative expenses offset these reductions. However,
overall expenses for 1998 exceeded 1997 by less than 1%.
COMMERCIAL & PROPERTY
Revenues from Commercial & Property were $4.1 million in
1998 compared to $5.1 million in 1997. This segment produced an
operating loss of $1.1 million in 1998 compared to $479,000 in
1997. The reduction in revenue and the increase in operating
loss was principally due to a decrease in land sales attributable
to this segment. Land sales contributed gains of $221,000 in
1998 compared to $1 million in 1997.
Costs and expenses for this segment were $5.2 million in
1998 compared to $5.5 million in 1997. Lower expense in 1998 was
primarily due to lower insurance and other costs for land
management. The Company's equity in losses of Kaahumanu Center
Associates was $1,240,000 in 1998 compared to $1,155,000 in 1997.
The increase in the loss reflects reductions in minimum rents and
lower recoveries of common area costs from tenants.
1997 vs. 1996
CONSOLIDATED
The Company reported consolidated net income of $863,000 for
1997 compared to a net loss of $747,000 for 1996. The improved
results were due to land sales that contributed $3.3 million to
net income in 1997. In the second quarter of 1997, the Resort
segment recorded the sale of a 50% interest in the 12-acre parcel
of land adjacent to The Kapalua Bay Hotel. In the third quarter
of 1997, the Commercial & Property division recorded the sale of
two land parcels.
General and administrative expenses increased by about 1% in
1997 compared to 1996 as increases due to wage adjustments and
the use of outside consultants were partially offset by lower
expenses for pensions, postretirement benefits and insurance.
Interest expense decreased by 15% in 1997 compared to 1996.
The decrease is a result of lower average borrowings in 1997 and
lower average interest rates. The rate reduction is the result
of moving borrowings into lower fixed rate loans at the end of
1996 and during 1997, and renewing the Company's revolving credit
lines at lower rates in 1997.
PINEAPPLE
Revenues from Pineapple operations were $90.9 million in
1997 compared to $95.7 million in 1996. Operating profits from
Pineapple were $2.1 million in 1997 compared to $2.7 million in
1996. Lower case sales volume (the number of cases sold) and a
change in the mix of products sold (fruit, juice, concentrate)
resulted in a $6.8 million decline in revenue from Pineapple
operations. This decline was partially offset by higher average
sales prices and higher fresh fruit and other sales.
Pineapple cost of sales decreased with the reduction in
sales volume. The average cost of sales per case sold in 1997
was higher than 1996 because in 1996 there was a partial
liquidation of LIFO inventories that resulted in lower costs from
prior years being included in cost of sales. Cost of sales for
1996 would have been higher by $1,281,000 based on current
production costs for that year. In 1997, recoveries (the amount
of saleable product per ton of fruit processed) were better than
in 1996, resulting in a lower unit production cost of canned
pineapple product. In 1996, unfavorable weather conditions
resulted in poor yield (tons per acre) and lower recoveries and,
in turn, an increase in unit production costs.
Pineapple shipping and marketing costs were lower in 1997
compared to 1996 as a result of the lower volume of cases sold
and changes in marketing programs.
RESORT
Revenues from the Kapalua Resort operations were $40.3
million in 1997 compared to $35.7 million in 1996. Operating
profits from this segment were $3.8 million in 1997 compared to
$1.3 million in 1996. Revenues and operating profits for 1997
included the sale to the owners of The Kapalua Bay Hotel of a 50%
interest in the 12-acre parcel of land adjacent to the Hotel.
This transaction added $4.2 million to Resort revenues and
operating profits.
Excluding land sales, the Resort operating loss was $452,000
in 1997 compared to an operating profit of $1.3 million in 1996.
Lower results in 1997 largely reflect a 30% decline in income
from commercial leases and an 8% reduction in merchandise sales.
The most significant lease rent reduction was attributable to The
Kapalua Bay Hotel, which was closed during part of 1997 for
restoration work. The ground lease for The Kapalua Bay Hotel was
renegotiated as of September 1996 to include a one year
moratorium on ground rent and two years of reduced rents.
Closure of the hotel also affected Kapalua's other operations,
including merchandise sales and percentage rents from other
commercial leases.
In 1997, The Kapalua Villas consolidated villa management on
the resort by increasing the number of units in the program by
55%. As a result, both gross rental income and management fees
increased by 44% in 1997. This expansion of The Villas rental
program resulted in significantly higher operating expenses in
1997, which offset increased revenue.
Resort golf operations contributed a 5% increase in revenues
in 1997 due to an increase in the number of paid rounds.
Commission income from Kapalua Realty increased by 40% in 1997
and Resort membership income increased over 60%. However, these
gains were more than offset by increased legal expenses, resort
maintenance and repairs and administration costs.
COMMERCIAL & PROPERTY
Revenues from the Commercial & Property division were $5.1
million in 1997 compared to $4.9 million in 1996. Operating
losses attributable to this segment were $479,000 in 1997
compared to $508,000 in 1996. Improved revenues and operating
profits in 1997 were due to two land sales in the third quarter
of 1997. Land sales in 1997 added $1 million to revenues and
operating profits compared to $700,000 in 1996.
Costs and expenses charged to Commercial & Property were
$5.5 million in 1997 compared to $5.4 million in 1996. Included
in costs and expenses is the Company's equity in the losses of
Kaahumanu Center Associates, which was $1.2 million in 1997
compared to $1 million in 1996. Increased revenues at Kaahumanu
Center were more than offset by higher expenses, most
significantly higher payroll and related costs and bad debt
expense.
LIQUIDITY, CAPITAL RESOURCES AND OTHER
At December 31, 1998, the Company's total debt, including
capital leases, was $26.3 million, a reduction of $6.2 million
from year-end 1997. Total debt was reduced as a result of cash
flows from operating activities. Unused short- and long-term
credit lines available to the Company at December 31, 1998
totaled $35.4 million. Included in this amount is a $15 million
development line of credit for construction of The Village Course
Clubhouse and Kapalua Golf Academy. Ground breaking for this
capital project took place in January of 1999.
Resort capital expenditures for projects other than the
clubhouse and golf academy are expected to be $2.5 million in
1999, of which 66% are for replacement of existing equipment.
Pineapple capital expenditures are expected to be $7 million in
1999, including $5.2 million for equipment replacement. In
addition to these capital expenditures, the Company expects to
invest approximately $1.4 million in other investments for its
Pineapple and Resort operations. The credit lines currently
available to the Company are expected to be sufficient to fund
seasonal cash requirements as well as the planned capital
expenditures and investments.
Antidumping duties were in effect on canned pineapple fruit
imported from Thailand throughout 1998 as a result of an
antidumping petition in 1994 to which the Company was a party.
In 1997, both the Company and the Department of Commerce appealed
a November 1996 decision by the United States Court of
International Trade (USCIT) regarding the appropriate method to
allocate cost to canned pineapple. The USCIT decision required
the Department of Commerce to recalculate the antidumping duties
using accounting methods not normally used by Thai producers.
The Company and the Department of Commerce believe this method
understates the magnitude of canned pineapple dumping by Thai
producers. 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. A final decision
is expected sometime in 1999.
The amount of duties on pineapple imports from Thailand is
subject to annual administrative reviews by the Department of
Commerce. Either the Company or the Thai producers may request
these reviews. If the cost of production changes relative to the
selling price of the product in the U.S., the duties would be
adjusted. Some of the Thai pineapple companies have
significantly reduced their antidumping duties through the annual
review process. The U.S. Department of Commerce has begun the
third annual review and preliminary margins are expected to be
announced in April 1999, with final results in July 1999.
Present antidumping duties on imports of canned pineapple fruit
from Thailand range from less than 1% up to 51%.
The Company is a party to litigation related to the County
of Maui's claim against certain chemical manufacturers because of
contamination by a nematocide commonly known as DBCP in certain
water wells on Maui (see Note 12 to Consolidated Financial
Statements).
The Company, as a partner in various partnerships, may under
particular circumstances be called upon to make additional
capital contributions (see Note 3 to Consolidated Financial
Statements).
YEAR 2000
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. Several of the
Company's data processing applications use software programs
purchased from outside vendors. Except as mentioned in the
discussion that follows, all applications requiring upgrades are
now Year 2000 compliant.
The Company has received the vendor-provided software
upgrades for its Human Resource system. Installation and testing
of this upgrade is scheduled for completion by the end of the
first quarter 1999. The Year 2000 software upgrade for the
Resort merchandise inventory control and golf reservations
application will be received in March 1999. Installation and
testing will follow and is targeted for May 1999. The upgrade to
the operating system used by this application is presently
available and will be installed after the software application is
installed, tested and in use. The target date for completion is
July 1, 1999.
All of the Company's custom data processing applications
require 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 complete by year-end 1998 and the remaining
custom data processing applications are scheduled to be compliant
by the end of the second quarter of 1999.
It is anticipated the Company's Information Services
personnel will spend approximately 90% of their time on Year 2000
compliance through the second quarter of 1999 and approximately
50% of their time 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, installations
and testing, and that no outside resources will be required. The
Company has not incurred any material expenditures of Year 2000
compliance and, based on current information, no material future
expenditures have been identified. 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 initiated correspondence with vendors, suppliers
and trading partners during 1998 and January 1999 to assess risk
of business interruption by noncompliance of third parties.
Through early March 1999, the Company received responses to
approximately 40% of its inquiries, including all of those 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 first quarter of 1999.
The most reasonably likely worst case scenario involves
installation of the upgrade for the Resort merchandise inventory
control system. This system accumulates and processes data for
approximately 150,000 items sold in ten retail outlets at the
Kapalua Resort. Delay in the installation and testing of this
software upgrade could affect merchandise purchase order
procedures, resulting in decreased control over inventory levels.
Reorder lead times range from four to seven months and proper
reorder control requires that active purchase orders be recorded
in the inventory control system.
The Company has obtained a commitment for delivery and
installation of an alternate merchandise inventory control system
that is Year 2000 compliant. Contingency plans include beginning
installation of the alternate system in May 1999 if it does not
appear that the June 1 target date for Year 2000 compliance of
the present system will be met. Should it become necessary to
install an alternate system for the Resort merchandise inventory
control, the expected cost for software, hardware and
installation is estimated to be $250,000.
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. At December
31, 1998, 77% of the Company's short- and long-term borrowing
commitments carried interest rates that were periodically
adjustable to the prime rate or to a LIBOR rate and 23% carried
interest at fixed rates. Based on debt outstanding at the end of
1998, a hypothetical 100 basis point increase in interest rates
would result in a reduction to annual pretax income of
approximately $150,000. A hypothetical decrease in interest
rates of 100 basis points would increase the fair value of the
Company's long-term debt by approximately $400,000. At December
31, 1998, the fair value of the Company's long-term debt exceeded
the carrying amount by approximately $22,000 as a result of a
general decline in quoted interest rates.
IMPACT OF INFLATION AND CHANGING PRICES
The Company uses the LIFO method of accounting for its
pineapple inventories. Under this method, the cost of products
sold approximates current cost and during periods of rising
prices the ending inventory is reflected at an amount below
current cost. The replacement cost of pineapple inventory was
$19 million at December 31, 1998, which was $11 million more than
the amount reflected in the financial statements.
Most of the land owned by the Company was acquired from 1911
to 1932 and is carried at cost. A small portion of "Real Estate
Held for Sale" represents land cost. Replacements and additions
to the Pineapple operations occur every year and some of the
assets presently in use were placed in service in 1934. At
Kapalua, some of the fixed assets were constructed and placed in
service in the mid-to-late 1970s. Depreciation expense would be
considerably higher if fixed assets were stated at current cost.
FORWARD-LOOKING STATEMENTS
The Company's Annual Report to Shareholders contains forward-
looking statements (within the meaning of Private Securities
Litigation Reform Act of 1995) as to the Company's expectations
concerning 1999 profitability, the future of new products and new
business development, distribution of pineapple through Premium
Tropicals International LLC and under the Royal Coast label, the
appeal of a decision affecting antidumping duties, a continuing
relationship with Mercedes-Benz and the PGA TOUR, management
changes at The Kapalua Bay Hotel, success of The Village Course
Clubhouse and Kapalua Golf Academy, and development and sale of
condominiums comprising Coconut Grove on Kapalua Bay. In
addition, from time to time, the Company may publish forward-
looking statements as to those matters or other aspects of the
Company's anticipated financial performance, business prospects,
new products, marketing initiatives, or similar matters.
Forward-looking statements contained in the Annual Report to
Shareholders or otherwise made by the Company are subject to
numerous factors (in addition to those otherwise noted in the
Company's Annual Report or in its filings with the Securities and
Exchange Commission) that could cause the Company's actual
results and experience to differ materially from expectations
expressed by the Company. Factors that might cause such
differences, among others, include (1) changes in domestic,
foreign or local economic conditions that affect availability or
cost of funds, or the number, length of stay or expenditure
levels of eastbound or westbound visitors, or agricultural
production and transportation costs of the Company and its
competitors, or Maui retail or real estate activity; (2) the
effect of weather conditions on agricultural operations of the
Company and its competitors; (3) the success of the Company in
obtaining land use entitlements and timely resolution of
contested case proceedings or other actions that could delay or
prevent the Company's development activities or public projects
that may affect its operations (such as the expansion of Kahului
Airport runway); (4) the possibility of an adverse ruling on
appeal of the antidumping decision; (5) events in the airline
industry affecting passenger or freight capacity or cost; (6)
possible shifts in market demand; (7) the impact of competing
products, competing resort destinations, and competitors'
pricing; and (8) the Company's assessment of the time and
resources required with respect to Year 2000 compliance.
MAUI LAND & PINEAPPLE COMPANY, INC.
Officers
President & Chief Executive Officer
Gary L. Gifford
Executive Vice President/Finance
Paul J. Meyer
Executive Vice President/Pineapple
Douglas R. Schenk
Executive Vice President/Resort
Donald A. Young
Vice President/Retail Property
Scott A. Crockford
Vice President/Land Management & Development
Warren A. Suzuki
Treasurer
Darryl Y. H. Chai
Secretary
Adele H. Sumida
Controller & Assistant Treasurer
Ted L. Proctor
Directors
Mary C. Sanford--Chairman
Chairman of the Board
Maui Publishing Company, Ltd.
Richard H. Cameron--Vice Chairman
Publisher
Maui Publishing Company, Ltd.
Peter D. Baldwin
President
Baldwin Pacific Corporation
Samuel K. Himmelrich, Sr.
President
Windsor Terminal, Inc.
Randolph G. Moore
Chief Executive Officer
Kaneohe Ranch
Fred E. Trotter III
President
F. E. Trotter, Inc.
Audit and Compensation Committees
Peter D. Baldwin
Richard H. Cameron
Samuel K. Himmelrich, Sr.
Randolph G. Moore--Chairman, Audit
Mary C. Sanford
Fred E. Trotter III--Chairman, Compensation
PRINCIPAL SUBSIDIARIES
MAUI PINEAPPLE COMPANY, LTD.
Officers
President & Chief Executive Officer
Douglas R. Schenk
Executive Vice President/Sales & Marketing
James B. McCann
Executive Vice President/Finance
Paul J. Meyer
Vice President/Cannery
Eduardo E. Chenchin
Vice President/Plantations
L. Douglas MacCluer
Treasurer
Darryl Y. H. Chai
Secretary
Adele H. Sumida
Controller
Stacey M. Jio
Assistant Treasurer
Ted L. Proctor
Directors
Mary C. Sanford--Chairman
Richard H. Cameron--Vice Chairman
Peter D. Baldwin
Douglas B. Cameron
Gary L. Gifford
Paul J. Meyer
Randolph G. Moore
Claire C. Sanford
Douglas R. Schenk
Fred E. Trotter III
KAPALUA LAND COMPANY, LTD.
Officers
President & Chief Executive Officer
Donald A. Young
Executive Vice President/Finance
Paul J. Meyer
Vice President/Administration
Caroline P. Egli
Vice President/Development
Robert M. McNatt
Vice President/Resort Operations
Gary M. Planos
Treasurer
Darryl Y. H. Chai
Secretary
Adele H. Sumida
Controller
Russell E. Johnson
Assistant Treasurer
Ted L. Proctor
Directors
Mary C. Sanford--Chairman
Richard H. Cameron--Vice Chairman
Peter D. Baldwin
Gary L. Gifford
Paul J. Meyer
Randolph G. Moore
Jared B. H. Sanford
Fred E. Trotter III
Donald A. Young
Andrew T. F. Ing, died March 6, 1999. Director Emeritus of Maui
Land & Pineapple Company, Inc., Director of Maui Pineapple
Company, Ltd. and Kapalua Land Company, Ltd.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MAUI
LAND & PINEAPPLE COMPANY, INC. BALANCE SHEET AS OF DECEMBER 31, 1998 AND THE
STATEMENT OF OPERATIONS FOR THE YEAR THEN ENDED, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,447
<SECURITIES> 0
<RECEIVABLES> 13,498
<ALLOWANCES> 493
<INVENTORY> 15,520
<CURRENT-ASSETS> 35,631
<PP&E> 209,967
<DEPRECIATION> 120,046
<TOTAL-ASSETS> 136,247
<CURRENT-LIABILITIES> 16,646
<BONDS> 23,592
0
0
<COMMON> 12,318
<OTHER-SE> 50,174
<TOTAL-LIABILITY-AND-EQUITY> 136,247
<SALES> 113,391
<TOTAL-REVENUES> 143,711
<CGS> 76,049
<TOTAL-COSTS> 102,217
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,039
<INCOME-PRETAX> 5,528
<INCOME-TAX> 1,188
<INCOME-CONTINUING> 4,340
<DISCONTINUED> 0
<EXTRAORDINARY> (744)
<CHANGES> 0
<NET-INCOME> 3,596
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Partners of Kaahumanu Center Associates:
We have audited the accompanying balance sheets of Kaahumanu
Center Associates (a Hawaii limited partnership) as of December
31, 1998 and 1997, and the related statements of operations,
changes in partners' capital (deficit) and cash flows for each of
the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Partnership at
December 31, 1998 and 1997, and the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted
accounting principles.
/S/ DELOITTE & TOUCHE
DELOITTE & TOUCHE LLP
Honolulu, Hawaii
February 8, 1999
<TABLE>
KAAHUMANU CENTER ASSOCIATES
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<CAPTION>
ASSETS
1998 1997
<S> <C> <C>
Current Assets
Cash $ 404,688 $ 552,879
Accounts receivable - less allowance of
$206,402 and $247,624
for doubtful accounts 558,272 318,404
Prepaid expenses 76,084 51,225
Total Current Assets 1,039,044 922,508
Property
Land and land improvements 6,050,064 6,016,855
Building 81,529,259 81,080,876
Furniture, fixtures and equipment 5,047,416 4,381,473
Construction in process 60,227 646,626
Total Property 92,686,966 92,125,830
Accumulated depreciation 18,826,086 15,586,843
Net Property 73,860,880 76,538,987
Other Assets 2,310,999 2,493,210
Total Assets $77,210,923 $79,954,705
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Current portion of long-term debt $ 948,517 $ 803,142
Accounts payable 825,831 188,426
Due to Maui Land &
Pineapple Company, Inc. 333,290 429,675
Other current liabilities 92,312 32,274
Total Current Liabilities 2,199,950 1,453,517
Long-Term Liabilities
Long-term debt 61,284,878 62,300,253
Other long-term liabilities 80,688 76,188
Total Long-Term Liabilities 61,365,566 62,376,441
Partners' Capital 13,645,407 16,124,747
Total Liabilities and
Partners' Capital $77,210,923 $79,954,705
See notes to financial statements.
</TABLE>
<TABLE>
KAAHUMANU CENTER ASSOCIATES
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Revenues
Rental income - minimum $7,235,108 $7,521,860 $7,721,398
Rental income - percentage 1,029,760 874,362 672,790
Other operating income - primarily
recoveries from tenants 5,359,743 5,548,824 5,283,092
Total Revenues 13,624,611 13,945,046 13,677,280
Costs and Expenses
Utilities 2,427,054 2,689,715 2,707,707
Payroll and related costs 1,976,969 1,938,328 1,843,850
Depreciation
and amortization 3,452,639 3,349,654 3,277,602
Interest 5,447,733 5,522,235 5,603,074
Repairs and maintenance 652,390 545,817 508,892
General excise taxes 530,313 547,949 538,472
Real property taxes 314,181 305,842 288,938
Insurance 278,605 320,284 281,276
Provision for
doubtful accounts 327,914 360,788 33,868
Advertising and promotions 158,493 148,972 106,425
Management fee 258,275 262,380 262,319
Professional fees 175,971 191,915 174,779
Other expenses 103,414 71,305 70,298
Total Costs and Expenses 16,103,951 16,255,184 15,697,500
Net Loss $(2,479,340) $(2,310,138) $(2,020,220)
See notes to financial statements.
</TABLE>
<TABLE>
KAAHUMANU CENTER ASSOCIATES
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<CAPTION>
State of
Hawaii
Maui Land & Employees'
Pineapple Retirement
Company, Inc. System TOTAL
<S> <C> <C> <C>
Partners' Capital (Deficit),
December 31, 1995 $(5,582,080) $24,910,499 $19,328,419
Adjustment to prior year
conversion of payable balance (533,314) -- (533,314)
Net Loss - 1996 (1,010,110) (1,010,110) (2,020,220)
Partners' Capital (Deficit),
December 31, 1996 (7,125,504) 23,900,389 16,774,885
Cash Calls 830,000 830,000 1,660,000
Net Loss - 1997 (1,155,069) (1,155,069) (2,310,138)
Partners' Capital (Deficit),
December 31, 1997 (7,450,573) 23,575,320 16,124,747
Net Loss - 1998 (1,239,670) (1,239,670) (2,479,340)
Partners' Capital (Deficit),
December 31, 1998 $(8,690,243) $22,335,650 $13,645,407
See notes to financial statements.
</TABLE>
<TABLE>
KAAHUMANU CENTER ASSOCIATES
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Operating Activities:
Net Loss $(2,479,340) $(2,310,138) $(2,020,220)
Adjustments to reconcile
net loss to cash provided
by operating activities:
Depreciation
and amortization 3,452,639 3,349,654 3,277,602
(Increase) decrease in accounts
receivable (239,868) 161,743 336,498
Increase (decrease) in
accounts payable 548,765 (337,831) (359,679)
Increase in noncurrent
accounts receivable (192,282) (139,743) (359,705)
Net change in other operating
assets and liabilities 77,282 (9,734) 34,936
Net Cash Provided by Operating
Activities 1,167,196 713,951 909,432
Investing Activities:
Purchases of property (414,746) (1,344,934) (777,527)
Payments for deferred costs -- -- (44,084)
(Increase) decrease in
restricted cash (30,641) 144,669 631,500
Net Cash Used in Investing
Activities (445,387) (1,200,265) (190,111)
Financing Activities:
Payments of long-term debt (870,000) (797,799) (716,488)
Payment to ML&P for adjustment
of prior
year payable conversion -- -- (328,476)
Proceeds from cash calls -- 1,660,000 --
Net Cash Provided by (Used in)
Financing Activities (870,000) 862,201 (1,044,964)
Net Increase
(Decrease) in Cash (148,191) 375,887 (325,643)
Cash, Beginning of Year 552,879 176,992 502,635
Cash, End of Year $404,688 $552,879 $176,992
See notes to financial statements.
</TABLE>
KAAHUMANU CENTER ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
ORGANIZATION
Kaahumanu Center Associates (the Partnership) was formed on June
23, 1993 as a limited partnership between Maui Land & Pineapple
Company, Inc. (ML&P), as general partner, and the Employees'
Retirement System of the State of Hawaii (ERS), as limited
partner. The purpose of the partnership is to finance the
expansion and renovation of and to own and operate the Kaahumanu
Shopping Center (the Center).
The Center is a regional shopping mall located in Kahului, Maui.
Prior to the expansion, the Center consisted of approximately
315,000 square feet of gross leasable area. The expansion and
renovation which was completed in November 1994, increased the
Center to approximately 573,000 square feet of gross leasable
area.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The Partnership's policy is to prepare its
financial statements using the accrual basis of accounting.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses
during the reporting periods. Future actual amounts could differ
from those estimates.
Property - Property which was contributed to the partnership by
ML&P is stated at ML&P's net book value at the date of
contribution; subsequent additions are stated at cost.
Depreciation is computed using the straight-line method.
Noncurrent Accounts Receivable - The excess of minimum rental
income recognized on a straight-line basis over amounts
receivable according to provisions of the lease are classified as
noncurrent accounts receivable, after deducting an estimated
amount for amounts not recoverable. Noncurrent accounts
receivable are included in Other Assets on the Balance Sheets.
Advertising and Promotion - The cost of advertising and sales
promotion activities is expensed as incurred.
Income Taxes - The Partnership is not subject to federal and
state income taxes. The distributive shares of income or loss
and other tax attributes from the Partnership are reportable by
the individual partners.
PARTNERSHIP AGREEMENTS
Capital Contributions - ML&P contributed the land and the
shopping center improvements as they existed prior to the
expansion and renovation project, subject to the existing first
mortgage, together with approximately nine acres of adjacent land
which became part of the expanded shopping center, for a 99%
interest in the Partnership. Effective April 30, 1995, an amount
of $1,332,000 owing to ML&P was considered a capital
contribution. This amount was reduced in 1996 by $533,000 for
items which would have impacted the previous amount owing,
including a payment of $328,000 to ML&P in 1996.
ERS originally contributed $312,000 for a one- percent interest
in the Partnership and made a loan of $30.6 million to the
Partnership. Effective April 30, 1995, after completion of the
expansion and renovation and the satisfaction of certain
conditions, ERS converted its loan to capital for an additional
49% interest and became a 50% partner with ML&P.
In 1997 the Partnership received cash of $1,660,000 from the
partners pursuant to cash calls.
Allocations and Distributions - Profit and loss allocations and
cash distributions of the partnership are based on the ownership
interests of the partners.
ERS and ML&P each have a 9% cumulative, non-compounded priority
right to cash distributions based on their net contributions to
the partnership (preferred return). The ML&P preferred return is
subordinate to the ERS preferred return. For the purpose of
calculating the preferred returns, each partner's capital
contribution had an agreed upon value of $30.9 million on April
30, 1995. The accumulated unpaid preferred returns at December
31, 1998 were $8.8 million each for ML&P and ERS.
Management and Operations - The Partnership has an Operating
Agreement with ML&P for the operation of the Center. The
Operating Agreement has an initial term of 15 years, which
commenced when ERS became a 50% partner, with options to renew
for four additional 10-year periods. It provides for certain
performance tests, which if not met could result in termination
of the agreement.
ML&P as managing partner, is responsible for the day-to-day
management of the Partnership's business affairs. Major
decisions, as defined in the partnership agreement, require the
unanimous approval of the partners.
SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental Disclosure of Cash Flow Information and Non-Cash
Investing and Financing Activities:
1.Interest paid during 1998, 1997 and 1996 was $5,448,000,
$5,522,000 and $5,603,000, respectively.
2.In 1996, $533,000 of partners' capital was adjusted, as discussed
in "Capital Contributions" above.
RELATED PARTY TRANSACTIONS
Pursuant to the Partnership Operating Agreement, the Partnership
pays to ML&P an operator's fee equal to 3% of gross revenues, as
defined. In 1998, 1997 and 1996, ML&P charged the Partnership
$258,000, $262,000 and $262,000, respectively, for management
fees.
The Partnership does not have any employees. As such, ML&P
provides all on-site and administrative personnel and also incurs
other costs and expenses, primarily insurance, which are
reimbursable by the Partnership. In 1998, 1997, and 1996 ML&P
charged the Partnership $2,303,000, $2,240,000 and $2,391,000,
respectively, for payroll and other costs and expenses. Prior to
1997, real property taxes were paid on behalf of the Partnership
by ML&P and were included in the reimbursable amounts.
ML&P generates a portion of the electricity which is used by the
Center. In 1998, 1997, and 1996 ML&P charged the Partnership
$2,144,000, $2,312,000 and $2,359,000, respectively, for
electricity.
Amounts due to ML&P for management fees, electricity and
reimbursable costs were
$333,000 and $430,000 as of December 31, 1998 and 1997,
respectively.
OTHER ASSETS
Other Assets at December 31, 1998 and 1997 consisted of the
following:
1998 1997
Deferred costs $ 856,321 $ 994,227
Restricted cash 758,398 727,757
Noncurrent accounts receivable 696,280 771,226
Total Other Assets $2,310,999 $2,493,210
Deferred costs are primarily leasing consultation costs and are
net of amortization of $721,000 and $708,000, respectively, at
December 31, 1998 and 1997. In 1998, $3,048,000 of deferred
costs, primarily amounts paid to tenants for infrastructure
improvements, were reclassified to property. Restricted cash
represents proceeds from the mortgage loan which are reserved for
additional expansion costs (see BORROWING ARRANGEMENTS), as well
as a percentage of revenues retained for capital improvements as
set forth in the Partnership Operating Agreement.
BORROWING ARRANGEMENTS
The Partnership has a mortgage loan which bears interest at 8.57%
and is payable in monthly installments of $526,000, including
interest, through 2005 when the entire balance is payable. The
loan is collateralized by the Center and is nonrecourse except
for the first $10 million which is guaranteed by ML&P until the
Center attains a defined level of net operating income.
Scheduled principal maturities for the next five years from 1999
through 2003 are as
follows: $949,000, $1,019,000, $1,126,000, 1,228,000 and $1,339,000.
LEASES
Tenant leases of the Center provide for monthly base rent plus
percentage rents and reimbursement for common area maintenance
and other costs. Future minimum rental income to be received
under non-cancelable operating leases aggregates $56,588,000 and
is receivable during the next five years (1999 to 2003) as
follows: $6,675,000, $6,576,000, $6,509,000, $6,176,000,
$6,035,000, respectively, and $24,617,000 thereafter.
CONCENTRATION OF CREDIT RISK
The Partnership extends credit to its tenants in the course of
its leasing operations. The creditworthiness of existing and
potential tenants is evaluated and under certain circumstances a
security deposit is required.
RECLASSIFICATIONS
Certain amounts for prior years have been reclassified to conform
to the presentation for the current year.
* * * * *
