1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Act of 1934
For the quarter ended March 31, 1997 Commission File Number 33-24180
AMFAC/JMB HAWAII, INC.
(Exact name of registrant as specified in its charter)
Hawaii 99-0217738
(State of organization) (I.R.S. Employer Identification No.)
For the quarter ended March 31, 1997 Commission File Number 33-24180-01
AMFAC/JMB FINANCE, INC.
(Exact name of registrant as specified in its charter)
Illinois 36-3611183
(State of organization) (I.R.S. Employer Identification No.)
900 N. Michigan Ave., Chicago, Illinois 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312-440-4800
See Table of Additional Registrants Below.
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
As of May 15, 1997, each of Amfac/JMB Hawaii, Inc. and
Amfac/JMB Finance, Inc. had 1,000 shares of Common Stock
outstanding. All such Common Stock is owned by its respective
parent and not traded on a public market.
ADDITIONAL REGISTRANTS (1)
Address, including,
zip code,
Exact name of State or other IRS and telephone number,
registrant as jurisdiction of Employer including area code of
specified in its incorporation or Identification registrant's principal
Charter organization Number executive offices
Amfac Agri- Hawaii 99-0176334 900 North Michigan Avenue
business, Inc. Chicago,Illinois 60611
312/440-4800
Amfac Property Hawaii 99-0150751 900 North Michigan Avenue
Development Corp. Chicago, Illinois 60611
312/440-4800
Amfac Property Hawaii 99-0202331 900 North Michigan Avenue
Investment Chicago, Illinois 60611
Corp. 312/440-4800
Amfac Sugar and Hawaii 99-0185633 900 North Michigan Avenue
Agribusiness, Chicago, Illinois 60611
Inc. 312/440-4800
Amfac Vacation Hawaii 94-3261831 900 North Michigan Avenue
Managers, Inc. Chicago, Illinois 60611
(312) 440-4800
Kaanapali Water Hawaii 99-0185634 900 North Michigan Avenue
Corporation Chicago, Illinois 60611
312/440-4800
Kekaha Sugar Hawaii 99-0044650 900 North Michigan Avenue
Company, Chicago, Illinois 60611
Limited 312/440-4800
H. Hackfeld Hawaii 99-0037425 900 North Michigan Avenue
& Co., Ltd. Chicago, Illinois 60611
312/440-4800
The Lihue Hawaii 99-0046535 900 North Michigan Avenue
Plantation Chicago, Illinois 60611
Company, 312/440-4800
Limited
Oahu Sugar Hawaii 99-0105277 900 North Michigan Avenue
Company, Chicago, Illinois 60611
Limited 312/440-4800
Pioneer Mill Hawaii 99-0105278 900 North Michigan Avenue
Company, Chicago, Illinois 60611
Limited 312/440-4800
Puna Sugar Hawaii 99-0051215 900 North Michigan Avenue
Company, Chicago, Illinois 60611
Limited 312/440-4800
Waiahole Hawaii 99-0144307 900 North Michigan Avenue
Irrigation Chicago, Illinois 60611
Company, 312/440-4800
Limited
Waikele Golf Hawaii 99-0304744 900 North Michigan Avenue
Club, Inc. Chicago, Illinois 60611
312/440-4800
1) The Additional Registrants listed are wholly-owned
subsidiaries of the registrant and are guarantors of the
registrant's Certificate of Land Appreciation Notes due
2008.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 21
PART II OTHER INFORMATION
Item 1. Legal Proceedings 31
Item 6. Exhibits and Reports on Form 8-K 31
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
AMFAC/JMB HAWAII, INC.
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996
(Dollars in Thousands)
(Unaudited)
A S S E T S
<CAPTION>
March 31, December 31,
1997 1996
-------------- --------------
<S> <C> <C>
A S S E T S
Current assets:
Cash and cash equivalents $7,908 8,736
Receivables-net 3,969 4,741
Inventories 63,690 56,808
Prepaid expenses 3,839 3,439
-------- --------
Total current assets 79,406 73,724
-------- --------
Investments 46,287 46,187
-------- --------
Property, plant and equipment:
Land and land improvements 286,549 289,294
Machinery and equipment 60,917 60,981
Construction in progress 1,481 1,365
-------- --------
348,947 351,640
Less accumulated depreciation
and amortization 35,371 33,856
-------- --------
313,576 317,784
-------- --------
Deferred expenses, net 12,772 12,975
Other assets 36,367 32,935
-------- --------
$ 488,408 483,605
========== ==========
L I A B I L I T I E S
Current liabilities:
Accounts payable $ 6,337 5,719
Accrued expenses 7,935 9,274
Current portion of
long-term debt 1,294 1,471
AMFAC/JMB HAWAII, INC.
Consolidated Balance Sheets - Continued
March 31, 1997 and December 31, 1996
(Dollars in Thousands)
(Unaudited)
March 31, December 31,
1997 1996
------------- -------------
Current portion of
deferred income taxes 7,953 5,422
Amounts due to affiliates 9,582 8,905
-------- --------
Total current liabilities 33,101 30,791
-------- --------
Amounts due to affiliates 113,762 103,579
Accumulated postretirement
benefit obligation 56,679 57,662
Long-term debt 105,770 100,606
Other long-term liabilities 34,820 35,501
Deferred income taxes 87,571 88,345
Certificate of Land
Appreciation Notes 220,692 220,692
-------- --------
Total liabilities 652,395 637,176
-------- --------
Commitments and contingencies
(notes 2, 3, 4, 6, 7 and 8)
S T O C K H O L D E R `S E Q U I T Y (D E F I C I T )
Common stock, no par value;
authorized, issued and
outstanding 1,000 shares 1 1
Additional paid-in capital 1,207 6,278
Retained earnings (deficit) (165,195) (159,850)
--------- ---------
Total stockholder's equity
(deficit) (163,987) (153,571)
--------- ---------
$ 488,408 483,605
============ ===========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<TABLE>
AMFAC/JMB HAWAII, INC.
Consolidated Statements of Operations
Three Months Ended March 31, 1997 and 1996
(Dollars in Thousands)
(Unaudited)
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Revenue:
Agriculture $ 675 5,688
Property 8,808 9,368
------- -------
9,483 15,056
------- -------
Cost of sales:
Agriculture 769 4,113
Property 5,738 5,339
------- ------
6,507 9,452
Operating expenses:
Selling, general
and administrative 3,066 3,149
Depreciation and
amortization 1,515 1,596
------- -------
Total costs and expenses 11,088 14,197
Operating income(loss) (1,605) 859
------- -------
Non-operating income
(expenses):
Amortization of
deferred costs (419) (316)
Interest expense (6,676) (6,908)
Interest income 41 92
------- -------
(7,054) (7,132)
------- -------
Loss before taxes (8,659) (6,273)
------- -------
Income tax benefit (3,314) (2,333)
------- -------
Net loss $(5,345) (3,940)
======== ========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<TABLE>
AMFAC/JMB HAWAII, INC.
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996
(Dollars in Thousands)
(Unaudited)
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(5,345) (3,940)
Items not requiring (providing) cash:
Depreciation and amortization 1,515 1,596
Amortization of deferred costs 419 316
Equity in earnings of investments 10 23
Income tax benefit (3,314) (2,333)
Changes in:
Receivables - net 772 2,760
Inventories (4,009) (6,407)
Prepaid expenses (400) 214
Accounts payable 618 (1,217)
Accrued expenses (1,339) (933)
Amounts due to affiliates 677 1,208
Other long-term liabilities (2,002) 1,344
-------- --------
Net cash used in
operating activities (12,398) (7,369)
-------- --------
Cash flows from investing activities:
Property additions (116) (514)
Investments in joint ventures
and partnerships (110) (135)
Other assets (3,432) 99
Other long-term liabilities 274 (224)
-------- --------
AMFAC/JMB HAWAII, INC.
Consolidated Statement of Cash Flows - Continued
Three Months Ended March 31, 1997 and 1996
(Dollars in Thousands)
(Unaudited)
1997 1996
------- --------
Net cash used in investing activities (3,384) (774)
-------- --------
Cash flows from financing activities:
Deferred expenses (216) 8
Net borrowings (repayments) of
long-term debt 4,987 (486)
Amounts due to affiliates 10,183 7,437
--------- --------
Net cash provided by financing activities 14,954 6,959
--------- --------
Net decrease in cash and cash
equivalents (828) (1,184)
Cash and cash equivalents,
beginning of year 8,736 11,745
--------- --------
Cash and cash equivalents,
end of period $ 7,908 10,561
========= ========
Supplemental disclosure of cash flow
information:
Cash paid for interest
(net of amount capitalized) $ 6,543 5,250
========= ========
Schedule of non-cash investing and
financing activities:
Transfer of property actively held
for sale to real estate inventories
and accrued costs relating to real
estate sales $ 2,873 510
========= ========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements
March 31, 1997 and 1996
(Dollars in Thousands)
Readers of this quarterly report should refer to the Company's
audited financial statements for the fiscal year ended December
31, 1996, which are included in the Company's 1996 Annual Report,
as certain footnote disclosures which would substantially
duplicate those contained in such audited financial statements
have been omitted from this report.
(1) BASIS OF ACCOUNTING
On November 17, 1988, the stockholders of Amfac, Inc.
("Amfac") agreed to the merger ("Merger") of Amfac with an
affiliate of JMB Realty Corporation ("JMB"). The Merger was
consummated on November 18, 1988. Amfac/JMB Hawaii, Inc. (the
"Company") was wholly-owned by Amfac, a subsidiary of Northbrook
Corporation ("Northbrook"). In May 1995, Amfac was merged into
Northbrook, with Northbrook being the surviving corporation.
The Company has two primary business segments. The
agriculture segment ("Agriculture") is responsible for the
Company's activities related to the cultivation and processing of
sugar cane and other agricultural products. The real estate
segment ("Property") is responsible for development and sales
activities related to the Company's owned land, all of which is
in the State of Hawaii, and the management and operation of the
Company's golf course facilities.
The consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
The Company's policy is to consider all amounts held with
original maturities of three months or less in U.S. Government
obligations, certificates of deposit and money market funds
(approximately $3,600 and $4,900 at March 31, 1997 and December
31, 1996, respectively) as cash equivalents, which approximates
market. These amounts include $1,255 and $1,552 at March 31,
1997 and December 31, 1996, respectively, which were restricted
primarily to fund debt service on long-term debt related to the
acquisition of power generation equipment (see note 4).
As part of the Company's agriculture operations, the Company
enters into commodities futures contracts and options in sugar as
deemed appropriate to reduce the risk of future price
fluctuations in sugar. These futures contracts and options are
accounted for as hedges and, accordingly, gains and losses are
deferred and recognized in cost of sales as part of the
production cost.
Investments in certain partnerships and joint ventures, if
any, over which the Company exercises significant influence are
accounted for by the equity method. Revenues include the
Company's equity in net income or loss from such investments. To
the extent the Company engages in such activities as a general
partner, the Company is contingently liable for the obligations
of its partnership and joint venture investments.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
Project costs associated with the acquisition, development
and construction of real estate projects are capitalized and
classified as construction in progress. Such capitalized costs
are not in excess of the project's estimated fair value, as
reviewed periodically or as considered necessary.
Land actively held for sale and any related development
costs transferred from construction in progress are reported as
inventories in the accompanying consolidated balance sheets and
are stated at the lower of cost or fair value less costs to sell.
For financial reporting purposes, the Company uses the
effective interest rate method and accrued interest on the
Certificate of Land Appreciation Notes due 2008 ("COLAS") at 4%
per annum, which is the "Mandatory Base Interest" (see note 3).
Interest is capitalized to qualifying assets (principally
real estate under development) during the period that such assets
are undergoing activities necessary to prepare them for their
intended use. Such capitalized interest is charged to cost of
sales as revenue from the real estate development is recognized.
Interest cots of $358 and $0 have been capitalized for the three
months ended March 31, 1997 and 1996, respectively.
Net interest received (paid) on contracts that qualify as
hedges is recognized over the life of the contract as an
adjustment to interest income (expense) of the hedged financial
instrument.
The Company and its subsidiaries report their taxes as part
of the consolidated tax return of the Company's parent,
Northbrook. The Company and its subsidiaries have entered into a
tax indemnification agreement with Northbrook that indemnifies
the Company and its subsidiaries for responsibility for all past,
present and future federal and state income tax liabilities
(other than income taxes which are directly attributable to
cancellation of indebtedness income caused by the repurchase or
redemption of securities as provided for in or contemplated by
the Repurchase Agreement).
Current and deferred taxes have been allocated to the
Company as if the Company were a separate taxpayer in accordance
with the provisions of SFAS No. 109-Accounting for Income Taxes.
However, to the extent the tax indemnification agreement does not
require the Company to actually pay income taxes, current taxes
payable or receivable have been reflected as deemed contributions
or distributions, respectively, to additional paid-in capital in
the accompanying consolidated financial statements.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
(2) AMOUNTS DUE TO AFFILIATES - FINANCING
The maturity date of the approximately $15,097 of remaining
acquisition-related financing owed to affiliates had a maturity
date of June 1, 1998 and bore interest at a rate per annum based
upon the prime interest rate (8.5% at March 31, 1997), plus one
percent.
On June 1, 1995, the Company borrowed $52,000 from
Northbrook to redeem Class A COLAS pursuant to the Redemption
Offer (see note 3). The Company has also borrowed approximately
$18,746 and $9,814 during 1996 and 1995, respectively, to fund
COLA Mandatory Base Interest payments and other operational
needs. The loans from Northbrook were payable interest only,
matured on June 1, 1998 and carried an interest rate per annum
equal to the prime interest rate plus two percent.
In February 1997 the above noted affiliate loans, along with
certain other amounts due Northbrook, were converted into a new
ten-year note payable. The new note is payable interest only and
accrues interest at the prime rate plus 2%. The Company borrowed
an additional $7,714 during the three months ended March 31, 1997
to fund COLA Mandatory Base Interest payments and other
operational needs. The total amount due Northbrook as of March
31, 1997 was $113,762, which includes accrued interest of $1,289.
Pursuant to the Indenture relating to the COLAS, the amounts
borrowed from Northbrook are considered "Senior Indebtedness" to
the COLAS.
(3) CERTIFICATE OF LAND APPRECIATION NOTES
The COLAS are unsecured debt obligations of the Company.
Interest on the COLAS is payable semi-annually on February 28 and
August 31 of each year. The COLAS mature on December 31, 2008,
and bear interest after the Final Issuance Date (August 31, 1989)
at a rate of 10% per annum ("Base Interest") of the outstanding
principal balance of the COLAS on a cumulative, non-compounded
basis, of which 6% per annum is contingent ("Contingent Base
Interest") and payable only to the extent of Net Cash Flow (Net
Cash Flow for any period is generally an amount equal to 90% of
the Company's net cash revenues and receipts after payment of
cash expenditures, including the Qualified Allowance (as defined)
other than federal and state income taxes and after the
establishment by the Company of reserves).
In each calendar year, principal reductions may be made from rem
aining Net Cash Flow, if any, in excess of all current and unpaid
deferred Contingent Base Interest. The COLAS will bear additional
contingent interest in any year, after any principal reduction,
equal to 55% of remaining Net Cash Flow. Upon maturity, holders
of COLAS will be entitled to receive the remaining outstanding
principal balance of the COLAS plus unpaid Mandatory Base
Interest (4%) plus additional interest equal to the unpaid
Contingent Base Interest, to the extent of the Maturity Market
Value (Maturity Market Value generally means 90% of the excess of
the Fair Market Value (as defined) of the Company's assets
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
at Maturity over its liabilities incurred in connection with its
operations), plus 55% of the remaining Maturity Market Value.
On March 14, 1989, Amfac/JMB Finance ("Finance"), a wholly-
owned subsidiary of Northbrook, and the Company entered into an
agreement (the "Repurchase Agreement") concerning Finance's
obligations to repurchase, on June 1, 1995 and 1999, the COLAS
upon request of the holders thereof. The COLAS were issued in
two units consisting of one Class A and one Class B COLA. As
specified in the Repurchase Agreement, the repurchase of the
Class A COLAS may have been requested by the holders of such
COLAS on June 1, 1995 at a price equal to the original principal
amount of such COLAS ($.5) minus all payments of principal and
interest allocated to such COLAS. The cumulative interest paid
per Class A COLA through June 1, 1995 was $.135. The repurchase
of the Class B COLAS may be requested of Finance by the holders
of such COLAS on June 1, 1999 at a price equal to 125% of the
original principal amount of such COLAS ($.5) minus all payments
of principal and interest allocated to such COLAS. Through the
date of this report, the cumulative interest paid per Class A and
Class B COLA is approximately $.175 and $.175, respectively.
On March 14, 1989, Northbrook entered into a keep-well
agreement with Finance, whereby it agreed to contribute
sufficient capital or make loans to Finance to enable Finance to
meet its COLA repurchase obligations described above.
Notwithstanding Finance's repurchase obligations, the Company may
elect to redeem any COLAS requested to be repurchased at the
specified price.
On March 15, 1995, pursuant to the indenture that governs
the terms of the COLAS (the "Indenture"), the Company elected to
offer to redeem (the "Redemption Offer") all Class A COLAS from
the registered holders at the same price as would be required of
Finance under the Repurchase Agreement, thereby eliminating
Finance's obligation to satisfy the Class A COLA repurchase
options requested by such holders as of June 1, 1995. Pursuant
to the Redemption Offer, and in accordance with the terms of the
Indenture, the Company was therefore obligated to purchase any
and all Class A COLAS submitted pursuant to the Redemption Offer
at a price of $.365 per Class A COLA. In conjunction with the
Company's Redemption Offer, the Company made a tender offer (the
"Tender Offer") to purchase up to approximately $68,000 principal
value of the Class B COLAS at a price of $.220 per Class B COLA
from COLA holders electing to have their Class A COLAS
repurchased. Approximately 229,000 Class A COLAS were submitted
for repurchase pursuant to the Redemption Offer and
approximately
99,000 Class B COLAS were submitted for repurchase pursuant to
the Tender Offer, requiring an aggregate payment by the Company
of approximately $105,450 on June 1, 1995. The Company used its
available cash to purchase Class B COLAS pursuant to the Tender
Offer and borrowed $52,000 from Northbrook to purchase Class A
COLAS pursuant to the Redemption Offer.
As a result of the COLA repurchases in 1995, the Company
retired approximately $164,045 in face value of COLA debt and
recognized a financial statement gain in 1995 of approximately
$32,544 (net of income taxes of $20,807, the write-off of
deferred financing costs of $10,015, the write-off of accrued
Contingent Base Interest of $5,667 and expenses of $894). Such
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
gain was treated as cancellation of indebtedness income for tax
purposes and, accordingly, the income taxes related to the
Class A Redemption Offer (approximately $9,106) were not
indemnified by the tax agreement with Northbrook (see note 1).
The terms of the Indenture relating to the COLAS place
certain restrictions on the Company's declaration and payment of
dividends. Such restrictions generally relate to the source,
timing and amounts that may be declared and/or paid. The COLAS
also impose certain restrictions on, among other things, the
creation of additional indebtedness for certain purposes, the
Company's ability to consolidate or merge with or into other
entities, and the Company's transactions with affiliates.
(4) LONG-TERM DEBT
In June 1991, the Company obtained a five-year $66,000
nonrecourse loan from the Employees' Retirement System of the
State of Hawaii ("ERS"). The loan is secured by a first mortgage
on the Kaanapali Golf Courses, and is considered "Senior
Indebtedness" (as defined in the Indenture relating to the
COLAS). The loan bore interest at a rate per annum equal to the
greater of (i) the base interest rate announced by the Bank of
Hawaii on the first of July for each year or (ii) ten percent per
annum through June 30, 1993 and nine percent per annum
thereafter. The annual interest payments were in excess of the
cash flow generated by the Kaanapali Golf Courses.
In April 1996, the Company reached an agreement to amend the
loan with the ERS, extending the maturity date for five years.
In exchange for the loan extension, the ERS received the right to
participate in the "Net Disposition Proceeds" (as defined)
related to the sale or refinancing of the golf courses or at the
maturity of the loan. The ERS share of the Net Disposition
Proceeds increases from 30% through June 30, 1997, to 40% for the
period from July 1, 1997 to June 30, 1999 and to 50% thereafter.
The loan amendment effectively adjusted the interest rate as of
January 1, 1995 to 9.5% until June 30, 1996. After June 30,
1996, the loan bears interest at a rate per annum equal to 8.73%.
The loan amendment requires the Company to pay interest at the
rate of 7% for the period from January 1, 1995 to June 30, 1996,
7.5% from July 1, 1996 to June 30, 1997, 7.75% from July 1, 1997
to June 30, 1998 and 8.5% thereafter ("Minimum Interest").
Accrued Minimum Interest as of March 31, 1997 was $1,221. The
scheduled Minimum Interest payments are paid quarterly on the
principal balance of the $66,000 loan. The difference between
the accrued interest expense and the Minimum Interest payment
accrues interest and is payable on an annual basis from excess
cash flow, if any, generated from the Kaanapali Golf Courses.
The accrued interest payable from excess cash flow was $3,419 as
of March 31, 1997. Although the outstanding loan balance remains
nonrecourse, certain payments and obligations, such as the
Minimum Interest payments and the ERS's share of appreciation, if
any, are recourse to the Company. However, the Company's
obligations to make future Minimum Interest payments and to pay
the ERS a share of appreciation would be terminated if the
Company tendered an executed deed to the golf course property to
the ERS in accordance with the terms of the amendment.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
In January 1993, The Lihue Plantation Company, Limited
("Lihue") obtained a ten-year $13,250 loan used to fund the
acquisition of Lihue's power generation equipment. The $13,250
loan, constituting "Senior Indebtedness" under the COLAS'
Indenture, consists of two ten-year amortizing term loans of
$10,000 and $3,250, respectively, payable in forty consecutive
installments commencing July 1, 1993 in the principal amount of
$250 and $81, respectively (plus interest). The remaining
balance of the $3,250 loan was fully repaid in January 1997. The
$10,000 loan has an outstanding balance of $6,184 as of March 31,
1997 and bears interest at a rate equal to prime rate (8.5% at
March 31, 1997) plus three and one half percent. Lihue has
purchased an interest rate agreement which protects against
fluctuations in interest rates and effectively caps the prime
rate at eight percent for the first seven years of the loan
agreement. The loan is secured by the Lihue power generation
equipment, sugar inventories and receivables, certain other
assets and real property of the Company and has limited recourse
to the Company and certain other subsidiaries.
In October 1993, Waikele Golf Club, Inc. ("WGCI"), a wholly-
owned subsidiary of the Company that owns and operates the
Waikele Golf Course, obtained a five year $20,000 loan facility
from two lenders. The loan consisted of two $10,000 amortizing
loans. Each loan bore interest only for the first two years and
interest and principal payments based upon an assumed 20 year
amortization period for the remaining three years. The loans bore
interest at prime plus 1/2% and LIBOR (5.5% at March 31, 1997)
plus 3%, respectively. In February 1997, WGCI entered into an
amended and restated loan agreement with the Bank of Hawaii,
whereby the outstanding principal amount of the loan was
increased to $25,000, the maturity date was extended to February
2007, the interest rate was changed to LIBOR plus 2% until the
fifth anniversary and LIBOR plus 2.5% thereafter and principal is
to be repaid based on a 30-year amortization schedule. As of
March 31, 1997, the outstanding principal balance was $24,962,
with scheduled remaining annual principal maturities of $151 in
1997, $243 in 1998, $262 in 1999, $282 in 2000, $304 in 2001 and
$23,720 thereafter. The loan is secured by WGCI's assets (the
golf course and related improvements and equipment), is
guaranteed by the Company, and is considered "Senior
Indebtedness" (as defined in the Indenture relating to the
COLAS).
In December 1996, Amfac Property Development Corp., a wholly-
owned subsidiary of the Company, obtained a $10,000 loan facility
from a Hawaii bank. The loan is secured by a mortgage on property
under development at the mill-site of Oahu Sugar (the sugar
plantation was closed in 1995), and is considered "Senior
Indebtedness" (as defined in the Indenture relating to the
COLAS). The loan bears interest at the bank's base rate (8.5% at
March 31, 1997) plus .5% and matures on December 1, 1998.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
(5) SEGMENT INFORMATION
Agriculture and Property comprise separate industry segments
of the Company. "Operating Income-Other" consists primarily of
unallocated overhead expenses and "Total Assets-Other" consists
primarily of cash and deferred expenses. Total assets at the
balance sheet dates and capital expenditures, operating income
(loss) and depreciation and amortization during the three months
ended March 31, 1997 and 1996 are set forth below by each
industry segment:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ---------
<S> <C> <C>
Total Assets:
Agriculture $239,839 239,222
Property 230,724 225,372
Other 17,845 19,011
--------- ---------
$488,408 483,605
========= =========
Three Months Three Months
Ended Ended
March 31, March 31,
1997 1996
----------- -----------
Capital Expenditures:
Agriculture $ 23 341
Property 93 173
--------- ---------
$ 116 514
========= =========
Operating income (loss):
Agriculture $(1,216) 395
Property 33 1,412
Other (422) (948)
--------- ---------
$(1,605) 859
========== =========
Depreciation and amortization:
Agriculture $ 971 1,029
Property 533 518
Other 11 49
--------- ---------
$1,515 1,596
========= =========
</TABLE>
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
(6) TRANSACTIONS WITH AFFILIATES
The Company incurred interest expense of approximately
$2,024 for the three months ended March 31, 1996 and
approximately $2,469 for the three months ended March 31, 1997 in
connection with the acquisition and additional financing obtained
from an affiliate. Approximately $1,289 of such interest was
unpaid as of March 31, 1997.
With respect to any calendar year, JMB or its affiliates may
receive a Qualified Allowance in an amount equal to: (i)
approximately $6,200 during each of the calendar years 1989
through 1993, and (ii) thereafter, 1-1/2% per annum of the Fair
Market Value (as defined) of the gross assets of the Company and
its subsidiaries (other than cash and cash equivalents and
Excluded Assets (as defined)) for providing certain advisory
services for the Company. However, such amounts shall be earned
and paid for each year only following the payment of a specified
level of Base Interest to the holders of the COLAS. Any portion
of the Qualified Allowance not paid for any year shall accumulate
without interest. A Qualified Allowance for 1989 of approximately
$6,200 was paid on February 28, 1990. Any Qualified Allowance for
1990 through 1996 has been deferred and is payable only to the
extent future Net Cash Flows are sufficient to pay the holders of
the COLAS a specified level of return and, accordingly, no such
amounts have been reflected in the accompanying consolidated
financial statements. JMB has informed the Company that no
incremental costs or expenses have been incurred relating to the
provision of these advisory services. The Company believes that
using an incremental cost methodology is reasonable.
The Company, its subsidiaries, and their joint ventures
reimburse Northbrook, JMB and their affiliates for direct
expenses incurred on their behalf, including salaries and salary-
related expenses incurred in connection with the management of
the Company's or its subsidiaries' and the joint ventures'
operations. The total of such costs was approximately $163 for
the three months ended March 31, 1997 and approximately $154 for
the three months ended March 31, 1996; approximately $163 of such
costs were unpaid as of March 31, 1997. In addition, as of March
31, 1997, the other amounts due to affiliates includes $9,106 of
income tax payable related to the Class A COLA Redemption Offer
(see note 3). Also, the Company pays a non-accountable
reimbursement of approximately $30 per month to JMB or its
affiliates in respect of general overhead expense, all of which
was paid as of March 31, 1997.
JMB Insurance Agency, Inc. earns insurance brokerage
commissions in connection with providing the placement of
insurance coverage for certain of the properties and operations
of the Company. Such commissions are comparable to those
available to the Company in similar dealings with unaffiliated
third parties. The total of such commissions for the three
months ended March 31, 1996 was approximately $235 and
approximately $250 for the three months ended March 31, 1997, all
of which was paid as of March 31, 1997.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
Northbrook and its affiliates allocate certain charges for
services to the Company based upon the estimated level of
services. Such charges totaled $254 and $240 for the three months
ended March 31, 1997 and March 31, 1996, respectively. The
affiliated charges for the first quarter of 1997 were offset by
$197 of charges for services provided by the Company for
Northbrook. As of March 31, 1997, on a net basis, the amount due
Northbrook totaled approximately $313 related to these services.
These services and costs are intended to reflect the Company's
separate costs of doing business and are principally related to
the inclusion of the Company's employees in the Northbrook
pension plan, payment of severance and termination benefits and
reimbursement for insurance claims paid on behalf of the Company.
All amounts described above, deferred or currently payable, do
not bear interest and are expected to be paid in future periods.
(7) EMPLOYEE BENEFIT PLANS
The Company participates in benefit plans covering
substantially all of its employees, which provide benefits based
primarily on length of service and compensation levels. These
plans are administered by Northbrook in conjunction with other
plans providing benefits to employees of Northbrook and its
affiliates.
(8) COMMITMENTS AND CONTINGENCIES
The Company is involved in various matters of litigation and
other claims. Management, after consultation with legal counsel,
is of the opinion that the Company's liability (if any), when
ultimately determined, will not have a material adverse effect on
the Company's financial position.
The Company's Property segment had contractual commitments
(related to project costs) of approximately $1,527 as of March
31, 1997. Additional development expenditures are dependent upon
the Company's ability to obtain financing for such costs and on
the timing and extent of property development and sales.
As of March 31, 1997, certain portions of the Company's land
not currently under development or used in sugar operations are
mortgaged as security for approximately $1,300 of performance
bonds related to property development.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Concluded
(Dollars in Thousands)
(9) INCOME TAXES
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes. Significant components of the Company's
deferred tax liabilities and assets
as of December 31, 1996 are as follows:
Deferred tax (assets):
Postretirement benefits $(22,488)
Interest accruals (2,975)
Other accruals (3,549)
---------
Total gross deferred tax assets (29,012)
---------
Deferred tax liabilities:
Accounts receivable, related to profit on sales of sugar 3,065
Inventories, principally due to sugar production
costs, capitalized costs, capitalized interest and
purchase accounting adjustments 258
Plant and equipment, principally due to depreciation
and purchase accounting adjustments 8,129
Land and land improvements, principally due
to purchase accounting adjustments 89,537
Deferred gains, due to installment sales for income
tax purposes 7,429
Investments in unconsolidated entities, principally
due to purchase accounting adjustments 14,361
--------
Total deferred tax liabilities 122,779
--------
Net deferred tax liability $93,767
=========
<TABLE>
AMFAC/JMB FINANCE, INC.
Balance Sheets
March 31, 1997 and December 31, 1996
(Dollars in thousands, except per share information)
(Unaudited)
<CAPTION>
A s s e t s
March 31, December 31,
1997 1996
----------- -----------
<S> <C> <C>
Cash $ 1 1
========= ==========
L i a b i l i t y a n d S t o c k h o l d e r ` s E q u i t y
Repurchase obligation (note 2)
Common stock, $1 par value; authorized, issued
and outstanding - 1,000 shares $ 1 1
========== ==========
<FN>
The accompanying notes are an integral part of these balance sheets.
</TABLE>
AMFAC/JMB FINANCE, INC.
Notes to the Balance Sheets
(Unaudited)
(Dollars in Thousands)
(1) ORGANIZATION AND ACCOUNTING POLICY
Amfac/JMB Finance, Inc. ("Finance") was incorporated
November 7, 1988 in the State of Illinois. Finance has had no
financial operations. All of the outstanding shares of
Finance are owned by Northbrook Corporation ("Northbrook").
(2) REPURCHASE OBLIGATIONS
On March 14, 1989, Finance and a subsidiary of Northbrook
(Amfac/JMB Hawaii, Inc.) entered into an agreement (the
"Repurchase Agreement") concerning Finance's obligation (on
June 1, 1995 and 1999) to repurchase, upon request of the
holders thereof, the Certificate of Land Appreciation Notes
due 2008 ("COLAS"), to be issued by Amfac/JMB Hawaii, Inc. in
conjunction with the acquisition of Amfac/JMB Hawaii, Inc.. A
total aggregate principal amount of $384,737 of COLAS were
issued during the offering, which terminated on August 31,
1989. The COLAS were issued in two units consisting of one
Class A and one Class B COLA. As specified in the Repurchase
Agreement, the repurchase of the Class A COLAS may have been
requested of Finance by the holders of such COLAS on June 1,
1995 at a price equal to the original principal amount of such
COLAS ($.500) minus all payments of principal and interest
allocated to such COLAS. The cumulative interest paid per
Class A COLA through June 1, 1995 was $.135. The repurchase
of the Class B COLAS may be requested of Finance by the
holders of such COLAS on June 1, 1999 at a price equal to 125%
of the original principal amount of such COLAS ($.500) minus
all payments of principal and interest allocated to such
COLAS. To date, the cumulative interest paid per Class A and
Class B COLA is approximately $.175 and $.175, respectively.
On March 14, 1989, Northbrook entered into a keep-well
agreement with Finance, whereby it agreed to contribute
sufficient capital to Finance to enable Finance to meet the
COLA repurchase obligations described above. Notwithstanding
Finance's repurchase obligations, Amfac/JMB Hawaii, Inc. may
elect to redeem any COLAS requested to be repurchased at the
specified purchase price in accordance with the terms in the
indenture that governs the terms of the COLAS (the
"Indenture").
On March 15, 1995, pursuant to the Indenture, Amfac/JMB
Hawaii, Inc. elected to exercise its right to redeem, and
therefore was obligated to repurchase, any and all Class A
COLAS submitted pursuant to the redemption offer at a price of
$.365 per Class A COLA.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
All references to "Notes" herein are to Notes to
Consolidated Financial Statements contained in this report.
On December 5, 1988, the Company commenced an offering to
the public of COLAS pursuant to a Registration Statement on
Form S-1 under the Securities Act of 1933. A total of 384,737
COLAS were issued prior to the termination of the offering on
August 31, 1989. The net proceeds received from the sale of
the COLAS totaled approximately $352 million (after deduction
of organization and offering expenses of approximately $33
million). Such net proceeds were used to repay a portion of
the acquisition-related financing, which was incurred to pay
certain costs associated with the Merger, including a portion
of the Merger consideration paid to shareholders of Amfac.
On March 14, 1989, Amfac/JMB Finance ("Finance"), a
wholly-owned subsidiary of Northbrook Corporation
("Northbrook"), and the Company entered into an agreement (the
"Repurchase Agreement") concerning Finance's obligations (on
June 1, 1995 and 1999) to repurchase the COLAS upon request of
the holders thereof. The COLAS were issued in two units
consisting of one Class A and one Class B COLA. As specified
in the Repurchase Agreement, the repurchase of the Class A
COLAS may have been requested by the holders of such COLAS on
June 1, 1995 at a price equal to the original principal amount
of such COLAS ($500) minus all payments of principal and
interest allocated to such COLAS. The cumulative interest paid
per Class A COLA through June 1, 1995 was $135. The
repurchase of the Class B COLAS may be requested of Finance by
the holders of such COLAS on June 1, 1999 at a price equal to
125% of the original principal amount of such COLAS ($500)
minus all payments of principal and interest allocated to such
COLAS. Through the date of this report, the cumulative
interest paid per Class A and Class B COLA is approximately
$175 and $175, respectively.
On March 14, 1989, Northbrook entered into a keep-well
agreement with Finance, whereby it agreed to contribute
sufficient capital or make loans to Finance to enable Finance
to meet its COLA repurchase obligations described above.
Notwithstanding Finance's repurchase obligations, the Company
may elect to redeem any COLAS requested to be repurchased at
the specified price.
On March 15, 1995, pursuant to the indenture that governs
the terms of the COLAS (the "Indenture"), the Company elected
to offer to redeem (the "Redemption Offer") all Class A COLAS
from its registered holders. Pursuant to the Redemption
Offer, and in accordance with the terms of the Indenture, the
Company was therefore obligated to purchase any and all Class
A COLAS submitted pursuant to the Redemption Offer at a price
of $365 per Class A COLA. In conjunction with the Company's
Redemption Offer, the Company made a tender offer (the "Tender
Offer") to purchase up to approximately $68 million principal
value of the Class B COLAS at a price of $220 per Class B COLA
from COLA holders electing to have their Class A COLAS
repurchased. Approximately 229,000 Class A COLAS were
submitted for repurchase pursuant to the Redemption Offer and
approximately 99,000 Class B COLAS were submitted for
repurchase pursuant to the Tender Offer, requiring an
aggregate payment of the Company of approximately $105 million
on June 1, 1995. The Company used its available cash to
purchase Class B COLAS pursuant to the Tender Offer and
borrowed $52 million from Northbrook to purchase Class A COLAS
pursuant to the Redemption Offer. As of March 31, 1997, the
Company has approximately 156,000 Class A COLAS and
approximately 286,000 Class B COLAS outstanding with a
principal balance of approximately $78 million and $143
million, respectively.
In addition to the $52 million borrowed from Northbrook
to redeem Class A COLAS pursuant to the Redemption Offer (see
Note 3), the Company has also borrowed approximately $18.8
million and $9.8 million during 1996 and 1995, respectively,
to fund COLA Base Interest payments and other operational
needs. These loans from Northbrook were payable interest
only, matured on June 1, 1998 and carried an interest rate per
annum equal to the prime interest rate plus two percent.
In February 1997 the above noted affiliate loans, along
with certain other amounts due Northbrook, were converted into
a new ten-year note payable. The new note is payable interest
only and accrues interest at the prime rate plus 2%. The
Company borrowed an additional $7.7 million during the three
months ended March 31, 1997 to fund COLA Base Interest
payments and other operational needs. The total amount due
Northbrook as of March 31, 1997 was $113.8 million, which
includes accrued interest of $1.3 million. Pursuant to the
Indenture relating to the COLAS, the amounts borrowed from
Northbrook are considered "Senior Indebtedness" to the COLAS.
As a result of the COLA repurchases, the Company retired
approximately $164 million face value of debt and recognized a
financial statement gain in 1995 of approximately $32.5
million (net of income taxes of $20.8 million, the write-off
of deferred financing costs of $10.0 million, the write-off of
accrued contingent base interest of $5.7 million and expenses
of $.9 million). Such gain was treated as cancellation of
indebtedness income for tax purposes and, accordingly, the
income taxes related to the Class A Redemption Offer
(approximately $9.1 million) were not indemnified by the tax
agreement with Northbrook (see Note 1).
Pursuant to the terms of the Indenture relating to the
COLAS, the Company is required to maintain a Value Maintenance
Ratio of 1.05 to 1.00. Such ratio is equal to the relationship
of the Company's Net Asset Value (defined as the excess of (i)
Fair Market Value of the gross assets of the Company over (ii)
the amount of the liabilities (excluding liabilities resulting
from generally accepted accounting principles enacted
subsequent to the date of the Indenture) of the Company other
than the outstanding principal balance of the COLAS, any
unpaid Mandatory and Contingent Base Interest, and certain
other liabilities, to the sum of (x) the outstanding principal
amount of the COLAS, plus (y) any unpaid Base Interest, plus
(z) the outstanding principal balance of any Indebtedness
incurred to redeem COLAS. The COLA Indenture requires the
Company to obtain independent appraisals of the fair market
value of the gross assets used to calculate the Value
Maintenance Ratio as of December 31 in each even-numbered
calendar year. Accordingly, the Company obtained independent
appraisals of substantially all of its gross real estate
assets as of December 31, 1996; the appraised values of such
assets were sufficient to meet the Value Maintenance Ratio. In
odd-numbered years (during which time appraisals are not
required), the Fair Market Value of the gross assets of the
Company used to compute the Value Maintenance Ratio is
determined by the Company's management. To the extent that
management believes that the aggregate Fair Market Value of
the Company's assets exceeds by more than 5% the Fair Market
Value of such assets included in the most recent appraisal,
the Company must obtain an updated appraisal supporting such
increase. It should be noted that the concept of Fair Market
Value is intended to represent the value that an independent
arm's-length purchaser, seeking to utilize such asset for its
highest and best use would pay, taking into consideration the
risks and benefits associated with such use or development,
current restrictions on development (including zoning
limitations, permitted densities, environmental restrictions,
restrictive covenants, etc.) and the likelihood of changes to
such restrictions; provided, however, that with respect to any
Fair Market Value determination of all of the assets of the
Company, such assets shall not be valued as if sold in bulk to
a single purchaser. There can be no assurance that the
Company's properties can be ultimately sold at prices
equivalent to their appraised values.
In June 1991, the Company obtained a five-year $66
million loan from the Employees' Retirement System of the
State of Hawaii ("ERS"). The nonrecourse loan is secured by a
first mortgage on the Kaanapali Golf Courses, and is
considered "Senior Indebtedness" (as defined in the Indenture
relating to the COLAS). The loan bore interest at a rate per
annum equal to the greater of (i) the base interest rate
announced by the Bank of Hawaii on the first of July for each
year or (ii) ten percent per annum through June 30, 1993 and
nine percent per annum thereafter. The annual interest
payments were in excess of the cash flow generated by the
Kaanapali Golf Courses.
In April 1996, the Company reached an agreement to amend
the loan with the ERS, extending the maturity date for five
years. In exchange for the loan extension, the ERS received
the right to participate in the "Net Disposition Proceeds" (as
defined) related to the sale or the refinancing of the golf
courses or at the maturity of the loan. The ERS share of the
Net Disposition Proceeds increases from 30% through June 30,
1997, to 40% for the period from July 1, 1997 to June 30, 1999
and to 50% thereafter. The loan amendment effectively
adjusted the interest rate as of January 1, 1995 to 9.5% until
June 30, 1996. After June 30, 1996, the loan bears interest
at a rate per annum equal to 8.73%. The loan amendment
requires the Company to pay interest at the rate of 7% for the
period from January 1, 1995 to June 30, 1996, 7.5% from July
1, 1996 to June 30, 1997, 7.75% from July 1, 1997 to June 30,
1998 and 8.5% thereafter ("Minimum Interest"). Accrued Minimum
Interest as of March 31, 1997 was $1.2 million. The scheduled
Minimum Interest payments are paid quarterly on the principal
balance of the $66 million loan. The difference between the
accrued interest expense and the Minimum Interest payment
accrues interest and is payable on an annual basis from excess
cash flow, if any, generated from the Kaanapali Golf Courses.
The accrued interest payable from excess cash flow was
approximately $3.4 million as of March 31, 1997. Although the
outstanding loan balance remains nonrecourse, certain payments
and obligations such as the Minimum Interest payments and the
ERS's share of appreciation, if any, are recourse to the
Company. However, the Company's obligations to make future
Minimum Interest payments and to pay the ERS a share of
appreciation would be terminated if the Company tendered an
executed deed to the golf course property to the ERS in
accordance with the terms of the amendment.
In October 1993, Waikele Golf Club, Inc. ("WGCI"), a
wholly-owned subsidiary of the Company that owns and operates
the Waikele Golf Course, obtained a five year $20 million loan
facility from two lenders. The loan consisted of two $10
million amortizing loans. Each loan bore interest only for
the first two years with interest and principal payments based
upon a 20 year amortization period for the remaining three
years. The loans bore interest at prime (8.5% at March 31,
1997) plus 1/2% and LIBOR (5.5% at March 31, 1997) plus 3%,
respectively. In February 1997, WGCI entered into an amended
and restated loan agreement with the Bank of Hawaii, (they
bought out the other lender's interest), whereby the
outstanding principal amount of the loan was increased to $25
million, the maturity date was extended to February 2007, the
interest rate was changed to LIBOR plus 2% until the fifth
anniversary and LIBOR plus 2.5% thereafter and principal will
be repaid based on a 30-year amortization schedule. The loan
is secured by WGCI's assets (see Note 4), is guaranteed by the
Company and is considered "Senior Indebtedness" (as defined in
the COLA Indenture).
Pursuant to an agreement entered into with the City of
Honolulu in 1991 relating to the development of the Company's
Waikele project, if the Company sells the Waikele golf course,
depending on the price and certain other contingencies, a
payment of up to $15 million might be required to be made to
the City to be used to assist in the City's affordable housing
developments.
In December 1996, Amfac Property Development Corp., a
wholly-owned subsidiary of the Company, obtained a $10 million
loan facility from a Hawaii bank. The loan is secured by a
mortgage on property under development at the mill-site of
Oahu Sugar (the sugar plantation was closed in 1995), and is
considered "Senior Indebtedness" (as defined in the Indenture
relating to the COLAS). The loan bears interest at the bank's
base rate (8.5% at March 31, 1997) plus .5% and matures on
December 1, 1998.
A significant portion of the Company's cash needs result
from the nature of the real estate development business, which
requires significant investment in preparing development
plans, seeking land urbanization and other governmental
approvals, and completing infrastructure improvements prior to
the realization of sales proceeds. The Company has funded its
cash requirements to date primarily through the use of short-
term bank borrowings, long-term financing secured by its golf
courses on Maui and Oahu and by a planned real estate project
on Oahu, borrowings from affiliates and revenues generated
from the development and sale of its properties and
investments. Funding of the Company's future cash
requirements is dependent upon obtaining appropriate financing
and revenues generated from the development and sale of its
properties.
In order to generate additional cash flows for the
Company, management has identified certain land parcels that
are not included in the Company's long-term development plans.
During the three months ended March 31, 1997, the Company
generated approximately $2.9 million from non-strategic land
sales. During 1996, the Company generated approximately $18.9
million in land sales, most of which related to non-strategic
parcels.
At March 31, 1997, the Company had cash and cash
equivalents of approximately $7.9 million.
The Company intends to use its cash reserves, sales
proceeds and financing or joint venture arrangements to meet
its short-term and long-term liquidity requirements, which
include funding the development costs remaining at Waikele and
on West Maui, Oahu and Kauai, agricultural deficits, payment
of interest expense and the repayment of principal on debt
obligations, as necessary. The Company's long-term remaining
liquidity is dependent upon its ability to obtain additional
financing and the consummation of certain property sales.
There can be no assurance that additional long-term financing
can be obtained or property sales consummated. The Company's
land holdings on Maui and Kauai are its primary sources of
future land sale revenues. However, due to current market
conditions, the difficulty in obtaining land use approvals and
the high development costs of required infrastructure, the
planned development of these land holdings and the ability to
generate cash flow from these land holdings are longer term in
nature than the time frame experienced at Waikele.
Accordingly, if no such financing can be obtained or
additional property sales consummated, the Company will defer
(to the extent possible) development costs and capital
expenditures to meet liquidity requirements. Additionally, the
Company's plans for property sales may also be adversely
impacted by the inability of potential buyers to obtain
financing.
The Company does not expect to generate a sufficient
level of Net Cash Flow to pay Base Interest in excess of four
percent for 1997.
The Company continues to implement certain cost savings
measures and to defer development project costs and capital
expenditures for longer-term projects. The Company's Property
segment is anticipated to expend an additional approximately
$14.2 million in project costs during the remainder of 1997.
The price of raw sugar that the Company receives is based
upon the price of domestic sugar (less delivery and
administrative costs) as currently controlled by U.S.
Government price supports legislation. On April 4, 1996,
President Clinton signed the Federal Agriculture Improvement
and Reform Act of 1996 ("the Act"). The Act, which expires in
2002, keeps the loan rate at 18 cents per pound. However, the
Act includes certain other adjustments to the sugar program
including making crop loans recourse to the producer and
repealing marketing allotments which may over time depress the
domestic price of raw sugar. There can be no assurance that,
in the future, the government price support will not be
reduced or eliminated entirely. Such a reduction or an
elimination of price supports could have a material adverse
affect on the Company's agriculture operations, and possibly
could cause the Company to evaluate the cessation of its
remaining sugar cane operations.
The sugar industry in Hawaii has experienced significant
difficulties during the past several years. Growers in Hawaii
have struggled with the high costs of production, which have
led to the closure of several plantations, including the
Company's sugar operations on Oahu in 1995. The Company has
tried to address these challenges through a number of
different measures, including a restructuring in 1995, whereby
its two Kauai plantations were consolidated and all of its
sugar operations (including the Maui plantation) were changed
to a seasonal mode.
While the above-noted changes have helped to reduce
expenses, the Company must continue to explore alternatives to
further address the high costs of sugar production. One such
alternative relates to the three-year labor contract the
Company has with its sugar plantation employees, which expires
in February 1998. Within the contract is a provision that
allows the Company and the union to renegotiate wages in 1997.
In light of the difficulties the Company has had in trying to
improve the operating results of its sugar business,
management has been meeting with union representatives to
discuss appropriate wage levels. After discussions and
negotiations with the union, it was agreed that wages would
remain at the current levels until the end of the contract.
This agreement is subject to ratification by the union
membership. The Company and the union have tentatively agreed
to return to the bargaining table during the summer of 1997 to
negotiate the terms for a new contract which will begin in
1998. Although the Company is hopeful that it will reach
agreement on contract modifications that would help improve
the viability of its sugar plantations, there can be no
assurance that sufficient changes will be agreed upon.
In early March 1997, the Company announced a
restructuring that has resulted in the creation of six
separate operating entities in the following businesses:
Sugar, Golf, Coffee, Water, Land Management and Real Estate
Development. Each separate company or division will be
responsible for its own operations. The Company believes it
will operate more effectively as several smaller
entrepreneurial-minded entities, rather than as one large,
diverse conglomerate. Approximately four percent of the
Company's total employees were released as part of the
restructuring, which is expected to result in annual payroll
savings of approximately $1.1 million. The Company incurred
termination costs of approximately $.6 million related to the
restructuring during the first quarter of 1997.
RESULTS OF OPERATIONS
GENERAL:
The Company and its subsidiaries report their taxes as a
part of the consolidated tax return of the Company's parent,
Northbrook. The Company and its subsidiaries entered into a
tax indemnification agreement with Northbrook, which
indemnifies the Company and its subsidiaries for
responsibility for all past, present and future federal and
state income tax liabilities (other than income taxes which
are directly attributable to cancellation of indebtedness
income caused by the repurchase or redemption of securities as
provided for in or contemplated by the Repurchase Agreement).
Current and deferred taxes have been allocated to the
Company as if the Company were a separate taxpayer in
accordance with the provisions of SFAS No. 109 - Accounting
for Income Taxes. However, to the extent the tax
indemnification agreement does not require the Company to
actually pay income taxes, current taxes payable or receivable
(excluding income taxes which are directly attributable to
cancellation of indebtedness income caused by the repurchase
or redemption of securities as provided for in or contemplated
by the Repurchase Agreement) have been reflected as deemed
contributions and distributions, respectively, to additional
paid-in capital in the accompanying consolidated financial
statements.
Accrued expenses decreased as of March 31, 1997 as
compared to December 31, 1996, primarily due to the timing of
COLA interest payments.
Long-term debt increased as of March 31, 1997 as compared
to December 31, 1996, due primarily to the refinancing of the
WGCI loan (see Note 4).
The current portion of amounts due to affiliates
increased as of March 31, 1997 as compared to December 31,
1996 due primarily to pension costs and salary-related costs
incurred on behalf of the Company.
The long-term portion of amounts due to affiliates
increased as of March 31, 1997 as compared to December 31,
1996, due primarily to financing provided by affiliates to
fund interest payments and other operational needs (see Note
6).
AGRICULTURE:
The Company's Agriculture segment is responsible for
activities related to the cultivation, processing and sale of
sugar cane and other agricultural products. Agriculture's
revenues are primarily derived from the Company's sale of its
raw sugar.
The Company's sugar plantation subsidiaries sell their
raw sugar production to the Hawaiian Sugar and Transportation
Company ("HSTC"), which is an agricultural cooperative owned
by the major Hawaii producers of raw sugar (including the
Company), under a marketing agreement. HSTC sells the raw
sugar production to the California and Hawaii Sugar Company
("C&H") pursuant to a long-term supply contract. The terms of
the supply contract do not require a specified level of
production by the Hawaii producers; however, HSTC is obligated
to sell and C&H is obligated to purchase any raw sugar
produced. HSTC returns to its raw sugar suppliers proceeds
based upon the domestic sugar price less delivery and
administrative charges. The Company recognizes revenues and
related cost of sales upon delivery of its raw sugar to C&H.
The price of raw sugar that the Company receives is based
upon the price of domestic sugar (less delivery and
administrative costs) as currently controlled by U.S.
Government price supports legislation. On April 4, 1996,
President Clinton signed the Federal Agriculture Improvement
and Reform Act of 1996 ("the Act"). The Act, which expires in
2002, keeps the loan rate at 18 cents per pound. However, the
Act includes certain other adjustments to the sugar program
including making crop loans recourse to the producer and
repealing marketing allotments which may over time depress the
domestic price of raw sugar. There can be no assurance that,
in the future, the government price support will not be
reduced or eliminated entirely. Such a reduction or an
elimination of price supports could have a material adverse
affect on the Company's agriculture operations, and possibly
could cause the Company to evaluate the cessation of its
remaining sugar cane operations.
As part of the Company's agriculture operations, the
Company enters into commodities futures contracts and options
in sugar as deemed appropriate to reduce the risk of future
price fluctuations in sugar. These futures contracts and
options are accounted for as hedges and, accordingly, gains
and losses are deferred and recognized in cost of sales as
part of the production cost.
The sugar industry in Hawaii has experienced significant
difficulties during the past several years. Growers in Hawaii
have struggled with the high costs of production, which have
led to the closure of several plantations, including the
Company's sugar operations on Oahu in 1995. The Company has
tried to address these challenges through a number of
different measures, including a restructuring in 1995, whereby
its two Kauai plantations were consolidated and all of its
sugar operations (including the plantation on Maui) were
changed to a seasonal mode.
While the above-noted changes have helped to reduce
expenses, the Company must continue to explore alternatives to
further address the high costs of sugar production. One such
alternative relates to the three-year labor contract the
Company has with its sugar plantation employees, which expires
in February 1998. Within the contract is a provision that
allows the Company and the union to renegotiate wages in 1997.
In light of the difficulties the Company has had in trying to
improve the operating results of its sugar business,
management has been meeting with union representatives to
discuss appropriate wage levels. After discussions and
negotiations with the union, it was agreed that wages would
remain at the current levels until the end of the contract.
This agreement is subject to ratification by the union
membership. The Company and the union have tentatively agreed
to return to the bargaining table during the summer of 1997 to
negotiate the terms for a new contract which will begin in
1998. Although the Company is hopeful that it will reach
agreement on contract modifications that would help improve
the viability of its sugar plantations, there are no
assurances that sufficient changes will be agreed upon.
Inventories increased as of March 31, 1997 as compared to
December 31, 1996 due to the capitalization of planting and
other costs and the timing of harvesting of sugar cane.
Agricultural revenues and cost of sales decreased and the
operating income decreased for the three months ended March
31, 1997 as compared to the three months ended March 31, 1996
due to the timing of sugar production and related sales.
PROPERTY:
The Company's Property segment is responsible for the
following: land planning and development activities;
obtaining land use, zoning and other governmental approvals;
selling or financing developed and undeveloped land parcels;
and the management and operation of the Company's golf course
facilities.
For the three months ended March 31, 1997 and 1996, the
Company generated approximately $2.9 million and $3.1 million
of land sales, respectively.
Land and land improvements decreased as of March 31, 1997
compared to December 31, 1996 due primarily to land sales.
Other assets increased as of March 31, 1997 as compared
to December 31, 1996 primarily due to a long-term receivable
arising from a land sale during the first quarter of 1997.
Although property sales decreased, cost of sales
increased for the three months ended March 31, 1997 as
compared to the three months ended March 31, 1996 primarily
due to lower margins realized on property sold during the
first quarter of 1997.
MAUI ACTIVITY
The planned development of the Company's land on Maui is
expected to be longer term in nature than the time frame
experienced with Waikele. As Maui is less populated than Oahu
and more dependent on the resort/tourism industry, much of the
Company's land is intended for resort and resort-related uses.
Due to overall economic conditions and trends in tourism,
recent demand for these land uses has been relatively weak.
The Company's currently available homesite product on Maui,
which is targeted to the second home buyer, has experienced
slower sales activity to date than originally expected. The
Company's competitors on Maui have also experienced slow sales
activity in the second home market. The Company is continuing
to evaluate its planned products and the timing of development
of its land holdings in light of the current weak market
demand and the capital resources needed for future
development.
The Company is marketing Kaanapali Golf Estates, a
residential community that is part of South Beach Mauka
adjacent to the Kaanapali Beach Resort in West Maui. The
Company currently has six homesites on the market, which are
priced from approximately $.4 million to $1 million. In
addition, the Company is in the process of obtaining final
subdivision approval for a 32 lot subdivision of parcel "17B"
at Kaanapali Golf Estates. Fourteen of these lots were
marketed earlier during the first quarter of 1997 and
reservations have been taken for all 14 lots. Closing of the
sale of these lots is pending final subdivision, which is
expected in the second or third quarter of 1997. The prices
for the lots are expected to be $.15 million each.
In 1995, the Company subdivided an ocean front parcel in
Kaanapali into six single family homesites of approximately
one acre each. Sales of two of the lots in the project closed
in December 1995, generating total sales proceeds of
approximately $4.1 million. The Company has entered into a
sales agreement for the four remaining lots. This sale, which
is scheduled to close June 1997, is for $5.2 million.
In 1986, the Company entered into a joint venture
agreement with Tobishima Pacific Inc. ("Tobishima"), a wholly-
owned subsidiary of a Japanese company, the purpose of which
is to plan, manage and develop approximately 96 acres of
beachfront property at Kaanapali (known as "North Beach").
The joint venture (in which the Company has a 50% interest)
has State land use and County zoning approvals for the
subdivision and development of the infrastructure improvements
necessary to accommodate up to 3,200 hotel and/or condominium
units on this site. This North Beach property constitutes
nearly all of the remaining developable beachfront acreage at
Kaanapali. In October 1992, the Company completed
construction of a 3-acre park on the North Beach site, which
is part of the master plan for this property and was a
requirement imposed by the County in obtaining certain
permits. The development of North Beach continues to be tied
to the completion of the Lahaina bypass highway or other
traffic mitigation measures satisfactory to the Maui County
Planning Commission.
The Company is seeking final approvals to develop a time-
share resort on 14 acres of the North Beach property (the
"Site"). A land option/purchase agreement was entered into
with Tobishima in October 1996. This agreement gives the
Company an option to purchase Tobishima's 50% interest in the
Site for $7 million. The Company does not expect to consummate
the purchase until all discretionary land use permits are
received for development of the time-share resort. In
accordance with the land option/purchase agreement, the
Company has made a nonrefundable deposit of $.1 million (which
may be applied to the purchase price) to keep the option
available through September 30, 1997. Additional
nonrefundable deposits may be made to extend the option
through August 31, 2000. On March 12, 1997, the Company filed
an application for a special management area use permit with
the County of Maui ("SMA Permit") for the time-share resort.
Although there is no assurance that the SMA permit will be
received (and that if such permit is received, that its terms
will be acceptable to the Company), management is optimistic
that the Company will receive the necessary approvals to
proceed with the project.
The Company believes that the potential for a successful
time-share development at North Beach will be greatly enhanced
by the involvement of a company with past experience in time-
share development, and in the marketing and sale of time-share
intervals (one week ownership rights). In February 1997, the
Company formed a limited partnership with an affiliate of an
experienced time-share development and management company.
Known as Kaanapali Ownership Resorts L.P., the new limited
partnership is owned 85% by affiliates of the Company and 15%
by Kaanapali Partners Limited Partnership, an affiliate of the
owners of the Ridge Tahoe in Nevada. After receipt of the SMA
permit, the partnership will need to arrange project financing
for the development of the resort. In addition, the land
option/purchase agreement includes short-term seller
financing, which the partnership may decide to utilize.
In February 1996, the Maui County Council adopted a
Community Plan ordinance for West Maui that does not include
any amendments to the current Community Plan designation of
the Company's North Beach property (thus rejecting the CAC
recommendations that two-third's of North Beach be downzoned
to "Park"). The ordinance was signed by the Mayor of the
County of Maui and became effective on February 27, 1996.
Further, the Department of the Army has determined that
there are two wetlands sites on the North Beach property,
totaling approximately 21,800 square feet. The Company has
retained experts to evaluate these sites and to insure
compliance with all laws. While there can be no assurances as
to the ultimate determinations with respect to the wetlands
issue, the Company does not anticipate that these sites will
materially adversely affect the development plans for North
Beach.
In March 1991, the Company received final land use
approval from the State for development of approximately 240
residential lots on approximately 125 acres of land known as
"South Beach Mauka", located adjacent to the existing
Kaanapali Beach Resort. In connection with this land use
approval, the Company has agreed to the State policy of
providing additional housing on Maui in the affordable price
range, and to participating in the funding of the design and
construction of the planned bypass highway extending from
Lahaina to Kaanapali. The Company has entered into a
development agreement with the State Department of
Transportation covering the Company's participation in the
design and construction of the bypass highway development. It
is anticipated that, upon the receipt of government approvals,
the Company will expend up to $3.5 million (in the aggregate),
of which $2.4 million has been spent as of March 31, 1997,
toward the design of the bypass highway and/or the widening of
the existing highway.
In connection with the development of North Beach Mauka
and adjacent parcels, the Company has committed $6.7 million
for the construction of the bypass highway, subject to certain
conditions. The development and construction of the bypass
highway is expected to be a long-term project that will not be
completed until the year 2004 or later.
During 1993, the Company obtained final land use approval
from the State, and certification through the State's Housing
Finance Development Corporation ("HFDC"), for the development
of a project on approximately 300 acres of Company land known
as "Puukolii Village", which is also located near Kaanapali
Beach Resort. In connection with this land use approval, the
Company has committed to providing additional housing on Maui
in the affordable price range. The final land use approval and
the HFDC development agreement contain certain conditions
which must be satisfied in order for the Company to develop
Puukolii Village, including adding the access road which will
benefit uses for adjacent Company lands in future periods.
Moreover, development of certain portions of Puukolii Village
cannot commence until after completion of the state-planned
Lahaina bypass highway (mentioned above). The proposed
development of Puukolii Village is anticipated to satisfy the
Company's affordable housing requirements in connection with
the South Beach Mauka land use approval and other development
in the surrounding area. The Company commenced construction of
infrastructure of Puukolii Village in the last quarter of
1996, beginning with the access road.
OAHU ACTIVITY
The Company is currently developing the approximately 60
acres of fee simple land it owns at the mill-site of Oahu
Sugar Company (which was shut down in 1995). The Company has
received zoning for a light industrial subdivision on an
approximately 37-acre portion of the property, which excludes
property containing the sugar mill and adjacent buildings. In
connection with the development of this property, the Company
has received state land use urbanization for the entire 60-
acre site. In November 1995, the Company received a "light
industrial" rezoning. Marketing of parcels within the light
industrial subdivision is slated for mid-to-late 1997 after
the subdivision is complete. In addition, the Company has
begun the process of seeking the necessary government
approvals for the redevelopment for the remainder of the mill-
site parcels, including planned commercial, public and quasi-
public uses.
KAUAI ACTIVITY
In June 1994, the Company submitted a Land Use Boundary
Amendment Petition with the State of Hawaii Land Use
Commission ("LUC") and a General Plan Amendment Application
with the County of Kauai for the urbanization of approximately
552 acres of land on Kauai currently in sugar cane
cultivation. The proposed project is planned to be a mixed
use master planned community which will include a variety of
both affordable and market rate residential units, commercial
and industrial projects and a number of community and public
based facilities. The filing of these land use applications
is the first step required in converting agriculture zoned
land into urban zoned land. There are a number of additional
reports, studies, applications and permits that will be
required before final land use approvals are obtained. In May
1995, the County of Kauai approved the Company's General Plan
Amendment Application, subject to a number of conditions. In
December 1995, the LUC granted the Company the land use
amendments sought by the Company subject to a number of
conditions. In May 1996, the Kauai County approved the
Company's application to rezone the project. Before
construction can commence, the Company must satisfy several
conditions imposed during the approval process and obtain
additional administrative development permits for requirements
such as grading and subdivision. The permitting process in
Hawaii has historically been a very difficult and arduous
process and there is no guarantee that all permits will be
obtained. Once construction commences, subject to market
conditions, the project is expected to span over 20 years.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not involved in any material pending legal
proceedings, other than ordinary routine litigation incidental
to its business. The Company and/or certain of its affiliates
have been named as defendants in several pending lawsuits.
While it is impossible to predict the outcome of the
litigation that is now pending (or threatened) and for which
the potential liability is not covered by insurance, the
Company is of the opinion that the ultimate liability from any
of the litigation will not materially adversely affect the
Company's results of operations or its financial condition.
<TABLE>
<CAPTION>
<S>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)The following documents are included as an
exhibits to this report.
<C> <C>
4.1* Indenture, including
the form of COLAS, among Amfac/JMB
Hawaii, Inc., its subsidiaries as
Guarantors and Continental Bank
National Association, as Trustee
(dated as of March 14, 1989).
4.2** Amendment dated
as of January 17, 1990 to the
Indenture relating to the COLAS.
4.3*** $28,097,832
Promissory Note from Amfac, Inc. to
Amfac/JMB Hawaii, Inc. extended and
reissued effective December 31,
1993.
4.4**** The five year
$66,000,000 loan with the Employees'
Retirement System of the State of
Hawaii to Amfac/JMB Hawaii, Inc. as
of June 25, 1991.
4.5***** $13,250,000 Loan
Agreement among Heller, Financial,
Inc., as Lender, The Lihue
Plantation Company Limited, as
Borrower, and Amfac/JMB Hawaii,
Inc., Kekaha Sugar Company, Limited,
Oahu Sugar Company Limited and
Pioneer Mill Company, Limited, as
Guarantors December 30, 1992.
4.6****** $10,000,000 loan
agreement between Waikele Golf Club,
Inc. and ORIX USA Corporation.
$10,000,000 loan
agreement between Waikele Golf Club,
Inc. and Bank of Hawaii.
4.7******* $52,000,000
Promissory Note to Northbrook
Corporation from Amfac/JMB Hawaii,
Inc. effective May 31, 1995 is filed
herewith.
4.8******** Agreement
for delivery and sale of raw sugar
between Hawaii Sugar Transportation
Corporation, as seller, and C&H, as
Buyer, dated June 4, 1993.
4.9********* Previously
filed as an exhibit to the Company's
Form 10-Q report under the
Securities Act of 1934 (File No. 33-
24180) filed May 13, 1996 and hereby
incorporated by reference. Standard
Sugar Marketing Contracts between
Hawaiian Sugar Transportation
Company and Hawaii Sugar Growers
dated June 4, 1993.
4.10********** Amendment
to the $66,000,000 loan with the
Employees' Retirement System of the
State of Hawaii to Amfac/JMB Hawaii,
Inc. as of April 18, 1996.
4.11*********** Amended and Restated $52,000,000
Promissory Note to Northbrook
Corporation from Amfac/JMB Hawaii,
Inc. extended and reissued effective
June 1, 1996.
4.12************ Amended and Restated $28,087,832
Promissory Note from Amfac, Inc. to
Amfac/JMB Hawaii, Inc. extended and
reissued effective June 1, 1996.
4.13*************$10,000,000 loan
agreement between Amfac Property
Development Corp. and City Bank at
December 18, 1996
4.14*************$104,759,324
Promissory Note between Northbrook
Corporation and Amfac/JMB Hawaii,
Inc. dated February 17, 1997
4.15 Amended and Restated
$25,000,000 loan agreement with the
Bank of Hawaii dated February 4,
1997.
4.16 Limited Partnership
Agreement for Kaanapali Ownership
Resorts, L.P. dated February 1, 1997
for development of time-share resort
on Kaanapali.
10.1* General Lease S-
4222, dated January 1, 1969, by and
between the State of Hawaii and
Kekaha Sugar Company, Limited.
10.2* Grove Farm Haiku
Lease, dated January 25, 1974 by and
between Grove Farm Company,
Incorporated and The Lihue
Plantation Company, Limited.
10.3* General Lease S-
4412, dated October 31, 1974, by and
between the State of Hawaii and the
Lihue Plantation Company, Limited.
10.4* General Lease S-
4576, dated March 15, 1978, by and
between the State of Hawaii and The
Lihue Plantation Company, Limited.
10.5* General Lease S-
3827, dated July 8, 1964, by and
between the State of Hawaii and East
Kauai Water Company, Ltd.
10.6* Amended and
Restated Power Purchase Agreement,
dated as of June 15, 1992 by and
between The Lihue Plantation
Company, Limited and Citizens
Utilities Company.
10.7* Amendment to the
Campbell Estate Lease, dated April
16, 1970, between Trustees under the
Will and of the Estate of James
Campbell, Deceased, and Oahu Sugar
Company, Limited amending and
restating the previous lease.
10.8* Bishop Estate
Lease No. 24,878, dated June 17,
1977, by and between the Trustees of
the Estate of Bernice Pauahi Bishop
and Pioneer Mill Company, Limited.
10.9* General Lease S-
4229, dated February 25, 1969, by
and between the State of Hawaii, by
its Board of Land and Natural
Resources and Pioneer Mill Company,
Limited.
10.10* Honokohau Water
License, dated December 22, 1980,
between Maui Pineapple Company Ltd.
and Pioneer Mill Company, Limited.
10.11* Water Licensing
Agreement, dated September 22, 1980,
by and between Maui Land & Pineapple
Company, Inc. and Amfac, Inc.
10.12* Joint Venture
Agreement, dated as of March 19,
1986, by and between Amfac Property
Development Corp. and Tobishima
Properties of Hawaii, Inc.
10.13* Development
Agreement, dated March 19, 1986, by
and between Kaanapali North Beach
Joint Venture and Amfac Property
Investment Corp. and Tobishima
Pacific, Inc.
10.14** Keep-Well Agreement between Northbrook
Corporation and Amfac/JMB Finance, Inc.
10.15** Repurchase
Agreement, dated March 14, 1989, by
and between Amfac/JMB Hawaii, Inc.
and Amfac/JMB Finance, Inc.
10.16** Amfac Hawaii Tax
Agreement, dated November 21, 1988
between Amfac/JMB Hawaii, Inc., and
Amfac Property Development Corp.;
Amfac Property Investment Corp.;
Amfac Sugar and Agribusiness, Inc.;
Kaanapali Water Corporation; Amfac
Agribusiness, Inc.; Kekaha Sugar
Company, Limited; The Lihue
Plantation Company, Limited; Oahu
Sugar Company, Limited; Pioneer Mill
Company, Limited; Puna Sugar
Company, Limited; H. Hackfeld & Co.,
Ltd.; and Waiahole Irrigation
Company, Limited.
10.17** Amfac-Amfac
Hawaii Tax Agreement, dated February
27, 1989 between Amfac, Inc. and
Amfac/JMB Hawaii, Inc.
10.18** Services
Agreement, dated November 18, 1988,
between Amfac/JMB Hawaii, Inc., and
Amfac Property Development Corp.;
Amfac Property Investment Corp.;
Amfac Sugar and Agribusiness, Inc.;
Kaanapali Water Corporation; Amfac
Agribusiness, Inc.; Kekaha Sugar
Company, Limited; The Lihue
Plantation Company, Limited; Oahu
Sugar Company, Limited; Pioneer Mill
Company, Limited; Puna Sugar
Company, Limited; H. Hackfeld & Co.,
Ltd.; and Waiahole Irrigation
Company, Limited and JMB Realty
Corporation.
19.0******* $35,700,000
agreement for sale of C&H and
certain other C&H assets, to A&B
Hawaii, Inc. in June of 1993.
Pursuant to item 6.01
(b)(4) of Regulation SK, the
registrant hereby undertakes to
provide the commission upon its
request a copy of any agreement with
respect to long-term indebtedness of
the registrant and its consolidated
subsidiaries that does not exceed 10
percent of the total assets of the
registrant and its subsidiaries on a
consolidated basis.
</TABLE>
* Previously filed as exhibits to the Company's
Registration Statement of Form S-1 (as amended) under the
Securities Act of 1933 (File No. 33-24180) and hereby
incorporated by reference.
** Previously filed as exhibits to the Company's Form
10-K report under the Securities Act of 1934 (File No. 33-
24180) filed on March 27, 1989 and hereby incorporated by
reference.
*** Previously filed as exhibits to the Company's Form
10-K report under the Securities Act of 1934 (File No. 33-
24180) filed on March 27, 1991 and hereby incorporated by
reference.
**** Previously filed as exhibits to the Company's Form
10-Q report under the Securities Act of 1934 (File No. 33-
24180) filed on August 13, 1991 and hereby incorporated by
reference.
***** Previously filed as exhibit to the Company's Form 10-
K report under the Securities Act of 1934 (File No. 33-24180)
filed on May 29, 1993 and hereby incorporated by reference.
****** Previously filed as exhibit to the Company's
Form 10-Q report under the Securities Act of 1934 (File No. 33-
24180) filed November 11, 1993 and hereby incorporated by
reference.
******* Previously filed as exhibit to the Company's
Form 10-K report under the Securities Act of 1934 (File No. 33-
24180) filed March 27, 1994 and hereby incorporated by
reference.
******** Previously filed as an exhibit to the Company's Form
10-Q report under the Securities Act of 1934 (File No. 33-
24180) filed May 12, 1995 and hereby incorporated by
reference.
******** Previously filed as exhibit to the Company's Form
10-Q report under the Securities Act of 1934 (File No. 33-
24180) filed May 13, 1996 and hereby incorporated by
reference.
********* Previously filed as an exhibit to the Company's Form
10-Q report under the Securities Act of 1934 (File No. 33-
24180) filed May 13, 1996 and hereby incorporated by
reference.
********** Previously filed as exhibit to the Company's
Form 10-K report under the Securities Act of 1934 (File No. 33-
24180) filed on August 13, 1996 and hereby incorporated by
reference.
*********** Previously filed as exhibit to the Company's
Form 10-Q report under the Securities Act of 1934 (File No. 33-
24180) filed August 13, 1996 and hereby incorporated by
reference.
************ Previously filed as exhibit to the Company's
Form 10-Q report under the Securities Act of 1934 (File No. 33-
24180) filed August 13, 1996 and hereby incorporated by
reference.
************* Previously filed as an exhibit to the Company's
Form 10-K report under the Securities Act of 1934 (File No. 33-
24180) filed March 21, 1997 and hereby incorporated by
reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMFAC/JMB HAWAII, INC.
By: Gary Smith
Vice President
Date: May 15, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: May 15, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMFAC/JMB FINANCE, INC.
By: Gary Smith
Vice President
Date: May 15, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: May 15, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMFAC AGRIBUSINESS, INC.
By: Gary Smith
Vice President
Date: May 15, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: May 15, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMFAC PROPERTY DEVELOPMENT CORP.
By: Gary Smith
Vice President
Date: May 15, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: May 15, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMFAC PROPERTY INVESTMENT CORP.
By: Gary Smith
Vice President
Date: May 15, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: May 15, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMFAC SUGAR AND AGRIBUSINESS, INC.
By: Gary Smith
Vice President
Date: May 15, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: May 15, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMFAC VACATION MANAGERS, INC.
By: Gary Smith
Vice President
Date: May 15, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: May 15, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
KAANAPALI WATER CORPORATION
By: Gary Smith
Vice President
Date: May 15, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: May 15, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
KEKAHA SUGAR COMPANY, LIMITED
By: Gary Smith
Vice President
Date: May 15, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: May 15, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
H. HACKFELD & CO., LTD.
By: Gary Smith
Vice President
Date: May 15, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: May 15, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE LIHUE PLANTATION COMPANY, LIMITED
By: Gary Smith
Vice President
Date: May 15, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: May 15, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OAHU SUGAR COMPANY, LIMITED
By: Gary Smith
Vice President
Date: May 15, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: May 15, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PIONEER MILL COMPANY, LIMITED
By: Gary Smith
Vice President
Date: May 15, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: May 15, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PUNA SUGAR COMPANY, LIMITED
By: Gary Smith
Vice President
Date: May 15, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: May 15, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WAIAHOLE IRRIGATION COMPANY, LIMITED
By: Gary Smith
Vice President
Date: May 15, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: May 15, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WAIKELE GOLF CLUB, INC.
By: Gary Smith
Vice President
Date: May 15, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: May 15, 1997
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THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENT INCLUDED IN SUCH REPORT
</LEGEND>
<CIK> 0000839437
<NAME> AMFAC/JMB HAWAII, INC.
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<FISCAL-YEAR-END> MAR-31-1997
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<CASH> 7,908
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<RECEIVABLES> 7,808
<ALLOWANCES> 0
<INVENTORY> 63,690
<CURRENT-ASSETS> 79,406
<PP&E> 348,947
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<TOTAL-ASSETS> 488,408
<CURRENT-LIABILITIES> 33,101
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0
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<SALES> 9,483
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<CGS> 6,507
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<OTHER-EXPENSES> 419
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</TABLE>
LIMITED PARTNERSHIP AGREEMENT
OF
KAANAPALI OWNERSHIP RESORTS, L.P.
BETWEEN
AMFAC VACATIONS MANAGERS, INC.,
as a General Partner
AMFAC VACATIONS, L.P.,
as a Limited Partner
Kaanapali Partners Limited Partnership,
as a General Partner
and
Kaanapali Partners Limited Partnership,
as a Limited Partner
Dated as of February 1, 1997
LIMITED PARTNERSHIP AGREEMENT
THIS LIMITED PARTNERSHIP AGREEMENT of Kaanapali Ownership
Resorts, L.P. (the or this "Agreement") is made and entered into
as of the lst day of February, 1997, by and between AMFAC
VACATIONS MANAGERS, INC., a Hawaiian corporation, as a general
partner ("AVM"); AMFAC VACATIONS, L.P., a Hawaiian limited
partnership, as a limited partner ("AVLP"); and Kaanapali
Partners Limited Partnership, a Nevada limited partnership
("KP"), both as a general partner and as a limited partner.
RECITALS
A. Amfac Property Investment Corp. ("APIC"), a limited
partner of AVLP, owns a fifty percent (50%) undivided interest
(the "APIC Land Interest") as a tenant in common in a beachfront
parcel of approximately fourteen (14) acres located on the Island
of Maui in the State of Hawaii, which parcel is commonly referred
to as Kaanapali North Beach Lot #1 (the "Site"). The other fifty
percent (50%) undivided interest (the "TPI Land Interest") in the
Site is owned by Tobishima Pacific, Inc. ("TPI"). APIC has
entered into the Land Purchase Agreement to purchase the TPI Land
Interest.
B. The owners of KP have substantial experience in
developing and operating time share resorts.
C. AVM, AVLP, KP-GP and KP-LP (each, a "Partner" and
collectively, the "Partners") wish to join together to form
Kaanapali Ownership Resorts, L.P. (the "Partnership") as a
limited partnership under the laws of the State of Delaware, for
the principal purpose of constructing, developing, operating and
managing the Resort and selling time-share interests therein.
D. AVM will contribute cash to the Partnership. AVLP will
contribute cash, prepaid costs and the APIC Land Interest to the
Partnership. KP-GP will contribute cash to the Partnership and
will cause certain management and administrative services and
tangible and intangible personal property to be provided to the
Partnership and the Resort. KP-LP will contribute cash to the
Partnership.
E. The Partnership will assume the obligation of the buyer
pursuant to the Land Purchase Agreement to purchase the TPI Land
Interest and seek financing for the construction of the Resort.
F. The parties hereto desire to set forth in this
Agreement the terms and conditions of their agreements and
understandings with respect to the Partnership.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the
mutual promises contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound,
hereby acknowledge and agree as follows:
II. DEFINITIONS
The following terms shall have the following meanings when
used herein:
A. "Act" shall mean the Delaware Revised Uniform Limited
Partnership Act, as amended and in effect from time to time (or
any corresponding provisions of successor law).
B. "Additional Capital Contributions" shall mean the
additional capital contributions to be made by each Partner
pursuant to Section 3.3.
C. "Adjusted Capital Account Deficit" shall mean, with
respect to any Limited Partner, at any time, the deficit balance,
if any, in such Partner's Capital Account (or, in the case of
KP-LP, its sub-Capital Account as required pursuant to
Section 3.8(a)) after giving effect to the following adjustments:
1. credit to such Capital Account any amounts which such
Partner is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to
Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
2. debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section 1.704-
1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith.
D. "Adjusted Prime Rate" shall mean the "prime rate" as
published from time to time in the Eastern Edition of The Wall
Street Journal, plus three percent (3%). Each change in the
Adjusted Prime Rate due to a change in such prime rate shall take
effect simultaneously with such change in such prime rate,
without Notice. Notwithstanding the foregoing, in the event that
the foregoing Adjusted Prime Rate shall be in violation of any
usury or similar law, then the Adjusted Prime Rate shall be
reduced to the extent necessary to comply with any applicable
usury or similar law.
E. "Administrative General Partner" shall have the meaning
set forth in Section 6.3.
F. "Affiliate" of any Person shall mean any other Person
directly or indirectly controlling, controlled by or under common
control with, such Person. For purposes of this definition, the
term "control" (including the correlative meanings of the terms
"controlling," "controlled by" and "under common control with"),
as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the
direction of the management policies of such Person, whether
through the ownership of voting securities or by contract or
otherwise, and, without limiting the foregoing, shall include the
general partner of such Person, provided (but without limiting
the foregoing) that no pledge of voting securities of any Person
without the current right to exercise voting rights with respect
thereto shall by itself be deemed to constitute control over such
Person.
G. "Agreement" shall mean this Limited Partnership
Agreement as it may be amended from time to time in accordance
with the provisions of Section 13.1 of this Agreement.
H. "Amfac" shall mean Amfac/JMB Hawaii, Inc.
I. "APIC" is defined in the preamble.
J. "APIC Land Interest" is defined in Recital A.
K. "Appraisal Dispute" shall have the meaning ascribed to such
term in Section 11.2(d).
L. "Auditors" shall mean the Partnership's independent
certified public accounting firm. The Partnership's Auditors
shall initially be KPMG Peat Marwick and shall thereafter be such
other independent certified public accounting firm of national
prominence as may be selected by the Committee in the event that
KPMG Peat Marwick is no longer able to serve as the Partnership's
Auditors or in the event that the Committee determines that it is
in the best interest of the Partnership to engage another
independent certified public accounting firm of national
prominence as the Partnership's Auditors.
M. "AVLP" is defined in the preamble.
N. "AVLP Percentage Interest" shall have the meaning
ascribed to such term in Sections 3.1 and 3.9.
O. "AVM Percentage Interest" shall have the meaning set
forth in Sections 3.1 and 3.9.
P. "Bankruptcy" of a General Partner shall mean the occurrence
with respect to such Partner of any of the events specified in
Section 17-402(a)(4) or Section 17-402-(a)(5) of the Act.
Q. "Business Day" shall mean any day other than a Saturday
or Sunday on which commercial banks are required or permitted to
be open for the transaction of business in Honolulu, Hawaii.
R. "Business Plan" shall mean an annual business plan of
the Partnership prepared pursuant to and in accordance with
Section 8.3.
S. "Capital Account" shall mean, with respect to any
Partner, the capital account which shall be maintained for such
Partner by the Partnership in accordance with the following
provisions:
1. To each Partner's capital account there shall be
credited such Partner's capital contributions (for this purpose
any property to be contributed in kind shall be valued at its
initial Gross Asset Value) such Partner's distributive share of
Profits and any items in the nature of income or gain that are
specially allocated to such Partner and the amount of any
liabilities of the Partnership that are assumed by such Partner
or secured by any Property that is distributed to such Partner in
accordance with this Agreement.
2. From each Partner's capital account there shall be
debited the amount of cash and the Gross Asset Value of any
Property distributed or deemed to be distributed to such Partner
pursuant to this Agreement, such Partner's distributive share of
Losses and any items in the nature of expenses or losses which
are specially allocated to such Partner, and the amount of any
liabilities of such Partner assumed by the Partnership or which
are secured by any Property contributed by such Partner to the
Partnership.
3. In the event that an Economic Interest in the
Partnership is transferred in a Permitted Transfer in accordance
with the terms of this Agreement, the Transferee shall succeed to
the Capital Account of the transferor to the extent it relates to
the transferred Economic Interest.
(d) The foregoing provisions and the other provisions
of this Agreement relating to the maintenance of Capital Accounts
are intended to comply with Section 1.704-1(b) of the
Regulations, and shall be interpreted and applied in a manner
consistent with such Regulations.
T. "Cash Contributions" shall mean, with respect to any
Partner, at any time, the aggregate amount of money theretofore
contributed to the Partnership by such Partner, and, in the case
of AVLP, shall include the Prepaid Costs.
U. "Cash Shortfall" shall have the meaning ascribed to
such term in Section 3.6.
V. "Certificate of Limited Partnership" shall mean the
Certificate referred to in Section 2.3 hereof and Section 17-201
of the Act.
W. "Certificate of Occupancy" shall mean a certificate of
occupancy issued by the Land Use and Codes Administration of the
Department of Public Works and Waste Management of the County of
Maui, State of Hawaii.
X. "Club Condominium" shall have the meaning ascribed to
such term in Schedule III-B(2).
Y. "CO Date" shall have the meaning ascribed to such term
in Section 3.3(e).
Z. "Code" shall mean the Internal Revenue Code of 1986, as
amended and in effect from time to time.
AA. "Committee" shall have the meaning ascribed to such
term in Section 6.2(a).
BB. "Condominium Owners Association" shall mean the membership
association comprising the owners of the condominium units in the
Resort.
CC. "Contributed Land Value" shall mean, as of the date of
this Agreement, Seven Million Dollars ($7,000,000).
DD. "Depreciation" shall mean, for each Fiscal Year, an
amount equal to the depreciation, amortization, or other cost
recovery deduction allowable under the Code with respect to an
asset for such Fiscal Year, except that if the Gross Asset Value
of an asset differs from its adjusted basis as determined for
federal income tax purposes at the beginning of such Fiscal Year,
Depreciation shall be an amount which bears the same ratio to
such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for
such Fiscal Year bears to such beginning adjusted basis;
provided, however, that if the adjusted basis for federal income
tax purposes of an asset at the beginning of a Fiscal Year is
zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected
by the Committee.
EE. "Distributable Cash" shall mean, for any fiscal period,
the excess of (a) all cash on hand or in bank accounts of the
Partnership at the end of such period without regard to the
source from which derived (excepting only amounts held by the
Partnership on behalf of a party other than the Partnership or
the Partners), over (b) the sum of (i) the aggregate amount which
the Committee then anticipates will be payable by the Partnership
in future periods, including without limitation expenditures for
property taxes, insurance, debt service (other than with respect
to Partner Loans), capital items, construction costs and
improvements, and similar items, and (ii) reserves which the
Committee determines are reasonably necessary in order to satisfy
known or reasonably foreseeable or contingent liabilities of the
Partnership. In determining the adequacy of the Partnership's
reserves for this purpose, the Committee shall take into account
the amount and timing of cash receipts that are expected to be
received by the Partnership as a result of its normal operations.
FF. "Economic Interest" of a Partner shall mean such Partner's
interest in the Profits, Losses, Distributions and any other
items of income, gain, loss, deduction or credit of the
Partnership, but not the right of such Partner to vote or
otherwise participate in the management of the Partnership.
GG. "Event of Liquidation" shall have the meaning ascribed
to such term in Section 10.2.
HH. "Executive Management Services" shall have the meaning
ascribed to such term in Section 8.1.
II. "First Restricted Period" shall have the meaning set
forth in Section 2.10(b).
JJ. "Final Project Value" shall have the meaning ascribed to
such term in Section 11.2(d).
KK. "Fiscal Year" shall mean (i) the period commencing on
the effective date of this Agreement and ending on December 31,
1997, and (ii) any subsequent calendar year unless the Committee
determines that the Partnership is required to use a fiscal year
other than the calendar year for federal income tax purposes.
LL. "Formal Appraisal" shall have the meaning ascribed to such
term in Section 11.2(d).
MM. "General Partners" shall mean AVM and KP-GP.
NN. "Gross Asset Value" shall mean, with respect to any
asset, the asset's adjusted basis for federal income tax
purposes, except as follows:
1. The initial Gross Asset Value of any Property
contributed by a Partner to the Partnership shall be the gross
fair market value of such asset, as agreed upon by the Partners;
provided that the initial Gross Asset Value of the APIC Land
Interest shall be $7,000,000.
2. The Gross Asset Values of the Partnership's Properties
shall be adjusted to equal their respective gross fair market
values, as determined by the Partners, as of the following times:
a. upon the making of any additional capital contribution
(other than an Additional Capital Contribution pursuant to
Section 3.3 or a Special Capital Contribution pursuant to Section
3.6 and other than a de minimis capital contribution) in exchange
for the acquisition or increase of an Interest;
b. upon the distribution by the Partnership to a Partner
of more than a de minimis amount of Property as consideration for
an Interest;
c. upon the liquidation of the Partnership within the
meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations.
3. The Gross Asset Value of any Partnership Property
distributed to any Partner shall be adjusted to equal the gross
fair market value of such Property on the date of distribution,
as determined by the distributee Partner and the Committee;
4. The Gross Asset Values of the Partnership's Properties
shall be increased (or decreased) to reflect any adjustments to
the adjusted basis of such assets pursuant to Sections 734(b) or
743(b) of the Code, but only to the extent that such adjustments
are taken into account in determining Capital Accounts pursuant
to Section 1.704-1(b)(2)(iv)(m) of the Regulations.
If the Gross Asset Value of a Partnership Property has been
determined or adjusted pursuant to any of subsections (a), (b),
or (d) of this Section 1.40, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account
with respect to such Property for purposes of computing Profits
and Losses.
OO. "Homeowners Associations" shall mean collectively the
Interval Owners Association and the Condominium Owners
Association, and each such association shall sometimes be
referred to as a "Homeowners Association."
PP. "Indemnified Person" shall have the meaning ascribed to
such term in Section 6.8(b).
QQ. "Initial Capital Contributions" shall have the meaning
ascribed to such term in Section 3.2.
RR. "Interest" shall mean the entire interest of a Partner in
the Partnership, including the Economic Interest of such Partner
and all of such Partner's rights, powers, and privileges under
this Agreement or the Act.
SS. "Interval" shall mean a fee simple interest
representing the perpetual right to use the Resort and its
facilities for a specified period of time each year.
TT. "Interval Owners Association" shall mean the membership
association comprised of the owners of the Intervals.
UU. "Key Executives" shall mean certain key executives of
the KP Group, including Ronald J. Wilhite, Lexie W. Adams,
Charles R. Sewell and Robert W. Dunbar, who are to provide the
Executive Management Services to the Partnership.
VV. "KP-GP" shall mean KP in its capacity as a general
partner.
WW. "KP-LP" shall mean KP in its capacity as a Limited
Partner.
XX. "KP-GP Percentage Interest" shall have the meaning
ascribed to such term in Sections 3.1 and 3.9.
YY. "KP Group" shall mean KP, its Affiliates, and the Key
Executives, and each of them shall constitute a "member" of the
KP Group.
ZZ. "KP-LP Percentage Interest" shall have the meaning
ascribed to such term in Sections 3.1 and 3.9.
AAA. "Land Closing" shall mean the consummation of the purchase
of the TPI Land Interest pursuant to the Land Purchase Agreement.
BBB. "Land Purchase Agreement" shall mean that certain
Purchase and Sale Agreement and Escrow Instructions by and
between APIC and TPI, dated as of October 16, 1996, a copy of
which is attached hereto as Exhibit B.
CCC. "Limited Partners" shall mean AVLP and KP-LP.
DDD. "Notice" shall mean notice provided in accordance with
Article 12.
EEE. "Operating Budget" shall mean an annual budget for the
Partnership prepared pursuant to and in accordance with Section
8.3.
FFF. "Partner" and "Partners" are defined in Recital C.
GGG. "Partnership" is defined in Recital C.
HHH. "Partner Loans" shall have the meaning ascribed to such
term in Section 3.7.
III. "Percentage Interests" shall have the meaning ascribed
to such term in Sections 3.1 and 3.9.
JJJ. "Permitted Transfer" shall have the meaning ascribed to
such term in Section 9.2.
KKK. "Person" shall mean any individual, corporation,
partnership, or other entity.
LLL. "Pre-Entitlement Period" shall mean the period during
which, among other things, the Resort will be designed, the
initial Business Plan will be developed, and approval will be
obtained from the County of Maui for the construction and
development of the Resort. This period will end when a Project
SMA for the Resort is approved by the County of Maui.
MMM. "Prepaid Costs" shall mean the aggregate amount of out-of-
pocket fees, costs, expenses and deposits incurred by APIC, AVLP
or any Affiliate thereof prior to the Land Closing in connection
with the acquisition of the Site; planning, feasibility studies
or development work relating to the Site or the Resort; the
application for and processing of the Project SMA and, to the
extent applicable to or benefiting the Project, the Master SMA;
the valuation of the Site or a portion thereof; any deposits paid
pursuant to the Land Purchase Agreement; and any costs (including
professional fees) incurred in connection with the formation of
the Partnership. The amount of Prepaid Costs which have been
paid by AVLP and its Affiliates as of December 31, 1996 is
reflected in Schedule II. From time to time, AVLP will update
the schedule of Prepaid Costs and provide an updated copy to the
Partnership. A final schedule of Prepaid Costs will be prepared
by AVLP and submitted to the Partnership ten (10) Business Days
prior to the date of the Land Closing.
NNN. "Pre-Sales Period" shall mean the period beginning with
the end of the Pre-Entitlement Period and ending on the CO Date
during which, among other things, the Partnership will begin to
hire management personnel, establish accounting and business
policies and procedures, develop marketing programs, begin pre-
sales of Intervals and perform construction work on all or a
portion of the Resort.
OOO. "Profits" or "Losses" shall mean, for each Fiscal Year
or other period, an amount equal to the Partnership's taxable
income or loss for such year or period, determined in accordance
with Code Section 703(a) (for this purpose, all items of income,
gain, loss or deduction required to be stated separately pursuant
to Code Section 703(a)(1) shall be included in taxable income or
loss), with the following adjustments:
1. any income or gain of the Partnership that is exempt
from federal income tax and not otherwise taken into account in
computing Profits or Losses shall be added to such taxable income
or loss;
2. any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Section 705(a)(2)(B) of the
Code expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the
Regulations, and not otherwise taken into account in computing
Profits or Losses, shall be subtracted from such taxable income
or loss;
3. in the event the Gross Asset Value of any the
Partnership asset is adjusted pursuant to Section 1.40, the
amount of such adjustment shall be taken into account as gain or
loss from the disposition of such asset for purposes of computing
Profits or Losses;
4. gain or loss resulting from any disposition of the
Partnership's assets with respect to which gain or loss is
recognized for federal income tax purposes shall be computed with
reference to the Gross Asset Value of the asset disposed of,
notwithstanding that the adjusted tax basis of such asset differs
from its Gross Asset Value;
5. in lieu of the depreciation, amortization and/or cost
recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation
for such Fiscal Year;
6. to the extent an adjustment to the adjusted tax basis
of any Partnership asset pursuant to Section 734(b) or of the
Code Section 743(b) is required pursuant to Section 1.704-
1(b)(2)(iv)(m)(4) of the Regulations to be taken into account in
determining Capital Accounts as a result of a distribution other
than in liquidation of a Partner's interest in the Partnership,
the amount of such adjustment shall be treated as an item of gain
(if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases the basis of the asset) from the
disposition of the asset and shall be taken into account for
purposes of computing Profits or Losses; and
7. any items of income, gain, loss or deduction which are
allocated pursuant to Section 2 or Section 3 of Exhibit A hereto
shall not be taken into account in computing Profits or Losses.
PPP. "Project" shall include the Site and the Resort.
QQQ. "Property" or "Properties" shall mean any or all of the
Partnership's assets, including without limitation its cash,
working capital, real estate, and improvements, whether
contributed to, purchased by or constructed by the Partnership.
RRR. "Purchaser Notes" shall mean any debt obligations received
from purchasers of Intervals in connection with the sale of
Intervals to such purchasers.
SSS. "Regulations" shall mean the federal income tax
regulations promulgated under the Code.
TTT. "Resort" shall mean the time-share resort to be
constructed on the Site.
UUU. "Right of First Refusal" shall have the meaning set
forth in Section 9.6.
VVV. "Securities Act" shall have the meaning set forth in
Section 9.3.
WWW. "Service and License Agreements" shall mean a series of
agreements to be entered into pursuant to Article 8 pursuant to
which the members of the KP Group will provide certain services
and rights to the Partnership including loan collection and
servicing, management of the Homeowners Associations, a software
license and software support, sales and marketing management,
telemarketing services, and central reservation services. The
services and rights to be provided pursuant to the Service
Agreements are generally described in Schedules III-A through
III-F.
XXX. "Site" shall have the meaning ascribed to such term in
Recital A.
YYY. "Special Capital Contributions" shall have the meaning
ascribed to such term in Section 3.6.
ZZZ. "Substitute Limited Partner" shall mean a Transferee of an
Economic Interest who has become a substitute limited partner in
accordance with the procedures specified in Section 9.5.
AAAA. "Tax Distribution Date" shall mean the first Business
Day which is at least 10 calendar days following the end of each
quarter of the Fiscal Year.
BBBB. "Tax Distribution Entitlement" shall mean, on any
Tax Distribution Date, an amount equal to the sum of (a) the
product of (i) forty percent (40%) and (ii) the Profits and other
items of Partnership taxable income allocated to such Partner (or
estimated to be allocable to such Partner) for the Fiscal quarter
just ended, and (b) the cumulative amount of Tax Distribution
Entitlements accrued but not previously distributed to such
Partner solely as a result of insufficiency of Distributable
Cash.
CCCC. "TPI" is defined in Recital A.
DDDD. "TPI Land Interest" is defined in Recital A.
EEEE. "Transfer" shall mean any voluntary or involuntary
(whether by operation of law or otherwise) sale, assignment,
pledge, hypothecation or encumbrance.
FFFF. "Transferee" shall mean a Person who has acquired an
Economic Interest in the Partnership pursuant to a Permitted
Transfer but who has not been admitted to the Partnership as a
Substitute Limited Partner.
GGGG. "Transferring Limited Partner" shall have the meaning
ascribed to such term in Section 9.6.
HHHH. "Unrecovered Cash Contributions" shall mean, with
respect to any Partner at any time, the excess of (a) the
aggregate amount of such Partner's Cash Contributions (determined
as of such time), over (b) the aggregate amount of distributions
theretofore made to such Partner in respect of its Unrecovered
Cash Contributions pursuant to Section 4.2(a).
IIII. "Unrecovered Land Preference" shall mean, with
respect to AVLP, the excess of (a) the Contributed Land Value,
over (b) the aggregate amount theretofore distributed to AVLP in
respect of the Unrecovered Land Preference pursuant to
Section 4.2(a).
JJJJ. "Voting Interest" of a voting member of the
Committee shall mean that percentage of the total votes permitted
to be cast by all voting members equal to the ratio obtained by
dividing the Percentage Interest of the General Partner that
appointed such voting member by the total of the Percentage
Interests of all of the General Partners that have appointed
voting members.
III. FORMATION OF PARTNERSHIP
A. Formation. The Partners hereby associate themselves
together as a limited partnership (the "Partnership") pursuant to
the provisions of the Act upon the terms and conditions set forth
in this Agreement.
B. Name. The name of the Partnership shall be "KAANAPALI
OWNERSHIP RESORTS, L.P."
C. Certificate; Qualification. The General Partners shall
execute and file a Certificate of Limited Partnership with the
Secretary of State of the State of Delaware in accordance with
the Act. The Partnership shall file any assumed or fictitious
name certificate(s) or other documents as may be required by, and
shall otherwise comply with, all applicable laws. The
Administrative General Partner shall cause the Partnership to
submit to the Director of the Department of Commerce and Consumer
Affairs for the State of Hawaii an application for registration
as a foreign limited partnership certified and signed by the
Administrative General Partner, and the Administrative General
Partner further agrees to undertake such other steps as may be
necessary to qualify and register the Partnership as a foreign
limited partnership in the State of Hawaii and each other
jurisdiction where it is required to do so by reason of the
nature of its business or the ownership of its Properties.
D. Term. The term of the Partnership shall commence upon
the filing of the Certificate of Limited Partnership in the
office of the Secretary of State of the State of Delaware and
shall continue for a period of twenty-five (25) years unless the
Partnership is earlier dissolved and liquidated pursuant to any
provision hereof, by judicial action, or by operation of law.
Upon the termination of the Partnership, the Partnership's
Certificate of Limited Partnership shall be cancelled, as
required by law.
E. Principal Office. The principal office of the
Partnership shall be at 2530 Kekaa Drive, Lahaina, Hawaii 96761
or such other place as the Committee may from time to time
determine.
F. Partnership Act; Ownership. The rights and obligations
of the Partners and the formation, operation and termination of
the Partnership shall be governed by this Agreement and the Act.
The Interest of each Partner shall be personal property for all
purposes. All Property owned by the Partnership shall be deemed
to be owned by the Partnership as a partnership, and no Partner
individually shall have any ownership of, or ability to transfer,
such Property.
G. Purposes. The business and purposes of the Partnership
shall be limited strictly to (a) assuming and consummating the
Land Purchase Agreement, (b) owning the Site for development as
the Resort, (c) constructing, developing, operating, maintaining,
owning and managing the Resort, (d) financing and/or refinancing,
by mortgage loan or otherwise, all or a portion of any amounts,
costs, or expenses relating to (i) the purchase of the TPI Land
Interest, (ii) the development and construction of the Resort
(whether or not such development or construction costs relate
directly to improvements on the Site), or (iii) the operation of
the Resort, (e) marketing and selling the Intervals, and
providing or arranging for financing to the purchasers,
(f) hypothecating, securitizing or otherwise refinancing the
Purchaser Notes, (g) operating and administering the Resort and
the Partnership and (h) engaging in such other activities,
operations and businesses and entering into such agreements or
financial arrangements as the Committee may deem necessary or
appropriate to the foregoing purposes. The Partnership shall not
engage in any other business without the consent of all of the
General Partners.
H. Tax Treatment of Partnership. The Partners intend that
the Partnership shall be treated as a partnership for federal and
state income tax purposes. The Committee shall cause the
Partnership to take all appropriate actions, including the filing
of available tax elections, which shall be necessary or helpful
to establish or enhance the status of the Partnership as a
partnership for tax purposes. If directed to do so by the
Committee at any time following the date on which the Hawaii
Limited Liability Act becomes effective, the Partners and the
Partnership shall take such actions as may be required to convert
the Partnership into a limited liability company which shall be
characterized as a partnership for federal and state income tax
purposes.
I. Authority of Limited Partners. Except as expressly
provided in this Agreement, no Limited Partner shall have any
authority to act for, or to assume any obligation or
responsibility on behalf of, the Partnership or any other
Partner.
J. Restrictions on Certain Activities.
1. Subject to the limitations applicable to the KP Group
pursuant to Section 2.10(b), this Agreement shall not prohibit
any Partner or any of its Affiliates from owning, operating, or
investing in any real estate or engaging in any resort activities
not owned or operated by the Partnership, wherever located.
Subject to the limitations contained in Section 2.10(b), each
Partner and any of its Affiliates may engage in or possess an
interest in another business venture or ventures of any nature
and description (whether or not the same may, directly or
indirectly, compete with this Partnership), independently or with
others, including but not limited to the ownership, financing,
leasing, operation, management, syndication, brokerage and
development of real property or resort activities, and neither
the Partnership nor the Partners shall have any rights by virtue
of this Agreement or their relationship as Partners in and to
said other ventures or to the income or profits derived
therefrom.
2. Each member of the KP Group agrees on behalf of himself
or itself that during the period beginning on the date hereof and
ending on December 31, 1998 ("First Restricted Period"), no such
member shall engage, directly or indirectly, in any capacity
(whether as an owner, employee, agent, independent contractor,
consultant, partner or otherwise), in any marketing or consulting
activities relating to any hotel or resort in the State of Hawaii
without the prior written consent of AVM, which consent may be
given or withheld by AVM in its sole and absolute discretion.
Each member of the KP Group further agrees that during the period
beginning on the day after the last day of the First Restricted
Period and for so long thereafter as the Partnership is otherwise
offering for sale any previously unsold Intervals, no such member
shall engage, directly or indirectly, in any capacity (whether as
an owner, employee, agent, independent contractor, consultant,
partner or otherwise), in any marketing or consulting activities
relating to the sale of time share intervals by or relating to
any hotel or resort on the Island of Maui. Each member of the KP
Group acknowledges that AVM and AVLP would not have entered into
this Agreement without the foregoing covenant and that the
failure of any member of the KP Group to comply with this
covenant will cause the Partnership, AVM, AVLP and the partners
of AVLP to be materially damaged. Without waiving any other
remedy which the Partnership, AVM, AVLP or the partners of AVLP
may have at law or in equity, KP agrees that, should any member
of the KP Group challenge or contest the validity of the covenant
set forth in this Section 2.10(b), the KP-GP Percentage Interest
and the KP-LP Percentage Interest each shall be reduced to zero
effective upon the delivery by AVM to KP-GP and KP-LP of Notice
requiring such reduction. In the event that a court determines
that this covenant is unenforceable due to overbreadth (as to
duration, geographic scope or otherwise), it is the Partners'
intent that the covenant will be enforced subject to such
modifications as the court determines is appropriate.
3. Nothing in Section 2.10(b) shall prevent any member of
the KP Group from providing receivables management services or
property management services to any Person, whether or not within
the State of Hawaii or the Island of Maui, provided that each
member of the KP Group covenants that the provision of any such
services to other persons will not adversely affect the extent or
quality of the services to be provided by any member of the KP
Group to the Partnership pursuant to this Agreement or the
Service Agreements. In no event shall any member of the KP Group
use or divulge any information which is confidential or
proprietary information of the Partnership or which relates to
the ownership, development or operation of the Resort in
connection with any activities not owned or operated by the
Partnership.
IV. PERCENTAGE INTERESTS; CAPITAL
CONTRIBUTIONS; OTHER FINANCING
A. Percentage Interests. Except as provided in Section
3.9, the Percentage Interests of the Partners shall be as
follows:
General Partner Limited Partner Aggregate
Percentage Percentage Percentage
Partner Interest Interest Interest
KP 1.00% 14.00% 15.00%
AVM 5.67% 0.00% 5.67%
AVLP 0.00% 79.33% 79.33%
B. Initial Capital Contributions. Upon the formation of
the Partnership the Partners have made the following
contributions to its capital (the "Initial Capital
Contributions"):
1. AVM has contributed One Hundred Thousand Dollars
($100,000) in cash; and
2. KP-GP has contributed $10,000 in cash.
C. Additional Capital Contributions. The Partners shall
make additional capital contributions ("Additional Capital
Contributions") in the amounts and at the times specified in this
Section 3.3.
1. Immediately prior to the Land Closing, AVLP shall cause
the Land Purchase Agreement to be contributed to the Partnership,
and, simultaneously therewith, the Administrative General Partner
shall cause the Partnership to assume the purchaser's obligations
under the Land Purchase Agreement, as provided for at Section
16(a)(ii) of such agreement, including, without limitation, the
obligations at Section 3 of such agreement and the Cost Sharing
and Reciprocal Easement Agreement and the Subdivision Bond
Reimbursement Agreement (as those terms are defined in the Land
Purchase Agreement). At the time of such assumption, AVLP or its
Affiliate will enter into an agreement with the Partnership
providing that, with respect to the portion of Infrastructure
Improvements which constitute Shared Infrastructure Improvements,
the Partnership will be responsible only for those portions of
the cost of designing, developing and constructing the Shared
Infrastructure Improvements (as that term is defined in the Land
Purchase Agreement) attributable to or which benefit the Project.
The Partners acknowledge that, until such time as the Partnership
assumes the purchaser's obligations under the Land Purchase
Agreement, the Partnership shall not have an interest in the
Project, the Project SMA, the Master SMA, or any other property
interest or license relating to the Project. Prior to the
Partnership's assumption of the Land Purchase Agreement, AVLP and
its Affiliates will retain authority for determining and remain
responsible for paying the costs, expenses and deposits
associated with the Land Purchase Agreement, the Project SMA and
the Master SMA. Upon assumption of the Land Purchase Agreement
by the Partnership, AVLP shall cause the Prepaid Costs, including
all costs, expenses and deposits paid by AVLP or its Affiliates
prior to the date of such assumption as provided for in the
preceding sentence, to be contributed to the Partnership as an
Additional Capital Contribution, and thereafter, all such amounts
not previously paid by AVLP or its Affiliates shall be paid by
the Partnership.
2. Immediately following the Land Closing (and provided that
the Partnership shall have assumed the obligations described in
Section 3.3(a)), simultaneously with the Additional Capital
Contribution to be made by KP-LP pursuant to Section 3.3(c)),
AVLP shall contribute the APIC Land Interest to the Partnership.
3. Immediately following the Land Closing (and simultaneously
with AVLP's Additional Capital Contribution pursuant to Section
3.3(b)), KP-GP shall contribute $36,666 in cash and KP-LP shall
contribute $153,334 in cash.
4. Subject to the limitations set forth in this
Section 3.3(d), AVM and AVLP shall, promptly upon the receipt of
Notice provided by the Committee, contribute such additional
capital to the Partnership as the Committee determines is needed
for the planning and start-up of the Resort. All such
contributions shall be made in such proportions as may be
required in order that the aggregate amount of capital
contributed to the Partnership by AVM and AVLP under Sections
3.2(a), 3.3(a), 3.3(b) and 3.3(c) is contributed 6.67% by AVM and
93.33% by AVLP; provided, however, that neither AVM nor AVLP
shall be required to make any Additional Capital Contributions
pursuant to this Section 3.3(d) once either of the following
conditions is met: (1) ninety (90) days have expired after the
CO Date, or (2) the aggregate amount of Additional Capital
Contributions made by AVM and AVLP pursuant to this Section
3.3(d) has exceeded the excess of $3,000,000 over the sum of
(i) $100,000, and (ii) the Prepaid Costs.
5. Subject to Section 8.6(b), KP-LP shall make Additional
Capital Contributions to the Partnership in immediately available
funds as follows:
(1) $50,000 on the first Business Day which is one (1) year
after the date on which the first Certificate of Occupancy for
the Resort (whether temporary or permanent), or any portion of
the Resort, is obtained (the "CO Date");
(2) $75,000 on the first Business Day which is two (2)
years after the CO Date;
(3) $100,000 on the first Business Day which is three (3)
years after the CO Date;
(4) $125,000 on the first Business Day which is four (4)
years after the CO Date; and
(5) $150,000 on the first Business Day which is five (5)
years after the CO Date.
D. Limitation on Contributions. After making its Initial
Capital Contributions and Additional Capital Contributions,
except as provided in Section 11.2(k) or by applicable law, no
Partner shall be required to make any additional capital
contributions to the Partnership; provided, however, that the
Partners may make Special Capital Contributions pursuant to
Section 3.6; and provided further, that the Limited Partners may
be required to return Partnership distributions to the
Partnership pursuant to Section 3.10 in accordance with
applicable law.
E. Debt Financing. In order to fund the costs of
acquiring the TPI Land Interest and developing and constructing
the Resort, and, to the extent that the Committee determines that
the aggregate capital contributions provided for in Sections 3.2
and 3.3 and the income of the Partnership are insufficient to
fund all of the Partnership's other costs and expenses, the
Committee on behalf of the Partnership shall seek to obtain debt
financing on such terms as the Committee determines are
commercially reasonable. In connection therewith, the Committee,
in its reasonable judgment, may mortgage or grant liens on the
Properties and hypothecate or securitize the Purchaser Notes. KP
acknowledges that an Affiliate of AVM and AVLP will guarantee the
entire amount of the debt incurred or assumed by the Partnership
pursuant to the Land Purchase Agreement. AVM and AVLP agree that
they will not object to an arrangement whereby KP would also
become jointly and severally liable as guarantor for a portion of
such debt not to exceed fifteen percent (15%) thereof (or, if
less, a percentage of such debt equal to the combined Percentage
Interests of KP-GP and KP-LP in the Partnership). If AVM, AVLP
or an Affiliate of either of them guarantees any other debt of
the Partnership, AVM and AVLP agree that they will not object to
an arrangement whereby KP would also become jointly and severally
liable as a guarantor for a portion of such debt not to exceed
fifteen percent (15%) thereof (or, if less, a percentage of such
debt equal to the aggregate Percentage Interests of KP in the
Partnership). Nothing in this Section 3.5 shall be construed to
require the Partnership to reject or otherwise delay available
financing or to obtain financing on less favorable terms so that
KP may provide such co-guarantee.
F. Special Capital Contributions. If the Committee shall
determine that debt financing as contemplated by Section 3.5
cannot be obtained on commercially reasonable terms, the
Committee shall determine from time to time the amount of the
additional funds required to carry on the Partnership's business
("Cash Shortfall"). The Partners shall thereupon determine
(subject to a requirement of unanimous consent) whether to make
capital contributions to the Partnership ("Special Capital
Contributions") in order to fund such Cash Shortfall. All
Special Capital Contributions shall be made by the Partners in
proportion to their respective Percentage Interests.
G. Partner Loans. If the Partners do not unanimously
agree to make Special Capital Contributions pursuant to Section
3.6, the Partners may, with the consent of the Committee, advance
to the Partnership as loans amounts sufficient to fund any Cash
Shortfall ("Partner Loans"); provided, that Partner Loans shall
not be made for the purpose of funding the construction costs of
the Resort; and provided further, that if more than one Partner
wishes to make a Partner Loan, such Loans shall be made in
proportion to the respective Percentage Interests of those
Partners wishing to make Partner Loans. Partner Loans shall
accrue interest on principal and unpaid interest at the Adjusted
Prime Rate, shall be repaid as provided in Section 4.1, and shall
be deemed third party debt of the Partnership. The lending
Partner(s) shall be a creditor(s) of the Partnership with respect
to its (or their) Partner Loans.
H. Capital Accounts.
1. The Partnership shall maintain a Capital Account for
each Partner and, in the case of KP, shall maintain separate sub-
Capital Accounts for KP-GP and KP-LP. The initial Capital
Account balances of the Partners shall reflect the cash and the
agreed Gross Asset Value of the Property contributed to the
Partnership upon the formation of the Partnership pursuant to
Section 3.2.
2. Neither Partner shall be entitled to make withdrawals
from or to receive repayment of its Capital Account except as
expressly provided herein.
3. Neither Partner shall be entitled to interest with
respect to amounts in its Capital Account.
4. Except as provided in Section 11.2(k), each Partner
shall look solely to the assets of the Partnership, and no
Partner shall look to any other Partner, for the return of any
amount in its Capital Account. Except as expressly provided in
Article 11, neither Partner shall have the right to demand or
receive Property other than cash in return for its respective
capital contributions or in liquidation of its Interest.
I. Adjustments to Percentage Interests. The Percentage
Interests of the Partners shall be adjusted as follows:
1. if the Committee exercises its right pursuant to
Section 8.4 to terminate the Executive Management Services during
the Pre-Entitlement Period, the Interest of KP as a General
Partner shall be converted to an Interest as a Limited Partner,
the Percentage Interest of KP as a Limited Partner (including
such converted Interest) shall be reduced to five percent (5%),
and the Percentage Interests of the Partners shall thereafter be
as follows:
General Partner Limited Partner Aggregate
Percentage Percentage Percentage
Partner Interest Interest Interest
AVM 5.67% 0.00% 5.67%
KP 0.00% 5.00% 5.00%
AVLP 0.00% 89.33% 89.33%
2. if the Committee exercises its right pursuant to
Section 8.4 to terminate the Executive Management Services during
the Pre-Sales Period, the Interest of KP as a General Partner
shall be converted to an Interest as a Limited Partner, the
Percentage Interest of KP as a Limited Partner (including such
converted Interest) shall be reduced to nine percent (9%), and
the Percentage Interests of the Partners shall thereafter be as
follows:
General Partner Limited Partner Aggregate
Percentage Percentage Percentage
Partner Interest Interest Interest
AVM 5.67% 0.00% 5.67%
KP 0.00% 9.00% 9.00%
AVLP 0.00% 85.33% 85.33%
3. if the Committee exercises its right pursuant to
Section 8.4 to terminate the Executive Management Services after
the Pre-Sales Period, the Interest of KP as a General Partner
shall be converted to an Interest as a Limited Partner, the
Percentage Interest of KP as a Limited Partner (including such
converted Interest) shall be increased to fifteen (15%), and the
Percentage Interests of the Partners shall thereafter be as
follows:
General Partner Limited Partner Aggregate
Percentage Percentage Percentage
Partner Interest Interest Interest
AVM 5.67% 0.00% 5.67%
KP 0.00% 15.00% 15.00%
AVLP 0.00% 79.33% 79.33%
4. if KP-GP exercises its right pursuant to Section 8.6 to
terminate its obligation to provide Executive Management Services
or to cause the Key Executives to provide the Executive
Management Services during the Pre-Entitlement Period, or if KP-
GP fails to provide or cause to be provided any of the rights or
services contemplated by Section 8.5, the Interest of KP as a
General Partner and Limited Partner shall be reduced to zero,
such exercise by KP shall constitute an Event of Liquidation
pursuant to Section 10.2(e), and the Percentage Interests of the
Partners shall thereafter be as follows:
General Partner Limited Partner Aggregate
Percentage Percentage Percentage
Partner Interest Interest Interest
AVM 5.67% 0.00% 5.67%
KP 0.00% 0.00% 0.00%
AVLP 0.00% 94.33% 94.33%
5. if KP-GP exercises its right pursuant to Section 8.6 to
terminate its obligation to provide Executive Management Services
or to cause the Key Executives to provide the Executive
Management Services during the Pre-Sales Period, or if KP-GP
fails to provide or cause to be provided any of the rights or
services contemplated by Section 8.5, the Interest of KP as a
General Partner shall be converted to an Interest as a Limited
Partner, the Percentage Interest of KP as a Limited Partner
(including such converted Interest) shall be reduced to one and
one-half percent (1.5%), and the Percentage Interests of the
Partners shall thereafter be as follows:
General Partner Limited Partner Aggregate
Percentage Percentage Percentage
Partner Interest Interest Interest
AVM 5.67% 0.00% 5.67%
KP 0.00% 1.50% 1.50%
AVLP 0.00% 92.83% 92.83%
6. if KP-GP exercises its right pursuant to Section 8.6 to
terminate its obligation to provide Executive Management Services
or to cause the Key Executives to provide the Executive
Management Services after the Pre-Sales Period, or if KP-GP fails
to provide or cause to be provided any of the rights or services
contemplated by Section 8.5, the Interest of KP shall be
converted to an Interest as a Limited Partner, the Percentage
Interest of KP as a Limited Partner (including such converted
Interest) shall be reduced to three percent (3%), and the
Percentage Interests of the Partners shall thereafter be as
follows:
General Partner Limited Partner Aggregate
Percentage Percentage Percentage
Partner Interest Interest Interest
AVM 5.67% 0.00 5.67%
KP 0.00% 3.00% 3.00%
AVLP 0.00% 91.33% 91.33%
J. Limited Liability. The Limited Partners shall not be
bound by, nor be personally liable for, the expenses, liabilities
or obligations of the Partnership; provided, however, that to the
extent required by Section 17-607 of the Act, if any Limited
Partner receives one or more distributions from the Partnership,
such Limited Partner shall be liable to the Partnership for the
return of any sum, not in excess of such distribution(s), as may
be required under the Act.
V. DISTRIBUTIONS
A. Partner Loans and Tax Distributions. Not later than
each Tax Distribution Date, the Committee shall determine the
amount of the Partnership's Distributable Cash and the amount of
each Partner's Tax Distribution Entitlement and, subject to any
applicable restrictions pursuant to agreements with the
Partnership's creditors or applicable law, Distributable Cash
shall be paid to the Partners as follows:
1. An aggregate amount of Distributable Cash not exceeding
the outstanding principal amount of and accrued interest on all
Partner Loans shall be paid to those Partners that have made
Partner Loans pursuant to Section 3.7 in proportion to, and to
the extent of, the outstanding balances of such Partner Loans,
first in payment of interest on and then in payment of the
principal amount of such Partner Loans; provided, however, that
in no event shall distributions pursuant to this Section 4.1(a)
be treated as Partnership distributions requiring an adjustment
to a Partner's Capital Account; and
2. if no Partner Loan is then outstanding, Distributable Cash
shall be paid to the Partners in proportion to, and in an amount
not exceeding, their respective Tax Distribution Entitlements.
B. Distributions. Subject to any applicable restrictions
pursuant to agreements with the Partner's creditors or applicable
law, any Distributable Cash remaining after distributions are
made pursuant to Section 4.1 shall be distributed to the Partners
not less frequently than once each Fiscal Year and if not already
distributed for a particular Fiscal Year shall be distributed not
later than sixty (60) days following the end of such Fiscal Year
as follows and in the following order of priority:
1. to the Partners in proportion to (i) in the case of KP-
GP, KP-LP and AVM, the percentage for each such Partner computed
by dividing the Unrecovered Cash Contribution of each such
Partner by the sum of the Unrecovered Cash Contributions of all
of the Partners and the Unrecovered Land Preference, and (ii) in
the case of AVLP, the percentage computed by dividing (x) the sum
of the Unrecovered Cash Contribution of AVLP and the Unrecovered
Land Preference by (y) the sum of the Unrecovered Cash
Contributions of all of the Partners and the Unrecovered Land
Preference.
2. Thereafter, to the Partners in proportion to their
respective Percentage Interests (as in effect on the date such
distribution is made).
C. Withholding. The Partnership shall be authorized to
withhold from the distributions of Distributable Cash to be made
to any Partner, or with respect to allocations of Profits, income
or gain to be made to any Partner, and to pay over to applicable
tax authorities, any amounts required to be withheld pursuant to
the Code or other applicable tax law. Any amounts so withheld
shall be treated as distributed to such Partner pursuant to this
Article 4 for all purposes of this Agreement.
VI. PROFITS AND LOSSES
A. Subject to the allocations set forth in Sections 2
and 3 of Exhibit A, and except as provided in Section 11.2(f),
Profits of the Partnership for any Fiscal Year or other period
shall be allocated as follows and in the following order of
priority:
1. First, to those Partners (if any) having negative
Capital Accounts, in proportion to such negative Capital
Accounts, until no Partner has a negative Capital Account;
provided, that for purposes of this Section 5.1(a), in
determining the balance of a Partner's Capital Account, such
Capital Account shall be hypothetically increased by such
Partner's share of Partnership Minimum Gain and Partner Minimum
Gain (each of which shall be determined as set forth in Exhibit A
hereto).
2. Thereafter, any remaining Profits shall be allocated to
all of the Partners in proportion to their respective Percentage Interests.
B. Subject to the allocations set forth in Sections 2
and 3 of Exhibit A, and except as provided in Section 11.2(g),
Losses of the Partnership for any Fiscal Year or other period
shall be allocated as follows and in the following order of
priority:
1. Losses shall be allocated to the Partners in proportion
to their respective Percentage Interests; provided, however, that
Losses shall not be allocated to AVLP or KP-LP to the extent such
Losses would cause or increase an Adjusted Capital Account
Deficit for such Limited Partner.
2. Any Losses which would be allocated to AVLP but for the
proviso in Section 5.2(a) shall be reallocated to AVM, and any
Losses which would be allocated to KP-LP but for the proviso in
Section 5.2(a) shall be allocated to KP-GP (or, if the Interest
of KP-GP has been converted to an Interest as a Limited Partner,
such Losses shall be allocated to AVM).
3. Notwithstanding anything to the contrary in Section
5.2(a), if any Losses allocable to AVLP pursuant to Section
5.2(a) would be suspended pursuant to Section 704(d) of the Code,
such Losses shall, if AVM so requests, be allocated to AVM rather
than to AVLP.
VII. MANAGEMENT OF THE PARTNERSHIP
A. In General. The affairs of the Partnership shall be
managed by its General Partners acting through the Executive
Committee and the Administrative General Partner. Either General
Partner, acting alone, shall have the power to bind the
Partnership; provided, however, that either General Partner's
authority to so act shall be subject to the prior approval of the
Executive Committee. If at any time there is only one General
Partner, such General Partner shall manage the affairs of the
Partnership in its sole discretion.
B. Executive Committee.
1. Except as otherwise provided in this Agreement, all
powers of the Partnership shall be exercised by or under the
authority of an Executive Committee (the "Committee") which shall
oversee all aspects of the Partnership's business and the
activities of the Key Executives and the Administrative General
Partner.
2. Each General Partner shall by written Notice to the
Partnership and any other General Partner appoint one voting
member and one non-voting member to the Committee on an annual
basis; provided, however, that if any General Partner which has
appointed voting or nonvoting members thereafter ceases to be a
General Partner or its Interest as a General Partner has been
converted to a Limited Partnership Interest as provided for
herein, such appointees shall immediately resign from the
Committee and such Partner shall no longer be entitled to appoint
members to the Committee. Each voting member shall be entitled
to cast a percentage of the total vote equal to its Voting
Interest. Each voting member may provide a proxy authorizing the
nonvoting member appointed by the same General Partner to vote in
the place of such voting member at any meeting of the Committee.
Each General Partner shall have the right to remove or replace
any member of the Committee appointed by such General Partner by
delivering written notice of such removal to the Partnership and
to the other General Partner. Vacancies on the Committee shall
be promptly filled by the General Partner which appointed the
member previously holding the position which is then vacant.
3. Among other powers, the Committee shall specifically have
the authority and responsibility to approve the following:
a. Operating Budgets and Business Plans;
b. Capital expenditures programs;
c. Personnel employment, compensation, training and
evaluation policies;
d. Sales and marketing programs;
e. Sales and marketing agreements with third parties;
f. Pricing and commissions for sales of Intervals;
g. The terms of any financing to be obtained by the
Partnership and any liens or mortgages granted with respect
thereto;
h. The terms of any financing or sale of Purchaser
Notes;
i. Design of the Resort and amenities;
j. Service, construction and vendor agreements other
than the Service Agreements;
k. Sale or refinancing of the Site, the Resort, or
the Project; and
l. Admission of any new Partner; provided, however,
that all of the Partners (including Limited Partners) shall be
entitled to vote in accordance with their respective Percentage
Interests on the admission to the Partnership of Transferees of
Economic Interests as Substitute Limited Partners, in accordance
with Section 9.5.
4. The Committee shall meet on a regular basis as
necessary but, in any event, not less than once each quarter at
the offices of the Partnership or at such other location or using
such means of communication (including telephonic) other than an
in-person meeting as may be agreed on by the members of the
Committee. Any General Partner may call a special meeting of the
Committee upon not less than two (2) days' prior written or
telephonic notice to the other General Partner; provided,
however, that in the event of an emergency, a meeting may be
called upon less than two (2) days' notice (which notice shall be
reasonable under the circumstances), and in any event a meeting
shall be validly called if the members of the Committee actually
meet (whether in-person or by other means of communication) and
each General Partner executes a written waiver of notice of such
meeting. An agenda for each regular meeting shall be prepared in
advance by the Administrative General Partner (as defined in
Section 6.3), and an agenda for each special meeting shall be
prepared in advance by the General Partner which calls a special
meeting. Attendance by voting members of the Committee
representing over fifty percent (50%) of the total Voting
Interests shall constitute a quorum, and all actions of the
Committee shall be taken by a vote of voting members holding
Voting Interests aggregating in excess of fifty percent (50%),
except for amendments to this Agreement as provided for in
Section 13.1. The Administrative General Partner shall cause
written minutes to be prepared of all actions taken by the
Committee and shall, within ten (10) days thereafter, deliver a
copy thereof to the members of the Committee for their approval.
5. The Committee may by resolution delegate its powers, but
not its responsibilities, to employees of the Partnership or
either Partner, the Key Executives or to any other Person.
C. Administrative General Partner. The Committee shall
appoint an Administrative General Partner which shall initially
be KP-GP. The Administrative General Partner shall serve at the
pleasure of, and shall be responsible to, the Committee. The
Administrative General Partner shall have responsibility for the
day-to-day oversight and administration of the Partnership's
business activities and internal affairs, including the
management of cash and personnel, subject to the guidance of the
Committee. Whenever action by the Partnership is required,
unless otherwise specifically provided, such action shall be
taken by the Administrative General Partner.
D. Bank Accounts. The Partnership shall maintain one or
more bank accounts in such banks or other depository institutions
as the Administrative General Partner may recommend and the
Committee may approve from time to time. All funds of the
Partnership shall be promptly deposited in the Partnership's bank
accounts or in such other investments as the Committee may
approve for the Partnership's working capital. The Committee
from time to time shall authorize signatories for all such
accounts and investments.
E. Reimbursement of Costs and Expenses. Subject to the
provisions of this Section 6.5, the Committee shall determine the
amounts, if any, of reimbursement to which any General Partner
shall be entitled in respect of expenses incurred by such General
Partner on behalf of the Partnership. Except as provided in
Section 8.2, in no event shall general overhead or administrative
expenses of either General Partner or their Affiliates be
allocated or charged to the Partnership. No salaries, fees,
commissions or other compensation shall be paid by the
Partnership to any Partner, any Affiliate of a Partner, or any
member of the Committee for any services rendered to the
Partnership except as specifically provided for in Section 8.2 or
in a Service Agreement.
F. Voting Rights of Limited Partners. The Limited Partners
shall have the right to vote on and to give or withhold their
consent to the matters specifically subject to their vote or
consent under this Agreement and otherwise shall have the voting
rights conferred on limited partners pursuant to applicable law.
G. Fidelity Bonds and Insurance. The Partnership shall,
to the extent that customary fidelity bonds can be obtained from
reputable surety companies at commercially reasonable rates,
obtain such bonds covering all Persons having access to the
Partnership's funds, indemnifying the Partnership against loss
resulting from fraud, theft, and dishonest and other wrongful
acts of such Persons. The Partnership shall carry or cause to be
carried on its behalf with companies acceptable to the Committee
all Property, liability and workmen's compensation insurance as
shall be required under applicable law, mortgages, leases,
agreements, and other instruments as may be required by the
Committee.
H. Limited Liability of the General Partners;
Indemnification.
(a) Notwithstanding anything to the contrary stated
herein, neither General Partner, nor any officer, director,
shareholder, partner, trustee, beneficiary, employee, agent,
heir, assign, successor-in-interest, Affiliate thereof or Key
Executive, shall be liable, responsible or accountable in damages
or otherwise to another Partner or to the Partnership for any act
performed by such General Partner or Person, or for any omission
or failure to act, if the performance of such act or such
omission or failure is done in good faith and within the scope of
the authority conferred upon the General Partner or, with respect
to the Executive Management Services, the Key Executives, by this
Agreement or by law, except for acts of willful misconduct;
(b) The Partnership shall indemnify and hold harmless
each General Partner, each of its officers, directors,
shareholders, partners, trustees, beneficiaries, employees,
agents, heirs, assigns, successors-in-interest and Affiliates and
each Key Executive (each an "Indemnified Person") from and
against any and all loss, damage, liability and expense,
including costs and reasonable attorneys' fees, to which any such
Indemnified Person may be put or which any such Indemnified
Person may incur by reason of or in connection with any act
performed by such Indemnified Person or any omission or failure
to act if the performance of such act was done in good faith and
within the scope of the authority conferred upon such General
Partner or, with respect to the Executive Management Services,
the Key Executives by this Agreement or by law, except for acts
of willful misconduct. The Partnership's indemnification
obligation hereunder shall apply not only with respect to any
action or allegation brought by the Partnership or a Partner but
also with respect to any action or allegation brought by any
other Person.
The right of indemnification provided by this
Section 6.8(b) shall be in addition to any rights to which the
Indemnified Person may otherwise be entitled and shall inure to
the benefit of the successors, assigns, executors or
administrators of such Indemnified Person. Any Indemnified
Person shall have the right to select his or its own attorney, if
he or it makes a reasonable showing that the attorney for the
Partnership cannot adequately represent his or its interest. The
Partnership shall pay the expenses incurred by any Indemnified
Person in defending a civil or criminal action, suit or
proceeding in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by such
Indemnified Person to repay such payment if there shall be an
adjudication or determination that he or it is not entitled to
indemnification as provided in this Agreement. An Indemnified
Person may not satisfy any right of indemnity or reimbursement
granted in this Section 6.8(b) or to which it, as an Indemnified
Person, may be otherwise entitled except out of the assets of the
Partnership, and no Partner or its Affiliates, including, without
limitation, the other General Partner, shall be personally liable
with respect to any such claim for indemnity or reimbursement.
(c) Notwithstanding the foregoing, the limitations on
liability set forth at Section 6.8(a) and the rights to
indemnification at Section 6.8(b) shall not be applicable to any
member of the KP Group, any officer, director, shareholder,
partner, trustee, beneficiary, employee, agent, heir, assigns,
successors-in-interest thereof or any Key Executive with respect
to any losses, damages, liabilities or expenses attributable or
arising out of the services to be provided by any member of the
KP Group pursuant to the Service and License Agreements and as
otherwise described in Schedules III-A through III-F.
VIII. BOOKS AND RECORDS; FINANCIAL
STATEMENTS; TAXES
A. Books and Records. Subject to Section 7.5, the
Partnership's books and records shall be kept in accordance with
the accrual method of accounting consistently applied and on the
basis of the Partnership's Fiscal Year. The Partnership's books
and records shall be kept at the principal place of business of
the Partnership and shall at all reasonable times be open to the
inspection of, and may be copied and excerpts taken therefrom by,
either Partner or its duly authorized representative(s). The
books and records of the Partnership shall reflect all of the
Partnership's transactions, shall be appropriate and adequate for
the Partnership's business and shall provide supporting detail
for all federal, state, and (if applicable) local tax returns.
B. Financial Statements. An annual financial statement
shall be prepared in accordance with generally accepted
accounting principles and certified by the Partnership's
Auditors, all at the expense of the Partnership within one
hundred twenty (120) days following the end of the Partnership's
Fiscal Year. Copies of the certified annual financial statements
of the Partnership shall promptly be made available to each
Partner.
C. Tax Information and Filings. Within seventy-five (75)
days following the end of each Fiscal Year, the Administrative
Partner shall cause to be prepared and filed with appropriate
governmental authorities, at the expense of the Partnership,
federal and state partnership information tax returns and shall
cause Schedules K-1 to be delivered to the Partners. The
Administrative General Partner shall file or cause to be filed
with the State of Hawaii all Partnership annual statements and
required Hawaii general excise tax returns and other returns.
D. Quarterly Reports. Within forty-five (45) days
following the end of each Fiscal quarter (or on such other dates
as the Partners may agree, possibly including the due dates for
payments of federal estimated income tax), the Partnership shall
cause to be prepared and delivered to each Partner, at the
expense of the Partnership, a statement (which may be unaudited)
reflecting the Partnership's results of operations for that
portion of the current Fiscal Year up to the date as of which
such statements are prepared.
E. Method of Accounting for Installment Sales. Except as
otherwise provided in the following sentence of this Section 7.5,
the Partnership shall, to the extent permitted by the Code and
other applicable law, employ the installment method of accounting
for reporting sales of Intervals for federal and state income tax
purposes. The Committee shall have the authority to cause the
Partnership to elect to report the sales of Intervals pursuant to
any legally permissible method of accounting other than the
installment method; provided, however, that if the use of such
alternative accounting method would cause the Partnership to
report taxable gain on a basis that is more accelerated than
would result under the installment method, the Partnership shall
not use such alternative accounting method unless the Partnership
has sufficient Distributable Cash to enable it to pay sufficient
Tax Distributions to the Partners to cover the incremental tax
burden resulting in the year of sale from the use of such
alternative accounting method.
F. Tax Matters Partner. AVM shall be the "tax matters
partner" of the Partnership for purposes of section 6231(a)(7) of
the Code and shall have the powers and exercise the
responsibilities imposed on the tax matters partner under the
Code. AVM is hereby authorized to represent the Partnership, at
the Partnership's expense, in connection with any examinations of
the Partnership's affairs by tax authorities, including any
resulting judicial and administrative proceedings, and to expend
Partnership funds for professional services and costs associated
therewith.
G. Tax Elections. Subject to Sections 2.8 and 7.5, AVM
shall determine whether the Partnership shall make available tax
elections; provided, however, that, upon the request of KP-GP,
the Partnership shall make tax elections reasonably requested by
KP-GP if, in the good-faith judgment of AVM, the election would
not have an adverse effect on AVM, AVLP or the direct or indirect
owners of either of them. If directed by the Committee, the
Administrative General Partner is authorized to sign, on behalf
of the Partnership, an election relating to the classification of
the Partnership as a partnership for federal income tax purposes
pursuant to Regulations Section 301.7701-3(c).
H. Responsibility for Taxes. Except as otherwise expressly
provided in a Service Agreement, each of the Partners, each Key
Executive and each of their respective Affiliates shall be solely
responsible for taxes of any nature whatsoever imposed on him,
her, or it. Without limiting the rights of any Partner to
receive amounts pursuant to Section 4.1, the Partnership shall
not be required to make any payments or reimburse any amount to
any Partner, Affiliate of a Partner or Key Executive on account
of taxes imposed on such person, and the Partnership shall have
the authority to withhold any taxes in accordance with law.
IX. EXECUTIVE MANAGEMENT SERVICES;
OTHER SERVICES
A. Executive Management Services. KP-GP shall cause the
Key Executives to provide to the Partnership the executive
management services described in Schedule I (the "Executive
Management Services"). Subject to Section 8.2, KP-GP shall not
charge the Partnership for such services. The Partnership shall
reimburse KP-GP for the reasonable, out-of-pocket travel costs of
the Key Executives and other persons under the direct supervisory
control of the Key Executives providing services pursuant to this
Section 8.1. The Key Executives, or any other persons performing
the Executive Management Services, shall be subject to the
supervision and direction of the Administrative General Partner
and the Committee, and shall provide such information and reports
to the Administrative General Partner and the Committee as they
may require. KP-GP and each of the Key Executives recognize that
each of the Key Executives will provide to the Partnership areas
of expertise that are not within the scope of the expertise
currently provided by any other Key Executive. If any Key
Executive ceases to provide services to the Partnership for any
reason, and the remaining Key Executives are unable to provide
the services previously provided by such Key Executive. KP-GP
promptly shall arrange to replace such Key Executive by another
person who shall perform the services previously performed by
such Key Executive. Any such replacement shall be subject to the
prior written approval of AVM, which shall not be unreasonably
withheld.
B. Cost of Relocated Executive. If one of the Key Executives
relocates (at the request of the Committee) to the Island of Maui
in the State of Hawaii to supervise the Resort start-up during
the Pre-Entitlement Period or the Pre-Sales Period, the
Partnership shall reimburse KP Group for a portion of its costs
with respect to such employee in accordance with an arrangement
which shall be subject to prior approval by the Committee, such
approval not to be unreasonably withheld. The costs to be
reimbursed shall consist of a fixed amount to be agreed to by the
Committee to reimburse the KP Group for a portion of such
employee's compensation and housing and the reasonable and
documented travel costs of such Key Executive.
C. Business Plan. As part of the Executive Management
Services and after consultation with the members of the
Committee, the Key Executives (or other personnel under the
direct supervisory control of the Key Executives) shall prepare
and submit to the Committee on an annual basis no later than
October 15 of each year a (i) business plan (the "Business Plan")
which shall set forth the general business direction, policies
and programs for the Partnership for the upcoming Fiscal Year,
and (ii) an operating budget ("Operating Budget"), regarding the
operations of the business of the Partnership during that Fiscal
Year. In addition, the Key Executives shall prepare quarterly
reports comparing actual financial results to the Operating
Budget. Each Business Plan and Operating Budget shall be subject
to review and approval by the Committee. There shall be no
material modifications of or departures from approved Business
Plans and Operating Budgets without the consent of the Committee.
D. Partnership's Right to Terminate Executive Management
Services. The Committee shall have the right to terminate the
Executive Management Services at any time for any reason or for
no reason. Any such termination shall not affect the
continuation or termination of the Service Agreements which shall
contain their own provisions relating to termination. In the
event of a termination of the Executive Management Services, the
provisions of Section 3.9 regarding adjustments to the Percentage
Interests of the Partners shall apply.
E. Service and License Agreements. KP-GP shall provide or
cause to be provided certain other services and rights to the
Partnership on an ongoing basis pursuant to Service and License
Agreements to be entered into, the terms of which are generally
described in Schedules III-A through III-F; provided, however,
that, notwithstanding the information in such schedules, the
final terms and conditions of each such agreement shall be
subject to the approval of the Committee. The Service and
License Agreements shall be negotiated in good faith by the KP
Group and the Committee, shall comply with and be subject to all
applicable laws and regulations applicable to time share resorts
and condominium associations and their members and owners, and
shall be finalized no later than ninety (90) days after the date
of this Agreement.
F. KP-GP Right to Terminate Executive Management Services.
1. KP-GP may terminate its obligations to provide the
Executive Management Services for any reason or for no reason.
2. If, after the close of the Pre-Entitlement Period, KP-GP
terminates any of its obligations to provide the Executive
Management Services, its Interest shall be converted to an
Interest as a limited partner, the KP-LP Percentage Interest
shall be adjusted (as provided in Section 3.9), and KP-LP shall
not thereafter be required to make any further Additional Capital
Contributions pursuant to Section 3.3(e).
G. Agreement with Amfac. No later than 60 days after the
date of the Land Closing, AVLP shall cause Amfac to enter into an
agreement with the Partnership pursuant to which the Partnership
will make the beach club facilities of the Resort accessible to
owners of properties in Amfac's various developments for a fee
equal to any incremental cost incurred by the Partnership for
such usage plus an additional amount which shall be subject to
the prior approval of the Committee, and Amfac will provide
certain privileges (which shall not, however, include discounts
on greens fees), at the Kaanapali golf courses to the owners of
Intervals; provided, however, that pursuant to an arrangement to
be negotiated in good faith by the Partnership, the Homeowners
Association and Amfac, Amfac will grant discounts on greens fees
to members of the Homeowners Association in exchange for an
annual payment to be made to Amfac by the Homeowners Association
(the amount of which payment shall be consistent with the fair
market value of the discount). The agreement with Amfac will
also provide that at no cost to the Partnership (other than
Amfac's out-of-pocket expenses), Amfac will guarantee payment of
the purchase money note provided for in the Land Purchase
Agreement and that APIC will provide Kaanapali North Beach Lot #2
as collateral for such purchase money note.
X. TRANSFERS OF INTERESTS
A. Transfers by General Partners. No General Partner shall
Transfer all or any part of its Interest to any Person or enter
into any agreement or commitment to Transfer an Interest, and any
attempt to do so shall be null and void ab initio and shall not
be given effect by the Partnership.
B. Transfers by Limited Partners. Except as expressly
permitted in this Section 9.2 (a "Permitted Transfer"), no
Limited Partner shall, voluntarily or involuntarily, whether by
operation of law other otherwise, Transfer or enter into any
agreement or commitment to Transfer all or any portion of its
Interest to any Person and any attempt to do so shall be null and
void ab initio and shall not be given effect by the Partnership.
A Permitted Transfer may be made only in accordance with and
subject to the restrictions and limitations set forth in
Sections 9.3, 9.4, and 9.5.
1. Any Limited Partner may Transfer all or any portion of its
Economic Interest to an Affiliate of such Limited Partner;
provided, however, that contemporaneously with such Transfer, the
Transferee Affiliate and the transferring Limited Partner shall
represent in writing to the Partnership and the other Partners
that they will remain Affiliates after such Transfer for so long
as either the transferring Limited Partner or the Transferee
Affiliate continues to hold any Interest; and provided further,
that the Transferee Affiliate shall not be admitted to the
Partnership as a Substitute Limited Partner except in accordance
with the procedures set forth in Section 9.5.
2. Subject to the right of first refusal granted to KP-LP
pursuant to Section 9.6, AVLP may at any time Transfer, in one or
more Transfers, to one or more Persons, a portion of its Economic
Interest not exceeding in the aggregate fifty percent (50%)
thereof; provided, however, that no Transferee of such portion
shall be admitted to the Partnership as a Substitute Limited
Partner except in accordance with the procedures set forth in
Section 9.5.
3. Subject to the right of first refusal granted to AVLP
pursuant to Section 9.6, KP-LP may at any time Transfer, in one
or more Transfers, to one or more Persons, a portion of its
Economic Interest not exceeding in the aggregate fifty percent
(50%) thereof; provided, however, that no Transferee of such
portion shall be admitted to the Partnership as a Substitute
Limited Partner except in accordance with the procedures set
forth in Section 9.5.
C. Conditions to Transfers. Each of the Partners
acknowledges and represents as to itself and its partners, and
each Key Executive acknowledges and represents with respect to
each partner and Affiliate of KP and each Affiliate of such
partner, that (i) the Interests have not been, and will not be,
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or applicable state securities laws and may
only be offered in transactions exempt from the registration
requirements under the Securities Act or applicable state
securities laws, (ii) it is acquiring its Interest or an interest
in KP or Affiliates of KP, as the case may be, for investment
purposes only and not with a view to the sale or other
distribution thereof in whole or in part and it will not
Transfer, directly or indirectly, the Interests or Economic
Interests except in compliance with the Securities Act and the
rules and regulations promulgated thereunder and any applicable
state securities laws, (iii) it understands that no federal or
state agency has passed upon an investment in the Partnership or
made any finding or determination as to the advisability or
fairness of an investment in the Partnership, and (iv) its
investment in and receipt of its Interest was not accompanied by
the publication of any advertisement and was not effected by or
through a broker-dealer in a public offering. No Transfer,
direct or indirect, of any Interest or Economic Interest
(including Transfers contemplated under Section 9.7) shall be
made without prior written notice to the Committee. As a
condition to the effectiveness of any such Transfer, the
Committee may require the delivery of an opinion of counsel that
such Transfer would not violate any federal or applicable state
securities laws or regulations. Notwithstanding the foregoing,
nothing herein shall constitute an acknowledgement by either
Partner that its Interest is, or cause such Partner's Interest to
become, a security.
D. Restrictions on Transfers.
1. No Transfer of any Interest or Economic Interest shall be
permitted if, as a result of such Transfer, in the opinion of
legal counsel for the Partnership, the Partnership would
terminate for federal income tax purposes under Section
708(b)(1)(B) of the Code, unless the Committee determines that
such tax termination would not have a material adverse effect on
the Partnership or any Partner.
2. No Transfer of any Interest or Economic Interest shall
be permitted if, in the opinion of legal counsel for the
Partnership, such Transfer would jeopardize the Partnership's
classification as a partnership for federal income tax purposes.
3. Any purported Transfer made in contravention of Sections
9.3, 9.4(a) or 9.4(b) shall be null and void ab initio and shall
not be given effect by the Partnership.
E. Admission of Substitute Limited Partners; Rights of
Transferees of Economic Interests.
1. No Transferee of an Economic Interest shall be admitted
to the Partnership as a Substitute Limited Partner unless (1) all
of the Partners provide their prior written consent, which
consent may be given or withheld in the absolute discretion of
each such Partner, and (2) each of the following conditions is
satisfied:
(1) a duly executed and acknowledged written instrument of
Transfer shall have been filed with the Partnership, which
instrument shall specify the Economic Interest being assigned and
set forth the intention of the transferring Limited Partner that
the Transferee succeed to a specified portion of such
transferring Limited Partner's Interest as a Limited Partner;
(2) the transferring Limited Partner and the Transferee
shall have executed, acknowledged and delivered such other instru
ments as the Committee may deem necessary or desirable to effect
such substitution, which may include an opinion of counsel
regarding the effect and legality of any such proposed Transfer,
and which shall include the written acceptance and adoption by
the Transferee of the provisions of this Agreement; and
(3) a Transfer fee sufficient to cover all reasonable expenses
of the Partnership connected with such substitution shall have
been paid to the Partnership.
2. Effective upon the date of substitution, a transferring
Limited Partner shall cease to have the power to exercise any
rights with respect to any Transferred portion of a Limited
Partnership Interest with respect to which the Transferee becomes
a Substitute Limited Partner.
3. The rights of a Permitted Transferee who is not admitted
as a Limited Partner shall be limited to the right to receive
allocations of Profits, Losses, income, gain, deduction, loss, or
credit and distributions of Distributable Cash from the
Partnership with respect to the Economic Interest Transferred and
to succeed to an appropriate portion of the Capital Account
relating to the Economic Interest Transferred. The Transferee of
an Economic Interest who has not been admitted as a Limited
Partner shall not have the right to vote as a Partner, to inspect
the Partnership's books and records or otherwise to exercise the
rights of a Limited Partner hereunder or under the Act unless and
until it is admitted as a Substitute Limited Partner in
accordance with this Agreement and the Act.
4. Upon the occurrence of a Permitted Transfer during any
Fiscal Year, Profits, Losses, each item thereof, and all other
items attributable to such Economic Interest for such Fiscal Year
shall be divided and allocated between the Transferor and the
Transferee by taking into account their varying interests during
the Fiscal Year in accordance with Code Section 706(d), using any
conventions permitted by law and selected by the Committee. All
distributions made on or before the date of a Permitted Transfer
shall be made to the transferor, and all distributions thereafter
shall be made to the Transferee. Solely for purposes of making
such allocations and distributions, the Partnership shall
recognize a Permitted Transfer upon receipt by the Administrative
General Partner of written notice stating the date such Economic
Interest was transferred and such other information as the
Committee may reasonably require. Neither the Partnership nor
any Partner shall incur any liability for making allocations and
distributions in accordance with the provisions of this Section
9.5(c), whether or not the Partnership or the Administrative
General Partner has knowledge of any Transfer.
F. Right of First Refusal. This Section 9.6 shall apply
whenever AVLP or KP-LP (the "Transferring Limited Partner")
desires to Transfer, pursuant to Section 9.2(b) or 9.2(c), a
portion of its Economic Interest to any Person that has made a
bona fide offer to purchase such Interest.
1. The Transferring Limited Partner shall first give
written Notice to all of the Partners setting forth the proposed
Transferee's name, the terms on which the Economic Interest is to
be transferred, and the purchase price and terms of sale for the
Interest.
2. For thirty (30) days after such Notice is received, the
other Partners shall have the right to purchase, in proportion to
their relative Percentage Interests, all of the Economic Interest
offered to be Transferred, on the terms stated in such Notice.
3. To the extent that the other Partners do not exercise
their rights pursuant to Section 9.6(b), the Transferring Limited
Partner may, within 60 days from the date such Notice was
received, and on the terms and conditions stated in such Notice,
Transfer the portion of the Economic Interest identified in such
Notice, but only to the proposed Transferee and upon the terms
stated in such Notice.
4. Nothing contained in this Section 9.6 or any other
provision of this Agreement shall limit, and the right of first
refusal granted to KP-GP and KP-LP shall not be applicable to,
the right of the Committee to sell or otherwise dispose of the
Resort or any other asset of the Partnership at any time or the
right of AVM to elect at any time to dissolve the Partnership
pursuant to Section 10.2(c).
G. Limitations on Transfers of Interests in Partners.
1. For so long as KP is a General Partner, (i) each of the
partners of KP as of the date hereof shall retain its partnership
interest in KP, (ii) KP shall not Transfer any portion of its
Interest as a General Partner in the Partnership, and (iii) KP
shall not Transfer more than fifty percent (50%) of its Interest
as a Limited Partner in the Partnership, and KP agrees that any
transfer in violation of this Section shall be void ab initio.
2. For so long as AVM is a General Partner, Amfac shall
continue to hold (directly or indirectly) one hundred percent
(100%) of the outstanding stock of AVM. Any transfer in
violation of this Section shall be void ab initio.
3. No Partner shall permit any Affiliate of it to Transfer or
permit to be Transferred any interest in any direct or indirect
owner of such Partner if, as a result of such Transfer, in the
opinion of legal counsel for the Partnership, the Partnership
would terminate for federal income tax purposes under Section
708(b)(1)(B) of the Code, unless the Committee determines that
such tax termination would not have a material adverse effect on
the Partnership or any Partner.
XI. WITHDRAWAL; DISSOLUTION;
EVENTS OF LIQUIDATION
A. Covenant Not to Withdraw.
1. Without the prior written consent of AVM (which consent
may be given or withheld in the sole and absolute discretion of
AVM), KP covenants that it shall not: (a) withdraw or attempt to
withdraw from the Partnership either as a General Partner or as a
Limited Partner prior to the termination of the Partnership at
the conclusion of the twenty-five (25) year term specified in
Section 2.4 or upon an earlier liquidation of the Partnership in
accordance Section 10.2 (other than Section 10.2(d); (b) take any
action to file a Certificate of Dissolution or its equivalent
with respect to itself, (c) take or consent to any action that
would cause a Bankruptcy or dissolution of KP, or of any of its
partners, (d) exercise any power under the Act to dissolve the
Partnership, (e) petition for judicial dissolution of the
Partnership or subject the Partnership or the Property to the
authority or jurisdiction of any court of bankruptcy, insolvency,
receivership or other similar proceeding, (f) demand a return of
its Initial Capital Contributions, Additional Capital
Contributions, Special Capital Contributions or Profits (or a
bond or other security for the return of such Contributions or
Profits), or (g) take any other action that would constitute an
event of withdrawal of a general partner pursuant to Section 17-
402 of the Act.
2. If KP attempts to withdraw from the Partnership as a
General Partner in breach of its covenant pursuant to Section
10.1(a),
a. KP-GP's Interest as a General Partner shall be converted
to an Interest as a Limited Partner (which Interest shall have a
Percentage Interest of zero); and
b. KP shall promptly and fully indemnify AVM, AVLP and the
Partnership on an after-tax basis for any costs or losses
(including loss of profits) inflicted on such Persons as a result
of its breach of such covenant, and the Partnership shall be
entitled to offset against any payments that may be due to KP in
respect of such converted Interest any such costs or losses.
3. Any attempt by KP to withdraw from the Partnership as a
Limited Partner in violation of Section 10.1(a) shall be of no
force or effect.
B. Events of Liquidation. The Partnership shall be dissolved
upon the occurrence of any of the following events ("Event of
Liquidation").
1. The expiration of the 25 year term of the Partnership as
provided in Section 2.4;
2. The sale of the Project and/or of all or substantially
all of the Partnership's Properties (other than the sale of
Intervals in the ordinary course of the Partnership's business);
3. The written election of AVM (which may be made by AVM
at any time, in its sole discretion, for any reason or for no
reason and which may be made without regard to the effect such
election may have on the rights of KP-GP, KP-LP, or KP's partners
or Affiliates, which shall be limited to those set forth in
Article 11);
4. The withdrawal of KP from the Partnership as a General
Partner pursuant to any event specified in Section 17-402 of the
Act, unless the business of the Partnership is continued pursuant
to Section 10.3;
5. The exercise by KP-GP at any time during the Pre-
Entitlement Period of its right pursuant to Section 8.6 to
terminate its obligation to cause the Key Executives to provide
the Executive Management Services;
6. The entry of a decree of judicial dissolution;
7. The happening of any event that makes it
unlawful or impossible to carry on the business of the
Partnership; or
8. otherwise as required by law.
C. Agreement to Continue Business. Notwithstanding anything
to the contrary in this Agreement, neither the withdrawal or
attempted withdrawal of KP from the Partnership as a General
Partner nor the occurrence with respect to KP of any event
constituting an event of withdrawal pursuant to Section 17-402 of
the Act shall cause the Partnership to be dissolved, wound up, or
liquidated if at the time of such event there is at least one
other General Partner and such other General Partner agrees to
carry on the business of the Partnership, or if there is no other
General Partner, then within 90 days after such withdrawal or
event of withdrawal of KP, not less than a majority in interest
of the remaining Partners agree in writing to continue the
business of the Partnership and to appoint, effective as of the
date of withdrawal or event of withdrawal with respect to KP, one
or more additional General Partners. This Section 10.3 is
intended to provide to the Partnership the right to continue its
business in accordance with Section 17-801 of the Act and shall
be interpreted and applied consistently with such provision.
XII. WINDING UP AND LIQUIDATION
A. Pre-Entitlement Period Liquidation. If the Partnership is
dissolved for any reason prior to the close of the Pre-
Entitlement Period, the following provisions shall apply:
1. The Partnership's debts and liabilities to creditors
(including, to the extent permitted by law, any Partners that
have made Partner Loans) shall be paid or provided for (which may
include, without limitation, the assumption of all or a portion
of such debts and liabilities by AVM or AVLP if AVM or AVLP so
elects), and any reserves reasonably required to provide for the
fixed or contingent liabilities of the Partnership shall be
created; provided, however, that if the amount available for
repayment of Partner Loans shall be insufficient to repay all
such Loans, then repayment shall be made pro rata in accordance
with the remaining outstanding balance of each of the Partner
Loans;
2. The Partnership's Properties shall not be sold but shall
instead be distributed to the Partners as follows:
a. The Project (including all tangible and intangible real
and personal property relating thereto) shall be distributed to
AVM and/or AVLP as such Partners may direct;
b. The Land Purchase Agreement and all rights and
obligations thereunder (including the Assumption Agreements),
whether executed or executory, shall be reassigned to AVLP;
c. The Partnership's cash shall be applied to return the
Unrecovered Cash Contributions of the Partners in proportion to
the amount of each Partner's Unrecovered Cash Contributions;
provided, however, that the Partnership shall not be required to
sell or otherwise dispose of any of the assets described in
clauses (1) or (2) of this Section 11.1(b) in order to repay the
Partners' Unrecovered Cash Contributions;
d. Any remaining cash shall be distributed to the Partners
in accordance with their respective Percentage Interests; and
e. Any remaining Properties shall be distributed to the
Partner that contributed such Property to the Partnership;
provided, however, that AVM and AVLP and their Affiliates and
designees, including the Homeowners Association, shall be
entitled to continue to use the software licensed to the
Partnership or the Homeowners Association by KP or its Affiliate
on a nonexclusive basis for a period of 120 days following such
dissolution.
B. Winding Up And Liquidation After Pre-Entitlement Period.
1. If the Partnership is dissolved pursuant to an Event of
Liquidation other than an event of liquidation described in
Section 10.2(e), the Partnership shall engage in no further
business other than collecting its receivables, discharging its
liabilities, liquidating its assets (other than the Project and
any other assets that are to be distributed in kind to the
Partners) and operating the Resort on an interim basis until the
Project can be distributed to AVM and AVLP (if AVM provides the
Notice referred to in Section 11.2(d)) or sold to a third party,
subject to the following provisions of this Section 11.2. This
Agreement shall remain in full force and effect during the period
of winding up.
2. The Partners shall jointly wind up the Partnership's
affairs; provided, however, that if KP-GP has caused an Event of
Liquidation pursuant to Section 10.2, AVM shall be the
liquidating Partner and shall have full right and unlimited
discretion to determine in good faith the time, manner and terms
of any sale or sales of the Property pursuant to such liquidation
having due regard to the activity and condition of the relevant
market and general financial and economic conditions.
3. The Partners shall take full account of the Partnership's
assets and liabilities. Unless AVM provides Notice pursuant to
Section 11.2(d), the receivables of the Partnership shall be
collected, and its assets (other than the Purchaser Notes, if the
Partners agree to cause the Partnership to distribute such
Purchaser Note in kind to the Partners or to any Partner) shall
be liquidated as promptly as is consistent with obtaining the
fair market value thereof.
4. If AVM provides Notice to KP-GP that AVM and AVLP elect to
receive the Project as a liquidating distribution, the
Partnership shall not sell the Project but the Partnership shall
determine the fair market value of the Project, together with any
other Properties that AVM determines is necessary for the
operation of the Resort (the value of the Project and such
Properties collectively, the "Final Project Value").
(1) For purposes of this Section 11.2(d), the General Partners
shall attempt to determine the Final Project Value by mutual
agreement.
(2) If the General Partners are unable to agree on the Final
Project Value, the Final Project Value shall be determined by
appraisal by an appraiser agreed upon by the General Partners,
or, if the General Partners are not able to agree on the
selection of an appraiser (an "Appraisal Dispute"), then the
Final Project Value shall be determined by three (3) appraisers
in accordance with the following procedures and subject to the
following terms and conditions:
(A) Any General Partner believing that an
Appraisal Dispute has arisen shall notify the other General
Partner in writing of such belief, shall indicate the basis upon
which such General Partner believes that an Appraisal Dispute has
arisen, and shall expressly request a formal appraisal (a "Formal
Appraisal") pursuant to this Section 11.2(d);
(B) Within twenty (20) days after notice
from any General Partner to the General Partner requesting a
Formal Appraisal, each General Partner shall appoint one
appraiser and notify the other in writing of its selection. If
any General Partner fails to so appoint an appraiser, the Final
Project Value shall be determined without an appraiser appointed
by such General Partner. The appraiser(s) so chosen by the
General Partners shall, within twenty (20) Business Days after
their appointment, appoint one additional appraiser and, if the
appraisers appointed by the General Partners fail to so choose an
additional appraiser, an additional appraiser shall, upon the
application of any General Partner, be promptly appointed by a
judge of the First Circuit Court of the State of Hawaii in
accordance with Chapter 658 of the Hawaii Revised Statutes, as
amended. Each appraiser selected hereunder shall be certified as
an M.A.I. and shall have at least 10 years experience in
appraising real estate similar in character to the Resort and
located in the State of Hawaii.
(C) The Final Project Value shall be
determined by the agreement of all of the appraisers appointed
pursuant to Section 11.2(d)(ii)(b), or, if the appraisers are
unable to reach an agreement, the Final Project Value shall be
determined by taking the average of the appraisals as separately
determined by each of the appraisers; provided, however, that in
the event the lowest or highest of such three appraisals, or
both, varies by more than ten percent (10%) from the middle
appraisal, the appraisal or appraisals so varying shall be
disregarded and the remaining appraisals shall be averaged, and
such average shall constitute the Final Project Value (or if only
one appraisal shall not be disregarded, it shall constitute the
Final Project Value).
(D) Each General Partner shall bear the
costs and fees of the appraiser appointed by it. The Partnership
shall bear the costs and fees of the appraiser appointed by the
other appraisers.
5. The Partners' Capital Accounts shall be adjusted to
reflect all prior distributions to the Partners and all Profits,
Losses and income, gain, loss or deduction attributable to sales
or other dispositions of the Partnership's Properties and the
manner in which any unrealized income, gain, loss or deduction
inherent in the Project and such other Properties as the Partners
shall agree to receive in kind upon liquidation of the
Partnership would be allocated to the Partners pursuant to
Section 11.2(f) or Section 11.2(g) if these Properties were sold
or otherwise disposed of in a taxable transaction for their fair
market value.
6. Subject to, and after making, the allocations set forth in
Sections 2 and 3 of Exhibit A, Profits and any other items of
income or gain resulting from sales or other dispositions of the
Partnership's properties pursuant to a liquidation and winding up
of the Partnership shall be allocated as follows:
a. Profits shall first be allocated to the Partners in
proportion to the negative balances (if any) in their respective
Capital Accounts until such Capital Accounts are increased to
zero.
b. Profits shall next be allocated to AVLP (if necessary)
until the balance in its Capital Account is at least equal to the
Unrecovered Land Preference, determined immediately prior to
making such allocation.
c. Profits shall next be allocated to the Partners in
proportion to the excess, for each Partner of (i)(A) in the case
of AVLP, the sum of its Unrecovered Land Preference and its
Unrecovered Cash Contributions, and, (B) in the case of each of
the other Partners, the amount of their respective Unrecovered
Cash Contributions, over (ii) such Partner's Capital Account
balance.
d. Profits shall next be allocated as required so that the
excess amounts, for each Partner, of (i) the positive balance of
such Partner's Capital Account, over (ii)(A), in the case of
AVLP, the sum of its Unrecovered Land Preference and its
Unrecovered Cash Contribution, and (B) in the case of each of the
other Partners, the amount of their respective Unrecovered Cash
Contributions, stand in the ratios of their respective Percentage
Interests (as in effect at the time such allocation is being
made).
e. Any remaining Profits shall be allocated to the
Partners in proportion to their respective Percentage Interests
(as in effect at the time such allocation is being made).
7. Subject to, and after making, the allocations set forth in
Sections 2 and 3 of Exhibit A, Losses and other items of loss or
deduction of the Partnership resulting from sales or other
dispositions of the Partnership's Properties pursuant to a
liquidation and winding up of the Partnership shall be allocated
as follows:
a. Losses shall first be allocated to the Partners in
proportion to, and to the extent of, the excess amount, for each
Partner, of (i) the positive balance of such Partner's Capital
Account, over (ii)(a) in the case of AVLP, the sum of its
Unrecovered Land Preference and its Unrecovered Cash
Contribution, and (B) in the case of each of the other Partners,
their respective Unrecovered Cash Contributions.
b. Losses shall next be allocated to the Partners in
proportion to, and to the extent of, (i) in the case of AVLP, the
excess of its Capital Account over the amount of its Unrecovered
Land Preference, and (ii) in the case of each of the other
Partners, their respective positive Capital Account balances.
c. Losses shall next be allocated to AVLP until its Capital
Account is reduced to zero.
d. Any remaining Losses shall be allocated to the General
Partners in proportion to their respective Percentage Interests
(as in effect at the time such allocation is being made).
8. During the period of winding up, the
Partnership's Auditors shall prepare and furnish to each of the
Partners, until complete liquidation is accomplished, all the
financial statements required pursuant to Section 7.4.
9. Following the payment of the expenses of liquidation,
and subject to the right and obligation of the Partners to set up
such cash reserves as and for so long as they may deem it
reasonably necessary in good faith for the satisfaction of any
contingent or unforeseen liabilities or obligations of the
Partnership, the proceeds of the liquidation and any other funds
of the Partnership shall be distributed in the following order of
priority:
a. The Partnership's debts and liabilities to creditors
(including, to the extent permitted by law, Partners that have
made Partner Loans) shall be paid or provided for; provided,
however, that if the amount available for repayment of Partner
Loans shall be insufficient to repay all such Loans, then
repayment shall be made pro rata in accordance with the remaining
outstanding balance of each of the Partner Loans;
b. Next, if AVM and AVLP elect to receive the Project, the
Project (together with any other Properties included in the Final
Project Value) shall be distributed to AVM and AVLP in undivided
interests reflecting the relative ratios of their Capital
Accounts; provided, however, that if the Final Project Value (net
of any debts of the Partnership assumed by AVLP or AVM to which
the Project is subject) exceeds the aggregate balance of AVM's
and AVLP's Capital Accounts (as adjusted pursuant to Section
11.2(e)), AVM and AVLP shall contribute to the Partnership the
excess of such Final Project Value over such aggregate balance,
and the amount so contributed shall be deemed assets of the
Partnership available for distribution in liquidation of the
Partnership; and
c. Next, the Partnership's remaining Properties and other
assets (including cash and any Purchaser Notes not previously
distributed) shall be distributed to the Partners in proportion
to their remaining respective positive Capital Account balances
(after adjusting such balances to reflect all prior distributions
under this Section 11.2). Any Purchaser Notes shall be
distributed to the Partners in appropriate undivided interests
unless the Partners shall unanimously agree to another
distribution.
10. No Limited Partner shall have any liability to the
Partnership or to any other Partner on account of any deficit
balance in such Limited Partner's Capital Account.
11. At the end of the taxable year of the Partnership in
which a liquidation of a General Partner's interest in the
Partnership occurs or within ninety (90) days after the date of
such liquidation, whichever is later, such General Partner shall
pay to the Partnership in immediately available funds an amount
equal to any deficit balance remaining in such General Partner's
Capital Account after application of the foregoing provisions of
this Section 11.2. Such funds shall be paid to the Partnership's
creditors or distributed to the Partners in accordance with the
provisions of this Section 11.2. For the purposes of this
Section 11.2(k), the term "liquidation" shall have the meaning
ascribed to such term in Section 1.704-1(b)(2)(ii)(g) of the
Regulations.
XIII. NOTICES
A. In Writing; Address. All notices, demands, consents and
reports provided for in this Agreement shall be in writing and
shall be given to the Partnership or the Partners or the other
Partner at the address set forth below or at such other address
as the Partnership or either of the Partners may hereafter
specify in writing.
AVM:
700 Bishop St., 21st Floor
Honolulu, HI 96813
Attention: Kirk Anderson, Esq.
with a copy to:
Northbrook Corporation
900 N. Michigan Ave.
Chicago, IL 60611
Attention: Gary Grottke
AVLP:
700 Bishop St., 21st Floor
Honolulu, HI 96813
Attention: Kirk Anderson, Esq.
with a copy to:
Northbrook Corporation
900 N. Michigan Ave.
Chicago, IL 60611
Attention: Gary Grottke
KP:
1702 County Road
Suite D
Minden, Nevada 89423
Attention: Lex Adams
with a copy to:
P.O. Box 5790
Stateline, Nevada 89449
Attention: Lex Adams
A copy of any notice, demand, consent or report to the
Partnership shall be given to each Partner at the addresses
provided for above.
B. Method. Such notice or other communication may be mailed
by registered or certified mail, return receipt requested,
postage prepaid, deposited in a United States post office or a
depository for the receipt of mail regularly maintained by the
post office. If so mailed, such notice or other communication
shall be deemed to have been received by the addressee on the
third day following the date of such mailing. Such notices,
demands, consents and reports may also be delivered by hand, or
by any other method or means permitted by law.
C. Copies. A copy of any notice, service of process, or
other document in the nature thereof, received by either Partner
from anyone other than the other Partner shall be delivered by
the receiving Partner to the other Partner as soon as
practicable.
XIV. MISCELLANEOUS
A. Amendments. This Agreement may be amended only by the
written consent of all of the Partners.
B. Additional Documents and Acts. In connection with this
Agreement, as well as all transactions contemplated by this
Agreement, each Partner agrees to execute and deliver such
additional documents and instruments, and to perform such
additional acts as may be necessary or appropriate to effectuate,
carry out and perform all of the terms, provisions and conditions
of this Agreement, and all such transactions. All approvals of
either party hereunder shall be in writing.
C. Captions. Section titles contained in this Agreement are
only for convenience of reference and shall in no way define,
limit, extend or describe the scope of this Agreement or the
intent of any provision.
D. No Construction Against Draftsman. This Agreement shall
be construed without regard to any presumption or other rule
requiring construction against the Partner causing this Agreement
or any portion thereof to be drafted.
E. Choice of Law. Notwithstanding the place of execution or
performance, this Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware.
F. Pronouns. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine or neuter, singular
or plural, as the identity of the person or persons may require.
G. Entire Agreement. This instrument and all agreements and
other documents referred to or contemplated herein contain all of
the understandings and agreements of whatsoever kind and nature
existing between the parties hereto with respect to this
Agreement and the rights, interests, understandings, agreements
and obligations of the respective parties pertaining to the
Partnership.
H. References to this Agreement. Numbered or lettered
articles, sections and subsections herein contained refer to
articles, sections and subsections of this Agreement unless
otherwise expressly stated.
I. Binding Effect. Subject to Article 9, this Agreement
shall be binding upon and inure to the benefit of the Partners
and their respective successors and assigns.
J. Counterparts. This Agreement may be executed in any
number of counterparts, and each counterpart shall be deemed an
original and all of such counterparts shall constitute one and
the same Agreement.
K.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, as of the day and year first above written.
AMFAC VACATIONS MANAGERS, INC.
By:__________________________________
Name:
Its:
AMFAC VACATIONS, L.P.
By: AMFAC
VACATIONS MANAGERS, INC., its
general partner
By:________________________________
Name:
Its:
KAANAPALI PARTNERS
LIMITED PARTNERSHIP
By: RESORTS
WEST III, INC., its Managing
General Partner
By:________________________________
Name:
Its:
The undersigned Key
Executives agree, acknowledge and
represent as to those matters set forth
at Section 2.10, Article 8 and Article
9:
_____________________________________
Lexie W. Adams
_____________________________________
Robert W. Dunbar
_____________________________________
Charles R. Sewell
_____________________________________
Ronald J. Wilhite
EXHIBIT A
XV. Definitions. The following definitions shall apply for
purposes of this Agreement.
A. "Nonrecourse Deductions" shall have the meaning set
forth in Section 1.704-2(b)(1) of the Regulations.
B. "Partnership Minimum Gain" shall have the meaning of
"partnership minimum gain" set forth in Sections 1.704-2(b)(2)
and 1.704-2(d) of the Regulations.
C. "Partnership Section 482 Allocation" shall have the
meaning ascribed to such term in Section 3.2 of this Exhibit A.
D. "Partnership Correlative Item" shall have the meaning
ascribed to such term in Section 3.2 of this Exhibit A.
E. "Partner Correlative Item" shall have the meaning
ascribed to such term in Section 3.3 of this Exhibit A.
F. "Partner Minimum Gain" shall have the meaning of "partner
nonrecourse debt minimum gain" set forth in Section 1.704-2(i)(2)
of the Regulations.
G. "Partner Nonrecourse Debt" shall have the meaning of
"partner nonrecourse debt" set forth in Section 1.704-2(b)(4) of
the Regulations.
H. "Partner Nonrecourse Deductions" shall have the meaning
of "partner nonrecourse deductions" set forth in Sections
1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.
I. "Partner Section 482 Allocation" shall have the meaning
ascribed to such term in Section 3.3 of this Exhibit A.
XVI. Regulatory Allocations.
A. Minimum Gain Chargeback. Notwithstanding any other
provision of this Agreement, to the extent required by Section
1.704-2(f) of the Regulations, in the event that there is a net
decrease in Partnership Minimum Gain during any Fiscal Year, each
Partner shall be specially allocated items of Partnership income
and gain for such Fiscal Year (and if necessary, subsequent
Fiscal Years) in an amount equal to such Partner's share of the
net decrease in Partnership Minimum Gain, determined in
accordance with Section 1.704-2(g) of the Regulations. This
Section 2.1 is intended to comply with the minimum gain
chargeback requirement set forth in Section 1.704-2(f) of the
Regulations and shall be interpreted consistently therewith.
B. Partner Minimum Gain Chargeback. Notwithstanding any
other provision of this Agreement (other than Section 2.1 of this
Exhibit A), if during any Fiscal Year there is a net decrease in
Partner Minimum Gain, each Partner who has a share of such
Partner Minimum Gain (determined in accordance with Section 1.704-
2(i)(5)) of the Regulations shall be specially allocated items of
income and gain for such Fiscal Year (and, if necessary,
subsequent Fiscal Years) in an amount equal to such Partner's
share of the net decrease in the Partner Minimum Gain determined
in accordance with Section 1.704-2(i)(4) of the Regulations.
This Section 2.2 is intended to comply with the minimum gain
chargeback requirement of Section 1.704-2(i)(4) of the
Regulations and shall be interpreted consistently therewith.
C. Qualified Income Offset. Any Limited Partner which
unexpectedly receives an adjustment, allocation, or distribution
described in subparagraphs (4), (5) or (6) of Section
1.704-1(b)(2)(ii)(d) of the Regulations, which adjustment,
allocation or distribution creates or increases a deficit balance
in that Partner's Capital Account, shall be allocated items of
"book" income and gain in an amount and manner sufficient to
eliminate the deficit balance in that Partner's Capital Account
so created or increased as quickly as possible in accordance with
Section 1.704-1(b)(2)(ii)(d) of the Regulations.
D. Allocations of Nonrecourse Deductions. Nonrecourse
Deductions shall be allocated to the Partners in accordance with
their respective Percentage Interests.
E. Allocations of Partner Nonrecourse Deductions. Partner
Nonrecourse Deductions shall be allocated among the Partners in
accordance with the manner in which they bear the economic risk
of loss of the Partner Nonrecourse Debt creating such Partner
Nonrecourse Deductions.
XVII. Other Allocation Rules
A. Allocation With Respect to Imputed Interest. To the
extent the Partnership has taxable interest income pursuant to
Section 483 or Sections 1271 through 1288 of the Code with
respect to the obligation of any Partner to make Capital
Contributions, such interest income shall be specially allocated
to the Partner whose obligation gave rise to such interest income
but the amount of such interest income shall not be credited to
such Partner's Capital Account.
B. Partnership Section 482 Adjustment. If the Internal
Revenue Service reallocates an item of income, deduction or loss
to the Partnership pursuant to Section 482 of the Code or any
similar rule or principle of law (a "Partnership Section 482
Allocation"), and a Partner or an Affiliate of such Partner has a
corresponding correlative item of deduction, loss or income (as
determined under Section 1.482-1(g)) of the Regulations (the
"Partner Correlative Item"), the item of income, deduction or
loss constituting such Partnership Section 482 Allocation shall
be specially allocated to the Partner who received (or whose
Affiliate received) such Partner Correlative Item, and a
corresponding deemed contribution or distribution shall likewise
be allocated to such Partner.
C. Partner Section 482 Adjustment. If the Internal
Revenue Service reallocates an item of income, deduction or loss
to a Partner or an Affiliate of such Partner pursuant to Section
482 of the Code or any similar rule or principle of law (a
"Partner Section 482 Allocation"), and the Partnership has a
corresponding correlative item of deduction, loss or income (as
determined under Section 1.482-1(g)) of the Regulations (the
"Partnership Correlative Item"), such Partnership Correlative
Item shall be specially allocated to the Partner that received
(or whose Affiliate received) such Partner Section 482
Allocation, and a corresponding deemed contribution or
distribution shall likewise be allocated to such Partner.
D. Allocations for Tax Purposes.
1. In accordance with Code Section 704(c) of the Code and
the Regulations thereunder, income, gain, loss and deduction with
respect to any Property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among
the Partners so that a contributing Partner recognizes the
variation, if any, between the adjusted basis and the initial
Gross Asset Value of the Property contributed by that Partner.
Unless the Partners otherwise agree, allocations pursuant to this
Section 3.4(a) shall use the "traditional allocation method" as
set forth in Section 1.704-3(b) of the Regulations or any
successor provision thereto.
2. In the event the Gross Asset Value of any Partnership
Property is adjusted pursuant to Section 1.40, subsequent
allocations of income, gain, loss and deduction with respect to
that asset shall take into account any variation between the
Gross Asset Value of that asset before such adjustment and its
Gross Asset Value after such adjustment in the same manner as the
variation between adjusted basis and Gross Asset Value is taken
into account under Section 3.4(a) of this Exhibit A with respect
to contributed Property, and such variation shall be allocated in
accordance with the principles of Section 1.704-1(b)(2)(iv)(f) of
the Regulations.
E. Varying Interests. For purposes of determining the
Profits, Losses, or any other items allocable to any period,
Profits, Losses, and any such other items shall be determined on
a daily, monthly or other basis, as determined by the Committee
using any permissible method under Section 706 of the Code and
the Regulations thereunder.
F. Excess Nonrecourse Liabilities. For purposes of
Regulations section 1.752-3, any excess nonrecourse liabilities
of the Partnership shall be allocated to the Partners in
accordance with their respective Percentage Interests.
G. Treatment of Fees. The Partners intend that any fees to
be paid to any Partner or its Affiliate pursuant to any Service
Agreement or License Agreement shall be not be treated as
Partnership distributions and shall not reduce the Capital
Account of the Partner receiving such fees. If any Partnership
expenditure treated as a deduction on the Partnership's Federal
income tax return is disallowed as a deduction and treated as a
Partnership distribution pursuant to Section 731 of the Code,
there shall be a special allocation of gross income to the
Partner deemed to have received such distribution equal to the
amount of such distribution.
H.
EXHIBIT B
Land Purchase Agreement
SCHEDULE I
Summary of
Executive Management Services
H. Pre-Entitlement Period
1. Design/Development
a. Participate directly in the overall planning and
design of the Resort.
b. Assist in the entitlement process, including the
development of a public relations program.
c. Review and comment on interior plans for the units
and all common areas.
d. Provide input into product development, including
unit mix, an every-other-year offering, fee vs. right to use,
floating vs. fixed week, amenities package, etc.
e. Review of construction drawings for the Resort.
f. Attend meetings with architects, engineers,
consultants and others involved in the planning and design of the
Resort.
2. Financial
a. Preparation of a detailed financial feasibility
analysis for the Resort of "lender quality."
b. Preparation of operating budgets and a business
plan.
c. Provide contacts and introductions to lenders and
participate directly in financing negotiations.
3. Sales and Marketing
a. Responsibility for development of marketing and
lead generation strategies.
b. Handle exchange company negotiations and
documentation.
c. Review of promotional programs.
d. Compliance with state sales registration and
disclosure requirements.
4. Administrative and Others
a. Develop staffing needs for all aspects of the
Resort's operations and a hiring timetable.
b. Handle all legal filings and documentation.
c. Upon the request of the Committee, development of
programs for the rental of Intervals on behalf of the
Partnership, the Interval owners and the Interval Owners
Association.
I. Pre-Sales Period
1. Design/Development
a. Review of construction progress and budgets.
b. Review of the furniture, fixtures and equipment
("FF&E") package and budget.
c. Review of various interior design details, as
needed.
2. Financial
a. Assistance with financing documentation.
b. Establish and implement accounting and bookkeeping
policies, procedures and systems on Maui.
c. Preparation of monthly variance reports from the
operating budget and quarterly re-forecasts for the remainder of
each fiscal year for submission to the Partnership.
3. Sales and Marketing
a. Oversee pre-sales, if any.
b. Participate in and be responsible for overseeing
and developing marketing affiliations with local and national
business partners, including airlines, car rental companies, golf
courses, hotels, retailers, travel agencies, etc.
4. Administrative and Other
a. Recruit and hire management personnel for the
Resort.
b. Design of compensation programs.
c. Develop employee training programs.
d. Secure office space and handle all office setup
activities.
J. Period From CO Date to Two Years After the CO Date
1. Design/Development
a. Participate in planning and design of subsequent
phases of Resort development.
2. Financial
a. Prepare annual updates to the business plan.
b. Prepare annual operating budgets and monthly
variance reports.
c. Assist in dealing with financing and lender
issues.
3. Sales and Marketing
a. Monitor the effectiveness of and supervise sales
and marketing programs.
4. Administrative and Other
a. Provide assistance to Resort management, as
needed.
b. If requested by the Committee, cause Resorts West,
a Nevada general partnership ("RW"), to enter into rental
management agreements with the Partnership, owners of Intervals,
and/or the Interval Owners Association.
K. Period Following the Date Which is Two Years After the CO
Date
The only obligations of KP during this time period will be
to serve as a General Partner and member of the Committee
and, if the Committee so desires, as Administrative General
Partner.
SCHEDULE II
Schedule of Prepaid Costs
as of December 31, 1996/1
I. Timeshare Consulting Fees
A. Timeshare/Economics Consulting Fees
1. The Ridge Tahoe/Interval Resorts West $101,292
2. RCI Consulting 14,245
3. Helen Lanford 55,125
4. KMPG-Peat Marwick 39,958
$210,620
B. Architectural and Design
1. Wimberly Allison Tong Goo (architects) 78,279
2. Pamela Temples Interiors (interiors) 14,000
3. Austin Tsutsumi & Assoc.
(topo survey-Lots 1 & 2) 8,500
100,779
C. Public Relations/Marketing
1. Leland Chang Consultant
(mtg. design, facilitator) 2,352
2. Professional Communications
(public relations) 6,871
9,223
D. Legal
1. McCorriston Miho Miller Mukai 4,435
II. SMA
A. Environmental Impact Statement
1. Munekiyo & Arakawa, Inc. 99,220
2. Austin Tsutsumi & Assoc.
(civil, traffic, survey) 45,212
3. Oceanit Laboratories
(erosion, algae bloom) 74,166
218,598
B. Legal Fees
1. Cofer Beauchamp & Butler 336
2. Carlsmith Ball Wichman Case Ichiki 10,584
3. Marr Jones 38
4. Gerson Grekin & Wynhoff 617
11,575
C. SMA Consulting Fees
1. Pat Lee & Assoc. (public relations) 30,262
2. Earthplan (vacation club impact) 35,282
3. Darian Robin & Assoc.
(public relations) 13,274
4. George Kanahele & Assoc.
(Hawaiian review) 10,506
5. Tunnel-Spangler (graphics) 25,898
6. Ostrander Chu (advertising) 14,876
7. PBR Hawaii (SMA modifications) 5,963
136,061
D. Other
1. HONBLUE (copying, printing) 45
2. Light, Inc. (copying, printing) 496
3. Air Survey Hawaii (photos) 203
4. MGCC (business internet) 104
5. Dateline Media (VHS-TV news story) 36
6. Poster Maui (framed pictures) 693
7. Westin Maui (meeting)
472
8. Best Instant Printing
(copies, printing, business cards) 249
9. Bauer Audio Visual (scoping meeting) 495
2,793
III. Partnership Formation
A. Legal Fees
1. Mayer, Brown & Platt 11,385
2. Goodsill Anderson Quinn & Stifel 40
3. Cades, Schutte, Fleming & Wright 3,156
14,581
IV. Land Purchase Agreement
A. Deposit - Tobishima Pacific, Inc. 100,000
B. Legal Fees - Mayer, Brown & Platt 28,700
128,700
V. Parks/Dedications
A. Wainee Park Expansion
Chris Hart and Partners (planning) 56,152
Partnership percentage x16%
Allocation to Partnership 8,984
VI. Honoapillani Highway Widening Design 487,110
A. Austin Tsutsumi & Assoc.
(alignment, survey, capacity study) 1,400
B. Title Guaranty of Hawaii (status reports) 488,510
Partnership Percentage x16%
Allocation to Partnership 78,162
TOTAL $920,076
SCHEDULE III-A
Loan Collections and Servicing Agreement
L. To the extent permitted by and subject to conditions imposed
by the Partnership's lenders, Resorts Financial Services ("RFS")
and the Partnership will enter into a Loan Collection and
Servicing Agreement which will have a term of three years from
the CO Date, subject to earlier cancellation "for cause." After
three years, either party may cancel without penalty upon giving
120 days' notice.
M. Pursuant to the agreement, RFS will be responsible for all
aspects of managing the consumer notes receivables portfolio
("Loans") held by the Partnership. In performing this service,
RFS will utilize its proprietary loan collections and servicing
software.
N. All loan servicing employees and contractors, whether on-
site or off-site, will be employed by or contractors of RFS at
its, and not the Partnership's, cost. The Partnership
acknowledges that on-site escrow and contracts personnel involved
in the sale and marketing of Intervals will be employees of the
Partnership and will not be considered to be loan collections
and/or servicing personnel.
O. RFS' loan servicing employees will become intimately
familiar with the Resort and its operations and will provide a
service level which is not less than that currently provided to
the owners at The Ridge Tahoe.
P. RFS will receive from the Partnership an annual fee equal to
the sum, for each Loan, of 0.5% multiplied by the average
outstanding principal balance of such Loan for such year;
provided, however, that the amount of such fee shall be equitably
adjusted if the Partnership's lenders should require that any
loan collection or servicing functions (including disbursement of
collected funds) must be handled by a party other than RFS. In
addition, RFS will be entitled to collect a monthly loan
servicing and collection fee from the obligor on each Loan. The
amount of such fee, which will initially be $5 per month, will be
consistent with market practice. The Partnership will in no
event be liable for such monthly loan collection and servicing
fee. RFS may initiate remedies against the obligor on a Loan in
accordance with policies and procedures established by the
Committee. RFS will not be entitled to any compensation or
reimbursement in respect of its loan collection and servicing
activity except as provided in this section.
SCHEDULE III-B(1)
Homeowners Associations Management
Services Agreements
Q. The Partnership, on behalf of each Homeowners Association,
will enter into separate Management Services Agreements with RW.
Each Management Services Agreement will have a term equal to the
lesser of five years or the maximum term permitted by law and, if
permitted by law, with successive one-year renewals and which
will be cancelable by a majority vote of the Homeowners
Association's members or otherwise as required by applicable law.
R. Pursuant to the Homeowners Association Management Services
Agreements, RW will assume complete responsibility for performing
the following functions, which shall be allocated between the
agreements as appropriate:
1. Central reservations for use of Intervals.
2. Day-to-day resort management including rooms, parking,
maintenance, etc.
3. Management of the Association, including recordkeeping,
filings, preparation of budgets and maintenance of reserves, and
compliance with applicable regulations relating to Association
finances.
4. Operating and maintaining common areas, including
parking, grounds, hallways, and building exteriors and unit
interiors.
5. Conducting owner satisfaction surveys.
6. Assisting with exchange company relations.
S. RW will utilize its own employees to provide the resort
management services listed above.
T. RW will receive a management fee from the Homeowners
Association equal to the lesser of 10% of the annual expenses and
expenditures of reserve funds of the Homeowners Association, or
the maximum percentage allowed under state law.
SCHEDULE III-B(2)
Club Facilities Management Services Agreement
XVIII. The Partners anticipate that certain amenities relating
to the Resort (including but not limited to one or more of a
restaurant, bar, tennis facility, pool, health club, convenience
store, and parking and other common areas relating to any of the
foregoing) (the "Amenities") may be owned by the Partnership, an
affiliate of the Partnership or as a condominium (the "Club
Condominium") under separate ownership from the condominium
subject to the time-share agreement. The Partners further
anticipate that the Amenities will be made accessible to owners
of Intervals as well as to other property owners in the area
pursuant to contracts to be negotiated with the Interval Owners
Association and, possibly, such other owners.
XIX. To the extent any of the Amenities are owned by the
Partnership, an Affiliate or the Club Condominium, KP will cause
RW to enter into a management services agreement with the
Partnership, an Affiliate (or, if appropriate, with the member
association for the Club Condominium) pursuant to which RW will
assume complete responsibility for managing the Amenities.
XX. RW will utilize its own employees to provide the resort
management services listed above.
XXI. RW will be entitled to retain as a management fee an amount
equal to 50% of the pre-tax net income (as determined in
accordance with generally accepted accounting principles)
generated by the Amenities. The balance of such income shall
belong to the Partnership or the Club Condominium, as the case
may be.
SCHEDULE III-C
Software License and Support Services Agreement
A. The Partnership, RW and RFS will enter into a Software
License and Support Services Agreement which will include the
following terms:
1. RW and RFS (collectively, the "Licensors") will license
their proprietary software to the Partnership for an annual fee
of $20,000, payable quarterly in arrears.
a. The licensed software will cover all aspects of
the Resort's operations (except construction management),
including Resort and Homeowners Association management,
accounting and recordkeeping systems, and sales and marketing.
b. The licensed software will be integrated with the
loan collections and servicing software that RFS will utilize for
servicing the Partnership's notes receivables pursuant to the
Loan Collection and Servicing Agreement.
2. RFS will install the licensed software on hardware
purchased by the Partnership and will train the Partnership's
employees in the use of the licensed software.
a. RFS will use its own employees, including
supervisory personnel, to complete the installation and training.
Installation will be completed within forty-five (45) days prior
to the issuance of a Certificate of Occupancy ("CO") for the
Resort, or (if earlier), thirty (30) days prior to the beginning
of pre-sales of Intervals. Training will be completed within
thirty (30) days following the completion of installation.
b. RFS supervisory personnel will keep the Committee
informed at all times of the progress of the installation and any
problems associated with the installation.
c. Charges for RFS's personnel time will be made
based on its direct costs (which will be limited to an allocable
portion of their base salary, payroll taxes, fringe benefits and
the prior year's annual bonus for personnel actually rendering
services to the Partnership). No administrative or overhead
charges will be made by RFS. RFS will provide the Committee with
a detailed schedule of such costs for the entire installation and
training sixty (60) days prior to the commencement of
installation.
d. Reasonable and documented out-of-pocket costs
incurred by RFS personnel will be reimbursed by the Partnership.
e. All actions and expenditures made and costs
incurred by RFS in connection with the installation of the
licensed software must be approved in advance by the Committee.
3. RFS will provide software support for as long as the
software license is in effect.
a. RFS personnel will provide technical assistance
and advice to Partnership employees on an as- needed basis.
b. Support will be provided over the telephone or in
person as requested by Partnership employees.
c. Charges for RFS personnel time will be made at
RFS's direct cost (as defined in I.B.3 above), and out-of-pocket
costs will be reimbursed as incurred.
d. The Partnership will employ one MIS support person
at the Site as needed from time to time.
4. The license will begin at the start of the Pre-Sales
Period and remain in effect as long as the Partnership remains in
existence, and if AVM, AVLP or an Affiliate takes possession of
the Resort pursuant to Article 11, the license will remain in
effect for a period of 180 days thereafter. The license may be
cancelled by the Partnership at any time without penalty. The
license will contain customary representations and warranties
regarding the Licensors' title and the suitability of the
licensed software for the purposes of the licensee.
5. During the term of the license, the Partnership will be
entitled to all system upgrades and improvements at no additional
cost, except for any documented out-of-pocket costs incurred by
RFS to install such upgrades.
B. The software to be licensed under the Software License and
Support Agreement will include all proprietary software currently
owned by RW and RFS (or which either of them has the right to
use) and which are necessary for the development, marketing and
operation of the Resort and shall include applications relating
to:
A. Community Marketing Department
B. Sales Front Desk
C. Contract Department
D. Escrow Department
E. MIS Department
F. Reservations Department
F. Front Desk
G. Housekeeping
C. The Software License will not include "off-the-shelf"
software applications with respect to which neither RW nor RFS
has any exclusive or proprietary rights.
SCHEDULE III-D
Sales and Marketing Services Agreement
D. KP and the Partnership will enter into a Sales and Marketing
Services Agreement pursuant to which KP will be fully responsible
for managing, overseeing and supervising the Partnership's
employees in connection with all sales and marketing activities
and programs for the Resort, including the following:
1. Development of comprehensive sales and marketing
programs based on strategies developed by the Key Executives.
2. Full responsibility for recruiting, hiring and training
all sales and marketing personnel
3. Supervising the preparation of design plans for the on-
site sales center
4. Supervising the selection of OPC and off-site sales
centers, negotiating leases for such locations, and supervising
the design and construction of tenant improvements
5. Overseeing development of sales and promotional
literature
6. Supervising project sales and marketing personnel
7. Approving all advertising programs
8. Reviewing daily sales reports
9. Coordinating sales and marketing affiliations with
outside companies
10. Ensuring proper closing and escrow procedures
11. Maintaining compliance with established sales policies.
E. KP will report to the Committee on a bi-monthly basis unless
the Committee authorizes less frequent reports.
F. KP will establish Interval pricing parameters and "first
day" incentives for approval by the Committee by no later than 90
days before the commencement of pre-sales of Intervals.
G. The Partnership will pay KP, on a monthly basis, a fee equal
to 2% of sales closed during such month (the "Override") as
compensation for the services described above. KP will not be
entitled to any additional compensation or reimbursement.
H. The Partnership may cancel the Sales and Marketing Services
Agreement at any time after giving 60 days' notice; provided,
however, that if such cancellation is not for cause, the
Partnership will continue to pay 100% of the Override for 18
months after the date on which the first Interval sale closes.
I.
SCHEDULE III-E
Telemarketing Services Agreement
1. Interval Resorts West, Inc. ("IRW") and the Partnership will
enter into a Telemarketing Services Agreement pursuant to which
sales of the Partnership's Intervals will be marketed through the
telemarketing facilities operated by IRW for so long as IRW
conducts a telemarketing program on its own behalf or on behalf
of other resorts operated by the Ridge Group. The telemarketing
services to be provided will be provided by trained personnel and
will be comparable or superior in nature, scope and quality to
the services provided by the Ridge Group at the Ridge Tahoe
resort.
2. This agreement may be terminated by the Partnership at any
time without penalty.
3. IRW's sole compensation for the services to be provided
hereunder will be reimbursement of its costs, which will be
separately calculated for each program that IRW's telemarketing
group undertakes on behalf of the Partnership.
4. RW's costs for purposes of the Telemarketing Services
Agreement will be its fully-loaded costs, which will include
salary and benefit costs, payroll taxes, and employee-related
insurance, as well as facilities and equipment rent, utilities,
and supplies. These costs will be allocated based upon the
portion of employee time spent by IRW's telemarketing group on
the Partnership's activities as compared with non-Partnership
work.
5. All services and charges must be approved by the Committee
in advance.
6. If IRW wishes to cease operating a telemarketing facility on
its own behalf or on behalf of other resorts operated by the
Ridge Group, IRW will provide six (6) months' prior notice to the
Partnership. The Partnership will thereupon have the option to
take over IRW's telemarketing operations (including the
assumption by the Partnership of all or any rights and
obligations of IRW under real property or equipment leases, the
right to use software relating to the telemarketing activity and
to hire IRW's telemarketing employees).
SCHEDULE III-F
Central Reservations Services Agreement
7. KP will cause RW to enter into a Central Reservations
Services Agreement with the Interval Owners Association pursuant
to which RW will provide to the Partnership the use of its
telephone reservations system, reservations personnel, and all
other systems, services and facilities of RW relating to
reservations. The reservations services to be provided by RW
under this Agreement will be comparable or superior in nature,
scope and quality to the reservation services provided by the
Ridge Group for the Ridge Tahoe resort.
8. RW will provide the central reservation services to the
Interval Owners Association at its cost, as defined in the
following paragraph.
9. RW's costs for purposes of the Central Reservations Services
Agreement will be its fully-loaded costs, which will be comprised
of salary and benefit costs, payroll taxes, and employee-related
insurance for RW's central reservations staff, as well as
facilities and equipment rent and costs of utilities and supplies
actually incurred by RW in providing central reservations
services. These costs will be allocated based upon the portion
of time spent by the central reservations staff on the Interval
Owners Association's activities as compared with non-Interval
Owners Association central reservations work.
10. All services and charges shall be approved by the Committee
in advance.
11. The Central Reservations Services Agreement will remain in
effect for a minimum of two years following the CO Date, and
thereafter, may be cancelled by RW only with twelve (12) months'
prior written Notice of Termination. Notice of Termination may
not be given earlier than the date which is two years after the
CO Date. Prior to the effective date of any such termination, KP
and RW will provide to the Interval Owners Association copies of
all records and information as are reasonably requested by the
Interval Owners Association for the uninterrupted operational
administration of, and so that the Interval Owners Association
may establish, a replacement central reservation system for the
Resort.
12.
TABLE OF CONTENTS
1 DEFINITIONS 2
2 FORMATION OF PARTNERSHIP 13
3 PERCENTAGE INTERESTS; CAPITAL CONTRIBUTIONS; OTHER
FINANCING 16
4 DISTRIBUTIONS 23
5 PROFITS AND LOSSES 24
6 MANAGEMENT OF THE PARTNERSHIP 25
7 BOOKS AND RECORDS; FINANCIAL STATEMENTS; TAXES 30
8 EXECUTIVE MANAGEMENT SERVICES; OTHER SERVICES 32
9 TRANSFERS OF INTERESTS 34
10 WITHDRAWAL; DISSOLUTION; EVENTS OF LIQUIDATION 39
11 WINDING UP AND LIQUIDATION 41
12 NOTICES 47
13 MISCELLANEOUS 48
EXHIBITS
Tax Allocations Exhibit A
Land Purchase Agreement Exhibit B
SCHEDULES
Executive Management Services Schedule I
Schedule of Prepaid Costs Schedule II
Service and License Agreements --
Loan Collections and Servicing Agreement Schedule III-A
Homeowners Associations
Management
Services Agreement
Schedule III-B(1)
Club Facilities Management
Services Agreement Schedule III-B(2)
Software License and
Support Services Agreement Schedule III-C
Sales and Marketing Services Agreement Schedule III-D
Telemarketing Services Agreement Schedule III-E
Central Reservations Services Agreement Schedule III-F
_______________________________
1/ This schedule does not include costs which have not yet been
paid or which have not been invoiced.
AMENDED AND RESTATED NOTE
---------------------------
This Amended and Restated Note ("Note") dated February
4, 1997 is made by WAIKELE GOLF CLUB, INC., a Hawaii
corporation (the "Maker") in favor of BANK OF HAWAII, a
Hawaii banking corporation (the "Bank").
RECITALS:
(a) Maker executed and delivered to the Bank a
promissory note dated September 28, 1993 payable to the
Bank's order in the original principal amount of
$10,000,000 (the "Original Bank Note").
(b) Maker executed an delivered to Orix USA
Corporation a second promissory note also dated September
28, 1993 payable to the order of Orix USA Corporation in
the original principal amount of $10,000,000 (the "Original
Orix Note").
(c) Bank has purchased the Original Orix Note, and is
the holder of the Original Bank Note and the Original Orix
Note (collectively the "Original Notes").
(d) The Original Notes are secured by, among other
instruments, a Mortgage, Security Agreement and Financing
Statement dated September 28, 1993, filed in the Office of
the Assistant Registrar of the Land Court of the State of
Hawaii as Land Court Document No. 2072517 noted on Transfer
Certificate of Title Nos. 418, 785 and 428,219, and
recorded in the Bureau of Conveyances of the State of
Hawaii as Document No. 93-162322 ("Mortgage") and a
Financing Statement recorded in said Bureau as Document No.
93-162323 ("UCC-1")
(e) The Original Notes, the Mortgage, the UCC-1 and
the other instruments evidencing, securing or otherwise
relating to the Original Notes are sometimes hereinafter
called the "Loan Documents."
(f) The Maker has requested the Bank to increase the
principal amount of the loan outstanding as of the date of
this Note to $25,000,000 and to revise certain other terms
of the Original Notes and the other Loan Documents.
(h) The Maker and the Bank have entered into an
Amendment to Mortgage and Other Loan Documents dated the
same date as this Note (the "Amendment").
Amended and Restated Note:
- --------------------------
For good and valuable consideration received by the
Maker, the receipt and sufficiency of which are hereby
acknowledged by the Maker, subject to and effective upon
the satisfaction of the conditions set forth in the
Amendment, the Original Notes are combined into one
promissory note, and amended and restated in their entirety
to read as follows, and all references in the Mortgage and
other Loan Documents to the Original Notes are deemed to
refer to this Amended and Restated Note:
$25,000,000 February 4, 1997
Honolulu, Hawaii
WAIKELE GOLF CLUB, INC., a Hawaii corporation (the
"Maker"), hereby promises to pay to the order of BANK OF
HAWAII, a Hawaii banking corporation (the "Bank"), at the
Bank's principal office at 111 South King Street, Honolulu,
Hawaii 96813, or in such manner and at such other place as
the holder of this Note may from time to time designate in
writing delivered to the Maker, at the times set forth
herein, (a) the principal amount of $25,000,000, or, if
less, so much thereof as may have been disbursed by the
Bank to or for the account of the Maker and shall remain
outstanding under this Note, and (b) interest on
outstanding balances of principal under this Note at the
rate or rates described below.
1. Loan Evidenced by this Note. This Note evidences
the Loan made or to be made or deemed to be made by the
Bank under the Amended and Restated Term Loan Agreement
("Loan Agreement") dated as of the date of this Note,
between the Maker, as "Borrower," and the Bank, as
"Lender". Capitalized terms used in this Note and not
otherwise defined in this Note have the meanings given to
them in the Loan Agreement.
2. Interest Rate. Outstanding balances of principal
under this Note, prior to the maturity (whether by
acceleration or otherwise) of the indebtedness evidenced by
this Note, shall bear interest from the date of this Note
until the fifth anniversary date of this Note at a fixed
rate for the applicable LIBOR Interest Period of Two
Hundred (200) basis points (i.e., two percentage points)
above the applicable LIBOR Rate, and from the fifth
anniversary date to the tenth anniversary date of this
Note, at a fixed rate for the applicable LIBOR Interest
Period of Two Hundred Twenty Five (225) basis points (i.e.,
two and twenty-five hundredths percentage points) above the
applicable LIBOR Rate.
Any provision contained in this Note to the contrary
notwithstanding, if in respect of any LIBOR Interest Period
deposits in United States Dollars (in the applicable
amounts) are not being offered to the Bank in the relevant
market for such LIBOR Interest Period, the Bank shall
forthwith give notice thereof to the Maker, whereupon
(until the Bank notifies the Maker that the circumstances
giving rise to such suspension no longer exists) the
calculation of interest under this Note on the basis of a
LIBOR rate shall be suspended, and interest shall be
calculated at a floating rate equal to the Base Rate in
effect from time to time.
3. Computation of Interest. Interest hereunder
shall be computed on the basis of a year of 360 days and
paid for the actual number of days elapsed.
4. Payments of Interest and Principal. The Maker
shall pay principal and interest monthly on the first day
of each month for the month immediately preceding, as
follows: (a) accrued interest calculated on the basis of
the applicable LIBOR Rate (or if applicable under paragraph
2 the floating Base Rate) then in effect on outstanding
balances of principal under this Note, together with (b)
equal principal amortization payments in the amount of
1/12th of the total principal amount payable during each
one-year increment of the term of the Loan, (i.e., the
first one-year increment commencing on the date of this
Note and each one-year increment thereafter commencing on
the anniversary date of this Note), as computed on the
basis of
(i) the interest rate in effect as of first day of each
such increment, (ii) the principal balance of the Note
outstanding as of the first date of each such increment,
and (iii) the then-remaining balance of an initial 30-year
amortization schedule, e.g. a 30-year amortization schedule
in the first increment commencing on the date of this Note,
a 29-year amortization schedule in the second increment
commencing on the first anniversary of this Note, etc.
The Maker shall repay the entire outstanding balance
of principal hereunder together with all accrued and then
unpaid interest on the tenth anniversary date of this Note
(i.e., February 4, 2007).
5. Voluntary Prepayments. The Maker shall have the
right from time to time and at any time, upon not less than
two full Domestic Business Days' prior written notice to
the Bank, to make voluntary prepayments of principal
outstanding under this Note, without prepayment penalty, in
an amount not less than $250,000 (and only in) integral
multiples of $50,000, provided, however, if the Maker
prepays any principal amount or otherwise makes any payment
of principal on any day other than the last day of the
applicable LIBOR Interest Period, the Maker shall reimburse
to the Bank, on demand, the expenses and funding losses
incurred by the Bank as a result of such prepayment as
reasonably determined by the Bank. Should any such
voluntary prepayment be made, there will be no changes in
the maturity date of this Note or in the amount of the
monthly payments unless the holder of this Note agrees in
writing to those changes.
6. Payment Dates. Whenever any payment of principal
of, or interest on, any amount hereunder shall be due on a
day which is not a LIBOR Business Day, the date for payment
thereof shall be extended to the next succeeding LIBOR
Business day unless as a result thereof it would fall in
the next calendar month, in which case it shall be advanced
to the next preceding LIBOR Business Day. If the date for
any payment of principal is extended by operation of law or
otherwise, interest shall be payable for such extended
time.
7. Illegality. If, after the date of this Note, the
adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or
administration thereof by any governmental authority,
central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by
the Bank with any request or directive (whether or not
having the force of law) of any such authority, central
bank or comparable agency shall make it unlawful or
impossible for the Bank to make, maintain or fund loans in
respect of which interest is or is to be calculated on the
basis of a LIBOR Rate, the Bank shall forthwith so notify
the Maker, whereupon until the Bank notifies the Maker that
the circumstance giving rise to such suspension no longer
exist, the calculation of interest under this Note on the
basis of a LIBOR Rate shall be suspended, and interest
shall be calculated on the basis of the floating Base Rate
as provided in paragraph 2 above.
8. Increased Costs.
8.1 If, after the date of this Note, the adoption of
any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or
administration thereof by any governmental authority,
central bank or comparable agency charged with the
interpretation or administration thereof or compliance by
the Bank with any request or directive (whether or not
having the force of law) of any such authority, central
bank or comparable agency:
(a) Shall subject the Bank to any tax, duty or
other charge in respect of LIBOR Rate loans or shall
change the basis of taxation of payments to the Bank of
the principal of or interest on LIBOR Rate loans
(except for changes in the rate of tax on the overall
net income or gross income of the Bank); or
(b) Shall impose, modify or deem applicable any
reserve (including, without limitation, any imposed by
the Board of Governors of the Federal Reserve System),
special deposit or similar requirement against assets of,
deposits with or for the account or, or credit
extended by, the Bank;
8.2 A certificate of the Bank claiming compensation
under this paragraph 8 and setting forth the additional
amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In
determining such amount, the Bank may use any reasonable
averaging and attribution methods.
9. Interest After Dates Fixed for Payment or
Prepayment. Any provision contained in this Note to the
contrary notwithstanding, and at the option of the holder
of this Note, if any payment of principal or interest shall
not be made within five days after the same becomes due,
interest shall be payable on the principal portion of such
defaulted payment and, if permitted by law, on the interest
portion of such defaulted payment, at a rate one and one-
half percentage points above the rate otherwise applicable
thereto under paragraph 2 of this Note (the "Defaulted
Rate") and, if any such payment of principal or interest
shall not be made for 30 days after the same becomes due,
interest shall be payable at the Default Rate on the whole
of the outstanding principal balance of this Note.
10. Acceleration. If any "Event of Default" (as that
term is defined in Article 7 of the Loan Agreement) shall
occur and be continuing, the entire outstanding principal
balance and accrued interest thereon, together with (to the
extent permitted under applicable law) costs and reasonable
attorneys' fees incurred by the Bank or by the holder of
this Note in collecting or enforcing payment, shall become
due and payable, anything contained in this Note to the
contrary notwithstanding, time being of the essence, (a)
immediately and without notice upon the occurrence of an
Event of Default specified in any one of Sections 7.1.4
through 7.1.8 of the Loan Agreement, and (b) at the option
of the Bank, but only upon written notice to the Maker,
upon the occurrence of any other Event of Default.
11. Definitions. Wherever any of the following terms
is used in this Note:
11.1 "Base Rate" means the primary index rate
established by the Bank from time to time in good faith in
the ordinary course of its business and with due
consideration of the money market, and published by
intrabank circular letters or memoranda for the guidance of
its loan officers in pricing all of the Bank's loans in
respect of which the interest rate floats with or above the
Base Rate. (If Bank's "Base Rate" is discontinued and
replaced by a comparable rate then, for all purposes of
this Note, the comparable rate shall be substituted in
place of the discontinued Base Rate).
11.2 "Domestic Business Day" means any day except a
Saturday, Sunday or other day on which commercial banks in
the State of Hawaii are authorized by law to close.
11.3 "LIBOR Business Day" means any Domestic Business
Day on which commercial banks are open for domestic and
international business(including dealings in U.S. dollar
deposits) in the interbank markets.
11.4 "LIBOR Interest Period" means a period of three
months; provided, however, that any LIBOR Interest Period
which would otherwise end on a day that is not a LIBOR
Business Day shall be extended to the next succeeding LIBOR
Business Day.
11.5 "LIBOR Rate" means, for each LIBOR Interest
Period, a reserve-adjusted rate of interest per annum
rounded upward, if necessary, to the nearest 4 decimal
places, at which U.S. dollar deposits in immediately
available funds are offered to major banks in the interbank
market at 11:00 a.m., New York time, on the day which is
two LIBOR Business Days prior to the commencement of a
LIBOR Interest Period. The Bank shall establish the LIBOR
Rate for each LIBOR Interest Period based on offered rates
as reported by reporting services generally used by the
Bank. Such offered rates are quoted based on both the
amount of the LIBOR Rate loan and the LIBOR Interest
Period. The LIBOR Rate shall incorporate the LIBOR Reserve
Requirement.
11.6 "LIBOR Reserve Requirement" means the then
maximum effective rate per annum (expressed as a
percentage), as determined solely by the Bank, of the
reserve requirements imposed by any regulatory body, such
as those pursuant to Regulation D of the Board of Governors
of the Federal Reserve System, on eurocurrency liabilities
of U.S. banks having a maturity equal to the term of the
LIBOR Interest Period, as adjusted by the Bank for expected
changes in such percentage during the applicable LIBOR
Interest Period.
12. Miscellaneous.
12.1 The Bank shall be and is authorized and directed
to maintain records of account regarding the Loan,
evidencing the date and principal amount of each advance of
Loan proceeds under this Note and the date and amount of
each repayment and prepayment of principal and payment of
interest received from the Maker. Such records shall
constitute prima facie evidence of the making and repayment
of such advances and of the payment of such interest.
However, neither the Bank's failure to maintain such
records nor the Bank's making of erroneous notations in
such records shall affect the Maker's obligation, which the
Maker hereby accepts, to repay outstanding principal
balances of all advances actually made pursuant to the Loan
Agreement and evidenced by this Note, together with accrued
interest thereon at rates stated in this Note.
12.2 All payments under this Note shall be made in
United States dollars at the Bank's principal office in
Honolulu, Hawaii or at such other place as the holder of
this Note may designate in writing.
12.3 The holder of this Note is entitled to the
benefits of the Loan Agreement.
12.4 This Note is to be construed in accordance with,
and governed by, the laws of Hawaii.
12.5 As to this Note the Maker and all others who may
be or become liable for all or any part of the obligations
evidenced by this Note waive valuation and appraisement,
presentment, protest, notice, demand and notice of
dishonor, and consent to any all releases or substitutions
of security and consent to any number of renewals or
extensions of time for the payment hereof or any other
indulgence or indulgences at any time or from time to time
may be or become liable for all or and part of the
obligations evidenced by this Note.
IN WITNESS WHEREOF, the Maker has caused this Note to
be executed and delivered by its duly authorized officers,
as of the day and year first above written.
WAIKELE GOLF CLUB, INC.
By:_______________________
Its Senior Vice President
By:_______________________
Its
AMENDED AND RESTATED TERM LOAN AGREEMENT
-------------------------------------------
This Amended Restated Term Loan Agreement, (the "Loan
Agreement"), dated as of February 4, 1997, is by and
between BANK OF HAWAII, a Hawaii banking corporation (the
"Lender") and WAIKELE GOLF CLUB, INC., a Hawaii corporation
(the "Borrower").
Recitals:
(a) Lender and Orix USA Corporation, a Delaware
corporation ("Orix"), and Borrower entered into a Term Loan
Agreement dated September 28, 1993 whereby Lender and Orix
each agreed to lend to Borrower, and Borrower agreed to
borrow from Lender and Orix, $10,000,000, for an aggregate
total loan of $20,000,000, upon the terms and conditions
set forth therein (the "Original Loan Agreement").
(b) Pursuant to the Original Loan Agreement, Borrower
executed and delivered to Lender a promissory note dated
September 28, 1993 payable to the Lender's order in the
original principal amount of $10,000,000 (the "Original
Bank Note").
(c) Pursuant to the Original Loan Agreement, Borrower
executed and delivered to Orix a second promissory note
also dated September 28, 1993 payable to the order of Orix
in the original principal amount of $10,000,000 (the
"Original Orix Note").
(d) Lender has purchased the Original Orix Note, and
is the holder of the Original Bank Note and the Original
Orix Note (collectively the "Original Notes").
(e) Borrower has requested Lender to increase the
principal amount of the loan outstanding as of the date of
this Loan Agreement to $25,000,000 and to revise certain
other terms of the Original Notes and the other Loan
Documents (hereinafter defined).
(f) Borrower and Lender have entered into an
Amendment to Mortgage and Other Loan Documents dated the
same date as this Loan Agreement ("Amendment").
Amended and Restated Term Loan Agreement:
For good and valuable consideration received by the
Maker, the receipt and sufficiency of which are hereby
acknowledged by the Borrower, subject to and effective upon
the satisfactory of the conditions set forth in the
Amendment, the Original Loan Agreement is amended and
restated in it entirety to read as follows, and all
references in the Loan Documents to the Original Loan
Agreement are deemed to refer to this Loan Agreement:
Intending to be legally bound by this Loan Agreement,
the Lender and Borrower agree as follows:
Article 1. Additional Definitions
As used in this Loan Agreement, each of the terms
defined in this Article 1 shall have the meaning given to
it in this Article 1:
1.1 "Affiliate" means any person which directly or
indirectly controls, is controlled by or is under common
control with either the Borrower or the Guarantor.
1.2 "Amendment" means the Amendment to Mortgage and
other Loan Documents of even date between the Borrower and
the Lender.
1.3 "Assignment of Lessor's Interest" means the
Assignment of Lessor's Interest dated September 28, 1993
made by the Borrower in favor of the Lender and Orix and
recorded in the Bureau of Conveyance of the State of Hawaii
as Document No. 93-162324.
1.4 "Domestic Business Day" means any day except a
Saturday, Sunday or other day on which commercial banks in
Hawaii are authorized by law to close.
1.5 "Environmental Indemnification Agreement" means
the Environment Indemnification Agreement dated September
28, 1993 made by the Borrower in favor of the Lender and
Orix.
1.6 "Financial Statements" means the financial
statements (a) heretofore furnished to the Lender, and (b)
to be furnished to the Lender pursuant to the provisions of
this Loan Agreement.
1.7 "Guarantor" means Amfac/JMB Hawaii, Inc., a
Hawaii corporation.
1.8 "Guaranty" means a Guaranty, dated September 28,
1993 made by the Guarantor in favor of the Lender and Orix.
1.9 "Land" means the approximately 136 acres
comprising all of the Waikele Golf Course, located at
Waikele, Waipahu, Hawaii, and more particularly described
in the Mortgage.
1.10 "Laws" means all ordinances, statutes, rules,
regulation, orders, injunctions, writs or decrees of any
government or political subdivision or agency thereof, or
any court or similar entity established by any thereof.
1.11 "Loan Documents" means this Loan Agreement, the
Amendment, the Note, the Mortgage, the Guaranty, the
Environmental Indemnification Agreement, a UCC-1, and an
Assignment of Lessor's Interest, in each case as originally
executed and as thereafter amended, modified or restated at
any time in accordance with the respective terms thereof.
1.12 "Loan" means the loan to be made to the Borrower
pursuant to this Loan Agreement.
1.13 "Mortgage" means a Mortgage, Security Agreement
and Financing Statement, dated September 28, 1993, by the
Borrower, as mortgagor, in favor of the Lender and Orix, as
mortgagee, filed in the Office of the Assistant Registrar
of the Land Court of the State of Hawaii as Land Court
Document No. 2072517 noted on Transfer Certificate of Title
Nos. 418,785 and 428,219, and recorded in the Bureau of
Conveyances of the State of Hawaii as Document No. 162322,
as amended by the Amendment.
1.14 "Mortgaged Properties" means all the properties
described in and encumbered by the Mortgage.
1.15 "Note" means the Amended and Restated Note issued
by the Borrower to the Lender, including extensions,
renewals and modifications thereof, evidencing the Loan, in
the form or substantially in the form of Exhibit 1.15,
attached to this Loan Agreement.
1.16 "Obligations" means, collectively, the obligation
of the Borrower to pay the principal of and interest on the
Note in accordance with the terms thereof and to satisfy
all of the Borrower's other indebtedness, covenants,
liabilities and obligations to the Lender under the Loan
Documents, whether now existing or hereafter incurred,
matured or unmatured, direct or contingent, joint or
several.
1.17 "Premises" means the Waikele Golf Course and the
22,000 square foot clubhouse facility, located on the Land.
1.18 "Person" means any individual, corporation,
partnership, association, joint-stock company, trust,
unincorporated organization, joint venture, court or
government or political subdivision or agency thereof.
1.19 "Records" means correspondence, memoranda, tapes,
discs, papers, books and other documents, or transcribed
information of any type, whether expressed in ordinary or
machine language.
Article 2. The Loan
2.1 Loan. On the terms and provisions and subject
to the satisfaction of the conditions stated in this Loan
Agreement, the Lender hereby agrees to make a Loan to the
Borrower in the principal amount of $25,000,000. All of
the outstanding principal balance of, and accrued but
theretofore unpaid interest on, the Loan shall be paid in
full on or before the tenth anniversary date of the date of
this Loan Agreement.
2.2 Amount (and Disbursements) of the Loan. Pursuant
to the Original Loan Agreement, Lender and Orix disbursed
to Borrower and Borrower received Loan proceeds in the
principal amount of $20,000,000. As of February ___, 1997
the outstanding principal balance of the Loan is
$_____________. Upon satisfaction of all of the conditions
set forth in Article 3, the Lender will disburse to the
Borrower the balance of the Loan proceeds, provided that
the total outstanding balance of the Loan shall not exceed
$25,000,000.
2.3 Note. The Loan made by the Lender to the Borrower
shall be evidenced by the Note in the principal amount of
$25,000,000 and otherwise duly completed.
2.4 Disbursements. During the term of the Loan the
Lender will credit the proceeds of the Loan to the
Borrower's deposit account with Lender or, at the
Borrower's request, disburse the proceeds to the order of
the Borrower.
2.5 Commitment Fees. The Borrower shall pay to the
Lender, a commitment fee of $200,000, which shall be paid
in full on the date of the execution of this Loan Agreement
and shall be nonrefundable.
2.6 Interest Rates and Payments of Interest.
Interest on the Loan shall be paid at the rates, at the
times and in the manner stated in the Note.
2.7 Payments and Prepayments of Principal. Principal
balances outstanding under the Note 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 Note.
Prepayments of principal shall be in amounts not less than
$250,000, and in integral multiples of $50,000.
2.8 Sums Payable to the Lender. The Lender shall
send to the Borrower, from time to time, statements of all
amounts due under the Note and other Loan Documents, which
statements shall be considered correct and conclusively
binding on the Borrower, absent manifest error, unless the
Borrower notifies the Lender to the contrary within 30
Domestic Business Days of its receipt of any statement
which it deems to be incorrect. All sums payable to the
Lender under the Note and other Loan Documents shall be
paid directly to the Lender, not later than 10:00 a.m.
(Honolulu time) on the date when due, in immediately
available funds.
Article 3. Conditions Precedent
The Lender shall have no obligation to make
disbursement of the Loan pursuant to the provisions of this
Loan Agreement, unless and until all conditions stated in
this Article 3 shall have been satisfied.
3.1 Documents Required. The Lender shall have
received such executed originals or certified copies of
each of the following instruments as the Lender may have
reasonably requested, in each case in form and substance
acceptable to the Lender and its legal counsel:
3.1.1 This Loan Agreement, the Amendment, the
Note, the Mortgage, the Assignment of Lessor's Interest,
UCC Financing Statements describing the security interests
created by the Mortgage, the Environmental Indemnification
Agreement and the Guaranty.
3.1.2 A certificate signed by the Borrower's
corporate secretary, certifying to the Lender: (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.
3.1.3 A certificate signed by the Guarantor's
corporate secretary, certifying to the Lender: (1) as to
the adoption of Resolutions of the Guarantor's Board of
Directors authorizing the execution, delivery and
performance of the Guaranty; (2) as to the incumbency and
signatures of the officers of the Guarantors signing the
Guaranty; and (3) that the Articles of Incorporation and By-
laws of the Guarantor, true copies of which have been
attached to such certification, have not been amended since
the date of such delivery.
3.1.4 A current certificate of the Director of
Commerce and Consumer Affairs of the State of Hawaii,
evidencing the good standing of the Borrower and the
Guarantor in the State of Hawaii,
3.1.5 A current tax clearance certificate for
each of the Borrower and the Guarantor issued by the Hawaii
Department of Taxation.
3.1.6 Endorsements to the ALTA Lender's policy of
Title Insurance heretofore issued to the Lender relating to
the Mortgage, insuring for $25,000,000 that the Mortgage as
amended by the Amendment, the Assignment of Lessor's
Interest and the UCC-1 are valid first liens on the
properties described therein, free and clear of all
encumbrances except those approved by the Lender in
writing.
3.1.7 Evidence that the Borrower carries in
respect of the Premises public liability insurance,
property damage insurance, fire insurance with extended
coverage and business interruption insurance, in amounts
acceptable to the Lender, and flood insurance in such
amount as may be required by law (all policies evidencing
fire and rental loss insurance shall contain a mortgagee's
loss payable endorsement acceptable to the Lender, and all
policies must contain an endorsement requiring that the
Lender receive, by mail addressed to it at P.O. Box 2900,
Honolulu, Hawaii 96846, Attn: Construction and Income
Property Loan Department, at least 30 days' prior written
notice of any cancellation of or material revision in
coverage). The Borrower may obtain such insurance from any
insurance company or companies doing business in Hawaii.
3.1.8 Evidence reasonably satisfactory to the
Lender that all costs of the acquisition, construction,
furnishing and equipping of the Premises have been paid or
Borrower has sufficient funds immediately available for the
payment thereof.
3.1.9 With respect to all improvements on the
Premises evidence that the improvements have been
substantially completed and that a notice of completion and
affidavit of publication has been published and filed,
respectively, in accordance with the procedures stated in
Section 507-43 of the Hawaii Revised Statutes, and 47 days
shall have expired subsequent to the filing of such
affidavit in the office of the clerk of the applicable
Circuit Court of the State of Hawaii without the filing of
any claim.
3.1.10 Evidence that all building permits and other
approvals from governmental authorities, necessary or
advisable for development and construction of the Premises,
were obtained, and that the Borrower has obtained all
required occupancy and use certificates and licenses
necessary to occupy and use the Premises for their intended
purposes.
3.1.11 A complete set of the final plans and
specifications and an ALTA survey of the Premises.
3.1.12 A copy of the phase one environmental audit of
the Premises, dated August 16, 1990, and made by Harding
Lawson Associates.
3.1.13 An appraisal of the Premises, made by an
appraiser and in the form and content acceptable to the
Lender, demonstrating the Loan does not exceed 70% of the
fair market value of the Premises.
3.1.14 Written opinions of counsel to the Borrower or
the Guarantor, addressed to the Lender, stating that:
(a) The Borrower and the Guarantor are corporations
duly organized, validly existing and in good standing under
the Laws of the State of Hawaii;
(b) The Borrower and Guarantor have the corporate
power and authority to execute and deliver the Loan
Documents, to borrow money hereunder, and to perform the
Obligations;
(c) All corporate action required to be taken by the
Borrower and the Guarantor to enter into the transactions
contemplated by this 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 Guarantor, or
of any applicable Laws or any other agreement binding upon
the Borrower or Guarantor or their property of which such
counsel has knowledge and the Borrower's and the
Guarantor's execution, delivery and performance of the Loan
Documents do not require the consent or approval of any
governmental body or regulatory authority;
(d) The Loan Documents and all other documents
required to be delivered by the Borrower and the Guarantor
pursuant to the provisions of this Loan Agreement have been
duly executed by, and each is a valid and binding
obligation of, the Borrower and the Guarantor, enforceable
in accordance with its terms;
(e) All obligations of the Borrower and the Guarantor
in respect of the Loan constitute "Senior Indebtedness" as
that term is used in the Amfac/JMB Hawaii, Inc. Certificate
of Land Appreciation Notes due 2008 ("COLAS") and the
indebtedness under which the COLAS were issued, and the
indebtedness evidenced by the COLAS in a unsecured debt
obligation of the Guarantor and Borrower, subordinate in
payment to the indebtedness of the Guarantor and Borrower
in respect of the Loan; and
(f) Such counsel is without any knowledge of any
matters contrary to the representations and warranties
contained in Article 4 of this Loan Agreement.
The opinion of Borrower's counsel and the opinion in
subparagraph (e) relating to the COLAS may be from
Guarantor's counsel. The opinion of Guarantor's counsel
may be from in-house counsel of the Guarantor.
3.2 Certain Other Events. At the time of the
disbursement of Loan proceeds under this Loan Agreement and
of any subsequent disbursement of Loan proceeds under this
Loan Agreement:
3.2.1 No Event of Default under this 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.
3.2.2 The representations and warranties contained
in Article 4 of this 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.
3.2.3 All legal matters incidental to such
disbursement shall be reasonably satisfactory to the
Lender's counsel.
Article 4. Representations and Warranties
To induce the Lender to enter into this Loan
Agreement, the Borrower represents and warrants to the
Lender as follows:
4.1 Corporate Organization; Standing of Borrower.
The Borrower and the Guarantor are corporations duly
organized, validly existing and in good standing under the
Laws of State of Hawaii; the Borrower and the Guarantor
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.
4.2 No violation of Other Agreements. The execution
and performance of the Loan Documents will not immediately,
or with the passage of time or the giving of notice, or
both:
4.2.1 Violate the Articles of Incorporation or
Bylaws of the Borrower or the Guarantor, or violate any
Laws or breach or result in a default under any material
contract, agreement, or instrument to which the Borrower or
the Guarantor is a party or by which the Borrower or the
Guarantor or their property is bound, or require the
consent or approval of any governmental office or official;
or
4.2.2 Result in the creation (or an obligation to
create) or imposition of any security interest, in or lien
or encumbrance on, the Mortgaged Properties, other than the
liens or security interests intended to be created by or
permitted by the Mortgage or this Agreement.
4.3 Corporate Authority. The Borrower and the
Guarantor have the corporate power and authority to execute
and deliver the Loan Documents and to incur and perform the
Obligations, and have taken all corporate action necessary
to authorize the execution, delivery and performance of the
Loan Documents.
4.4 No Consent. The Borrower's and the Guarantor's
execution, delivery and performance of the Loan Documents
do not require the consent or approval of any governmental
body or other regulatory authority.
4.5 Binding Obligations. This 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 the Guarantor and enforceable in
accordance with their respective terms.
4.6 Financial Statements True. All Financial
Statements heretofore furnished by the Borrower or the
Guarantor to the Lender, including any schedules and notes
pertaining thereto, were prepared in accordance with
generally accepted accounting principles consistently
applied, and fully and fairly presented the financial
condition of the Borrower and the Guarantor at the dates
thereof and the results of operations for the periods
covered thereby, and as of the date of this Loan Agreement
there have been no material adverse changes in the
financial condition or business of the Borrower or the
Guarantor.
4.7 Taxes. Except as otherwise permitted by this
Loan Agreement or by the Loan Documents, the Borrower and
the Guarantor 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 Loan Agreement 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 Loan Agreement, 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.
4.8 Compliance with Laws. Except to the extent that
the failure to comply would not materially interfere with
the conduct of the business of the Borrower or the
Guarantor or have a materially adverse effect on the
ability of the Borrower or the Guarantor to perform their
respective obligations under the Loan Documents, the
Borrower and the Guarantor have complied with all
applicable Laws in respect of: (1) the conduct of their
respective businesses; and (2) the use, maintenance, and
operation of the real and personal properties owned or
leased by them in the conduct of their respective
businesses.
4.9 No Hazardous Materials. To the best of the
Borrower's knowledge and without the benefit of any
investigation on the Borrower's part other than the
environmental audit described in this Loan Agreement, there
are not chemical substances, pollutants, contaminants or
hazardous or toxic substances, materials or wastes
(collectively, "hazardous materials") at the Premises where
such would have a materially adverse effect on the ability
of the Borrower or the Guarantor to perform their
respective obligations under the Loan Documents.
4.10 No Litigation. No Litigation or other proceeding
is pending or threatened against the Borrower or the
Guarantor or the Premises which, if determined adversely to
the Borrower or the Guarantor, would have a materially
adverse effect on the ability of the Borrower or the
Guarantor to perform their respective obligations under the
Loan Documents.
4.11 Good Title. The Borrower has good and insurable
title to the Land and the Premises, subject only to such
exceptions or encumbrances as are shown in that certain
Preliminary Report dated January 24, 1997, issued by Title
Guaranty of Hawaii, Inc. with respect to the Land, and the
encroachments shown in the surveys of the Land made by
Wayne M. Teruya dated February 9, 1993 (Lot 12), March 6,
1993 (Lot 13), April 6, 1993 (Lot 13212), April 8, 1993
(Lot 13200), and April 16, 1993 (Lots 5 and 13811), as
revised, and good and marketable title to all other assets
subject only to such exceptions or encumbrances as to not
materially adversely affect its ability to perform its
obligations under the Loan Documents.
4.12 Pension Plans. All employee pension benefit
plans ("Pension Plans" as defined in the Employee
Retirement Income Security Act of 1974, as amended
("ERISA") and subject to Title IV of ERISA, of the Borrower
and the Guarantor meet the minimum funding standards of 302
of ERISA, and no Reportable Event, as defined in ERISA, or
non-exempt prohibited transaction, as described in Section
406 of ERISA, has occurred in respect of any such Pension
Plans that could reasonably result in material liability of
the Borrower or the Guarantor in excess of any liability
disclosed in the Financial Statements.
4.13 Statements True. No representation or warranty
by the Borrower contained in this Loan Agreement or in any
certificate or other document furnished by the Borrower
pursuant to this 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.
All representations and warranties stated in this
Article shall survive until all the Obligations shall have
been satisfied in full.
Article 5. Affirmative Covenants
The Borrower covenants to and agrees with the Lender
that, so long as any of the Obligations shall remain
unsatisfied or any commitments hereunder remain
outstanding, the Borrower will comply, and will cause the
Guarantor to comply, with the following covenants;
5.1 Financial Statements. The Borrower will furnish
or cause to be furnished to the Lender:
5.1.1 Within ten (10) Domestic Business Days after
the same are required to be filed with the Securities and
Exchange Commission, copies of the Guarantor's 10-K and 10-
Q statements;
5.1.2 Within 90 days after the close of each
quarterly accounting period in each fiscal year, (a)
summary schedules of income and cash flow for the
Borrower's business, (b) a statement of operations of the
Borrower for such quarterly period; (c) a balance sheet of
the Borrower as of the end of such quarterly period;
(subject to year-end audit adjustment and certified by the
president or any vice president of the Borrower to have
been prepared in accordance with generally accepted
accounting principles consistently applied by the Borrower,
except for any inconsistencies explained in the
certificate, all of which reports shall be in the form of
Exhibit 5.1.2 attached hereto), and (d) a certification by
the president or any vice president of the Borrower, in
reasonable detail, or any vice president of the Borrower,
in reasonable detail, evidencing the Borrower's compliance
at the end of such quarterly accounting period with the
covenants contained in Articles 5 and 6 of this Loan
Agreement;
5.1.3 Within 120 days after the close of each
fiscal year: (a) a statement of cash flow of the Borrower
for such fiscal year; (b) a statement of operations of the
Borrower for such fiscal year; (c) a balance sheet of the
Borrower as of the end of such fiscal year; (all of the
aforementioned financial statements to be certified by
independent certified public accountants selected by the
Borrower; and (d) a certification by the president or any
vice president of the Borrower, in reasonable detail,
evidencing the Borrower's compliance at the end of such
fiscal year with the covenants contained in Articles 5 and
6 of this Loan Agreement; and
5.1.4 By March 31 of each year, copies of the
Borrower's three year summary forecast of cash receipts and
expenditures for the Borrower's business, prepared on a
calendar year basis.
5.2 Maintain Assets in Good Order. The Borrower will
maintain its 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 and in the normal course of business, 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 5.3 of this
Loan Agreement.
5.3 Pay Taxes. The Borrower will pay or cause to be
paid when due, all taxes, assessments and charges or levies
imposed upon it or on any of its property or which it is
required to withhold and pay over, except where contested
in good faith by appropriate proceedings with adequate
reserves therefore having been set aside on its books, and
the Borrower will pay or cause to be paid 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 this
Loan Agreement and the Note by reason of any existing or
hereafter enacted federal or state statute.
5.4 Inspection. Subject to Section 8.7 of this Loan
Agreement, the Borrower will, when reasonably requested in
writing so to do, make available for inspection by the
Lender's duly authorized representatives any of its
properties and Records, and will furnish to the Lender any
information regarding its business affairs and financial
condition within a reasonable time after written request
therefore.
5.5 Maintain Corporate Existence. The Borrower will
take all necessary steps to preserve its corporate
existence and to comply with all present and future Laws
applicable to it in the operation of its businesses and to
comply with all material agreements to which it is subject.
5.6 Notice of Default. The Borrower will notify the
Lender 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, would
become such an Event of Default, or of the failure of the
Borrower or the Guarantor to observe any of their
respective material undertakings under this Loan Agreement.
5.7 Fund Pension Plans. The Borrower will: (1) fund
all its Pension Plans (defined in Section 4.12) in
accordance with no less than the minimum funding standards
of 302 of ERISA; and (2) promptly advise the Lender of the
occurrence of any Reportable Event or nonexempt prohibited
transaction as described in Section 406 of ERISA, in
respect of any such Pension Plans that could result in
material liability of the Borrower or the Guarantor.
Article 6. Negative Covenants.
6.1 No Reorganization. The Borrower will not,
without the prior written consent of the Lender, enter into
any merger, consolidation, reorganization or
recapitalization, or reclassify its capital stock, or
substantially change the nature of its business as now
conducted.
6.2 Disposition of Assets. The Borrower will not,
without the prior written consent of the Lender, sell,
transfer, lease or otherwise dispose of all or any material
part of its assets except (a) in the ordinary course of
business as now conducted, (b) for a lease of the
restaurant area within the clubhouse located on the
Premises, provided the lease if for market rental rates and
on customary terms for a restaurant lease of similar size,
(c) for payment to Guarantor or any Affiliate for inter-
company services rendered by Guarantor or such Affiliate to
the Borrower in the ordinary course of Borrower's business,
or (d) stockholder distributions in compliance with Hawaii
law.
6.3 No Untrue Statements. Neither the Borrower nor
the Guarantor will knowingly furnish to the Lender any
certificate or other document that will knowingly 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.
6.4 Margin Stock. Neither the Borrower nor the
Guarantor will directly or indirectly apply any part of the
proceeds of any of the Loan 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.
6.5 No Other Borrowings. The Borrower will not,
without the prior written consent of the Lender, incur,
agree to incur, assume, or in any manner become liable in
respect of indebtedness (recourse or nonrecourse) other
than (a) indebtedness evidenced by the Note and this Loan
Agreement, (b) indebtedness secured by a security interest
or encumbrance permitted under Section 6.6 of this Loan
Agreement, (c) indebtedness under the COLAS, and (d)
unsecured indebtedness incurred and paid in the ordinary
course of the Borrower's business.
6.6 No Other Encumbrances. The Borrower will not,
without the prior written consent of the Lender,
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 (for
purposes of this Section 6.6, encumbrances incurred or
created in the ordinary course of the business shall be
deemed to include (a) liens for taxes and governmental (or
quasi-governmental) assessments or similar charges that are
not yet due and payable, (b) 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,
(c) liens of mechanics, materialmen, warehousemen, carriers
or other similar liens that are not yet due and payable,
(d) 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 $50,000 for all
such pledges or deposits in the aggregate for the Borrower,
(e) retained liens or security interest of equipment
lessors on equipment leased under equipment leases, and (f)
retained liens or security interests of equipment vendors
securing payment of the purchase price of such equipment
purchased on time by the Borrower.
Article 7. Default
7.1 Events of Default. The occurrence of any one or
more of the following events shall constitute an Event of
Default under this Loan Agreement and the Note:
7.1.1 Failure to Pay. The Borrower shall fail to
pay when due any principal or interest or fee or other
charge payable under this Loan Agreement or the Note and
such failure shall continue for a period of five Domestic
Business Days.
7.1.2 Breach of Covenant. The Borrower or the
Guarantor shall fail to observe or perform any other
obligation to be observed or performed by it under this
Loan Agreement or the Note and such failure from the
Lender; or (2) the Lender is notified of such failure
pursuant to the provisions of Section 5.6 of this Loan
Agreement, whichever is earlier. Notwithstanding the
foregoing, no Event of Default shall be deemed to have
occurred if, with respect to any default which is of such
character as to require more than 30 days to cure, the
Borrower or the Guarantor shall have commenced such cure
within such 30-day period and shall thereafter diligently
and continuously pursue appropriate steps to cure such
default, and the same shall have been completely remedied
within 90 days after the date that the Borrower has been
notified of such default, provided during the pendency of
such cure period the default will not subject the Mortgaged
Properties or any part thereof to forfeiture, loss or
material damage or the reasonable probability thereof.
7.1.3 False Statements. Any Financial Statement,
other statement, representation, warranty or certificate
made or furnished by the Borrower or the Guarantor to the
Lender in connection with this Loan Agreement, or as an
inducement to the Lender to enter into this Loan Agreement,
or in any separate statement or document delivered pursuant
to the provisions of this Loan Agreement, shall be
materially and knowingly false, incorrect, or incomplete
when made or delivered.
7.1.4 Inability to Pay Debts. The Borrower or the
Guarantor shall admit in writing its inability to pay its
debts as they mature, or shall make an assignment for the
benefit of any of its creditors.
7.1.5 Involuntary Bankruptcy. A decree or order
for relief shall be entered by a court having jurisdiction
in respect of the Borrower or the Guarantor 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, sequestrate (or similar official) shall
be appointed for the Borrower or Guarantor 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.
7.1.6 Voluntary Bankruptcy. The Borrower or the
Guarantor 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
Guarantor 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 the Guarantor or any substantial part of its
property.
7.1.7 Judgments. A final judgment which alone or
with other outstanding final judgments against the Borrower
exceeds $1,000,000, or alone or with other outstanding
final judgments against the Borrower and/or the Guarantor
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 discharged within 60 days after
expiration of any such stay.
7.1.8 Guarantor. If the Guarantor should deny
liability under or attempt to rescind or revoke its
Guaranty for any reason whatsoever, or if the Guarantor
should become insolvent or admit in writing its inability
to meet its debts as they become due or if bankruptcy,
insolvency or similar proceedings should be commenced by or
against the Guarantor, unless, within 120 days after any
such event, its Guaranty shall have been superseded by a
new guaranty (in the form of the original Guaranty) issued
by one or more other guarantors reasonably acceptable to
the Lender.
7.2 Acceleration. Immediately and without notice
upon the occurrence of an Event of Default specified in the
foregoing subsections 7.1.4 through 7.1.8, or at the option
of the Lender, but only upon notice by the Lender to the
Borrower, upon the occurrence of any other Event of
Default, all of the Obligations shall immediately become
due and payable without further action of any kind.
Immediately and without notice upon the occurrence of any
Event of Default specified in Section 7.1, the Lender shall
have no obligation to make any further disbursements of the
Loan under this Loan Agreement.
Article 8. Miscellaneous
8.1 Further Assurance. From time to time, the
Borrower and the Lender will execute and deliver such
additional documents and provide such additional
information as may be reasonably required to carry out the
intent of this Loan Agreement.
8.2 Reappraisals. The Lender shall have the right to
obtain at the Borrower's expense reappraisals of the
Mortgaged Properties, from any licensed or certified
appraiser designated by the Lender, from time to time (a)
whenever a reappraisal is required by any law, rule or
regulation applicable to the conduct of the Lender's
business, or is requested or directed by any governmental
authority charged with the administration of such law, rule
or regulation or the Lender's compliance therewith, whether
or not such request or direction has the force of law, or
(b) whenever the Lender had reasonable cause to believe
that the current Loan-to-value ratio (i.e., the quotient
obtained by dividing the total amount of the Loan by the
current fair market value of the Mortgaged Properties)
exceeds 70%, or (c) whenever deemed appropriate by the
Lender, following the occurrence or during the continuance
of any Event of Default. The Lender will give the Borrower
notice that it is having or is required to have the
Mortgaged Properties reappraised, the reasons for the
reappraisal, and a copy of the appraisal when completed.
8.3 Enforcement and Waiver by the Lender. The Lender
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 the
Lender in refraining form so doing at any time or times.
The failure of the Lender at any time or times to enforce
its rights under such provisions, 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 the Lender shall preclude the further or
other exercise thereof. All rights and remedies of the
Lender 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.
8.4 Expenses of the Lender. The Borrower will, on
written demand accompanied by appropriate statements,
reimburse to the Lender all reasonable expenses, including
the reasonable fees and expenses of legal counsel for the
Lender, incurred by the Lender in connection with the
negotiation, preparation, 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.
8.5 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 five
(5) Domestic Business Days has elapsed from the date of the
deposit of the same 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:
If to the Borrower:
Waikele Golf Club
700 Bishop Street, Suite 2100
Honolulu, Hawaii 96813
Attention: Legal Department
Telecopy No.: (808) 543-8528
If to the Lender:
Bank of Hawaii
CIPLD, 366
P.O. Box 2900
Honolulu, Hawaii 96846
Attention: Administrative Officer
Telecopy No.: (808) 538-4060
8.6 Waiver by the Borrower. To the maximum extent
permitted by applicable Laws, the Borrower waives notice
and opportunity to be heard, after acceleration in the
manner provided above in Section 7.2, before exercise by
the Lender of the remedy or setoff or of any other remedy
or procedure permitted by any applicable Laws or by any
agreement with the Borrower or the Guarantor, and, except
where specifically required by the Loan Documents or by any
applicable Laws, notice of any other action taken by the
Lender.
8.7 Disclosure of Information. The Borrower consents
to the Lender's disclosure to other lenders participating
or considering participating in the Loan 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 the Guarantor. The
Lender agrees that is shall maintain confidentiality with
regard to nonpublic information concerning the Borrower and
Guarantor obtained from the Borrower, provided that the
Lender shall not be precluded from making disclosure
regarding such information: (i) to their own respective
counsel, accountants and other professional advisors, (ii)
in response to a subpoena or order of a court of
governmental agency, (iii) to any entity participating or
considering participating in any credit made under this
Loan Agreement, (iv) to any guarantor or subordinated
lender with respect to this Loan Agreement and whose
identity has been previously disclosed in writing to the
Borrower, or (v) as required by law or applicable
regulation.
8.8 Applicable Law. The substantive Laws of the
State of Hawaii shall govern the construction of this Loan
Agreement and the Note and the rights and remedies of the
parties hereto and thereto.
8.9 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 Lender, the Lender and the
Borrower concerning the subject matter hereof.
8.10 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 the Lender, 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 Loan, unless in writing signed by the
Lender.
8.11 Assignment.
8.11.1 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 Lender.
8.11.2 At any time and from time to time, Lender may
sell, transfer, assign or grant participations in the Loan
and in any of the Loan Documents. Borrower authorized the
Lender to forward to each participant and prospective
participant all documents and information, including
without limitation financial information, relating to the
Loan as Lender determines to be necessary or desirable,
whether furnished by Borrower or any Guarantor. Borrower
shall have the right to approve any assignment of the Loan,
which approval will not be unreasonably withheld or
delayed. Borrower shall not have any approval right as to
a participation. If Lender makes an assignment or
participation Lender will notify Borrower and Guarantor
thereof and will provide the identity and contact person
and address of such assignee or participant.
8.12 Severability. If any provisions 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.
8.13 Section Headings. The titles of Sections appear
herein as a matter of convenience only, and shall not
affect the construction of this Loan Agreement or any
provision hereof.
8.14 Survival of Certain Payment Obligations. The
obligations of the Borrower to indemnify the Lender
against, and pay an reimburse to the Lender, the costs and
expenses referred to in Section 8.4 of this Loan Agreement
(a) shall survive the repayment of the Loan and termination
of this Loan Agreement to the extent such losses, costs and
expenses are specifically billed to the Borrower, within 60
days after full repayment of the Loan and termination of
this Agreement, and (b) shall not survive the repayment of
the Loan and termination of this 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 Loan and termination of this Loan
Agreement.
8.15 Arbitration. If Borrower or Lender request any
controversy or claim between Borrower and Lender arising
out of or relating to the Loan will be decided by
arbitration conducted in the State of Hawaii in accordance
with Chapter 658 of the Hawaii Revised Statutes and the
Commercial Arbitration Rules of the American Arbitration
Association. The arbitrator's will apply any applicable
statute of limitations and will determine any controversy
concerning whether an issue is arbitrable. Judgment on any
arbitration award may be entered in any court having
jurisdiction. The prevailing (winning) party will be
entitled to recover its reasonable attorney's fees and
costs. This agreement to arbitrate shall not limit or
restrict the right, if any, of either party, whether
before, during or following any arbitration proceeding, (a)
to exercise self help remedies such at setoff, (b) to
foreclose the Mortgage lien or other security interest in
real or personal property collateral, or (c) to obtain
provisional or ancillary remedies such as the appointment
of a receiver of the Mortgaged Properties, or injunctive
relief from a court having jurisdiction, and either party
may seek those remedies without waiving the right to submit
the controversy or claim in questions to arbitration.
8.16 Limitation of Liability. Neither any Affiliate
other than the Borrower and Guarantor nor any present or
future advisor, trustee, director, officer, partner,
employee, beneficiary, shareholder, participant or agent of
or in the Borrower, the Guarantor or any Affiliate
(collectively, the "Related Persons") shall have any
liability, directly or indirectly, under or in connection
with the Loan Documents, or any amendment or amendments to
any of the Loan Documents made at the time or times,
heretofore or hereafter, and the Lender and its successors
and assigns and, without limitation, all other persons and
entities, shall look solely to the Borrower and the
Guarantor for the payment of any claim or for any
performance of any obligation under the Loan Documents, and
the Lender hereby waives any and all claims of personal
liability against all Related Persons; PROVIDED, HOWEVER,
that the foregoing limitation and waiver shall not prohibit
the Lender from pursuing any tort action for recovery of
losses or damages suffered by the Lender and arising out of
the conversion, waste, fraud, misappropriation or other
tortious or intentional acts of any such Related Persons.
The limitation of liability provided in this Section is in
addition to, and not in limitation of, any limitation on
liability applicable to any such Related Persons provided
by law or by any other contract, agreement or instrument.
The terms and provisions of this Section shall prevail over
any conflicting terms and provisions of any of the Loan
Documents.
8.17 Execution in Counterparts. This Loan Agreement
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.
Article 9. Consent of Guarantor
The Guarantor does hereby consent to and ratify the
agreements set forth in this Loan Agreement, the Note, and
the Amendment and all the terms and conditions of this Loan
Agreement, the Note, and the Amendment, and agrees that the
absolute and unconditional guarantee and agreements of the
Guarantor to the Lender under the Guaranty shall apply with
full force and effect to this Loan Agreement, the Note, the
Amendment, and the other Loan Documents as modified by this
Loan Agreement, the Note and the Amendment, and confirms
that its Guaranty remains in full force and effect and
applies to all of the Borrower's obligations under the Loan
Documents, as amended.
IN WITNESS WHEREOF, the Borrower, Guarantor, and the
Lender have duly executed this Loan Agreement
WAIKELE GOLF CLUB, INC. AMFAC/JMB HAWAII,
INC.
By________________________
By_____________________
Its Senior Vice President Its Vice President
By________________________ By_____________________
Its (Seal) Its
Borrower Guarantor
BANK OF HAWAII
By________________________
Its Vice President
Lender
AMENDED AND RESTATED NOTE
This Amended and Restated Note ("Note") dated February
____, 1997 is made by WAIKELE GOLF CLUB, INC., a Hawaii
corporation (the "Maker") in favor of BANK OF HAWAII, a
Hawaii banking corporation (the "Bank")
Recitals:
(a) Maker executed and delivered to the Bank a
promissory note dated September 28, 1993 payable to the
Bank's order in the original principal amount of
$10,000,000 (the "Original Bank Note").
(b) Maker executed and delivered to Orix USA
Corporation a second promissory note also dated September
28, 1993 payable to the order of Orix USA Corporation in
the original principal amount of $10,000,000 (the "Original
Orix Note").
(c) Bank has purchased the Original Orix Note, and is
the holder of the Original Bank Note and the Original Orix
Note (collectively the "Original Notes").
(d) The Original Notes are secured by, among other
instruments, a Mortgage, Security Agreement and Financing
Statement dated September 28, 1993, filed in the Office of
the Assistant Registrar of the Land Court of the State of
Hawaii as Land Court Document No. 2072517 noted on Transfer
Certificate of Title Nos. 418,785 and 428,219, and recorded
in the Bureau of Conveyances of the State of Hawaii as
Document No. 93-162322 ("Mortgage") and a Financing
Statement recorded in said Bureau as Document NO. 93-12323
("UCC-1").
(e) The Original Notes, the Mortgage, the UCC-1 and
the other instruments evidencing, securing or otherwise
relating to the Original Notes are sometimes hereinafter
called the "Loan Documents."
(f) The Maker has requested the Bank to increase the
principal amount of the loan outstanding as of the date of
this Note to $25,000,000 and to revise certain other terms
of the Original Notes and the other Loan Documents.
(h) The Maker and the Bank have entered into an
Amendment to Mortgage and Other Loan Documents dated the
same date as this Note (the "Amendment").
Amended and Restated Note:
For good and valuable consideration received by the
Maker, the receipt and sufficiency of which are hereby
acknowledged by the Maker, subject to and effective upon
the satisfaction of the conditions set forth in the
Amendment, the Original Notes are combined into one
promissory note, and amended and restated in their entirety
to read as follows, and all references in the Mortgage and
other Loan Documents to the Original Notes are deemed to
refer to this Amended and Restated Note:
$25,000,000 February ___, 1997
Honolulu, Hawaii
WAIKELE GOLF CLUB, INC., a Hawaii corporation (the
"Maker"), hereby promises to pay to the order of BANK OF
HAWAII, a Hawaii banking corporation (the "Bank"), at the
Bank's principal office at 111 South King Street, Honolulu,
Hawaii 96813, or in such other manner and at such other
place as the holder of this Note bay from time to time
designate in writing delivered to the Maker, at the times
set forth herein, (a) the principal amount of $25,000,000,
or, if less, so much thereof as may have been disbursed by
the Bank to or for the account of the Maker and shall
remain outstanding under this Note, and (b) interest on
outstanding balances of principal under this Note at the
rate or rates described below.
1. Loan Evidenced by this Note. This Note evidences
the Loan made or to be made or deemed to be made by the
Bank under the Amended and Restated Term Loan Agreement
("Loan Agreement") dated as of the date of this Note,
between the Maker, as "Borrower" and the Bank, as "Lender".
Capitalized terms used in this Note and other otherwise
defined in this Note have the meanings given to them in the
Loan Agreement.
2. Interest Rate. Outstanding balances of principal
under this Note, prior to the maturity (whether by
acceleration or otherwise) of the indebtedness evidenced by
this Note, shall bear interest from the date of this Note
until the fifth anniversary date of this Note at a fixed
rate for the applicable LIBOR Interest Period of Two
hundred (200) basis points (i.e., two percentage points)
above the applicable LIBOR Rate, and from the fifth
anniversary date to the tenth anniversary date of this
Note, at a fixed rate for the applicable LIBOR Interest
Period of Two Hundred Twenty-five (225) basis points (i.e.,
two and twenty-vie hundredths percentage points) above the
applicable LIBOR Rate.
Any provision contained in this Note to the contrary
notwithstanding, if in respect of any LIBOR Interest Period
deposits in United States Dollars (in the applicable
amounts) are not being offered to the Bank in the relevant
market for such LIBOR Interest Period, the Bank shall
forthwith give notice thereof to the Maker, whereupon
(until the Bank notifies the Maker that the circumstances
giving rise to such suspension no longer exist) the
calculation of interest under this Note on the basis of a
LIBOR Rate shall be suspended, and interest shall be
calculated at a floating rate equal to the Base Rate in
effect from time to time.
3. Computation of Interest. Interest hereunder
shall be computed on the basis of a year of 360 days and
paid for the actual number of days elapsed.
4. Payments of Interest and Principal. The Maker
shall pay principal and interest monthly on the first day
of each month for the month immediately preceding, as
follows: (a) accrued interest calculated on the basis of
the applicable LIBOR Rate (or if applicable under paragraph
2 of the floating Base Rate) then in effect on outstanding
balances of principal under this Note, together with (b)
equal principal amortization payments in the amount of
1/12th of the total principal amount payable during each
one-year increment of the term of the Loan, (i.e., the
first one-year increment commencing on the date of this
Note and each one-year increment thereafter commencing on
the anniversary date of this Note), computed on the basis
of (i) the interest rate in effect as of first day of each
such increment, (ii) the principal balance of the Note
outstanding as of the first date of each such increment,
and (iii) the then remaining balance of an initial 30-year
amortization schedule, e.g. a 30-year amortization schedule
in the first increment commencing on the date of this Note,
a 29-year amortization schedule in the second increment
commencing on the first anniversary date of this Note, etc.
The Maker shall repay the entire outstanding balance
of principal hereunder together with all accrued and then
unpaid interest on the tenth anniversary date of this Note
(i.e., February ____, 2007).
5. Voluntary Prepayments. The Maker shall have the
right from time to time and at any time, upon not less than
two full Domestic Business Days' prior written notice to
the Bank, to make voluntary prepayments of principal
outstanding under this Note, without prepayment penalty, in
an amount not less than $250,000 (and only in) integral
multiples of $50,000, provided, however, if the Maker
prepays any principal amount or otherwise makes any payment
of principal on any day other than the last day of the
applicable LIBOR Interest Period, the Maker shall reimburse
to he Bank, on demand, the expenses and funding losses
incurred by the Bank as a result of such prepayment as
reasonably determined by the Bank. Should any such
voluntary prepayment be made, there will be no changes in
the maturity date of this Note or in the amount of the
monthly payments unless the holder of this Note agrees in
writing to those changes.
6. Payment Dates. Whenever any payment of principal
of, or interest on, any amount hereunder shall be due on a
day which is not a LIBOR Business Day, the date for payment
thereof shall be extended to the next succeeding LIBOR
Business Day unless as a result thereof if would fall in
the next calendar month, in which case it shall be advanced
to the next preceding LIBOR Business Day. If the date for
any payment of principal is extended by operation of law or
otherwise, interest shall be payable for such extended
time.
7. Illegality. If, after the date of this Note, the
adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or
administration thereof by any governmental authority,
central bank or comparable agency charged with the
interpretation or administration thereof, compliance by the
Bank with any request or directive (whether or not having
the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for
the Bank to make, maintain or fund loans in respect of
which interest is or is to be calculated on the basis of a
LIBOR Rate, the Bank shall forthwith so notify the Maker,
whereupon until the Bank notifies the Maker that the
circumstances giving rise to such suspension no longer
exist, the calculation of interest under this Note on the
basis of a LIBOR rate shall be suspended, and interest
shall be calculated on the basis of the floating Base Rate
as provided in paragraph 2 above.
8. Increased Costs.
8.1 If, after the date of this Note, the adoption of
any applicable law, rule or regulation, or any change
therein or any change in the interpretation or
administration thereof by any governmental authority,
central bank or comparable agency charged with the
interpretation or administration thereof or compliance by
the Bank with any request or directive (whether or not
having the force of law) of any such authority, central
bank or comparable agency:
(a) Shall subject the Bank to any tax, duty or
other charge in respect of LIBOR Rate loans or shall
change the basis of taxation of payment to the Bank
of the principal of or interest on LIBOR Rate Loans
(except for changes in the rate of tax on the overall
net income or gross income of the Bank); or
(b) Shall impose, modify or deem applicable any
reserve (including, without limitation, any imposed
by the Board of Governors of the Federal Reserve
System), special deposit or similar requirement
against assets of, deposits with or for the account
of, or credit extended by, the Bank;
and the result of any of the foregoing is to increase the
cost to the Bank of permitting interest hereunder to be
calculated on the basis of a LIBOR Rate, or to reduce the
amount of any sum received or receivable by the Bank under
this Note, by an amount deemed by the Bank to be material,
then, within fifteen Domestic Business Days after demand by
the Bank, supported by a certification showing in
reasonable detail the calculation and amount of such
increased costs or reduction, the Maker will pay to the
Bank such additional amount or amounts as will compensate
the Bank for such increased cost or reduction of
receivables. The Bank shall promptly notify the Maker of
any event of which it has knowledge, occurring after the
date of this Note, which would entitle the Bank to
compensation pursuant to this Paragraph 8.
8.2 A certificate of the Bank claiming compensation
under this paragraph 8 and setting forth the additional
amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In
determining such amount, the Bank may use any reasonable
averaging and attribution methods.
9. Interest After Dates Fixed for Payment or
Prepayment. Any provision contained in this Note to the
contrary notwithstanding, and at the option of the holder
of this Note, if any payment of principal or interest shall
not be made within five days after the same becomes due,
interest shall be payable on the principal portion of such
defaulted payment and, if permitted by law, on the interest
portion of such defaulted payment, at a rate one and one-
half percentage points above the rate otherwise applicable
thereto under paragraph 2 of this Note (the "Default Rate")
and, if any such payment of principal or interest shall not
be made for 30 days after the same becomes due, interest
shall be payable at the Default Rate on the whole of the
outstanding principal balance of this Note.
10. Acceleration. If any "Event of Default" (as that
term is defined in Article 7 of the Loan Agreement) shall
occur and be continuing, the entire outstanding principal
balance and accrued interest thereon, together with (to the
extent permitted under applicable law) costs and reasonable
attorneys' fees incurred by the Bank or by the holder of
this Note in collecting or enforcing payment, shall become
due and payable, anything contained in this Note to the
contrary notwithstanding, time being of the essence, (a)
immediately and without notice upon the occurrence of an
Event of Default specified in any one of Sections 7.1.4
through 7.1.8 of the Loan Agreement, and (b) at the option
of the Bank, but only upon written notice to the Maker,
upon the occurrence of any other Event of Default.
11. Definitions. Wherever any of the following terms
is used in this Note:
11.1 "Base Rate" means the primary index rate
established by the Bank from time to time in good faith in
the ordinary course of its business and with due
consideration of the money market, and published by
intrabank circular letters or memoranda for the guidance of
its loan officers in pricing all of the Bank's loans in
respect of which the interest rate floats with or above the
Base Rate. (If Bank's "Base Rate" is discontinued and
replaced by a comparable rate then, for all purposes of
this Note, the comparable rate shall be substituted in
place of the discontinued Base Rate).
11.2 "Domestic Business Day" means any day except a
Saturday, Sunday or other day on which commercial banks in
the State of Hawaii are authorized by law to close.
11.3 "LIBOR Business Day" means any Domestic Business
Day on which commercial banks are open for domestic and
international business (including dealings in U.S. dollar
deposits) in the interbank markets.
11.4 "LIBOR Interest Period" means a period of three
months; provided, however, that any LIBOR Interest Period
which would otherwise end on a day that is not a LIBOR
Business Day shall be extended to the next succeeding LIBOR
Business Day.
11.5 "LIBOR Rate" means, for each LIBOR Interest
Period, a reserve-adjusted rate of interest per annum
rounded upward, if necessary, to the nearest 4 decimal
places, at which U.S. dollar deposits in immediately
available funds are offered to major banks in the interbank
market at 11:00 a.m., New York time, on the day which is
two LIBOR Business Days prior to the commencement of a
LIBOR Interest Period. The Bank shall establish the LIBOR
Rate for each LIBOR Interest Period based on offered rates
as reported by reporting services generally used by the
Bank. Such offered rates are quoted based on both the
amount of the LIBOR Rate loan and the LIBOR Interest
Period. The LIBOR Rate shall incorporate the LIBOR Reserve
Requirement.
11.6 "LIBOR Reserve Requirement" means the then
maximum effective rate per annum (expressed as a
percentage), as determined solely by the Bank. of the
reserve requirements imposed by any regulatory body, such
as those pursuant to Regulation D of the Board of Governors
of the Federal Reserve System, on eurocurrency liabilities
of U.S. banks having a maturity equal to the term of the
LIBOR Interest Period, as adjusted by the Bank for expected
changes in such percentage during the applicable LIBOR
Interest Period.
12. Miscellaneous.
12.1 The Bank shall be and is authorized and directed
to maintain records of account regarding the Loan,
evidencing the date and principal amount of each advance of
Loan proceeds under this Note and the date and amount of
each repayment and prepayment of principal and payment of
interest received from the Maker. Such records shall
constitute prima facie evidence of the making and repayment
of such advances and of the payment of such interest.
However, neither the Bank's failure to maintain such
records not the Bank's making of erroneous notations in
such records shall affect the Maker's obligation, which the
Maker hereby accepts, to repay outstanding principal
balances of all advances actually made pursuant to the Loan
Agreement and evidenced by this Note, together with accrued
interest thereon at rates stated in this Note.
12.2 All payment under this Note shall be made in
United States dollars at the Bank's principal office in
Honolulu, Hawaii or at such place as the holder of this
Note may designate in writing.
12.3 The holder of this Note is entitled to the
benefits of the Loan Agreement
12.4 This Note is to be construed in accordance with,
and governed by, the laws of Hawaii.
12.5 As to this Note the Maker and all other who may
be or become liable for all or any part of the obligations
evidenced by this Note waive valuation and appraisement,
presentment, protest, notice, demand and notice of
dishonor, and consent to any and all releases or
substitutions of security and consent to any number of
renewals or extensions of time for the payment hereof or
any other indulgence or indulgences at any time or from
time to time granted to the undersigned or to any person
who at any time may become liable for all or and part of
the obligations evidenced by this Note.
IT WITNESS WHEREOF, the Maker has caused this Note to
be executed and delivered by its duly authorized officers,
as of the day and year first above written.
WAIKELE GOLF CLUB, INC.
By ____________________
Its
By ____________________
Its
LAND COURT SYSTEM REGULAR SYSTEM
AMENDMENT TO MORTGAGE AND OTHER LOAN DOCUMENTS
This Amendment to Mortgage and other Loan Documents
("Amendment") dated February 4, 1997, is by and among
WAIKELE GOLF CLUB, INC., a Hawaii corporation (the
"Borrower"), and BANK OF HAWAII, a Hawaii corporation (the
"Lender").
Recitals:
(a) Lender, ORIX USA Corporation, a Delaware
corporation ("Orix"), and Borrower entered into a Term Loan
Agreement dated September 28, 1993 whereby Lender and Orix
agreed to lend to Borrower, and Borrower agreed to borrow
from Lender and Orix, an aggregate principal amount of
$20,000,000 (the "Loan"), upon the terms and conditions set
forth in the Term Loan Agreement (the "Original Loan
Agreement").
(b) Pursuant to the Original Loan Agreement, Borrower
executed and delivered to Lender a promissory note dated
September 28, 1993 payable to the Lender's order in the
original principal amount of $10,000,000 (the "Original
Bank Note"), and executed and delivered to Orix a second
promissory note also dated September 28, 1993 payable to
the order of Orix in the original principal amount of
$10,000,000 (the "Original Orix Note").
(c) The Original Bank Note and the Original Orix Note
are collectively called the "Original Notes".
(d) The Original Notes are secured by, among other
instruments:
(1) a Mortgage, Security Agreement and Financing
Statement dated September 28, 1993, made by Borrower
in favor of Lender and Orix, filed in the Office of
the Assistant Registrar of the Land Court of the State
of Hawaii and Land Court Document No. 2072517 noted on
TRANSFER CERTIFICATE OF TITLE NOS. 418, 785 and
428,219 and recorded in the Bureau of Conveyance of
the State of Hawaii as Document No. 162322
("Mortgage");
(2) A Financing Statement made by Borrower in
favor of Lender and Orix, recorded in said Bureau as
Document No. 93-162323 ("UCC-1"); and
(3) an Assignment of Lessor's Interest dated
September 28, 1993, made by Borrower in favor of
Lender and Orix, recorded in said Bureau as Document
No. 93-162324 ("Assignment").
(e) The obligations of the Loan are guaranteed by a
Guaranty dated September 28, 1993 (the "Guaranty") made by
the Guarantor (defined in the Original Loan Agreement).
(f) The Original Notes, the Mortgage, the UCC-1, the
Assignment, the Guaranty, and all other instruments
evidencing, securing or otherwise relating to the Loan are
sometimes hereinafter called the "Loan Documents".
(g) Orix assigned to Lender the Original Orix Note,
and Orix's interest in the Mortgage, the UCC-1, the
Assignment, the Guaranty and all other Loan Documents by
Assignment of Loan Documents dated February 4, 1997, filed
in said Office as Land Court Document No. ___________ and
recorded in said Bureau as Document No. __________.
(h) Borrower has requested Lender to increase the
principal amount of the loan to $25,000,000, to revise
certain other terms of the Original Notes and the other
Loan Documents, and to replace the Exhibit A originally
attached to the Loan Documents with the Exhibit A attached
to this Amendment.
Agreements:
For good and valuable consideration received by the
Lender, the Borrower and the Guarantor, the receipt and
sufficiency of which are hereby acknowledged by the Lender,
the Borrower and the Guarantor, it is agreed:
1. Amended Note. The Original Notes are combined
into one promissory note, and amended and restated in their
entirety as set forth in the Amended and Restated Note in
the original principal amount of $25,000,000, dated the
same date as this Amendment, and executed and delivered by
the Borrower to the Lender ("Restated Note"). All
references in the Mortgage and the other Loan Documents to
the Original Notes are hereafter deemed to refer to the
Restated Note.
2. Amended Loan Agreement. Borrower has executed
and delivered to the Lender an Amended and Restated Term
Loan Agreement dated the same date as this Amendment (the
"New Loan Agreement"). All references in the Mortgage and
the other Loan Documents to the Loan Agreement are
hereafter deemed to refer to the New Loan Agreement.
3. Amended Exhibit A. The Exhibit A attached to the
Mortgage, the UCC-1, the Assignment, and any other Loan
Documents, is replaced by the Exhibit A attached to this
Amendment, and the Borrower does hereby mortgage to the
Lender, and its successors and assigns, and does hereby
grant to the Lender and its successors and assigns a
security interest in, all and singular, the property
described in Exhibit A attached to this Amendment, together
with the improvements, fixtures and other real property
interests and personal property described in the Mortgage,
the UCC-1, the Assignment, and the other Loan Documents, as
being appurtenant to, located or constructed on, related
to, arising from, used or to be used in connection with,
etc., the property described in the Exhibit A attached to
such Loan Documents, upon all the terms and conditions set
forth in the Mortgage, UCC-1, Assignment and other Loan
Documents, as fully and as completely as though the Exhibit
A attached to this Amendment had been originally attached
to such Loan Documents. The purpose of substituting the
Exhibit A attached to this Amendment is to use a current
description of the mortgaged and pledged property after the
effect of certain consolidations and subdivisions of the
property originally described in the Loan Documents.
4. Acknowledgment and Waiver. The Borrower
acknowledges that is has no claim, offsets or defenses of
any nature whatsoever against the Lender with respect to
the Original Notes as amended by the Restated Note or the
other Loan Documents, on and as of the date of this
Amendment, and waives any right which it may now have,
known or unknown, to assert and such claim, offset or
defense.
5. Conditions Precedent. This Amendment shall not
become effective until, but shall become effective upon,
the date on which all of the following conditions shall
have been satisfied (or, in lieu of satisfaction, waived in
writing by the Lender, in the Lender's sole discretion):
(a) Lender shall have received a fully executed
original of the Restated Note and such number of fully
executed originals as the Lender may request of this
