SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________ to ___________.
Commission file number: 33-55254-34.
MAUI USA, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 87-0485322
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
505 FRONT STREET, SUITE 233, LAHAINA, MAUI, HAWAII 96761
(Address of principal executive offices) (Zip Code)
(808) 667-0647
(Issuer's telephone number)
(Former name, former address and former
fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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.
<PAGE>
Yes X No
As of August 8, 1996, 8,000,000 shares of Class A Common Stock and
2,000,000 shares of Class B Common Stock of the issuer were outstanding.
<PAGE>
<TABLE>
MAUI USA, INC.
INDEX
<CAPTION>
Page
Number
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statement of Operations - For the
three months ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . .
Statement of Operations - For the
six months ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . .
Statement of Cash Flows - For the
six months ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II - OTHER INFORMATION
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS - JUNE 30, 1996 AND DECEMBER 31, 1995
Maui USA Inc.
Consolidated Balance Sheet
June 30, 1996 December 31, 1995
ASSETS (unaudited)
Cash (including restricted
cash of $8,763
and $1,142,872) $ 49,250 $ 1,202,656
Receivable from County of
Maui 790,719 --
Land under development 16,898,757 15,278,255
Furniture and equipment, 14,446 16,626
net
Other 68,891 74,393
Total Assets $ 17,822,063 $ 16,571,930
LIABILITIES AND
STOCKHOLDERS' EQUITY
Accounts payable $ 1,064,711 $ 615,926
Note payable to Bank 7,500,000 7,500,000
Payable to affiliates 3,866,380 2,990,845
Total liabilities 12,431,091 11,106,771
Stockholders' equity
Common Stock
Class A, $.001 par value; 8,000 8,000
authorized - 25,000,000
shares, outstanding -
8,000,000 shares
Class B, $.001 par value; 2,000 2,000
authorized - 5,000,000
shares, outstanding -
2,000,000 shares
Additional paid-in capital 5,556,149 5,556,149
Accumulated deficit (175,177) (100,990)
Total stockholders' equity 5,390,972 5,465,159
Total liabilities and
stockholders' equity $ 17,822,063 $ 16,571,930
See accompanying notes to consolidated financial statements.
<PAGE>
STATEMENT OF OPERATIONS - FOR THE THREE MONTHS ENDED
JUNE 30, 1996 AND 1995
Maui USA Inc.
Consolidated Statement of Operations
(unaudited)
Three Months Ended June 30,
1996 1995
Interest income $ 10,494 $ 8,732
General and administrative
expenses (50,578) (27,090)
Net loss $ (40,084) $ (18,358)
Loss per common share
Primary $ (0.004) $ (0.002)
See accompanying notes to consolidated financial statements.
<PAGE>
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1995
Maui USA Inc.
Consolidated Statement of Operations
(unaudited)
Six Months Ended June 30,
1996 1995
Interest income $ 22,067 $ 22,316
General and administrative
expenses (96,254) (56,421)
Net loss $ (74,187) $ (34,105)
Loss per common share
Primary $ (0.007) $ (0.003)
See accompanying notes to consolidated financial statements.
<PAGE>
STATEMENT OF CASH FLOWS - FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1995
Maui USA Inc.
Consolidated Statement of Cash Flows
(unaudited)
Six Months Ended June 30,
1996 1995
Cash flows from operating
activities
Net loss $ (74,187) $ (34,105)
Adjustments to reconcile
net loss to net cash
provided by operating
activities
Depreciation and
amortization 2,180 -
Changes in assets and
liabilities
Increase in receivable
from County of Maui (790,719) -
(Increase) decrease in
other assets 5,502 (6,443)
Increase in accounts
payable 448,785 33,711
Net increase in payable
to affiliates 875,535 314,905
Net cash provided by
operating activities 467,096 308,068
Cash flows used in
investing activities
Costs of land under
development (1,620,502) (1,831,864)
Net purchases of
furniture and
equipment - (3,449)
Net cash used in
investing activities (1,620,502) (1,835,313)
Net decrease in cash (1,153,406) (1,527,245)
Cash at beginning of
period
(including restricted
cash of $1,142,872 and
$1,209,368) 1,202,656 1,569,797
Cash at end of period
(including restricted
cash of $8,763 and
$34,548) $ 49,250 $ 42,552
<PAGE>
See accompanying notes to consolidated financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MAUI USA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of management, the unaudited financial information
included in this report contains all adjustments, consisting of normal
recurring adjustments only, necessary for a fair presentation of the
results of operations and cash flows for the interim periods covered
and the financial condition of the Company at the dates of the balance
sheets. The operating results for the interim periods are not
necessarily indicative of the results to be expected for the full
fiscal year. The accounting policies followed by the Company are set
forth in Note 2 to the financial statements included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1995.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121 (FAS 121), "Accounting for the Impairment
of Long-Lived Assets and for Assets to be Disposed Of." FAS 121
requires that long-lived assets and certain identifiable intangibles
held and used by an entity be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Additionally, FAS 121 generally requires
that the long-lived assets and certain identifiable intangibles to be
disposed of be reported at the lower of the carrying amount or fair
value less cost to sell. The adoption of FAS 121 by the Company did
not have a material effect on the unaudited financial information
included in this report.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123 (FAS 123), "Accounting for Stock-Based
Compensation," which establishes financial accounting and reporting
standards for stock-based employee compensation plans. The adoption of
FAS 123 by the Company did not have a material effect on the unaudited
financial information included in this report.
2. MATERIAL COMMITMENTS
Maui USA, Inc. (the "Company") is continuing with its development of
three adjoining parcels of land, totaling approximately sixty acres,
located on the Kahana Ridge in West Maui (the "Project"). The expected
completion date for development of the Project is March 1997. The
Company has approximately $9 million in outstanding commitments related
to a $11,456,000 fixed-price contract with a construction company for
mass grading and infrastructure construction for the Kahana Ridge
Project. In connection with this contract, the Company is required to
place into escrow $4 million to fund the initial costs of construction
of the Project. Additionally, as and when the individual lots are
sold, $50,000 from the sale of each lot is to be paid directly to the
general contractor of the Project.
3. EVENT SUBSEQUENT TO JUNE 30, 1996
On July 25, 1996, the Company entered into an agreement with an
investor whereby the Company received $8 million in financing in the
form of a mortgage loan. In connection with this agreement the Company
repaid half of the $7.5 million loan from the Bank of Bermuda, and the
Bank approved the transfer of the remaining $3.75 million note payable
from 3521 Corp. (an affiliate) to the Company. The remaining Bank of
Bermuda loan is subordinate to the $8 million mortgage loan and fixed
<PAGE>
price contract with the construction company. The Company also used $4
million of the proceeds to fund the general contractor's escrow account
for construction of the Project. The remaining proceeds were used to
pay legal and administrative fees in connection with the financing and
provide additional working capital to the Company.
Pursuant to the terms of the financing agreement, as and when the
individual lots are sold, $100,000 from the sale of each lot is to be
paid directly to the investor until the $8 million advance is paid in
full, together with the specified internal rate of return on the
advance.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
MATERIAL CHANGES IN FINANCIAL CONDITION
Maui USA, Inc. (the "Company") is continuing with its development
of three adjoining parcels of land, totalling approximately sixty acres,
located on the Kahana Ridge in West Maui (the "Project"). The expected
completion date for development of the Project is March 1997. Costs
incurred during the six month period ended June 30, 1996 relate to
development of the infrastructure of the Project and resulted in a
significant increase (approximately $1,620,000) in Land Under Development
(as set forth on the Company's unaudited consolidated balance sheet).
Pursuant to an agreement dated March 30,1995, as amended, between the
Company and the Department of Water Supply of the County of Maui (the
"County"), the County has agreed to fund approximately one-half of the cost
of constructing a water storage tank and transmission pipeline for the
Project. The receivable from the County of Maui represents the County's
pro rata share of the construction costs incurred through June 30,1996 for
the water tank and pipeline. The increase in accounts payable and payable
to affiliates from December 31, 1995 is due principally to the land
development costs incurred in connection with the Project.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Increased general and administrative expenses for the six month
period ended June 30, 1996 compared to the respective corresponding 1995
period relate primarily to non-capitalizable media advertising expenses for
the Project.
<PAGE>
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On July 25, 1996, the Company entered into a financing agreement with
an investor whereby the Company received $8 million in financing in
the form of a mortgage loan. In connection with this agreement the
Company repaid half of an outstanding $7.5 million demand note payable
by 3521 Corp., an affiliate of the Company, to the Bank of Bermuda,
and the Bank of Bermuda approved the transfer of the remaining $3.75
million note payable from 3521 Corp. to the Company. The remaining
Bank of Bermuda loan is subordinate to the $8 million mortgage loan
and to a fixed price contract existing with a construction company
relating to construction of the Project. The Company also used $4
million of the proceeds to fund the general contractor's escrow
account for construction of the Project. The remaining proceeds were
used to pay legal and administrative fees in connection with the
financing and to provide additional working capital to the Company.
Pursuant to the terms of the financing agreement, as and when the
individual lots are sold, $100,000 from the sale of each lot is to be
paid directly to the investor until the $8 million advance is paid in
full, together with the specified internal rate of return on the
advance.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 6.1 Loan Agreement dated July 25, 1996 between the Company
and CFSC Capital Corp. XI.
Exhibit 27 Financial Data Schedule
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: August 13, 1996 MAUI USA, INC.
By: /s/ Myron O. Kirkeby
Myron O. Kirkeby
President, Chief Executive
Officer and Treasurer
<PAGE>
Exhibit Number Description Sequentially
Numbered Pages
Exhibit 6.1 Loan Agreement dated
July 25, 1996 between
the Company and CFSC
Capital Corp. XI
Exhibit 27 Financial Data Schedule
LOAN AGREEMENT
This LOAN AGREEMENT, dated July 25, 1996, is made by and between
MAUI USA INC., a Nevada corporation (the "Borrower"), and CFSC CAPITAL
CORP. XI, a Delaware corporation (the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower desires to obtain from the Lender a loan in
the principal amount of EIGHT MILLION AND NO/100 DOLLARS ($8,000,000.00)
(the "Loan"); and
WHEREAS, subject to and upon the terms and conditions set forth
herein, the Lender is willing to make available to the Borrower such Loan.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants herein provided and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows (capitalized terms used herein shall have the
meaning specified therefor in Section 8.1 hereinbelow, unless otherwise
defined herein):
SECTION 1. AMOUNT AND TERMS OF LOAN
1.1 The Loan. Subject to and upon the terms and conditions set
forth herein, the Lender agrees to make the Loan to the Borrower.
1.2 The Note.
(a) Form of Note. The Borrower's obligation to pay the
principal of, and interest on, the Loan made by the Lender shall be
evidenced by a single promissory note payable to the order of the Lender,
which promissory note shall be in the form of Exhibit A hereto (the "Note")
with blanks appropriately completed in conformity herewith. The Note
shall: (i) be payable to the order of the Lender and be dated the date
hereof; (ii) be in a stated principal amount equal to the Loan; (iii)
mature on the Maturity Date; (iv) bear interest as provided in Section 2.1;
and (v) be subject to the terms of and entitled to the benefits of this
Agreement.
(b) Records of Loan. The Lender shall maintain such records of
its making the Loan, repayment of principal thereof and interest thereon
and other information relating thereto as the Lender shall deem appropriate
in accordance with its customary practices, which records shall constitute
prima facie evidence thereof. Failure to maintain such records shall not
limit or otherwise affect the obligation of the Borrower hereunder or under
the Note, and payments of principal or interest by the Borrower shall not
be affected thereby.
1.3 Purposes. Subject to any and all restrictions herein, the
proceeds of the Loan shall be used by the Borrower solely to refinance a
portion of the existing indebtedness secured by the Property, to pay the
<PAGE>
costs of constructing the Infrastructure and the Offsite Water System, and
to pay costs incurred in connection with this loan transaction.
1.4 Disbursement of Loan Proceeds. Upon closing, the Loan
proceeds shall be disbursed into a closing escrow at Title Guaranty Escrow
of Hawaii, Inc., and from such escrow shall be disbursed in accordance with
written instructions from the Borrower which have been approved by the
Lender, provided that not less than $4,000,000.00 shall be disbursed for
Borrower's account to Citibank N.A. Escrow to be held and disbursed in
accordance with the Escrow Agreement and $3,750,000.00 shall be disbursed
to The Bank of Bermuda, Limited in partial payment of the existing loan
encumbering a portion of the Property.
SECTION 2. INTEREST
2.1 Rate of Interest. The Borrower agrees to pay interest on
the Loan in an amount equal to the greater of: (a) $3,000,000 or (b) an
amount sufficient to provide to the Lender an internal rate of return of
thirty percent (30%) per annum (the "Minimum IRR"); provided that, if there
is an Event of Default under this Agreement, the interest on the Loan shall
be an amount sufficient to provide the Lender an internal rate of return of
fifty percent (50%) per annum over the entire term of the Loan (the
"Default IRR").
2.2 Damages. The Borrower hereby acknowledges and agrees that
(a) the Lender will incur damages and other costs and expenses in the event
of the Borrower's failure to pay when due any payments hereunder or under
the other Loan Documents and in the event of the Borrower's failure to
comply with the terms of the Loan Documents, (b) the extent of such
damages, costs and expenses are difficult to forecast, and (c) the charges
and fees provided herein to be assessed in the event of such a late payment
or other Event of Default by the Borrower are not an unreasonable forecast
of the damages, costs and expenses which will be incurred by the Lender as
a result thereof. Notwithstanding the foregoing, or anything else to the
contrary herein, in the Note or any of the other Loan Documents, the rate
of interest (including, without limitation, fees, late charges and other
expenses) specified to be paid by the Borrower hereunder or thereunder
shall in no event exceed the maximum rate therefor which may be permitted
under applicable law. If, from whatever circumstance whatsoever,
performance by the Borrower of any such payment of interest (including,
without limitation, payment of any fees, late charges or other expenses)
shall exceed the limits of validity prescribed therefor under applicable
law, then, automatically, such obligation to be performed shall be reduced
to the limit of such validity prescribed by applicable law. If,
notwithstanding the foregoing limitations, any excess interest or other
charges shall be determined by a court of competent jurisdiction to have
been received by the Lender, the same shall be deemed to have been held as
additional security for the payment and performance of the obligations of
the Borrower under the Loan Documents.
SECTION 3. PAYMENTS
3.1 Repayment. The Loan shall be considered fully repaid only
when (i) the Lender has been repaid all fees, costs and expenses payable
to the Lender under the Loan Documents and the entire principal balance of
the Loan together with interest thereon in an amount which is sufficient to
provide to the Lender the Minimum IRR or the Default IRR, as applicable and
(ii) the total Net Sales Proceeds paid the Lender (exclusive of any portion
thereof applied to fees, costs and expenses other than principal and
interest) plus all payments of principal and interest to the Lender from
sources other than the Net Sales Proceeds equals $11,000,000.00. The Loan
<PAGE>
shall be due and payable as follows:
(a) Until such time as the sums due to the General Contractor
under the General Contract (inclusive of interest and sums payable
under Change Orders, but exclusive of any damage claims) have been
paid in full, or if earlier, the Loan has been repaid in full, the Net
Sales Proceeds from the sale of each of the Units shall be paid upon
closing of each sale as follows: (i) First, $100,000.00 per Unit
shall be paid to the Lender; (ii) Second, up to $50,000.00 per Unit
shall be paid directly to the General Contractor (or to an escrow
account previously established with Citibank, N.A. for the purpose of
administering payments to the General Contractor pursuant to the
Escrow Agreement); and (iii) Third, the remainder shall be paid to the
Lender. In any event, the Lender shall receive not less than
$100,000.00 upon the closing of each of the Units. Notwithstanding
the foregoing, upon any foreclosure sale or a deed in lieu of
foreclosure conveying all or any portion of the Property or Units, the
entire sales price shall be paid to the Lender until such time as the
unpaid principal balance of the Loan, together with interest in an
amount as provided in Section 2.1 above and all fees, costs and
expenses on the Loan have been paid in full.
(b) If all sums due to the General Contractor under the General
Contract (inclusive of interest and sums payable under Change Orders,
but exclusive of any damage claims) have been paid in full, but the
Loan has not yet been fully paid, then the entire Net Sales Proceeds
from the sale of each Unit shall be paid to the Lender until such time
as the Loan is fully repaid.
(c) On the Maturity Date (or any acceleration thereof) the
entire remaining unpaid principal balance of the Loan, together with
interest in an amount as provided in Section 2.1 above and all fees,
costs and expenses on the Loan, shall be due and payable in full.
3.2 Optional Prepayment. At any time prior to the Maturity
Date, the Borrower shall have the option to prepay the Loan, in whole or in
part (any prepayment in full must include the unpaid principal balance of
the Loan plus interest in an amount as provided in Section 2.1 above plus
all fees, costs and expenses due on the Loan) provided that with respect to
any prepayment other than from Net Sales Proceeds as provided above, the
Borrower gives the Lender no less than five (5) Business Days' prior
written and irrevocable notice of the Borrower's election to prepay.
3.3 Payments on Non-Business Days. Whenever any payment to be
made hereunder or under the Note shall be stated to be due on a day which
is not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day.
3.4 Method and Place of Payment, etc. All payments under this
Agreement shall be made to the Lender by wire transfer of immediately
available funds in freely transferable U.S. Dollars to an account
designated by Lender.
3.5 Net Payments. All payments under this Agreement shall be
made without set-off or counterclaim and in such amounts as may be
necessary in order that all such payments of principal and interest and
other amounts (after deduction or withholding for or on account of (a) any
gross excise tax (if any) payable by the Lender under the laws of the State
of Hawaii and any present or future taxes, levies, imposts, duties or other
charges of whatsoever nature imposed by any government or any political
subdivision or taxing authority thereof, other than any tax (except such
taxes referred to in clause (b) below) on or measured by the net income of
the Lender pursuant to the income tax laws of the jurisdiction where the
<PAGE>
Lender's principal or lending office is located (collectively the "Taxes")
and (b) deduction of an amount equal to any taxes, on or measured by the
net income payable by the Lender with respect to the amount by which the
payments required to be made by this Section 3.5 exceed the amount
otherwise specified to be paid under this Agreement and the Note) shall not
be less than the amounts otherwise specified to be paid under this
Agreement and the Note. A certificate as to any additional amounts payable
to the Lender under this Section 3.5 submitted to the Borrower by the
Lender shall, absent manifest error, be final, conclusive and binding upon
all the parties hereto. With respect to each deduction or withholding for
or on account of any Taxes, the Borrower shall promptly furnish to the
Lender such certificates, receipts and other documents as may be required
(in the judgment of the Lender) to establish any tax credit to which the
Lender may be entitled.
3.6 Application of Payment. All payments made hereunder, under
the Note and under the other Loan Documents shall be applied as follows:
first, to the payment of fees, costs and expenses and other amounts then
due to the Lender hereunder; second, to the payment of interest then due;
and third, to the payment of principal then due on the Note.
3.7 Option to Acquire Units. As additional consideration for
the Loan, Borrower hereby grants to Lender an option to acquire up to five
(5) Units upon the following terms and conditions:
(a) The option may be exercised at any time on or before the
earlier to occur of (i) twenty-four (24) months from the date of this
Agreement or (ii) thirty (30) days after all sums due under the Note
and Loan Documents have been paid in full (the "Option Period") by
written notice given by the Lender to the Borrower specifying the
number of Units (up to the maximum of 5) Lender wishes to acquire and
the lot designations thereof, which may be any Unit (an "Available
Unit") which, at the time of such exercise, is neither subject to an
existing sales contract nor subject to current negotiations for a
sales contract with a third party buyer. From time to time at
Lender's request, Borrower will provide Lender with a list of the
Available Units.
(b) Although the option may be exercised at any time during the
Option Period, the actual conveyance of the Units will not occur until
three (3) Business Days after the contract price under the General
Contract has been paid in full (the "Unit Closing Date").
Accordingly, if all sums due under the Loan Documents and Note have
been paid in full but the contract price under the General Contract
has not yet been fully paid, the Lender will execute and deliver
partial releases of Units as they are sold as otherwise provided in
the Mortgage, but no consideration will be payable to the Lender for
such partial releases. A full release of the Mortgage will be
executed and delivered only after all sums due under the Loan
Documents and Note have been fully paid and all obligations under the
Loan Documents, including the performance of the obligations under
this option, have been fully performed.
(c) The purchase price for each Unit conveyed to the Lender
pursuant to this option will be two-thirds of the price of the Unit as
specified in Exhibit C attached hereto. The purchase price may be
paid, at Lender's option, either in cash or by way of an offset
against sums due under the Note.
(d) If, after Lender has exercised its option, there is an Event
of Default hereunder, the Lender shall have the right but not the
obligation to rescind its exercise of the option.
<PAGE>
(e) The Units will be conveyed to the Lender free and clear of
all liens and mortgages but subject to (i) certain other encumbrances
as specified in the standard form sales contract used for sales to
third party buyers which has been submitted to and approved by Lender
and (ii) a restriction that the Units may not be offered for sale or
sold to any third party (other than an officer, director or affiliate
of Lender) for a period of one (1) year following conveyance of title
to the Units to Lender. All closing costs shall be borne by the
Borrower, as seller, and the Lender, as buyer, in accordance with the
provisions of said standard form sales contract. The form of Deed for
the Units shall be the standard form used for the Project.
SECTION 4. CONDITIONS PRECEDENT TO CLOSING
The Lender shall be under no obligation to close the Loan until
each of the following conditions has been satisfied:
4.1 Material Adverse Change/Legal Proceeding. There shall be no
material adverse change in the condition or value of the Property or the
financial condition or credit of the Borrower. All aspects of the Loan
shall be as represented to the Lender without material, adverse change at
the time of Closing. No legal proceedings which may materially and
adversely affect the Borrower or any real or personal property which will
secure the Loan or any of the transactions mentioned or contemplated by
this Agreement shall be threatened or commenced.
4.2 Agreements/Recordation. The Lender shall have received
originals or certified copies of each of the following documents and
instruments, duly executed and delivered by the Borrower and all other
parties thereto, in each case in form and substance satisfactory to the
Lender:
(a) This Agreement;
(b) The Note;
(c) The Escrow Agreement;
(d) A full release of the Participation Agreement; and
(e) All other Loan Documents.
The Mortgage and Security Agreement and the Subordination Agreement shall
have been duly recorded in the Bureau of Conveyances of the State of Hawaii
and the Financing Statement shall have been duly filed in the States of
Hawaii and Nevada.
4.3 Submissions. Unless otherwise agreed by the Lender in its
sole discretion, the Lender shall have received, in each case in form and
substance satisfactory to the Lender, each of the following, in each case
at the sole cost of Borrower:
(a) Liens and Encumbrances. Copies of all liens and
encumbrances affecting the Property.
(b) Title Insurance. A mortgagee's ALTA title insurance policy
including such endorsements as may be requested by the Lender at its
discretion, insuring the Mortgage and Security Agreement as a first
lien on the Property for the full amount of the Loan, subject only to
encumbrances approved by the Lender. Without limiting the foregoing,
the policy shall include an ALTA 100 endorsement, an access
endorsement, a contiguity endorsement and a zoning endorsement.
<PAGE>
(c) Financing Statement Report. UCC financing statement reports
with respect to filings in Hawaii and Nevada by a licensed searcher of
titles advising the Lender that a search of the public records
discloses, as of the time of closing of the Loan, no retail
installment contracts, conditional sales contracts, chattel mortgages,
leases of personalty, financing statements, title retention agreements
or other liens of any kind filed and/or recorded against the personal
property described in the Mortgage and Security Agreement or against
the Property.
(d) Property and Liability Insurance. Property insurance
policies covering the Property. Unless otherwise agreed by the
Lender, at a minimum, such property insurance shall insure against
destruction or damage by fire, wind, hurricane and other perils
covered by an ISO Commercial Property Broad Causes of Loss form or its
equivalent, shall include replacement cost coverage and an agreed
value endorsement. While any of the insurable properties are under
construction, such property insurance shall be on the standard
builder's risk completed value form of policy, nonreporting coverage.
If the Property is located in a "Special Flood Hazard" area, the
Borrower will provide the flood insurance authorized by the Flood
Disaster Protection Act of 1973. In addition, the Lender shall be
furnished with commercial liability insurance policies in an amount
and with coverages acceptable to the Lender. The liability policies
shall name the Lender as an insured party and each property insurance
policy shall contain a mortgagee clause acceptable to the Lender. The
Lender shall have received a certificate(s) of insurance evidencing
the required coverage on the ACORD 27 form. All policies shall,
unless otherwise agreed by the Lender, be deposited with the Lender
throughout the term of this Agreement.
(e) Financial Statements. Current, signed financial statements
of the Borrower.
(f) Approvals. All information and documents (whether or not
specified in this Agreement) which may be requested by the Lender
related to any real or personal property which will serve as security
for the Loan or to any of the transactions mentioned in or
contemplated by this Agreement.
(g) Compliance. Evidence that the Property and its contemplated
use, as well as the proposed Infrastructure, shall conform to Federal,
State and County zoning, environmental and other legal requirements
and that the Property is properly zoned for single-family residential
use, except for one lot which is zoned for multi-family use.
(h) Organizational Documents. Certified copies of the
Organizational Documents and certificates of good
standing/authorizations of the Borrower, a tax clearance certificate
for the Borrower and corporate resolutions of the Borrower authorizing
the Loan and execution of the Loan Documents.
(i) Environmental Report. An environmental hazards assessment
and audit of the Property, which shall have been submitted to Lender
not less than seven (7) Business Days prior to closing. The Borrower
shall have taken all steps recommended by such report to address any
hazardous waste issues.
(j) Survey. The Borrower shall have provided a survey of the
Property if and as required by the title company issuing the title
policy to the Lender.
(k) Counsel Opinion. Opinion of counsel for the Borrower, which
<PAGE>
shall state that:
(i) The Borrower is duly organized, validly existing, and
in good standing and registered and qualified to do business
under the laws of the jurisdiction of its incorporation and the
State of Hawaii.
(ii) The parties executing and delivering the Loan Documents
on behalf of the Borrower have the power and legal capacity to
execute and deliver such documents.
(iii) Compliance by the Borrower with its obligations under
the Loan Documents will not violate any law, including usury
laws, or its Organizational Documents.
(iv) No action of any governmental commission or agency or
any other Person is required in connection with the execution and
delivery of the Loan Documents.
(v) The Loan Documents have been duly authorized, executed
and delivered and are valid and legally binding obligations of
the Borrower, enforceable in accordance with their terms.
(vi) The rights of the purchasers under all sales contracts
for Units (entered into after recordation of the Mortgage) shall
be subordinate to the liens of the Loan Documents.
(vii) The Borrower's sales program and the project documents
applicable to the Units, including (without limitation) the sales
contract for the Units, are in full compliance with the Federal
Interstate Land Sales Full Disclosure Act and the Uniform Land
Sales Practices Act, to the extent applicable to the Units.
(l) Plans and Specifications. Final Plans and Specifications
for the Infrastructure and for the Offsite Water System approved by
all Governmental Authorities and initialed for identification purposes
by the Borrower, the Borrower's Engineer, and the General Contractor
or Offsite Water System Contractor, as applicable.
(m) Soils Report. A soils report for the Property.
(n) Construction Contract/Subordinations. Executed copies of
the General Contract, copies of all executed subcontracts (to the
extent available under the General Contract) for the Infrastructure, a
list, certified by the Borrower, of all contracts executed by the
Borrower for the performance of services or the supply of materials in
connection with the construction of the Infrastructure and
subordination agreements executed by all major subcontractors under
the General Contract.
(o) Offsite Water System Contract. Executed copy of the Offsite
Water System Contract.
(p) Engineer's Contract. Executed copy of the Engineer's
Agreement which shall provide that the Borrower's Engineer will review
construction of the Infrastructure and the Offsite Water System.
(q) Engineer's/Contractor's Agreements. The Engineer's
Statement and the Contractor's Consent and Agreement from each of the
General Contractor and the Offsite Water System Contractor.
(r) Engineer's Policy. A copy of the errors and omissions
policy for the Borrower's Engineer.
<PAGE>
(s) Bond. Unless otherwise agreed by the Lender, 100% labor and
material payment and performance bonds for construction of the
Infrastructure and the Offsite Water System, which shall be dual
obligee bonds naming the Lender as an additional obligee. The bonds
shall be accompanied by verification from the surety that the person
executing such bonds has authority to do so. If requested by the
Lender, financial statements, a current credit report and the Lender
reference for the surety shall be submitted to the Lender and, if
requested by the Lender, such bonds shall be reinsured by such number
of additional sureties as the Lender may reasonably require.
(t) Permits. Evidence of entitlements and copies of all permits
and approvals required from any Governmental Authority for the
construction of the Infrastructure and the Offsite Water System.
(u) Preliminary Subdivision Approval. Preliminary subdivision
approval for the subdivision of the Property into 233 residential lots
(including 232 single family lots and one multi-family lot of
approximately 5.3 acres) plus the necessary roadway, park and other
incidental lots, which preliminary approval shall provide that final
subdivision approval will be issued subject only to terms and
conditions as are approved by the Lender.
(v) Archeological Study. An archeological study of the
Property.
(w) CPM Schedule/Budget. The CPM Schedule and the Budget for
the construction of the Infrastructure, which shall include cash flow
projections for the term of this Agreement, and which shall have been
submitted to Lender not less than two (2) Business Days prior to
closing.
(x) Assignment of Escrow Agreement, Sales Contracts and Escrow
Deposits. An Assignment of Sales Contracts naming Lender as assignee,
as well as escrow's consent thereto.
(y) Assignment of Escrow Agreement and Consent. An
Assignment of Escrow Agreement and Consent, naming the Lender as
assignee, as well as escrow's consent thereto and an
acknowledgment by the depository with which the applicable
account is maintained.
(z) Purchaser's Escrow. An agreement providing that all funds
paid by each purchaser as a downpayment on a Unit shall be escrowed
pending closing of the Unit. Escrowed funds may not be used by the
Borrower for any purpose prior to closing of the sale of the Unit.
(aa) Sales and Registration Documentation. Copies of the
standard form sales contract to be used for sales of Units and all
materials submitted with respect to registration of the Project under
federal and/or state laws, rules and regulations, together with
evidence that (i) amendments to such registrations have been filed to
reflect the change in the identity of the developer from 3521 Corp. to
Borrower, and (ii) the currently required annual reports due with
respect to each of such registrations has been filed by Borrower.
(bb) Consents. Consents and agreements executed by MLP and the
Board consenting to the Assignment of Contracts and containing such
lender protection provisions as required by Lender, in the forms
attached hereto as Exhibit B-1 and B-2.
4.4 Other Legal Matters. All legal matters incidental to the
Loan shall be satisfactory to the Lender.
<PAGE>
4.5 No Default. On the date of the Loan and after giving effect
hereto, there shall exist no Default or Event of Default.
4.6 Representations and Warranties. On the date of the Loan and
after giving effect thereto, all representations and warranties contained
in Section 7 shall be true and correct in all material respects with the
same force and effect as though such representations and warranties had
been made on and as of such date.
SECTION 5. COVENANTS
While this Agreement is in effect and until all obligations
hereunder, under the Note and other Loan Documents shall have been paid and
performed in full, the Borrower agrees that:
5.1 Financial Statements and Other Information. The Borrower
will furnish to the Lender (in each case prepared in accordance with
generally accepted accounting principles applied on a consistent basis):
(a) Within one hundred twenty (120) days after the end of each
fiscal year of the Borrower, a financial statement of the Borrower
including an income statement, balance sheet and statement of cash
flows, each such financial statement to be prepared and audited by a
firm of independent certified public accountants selected by the
Borrower and reasonably satisfactory to the Lender.
(b) From time to time, with reasonable promptness, such further
information regarding the business, affairs and financial condition of
the Borrower as the Lender may reasonably request.
(c) On or before the seventh (7th) day of each month, a status
report itemizing the Units for which the Borrower holds sales
contracts as well as Borrower-prepared financial statements.
(d) Upon acquiring knowledge of the existence of a Default or
Event of Default or a circumstance which could reasonably be expected
to give rise to a Default or an Event of Default, the Borrower will
promptly deliver to the Lender a certificate of the Responsible
Officer of the Borrower specifying:
(i) the nature of such Default or Event of Default or
occurrence,
(ii) the period of the existence thereof, and
(iii) the actions that the Borrower proposes to take with
respect thereto.
The Borrower agrees that, during the entire term of this
Agreement, the Lender shall have the continuing right to obtain credit
reports on the Borrower without further authorization from the Borrower.
5.2 Notice of Litigation or Loss. The Borrower shall give to
the Lender prompt written notice of:
(a) any and all pending or threatened actions, suits and
proceedings involving or affecting the Property, the Project or the
Borrower and involving an amount of $100,000.00 or more or an adverse
determination of which would materially adversely affect the condition
(financial or otherwise) or operation of the Property, the Project or
the Borrower;
<PAGE>
(b) any uninsured loss through fire, theft, liability or
property damage exceeding $100,000.00; and
(c) any combination of pending or threatened actions, suits and
proceedings involving or affecting the Property, the Project or the
Borrower and uninsured losses which involve, in the aggregate in any
one fiscal year, $250,000.00 or more.
5.3 Taxes. The Borrower shall duly pay and discharge, or cause
to be paid and discharged, when due, all taxes, assessments and other
governmental charges imposed upon it and its properties (including the
Property), or any part thereof or upon the income or profits therefrom, as
well as all claims for labor, materials or supplies which if unpaid might
by law become a lien or charge upon any of the Borrower's properties,
except such of the foregoing as are being diligently contested in good
faith and by appropriate proceedings and reserved on its balance sheet, if
and to the extent required under generally accepted accounting principles.
5.4 Insurance. The Borrower shall insure and keep insured, with
good and responsible insurance companies selected by the Borrower, all of
its property of an insurable nature (including, without limitation, all
buildings, equipment and fixtures) against damage, fire and other
casualties in such manner and to the extent required by the Lender. The
Borrower shall furnish the Lender with certificates (ACORD Form 27)
evidencing the required insurance coverage and shall provide the Lender
with renewal certificates at least ten (10) Business Days prior to the
expiration date of each policy for which a certificate was previously
furnished. If the Borrower fails to maintain the required insurance, the
Lender is authorized to obtain the insurance at the Borrower's expense.
5.5 Existence, etc. The Borrower shall at all times: (a)
maintain, preserve and keep in full force and effect its existence as a
Nevada corporation, (b) comply with all applicable statutes, laws, rules
and regulations of all Governmental Authorities, (c) remain or become
qualified to engage in business in good standing in all jurisdictions in
which the nature or transaction of its business or the character of its
properties make such qualification necessary, and (d) maintain, preserve
and protect all Governmental Authorizations and all other rights,
franchises, licenses, patents, trademarks and tradenames owned by or
licensed to the Borrower and material to its business or its performance of
its obligations under the Loan Documents.
5.6 Maintenance. The Borrower shall maintain, preserve and keep
the Property, and the Borrower's equipment and every part thereof in good
repair, working order and condition.
5.7 Reportable Event. The Borrower shall, as soon as possible
and, in any event, within twenty (20) days after it knows or has reason to
know that a Reportable Event has occurred, that an accumulated funding
deficiency has been incurred or an application may be or has been made to
the Secretary of the Treasury for a waiver of the minimum funding standard
under Section 412 of the Code with respect to a Plan, that a Plan has been
or may be terminated, that proceedings may be or have been instituted to
terminate a Plan, or that the Borrower or an ERISA Affiliate will or may
incur any liability to or on account of a Plan under Section 4062, 4063,
4064, 4201 or 4204 of ERISA, deliver to the Lender a certificate of the
chief financial officer setting forth details as to such occurrence and
action, of any, which it is required or proposes to take, together with any
notices required or proposed to be filed with or by it, the ERISA
Affiliate, the PBGC or the plan administrator with respect thereto. If
requested by the Lender, the Borrower will furnish the Lender a copy of the
annual report of each Plan (Form 5500 series), if any, required to be filed
with the Internal Revenue Service. Copies of annual reports or any notices
<PAGE>
required to be delivered to the Lender hereunder shall be delivered no
later than thirty (30) days after the later of the date such report or
notice has been filed with the Internal Revenue Service or the PBGC or the
date of receipt thereof. If the Borrower does not maintain a Plan, but
shall at any time adopt or become obligated to contribute to a Plan, it
shall comply with the foregoing provisions of this Section 5.7.
5.8 Inspection of Property; Books and Records; Discussions. The
Borrower shall permit the Lender and/or any authorized representative(s)
designated from time to time by the Lender to visit and inspect any of the
properties of the Borrower, including its financial and accounting records,
and to make copies and take extracts therefrom, and to discuss its affairs,
finances and accounts with its officers and independent public accountants,
all upon reasonable notice and at such reasonable times during normal
business hours, as often as may be reasonably requested. In connection
with such inspections, Lender shall cause as little interference with the
Borrower's business operations as is reasonably possible. The Borrower
shall keep proper books of record and account in which full, true and
correct entries in conformity with generally accepted accounting
principles, consistently applied (and in conformity with all Requirements
of Law) shall be made of all dealings and transactions in relation to its
business and activities.
5.9 Governmental Authorizations. The Borrower shall at all
times comply in all respects with the terms of all Governmental
Authorizations, and shall promptly (and in any event within ten (10)
Business Days) notify the Lender upon obtaining knowledge of (a) the
termination, cancellation, material modification, lapse, non-renewal or
other loss of any Governmental Authorization, and (b) any proceedings to
which the Borrower is a party which involves a material risk of any matters
est forth in clause (a) immediately preceding, and shall promptly furnish
the Lender with copies of and information with respect to any new
Governmental Authorizations issued to or acquired by the Borrower.
5.10 Changes to Plans and Specifications or Construction
Contract or the Offsite Water System Contract. No material changes shall
be made in the Plans and Specifications or the Construction Contract or the
Offsite Water System Contract without the prior written approval of the
Lender and the sureties on applicable bonds. A change shall be considered
material if it results in a Change Order requiring the approval of the
Lender as set forth below or if it results in a change in the timing of
payments or the applicable retentions. The Borrower will not permit the
performance of any work pursuant to any Change Order which will result in
an increase or decrease in the cost of the construction of the
Infrastructure or the Offsite Water System in excess of $100,000.00 (each
change considered separately without reduction by cost savings or increase
by other change), nor pursuant to any Change Order which, together with the
aggregate of Change Orders theretofore executed by the Borrower, will
result in an increase or decrease in such price in excess of an aggregate
amount of $500,000.00, unless, in either case, the Borrower shall have
received the prior written approval of the Lender to such Change Order. In
all cases, computations of increases will be made without giving effect to
any cost savings and all decreases will be calculated without giving effect
to cost increases. (By way of example, if a Change Order involves changes
which increase the cost by $150,000.00 but also involves changes which
decrease the cost by $100,000.00, consent will still be required). The
Borrower will obtain all required consents of all sureties on applicable
bonds before approving or requesting any Change Order.
5.11 Consents. All (a) required consents (whether required by
or from Governmental Authority or any other Person and (b) all licenses
required by any Governmental Authority to which the Borrower is subject or
to which the construction is subject and, which, in either case, may be
<PAGE>
necessary in relation to this Agreement, the Loan, the Loan Documents or
the construction of the Infrastructure of the Offsite Water System have
been obtained or will be obtained prior to the date required.
5.12 Commencement and Completion of Construction. The Borrower
will commence construction of the Infrastructure and the Offsite Water
System no later than the date shown for such commencement on the CPM
Schedule; diligently proceed with the construction and complete the
construction of the Infrastructure and the Offsite Water System no later
than the date shown for such completion on the CPM Schedule.
5.13 Use of Loan Proceeds; Payment of Construction Costs. The
Borrower will use the Loan proceeds solely for the purposes permitted by
Section 1.3. Borrower shall obtain Lender's written consent prior to any
deviation from any line item in the Budget which, together with all prior
deviations in such line item, equals or exceeds the lesser of $50,000.00 or
ten percent (10%) of the amount of the line item as shown in the Budget.
The Borrower will pay promptly all valid charges for material and labor of
the General Contractor, the Offsite Water System Contractor and
subcontractors. Should any claims of lien be filed or recorded or any stop
notice served, the Borrower shall forthwith pay and discharge the same and
cause the same to be released or bond around the same.
5.14 Contractor's Insurance. The Borrower will require the
General Contractor, the Offsite Water System Contractor and subcontractors
to carry (a) liability insurance with coverage and in form acceptable to
the Lender, naming the Lender as an additional insured and (b) workmen's
compensation insurance.
5.15 Performance of Construction. The Borrower shall coordinate
the construction so that all work and materials shall be in accordance with
good building practices and in conformity with all governmental laws and
regulations and in strict accordance with the Plans and Specifications.
5.16 Sign. At the Lender's request, the Borrower will, at its
cost, erect and maintain during the period of construction a sign on the
Property indicating the source of construction financing.
5.17 Change in Nature of Business; Organizational Documents; or
Name. The Borrower hereby agrees that, so long as this Agreement remains
in effect, the Note remains outstanding and unpaid or any other amount is
owing to the Lender under any of the Loan Documents, the Borrower shall
not, without the prior written consent of the Lender change the nature of
its business as conducted or proposed to be conducted on and as of the date
hereof, or engage in any type of business not reasonably related to such
business, or amend, modify, revise, supplement or otherwise change the
terms of its Organizational Documents in a manner that violates any other
provision of the Loan Documents or which would adversely affect the Loan or
the Lender's rights under the Loan Documents.
5.18 Investment Limitations. The Borrower shall not, without
the Lender's prior written consent, make any additional investments.
5.19 Disclosure of Information. The Borrower consents to all
discussions and disclosures of information regarding any aspect of the
Loan, the Borrower, its operations or financial condition, including
insurance information, and to all agreements made, now or in the future,
between the Lender and any participant or assignee of the Loan pertaining
to the Borrower or the Loan as the Lender and such participant or assignee
deem appropriate.
5.20 Sales of Units. Unless otherwise agreed by Lender in
writing, Units shall be sold only to bona fide third party purchasers and
<PAGE>
for prices not less than those set forth in Exhibit C attached hereto. For
each sale, Borrower shall use the form of sales contract previously
submitted to and approved by Lender, without material modification unless
otherwise agreed by Lender.
5.21 Indemnity. The Borrower will indemnify, defend and hold
harmless the Lender against any and all claims, losses and damages incurred
by Lender and arising out of any breach by Borrower of its agreements or
covenants, or out of any misrepresentations, contained in this Agreement or
in any other Loan Document.
5.22 Final Subdivision Approval. Within eight (8) months from
the date of this Agreement, Borrower shall have either (a) obtained final
subdivision approval for the entire Project, or (b) obtained a developer's
completion bond for the entire Project in form and content as required by
the County of Maui and applied for final subdivision approval for the
entire Project. If the time for the General Contractor's performance under
the Construction Contract is extended because of delays caused by
circumstances beyond the Borrower's and Contractor's control, the eight (8)
month period for satisfaction of the obligations under this Section shall
be extended for a like period of time. In any event, if final subdivision
approval is not obtained prior to January 6, 1997, Borrower shall have
obtained, and provided to Lender, a copy of a further extension of the
preliminary subdivision approval, which shall be further extended from time
to time as necessary until final subdivision approval is obtained.
5.23 Copies of Applications for Payment. Upon receipt of each
Application for Payment under the Construction Contract, Borrower shall
immediately forward a copy thereof to the Lender.
SECTION 6. EVENTS OF DEFAULT
Upon the occurrence of any of the following events (each an
"Event of Default"):
6.1 Representations, etc. Any certificate furnished by the
Borrower to the Lender pursuant hereto shall prove to have been incorrect
in any material adverse respect or any of the representations and
warranties made by the Borrower herein or in connection herewith shall
prove to be, or become, incorrect in any material, adverse respect.
6.2 Principal, Interest and Other Sums. The Borrower shall fail
to pay: (a) any payment of principal or interest under the Note within
five (5) days after it is due, or (b) any other amount payable by the
Borrower hereunder or under any of the other Loan Documents within five (5)
days after written notice that such sum is due is given to Borrower by
Lender.
6.3 Bankruptcy, etc. The Borrower shall commence a voluntary
case concerning itself under Title 11 of the United States Code entitled
"Bankruptcy" as now or hereafter in effect or any successor thereto (the
"Bankruptcy Code"); or an involuntary case is commenced against the
Borrower under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or other similar law of any jurisdiction now or
hereafter in effect, and relief is ordered against the Borrower or the
petition is controverted but is not dismissed within ninety (90) days after
the commencement of such case; or the Borrower is not generally paying its
debts as they become due; or a trustee (as defined in the Bankruptcy Code)
is appointed for, or takes charge of, all or substantially all of the
property of the Borrower, or the Borrower commences any other proceeding
under any reorganization, arrangement, readjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
<PAGE>
jurisdiction whether now or hereafter in effect relating to the Borrower,
or there is commenced against the Borrower any such proceeding which
remains undismissed for a period of ninety (90) days or the Borrower fails
to controvert in a timely manner any such case under the Bankruptcy Code or
any such proceeding; or any order of relief or other order approving any
such case or proceeding is entered; or the Borrower by any act or failure
to act indicates its consent to, approval of or acquiescence in any such
case or proceeding or in the appointment of any custodian or the like for
it or any substantial part of its property or suffers any such appointment
to continue undischarged or unstayed for a period of ninety (90) days; or
the Borrower makes a general assignment for the benefit of creditors; or
any action is taken by the Borrower for the purpose of effecting any of the
foregoing.
6.4 Security Documents. Any Loan Document or other agreement,
if any, now or hereafter securing all or any part of the obligations of the
Borrower under this Agreement or the Note shall be deemed not to be legal,
valid and binding in according with its terms or the Borrower or any other
obligor thereunder or party thereto shall deny any liability or obligation
thereunder or the enforceabiliy thereof.
6.5 ERISA. Any member of the Controlled Group of which the
Borrower is a member shall fail to pay when due an amount or amounts which
it shall have become liable to pay to the PBGC or to a Plan under Title IV
of ERISA; or notice of intent to terminate a Plan or Plans having aggregate
Unfunded Vested Liabilities in excess of $250,000.00 (collectively, a
"Material Plan") shall be filed under Title IV of ERISA by any member of
the Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate or to cause a trustee to be appointed to administer any
Material Plan; or a proceeding shall be instituted by a fiduciary of any
Material Plan against any member of the Controlled Group to enforce Section
515 of ERISA and such proceeding shall not have been dismissed within
thirty (30) days thereafter; or a condition shall exist by reason of which
the PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must be terminated.
6.6 Judgment. Any final, uninsured judgment shall be rendered
against the Borrower for the payment of money in an amount which alone or
with other outstanding final judgments exceeds $250,000.00 in the aggregate
and (a) such judgment shall not be discharged or fully bonded against
within thirty (30) days, or (b) within thirty (30) days after entry of such
judgment, execution shall not be stayed pending appeal, or (c) such
judgment shall not be discharged within thirty (30) days after expiration
of any such stay.
6.7 Dissolution. Any action or proceeding shall have been
commenced to dissolve the Borrower or any petition or application shall
have been filed to initiate dissolution of the Borrower and such action,
proceeding, petition or application is not dismissed within thirty (30)
days after the commencement thereof without a dissolution of the Borrower
or the Borrower shall otherwise be deemed to have dissolved.
6.8 Termination of Governmental Authorizations. Any
Governmental Authorization (a) which is material to the Borrower's business
or operations or (b) the loss of which could materially adversely affect
the ability of the Borrower to perform its obligations under any of the
Loan Documents, shall be suspended, terminated, revoked, shall expire
without renewal on or before its expiration date, or shall become subject
to any injunction or order which has not been stayed and which may, in the
reasonable judgment of the Lender, materially adversely affect the business
or operations of the Borrower or its ability to perform its obligations
under the Loan Documents.
<PAGE>
6.9 Constructions of Infrastructure and Offsite Water System.
Once work is commenced on the Infrastructure and the Offsite Water System,
work ceases on the construction of such Infrastructure or Offsite Water
System for any reason other than strikes, lockouts, or acts of God beyond
the control of the Borrower for such period as would cause the completion
of such work to extend more than sixty (60) days beyond the date shown for
completion thereof in the CPM Schedule.
6.10 Litigation. There shall be commenced against Borrower any
litigation or proceeding or action for expropriation of any portion of
Borrower's property which, if determined adversely to Borrower, could have
a material adverse impact on the Property, the Project or the Borrower.
6.11 Abandonment. The Borrower abandons any portion of the
Property.
6.12 Adverse Change. Any event occurs which has a material
adverse impact on the Property, the Project or the Borrower.
6.13 Responsible Officer. The authority of any Responsible
Officer to have executed and/or delivered any document, instrument or
certificate so executed and/or delivered on behalf of the Borrower pursuant
to the Loan Documents shall for any reason be challenged or prove to have
been insufficient for the purpose of binding the Borrower with respect
thereto and the Borrower fails, upon the Lender's request, to immediately
and effectively ratify said authority of the Responsible Officer.
6.14 Final Subdivision Approval. The Borrower shall fail to
satisfy the obligations under Section 5.22 of this Agreement within thirty
(30) days of the date required.
6.15 Applications for Payment. The Borrower shall fail to
provide to Lender any Application for Payment received from the General
Contractor immediately upon receipt thereof.
6.16 Other Covenants. The Borrower shall fail to perform or
observe any other term, covenant or agreement contained in this Agreement,
the Note or any other Loan Document on its part to be performed or observed
and any such failure shall remain unremedied for the period provided for
remedy thereof, or if no such period is specified, for a period of thirty
(30) days after the earlier of (a) the date written notice thereof shall
have been given by the Lender to the Borrower and (b) the date the Borrower
should have delivered to the Lender a written notice of the occurrence of a
Default or Event of Default pursuant to Section 5.1(d) of this Agreement.
Then and in any such event and at any time thereafter, if any Event of
Default shall then be continuing, any of the following actions may be
taken: (a) the Lender may by written notice to the Borrower, declare the
principal of and accrued interest in respect of the Note to be, whereupon
the same and all other amounts due hereunder shall become, immediately due
and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by the Borrower, anything
contained herein or in the Note to the contrary notwithstanding, and (b)
all such other actions hereunder or under any of the other Loan Documents
(whether provided herein, therein, or otherwise by law) as the Lender may
elect; provided that if an Event of Default described in Section 6.3
hereinabove shall occur, the result which would otherwise occur only upon
the giving of written notice by the Lender to the Borrower or upon Lender's
election as specified in clauses (a) and (b) above shall occur
automatically without such election or the giving of any such notice. In
addition to the foregoing, the Lender may, at its option and without
obligation to do so, enter the Property and cause to be performed and
furnished any and all labor or work and materials which the Lender may deem
<PAGE>
necessary or desirable for the protection and completion of the
Infrastructure or the Offsite Water System in accordance with the Plans and
Specifications or as modified as the Lender may deem necessary and, to this
end, the Lender may do any act and enter into any contract and incur and
pay such costs therefor as the Lender deems proper for such purpose. Any
sums so expended shall be deemed loans to the Borrower and shall be secured
by the Loan Documents, and the Borrower agrees to pay such loans to the
Lender on demand, together with interest thereon sufficient to provide an
internal rate of return of fifty percent (50%) per annum. The Lender shall
also have power to prosecute and defend all actions and proceedings in
connection with the construction of the Infrastructure and to take such
action and require such performance as the Lender deems necessary under the
General Contract, the Engineer's Agreement, and any performance and payment
bonds.
SECTION 7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
In order to induce the Lender to enter into this Agreement and
the Lender to provide the Loan provided for herein, the Borrower makes the
following representations, warranties and agreements to and with the
Lender:
7.1 Corporate Status. The Borrower (a) is a Nevada corporation,
duly organized and registered and validly existing and in good standing
under the laws of the State of Nevada, (b) is authorized, to the extent
required under applicable law, to do business and is in good standing under
the laws of all states of the United States and in any other jurisdiction
wherein the nature of its business requires such qualification and the
failure to so qualify will have a material adverse effect on the Borrower,
and (c) has all necessary power and authority to execute, deliver and
perform this Agreement, the other Loan Documents and the Note and to borrow
the sums hereunder.
7.2 Authority; No Conflict. The execution, delivery and
performance by the Borrower of this Agreement, the Note and the other Loan
Documents to be executed and delivered by it as contemplated by this
Agreement, have been duly authorized by all necessary corporate action by
the Borrower and do not and will not violate any provision of law or
regulation, or any decree, order, writ or judgment to which the Borrower is
subject, or any provisions of the Borrower's Organizational Documents,
result in the breach of or constitute a default under any indenture or
other agreement or instrument to which the Borrower is a party and which
breach, individually or collectively with all other breaches of other
agreements or instruments, could materially adversely affect the business
or operations of the Borrower or its ability to perform its obligations
under the Loan Documents.
7.3 Responsible Officer. The Responsible Officer designated
from time to time by the Borrower to execute and deliver any document,
certificate or other instrument hereunder shall have or be deemed to have
at the time of such execution and delivery all necessary corporate
authority to so execute and deliver such documents, certificates and other
instruments on behalf of the Borrower, and shall continue to have, or be
deemed to have, such authority until such time as the Lender shall have
received written notice from the Borrower explicitly revoking such
authority on a prospective basis.
7.4 Legality, etc. This agreement constitutes and, when
executed and delivered, the Note and the other Loan Documents will
constitute legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their terms, except to
the extent limited by bankruptcy, insolvency or reorganization laws or by
<PAGE>
other laws relating to or affecting the enforceability of creditors' rights
generally and by general equitable principles which may limit the right to
obtain equitable remedies.
7.5 Financial Statements. The audited financial statements of
the Borrower for the period ending December 31, 1995, furnished to the
Lender, fairly present the financial position of the Borrower. Since that
date there has been no adverse change in the business, assets, financial
condition or operations of the Borrower which would materially and
adversely affect the ability of the Borrower to perform any of its
obligations hereunder, under the Note or under the other Loan Documents.
7.6 Litigation. No litigation, arbitration or administrative
proceeding is pending and, to the knowledge of the Borrower, no written
threat of such action has been made against the Borrower, which, if
determined adversely, would materially and adversely affect the ability of
the Borrower to perform any of its obligations under this Agreement, the
Note or the other Loan Documents and the Borrower agrees to provide the
Lender with such information in respect of all such litigation, arbitration
and administrative proceedings as the Lender may from time to time
reasonably request. There is no litigation, arbitration or administrative
proceeding pending or, to the knowledge of the Borrower, no written threat
of such action against the Borrower which questions the validity of this
Agreement, the Note or the other Loan Documents.
7.7 ERISA.
(a) The issuance of the Note hereunder will not cause the
Borrower to be engaged in a "prohibited transaction," as such term is
defined in Section 4975 of the Code and there have not been any "reportable
events," as that term is defined in Section 4043 of the Employee Retirement
Income Security Act of 1974, as amended, which would result in a material
liability to the Borrower.
(b) With respect to each Plan, the Borrower and each member of
the Controlled Group of which the Borrower is a member have fulfilled their
obligations under the minimum funding standards of ERISA and the Code and
are in compliance in all material respects with the presently applicable
provisions of ERISA and the Code, and have not incurred any termination
liability to the PBGC under Title IV of ERISA which is currently
unsatisfied. With respect to each Plan which is a multiemployer pension
plan, the Borrower and each member of the Controlled Group have fulfilled
their respective Plan contribution requirements under the applicable
collective bargaining agreement and have not incurred any withdrawal
liability to the Plan under Title IV of ERISA which is currently
unsatisfied.
7.8 Consents. No Governmental Authorizations or other
authorization, consent or approval from governmental bodies, regulatory
authorities or other Governmental Authorities or from any other Person is
required for the execution, delivery and performance of this Agreement or
any of the other Loan Documents by the Borrower, except such Governmental
Authorizations and other authorizations, consents and approvals as have
been obtained prior to the request for the Loan and which are in full force
and effect at the time of the funding of the Loan.
7.9 Payment of Taxes. The Borrower has filed all federal, state
and local tax returns which are required to be filed by it has paid or
caused to be paid all taxes as shown on such returns or on any assessment
received by it to the extent that such taxes have become due, except such
taxes, if any, as are being contested in good faith as to which adequate
reserves have been provided.
<PAGE>
7.10 Performance of Other Agreements. The Borrower is not in
default in any manner which would materially and adversely affect the
business, assets operations or conditions (financial or otherwise) of the
Borrower in the performance or fulfillment of any of the obligations,
covenants or conditions contained in any agreement or instrument to which
the Borrower is a party or by which the Borrower or any of its properties
is bound.
7.11 Title to Properties. The Borrower has good and marketable
title to all of its properties and assets, and all of such properties and
assets are free and clear of mortgages, pledges, liens, charges and other
encumbrances except as otherwise consented to in writing by the Lender.
7.12 Compliance of Property with Laws. The Borrower has
examined and is familiar with all the covenants, conditions, restrictions,
reservations, building laws, regulations and zoning ordinances affecting
the Property including without limitation any special regulations. After
construction in accordance with the Plans and Specifications, the
Infrastructure, the Offsite Water System and the Project will, in all
respects, conform to and comply with the requirements of said covenants,
conditions, restrictions, and reservations and will not be in violation of
applicable building laws, regulations and zoning ordinances and shall be in
accordance with all requirements of the Governmental Authorities having
jurisdiction thereof.
7.13 Governmental Authorizations. The Borrower has duly and
timely filed all registration statements and other filings which are
required to be filed under applicable law with respects to the operation of
its business and is and shall remain at all times in all respect in
compliance with all Governmental Authorizations and Requirements of Law.
The Borrower is presently and shall continuously remain in compliance in
all respects with all terms and conditions of all federal, state and local
laws, all rules, regulations and administrative orders of all Federal,
State and local commissions or authorities which have jurisdiction over the
Borrower or the operation of its business.
7.14 True and Complete Copies. All copies of documents
heretofore furnished by, or on behalf of, the Borrower to the Lender are
true and complete copies of the originals thereof, and all amendments and
modifications thereto, and are in full force and effect. There have been
no amendments or modifications to any such document except as heretofore
disclosed in writing to the Lender.
7.15 Use of Proceeds. Proceeds of the Loan will be used solely
for the purposes described in Section 1.3
All of the representations and warranties stated above in this Section 7
shall survive until all obligations hereunder, under the Note and under the
other Loan Documents are satisfied in full and this Agreement is
terminated.
SECTION 8. MISCELLANEOUS
8.1 Definitions. As used herein the following capitalized terms
shall have the meanings herein specified and shall include in the singular
number the plural and in the plural number the singular:
"Agreement" shall mean this Loan Agreement, as it may from time
to time be amended, supplemented or otherwise modified.
"Assignment of Contracts" shall mean an assignment of the
Borrower's rights under the Storage Tank Agreement, the Water Storage and
<PAGE>
Waterline Development Agreement, and the Right of Entry Agreement, in form
and substance satisfactory to the Lender.
"Assignment of Escrow Agreement and Consent" shall mean an
assignment of the Borrower's right, title and interest in, to and under the
Escrow Agreement, including escrow's consent thereto and an acknowledgment
by the depository in which the applicable account is maintained, in form
and substance satisfactory to Lender.
"Assignment of Sales Contracts" shall mean an assignment of sales
contracts, escrow deposits and escrow agreement in form and content
satisfactory to the Lender.
"Board" shall mean the Department of Water Supply of the County
of Maui, an agency of the County of Maui, a body corporate and politic, and
a political subdivision of the State of Hawaii.
"Borrower's Engineer" shall mean Austin Tsutsumi & Associates,
Inc., or any other engineer(s) approved by the Lender.
"Budget" shall mean the detailed budget of the overall costs of
the construction of the Infrastructure, including all Construction Costs
which has been approved by the Lender, specifying the sums which have been
or are to be paid by Borrower from its own funds and those sums to be paid
with, or reimbursed by, Loan proceeds, a copy of which budget is attached
hereto as Exhibit D.
"Bureau" shall mean the Bureau of Conveyances of the State of
Hawaii.
"Business Day" shall mean any day excluding: (a) Saturday and
Sunday, and (b) any day on which lenders in Honolulu, Hawaii, are
authorized or required by law or other governmental actions to close.
"Change Order(s)" shall mean any amendments or modifications to
the Plans and Specifications or the General Contract or the Offsite Water
System Contract or any subcontract.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"Consent and Agreement of Contractor" shall mean the agreement to
be executed by the General Contractor and by the Offsite Water System
Contractor in favor of the Lender in the form attached hereto as Exhibits
E-1 and E-2.
"Construction Costs" shall mean the total of all direct costs of
construction of the Infrastructure and the Offsite Water System.
"Controlled Group" shall mean with respect to any specified
Person, (a) all members of an affiliated group of corporations within the
meaning of Section 1504 of the Code and (b) all trades or businesses
(whether or not incorporated) under common control which, together with
such Person, are treated as a single employer under Section 414(b) or
414(c) of the Code.
"CPM Schedule" shall mean a critical path method construction
schedule or the equivalent thereof.
"Default" shall mean any event, act or condition which with
notice or lapse of time or both or with any other event, act or condition
would constitute an Event of Default.
<PAGE>
"Dollar(s)" shall mean lawful money of the United States of
America.
"Engineer's Agreement" shall mean the contract between the
Borrower and the Borrower's Engineer for the performance of engineering
services for the construction of the Infrastructure and the Offsite Water
System.
"Engineer's Statement" shall mean the agreement to be executed by
the Borrower's Engineer in favor of the Lender in the form attached hereto
as Exhibit F.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974 as amended from time to time. Section references to ERISA are to
ERISA as in effect at the date of this Agreement and any subsequent
provisions of ERISA, amendatory thereof, supplemental thereto or
substituted therefor.
"ERISA Affiliate" shall mean each trade or business (whether or
not incorporated) which together with the Borrower or any of its
subsidiaries would be deemed to be a "single employer" within the meaning
of Section 4001 of ERISA.
"Escrow Agreement" shall mean the Escrow Agreement dated April 5,
1996, made by and among Borrower, Citibank, N.A. Escrow, Lender and
Fletcher Pacific Construction Co., Ltd.
"Event of Default" shall mean each of the Events of Default
specified in Section 6 of this Agreement.
"Fair Market Value" of any property (personal or real) shall mean
the purchase price therefor which would be obtained in an arms-length cash
transaction between an informed and willing purchaser and an informed and
willing seller, in each case under no compulsion to enter into such
transaction.
"Financing Statement" shall mean a UCC-1 financing statement
executed by the Borrower in favor of the Lender.
"General Contract" shall mean the contract between the Borrower
and the General Contractor for construction of the Infrastructure.
"General Contractor" shall mean the Fletcher Pacific Construction
Co., Ltd.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Governmental Authorizations" shall mean all franchises,
licenses, permits, consents, approvals, authorizations and agreements
granted or issued by any local, state or Federal commission, agency or
authority or any other Governmental Authority, whether presently existing
or hereafter granted or issued to or obtained or used by the Borrower in
its business.
"Hazardous Material Indemnity Agreement" shall mean an agreement
whereby the Borrower indemnifies the Lender against all claims, losses and
damages related to hazardous materials in, on or about the Property, in
form and substance satisfactory to the Lender.
"Indirect costs" shall mean the total of the costs and expenses
<PAGE>
other than Construction Costs relating to construction of the
Infrastructure and the financing thereof.
"Infrastructure" shall mean the offsite and on-site
infrastructure (including drainage, sewer and water lines and roadways but
exclusive of the Offsite Water System) necessary to deliver the 233
residential lots, including one multi-family lot, comprising the Project.
"Loan" shall have the meaning assigned thereto in Section 1.1.
"Loan Documents" shall mean this Agreement, the Note, the
Mortgage and Security Agreement, the Assignment of Sales Contracts, the
Financing Statement, the Hazardous Materials Indemnity Agreement, the
Assignment of Contracts, the Assignment of Escrow Agreement and Consent,
the Subordination Agreement, the Escrow Agreement and all such other
instruments, documents and agreements evidencing or securing the Loan or
required by the terms of this Agreement to be executed and delivered by the
Borrower as a condition to the Loan.
"Maturity Date" shall mean the date which is two (2) years from
the date of this Agreement.
"Minimum IRR" shall have the meaning assigned thereto in Section
2.1.
"MLP" shall mean Maui Land & Pineapple Company, Inc., a Hawaii
corporation.
"Mortgage and Security Agreement" shall mean a mortgage and
security agreement, in form and content satisfactory to the Lender,
granting to the Lender a first lien on all of the Borrower's right, title
and interest in and to the Property and the improvements constructed and to
be constructed thereon and personal property related thereto.
"Net Sales Proceeds" shall mean the gross sales proceeds for a
Unit, which shall in no event be less than the sales price for such Unit as
set forth in Exhibit C attached hereto, less reasonable commissions and
normal closing costs, which commissions and costs shall not, without the
Lender's prior written consent, exceed, in the aggregate, six percent (6%)
of the gross sales price.
"Note" shall have the meaning assigned thereto in Section 1.2.
"Offsite Water System" shall mean the offsite waterline and
waterstorage tank to be built by the Borrower upon land owned by MLP
pursuant to the Water Storage and Waterline Development Agreement.
"Offsite Water System Contract" shall mean the Contract dated
September 20,1995, among 3521 Corp., the Borrower and the Offsite Water
System Contractor for the construction of the Offsite Water System.
"Offsite Water System Contractor" shall mean Goodfellow Brothers,
Inc., a Hawaii corporation.
"Organizational Documents" shall mean, with respect to a
corporation, its articles of incorporation and bylaws and all amendments
thereto, and with respect to a partnership or joint venture, its
partnership or joint venture agreement, and all amendments thereto.
"Participation Agreement" shall mean the Transfer Participation
Agreement dated February 13, 1993 between Pioneer Mill Company, Limited and
Uhina Corp.
<PAGE>
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Person" shall mean and include any individual, partnership,
firm, corporation, association, trust or other enterprise or any
governmental or political subdivision or agency, department or instrument
thereof.
"Plan" shall mean at any time an employee pension benefit plan
which is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code and is either (a) maintained by a
member of the Controlled Group (including the Borrower) for employees of a
member of the Controlled Group or (b) maintained pursuant to a collective
bargaining agreement or any other arrangement under which more than one
employer makes contributions and to which a member of the Controlled Group
is then making or accruing an obligation to make contributions or has
within the preceding five plan years made contributions.
"Plans and Specifications" shall mean the final plans and
specifications for the construction of the Infrastructure and the Offsite
Water System which have been prepared by the Borrower's Engineer and
approved as required by this Agreement, together with all amendments and
modifications thereof made by Change Orders.
"Project" shall mean the Kahana Ridge residential subdivision
project located in Maui, Hawaii, and to be comprised of 233 residential
lots (including 232 single-family residential lots plus one multi-family
lot), a park lot, an archeological site lot and related roadway lots.
"Property" shall mean approximately 60 acres of land located at
Maui, Hawaii, more particularly described in Exhibit A to the Mortgage and
Security Agreement.
"Reportable Event" shall mean an event described in Section
4043(b) of ERISA (with respect to which the 30-day notice requirement has
not been waived by the PBGC).
"Requirements of Law" shall mean, as to any Person, the
partnership agreement, certificate, charter or articles of incorporation
and by-laws or other organization or governing documents of such Person,
and any material statute, law, treaty, rule or regulation or determination
of an arbitrator or a court of other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Responsible Officer" shall mean such Person(s) (a) who shall
have received and who shall possess all necessary and appropriate authority
to execute and deliver certificates, documents and/or instruments hereunder
on behalf of the Borrower, and (b) with respect to whom the Borrower shall
have designated and certified to the Lender and provided the Lender
satisfactory evidence of such authority.
"Right of Entry Agreement" shall mean the Right of Entry
Agreement for the Construction of Offsite Drains and Siltation Basin and
for the Post-Construction Delivery of Easement dated December 22, 1995
among 3521 Corp., the Borrower and MLP.
"Storage Tank Agreement" shall mean the Agreement Concerning The
Construction Of A One Million Gallon Storage Tank dated March 30, 1995,
between the Board and 3521 Corp., which has been partially assigned to the
Borrower by agreement dated April 12, 1996.
"Subordination Agreement" shall mean a subordination agreement in
<PAGE>
form and substance satisfactory to the Lender whereby The Bank of Bermuda,
Limited subordinates its loan and security interest in the Property to the
Loan and Loan Documents.
"Unfunded Vested Liabilities" means, with respect to any Plan at
any time the amount (if any) by which (a) the present value of all vested
nonforfeitable benefits under such Plan exceeds or (b) the Fair Market
Value of all Plan assets allocable to such benefits, all determined as of
the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the
Controlled Group to the PBGC or the Plan under Title IV of ERISA.
"Unit(s)" shall mean the 233 single-family residential lots
comprising the Project.
"Water Storage and Waterline Development Agreement" shall mean
the Water Storage and Waterline Development Agreement dated December 20,
1995 among 3521 Corp., the Borrower, MLP, the Board and the Offsite Water
System Contractor.
"Written" or "in writing" shall mean any form of written
communication including (without limitation) communication by means of
telex, telecopier device, telegraph or cable.
8.2 Accounting Principles. All statements to be prepared and
determinations to be made under this Agreement, including (without
limitation) those pursuant to Section 5 shall be prepared and made in
accordance with generally accepted accounting principles applied on a
consistent basis.
8.3 Exercise of Rights; Consents. Neither the failure nor delay
on the part of the Lender to exercise any right, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under this Agreement
preclude any other or further exercise thereof, or the exercise of any
other right, power or privilege. The rights and remedies herein expressly
provided as cumulative and not exclusive of any rights or remedies which
the Lender would otherwise have. No notice to or demand on the Borrower in
any case shall entitled the Borrower to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the
right of the Lender to any other or further action in any circumstances
without notice or demand. Any and all consents of the Lender required by
or pursuant to the terms of this Agreement or the other Loan Documents,
shall be in writing, signed by the Lender, and unless otherwise
specifically stated herein or therein, shall be given or withheld in the
sole discretion of the Lender.
8.4 Amendment and Waiver. Neither this Agreement, the Note, any
Loan Document nor any terms hereof or thereof may be amended, supplemented,
waived or otherwise modified except in writing and signed by the parties
hereto. In the case of any waiver, the Borrower and the Lender shall be
restored to their former position and rights hereunder and under the Note,
and any Default or Event of Default waived shall be deemed to be cured and
not continuing; but no such waiver shall extend to any subsequent or other
Default or Event of Default, or impair any right arising therefrom.
8.5 Expenses.
(a) The Borrower agrees to pay all out-of-pocket expenses of the
Lender incurred in connection with the preparation, execution, enforcement
and administration of this Agreement, the Note and the other Loan Documents
and the making and repayment of the Loan, including without limitation, the
costs of title policy, attorneys' fees, appraisal fees, recording costs,
<PAGE>
special mortgage recording fees and escrow fees and including Lender's
costs of performing its "due diligence" in connection with the Loan,
provided that Lender submits to Borrower receipts or other evidence of such
due diligence costs and provided further that the reimbursement for such
due diligence costs shall not exceed $10,000.00. Other than costs of
enforcement, all such reimbursements shall be paid at closing of the Loan.
(b) The Borrower further agrees to pay, and to save the Lender
harmless from all liability for, any stamp or other documentary taxes which
may be payable in connection with the Borrower's execution or delivery of
this Agreement and the other Loan Documents, its borrowings hereunder, or
its issuance of the Note or of any other instruments or documents provided
for herein or delivered or to be delivered by the Borrower hereunder or in
connection herewith.
(c) All obligations provided for in this Section 8.5 shall
survive any termination of this Agreement.
8.6 Successors and Assigns. This Agreement shall bind, and the
benefits thereof shall inure to, the Borrower, the Lender and their
respective successors and assigns, provided that the Borrower may not
transfer or assign any or all of its rights and/or obligations hereunder or
under the other Loan Documents without the prior written consent of the
Lender, which may be withheld in the Lender's sole discretion.
8.7 Consent to Set-Off. In addition to any rights and remedies
of the Lender provided by law, the Lender shall have the right, without
prior notice to the Borrower, any such notice being expressly waived by the
Borrower to the extent permitted by applicable law, upon the occurrence of
any Event of Default or upon the filing of a petition under any of the
provisions of the federal Bankruptcy Code or amendments thereto by; the
making of a general assignment for the benefit of creditors by; the
application for the appointment, or the appointment, of any receiver of, or
of any material portion of the property of; the issuance of any execution
against any material portion of the property of; the issuance of a subpoena
or order, in supplementary proceedings, against or with respect to any
material portion of the property of; or the issuance of a warrant of
attachment against any material portion of the property of, the Borrower,
to set-off and apply against any indebtedness whether matured or unmatured,
of the Borrower to the Lender, any amount owing from the Lender to the
Borrower, at or at any time after, the happening of any of the above
mentioned events, and the aforesaid right of set-off may be exercised by
the Lender against the Borrower or against any trustee in bankruptcy,
debtor in possession, assignee for the benefit of creditors, receiver or
execution, judgment or attachment creditor of the Borrower, or against
anyone else claiming through or against the Borrower or such trustee in
bankruptcy, debtor in possession, assignee for the benefit of creditors,
receiver, or execution, judgment or attachment creditor, notwithstanding
the fact that such right of set-off shall not have been exercised by such
Lender prior to the making, filing, issuance or service upon the Borrower
and the Lender of, or of notice of, any such petition; assignment for the
benefit of creditors; appointment or application for the appointment of a
receiver; or issuance of execution, subpoena, order or warrant.
8.8 Notices, Requests, Demands. All notices, requests, demands
or other communications to or upon the parties hereto shall be deemed to
have been given or made when given or made (a) in the case of notice by
mail or by courier, when actually received, and (b) in the case of
telecopier notice, when actually received, in each case addressed to the
Borrower or the Lender, as the case may be, at their respective addresses
and facsimile numbers shown below their signatures hereto or at such other
address or facsimile number as such party may hereafter specify in writing
to the other. No method of giving notice is hereby precluded.
<PAGE>
8.9 Survival of Representations and Warranties. All
representations and warranties contained herein or otherwise made in
writing by the Borrower in connection herewith shall survive the execution
and delivery of this Agreement and the Note.
8.10 Governing Law. This Agreement and the rights and
obligations of the parties under this Agreement, the Note and the other
Loan Documents shall be governed by the laws of the State of Hawaii (but
without giving effect or principles of conflict of laws) as to
interpretation, enforcement, validity, construction, effect and in all
other respects, but excluding perfection, which shall be governed by and
controlled by the laws of the relevant jurisdiction.
8.11 Counterparts. This Agreement may be executed in any number
of copies, and by the parties hereto on the same or separate counterparts,
each of which shall be deemed to be an original instrument but all of which
together shall constitute one and the same agreement.
8.12 Further Assurances. From time to time, within fifteen (15)
days after the Lender's demand therefor, the Borrower will execute and
deliver to the Lender such additional documents, will take such further
action and will provide the Lender with such additional information as the
Lender may reasonably require to carry out the terms of this Agreement and
the other Loan Documents, and to be informed of the Borrower's status and
affairs.
8.13 Entire Agreement. This Agreement and the Loan Documents
contain the entire agreement between the parties. This Agreement and the
Loan Documents supersede any and all other agreements and communications,
either oral or in writing, between the parties hereto with respect to the
subject matter of this Agreement and the Loan Documents.
8.14 Descriptive Headings. The descriptive headings of the
various provisions of this Agreement are inserted for convenience of
reference only and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered on the date
first above written.
By: CFSC CAPITAL CORP. XI, a Delaware
corporation
By: /s/Steve Trawick
Name: Steve Trawick
Title: Assistant Vice President
Telephone No.: (612) 984-3055
Telecopy No.: (612) 984-3905
Address: c/o Cargill, Incorporated
P.O. Box 5653
Minneapolis, Minnesota 55440
Attn: Mr. Steve Trawick
MAUI USA INC., a Nevada corporation
By: /s/Mike O. Kirkeby
Name: Mike O. Kirkeby
Title: President
Telephone No.: (808) 667-0647
Telecopy No.: (808) 661-5543
Address: 505 Front Street, Suite 233
Lahaina, Maui, Hawaii 96761
Attn: Mr. Mike Kirkeby
<PAGE>
EXHIBIT A
PROMISSORY NOTE
U.S. $8,000,000.00 Honolulu, Hawaii
Effective Date: __________ __, 1996
1. Promise to Pay; Interest Rate; Payment Schedule.
The undersigned, MAUI USA INC., a Nevada corporation (the "Borrower"),
hereby promises to pay to the order of CFSC CAPITAL CORP. XI, a Delaware
corporation (the "Lender"), in lawful money of the United States of America
(in freely transferable U.S. Dollars and in immediately available funds),
at c/o Cargill, Incorporated, P.O. Box 5653, Minneapolis, Minnesota 55440,
at the times and in the manner provided in the Agreement referred to below,
the principal sum of EIGHT MILLION AND NO/100 DOLLARS ($8,000,000.00), or
so much thereof as may have been disbursed by the Lender and remain
outstanding.
The Borrower also promises to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid
at the rates per annum which shall be determined in accordance with the
provisions of Section 2.1 of that certain Loan Agreement (the "Agreement")
dated __________ __, 1996, between the Borrower and the Lender, said
interest to be payable at the times and in the manner provided for in the
Agreement. The Borrower also promises to pay the outstanding principal
amount of this Note in like money at said office at the times and in the
manner provided for in the Agreement.
2. Events of Default; Remedies. This Note is the Note referred to in the
Agreement and is entitled to the benefits thereof. If an Event of Default
(as defined in the Agreement) shall occur and be continuing, the Lender
shall have all rights and remedies, legal or equitable, available to the
Lender under any of the Loan Documents (as defined in the Agreement) or at
law.
3. Late Charges. If any payment due under this Note is not made within
ten (10) days of the date when due, the Borrower will pay to the Lender a
late charge in respect of that payment, in the amount of 5% of the overdue
payment.
4. Lender's Expenses. The Borrower will pay on demand all of the
Lender's reasonable expenses, including reasonable attorneys' fees, arising
out of or related to the protection or enforcement of the Lender's rights
under this Note or any other of the Loan Documents, whether or not an Event
of Default shall have occurred and whether or not legal proceedings are
commenced.
5. Limitation on Payments. In no event shall the Borrower be obligated
to pay any amount under this Note that exceeds the maximum amount allowable
by law. If any sum is collected in excess of the applicable maximum amount
allowable by law, the excess collected shall, at the Lender's discretion,
be applied to reduce the principal balance of this Note or returned to the
Borrower.
6. Waivers. The Borrower (and each of them, if more than one) waives
presentment, demand for payment, notice of dishonor, and any and all other
<PAGE>
notices or demands in connection with the delivery, acceptance, performance
or enforcement of this Note, and consents to any extension of time (and
even multiple extensions of time for longer than the original term),
renewals, releases of any person or organization liable for the payment of
this Note, and waivers or modifications or other indulgences that may be
granted or consented to by the Lender in respect to the loan evidenced by
this Note.
7. Severability. If any provision of this Note is invalid or
unenforceable, such validity or unenforceability shall not affect any other
provision of this Note that can be given effect. The provisions of this
Note are several.
8. Governing Law. This Note shall be governed by the laws of the State
of Hawaii.
MAUI USA INC.,
a Nevada corporation
By__________________________
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-1-1996 JAN-1-1995
<PERIOD-END> JUN-30-1996 DEC-31-1995
<CASH> 49,250 1,202,656
<SECURITIES> 0 0
<RECEIVABLES> 798,719 8,000
<ALLOWANCES> 0 0
<INVENTORY> 16,898,757 15,278,255
<CURRENT-ASSETS> 0 0
<PP&E> 21,794 21,794
<DEPRECIATION> 7,348 5,168
<TOTAL-ASSETS> 17,822,063 16,571,930
<CURRENT-LIABILITIES> 1,064,711 615,926
<BONDS> 11,366,380 10,490,845
0 0
0 0
<COMMON> 10,000 10,000
<OTHER-SE> 5,380,972 5,455,159
<TOTAL-LIABILITY-AND-EQUITY> 5,390,972 5,465,159
<SALES> 0 0
<TOTAL-REVENUES> 22,067 13,584
<CGS> 0 0
<TOTAL-COSTS> (96,254) (29,331)
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (74,187) (15,747)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (74,187) (15,747)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (74,187) (15,747)
<EPS-PRIMARY> (.007) (.001)
<EPS-DILUTED> 0 0
</TABLE>
