-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G8WtAlYRTVr2qYSAGtT1TJdgrmQBha6uVDiAsOqWBgpaf3s8TzgrKtwqCYzvNIVj wLLEEepcKWTSCgfS8uiy1g== 0000063330-99-000026.txt : 19990817 0000063330-99-000026.hdr.sgml : 19990817 ACCESSION NUMBER: 0000063330-99-000026 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAUI LAND & PINEAPPLE CO INC CENTRAL INDEX KEY: 0000063330 STANDARD INDUSTRIAL CLASSIFICATION: CANNED, FRUITS, VEG & PRESERVES, JAMS & JELLIES [2033] IRS NUMBER: 990107542 STATE OF INCORPORATION: HI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06510 FILM NUMBER: 99690243 BUSINESS ADDRESS: STREET 1: PO BOX 187 STREET 2: 120 KANE ST CITY: KAHULUI MAUI STATE: HI ZIP: 96732 BUSINESS PHONE: 8088773351 MAIL ADDRESS: STREET 1: PO BOX 187 CITY: KAHULUI STATE: HI ZIP: 96732 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 1999 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-6510 MAUI LAND & PINEAPPLE COMPANY, INC. (Exact name of registrant as specified in its charter) HAWAII 99-0107542 (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) P. O. BOX 187, KAHULUI, MAUI, HAWAII 96733-6687 (Address of principal executive offices) Registrant's telephone number, including area code: (808) 877-3351 NONE Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at August 6, 1999 Common Stock, no par value 7,188,500 shares MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES INDEX Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheets, June 30, 1999 (Unaudited) and December 31, 1998 3 Condensed Statements of Operations and Retained Earnings, Three Months Ended June 30, 1999 and 1998 (Unaudited) 4 Condensed Statements of Operations and Retained Earnings, Six Months Ended June 30, 1999 and 1998 (Unaudited) 5 Condensed Statements of Cash Flows, Six Months Ended June 30, 1999 and 1998 (Unaudited) 6 Notes to Condensed Financial Statements (Unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings 14 Item 4. Submission of Matters to a Vote of Security-Holders 16 Item 6. Exhibits and Reports on Form 8-K 16 PART I FINANCIAL INFORMATION Item 1. Financial Statements MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES CONDENSED BALANCE SHEETS Unaudited 6/30/99 12/31/98 (Dollars in Thousands) ASSETS Current Assets Cash and cash equivalents $ 2,254 $ 3,447 Accounts and notes receivable 8,723 13,005 Inventories 21,363 15,520 Other current assets 3,518 3,659 Total current assets 35,858 35,631 Property 215,573 209,967 Accumulated depreciation (124,364) (120,046) Property - net 91,209 89,921 Other Assets 11,624 10,695 Total 138,691 136,247 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Current portion of long-term debt and capital lease obligations 3,546 2,753 Trade accounts payable 5,400 6,613 Other current liabilities 8,242 7,280 Total current liabilities 17,188 16,646 Long-Term Liabilities Long-term debt and capital lease obligations 23,050 23,592 Accrued retirement benefits 23,200 22,920 Equity in losses of joint venture 8,476 7,969 Other long-term liabilities 3,179 2,628 Total long-term liabilities 57,905 57,109 Stockholders' Equity Common stock, no par value - 7,200,000 shares authorized, 7,188,500 issued and outstanding 12,318 12,318 Retained earnings 51,280 50,174 Stockholders' equity 63,598 62,492 Total $138,691 $ 136,247 See accompanying Notes to Condensed Financial Statements. MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (UNAUDITED) Three Months Ended 6/30/99 6/30/98 (Dollars in Thousands Except Share Amounts) Revenues Net sales $22,013 $22,263 Operating income 8,032 7,221 Other income 326 652 Total Revenues 30,371 30,136 Costs and Expenses Cost of goods sold 13,776 15,122 Operating expenses 6,946 6,500 Shipping and marketing 3,603 3,689 General and administrative 4,773 3,563 Interest 401 325 Equity in losses of joint ventures 268 748 Total Costs and Expenses 29,767 29,947 Income Before Income Taxes 604 189 Income Tax Expense 223 66 Net Income 381 123 Retained Earnings, Beginning of Period 50,899 46,272 Retained Earnings, End of Period 51,280 46,395 Per Common Share Net income $ .05 $ .02 See accompanying Notes to Condensed Financial Statements. MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (UNAUDITED) Six Months Ended 6/30/99 6/30/98 (Dollars in Thousands Except Share Amounts) Revenues Net sales $45,297 $42,421 Operating income 18,196 15,408 Other income 525 776 Total Revenues 64,018 58,605 Costs and Expenses Cost of goods sold 28,518 29,402 Operating expenses 13,422 13,002 Shipping and marketing 9,367 7,168 General and administrative 8,220 7,168 Interest 892 1,508 Equity in losses of joint ventures 417 647 Total Costs and Expenses 60,836 58,895 Income (Loss) Before Income Taxes 3,182 (290) Income Tax Expense (Credit) 1,177 (107) Net Income (Loss) 2,005 (183) Retained Earnings, Beginning of Period 50,174 46,578 Cash Dividends (899) -- Retained Earnings, End of Period 51,280 46,395 Per Common Share Net income (loss) .28 (.03) Dividends $ .125 $ -- See accompanying Notes to Condensed Financial Statements. MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended 6/30/99 6/30/98 (Dollars in Thousands) Net Cash Provided by (Used in) Operating Activities $ 7,852 $ (806) Investing Activities Purchases of property (7,027) (3,060) Proceeds from disposal of property 122 601 Contributions to joint ventures (300) (100) Other (1,462) (454) Net Cash Used in Investing Activities (8,667) (3,013) Financing Activities Payments of long-term debt and capital lease obligations (954) (4,839) Proceeds from long-term debt 932 7,800 Proceeds from short-term debt 273 -- Dividend paid (899) -- Other 270 -- Net Cash Provided by (Used in) Financing Activities (378) 2,961 Net Decrease in Cash (1,193) (858) Cash and Cash Equivalents at Beginning of Period 3,447 1,611 Cash and Cash Equivalents at End of Period $ 2,254 $ 753 Supplemental Disclosure and Cash Flow Information - Interest (net of amounts capitalized) of $844,000 and $1,581,000 was paid during the six months ended June 30, 1999 and 1998, respectively. Income taxes of $1,036,000 and $519,000 were paid during the six months ended June 30, 1999 and 1998, respectively. See accompanying Notes to Condensed Financial Statements. MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 1. In the opinion of management, the accompanying condensed financial statements contain all normal and recurring adjustments necessary to present a fair statement of financial position, results of operations and cash flows for the interim periods ended June 30, 1999 and 1998. 2. The Company's reports for interim periods utilize numerous estimates of production, general and administrative expenses, and other costs for the full year. Consequently, amounts in the interim reports are not necessarily indicative of results for the full year. 3. The effective tax rate for 1999 and 1998 differs from the statutory federal rate of 34% primarily because of the state tax provision and refundable state tax credits. 4. Accounts and notes receivable are reflected net of allowance for doubtful accounts of $688,000 and $493,000 at June 30, 1999 and December 31, 1998, respectively. 5. Inventories as of June 30, 1999 and December 31, 1998 were as follows (in thousands): 6/30/99 12/31/98 Pineapple products Finished goods $ 8,543 $ 5,979 Work in progress 2,657 839 Raw materials 2,669 1,562 Real estate held for sale 1,187 1,083 Merchandise, materials and supplies 6,307 6,057 Total Inventories $21,363 $15,520 6. Business Segment Information (in thousands): Three Months Ended Six Months Ended June 30 June 30 1999 1998 1999 1998 Revenues Pineapple $ 19,249 $ 19,710 $ 39,168 $ 37,026 Resort 10,057 9,329 22,801 19,436 Commercial & Property 1,031 1,132 1,954 2,127 Other 34 (35) 95 16 Total revenues 30,371 30,136 64,018 58,605 Operating profit (loss) Pineapple 1,399 539 3,242 (200) Resort 1,101 843 2,759 2,326 Commercial & Property (166) (158) (381) (400) Other (1,329) (287) (1,546) (508) Total operating profit 1,005 937 4,074 1,218 Interest expense (401) (748) (892) (1,508) Income tax (expense) credit (223) (66) (1,177) 107 Net income $ 381 $ 123 $ 2,005 $ (183) 7. Average common shares outstanding for the interim periods ended June 30, 1999 and 1998 were 7,188,500. 8. In December of 1998, the presentation of "operating profit (loss)" was modified to include allocated expenses of centralized functions and the part of corporate administration attributable to the business segment. Operating profits for prior periods have been restated to conform to the current presentation. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Consolidated Consolidated net income for the second quarter of 1999 was $381,000 compared to $123,000 for the second quarter of 1998. Revenues of $30.4 million for the second quarter of 1999 were approximately 1% higher than the second quarter of 1998. For the first half of 1999, the Company produced net income of $2 million compared to a net loss of $183,000 for the first half of 1998. Revenues for the first half of 1999 were 9% higher than the same period in 1998. Net income for 1999 is lower by $692,000 ($1.1 million general and administrative expense, less income tax credit of $406,000) because of a second quarter write-off of deferred costs for consultants engaged to analyze and develop potential strategic plans for the Company. These costs were charged to expense due to the pending sale of approximately 41% of the Company's outstanding shares that was announced on July 1, 1999. Interest expense was lower by 46% and 41% for the second quarter and first half of 1999, respectively, compared to the same periods in 1998 due to lower average borrowings and to lower average interest rates. Borrowings were lower in 1999 because of the retirement of certain debt in December 1998 and higher cash flows from operating activities during 1999. Pineapple Revenue from Pineapple operations was lower by 2% for the second quarter of 1999, but higher by 6% for the first half of 1999 as compared to the same periods in 1998. Pineapple operations produced an operating profit of $1.4 million for the second quarter of 1999 compared to $539,000 for the second quarter of 1998. For the first six months of 1999 the Pineapple segment reported operating profit of $3.2 million compared to an operating loss of $200,000 for the first six months in 1998. These results primarily reflect higher average prices for canned pineapple in 1999, which more than offset lower case sales volume and higher average cost of sales per case. Higher prices resulted in increased revenue of approximately $1.6 million and $2.9 million, respectively, for the second quarter and first half of 1999. Lower case sales volume resulted in lower revenue of approximately $2.2 million and $1 million, respectively, for the second quarter and first half of 1999. Unseasonably cool weather on Maui has caused some delays in delivery of fruit to the cannery. This resulted in higher production costs and a slightly higher cost of sales per case for the second quarter and first half of 1999. The County of Maui has imposed water use restrictions in Upcountry Maui because of drought conditions. Improvements to our irrigation systems over the past few years have substantially increased our ability to weather a drought. The Company has experienced some delay in its normal planting schedule because of the dry conditions. Resort Revenues from the Company's Kapalua Resort segment were $10.1 million for the second quarter of 1999 compared to $9.3 million for the second quarter of 1998. For the first half of 1999 Resort revenues were $22.8 million compared to $19.4 million for the first half of 1998. The operating profit from the Resort was $1.1 million for the second quarter of 1999 compared to $843,000 for the second quarter of 1998. For the first six months of 1999 Resort operating profit was $2.8 million compared to $2.3 million for the first six months of 1998. Approximately half of the increase in revenues for the first six months of 1999 was due to tournament operations fees received as a result of hosting the Mercedes Championships held in January of 1999. Costs and expenses to host the tournament more than offset the tournament operations fees and were charged primarily to marketing expense in the first quarter of 1999. Higher Resort marketing expense is largely the reason for the increase in consolidated Shipping and Marketing expenses for the first six months of 1999 compared to the same period in 1998. The increase in revenues and operating profits in the second quarter and first half of 1999 were primarily attributable to increased profits from golf, retail, villa rental operations and the hotel ground leases. Higher average green fees in first half of 1999 more than offset a reduction in the number of paid rounds of golf. For the second quarter of 1999, both average green fees and the number of paid rounds of golf exceeded the second quarter of 1998. The Company is proceeding with development plans for 14 single- family lots on the remaining 34 acres in Plantation Estates Phase II. We have reservation agreements for 12 of the lots. If closing of the reservation agreements and construction of the improvements commence in October as currently planned, the Company will begin recognizing profits from this project in the fourth quarter of 1999, using the percentage of completion method, over the period of construction of the site improvements. Commercial & Property Revenues from the Commercial & Property segment were $1 million for the second quarter of 1999 compared to $1.1 million for the second quarter of 1998. For the first six months of 1999 Commercial & Property revenues were $2 million compared to $2.1 million for the first six months of 1998. Lower revenues in 1999 were primarily due to higher land sales in 1998. The segment generated an operating loss of $166,000 for the second quarter of 1999 compared to $158,000 for the second quarter of 1998. For the first half of 1999 the loss from this segment was $381,000 compared to $400,000 for the first half of 1998. The Company's losses from its investment in Kaahumanu Center were $289,000 for the second quarter of 1999 compared to $321,000 for the second quarter of 1998. For the first half of 1999 the Company's loss from Kaahumanu Center was $469,000 compared to $651,000 for the first half of 1998. The lower loss for 1999 was principally attributable to higher revenues and lower bad debt expense in 1999. LIQUIDITY, CAPITAL RESOURCES AND OTHER Total debt including capital leases was $26.6 million at June 30, 1999, compared to $26.3 million at December 31, 1998. Outstanding debt is expected to increase in the third quarter as seasonal cash requirements for the pineapple operations and construction of The Village Course Clubhouse and Kapalua Golf Academy continues. Unused short- and long-term lines of credit available to the Company at June 30, 1999, including the $15 million development line of credit for construction of the clubhouse and golf academy, totaled $33.6 million. These credit lines and anticipated cash flows from operations are expected to be adequate to cover the Company's cash requirements for 1999. Expenditures for fixed assets and deferred development costs are estimated to be approximately $22 million in 1999. This amount includes approximately $11.2 million for the clubhouse and golf academy and $6.5 million for replacement of existing equipment for Pineapple and Resort operations. Effective June 1, 1999, the Company's $15 million bridge loan agreement was amended and restated in its entirety and converted to a term loan secured by certain parcels of the Company's real property on Maui. Principal payments are due from September 2004 through June 2009. Interest rates on the loan are adjustable to 2.15% to 2.55% above six-month, one year and three year rates made available by the Federal Farm Credit Bank. The agreement includes certain financial covenants including the maintenance of a minimum tangible net worth and debt coverage ratio, maximum funded debt to capitalization ratio, and limits on capital expenditures, investments and the payment of dividends. Kapalua Coconut Grove LLC is in the process of obtaining financing for the construction of 36 luxury beachfront condominiums on the parcel adjacent to the Kapalua Bay Hotel. The Company, as a 50% member of the limited liability company, may be required under certain circumstances to guarantee the construction loan. Presales of the project are scheduled for August 1999 and mass grading and site work is scheduled to begin in October. The Company has evaluated its information technology (IT) and non- IT systems with respect to Year 2000 capability and has set target dates for compliance of all systems. In May of 1999 the manufacturer of the Company's power generating system informed the Company that the monitoring and control portion of the system is not Year 2000 compliant and that they would be unable to supply an upgrade or replacement parts for the non-compliant system. The Company has found alternative sources for monitoring and control systems that are Year 2000 compliant and has awarded the contract for the purchase and installation of the equipment. It is estimated that the power generating system will be compliant by October 15, 1999. Several of the Company's data processing applications use software programs purchased from outside vendors. All applications requiring software upgrades from outside vendors are now Year 2000 compliant. The upgrade to the operating system used by the Resort merchandise inventory control and golf reservations applications has been received and will be installed and tested in September. The target date for completion is October 1, 1999. All of the Company's custom data processing applications required modification to be Year 2000 compliant. Among them, the Pineapple sales system and the Pineapple warehouse system are critical to the Company's operations. Modification and testing of both systems were completed by year-end 1998. The remaining custom data processing applications are now compliant and testing will continue through the end of the third quarter of 1999. The Company initiated correspondence with vendors, suppliers and trading partners during 1998 and through the first quarter of 1999 to assess risk of business interruption by noncompliance of third parties. The Company received responses from all of those businesses whose noncompliance would have a material impact on the Company. The responses indicate that these companies' data processing systems are either Year 2000 compliant or are expected to be compliant by the end of the third quarter of 1999. The most reasonably likely worst case scenario regarding Year 2000 is the non-compliance of the power generating system. These generators are the primary source of electricity for Kaahumanu Shopping Center, the Company's pineapple cannery and the administrative offices in Kahului. The Company is prepared to monitor and control the generators manually should there be delays in upgrading the system. Alternatively, the Company's electricity requirements can be met by the electric public utility company on Maui, but control and reliability could be sacrificed. It is anticipated the Company's Information Services personnel will spend approximately 50% of their time on continued testing and monitoring and on non-critical Year 2000 programming issues during the second half of 1999 and the first quarter of 2000. It appears that the Company's present Information Services personnel will be able to complete all program modifications, installation and testing, and that no outside resources will be required. The Company does not separately track internal costs incurred for Year 2000 issues. Such costs are principally payroll and related costs for the Company's Information Services personnel. The Company has not incurred any material external expenditures for Year 2000 compliance to date. The purchase, installation and testing of the monitoring and control system for the power generation plant is expected to cost approximately $145,000. Should the alternative of purchasing electricity from the public utility become necessary, the incremental cost to the Company is estimated to be approximately $1,000 per day. Based on current information, no other material future expenditures have been identified. This report contains forward-looking statements, within the meaning of Private Securities Litigation Reform Act of 1995, as to the Company's expectations for positive cash flows from operating activities, the development of Plantation Estates Phase II and Kapalua Coconut Grove, its expectations regarding the Year 2000 issue and other matters. Forward-looking statements contained in this report or otherwise made by the Company are subject to certain risks and uncertainties that could cause actual results to differ materially from those in the forward- looking statements. Potential risks and uncertainties include, but are not limited to, those risks and uncertainties as disclosed in the Company's Form 10-K filing with the Securities and Exchange Commission. Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company's primary market risk exposure with regard to financial instruments is to changes in interest rates. The Company manages this risk by monitoring interest rates and future cash requirements, and evaluating opportunities to refinance borrowings at various maturities and interest rates. During the second quarter of 1999, the Company's conversion of its $15 million bridge loan into a term loan did not have a material impact on the Company's market risk exposure due to changes in interest rates. PART II OTHER INFORMATION Item 1. Legal Proceedings A. Antidumping Petition In April of 1998, the United States Court of Appeals for the Federal Circuit heard the appeals of Maui Pineapple Company, Ltd. and the Department of Commerce regarding the antidumping petition and calculation of duties on imports of canned pineapple fruit from Thailand. A final decision was reached on July 28, 1999. In its decision by judges Archer and Rader, the United States Court of Appeals for the Federal Circuit said, "We conclude in this case that the Commerce's interpretation was reasonable, supported by substantial evidence, and thus entitled to deference. For the reasons stated, the decision of the Court of International Trade is REVERSED." The decision, in effect, affirms the duties on imports of canned pineapple fruit from Thailand established as a result of the Company's antidumping petition. Preliminary results of the third administrative review covering the period from July 1997 to June 1998 were published in June 1999, and did not result in any material changes to the duties being assessed. B. Chemical Litigation See item 3.B of Form 10-K for the year ended December 31, 1998, for background information concerning these proceedings. In Board of Water Supply of the County of Maui vs. Shell Oil Company, et al. (the "DBCP Litigation"), global settlement negotiations involving all of the Defendants, including the Company, with the assistance of a mediator are progressing. During the pendency of such negotiations the parties have stayed all discovery and trial preparation. In the DBCP Litigation, the County of Maui seeks to hold Dow Chemical Company, Occidental Chemical Corporation, Occidental Petroleum Corporation, Shell Oil Company, AMVAC Chemical Corporation, American Vanguard Corporation, Brewer Environmental Industries LLC, Maui Pineapple Company, Ltd. and Maui Land & Pineapple Company, Inc. jointly and severally liable for DBCP remediation of certain water wells. On August 5, 1999, Maui Land & Pineapple Company, Inc. and Maui Pineapple Company, Ltd., entered into a settlement agreement with Occidental Chemical Company and its affiliates in Maui Land & Pineapple Company, Inc. vs. Occidental Chemical Corporation regarding the claim made by Occidental for indemnification under that March 14, 1978 Agreement between the parties. The Company has agreed to pay to Occidental $100,000 for a release of liability for past, present and future attorneys' fees and costs in the DBCP Litigation and as elected by Occidental, either (a) (i) 50% of Occidental's share (up to a maximum of $300,000, subject to potential increase) of the negotiated cost of remediation of one existing well and the temporary drought treatment of two wells which are the subject of the DBCP Litigation and (ii) 50% of Occidental's share of future capital, operation and maintenance costs associated with the remediation of future DBCP affected wells on Maui as such costs may become due and payable to the Board of Water Supply (the "Board") pursuant to the terms of a settlement agreement with Occidental or (b) 50% of any settlement paid by Occidental to the Board relating to the DBCP Litigation if Occidental settles separately, or (c) in the event a settlement is not reached in the DBCP Litigation, 50% of Occidental's liability if the matter proceeds to trial and results in a judgment against Occidental. In addition, the Company has agreed to pay 50% of Occidental's share of any liability in any future action brought against it by the Board or any other person alleging property damage allegedly based on contamination of one or more water wells on Maui by DBCP, whether such liability is determined by settlement or by verdict, and pay 50% of Occidental's attorneys' fees and costs and expenses incurred in the defense of such action. The Company is a party to litigation with the Hawaiian Insurance & Guaranty Company (now known as HUI/Unico in Liquidation, Inc. ("HUI/Unico")) relating to insurance coverage for the claims made by Occidental. An agreement in principle, subject to formal settlement documentation, was reached on July 22, 1999, under which the Company would receive $600,000 from HUI/Unico and the Company would release any right that it had to make any existing or future claims against such insurance policy. A definitive settlement agreement is currently being prepared. A reserve of $250,000 was established in June 1999 against identifiable liabilities arising out of the foregoing cases. Item 4. Submission of Matters to a Vote of Security-Holders On April 30, 1999, the annual meeting of the Company's shareholders was held. Proxies for the meeting were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934. The number of outstanding shares as of March 8, 1999, the record date of the annual meeting, was 7,188,500. The results of the matters voted upon were as follows: Election of Class Three directors for a three-year term: Shares Voted For Shares Withheld Richard H. Cameron 6,624,510 55,740 Morton B. Plant 6,630,302 49,948 Election of the firm Deloitte & Touche LLP as auditor of the Company for the fiscal year 1999: Shares voted for: 6,656,186 Shares voted against: 16,270 Shares abstained: 7,794 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (4) Instruments Defining the Rights of Security Holders A.* Term Loan Agreement between Pacific Coast Farm Credit Services and Maui Land & Pineapple Company, Inc. entered into as of June 1, 1999. (27)* Financial Data Schedule As of June 30, 1999 and for the six months then ended. *Filed Herewith (b) Reports on Form 8-K The Company filed no reports on Form 8-K for the period covered by this report. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MAUI LAND & PINEAPPLE COMPANY, INC. August 13, 1999 /S/ PAUL J. MEYER Date Paul J. Meyer Executive Vice President/Finance (Principal Financial Officer) EX-27 2
5 This schedule contains summary financial information extracted from the Maui Land & Pineapple Company, Inc. Balance Sheet as of June 30, 1999 and the Statement of Operations for the six months then ended, and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1999 JUN-30-1999 2,254 0 9,411 688 21,363 35,858 215,573 124,364 138,691 17,188 23,050 0 0 12,318 51,280 138,691 45,297 64,018 28,518 41,940 0 0 892 3,182 1,177 2,005 0 0 0 2,005 .28 .28
EX-4 3 TERM LOAN AGREEMENT between PACIFIC COAST FARM CREDIT SERVICES, ACA and MAUI LAND & PINEAPPLE COMPANY, INC. Loan No. 0426195000 June 1, 1999 Loan No. 0426195000 TERM LOAN AGREEMENT This TERM LOAN AGREEMENT ("Agreement") is entered into as of June 1, 1999 between PACIFIC COAST FARM CREDIT SERVICES, ACA, ("PCFC") and MAUI LAND & PINEAPPLE COMPANY, INC., a Hawaii corporation ("Borrower"). Recitals A. Borrower and PCFC are parties to that certain Bridge Loan Agreement dated as of December 30, 1998 (the "Bridge Loan Agreement"), pursuant to which PCFC advanced to Borrower as a bridge loan in the principal amount of Fifteen Million Dollars ($15,000,000) (the "Bridge Loan"). B. Borrower has requested, and PCFC has agreed, to amend and restate the Bridge Loan Agreement in its entirety to convert the Bridge Loan into a term loan, on the terms and conditions set forth below. Agreement NOW, THEREFORE, in consideration of the premises and covenants set forth below, the parties hereby agree that the Bridge Loan Agreement is hereby amended and restated in its entirety as follows: 1. Definitions and Rules of Construction. (a) Definitions. The following terms used in this Agreement shall have the following meanings: "Adjusted Gains on Asset Sales" shall mean the capital gains recognized by Borrower upon the sale of a real property asset, or upon the sale of a real property asset by a Person in which Borrower has an investment or upon the sale by Borrower of its interest in a Person holding a real property asset, attributable to the increase in value of the real property that occurred as a result of appreciation in value of the underlying land prior to the commencement of development of such real property, as opposed to profit attributable to the increase in value that occurred after commencement of development. "Affiliate" shall mean, with respect to any Person, (i) each Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, ten percent (10%) or more of the Stock having ordinary voting power in the election of directors of such Person, (ii) each Person that controls, is controlled by or is under common control with such Person or any Affiliate of such Person, or (iii) each of such Person's officers, directors, joint venturers and partners. For the purpose of this definition, "control" of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise. "Agreement" shall mean this Term Loan Agreement, together with Exhibits and Schedules attached hereto, and as hereafter amended, restated, modified, or supplemented. "Applicable Spread" shall mean, (i) with respect to the Six Month Fixed Rate Tranche, two and one-half percent (2.50%), (ii) with respect to the One Year Fixed Rate Tranche, two and fifty-five one-hundredths percent (2.55%), and (iii) with respect to the Three Year Fixed Rate Tranche, either (x) two and one-half percent (2.50%) during any six month fixed rate Interest Period, or (y) two and forty-five one-hundredths percent (2.45%) during any three year fixed rate Interest Period; provided, that the Applicable Spread for any Fixed Rate Tranche may be adjusted pursuant to Section 4(c)(2). "Bridge Loan Agreement" shall have the meaning assigned thereto in the Recitals. "Business Day" shall mean any day that is not a Saturday, a Sunday, or a day on which banks are required or permitted to be closed in the State of California. "Capital Expenditures" shall mean, for any period, the aggregate of all expenditures (whether paid in cash or other consideration or accrued as a liability and including that portion of Capital Leases that is capitalized on the balance sheet of Borrower including in connection with a sale-leaseback transaction) by Borrower and its Subsidiaries for the acquisition or leasing of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) which are required to be capitalized under GAAP on a consolidated balance sheet of Borrower and its Subsidiaries. Capital Expenditures shall not include (i) the actual value received for existing equipment either traded-in at time of purchase of new equipment or sold in the ordinary course of business (but only to the extent such equipment is replaced), and (ii) expenditures made from insurance proceeds. "Capital Lease" shall mean any lease of any property (whether real, personal or mixed) by Borrower or a Subsidiary as lessee that, in accordance with GAAP, either would be required to be classified and accounted for as a capital lease on a balance sheet of Borrower or such Subsidiary or otherwise be disclosed as such in a note to such balance sheet. "Cash Equivalents" shall mean any of the following: (i) certificates of deposit or other depository accounts with commercial banks organized under the laws of the United States or a state thereof, to the extent such certificates or accounts are fully insured by the Federal Deposit Insurance Corporation; (ii) treasury bills, and other marketable obligations issued or fully guaranteed by, or backed by the full faith and credit of, the United States and maturing not more than one (1) year from the date of issuance; or (iii) open market commercial paper rated at least "A1" or "P1" or higher by a national credit rating agency and maturing not more than two hundred seventy (270 ) days from the date of issuance. "Closing Date" shall mean the date on which all of the conditions precedent described in Section 3 shall have been satisfied or waived by PCFC, and the Term Loan has been funded or applied by PCFC to refinance the Bridge Loan. "Collateral" shall mean all of the real property and interests in property described in Section 9, and all other property and interests in property that now or hereafter secure the payment of any of the Obligations. "Consolidated Cash Flow" shall mean, for any period, for Borrower and its Subsidiaries on a consolidated basis, the sum (without duplication) of: (a) Consolidated Net Income; plus (b) the sum of (i) Equity in Losses of Joint Ventures, (ii) extraordinary non-cash losses, (iii) interest expense (including the interest portion of any capitalized lease obligations); (iv) depletion, depreciation and amortization, and (v) losses on asset sales; minus (c) the sum of (i) Equity in Earnings of Joint Ventures, (ii) extraordinary gains, (iii) non- cash amounts resulting from Adjusted Gains on Asset Sales, (iv) Maintenance Capital Expenditures, and (v) Restricted Payments made during such period, other than Restricted Payments referred to in clause (iii) of the definition of Restricted Payments. "Consolidated Debt Coverage Ratio" shall mean, as at any date of determination, the ratio of Consolidated Cash Flow for any period to Consolidated Debt Service for such period. "Consolidated Debt Service" shall mean, for any period, for Borrower and its Subsidiaries on a consolidated basis, the sum (without duplication) of the following: (i) interest expense (including the interest portion of any capitalized lease obligations); and (ii) scheduled principal payments (including the principal portion of capitalized lease obligations). "Consolidated EBITDA" shall mean, for any period, for Borrower and its Subsidiaries on a consolidated basis, the sum (without duplication) of: (a) Consolidated Net Income; plus (b) the sum of (i) Federal, state, local, and foreign income taxes, (ii) Equity in Losses of Joint Ventures, (iii) interest expense (including the interest portion of any capitalized lease obligations), (iv) depletion, depreciation and amortization, (v) losses on asset sales, and (vi) all other non-cash expenses; minus (c) the sum of (i) Equity in Earnings of Joint Ventures, (ii) non-cash amounts resulting from Adjusted Gains on Asset Sales, and (iii) extraordinary gains. "Consolidated Funded Debt" shall mean, as at any date of determination, for Borrower and its Subsidiaries on a consolidated basis, all indebtedness for borrowed money evidenced by notes, bonds, debentures, or similar evidences of indebtedness, and which by its terms matures more than one year from, or is directly or indirectly renewable or extendible at such Person's option under a revolving credit or similar agreement obligating the lender or lenders thereunder to extend credit over a period of more than one year from the date of creation thereof, and specifically including (i) capital lease obligations, (ii) current maturities of long-term debt, (ii) revolving credit and short-term debt extendible beyond one year at the option of the debtor, and (iii) the Obligations. "Consolidated Indebtedness" shall mean, as at any date of determination, for Borrower and its Subsidiaries on a consolidated basis, the sum (without duplication) of: (i) all obligations for borrowed money or for the deferred purchase price of property or services (including the present value of capitalized lease obligations) which, in accordance with GAAP, would be included in determining total liabilities as shown on the liability side of a balance sheet as of the date at which such indebtedness is to be determined; (ii) guarantees (other than Borrower's $10,000,000 limited payment guaranty of indebtedness of Kaahumanu Center Associates relating to the Kaahumanu Shopping Center); and (iii) letters of credit (other than letters of credit to support trade payables) and endorsements (other than of notes, bills, and checks presented to banks for collection or deposit in the ordinary course of business), in each case to support obligations for borrowed money of others. "Consolidated Indebtedness to Consolidated EBITDA Ratio" shall mean, as at any date of determination, the ratio of Consolidated Indebtedness, as of such date of determination, to Consolidated EBITDA for the relevant period. "Consolidated Net Cash Flow" shall mean, for any period, for Borrower and its Subsidiaries on a consolidated basis, the sum (without duplication) of: (a) Consolidated Net Income; plus (b) the sum of (i) extraordinary non-cash losses, (ii) depletion, depreciation and amortization, and (iii) losses on asset sales (excluding the cash portion of any such losses); minus (c) the sum of (i) extraordinary gains, (ii) gains on asset sales (excluding the cash portion of any gain associated with the sale of property), (iii) principal payments on term debt (including the interest portion of any capitalized lease obligations), (iv) Maintenance Capital Expenditures, and (v) other Capital Expenditures (net of the value associated with any exchange of assets, any amounts financed, and any amounts for which a firm financing commitment is available to Borrower or any Subsidiary, at its discretion). "Consolidated Net Income" shall mean, for any period, on a consolidated basis, the net income, if any, of Borrower and its Subsidiaries, determined in accordance with GAAP. "Consolidated Net Loss" shall mean, for any period, on a consolidated basis, the net loss, if any, of Borrower and its Subsidiaries, determined in accordance with GAAP. "Consolidated Net Worth" shall mean, as at any date of determination, on a consolidated basis, the gross book value of the assets of Borrower, minus the sum of (i) all reserves applicable thereto, and (ii) all liabilities of Borrower (including subordinated liabilities). "Consolidated Tangible Net Worth" shall mean, as at any date of determination, the gross book value of the assets of Borrower, (exclusive of goodwill, patents, trademarks, trade names, organization expense, unamortized debt discount and expense, deferred charges (other than deferred development costs related to the Kapalua Resort, provided the aggregate of said costs shall not exceed $5,000,000), and other like intangibles), minus (i) reserves applicable thereto, and (ii) all liabilities (including subordinated liabilities), in each case determined in accordance with GAAP and taking into effect such other adjustments as may be reasonably determined by PCFC in accordance with GAAP. "Consolidated Total Capitalization" shall mean, as at any date of determination, the sum of (i) Consolidated Funded Debt, plus (ii) Consolidated Net Worth. "Default" shall mean the occurrence of any event or circumstance which, with the passage of time or the giving of notice or both, would become an Event of Default. "Default Rate" shall mean a rate of interest that is three percent (3.00%) higher than the rate otherwise applicable. "Discounted Value" shall mean, with respect to any Prepayment, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Prepayment from their respective scheduled due dates to the payment date with respect to such Prepayment, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest is payable for such Prepayment) equal to the Reinvestment Yield with respect to such Prepayment. "Environmental Laws" shall mean all applicable federal, state, local and foreign laws, statutes, ordinances, codes, rules, standards and regulations, now or hereafter in effect, and any applicable judicial or administrative interpretation thereof, including any applicable judicial or administrative order, consent decree, order or judgment, imposing liability or standards of conduct for or relating to the regulation and protection of human health, safety, the environment and natural resources (including ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation). Environmental Laws include: the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. 9601 et seq.) ("CERCLA"); the Hazardous Materials Transportation Authorization Act of 1994 (49 U.S.C. 5101 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. 136 et seq.); the Solid Waste Disposal Act (42 U.S.C. 6901 et seq.); the Toxic Substance Control Act (15 U.S.C. 2601 et seq.); the Clean Air Act (42 U.S.C. 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.); the Occupational Safety and Health Act (29 U.S.C. 651 et seq.); the Safe Drinking Water Act (42 U.S.C. 300(f) et seq.); and any and all regulations promulgated thereunder, and all analogous state, local and foreign counterparts or equivalents and any transfer of ownership notification or approval statutes. "Environmental Liabilities" shall mean, with respect to any Person, all liabilities, obligations, responsibilities, response, remedial and removal costs, investigation and feasibility study costs, capital costs, operation and maintenance costs, losses, damages, punitive damages, property damages, natural resource damages, consequential damages, treble damages, costs and expenses (including all fees, disbursements and expenses of counsel, experts and consultants), fines, penalties, sanctions and interest incurred as a result of or related to any claim, suit, action, investigation, proceeding or demand by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law, including any arising under or related to any Environmental Laws, environmental permits, or in connection with any release or threatened release or presence of a Hazardous Material whether on, at, in, under, from or about or in the vicinity of any real or personal property. "Equity in Earnings of Joint Ventures" shall mean that portion of the earnings from joint ventures that is not distributed in cash to Borrower, determined on a consolidated basis in conformity with GAAP. "Equity in Losses of Joint Venture" shall mean the non-cash portion of any losses realized from joint ventures, determined on a consolidated basis in conformity with GAAP. "Event of Default" shall have the meaning assigned thereto in Section 13. "Farm Credit One-Year Discount Note Rate" shall mean, at any time, the all-in cost paid by Western Farm Credit Bank on one-year Farm Credit Discount Notes made available to Western Farm Credit Bank by the Federal Farm Credit Banks Funding Corporation. "Farm Credit Six-Month Discount Note Rate" shall mean, at any time, the all-in cost paid by Western Farm Credit Bank on six-month Farm Credit Discount Notes made available to Western Farm Credit Bank by the Federal Farm Credit Banks Funding Corporation. "Farm Credit Medium Term Note Rate" shall mean, at any time, the all-in cost paid by Western Farm Credit Bank on three year Farm Credit Medium Term Notes, made available to Western Farm Credit Bank by the Federal Farm Credit Banks Funding Corporation. "Fiscal Quarter" shall mean any of the quarterly accounting periods of Borrower. "Fiscal Year" shall mean the 12-month period of Borrower ending December 31 of each year. Subsequent changes of the fiscal year of Borrower shall not change the term "Fiscal Year," unless PCFC shall consent in writing to such change. "Fixed Rate Tranche" shall have the meaning assigned to it in Section 2. "GAAP" shall mean generally accepted accounting principles. "Guarantor" shall mean any Person that has guaranteed to PCFC all or any part of the Loan. "Guaranty Agreement" shall mean any Continuing Guaranty or other agreement by which a Guarantor has guaranteed all or any portion of the Loan. "Hazardous Material" shall mean any substance, material or waste that is regulated by or forms the basis of liability now or hereafter under, any Environmental Laws, including any material or substance that is (a) defined as a "solid waste," "hazardous waste," "hazardous material," "hazardous substance," "extremely hazardous waste," "restricted hazardous waste," "pollutant," "contaminant," "hazardous constituent," "special waste," "toxic substance" or other similar term or phrase under any Environmental Laws, (b) petroleum or any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB's), or any radioactive substance. "Indemnified Person" shall mean all Persons indemnified by Borrower pursuant to Section 15. "Index Rate" shall mean, at any time, (i) with respect to the Six Month Fixed Rate Tranche, the Farm Credit Six- Month Discount Note Rate then in effect, (ii) with respect to the One Year Fixed Rate Tranche, the Farm Credit One-Year Discount Note Rate then in effect, and (iii) with respect to the Three Year Fixed Rate Tranche, either (x) if a six month fixed rate Interest Period is then in effect, the Farm Credit Six-Month Discount Note Rate then in effect, or (y) if a three year fixed rate Interest Period is then in effect, the Farm Credit Medium Term Note Rate then in effect. "Interest Period" shall mean, with respect to any Fixed Rate Tranche, a period beginning on the Closing Date or the Reset Date for such Fixed Rate Tranche, and ending on the next Reset Date for such Fixed Rate Tranche. "Investments" shall mean all expenditures by Borrower and its Subsidiaries, other than Capital Expenditures, made for the purpose of acquiring, increasing, or supplementing equity interests of any nature in partnerships, joint ventures, corporations, trusts, associations, or other business entities, or in real or personal property of any kind and as reflected as investments in Borrower's financial statements. "Lien" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing). "Maintenance Capital Expenditures" shall mean Capital Expenditures for the replacement of capital assets used in the ordinary course of business. "Make-Whole Amount" shall mean, with respect to any Prepayment of the Three Year Fixed Rate Tranche, the amount, if any, by which the Discounted Value of the Remaining Scheduled Payments with respect to the Prepayment exceeds the amount of such Prepayment; provided, that the Make-Whole Amount shall in no event be less than zero. "Material Adverse Effect" shall mean a Material Adverse Effect with respect to (i) the business, assets, operations, prospects, or financial or other condition of Borrower or any Guarantor, (ii) Borrower's ability to pay its obligations to PCFC under this Agreement, or (iii) PCFC's rights and remedies under this Agreement or any Guaranty Agreement. "Obligations" shall mean all loans, advances, debts, liabilities, and obligations, for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or amounts are liquidated or determinable and whether or not allowed as a claim in any proceeding referred to in Section 13(f)) owing by Borrower to PCFC, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, arising under any of the Other Documents. This term includes the Term Loan, all principal, interest, fees, charges, expenses, attorneys' fees and any other sum chargeable to Borrower under this Agreement or any of the Other Documents. "One Year Fixed Rate Tranche" shall have the meaning set forth in Section 2. "Other Agreements" shall mean all of the documents listed in Exhibit A. "Permitted Encumbrances" shall mean the following encumbrances: (i) Liens for taxes or assessments or other governmental charges or levies, either not yet due and payable or to the extent that nonpayment thereof is permitted by the terms of this Agreement; (ii) pledges or deposits securing obligations under workmen's compensation, unemployment insurance, social security or public liability laws or similar legislation; (iii) pledges or deposits securing bids, tenders, contracts (other than contracts for the payment of money) or leases to which Borrower or any Guarantor is a party as lessee made in the ordinary course of business; (iv) workers', mechanics', suppliers' or similar Liens arising in the ordinary course of business that are either not yet due and payable or that are being contested in good faith by appropriate proceedings and for which Borrower or any Guarantor has established adequate reserves; (v) carriers', warehousemen's, or other similar possessory Liens arising in the ordinary course of business; (vi) an attachment or judgment Lien, but only for a period of thirty (30) days following attachment of such Lien and such attachment or judgment lien shall cease to be a Permitted Encumbrance if the obligation that it secures has not been satisfied or bonded during such thirty (30) day period; (vii) zoning restrictions, easements, licenses, or other restrictions on the use of real property or other minor irregularities in title (including leasehold title) thereto, so long as the same do not materially impair the use, value, or marketability of such real property, leases or leasehold estates; (viii) Liens securing indebtedness owed by a Subsidiary to Borrower; (ix) security interests securing purchase money indebtedness in capital assets, the acquisition of which is permitted by this Agreement, and so long as the security interest does not encumber any asset other than the asset acquired; (x) any Lien listed as a Permitted Encumbrance on the Disclosure Schedule referred to in Exhibit A; (xi) the refinancing of the real property mortgages referred to in the Disclosure Schedule referred to in Exhibit A, provided that such refinancing covers the same property covered by the original mortgages, secures a principal amount not in excess of that secured by such mortgages on the date of refinancing, and the terms of such refinancing have all been negotiated at arms length and are on fair market terms; and (xii) other Liens securing Consolidated Indebtedness not exceeding Fifteen Million Dollars ($15,000,000) in the aggregate outstanding at any time, so long as such other Liens do not attach to any of the Collateral. "Person" shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). "Prepayment" shall mean a prepayment, prior to the Term Loan Maturity Date, of all or any portion of the principal amount of the Term Loan. "Reinvestment Yield" shall mean, with respect to any Prepayment of the Three Year Fixed Rate Tranche, the yield to maturity implied by (i) the yields reported, as of 10:00 a.m. (New York City time) on the second Business Day preceding the payment date with respect to such Prepayment, on the display designated as "Page PX1" or other applicable "PX" page of the Bloomberg Financial Markets Services Screen (or such other display as may replace Page PX1 or such other page on the Bloomberg Financial Markets Services Screen) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Prepayment as of such payment date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest date for which such yields have been so reported as of the second Business Day preceding the payment date with respect to such Prepayment, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Prepayment as of such payment date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the maturity closest to and greater than the Remaining Average Life and (2) the actively traded U.S. Treasury security with the maturity closest to and less than the Remaining Average Life. "Remaining Average Life" shall mean, with respect to any Prepayment of the Three Year Fixed Rate Tranche, the number of years (calculated to the nearest one-twelfth year) obtained by: (i) multiplying (a) the principal component of each Remaining Scheduled Payment covered by such Prepayment by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the date of such Prepayment and the scheduled due date of such Remaining Scheduled Payment; (ii) adding the products of each such calculation; and (iii) dividing the resulting sum by the amount of such Prepayment. "Remaining Scheduled Payments" shall mean, with respect to any Prepayment of the Three Year Fixed Rate Tranche, all payments and interest that would be due after the date of the Prepayment and on or prior to the next Reset Date with respect to the principal prepaid if such Prepayment were not made; provided, that if such payment date is not a date on which interest payments are due to be made under the terms of this Agreement, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such payment date and required to be paid on such payment date pursuant to this Agreement. "Reset Date" shall mean, (i) with respect to the Six Month Fixed Rate Tranche, December 1, 1999 and each June 1 and December 1 thereafter until the Term Loan Maturity Date, (ii) with respect to the One Year Fixed Rate Tranche, June 1, 2000 and each June 1 thereafter until the Term Loan Maturity Date, and (iii) with respect to the Three Year Fixed Rate Tranche, either (x) if a six month fixed rate Interest Period is then in effect, the June 1 or December 1 immediately following the commencement of such Interest Period, or (y) if a three year fixed rate Interest Period is then in effect, the June 1 or December 1 that corresponds to the third anniversary of the commencement of such Interest Period. "Restricted Payments" shall mean (i) dividends or other distributions or payments on account of or with respect to any capital stock of Borrower or of any Guarantor, except distributions consisting of such stock or, in the case of a Guarantor, distributions or payments made to Borrower, (ii) the redemption or acquisition of such stock or of warrants, rights, or other options to purchase such stock, except, in the case of a Guarantor, redemption or acquisition of stock held by Borrower, and (iii) any payment, repayment, redemption, retirement, repurchase or other acquisition, direct or indirect, by Borrower, any Guarantor or any Subsidiary of Borrower or any Guarantor of any principal portion of any obligation or indebtedness that has been subordinated to the indebtedness owed by Borrower to PCFC. "Six Month Fixed Rate Tranche" shall have the meaning set forth in Section 2. "Stock" shall mean all shares, options, warrants, general or limited partnership interests, participations or other equivalents (regardless of how designated) of or in a corporation, partnership or equivalent entity whether voting or nonvoting, including, without limitation, common stock, preferred stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended). "Subsidiary" shall mean, with respect to any Person, (i) any corporation of which an aggregate of more than 50% of the outstanding Stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of 50% or more of such Stock whether by proxy, agreement, operation of law or otherwise and (ii) any partnership, trust, limited liability company, or other entity in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than 50% or of which any such Person is a general partner or may exercise the powers of a general partner. "Term Loan" shall have the meaning set forth in Section 2. "Term Loan Fee" shall have the meaning set forth in Section 5. "Term Loan Maturity Date" shall have the meaning set forth in Section 2. "Three Year Fixed Rate Tranche" shall have the meaning set forth in Section 2. (b) Rules of Construction. Unless otherwise specified, references in this Agreement to a Section, Subsection, clause, Exhibit, or Schedule refer to such Section, Subsection, clause, Exhibit, or Schedule as contained in this Agreement. The words "herein," hereof," and "hereunder" and other words of similar import refer to this Agreement as a whole, including all Exhibits and Schedules hereto, as the same may from time to time be amended, restated, modified or supplemented. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural. The words "including," "includes," and "include" shall be deemed to be followed by the words "without limitation"; references to persons include their respective successors and assigns, to the extent permitted by the loan documents executed in connection with this Agreement, or, in the case of governmental persons, persons succeeding to the relevant functions of such persons; all references to statutes and related regulations shall include any amendments of the same and any successor statutes and regulations; whenever any provision in this Agreement or any such loan document refers to the knowledge (or analogous phrase) of Borrower or any Affiliate of Borrower, such words are intended to signify that Borrower or such Affiliate has actual knowledge or awareness of a particular fact or circumstance of that Borrower or such Affiliate, if it had exercised reasonable due diligence, would have known or been aware of such fact or circumstance. 2. The Loan. On the terms and conditions set forth in this Agreement, PCFC agrees to make a term loan to Borrower in a principal amount of Fifteen Million Dollars ($15,000,000) (the "Term Loan"). The Term Loan will be available to Borrower on the terms and conditions set forth in this Agreement on the Closing Date when all conditions precedent set forth in Section 3 have been satisfied. The Term Loan shall be used to refinance the obligations of Borrower to PCFC under the Bridge Loan Agreement. The Term Loan shall be divided into three interest rate components (each such interest rate component being referred to individually as a "Fixed Rate Tranche," and all such interest rate components being referred to collectively as the "Fixed Rate Tranches"), consisting of: (a) a Fixed Rate Tranche for Four Million Dollars ($4,000,000) utilizing fixed rate Interest Periods of six months (the "Six Month Fixed Rate Tranche"); (b) a Fixed Rate Tranche for Six Million Dollars ($6,000,000) utilizing fixed rate Interest Periods of one year (the "One Year Fixed Rate Tranche"); and (c) a Fixed Rate Tranche for Five Million Dollars ($5,000,000) utilizing any combination of six month fixed rate Interest Periods and three year fixed rate Interest Periods as Borrower may select, provided, that (i) Borrower may not select a three year fixed rate Interest Period commencing on any Reset Date after the seventh anniversary of the Closing Date, (ii) each Interest Period selected by Borrower shall apply to the entire amount of such Fixed Rate Tranche, and (iii) if any Event of Default has occurred and is continuing on any Reset Date for such Fixed Rate Tranche, the Interest Period selected on such Reset Date shall be a six month fixed rate Interest Period (the "Three Year Fixed Rate Tranche"). The Term Loan shall amortize as set forth in Section 4(a) and shall be due and payable in full on June 1, 2009 (the "Term Loan Maturity Date"); provided, that if the Obligations shall become due and payable in accordance with Section 14 or any other provision of this Agreement prior to such date, then the Term Loan Maturity Date shall be the date on which the Obligations become due and payable. 3. Conditions Precedent. PCFC's obligation to advance the Term Loan hereunder is subject to the following conditions precedent: (a) Required Documents. PCFC must have received from Borrower either an executed original, or a facsimile of the signature page of an executed original, of this Agreement as well as all of the other documents (the "Other Documents") listed in Exhibit A, each of which must be satisfactory to PCFC in its sole discretion. (b) Recordation of Modification of Mortgage and Issuance of Title Commitment. The Modification of and Supplement to Mortgage, Assignment of Rents, Security Agreement, Financing Statement and Fixture Filing executed by Borrower in favor of PCFC must have been duly recorded, and Title Guaranty of Hawaii, Incorporated must have issued its 1992 ALTA lender's policy of title insurance or commitment therefor in favor of PCFC, each in form and substance satisfactory to PCFC. (c) Approvals. PCFC shall have received evidence satisfactory to PCFC that all consents and approvals which are necessary for or required as a condition of the validity and enforceability of this Agreement and all documents and instruments contemplated hereby, have been obtained and are in full force and effect. (d) Event of Default. No Default or Event of Default shall have occurred and be continuing, and no default or event of default shall have occurred and be continuing under the Bridge Loan Agreement. (e) Loan Fee. Borrower shall have paid to PCFC the Term Loan Fee required by Section 5. (f) Continuing Guaranty Agreements. Borrower shall have delivered to PCFC continuing guaranty agreements, in form and substance satisfactory to PCFC, from the persons identified on Exhibit A pursuant to which such Persons guarantee to PCFC all of Borrower's obligations to PCFC under this Agreement. 4. Terms of Term Loan. (a) Repayment of Principal. Borrower shall repay principal of the Term Loan as follows: (1) Borrower shall pay the principal amount of the Six Month Fixed Rate Tranche ($4,000,000) in consecutive installments of Fifty Thousand Dollars ($50,000) each, commencing on September 1, 2004, and continuing on the first day of each December, March, June, and September thereafter through March 1, 2009, and a final payment of Three Million Fifty Thousand Dollars ($3,050,000) on the Term Loan Maturity Date; (2) Borrower shall pay the principal amount of the One Year Fixed Rate Tranche ($6,000,000) in consecutive installments of Seventy-Five Thousand Dollars ($75,000) each, commencing on September 1, 2004, and continuing on the first day of each December, March, June, and September thereafter through March 1, 2009, and a final payment of Four Million Five Hundred Seventy- Five Thousand Dollars ($4,575,000) on the Term Loan Maturity Date; and (3) Borrower shall pay the principal amount of the Three Year Fixed Rate Tranche ($5,000,000) in consecutive installments of Two Hundred and Fifty Thousand Dollars ($250,000) each, commencing on September 1, 2004, and continuing on the first day of each December, March, June, and September thereafter through March 1, 2009, and a final payment of Two Hundred Fifty Thousand Dollars ($250,000) on the Term Loan Maturity Date. Borrower shall repay all unpaid principal of the Term Loan, and all accrued interest, fees (including prepayment surcharges, if any) , and reimbursable expenses with respect thereto, in full, on the Term Loan Maturity Date. (b) Payment of Interest. Borrower shall pay interest on the Term Loan, in arrears, every three (3) months, commencing on September 1, 1999, and continuing on the first day of each December, March, June and September thereafter; provided, that interest accrued on the Term Loan but not otherwise due and payable at the expiration of an Interest Period or on the Term Loan Maturity Date shall become due and payable on such expiration date or the Term Loan Maturity Date, respectively. If any installment of interest or any other amount payable hereunder or under any Other Document becomes due and payable on a day other than a Business Day, the payment date for such payment shall be extended to the next succeeding Business Day and, with respect to payments of principal or other payments that bear interest (other than interest first due on such date), interest thereon shall be payable at the then applicable rate during such extension; provided, that if any installment of interest shall become due and payable on a Friday or Saturday, the payment date for such payment shall be the immediately preceding Business Day. (c) Interest Rates. (1) Interest on Fixed Rate Tranches. Each Fixed Rate Tranche shall bear interest, from the Closing Date through the date on which such Fixed Rate Tranche is paid in full, at a rate per annum equal to the sum of (i) the applicable Index Rate for such Fixed Rate Tranche, plus (ii) the Applicable Spread for the Interest Period then in effect for such Fixed Rate Tranche. (2) Adjustment in Applicable Spread. Commencing on the Reset Date corresponding to the third anniversary of the Closing Date, and continuing thereafter on the Reset Date corresponding to each subsequent anniversary of the Closing Date, the Applicable Spread for the Interest Period then in effect for each Fixed Rate Tranche shall be determined, in the manner set forth below, to be the Applicable Spread for the Interest Period then in effect for such Fixed Rate Tranche, based on Borrower's Consolidated Funded Debt to Consolidated EBITDA Ratio, for the immediately preceding Fiscal Year: Consolidated Funded Debt to Applicable Spread Consolidated EBITDA Ratio Level Six Month One Year Three Year Interest Period Interest Period Interest Period Greater than 2.75:1 2.50% 2.55% 2.45% 2.25:1 to 2.75:1 2.35% 2.40% 2.30% Less than 2.25:1 2.20% 2.25% 2.15% Notwithstanding any provision to the contrary: (i) the Applicable Spread for any Fixed Rate Tranche shall not adjust until the Reset Date for such Fixed Rate Tranche immediately following Borrower's delivery to PCFC of the annual, audited financial statements required pursuant to Section 11(g)(1) confirming any such adjustment; (ii) if either (x) Borrower fails to deliver to PCFC, on a timely basis, the annual, audited financial statements required pursuant to Section 11(g)(1), and such failure is not waived by PCFC, or (y) any other Default or Event of Default occurs and is continuing, then from and after such failure or Default or Event of Default the Applicable Margin for each Fixed Rate Tranche shall be that set forth in the row above entitled "Greater than 2.75:1;" and (iii) the Applicable Spread for any Fixed Rate Tranche shall not adjust retroactively for any Interest Period that has expired prior to such Reset Date. The Applicable Spread shall not include any prepayment surcharge that may be payable pursuant to Section 6(d). (3) Calculation of Interest. All calculations of interest for any Fixed Rate Tranche shall be made by PCFC on the basis of a three hundred sixty (360) day year consisting of twelve (12) months of thirty (30) days per month. Each determination by PCFC of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error or bad faith. (4) Default Rate. Any overdue principal or interest with respect to any portion of the Term Loan, and the amount of any fees, costs, or expenses that Borrower is obligated to pay to PCFC under this Agreement not paid when due, shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Default Rate. In addition, upon and after the occurrence of an Event of Default and continuing until such Event of Default has been cured or waived in writing by PCFC in accordance with the terms of this Agreement, interest shall accrue on all obligations owed by Borrower to PCFC hereunder at the Default Rate. The interest rate increase to the Default Rate shall take effect immediately upon the occurrence of an Event of Default, without prior notice to Borrower. (5) Interest Not to Exceed Maximum Lawful Rate. Notwithstanding anything to the contrary set forth in this Agreement, if at anytime until payment in full of all Obligations, the rate of interest payable hereunder exceeds the highest rate of interest permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto (the "Maximum Lawful Rate"), then in such event and so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate; provided, that if at any time thereafter the rate of interest payable hereunder is less than the Maximum Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by PCFC is equal to the total interest which PCFC would have received had the interest rate payable hereunder been (but for the operation of this Section 4(c)(5) the interest rate payable since the date of this Agreement. Thereafter, the interest rate payable hereunder shall be the rate of interest set forth herein, unless and until the rate of interest again exceeds the Maximum Lawful Rate, in which event this paragraph shall again apply. In no event shall the total interest received by PCFC pursuant to the terms hereof exceed the amount which PCFC could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate. In the event the Maximum Lawful Rate is calculated pursuant to this Section 4(c)(5), such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made. In the event that a court of competent jurisdiction, notwithstanding the provisions of this Section 4(c)(5), shall make a final determination that PCFC has received interest hereunder in excess of the Maximum Lawful Rate, PCFC shall, to the extent permitted by applicable law, promptly apply such excess first to any interest due and not yet paid, then to the outstanding principal of the Term Loan (without premium or penalty), and then to any other unpaid obligations owed by Borrower under this Agreement and thereafter shall refund any excess to Borrower or as a court of competent jurisdiction may otherwise order. (6) Additional Fixed Rate Provisions. If at any time PCFC reasonably determines that for any reason adequate and reasonable means do not exist for ascertaining the Farm Credit Discount Note Rate, the Farm Credit Medium Term Note Rate, or any other index hereunder, or any such rate or index generally becomes unavailable to PCFC, PCFC shall promptly give notice thereof to Borrower and shall designate an alternative index that is reasonably comparable to the Farm Credit Discount Note Rate, the Farm Credit Medium Term Note Rate, or such other index; provided, that PCFC's determination under this Section 4(c)(6) as to Borrower shall be in accordance with its treatment of other borrowers under commercial loans generally. In the event that any law, treaty, rule, regulation, or determination of a court or governmental authority or any change therein or in the interpretation or application thereof or compliance by PCFC with any request or directive (whether or not having the force of law) from any central bank or governmental authority: (A) shall subject PCFC to any tax of any kind whatsoever with respect to any rate, or change the basis of taxation of payments to PCFC of principal, interest or any other amount payable under this Agreement (except for changes in the rate of tax on the overall net income of PCFC); or (B) shall impose, modify, or hold applicable any reserve, special deposit, compulsory loan, or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of PCFC; or (C) shall impose on PCFC any other condition; and the result of any of the foregoing is to increase the cost to PCFC of making, renewing, or maintaining any portion of the Term Loan with interest rates tied to rate and/or to reduce any amount receivable by PCFC in connection therewith; then in any such case, Borrower shall pay to PCFC, immediately upon demand, such amount or amounts as may be necessary to compensate PCFC for any additional costs incurred by PCFC and/or reductions in amounts received by PCFC which are attributable to such rates made available to Borrower hereunder. In determining which costs incurred by PCFC or reductions in amounts received by PCFC are attributable to such rates, any reasonable allocation made by PCFC among its operations shall be conclusive and binding upon Borrower; provided, that PCFC's determination under this Section 4(c)(d) as to Borrower is in accordance with its treatment of other borrowers under commercial loans generally. 5. Loan Fee. In consideration of the execution and delivery of this Agreement by PCFC, Borrower shall pay to PCFC a term loan fee of One Hundred Five Thousand Dollars (the "Term Loan Fee"), which Term Loan Fee is equal to seven tenths of one percent (0.70%) of the term loan commitment made available to Borrower by PCFC, and the payment of which shall be reduced by (i) Seventy-Five Thousand Dollars ($75,000) (the amount of the bridge loan fee paid by Borrower to PCFC on December 30, 1998), and (ii) the unused portion, if any, of any application fees and expense and other deposits paid by Borrower to PCFC. The Term Loan Fee shall be due and payable upon the Closing Date. The full amount of the Term Loan Fee shall be considered earned upon receipt and no portion of the Term Loan Fee shall be refundable to Borrower under any circumstances. 6. Prepayments. (a) Prepayment in Full of Term Loan. Borrower shall have the right at any time to make a voluntary Prepayment of the entire amount of the Term Loan and to terminate this Agreement upon at least thirty (30) Business Days prior notice to PCFC and payment, in full, of the Term Loan and all interest, fees, reimbursable expenses, and other Obligations as of the date of such Prepayment and, if such Prepayment does not occur on a date that is a Reset Date for each Fixed Rate Tranche, the surcharge or surcharges described in Section 6(d). (b) Prepayment of any Fixed Rate Tranche on Reset Date. Borrower shall have the right at any time to make a voluntary Prepayment of the entire amount or any portion of any Fixed Rate Tranche upon any Reset Date for such Fixed Rate Tranche, without premium or surcharge, upon at least thirty (30) Business Days prior notice to PCFC. If such Prepayment is for the entire amount of such Fixed Rate Tranche, such Prepayment must include all accrued interest on such Fixed Rate Tranche as of the date of such Prepayment. Each such partial Prepayment of a Fixed Rate Tranche shall be applied in inverse order of maturity, and shall not result in an extension or other adjustment of the existing amortization schedule for such Fixed Rate Tranche. (c) Partial Prepayment of Term Loan Other Than on Reset Date. Borrower shall have the right at any time to make such Prepayment of any portion of the Term Loan on any date other than a Reset Date for such portion, so long as Borrower provides at least five (5) Business Days notice to PCFC and pays the surcharges calculated in accordance with Section 6(d). Unless otherwise approved by PCFC, in its discretion, all such partial Prepayments shall be applied by PCFC on a pro rata basis to each Fixed Rate Tranche then outstanding in the same proportion as the principal balance of such Fixed Rate Tranche bears to the aggregate principal balance of the Term Loan then outstanding. Each such partial Prepayment of the Term Loan shall be applied in inverse order of maturity to the Fixed Rate Tranches to which it is applied, and shall not result in an extension or other adjustment of the existing amortization schedule for any Fixed Rate Tranche. (d) Prepayment Surcharges. Except to the extent otherwise provided in Sections 6(a) and (b), at the time that Borrower makes a Prepayment, whether or not such Prepayment is voluntary by or on behalf of Borrower and specifically including a prepayment occurring as the result of an acceleration of the Term Loan, Borrower shall simultaneously pay to PCFC a prepayment surcharge for each Fixed Rate Tranche of the Term Loan so prepaid determined as follows: (1) the prepayment surcharge applicable to a Prepayment of the Six Month Fixed Rate Tranche or the One Year Fixed Rate Tranche shall be an amount equal to any loss of earnings through the next Reset Date for such Fixed Rate Tranche, plus any other expense of PCFC or its participants incurred or projected by PCFC as a result of such Prepayment, in each case as reasonably determined by PCFC; and (2) the prepayment surcharge applicable to a Prepayment of the Three Year Fixed Rate Tranche shall equal the Make-Whole Amount. 7. Manner and Time of Payment. Borrower shall make all payments by wire transfer of immediately available funds as follows: To: Bank of America 10 Santa Rosa Avenue Santa Rosa, CA 95405 ABA Routing No.: 121000358 Account Number: 14984-00266 Account Name: Pacific Coast Farm Credit Services, ACA Reference: Loan # 0426195000 Attention: Tina Anaya, Accounting P.O. Box 1120, Santa Rosa, CA 95492 Tel: (707) 545-1200 Fax: (707) 545-4446 Tax ID No.: 94-1160795 (or to such other account as PCFC may designate by notice). Borrower shall give PCFC telephonic notice no later than 12:00 noon Pacific Time of its intent to make a wire transfer. Wire transfers received after 2:00 p.m. Pacific Time shall be credited on the next business day. 8. Capitalization. Borrower agrees to make such investments in PCFC as PCFC may from time to time require in accordance with its bylaws and capital plan. In connection with the foregoing, the Borrower hereby acknowledges receipt, prior to the execution of this document, of copies of the following: Notice Regarding Your Required Investment in this Association, 1998 Annual Report, and the Association's Capitalization Plan and Bylaws. All such investments and all other equities which the Borrower may now own or hereafter acquire or be allocated in PCFC shall be subject to a statutory first lien in favor of PCFC to secure any indebtedness of Borrower to PCFC. At the option of PCFC, any amounts borrowed to purchase capital stock or participation certificates, and any amounts repaid from redemption of such stock or certificates, may be recorded as part of the loan accounting in the transaction summary, or in a separate stock or loan account. A certificate will not be issued for capital stock or participation certificates, but ownership will be evidenced by the records of PCFC. THE OWNERSHIP OF THE CAPITAL STOCK OR PARTICIPATION CERTIFICATES WILL BE REGISTERED ON THE RECORDS OF PCFC AS FOLLOWS: MAUI LAND & PINEAPPLE COMPANY, INC., A HAWAII CORPORATION. Borrower hereby grants to PCFC a security interest in and lien upon all capital stock and participation certificates as collateral for the Term Loan. Upon an Event of Default, PCFC may but is not required to apply all or part of the proceeds from such capital stock or participation certificates against the Term Loan. UNTIL WRITTEN NOTICE OF REVOCATION IS RECEIVED BY PCFC, PAUL J. MEYER IS AUTHORIZED TO VOTE FOR THE ABOVE-NAMED BORROWER AND IS AUTHORIZED TO REQUEST THE CONVERSION FROM ONE CLASS TO ANOTHER OF ALL SHARES OF CAPITAL STOCK WHICH MAY BE REGISTERED IN THE NAME OF BORROWER. As required by PCFC's bylaws and the federal income tax law, Borrower agrees that the amount of any distribution of patronage made by written notice of allocation to Borrower after the date of this Agreement will be included in the Borrower's gross income for the purpose of federal income tax for the year in which the notice is received. PCFC hereby confirms that, as of the date of this Agreement, Borrower has made all investments in PCFC currently required under its bylaws and capital plan. 9. Collateral; No Subordination. The obligations of Borrower to PCFC hereunder shall be secured as follows: (i) PCFC shall have first priority Liens on Borrower's fee interests in the real property located on the Island and County of Maui, State of Hawaii and identified as Tax Map Key parcel numbers (2) 2-4-001-003, (2) 2-3-002-008, (2) 2-3-009-008, (2) 2-2-002-017, and (2) 4-3-001-031; (ii) PCFC shall have the lien referred to in Section 8 and any other liens provided by the Farm Credit Act; and (iii) PCFC shall have, and Borrower hereby grants PCFC a security interest in, all cash, accounts, securities, investment property, instruments, documents, or other property of Borrower that is in PCFC's possession or under its control (the items described in clauses (i), (ii), and (iii) collectively, the "Collateral"). The obligations of Borrower to PCFC under this Agreement shall constitute senior indebtedness and are not subordinate in payment or priority to any other obligations of Borrower. 10. Representations and Warranties. Borrower represents and warrants to PCFC that, except as may be set forth in the disclosure schedule referred to in Exhibit A (the "Disclosure Schedule") or in a subsequent written disclosure to PCFC, each of the following statements is true and correct on the date hereof and shall also be true and correct on the date that Borrower requests the Term Loan and at all times thereafter: (a) Corporate Existence; Compliance with Law and Agreements. Borrower and each Guarantor: (i) are corporations duly organized, validly existing and in good standing under the laws of the State of Hawaii; (ii) are duly qualified as foreign corporations and in good standing under the laws of each jurisdiction where their ownership or lease of property or the conduct of their businesses require such qualification (except for jurisdictions in which such failure to so qualify or to be in good standing would not have a Material Adverse Effect); (iii) have the requisite corporate power and authority and the legal right to own, pledge, mortgage, or otherwise encumber and operate all real property that they own, to lease the real property they operate under lease, and to conduct their businesses as now, heretofore, and proposed to be conducted; (iv) have all material licenses, permits, consents, or approvals from or by, and have made all material filings with, and have given all material notices to, all governmental authorities having jurisdiction, to the extent required for such ownership, operation, and conduct; (v) are in compliance with their articles or certificates of incorporation and by-laws; (vi) are in compliance with all applicable provisions of law where the failure to comply would have a Material Adverse Effect, and (vii) are not in default, and, to Borrower's knowledge, no third party is in default, under or with respect to any contract, agreement, lease or other instrument to which Borrower or any Guarantor is a party which default in each case or in the aggregate would have a Material Adverse Effect. (b) Corporate Power; Authorization; Enforceable Obligations. The execution, delivery, and performance by Borrower of the Agreement, and any Other Documents to which Borrower is a party, and by each Guarantor of such Guarantor's Guaranty Agreement: (i) are within Borrower's or such Guarantor's corporate power; (ii) have been duly authorized by all necessary or proper corporate action; (iii) are not in contravention of any provision of Borrower's or such Guarantor's articles of or certificate of incorporation or by-laws; (iv) will not violate any law or regulation, or any order or decree of any court or governmental instrumentality; (v) will not conflict with or result in the breach or termination of, constitute a default under or accelerate any performance required by, any material indenture, mortgage, deed of trust, lease, agreement or other instrument to which Borrower or any Guarantor is a party or by which Borrower or any Guarantor or any of Borrower's or any Guarantor's property is bound; (vi) will not result in the creation or imposition of any lien upon any of the property of Borrower or any Guarantor; and (vii) do not require the consent or approval of any governmental authority or any other Person, except for consents or approvals which have been duly obtained, made, or complied with. This Agreement constitutes a legal, valid, and binding obligation of Borrower enforceable against it in accordance with its terms except for general principles of equity and the effect of bankruptcy, insolvency, and other laws affecting the rights of creditors generally. (c) Financial Statements and Condition; Disclosure. The current audited and unaudited financial statements previously delivered by Borrower to PCFC, and all financial statements to be delivered by Borrower to PCFC pursuant to Section 11(g) (i) fairly present in all material respects the financial position of Borrower as of the dates specified in such financial statements, (ii) have been prepared in accordance with GAAP, consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments), and (iii) do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. There has been no material adverse change in the financial condition, operations, business, properties or prospects of Borrower since the date of such financial statements except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact or circumstance known to Borrower that could reasonably be expected to have a Material Adverse Effect. Borrower is solvent and will continue to be solvent after giving effect to the transactions contemplated by this Agreement. There is no action, claim or proceeding now pending or, to Borrower's knowledge, threatened against Borrower before any court, board, commission, agency, or instrumentality of any federal, state, or local government or of any agency or subdivision thereof, or before any arbitrator or panel of arbitrators, which, if determined adversely, could have a Material Adverse Effect. (d) Taxes. Borrower and each Guarantor have filed all tax returns that are required to have been filed in any jurisdiction and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon it or its properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (i) the amount of which is not individually or in the aggregate material or (ii) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which Borrower or such Guarantor has established adequate reserves in accordance with GAAP. Borrower knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. (e) Licenses; Permits; Intellectual Property Rights. Borrower and each Guarantor own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are necessary to the conduct of Borrower's or such Guarantor's business, without known conflict with the rights of others. To the best knowledge of Borrower, no product of Borrower or any Guarantor infringes in any material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark and trade name or other right owned by any other Person. To the best knowledge of Borrower, there is no Material violation by any Person of any right of Borrower or Guarantor with respect to any patent, copyright, service mark, trademark and trade name or other right owned by Borrower or any Guarantor. (f) Labor Matters. There are no strikes or other labor disputes against Borrower or any Guarantor that are pending or, to Borrower's knowledge, threatened which would have a Material Adverse Effect. All payments due from Borrower or any Guarantor on account of employee health and welfare insurance which would have a Material Adverse Effect if not paid have been paid or accrued as a liability on the books of Borrower or such Guarantor. (g) Investment Company Act. Neither Borrower nor any Guarantor is an "investment company" or an "affiliated Person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. (h) Margin Regulations. Neither Borrower nor any Guarantor owns any "margin security", as that term is defined in Regulations G and U of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"). (i) ERISA. Each "Plan" (as defined below) is in compliance in all material respects with the applicable provisions of ERISA and the Internal Revenue Code ("IRC") and with respect to each Plan, other than a Qualified Plan, all required contributions and benefits have been paid in accordance with the provisions of each such Plan to the extent that the failure to pay any such contribution or benefit would have a Material Adverse Effect. There are no pending or, to Borrower's knowledge, threatened claims, actions or lawsuits (other than claims for benefits in the normal course), asserted or instituted against Borrower or any Guarantor or any Plan or its assets. Neither Borrower, any Guarantor, nor any ERISA Affiliate of either has incurred or reasonably expects to incur any Withdrawal Liability under Section 4201 of ERISA as a result of a complete or partial withdrawal from a Multiemployer Plan. Neither Borrower nor any Guarantor has engaged in a prohibited transaction, as defined in Section 4975 of the IRC or Section 406 of ERISA, in connection with any Plan, which would subject Borrower or such Guarantor (after giving effect to any exemption) to a material tax on prohibited transactions imposed by Section 4975 of the IRC or any other material liability. As used above, the term "Plan" shall mean, with respect to Borrower or any Guarantor or any ERISA Affiliate of either, at any time, an employee benefit plan, as defined in Section 3(3) of ERISA, which Borrower maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. The terms "Qualified Plan" and "Multiemployer Plan" shall have the meaning given them in ERISA. (j) Brokers. No broker or finder acting on behalf of Borrower or any Guarantor brought about the obtaining, making, or closing of the Term Loan and neither Borrower nor any Guarantor nor PCFC have any obligation to any Person in respect of any finder's or brokerage fees in connection with the Term Loan. (k) Environmental Matters. Except as set forth in the Disclosure Schedule, and except for matters that do not relate to any of the Collateral and do not, individually or in the aggregate, constitute a Material Adverse Effect, as of the date of this Agreement: (i) all of Borrower's real property is free of contamination from any Hazardous Material except for such contamination that would not adversely impact the value or marketability of such real property and that would not result in Environmental Liabilities that could reasonably be expected to exceed $100,000; (ii) Borrower has not caused or suffered to occur any release of Hazardous Materials on, at, in, under, above, to, from or about any of its real property; (iii) Borrower is and has been in compliance with all Environmental Laws, except for such noncompliance which would not result in Environmental Liabilities which could reasonably be expected to exceed $100,000; (iv) Borrower has obtained, and is in compliance with, all environmental permits required by Environmental Laws for the operations of its respective businesses as presently conducted or as proposed to be conducted, except where the failure to so obtain or comply with such environmental permits would not result in Environmental Liabilities that could reasonably be expected to exceed $100,000, and all such Environmental Permits are valid, uncontested and in good standing; (iii) Borrower is not involved in operations and does not know of any facts, circumstances or conditions, including any releases of Hazardous Materials, that are likely to result in any Environmental Liabilities of Borrower that could reasonably be expected to exceed $100,000, and Borrower has not permitted any current or former tenant or occupant of any of its real property to engage in any such operations; (iv) there is no litigation arising under or related to any Environmental Laws, environmental permits or Hazardous Material that seeks damages, penalties, fines, costs or expenses in excess of $50,000 or injunctive relief against, or that alleges criminal misconduct by, Borrower; (v) no notice has been received by Borrower identifying it as a "potentially responsible party" or requesting information under CERCLA or analogous state statutes, and to the knowledge of Borrower, there are no facts, circumstances or conditions that may result in Borrower being identified as a "potentially responsible party" under CERCLA or analogous state statutes; and (vi) Borrower has provided to PCFC copies of all existing, material environmental reports, reviews and audits and all written information pertaining to actual or potential Environmental Liabilities, in each case relating to Borrower. (l) Year 2000. Borrower has completed a Year 2000 Assessment and Corrective Plan that will eliminate all limitations on the ability of Borrower and the Subsidiaries, and any software, hardware, microchips, peripheral interfaces, and systems used by Borrower or any Subsidiary, to accurately accept, create, manipulate, sort, sequence, calculate, compare, or provide calendar date information with respect to calendar year 2000 and any year thereafter, including exchanges of information among data systems. Such Assessment and Corrective Plan provides for the elimination of all such limitations on or before September 30, 1999. 11. Affirmative Covenants. Unless otherwise agreed to in writing by PCFC, while this agreement is in effect whether or not any indebtedness is outstanding hereunder, Borrower agrees to, and, except with respect to the covenant contained in Section 11(a), to cause each Guarantor to: (a) Eligibility. Maintain its status as an entity eligible to borrow from PCFC. (b) Corporate Existence. Preserve and keep in full force its corporate status, existence and good standing in the jurisdiction of its organization, its qualifications to transact business in all places required by law, and all licenses, certificates, permits, authorizations, approvals and the like which are material to the conduct of its business or required by law. (c) Compliance with Laws. Comply in all material respects with all applicable federal, state, and local laws, rules, regulations, ordinances, codes, and orders (collectively "Laws"). Without limiting the foregoing, Borrower agrees to comply in all material respects, and to cause all Guarantors and all Persons occupying or present on any properties of Borrower or any Guarantor to so comply, with all Laws relating to environmental protection. (d) Property Maintenance. Maintain all of its property that is necessary to or useful in the proper conduct of its business in good working condition, ordinary wear and tear excepted. (e) Books and Records. Keep adequate records and books of account in which complete entries will be made in accordance with past practices. (f) Inspection. Permit PCFC or its agents, during normal business hours or at such other times as the parties may agree, to examine Borrower's or any Guarantor's properties, books, and records, and to discuss Borrower's or any Guarantor's affairs, finances, and accounts with its respective officers, directors, employees, and independent certified public accountants. (g) Reports and Notices. Furnish to PCFC: (1) Annual Financial Statement. As soon as possible, but in no event later than 90 days after the end of any Fiscal Year of Borrower occurring during the term hereof, annual financial statements of Borrower prepared in accordance with GAAP consistently applied. Such financial statements shall: (i) be audited by independent certified public accountants selected by Borrower and acceptable to PCFC; (ii) be accompanied by a report of such accountants containing an opinion acceptable to PCFC; (iii) be accompanied by a compliance certificate from Borrower's chief financial officer, in the form attached hereto as Exhibit B, certifying that as of the date of such financial statement there did not exist a Default or Event of Default under this Agreement; (iv) be prepared in reasonable detail and in comparative form; (v) include a balance sheet, a statement of income, a statement of retained earnings, a statement of all cash flows and all notes and schedules relating thereto; (2) Quarterly Financial Statements. No later than 60 days after the end of each Fiscal Quarter, internally prepared quarterly financial statements containing the same information regularly generated by Borrower on its internal quarterly financial statements and its quarterly filings with the Securities and Exchange Commission on Form 10-Q, accompanied by a compliance certificate from Borrower's chief financial officer, in the form attached hereto as Exhibit B, certifying that as of the date of such financial statement there did not exist a Default or Event of Default under this Agreement; (3) Annual Capital Expenditures Budget. No later than November 30th of each year, Borrower's capital expenditures budget for the forthcoming Fiscal Year; (4) Annual Budget and Five Year Plan. No later than 30 days prior to the beginning of each Fiscal Year, Borrower's annual budget for the forthcoming Fiscal Year and rolling five-year plan for the forthcoming five-year period; (5) Modifications to Annual Budget or Five-Year Plan. No later than 60 days after the end of each Fiscal Quarter, any modification or group of related modifications to Borrower's capital expenditures budget, its annual budget, or its rolling five-year plan, if such modification or group of related modifications increases or decreases the expenditures or revenues described therein by One Million Dollars ($1,000,000) or more; (6) Notice of Default. Promptly after becoming aware thereof, notice of the occurrence of a Default or Event of Default; (7) Tax Returns. Within 30 days after filing of such tax returns, a copy of such portions of every federal income tax return filed by Borrower as are necessary to enable PCFC to verify Borrower's calculations of Adjusted Gains on Asset Sales and, if requested by PCFC, a signed copy of the entire tax return; (8) Notice of Non-Environmental Litigation. Promptly after the commencement thereof, notice of the commencement of all actions, suits, or proceedings before any court, arbitrator, or governmental department, commission, board, bureau, agency, or instrumentality affecting Borrower or any Guarantor which, if determined adversely to Borrower or such Guarantor, could have a Material Adverse Effect; (9) Notice of Environmental Litigation, Etc. Promptly after receipt thereof, notice of the receipt of all pleadings, orders, complaints, indictments, or any other communication alleging a condition that may require Borrower or Guarantor to undertake or to contribute to a cleanup or other response under environmental laws, or which seeks penalties, damages, injunctive relief, or criminal sanctions related to alleged violations of such Laws, or which claims personal injury or property damage to any Person as a result of environmental factors or conditions, in each case to the extent such communication relates to any of the Collateral or to matters that could reasonably be deemed to constitute a Material Adverse Effect; and (10) Other Information. Such other information regarding the condition or operations, financial or otherwise, of Borrower or any Guarantor as PCFC may, from time to time, reasonably request. (h) Insurance. At Borrower's sole cost and expense, maintain, with financially sound and reputable insurers, insurance providing for the following types of coverages in at least the following amounts: (i) "All Risk" physical damage insurance on all of Borrower's tangible real and personal property and assets, including volcanic activity (but not eruption) coverage; (ii) comprehensive general liability insurance on an "occurrence basis" against claims for personal injury, bodily injury and property damage with a minimum limit of One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the aggregate, which coverage shall include premises/operations, broad form contractual liability, underground, explosion and collapse hazard, independent contractors, broad form property coverage, products and completed operations liability; (iii) with respect to worker's compensation insurance, either self-insurance through reserves in excess of the minimum required amounts, or commercial insurance within the applicable statutory limits, in either case which includes coverage for employee's occupational disease and employer's liability within such legal amounts or limits; (iv) automobile liability insurance for all owned, non-owned or hired automobiles against claims for personal injury, bodily injury, and property damage with a minimum combined single limit of One Million Dollars ($1,000,000) per occurrence; and (v) umbrella insurance of Fifty Million Dollars ($50,000,000) per occurrence and Fifty Million Dollars ($50,000,000) in the aggregate. All of such policies shall at all times remain in full force and effect and in form and with insurers recognized as adequate by PCFC, and provide coverage of such risks and for such amounts as are customarily maintained for businesses of the scope and size of Borrower's and Guarantor's and as otherwise acceptable to PCFC. PCFC reserves the right at any time, upon a review of Borrower's and the Guarantors' risk profile, to require additional forms and limits of insurance. Borrower shall, if requested by PCFC, provide PCFC with a report of Borrower's insurance broker concerning Borrower's and the Guarantors' insurance policies. 12. Negative Covenants. Unless otherwise agreed to in writing by PCFC, while this Agreement is in effect, Borrower will not, and will not permit any Guarantor to: (a) Mergers, Acquisitions, Etc. (1) Merge or consolidate with any other entity, or commence operations under any other name. (2) Without the prior, written consent of PCFC, (i) acquire all or substantially all of the assets of any Person or entity, (ii) form or create any new Subsidiary or Affiliate, or (iii) enter into any business venture, including any joint venture, partnership, or limited liability company other than in the ordinary course of business, as conducted on the Closing Date; provided, that PCFC's consent to any of the foregoing shall not be unreasonably withheld. (b) Transfer of Assets. Sell, transfer, lease, or otherwise dispose of any of its assets, except (i) in the ordinary course of Borrower's or such Guarantor's business (including dispositions of real property, other than Collateral, held for investment), (ii) transactions outside the ordinary course of Borrower's or such Guarantor's business, but only to the extent that the aggregate amount of all assets involved in such transactions from and after the date of this Agreement have a fair market value of less than Five Million Dollars ($5,000,000), (iii) disposal of worn-out or obsolete assets, (iv) disposal of equipment that is being replaced by equipment having a similar value and serving a similar function, (v) transfers between Borrower and any Guarantor or between any Guarantors of assets other than the Collateral, but only to the extent that the aggregate amount of all assets involved in such transfers during any Fiscal Year have a fair marked value of less than One Million Dollars ($1,000,000), (vi) transfers to Subsidiaries of Borrower that are specifically identified on the Disclosure Schedule, and (vii) other transfers, excluding transfers of Collateral, to the extent that the greater of (x) the aggregate book value of such transferred assets, or (y) the fair market value of such transferred assets, is less than fifteen percent (15%) of the total book value of Borrower's assets (net of reserves), on a consolidated basis; provided, that any transfer of assets under clause (vii) in excess of such fifteen percent (15%) level is permitted if the proceeds of such sale are used, within 180 days of such sale either (I) to acquire assets of a similar type and of equal or greater value, or (II) to reduce Consolidated Indebtedness; and provided, further, that each such transaction referred to in clauses (i) through (vii) above shall be at arm's length and for fair market value. (c) Change in Business. Engage in any business activities or operations substantially different from or unrelated to Borrower's or such Guarantor's present business activities or operations. (d) Liens. Create or permit any Lien on any Collateral except for Permitted Encumbrances. (e) Capital Expenditures. Make Capital Expenditures, other than Capital Expenditures for Borrower's "Kaahumanu Center Associates" Subsidiary, in excess of the following amounts during the following Fiscal Years: Fiscal Year Amount 1999 $25,000,000 2000 $12,500,000 2001 $12,500,000 2002 $14,500,000 2003 and each Fiscal Year thereafter $12,500,000 (f) Investments. Make any investment in or loan to any person, other than: (i) cash and Cash Equivalents; (ii) loans to wholly- owned Subsidiaries; (iii) loans to employees, so long as any such loan in excess of $250,000 is disclosed to and approved by PCFC; (iv) loans to Affiliates, subject to the limitations set forth in Section 12(h); (v) existing investments set forth in the Disclosure Schedule; (v) Investments in and Capital Expenditures for Borrower's "Kaahumanu Center Associates" Subsidiary in an aggregate, cumulative amount of up to $2,000,000; and (vi) Investments to acquire the assets of any Person, form or create any Subsidiary or Affiliate, or enter into any business venture, in each case that is related to Borrower's core businesses as of the date of this Agreement. (g) Restricted Payments. Make any Restricted Payments unless each and every one of the following conditions has been fulfilled: (i) no Default or Event of Default then exists or has occurred within the twelve (12) month period preceding the making of such Restricted Payment, nor shall a Default or Event of Default occur from the making of such Restricted Payment, (ii) the amount of the Restricted Payment, together with the aggregate amount of all other Restricted Payments made during any Fiscal Year, shall not exceed the lesser of (x) fifty percent (50%) of Borrower's Consolidated Net Income for the immediately preceding Fiscal Year, or (y) seventy-five percent (75%) of Borrower's Consolidated Net Cash Flow for such immediately preceding Fiscal Year. (h) Transactions with Affiliates. Enter into any transaction or arrangement with any Affiliate, or permit any Subsidiary to enter into any transaction or arrangement with any Affiliate of it (including the purchase from, sale to, or exchange of property with, or the rendering of any service by or for any Affiliate), that is not entered into in the ordinary course of business and upon fair and reasonable terms that are no less favorable to Borrower or such Subsidiary than would be obtained in a comparable arms-length transaction with a Person not an Affiliate, other than (i) any transaction between Borrower and any Guarantor, or (ii) any transaction between Borrower and any Subsidiary entered into in the ordinary course of Borrower's business for interest-free loans to Borrower as part of Borrower's customary cash-management practices. (i) Financial Covenants. (1) Minimum Tangible Net Worth. Borrower shall not permit its Consolidated Tangible Net Worth, as of the last day of each Fiscal Quarter, commencing with the Fiscal Quarter ending June 30, 1999, to be less than the sum of (i) Fifty-Eight Million Seven Hundred Ninety -Eight Thousand Dollars ($58,798,000), plus (ii) fifty percent (50%) of the aggregate amount of Borrower's Consolidated Net Income, to the extent positive, for Fiscal Year 1999 and each Fiscal Year thereafter (on a cumulative basis). (2) Funded Debt to Capitalization. Borrower shall not permit Consolidated Funded Debt to exceed fifty-five percent (55%) of Consolidated Total Capitalization. (3) Debt Coverage Ratio. Commencing with the Fiscal Year ending December 31, 1999 and continuing for each Fiscal Year thereafter through the Term Loan Maturity Date, Borrower shall not permit the Consolidated Debt Coverage Ratio for such Fiscal Year to be less than 1.25 to 1.00. 13. Events of Default. Each of the following shall constitute an "Event of Default" hereunder: (a) Payment Default. Failure by Borrower to make any payment of principal or interest required to be made under this Agreement within three (3) days of the date when due, or failure to pay any other amount owed to PCFC hereunder on the date when due. (b) Representations and Warranties. Any representation or warranty made by Borrower herein or in any agreement, certificate, or document related hereto or furnished in connection herewith, or by any Guarantor in any Guaranty Agreement or in any agreement, certificate, or document related to such Guaranty Agreement, shall prove to have been false or misleading in any material respect on or as of the date made. (c) Other Covenants and Agreements. Borrower fails to perform or comply with any covenant or agreement contained in this Agreement (other than those referred to in Section 13(a)) or any Guarantor fails to perform or comply with any covenant or agreement contained in any Guaranty Agreement; provided, that if such failure is by its nature capable of being cured, then such failure shall not become an Event of Default unless such failure remains uncured for fifteen (15) days. (d) Other Indebtedness. Borrower or any Guarantor shall fail to pay when due any Consolidated Indebtedness for borrowed money or any other event occurs which, under any agreement or instrument relating to such Consolidated Indebtedness, has the effect of accelerating or permitting the acceleration of such Consolidated Indebtedness, whether or not such Consolidated Indebtedness is actually accelerated. (e) Judgments. A judgment, decree, or order for the payment of money in excess of One Million Dollars ($1,000,000) shall be rendered against Borrower or any Guarantor, the amount of which judgment, decree, or order is not subject to undisputed insurance coverage, and either: (i) enforcement proceedings shall have been commenced; or (ii) such judgment, decree, or order shall continue unsatisfied and in effect for a period of twenty (20) consecutive days without being vacated, discharged, satisfied, or stayed pending appeal. (f) Insolvency, Etc. Borrower or any Guarantor: (i) shall become insolvent or shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they come due; or (ii) shall suspend its business operations or a material part thereof or make an assignment for the benefit of creditors; or (iii) shall apply for, consent to, or acquiesce in the appointment of a trustee, receiver, or custodian for it or any of its property; or (iv) shall commence or have commenced against it any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, or liquidation law or statute of any jurisdiction. (g) Material Adverse Change. Any material adverse change occurs, as reasonably determined by PCFC, in Borrower's ability to perform its obligations under this Agreement. 14. Remedies Upon Events of Default. Upon the occurrence of and during the continuance of each and every Event of Default: (a) Termination of Rights; Acceleration. PCFC may, without notice to Borrower, declare the entire unpaid principal balance under this Agreement, all accrued interest thereon and all other amounts payable under this Agreement, to be immediately due and payable. Upon such a declaration, the unpaid principal balance under this Agreement and all such other amounts shall become immediately due and payable, without protest, presentment, demand, or further notice of any kind, all of which are hereby expressly waived by Borrower. (b) Enforcement. PCFC may proceed to protect, exercise, and enforce such rights and remedies against Borrower and against the Collateral as may be provided by this Agreement, by any Guaranty Agreement, by any Other Document, or under law, each and every one of such rights and remedies shall be cumulative and may be exercised from time to time, and no failure on the part of PCFC to exercise, and no delay in exercising, any right or remedy shall operate as a waiver thereof, or the exercise of any other right. Without limiting the foregoing, PCFC may, as provided in the Farm Credit Act of 1971, as amended, retire and cancel all or any portion of Borrower's stock or other equities in PCFC and apply the proceeds thereof against Borrower's indebtedness to PCFC. In addition, PCFC may hold, set off, sell, and/or apply against Borrower's indebtedness any and all cash, accounts, securities, instruments, documents, or other property in PCFC's possession or under its control. If, at the conclusion of any foreclosure or collection of any Collateral, the proceeds of such foreclosure or collection are insufficient to pay and discharge the Obligations in full, then Borrower shall remain liable for the full amount of the remaining Obligations, and PCFC shall have all legal rights, remedies, and recourse against Borrower and any remaining Collateral for such remaining Obligations. (c) Application of Funds. All amounts received by PCFC shall be applied to amounts owing under this Agreement in such order and manner as PCFC may in its sole discretion elect. 15. Indemnity. Borrower shall indemnify and hold harmless each of PCFC and its Affiliates, and each such Person's respective officers, directors, employees, attorneys, agents and representatives (each, an "Indemnified Person"), from and against any and all suits, actions, proceedings, claims, damages, losses, liabilities and expenses (including reasonable attorneys' fees and disbursements and other costs of investigation or defense, including those incurred upon any appeal) that may be instituted or asserted against or incurred by any such Indemnified Person as the result of credit having been extended, suspended or terminated under this Agreement and the other Loan Documents and the administration of such credit, and in connection with or arising out of the transactions contemplated hereunder and thereunder and any actions or failures to act in connection therewith, including any and all Environmental Liabilities and legal costs and expenses arising out of or incurred in connection with disputes between or among any parties to any of the Loan Documents (collectively, "Indemnified Liabilities"); provided, that Borrower shall not be liable for any indemnification to an Indemnified Person to the extent that any such suit, action, proceeding, claim, damage, loss, liability or expense results solely from that Indemnified Person's gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction. 16. Complete Agreement; Amendments. This Agreement and all documents and instruments contemplated hereby are intended by the parties to be a complete and final expression of their agreement. No amendment, modification, or waiver of any provision hereof or thereof, nor any consent to any departure of Borrower herefrom or therefrom, shall be effective unless approved by PCFC and contained in a writing signed by or on behalf of PCFC and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. This Agreement amends and restates, in its entirety, the Bridge Loan Agreement. 17. Counterparts; Effectiveness. This Agreement may be executed in any number of separate counterparts, each or which shall collectively and separately constitute one agreement. This Agreement shall become effective upon execution by each party and delivery to the other parties of either an executed original of the signature pages hereof or of a facsimile of such executed original of the signature pages hereof. 18. Applicable Law. Except to the extent governed by applicable federal law, this Agreement shall be governed and construed in accordance with the laws of the State of California, without reference to choice of law doctrine. 19. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THE PARTIES. 20. Notices. All notices hereunder shall be in writing and shall be deemed to be duly given upon delivery, if personally delivered, delivered by messenger service, or sent by telegram or facsimile transmission, or three (3) days after mailing if sent by express, certified or registered mail, to the parties at the following addresses (or such other address for a party as shall be specified by like notice): If to PCFC as follows: Pacific Coast Farm Credit Services, ACA 5560 South Broadway Eureka, CA 95503 Attn: Account Officer -- Maui Land & Pineapple Fax No.: (707) 442-1268 and to Pacific Coast Farm Credit Services, ACA 200 Concourse Boulevard Santa Rosa, CA 95403 P.O. Box 1330 Santa Rosa, CA 95402 Attn: Account Officer -- Maui Land & Pineapple Fax No.: (707) 545-7200 If to Borrower, as follows; Maui Land & Pineapple Company, Inc. PO Box 187, Kahului, Hawaii 96732-0187 Attn: Executive Vice President-Finance Fax No.: (808) 871-0953 21. Costs and Expenses. Borrower shall pay all costs incurred by PCFC, including reasonable attorneys fees, in connection with the preparation for, negotiation of, and documentation of this Agreement, the Other Documents, and any Guaranty Agreement. If in the future PCFC shall employ the services of legal counsel or any other professional or any third party in connection with (i) any request made by Borrower to PCFC for a modification, amendment, waiver, or consent in connection with this Agreement, any Other Document, or any Guaranty Agreement, (ii) rendering advice or other services to PCFC regarding PCFC's rights or obligations under this Agreement or any Other Document or any Guaranty Agreement, whether or not an Event of Default has occurred, (iii) representing the interests of PCFC in any judicial or nonjudicial action, suit or proceeding instituted by PCFC or any other Person connected with or related to or with reference to the Term Loan or to reclaim, seek relief from a judicial or statutory stay, sequester, protect, preserve or enforce PCFC's interests, then in such event Borrower promises to pay reasonable attorney's fees and reasonable costs and expenses incurred by PCFC and/or its attorney in connection with the above-mentioned events. Such amounts shall be payable upon demand. 22. Effectiveness; Severability. This Agreement shall continue in effect until all indebtedness and obligations of Borrower hereunder shall have been repaid and all commitments of PCFC hereunder have terminated. Any provision of this Agreement or of any instrument or document contemplated hereby which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or thereof. 23. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of Borrower and PCFC and their respective successors and assigns except that Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of PCFC. PCFC may assign all or any portion of its obligations under this Agreement without prior notice to Borrower and such assignment shall relieve PCFC of any future obligations hereunder. PCFC may grant or sell participation interests in its interests under this Agreement without notice to Borrower. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers as of the date shown above. BORROWER: MAUI LAND & PINEAPPLE COMPANY, INC., a Hawaii Corporation By: /S/ GARY L. GIFFORD Title: PRESIDENT By: /S/ PAUL J. MEYER Title: EXECUTIVE VICE PRESIDENT/FINANCE PCFC: PACIFIC COAST FARM CREDIT SERVICES, ACA By: /S/ SEAN P. O'DAY Sean P. O'Day, Regional Vice-President -----END PRIVACY-ENHANCED MESSAGE-----