-----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, Df39iUMMsCOdxT9rcEcSs3FPp/yx/7gp10pul+vnR8JBRJB23zwC5K7KIOKzgbcT M1g1wZAZY20dLlUHKKVhAg== 0000842701-96-000007.txt : 19960816 0000842701-96-000007.hdr.sgml : 19960816 ACCESSION NUMBER: 0000842701-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: CSX FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMFAC JMB FINANCE INC CENTRAL INDEX KEY: 0000842701 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE OPERATORS (NO DEVELOPERS) & LESSORS [6510] IRS NUMBER: 363611183 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-24180-01 FILM NUMBER: 96614168 BUSINESS ADDRESS: STREET 1: 900 N MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60611 BUSINESS PHONE: 3124404800 MAIL ADDRESS: STREET 1: 900 N MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60611 10-Q 1 Securities and Exchange Commission 450 Fifth Street, N.W. Judiciary Plaza Washington, D.C. 20549 Re: AMFAC/JMB FINANCE, INC. Commission File No. 36-3611183 Form 10-Q Gentlemen: Enclosed, for the above-mentioned registrant, are eight copies one of which is manually executed of registrant's current report on Form 10-Q for the quarter ended June 30, 1996. Please acknowledge receipt of the Form 10-Q filing, by signing and returning the self-addressed stamped postcard. Thank You. Very truly yours, AMFAC/JMB FINANCE, INC. By: Northbrook Corporation Parent Company By: _____________________ Gary Smith Vice President and Principal Accounting Officer Securities and Exchange Commission 450 Fifth Street, N.W. Judiciary Plaza Washington, D.C. 20549 Re: AMFAC/JMB HAWAII, INC. Commission File No. 33-24180 Form 10-Q Gentlemen: Enclosed, for the above-mentioned registrant, are eight copies one of which is manually executed of registrant's current report on Form 10-Q for the quarter ended June 30, 1996. Please acknowledge receipt of the Form 10-Q filing, by signing and returning the self-addressed stamped postcard. Thank You. Very truly yours, AMFAC/JMB HAWAII, INC. By: Northbrook Corporation Parent Company By: _____________________ Gary Smith Vice President and Principal Accounting Officer SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Act of 1934 For the quarter ended June 30, 1996 Commission File Number 33- 24180 AMFAC/JMB HAWAII, INC. (Exact name of registrant as specified in its charter) Hawaii 99-0217738 (State of organization) (I.R.S. Employer Identification No.) AMFAC/JMB FINANCE, INC. (Exact name of registrant as specified in its charter) Illinois 36-3611183 (State of organization) (I.R.S. Employer Identification No.) 900 N. Michigan Ave., Chicago, Illinois 60611 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code 312-440-4800 See Table of Additional Registrants Below. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of August 13, 1996, each of Amfac/JMB Hawaii, Inc. and Amfac/JMB Finance, Inc. had 1,000 shares of Common Stock outstanding. All such Common Stock is owned by its respective parent and not traded on a public market. ADDITIONAL REGISTRANTS (1) Address, including, zip code, Exact name of State or other IRS and telephone number, registrant as jurisdiction of Employer including area code of specified in its incorporation or Identification registrant's principal Charter organization Number executive offices Amfac Property Hawaii 99-0150751 900 North Michigan Avenue Development Corp. Chicago, Illinois 60611 312/440-4800 Amfac Property Hawaii 99-0202331 900 North Michigan Avenue Investment Chicago, Illinois 60611 Corp. 312/440-4800 Amfac Sugar and Hawaii 99-0185633 900 North Michigan Avenue Agribusiness, Chicago, Illinois 60611 Inc. 312/440-4800 Kaanapali Water Hawaii 99-0185634 900 North Michigan Avenue Corporation Chicago, Illinois 60611 312/440-4800 Amfac Agri- Hawaii 99-0176334 900 North Michigan Avenue business, Inc. Chicago, Illinois 60611 312/440-4800 Kekaha Sugar Hawaii 99-0044650 900 North Michigan Avenue Company, Chicago, Illinois 60611 Limited 312/440-4800 The Lihue Hawaii 99-0046535 900 North Michigan Avenue Plantation Chicago, Illinois 60611 Company, 312/440-4800 Limited Oahu Sugar Hawaii 99-0105277 900 North Michigan Avenue Company, Chicago, Illinois 60611 Limited 312/440-4800 Pioneer Mill Hawaii 99-0105278 900 North Michigan Avenue Company, Chicago, Illinois 60611 Limited 312/440-4800 Puna Sugar Hawaii 99-0051215 900 North Michigan Avenue Company, Chicago, Illinois 60611 Limited 312/440-4800 H. Hackfeld Hawaii 99-0037425 900 North Michigan Avenue & Co., Ltd. Chicago, Illinois 60611 312/440-4800 Waiahole Hawaii 99-0144307 900 North Michigan Avenue Irrigation Chicago, Illinois 60611 Company, 312/440-4800 Limited Waikele Golf Hawaii 99-0304744 900 North Michigan Avenue Club, Inc. Chicago, Illinois 60611 312/440-4800 1) The Additional Registrants listed are wholly-owned subsidiaries of the registrant and are guarantors of the registrant's Certificate of Land Appreciation Notes due 2008. TABLE OF CONTENTS PART I FINANCIAL INFORMATION Item 1. Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 23 PART II OTHER INFORMATION Item 1. Legal Proceedings 32 Item 6. Exhibits and Reports on Form 8-K 33 PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements AMFAC/JMB HAWAII, INC. Consolidated Balance Sheets June 30, 1996 and December 31, 1995 (Dollars in Thousands) (Unaudited) A S S E T S
June 30, December 31, 1996 1995 -------------- -------------- A S S E T S Current assets: Cash and cash equivalents $9,641 11,745 Receivables-net 14,122 8,720 Inventories 47,614 49,641 Prepaid expenses 2,571 3,102 -------- -------- Total current assets 73,948 73,208 -------- -------- Investments 45,168 45,080 -------- -------- Property, plant and equipment: Land and land improvements 333,919 336,069 Machinery and equipment 57,230 56,882 Construction in progress 2,245 1,428 -------- -------- 393,394 394,379 Less accumulated dep. and amortization 30,912 27,762 -------- -------- 362,482 366,617 -------- -------- Deferred expenses 13,443 14,225 Other assets 29,964 28,468 -------- -------- $ 525,005 527,598 ========== ========== L I A B I L I T I E S Current liabilities: Accounts payable $ 6,970 8,562 Accrued expenses 9,638 13,268 Current portion of long-term debt 1,730 67,730 Current portion of deferred inc. taxes 14,348 10,902 AMFAC/JMB HAWAII, INC. Consolidated Balance Sheets - Continued June 30, 1996 and December 31, 1995 (Dollars in Thousands) (Unaudited) June 30, December 31, 1996 1995 ------------- ------------- Amounts due to affiliates 27,595 22,862 -------- -------- Total current liabilities 60,281 123,324 -------- -------- Amounts due to affiliates 90,110 76,911 Accum. postretirement benefit obligation 59,207 61,037 Long-term debt 91,772 26,765 Other long-term liabilities 36,335 34,366 Deferred income taxes 97,962 98,691 Certificate of Land Appreciation Notes 220,692 220,692 -------- -------- Commitments and contingencies (notes 3, 4, 5, 7, 8, 9 and 10) Total liabilities 656,359 641,786 -------- -------- S T O C K H O L D E R S' E Q U I T Y (D E F I C I T ) Common stock, no par value Authorized, issued and outstanding 1,000 shares 1 1 Additional paid-in capital 3,385 11,495 Retained earnings (deficit) (134,740) (125,684) --------- --------- Total stockholders' equity (deficit) (131,354) (114,188) --------- --------- $ 525,005 527,598 ============ =========== The accompanying notes are an integral part of the consolidated financial statements.
AMFAC/JMB HAWAII, INC. Consolidated Statements of Operations Six Months Ended June 30, 1996 and 1995 (Dollars in Thousands) (Unaudited)
Three Months Ended Six Months Ended June 30 June 30 -------------------- --------------------- 1996 1995 1996 1995 (Restated) (Restated) ------- ------- ------ ------ Revenue: Agriculture $16,744 18,427 22,432 19,726 Property 12,215 16,611 21,583 29,457 ------- ------- ------- ------- 28,959 35,038 44,015 49,183 ------- ------- ------- ------- Cost of sales: Agriculture 17,532 19,830 21,645 20,399 Property 8,385 8,708 13,724 16,765 ------- ------- -------- ------- 25,917 28,538 35,369 37,164 Selling, general and administrative 2,793 3,109 5,942 7,184 Depreciation and amortization 1,554 1,606 3,150 3,320 ------- ------- ------- ------- Total costs and expenses 30,264 33,253 44,461 47,668 Operating income (loss) (1,305) 1,785 (446) 1,515 ------- ------- ------- ------- Non-operating income (expenses): Amortization of financing costs (451) (444) (767) (955) Interest expense (6,490) (5,565) (13,398) (11,571) Interest income 70 932 162 1,283 ------- ------- ------- ------- (6,871) (5,077) (14,003) (11,243) ------- ------- ------- ------- Loss before taxes (8,176) (3,292) (14,449) (9,728) ------- ------- -------- ------ Income tax benefit 3,060 1,207 5,393 3,616 ------- ------- ------- ------- Loss before extra- ordinary item (5,116) (2,085) (9,056) (6,112) AMFAC/JMB HAWAII, INC. Consolidated Statements of Operations - Continued Six Months Ended June 30, 1996 and 1995 (Dollars in Thousands) (Unaudited) Three Months Ended Six Months Ended June 30 June 30 -------------------- --------------------- 1996 1995 1996 1995 (Restated) (Restated) ------- ------- ------ ------ Extraordinary gain from extinguishment of debt (less app- licable income taxes of $20,807) -- 32,544 -- 32,544 ------- -------- ------- ------- Net income (loss) $(5,116) 30,459 (9,056) 26,432 ======= ======= ======= ======= The accompanying notes are an integral part of the consolidated financial statements.
AMFAC/JMB HAWAII, INC. Consolidated Statements of Cash Flows Six Months Ended June 30, 1996 and 1995 (Dollars in Thousands) (Unaudited)
1996 1995 (Restated) -------- -------- Cash flows from operating activities: Net income (loss) $(9,056) 26,432 Items not requiring (providing) cash: Depreciation and amortization 3,150 3,320 Amortization of deferred expenses 767 955 Equity in earnings of investments 23 62 Income tax expense (benefit) (5,393) 17,191 Extraordinary gain from extinguish- ment of debt -- (53,351) Changes in: Receivables - net (5,402) 4,006 Inventories 4,437 (2,815) Prepaid expenses 531 554 Accounts payable (1,592) 2,398 Accrued expenses (3,630) (1,811) Amounts due to affiliates 4,733 8,579 Other long-term liabilities (2,134) (132) -------- -------- Net cash provided by (used in) operating activities (13,566) 5,388 -------- -------- Cash flows from investing activities: Property additions (1,175) (1,975) Property disposals and retirements - net -- 2,673 Investments in joint ventures and partnerships (111) (167) Short-term investments -- 31,998 Other assets (1,496) (937) Other long-term liabilities 2,023 (5,060) -------- -------- AMFAC/JMB HAWAII, INC. Consolidated Statement of Cash Flows - Continued Six Months Ended June 30, 1996 and 1995 (Dollars in Thousands) (Unaudited) 1996 1995 (Restated) -------- -------- Net cash provided by (used in) investing activities (759) 26,532 -------- -------- Cash flows from financing activities: Deferred expenses 15 1 Other cost related to extinguishment of debt -- (704) Net repayments of long-term debt (993) (1,610) Payment to redeem and purchase Certificate of Land Appreciation Notes (COLAS) -- (105,452) Amounts due to affiliates 13,199 52,000 --------- -------- Net cash provided by (used in) financing activities 12,221 (55,765) --------- -------- Net decrease in cash and cash equivalents (2,104) (23,845) Cash and cash equivalents, beginning of year 11,745 31,702 --------- -------- Cash and cash equivalents, end of period $ 9,641 7,857 ========= ======== Supplemental disclosure of cash flow information: Cash paid for interest (net of amounts capitalized) $10,275 11,724 ========= ======== AMFAC/JMB HAWAII, INC. Consolidated Statement of Cash Flows - Continued Six Months Ended June 30, 1996 and 1995 (Dollars in Thousands) (Unaudited) 1996 1995 (Restated) -------- -------- Schedule of non-cash investing and financing activities: Transfer of property actively held for sale to real estate inventories and accrued costs relating to real estate sales $ 2,410 5,110 ========= ======== Disposition of Debt: Gain on extinguishment of debt $ -- 53,351 Face value of debt extinguishment -- (164,045 ) Other costs related to debt extinguishment -- 894 Write-off of deferred COLA costs -- 10,015 Write-off of Contingent Base Interest -- (5,667) --------- --------- Cash paid to redeem and purchase COLAS $ -- (105,452) ========= ========= The accompanying notes are an integral part of the consolidated financial statements.
AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements June 30, 1996 and 1995 (Dollars in Thousands) Readers of this quarterly report should refer to the Company's audited financial statements for the fiscal year ended December 31, 1995, which are included in the Company's 1995 Annual Report, as certain footnote disclosures which would substantially duplicate those contained in such audited financial statements have been omitted from this report. (1) ADJUSTMENTS The extraordinary gain from extinguishment of debt as originally reported in the consolidated statements of operations for the three and six months ended June 30, 1995 has been restated to include the effect of the write-off of accrued contingent base interest of $5,667, less additional expenses of $190 (net of taxes of $2,135). In the opinion of the Company, all other adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation have been made to the accompanying figures as of June 30, 1996 and for the three and six months ended June 30, 1996 and 1995. (2) BASIS OF ACCOUNTING On November 17, 1988, the stockholders of Amfac, Inc. ("Amfac") agreed to the merger ("Merger") of Amfac with an affiliate of JMB Realty Corporation ("JMB"). The Merger was consummated on November 18, 1988. Amfac/JMB Hawaii (the "Company") was a wholly-owned subsidiary of Amfac, a subsidiary of Northbrook Corporation ("Northbrook"). In May 1995, Amfac was merged into Northbrook, with Northbrook being the surviving corporation. The Company has two primary business segments. The agriculture segment ("Agriculture") is responsible for the Company's activities related to the cultivation and processing of sugar cane and other agricultural products. The real estate segment ("Property") is responsible for land development activities related to the Company's owned land in the State of Hawaii, and the management and operation of the Company's golf course facilities. The consolidated financial statements as of December 31, 1995 and for the six months ended June 30, 1996 include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company's policy is to consider all amounts held with original maturities of three months or less in U.S. Government obligations, certificates of deposit and money market funds (approximately $4,100 and $3,700 at June 30, 1996 and December 31, 1995, respectively) as cash equivalents, which approximates market. These amounts include $1,185 and $1,623 at June 30, 1996 and December 31, 1995, respectively, which were restricted primarily to fund debt service on certain long-term debt (see note 5). AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements - Continued (Dollars in Thousands) As part of the Company's agriculture operations, the Company enters into commodities futures contracts and options in sugar as deemed appropriate to reduce the risk of future price fluctuations in sugar. These futures contracts and options are accounted for as hedges and, accordingly, gains and losses are deferred and recognized in cost of sales as part of the production cost. Investments in certain partnerships and joint ventures, if any, over which the Company exercises significant influence are accounted for by the equity method. Revenues include the Company's equity in net income or loss from such investments. To the extent the Company engages in such activities as a general partner, the Company is contingently liable for the obligations of its partnership and joint venture investments. Project costs associated with the acquisition, development and construction of real estate projects are capitalized and classified as construction in progress. Such capitalized costs are not in excess of the project's estimated net realizable value. Land actively held for sale and any related development costs transferred from construction in progress are reported as inventories in the accompanying consolidated balance sheets and are stated at the lower of cost or fair value less costs to sell. For financial reporting purposes, the Company uses the effective interest rate method and accrues interest on the Certificate of Land Appreciation Notes due 2008 ("COLAS") at 4% per annum, which is the "Mandatory Base Interest" (see note 4). Interest is capitalized to qualifying assets (principally real estate under development) during the period that such assets are undergoing activities necessary to prepare them for their intended uses. Such capitalized interest is charged to cost of sales as revenue from the real estate development is recognized. No material amounts have been capitalized for the six months ended June 30, 1996 and 1995. The Company and its subsidiaries report their taxes as part of the consolidated tax return of the Company's parent, Northbrook. The Company and its subsidiaries have entered into a tax indemnification agreement with Northbrook which indemnifies the Company and its subsidiaries for responsibility for all past, present and future federal and state income tax liabilities (other than income taxes which are directly attributable to cancellation of indebtedness income caused by the repurchase or redemption of securities as provided for in or contemplated by the Repurchase Agreement) (see note 4). AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements - Continued (Dollars in Thousands) Current and deferred taxes have been allocated to the Company as if the Company were a separate taxpayer in accordance with the provisions of SFAS No. 109-Accounting for Income Taxes. However, to the extent the tax indemnification agreement does not require the Company to actually pay income taxes, current taxes payable or receivable have been reflected as deemed contributions or distributions, respectively, to additional paid-in capital in the accompanying consolidated financial statements. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. (3) AMOUNTS DUE TO AFFILIATES - FINANCING The maturity date of the approximately $15,097 of remaining acquisition-related financing owed to affiliates has been extended to June 1, 1998 and bears interest at a rate per annum based upon the prime interest rate (8.25% at June 30, 1996), plus one percent. On June 1, 1995, the Company borrowed $52,000 from Northbrook to redeem Class A COLAS pursuant to the Redemption Offer (see note 4). The Company has also borrowed approximately $13,087 and $9,814 at June 30, 1996 and December 31, 1995, respectively, to fund COLA Base Interest payments and other operational needs. The loans from Northbrook are payable interest only, mature on June 1, 1998 and carry an interest rate per annum equal to the prime interest rate plus two percent. Pursuant to the Indenture relating to the COLAS, the amounts borrowed from Northbrook are considered "Senior Indebtedness" to the COLAS. (4) CERTIFICATE OF LAND APPRECIATION NOTES The COLAS are unsecured debt obligations of the Company. Interest on the COLAS is payable semi-annually on February 28 and August 31 of each year. The COLAS mature on December 31, 2008, and bear interest after the Final Issuance Date (August 31, 1989) at a rate of 10% per annum ("Base Interest") of the outstanding principal balance of the COLAS on a cumulative, non-compounded basis, of which 6% per annum is contingent ("Contingent Base Interest") and payable only to the extent of Net Cash Flow (Net Cash Flow for any period is generally an amount equal to 90% of the Company's net cash revenues and receipts after payment of cash expenditures, including the Qualified Allowance (as defined) other than federal and state income taxes and after the establishment by the Company of reserves). AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements - Continued (Dollars in Thousands) In each calendar year, principal reductions may be made from remaining Net Cash Flow, if any, in excess of all current and unpaid deferred Contingent Base Interest. The COLAS will bear additional contingent interest in any year, after any principal reduction, equal to 55% of remaining Net Cash Flow. Upon maturity, holders of COLAS will be entitled to receive the remaining outstanding principal balance of the COLAS plus unpaid Mandatory Base Interest (4%) plus additional interest equal to the unpaid Contingent Base Interest, to the extent of the Maturity Market Value (Maturity Market Value generally means 90% of the excess of the Fair Market Value (as defined) of the Company's assets at Maturity over its liabilities incurred in connection with its operations), plus 55% of the remaining Maturity Market Value. On March 14, 1989, Amfac/JMB Finance ("Finance"), a wholly- owned subsidiary of Northbrook and the Company entered into an agreement (the "Repurchase Agreement") concerning Finance's obligations to repurchase, on June 1, 1995 and 1999, the COLAS upon request of the holders thereof. The COLAS were issued in two units consisting of one Class A and one Class B COLA. As specified in the Repurchase Agreement, the repurchase of the Class A COLAS may have been requested by the holders of such COLAS on June 1, 1995 at a price equal to the original principal amount of such COLAS ($.5) minus all payments of principal and interest allocated to such COLAS. The cumulative interest paid per Class A COLA through June 1, 1995 was $.135. The repurchase of the Class B COLAS may be requested of Finance by the holders of such COLAS on June 1, 1999 at a price equal to 125% of the original principal amount of such COLAS ($.5) minus all payments of principal and interest allocated to such COLAS. Through the date of this report, the cumulative interest paid per Class A and Class B COLA is approximately $.155 and $.155, respectively. On March 14, 1989, Northbrook entered into a keep-well agreement with Finance, whereby it agreed to contribute sufficient capital or make loans to Finance to enable Finance to meet its COLA repurchase obligations described above. Notwithstanding Finance's repurchase obligations, the Company may elect to redeem any COLAS requested to be repurchased at the specified price. On March 15, 1995, pursuant to the indenture that governs the terms of the COLAS (the "Indenture"), the Company elected to offer to redeem (the "Redemption Offer") all Class A COLAS from the registered holders at the same price as would be required of Finance under the Repurchase Agreement, thereby eliminating Finance's obligation to satisfy the Class A COLA repurchase options requested by such holders as of June 1, 1995. Pursuant to the Redemption Offer, and in accordance with the terms of the Indenture, the Company was therefore obligated to purchase any and all Class A COLAS submitted pursuant to the Redemption Offer at a price of $.365 per Class A COLA. In conjunction with the Company's Redemption Offer, the Company made a tender offer (the "Tender Offer") to purchase up to approximately $68,000 principal value of the Class B COLAS at a price of $.220 per Class B COLA from COLA holders electing to have their Class A COLAS repurchased. Approximately 229,000 Class A COLAS were submitted for repurchase pursuant to the Redemption Offer and approximately AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements - Continued (Dollars in Thousands) 99,000 Class B COLAS were submitted for repurchase pursuant to the Tender Offer, requiring an aggregate payment by the Company of approximately $105,450 on June 1, 1995. The Company used its available cash to purchase Class B COLAS pursuant to the Tender Offer and borrowed $52,000 from Northbrook to purchase Class A COLAS pursuant to the Redemption Offer. As a result of the COLA repurchases in 1995, the Company retired approximately $164,045 in face value of COLA debt and recognized a financial statement gain in the second quarter of 1995 of approximately $32,544 (net of income taxes of $20,807, the write-off of deferred financing costs of $10,015, the write- off of accrued contingent base interest of $5,667 and expenses of $894). Such gain is treated as cancellation of indebtedness income for tax purposes and, accordingly, the income taxes related to the Class A Redemption Offer (approximately $9,106) will not be indemnified by the tax agreement with Northbrook (see note 2). The terms of the Indenture relating to the COLAS place certain restrictions on the Company's declaration and payment of dividends. Such restrictions generally relate to the source, timing and amounts which may be declared and/or paid. The COLAS also impose certain restrictions on, among other things, the creation of additional indebtedness for certain purposes, the Company's ability to consolidate or merge with or into other entities, and the Company's transactions with affiliates. (5) LONG-TERM DEBT In June 1991, the Company obtained a five-year $66,000 loan from the Employees' Retirement System of the State of Hawaii ("ERS"). The nonrecourse loan is secured by a first mortgage on the Kaanapali Golf Courses, and is considered "Senior Indebtedness" (as defined in the Indenture relating to the COLAS). The loan bore interest at a rate per annum equal to the greater of (i) the base interest rate announced by the Bank of Hawaii on the first of July for each year or (ii) ten percent per annum through June 30, 1993 and nine percent per annum thereafter. The annual interest payments were in excess of the cash flow generated by the Kaanapali Golf Courses. In April 1996, the Company reached an agreement to amend the loan with the ERS, extending the maturity date for five years. In exchange for the loan extension, the ERS received the right to participate in the "Net Disposition Proceeds" (as defined) related to the sale or the refinancing of the golf courses or at the maturity of the loan. The ERS share of the Net Disposition Proceeds increases from 30% through June 30, 1997, to 40% for the period from July 1, 1997 to June 30, 1999 and to 50% thereafter. The loan amendment effectively adjusts the interest rate as of January 1, 1995 to 9.5% until June 30, 1996. After June 30, 1996, the loan bears interest at a rate per annum equal to the five-year treasury rate on July 1, 1996 (6.48%) plus 2 1/4%. The loan amendment requires the Company to pay interest at the rate of 7% for the period from January 1, 1995 to June 30, 1996, 7.5% from July 1, 1996 to June 30, 1997, 7.75% from July 1, 1997 to June 30, 1998 and 8.5% thereafter ("Minimum Pay Rates"). The Company has made payments in April 1996 for $4,119 and in July 1996 for $1,148, representing the minimum interest payment due through July 1, 1996. The scheduled minimum payments are paid quarterly on AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements - Continued (Dollars in Thousands) the principal balance of the $66,000 loan. The difference between the accrued interest expense and the minimum interest payment accrues interest and is payable on an annual basis from excess cash flow, if any, generated from the Kaanapali Golf Courses. Although the outstanding loan balance remains nonrecourse, the amendment makes the minimum interest payments and the ERS's share of appreciation, if any, recourse to the Company. However, the Company's obligations to make future minimum interest payments and to pay the ERS a share of appreciation would be terminated if the Company tendered an executed deed to the golf course property to the ERS in accordance with the terms of the amendment. In January 1993, The Lihue Plantation Company, Limited ("Lihue") obtained a ten-year $13,250 loan used to fund the acquisition of Lihue's power generation equipment. The $13,250 loan, constituting "Senior Indebtedness" under the COLAS' Indenture, consists of two ten-year amortizing term loans of $10,000 and $3,250, respectively, payable in quarterly installments commencing July 1, 1993 in the principal amount of $250, and $81 (plus interest), respectively. The $10,000 and $3,250 loans have outstanding balances of $7,000 and $789, respectively, as of June 30, 1996 and bear interest at a rate equal to the prime rate (8.25% at June 30, 1996) plus three and one half percent and the prime rate plus four and one-half percent, respectively. Lihue has purchased an interest rate agreement which effectively caps the prime rate for the first five years of the loan agreement at eight percent. The loan is secured by the Lihue power generation equipment, sugar inventories and receivables, certain other assets and real property of the Company and has limited recourse to the Company and certain other subsidiaries. In October 1993, Waikele Golf Club, Inc. ("WGCI"), a wholly- owned subsidiary of the Company which owns and operates the Waikele Golf Course, obtained a five-year $20,000 loan facility from two lenders. The loan consists of two $10,000 amortizing loans. Each loan bears interest only for the first two years and interest and principal payments based upon an assumed 20-year amortization period for the remaining three years. The loans bear interest at prime plus 1/2% and LIBOR (5.6% at June 30, 1996) plus 3%, respectively. The loan is secured by WGCI's assets (the golf course and related improvements and equipment), is guaranteed by the Company, and is considered "Senior Indebtedness" (as defined in the Indenture relating to the COLAS). As of June 30, 1996 the remaining scheduled annual principal maturities are $202 in 1996, $405 in 1997, and the balance of $19,106 in 1998. AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements - Continued (Dollars in Thousands) (6) SEGMENT INFORMATION Agriculture and Property comprise separate industry segments of the Company. "Operating Income-Other" consists primarily of unallocated overhead expenses and "Total Assets-Other" consists primarily of cash and deferred expenses. Total assets at the balance sheet dates, capital expenditures, operating income (loss) and depreciation and amortization during the six months ended June 30, 1996 and 1995 are set forth below by each industry segment:
June 30, December 31, 1996 1995 --------- --------- Total Assets: Property $196,892 199,999 Agriculture 306,204 304,170 Other 21,909 23,429 --------- --------- $525,005 527,598 ========= ========= Six Months Six Months Ended Ended June 30, June 30, 1996 1995 ----------- ----------- Capital Expenditures: Agriculture $ 711 838 Property 464 1,137 --------- --------- $1,175 1,975 ========= ========= Six Months Six Months Ended Ended June 30, June 30, 1996 1995 ------------ ------------ Operating income (loss): Agriculture $(1,556) (3,307) Property 2,363 7,105 Other (1,253) (2,283) --------- --------- $ (446) 1,515 ========== ========= Depreciation and amortization: Agriculture $2,048 2,339 Property 1,051 885 Other 51 96 --------- --------- $3,150 3,320 ========= =========
AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements - Continued (Dollars in Thousands) (7) TRANSACTIONS WITH AFFILIATES The Company incurred interest expense of approximately $4,200 for the six months ended June 30, 1996 and approximately $1,353 for the six months ended June 30, 1995 in connection with the acquisition and additional financing, obtained from an affiliate. Approximately $9,065 of such interest was unpaid as of June 30, 1996. With respect to any calendar year, JMB or its affiliates are entitled to a Qualified Allowance in an amount equal to: (i) approximately $6,200 during each of the calendar years 1989 through 1993, and (ii) thereafter, 1-1/2% per annum of the Fair Market Value (as defined) of the gross assets of the Company and its subsidiaries (other than cash and cash equivalents and Excluded Assets (as defined)). However, such amount shall be paid for each year only following the payment of a specified level of Base Interest to the holders of the COLAS. Any portion of the Qualified Allowance not paid for any year shall accumulate without interest. Any Qualified Allowance subsequent to 1989 has been deferred and is payable only to the extent future Net Cash Flows are sufficient to pay the holders of the COLAS a specified level of return and, accordingly, no such amounts have been reflected in the accompanying consolidated financial statements. The Company, its subsidiaries, and their joint ventures reimburse Northbrook, JMB and their affiliates for direct expenses incurred on their behalves, including salaries and salary-related expenses incurred in connection with the management of the Company's (or subsidiaries' or joint ventures') operations. The total of such costs was approximately $249 during the six months ended June 30, 1995 and approximately $308 for the six months ended June 30, 1996; approximately $896 of such costs were unpaid as of June 30, 1996. In addition, as of June 30, 1996, the other amounts due to affiliates includes $9,106 of income taxes payable related to the Class A COLA Redemption Offer (see note 4). Also, the Company pays a non- accountable reimbursement of approximately $30 per month to JMB and its affiliates for general overhead expenses, all of which was paid as of June 30, 1996. JMB Insurance Agency, Inc. earns insurance brokerage commissions in connection with providing the placement of insurance coverage for certain of the properties and operations of the Company. Such commissions are comparable to those available to the Company in similar dealings with unaffiliated third parties. The total of such commissions for the six months ended June 30, 1995 was approximately $668 and approximately $423 for the six months ended June 30, 1996 all of which was paid as of June 30, 1996. AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements - Continued (Dollars in Thousands) Northbrook and its affiliates allocate certain charges for services to the Company based upon the estimated level of services, of which $8,528 was unpaid as of June 30, 1996. These services and costs are intended to reflect the Company's separate costs of doing business and are principally related to the inclusion of the Company's employees in the Northbrook pension plan, payment of severance and termination benefits and reimbursement for insurance claims paid on behalf of the Company. All amounts described above, deferred or currently payable, do not bear interest and are expected to be paid in future periods. (8) EMPLOYEE BENEFIT PLANS The Company participates in benefit plans covering substantially all of its employees, which provide benefits based primarily on length of service and compensation levels. These plans are administered by Northbrook in conjunction with other plans providing benefits to employees of Northbrook and its affiliates. One of the Company's defined benefit plans, the Retirement Plan for the Employees of Amfac, Inc. (the "Plan"), terminated effective December 31, 1994. The settlement of the Plan occurred in May 1995. The Company replaced this plan with the "Core Retirement Award Program", a defined contribution plan that commenced on January 1, 1995. In the new plan an Eligible Employee (as defined) is credited with an annual contribution equal to 3% of the employee's qualified compensation. The new plan's cost to the Company and the benefits provided to the participants are comparable to the former Plan. (9) COMMITMENTS AND CONTINGENCIES The Company is involved in various matters of litigation and other claims. Management, with knowledge of facts and after consultation with legal counsel, is of the opinion that the Company's liability (if any), when ultimately determined, will not have a material adverse effect on the Company's financial position. The Company's Property segment has contractual commitments (related to project costs) of approximately $2,600 as of June 30, 1996. Additional development expenditures are dependent upon the Company's ability to obtain financing for such costs and on the timing and extent of property development and sales. As of June 30, 1996 certain portions of the Company's land not currently under development or used in sugar operations are mortgaged as security for approximately $1,128 of performance bonds related to property development. AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements - Concluded (Dollars in Thousands) (10) INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of December 31, 1995 are as follows: Deferred tax assets: Postretirement benefits $(23,804) Interest accruals (3,149) Other accruals (3,074) --------- Total gross deferred tax assets (30,027) --------- Deferred tax liabilities: Accounts receivable, related to profit on sales of sugar 3,332 Inventories, principally due to sugar production costs, capitalized interest and purchase accounting adjustments 4,716 Plant and equipment, principally due to differences in depreciation and purchase accounting adjustments 7,696 Land and land improvements, principally due to purchase accounting adjustments 101,204 Deferred gains, due to installment gains for income tax purposes 8,492 Investments in unconsolidated entities, principally due to purchase accounting adjustments 14,180 -------- Total deferred tax liabilities 139,620 -------- Net deferred tax liability $109,593 ========= AMFAC/JMB FINANCE, INC. Balance Sheets June 30, 1996 and December 31, 1995 (Dollars in thousands, except per share information) (Unaudited) A s s e t
June 30, December 31, 1996 1995 ----------- ----------- Cash $ 1 1 ========== ========= L i a b i l i t y a n d S t o c k h o l d e r ` s E q u i t y Repurchase obligation (note 2) Common stock, $1 par value; authorized, issued and outstanding - 1,000 shares $ 1 1 ========== ========== The accompanying notes are an integral part of these balance sheets.
AMFAC/JMB FINANCE, INC. Notes to the Balance Sheets (Unaudited) (Dollars in Thousands) (1) ORGANIZATION AND ACCOUNTING POLICY Amfac/JMB Finance, Inc. ("Finance") was incorporated November 7, 1988 in the State of Illinois. Finance has had no financial operations. All of the outstanding shares of Finance are owned by Northbrook Corporation ("Northbrook"). (2) REPURCHASE OBLIGATIONS On March 14, 1989, Finance and a subsidiary of Northbrook (Amfac/JMB Hawaii, Inc.) entered into an agreement (the "Redemption Agreement") concerning Finance's obligation (on June 1, 1995 and 1999) to repurchase, upon request of the holders thereof, the Certificate of Land Appreciation Notes due 2008 ("COLAS"), to be issued by Amfac/JMB Hawaii, Inc. in conjunction with the acquisition of Amfac/JMB Hawaii, Inc.. A total aggregate principal amount of $384,737 of COLAS were issued during the offering, which terminated on August 31, 1989. The COLAS were issued in two units consisting of one Class A and one Class B COLA. As specified in the Repurchase Agreement, the repurchase of the Class A COLAS may have been requested of Finance by the holders of such COLAS on June 1, 1995 at a price equal to the original principal amount of such COLAS ($.500) minus all payments of principal and interest allocated to such COLAS. The cumulative interest paid per Class A COLA through June 1, 1995 was $.135. The repurchase of the Class B COLAS may be requested of Finance by the holders of such COLAS on June 1, 1999 at a price equal to 125% of the original principal amount of such COLAS ($.500) minus all payments of principal and interest allocated to such COLAS. To date, the cumulative interest paid per Class A and Class B COLA is approximately $.155 and $.155, respectively. On March 14, 1989, Northbrook entered into a keep-well agreement with Finance, whereby it agreed to contribute sufficient capital to Finance to enable Finance to meet the COLA repurchase obligations described above. Notwithstanding Finance's repurchase obligations, Amfac/JMB Hawaii, Inc. may elect to redeem any COLAS requested to be repurchased at the specified purchase price in accordance with the terms in the indenture that governs the terms of the COLAS (the "Indenture"). On March 15, 1995, pursuant to the Indenture, Amfac/JMB Hawaii, Inc. elected to exercise its right to redeem, and therefore was obligated to repurchase, any and all Class A COLAS submitted pursuant to the Redemption Offer at a price of $.365 per Class A COLA. PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources All references to "Notes" herein are to Notes to Consolidated Financial Statements contained in this report. On December 5, 1988, the Company commenced an offering to the public of COLAS pursuant to a Registration Statement on Form S-1 under the Securities Act of 1933. A total of 384,737 COLAS were issued prior to the termination of the offering on August 31, 1989. The net proceeds received from the sale of the COLAS totaled approximately $352 million (after deduction of organization and offering expenses of approximately $33 million). Such net proceeds were used to repay a portion of the acquisition-related financing, which was incurred to pay certain costs associated with the Merger including a portion of the Merger consideration paid to shareholders of Amfac. On March 14, 1989, Amfac/JMB Finance ("Finance"), a wholly-owned subsidiary of Northbrook Corporation ("Northbrook"), and the Company entered into an agreement (the "Repurchase Agreement") concerning Finance's obligations (on June 1, 1995 and 1999) to repurchase the COLAS upon request of the holders thereof. The COLAS were issued in two units consisting of one Class A and one Class B COLA. As specified in the Repurchase Agreement, the repurchase of the Class A COLAS may have been requested by the holders of such COLAS on June 1, 1995 at a price equal to the original principal amount of such COLAS ($500) minus all payments of principal and interest allocated to such COLAS. The cumulative interest paid per Class A COLA through June 1, 1995 was $135. The repurchase of the Class B COLAS may be requested of Finance by the holders of such COLAS on June 1, 1999 at a price equal to 125% of the original principal amount of such COLAS ($500) minus all payments of principal and interest allocated to such COLAS. Through the date of this report, the cumulative interest paid per Class A and Class B COLA is approximately $155 and $155, respectively. On March 14, 1989, Northbrook entered into a keep-well agreement with Finance, whereby it agreed to contribute sufficient capital or make loans to Finance to enable Finance to meet its COLA repurchase obligations described above. Notwithstanding Finance's repurchase obligations, the Company may elect to redeem any COLAS requested to be repurchased at the specified price. On March 15, 1995, pursuant to the indenture that governs the terms of the COLAS (the "Indenture"), the Company elected to offer to redeem (the "Redemption Offer") all Class A COLAS from its registered holders. Pursuant to the Redemption Offer, and in accordance with the terms of the Indenture, the Company was therefore obligated to purchase any and all Class A COLAS submitted pursuant to the Redemption Offer at a price of $365 per Class A COLA. In conjunction with the Company's Redemption Offer, the Company made a tender offer (the "Tender Offer") to purchase up to approximately $68 million principal value of the Class B COLAS at a price of $220 per Class B COLA from COLA holders electing to have their Class A COLAS repurchased. Approximately 229,000 Class A COLAS were submitted for repurchase pursuant to the Redemption Offer and approximately 99,000 Class B COLAS were submitted for repurchase pursuant to the Tender Offer, requiring an aggregate payment of the Company of approximately $105 million on June 1, 1995. The Company used its available cash to purchase Class B COLAS pursuant to the Tender Offer and borrowed $52 million from Northbrook to purchase Class A COLAS pursuant to the Redemption Offer. As described above, the Company borrowed $52 million from Northbrook to redeem Class A COLAS pursuant to the Redemption Offer (see Note 4). The Company has also borrowed approximately $13.1 million and $9.8 million at June 30, 1996 and December 31, 1995, respectively, to fund COLA Base Interest payments and other operational needs. The loans from Northbrook are payable interest only, mature on June 1, 1998 and carry an interest rate per annum equal to the prime interest rate plus two percent. Pursuant to the Indenture relating to the COLAS, the amounts borrowed from Northbrook are considered "Senior Indebtedness" to the COLAS. As a result of the repurchases, the Company retired approximately $164 million face value of COLA debt and recognized a financial statement gain in the second quarter of 1995 of approximately $32.5 million (net of income taxes of $20.8 million, the write-off of deferred financing costs of $10.0 million, the write-off of accrued contingent base interest of $5.7 million and expenses of $.9 million). Such gain is treated as cancellation of indebtedness income for tax purposes and, accordingly, the income taxes related to the Class A Redemption Offer (approximately $9.1 million) will not be indemnified by the tax agreement with Northbrook (see Note 2). Pursuant to the terms of the Indenture relating to the COLAS, the Company is required to maintain a Value Maintenance Ratio of 1.05 to 1.00. Such ratio is equal to the relationship of the Company's Net Asset Value (defined as the excess of (i) Fair Market Value of the gross assets of the Company over (ii) the amount of the liabilities (excluding liabilities resulting from generally accepted accounting principles enacted subsequent to the date of the Indenture) of the Company other than the outstanding principal balance of the COLAS, any unpaid Mandatory and Contingent Base Interest, and certain other liabilities, to the sum of (x) the outstanding principal amount of the COLAS, plus (y) any unpaid Base Interest, plus (z) the outstanding principal balance of any Indebtedness incurred to redeem COLAS. The COLA Indenture requires the Company to obtain independent appraisals of the fair market value of the gross assets used to calculate the Value Maintenance Ratio as of December 31 in each even-numbered calendar year. Accordingly, the Company obtained independent appraisals of substantially all of its gross real estate assets as of December 31, 1994; the appraised values of such assets ranged in total from approximately $600-$650 million. In odd-numbered years (during which time appraisals are not required), the Fair Market Value of the gross assets of the Company used to compute the Value Maintenance Ratio is determined by the Company's management. To the extent that management believes that the aggregate Fair Market Value of the Company's assets exceeds by more than 5% the Fair Market Value of such assets included in the most recent appraisal, the Company must obtain an updated appraisal supporting such increase. Management does not believe that the aggregate Fair Market Value of the Company's assets as of December 31, 1995 has increased by more than 5% from the appraisal values obtained as of December 31, 1994. Based on such values, and after consideration of the other components of the computation, the Company was in compliance with the Value Maintenance Ratio as of December 31, 1994 and December 31, 1995. It should be noted that the concept of Fair Market Value is intended to represent the value that an independent arm's-length purchaser, seeking to utilize such asset for its highest and best use, would pay after taking into consideration the risks and benefits associated with such use or development, current restrictions on development (including zoning limitations, permitted densities, environmental restrictions, restrictive covenants, etc.) and the likelihood of changes to such restrictions; provided, however, that with respect to any Fair Market Value determination of all of the assets of the Company, such assets shall not be valued as if sold in bulk to a single purchaser. There can be no assurance that the Company's properties can be ultimately sold at prices equivalent to their appraised values. In June 1991, the Company obtained a five-year $66,000 loan from the Employees' Retirement System of the State of Hawaii ("ERS"). The nonrecourse loan is secured by a first mortgage on the Kaanapali Golf Courses, and is considered "Senior Indebtedness" (as defined in the Indenture relating to the COLAS). The loan bore interest at a rate per annum equal to the greater of (i) the base interest rate announced by the Bank of Hawaii on the first of July for each year or (ii) ten percent per annum through June 30, 1993 and nine percent per annum thereafter. The annual interest payments were in excess of the cash flow generated by the Kaanapali Golf Courses. In April 1996, the Company reached an agreement to amend the loan with the ERS, extending the maturity date for five years. In exchange for the loan extension, the ERS received the right to participate in the "Net Disposition Proceeds" (as defined) related to the sale or the refinancing of the golf courses or at the maturity of the loan. The ERS share of the Net Disposition Proceeds increases from 30% through June 30, 1997, to 40% for the period from July 1, 1997 to June 30, 1999 and to 50% thereafter. The loan amendment effectively adjusts the interest rate as of January 1, 1995 to 9.5% until June 30, 1996. After June 30, 1996, the loan bears interest at a rate per annum equal to the five-year treasury rate on July 1, 1996 (6.48%) plus 2 1/4%. The loan amendment requires the Company to pay interest at the rate of 7% for the period from January 1, 1995 to June 30, 1996, 7.5% from July 1, 1996 to June 30, 1997, 7.75% from July 1, 1997 to June 30, 1998 and 8.5% thereafter ("Minimum Pay Rates"). The Company has made payments in April 1996 for $4,119 and in July 1996 for $1,148, representing the minimum interest payment due for the period through July 1, 1996. The scheduled minimum interest payments are paid quarterly on the principal balance of the $66,000 loan. The difference between the accrued interest expense and the minimum interest payment accrues interest and is payable on an annual basis from excess cash flow, if any, generated from the Kaanapali Golf Courses. Although the outstanding loan balance remains nonrecourse, the amendment makes the minimum interest payments and the ERS's share of appreciation, if any, recourse to the Company. However, the Company's obligations to make future minimum interest payments and to pay the ERS a share of appreciation would be terminated if the Company tendered an executed deed to the golf course property to the ERS in accordance with the terms of the amendment. In October 1993, Waikele Golf Club, Inc. ("WGCI"), a wholly-owned subsidiary of the Company that owns and operates the Waikele Golf Course, obtained a five-year $20 million loan facility from two lenders. The loan consists of two $10 million amortizing loans. Each loan bears interest only for the first two years and interest and principal payments based upon an assumed 20-year amortization period for the remaining three years. The loans bear interest at prime plus 1/2% and LIBOR (5.6% at June 30, 1996) plus 3%, respectively. The loan is secured by WGCI's assets (the golf course and related improvements and equipment), is guaranteed by the Company, and is considered "Senior Indebtedness" (as defined in the Indenture relating to the COLAS). Pursuant to an agreement entered into with the City of Honolulu in 1991 relating to the development of the Company's Waikele project, if the Company sells the Waikele golf course, depending on the price and certain other contingencies, a payment of up to $15 million might be required to be made to the City to be used to assist in the City's affordable housing developments. A significant portion of the Company's cash needs result from the nature of the real estate development business, which requires significant investment in preparing development plans, seeking land urbanization and other governmental approvals, and completing infrastructure improvements prior to the realization of sales proceeds. The Company has funded its cash requirements to date primarily through the use of short- term bank borrowings, long-term financing secured by its golf courses on Maui and Oahu, borrowings from affiliates and revenues generated from the development and sale of its properties and investments. Funding of the Company's future cash requirements is dependent upon obtaining appropriate financing and revenues generated from the development and sale of its properties. Although under current market conditions development financing is difficult to obtain, the Company is not currently seeking this type of financing based upon the stage of development of its various land holdings in Hawaii. In order to generate additional cash flows for the Company, management has identified certain land parcels that are not included in the Company's long-term development plans. During the six months ended June 30, 1996, the Company generated approximately $4.4 million from non-strategic land sales and an additional $5.0 million from the sale of 17 lots at its Kaanapali Golf Estates development on the island of Maui. During 1995, the Company generated approximately $30.8 million in land sales, most of which related to non-strategic parcels. In addition, during 1995 the Company received an approximate $1.0 million deposit, which represents the purchase price for 10 acres on Oahu. At June 30, 1996, the Company had cash and cash equivalents of approximately $9.6 million. The Company intends to use its cash reserves, sales proceeds and financing or joint venture arrangements to meet its short-term and long-term liquidity requirements, which include funding the development costs remaining at Waikele, West Maui and Kauai, agricultural deficits, payment of interest expense and the repayment of principal on debt obligations. The Company's long-term liquidity is dependent upon its ability to obtain additional financing and the consummation of certain property sales. There can be no assurance that additional long-term financing can be obtained or property sales consummated. In general, the Company's land holdings on Maui and Kauai are its primary sources of future land sale revenues. However, due to current market conditions, the difficulty in obtaining land use approvals and the high development costs of required infrastructure, the planned development of these land holdings and the ability to generate cash flow from them are expected to be long-term in nature. Accordingly, if no such financing can be obtained or additional property sales consummated, the Company will defer (to the extent possible) development costs and capital expenditures to meet liquidity requirements. Additionally, the Company's plans for property sales may also be adversely impacted by the inability of potential buyers to obtain financing. The Company does not expect to generate a sufficient level of Net Cash Flow to pay Base Interest in excess of four percent for 1996. The Company continues to implement certain cost savings measures and to defer development project costs and capital expenditures for longer-term projects. The Company's Property segment is anticipated to expend an additional approximately $7.0 million in project costs during the remainder of 1996. During 1995, the Company restructured its sugar operations, including consolidation of the operations at its two Kauai plantations and changing to a seasonal mode of operations at each of its plantations (consistent with other global sugar operations). The Company anticipates that cost savings related to the sugar operations will be associated with these changes. The price of raw sugar that the Company receives is based upon the price of domestic sugar (less delivery and administrative costs) as currently controlled by U.S. Government price supports legislation. On April 4, 1996, President Clinton signed the Federal Agriculture Improvement and Reform Act of 1996 ("the Act"). The Act keeps the loan rate at 18 cents per pound. However, the Act includes certain other adjustments to the sugar program including making crop loans recourse to the producer and repealing marketing allotments which may over time depress the domestic price of raw sugar. There can be no assurance that, in the future, the government price support will not be reduced or eliminated entirely. Such a reduction or an elimination of price supports could have a material adverse affect on the Company's agriculture operations, and possibly could cause the Company to evaluate the cessation of its remaining sugar cane operations. In August 1993, the Company announced its plans to phase out the sugar operations at its Oahu Sugar Company by mid- 1995, such phase out coinciding with the expiration of its major land lease on Oahu. Oahu Sugar, which operated almost entirely on leased land, had incurred losses in its sugar operations in prior years and expected those losses to continue in the future. Oahu Sugar completed the final harvest of its crop in April 1995. The Company has shut down Oahu Sugar and any estimated future costs related to the shut down are not expected to have a material adverse effect on the financial condition of the Company. The Company is currently pursuing development of the fee simple land it owns adjacent to the Oahu Sugar mill site, including seeking the necessary government approvals for a light industrial subdivision for a portion of the property, as discussed below. RESULTS OF OPERATIONS GENERAL: The Company and its subsidiaries report their taxes as a part of the consolidated tax return of the Company's parent, Northbrook. The Company and its subsidiaries entered into a tax indemnification agreement with Northbrook, which indemnifies them for responsibility for all past, present and future federal and state income tax liabilities (other than income taxes which are directly attributable to cancellation of indebtedness income caused by the repurchase or redemption of securities as provided for in or contemplated by the Repurchase Agreement). Effective January 1, 1993, the Company adopted SFAS No. 109 - Accounting for Income Taxes ("SFAS No. 109"). This statement establishes financial accounting and reporting standards for the effects of income taxes that result from an enterprise's activities during the current and preceding years. SFAS No. 109 changed the Company's previous practice in that it requires the accrual of deferred taxes and the recording of a provision for taxes in the separate financial statements of members of a consolidated tax group, including the recognition of deferred tax assets and liabilities for the tax effects of differences between assigned values and tax bases of assets acquired and liabilities assumed in the Merger (see Note 1). Accordingly, current and deferred taxes have been allocated to the Company as if the Company were a separate taxpayer. However, in general, the tax indemnification agreement does not require the Company to actually pay income taxes; current taxes payable or receivable (excluding income taxes which are directly attributable to cancellation of indebtedness income caused by the repurchase or redemption of securities as provided for in or contemplated by the Repurchase Agreement) have been reflected as deemed contributions and distributions, respectively, to additional paid-in capital in the accompanying consolidated financial statements. Accrued expenses decreased as of June 30, 1996 as compared to December 31, 1995, primarily due to the reclassification of deferred interest on the ERS loan to non- current. Current portion of long-term debt decreased and long-term debt increased as of June 30, 1996 as compared to December 31, 1995, due primarily to the reclassification of the ERS loan from current to long-term (see Note 5). Current portion of deferred income taxes increased at June 30, 1996 as compared to December 31, 1995 due primarily to an increase in agricultural inventory costs, which are deductible for tax purposes, and an increase in agricultural receivables related to raw sugar deliveries, which are taxable generally upon receipt. The current portion of amounts due affiliates increased as of June 30, 1996 as compared to December 31, 1995 primarily due to accrued interest on financing provided by affiliates. Other long-term liabilities increased as of June 30, 1996 as compared to December 31, 1995 primarily due to the difference between the interest expense accrued and minimum interest payments required under the amended terms of the ERS loan. (see Note 5). Interest expense increased for the three and six months ended June 30, 1996 as compared to the three and six months ended June 30, 1995 primarily due to interest expense related to additional affiliated financing, partially off-set by the early retirement of Class A and Class B COLAS. AGRICULTURE: The Company's Agriculture segment is responsible for activities related to the cultivation, processing and sale of sugar cane and other agricultural products. Agriculture's revenues are primarily derived from the Company's sale of its raw sugar. The Company's sugar plantation subsidiaries sell their raw sugar production to the Hawaiian Sugar and Transportation Company ("HSTC"), which is an agricultural cooperative owned by the major Hawaii producers of raw sugar (including the Company), under a marketing agreement. HSTC sells the raw sugar production to the California and Hawaii Sugar Company ("C&H") pursuant to a long-term supply contract. The terms of the supply contract do not require a specified level of production by the Hawaii producers; however, HSTC is obligated to sell and C&H is obligated to purchase any raw sugar produced. HSTC returns to its raw sugar suppliers proceeds based upon the domestic sugar price less delivery and administrative charges. The Company recognizes revenues and related cost of sales upon delivery of its raw sugar to C&H. The price of raw sugar that the Company receives is based upon the price of domestic sugar (less delivery and administrative costs) as currently controlled by U.S. Government price supports legislation. On April 4, 1996, President Clinton signed the Federal Agriculture Improvement and Reform Act of 1996 ("the Act"). The Act keeps the loan rate at 18 cents per pound. However, the Act includes certain other adjustments to the sugar program including making crop loans recourse to the producer and repealing marketing allotments which may over time depress the domestic price of raw sugar. There can be no assurance that, in the future, the government price support will not be reduced or eliminated entirely. Such a reduction or an elimination of price supports could have a material adverse affect on the Company's agriculture operations, and possibly could cause the Company to evaluate the cessation of its remaining sugar cane operations. As part of the Company's agriculture operations, the Company enters into commodities futures contracts and options in sugar as deemed appropriate to reduce the risk of future price fluctuations in sugar. These futures contracts and options are accounted for as hedges and, accordingly, gains and losses are deferred and recognized in cost of sales as part of the production cost. In September 1992, Hurricane Iniki struck the Island of Kauai causing considerable damage and loss to the people and businesses on Kauai. The Company has two sugar plantations on Kauai, both of which sustained considerable damage. The Company's real estate assets on Kauai suffered little damage, since most of the Company's development expenditures up to that time had been focused on the islands of Oahu and Maui. The Company settled its insurance claims in 1995 for the damage suffered and collected approximately $30 million in proceeds over the approximately three year period. Receivables increased as of June 30, 1996 as compared to December 31, 1995 primarily due to the timing of payments for deliveries of raw sugar partially offset by the collection of certain insurance claims outstanding as of December 31, 1995. Inventories decreased as of June 30, 1996 as compared to December 31, 1995 primarily due to the timing of the harvesting of sugar cane. Agricultural revenues and cost of sales increased for the six months ended June 30, 1996 as compared to the six months ended June 30, 1995 due to increased production, the timing of shipments of raw sugar to C&H and the closure of Oahu Sugar in April 1995. Agricultural revenues and cost of sales decreased for the three months ended June 30, 1996 as compared to the three months ended June 30, 1995 due to the timing of shipments of raw sugar to C&H. Agricultural operating loss decreased for the six months ended June 30, 1996 as compared to the six months ended June 30, 1995 due to the amortization of unrecognized gains related to postretirement benefit obligations and higher cost in 1995 associated with the final phase of operations at Oahu Sugar. PROPERTY: The Company's Property segment is responsible for the following: land planning and development activities; obtaining land use, zoning and other governmental approvals; selling or financing developed and undeveloped land parcels; and the management and operation of the Company's golf course facilities. For the six months ended June 30, 1996, the Company generated approximately $9.4 million of land sales. Property sales and cost of sales decreased for the three and six months ended June 30, 1996 as compared to the three and six months ended June 30, 1995 primarily due to the receipt of proceeds related to certain contingent participation rights at Waikele in 1995 and the decreased sales volume of non-strategic land parcels, offset in part by increased sales at the Kaanapali Golf Estates in 1996. The Company is currently examining options for developing the approximately 60 acres of fee simple land it owns at the mill site of Oahu Sugar Company (the plantation was shut down in 1995), and has begun the process of seeking community input and the necessary government approvals for a light industrial subdivision on an approximately 31-acre portion of the property, which excludes property containing the sugar mill and adjacent buildings. In connection with the development of this property, the Company has received state land use urbanization for the entire 60-acre site. In addition, the Company has received an "industrial" city development plan designation for 25.5 acres of the proposed 31-acre light industrial subdivision, and has obtained City Council approval of "industrial" designation for the remaining 5.5 acres. In March 1991, the Company received final land use approval from the State for development of approximately 240 residential lots on approximately 125 acres of land known as "South Beach Mauka" and located adjacent to the existing Kaanapali Beach Resort. In connection with this land use approval, the Company is committed to providing additional housing on Maui in the affordable price range, and to participating in the funding of the design and construction of the planned bypass highway extending from Lahaina to Kaanapali. The Company has entered into a development agreement with the State Department of Transportation covering the Company's participation in the design and construction of the bypass highway development. It is anticipated that, upon the receipt of government approvals, the Company will expend up to $3.5 million (in the aggregate) in the design of the bypass highway and/or the widening of the existing highway. Financial participation by the Company of up to $6.7 million for the construction of the bypass highway is subject to certain conditions related to certain future land use designations and zoning of Company lands. The development and construction of the bypass highway is expected to be a long- term project. During 1993, the Company obtained final land use approval from the State, and certification through the State's Housing Finance Development Corporation ("HFDC"), for the development of a project on approximately 300 acres of Company land known as "Puukolii Village", which is also located near Kaanapali Beach Resort. In connection with this land use approval, the Company is committed to providing additional housing on Maui in the affordable price range. The final land use approval and the HFDC development agreement contain certain conditions which must be satisfied in order for the Company to develop Puukolii Village, including realigning the access road (which will benefit uses for adjacent Company lands in future periods). Moreover, development of certain portions of Puukolii Village cannot commence until after completion of the state-planned Lahaina bypass highway (mentioned above). The proposed development of Puukolii Village is anticipated to satisfy the Company's affordable and employee housing requirements in connection with the South Beach Mauka land use approval as well as the North Beach property (described below). The Company anticipates commencing construction of infrastructure of Puukolii Village in the second half of 1996. The planned development of the Company's land on Maui is expected to be long term in nature. As Maui is less populated than Oahu and more dependent on the resort/tourism industry, much of the Company's land is intended for resort and resort- related uses. Due to overall economic conditions and trends in tourism, recent demand for these land uses has been relatively weak. The Company's currently available homesite product on Maui, which is targeted to the second home buyer, has experienced slow sales activity to date. The Company's competitors on Maui have also experienced slow sales activity in the second home market. The Company is continuing to evaluate its planned products and the timing of development of its land holdings in light of the current weak market demand and the capital resources needed for future development. The Company is marketing Kaanapali Golf Estates, a new residential community, which is part of South Beach Mauka adjacent to the Kaanapali Beach Resort in West Maui. During the six months ended June 30, 1996, the Company sold 17 homesites for approximately $5.0 million which includes 8 homesites to a developer who plans to construct and sell houses on these lots. One additional homesite was sold subsequent to June 30, 1996. The Company currently has six homesites on the market, which are priced from approximately $400,000 to $1 million. In 1995, the Company subdivided an ocean front parcel in Kaanapali into six single family homesites of approximately one acre each. The individual lot prices range from $1.9 million to $2.4 million. Sales of two of the lots in the project closed in December 1995, generating total sales proceeds of approximately $4.1 million. The Company is marketing the remaining four lots. In 1986, the Company entered into a joint venture agreement with Tobishima Pacific Inc., a wholly- owned subsidiary of a Japanese company, the purpose of which is to plan, manage and develop approximately 96 acres of beachfront property at Kaanapali (known as "North Beach"). The joint venture (in which the Company has a 50% interest) has State land use and County zoning approvals for the subdivision and development of the infrastructure improvements necessary to accommodate up to 3,200 hotel and/or condominium units on this site. This North Beach property constitutes nearly all of the remaining developable beachfront acreage at Kaanapali. In October 1992, the Company completed construction of a 3-acre park on the North Beach site, which is part of the master plan for this property and was a requirement imposed by the County in obtaining certain permits. The development of North Beach continues to be tied to the completion of the aforementioned Lahaina bypass highway or other traffic mitigation measures satisfactory to the Maui County Planning Commission. The Company is currently reviewing alternatives in providing other traffic mitigation measures. In February 1996, the Maui County Council adopted a Community Plan ordinance for West Maui that does not include any amendments to the current Community Plan designation of the Company's North Beach property (thus rejecting the CAC recommendations that two-third's of North Beach be downzoned to "Park"). The ordinance was signed by the Mayor of the County of Maui in late February 1996. The Department of the Army has determined that there are two wetlands sites on the North Beach property, totaling approximately 21,800 square feet. The Company has retained experts to evaluate these sites and to insure compliance with all laws. While there can be no assurance as to the ultimate determinations with respect to the wetlands issue, the Company does not anticipate that these sites will materially adversely affect the development plans for North Beach. In June 1994, the Company submitted a Land Use Boundary Amendment Petition with the State of Hawaii Land Use Commission ("LUC") and a General Plan Amendment Application with the County of Kauai for the urbanization of approximately 552 acres of land on Kauai currently in sugar cane cultivation. The proposed project is planned to be a mixed use master planned community which will include a variety of both affordable and market rate residential units, commercial and industrial projects and a number of community and public based facilities. The filing of these land use applications is the first step required in converting agriculture zoned land into urban zoned land. There are a number of additional reports, studies, applications and permits that will be required before final land use approvals are obtained. In May 1995, the County of Kauai approved the Company's General Plan Amendment Application, subject to a number of conditions (to be addressed during the subsequent zoning amendment process). In December 1995, the LUC granted the Company the land use amendments sought by the Company subject to a number of conditions. In May 1996, the Kauai County approved the Company's application to rezone the project. While the Company is optimistic that the proposed project will continue to receive favorable support, it is anticipated that the approval process will require at least 3 - 5 years. The entitlement process in Hawaii has historically been a very difficult and arduous process and there is no guarantee that all approvals will be obtained. Once construction commences, subject to market conditions, the project is expected to span over 20 years. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company and/or certain of its affiliates have been named as defendants in several pending lawsuits, most of which constitute routine litigation arising from the ordinary course of business. While it is impossible to predict the outcome of the litigation that is now pending (or threatened) and for which the potential liability is not covered by insurance, the Company is of the opinion that the ultimate liability from any of the litigation will not materially adversely affect the Company's financial condition.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a)The following documents are included as an exhibits to this report. 4.1* Indenture, including the form of COLAS, among Amfac/JMB Hawaii, Inc., its subsidiaries as Guarantors and Continental Bank National Association, as Trustee (dated as of March 14, 1989). 4.2** Amendment dated as of January 17, 1990 to the Indenture relating to the COLAS. 4.3*** $28,097,832 Promissory Note from Amfac, Inc. to Amfac/JMB Hawaii, Inc. extended and reissued effective December 31, 1993. 4.4**** The five year $66,000,000 loan with the Employees' Retirement System of the State of Hawaii to Amfac/JMB Hawaii, Inc. as of June 25, 1991. 4.5***** $13,250,000 Loan Agreement among Heller, Financial, Inc., as Lender, The Lihue Plantation Company Limited, as Borrower, and Amfac/JMB Hawaii, Inc., Kekaha Sugar Company, Limited, Oahu Sugar Company Limited and Pioneer Mill Company, Limited, as Guarantors December 30, 1992. 4.6****** $10,000,000 loan agreement between Waikele Golf Club, Inc. and ORIX USA Corporation. $10,000,000 loan agreement between Waikele Golf Club, Inc. and Bank of Hawaii. 4.7******* $52,000,000 Promissory Note to Northbrook Corporation from Amfac/JMB Hawaii, Inc. effective May 31, 1995 is filed herewith. 4.8******** Agreement for delivery and sale of raw sugar between Hawaii Sugar Transportation Corporation, as seller, and C&H, as Buyer, dated June 4, 1993. 4.9********* Previously filed as an exhibit to the Company's Form 10-Q report under the Securities Act of 1934 (File No. 33-24180) filed May 13, 1996 and hereby incorporated by reference. Standard Sugar Marketing Contracts between Hawaiian Sugar Transportation Company and Hawaii Sugar Growers dated June 4, 1993. 4.10 Amendment to the $66,000,000 loan with the Employees' Retirement System of the State of Hawaii to Amfac/JMB Hawaii, Inc. as of April 18, 1996. 4.11 Amended and Restated $52,000,000 Promissory Note to Northbrook Corporation from Amfac/JMB Hawaii, Inc. extended and reissued effective June 1, 1996. 4.12 Amended and Restated $28,087,832 Promissory Note from Amfac, Inc. to Amfac/JMB Hawaii, Inc. extended and reissued effective June 1, 1996. 10.1* General Lease S- 4222, dated January 1, 1969, by and between the State of Hawaii and Kekaha Sugar Company, Limited. 10.2* Grove Farm Haiku Lease, dated January 25, 1974 by and between Grove Farm Company, Incorporated and The Lihue Plantation Company, Limited. 10.3* General Lease S- 4412, dated October 31, 1974, by and between the State of Hawaii and the Lihue Plantation Company, Limited. 10.4* General Lease S- 4576, dated March 15, 1978, by and between the State of Hawaii and The Lihue Plantation Company, Limited. 10.5* General Lease S- 3827, dated July 8, 1964, by and between the State of Hawaii and East Kauai Water Company, Ltd. 10.6* Amended and Restated Power Purchase Agreement, dated as of June 15, 1992 by and between The Lihue Plantation Company, Limited and Citizens Utilities Company. 10.7* Amendment to the Campbell Estate Lease, dated April 16, 1970, between Trustees under the Will and of the Estate of James Campbell, Deceased, and Oahu Sugar Company, Limited amending and restating the previous lease. 10.8* Bishop Estate Lease No. 24,878, dated June 17, 1977, by and between the Trustees of the Estate of Bernice Pauahi Bishop and Pioneer Mill Company, Limited. 10.9* General Lease S- 4229, dated February 25, 1969, by and between the State of Hawaii, by its Board of Land and Natural Resources and Pioneer Mill Company, Limited. 10.10* Honokohau Water License, dated December 22, 1980, between Maui Pineapple Company Ltd. and Pioneer Mill Company, Limited. 10.11* Water Licensing Agreement, dated September 22, 1980, by and between Maui Land & Pineapple Company, Inc. and Amfac, Inc. 10.12* Joint Venture Agreement, dated as of March 19, 1986, by and between Amfac Property Development Corp. and Tobishima Properties of Hawaii, Inc. 10.13* Development Agreement, dated March 19, 1986, by and between Kaanapali North Beach Joint Venture and Amfac Property Investment Corp. and Tobishima Pacific, Inc. 10.14 Keep-Well Agreement between Northbrook Corporation and Amfac/JMB Finance, Inc. 10.15* Repurchase Agreement, dated March 14, 1989, by and between Amfac/JMB Hawaii, Inc. and Amfac/JMB Finance, Inc. 10.16* Amfac Hawaii Tax Agreement, dated November 21, 1988 between Amfac/JMB Hawaii, Inc., and Amfac Property Development Corp.; Amfac Property Investment Corp.; Amfac Sugar and Agribusiness, Inc.; Kaanapali Water Corporation; Amfac Agribusiness, Inc.; Kekaha Sugar Company, Limited; The Lihue Plantation Company, Limited; Oahu Sugar Company, Limited; Pioneer Mill Company, Limited; Puna Sugar Company, Limited; H. Hackfeld & Co., Ltd.; and Waiahole Irrigation Company, Limited. 10.17* Amfac-Amfac Hawaii Tax Agreement, dated February 27, 1989 between Amfac, Inc. and Amfac/JMB Hawaii, Inc. 10.18* Services Agreement, dated November 18, 1988, between Amfac/JMB Hawaii, Inc., and Amfac Property Development Corp.; Amfac Property Investment Corp.; Amfac Sugar and Agribusiness, Inc.; Kaanapali Water Corporation; Amfac Agribusiness, Inc.; Kekaha Sugar Company, Limited; The Lihue Plantation Company, Limited; Oahu Sugar Company, Limited; Pioneer Mill Company, Limited; Puna Sugar Company, Limited; H. Hackfeld & Co., Ltd.; and Waiahole Irrigation Company, Limited and JMB Realty Corporation. 19.0******* $35,700,000 agreement for sale of C&H and certain other C&H assets, to A&B Hawaii, Inc. in June of 1993. Pursuant to item 6.01 (b)(4) of Regulation SK, the registrant hereby undertakes to provide the commission upon its request a copy of any agreement with respect to long-term indebtedness of the registrant and its consolidated subsidiaries that does not exceed 10 percent of the total assets of the registrant and its subsidiaries on a consolidated basis.
* Previously filed as exhibits to the Company's Registration Statement of Form S-1 (as amended) under the Securities Act of 1933 (File No. 33-24180) and hereby incorporated by reference. ** Previously filed as exhibits to the Company's Form 10-K report under the Securities Act of 1934 (File No. 33- 24180) filed on March 27, 1989 and hereby incorporated by reference. *** Previously filed as exhibits to the Company's Form 10-K report under the Securities Act of 1934 (File No. 33- 24180) filed on March 27, 1991 and hereby incorporated by reference. **** Previously filed as exhibits to the Company's Form 10-Q report under the Securities Act of 1934 (File No. 33- 24180) filed on August 13, 1991 and hereby incorporated by reference. ***** Previously filed as exhibit to the Company's Form 10- K report under the Securities Act of 1934 (File No. 33-24180) filed on May 29, 1993 and hereby incorporated by reference. ****** Previously filed as exhibit to the Company's Form 10-Q report under the Securities Act of 1934 (File No. 33- 24180) filed November 11, 1993 and hereby incorporated by reference. ******* Previously filed as exhibit to the Company's Form 10-K report under the Securities Act of 1934 (File No. 33- 24180) filed March 27, 1994 and hereby incorporated by reference. ******** Previously filed as an exhibit to the Company's Form 10-Q report under the Securities Act of 1934 (File No. 33- 24180) filed May 12, 1995 and hereby incorporated by reference. ******** Previously filed as exhibit to the Company's Form 10-Q report under the Securities Act of 1934 (File No. 33- 24180) filed May 13, 1996 and hereby incorporated by reference. ********* Previously filed as an exhibit to the Company's Form 10-Q report under the Securities Act of 1934 (File No. 33- 24180) filed May 13, 1996 and hereby incorporated by reference. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMFAC/JMB HAWAII, INC. By: Gary Smith Vice President Date:August 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:August 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMFAC/JMB FINANCE, INC. By: Gary Smith Vice President Date:August 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:August 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMFAC PROPERTY DEVELOPMENT CORP. By: Gary Smith Vice President Date: August 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:August 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMFAC PROPERTY INVESTMENT CORP. By: Gary Smith Vice President Date:August 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:August 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMFAC SUGAR AND AGRIBUSINESS, INC. By: Gary Smith Vice President Date:August 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:August 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KAANAPALI WATER CORPORATION By: Gary Smith Vice President Date:August 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:August 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMFAC AGRIBUSINESS, INC. By: Gary Smith Vice President Date:August 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:August 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KEKAHA SUGAR COMPANY, LIMITED By: Gary Smith Vice President Date:August 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:August 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE LIHUE PLANTATION COMPANY, LIMITED By: Gary Smith Vice President Date:August 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:August 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OAHU SUGAR COMPANY, LIMITED By: Gary Smith Vice President Date:August 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:August 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PIONEER MILL COMPANY, LIMITED By: Gary Smith Vice President Date:August 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:August 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PUNA SUGAR COMPANY, LIMITED By: Gary Smith Vice President Date:August 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:August 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. H. HACKFELD & CO., LTD. By: Gary Smith Vice President Date:August 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:August 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WAIAHOLE IRRIGATION COMPANY, LIMITED By: Gary Smith Vice President Date:August 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:August 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WAIKELE GOLF CLUB, INC. By: Gary Smith Vice President Date:August 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:August 13, 1996 EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN SUCH REPORT. 0000842701 AMFAC/JMB FINANCE, INC. 6-MOS DEC-31-1996 JUN-30-1996 9,641 0 16,693 0 47,614 73,948 393,394 30,912 525,005 60,281 312,464 0 0 1 (131,354) 525,005 44,015 44,177 35,369 44,461 767 0 13,398 (14,449) 5,393 (9,056) 0 0 0 (9,056) (9.06) (9.06)
EX-1 3 AMENDMENT OF LOAN AGREEMENT THIS AMENDMENT TO LOAN AGREEMENT is made and entered into this 18th day of April 1996, but effective as of January 1, 1995, by and between EMPLOYEES' RETIREMENT SYSTEM OF THE STATE OF HAWAII, a governmental agency of the State of Hawaii (the "Lender"), and AMFAC/JMB HAWAII, INC., a Hawaii corporation ("AJHI"), AMFAC PROPERTY INVESTMENT CORP., a Hawaii corporation ("APIC"), and PIONEER MILL COMPANY, LIMITED, a Hawaii corporation ("Pioneer Mill"), and, collectively with AJHI and APIC, the "Borrower"). RECITALS. This Amendment of Loan Agreement is entered into with reference to the following: A. Lender and Borrower entered into a Loan Agreement dated June 25, 1991 providing for a loan from Lender in the principal sum of SIXTY-SIX MILLION AND 00/100 DOLLARS ($66,000,000.00) (the "Loan"). B. Borrower has requested that the Lender extend the maturity date of the Loan to June 30, 2001 and that certain terms of the loan be amended, and the Lender is willing to accede to Borrower's request as provided herein. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreement contained herein, the receipt and sufficiency of which is hereby acknowledged, Lender and Borrower agree as follows: 1. Acknowledgments and Extension of Maturity Date. Borrower acknowledges (1) that the total amount of principal due and owing under the Loan as of December 31, 1994 is $66,000,000.00, (2) that Borrower as of the date hereof has no defenses of offsets against collection by Lender, and (3) that all Loan Documents are still in full force and effect, without any default thereunder. The Maturity Date is hereby extended to June 30, 2001. Accordingly, the definition of "Maturity Date" in Section 1. of the Loan Agreement is hereby amended to read as follows: "Maturity Date" means June 30, 2001. 2. Interest. Section 2.2 of the Loan Agreement is hereby amended in its entirety to read as follows: 2.2 Interest. Interest on the outstanding principal balance of the Loan from the date of advance of Loan proceeds until payment in full shall be payable as provided in section 2.3 of the Loan Agreement and in all events shall accrue as follows: (a) From the date of advance to and including June 30, 1992, at a rate per annum equal to the greater of (i) one (1.00) percentage point higher than the Base Interest Rate in effect on the date of advance, or (ii) ten percent (10%) per annum. (b) From July 1, 1992 to and including June 30, 1993, at a rate per annum equal to the greater of (i) one (1.00) percentage point higher than the Base Interest Rate in effect on July 1, 1992, or (ii) ten percent (10%) per annum. (c) From July 1, 1993 to and including June 30, 1994, at a rate per annum equal to the greater of (i) one (1.00) percentage point higher than the Base Interest Rate in effect on July 1, 1993, or (ii) nine percent (9%) per annum. (d) From July 1, 1994 to and including December 31, 1994, at a rate per annum equal to the greater of (i) one (1.00) percentage point higher than the Base Interest Rate in effect on July 1, 1994, or (ii) nine percent (9%) per annum. (e) From January 1, 1995, to and including June 30, 1996, at a rate per annum equal to the greater of (i) one (1.00) percentage point higher than the Base Interest Rate in effect on January 1, 1995, or (ii) nine percent (9%) per annum. (f) From July 1, 1996 to the Maturity Date, at a rate equal to 2.25% (225 basis points) above the interest rate in effect on July 1, 1996 on five-year notes issued by the United States Department of the Treasury with a maturity closest to June 30, 2001 as published in The Wall Street Journal. Interest shall be computed on the basis of the actual number of days elapsed between payments and on the basis of a 365 day year (or a 366 day year as the actual case may be). 3. Payments. The Borrower shall be obligated to make Minimum Payments (as hereinafter defined) pursuant to Sections 2.3 and 8.6 of the Loan Agreement as amended hereby and to pay the Deferred Amount (as hereinafter defined) together with interest thereon pursuant to Sections 2.3 and 8.6 of the Loan Agreement as amended hereby and pursuant to Section 4 of this Amendment of Loan Agreement. Section 2.3 of the Loan Agreement is hereby amended in its entirety to read as follows: 2.3 Payments. (a) Annual Interest Payment. On July 1, 1992, the Borrower shall pay all accrued interest on the entire principal amount of the Loan outstanding. (b) Quarterly Interest Payments. (1) For the period from the date of advance to and including December 31, 1994, the Borrower shall pay interest only on the entire principal amount of the Loan outstanding, quarterly in arrears, commencing on October 1, 1992, and continuing on the first day of each of the months of January, April, July and October thereafter. (2) For the period from January 1, 1995 to the Maturity Date, the Borrower shall make minimum quarterly payments on account of interest (the "Minimum Payments") computed at the following rates (the "Minimum Pay Rates"): (A) For the period from January 1, 1995 to and including June 30, 1996, the Minimum Pay Rate shall be seven percent (7%) per annum. (B) For the period from July 1, 1996 to and including June 30, 1997, the Minimum Pay Rate shall be seven and 50/100 percent (7.50%) per annum. (C) For the period from July 1, 1997 to and including June 30, 1998, the Minimum Pay Rate shall be seven and 75/100 percent (7.75%) per annum. (D) For the period from July 1, 1998 to the Maturity Date, the Minimum Pay Rate shall be eight and 50/100 percent (8.50%) per annum. (3) The amount by which interest accrued on the Loan exceeds the Minimum Payments and any other payments made by the Borrower on account of interest shall hereinafter be referred to as the "Deferred Amount." The Deferred Amount shall accrue interest at the applicable interest rates set forth in Section 2.2 above until paid. (4) The Deferred Amount, together with interest accrued thereon, shall be payable from Net Income Available for Debt Service from the Golf Courses. For purposes of the foregoing, "Net Income Available for Debt Service" means, for each fiscal year of the Borrower, the amount derived by subtracting from the fees, revenues, rents and other income of the Golf Courses (excluding "Net Disposition Proceeds" as defined below), interest payments made to the Lender and operating expenses incurred by Borrower related to the use, ownership and operation of the Golf Courses (computed on an accrual basis) including, without limitation, salaries and other payroll costs for all necessary personnel, utility charges, maintenance and administrative costs, all taxes applicable to the use, ownership and operation of the Golf Courses, real property taxes, license fees, insurance premiums, costs of compliance with the Loan Documents, reasonable amounts for working capital reserves as established in an annual Budget provided to Lender, independent outside counsel fees, independent outside certified public accountant fees, other independent professional fees, all capital expenditures and reserves therefor necessary or desirable in the use or operation of the Golf Courses and all other costs necessary and related to the use, ownership and operation of the Golf Courses and other sums in amounts approved in the Budget, and excluding any non-cash charges for items such as depreciation and amortization of property, payments to Lender for late payments or other penalties, all federal, state or local income taxes, any allocation for general overhead costs and any separate fees for management (i.e., any percentage management fees or a separate fee for management whether based on a percentage of costs or a fixed fee). "Management fees" as used herein are not intended to include salary and other compensation of employees, including managerial employees actually managing the Golf Courses. Net Income Available for Debt Service from the Golf Courses shall be paid to the Lender and applied towards payment of the Deferred Amount within one hundred twenty (120) days of the end of each fiscal year of the Borrower, until such Deferred Amount, together with interest accrued thereon, is paid in full. Borrower covenants and agrees to and with the Lender that it will manage the Golf Courses and the Real Property at cost until the earlier of the: (i) Maturity Date or (ii) the date of the conveyance of the Golf Courses to the Lender. 4. Net Disposition Process and Appreciation. As an inducement to the execution of this Amendment of Loan Agreement by Lender, Borrower covenants and agrees that, upon maturity of the Loan or earlier sale or refinancing of the Real Property, Net Disposition Process (as hereinafter defined) shall be applied in the following order: (a) First, towards the payment of any and all expenses owing to the Lender under the Loan Documents, next towards the payment of unpaid accrued interest (including any interest on Deferred Amount and including Deferred Amount), next towards the payment of the unpaid balance due on the Loan. (b) Second, towards the payment to Lender of the following amounts, expressed as a percentage of the Net Disposition Proceeds remaining after payment of (a) above: (1) If the receipt (constructive or otherwise) of the Net Disposition Proceeds occurs during the period from January 1, 1995 up to and including June 30, 1997, thirty percent (30%) of the Net Disposition Proceeds. (2) If the receipts (constructive or otherwise) of the Net Disposition Proceeds occurs during the period from July 1, 1997 up to and including June 30, 1999, forty percent (40%) of the Net Disposition Proceeds. (3) If the receipt (constructive or otherwise) of the Net Disposition Proceeds occurs during the period from July 1, 1999 up to and including the Maturity Date, fifty percent (50%) of the Net Disposition Proceeds. (c) Third, any remaining Net Disposition Proceeds shall be paid to the Borrower. "Net Disposition Proceeds" means the "Net Condemnation Proceeds", the "Net Financing Proceeds", the "Net Insurance Proceeds" or the "Net Sales Proceeds", or any amount thereof or all thereof, received by or made available to the Borrower. "Net Condemnation Proceeds" means any award as compensation for the taking of the Golf Courses and/or the Real Property or any part thereof, less the reasonable costs and expenses incurred in connection therewith. "Net Financing Proceeds" means the proceeds of any financing of the Real Property or refinancing of any indebtedness affecting or related to the Real Property, less the actual reasonable costs and expenses thereof. "Net Insurance Proceeds" means the proceeds of insurance with respect to damage or destruction to the Golf Courses or any personal property (including title insurance proceeds), less the reasonable costs and expenses incurred in connection therewith and any amounts applied or held to be applied for the restoration or replacement of the same pursuant to the Loan Documents. "Net Sales Proceeds" means the proceeds of any sale of all or part of the Golf Courses or the Real Property, subject to Lender's consent rights as provided in the Loan Documents, less the reasonable costs and expenses thereof. Reasonable costs and expenses thereof in the event of refinancing or sale shall include, without limitation, reasonable brokerage commissions, refinance charges (including underwriting prevalent at the time), escrow charges, recording fees, conveyance tax, title insurance premiums, appraisal fees, survey fees, and other expenses normally and customarily incurred in the sale or refinancing of similar properties in the State of Hawaii. Anything herein to the contrary notwithstanding, without the prior consent of Lender, Borrower may consummate an arms length sale of the Real Property to a bonafide third party that has no affiliation with the Borrower or any of the constituent partners of Borrower or any affiliate of the Borrower, following the sale, will have any residual interest of any nature in the Real Property or in the Golf Courses, and provided that the sale will result in full payment to Lender of all amounts described in subsection 4. (a) above. The parties intend for the Lender to share in the appreciated value of the Real Property, in the percentage shares, as set forth above. When the Loan is to be repaid, the Borrower will provide the Lender with reasonable notice of the proposed repayment, whether through sale, refinancing or otherwise. Upon receipt of such notice, if the Loan is to be repaid from proceeds other than Net Condemnation Proceeds, Net Insurance Proceeds or Net Sales Proceeds, then the Lender shall have the option to have the fair market value of the Real Property be determined by an appraisal process as follows: Within five (5) working days of receipts of such notice, the Lender shall provide the Borrower with written notice that the Lender has decided to trigger the appraisal process. Within five (5) working days of receipt of said notice, the parties will meet to select a single qualified appraiser, as defined below, who upon selection will determine the fair market value of the Real Property. If within three (3) working days of the meeting, the parties are unable to agree on a single appraiser, then the single appraiser will be selected by two (2) appraisers, one to be designated by each party. If either party fails to designate an appraiser within seven (7) days of the date of the meeting, or if the two appraisers are unable to agree on the third within a reasonable period of time, then either party may request that the First Circuit Court of the State of Hawaii designate the appraiser in question. The term "qualified appraiser" shall mean an appraiser who shall be a holder of a current M.A.I. designation and shall have not less than ten (10) years effective experience in the field of commercial real estate appraising in the state of Hawaii. The fair market value of the Real Property will be determined by such single selected appraiser who will appraise the value of the Real Property and will no conduct evidentiary hearings. The parties shall be entitled to consult with their designated appraiser prior to his or her appointment and subsequently, but may not consult with the third appraiser at any time after he or she is selected. The fact that any of the appraisers shall have acted for any of the parties at any time shall not be grounds for disqualification. The third appraiser shall make this determination and notify the parties within forty (40) days of appointment. The decision of the third appraiser shall be binding on the parties. The entire cost of the appraisal shall be borne by the Borrower. The Borrower shall be entitled to proceed with the Borrower's refinancing or other repayment of the Loan (with or without refinancing) and in all events the Borrower will be required to make the payment to Lender as required under Section 4. (a) above and the payment of the Lender's share of Net Disposition Proceeds as provided in Section 4. (b) above. Following the determination of the fair market value of the Real Property, the Borrower shall also be required to pay to Lender the percentage share (in the applicable percentage provided above) of the amount, if any, by which such fair market value as determined exceeds the total amount of payments made to Lender under Sections 4. (a) and 4. (b) above (the "Appreciation Premium"). Anything herein to the contrary notwithstanding, the Lender shall have no right to trigger the appraisal process described above, and no right to any Appreciation Premium, if the Loan is being paid as a result of a total condemnation of the Property or as a result of any arms length sale of the Real Property to a third party. 5. Conveyance of Property to Lender. The Borrower shall have the right, at any time, and the Lender shall have the right at any time after the Maturity Date, if the Loan has not been paid, to cause the Real Property to be conveyed to the Lender in either a deed in lieu transaction or through an uncontested foreclosure proceeding, in full satisfaction of that portion of the Loan other than the Recourse Portion of the Loan (as hereinafter defined). If at any time, the Borrower proposes to convey the Real Property to the Lender or the Lender requests such conveyance or an uncontested foreclosure, the Borrower, at its cost and expense, shall cause a Phase I Environmental Report of the Real Property to be completed and submitted to the Lender. In all events, the Lender shall not be required to accept the Real Property unless either the Phase I Environmental Report is reasonably acceptable to Lender or recommends a Phase II Report which is conducted at Borrower's expense and such Phase II Report is reasonably acceptable to Lender or if any contamination is reported, the same is removed or remediated to Lender's satisfaction. In all events, the Borrower will perform its obligations under the Hazardous Materials Indemnity Agreement. In addition, the Borrower, at Borrower's sole cost and expense, will provide the Lender with an ALTA Owner's Policy of Title Insurance, insuring Lender's fee simple title to the Real Property, free and clear of any mortgage liens, other than the lien of the Lender's mortgage and subject only to those matters described or permitted in the Lender's mortgage or in the Loan Documents. The Borrower will convey the Real Property to the Lender by limited warranty deed, warranting only that the Borrower has good title, has right to convey and that Borrower has not conveyed title or mortgaged or, except as described or permitted in the mortgage or in the Loan Documents, granted any interest to any person other than the Lender. The following will be prorated as of 12:00 midnight on the date of the Deed is recorded: rents and other revenues from the Real Property . The following will not be prorated: (a) Amounts paid or payable to vendors under any service contracts to be assigned to Lender which Lender chooses to accept, real property taxes, utility charges, tenant deposits, reserve accounts, prepaid premiums, reserves, etc. Reserve accounts, insurance policies, tenant deposits and reserves will be transferred to Lender. (b) All employee wages, bonuses, social security and other payroll taxes, workers' compensation insurance premiums and fringe benefits, if any, including without limitation accrued benefits, such as vacation, sick leave and severance pay will be paid by the Borrower and the Lender will have no obligation to employ any employee of the Borrower or the Property. The Borrower will indemnify and hold the Lender harmless from and against any claims, losses, damages, costs, including defense costs, incurred by Lender as a result of the Borrower's failure to perform its obligations with respect to such employee matters, and this indemnity obligation shall be part of the Borrower's obligation under Section 7.6. Borrower will be responsible for and will pay all obligations to third parties accrued prior to the conveyance of the Real Property and the Lender will pay all obligations of the Real Property accruing from and after the date of Conveyance. The Borrower's obligation to make Minimum Payments and payments of Deferred Amounts for any period after the Termination Date as hereinafter defined shall terminate on the Termination Date. The Borrower's obligations to pay such payments for all periods prior to the Termination Date (which obligations are set forth in Section 2.3 and 8.6 hereof) shall continue unimpaired and unaffected by the conveyance of the Real Property. The "Termination Date" shall mean the date that the Borrower shall tender to the Lender the executed Deed in recordable form (notwithstanding the Lender's election to require an environmental assessment as provided above) and notwithstanding the Lender's election to process an uncontested foreclosure action; provided, however, that Borrower cooperates in consummating such foreclosure proceedings. The conveyance of the Real Property by the Borrower to the Lender by deed in lieu of foreclosure, or by judicial foreclosure will not discharge or in any manner impair the obligations of the Borrower with respect to the Recourse Portion of the Loan, as hereinafter defined. If at any time the Borrower conveys title to the Lender, the Borrower will also assign to the Lender all rights, title and interest in all assets related to the ownership and operation of the Golf Courses and the Real Property, whether tangible or intangible, whether contract rights or otherwise, including trade names used exclusively by the Real Property (excluding any of the same also used for other property of the Borrower), intellectual property used exclusively by the Real Property (excluding any of the same also used for other property of the Borrower), any tort or other claims accruing to the benefit of the Borrower and any and all other assets required or beneficial in the ownership and operation of the Golf Courses and the Real Property. The Lender shall assume contracts and obligations to which the Lender has consented or which are otherwise permitted under the Loan Agreement and shall have the right to assume any other contracts or other obligations in connection with such assignments. 6. Non-recourse. Section 8.6 of the Loan Agreement is hereby amended in its entirety as follows: 8.6 Non-recourse. Except as otherwise expressly provided in Sections 8.6(a) through (d) (hereinafter called the "Recourse Portion" of the Loan) Borrower shall not be personally liable for the payment of the Loan or for any deficiency judgment and the Lender's sole recourse shall be to look solely to the Mortgaged Property for the payment of any sums or the performance by the Borrower of any other obligations described in the Loan Documents (as the same may be amended). However: (a) The foregoing limitation (1) shall not prohibit the Lender from pursuing any tort action for recovery of losses or damages suffered by Lender and arising out of the conversion, waste, fraud, misappropriation or other tortious or intentional act or omission of any person, including AJHI, APIC and Pioneer Mill, (2) shall not limit the Borrower's obligations and liabilities under and pursuant to Section 7.6 hereof and (3) shall not limit the Borrower's obligations and liabilities pursuant to the Hazardous Materials Indemnity Agreement; (b) the Borrower shall be personally liable for the payment of the Minimum Payments required to be made hereunder prior to the Termination Date and the Appreciation Premium if any pursuant to Section 4 hereof; (c) the Borrower shall be personally liable for that amount, if any, which is equal to the sum of all revenues derived by the Borrower from the operation of the Golf Courses during the period commencing on the date six (6) months prior to the occurrence of a default in payment of any Minimum Payments, or a default in the payment of Deferred Amounts or interest thereon as required hereby, and ending on the Termination Date to the extent that such revenues are not applied by the Borrower as provided in the Loan Documents as amended pursuant to the provisions hereof. Borrower's personal liability with respect to the application and payment of such revenues shall continue not withstanding any termination of Borrower's obligations to continue to make Minimum Payments; (d) the Borrower shall be personally liable for all costs, expenses and liabilities described in Section 7.6. of the Loan Agreement. Nothing herein contained will impair the right of the Lender to accelerate the maturity of the Loan on the occurrence of a default; relieve the Borrower of the Borrower's obligation to perform the agreements set forth in the Loan Documents or any other instrument now or hereafter evidencing or securing payment of the indebtedness hereby secured (subject to the limitations on personal liability for payment of the indebtedness evidenced by the Note as provided herein); impair any lien or security interest now or hereafter held by the Lender; or limit or restrict the Lender's exercise of any right or remedy with respect to the Golf Courses and the Real Property. All other Loan Documents shall be deemed to be amended to be consistent with the provisions hereof. The foregoing notwithstanding, no Affiliate, officer, director, shareholder, principal, trustee or advisor of the Borrower shall have any personal liability under this Amendment or under the Loan Documents. 7. Ratification of Loan Agreement. Sections 4 and 5 of this Amendment are hereby added to the Loan Agreement. Except as modified hereunder, the Loan Agreement is hereby ratified, confirmed and approved and shall remain in full force and effect. 8. Counterparts. This Amendment may contain more than one (1) counterpart of the signature page and this Amendment may be executed by the affixing of the signatures of each of the parties to one (1) such counterpart signatures pages; and all of such counterpart signature pages shall be read as though one (1), and they shall have the same force and effect as though all of the signers had signed a single signature page. IN WITNESS WHEREOF, the undersigned have executed this Amendment of Loan Agreement effective as of January 1, 1995. Borrower: AMFAC/JMB HAWAII, INC., a Hawaii corporation By________________________ Its President AMFAC PROPERTY INVESTMENT CORP., a Hawaii corporation By_____________________________ Its Senior Vice President PIONEER MILL COMPANY, LIMITED, a Hawaii corporation By______________________________ Its Assistant Secretary Lender: EMPLOYEES' RETIREMENT SYSTEM OF THE STATE OF HAWAII, a governmental agency of the State of Hawaii By____________________________ Its By____________________________ Its AMFAC PROPERTY INVESTMENT CORP., a Hawaii corporation By___________________________ Its PIONEER MILL COMPANY, LIMITED, a Hawaii corporation By___________________________ Its Lender: EMPLOYEES' RETIREMENT SYSTEM OF THE STATE OF HAWAII, a governmental agency of the State of Hawaii By____________________________ Its Secretary By____________________________ Its Trustee 1 EX-2 4 EXTENDED AND REISSUED EFFECTIVE JUNE 1, 1996 FLOATING RATE PROMISSORY NOTE US$52,000,000.00 Chicago, Illinois May 31, 1995 AMFAC/JMB HAWAII, INC., a Hawaii corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of Northbrook Corporation (the "Holder"), on or before June 1, 1998 (the "maturity date"), the principal sum of FIFTY-TWO MILLION United States dollars (US$52,000,000.00) or, if less, the aggregate unpaid principal amount as shown either on the schedule attached hereto (and any continuation thereof) or in the records of the Holder, with interest on the unpaid balance of such principal amount at a rate per annum equal to the Reference Rate (as defined below) plus 2% per annum, which interest shall be payable in arrears on September 30, 1995, on the last day of every third month thereafter prior to the maturity date and on the maturity date or, if the Borrower shall fail to pay the unpaid balance of such principal amount on the maturity date, on the day on which the unpaid balance of such principal amount is paid in full; provided, however, that whenever any payment to be made hereunder shall be stated to be due on a day other than a day when commercial banks are open for normal business in Chicago, Illinois, such payment shall be made on the next succeeding day when such banks shall be so open (and such extension of time shall be included in the computation of interest due on such day). All computation of interest hereunder shall be made on the basis of a year of 360 days for the actual number of days elapsed. The Referenced Rate shall mean, at any time, the rate of interest then most recently announced by Bank of America N.A. at Chicago, Illinois as its "reference" rate, or its equivalent rate at such time. Borrower represents and warrants that indebtedness represented by this Promissory Note is for business purposes within the meaning of Section 6404 of Chapter 17 of the Illinois Revised Statutes and that such indebtedness constitutes a business loan within the meaning of such Section and is not usurious. Both principal and interest are payable in United States dollars to the order of the Holder in same-day funds on the day when due. The unpaid principal amount of this Promissory Note may be prepaid in whole or in part at any time by the Borrower without premium, penalty or costs whatsoever, provided that all accrued and unpaid interest on the principal amount so prepaid is paid at such time. Borrower hereby waives presentment for payment, demand, protest and notice of dishonor and hereby assents to any extension of the time of payment, forbearance or other indulgence that may be granted by the Holder, without notice. The terms of this Promissory Note may not be modified or terminated orally, but only by an agreement in writing signed by the party to be charged. The principal sum under this Promissory Note is considered to be Senior Indebtedness to the COLAS pursuant to the Indenture. This Promissory Note is issued in substitution of that certain Promissory Note issued by the Borrower in the principal amount of US$52,000,000.00 dated May 31, 1995, as extended and reissued effective June 1, 1996 and issuance of this Promissory Note is not intended to extinguish any indebtedness. This Promissory Note shall be governed by and construed in accordance with the internal laws of the State of Illinois. Amfac/JMB Hawaii, Inc. By:____________________ Chester A. Richardson Senior Vice President Schedule Attached to Floating Rate Promissory Note dated May 31, 1995, as extended and reissued effective June 1, 1996 of Amfac/JMB Hawaii, Inc. payable to the order of Northbrook Corporation. Principal Payments -------------------- Date Amount of Principal Unpaid Principal Balance Notation Made By 5/31/95 $52,000,000.00 EX-3 5 3 EXTENDED AND REISSUED EFFECTIVE JUNE 1, 1996 FLOATING RATE PROMISSORY NOTE US$28,097,831.90 Chicago, Illinois August 18, 1989 AMFAC/JMB HAWAII, INC., a Hawaii corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of Northbrook Corporation (successor corporation to Amfac, Inc.) (the "Holder"), on or before June 1, 1998 (the "maturity date"), the principal sum of TWENTY-EIGHT MILLION NINETY-SEVEN THOUSAND EIGHT HUNDRED THIRTY-ONE AND 90/100 United States dollars (US$28,097,831.90) or, if less, the aggregate unpaid principal amount as shown either on the schedule attached hereto (and any continuation thereof) or in the records of the Holder, with interest on the unpaid balance of such principal amount at a rate per annum, at any time prior to August 18, 1990, equal to the Reference Rate (as defined below) and, at any time on or after August 18, 1990, equal to the Reference Rate plus 1% per annum, which interest shall be payable on September 30, 1989, on the last day of every third month thereafter prior to the maturity date and on the maturity date or, if the Borrower shall fail to pay the unpaid balance of such principal amount on the maturity date, on the day on which the unpaid balance of such principal amount is paid in full; provided, however, that whenever any payment to be made hereunder shall be stated to be due on a day other than a day when commercial banks are open for normal business in Chicago, Illinois, such payment shall be made on the next succeeding day when such banks shall be open (and such extension of time shall be included in the computation of interest due on such day). All computations of interest hereunder shall be made on the basis of a year of 360 days for the actual number of days elapsed. The Referenced Rate shall mean, at any time, the rate of interest then most recently announced by Bank of America at Chicago, Illinois as its "reference" rate, or its equivalent rate at such time. Borrower represents and warrants that indebtedness represented by this Promissory Note is for business purposes within the meaning of Section 6404 of Chapter 17 of the Illinois Revised Statutes and that such indebtedness constitutes a business loan within the meaning of such Section and is not usurious. Both principal and interest are payable in United States dollars to the order of the Holder in same-day funds on the day when due. The unpaid principal amount of this Promissory Note may be prepaid in whole or in part at any time by the Borrower without premium, penalty or costs whatsoever, provided that all accrued and unpaid interest on the principal amount so prepaid is paid at such time. Borrower hereby waives presentment for payment, demand, protest and notice of dishonor and hereby assents to any extension of the time of payment, forbearance or other indulgence that may be granted by the Holder, without notice. The terms of this Promissory Note may not be modified or terminated orally, but only by an agreement in writing signed by the party to be charged. This Promissory Note is subject to subordination in accordance with the terms of that certain Intercreditor Agreement dated as of September 10, 1991 made by Northbrook Corporation. This Promissory Note is issued in substitution of that certain Floating Rate Promissory Note issued by the Borrower in the principal amount of US$28,097,831.90 dated August 18, 1989, as extended and reissued effective August 18, 1990, December 31, 1991, December 31, 1993, December 31, 1995, and June 1, 1996 and issuance of this Promissory Note is not intended to extinguish any indebtedness under such Floating Rate Promissory Note. This Promissory Note shall be governed by and construed in accordance with the internal laws of the State of Illinois. Amfac/JMB Hawaii, Inc. By: _____________________ Steven E. Plonsker Senior Vice President & Chief Financial Officer Schedule Attached to Floating Rate Promissory Note dated August 18, 1989, as extended and reissued effective August 18, 1990, December 31, 1990, December 31, 1991, December 31, 1993, December 31, 1995 and June 1, 1996 of Amfac/JMB Hawaii, Inc. payable to the order of Northbrook Corporation. PRINCIPAL PAYMENTS _______________________________________________________________ Amount of Unpaid Principal Principal Notation Date Repaid Balance Made by _______________________________________________________________ 8/19/89 $28,097,831.90____________________ 7/30/93 $13,000,000 $15,097,831.90____________________ 3/9/95 ($7,694,740) $22,792,571.90___________________ 5/5/95 $7,694,740 $15,097,831.90___________________ _______________________________________________________________ _______________________________________________________________ EX-4 6 2 KAUAI ELECTRIC DIVISION 4463 PAHEE STREET * LIHUE, HAWAII 96766-2032 May 7, 1992 The Lihue Plantation Company, Limited 2970 Kele Street Lihue, Kauai, Hawaii 96766 Re: Amended and Restated Power Purchase Agreement dated June 15, 1992 (the "Agreement") - 1996 Grinding Season Gentlemen: This letter sets forth the agreement of the parties with respect to the 1996 "Grinding Season" contemplated in Paragraph 4.c) of the Agreement. We have agreed as follows: 1. 1996 Grinding Season: The 1996 Grinding Season shall last for at least 37 weeks and will be broken down into separate periods as follows: Period 1 -- 1/4/96 through 2/20/96 (48 days = 1,152 hrs.) Period 2 -- 5/14/96 through 5/26/96 (13 days = 312 hrs.) 11/5/96 through 12/10/96 (36 days = 864 hrs.) Period 3 -- 5/27/96 through 11/4/96 (162 days = 3,888 hrs.) Total -- 37 weeks (259 days = 6,216 hrs.) 2. Period 1 Energy Rates: During Period 1, there will be no changes to the rates specified in the Agreement. 3. Period 2 Energy Rates: It is agreed that during Period 2, the rates specified in Paragraph 4 of the Agreement for all energy delivered to Citizens by Lihue shall be applied as follows: a) During the entirety of Period 2, Citizens will purchase not less than 11,764,000 KWH from Lihue and agrees to exercise reasonable efforts to dispatch 1,500 KW at the rate provided in subparagraph 4.f) 1. of the Agreement (the "Grind 1 Rate") provided, however, that during those periods when the 1,500 KW dispatch exceeds levels that Citizens would normally economically dispatch from Lihue, then Lihue agrees to pay to Citizens a sum equal to the difference between the cost of such energy at the Grind 1 Rate and the cost of such economic dispatch. b) Citizens reserves the right in its sole discretion at any time during Period 2 to dispatch energy from Lihue at a rate in excess of the 1,500 KW dispatch up to 14,000 KW provided further, that all such energy shall be dispatched at the Grind 1 Rate until 40,000,000 KWH has been dispatched during the 1996 Grinding Season at the Grind 1 Rate (including any energy previously dispatched during the 1996 Grinding Season at the Grind 1 Rate); energy dispatched in excess of the first 40,000,000 KWH shall be at the rate provided in subparagraph 4.f) 2. of the Agreement (the "Grind 2 Rate"). c) Citizens will make reasonable efforts to accept all energy which Lihue may deliver from time to time in excess of Citizens' economic dispatch requirements and which exceeds 1,500 KW, provided, however, that all such energy delivered by Lihue shall be at the rate provided in subparagraph 4.i) of the Agreement (the "Surplus Rate"). d) Notwithstanding anything to the contrary contained in this Paragraph 2, Citizens shall have the sole and absolute right to dispatch the full KVAR output up to the equipment capability of the Lihue power plant. e) During Period 2, if upon 24 hours notice, Lihue requests off-season energy rates, due to weather (rain out) pursuant to paragraph 4.c) Grinding Season, then KE will not be required to pay the "park rate" portion ($142.70/hr. / kw) of the off-season energy rates to Lihue. f) A minimum of six hours notice from Lihue to Citizens will be required before Lihue's return to service after a rain out. Kwh deliveries to Citizens before the time of return to service will be at the surplus rate as defined in subparagraph 4.i) of the Agreement. A delay in Lihue's return to service will be applied to power outages, in accordance with Liquidated Damages, paragraph 18 of the Agreement. 4. Period 3 Energy Rates: It is agreed that during Period 3, the rates specified in Paragraph 4 of the Agreement for all energy delivered to Citizens by Lihue shall be applied as follows: a) During Period 3, Citizens will purchase not less than 25,019,305 KWH of energy delivered by Lihue which energy shall be available for hourly dispatch by Citizens at any KW level between 0 KW and 14,000 KW. Notwithstanding anything to the contrary contained in this Paragraph 4, Citizens shall have the sole and absolute right to dispatch the full KVAR output up to the equipment capability of the Lihue power plant. b) The rate for the first 40,000,000 KWH dispatched by Citizens and delivered to Citizens by Lihue (including any energy previously dispatched during the 1996 Grinding Season at the Grind 1 Rate) shall be the Grind 1 Rate. All energy dispatched by Citizens in excess of the first 40,000,000 KWH shall be at the Grind 2 Rate. c) Citizens will make reasonable efforts to accept all energy which Lihue may deliver from time to time in excess of Citizens' economic dispatch requirements provided, however, that all such energy be delivered by Lihue shall be at Surplus Rate. d) Notwithstanding the provisions of subparagraph 4.d) of the Agreement to the contrary, Citizens dispatch shall not consider any energy delivered by Lihue at the Surplus Rate (surplus energy) in the determination of Lihue's dispatch level. e) During Period 3, if upon 24 hours notice, Lihue requests off-season energy rates, due to weather (rain out) pursuant to paragraph 4.c) Grinding Season, then KE will not be required to pay the "park rate" portion ($142.70/hr / kw) of the off-season energy rate to Lihue. f) A minimum of six hours notice from Lihue to Citizens will be required before Lihue's return to service after a rain out. Kwh deliveries to Citizens before the time of return to service will be at the surplus rate as defined in subparagraph 4.i) of the Agreement. A delay in Lihue's return to service will be applied to power outages, in accordance with Liquidated Damages, paragraph 18 of the Agreement. 5. Citizens' Costs: Lihue agrees to reimburse Citizens for all costs incurred in making changes to its billing practices to accommodate the rate schedule set forth above at the rate of $35.00 per man-hour provided that such costs shall not exceed the sum of $5,000.00 for the 1996 Grinding Season. 6. Term: The term of this letter agreement shall expire at the end of the 1996 Grinding Season provided, however, that either party may terminate this letter agreement on seven (7) days written notice to the other. In the case of early termination, the Grinding Season shall be deemed to run for a period of 37 weeks (from January 4 through February 20, 1996 and from May 14 through December 10, 1996) and all other terms of the Agreement shall apply except that the requirement that Citizen purchase 40,000,000 KWH of energy at Grinding Season rates as provided in subparagraph 4.e) of the Agreement shall be prorated by taking the number of hours remaining in the Grinding Season and dividing by 6,216 hours. 7. Effectiveness of Agreement: During the effective term of this letter agreement, all other terms of the Agreement other than those specifically modified herein shall remain in full force and effect including without limitation, the provisions regarding maintenance and liquidated damages. 8. PUC Approval: This letter is subject to any PUC approvals that may be required. If the foregoing is in accordance with the terms of our agreement, please execute this letter in the space provided below. Very truly yours, Citizens Utilities Company By___________________________ Its__________________________ Agreed and Accepted this 13th Day of May, 1996 The Lihue Plantation Company, Limited By___________________________ Its__________________________ -----END PRIVACY-ENHANCED MESSAGE-----