Document:

ex10-1.htm

Exhibit 10.1

 

CREDIT AGREEMENT

 

 

This Credit Agreement (the “Agreement”) dated August 4, 2016 (the “Effective Date”), is made by and between FIRST HAWAIIAN BANK, a Hawaii corporation (the “Lender”), and MAUI LAND & PINEAPPLE COMPANY, INC., a Hawaii corporation (the “Borrower”).

 

RECITALS:

 

A.     The Borrower desires to obtain from the Lender a revolving credit facility (“Credit Facility”), as described in Sections 1.1 and 1.2 of this Agreement; and

 

B.     Subject to and upon the terms and conditions set forth herein, the Lender is willing to make such Credit Facility available to the Borrower on the terms and conditions set forth hereinbelow;

 

NOW, THEREFORE, in consideration of the premises, the mutual covenants herein set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower and Lender hereby agree, effective as of the Effective Date (all capitalized terms used herein shall have the meaning specified therefor in Article VIII unless otherwise defined herein), as follows:

 

I. CREDIT FACILITY

 

1.1     In General. Subject to the terms of this Agreement and the other Loan Documents, the Lender hereby extends and establishes the Credit Facility in favor of the Borrower pursuant to Section 1.2 hereof. The Borrower acknowledges and agrees that the specific stated purpose of the Credit Facility is to provide financing for the purposes described in Sections 1.2(b) of this Agreement. The Credit Facility is for business purposes and is not a consumer loan.

 

1.2     Amount and Terms of the Credit Facility.

 

(a)     Revolving Credit Commitment. 

 

Subject to and upon the terms and conditions herein set forth, and provided that no Event of Default then exists, the Lender agrees and from time to time prior to the Maturity Date to make advances to the Borrower of up to the Revolving Loan Commitment by way of revolving loans as described in this Section 1.2. Each extension of credit under the Credit Facility shall be in such amount permitted by the terms of this Agreement as the Borrower may request, but the aggregate principal amount of all extensions of credit at any one time outstanding under the Credit Facility shall not exceed the Revolving Loan Commitment.

 

(b)     Purpose of Revolving Loans. The Borrower may use the proceeds of borrowings under the Credit Facility (referred to as “Revolving Borrowings”) for working capital and general business purposes.

 

 

 

 

 

 

(c)     Terms of Credit Facility. The Credit Facility and all Revolving Borrowings: (i) may be borrowed, repaid and reborrowed in accordance with the provisions hereof; (ii) shall bear interest as described in Section 1.4 of this Agreement; and (iii) except as otherwise specified in this Agreement, shall mature and be payable on the Maturity Date. Each Revolving Borrowing, together with the then aggregate outstanding principal amount of all other Revolving Borrowings shall not at any time exceed in principal amount the Revolving Loan Commitment.

 

(d)     Maturity Date. Unless extended or sooner terminated in accordance with this Agreement the Credit Facility shall terminate on December 31, 2019 (such dated as extended or sooner terminated being referred to herein as the “Maturity Date”, and the period of time between the Effective Date and December 31, 2019 being referred to herein as the “Original Term”). 

 

(e)     Options to Extend Maturity Date.

 

(i)     Extension Options. The Borrower shall have two (2) consecutive options (each, an “Extension Option”) of one (1) year each to extend the Original Term of the Credit Facility, subject to the following conditions and as more particularly described in this Section 1.2(e):

 

(A)     No Default or Event of Default shall have occurred and be continuing; 

 

(B)     The Borrower shall have complied with all Debt Yield requirements set forth in Section 4.15(d) 

 

(C)     The Borrower shall provide the Lender with at least forty-five (45) days’ written notice of its intent to exercise each Extension Option; and 

 

(D)     Upon exercise of each Extension Option, the Borrower shall pay an extension fee in the amount of one-fourth percentage points (.25%) of the Revolving Loan Commitment for the applicable Extension Option. 

 

(ii)     First Extension Option Terms and Conditions. The first Extension Option, if duly exercised and if all conditions thereof are duly satisfied, shall extend the Maturity Date by one (1) year from December 31, 2019 (the “First Extension Date”) to December 31, 2020 (said period being referred to herein as the “First Extension Period”). In addition to the terms and conditions set forth in Section 1.2(e)(i) above, the first Extension Option shall be subject to the following additional terms and conditions:

 

(A)     Prior to the First Extension Date, the Lender shall have received an updated appraisal, dated no earlier than sixty (60) days prior to the First Extension Date, showing the value of the Primary Mortgaged Property (exclusive of any released property and rounded upward to the nearest $1000 increment) to be no less than the amount necessary to cause the Loan to Value Ratio with respect to the Primary Mortgaged Property only, to be no more than sixty-five percent (65%) (i.e., based on a Revolving Loan Commitment of $22,500,000 for the First Extension Period, the required value of the Primary Mortgaged Property would be no less than $34,616,000). If the appraised value is less than such amount, the Borrower may exercise the first Extension Option, but the Revolving Loan Commitment shall be reduced to a level sufficient to cause the Loan to Value Ratio for the First Extension Period to be no more than 65%, and the extension fee for the first Extension Option shall be correspondingly reduced. 

 

 

 

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(B)     If the then outstanding principal balance of the Revolving Borrowings exceeds the Revolving Loan Commitment for the First Extension Period, the Borrower shall repay the Credit Facility to a level that does not exceed such Revolving Loan Commitment.

 

(C)     The Borrower shall have at all times prior to the First Extension Date complied with the financial covenants of the Loan, including the Debt Yield requirements described in Section 4.15(d). 

 

(iii)     Second Extension Option Terms and Conditions: The second Extension Option, if duly exercised and if all conditions thereof are duly satisfied, shall extend the Maturity Date by one (1) year from December 31, 2020 (the “Second Extension Date”) to December 31, 2021 (said period being referred to herein as the “Second Extension Period”). In addition to the terms and conditions set forth in Section 1.2(e)(i) above, the second Extension Option shall be subject to the following additional terms and conditions:

 

(A)     The Borrower shall have duly exercised and complied with the terms of the first Extension Option.

 

(B)     Prior to the Second Extension Date, the Lender shall have received an updated appraisal, dated no earlier than sixty (60) days prior to the Second Extension Date, showing the value of the Primary Mortgaged Property (exclusive of any released property and rounded upward to the nearest $1000 increment) to be no less than the amount necessary to cause the Loan to Value Ratio with respect to the Primary Mortgaged Property only, to be no more than sixty-five percent (65%) (i.e., based on a Revolving Loan Commitment of $20,000,000 for the Second Extension Period, the required value of the Primary Mortgaged Property would be no less than $30,770,000). If the appraised value is less than such amount, the Borrower may exercise the second Extension Option, but the Revolving Loan Commitment shall be reduced to a level sufficient to cause the Loan to Value Ratio for the Second Extension Period to be no more than 65%, and the extension fee for the second Extension Option shall be correspondingly reduced. 

 

(C)     If the then outstanding principal balance of the Revolving Borrowings exceeds the Revolving Loan Commitment for the Second Extension Period the Borrower shall repay the Credit Facility to a level that does not exceed such Revolving Loan Commitment.

 

(D)     The Borrower shall have at all times prior to the Second Extension Date complied with the financial covenants of the Loan, including the Debt Yield requirements, described in Section 4.15(d). 

 

 

 

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(f)     Procedure and Conditions for Revolving Borrowings. 

 

From time to time prior to the Maturity Date but not more than once per month, the Borrower may request that the Lender provide the Borrower with indicative rates, and/or request a draw on the Credit Facility (each such draw being considered a Revolving Borrowing). Each such request shall be made by written notice substantially in the form of Exhibit “C” hereto delivered to the Lender no later than 11:00 a.m. (Hawaii Standard Time) at least two (2) Business Days’ in advance, shall be irrevocable, and shall specify the aggregate principal amount which the Borrower desires to draw, the date of the Revolving Borrowing (which shall be a Business Day and which must be a date no later than two (2) Business Days prior to the Maturity Date). 

 

(g)     Disbursement of Revolving Loan Funds.

 

No later than 11:00 a.m. (Hawaii Standard Time) on the date properly specified in a Notice of Borrowing, and provided that no Event of Default then exists, the Lender will make available the amount of the Revolving Borrowing requested to be made on such date in U.S. Dollars and in immediately available funds, against delivery to the Lender by the Borrower of any documents and papers provided for herein.

 

(h)     Note.

 

(i)     The Borrower’s obligations to pay the principal of, and interest on, the Revolving Credit Line and all Revolving Borrowings shall be evidenced by a single promissory note payable to the order of the Lender substantially in the form of Exhibit “A” hereto (as from time to time amended, modified or replaced, the “Note”) with blanks appropriately completed in conformity herewith. The Note shall: (A) be payable to the order of the Lender and be dated as of the Closing Date; (B) be in a stated principal amount equal to the Revolving Loan Commitment; (C) mature on the Maturity Date; (D) bear interest as provided in Section 1.4 of this Agreement; and (E) be entitled to the benefits, and subject to the terms and conditions, of this Agreement.

 

(ii)     The Lender shall maintain such records of its making of each Revolving Borrowing, repayment of principal thereof (if any) and interest thereon and other information relating thereto as it shall deem appropriate in accordance with its customary practices, which records shall constitute prima facie evidence thereof. Failure to maintain such records with respect to the Credit Facility or any Revolving Borrowing shall not limit or otherwise affect the obligation of the Borrower hereunder or under the Note with respect to the Credit Facility or any Revolving Borrowing, and payments of principal (if any) or interest by the Borrower shall not be affected thereby. Although the Note shall be dated the Closing Date, interest in respect thereof shall be payable only for the periods during which Revolving Borrowings are outstanding, and although the stated principal amount of the Note shall be equal to the Revolving Loan Commitment, the Note shall be enforceable with respect to the Borrower’s obligation to pay principal thereunder (if any) and interest thereon only to the extent of the aggregate unpaid principal amount of the Revolving Borrowings at the time outstanding.

 

 

 

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1.3     Security. The Credit Facility shall be secured by liens on or security interests in the following collateral (“Collateral”), which liens or security interests shall be of first priority unless otherwise agreed by the Lender:

 

(a)     The Mortgaged Property and the Borrower’s interest as lessor in, and all rents from, leases relating to the Mortgaged Property; and

 

(b)     The Personal Property, including all of the stock of KWC and KWTC but excluding the stock and membership interests in the other Borrower Subsidiaries.

 

1.4     Interest.

 

(a)     Interest on Revolving Borrowings.

 

The Borrower agrees to pay interest on the outstanding principal balance of each Revolving Borrowing at a rate per annum equal to three and 50/100 percentage points (3.50%) (the “Margin”) higher than the “LIBOR Rate” (as hereinafter defined); PROVIDED, HOWEVER, that until the date that PUC Approval (as hereinafter defined) is issued, the Margin shall be three and 75/100 percentage points (3.75%), and interest shall accrue on the outstanding balance of each Revolving Borrowing at a rate per annum equal to three and 75/100 percentage points (3.75%) higher than the LIBOR Rate. The interest rate shall be adjusted monthly on the first Business Day of each calendar month during the term of the Loan (each such date being referred to as an “Interest Adjustment Date”), to a rate equal to the LIBOR Rate in effect on such date, plus the Margin.

 

Interest shall be computed on the basis of a year of 360 days, and the actual number of days elapsed.

 

As used herein, the term “LIBOR Rate” shall mean the offered rate of interest which appears on the Bloomberg Official BBAM LIBOR Rates page as of 11:00 a.m. London Time on the day that is two (2) LIBOR Banking Days prior to the next Interest Adjustment Date, for deposits, in U.S. Dollars, for a period of one (1) month (“LIBOR”); provided that the LIBOR Rate shall not be less than zero, and if the above described offered rate of interest is a negative number, the LIBOR Rate will be zero. A “LIBOR Banking Day” means a day on which London banks are open for business for trading inter-bank U.S. Dollar deposits.

 

If any law or regulation, or any change therein, shall make it unlawful for interest to be calculated using the LIBOR Rate, the Borrower shall have no right to have interest based on the LIBOR Rate, and interest on the outstanding principal balance shall automatically, upon notice given by the Lender to the Borrower, accrue at a fluctuating rate per annum equal to the Prime Rate. Each change in such fluctuating rate shall take effect simultaneously with the effective date of the corresponding change in the Prime Rate. “Prime Rate” or “Prime” shall mean the lending rate of interest announced publicly by First Hawaiian Bank from time to time as its “prime interest rate”, which rate shall not necessarily be the best or lowest rate charged by First Hawaiian Bank from time to time. 

 

In addition, if no rates appear on the Bloomberg Official BBAM LIBOR Rates page for deposits, in U.S. Dollars, for a period of one (1) month, or if on any date for determining the LIBOR Rate, adequate and fair means do not exist for ascertaining the applicable interest rate by reference to LIBOR, interest shall accrue at a fluctuating rate per annum equal to the Prime Rate in effect from time to time, until the first Business Day of the calendar month next following the date after one or more rates do appear on the Bloomberg Official BBAM LIBOR Rates page for deposits, in U.S. Dollars, for a period of one (1) month and the interest rate is readily ascertainable by reference to LIBOR.

 

 

 

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Upon an Event of Default, the interest shall accrue at the rate four percentage points (4.00%) higher than the greater of (i) the rate which would be charged in the absence of default, or (ii) the Prime Rate, fluctuating with the Prime Rate (the “Default Rate”).

 

(b)     Miscellaneous.

 

Interest hereunder shall be computed, but not compounded, daily on the basis of the rate of interest then in effect.

 

Any floating rate of interest will increase or decrease during the term of this Agreement if there is an increase or decrease in the rate to which the floating rate is tied. If the rate to which the floating rate is tied is no longer available, the Lender will choose a new rate that is based on comparable information.

 

Notwithstanding any provision in this Agreement, the Note, or in any of the other Loan Documents to the contrary, the rate of interest which the Borrower shall be required to pay to the Lender shall in no event exceed the maximum rate which may be permitted under applicable law. If, from whatever circumstance whatsoever, performance by the Borrower of any obligation under this Agreement, the Note, or any of the other Loan Documents, at the time performance thereof shall be due (including, without limitation, the payment of interest at the Default Rate or otherwise, or the payment of any fee, charge or expense to be paid or incurred by the Borrower which shall be deemed to be interest), shall involve transcending the limits of validity prescribed by applicable law, then automatically, such obligation to be performed shall be reduced to the limit of such validity prescribed by applicable law. If, notwithstanding the foregoing limitations, any excess interest shall be determined to have been received, the same shall be deemed to have been held as additional security.

 

1.5     Repayment of Credit Facility.

 

(a)     Repayment of Revolving Credit Line.

 

(i)     Interest Payments. The Borrower shall make monthly payments of all accrued interest on the outstanding principal balance of each Revolving Borrowing on the first day of each calendar month.

 

(ii)     Maturity of the Revolving Credit Line. All unpaid principal and accrued interest on all Revolving Borrowings will be due and payable on the Maturity Date, without notice or demand, whereupon the Credit Facility will terminate. 

 

 

 

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(b)     Prepayments and Partial Releases.

 

(i)     Voluntary Prepayments. The Borrower may prepay all or any portion of principal on any Revolving Borrowing without a prepayment charge, provided that a minimum of three (3) Business Days’ notice is given to the Lender, and provided that at the time of any such prepayment the Borrower shall pay all interest theretofore accrued on all Revolving Borrowings. Until the Credit Facility is paid in full (principal and interest), no optional prepayment shall be credited to or relieve the Borrower to any extent from its obligation thereafter to pay any monthly installment of interest or any other payment required under the Credit Facility. 

 

(ii)     Cash Flow. The Borrower acknowledges that the Credit Facility is being underwritten by the Lender based on the cash flow from the Borrower’s operations and from the operations of the Borrower Subsidiaries, and the Borrower agrees that such cash flow will be used for the repayment of Revolving Borrowings under the Credit Facility. 

 

(iii)     Partial Releases of Mortgaged Property. The Lender shall, upon the request of the Borrower, release portions of the Mortgaged Properties from the Mortgage and Security Agreement, upon the following conditions:

 

(A)     No Default or Event of Default shall have occurred and be continuing; 

 

(B)     After taking into account the effects of the release, the Borrower shall continue to be in compliance with the terms and conditions set forth in Section 4.15 of this Agreement;

 

(C)     The Borrower shall pay to the Lender at the time of such partial release, the applicable Release Price therefor, and shall pay to the Lender at the time of such partial release, an administrative release fee of Two Hundred Dollars ($200.00) per mortgage release; 

 

(D)     In addition to the administrative release fee, the Borrower shall pay to the Lender all appraisal costs, all costs of preparing the release documents and all legal and other costs associated with the partial release and any recording costs that have been or will be incurred by the Lender in connection with the partial release. 

 

Upon receipt, the Release Price shall be applied to reduce the outstanding principal balance of the Credit Facility and shall permanently reduce the Revolving Loan Commitment by the amount of the Release Price.

 

As used herein the term “Release Price” shall mean (a) with respect to the Primary Mortgaged Property or any portion thereof, the greater of the Actual Net Sales Proceeds or eighty-five percent (85%) the Appraised Value of the property being released, and (b) with respect to any Mortgaged Property other than Primary Mortgaged Property, an amount mutually agreed upon by the Borrower and the Lender. 

 

 

 

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“Actual Net Sales Proceeds” with respect to any Mortgaged Property being released shall mean the actual gross sales price for such property, less (i)  actual sales commissions paid by the Borrower (or charged to the Borrower at closing), if any, not to exceed five percent (5.00%) of the gross sales price for such property; and (ii)  actual customary and standard closing costs paid by the Borrower (or allocated to the Borrower at closing), if any, such as escrow, recording, conveyance tax, and document preparation fees, not to exceed one percent (1.00%) of the gross sales price for such property.

 

(c)     Currency, Place and Dates of Payments. Payments shall be made in United States money in immediately available funds at the Lender’s address in Section 7.5 of this Agreement, or at such other place as the Lender shall have designated by written notice to the Borrower. Whenever any payment to be made hereunder or under the Note shall be stated to be due on a day which is not a Business Day, as may be applicable, the due date thereof shall be extended to the next succeeding Business Day, and, if a payment of principal has been so extended, the interest shall be payable on such principal at the applicable rate during such extension. Any payment made after 10:00 a.m. (Hawaii Standard Time) may, at the Lender’s option, be credited as paid on the following Business Day.

 

(d)     Net Payments. All payments under this Agreement shall be made without setoff or counterclaim and in such amounts as may be necessary in order that all such payments of principal and interest (after (i) deduction or withholding for or on account of any present or future taxes, levies, imposts, duties or other charges of whatsoever nature imposed by any government or any political subdivision or taxing authority thereof, other than any tax (except such taxes referred to in clause (ii) below) on or measured by the net income of a lender pursuant to the income tax laws of the jurisdiction where such lender’s principal or lending office is located (collectively the “Taxes”); and (ii) deduction of an amount equal to any taxes, on or measured by the net income, payable by such lender with respect to the amount by which the payments required to be made by this Section 1.5(d) exceed the amount otherwise specified to be paid under this Agreement and the Note) shall not be less than the amounts otherwise specified to be paid under this Agreement and the Note. A certificate as to any additional amounts payable to the Lender under this Section 1.5(d) submitted to the Borrower by such Lender shall show in reasonable detail the amount payable and the calculations used to determine such amount and shall, absent manifest error, be final, conclusive and binding upon all parties hereto. With respect to each deduction or withholding for or on account of any Taxes, the Borrower shall promptly furnish to the Lender such certificates, receipts and other documents as may be required (in the judgment of such Lender) to establish any tax credit to which such Lender may be entitled.

 

(e)     Late Charges. If any payment under this Agreement is not made within ten (10) calendar days after such payment is due, the Borrower will pay to the Lender, a late charge in respect of that payment, in the amount of five percent (5%) of the overdue payment.

 

(f)     Application of Payments. Except as otherwise specified in this Agreement, all payments made under this Agreement, the Note and other Loan Documents shall be applied first to advances made by the Lender or costs incurred by the Lender, then to late payment charges, then to interest, and then to principal; provided, however, that in an Event of Default, the Lender shall be entitled to allocate all payments received by the Lender to principal, interest, late payment charges, advances and/or costs in such order as the Lender may elect. The receipt of a check shall not, in itself, constitute payment hereunder unless and until the check is honored.

 

 

 

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(g)     Effect of Prepayments. No prepayments (whether voluntary or otherwise) shall reduce or affect any regularly scheduled installment payment or any required prepayment specified in this Agreement.

 

1.6     Evidence of Indebtedness; Loan Documents. The Credit Facility is or is to be evidenced and/or secured by this Agreement, the Note, the Mortgage, the Assignment of Rents, the Security Agreement, the KWTC Stock Pledge, the KWC Stock Pledge, the Negative Pledge Agreement, the Closing Certificate, and all such other documents as the Lender may require from time to time in order to effectuate the intent of this Agreement, together with all renewals, extensions and modifications thereto (the “Loan Documents”).

 

1.7     The Borrower’s Obligations. The Borrower’s obligations to pay, observe and perform all indebtedness, liabilities, covenants and other obligations on the part of the Borrower to be paid, observed and performed under this Agreement, the Note and all other Loan Documents, are herein collectively called the “Obligations”.

 

1.8     Loan Fee. The Borrower agrees to pay to the Lender a non-refundable loan fee (the “Loan Fee”), in an amount equal to Two Hundred Seventy Thousand and No/100 Dollars ($270,000.00), $50,000.00 of which has been earned and paid, and the remaining $220,000.00 of which is earned and payable on the Closing Date. Any portion of the Loan Fee, once earned, is nonrefundable.

 

II. CONDITIONS PRECEDENT

 

2.1     First Borrowing. The obligation of the Lender to make the Credit Facility available to the Borrower under this Agreement is subject to the satisfaction of all of the following conditions on or before the Closing Date or dates on which the Lender shall make any disbursement of Credit Facility proceeds to the Borrower:

 

(a)     Documents Required for Closing. The Lender shall have received, in each case in form and substance satisfactory to the Lender, such fully executed originals or certified copies as the Lender may have requested of each of the following, in each case as amended through the Closing Date:

 

(i)     Loan Documents. All of the Loan Documents, duly executed by the Borrower, including, without limitation:

 

(A)     This Agreement;

 

(B)     The Note; 

 

(C)     The Mortgage, in form and substance acceptable to the Lender;

 

 

 

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(D)     The Assignment of Rents, in form and substance acceptable to the Lender, 

 

(E)     Subordination, Nondisturbance and Attornment Agreements from Key Tenants in favor of the Lender, in form and substance acceptable to the Lender, provided that the Sansei SNDA and Outrigger SNDA may be deferred until after the Closing Date, as described in Section 4.17(a) and Section 4.17(b); 

 

(F)     The Security Agreement, in form and substance acceptable to the Lender; 

 

(G)     The KWTC Stock Pledge Agreement, in form and substance acceptable to the Lender;

 

(H)     One or more Uniform Commercial Code Financing Statement(s) perfecting the security interest in the Personal Property;

 

(I)     The Negative Pledge Agreement, in form and substance acceptable to the Lender;

 

(J)     Environmental Indemnity Agreement, in form and substance acceptable to the Lender;

 

(K)     The Closing Certificate, in form and substance acceptable to the Lender; and

 

(L)     Notice of Mortgage, Pledge or Purchase, suitable for filing with the Department of Taxation of the State of Hawaii.

 

(ii)     Consents. Evidence that all parties to the Loan Documents (except the Lender) have obtained all necessary and appropriate authority, approvals and consents to execute and deliver the Loan Documents. 

 

(iii)     Organizational Documents and Tax Clearances. All instruments pursuant to which the Borrower is organized and by which its internal affairs are governed and, if requested by the Lender, a Certificate of Good Standing or other evidence of the Borrower’s good standing and authority to conduct their business in the State of Hawaii, and a tax clearance for the Borrower issued by the Department of Taxation of the State of Hawaii.

 

(iv)     Evidence of Priority. Evidence acceptable to the Lender that the liens on and/or security interests in the Collateral have the priority required by the Lender.

 

(v)     Title Insurance, Leasehold Instruments, etc. An ALTA Form Lender’s Title Insurance Policy, assuring to the Lender the validity and agreed-upon priority of the Mortgage, and, if the Mortgage encumbers a leasehold estate, the applicable lease and a lessor’s consent to the Mortgage (if required).

 

 

 

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(vi)     Opinion(s) of Counsel. An opinion or opinions of counsel for the Borrower, addressed to the Lender, covering to the Lender’s satisfaction: (1) the due authorization, execution, delivery, binding effect, and enforceability of the Loan Documents; (2) no undisclosed litigation, (3) no consents or approvals required; (4) no conflicts with any agreement or laws; and (5) such other matters as the Lender may require; and

 

(vii)     Insurance. Evidence of the Borrower’s compliance, in respect of such properties, with the provisions stated below in Section 4.5.

 

(b)     Certain Other Events. On the Closing Date:

 

(i)     No Default or Event of Default shall have occurred and be continuing.

 

(ii)     No material adverse change shall have occurred in the financial condition of the Borrower or any Borrower Subsidiary since the date of the most recent financial statements submitted to the Lender.

 

(iii)     No material adverse change shall have occurred in the physical condition of the Borrower’s or any Borrower Subsidiary’s assets since the date of this Agreement.

 

(iv)     All legal matters incidental to the transaction contemplated hereby shall be satisfactory to legal counsel for the Lender.

 

(v)     The Borrower shall have paid to the Lender all fees described in Section 1.8 above.

 

(vi)     The representations and warranties contained in Article III shall be true. 

 

(c)     PUC Application. On the Closing Date, the Borrower shall have submitted an application with the PUC for approval of the Borrower’s pledge of the KWC stock to Lender pursuant to KWC Stock Pledge (the “PUC Application”) in form and substance acceptable to the Lender, and the Borrower shall have provided the Lender with a statement of the Borrower’s independent legal counsel acceptable to the Lender, in form and substance satisfactory to the Lender, that based on such counsel’s prior experience in similar matters, such counsel reasonably anticipates that the PUC will approve the PUC Application.

 

2.2     Subsequent Borrowings. The obligation of the Lender to disburse any draw or Borrowing on the Revolving Credit Line, or to make any subsequent loan or other extension of credit is subject to: (a) the prior satisfaction of all conditions stated above in Sections 2.1(a) and 2.1(c); (b) the satisfaction as of the date of such disbursement, conversion or subsequent loan or other extension of credit of the conditions stated above in Section 2.1(b); and (c) the delivery to the Lender of such additional Loan Documents as may have been reasonably requested by the Lender in respect to such conversion, subsequent loan or other extension of credit.

 

 

 

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III. REPRESENTATIONS AND WARRANTIES

 

To induce the Lender to make the Credit Facility available and to enter into this Agreement, the Borrower makes the following representations and warranties to the Lender, which representations and warranties shall survive the execution of this Agreement and continue so long as the Borrower is indebted to the Lender under the Loan Documents, and until payment in full of the Credit Facility:

 

3.1     Corporate Status. The Borrower is a Hawaii corporation duly organized, validly existing and in good standing under the laws of the State of Hawaii; the Borrower is authorized, to the extent required under applicable law, to do business and is in good standing in all other States of the United States and in any other jurisdiction wherein the nature of its business requires such qualification; there is no action required of the Borrower which has not already been taken to enable the Borrower to do business as presently conducted by it in the State of Hawaii and all other States and jurisdictions wherein it owns or leases properties or transacts or is engaged in business; the Borrower’s chief executive office is located at the address stated in Section 7.5 of this Agreement; the Borrower’s exact legal name is the name stated in the first paragraph of this Agreement; and the Borrower has all necessary power to execute, deliver and perform the Obligations, this Agreement, the Note, and each of the other Loan Documents to which it is party, to borrow under the Credit Facility hereunder and to incur the Obligations.

 

3.2     Authority; No Conflict. The execution, delivery and performance by the Borrower of this Agreement, the Note, and each of the other Loan Documents executed and delivered or to be executed and delivered by it as contemplated by this Agreement have been duly authorized by all necessary corporate action by the Borrower and will not immediately, or with the passage of time or the giving of notice, or both: (a) violate any provision of law or regulation, or any decree, order, writ or judgment, or any provision of the charter or articles of incorporation or by-laws (or other organic documents) of the Borrower or result in the breach of or constitute a default under any indenture or other agreement or instrument to which the Borrower is a party or by which its property is bound; or (b) result in the creation or imposition of any security interest in, or lien or encumbrance on, any of the assets of the Borrower, except in favor of the Lender.

 

3.3     Legality, Etc. This Agreement constitutes and, when executed and delivered, the Note, and each of the other Loan Documents will constitute legal, valid and binding obligations of the Borrower and each of the other parties thereto (other than the Lender) enforceable in accordance with their respective terms.

 

3.4     Litigation. No litigation, arbitration or administrative or bankruptcy proceeding is pending or, to the knowledge of the Borrower, threatened, which, if determined adversely to the Borrower or any Borrower Subsidiary, would materially and adversely affect the ability of the Borrower to perform any of its obligations under this Agreement, or any of the other Loan Documents, except as disclosed to the Lender from time to time in writing, and the Borrower agrees to provide the Lender with such information in respect thereof as the Lender may reasonably request. There is no litigation, arbitration or administrative proceeding pending or, to the knowledge of the Borrower, threatened which questions the validity of this Agreement, the Note, or any of the other Loan Documents.

 

 

 

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3.5     No Violation. No part of the proceeds of the Credit Facility under this Agreement will be used, directly or indirectly, by the Borrower for the purpose of purchasing or carrying any “margin stock” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, or for any other purpose which violates, or which conflicts with, the provisions of Regulations G, T, U or X of said Board of Governors. The Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any such “margin stock.” 

 

3.6     ERISA. 

 

(a)     The issuance of the Note hereunder will not cause the Borrower to be engaged in a “prohibited transaction,” as such term is defined in Section 4975 of the Internal Revenue Code and there have not been any “reportable events,” as that term is defined in Section 4043 of the Employee Retirement Income Security Act of 1974, as amended, which would result in a material liability to the Borrower. 

 

(b)     With respect to each Plan, the Borrower and each member of the Controlled Group of which the Borrower is a member have fulfilled their respective obligations under the minimum funding standards of ERISA and the Code and are in compliance in all material respects with the presently applicable provisions of ERISA and the Code, and have not incurred any termination liability to the PBGC under Title IV of ERISA which is currently unsatisfied. With respect to each Plan which is a multi-employer pension plan, the Borrower and each member of the Controlled Group of the Borrower has fulfilled its respective Plan contribution requirements under the applicable collective bargaining agreement and has not incurred any withdrawal liability to the Plan under Title IV of ERISA which is currently unsatisfied.

 

3.7     Consents. No authorization, consent or approval from governmental bodies or regulatory authorities is required for the making and performance of this Agreement by the Borrower and the execution, delivery and performance of the Note or other Loan Documents issued or proposed to be issued by the Borrower hereunder, except such authorizations, consents and approvals as have been obtained prior to the making of the Credit Facility and are in full force and effect. Without limitation, no authorization, consent or approval is required from the PUC or any other Government Authority for the execution, delivery and performance of the Negative Pledge Agreement or the KWTC Stock Pledge Agreement, and other than PUC Approval no authorization consent or approval is required from the PUC or any other Government Authority for the execution, delivery and performance of the KWC Stock Pledge Agreement.

 

3.8     Hazardous Substances. With respect to Hazardous Substances: (a) the Borrower and each Borrower Subsidiary is in compliance with all Environmental Laws; (b) neither the Borrower nor any Borrower Subsidiary has engaged in any Hazardous Substance Activity in violation of any Environmental Laws, nor to the best of the knowledge of the Borrower, after due inquiry and investigation, has any Hazardous Substance Activity otherwise occurred in violation of any Environmental Laws; (c) neither the Borrower nor any Borrower Subsidiary will engage in any Hazardous Substance Activity in violation of any Environmental Laws; (d) if at any time Hazardous Substances are discovered on, under, in or about any of the Borrower’s or any Borrower Subsidiary’s premises at levels in excess of the levels at which remedial action is required under applicable laws and regulations, the Borrower, at its sole cost and expense, will inform the Lender of the same and remediate such Hazardous Substances in accordance with a remedial program or corrective action program in accordance with the requirements of the Hawaii Department of Health, the Environmental Protection Agency, or any other entity enforcing any applicable environmental laws; (e) if at any time the Borrower or any Borrower Subsidiary is notified by the Hawaii Department of Health, the Environmental Protection Agency, or any other entity enforcing any applicable environmental laws that it is in violation of any Environmental Laws or named as a “potentially responsible person” under any Environmental Laws, the Borrower, at its sole cost and expense, will inform the Lender of same, take prompt action to correct the violation and come into compliance with all Environmental Laws; and (f) the Borrower shall indemnify, defend and save and hold harmless forever the Lender from and against any and all claims, actions, fines and penalties of whatever nature and kind whatsoever caused by or relating to any breach or violation of any of the foregoing representations or warranties of the Borrower or otherwise any violation of any Environmental Laws. The foregoing obligation set forth in this Section 3.8 shall survive the execution of this Agreement and the performance of all obligations of the Borrower hereunder.

 

 

 

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3.9     Investment Company. The Borrower is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended. 

 

3.10     Validity. This Agreement is, and the remainder of the Loan Documents are, or when delivered will be, legal, valid, binding, and enforceable in accordance with their respective terms.

 

3.11     Financial Statements. All financial statements heretofore given by the Borrower to the Lender, including any schedules and notes pertaining thereto, were prepared in accordance with GAAP and fully and fairly present the financial condition of the Borrower and Borrower Subsidiaries at the dates thereof and the results of operations for the periods covered thereby, and as of the date of this Agreement there have been no material adverse changes in the financial condition or business of the Borrower or any Borrower Subsidiary from the date of the most recent financial statements given to the Lender.

 

3.12     Taxes. Except as otherwise permitted by this Agreement, the Borrower and each Borrower Subsidiary has filed all tax returns it was required by law to have filed prior to the date of this Agreement, has paid or caused to be paid all taxes, assessments, and other governmental charges that were due and payable prior to the date of this Agreement, and has made adequate provision for the payment of such taxes, assessments, or other charges accruing but not yet payable, and the Borrower has no knowledge of any deficiency or additional assessment in a materially important amount in connection with any taxes, assessments, or charges not provided for on its or any Borrower Subsidiary’s books.

 

3.13     Compliance With Law. Except to the extent that the failure to comply would not materially interfere with the conduct of its business, the Borrower and each Borrower Subsidiary has complied with all applicable laws in respect of: (a) restrictions, specifications, or other requirements pertaining to products that it sells or to the services it performs; (b) the conduct of its business; and (c) the use, maintenance, and operation of its properties.

 

 

 

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3.14     Performance of Other Agreements. The Borrower is not in default in any manner under any other agreements to which the Borrower is a party which would materially and adversely affect its ability to: (a) perform its Obligations under this Agreement or other Loan Documents, (b) preserve and maintain the Collateral granted as security for the Credit Facility, or (c) perform or fulfill of any of its obligations, covenants or conditions contained in any agreement or instrument related to the Collateral to which the Borrower is a party or by which the Borrower or any of its properties is bound. No Borrower Subsidiary is in default in any manner under any other agreements to which it is a party which would materially and adversely affect its operations.

 

3.15     Title to Properties and Solvency of the Borrower. The Borrower and each Borrower Subsidiary has good and marketable title to all of its properties and assets. The Borrower is not insolvent (as defined in Section 101(32) of Title 11 of the United States Code) and will not be rendered so insolvent as a result of the transactions contemplated hereby or referred to herein.

 

3.16     Relationship Between Borrower and Subsidiaries. The Borrower is the parent company of and owns one hundred percent (100%) of the voting stock of KWC, KWTC, MPC, KLC and KAC. The Borrower holds fifty-one percent (51%) of the membership interests, including 51% of the voting interests and 51% of the interests in earnings and distributions, of KBHL. KLC owns one hundred percent (100%) of the voting stock of KRC, and KBHL holds one hundred percent (100%) of the membership interests, including voting interest and interest in earnings and distributions, of KBL. 

 

3.17     Each Borrower Subsidiary other than KBHL and KBL is a Hawaii corporation duly organized, validly existing and in good standing under the laws of the State of Hawaii; KBHL and KBL each is a Delaware limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and duly qualified to do business in and in good standing in the State of Hawaii; each Borrower Subsidiary is authorized, to the extent required under applicable law, to do business and is in good standing in all other States of the United States and in any other jurisdiction wherein the nature of its business requires such qualification; there is no action required of any Borrower Subsidiary which has not already been taken to enable such Borrower Subsidiary to do business as presently conducted by it in the State of Hawaii and all other States and jurisdictions wherein it owns or leases properties or transacts or is engaged in business. 

 

3.18     True and Complete Copies. All copies of documents heretofore furnished by, or on behalf of, the Borrower to the Lender are true and complete copies of the originals thereof, and all amendments and modifications thereto, and are in full force and effect. There have been no amendments or modifications to any such document except as heretofore disclosed in writing to the Lender.

 

3.19     Statements and Omissions. No representation or warranty by the Borrower contained in this Agreement or in any certificate or other document furnished by the Borrower pursuant to this Agreement contains any untrue statement of material fact or omits to state a material fact necessary to make such representation or warranty not misleading in light of the circumstances under which it was made.

 

 

 

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IV. AFFIRMATIVE COVENANTS

 

For so long as the Credit Facility remains in effect or any of the Obligations remains outstanding, the Borrower will, unless otherwise permitted by the Lender in writing:

 

4.1     Payments. Punctually pay when due all sums which may be due under the Loan Documents. 

 

4.2     Financial Reporting. Furnish or cause to be furnished to the Lender (in each case prepared in accordance with GAAP and in reasonable detail and form approved by the Lender as follows):

 

(a)     For each fiscal quarter commencing with the third quarter of 2016 and continuing thereafter, as soon as practicable and in any event no later than sixty (60) days after the end of such fiscal quarter:

 

(i)     the consolidated balance sheets and statements of shareholders’ equity of the Borrower and the Borrower Subsidiaries as of the end of such fiscal quarter, in comparative form to the figures for the corresponding quarter of the previous fiscal year; and

 

(ii)     the consolidated statements of income and expenses and statements of cash flow of the Borrower and the Borrower Subsidiaries for such fiscal quarter, in comparative form to the figures for the corresponding quarter of the previous fiscal year. 

 

(b)     For each fiscal year commencing with fiscal year 2016 and continuing thereafter, as soon as practicable and in any event no later than the last day of the first fiscal quarter of the following fiscal year:

 

(i)     the consolidated balance sheet and statements of shareholders’ equity of the Borrower and the Borrower Subsidiaries as of the end of such fiscal year, in comparative form to the figures for the previous fiscal year; and

 

(ii)     the consolidated statements of income and expenses and statements of cash flow of the Borrower and the Borrower Subsidiaries, in comparative form to the figures for the previous fiscal year; 

 

all in reasonable detail and accompanied by an unqualified opinion (or an opinion thereon reasonably satisfactory to the Lender) of independent public accountants of recognized national standing selected by the Borrower and satisfactory to the Lender, which opinion shall not contain an adverse report, a disclaimer, or be qualified or limited because of any restricted or limited examination by such accountant of any material portion of the Borrower’s or any Borrower Subsidiary’s records and shall state that such financial statements present fairly the financial condition of the Borrower and the Borrower Subsidiaries as of the dates indicated and the results of their operations and cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise stated therein) and that the examination by such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards.

 

 

 

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(c)     Concurrent with the quarterly and annual statements required under Sections 4.2(a) and 4.2(b), a compliance certificate of the chief financial officer or the president of the Borrower in the form attached hereto as Schedule 4.2 certifying, among other things, the Minimum Fixed Charge Coverage Ratio, Minimum Liquidity, Maximum Liabilities and Debt Yield of the Borrower and the Borrower Subsidiaries, in each case determined as provided in this Agreement, all in reasonable detail and certified by the chief financial officer of the Borrower that they fairly present the financial condition of the Borrower and the Borrower Subsidiaries as at the dates indicated and the results of their operations and changes in their financial position for the periods indicated, subject to changes resulting from audit and normal year-end adjustments. Said compliance certificate shall also certify: (a) the financial ratios and other requirements referred to in Section 4.15 hereinbelow and set forth such calculations thereof as may be reasonably necessary to confirm the same; (b) the representations and warranties set forth in Article III herein as being true and correct on and as of such date; and (c) that no Default or Event of Default has occurred and is continuing. The Borrower shall provide a revised Compliance Certificate (each, a “Recertification”) within five (5) Business Days after discovery of any error in a previously submitted Compliance Certificate or concurrently with the submittal of audited annual financial statements pursuant to Section 4.2(b) if the audited statements are materially different than the Borrower-prepared financial statements for the last fiscal quarter of the fiscal year.

 

(d)     For each fiscal year commencing with fiscal year 2016 and continuing thereafter, as soon as practicable and in any event no later than the last day of the first fiscal calendar of such fiscal year: (i) with respect to the Borrower, annual Borrower prepared rent rolls and operating statements for the Primary Mortgaged Property, and 2-year operating and cash flow projections; and (ii) with respect to KWC and KWTC, Borrower prepared operating statements and 2-year operating and cash flow projections.

 

(e)     Copies of all other detailed financial reports or management letters submitted by certified independent accountants to the Borrower or any Borrower Subsidiary in connection with any audit or examination, annual, interim or otherwise, all promptly upon receipt in final form; and

 

(f)     From time to time, with reasonable promptness, such further information regarding the business, affairs and financial condition of the Borrower or the Borrower Subsidiaries as the Lender may reasonably request.

 

4.3     Existence/Chief Executive Office. Preserve and maintain the Borrower’s and Borrower Subsidiaries’ legal existence and timely file all necessary and appropriate documents and exhibits and pay all appropriate fees and charges in connection therewith, and provide the Lender with forty-five (45) days’ prior written notice of any change in the Borrower’s or any Borrower Subsidiary’s name or type of entity or State of legal formation or the state of the Borrower’s or any Borrower Subsidiary’s chief executive office.

 

4.4     Observance of Laws. Comply, and cause each Borrower Subsidiary to comply, in all material respects with the requirements of all applicable laws, rules, regulations, orders, writs, judgments, decrees, determinations and awards of any Government Authority, non-compliance with which would materially adversely affect it or its operations or the Borrower’s ability to perform its obligations under the Loan Documents, and obtain and maintain all permits, memberships, franchises, contracts and licenses required, and all trademarks, trade names and trade name rights, patents, patent rights and fictitious name rights necessary for the Borrower and the Borrower Subsidiaries to conduct the business they operate during the term of this Agreement without conflict with the rights of others.

 

 

 

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4.5     Insurance. Insure and keep insured, and cause each Borrower Subsidiary to insure and keep insured, with good and responsible insurance companies, all of their property of an insurable nature (including, without limitation, all buildings, equipment and fixtures) against damage, fire and other casualties in such manner and to the extent that like properties are usually insured by companies in similar businesses, and insure and keep insured and cause each Borrower Subsidiary to insure and keep insured, at all times with good and responsible insurance companies against liability on account of damage to Persons or property as reasonably required by the Lender, taking into account the nature of the Borrower’s and Borrower Subsidiaries’ business and operations, risk history, and financial condition, and also against liability under all applicable workmen’s compensation laws. The Borrower shall, promptly on demand, furnish the Lender with certificates (ACORD Form 27 or its substantial equivalent) and copies of endorsements (waiver of subrogation, notice of cancellation, additional insured, and mortgagee/loss payable) evidencing the required insurance coverage, and provide the Lender with renewal certificates at least ten (10) Business Days prior to the expiration date of each policy for which a certificate was previously furnished. If the Borrower or any Borrower Subsidiary fails to maintain the required insurance, the Lender is authorized to obtain the insurance at the Borrower’s expense.

 

4.6     Inspections of Property, Books and Records. Permit any authorized representative(s) designated by the Lender, at the Lender’s expense, to visit and inspect any of the properties of the Borrower and the Borrower Subsidiaries, including the Borrower’s and Borrower Subsidiaries’ financial and accounting records, and to make copies and take extracts therefrom, and to discuss the affairs, finances and accounts of the Borrower and Borrower Subsidiaries with the Borrower’s officers and independent public accountants, all upon reasonable notice and in such reasonable times during normal business hours, as often as may be reasonably requested.

 

4.7     Accounting Records. Keep, and cause the Borrower Subsidiaries to keep, accurate and proper books of record and account in which full, true and correct entries, in conformity with GAAP (and in conformity with all applicable laws), shall be made in all material respects of all dealings and transactions relating to their respective business and activities.

 

4.8     Maintenance; Preservation of Properties. Maintain, preserve and keep, and cause Borrower Subsidiaries to maintain, preserve and keep, their respective equipment and properties and every part thereof in good repair, working order and condition and in compliance with all applicable federal, state and local laws, statutes and ordinances, and from time to time make all needed and appropriate repairs, renewals, replacements, additions, betterments and improvements thereto so that at all times the efficiency thereof shall be fully preserved and maintained.

 

 

 

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4.9     Taxes. Duly pay and discharge or cause to be paid and discharged, when due, all taxes, assessments and other charges of Government Authorities imposed upon Borrower, the Borrower Subsidiaries and their respective properties, or any part thereof or upon the income or profits therefrom, as well as all claims for labor, materials or supplies which if unpaid might by law become a lien or charge upon any of their respective properties, except such of the foregoing as are being diligently contested in good faith and reserved against on the respective balance sheets, if and to the extent required under GAAP, and by appropriate proceedings. If the Borrower or any Borrower Subsidiary receives a notice of assessment and has not reserved against it, the Borrower shall promptly give notice to the Lender of receipt thereof.

 

4.10     Governmental Authorizations. Maintain, preserve and protect all Governmental Authorizations, and comply in all respects with the terms of all Governmental Authorizations, and promptly (and in any event within ten (10) Business Days) notify the Lender upon obtaining knowledge of: (a) the termination, cancellation, material modification, lapse, non-renewal or other loss of any Government Authorization relating to Collateral or operation of the Borrower’s or any Borrower Subsidiary’s business; and (b) any proceedings to which the Borrower or any Borrower Subsidiary is a party which involves a material risk of any matters set forth in clause (a) immediately preceding; and promptly furnish the Lender with copies of and information with respect to any new Governmental Authorizations relating to the Collateral or operation of the Borrower’s or any Borrower Subsidiary’s business issued to or acquired by the Borrower or any Borrower Subsidiary.

 

4.11     Reportable Event. As soon as possible and, in any event, within twenty (20) days after the Borrower knows or has reason to know that a Reportable Event has occurred, that an accumulated funding deficiency has been incurred or an application may be or has been made to

the Secretary of the Treasury for a waiver of the minimum funding standard under Section 412 of the Code with respect to a Plan, that a Plan has been or may be terminated, that proceedings may be or have been instituted to terminate a Plan, or that the Borrower or any ERISA Affiliate of the Borrower will or may incur any liability to or on account of a Plan under Section 4062, 4063, 4064, 4201 or 4204 of ERISA, deliver to the Lender a certificate of the chief financial officer of the Borrower setting forth details as to such occurrence and action, if any, which it is required or proposes to take, together with any notices required or proposed to be filed with or by it, the ERISA Affiliate, the PBGC or the plan administrator with respect thereto. If requested by the Lender, the Borrower will furnish to the Lender a copy of the annual report of each Plan (Form 5500 series), if any, required to be filed with the Internal Revenue Service. Copies of annual reports or any notices required under this Agreement to be delivered to the Lender shall be delivered no later than thirty (30) days after the later of the date such report or notice has been filed with the Internal Revenue Service or the PBGC or the date of receipt thereof. If the Borrower does not maintain a Plan, but shall at any time adopt or become obligated to contribute to a Plan, it shall comply with the foregoing provisions of this 4.11.

 

4.12     Notices. Promptly give notice to the Lender of: (a) the occurrence of any Default or any Event of Default, including a certificate of an appropriate officer or officers of the Borrower specifying: (i) the nature of such Default or Event of Default; (ii) the period of the existence thereof; and (iii) the actions that the Borrower proposes to take with respect thereto; (b) any change in the name or organizational structure of the Borrower or any Borrower Subsidiary; (c) any uninsured loss suffered by the Borrower or any Borrower Subsidiary through fire, theft, liability or property damage exceeding $100,000; (d) any pending or threatened litigation affecting the Borrower or any Borrower Subsidiary or any Collateral; (e) any change in the Borrower’s or Borrower Subsidiaries’ principal place of business; and (f) change in the location of any Collateral.

 

 

 

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4.13     Agreements. Duly and timely perform, within all required time periods (after giving effect to any applicable grace periods), all of Borrower’s obligations and enforce all leases to which the Borrower is a party, when the failure to so perform and enforce would materially adversely affect the Borrower or its ability to perform its obligations under the Loan Documents.

 

4.14     Supplemental Disclosure. From time to time as may be necessary (in the event that such information is not otherwise delivered by the Borrower to the Lender pursuant to this Agreement), disclose to the Lender in writing any material matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described by the Borrower in the Loan Documents (including all appendices, schedules and exhibits thereto) or which is necessary to correct any information set forth or described by the Borrower hereunder or in connection herewith which has been rendered inaccurate thereby.

 

4.15     Financial Condition. Maintain the financial condition of the Borrower in accordance with GAAP, and as set forth in the applicable Compliance Certificate, as follows:

 

(a)     Fixed Charge Coverage Ratio. The Borrower shall at all times during the Credit Facility maintain a Minimum Fixed Charge Coverage Ratio of not less than 1.0 to one. The Borrower’s Minimum Fixed Charge Coverage Ratio shall be tested quarterly as of the end of each fiscal quarter and shall be determined on a rolling basis. 

 

(b)     Minimum Liquidity, The Borrower and Borrower Subsidiaries shall on a consolidated basis satisfy the following Minimum Liquidity amounts as of each of the following dates:

 

	
As of
	 	
Required Minimum Liquidity
	 
	
12/31/16
	 	$	500,000	 
	
6/30/17
	 	$	1,000,000	 
	
12/31/17
	 	$	1,500,000	 
	
12/31/18
	 	$	2,000,000	 
	
12/31 of any calendar year thereafter
	 	$	2,000,000	 

 

(c)     Maximum Liabilities. At all times during the Credit Facility, the Borrower’s and Borrower Subsidiaries’ consolidated Maximum Liabilities shall not exceed Forty-Five Million Dollars ($45,000,000.00). Maximum Liabilities shall be tested quarterly as of the last day of each fiscal quarter.

 

 

 

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(d)     Debt Yield. The Borrower shall at all times maintain a minimum Debt Yield of not less than nine percent (9%). Debt Yield shall be tested annually as of December 31 of each year, based on Primary NOI and the outstanding principal balance of the Credit Facility. 

 

In the event that the Borrower fails at any time to satisfy the Debt Yield requirement, it shall have the right to repay the Credit Facility (subject to the requirements of Section 1.5(b)) to a level sufficient to meet the Debt Yield requirement. If the Borrower fails to so repay the Credit Facility the Borrower shall forfeit its right to extend the Credit Facility pursuant to the Extension Options. 

 

4.16     PUC Approval. Diligently pursue PUC Approval and keep the Lender fully apprised of any communications received by or delivered to the PUC and any and all terms or conditions imposed, recommended or suggested by the PUC or any governmental authority with respect to the PUC Application. The Borrower shall have sole responsibility for, and shall timely satisfy, all terms and conditions imposed by the PUC or any other Government Authority in connection with the PUC Application or PUC Approval. Any failure to obtain PUC Approval and to satisfy all terms and conditions of PUC Approval by February 5, 2018, shall be considered an Event of Default. The Borrower shall execute and deliver the KWC Stock Pledge to the Borrower within five (5) Business Days after issuance of PUC Approval. 

 

4.17     Sansei and Outrigger Subordination Nondisturbance and Attornment Agreements. 

 

(a)     Diligently pursue the Sansei SNDA and keep the Lender fully apprised of the Borrower’s progress in obtaining the Sansei SNDA, including any communications sent or received with respect to the Sansei SNDA. The Borrower shall have sole responsibility for, and shall timely satisfy, all terms and conditions of delivery of the Sansei SNDA. Any failure to obtain the Sansei SNDA and to satisfy all terms and conditions of delivery thereof by September 1, 2016, shall be considered an Event of Default. 

 

(b)     Diligently pursue the Outrigger SNDA and keep the Lender fully apprised of the Borrower’s progress in obtaining the Outrigger SNDA, including any communications sent or received with respect to the Outrigger SNDA. The Borrower shall have sole responsibility for, and shall timely satisfy, all terms and conditions of delivery of the Outrigger SNDA. Any failure to obtain the Outrigger SNDA and to satisfy all terms and conditions of delivery thereof by September 1, 2016, shall be considered an Event of Default.

 

4.18     Compliance with USA PATRIOT Act. Use good faith and commercially reasonable efforts to comply (and cause the Borrower Subsidiaries and the Borrower’s and Borrower Subsidiaries’ officers and directors, and any direct or indirect owner of Borrower, to comply) with the USA PATRIOT Act (Title III of Pub. L. 107-56, signed into law October 26, 2011) (the “Patriot Act”), and all applicable requirements of governmental authorities having jurisdiction over the Borrower, the Borrower Subsidiaries, and the Borrower’s and Borrower Subsidiaries’ officers and directors, and any direct or indirect owner of the Borrower, including those relating to money laundering and terrorism. In the event that the Borrower or any Borrower Subsidiary fails to comply with this Section or with the Patriot Act or with any such requirements of governmental authorities, then the Lender may, at its option, cause the Borrower or such Borrower Subsidiary to comply therewith, and any and all reasonable costs and expenses incurred by the Lender in connection therewith shall be payable by the Borrower to the Lender on demand, and shall be secured by the Loan Documents. 

 

 

 

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V. NEGATIVE COVENANTS

 

The Borrower agrees that, so long as this Agreement remains in effect, the Note remains outstanding and unpaid or any other amount is owing to the Lender hereunder, thereunder or under any Loan Document, the Borrower shall not, and shall not permit any Borrower Subsidiary, directly or indirectly, to take any of the following actions without the prior written consent of the Lender (which consent may be given or withheld in the discretion of the Lender):

 

5.1     Limitation on Liens. Create, incur, assume or suffer to exist any Liens upon any of the Collateral or upon any of their respective property, assets or revenues, real or personal, tangible or intangible, whether now owned or hereafter acquired, or make any investment in Capital Expenditures, except (a) Liens in the ordinary course of the Borrower’s business, including easements and licenses, and (b) Liens associated with Capital Expenditures permitted under Section 5.3 below subject to the limitations contained therein and provided no Default or Event of Default has occurred or is continuing at the time of such Lien and after giving effect to such Lien no Default or Event of Default shall exist. 

 

5.2     Other Indebtedness. Create, incur or permit any liabilities resulting from any Indebtedness except as set forth in subsections (a) and (b) below, provided no Default or Event of Default has occurred or is continuing at the time of such Indebtedness and after giving effect to such Indebtedness no Default or Event of Default shall exist:

 

(a)     Indebtedness incurred in the ordinary course of the Borrower’s or a Borrower Subsidiary’s business, including equipment leases in the ordinary course of business; and 

 

(b)     Indebtedness associated with Capital Expenditures permitted under Section 5.3 below, subject to the limitations contained therein. 

 

5.3     Investments, Acquisitions and Capital Expenditures. Make or allow any Acquisition, Investment or Capital Expenditure or enter into any agreement to make any Acquisition, Investment, or Capital Expenditure, except Capital Expenditures incurred in the ordinary course of the Borrower’s or a Borrower Subsidiary’s business or that do not exceed $100,000.00, and provided no Default or Event of Default has occurred or is continuing at the time of such Capital Expenditure and after giving effect to such Capital Expenditure, no Default or Event of Default shall exist. 

 

5.4     Restriction on Fundamental Changes. Enter into any transaction of merger, spinoff, or consolidation, directly or indirectly, whether by operation of law or otherwise, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, transfer or otherwise dispose of, in one transaction or a series of transactions, all or any material part of its respective business, property or fixed assets, whether now owned or hereafter acquired, or acquire by purchase or otherwise all or substantially all the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any Person, except that:

 

(a)     any Borrower Subsidiary may be merged or consolidated with or into the Borrower or any wholly-owned Borrower Subsidiary; provided that, in the case of such a merger or consolidation, the Borrower or such wholly-owned Borrower Subsidiary shall be the continuing or surviving corporation;

 

 

 

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(b)     the Borrower and each Borrower Subsidiary may sell or otherwise dispose of real property inventory in the ordinary course of business, subject to obtaining any required release in accordance with the terms of this Agreement; and

 

(c)     the Borrower and each Borrower Subsidiary may sell or otherwise dispose of obsolete or worn out property in the ordinary course of business;

 

provided that, in no event shall the Borrower or any Borrower Subsidiary sell, assign, transfer, pledge or otherwise grant any Lien to any Person on any of its property, assets or revenues, real or personal, tangible or intangible, whether now owned or hereafter acquired, in which the Borrower has granted, or hereafter may grant, a Lien to the Lender. Any exceptions provided under subsections (a) through (c)above are conditioned upon no Default or Event of Default occurring or continuing at the time of such exception and after giving effect to such exception, that no Default or Event of Default shall exist.

 

5.5     Restricted Payments. Make or agree to make any dividend payment or other distribution or any loan to any shareholder or agree to repurchase the shares of any shareholder (any payment in respect of any such dividend, distribution, loan or repurchase being referred to herein as a “Restricted Payment”), except that distributions and dividends to the Borrower and redemptions of the Borrower’s interest in the Borrower Subsidiaries shall be allowed provided that no Default or Event of Default has occurred and is continuing at the time of such transaction, and provided, further, that after giving effect to such transaction, no Default or Event of Default shall exist.

 

5.6     Events of Default. Take or omit to take any action, which act or omission would constitute: (a) a default or an event of default pursuant to, or noncompliance with any of, the terms of any of the Loan Documents; or (b) a default or an event of default pursuant to, or non-compliance with, any other contract, agreement, lease, mortgage deed of trust or instrument to which the Borrower or any Borrower Subsidiary is a party or by which any of them or any of their respective property is bound, and which alone or in the aggregate with all other such defaults, events of default or non-compliance would materially adversely affect the business of the Borrower or any Borrower Subsidiary or the Borrower’s ability to perform its obligations under the Loan Documents. 

 

5.7     Sale, Mortgage or Pledge of Mortgaged Property or Collateral. Sell, mortgage, pledge, transfer, hypothecate, assign, encumber or convey the Mortgaged Property or the Collateral, or any portion thereof or interest therein, or any other portion of the Borrower’s or Borrower Subsidiaries’ assets without the prior written consent of the Lender unless the Borrower, with respect to any portion of the Mortgaged Property or Collateral, shall have satisfied the conditions for release thereof including without limitation, the conditions set forth in Section 1.5(b)(iii). 

 

 

 

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5.8     Priority. Permit any of the obligation of the Borrower or any Borrower Subsidiary under or otherwise in respect of this Agreement, the Note, and the Credit Facility and any and all other amounts due hereunder or thereunder to rank, as to payment and security, in pari passu with or lower in priority than any other Indebtedness other than Indebtedness permitted under Section 5.2, whether now existing or incurred hereafter, including indebtedness for borrowed money or under guarantees or in respect of any indenture, contract, agreement or other instrument or by which the Borrower or any Borrower Subsidiary or any of their respective property is bound, whether now existing or incurred hereafter. 

 

5.9     Business. Materially change the character of the Borrower’s or any Borrower Subsidiary’s current business, or engage in any type of business other than their respective current business.

 

5.10     Use of Funds. Use any of the proceeds of the Credit Facility for any purpose except as set forth in Section 1.2(b) of this Agreement.

 

5.11     Guaranties. Guarantee or become liable in any way as a surety, endorser (other than in the ordinary course of business), or accommodation endorser or otherwise for the debt or obligation of any Person.

 

VI. THE BANK’S RIGHTS UPON DEFAULT

 

6.1     Events of Default. Each of the following events is an “Event of Default” under this Agreement:

 

(a)     Transfers. Any (a) sale, conveyance, pledge, assignment, disposition or other transfer of or membership interests of KBHL, or the creation or issuance of new membership interests by KBHL, in one or a series of transactions which results in fifty percent (50.0%) or more of the membership interest of KBHL being vested in parties other than the Borrower, or which results in voting change in voting control of KBHL or (b) sale, conveyance, pledge, assignment, disposition or other transfer of corporate stock or membership interests of, or the creation or issuance of new stock or membership interests by any other Borrower Subsidiary, in one or a series of transactions which results in any of such Borrower Subsidiary’s corporate stock or membership interest being vested in parties other than the Borrower (any such sale, conveyance, pledge, assignment, disposition, transfer or other action described in clauses (a) and (b) being referred to as a “Transfer”), without the Lender’s prior written consent, which consent may be given or withheld at Lender’s sole discretion. Prior to issuing any written consent or denial of consent, the Lender shall have the right (but not the obligation) to request, and the Borrower shall provide, at the Borrower’s sole cost and expense, any information Lender deems necessary to evaluate the proposed Transfer, including, but not limited to, any reports, statements, studies, appraisals, agreements, commitments, and other documents in the Borrower’s possession or control. A Transfer shall include, but not be limited to: (a) an installment sales agreement wherein a stockholder or member agrees to sell all or any portion of the corporate stock or membership interest of the Borrower or a Borrower Subsidiary for a price to be paid in installments; (b) a sale, assignment or other transfer of, or the grant of a security interest in, the corporate stock or membership interest of the Borrower or a Borrower Subsidiary; (c) if a stockholder is a corporation, any merger, consolidation, or a sale or pledge of such corporation’s stock or the creation or issuance of new stock in one or a series of transactions, by which such corporation’s stock shall be vested in a party or parties who are not its shareholders; (d) if a stockholder or member is a limited or general partnership or joint venture, any merger or consolidation or the change, removal or addition of a general partner or the sale or pledge of the partnership interest of any general partner or any profits or proceeds relating to such partnership interest, or the sale or pledge of limited partnership interests or the creation or issuance of new limited partnership interests in one or a series of transactions, by which such limited partnership interests shall be vested in a party or parties who are not limited partners; (e) if a stockholder or member is a limited liability company, any merger or consolidation or the change, removal, resignation or addition of a managing member (or if no managing member, any member) or any profits or proceeds relating to such membership interest, or the sale or pledge of non-managing membership interests or the creation or issuance of new non-managing membership interests in one or a series of transactions, by which such non-managing membership interests shall be vested in a party or parties who are not now non-managing members; (f) if a stockholder or member is a trustee or nominee trustee of a trust, any merger, consolidation or the sale or pledge of the legal or beneficial interest in such trust or the creation or issuance of new legal or beneficial interests in one or a series of transactions, by which such beneficial or legal interests shall be vested in a party or parties who are not now legal or beneficial owners; or (g) the conversion of a stockholder or member from its present form of business organization to any other form of business organization, including, without limitation, a corporation, S-corporation, general partnership, limited partnership, limited liability partnership, limited liability company, or sole proprietorship. 

 

 

 

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(b)     Representations, etc. Any certificate furnished by the Borrower or any Borrower Subsidiary to the Lender pursuant hereto shall prove to have been incorrect in any material respect or any of the representations and warranties made by the Borrower or any Borrower Subsidiary herein or in connection herewith shall prove to have been incorrect in any material respect when made, or shall hereafter become incorrect in any material respect.

 

(c)     Payments Under Loan Documents. The Borrower shall fail to pay within ten (10) days of the due date: (a) any payment of principal on the Note; (b) any payment of interest on the Note; or (c) any other amounts payable by the Borrower hereunder or under any of the other Loan Documents.

 

(d)     Defaults Under Other Agreements. The Borrower or any Borrower Subsidiary shall default in the payment of any Indebtedness beyond any period of grace provided with respect thereto or the Borrower shall default in the performance or observance of any other agreement, term or condition contained in any instrument, agreement or indenture pursuant to which any such Indebtedness is created or by which it is secured for such period of time as would cause, or permit the holder or holders of such obligations (or a trustee or other Person on behalf of such holder or holders) to cause, such obligation to become due prior to its stated maturity or a portion thereof to be prepaid (other than by a regularly scheduled required prepayment) prior to such stated maturity.

 

(e)     Bankruptcy, etc. The Borrower or any Borrower Subsidiary shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled “Bankruptcy” as now or hereafter in effect or any successor thereto (the “Bankruptcy Code”); or an involuntary case is commenced against the Borrower or any Borrower Subsidiary under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or other similar law of any jurisdiction now or hereafter in effect, and relief is ordered against the Borrower or such Borrower Subsidiary or the petition is not dismissed within sixty (60) days after the commencement of such case; or a trustee (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property the Borrower or any Borrower Subsidiary; or the Borrower or any Borrower Subsidiary commences any other proceeding under any reorganization, arrangement, readjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to it; or there is commenced against the Borrower or any Borrower Subsidiary any such proceeding which remains undismissed for a period of sixty (60) days; or the Borrower or any Borrower Subsidiary is adjudicated insolvent or bankrupt; or the Borrower or any Borrower Subsidiary fails to controvert in a timely manner any such case under the Bankruptcy Code or any such proceeding, or any order of relief or other order approving any such case or proceeding is entered; the Borrower or any Borrower Subsidiary by any act or failure to act indicates its consent to, approval of or acquiescence in any such case or proceeding or in the appointment of any custodian or the like for it or any substantial part of its property or suffers any such appointment to continue undischarged or unstayed for a period of sixty (60) days; or the Borrower or any Borrower Subsidiary makes a general assignment for the benefit of creditors; or any action is taken by the Borrower or any Borrower Subsidiary for the purpose of effecting any of the foregoing.

 

 

 

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(f)     Loan Documents. The Borrower shall fail to perform in full or observe in full any term, covenant or agreement on its part to be performed or observed in Sections 4.3, 4.15, 4.16, 5.1, 5.2, 5.3, 5.4, 5.5, 5.7, 5.8, 5.9, 5.10 or 5.11 of this Agreement in accordance with the terms thereof.

 

(g)     PUC Approval. The Borrower fails to obtain PUC Approval, or to satisfy any condition of PUC Approval, or to execute and deliver the KWC Stock Pledge Agreement to the Lender, in each case by February 5, 2018. 

 

(h)     Sansei and Outrigger SNDAs. The Borrower fails to deliver either the Sansei SNDA or the Outrigger SNDA by the dates specified in Section 4.17. 

 

(i)     Security. Any of the mortgages, guarantees and security agreements now or hereafter existing which secure the obligations of the Borrower under this Agreement, the Note, and the other Loan Documents shall be deemed not to be legal, valid, binding and/or enforceable in accordance with their respective terms or any party thereto (other than the Lender) shall deny all or any obligation or liability thereunder.

 

(j)     ERISA. Any member of the Controlled Group of the Borrower shall fail to pay when due an amount or amounts aggregating in excess of U.S. $1,000,000 which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in excess of U.S. $3,000,000 (collectively, a “Material Plan”) shall be filed under Title IV of ERISA by any member of the Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Material Plan or a proceeding shall be instituted by a fiduciary of any Material Plan against any member of the Controlled Group to enforce Section 515 of ERISA and such proceeding shall not have been dismissed within thirty (30) days thereafter; or a condition shall exist by reason of which the PBGC Material Plan must be terminated.

 

 

 

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(k)     Material Adverse Change. There shall be a material adverse change in the condition (financial or otherwise) of the Borrower or any Borrower Subsidiary which shall materially adversely affect the ability of the Borrower to perform its obligations under the Loan Documents; or

 

(l)     Termination; Dissolution; Etc. Any action or proceeding shall have been commenced to terminate or dissolve the Borrower or any Borrower Subsidiary or any petition or application shall have been filed to initiate any such termination or dissolution, or the Borrower or any Borrower Subsidiary shall otherwise be deemed to have terminated or dissolved.

 

(m)     Other Loan Documents; Other Terms. (i) An “Event of Default” under and as defined in any of the other Loan Documents shall have occurred; or (ii) the Borrower shall otherwise fail to observe or perform any other term, covenant or agreement contained in this Agreement (other than the Events of Default described in any other subsection of this Section 6.1) or any of the other Loan Documents on its part to be observed or performed, and any such failure shall remain unremedied for any applicable grace period provided therefor, or if no grace period is so provided, then for a period of thirty (30) days after the earlier of: (A) the date written notice thereof shall have been given to the Borrower by the Lender; and (B) the date the Borrower should have delivered to the Lender a written notice of the occurrence of a Default or Event of Default in respect thereof pursuant to Section 4.12 hereinabove.

 

(n)     Collateral. Any Mortgaged Property, any stock of KWC or KWTC, or any other property, assets or revenues or any portion thereof, real or personal, tangible or intangible, whether now owned or hereafter acquired, in which the Borrower has granted, or hereafter may grant, a Lien to the Lender: (i) is sold, transferred, hypothecated, assigned or otherwise conveyed without the Lender’s prior written consent, except as specifically permitted in this Agreement or the other Loan Documents; or (ii) is seized, attached, executed, forfeited, confiscated, levied upon under any legal process or under any claim of legal right, or subject to forfeiture proceedings under any state or federal laws, and such seizure, forfeiture, confiscation, attachment or levy is not released or discharged; or (iii) is destroyed, lost or damaged and such destruction, loss or damage is not covered by insurance and replaced within thirty (30) days of such destruction, loss or damage.

 

(o)     Termination of Governmental Authorizations. Any Governmental Authorization: (a) which is material to the business or operations of the Borrower or any Borrower Subsidiary; or (b) the loss of which could materially adversely affect the ability of the Borrower to perform its Obligations under this Agreement or any of the Loan Documents, shall be suspended, terminated, revoked, shall expire without renewal on or before its expiration date, or shall become subject to any injunction or order which has not been stayed and which may, in the reasonable judgment of the Lender, materially adversely affect the business or operations of the Borrower or its ability to perform its Obligations under this Agreement or any other Loan Document. 

 

 

 

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(p)     Judgment. Any final, uninsured judgment shall be rendered against the Borrower or any Borrower Subsidiary for the payment of money in an amount which alone or with other outstanding final judgments exceeds Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate and:

 

(i)     such judgment shall not be discharged or fully bonded against within thirty (30) days; or

 

(ii)     within thirty (30) days after entry of such judgment, execution shall not be stayed pending appeal; or

 

(iii)     such judgment shall not be discharged within thirty (30) days after expiration of any such stay.

 

6.2     The Lender’s Rights. If an Event of Default shall occur and be continuing the Lender shall have, in addition to any and all other rights and remedies, legal or equitable, available to the Lender under any and all of the Loan Documents or at law, the following additional rights and remedies:

 

(a)     The absolute right to deny to the Borrower any further disbursement of the Credit Facility proceeds or other funds (the Lender’s obligation to extend any further credit to the Borrower shall immediately terminate);

 

(b)     The right, at the option of the Lender, to declare, without notice, the entire principal amount and accrued interest under the Credit Facility, plus any fees and charges reasonably incurred by the Lender under any of the Loan Documents, immediately due and payable;

 

(c)     The right, at the option of the Lender, to charge interest on any principal amount outstanding under this Agreement and also in respect of overdue interest on any Revolving Borrowing at the Default Rate; and

 

(d)     The right to the ex parte appointment without bond of a receiver, without regard to the value of any collateral or solvency of any party liable for payment, observance or performance of the Obligations and regardless of whether the Lender have any adequate remedy at law.

 

The Borrower hereby waives to the full extent that it may lawfully do so, the benefit of all such laws and any and all rights to have any of the property, assets or revenues or any portion thereof, real or personal, tangible or intangible, whether now owned or hereafter acquired, in which the Borrower has granted, or hereafter may grant, a Lien to the Lender marshaled upon any foreclosure of such property, assets or revenues and agrees that after the occurrence of any Event of Default, the Lender may, in its sole discretion, proceed to enforce its rights under the Loan Documents and to foreclose on any or all of such property, assets or revenue, irrespective of the differing nature thereof or whether or not the same constitutes real or personal property.

 

 

 

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VII. MISCELLANEOUS

 

7.1     Further Assurance. From time to time within five (5) Business Days after the Lender’s demand, the Borrower will execute and deliver such additional documents, take such further action and provide such additional information as may be reasonably requested by the Lender to carry out the intent of this Agreement and the other Loan Documents and to be informed of Borrower’s status and affairs.

 

7.2     Accounting Principles. Except as otherwise specifically provided in this Loan Agreement, all statements to be prepared and determinations to be made under this Agreement, including (without limitation) those pursuant to Article IV shall be prepared and made in accordance with GAAP.

 

7.3     Enforcement and Waiver by the Lender. The Lender shall have the right at all times to enforce the provisions of the Loan Documents as they may be amended from time to time, in strict accordance with their terms, notwithstanding any conduct or custom on the part of the Lender in refraining from so doing at any time or times. The failure of the Lender at any time or times to enforce its rights under such provisions, strictly in accordance with the same, shall not be construed as having created a custom in any way or manner contrary to specific provisions of the Loan Documents or as having in any way or manner modified or waived the same. All rights and remedies of the Lender are cumulative and concurrent and the exercise of one right or remedy shall not be deemed a waiver or release of any other right or remedy.

 

7.4     Expenses; Indemnity.

 

(a)     The Borrower agrees to pay all reasonable out-of-pocket expenses of the Lender incurred in connection with the preparation, execution, delivery, enforcement and administration of this Agreement, the Note, and the Loan Documents and the making and repayment of the Credit Facility, including, without limitation the reasonable legal fees and expenses of the Lender;

 

(b)     The Borrower further agrees to pay, and to save the Lender harmless from all liability for, any stamp or other documentary taxes which may be payable in connection with the Borrower’s execution or delivery of this Agreement and the other Loan Documents, its borrowings hereunder, or its issuance of the Note, or of any other instruments or documents provided for herein or delivered or to be delivered by the Borrower hereunder or in connection herewith;

 

(c)     Whether or not the transactions contemplated hereby shall be consummated: the Borrower shall pay and indemnify and hold harmless the Lender and its officers, directors, employees, counsel, agents and attorneys-in-fact (each, an ‘‘Indemnified Person’’) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including all fees and disbursements of counsel, the allocated costs of internal legal services, and disbursements of internal legal counsel) of any kind or nature whatsoever (except for such Indemnified Person’s own gross negligence or willful misconduct) with respect to and to the extent arising from the Borrower’s or any Borrower Subsidiary’s execution, delivery, enforcement or performance of this Agreement and any other Loan Documents, or the Borrower’s use of the proceeds of the Credit Facility, or arising from the action or failure to act of the Borrower, the Borrower Subsidiaries, or their respective officers, directors, employees, counsel, agents or attorneys-in-fact; and

 

 

 

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(d)     All obligations provided for in this Section 7.4 shall survive any termination of this Agreement.

 

7.5     Notices. All notices, requests, demands or documents that are required or permitted to be given or served hereunder shall be in writing and personally delivered, or sent by registered or certified mail addressed, or by facsimile or email with confirming hard copy of such facsimile or email sent, as follows:

 

	
 
	
To Borrower at:
	
Maui Land & Pineapple Company, Inc.

200 Village Road

Lahaina, Hawaii 96761

Attn: Tim T. Esaki

Facsimile No.: 

Email: 

      

	 	
To Lender at:
	
First Hawaiian Bank

999 Bishop Street

Honolulu, Hawaii 96813

Attn: Commercial Real Estate Division, Joyce Sakai

Facsimile No.: 

Email: 

 

	 	
with copy to:
	
Goodsill Anderson Quinn & Stifel

999 Bishop Street, Suite 1600

Honolulu, Hawaii 96813

Attention: Leighton Yuen, Esq.

Facsimile No. 

Email: 

 

The addresses may be changed from time to time by the addressee by serving notice as heretofore provided. Service of such notice or demand shall be deemed complete on the date of actual delivery as shown by the addressee’s registry or certification receipt or at the expiration of the second day after the date of mailing, whichever is earlier in time.

 

The Borrower hereby irrevocably authorizes the Lender to accept facsimile (“FAX”) transmissions of such notices, requests, demands and documents, provided such transmission is signed by Tim T. Esaki. The Borrower shall and does hereby hold the Lender harmless from, and indemnify the Lender against, any loss, cost, expense, claim or demand which may be incurred by or asserted against the Lender by virtue of the Lender acting upon any such notices, requests, demands or documents transmitted in accordance with the above provisions. Any such FAX transmission shall, at the Lender’s request, be separately confirmed by telephone conference between the Lender and the person described above, and shall be followed by transmission of the actual “hard copy” of the notice, request, demand or document in question.

 

 

 

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7.6     Waiver and Release by the Borrower. To the maximum extent permitted by applicable law, the Borrower:

 

(a)     Waives notice and opportunity to be heard, after acceleration of the indebtedness evidenced by the Loan Documents, before exercise by the Lender of the remedy of setoff or of any other remedy or procedure permitted by any applicable law or by any prior agreement with the Borrower, and, except where specifically required by this Agreement or by any applicable law, notice of any other action taken by the Lender;

 

(b)     Waives presentment, demand for payment, notice of dishonor, and any and all other notices or demands in connection with the delivery, acceptance, performance, or enforcement of this Agreement, and consents to any extension of time (and even multiple extensions of time for longer than the Original Term), renewals, releases of any person or organization liable for the payment of the Obligations under this Agreement, and waivers or modifications or other indulgences that may be granted or consented to by the Lender in respect of the Credit Facility and other extensions of credit evidenced by this Agreement; and

 

(c)     Releases the Lender and its officers, agents and employees from all claims for loss or damage caused by any act or omission on the part of any of them except willful misconduct or gross negligence.

 

7.7     Sales and Participations.

 

(a)     The Borrower shall have no right to assign or delegate any of its rights or obligations in the Credit Facility or under the Loan Documents without the prior written consent of the Lender, which the Lender may give or withhold in its sole and absolute discretion.

 

(b)     The Lender may at any time sell, assign, transfer, negotiate, grant participations in, or otherwise dispose of, to any one or more Participants, all or any part of the indebtedness of the Borrower at any time outstanding and held by the Lender under any of the Loan Documents. The Borrower acknowledges and agrees that any such disposition will give rise to an obligation of the Borrower to each Participant and that, in such event, each Participant shall, for all purposes hereof, be entitled to the benefits of the Loan Documents and all other documents, instruments and agreements therein described, as its interest may appear. The Borrower will, at the Lender’s request, cooperate with and assist in the Lender’s participation effort, including preparation of materials regarding the Mortgaged Property, Collateral and Borrower Subsidiaries and meeting with prospective Participants regarding the Mortgaged Property, other Collateral and Borrower Subsidiaries. The Borrower authorizes the Lender to disclose and distribute to prospective Participants such financial and other information concerning the Borrower, the Mortgaged Property, the Collateral and Borrower Subsidiaries as the Lender believes advisable in order to arrange participation of the Loan. The Borrower hereby consents to any and all discussions and agreements heretofore or hereafter made between the Lender and any Participant or prospective Participant regarding the interest rate, fees, and other terms and provisions applicable to the Credit Facility, and to the Lender’s disclosure to any Participant or prospective Participant, from time to time, of such financial and other information pertaining to the Borrower, any Borrower Subsidiary and the Credit Facility as the Lender and such Participant or prospective Participant may deem appropriate (whether public or non-public, confidential or non-confidential, and including information relating to any insurance required to be carried by the Borrower and any financial or other information bearing on the Borrower’s creditworthiness and the value of any Collateral). The Borrower acknowledges that the Lender’s disclosure of such information to any Participant or prospective Participant constitutes an ordinary and necessary part of the process of effectuating and servicing the Credit Facility. Further, the Borrower shall, from time to time at the request of the Lender and any Participant, and at no cost to the Borrower, execute and deliver, or cause to be executed and delivered, to the Lender or to such Participant (or any other party as the Lender or such Participant may designate), any and all such further instruments as may in the opinion of the Lender or such Participant be reasonably necessary or desirable to give full force and effect to such participation, including, but not limited to, such estoppel certificates or other instruments as may be requested from the Borrower to evidence the continuing validity of the Loan Documents and the absence of any default by the Lender thereunder; provided, however, that the contents of such instruments shall not, in any way, increase the obligations, liabilities, responsibilities, or burdens of the Borrower under the Loan Documents. In addition, the Borrower shall furnish to the Lender or any Participant all financial and other information relating to the Credit Facility, the Mortgaged Property, the Collateral, or the Borrower or any Borrower Subsidiary as may be requested by the Lender or such Participant. Notwithstanding the foregoing, the Borrower acknowledges that no Participant shall be deemed a direct lender or co-lender with the Lender. In the event the Loan is participated, the Lender, or an entity acceptable to the Lender and the Participants shall serve as administrative agent for all of the Loan Participants. If an administrative agent is appointed, the Lender and the Participants may require that any consent or approval rights of the Lender under the Loan Documents shall be processed thorough the administrative agent. 

 

 

 

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(c)     The Lender or any Participant may at any time pledge or grant a security interest in all or any portion of its rights under this Agreement and the Loan Documents to secure obligations of the Lender or such Participant, including any pledge or grant to secure obligations to a Federal Reserve Bank or to any other agency or instrumentality of the United States of America to support borrowings of federal funds; provided that no such pledge or grant of a security interest shall release the Lender or such Participant from any of its obligations hereunder or substitute any such pledgee or grantee for the Lender or such Participant as a party hereto.

 

7.8     Applicable Law. The substantive laws of the State of Hawaii shall govern the construction of this Agreement and the rights and remedies of the parties hereto. 

 

7.9     Binding Effect. This Agreement shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and permitted assigns, and shall be binding on the parties hereto and their respective heirs, personal representatives, successors and assigns.

 

7.10     Merger. This Agreement and the remainder of the Loan Documents constitute the full and complete agreement between the Lender and the Borrower with respect to the Credit Facility, and all prior oral and written agreements, commitments and undertakings shall be deemed to have been merged into the Loan Documents and such prior oral and written agreements, commitments and undertakings shall have no further force or effect except to the extent expressly incorporated in the Loan Documents.

 

 

 

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7.11     Amendments; Consents. No amendment, modification, supplement, termination, or waiver of any provision of this Agreement or the other Loan Documents, and no consent to any departure by the Borrower therefrom, may in any event be effective unless in writing signed by the Lender, and then only in the specific instance and for the specific purpose given.

 

7.12     Severability. If any provision of any of the Loan Documents shall be held invalid under any applicable law, such invalidity shall not affect any other provision of the Loan Documents that can be given effect without the invalid provision, and, to this end, the provisions of the Loan Documents are severable.

 

7.13     Right of Setoff. In addition to any right now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, the Lender is hereby authorized at any time and from time to time, without presentment, demand, protest or other notice of any kind to the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and any other indebtedness at any time held or owing by the Lender (including, without limitation, by branches and agencies of the Lender wherever located) to or for the credit or account of the Borrower against and on account of the duties, obligations, responsibilities, liabilities of the duties, obligations, responsibilities, liabilities and agreements of the Borrower to the Lender under this Agreement, the Note, or the other Loan Documents and all other claims of any nature or description arising out of or connected with this Agreement, the Note, or any other Loan Document, irrespective of whether or not the Lender shall have made any demand hereunder and although such agreements of the Borrower or claims of the Lender shall be contingent or unmatured.

 

7.14     Time is of the Essence. Time is of the essence under and in respect of this Agreement.

 

7.15     Headings. The headings of the various provisions of this Agreement are inserted for convenience of reference only and shall not affect the meaning or construction of any provision.

 

7.16     Counterparts. This Agreement may be executed in counterparts, each of which shall be an original instrument and all of which shall together constitute one and the same agreement.

 

7.17     Survival of Representations and Warranties. All representations and warranties contained herein or otherwise made in writing by the Borrower or Borrower Subsidiaries in connection herewith shall survive the execution and delivery of this Agreement, the Note, and the other Loan Documents.

 

7.18     OFAC Restrictions. The Lender and the Borrower are obligated to comply with the laws and regulations administered by the United States Office of Foreign Asset Control (“OFAC Restrictions”). In order to comply with OFAC Restrictions, the Lender may be required to temporarily suspend processing a transaction, which may result in delayed availability of funds, or may be prohibited from closing a transaction altogether. The Borrower agrees to the foregoing, and further agrees that if the Lender is required by applicable OFAC Restrictions to suspend processing of a transaction, or is prohibited by applicable OFAC Restrictions from closing a transaction, the Lender will not be liable for any damages of any kind or nature (including, without limitation, actual, consequential, special, incidental, punitive, or indirect damages, whether arising out of claims for “lender liability” or any other cause), which the Borrower may suffer or incur in connection with any such suspension of, or failure to close, a transaction.

 

 

 

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7.19     USA PATRIOT Act Notice. The Lender hereby notifies the Borrower that, pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow the Lender, as applicable, to identify Borrower in accordance with the Patriot Act.

 

7.20     Waiver of Jury Trial and Submission to Venue. The Borrower and each Borrower Subsidiary hereby knowingly, voluntarily and intentionally waives any right it may have to a jury trial in any legal proceeding which may be hereinafter instituted by the Lender or the Borrower or any Borrower Subsidiary to assert any of their respective claims arising out of or relating to this Agreement or any other agreement, instrument or document evidencing, securing or relating to the Credit Facility. In such event, the Borrower and each Borrower Subsidiary, at the request of the Lender, shall cause its attorney of record to effectuate such waiver in compliance with the Rules of Civil Procedure of the applicable jurisdiction, as the same may be amended from time to time. The Borrower and each Borrower Subsidiary each hereby submits to the jurisdiction of the courts of the State of Hawaii and agrees that any judgment of the courts of the State of Hawaii, including any in personam judgment, shall be deemed to have the same force and effect as that obtained from the courts in the jurisdiction in which the Borrower or such Borrower Subsidiary resides. The Borrower and each Borrower Subsidiary each hereby waives any right which it may have to transfer or change the venue of any litigation brought against it by the Lender in accordance with this paragraph.

 

VIII. DEFINITIONS

 

8.1     “Acquisition” means any transaction, or any series of related transactions, by which the Borrower or any Borrower Subsidiary directly or indirectly: (a) acquires any going business or all or substantially all of the assets of any firm, company, partnership, joint venture, limited liability, corporation or division thereof, whether through purchase of assets, merger or otherwise; or (b) acquires (in one transaction or as the most recent transaction in a series of transactions) control of at least a majority of the stock of a corporation having ordinary voting power for the election of directors; or (c) acquires control of fifty percent (50%) or more ownership interest in any partnership, limited liability company or other entity. The amount of any Acquisition shall be equal to the purchase price thereof.

 

8.2     “Actual Net Sales Proceeds” shall have the meaning set forth in Section 1.5(b)(iii) of this Agreement. 

 

 

 

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8.3     “Adjusted EBITDA” means the following for the period being measured: (A) the Borrower’s and Borrower Subsidiaries’ consolidated earnings; plus (B) provision for income taxes recognized; plus (C) interest expense on Indebtedness; plus (D) depreciation and amortization; plus (E) non-recurring charges and/or losses before taxes (whether cash or non-cash); minus (F) non-recurring earnings, income and/or gains before taxes (whether cash or non-cash), determined based on the most recent fiscal quarter, but annualized. 

 

8.4     “Affiliate” shall mean: (a) any Person, that directly or indirectly, through one or more intermediaries, controls Borrower or any Borrower Subsidiary (a “Controlling Person”); or (b) any Person (other than the Borrower or a Borrower Subsidiary) which is controlled by or is under common control with a Controlling Person. As used herein, the term “control” means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 

 

8.5     “Agreement” shall mean this Credit Agreement, as it may from time to time be amended, supplemented or otherwise modified.

 

8.6     “Appraised Value” with respect to any property shall be the fair market value of such property as determined by a licensed appraiser acceptable to and retained by the Lender, determined in accordance with the Uniform Standards of Professional Appraisal Practice and FIRREA requirements. 

 

8.7     “Assignment of Rents” means an assignment or assignments of rents and leases, in form and substance satisfactory to the Lender, assigning the Borrower’s interest as lessor in, and all rents from, leases relating to the Mortgaged Property.

 

8.8     “Bankruptcy Code” shall have the meaning provided in Section 6.1(e) of this Agreement.

 

8.9     “Borrower” shall have the meaning set forth in the first paragraph of this Agreement.

 

8.10     “Borrower Subsidiary” shall mean any Subsidiary of the Borrower. As of the Closing Date, the Borrower Subsidiaries consist of KWC, KWTC, MPC, KLC, KRC, KBHL, KBL and KAC. 

 

8.11     “Borrowing” shall mean any Revolving Borrowing.

 

8.12      “Business Day” shall mean any day, excluding Saturdays and Sundays, on which the main branch of the Lender in Honolulu, Hawaii is open to the public for carrying on substantially all of its banking functions.

 

8.13     “Capital Expenditure” means any expenditure for equipment, fixed assets, real property or improvements, or for replacements or substitutions therefor or additions thereto, that have a useful life of more than one (1) year.

 

 

 

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8.14     “Closing” shall refer to the execution and delivery of all Loan Documents, the recordation of the Mortgage, and the completion of all conditions for the first disbursement of Credit Facility proceeds to the Borrower, each in accordance with the terms of this Agreement. 

 

8.15     “Closing Certificate” shall mean a Closing Certificate substantially in the form attached as Exhibit “B” hereto and by this reference hereby made a part hereof, executed by the Borrower and delivered to the Lender on the Closing Date.

 

8.16     “Closing Date” shall mean the date that Closing occurs.

 

8.17     “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

 

8.18     “Collateral” shall have the meaning set forth in Section 1.3 of this Agreement. 

 

8.19     “Controlled Group” shall mean with respect to any specified Person: (a) all members of a controlled group of corporations; and (b) all trades or businesses (whether or not incorporated) under common control which, together with such Person, are treated as a single employer under Sections 414(b) or 414(c) of the Code.

 

8.20     “Credit Facility” shall have the meaning set forth in Recital A of this Agreement.

 

8.21      “Debt Service” shall mean the Borrower’s actual or required debt service payments with respect to any Indebtedness, including required or actual principal and interest payments and also including all actual or required payments under capital leases.

 

8.22     “Debt Yield” shall mean Primary NOI divided by the outstanding principal balance of the Credit Facility.

 

8.23     “Default” shall mean any event, act or condition which notice or lapse of time or both would constitute an Event of Default.

 

8.24     “Default Rate” shall have the meaning given in Section 1.4(a) of this Agreement.

 

8.25     “Effective Date” shall have the meaning set forth in the first paragraph of this Agreement. 

 

8.26     “Environmental Indemnity Agreement” shall mean an environmental indemnity agreement in form and substance satisfactory to the Lender, with respect to the Mortgaged Property.

 

8.27     “Environmental Laws” means all present and future federal, state or local laws, statutes, ordinances, rules or regulations and other requirements of governmental authorities relating to the environment, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et seq., as now or hereafter amended, the Clean Water Act, 33 U.S.C. § 1251 et seq., as now or hereafter amended, the Clean Air Act, 42 U.S.C. § 7401 et seq., as now or hereafter amended, the Toxic Substances Control Act, 15 U.S.C. § 2601-2629, as now or hereafter amended, the Safe Drinking Water Act, 42 U.S.C. § 300f-300j, as now or hereafter amended, the Environmental Response Law, Hawaii Revised Statutes, as amended, Ch. 128D, as now or hereafter amended, and the regulations now or hereafter adopted, published and/or promulgated pursuant thereto.

 

 

 

36

 

 

8.28     “ERISA” shall mean the Employee Retirement Income Security Act of 1974 as amended from time to time. Section references to ERISA are to ERISA as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

 

8.29     “ERISA Affiliate” shall mean each trade or business (whether or not incorporated) which together with the Borrower or any of its Subsidiaries would be deemed to be a “single employer” within the meaning of Section 4001 of ERISA.

 

8.30     “Extension Option” shall have the meaning set forth in Section 1.2(e) of this Agreement.

 

8.31     “Event(s) of Default” shall have the meaning set forth in Section 6.1 of this Agreement.

 

8.32     “First Extension Date” shall have the meaning set forth in Section 1.2(e) of this Agreement.

 

8.33     “First Extension Period” shall have the meaning set forth in Section 1.2(e) of this Agreement.

 

8.34     The term “fiscal year” shall mean, with respect to the Borrower and each Borrower Subsidiary, the fiscal year ending on December 31 of each year. References to specific fiscal years (e.g. “fiscal year 2016”) shall mean the fiscal year ending December 31 of the year specified.

 

8.35     The term “fiscal quarter” shall mean, with respect to the Borrower and each Borrower Subsidiary, the fiscal quarter ending on the last day of March, June, September and December of each year. References to specific fiscal quarter (e.g., “first fiscal calendar 2016”) shall mean the specified fiscal quarter of the fiscal year specified.

 

8.36     “Fixed Charges” shall mean the Borrower’s Debt Service for the most recent fiscal quarter, but annualized.

 

8.37     “GAAP” shall mean generally accepted accounting principles, consistently applied.

 

8.38     “Government Authority” means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

 

8.39     “Governmental Authorizations” shall mean all franchises, licenses, permits, consents, approvals, authorizations and agreements granted or issued by any local, state or Federal commission, agency or authority or any other Government Authority, whether presently existing or hereafter granted or issued to or obtained or used by the Borrower or any Borrower Subsidiary in its business and/or for the operation and use of the Collateral.

 

 

 

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8.40     “Hazardous Substance” means any substance that is at any time defined or listed in, or otherwise classified pursuant to, any applicable laws or regulations, including, without limitation, the environmental laws, as a “hazardous substance, hazardous waste, infectious waste, toxic substance, toxic pollutant” and including, without limitation, asbestos, polychlorinated biphenyls, petroleum products, petroleum byproducts, petroleum wastes and byproducts associated with the extraction, refining or use of petroleum or petroleum products, whether or not so listed or classified in such laws or regulations.

 

8.41     “Hazardous Substance Activity” means any actual, proposed or threatened storage, holding, existence, use, release, migration, emission, discharge, generation, processing, abatement, removal, repair, cleanup, detoxification, disposition, handling or transportation of any hazardous substance from, under, into or on the property or any other activity that occurs or causes or would cause such event to exist.

 

8.42     “Indebtedness” shall mean, with respect to a Person, all items of indebtedness and other obligations of the Person which, in accordance with generally accepted principles of accounting, would be included on the liability side of a balance sheet on the date as of which Indebtedness is to be determined, including, without limitation, (i) all obligations for borrowed money, (ii) all obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations in respect of accounts payable and accrued expenses, and (iv) all obligations to pay the deferred purchase price of property or services, plus obligations under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases, in respect of which obligations the Person is liable, whether pursuant to a guarantee, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations the Person otherwise assures a creditor against loss.

 

8.43     “Indemnified Person” shall have the meaning set forth in Section 7.4(c) of this Agreement.

 

8.44     “Interest Adjustment Date” shall have the meaning set forth in Section 1.4(a) of this Agreement.

 

8.45     “Investment” shall mean any investment by or of the Borrower or any Borrower Subsidiary, whether by means of purchase or other acquisition of capital stock, shares, options, warrants, participations or other interests of or in any other Person or by means of loan, advance, capital contribution, guaranty or other debt or equity participation or interest, or otherwise, in any other Person (other than any Affiliates), including any partnership, limited liability company and joint venture interests of such Person in any other Person. The amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment. 

 

8.46     “KAC” means Kapalua Advertising Company, Ltd., a Hawaii corporation. 

 

8.47     “KBHL” means Kapalua Bay Holdings, LLC, a Delaware limited liability company. 

 

 

 

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8.48     “KBL” means Kapalua Bay, LLC, a Delaware limited liability company, the sole member of which is KBHL.

 

8.49     “Key Tenants” shall mean the tenants holding the following tenant leases:

 

(a)     Lease dated December 7, 2007, as amended, by and between the Borrower and BC Restaurant Operator Inc., a Hawaii corporation; 

 

(b)     Lease dated May 11, 2011, as amended, by and between the Borrower and MNS, Ltd., a Hawaii corporation; 

 

(c)     Lease dated October 28, 2005, as amended, by and between the Borrower and Octopus/DK, Inc., a Hawaii corporation; 

 

(d)     Lease dated January 1, 2010, as amended, by and between the Borrower and Haliimaile Pineapple Company, Limited, a Hawaii corporation; 

 

(e)     Lease dated February 19, 1988, as amended, by and between the Borrower and Haliimaile Store, Inc., a Hawaii corporation; and

 

(f)     Lease dated December 16, 2009, as amended, by and between the Borrower and Outrigger Hotels Hawaii, a Hawaii limited partnership. 

 

8.50     “KLC” means Kapalua Land Company, Ltd., a Hawaii corporation.

 

8.51     “KRC” means Kapalua Realty, Ltd., a Hawaii corporation, the sole shareholder of which is KLC.

 

8.52      “KWC” means Kapalua Water Company, Ltd., a Hawaii corporation.

 

8.53     “KWC Stock Pledge Agreement” means a pledge of the stock of KWC by the Borrower in favor of the Lender, substantially in the form of the KWTC Stock Pledge Agreement with such modifications as required or approved by the Lender, granting to the Lender a first priority security interest in the Stock of KWC.

 

8.54     “KWTC” means Kapalua Waste Treatment Company, Ltd., a Hawaii corporation. 

 

8.55     “KWTC Stock Pledge Agreement” shall mean that certain Stock Pledge Agreement, in form and substance satisfactory to the Lender, executed by the Borrower and delivered to the Lender at Closing, granting to the Lender a first priority security interest in the Stock of KWTC.

 

8.56      “LIBOR” shall have the meaning set forth in Section 1.4(a) of this Agreement.

 

8.57     “LIBOR Banking Day” shall have the meaning provided in Section 1.4(a) of this Agreement.

 

8.58     “LIBOR Interest Period” shall mean the one month LIBOR interest period commencing on an Interest Adjustment Date. 

 

 

 

39

 

 

8.59     “LIBOR Rate” shall have the meaning provided in Section 1.4(a) of this Agreement.

 

8.60     “Liens” shall mean any mortgage, pledge, lien or other charge or encumbrance of any kind (including, without limitation, the charge upon property purchased under conditional sale or other title retention agreements), or grant of any security interest.

 

8.61     “Loan Documents” shall have the meaning set forth in Section 1.6 of this Agreement.

 

8.62     “Loan Fee” shall have the meaning set forth in Section 1.8 of this Agreement.

 

8.63     “Loan to Value Ratio” at any particular time shall mean the ratio that (a) the Revolving Loan Commitment at that time bears to (b) the Appraised Value of the applicable Collateral or Mortgaged Property.

 

8.64     “Margin” shall have the meaning provided in Section 1.4(a) of this Agreement. 

 

8.65     “Maturity Date” shall have the meaning set forth in Section 1.2(d) of this Agreement. 

 

8.66     “MPC” shall mean Maui Pineapple Company, Ltd., a Hawaii corporation.

 

8.67     “Maximum Liabilities” shall mean all liabilities which would, in conformity with GAAP, be classified as a liability on the consolidated balance sheet of the Borrower and the Borrower Subsidiaries.

 

8.68     “Minimum Fixed Charge Coverage Ratio” shall mean the ratio of Adjusted EBITDA to Fixed Charges.

 

8.69     “Minimum Liquidity” shall mean the sum of the Borrower’s and Borrower Subsidiaries’ consolidated (i) cash and cash equivalents; (ii) publicly traded marketable securities acceptable to the Lender; and (iii) the undisbursed Revolving Loan Commitment under the Credit Facility.

 

8.70     “Mortgage” shall mean that certain Mortgage, Security Agreement and Fixture Filing, in form and substance satisfactory to the Lender, executed by the Borrower in favor of the Lender, respectively granting to the Lender a first priority mortgage and security agreement in and to the Borrower’s interest in the Mortgaged Property.

 

8.71     “Mortgaged Property” shall mean all of the Primary Mortgaged Property plus all of the real and personal property at the following:

 

(a)     Fee simple property (TMK Parcel No. (2) 4-2-004-049), consisting of 41.5 acres of residential and commercial lands in Kapalua Central Resort, owned by the Borrower.

 

 

 

40

 

 

(b)     Fee simple property (TMK Parcel Nos. (2) 4-3-001-006 and (2)  4-2-001-042), consisting of 800 acres of residential, golf course and open space zoned land in Kapalua Mauka, owned by the Borrower. 

 

8.72     “Negative Pledge Agreement” shall mean that certain Negative Pledge Agreement in form and substance satisfactory to the Lender, executed by the Borrower in favor of the Lender, regarding the Borrower’s interest in KWC.

 

8.73     “Note” shall have the meaning set forth in Section 1.2(h) of this Agreement.

 

8.74     ‘‘Notice of Borrowing” shall mean notice of a requested Borrowing as described in Sections 1.2(f) of this Agreement.

 

8.75     “Obligations” shall have the meaning set forth in Section 1.7 of this Agreement.

 

8.76     “OFAC Restrictions” shall have the meaning set forth in Section 7.18 of this Agreement. 

 

8.77     “Original Term” shall have the meaning set forth in Section 1.2(d) of this Agreement. 

 

8.78     “Outrigger SNDA” shall mean a Subordination, Nondisturbance and Attornment Agreement in favor of the Lender, in form and substance acceptable to the Lender, from Outrigger Hotels Hawaii with respect to its tenant lease dated December 16, 2009, as amended.

 

8.79     “Participant” shall mean any lender or lenders that shall have agreed to purchase a participating interest in the Credit Facility and in the Loan Documents from the Lender.

 

8.80     “Patriot Act” shall have the meaning set forth in Section 4.18 of this Agreement.

 

8.81     “PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto.

 

8.82     “Person” shall mean and include any individual, corporation, partnership, limited liability company, association, trust, or legal entity or any governmental or political subdivision or agency, department or instrument thereof.

 

8.83     “Personal Property” shall mean all of the Borrower’s personal property, including, without limitation, accounts, accounts receivable, inventory, furniture, fixtures, equipment, general intangibles, trade names, licenses, deposit accounts and proceeds of the foregoing.

 

8.84     “Plan” means at any time an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either: (a) maintained by a member of the Controlled Group for employees of a member of the Controlled Group; or (b) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions.

 

 

 

41

 

 

8.85     “Primary Mortgaged Property” shall mean all of the real and personal property at the following:

 

(a)     Fee simple property (TMK Parcel No. (2) 4-2-004-035) located at 700 Office Road, Lahaina, Hawaii, owned by the Borrower, known as Honolua Village, occupied in part by the Borrower, the major tenant of which is Sansei Restaurant. 

 

(b)     Fee simple property (TMK Parcel Nos. (2) 4-2-004-025 and (2) 4-2-006-011) located at One Bay Club Place, Lahaina, Hawaii, owned by the Borrower, currently occupied by Merriman’s Restaurant.

 

(c)     Fee simple property (TMK Parcel No. (2) 4-2-004-060) located at 2000 Village Road, Lahaina, Hawaii, owned by the Borrower, known as the Kapalua Village Center (formerly the Kapalua Village Golf Course Clubhouse), the major tenants of which are Outrigger Hotels, Taverna Restaurant and Maui Clothing Company.

 

(d)     Fee simple property (TMK Parcel Nos. (2) 2-4-001-03, (2) 2-4-001-022, (2) 2-4-001-023 and (2) 2-5-003-018), consisting of 1,065 acres in Haliimaile, north of Makawao, owned by the Borrower, currently leased for agricultural, commercial and industrial purposes, including to Haliimaile Pineapple Company and the Haliimaile General Store.

 

(e)     Fee simple property (TMK Parcel No. (2) 4-2-004-054) located at 502 Office Road, Lahaina, Hawaii, owned by the Borrower, known as the Honolua Store, currently leased to ABC stores.

 

8.86     “Primary NOI” shall mean net operating income from tenant leases of the Primary Mortgaged Property and the net operating income of KWC and KWTC, calculated based on the trailing twelve months of revenues less the trailing twelve months of associated operating expenses. The calculation of Primary NOI shall exclude income and expenses from tenant leases which have expired or terminated within the trailing 12-month period, tenant leases which are in default and tenants who are not paying rent.

 

8.87     “Prime Rate” or “Prime” shall have the meaning set forth in Section 1.4(a) of this Agreement. 

 

8.88     “PUC” shall mean the Public Utilities Commission of the State of Hawaii. 

 

8.89     “PUC Application” shall have the meaning set forth in Section 2.1(c) of this Agreement. 

 

8.90     “PUC Approval” shall mean a final decision by the PUC approving the pledge of the stock of KWC to the Lender as security for the Obligations and the execution, delivery and performance of the KWC Stock Pledge.

 

8.91     The term “quarter” shall mean, unless “calendar quarter” is specified, the fiscal quarter. 

 

 

 

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8.92     “Regulation D” shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect or any successor to all or a portion thereof establishing reserve requirements. 

 

8.93     “Release Price” shall have the meaning as set forth in Section 1.5(b)(iii) of this Agreement.

 

8.94     “Reportable Event” shall mean an event described in Section 4043(b) of ERISA (with respect to which the 30-day notice requirement has not been waived by the PBGC). 

 

8.95     “Restricted Payment” shall have the meaning set forth in Section 5.5 of this Agreement.

 

8.96     “Revolving Borrowing” shall have the meaning set forth in Section 1.2(b) of this Agreement.

 

8.97     “Revolving Loan Commitment” shall mean (a) $27,000,000 during the Original Term of the Credit Facility, (b) $22,500,000 during the First Extension Period of the Credit Facility if first Extension Option is exercised pursuant to Section 1.2(e), and (c) $20,000,000 during the Second Extension Period of the Credit Facility if the second Extension Option is exercised pursuant to Section 1.2(e); SUBJECT, IN EACH CASE, to adjustment as provided in this Agreement, including without limitation, adjustments upon payment of Release Prices or if the Loan to Value conditions for the exercise of the applicable Extension Options are not satisfied. 

 

8.98     “Sansei SNDA” shall mean a Subordination, Nondisturbance and Attornment Agreement in favor of the Lender, in form and substance acceptable to the Lender, from Octopus/DK, Inc. with respect to its tenant lease dated October 28, 2005, as amended. 

 

8.99     “Scheduled Closing Date” shall mean August 5, 2016, or such earlier or later date that the Lender and Borrower agree Closing shall occur.

 

8.100     “Second Extension Date” shall have the meaning set forth in Section 1.2(e) of this Agreement.

 

8.101     “Second Extension Period” shall have the meaning set forth in Section 1.2(e) of this Agreement.

 

8.102     “Security Agreement” shall mean that certain Security Agreement, in form and substance satisfactory to the Lender, executed by the Borrower and granting a first priority security interest in the Personal Property.

 

8.103     “Subsidiary” shall mean and include, with respect to a Person, any company in which such Person now has or may hereafter acquire an aggregate of more than fifty percent (50%) of the voting stock and any partnership, limited liability company, or other entity in which such Person now has or may hereafter acquire majority control. For the purposes of this definition, “voting stock” means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock “has such voting power by reason of any contingency, and the term “majority control” means the right, ability or authority to manage, direct or control the business affairs of the subject entity.

 

 

 

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8.104      “Taxes” shall have the meaning set forth in Section 1.5(d) of this Agreement.

 

8.105     “Total Debt” shall mean the sum of obligations for borrowed money (including prorata shares of recourse obligations on investments), obligations evidenced by bonds, debentures, notes, or other similar instruments, obligations under capital leases, and standby letters of credit securing third party obligations. 

 

8.106     “Transfer” shall have the meaning set forth in Section 6.1(a) of this Agreement.

 

8.107     “Unfunded Vested Liabilities” means, with respect to any Plan at any time, the amount (if any) by which: (a) the present value of all vested nonforfeitable benefits under such Plan exceeds; (b) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the Controlled Group to the PBGC or the Plan under Title IV of ERISA.

 

8.108      “Written” or “in writing” shall mean any form of written communication or a communication by means of telex, facsimile device, telegraph or cable.

 

 

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IN WITNESS WHEREOF, the Borrower and the Lender have du1y executed this Agreement.

        

 

	
 
	
FIRST HAWAIIAN BANK
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
By: 
	
/s/ Joyce Y. Sakai
	
 

	
 
	
 
	
Joyce Y. Sakai
	
 

	
 
	
 
	
Senior Vice President
	
 

	 	 	 	Lender

     

 

	
 
	
MAUI LAND & PINEAPPLE COMPANY, INC.
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
By: 
	
/s/ Tim T. Esaki
	
 

	
 
	
 
	
Tim T. Esaki
	
 

	
 
	
 
	
Chief Financial Officer
	
 

	 	 	 	Borrower

 

 

 

45

 

 

EXHIBIT “A”

  

NOTE

  

	
U.S. $27,000,000.00
	
 Honolulu, Hawaii

	
 
	
 Dated as of __________________, 2016

     

FOR VALUE RECEIVED, the undersigned, MAUI LAND & PINEAPPLE COMPANY, INC., a Hawaii corporation, (the “Maker”), hereby promises to pay to the order of FIRST HAWAIIAN BANK, a Hawaii corporation (the “Payee”), in lawful money of the United States of America (in freely transferable U.S. dollars and in immediately available funds), at the offices at 999 Bishop Street, Honolulu, Hawaii 96813, at the times and in the manner provided in the Credit Agreement referred to below, the principal sum of TWENTY-SEVEN MILLION AND NO/100 DOLLARS ($27,000,000.00), or, if less, the aggregate unpaid principal amount of the Revolving Borrowings (as defined in the Credit Agreement) made by the Payee to the Maker pursuant to the Credit Agreement.

 

The Maker also promises to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates per annum which shall be determined in accordance with the provisions of that certain Credit Agreement dated _________________________, as now or hereafter amended from time to time (as amended, the “Credit Agreement”), by and among the Maker, as Borrower, and First Hawaiian Bank, as Lender, said interest to be payable at the times and in the manner provided for in the Credit Agreement. The Maker also promises to pay the outstanding principal amount of this Note in like money at said office at the times provided for in the Credit Agreement.

 

This Note is the Note referred to in the Credit Agreement and is entitled to the benefits thereof. If an Event of Default (as defined in the Credit Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Credit Agreement.

 

The Maker and all others who may become liable for any part of the obligations of the Maker hereunder, under the Credit Agreement or under the other Loan Documents (as defined in the Credit Agreement) hereby severally waive presentment, demand, protest and notice of protest, demand, dishonor and nonpayment of this Note, the Credit Agreement and the other Loan Documents, and consent to any number of renewals or extension of the timely payment hereof and thereof and to any release of the parties obligated hereunder or thereunder or forbearance in the enforcement hereof or thereof.

 

Without limiting any provision of the Credit Agreement, the Maker promises to pay the reasonable attorneys’ fees and such expenses as are incurred to induce or compel the payment of this Note, the Credit Agreement, the other Loan Documents or any portion of the indebtedness evidenced hereby or thereby, or incurred hereunder or thereunder whether suit is brought hereon, thereon, or not. To the fullest extent permitted by law, the Maker waives the right to plead any and all statutes of limitation as a defense to any demand for payment hereunder.

 

 

 

 

 

This Note shall be construed in accordance with and be governed by the laws of the State of Hawaii.

 

 

	
 
	
MAKER:
	
 

	 	 	 
	 	MAUI LAND & PINEAPPLE COMPANY, INC.	 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
By: 
	
/s/ 
	
 

	
 
	
 
	
Tim T. Esaki
	
 

	
 
	
 
	
Chief Financial Officer
	
 

 

 

 

2

 

   

STATE OF HAWAII     )

) SS.

CITY AND COUNTY OF HONOLULU     )

 

On ____________________, 2016 before me personally appeared Tim T. Esaki, to me personally known, who, being by me duly sworn or affirmed, did say that such person executed this ___-page Note dated _________________, in the First Circuit of the State of Hawaii, as the free act and deed of such person, and if applicable in the capacity shown, having been duly authorized to execute such instrument in such capacity.

 

 

                                                                                       

 

Print Name: ____________________________

Notary Public, State of Hawaii

 

My commission expires: 

 

	
NOTARY CERTIFICATION

(Hawaii Administrative Rule § 5-11-8)

 

Document Identification or Description:   Note

 

 

Date of Document : ________________________ Number of Pages ___________

 

 

             First               Circuit

(Jurisdiction of notarial act)

 

 

_____________________________________

Signature of Notary

 

 

_____________________________________

Type or Print Name of Notary

 

	
_____________________________________

Date of Notary Certificate 
	
(Official Stamp or Seal) 

  

 

 

3

 

   

EXHIBIT “B”

 

CLOSING CERTIFICATE

 

 

MAUI LAND & PINEAPPLE COMPANY, INC., a Hawaii corporation (the “Borrower”), represents and warrants to FIRST HAWAIIAN BANK (the “Lender”), pursuant to that certain Credit Agreement dated _______________, 2016 (the “Loan Agreement”) executed by and between the Borrower and the Lender, as follows: 

 

1.     Representation and Warranties True at Closing. The representations and warranties contained in Article III of the Loan Agreement and otherwise made by or on behalf of the Borrower or in connection with the Loan are true and correct as of the date hereof; provided that the representations and warranties set forth in Section 3.11 of the Loan Agreement shall be deemed to be made with respect to the financial statements most recently delivered to the Lender pursuant to the Loan Agreement.

 

2.     No Event of Default. There exists no condition or event which constitutes an Event of Default or which, after notice or lapse of time or both, would constitute such an Event of Default.

 

3.     Performance. The Borrower has performed and complied with all agreements and conditions contained in the Loan Agreement and other Loan Documents and required by the Lender to be performed and complied with by the Borrower prior to or as of the date hereof.

 

4.     No Claims, Defenses or Off-sets. As of the date hereof, the Borrower has no claims, defenses or off-sets against the Lender or against the Borrower’s obligations under the Loan Documents, whether in connection with the negotiations for or closing of the Credit Facility, or otherwise, and if any such claims, defenses or off-sets exist, they are hereby irrevocably waived and released.

 

5.     Defined Terms. All capitalized terms used herein have the meaning given to them in the Loan Agreement unless otherwise herein defined.

 

 

DATED: _______________________, 2016.

 

 

 

 

	
 
	
MAUI LAND & PINEAPPLE COMPANY, INC.
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
By: 
	
/s/ 
	
 

	
 
	
 
	
Tim T. Esaki
	
 

	
 
	
 
	
Chief Financial Officer
	
 

 

 

 

 

 

EXHIBIT “C”

 

NOTICE OF BORROWING

 

DATE:_____________________, 20___

 

	
TO: 
	
First Hawaiian Bank
999 Bishop Street
Honolulu, Hawaii 96813
Attn: ________________
Facsimile No.: (808) ________________

 

	
SUBJECT:
	
Credit Agreement (the “Agreement”) dated ____________________, 2016 between First Hawaiian Bank (the “Lender”), and Maui Land & Pineapple Company, Inc. (the “Borrower”)

 

Pursuant to Section 1.2(f) of the Agreement, the Borrower hereby requests a borrowing under the Credit Facility and confirms the following instructions therefor (capitalized terms not defined herein shall have the respective meanings assigned in the Agreement):

 

A.     BORROWING:

1.     Date and Amount:
Disbursement Date:          
Principal Amount:     $     

 

	 	
2.
	
Purpose of Borrowing and description of property on which Borrowing will be used: ____________________________________________________________ 
__________________________________________________________________ 
__________________________________________________________________ 

 

 

	
B.
	
METHOD OF DRAWING:

☐ Credit to _______________’s Deposit Account No. __________________ maintained with the First Hawaiian Bank.

☐ Wire Funds to:
ABA No.: _______________________________
Credit Account No.: _______________________
Special Instructions: ____________________________________________________

  

 

 

 

  

The Borrower hereby certifies as follows:

 

1.     The representations and warranties set forth in Article III of the Agreement are true and correct on and as of the date hereto, provided that the representations and warranties set forth in Section 3.11 of the Agreement shall be deemed to be made with respect to the financial statements most recently delivered to the Lender pursuant to the Agreement.

 

2.     As of the date hereof, no event has occurred and is continuing that: (a) constitutes an Event of Default under the Agreement; or (b) with the giving of notice or passage of time, or both, would constitute an Event of Default. The Borrower has observed and performed all of Borrower’s covenants and other agreements, and satisfied every condition, contained in the Agreement and in the other Loan Documents, to be observed, performed or satisfied by the Borrower.

 

 

	 	BORROWER:	 
	 	 	 
	
 
	
MAUI LAND & PINEAPPLE COMPANY, INC.
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
By: 
	
/s/ 
	
 

	
 
	
 
	
Name
	
 

	
 
	
 
	
Title
	
 

        

 

 

2

 

           

SCHEDULE 4.2

 

COMPLIANCE CERTIFICATE

 

 

	
DATE:
	
___________________________

 

	
TO:
	
First Hawaiian Bank
999 Bishop Street
Honolulu, Hawaii 96813
Attn: ______________________
Fax: (808)___________________

	
SUBJECT:
	
Credit Agreement (the “Agreement”) dated _____________________, 2016, between First Hawaiian Bank (“Lender”), and Maui Land & Pineapple Company, Inc. (the “Borrower”).

 

Pursuant to Section 4.2 of the Agreement, the Borrower hereby certifies as follows:

 

1.     The information furnished in Schedule 1 hereto is true, correct and complete as of the last day of the fiscal ____________ preceding the date of this Compliance Certificate.

 

2.     Except as disclosed in Schedule 2 hereto (if any), the representations and warranties set forth in Article III of the Agreement are true and correct on and as of the date hereof, provided that the representations and warranties set forth in Section 3.11 of the Agreement shall be deemed to be made with respect to the financial statements most recently delivered to the Lender pursuant to the Agreement.

 

 

 

 

   

3.     As of the date hereof, no event has occurred and is continuing that: (a) constitutes an Event of Default under the Agreement; or (b) with the giving of notice or passage of time, or both, would constitute an Event of Default. The Borrower has observed and performed all of Borrower’s covenants and other agreements, and satisfied every condition contained in the Agreement and in the other Loan Documents to be observed, performed or satisfied by Borrower.

 

 

	 	BORROWER:	 
	 	 	 
	
 
	
MAUI LAND & PINEAPPLE COMPANY, INC.
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
By: 
	
/s/ 
	
 

	
 
	
 
	
Name
	
 

	
 
	
 
	
Title
	
 

 

 

 

2

 

          

SCHEDULE 1

TO COMPLIANCE CERTIFICATE

FOR FISCAL [QUARTER/YEAR] ENDING: _______________________

FINANCIAL COVENANTS

A.     Fixed Charge Coverage Ratio (Tested and Reported Quarterly)

	
 

Adjusted EBITDA (consolidated)
	  	  
	
divided by
Fixed Charges (annualized)
	  	  
	
equals
Fixed Charge Coverage Ratio
(Minimum Required 1.0 to one)
	  	  

 

B.     Minimum Liquidity (Tested and Reported annually as of 12/31 and as of 6/30/17)

	
 

Undrawn Revolving Loan Commitment
	  	  
	
plus
Cash and Cash Equivalents (consolidated)
	  	  
	
plus
Publicly Traded Securities (consolidated) 
	  	  
	
equals
	  	  
	
Total Minimum Liquidity

(Required Minimum as set forth in Loan Agreement)
	  	  

 

C.     Maximum Liabilities (Tested and Reported Quarterly)

	
Total Maximum Liabilities (consolidated) 
(Maximum Permitted $45,000,000)
	  	  

 

D.     Debt Yield (Tested and Reported Annually)

	
Primary Mortgaged Property Tenant Leases 
	  	  
	
plus
KWC Net Operating Income 
	  	  
	
plus
KWTC Net Operating Income
	  	  
	
Primary NOI 
	  	  
	
divided by 
Outstanding Principal Balance of the Credit Facility
	  	  
	
equals
Debt Yield
(Required minimum: 9.0%)
	  	  

 

1Exhibit 10.1

 

LICENSE AGREEMENT

 

This LICENSE AGREEMENT,
including Schedules (collectively, this “Agreement”), is entered into as of 6th day of August, 2016(the
“Effective Date”) between Vitaxel Group Limited, a Nevada corporation (“Vitaxel”), and威达通有限公司Vitaxel
Private Limited, a limited liability entity and incorporated in台湾台北市南京东路三段337号12楼C室(Room
C, 12th Floor, No. 337, Nan-Jing E. Road, Sec. 3, Songshan Dist. Taipei City 105, Taiwan) (“Licensee”).
Vitaxel and Licensee may be referred to individually as a “Party” and collectively as the “Parties”.

 

		1.	Definitions.

 

a.           “Platform”
means Vitaxel’s online shopping and services platform(s), including but not limited to Vitaxel’s online shopping mall
known as “Vionmall”, which is geared for Vitaxel and its members and third party providers of products and services.

 

b.           “Territory”
means Taiwan.

 

c.           “Net
Profit” means the gross revenue deducted by operating expenses including administrative costs, finance costs, overhead
costs, marketing costs, taxes, and the costs of sale such as payment processing costs and any shipping costs.

 

d.           “Intellectual
Property” means all inventions, discoveries, trademarks, patents, trade names, copyrights, moral rights, jingles, know-how,
intellectual property, software, shop rights, licenses, developments, research data, designs, website designs, technology, trade
secrets, test procedures, processes, route lists, computer programs, computer discs, computer tapes, literature, reports and other
confidential information, intellectual and similar intangible property rights, whether or not patentable or copyrightable (or otherwise
subject to legally enforceable restrictions or protections against unauthorized third party usage), and any and all applications
for, registrations of and extensions, divisions, renewals and reissuance of, any of the foregoing, and rights therein, including
without limitation (i) rights under any royalty or licensing agreements, and (ii) programming and programming rights, whether on
film, tape or any other medium which a Party owns or for which has a right to use.

 

e.           “Vitaxel
Marks” means Vitaxel trademarks, brands, logos or service marks.

 

f.            “Vitaxel
Business” means a direct selling, multi-level marketing company offering travel, entertainment, lifestyle and other products
and services.

 

g.           “Users”
means end users who have registered for access to the Platform.

 

		2.	License; Ownership.

 

a.           Grant
of License. Vitaxel hereby grants Licensee an exclusive, nontransferable, revocable, license in the Territory during the Term,
subject to all of the terms and conditions hereof: (i) to use the Vitaxel Marks to operate a Vitaxel Business (ii) to authorize
Users to access and use the Platform; and (iii) to market and promote the Vitaxel Business and Platform.

 

    	 	- 1 -	CONFIDENTIAL

     

    

 

b.           Restrictions.
Licensee shall not, except as expressly provided otherwise herein: (i) copy, adapt, redistribute, reformat, reconfigure, translate
into another language, or otherwise modify the Platform; (ii) transfer all or any part of the Vitaxel Business or Platform to any
person or entity without the prior written consent of Vitaxel in each instance; (iii) sublicense, assign, delegate or otherwise
transfer this Agreement, the Vitaxel Business, the Platform, Vitaxel Marks or any of the related rights or obligations for any
reason without the prior written consent of Vitaxel in each instance; or (iv) otherwise use the Vitaxel Marks, Vitaxel Business,
or Platform other than as expressly set forth herein. In the event that Vitaxel becomes aware that Licensee has breached any of
the foregoing restrictions, Licensee shall have a commercially reasonable time to cure upon notice by Vitaxel. Licensee agrees
that (i) it shall not use any Vitaxel Marks in a manner likely to diminish the Vitaxel Marks’ commercial value; (ii) it shall
not knowingly permit any third party to use the Platform or Vitaxel Marks unless authorized to do so in writing by Vitaxel; (iii)
all goodwill associated with Licensee’s use of the Vitaxel Marks shall inure to Vitaxel; (iv) the Vitaxel Marks are and shall
remain the sole property of Vitaxel; (v) Licensee shall follow all guidelines for use of the Vitaxel Marks established by Vitaxel
and communicated to Licensee in writing; and (vi) nothing in this Agreement shall confer in Licensee any right of ownership in
the Vitaxel Marks or the Platform, and Licensee shall not make any representation to that effect, or use the Vitaxel Marks or the
Platform in a manner that suggests that such rights are conferred.

 

c.           Ownership.
As between Vitaxel and Licensee, Vitaxel shall retain all right, title and interest in and to (i) the Vitaxel Business and any
related know-how or trade secrets; (ii) the Platform and any underlying software and/or related databases; (ii) all Intellectual
Property for the Platform or Vitaxel Business and any other material provided to Licensee; (iii) the Vitaxel Marks; and (iv) any
improvements or modifications to the Vitaxel Business, Platform, know-how, or other materials related to the operation of the Vitaxel
Business in the Territory.

 

		3.	Fees.

 

a.           Setup Costs.
Licensee shall bear the initial costs of setting up the Vitaxel Business and the Platform for the Territory.

 

b.           Pricing/Royalties.
Licensee shall collect all revenues and agrees to pay Vitaxel revenue share of 70% of the Net Profit (the “Royalties”)
for every three (3) months period. Licensee shall provide a report of calculation of the Net Profit for every three (3) months
period (the “Report”). Each payment of the Royalties shall be accompanied by the Report and will be sent to: Vitaxel,
c/o Accounts Receivable, Wisma Ho Wah Genting No 35, Jalan Maharajalela, 50150 Kuala Lumpur, Malaysia. The Royalties shall be payable
in  US Dollars on the tenth (10th) day of every fourth months.

 

		4.	Audit Rights.

 

a.           Vitaxel
shall have the right to have an independent third party accounting firm access the books and records of Licensee solely to the
extent necessary to verify the accuracy of the reports and payments made hereunder. Such audit shall be conducted upon at least
thirty (30) days advanced written notice to Licensee on a date reasonably acceptable to both parties. Such audit shall be conducted
during Licensee’s normal business hours. Such audit shall not be more frequent than once (1) per calendar year (unless a
material inaccuracy was found in a prior audit). The final report of the auditing firm shall be shared with both of the parties
and shall report accuracy of payments only. Any amounts that are determined to be due and owing by one party to the other party
following such audit shall be paid within thirty (30) days thereafter.

 

    	 	- 2 -	CONFIDENTIAL

     

    

 

		5.	Right of Inspection.

 

a.           Vitaxel
shall at all reasonable times (upon at least thirty (30) days written notice), and during Licensee’s regular business hours,
have the right, but not the obligation, to visit and inspect Licensee’s facilities, at Vitaxel’s expense, so as to
assure compliance with the representations, warranties and covenants governing this Agreement.         

 

6.           Additional Rights. Vitaxel
and/or its subsidiaries will have the right of first refusal to acquire the Licensee if shareholders of Licensee decided to dispose
its assets or company.

 

7.          Warranties
and Disclaimer of Warranties and Representations. Vitaxel represents and warrants: (a)it owns the Vitaxel Business, Vitaxel
Marks, and Platform or otherwise has the right to grant Licensee the right to use the Vitaxel Business, Vitaxel Marks, and Platform
in accordance with this Agreement; and (b) Licensee’s use of Vitaxel Business, Vitaxel Marks, and Platform does not violate
or infringe upon the copyright, trademark, trade secret, patent or other proprietary or personal rights of any third party, including
without limitation, publicity and privacy rights, or defame any third party. Licensee represents and warrants: (a) Licensee has
the right to enter into this Agreement, is a limited liability entity duly organized, validly existing, and in good standing under
the laws of China, and that it has the power and authority to execute and deliver this Agreement and perform its obligations hereunder;
and (b) the services performed by Licensee, including without limitation, sales, technical, and customer support services, shall
be performed with satisfactory skill and diligence and in accordance with generally accepted practices and standards of companies
providing similar services. OTHER THAN AS EXPRESSLY SPECIFIED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES,
INCLUDING BUT NOT LIMITED TO ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY, NONINFRINGEMENT, DESIGN, CONDITION, AND/OR QUALITY.
VITAXEL makes no representation or warranty that the Content may be used for purposes of
initiating unsolicited communications, whether via e-mail, facsimile, or telephonic means. Further, VITAXELMAKES NO WARRANTY,
GUARANTY, OR REPRESENTATION THAT THE PLATFORM OR ANY CONTENT PROVIDED TO LICENSEE WILL BE FREE FROM ERRORS OR THAT ITS USE WILL
BE UNINTERRUPTED OR ERROR-FREE OR MAKE ANY OTHER REPRESENTATIONS REGARDING THE USE, OR THE RESULTS OF THE USE, OF SUCH LICENSOR
CONTENT IN TERMS OF SUITABILITY FOR OPERATIONAL REQUIREMENTS, OR OTHERWISE. THE PLATFORM AND ALL CONTENT PROVIDED HEREUNDER BY
OR ON BEHALF OF VITAXEL IS PROVIDED ON AN “AS IS” BASIS.

 

		8.	Indemnification.

 

a.           Vitaxel
Indemnification. Vitaxel shall indemnify, defend and hold harmless Licensee, its parents, affiliates and subsidiaries, and
its and their officers, directors, shareholders, employees and agents, from and against any losses, claims, demands, actions, suits,
proceedings, judgments, awards, liabilities, costs and expenses (including reasonable attorneys’ fees), or liability resulting
from any third party claims against Licensee that the Platform, as originally delivered to Licensee and used by Licensee solely
as permitted by this Agreement, infringes any Chinese copyright, trademark, patent, or other intellectual property right.

 

b.           Licensee
Indemnification. Licensee shall indemnify, defend and hold harmless Vitaxel, its parents, affiliates and subsidiaries, and
its and their officers, directors, shareholders, employees and agents, from and against any losses, settlements, claims, actions,
suits, proceedings, judgments, awards, liabilities, costs and expenses (including reasonable attorneys’ fees) which arise
out of or as a result of any use of the Platform by Licensee hereunder in violation of this Agreement.

 

    	 	- 3 -	CONFIDENTIAL

     

    

 

c.           Indemnification
Procedure. Each party’s indemnification obligations hereunder shall be subject to: (i) the indemnified party’s
prompt notification to the indemnifying party with respect to the pertinent third party claims, although failure to provide such
notification shall not excuse the indemnifying party’s obligations hereunder except to the extent of any material prejudice
as a direct result of such failure; (ii) the indemnifying party’s sole control of the settlement or defense of the pertinent
third party claims, although the indemnifying party shall not, without the prior written approval of the indemnified party, settle
or dispose of any claims in a manner that adversely effects the indemnified party’s rights or interests without the indemnified
party’s prior written consent; and (iii) the indemnified party’s provision of reasonable assistance to the indemnifying
party in defending the claim. The indemnified party shall have the right to participate at its own expense in the defense of an
indemnified claim.

 

d.           Limitation
on Indemnity. Vitaxel’s indemnity set forth in Section 8(a) above will not extend to any third-party infringement claims
resulting, in whole or in part, from (i) any non-permitted modification of the Platform by Licensee, or persons acting under the
control or direction of Licensee, to the extent that such modification gives rise to the infringement claims, (ii) the use of the
Platform by Licensee in any manner or application for which the same were not designed to be used, or (iii) the use of the Platform
by Licensee to make unsolicited communications (including, without limitation, communications via e-mail, faxes, or telephone)
to third parties.

 

9.          Confidential
Information. Each party understands and agrees that in the performance of this Agreement it may have access to private or confidential,
non-public information of the other party, or the other party’s parent company, subsidiaries and affiliates, and its and
their customers and suppliers, including but not limited to, trade secrets, marketing and business plans, customer information
and technical specifications, transaction data and other sales information (the “Confidential Information”).
Each party agrees that: (1) all Confidential Information has be marked or otherwise identified as Confidential; (2) all Confidential
Information shall remain the exclusive property of the owner thereof; and (3) it shall maintain, and shall cause its employees,
subcontractors and other agents to maintain, the confidentiality and secrecy of the other party’s Confidential Information.
Notwithstanding the foregoing, Confidential Information shall not include any information to the extent it (i) is or becomes a
part of the public domain through no act or omission of the receiving party, (ii) is rightfully in the receiving party’s
possession, without obligation of confidentiality with respect thereto, prior to the disclosing party’s disclosure, (iii)
is lawfully disclosed to the receiving party by a third party having no obligation of confidentiality with respect thereto, (iv)
is independently developed without access or reference to, or use of, the disclosing party’s Confidential Information, (v)
is released from confidential treatment by written consent of the disclosing party thereof; or (vi) is required to be disclosed
by applicable law or by request from a governmental agency, provided that the receiving party gives the disclosing party prior
written notice of such disclosure such that the disclosing party can obtain an appropriate protective order or similar remedy if
it so desires. Neither party shall disclose the existence or terms of this Agreement to any third-party without written permission
of the other.

 

10.         Limitation
of Damages. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY UNDER CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL THEORY
FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES ARISING OUT OF OR RELATED TO THIS AGREEMENT OR IN CONNECTION
WITH LICENSEE’S USE OF THE PLATFORM IN FURTHERANCE OF A PERMISSIBLE USE (EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES), INCLUDING BUT NOT LIMITED TO DAMAGES ARISING FROM LOSS OF BUSINESS, ANTICIPATED PROFITS OR REVENUE. IN NO EVENT
SHALL EITHER PARTY’S AGGREGATE LIABILITY ARISING FROM OR UNDER THIS AGREEMENT EXCEED THE TOTAL AMOUNT PAID OR PAYABLE BY
LICENSEE TO VITAXEL UNDER THIS AGREEMENT. THE LIMITATION OF LIABILITY IN THE PRECEDING SENTENCE SHALL NOT APPLY TO EACH PARTY’S
RESPECTIVE NON-DISCLOSURE OBLIGATIONS UNDER SECTION 9 OR TO DAMAGES ATTRIBUTABLE TO THE WILLFUL MISCONDUCT OF A PARTY, PROVIDED
THAT IN NO EVENT SHALL EITHER PARTY’S AGGREGATE LIABILITY ARISING FROM THE INDEMNIFICATION OBLIGATIONS OF SECTION 8 EXCEED
THE SUM OF $100,000.

 

    	 	- 4 -	CONFIDENTIAL

     

    

 

		11.	Term; Termination.

 

a.           Term.
The term of this Agreement shall commence on the Effective Date and shall continue for three (3) years with a possibility of renewal
for another three (3) years (the “Term”).

 

b.           Termination.
In addition to any rights set forth in this Agreement, Vitaxel may terminate this Agreement: (i) without cause; (ii) if Licensee
is in material breach of this Agreement and fails to cure such breach within ten (10) days after being notified, in writing, of
such breach, except in case of breach by Licensee of its obligation to pay applicable Fees, in which case Vitaxel shall be entitled
to terminate upon ten (10) days written notice; (iii) if Licensee files a petition in bankruptcy, or has such a petition filed
against it; or (iii) Licensee makes an assignment for the benefit of creditors, or if a receiver, trustee, custodian or similar
agent is appointed or takes possession of its assets. In the event Vitaxel fails to cure a material breach, or files a petition
of bankruptcy, or has such a petition filed against it, or makes an assignment for the benefit of creditors or if a receiver, trustee,
custodian or similar agent is appointed or takes possession of its assets, Licensee shall be entitled to terminate this Agreement
on ten (10) days written notice to Vitaxel.

 

c.           Effect
of Expiration or Termination.

 

i.            Upon
the expiration or earlier termination of this Agreement for any reason, Licensee shall immediately cease (a) operating the Vitaxel
Business; (b) using of the Platform, including without limitation any electronic databases, and return all documents, notes and
other tangible and intangible embodiments of or reflecting the Platform; (c) return all documents, notes and other tangible and
intangible embodiments of the other party’s Confidential Information.

 

ii.         Licensee
further agrees not to engage, start, or invest in a business competitive with Vitaxel in the Territory for three (3) years.

 

iii.         Vitaxel
reserves the right to remove any Users from the Platform without notice

 

d.           Survival
of Payment Obligations. Termination or expiration of this Agreement shall not affect the obligation of Licensee to pay all
amounts owing or to become owing pursuant to this Agreement.

 

		12.	Miscellaneous

 

a.           Notices.
All notices hereunder shall be in writing and shall be sent by certified mail, return receipt requested, or by overnight courier
service, to the address set forth below each party’s signature, or to such other addresses as may be stipulated in writing
by the parties pursuant hereto. Unless otherwise provided, notice shall be effective on the date it is officially recorded as delivered
by return receipt or equivalent.

 

    	 	- 5 -	CONFIDENTIAL

     

    

  

b.           Entire
Agreement; Amendment. This Agreement supersedes all prior agreements, arrangements and undertakings between the parties and
constitutes the entire agreement between the parties relating to the subject matter hereof. This Agreement may not be amended except
by written instrument executed by both parties.

 

c.           Language.
This Agreement has been prepared in English, and the English version thereof shall prevail even if a Chinese translation of the
Agreement may be prepared.

 

d.           Assignment.
Neither party shall assign this Agreement in whole or part without the prior written consent of the other party. Notwithstanding
the foregoing, Vitaxel’s rights and obligations under this Agreement may be assigned without the consent of the Licensee
in connection with a merger, reorganization or sale of all or substantially all of the assets or business to which this Agreement
relates.

 

e.           Force
Majeure. If either party is prevented from performing any of its duties and obligations hereunder (other than duties or obligations
with respect to payment) in a timely manner by reason of any act of God, strike, labor, dispute, flood, public disaster, equipment
or technical malfunctions or failures, power failures or interruptions or any other reason beyond its reasonable control, such
condition shall be deemed to be a valid excuse for delay of performance or for nonperformance of any such duty or obligation for
the period during which such conditions exists.

 

f.            Relationship
of the Parties. Notwithstanding anything to the contrary, this Agreement does not, and shall not be deemed to, constitute a
partnership or joint venture between the parties and neither party nor any of their respective directors, officers, employees or
agents shall, by virtue of the performance of their obligations under this Agreement, be deemed to be an agent or employee of the
other.

 

g.           Survival
of Certain Provisions. Notwithstanding the termination or expiration of this Agreement, the provisions of Sections 1, 2(c),
6, 7, 8, 9, 10(c), 10(d) and 11 shall survive and continue and shall bind the parties and their legal representatives, successors
and permitted assigns.

 

h.           No
Waiver. The waiver of any breach or failure of a term or condition of this Agreement by any party shall not be construed as
a waiver of any subsequent breach or failure of the same term or condition, or a waiver of any other breach or failure of a term
or condition of this Agreement.

 

i.            Governing
Law. This Agreement shall be governed by, and construed in accordance with, the laws of Malaysia. The parties hereto submit
to the exclusive jurisdiction of the courts located in Malaysia, for the purpose of resolving any dispute relating to the subject
matter of this Agreement or the relationship between the parties pursuant to this Agreement.

 

j.            Arbitration.
Prior to commencing any formal dispute resolution proceeding, at least senior executive having decision-making authority, from
each Party will meet, one or more times as is practical, to discuss and attempt to resolve the issue in good faith. Any decision
or resolution reached at these meetings will be final and binding on the parties once reduced to writing and signed by the Parties.
If, at the conclusion of these meetings, the Parties are unable to resolve their differences, then and only then, may a Party commence
an arbitration proceeding as set forth below. Any controversy, claim, or dispute arising out of or related to this Agreement or
the existence, interpretation, performance, or breach thereof, including but not limited to alleged violations of any laws shall
be resolved solely and exclusively by arbitration conducted in Malaysia, applying Malaysia law.

 

    	 	- 6 -	CONFIDENTIAL

     

    

 

k.          Announcements.
Licensee shall not issue any press releases or other public announcement or materials regarding this Agreement without the prior
written consent of Vitaxel in each instance.

 

l.            Counterparts;
Electronic Transmission. This Agreement may be executed in one or more counterparts, none of which need contain the signatures
of each of the parties and each of which shall be deemed an original. The parties may deliver executed signature pages to this
Agreement by electronic means, including facsimile or e-mail transmission. No party shall raise as a defense to the formation or
enforceability of this Agreement as a contract, and each party forever waives any such defense, either (i) the use of electronic
means to deliver a signature or (ii) the fact that any signature was signed and subsequently transmitted electronically, including
via facsimile or e-mail transmission.

 

WHEREFORE, for the
purpose of being bound, the parties execute this Agreement by their duly authorized representatives as of the date set forth above.

 

	VITAXEL LTD.	 	威达通有限公司 Vitaxel Private Limited

 

	By:  	/s/ Dato Lim Hui Boon	 	By:  	/s/ Illegible 
	Name:	Dato Lim Hui Boon	 	Name:  	 
	Title:	President	 	Title: 	 

 

	Notice Address:	 	Notice Address:
	 	 	 
	
        Vitaxel Ltd.

        Wisma Ho Wah Genting, No. 35

        Jalan Maharajalela, 50150

        Kuala Lumpur, Malaysia
	 	
        威达通有限公司
        Vitaxel Private Limited

        Room C, 12th Floor, No. 337, Nan-Jing E. Road,

        Sec. 3, Songshan Dist. Taipei City 105, Taiwan

 

	 	/s/ Gavin Lim Chin Hou	 
	 	Name: Gavin Lim Chin Hou, as witness	 
	 	 	 
	 	 	 
	 	 	 

 

 

 

    	 	- 7 -	CONFIDENTIAL

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