Barnwell Industries (BRN)

Contractual Obligations

Kaupulehu 2007 has an agreement with Mr. David Johnston, the son of a former director of Barnwell and minority interest owner in certain of Barnwell’s business ventures (see further discussion on related party interests at Note 8 in the “Notes to Condensed Consolidated Financial Statements”), under which Mr. David Johnston serves as Kaupulehu 2007’s project manager.  Kaupulehu 2007 also has an agreement with an independent building contractor for home building services for Kaupulehu 2007’s lots.  A significant provision of these agreements is that Mr. David Johnston and the building contractor will each receive 20% of the sales profit, which is contingent on the sale of each of the two homes under construction.

Additionally, please see the “Notes to Consolidated Financial Statements” in Barnwell’s Annual Report on Form 10-K for the year ended September 30, 2008 for discussion on other contractual obligations and commitments.

Contractual Obligations

Under the financing agreement with Royal Bank of Canada, the facility is reviewed annually, with the next review planned for April 2009.  Subject to that review, the facility may be extended one year with no required debt repayments for one year or converted to a two-year term loan by the bank.  If the facility is converted to a two-year term loan, Barnwell has agreed to the following repayment schedule of the then outstanding loan balance:  first year of the term period – 20% (5% per quarter), and in the second year of the term period – 80% (5% per quarter for the first three quarters and 65% in the final quarter).  Based on the terms of the existing agreement, if Royal Bank of Canada were to convert the facility to a two-year term loan upon its next review in April 2009, Barnwell would be obligated to make quarterly principal and interest repayments beginning in July 2009.  As such, two quarterly repayments of 5% each would be due within one year of December 31, 2008 and accordingly, we have classified 10% of the outstanding loan balance at December 31, 2008 as the current portion of long-term debt.

Kaupulehu 2007 has an agreement with Mr. David Johnston, the son of a director of Barnwell and minority interest owner in certain of Barnwell’s business ventures (see further discussion on related party interests at Note 8 in the “Notes to Condensed Consolidated Financial Statements”), under which Mr. David Johnston serves as Kaupulehu 2007’s project manager.  Kaupulehu 2007 also has an agreement with an independent building contractor for home building services for Kaupulehu 2007’s lots.  A significant provision of these agreements is that Mr. David Johnston and the building contractor will each receive 20% of the sales profit, which is contingent on the sale of each of the two homes under construction.

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Contractual Obligations

Barnwell’s credit facility at Royal Bank of Canada, a Canadian bank, was renewed in April 2008 for $20,000,000 Canadian dollars, or approximately US$18,870,000 at the September 30, 2008 exchange rate.  Borrowings under this facility were US$15,000,000 at September 30, 2008 and are included in long-term debt.  At September 30, 2008, Barnwell had unused credit available under this facility of approximately US$3,870,000.  The facility is available in U.S. dollars at the London Interbank Offer Rate plus 2.0%, at U.S. prime plus 0.75%, or in Canadian dollars at Canadian prime plus 0.75%.  A standby fee of 0.35% per annum is charged on the unused facility balance.

Kaupulehu 2007 has an agreement with Mr. David Johnston, the son of a director of Barnwell and minority interest owner in certain of Barnwell’s business ventures (see further discussion on related party interests at Note 9 in the “Notes to Consolidated Financial Statements” in Item 8), under which Mr. David Johnston serves as Kaupulehu 2007’s project manager.  Kaupulehu 2007 also has an agreement with an independent building contractor for home building services for Kaupulehu 2007’s lots.  A significant provision of these agreements is that Mr. David Johnston and the building contractor will each receive 20% of the sales profit, which is contingent on the sale of each of the two homes under construction.

As discussed in Note 11 in the “Notes to Consolidated Financial Statements” in Item 8, in December 2007, Kaupulehu 2007 refinanced $6,600,000 of its borrowings under a previously outstanding non-revolving credit facility with a new revolving credit facility from another financial institution.  The new facility provides $16,000,000 of credit under a revolving line of credit for the purpose of refinancing the acquisition of the three aforementioned parcels, financing the acquisition of a fourth parcel purchased in January 2008, and financing costs of home construction on the said four lots.  Under the terms of the facility, financing for home construction is limited to a maximum of two unsold homes under construction at any given time.  At September 30, 2008, Barnwell had unused credit available under this facility of approximately $4,783,000.

Contractual
Obligations

Barnwell’s credit facility at Royal Bank of Canada, a
Canadian bank, was renewed in April 2008 for $20,000,000 Canadian dollars,
or approximately US$18,870,000 at the September 30, 2008 exchange
rate.  Borrowings under this facility
were US$15,000,000 at September 30, 2008 and are included in long-term
debt.  At September 30, 2008,
Barnwell had unused credit available under this facility of approximately
US$3,870,000.  The facility is available
in U.S. dollars at the London Interbank Offer Rate plus 2.0%, at U.S. prime
plus 0.75%, or in Canadian dollars at Canadian prime plus 0.75%.  A standby fee of 0.35% per annum is charged
on the unused facility balance.

Kaupulehu 2007 has an agreement with Mr. David
Johnston, the son of a director of Barnwell and minority interest owner in
certain of Barnwell’s business ventures (see further discussion on related
party interests at Note 9 in the “Notes to Consolidated Financial
Statements” in Item 8), under which Mr. David Johnston serves as Kaupulehu
2007’s project manager.  Kaupulehu 2007
also has an agreement with an independent building contractor for home building
services for Kaupulehu 2007’s lots.  A
significant provision of these agreements is that Mr. David Johnston and
the building contractor will each receive 20% of the sales profit, which is
contingent on the sale of each of the two homes under construction.

As discussed in Note 11 in the “Notes to
Consolidated Financial Statements” in Item 8, in December 2007,
Kaupulehu 2007 refinanced $6,600,000 of its borrowings under a previously
outstanding non-revolving credit facility with a new revolving credit facility
from another financial institution.  The
new facility provides $16,000,000 of credit under a revolving line of credit
for the purpose of refinancing the acquisition of the three aforementioned
parcels, financing the acquisition of a fourth parcel purchased in January 2008,
and financing costs of home construction on the said four lots.  Under the terms of the facility, financing
for home construction is limited to a maximum of two unsold homes under
construction at any given time.  At September 30,
2008, Barnwell had unused credit available under this facility of approximately
$4,783,000.

Contractual Obligations

Barnwell’s credit facility at Royal Bank of Canada, a Canadian bank, was renewed in April 2008 for $20,000,000 Canadian dollars, or approximately US$19,634,000 at June 30, 2008 exchange rates.  Borrowings under this facility were US$15,399,000 at June 30, 2008 and are included in long-term debt.  At June 30, 2008, Barnwell had unused credit available under this facility of approximately US$4,235,000.  The facility is available in U.S. dollars at the London Interbank Offer Rate plus 2.0%, at U.S. prime plus 0.75%, or in Canadian dollars at Canadian prime plus 0.75%.  A standby fee of 0.35% per annum is charged on the unused facility balance.

Barnwell, through its interest in Kaupulehu 2007, has an obligation to purchase a parcel at a purchase price of $2,378,000 in the Lot 4A Increment I area of Kaupulehu, North Kona, Hawaii from WB KD Acquisition, LLC (“WB”), an unrelated entity.  The closing date for Kaupulehu 2007’s

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Contractual Obligations

Barnwell’s credit facility at Royal Bank of Canada, a Canadian bank, was renewed in April 2008 for $20,000,000 Canadian dollars, or approximately US$19,458,000 at March 31, 2008 exchange rates.  Borrowings under this facility were US$15,351,000 at March 31, 2008 and are included in long-term debt.  At March 31, 2008, Barnwell had unused credit available under this facility of approximately US$4,107,000.  The facility is available in U.S. dollars at the London Interbank Offer Rate plus 2.0%, at U.S. prime plus 0.75%, or in Canadian dollars at Canadian prime plus 0.75%.  A standby fee of 0.35% per annum is charged on the unused facility balance.

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Contractual Obligations

Barnwell, through its interest in Kaupulehu 2007, made nonrefundable initial deposits of $200,000 each to secure the right to purchase seven parcels at a purchase price of $2,378,000 each in the Lot 4A Increment I area of Kaupulehu, North Kona, Hawaii from WB KD Acquisition, LLC (“WB”), an unrelated entity, during fiscal 2007.  Kaupulehu 2007 purchased three parcels in fiscal 2007 and one parcel in January 2008 (see further discussion in Note 17 of the “Notes to Condensed Consolidated Financial Statements”).  The purchase of each of the remaining three lots is scheduled to close in March 2008, June 2008 and September 2008.  If any of the parcels is not purchased as per the terms of the purchase contract, the deposit related to any such parcels will be forfeited and Barnwell will incur an expense as a result of the write-off of the forfeited deposits.  Kaupulehu 2007 entered into an agreement with Mr. David Johnston, the son of Mr. Terry Johnston, a director of Barnwell, under which Mr. David Johnston will serve as Kaupulehu 2007’s project manager.  Kaupulehu 2007 also entered into an agreement with an independent building contractor for home building services for Kaupulehu 2007’s lots.  A significant provision of these agreements is that Mr. David Johnston and the building contractor will each receive 20% of the profit on the sale of each lot on which a house is constructed and have the right to purchase from WB one of the remaining lots Kaupulehu 2007 has agreed to acquire.  It is anticipated that any such service provider acquiring a lot will reimburse Kaupulehu 2007 for both the $200,000 deposit on such lot and interest costs incurred by Kaupulehu 2007 related to the initial deposit on such lot.

As discussed in Note 9 in the “Notes to Condensed Consolidated Financial Statements,” in December 2007, Kaupulehu 2007 refinanced $6,600,000 of its borrowings under a previously outstanding non-revolving credit facility with a new revolving credit facility from another financial institution.  The new facility provides $16,000,000 of credit under a revolving line of credit for the purpose of refinancing the acquisition of the three aforementioned parcels, financing the acquisition of a fourth parcel purchased in January 2008 (see further discussion in Note 17 of the “Notes to Condensed Consolidated Financial Statements”), and financing costs of home construction on the said four lots.  Under the terms of the facility, financing for home construction is limited to a maximum of two unsold homes under construction at any given time.  See further discussion on the Kaupulehu 2007 credit facility in Note 9 in the “Notes to Condensed Consolidated Financial Statements.”

Additionally, please see the “Notes to Consolidated Financial Statements” in Barnwell’s Annual Report on Form 10-K for the year ended September 30, 2007 for discussion on other contractual obligations and commitments.

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Contractual Obligations

Barnwell’s credit facility at the Royal Bank of Canada, a Canadian bank, was renewed in May 2007 for $20,000,000 Canadian dollars, or approximately US$18,810,000 at June 30, 2007 exchange rates.  Borrowings under this facility were US$13,232,000 at June 30, 2007 and are included in long-term debt.  At June 30, 2007, Barnwell had unused credit available under this facility of approximately US$5,578,000.  The facility is available in U.S. dollars at the London Interbank Offer Rate plus 1.5%, at U.S. prime plus 0.25%, or in Canadian dollars at Canadian prime plus 0.25%.  A standby fee of 0.25% per annum is charged on the unused facility balance.

As discussed in Note 5, “Deposits on Residential Parcels and Residential Lots Under Development,” in the “Notes to Condensed Consolidated Financial Statements,” Barnwell, through its 80%-owned real estate joint venture (the “Venture”), made nonrefundable initial deposits of $200,000 each to secure the right to purchase seven parcels in the Lot 4A Increment I area of Kaupulehu, North Kona, Hawaii from WB KD Acquisition, LLC (“WB”), an unrelated entity, during the second quarter of fiscal 2007.  Each lot under contract has a purchase price of $2,378,000 and the deposit for each lot will be applied to the purchase price of each lot.  In April 2007, the Venture purchased two of the aforementioned parcels and paid a total of $4,356,000 for the balance of the purchase price of those parcels.  The purchase of two additional lots is scheduled to close in October 2007 and the purchase of the remaining three lots is scheduled to close in April 2008.  If any of the parcels are not purchased as per the terms of the purchase contract, the deposit related to any such parcels will be forfeited and Barnwell will incur an expense as a result of the write-off of the forfeited deposits.  As of the date of this filing, the Venture is negotiating agreements with a project management company affiliated with Mr. Johnston and a building contractor for home building services for the Venture’s lots.  It is anticipated that a significant provision of such agreements will be that each such service provider will receive 20% of the profit on the sale of each lot on which a house is constructed.  In addition, the Venture intends to enter into contracts, one with the project management company affiliated with Mr. Johnston and one with the building contractor, wherein each will be granted the right to purchase from WB one of the five additional lots the Venture has agreed to acquire.  It is anticipated that any such agreement will specify the lot that will be acquired by such service provider and require such service provider to reimburse the Venture for both the $200,000 deposit on such lot and interest costs incurred by the Venture related to the initial deposit on such lot.

As discussed in Note 9, “Long-term Debt,” in the “Notes to Condensed Consolidated Financial Statements,” in April 2007 Barnwell, through its 80%-owned Venture, obtained a $7,500,000 credit facility from a financial institution for the purpose of refinancing a $1,400,000 loan obtained to finance the initial deposits on seven residential parcels and the acquisition of and a portion of the initial home construction on two of the aforementioned parcels.  The credit facility reduces to $5,000,000 in April 2008 and is due in total in October 2008.  Borrowings under this facility were $5,868,000 at June 30,

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2007, of which $5,000,000 is included in long-term debt and $868,000 is included in the current portion of long-term debt.  As of the date of this filing, the interest rate on the borrowings is primarily a floating rate equal to the 1-month London Interbank Offer Rate plus 1.75%.  The credit facility is guaranteed jointly and severally by Barnwell and Mr. Terry Johnston and is collateralized by future development rights option payments pledged by Kaupulehu Developments and a pledge not to otherwise pledge the fee simple interest in the two parcels in Increment I.

In March 2007, Barnwell completed an agreement to purchase a contract drilling rig for $731,000, $620,000 of which was financed by a bank loan.  The loan was obtained for a term of five years commencing in April 2007 with payments of $13,000 due monthly at an interest rate of 7.75% and is guaranteed in full by Barnwell.

See further discussion on long-term debt in Note 9 in the “Notes to Condensed Consolidated Financial Statements.”  Additionally, please see the “Notes to Consolidated Financial Statements” in Barnwell’s annual report on Form 10-K for the year ended September 30, 2006 for discussion on other contractual obligations and commitments.

Contractual Obligations

Barnwell’s credit facility at the Royal Bank of Canada, a Canadian bank, was renewed in May 2007 for $20,000,000 Canadian dollars, or approximately US$17,350,000 at March 31, 2007 exchange rates.  Borrowings under this facility were US$12,903,000 at March 31, 2007 and are included in long-term debt.  At March 31, 2007, Barnwell had unused credit available under this facility of approximately US$4,447,000.  The facility is available in U.S. dollars at the London Interbank Offer Rate plus 1.5%, at U.S. prime plus 0.25%, or in Canadian dollars at Canadian prime plus 0.25%.  A standby fee of 0.25% per annum is charged on the unused facility balance.

As discussed in Note 5, “Deposits on Residential Parcels,” in the “Notes to Condensed Consolidated Financial Statements,” Barnwell, through its 80%-owned real estate joint venture (the “Venture”), made nonrefundable initial deposits of $200,000 each to secure the right to purchase seven parcels in the Lot 4A Increment I area of Kaupulehu, North Kona, Hawaii from WB KD Acquisition, LLC (“WB”), an unrelated entity, during the three months ended March 31, 2007.  Each lot under contract has a purchase price of $2,378,000 and the deposit for each lot will be applied to the purchase price of each lot.  On April 30, 2007, the Venture purchased two of the aforementioned parcels and paid a total of $4,356,000 for the balance of the purchase price of those parcels.  The purchase of two additional lots is scheduled to close in October 2007 and the purchase of the remaining three lots is scheduled to close in April 2008.  If any of the parcels are not purchased as per the terms of the purchase contract, the deposit related to any such parcels will be forfeited and Barnwell will incur an expense as a result of the write-off of the forfeited deposits.  As of the date of this filing, the Venture is negotiating agreements with a project management company, an entity controlled by Mr. Johnston, and a building contractor for home building services for the Venture’s lots.  It is anticipated that a material portion of such agreements will be that each such service provider will receive 20% of the profit on the sale of each lot on which a house is constructed.  In addition, the Venture intends to enter into contracts, one with the project management company, an entity controlled by Mr. Johnston, and one with the building contractor, wherein each will be granted the right to purchase from WB one of the five additional lots the Venture has agreed to acquire.  It is anticipated that any such agreement will specify the lot that will be acquired by such service provider and require such service provider to reimburse the Venture for both the $200,000 deposit on such lot and interest costs incurred by the Venture related to the initial deposit on such lot.

As discussed in Note 8, “Long-term Debt,” in the “Notes to Condensed Consolidated Financial Statements,” Barnwell, through its 80%-owned Venture, financed the initial deposits on seven residential parcels via a $1,400,000 loan from a financial institution.  The loan bore interest at a rate of 7% and was guaranteed jointly and severally by Barnwell and Mr. Terry Johnston.  In April 2007, the Venture obtained a $7,500,000 credit facility from the same financial institution for the purpose of refinancing the $1,400,000 loan and to finance the acquisition of and a portion of the initial home construction on two of the aforementioned parcels.  The credit facility reduces to $5,000,000 in April 2008 and is due in total in June 2008.  As of the date of this filing, the interest rate on the credit facility is a floating rate equal to the 1-month London Interbank Offer Rate plus 1.75%.  The credit facility is guaranteed jointly and severally by Barnwell and Mr. Terry Johnston and is collateralized by future development rights option payments pledged by Kaupulehu Developments and a pledge not to otherwise pledge the fee simple interest in the two parcels in Increment I.

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