BARNWELL INDUSTRIES INC (Form: 10-Q, Received: 02/14/2014 12:10:40)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended December 31, 2013

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 1-5103

BARNWELL INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

DELAWARE

72-0496921

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

	1100 Alakea Street, Suite 2900, Honolulu, Hawaii	96813
	(Address of principal executive offices)	(Zip code)

(808) 531-8400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past

90 days.

x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was

required to submit and post such files).

x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer o
Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange

Act).

o Yes x No

As of February 12, 2014 there were 8,277,160 shares of common stock, par value $0.50, outstanding.

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BARNWELL INDUSTRIES, INC.

AND SUBSIDIARIES

INDEX

PART I.	FINANCIAL INFORMATION:

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets - December 31, 2013 and September 30, 2013	3

	Condensed Consolidated Statements of Operations - three months ended December 31, 2013 and 2012	4

	Condensed Consolidated Statements of Comprehensive Loss - three months ended December 31, 2013 and 2012	5

	Condensed Consolidated Statements of Cash Flows - three months ended December 31, 2013 and 2012	6

	Condensed Consolidated Statements of Equity - three months ended December 31, 2013 and 2012	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 4.	Controls and Procedures	33

PART II.	OTHER INFORMATION:

Item 1A.	Risk Factors	34

Item 6.	Exhibits	35

	Signature	36

	Index to Exhibits	37

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	December 31,			September 30,
	2013			2013
ASSETS
Current assets:
Cash and cash equivalents	$	5,269,000		$	7,828,000
Restricted cash	225,000			-
Accounts receivable, net of allowance for doubtful accounts of:
$35,000 at December 31, 2013; $43,000 at September 30, 2013	3,497,000			3,287,000
Prepaid expenses	333,000			230,000
Real estate held for sale	5,448,000			5,448,000
Other current assets	2,324,000			2,234,000

Total current assets	17,096,000			19,027,000

Restricted cash, net of current portion	1,775,000			-
Investments	7,374,000			2,381,000

Property and equipment	246,641,000			252,872,000
Accumulated depletion, depreciation, and amortization	(206,957,000		)	(211,566,000		)
Property and equipment, net	39,684,000			41,306,000

Total assets	$	65,929,000		$	62,714,000

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	3,429,000		$	4,415,000
Accrued capital expenditures	1,866,000			1,846,000
Accrued incentive and other compensation	1,365,000			1,652,000
Accrued operating and other expenses	3,199,000			2,670,000
Payable to affiliate	1,000,000			-
Current portion of long-term debt	7,106,000			5,240,000
Other current liabilities	1,206,000			624,000

Total current liabilities	19,171,000			16,447,000

Long-term debt	13,586,000			11,400,000

Liability for retirement benefits	3,218,000			3,137,000

Asset retirement obligation	7,444,000			7,520,000

Deferred income taxes	1,896,000			1,890,000

Total liabilities	45,315,000			40,394,000

Commitments and contingencies (Note 12)

Equity:
Common stock, par value $0.50 per share; authorized, 20,000,000 shares:
8,445,060 issued at December 31, 2013 and September 30, 2013	4,223,000			4,223,000
Additional paid-in capital	1,291,000			1,289,000
Retained earnings	14,543,000			15,532,000
Accumulated other comprehensive income, net	2,219,000			2,991,000
Treasury stock, at cost:
167,900 shares at December 31, 2013 and September 30, 2013	(2,286,000		)	(2,286,000		)

Total stockholders’ equity	19,990,000			21,749,000
Non-controlling interests	624,000			571,000

Total equity	20,614,000			22,320,000

Total liabilities and equity	$	65,929,000		$	62,714,000

See Notes to Condensed Consolidated Financial Statements

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BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended
	December 31,
	2013			2012
Revenues:
Oil and natural gas	$	5,327,000		$	5,640,000
Contract drilling	1,609,000			717,000
Sale of interest in leasehold land, net	120,000			-
Gas processing and other	145,000			194,000

	7,201,000			6,551,000
Costs and expenses:
Oil and natural gas operating	2,621,000			1,993,000
Contract drilling operating	1,312,000			608,000
General and administrative	1,856,000			2,142,000
Depletion, depreciation, and amortization	2,164,000			2,679,000
Reduction of carrying value of assets	-			2,327,000
Interest expense	163,000			152,000

	8,116,000			9,901,000

Loss before equity in loss of affiliates and income taxes	(915,000		)	(3,350,000		)

Equity in loss of affiliates	(147,000		)	-

Loss before income taxes	(1,062,000		)	(3,350,000		)

Income tax benefit	(62,000		)	(564,000		)

Net loss	(1,000,000		)	(2,786,000		)

Less: Net loss attributable to non-controlling interests	(11,000		)	(40,000		)

Net loss attributable to Barnwell Industries, Inc.	$	(989,000	)	$	(2,746,000	)


Basic net loss per common share attributable to Barnwell Industries, Inc. stockholders	$	(0.12	)	$	(0.33	)

Diluted net loss per common share attributable to Barnwell Industries, Inc. stockholders	$	(0.12	)	$	(0.33	)

Weighted-average number of common shares outstanding:
Basic	8,277,160			8,277,160
Diluted	8,277,160			8,277,160

See Notes to Condensed Consolidated Financial Statements

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BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

	Three months ended
	December 31,
	2013				2012

Net loss		$	(1,000,000	)		$	(2,786,000	)

Other comprehensive loss:
Foreign currency translation adjustments, net of taxes of $0		(780,000		)		(370,000		)
Retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0		8,000				65,000

Total other comprehensive loss		(772,000		)		(305,000		)

Total comprehensive loss		(1,772,000		)		(3,091,000		)

Less: Comprehensive loss attributable to non-controlling interests		(11,000		)		(40,000		)

Comprehensive loss attributable to Barnwell Industries, Inc.		$	(1,761,000	)		$	(3,051,000	)

See Notes to Condensed Consolidated Financial Statements

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BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three months ended
	December 31,
	2013				2012
Cash flows from operating activities:
Net loss		$	(1,000,000	)		$	(2,786,000	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Equity in loss of affiliates		147,000				-
Depletion, depreciation, and amortization		2,164,000				2,679,000
Reduction of carrying value of assets		-				2,327,000
Retirement benefits expense		91,000				154,000
Accretion of asset retirement obligation		126,000				96,000
Deferred income tax benefit		67,000				(1,122,000		)
Asset retirement obligation payments		(10,000		)		(17,000		)
Share-based compensation benefit		(175,000		)		(32,000		)
Retirement plan contributions		(1,000		)		(251,000		)
Sale of interest in leasehold land, net		(120,000		)		-
Real estate held for sale		-				(122,000		)
(Decrease) increase from changes in current assets and liabilities		(290,000		)		817,000

Net cash provided by operating activities		999,000				1,743,000

Cash flows from investing activities:
Payment to acquire interest in affiliates		(4,140,000		)		-
Proceeds from sale of interest in leasehold land, net of fees paid		120,000				-
Proceeds from gas over bitumen royalty adjustments		5,000				8,000
Capital expenditures - oil and natural gas		(1,617,000		)		(973,000		)
Capital expenditures - all other		-				(2,000		)

Net cash used in investing activities		(5,632,000		)		(967,000		)

Cash flows from financing activities:
Proceeds from long-term debt borrowings		4,186,000				502,000
Repayments of long-term debt		(134,000		)		(129,000		)
Increase in restricted cash		(2,000,000		)		-
Contributions from non-controlling interests		64,000				55,000

Net cash provided by financing activities		2,116,000				428,000

Effect of exchange rate changes on cash and cash equivalents		(42,000		)		(22,000		)

Net (decrease) increase in cash and cash equivalents		(2,559,000		)		1,182,000
Cash and cash equivalents at beginning of period		7,828,000				8,845,000

Cash and cash equivalents at end of period		$	5,269,000			$	10,027,000

See Notes to Condensed Consolidated Financial Statements

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BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three months ended December 31, 2013 and 2012

(Unaudited)

													Accumulated
						Additional							Other
	Shares		Common			Paid-In			Retained				Comprehensive				Treasury				Non-controlling				Total
	Outstanding		Stock			Capital			Earnings				Income				Stock				Interests				Equity
Balance at September 30, 2012		8,277,160		$	4,223,000		$	1,289,000		$	24,095,000			$	2,322,000			$	(2,286,000	)		$	482,000			$	30,125,000
Contributions from non-controlling interests																						55,000				55,000
Net loss										(2,746,000		)										(40,000		)		(2,786,000		)
Foreign currency translation adjustments, net of taxes of $0														(370,000		)										(370,000		)
Retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0														65,000												65,000
Balance at December 31, 2012		8,277,160		$	4,223,000		$	1,289,000		$	21,349,000			$	2,017,000			$	(2,286,000	)		$	497,000			$	27,089,000

Balance at September 30, 2013		8,277,160		$	4,223,000		$	1,289,000		$	15,532,000			$	2,991,000			$	(2,286,000	)		$	571,000			$	22,320,000
Contributions from non-controlling interests																						64,000				64,000
Net loss										(989,000		)										(11,000		)		(1,000,000		)
Share-based compensation							2,000																			2,000
Foreign currency translation adjustments, net of taxes of $0														(780,000		)										(780,000		)
Retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0														8,000												8,000
Balance at December 31, 2013		8,277,160		$	4,223,000		$	1,291,000		$	14,543,000			$	2,219,000			$	(2,286,000	)		$	624,000			$	20,614,000

See Notes to Condensed Consolidated Financial Statements

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BARNWELL INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Barnwell Industries, Inc. and all majority-owned subsidiaries (collectively referred to herein as “Barnwell,” “we,” “our,” “us,” or the “Company”), including a 77.6%-owned land investment general partnership (Kaupulehu Developments), a 75%-owned land investment partnership (KD Kona 2013 LLLP) and two 80%-owned joint ventures (Kaupulehu 2007, LLLP and Kaupulehu Investors, LLC). All significant intercompany accounts and transactions have been eliminated.

Barnwell’s investments in both unconsolidated entities in which a significant, but less than controlling, interest is held and in variable interest entities (“VIE”) in which the Company is not deemed to be the primary beneficiary are accounted for by the equity method.

Unless otherwise indicated, all references to “dollars” in this Form 10-Q are to U.S. dollars.

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements and notes have been prepared by Barnwell in accordance with the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. These condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in Barnwell’s September 30, 2013 Annual Report on Form 10-K. The Condensed Consolidated Balance Sheet as of September 30, 2013 has been derived from audited consolidated financial statements.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at December 31, 2013, results of operations, comprehensive loss, cash flows and equity for the three months ended December 31, 2013 and 2012, have been made. The results of operations for the period ended December 31, 2013 are not necessarily indicative of the operating results for the full year.

Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management of Barnwell to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ significantly from those estimates.

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Significant Accounting Policies

Other than as set forth below, there have been no changes to Barnwell’s significant accounting policies as described in the Notes to Consolidated Financial Statements included in Item 8 of the Company’s most recently filed Annual Report on Form 10-K.

Restricted Cash

Restricted cash consists of deposits for interest reserve and collateral for our land investment loan.

Equity Method Investments

Affiliated companies, which are limited partnerships or similar entities, in which Barnwell holds more than a 3 to 5% ownership interest, are accounted for as equity method investments. Equity method investment adjustments include Barnwell’s proportionate share of investee income or loss, adjustments to recognize certain differences between Barnwell’s carrying value and Barnwell’s equity in net assets of the investee at the date of investment, impairments, and other adjustments required by the equity method. Gain or losses are realized when such investments are sold.

Investments in equity method investees are evaluated for impairment as events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If the carrying amounts of the assets exceed their respective fair values, additional impairment tests are performed to measure the amounts of the impairment losses, if any. When an impairment test demonstrates that the fair value of an investment is less than its carrying value, management will determine whether the impairment is either temporary or other-than-temporary. Examples of factors which may be indicative of an other-than-temporary impairment include (i) the length of time and extent to which fair value has been less than carrying value, (ii) the financial condition and near-term prospects of the investee, and (iii) the intent and ability to retain the investment in the investee for a period of time sufficient to allow for any anticipated recovery in fair value. If the decline in fair value is determined by management to be other-than-temporary, the carrying value of the investment is written down to its estimated fair value as of the balance sheet date of the reporting period in which the assessment is made.

Variable Interest Entities

The consolidation of VIEs is required when an enterprise has a controlling financial interest and is therefore the VIE’s primary beneficiary. A controlling financial interest will have both of the following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The determination of whether an entity is a VIE and, if so, whether the Company is primary beneficiary, may require significant judgment.

Barnwell analyzes its unconsolidated affiliates in which it has an investment to determine whether the unconsolidated entities are VIEs and, if so, whether the Company is the primary beneficiary. This analysis includes a qualitative review based on an evaluation of the design of the entity, its organizational structure, including decision making ability and financial agreements, as well as a quantitative review. At December 31, 2013, our unconsolidated affiliates that have been determined to be VIEs are accounted under the equity method because we do not have a controlling financial interest and are therefore not the VIE’s primary beneficiary (see Note 5).

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Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” This update requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. The Company adopted the provisions of this ASU effective October 1, 2013. The adoption of this ASU impacted the presentation of Barnwell’s accumulated other comprehensive income footnote disclosures.

2. LOSS PER COMMON SHARE

Basic earnings (loss) per share excludes dilution and is computed by dividing net earnings (loss) attributable to Barnwell stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings (loss) per share includes the potentially dilutive effect of outstanding common stock options, to the extent their inclusion would be dilutive. Potentially dilutive shares are excluded from the computation of diluted earnings (loss) per share if their effect is anti-dilutive.

Potentially dilutive shares consist of the common shares issuable upon the exercise of outstanding stock options (both vested and non-vested) using the treasury stock method. Options to purchase 837,250 and 807,250 shares of common stock were excluded from the computation of diluted shares for the three months ended December 31, 2013 and 2012, respectively, as their inclusion would have been antidilutive due to the net loss attributable to Barnwell stockholders.

Reconciliations between net loss attributable to Barnwell stockholders and common shares outstanding of the basic and diluted net loss per share computations are detailed in the following tables:

Three months ended December 31, 2013

Net Loss

Per-Share

(Numerator)

(Denominator)

Amount

Basic net loss per share

(989,000

)

8,277,160

(0.12

)

Effect of dilutive securities - common stock options

Diluted net loss per share

(989,000

)

8,277,160

(0.12

)

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	Three months ended December 31, 2012
	Net Loss				Shares		Per-Share
	(Numerator)				(Denominator)		Amount
Basic net loss per share		$	(2,746,000	)		8,277,160		$	(0.33	)

Effect of dilutive securities - common stock options		-				-

Diluted net loss per share		$	(2,746,000	)		8,277,160		$	(0.33	)

3. SHARE-BASED PAYMENTS

The Company’s share-based compensation benefit and related income tax effects are as follows:

	Three months ended
	December 31,
	2013				2012

Share-based compensation benefit		$	(175,000	)		$	(32,000	)

Income tax effect		$	-			$	-

Share-based compensation benefit recognized in loss for the three months ended December 31, 2013 and 2012 are reflected in “General and administrative” expenses in the Condensed Consolidated Statements of Operations. There was no impact on income taxes for the three months ended December 31, 2013 and 2012 due to a full valuation allowance on the related deferred tax asset.

As of December 31, 2013, there was $119,000 of total unrecognized compensation cost related to nonvested share options. That cost is expected to be recognized over 3.9 years. The weighted-average grant date fair value of employee options granted during the three months ended December 31, 2013 was $2.04 (no options were granted during the three months ended December 31, 2012).

Equity-classified Awards

The following assumptions were used in estimating fair value for equity-classified share options granted in the three months ended December 31, 2013:

Expected volatility		55.6%
Expected dividends		0.0%
Expected term (in years)		10
Risk-free interest rate		3.0%
Expected forfeitures		None

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The application of alternative assumptions could produce significantly different estimates of the fair value of share-based compensation, and consequently, the related costs reported in the Condensed Consolidated Statements of Operations.

A summary of the activity in Barnwell’s equity-classified share options from October 1, 2013 through December 31, 2013 is presented below:

						Weighted-
						Average
			Weighted-			Remaining
			Average			Contractual		Aggregate
			Exercise			Term		Intrinsic
Options	Shares		Price			(in years)		Value
Outstanding at October 1, 2013		60,000		$	8.62
Granted		30,000		3.01
Exercised		-
Expired/Forfeited		-
Outstanding at December 31, 2013		90,000		$	6.75		3.9		$	-

Exercisable at December 31, 2013		60,000		$	8.62		0.9		$	-

Total share-based compensation expense for equity-classified awards vested in the three months ended December 31, 2013 and 2012 was $2,000 and $0, respectively.

Liability-classified Awards

In December 2013, Barnwell granted non-qualified options with an exercise price equal to the closing market price of Barnwell’s stock on the date of grant, that vest annually over four years of continuous service, and that expire ten years from the date of grant. The non-qualified options have stock appreciation rights features that permit the holder to receive stock, cash or a combination thereof equal to the amount by which the fair market value, at the time of exercise of the option, exceeds the option price.

The following assumptions were used in estimating fair value for all liability-classified share options outstanding:

	Three months ended December 31,
	2013	2012

Expected volatility range	49.4% to 62.6%	32.6% to 66.1%
Weighted-average volatility	56.5%	59.0%
Expected dividends	0.0%	0.0%
Expected term (in years)	0.9 to 10.0	0.2 to 7.0
Risk-free interest rate	0.1% to 3.0%	0.1% to 1.2%
Expected forfeitures	None	None

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A summary of the activity in Barnwell’s liability-classified share options from October 1, 2013 through December 31, 2013 is presented below:

						Weighted-
						Average
			Weighted-			Remaining
			Average			Contractual		Aggregate
			Exercise			Term		Intrinsic
Options	Shares		Price			(in years)		Value
Outstanding at October 1, 2013		717,250		$	8.37
Granted		30,000			3.01
Exercised		-
Expired/Forfeited		-
Outstanding at December 31, 2013		747,250		$	8.15		4.4		$	-

Exercisable at December 31, 2013		639,750		$	8.86		3.9		$	-

The following table summarizes the components of the total share-based compensation for liability-classified awards:

	Three months ended December 31,
	2013				2012

Due to vesting		$	7,000			$	18,000
Due to remeasurement			(184,000	)			(50,000	)

Total share-based compensation benefit for liability-based awards		$	(177,000	)		$	(32,000	)

4. REAL ESTATE HELD FOR SALE

Kaupulehu 2007, LLLP (“Kaupulehu 2007”) currently owns one luxury residence that is available for sale in the Lot 4A Increment I area located in the North Kona District of the island of Hawaii, north of Hualalai Resort at Historic Ka`upulehu, between the Queen Kaahumanu Highway and the Pacific Ocean.

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5. INVESTMENTS

A summary of Barnwell’s investments is as follows:

	December 31 ,			September 30,
	2013			2013
Investment in two residential parcels		$	2,331,000		$	2,331,000
Investment in land development partnerships			4,993,000			-
Investment in leasehold land interest – Lot 4C			50,000			50,000

Total investments		$	7,374,000		$	2,381,000

Investment in two residential parcels

Kaupulehu 2007 owns two residential parcels in the Lot 4A Increment I area located in the North Kona District of the island of Hawaii, north of Hualalai Resort at Historic Ka`upulehu, between the Queen Kaahumanu Highway and the Pacific Ocean.

Investment in land development partnerships

On November 27, 2013, Barnwell, through a wholly-owned subsidiary, entered into two limited liability limited partnerships, KD Kona 2013 LLLP and KKM Makai, LLLP, and indirectly acquired a 19.6% ownership interest in each WB Kukio Resorts, LLC, WB Maniniowali, LLC, and WB Kaupulehu, LLC for $5,140,000. These entities own certain real estate and development rights interests in the Kukio, Maniniowali, and Kaupulehu portions of Kukio Resort, a private residential community on the Kona coast of the island of Hawaii. WB Kaupulehu, LLC, which is comprised of WB KD Acquisition, LLC (“WB”) and WB KD Acquisition II, LLC (“WBKD”), is the developer of Kaupulehu Lot 4A Increments I and II, the area in which Barnwell has interests in percentage of sales payments. Barnwell’s investment in these entities is accounted for using the equity method of accounting.

The limited liability limited partnership agreements provide for a priority return of Barnwell’s investment prior to profit distributions. Net profits, losses and cash flows of the partnerships are allocated to Barnwell and the other partners at varying percentages based on whether the initial and any additional capital contributions have been repaid to the investors. For the period from the acquisition date, November 27, 2013, to December 31, 2013, Barnwell was allocated partnership losses of $147,000.

Barnwell, through affiliated entities, borrowed approximately $4,140,000 on the acquisition date under a new bank loan to partially fund the acquisition. In January 2014, Barnwell paid an additional $1,000,000, of which approximately $814,000 was borrowed under the new bank loan, to fund the remainder of the acquisition price. This amount is accrued under the caption “Payable to affiliate” in the Condensed Consolidated Balance Sheets at December 31, 2013.

The initial accounting for the acquisition by the general partner of the investees is incomplete as the general partner is currently in the process of performing an acquisition date audit. As such, we are unable to determine the amount, if any, of the basis difference between the underlying equity in net assets of the investee land development partnerships and the carrying value of Barnwell’s investment as a limited partner.

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Barnwell, as well as WB and certain other owners of the partnership, have jointly and severally executed a surety indemnification agreement. Bonds issued by the surety at December 31, 2013 totaled approximately $4,700,000 and relate to certain construction contracts of WB. If any such performance bonds are called, we may be obligated to reimburse the issuer of the performance bond as Barnwell, WB and certain other owners are jointly and severally liable, however we believe that it is remote that a material amount of any currently outstanding performance bonds will be called. Performance bonds do not have stated expiration dates. Rather, the performance bonds are released as the underlying performance is completed.

As of December 31, 2013, Barnwell’s maximum loss exposure as a result of its investment in the land development partnerships was $9,693,000, consisting of the carrying value of the investment of $4,993,000 and $4,700,000 from the surety indemnification agreement of which we are jointly and severally liable.

Summarized financial information for the land development partnerships is as follows for the period of November 27, 2013 to December 31, 2013:

Revenue	$	269,000
Gross profit	$	211,000
Loss from operations	$	(386,000	)
Net loss	$	(381,000	)

Percentage of sales payments

Kaupulehu Developments has the right to receive payments resulting from the sale of lots and/or residential units within approximately 870 acres of the Kaupulehu Lot 4A area in two increments (“Increment I” and “Increment II”).

The following table summarizes the Increment I percentage of sales payment revenues received during the three months ended December 31, 2013 (no amounts were received during the three months ended December 31, 2012). This sale occurred prior to our purchase of an ownership interest in the land development partnerships:

Sale of interest in leasehold land:
Proceeds	$	140,000
Fees		(20,000	)
Revenues – sale of interest in leasehold land, net	$	120,000

Investment in leasehold land interest - Lot 4C

Kaupulehu Developments holds an interest in an area of approximately 1,000 acres of vacant leasehold land zoned conservation located adjacent to Lot 4A. The lease terminates in December 2025.

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6. LONG-TERM DEBT

A summary of Barnwell’s long-term debt is as follows:

	December 31 ,				September 30,
	2013				2013

Canadian revolving credit facility		$	12,000,000			$	12,000,000
Real estate loan			4,506,000				4,640,000
Land investment loan			4,186,000				-

			20,692,000				16,640,000
Less: current portion			(7,106,000	)			(5,240,000	)

Total long-term debt		$	13,586,000			$	11,400,000

Canadian revolving credit facility

Barnwell has a credit facility at Royal Bank of Canada, a Canadian bank, for $20,000,000 Canadian dollars, or US$18,804,000 at the December 31, 2013 exchange rate. Unused credit available under this facility was US$6,804,000 and the interest rate on the facility was 2.66% at December 31, 2013.

Under the financing agreement with Royal Bank of Canada, the facility is reviewed annually, with the next review planned for April 2014. Subject to that review, the facility may be renewed for one year with no required debt repayments 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 this agreement, if Royal Bank of Canada were to convert the facility to a two-year term loan upon its next review in April 2014, Barnwell would be obligated to make quarterly principal and interest repayments beginning in July 2014. As such, two quarterly repayments of 5% each would be due within one year of December 31, 2013 and accordingly, we have included $1,200,000, representing 10% of the outstanding loan balance at December 31, 2013, in the current portion of long-term debt.

Real estate loan

Barnwell, together with its real estate joint venture, Kaupulehu 2007, has a non-revolving real estate loan with a Hawaii bank. Principal and interest are paid monthly and are determined based on a loan amortization schedule. The monthly payment will change as a result of an annual change in the interest rate, the sale of the house or the sale of a residential parcel. The interest rate adjusts each April for the remaining term of the loan to the lender’s then prevailing interest rate for similarly priced commercial mortgage loans or a floating rate equal to the lender’s base rate. The interest rate at December 31, 2013 was 3.53%. Any unpaid principal balance and accrued interest will be due and payable on April 1, 2018.

The loan is collateralized by, among other things, a first mortgage on Kaupulehu 2007’s lots together with all improvements thereon. Kaupulehu 2007 will be required to make a principal payment upon the sale of the house or a residential parcel in the amount of the net sales proceeds of the house or residential parcel; the loan agreement defines net sales proceeds as the gross sales proceeds for the house or residential parcel, less reasonable commissions and normal closing costs.

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The loan agreement contains provisions requiring us to maintain compliance with certain covenants including a consolidated debt service coverage ratio and a consolidated total liabilities to tangible net worth ratio.

The home collateralizing the loan is currently available for sale; therefore, the entire balance outstanding at December 31, 2013 under the term loan has been classified as a current liability.

Land investment loan

The bank loan matures in December 2015, with an option to extend one year, and accrues interest for the first year at 4.5% and resets annually thereafter to the lender’s then prevailing interest rate for similarly priced commercial mortgage loans or to the lender’s base rate plus 0.50%. The interest rate at December 31, 2013 was 4.50%. Principal payments are due on the receipt of percentage of sales payments from the sale of lots within Kaupulehu Lot 4A Increments I and II, upon the sale of Kaupulehu 2007’s residential parcels and on receipt of cash distributions from the land development partnerships. Additionally, Kaupulehu 2007 will be required to make a principal payment of $1,400,000 upon the sale of the real estate held for sale; therefore, $1,400,000 has been classified as a current liability.

The loan is collateralized by Kaupulehu Developments’ rights to percentage of sales payments from the sale of lots within Kaupulehu Lot 4A Increments I and II, a second mortgage on Kaupulehu 2007’s lots together with all improvements thereon, the interest in the land development partnerships and any distributions from the partnerships, a $1,000,000 interest reserve account and a $1,000,000 pledged deposit account. Barnwell is a guarantor of the loan.

7. RETIREMENT PLANS

Barnwell sponsors a noncontributory defined benefit pension plan (“Pension Plan”) covering substantially all of its U.S. employees. Additionally, Barnwell sponsors a Supplemental Employee Retirement Plan (“SERP”), a noncontributory supplemental retirement benefit plan which covers certain current and former employees of Barnwell for amounts exceeding the limits allowed under the Pension Plan, and a postretirement medical insurance benefits plan (“Postretirement Medical”) covering eligible U.S. employees.

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The following table details the components of net periodic benefit cost for Barnwell’s retirement plans:

	Pension Plan						SERP							Postretirement Medical
	Three months ended December 31,
	2013			2012				2013			2012				2013			2012
Service cost	$	59,000		$	68,000			$	12,000		$	13,000			$	3,000		$	4,000
Interest cost	85,000			75,000				16,000			14,000				13,000			12,000
Expected return on plan assets	(105,000		)	(97,000		)		-			-				-			-
Amortization of prior service cost (credit)	1,000			1,000				(1,000		)	(1,000		)		3,000			34,000
Amortization of net actuarial loss (gain)	9,000			26,000				1,000			5,000				(5,000		)	-

Net periodic benefit cost	$	49,000		$	73,000			$	28,000		$	31,000			$	14,000		$	50,000

Barnwell estimates that it will make approximately $600,000 in contributions to the Pension Plan during fiscal 2014. The SERP and Postretirement Medical plans are unfunded, and Barnwell will fund benefits when payments are made. Barnwell does not expect to make any benefit payments under the Postretirement Medical plan during fiscal 2014 and expected payments under the SERP for fiscal 2014 are not material. Fluctuations in actual equity market returns as well as changes in general interest rates will result in changes in the market value of plan assets and may result in increased or decreased retirement benefits costs and contributions in future periods.

8. INCOME TAXES

The components of loss before income taxes, after adjusting the loss for non-controlling interests, are as follows:

	Three months ended
	December 31,
	2013			2012

United States	$	(850,000	)	$	(1,288,000	)
Canada	(201,000		)	(2,022,000		)

	$	(1,051,000	)	$	(3,310,000	)

The components of the income tax benefit are as follows:

	Three months ended
	December 31,
	2013			2012

Current	$	(129,000	)	$	558,000
Deferred	67,000			(1,122,000		)

	$	(62,000	)	$	(564,000	)

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Barnwell’s effective consolidated income tax benefit rate for the three months ended December 31, 2013 and 2012, after adjusting loss before income taxes for non-controlling interests, was 6% and 17%, respectively.

Consolidated taxes do not bear a customary relationship to pretax losses due primarily to the fact that Canadian income taxes are not sheltered by U.S. source losses, Canadian income taxes are not estimated to have a current or future benefit as foreign tax credits or deductions for U.S. tax purposes, and U.S. consolidated net operating losses are not estimated to have any future U.S. tax benefit prior to expiration.

The Canada Revenue Agency is currently examining the Company’s Canadian federal income tax returns for fiscal 2010 and 2011.

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9. SEGMENT INFORMATION

Barnwell operates the following segments: 1) exploring for, developing, producing and selling oil and natural gas in Canada (oil and natural gas); 2) investing in land interests in Hawaii (land investment); 3) drilling wells and installing and repairing water pumping systems in Hawaii (contract drilling); and 4) developing homes for sale in Hawaii (residential real estate).

The following table presents certain financial information related to Barnwell’s reporting segments. All revenues reported are from external customers with no intersegment sales or transfers.

	Three months ended
	December 31,
	2013			2012
Revenues:
Oil and natural gas	$	5,327,000		$	5,640,000
Land investment	120,000			-
Contract drilling	1,609,000			717,000
Other	141,000			166,000
Total before interest income	7,197,000			6,523,000
Interest income	4,000			28,000
Total revenues	$	7,201,000		$	6,551,000

Depletion, depreciation, and amortization:
Oil and natural gas	$	2,059,000		$	2,535,000
Contract drilling	78,000			115,000
Other	27,000			29,000
Total depletion, depreciation, and amortization	$	2,164,000		$	2,679,000

Reduction of carrying value of assets:
Oil and natural gas	$	-		$	2,327,000

Operating profit (loss) (before general and administrative expenses):
Oil and natural gas	$	647,000		$	(1,215,000	)
Land investment	120,000			-
Contract drilling	219,000			(6,000		)
Other	114,000			137,000
Total operating profit (loss)	1,100,000			(1,084,000		)

Equity in loss of affiliates:
Land investment	(147,000		)	-

General and administrative expenses	(1,856,000		)	(2,142,000		)
Interest expense	(163,000		)	(152,000		)
Interest income	4,000			28,000
Loss before income taxes	$	(1,062,000	)	$	(3,350,000	)

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Assets By Segment:

	December 31 ,		September 30,
	2013		2013
Oil and natural gas (1)	$	39,148,000	$	40,559,000
Land investment (2)	7,374,000		2,381,000
Contract drilling (2)	3,114,000		2,905,000
Residential real estate (2)	5,448,000		5,448,000
Other:
Cash and cash equivalents	5,269,000		7,828,000
Restricted cash	2,000,000		-
Corporate and other	3,576,000		3,593,000
Total	$	65,929,000	$	62,714,000

(1) Primarily located in the province of Alberta, Canada.

(2) Located in Hawaii.

10. ACCUMULATED OTHER COMPREHENSIVE INCOME

The changes in each component of accumulated other comprehensive income (loss) were as follows:

	Three months ended
	December 31,
	2013			2012
Foreign currency translation:
Beginning accumulated foreign currency translation	$	3,701,000		$	5,020,000
Change in cumulative translation adjustment	(780,000		)	(370,000		)
Income taxes	-			-
Ending accumulated foreign currency translation	2,921,000			4,650,000
Retirement plans:
Beginning accumulated retirement plans benefit cost	(710,000		)	(2,698,000		)
Amortization of prior service cost	3,000			34,000
Amortization of net actuarial loss	5,000			31,000
Income taxes	-			-
Ending accumulated retirement plans benefit cost	(702,000		)	(2,633,000		)

Accumulated other comprehensive income, net of taxes	$	2,219,000		$	2,017,000

The accumulated other comprehensive loss components for the retirement plans are included in the computation of net periodic benefit cost which is a component of general and administrative expenses on the accompanying Condensed Consolidated Statement of Operations (see Note 7 for additional details).

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11. FAIR VALUE MEASUREMENTS

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued current liabilities approximate their fair values due to the short-term nature of the instruments. The carrying value of long-term debt approximates fair value as the terms approximate current market terms for similar debt instruments of comparable risk and maturities.

12. COMMITMENTS AND CONTINGENCIES

Environmental Matters

As of December 31, 2013 and September 30, 2013, environmental remediation costs of $781,000 and $783,000, respectively, which have not been discounted, were accrued in “Accrued operating and other expenses” on the Condensed Consolidated Balance Sheets. The amounts accrued represent the estimated liability for probable environmental remediation costs for soil contamination from infrastructure issues at the Dunvegan and Wood River properties. Because of the inherent uncertainties associated with environmental assessment and remediation activities, future expenses to remediate the currently identified sites, and sites identified in the future, if any, could be incurred.

13. INFORMATION RELATING TO THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three months ended December 31,
	2013			2012
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest	$	138,000		$	146,000
Income taxes (refunded) paid	$	(78,000	)	$	5,000

Supplemental disclosure of non-cash investing and financing activities:
Payable to affiliate for investment in land development partnerships	$	1,000,000		$	-

Capital expenditure accruals related to oil and natural gas exploration and development increased $82,000 and $844,000 during the three months ended December 31, 2013 and 2012, respectively. Additionally, during the three months ended December 31, 2013 and 2012, capital expenditure accruals related to oil and natural gas asset retirement obligations increased $57,000 and $48,000, respectively.

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14. OIL AND NATURAL GAS PROPERTIES

Under the full cost method of accounting, the Company performs quarterly ceiling test calculations. Barnwell’s net capitalized costs exceeded the ceiling limitation at December 31, 2012. As such, Barnwell reduced the carrying value of its oil and natural gas properties by $2,327,000 during the three months ended December 31, 2012. No such reduction was necessary during the three months ended December 31, 2013. The reduction is included in the Condensed Consolidated Statements of Operations under the caption “Reduction of carrying value of assets.”

15. SUBSEQUENT EVENT

In January 2014, Barnwell paid $1,000,000 to fund the remainder of the acquisition price for the land development partnership interests purchased in November 2013. This amount is accrued under the caption “Payable to affiliate” in the Condensed Consolidated Balance Sheets at December 31, 2013. An additional $814,000 was borrowed on the land investment loan to partially fund the remainder of the acquisition price, bringing the total borrowings under the land investment loan to the facility maximum of $5,000,000.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Relevant to Forward-Looking Information

For the Purpose Of “Safe Harbor” Provisions Of The

Private Securities Litigation Reform Act of 1995

This Form 10-Q, and the documents incorporated herein by reference, contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. A forward-looking statement is one which is based on current expectations of future events or conditions and does not relate to historical or current facts. These statements include various estimates, forecasts, projections of Barnwell’s future performance, statements of Barnwell’s plans and objectives, and other similar statements. Forward-looking statements include phrases such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “predicts,” “estimates,” “assumes,” “projects,” “may,” “will,” “will be,” “should,” or similar expressions. Although Barnwell believes that its current expectations are based on reasonable assumptions, it cannot assure that the expectations contained in such forward-looking statements will be achieved. Forward-looking statements involve risks, uncertainties and assumptions which could cause actual results to differ materially from those contained in such statements. The risks, uncertainties and other factors that might cause actual results to differ materially from Barnwell’s expectations are set forth in the “Forward-Looking Statements” and “Risk Factors” sections of Barnwell’s Annual Report on Form 10-K for the year ended September 30, 2013. Investors should not place undue reliance on these forward-looking statements, as they speak only as of the date of filing of this Form 10-Q, and Barnwell expressly disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking statements contained herein.

Critical Accounting Policies and Estimates

Management has determined that our most critical accounting policies and estimates are those related to the evaluation of recoverability of assets, depletion of our oil and natural gas properties, income taxes and asset retirement obligation which are discussed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2013. There have been no significant changes to these critical accounting policies and estimates during the three months ended December 31, 2013. We continue to monitor our accounting policies to ensure proper application of current rules and regulations.

Impact of Recently Issued Accounting Standards on Future Filings

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-04, “Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date.” This update provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. Examples of obligations within this guidance are debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The amendments are effective retrospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2013. The adoption of this update is not expected to have a material impact on Barnwell’s consolidated financial statements.

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In March 2013, the FASB issued ASU No. 2013-05, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity.” This update provides guidance on releasing cumulative translation adjustments when a reporting entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. In addition, these amendments provide guidance on the release of cumulative translation adjustments in partial sales of equity method investments and in step acquisitions. The amendments are effective on a prospective basis for fiscal years, and interim reporting periods within those years, beginning after December 15, 2013. The adoption of this update is not expected to have a material impact on Barnwell’s consolidated financial statements.

In April 2013, the FASB issued ASU No. 2013-07, “Liquidation Basis of Accounting,” which provides guidance on when and how to apply the liquidation basis of accounting and on what to disclose. The update requires an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent, as defined in the update. The amendments are effective on a prospective basis for an entity that determines liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. The adoption of this update is not expected to have a material impact on Barnwell’s consolidated financial statements.

In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,” which requires an entity to present an unrecognized tax benefit as a reduction of a deferred tax asset for an net operating loss (“NOL”) carryforward, or similar tax loss or tax credit carryforward, rather than as a liability when (1) the uncertain tax position would reduce the NOL or other carryforward under the tax law of the applicable jurisdiction and (2) the entity intends to use the deferred tax asset for that purpose. The amendments are effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this update is not expected to have a material impact on Barnwell’s consolidated financial statements.

Overview

Barnwell is engaged in the following lines of business: 1) exploring for, developing, producing and selling oil and natural gas in Canada (oil and natural gas segment), 2) investing in land interests in Hawaii (land investment segment), 3) drilling wells and installing and repairing water pumping systems in Hawaii (contract drilling segment), and 4) developing homes for sale in Hawaii (residential real estate segment).

Oil and Natural Gas Segment

Barnwell is involved in the acquisition, exploration and development of oil and natural gas properties in Canada where we initiate and participate in exploratory and developmental operations for oil and natural gas on properties in which we have an interest, and evaluate proposals by third parties with regard to participation in such exploratory and developmental operations elsewhere.

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Land Investment Segment

The land investment segment is comprised of the following components:

1) Through Barnwell’s 77.6% controlling interest in Kaupulehu Developments, a Hawaii general partnership, 75% controlling interest in KD Kona 2013 LLLP, a Hawaii limited liability limited partnership, and 34.45% non-controlling interest in KKM Makai, LLLP, a Hawaii limited liability limited partnership, the Company’s land investment interests include the following:

· The right to receive payments from WB KD Acquisition, LLC (“WB”) and WB KD Acquisition II, LLC (“WBKD”), resulting from the sale of lots and/or residential units within approximately 870 acres of the Kaupulehu Lot 4A area, located approximately six miles north of the Kona International Airport in the North Kona District of the island of Hawaii, adjacent to Hualalai Resort at Historic Ka`upulehu, between the Queen Kaahumanu Highway and the Pacific Ocean, by WB and WBKD in two increments (“Increment I” and “Increment II”). Increment I is an area zoned for approximately 80 single-family lots and a beach club on the portion of the property bordering the Pacific Ocean, and is partially developed. The purchasers of the 80 single-family lots will have the right to apply for membership in the Kuki’o Golf and Beach Club, which is located adjacent to and south of the Hualalai Resort at Historic Ka’upulehu. Increment II is the remaining portion of the approximately 870-acre property, is zoned for single-family and multi-family residential units and a golf course and clubhouse, and is not yet developed.

· A 19.6% ownership interest in each WB Kukio Resorts, LLC, WB Maniniowali, LLC, and WB Kaupulehu, LLC. These entities own certain real estate and development rights interests in the Kukio, Maniniowali, and Kaupulehu portions of Kukio Resort, a private residential community on the Kona coast of the island of Hawaii. WB Kaupulehu, LLC, which wholly owns WB and WBKD, is the developer of Kaupulehu Lot 4A Increments I and II, the area in which Barnwell has interests in percentage of sales payments.

· Approximately 1,000 acres of vacant leasehold land zoned conservation in the Kaupulehu Lot 4C area located adjacent to the 870-acre Lot 4A described above.

2) Barnwell owns an 80% controlling interest in Kaupulehu 2007, LLLP (“Kaupulehu 2007”), a Hawaii limited liability limited partnership. Kaupulehu 2007 owns two residential parcels in the Kaupulehu area that are held for investment.

Contract Drilling Segment

Barnwell drills water, water monitoring and geothermal wells and installs and repairs water pumping systems in Hawaii. Contract drilling results are highly dependent upon the quantity, dollar value and timing of contracts awarded by governmental and private entities and can fluctuate significantly.

Residential Real Estate Segment

Barnwell, through its 80%-owned real estate joint venture, Kaupulehu 2007, constructs and sells luxury single-family homes. Kaupulehu 2007, in addition to the two parcels described above, owns a luxury residence in the Kaupulehu area that is available for sale. Kaupulehu 2007 does not currently have any homes under construction.

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Results of Operations

Summary

Barnwell incurred a net loss of $989,000 for the three months ended December 31, 2013, a $1,757,000 increase in operating results from a net loss of $2,746,000 for the three months ended December 31, 2012. The following factors affected the results of operations for the three months ended December 31, 2013 as compared to the prior year period:

· There was a reduction of the carrying value of oil and natural gas properties of $2,327,000 in the prior year period and there was no such reduction in the three month period ended December 31, 2013;

· A $225,000 increase in contract drilling operating results, before taxes, primarily resulting from increased water well drilling activity and higher contract margins on water well drilling; and

· A $465,000 decrease in oil and natural gas segment operating profit, before the prior year reduction in carrying value of assets and taxes, primarily resulting from lower net production for all products and higher operating costs due to an increase in repairs and workovers.

General

Barnwell conducts operations in the U.S. and Canada. Consequently, Barnwell is subject to foreign currency translation and transaction gains and losses due to fluctuations of the exchange rates between the Canadian dollar and the U.S. dollar. The impact of fluctuations of the exchange rates between the Canadian dollar and the U.S. dollar may be material from period to period. Barnwell cannot accurately predict future fluctuations between the Canadian and U.S. dollar.

The average exchange rate of the Canadian dollar to the U.S. dollar decreased 6% in the three months ended December 31, 2013, as compared to the same period in the prior year, and the exchange rate of the Canadian dollar to the U.S. dollar decreased 3% at December 31, 2013, as compared to September 30, 2013. Accordingly, the assets, liabilities, stockholders’ equity and revenues and expenses of Barnwell’s subsidiaries operating in Canada have been adjusted to reflect the change in the exchange rates. Barnwell’s Canadian dollar assets are greater than its Canadian dollar liabilities; therefore, increases or decreases in the value of the Canadian dollar to the U.S. dollar generate other comprehensive income or loss, respectively. Other comprehensive income and losses are not included in net loss. Other comprehensive loss due to foreign currency translation adjustments, net of taxes, for the three months ended December 31, 2013 was $780,000, a $410,000 change from other comprehensive loss due to foreign currency translation adjustments, net of taxes, of $370,000 for the same period in the prior year. There were no taxes on other comprehensive loss due to foreign currency translation adjustments in the three months ended December 31, 2013 and 2012 due to a full valuation allowance on the related deferred tax asset.

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Oil and natural gas revenues

The following tables set forth Barnwell’s average prices per unit of production and net production volumes. Production amounts reported are net of royalties.

	Average Price Per Unit
	Three months ended				Increase
	December 31,				(Decrease)
	2013		2012		$		%
Natural Gas (Mcf)*	$	2.99	$	2.53	$	0.46	18%
Oil (Bbls)**	$	72.96	$	75.00	$	(2.04)	(3%)
Liquids (Bbls)**	$	43.70	$	40.29	$	3.41	8%

	Net Production
	Three months ended		Increase
	December 31,		(Decrease)
	2013	2012	Units	%
Natural Gas (Mcf)*	553,000	660,000	(107,000)	(16%)
Oil (Bbls)**	37,000	38,000	(1,000)	(3%)
Liquids (Bbls)**	19,000	24,000	(5,000)	(21%)

* Mcf = 1,000 cubic feet. Natural gas price per unit is net of pipeline charges.

** Bbl = stock tank barrel equivalent to 42 U.S. gallons

Oil and natural gas revenues decreased $313,000 (6%) for the three months ended December 31, 2013, as compared to the same period in the prior year, as the impact of higher prices for natural gas was more than offset by the impact of lower net production for all products.

Net natural gas production for the three months ended December 31, 2013 decreased 16%, as compared to the same period in the prior year largely due to natural declines in production from older properties.

Net natural gas liquids production decreased as compared to the same period in the prior year due to natural declines in production.

Oil and natural gas operating expenses

Oil and natural gas operating expenses increased $628,000 (32%) for the three months ended December 31, 2013, as compared to the same period in the prior year, primarily due to increased repair and maintenance costs which are trending higher as the average age of our properties increases, approximately $150,000 in repair work at a major oil battery in the Red Earth area and $50,000 in costs to eliminate a drilling commitment. Additionally, equalization credits of $26,000 for previously allocated operating expenses were received from non-operated properties in the current year period as compared to $220,000 in equalization credits received in the prior year period. Oil and natural gas operating expenses generally increase over time on a per unit basis as properties age and as more remedial repairs and maintenance are required.

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Sale of interest in leasehold land

The following table summarizes the percentage of sales payment revenues received from WB:

	Three months ended December 31,
	2013				2012
Sale of interest in leasehold land:
Proceeds		$	140,000			$	-
Fees		(20,000		)		-
Revenues – sale of interest in leasehold land, net		$	120,000			$	-

WB sold one single-family lot in Phase I of Increment I during the three months ended December 31, 2013. This sale occurred prior to our purchase of an ownership interest in the land development partnerships.

As of December 31, 2013, 32 of the 38 single-family lots in Phase I of Increment I have been sold by WB. Forty-two single-family lots are planned for Phase II of Increment I, for a total of 80 single-family lots planned for Increment I. The developer released and began marketing a portion of the 42 single-family lots in Phase II of Increment I, and as of December 31, 2013, one of the lots has been sold. It is uncertain when or if WB will complete the remaining single-family lots in Phase II of Increment I and there is no assurance with regards to the amounts of future sales from Increment I.

Contract drilling

Contract drilling revenues and contract drilling costs increased $892,000 (124%) and $704,000 (116%), respectively, for the three months ended December 31, 2013, as compared to the same period in the prior year. The contract drilling segment generated a $219,000 operating profit before general and administrative expenses in the three months ended December 31, 2013, an increase in operating results of $225,000 as compared to the $6,000 operating loss generated during the same period of the prior year. The increase in operating results was primarily due to increased water well drilling activity and higher contract margins on water well drilling in the current year period, partially offset by increased costs to resolve difficulties encountered on certain pump installation and repair contracts.

Contract drilling revenues and costs are not seasonal in nature, but can fluctuate significantly based on the awarding and timing of contracts, which are determined by contract drilling customer demand. There has been significant volatility in demand for water well drilling contracts in recent years due largely to the impact of the recession and continuing weak economic conditions on both private real estate development and governmental capital improvement budgets. This has generally led to increased competition for available contracts and lower margins on awarded contracts. Although the Company has experienced a recent increase in water well drilling activity, it is unable to predict the near-term and long-term availability of water well drilling and pump installation and repair contracts as a result of this volatility in demand.

General and administrative expenses

General and administrative expenses decreased $286,000 (13%) for the three months ended December 31, 2013, as compared to the same period in the prior year. The decrease was primarily due to the fact that general and administrative expenses in the current year period included a $177,000 reduction in stock appreciation rights expense resulting from a decline in the market price of the Company’s stock, as compared to a $32,000 reduction in stock appreciation rights expense in the prior period, and a $92,000 increase in administrative expense reimbursements from oil and natural gas joint venture partners.

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Depletion, depreciation, and amortization

Depletion, depreciation, and amortization decreased $515,000 (19%) for the three months ended December 31, 2013, as compared to the same period in the prior year. The decrease was primarily due to a 14% decrease in net production and a 6% decrease in the average exchange rate of the Canadian dollar to the U.S. dollar.

Reduction of carrying value of assets

Under the full cost method of accounting, the Company performs quarterly oil and natural gas ceiling test calculations. Barnwell’s net capitalized costs exceeded the ceiling limitation at December 31, 2012. As such, Barnwell reduced the carrying value of its oil and natural gas properties by $2,327,000 during the three months ended December 31, 2012. No such reduction was necessary during the three months ended December 31, 2013.

Changes in the 12-month rolling average first-day-of-the-month prices for oil, natural gas and natural gas liquids, the value of reserve additions as compared to the amount of capital expenditures to obtain them, and changes in production rates and estimated levels of reserves, future development costs and the market value of unproved properties, impact the determination of the maximum carrying value of oil and natural gas properties. The Company may be required to record reductions in the carrying value of its oil and natural gas properties in the future, however, the Company is unable to estimate a range of the amount of any potential future reduction in carrying value as variables that impact the ceiling limitation are dependent upon future prices and actual results of activity.

Equity in loss of affiliates

Income taxes

The Canada Revenue Agency is currently examining the Company’s Canadian federal income tax returns for fiscal 2010 and 2011.

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Net loss attributable to non-controlling interests

Earnings and losses attributable to non-controlling interests represent the non-controlling interests’ share of revenues and expenses related to the various partnerships and joint ventures in which Barnwell has interests.

Net loss attributable to non-controlling interests for the three months ended December 31, 2013 totaled $11,000, as compared to net loss attributable to non-controlling interests of $40,000 for the same period in the prior year. The $29,000 (73%) change is due primarily to impacts to non-controlling interests of higher revenues reported by the land investment segment in the current period as compared to the same period in the prior year.

Liquidity and Capital Resources

Barnwell’s primary sources of liquidity are cash on hand, cash flows from operations, land investment segment proceeds and available credit. At December 31, 2013, Barnwell had $5,269,000 in cash and cash equivalents and $6,804,000 of available credit under its credit facility with its Canadian bank.

Cash Flows

Cash flows provided by operations totaled $999,000 for the three months ended December 31, 2013, as compared to $1,743,000 for the same period in the prior year. This $744,000 decrease was primarily due to changes in working capital.

Net cash used in investing activities totaled $5,632,000 during the three months ended December 31, 2013, as compared to $967,000 during the same period of the prior year. The increase was primarily due to a $4,140,000 payment to acquire interest in the land development partnerships and a $644,000 increase in cash outflows for oil and natural gas capital expenditures.

Cash flows provided by financing activities totaled $2,116,000 for the three months ended December 31, 2013, as compared to $428,000 during the same period of the prior year. The $1,688,000 increase in cash flows was primarily due to a $3,684,000 increase in proceeds from debt borrowings as compared to the prior year period due to the land investment loan which was obtained on November 27, 2013, partially offset by a $2,000,000 increase in restricted cash, which includes an interest reserve account and a pledged deposit account related to the loan.

In January 2014, Barnwell paid an additional $1,000,000 to fund the remainder of the acquisition price of the interests in the land development partnerships, of which approximately $814,000 was borrowed under the land investment loan bringing the total borrowings to the facility maximum of $5,000,000. At December 31, 2013, the $1,000,000 is accrued under the caption “Payable to affiliate” in the Condensed Consolidated Balance Sheets.

Credit Arrangements

Barnwell has a credit facility at Royal Bank of Canada, a Canadian bank, for $20,000,000 Canadian dollars, or US$18,804,000 at the December 31, 2013 exchange rate of 0.9402. Borrowings under this facility were US$12,000,000 and unused credit available under this facility was US$6,804,000 at December 31, 2013. The interest rate on the facility at December 31, 2013 was 2.66%. Under the financing agreement with Royal Bank of Canada, the facility is reviewed annually, with the next review planned for April 2014. Subject to that review, the facility may be renewed for one year with no debt repayments or converted to a two-year term loan by the bank.

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Barnwell, together with its 80%-owned real estate joint venture, Kaupulehu 2007, has a non-revolving real estate loan with a Hawaii bank that terminates on April 1, 2018. Principal and interest are paid monthly and are determined based on a loan amortization schedule. Monthly payments of principal and interest are due on the first day of each month and will change as a result of an annual change in the interest rate, the sale of the house or the sale of a residential parcel. The interest rate adjusts each April for the remaining term of the loan to the lender’s then prevailing interest rate for similarly priced commercial mortgage loans or a floating rate equal to the lender’s base rate. The interest rate at December 31, 2013 was 3.53%. Any unpaid principal balance and accrued interest will be due and payable on April 1, 2018. The loan is collateralized by, among other things, a first mortgage on Kaupulehu 2007’s lots together with all improvements thereon. Kaupulehu 2007 will be required to make a principal payment upon the sale of the house or a residential parcel in the amount of the net sales proceeds of the house or residential parcel; the loan agreement defines net sales proceeds as the gross sales proceeds for the house or residential parcel, less reasonable commissions and normal closing costs.

On November 27, 2013, Barnwell, through affiliated entities, entered into a non-revolving loan with a Hawaii bank for $5,000,000 and borrowed approximately $4,186,000 on the loan to partially fund the acquisition of interests in the land development partnerships and certain acquisition costs. In January 2014, an additional $814,000 was borrowed on the loan to partially fund the remainder of the acquisition price, bringing the total borrowings under the land investment loan to the facility maximum of $5,000,000. The bank loan matures in December 2015, with an option to extend one year, and accrues interest for the first year at 4.5% and resets annually thereafter to the lender’s then prevailing interest rate for similarly priced commercial mortgage loans or to the lender’s base rate plus 0.50%. The loan is collateralized by Kaupulehu Developments’ rights to percentage of sales payments from the sale of lots within Kaupulehu Lot 4A Increments I and II, a second mortgage on Kaupulehu 2007’s lots together with all improvements thereon, the interest in the land development partnerships and any distributions from the partnerships, a $1,000,000 interest reserve account and a $1,000,000 pledged deposit account. Barnwell is a guarantor of the loan. Principal payments are due on the receipt of percentage of sales payments from the sale of lots within Kaupulehu Lot 4A Increments I and II, upon the sale of Kaupulehu 2007’s real estate held for sale and residential parcels and on receipt of cash distributions from the land development partnerships.

The loan agreements contain provisions requiring us to maintain compliance with certain covenants including a consolidated debt service coverage ratio of not less than 1.20 to 1 and a consolidated total liabilities to tangible net worth ratio not to exceed 2.65 to 1.

Oil and Natural Gas and Other Capital Expenditures

Barnwell’s oil and natural gas capital expenditures, including accrued capital expenditures, totaled $1,756,000 for the three months ended December 31, 2013, as compared to $1,865,000 for the same period in the prior year. Management expects that oil and natural gas capital expenditures in fiscal 2014 will range from $4,000,000 to $4,500,000. This estimated amount may increase or decrease as dictated by cash flows and management’s assessment of the oil and natural gas environment and prospects.

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During the three months ended December 31, 2013, Barnwell drilled two gross (1.2 net) development wells in Canada, both of which appear to be successful. The term “gross” refers to the total number of wells in which Barnwell owns an interest, and “net” refers to Barnwell’s aggregate interest therein. For example, a 50% interest in a well represents one gross well, but 0.5 net well. The gross figure includes interests owned of record by Barnwell and, in addition, the portion owned by others.

Other Considerations

We believe our sources of funds such as current cash balances, future operating cash flows, land investment segment proceeds, and available credit will provide sufficient liquidity to fund our operations, planned future capital expenditures, scheduled debt repayments and related interest. However, in the event oil and natural gas prices and production, land investment segment proceeds, and residential real estate home sale proceeds are less than current expectations, Barnwell’s Canadian revolving credit facility is reduced below the current level of borrowings under the facility upon the April 2014 review, and/or we fall short of our key financial debt covenants for our real estate and land investment loans and are required to repay all or a portion of our loan borrowings earlier than anticipated, we will be faced with reduced cash inflows and/or higher cash outflows than expected, which in turn could have a material adverse effect on our operations, liquidity, cash flows and financial condition. Absent a sufficient increase in natural gas and/or oil prices, it is unlikely that future oil and natural gas operating cash flows will be sufficient to fund the capital expenditure levels necessary to maintain current production and reserve levels. As such, the near-term and longer-term outlook for sources and uses of funds and oil and natural gas capital resources remains highly dependent on the factors noted above.

In the event our liquidity and capital resources are not sufficient to fund our future cash needs, the Company will need to obtain alternative terms or sources of financing or liquidate investments and/or operating assets to make any required cash outflows. Events and circumstances that lead to results that significantly differ from management’s expectations could have a material adverse effect on our operations, liquidity, cash flows, and financial condition.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that material information relating to Barnwell, including its consolidated subsidiaries, is made known to the officers who certify Barnwell’s financial reports and to other members of executive management and the Board of Directors.

As of December 31, 2013, an evaluation was carried out by Barnwell’s Chief Executive Officer and Chief Financial Officer of the effectiveness of Barnwell’s disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that Barnwell’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of December 31, 2013 to ensure that information required to be disclosed by Barnwell in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities Exchange Act of 1934 and the rules thereunder.

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Changes in Internal Control Over Financial Reporting

There was no change in Barnwell’s internal control over financial reporting during the quarter ended December 31, 2013 that materially affected, or is reasonably likely to materially affect, Barnwell’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1A. RISK FACTORS

Other than as set forth below, there have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended September 30, 2013.

We hold investment interests in unconsolidated land development partnerships, which are accounted for using the equity method of accounting, in which we do not have a controlling interest. These investments involve risks and are highly illiquid.

These investments involve risks which include:

· the lack of a controlling interest in these partnerships and, therefore, the inability to require that the entities sell assets, return invested capital or take any other action without obtaining the majority vote of partners;

· potential for future additional capital contributions to fund operations and development activities;

· the adverse impact on overall profitability if the entities do not achieve the financial results projected;

· the reallocation of amounts of capital from other operating initiatives and/or an increase in our indebtedness to pay potential future additional capital contributions, which could in turn restrict our ability to access additional capital when needed or to pursue other important elements of our business strategy;

· undisclosed, contingent or other liabilities or problems, unanticipated costs, and an inability to recover or manage such liabilities and costs; and

· certain underlying partnership data is not accessible to us, therefore we depend on the general partner to provide us with reliable accounting information.

We may be required to write-down the carrying value of our investment in land development partnerships if our assumptions about future lot sales and profitability prove incorrect.

In analyzing the value of our investment in land development partnerships, we have made assumptions about the level of future lot sales, operating and development costs, cash generation, and market conditions. These assumptions are based on management’s and the general partner’s best estimates and if the actual results differ significantly from these assumptions, we may not be able to realize the value of the assets recorded, which could lead to an impairment of certain of these assets in the future.

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We face risks related to “balloon payments” and refinancings.

Certain of our loans will have significant outstanding principal balances on their maturity dates, commonly known as “balloon payments.” There can be no assurance that we will have the funds available to fund the balloon payments or that we will be able to refinance the loans on favorable terms or at all. To the extent we cannot either pay off or refinance the loans on favorable terms or at all, we may be forced to dispose of properties or other assets on disadvantageous terms or pay higher interest rates, either of which could have an adverse impact on our financial condition and results of operations.

ITEM 6. EXHIBITS

Exhibit Number		Description

10.7		Limited Liability Limited Partnership Agreement of KD Kona 2013 LLLP dated November 27, 2013

10.8		Limited Liability Limited Partnership Agreement of KKM Makai, LLLP dated November 27, 2013

10.9		Loan Agreement, dated as of November 27, 2013 between KD Kona 2013 LLLP and KKM Makai, LLLP, as the borrowers, and American Savings Bank, F.S.B. as the lender

31.1		Certification of Chief Financial Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Executive Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002

32		Certification Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BARNWELL INDUSTRIES, INC.
	(Registrant)


Date: February 14, 2014	/s/ Russell M. Gifford
	Russell M. Gifford
	Chief Financial Officer,
	Executive Vice President,
	Treasurer and Secretary

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INDEX TO EXHIBITS

Exhibit Number		Description

10.7		Limited Liability Limited Partnership Agreement of KD Kona 2013 LLLP dated November 27, 2013

10.8		Limited Liability Limited Partnership Agreement of KKM Makai, LLLP dated November 27, 2013

10.9		Loan Agreement, dated as of November 27, 2013 between KD Kona 2013 LLLP and KKM Makai, LLLP, as the borrowers, and American Savings Bank, F.S.B. as the lender

31.1		Certification of Chief Financial Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Executive Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002

32		Certification Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

Exhibit No. 10.7

LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT OF

KD KONA 2013 LLLP

(a Hawaii Limited Liability Limited Partnership)

ARTICLE 1		GENERAL TERMS		1

1.1	Formation			1

1.2	Name			1

1.3	Filing of Certificate of Limited Partnership			1

1.4	Principal Place of Business			1

1.5	Purpose			1

1.6	Term of Partnership			1

1.7	Filings of Other Certificates			2

1.8	Other Activities of the Partners			2

1.9	Definitions			2

	(a)		“Act”	2

	(b)		“Capital Account”	2

	(c)		“Carrying Value”	2

	(d)		“Cash Flow”	3

	(e)		“Code”	3

	(f)		“Discretion”	3

	(g)		“Effective Date”	3

	(h)		“Fair Market Value”	3

	(i)		“General Partner”	4

	(j)		“Interest”	4

	(k)		“Limited Partners”	4

	(l)		“Partner”	4

	(m)		“Partnership”	4

	(n)		“Person”	4

	(o)		“Profits” and “Losses”	4

	(p)		“Purpose”	5

	(q)		“Sharing Ratio”	5

	(r)		“Transfer”	5

	(s)		“Treasury Regulations”	5

ARTICLE 2		CAPITALIZATION		5

2.1	Capital Accounts			5

2.2	Initial Capital Contributions			6

2.3	Additional Contributions, Loans and Withdrawals of Capital			6

	(a)		Additional Capital Contributions		6

			(i)	General Partner-Requested Contributions	6

			(ii)	Option to Fund Additional Capital	6

			(iii)	Contributions by New Partners	6

			(iv)	No Other Contribution Obligations	7

			(v)	No Duty to Restore Capital Account	7

	(b)		Loans		7

	(c)		Withdrawals and Interest		7

ARTICLE 3		PROFIT AND LOSS ALLOCATIONS			7

3.1	Allocations of Profits and Losses				7

	(a)		General Rule		7

	(b)		Deficit Capital Account and Related Rules		7

	(c)		Change in Partners’ lnterests		8

3.2	Tax Allocations				8

	(a)		Generally		8

	(b)		Special Rules		8

			(i)	Elimination of Book/Tax Disparities	8

			(ii)	Allocation of Items Among Partners	8

			(iii)	Conformity of Reporting	9

ARTICLE 4		DISTRIBUTIONS			9

4.1	Cash Flow Distributions				9

4.2	Liquidating Distributions				9

4.3	Other Distributions				9

ARTICLE 5		ACCOUNTING AND RECORDS			10

5.1	Fiscal Year				10

5.2	Method of Accounting				10

5.3	Books and Records and Inspection				10

5.4	Financial Statements and Tax Information				10

5.5	Taxation				10

	(a)		Tax Elections and Reporting		10

	(b)		Partnership Tax Returns		10

	(c)		Tax Audits		11

ARTICLE 6		MANAGEMENT			11

6.1	General			11

6.2	Authority and Duties of the General Partner			11

	(a)		Authority of the General Partner	11

	(b)		Duties of the General Partner	11

	(c)		Restrictions on Authority	11

	(d)		Meetings with Limited Partners	13

	(e)		Reports	13

6.3	Reimbursement of Expenses			13

6.4	Compensation of the General Partner			13

6.5	Liability and Indemnification of the General Partners			13

ARTICLE 7		THE GENERAL PARTNER		14

7.1	General Partner Not Liable for Partnership Obligations			14

7.2	Ceasing to be a General Partner			14

	(a)		Events of Cessation	14

	(b)		Conversion of General Partner Interest	14

7.3	Admission of a New General Partner			15

ARTICLE 8		LIMITED PARTNERS		15

8.1	No Management or Control			15

8.2	Liability and Indemnification of Limited Partners			15

	(a)		Liability of Limited Partners	15

	(b)		Indemnification of Limited Partners	15

ARTICLE 9		NEW PARTNERS; TRANSFERABILITY		16

9.1	Admission of New Partners for New Value			16

9.2	Prohibition on Transfer			16

9.3	Permitted Transfers			16

9.4	Right of First Refusal			16

9.5	Other Voluntary or Involuntary Transfers			17

	(a)		Right to Allocations and Distributions Only	17

	(b)		Substituted Limited Partners	17

9.6	Prohibited Transfers			17

9.7	Disassociation of a Partner			17

9.8	Offset Against Purchase Price			17

9.9	New Partners and Substitution of Partners			17

iii

9.10	Amendments to Reflect Permitted Change of Partners				18

ARTICLE 10		DISSOLUTION AND TERMINATION			18

10.1	No Termination				18

10.2	Events of Dissolution				18

10.3	Procedures upon Dissolution				19

	(a)		General		19

	(b)		Control of Winding Up		19

	(c)		Manner of Winding Up		19

	(d)		Application of Assets		19

			(i)	Creditors	19

			(ii)	Partners	19

10.4	Termination of the Partnership				19

ARTICLE 11		SECURITIES LAWS			20

11.1	Securities Laws Representations				20

ARTICLE 12		MISCELLANEOUS PROVISIONS			20

12.1	Arbitration				20

12.2	Amendment				20

12.3	Notices				20

12.4	Consequential Damages				21

12.5	Counterparts				21

12.6	Governing Law				21

12.7	Binding Effect				21

12.8	Partial Invalidity				21

12.9	Captions				21

12.10	Entire Agreement				21

12.11	No Rights in Third Parties				21

12.12	No Right to Partition				22

12.13	No Title to Partnership Property				22

12.14	Additional Documents				22

12.15	Persons Not Named				22

LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT OF

KD KONA 2013 LLLP

(a Hawaii Limited Liability Limited Partnership)

This Limited Liability Limited Partnership Agreement, dated as of November 27, 2013, is entered into by and between Barnwell Hawaiian Properties, Inc., a Delaware corporation (“ Barnwel l”), as General Partner, and Noble Enterprises, Inc., a Nevada corporation (“ Noble ”), as a Limited Partner.

RECITAL

The parties desire to form a limited liability limited partnership under the Hawaii Uniform Limited Partnership Act (the “ Act ”) in order that such partnership may engage in the activities described in Section 1.5 below;

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereby agree as follows:

ARTICLE 1

GENERAL TERMS

1.1 Formation . The parties hereby form a limited liability limited partnership (the “ Partnership ”) under the Act as of the Effective Date set forth in Section 1.6.

1.2 Name . The name of the Partnership shall be KD Kona 2013 LLLP.

1.3 Filing of Certificate of Limited Partnership . The General Partner shall file a certificate of limited partnership pursuant to the Act.

1.4 Principal Place of Business . The Partnership’s principal office and place of business shall be 1100 Alakea Street, Suite 2900, Honolulu, Hawaii 96813-2833. The principal office and place of business may be changed from time to time in the General Partner’s discretion.

1.5 Purpose . The purpose of the Partnership (the “ Purpose ”) is to purchase, and hold for investment, a limited partner interest in Ka’upulehu Makai, LLLP, a Hawaii limited liability limited partnership (“ Ka’upulehu Makai ”). The Partnership shall have any and all powers that are necessary or convenient to carry out the purposes of the Partnership, to the extent the same may be legally exercised by a limited liability limited partnership under the Act. Capitalized terms not defined herein shall have the meanings given them in the Ka`upulehu Makai November 26, 2013 Partnership Agreement.

1.6 Term of Partnership . The term of the Partnership shall commence on the later of (i) the date the certificate of limited partnership is filed pursuant to the Act, and

(ii) the date of execution and delivery of this Agreement (the “ Effective Date ”), and shall continue until terminated in accordance with ARTICLE 10.

1.7 Filings of Other Certificates . The General Partner shall cause to be executed and filed all certificates, statements or other instruments as the General Partner may deem necessary or advisable.

1.8 Other Activities of the Partners . The General Partner, the Limited Partners, and their respective affiliates, may each at any time engage in and possess interests in other business ventures of any type and description, independently or with others, whether such ventures are competitive with the Partnership or otherwise. Neither the Partnership nor any other Partner shall by virtue of this Agreement have any right, title or interest in or to such independent ventures or to the income or profits derived therefrom, nor shall engaging in such activities constitute a breach of any obligations hereunder.

1.9 Definitions . Capitalized terms used in this Agreement shall have the meanings specified in this Section 1.9, except as expressly stated otherwise. The singular shall include the plural and any gender shall include all genders. “Includes” or “including” shall mean “including, without limitation.”

(a) “ Act ” means the Hawaii Uniform Limited Partnership Act, HRS chapter 425E, as amended from time to time; provided, however , that if any amendment or successor law is applicable to the Partnership only upon election, then “Act” shall refer to the amended or successor law only upon election by all Partners.

(b) “ Capital Account ” has the meaning given in Section 2.1.

(c) “ Carrying Value ” means, with respect to any asset of the Partnership, the asset’s adjusted basis as of the relevant date for federal income tax purposes, except as follows:

(i) the initial Carrying Value of any asset contributed by a Partner to the Partnership shall be the gross Fair Market Value of such asset, which shall be equal to the amount credited to such Partner’s Capital Account for such contribution (increased by the amount of any liabilities which the Partnership assumes or takes subject to) as set forth herein or in any amendment or supplement hereto providing for the contribution of such asset; and

(ii) the Carrying Values of all Partnership assets (including intangible assets such as goodwill) shall be adjusted at the election of the General Partner to equal their respective Fair Market Values (determined on a gross basis) as of the following times: (A) the acquisition of an additional interest in the Partnership by any new or existing Partner in exchange for more than a de minimis capital contribution, within the meaning of Treasury Regulation section 1.704-1(b)(2)(iv)(f)(5), (B) the distribution by the Partnership to a Partner of more than a de minimis amount of money or Partnership property as consideration for an interest in the Partnership, and (C) the

liquidation of the Partnership within the meaning of Treasury Regulation section 1.704-1(b)(2)(iv)(f)(5)(ii);

provided that any such adjustment may be made effective, at the election of the General Partner, at any time on or after the occurrence of the specified event and no later than the first day of the next fiscal year of the Partnership. The foregoing definition of Carrying Value is intended to comply with the provisions of Treasury Regulation section 1.704-1(b)(2)(iv) and shall be interpreted and applied consistently therewith.

(d) “ Cash Flow ” means, for any period, the amount, computed on a cash basis, of:

(i) the sum of (A) gross receipts, all investment income of the Partnership, and all cash received from other sources, including sales or other events, and (B) any amounts released from reserves, reduced by:

(ii) the sum of (A) disbursements of the Partnership for operating expenses, principal and interest payments on debt, including any payments on loans made by a Partner pursuant to Section 2.3(b) below, and including also any debt repayments required or elected to be made in connection with any sale or other event, (B) capital expenditures determined, in the General Partner’s reasonable discretion, to be necessary or appropriate, and (C) a reasonable allowance for reserves for working capital and contingencies consistent with the Purpose;

provided that any cash received, expenses incurred and disbursements made with respect to the liquidation of the Partnership shall not be taken into account in computing Cash Flow.

(e) “ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

(f) “ Discretion ” means in the person’s sole and absolute discretion unless otherwise provided.

(g) “ Effective Date ” has the meaning given in Section 1.6.

(h) “ Fair Market Value ” of any asset held by the Partnership, or the Partnership Interest held by a Partner, as the case may be, shall be determined as follows:

(i) in the case of securities, the last sales price on the trading date immediately preceding the determination, if listed on a national securities exchange; the mean between the last “bid” and “asked” prices if traded in the over-the-counter market; or for other securities, the price that the General Partner reasonably determines to reflect the fair market value of such securities;

(ii) with respect to any other Partnership assets, the value that the General Partner reasonably determines to reflect the fair market value of such asset; and

(iii) with respect to a Partnership Interest being sold pursuant to Section 9.1, the value agreed upon by the Purchasing Party and the Selling Party.

(i) “ General Partner ” means any Person who has been admitted to the Partnership as general partner as a successor to the duties or interest of a general partner, in such Person’s capacity as a general partner. The initial General Partner is Barnwell Hawaiian Properties, Inc., a Delaware corporation (“Barnwell”).

(j) “ Interest ” means, in the context of a “ Partner’s Interest ,” the entire legal and equitable ownership interest of a Partner in the Partnership at any particular time. When used in the context of a General Partner, “ Interest ” means the Partnership Interest held by the Partner in its capacity as a General Partner. When used in the context of a Limited Partner, “ Interest ” means the Partnership Interest held by the Partner in its capacity as a Limited Partner.

(k) “ Limited Partners ” means any Person who has been admitted to the Partnership as a limited partner in accordance with the terms of this Agreement in such Person’s capacity as a limited partner. The initial Limited Partner is Noble Enterprises, Inc., a Nevada corporation.

(l) “ Partner ” means any General Partner or Limited Partner.

(m) “ Partnership ” means the Limited Liability Limited Partnership created by this Agreement.

(n) “ Person ” means any individual, partnership, corporation, association, business, trust, government or political subdivision, agency, or other entity.

(o) “ Profits ” and “ Losses ” means, for each fiscal year or part thereof, the Partnership’s taxable income or loss for such year determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss) with the adjustments set forth for proper maintenance of capital accounts in Treasury Regulation section 1.704-1(b), including the following adjustments:

(i) gain or loss resulting from any disposition of Partnership property, and depreciation or amortization deductions with respect thereto, shall be computed with reference to the Carrying Value of the property disposed of, rather than the adjusted tax basis of such property:

(ii) if any property is distributed in kind to any Partner, the difference between its Fair Market Value and its Carrying value at the time of distribution shall be treated as Profit or Loss, as the case may be, recognized by the Partnership; and

(iii) the amount of any adjustment to the Carrying Value of any partnership asset pursuant to Section 1.9(c)(ii) shall be taken into account as Profit or Loss from the disposition of such asset.

(p) “ Purpose ” has the meaning given in Section 1.5.

(q) “ Sharing Ratio ” means the percentages of each Partner as set forth in Exhibit “A” attached hereto and made a part hereof, or any different percentages for such Partners or any additional Partners as certified in a writing (which shall constitute a permissible amendment to this Agreement) delivered to each Partner by the General Partner which reflects:

(i) any adjustment to the Sharing Ratios in connection with the admission or withdrawal of any Partner, which adjustment shall take into account the Sharing Ratio of the admitted or withdrawing Partner in a manner proportional to the then existing Sharing Ratios of all other Partners; or

(ii) an adjustment of the Sharing Ratios of all Partners following a restatement of the Carrying Values of Partnership assets as described in the definition of “Carrying Value” in this Section 1.9 (for example, in connection with a disproportionate capital contribution or distribution by or to an existing Partner), which adjustment shall be accomplished by causing the Sharing Ratio of each Partner to equal the ratio (expressed as a percentage) that such Partner’s Capital Account on such date bears to the aggregate Capital Accounts of all Partners on such date, after taking into account (A) the restatement of such Carrying Values, (B) the allocation of the resulting Profit or Loss arising from such restatement in the manner set forth in Section 1.9(o)(iii), and (C) the allocation of all other Profits and Losses to the Partners for the portion of the fiscal year of the Partnership occurring prior to the adjustment date.

(r) “ Transfer ” means, in the context of a Transfer of an Interest, the sale, assignment, pledge, hypothecation, transfer or other disposition (voluntarily or involuntarily, by gift or otherwise, and whether as security or otherwise) by a Partner of all or a portion of the Partner’s Interest.

(s) “ Treasury Regulations ” means the regulations issued by the Treasury Department pursuant to the Code.

ARTICLE 2

CAPITALIZATION

2.1 Capital Accounts . A separate capital account (a “ Capital Account ”) shall be maintained for each Partner. Each Partner’s Capital Account shall be:

(a) increased by (i) the amount of such Partner’s cash contributions to the Partnership, (ii) the Fair Market Value of any assets contributed to the Partnership by such Partner, net of liabilities secured by such assets that the Partnership is considered to assume or take subject to under Code Section 752, and (iii) all profits and items of income or gain allocated to such Partner in accordance with ARTICLE 3; and

(b) decreased by (i) cash distributions to such Partner from the Partnership, (ii) the Fair Market Value of any assets distributed to such Partner from the Partnership, net of liabilities secured by such assets that such Partner is deemed to assume, or take subject to, under Code Section 752, and (iii) all items of deduction or loss allocated to such Partner in accordance with ARTICLE 3;

provided, however , that the Capital Accounts shall in all events be determined and maintained in accordance with the rules set forth in section 1.704-1(b) of the Treasury Regulations.

2.2 Initial Capital Contributions . The total initial capital contribution by the Partners to the Partnership (the “ Initial Capital Contribution ”) shall be as set forth in Exhibit “A” attached hereto and made part hereof. Each Partner shall receive, as of the Effective Date, a Capital Account credit for such contribution in such amount; provided, however , that the timing of the obligation to fund the Initial Capital Contribution shall be governed by the timing provisions for the initial capital contributions set forth in the Limited Liability Limited Partnership Agreement of Ka’upulehu Makai.

2.3 Additional Contributions, Loans and Withdrawals of Capital .

(a) Additional Capital Contributions .

(i) General Partner-Requested Contributions . The General Partner may, by written notice to each Partner, request additional capital contributions (“Additional Capital Contribution”) to the Partnership. Such notice shall set forth the total amount of funds required by the Partnership, the Partner’s proportionate share of such amount based on the Partner’s then existing Sharing Ratio, and the date by which the Requested Additional Capital Contribution is to be contributed, and the reason or reasons that the Partnership requires the additional funds. If approved by all Partners, which approval may be withheld in each Partner’s discretion, the Partners shall make the Requested Additional Capital Contribution by the date approved by the Partners. No Partner shall be obligated to make any Additional Capital Contribution which the Partner did not approve.

(ii) Option to Fund Additional Capital . In the event that less than all of the Partners approve any call for additional capital by the General Partner, then the other Partners shall be given the opportunity to make the Additional Capital Contributions in the ratio of the each contributing Partner’s Sharing Ratio to the total Sharing Ratios of those Partners who are willing to make the Additional Capital Contribution multiplied by the total amount of Additional Capital Contributions being requested by the General Partner.

(iii) Contributions by New Partners . A new Partner may be admitted to the Partnership for new value in accordance with Sections 7.3 or 9.1. Any new Partner shall make such capital contributions (“New Partner Capital Contributions”) to the Partnership upon its admission as a Partner as determined by the unanimous vote of the Partners in their discretion. New Partner Capital Contributions shall be

treated as Initial Capital Contributions for the purposes of Section 4.1 unless otherwise specified upon admission of the new Partner.

(iv) No Other Contribution Obligations . Except as set forth in Section 2.2, no Partner shall be required without such Partner’s consent to make any capital contributions to the Partnership on or after the Effective Date, whether on liquidation of the Partnership, by reason of a deficit Capital Account balance or otherwise.

(v) No Duty to Restore Capital Account . Notwithstanding anything to the contrary contained in this Agreement, and notwithstanding any custom or rule of law to the contrary, the deficit, if any, in the Capital Account of any Partner upon dissolution of the Partnership shall not be an asset of the Partnership and such Partner shall not be obligated to contribute such amount to the Partnership to bring the balance of such Partner’s Capital Account to zero.

(b) Loans . No Partner shall be required to lend any money to or for the benefit of the Partnership. If Partnership funds are insufficient to meet its costs, expenses, obligations or liabilities, or to make any expenditure authorized by this Agreement, any Partner may (but shall not be required to) lend all or a portion of the amount of needed funds to the Partnership. Any such loans shall bear interest at a rate of ten percent (10%) per annum, and shall be on such other terms as the General Partner and the Partner(s) making such loans may agree.

(c) Withdrawals and Interest . Except as expressly set forth herein, no Partner shall be entitled to withdraw any portion of its capital contribution or Capital Account balance. Except for the priority returns provided in Section 2.3(a)(ii) above and Section 4.1 below, no Partner shall be entitled to receive any interest on the balance in such Partner’s Capital Account.

ARTICLE 3

PROFIT AND LOSS ALLOCATIONS

3.1 Allocations of Profits and Losses .

(a) General Rule . Profits and Losses of the Partnership shall be allocated to the Partners in proportion to their Sharing Ratios, provided that at all times prior to Barnwell’s having received distributions under Section 4.1(b) equal to its Initial Capital Contribution plus the Second Priority Return thereon, such Profits and Losses shall be allocated one hundred percent (100%) to Barnwell and zero percent (0%) to the other Partners.

(b) Deficit Capital Account and Related Rules . Notwithstanding Section 3.1(a), allocations shall be made to the Partners as set forth in Treasury Regulation sections 1.704-1 (b) and 1.704-2 (relating to allocations of partnership income or loss) as such regulations relate to limitations on loss allocations determined by reference to a Partner’s negative Capital Account balance for which it is not economically responsible, allocations of gross income in connection with “qualified income offsets” (such as

distributions causing excess negative Capital Account balances), and allocations attributable to the presence of nonrecourse debt. If any such allocations are made which are inconsistent with the desired allocations in accordance with Sharing Ratios as described in Section 3.1(a), other items of income, gain, loss and deduction for such fiscal year and subsequent fiscal years shall be reallocated among the Partners, to the extent possible, so as to reverse the effect of any such disproportionate allocations.

(c) Change in Partners’ lnterests . If there is a change in any Partner’s share of the Partnership’s Profits, Losses or other items during any year, allocations among the Partners shall be made in accordance with their interests in the Partnership from time to time during such year in accordance with Code Section 706, using the closing of the books method, except that depreciation, amortization and similar items shall be deemed to accrue ratably on a daily basis over the entire year during which the corresponding asset is owned by the Partnership for the entire year, and over the portion of a year after such asset is placed in service by the Partnership if such asset is placed in service during the year.

3.2 Tax Allocations.

(a) Generally . Except as set forth in Section 3.2(b), allocations for tax purposes of items of income, gain, loss and deduction, and credits and basis therefor, shall be made in the same manner as allocations for book purposes as set forth in Section 3.1. Allocations pursuant to this Section 3.2 are solely for purposes of federal, state and local income taxes and shall not affect, or in any way be taken into account in computing, any Partner’s Capital Account or share of Profits, Losses, other items or distributions pursuant to any provision of this Agreement.

(b) Special Rules .

(i) Elimination of Book/Tax Disparities . If any Partnership property has a Carrying Value different than its adjusted tax basis to the Partnership for federal income tax purposes (whether by reason of the contribution of such property to the Partnership, the revaluation of such property hereunder, or otherwise), allocations of taxable income, gain, loss and deduction under this Section 3.2 with respect to such asset shall take account of any variation between the adjusted tax basis of such asset for federal income tax purposes and its Carrying Value in the same manner as under Code Section 704(c) or the principles set forth in Treasury Regulation section 1.704-1(b)(2)(iv)(g).

(ii) Allocation of Items Among Partners . Each item of income, gain, loss, deduction and credit and all other items governed by Code Section 702(a) shall be allocated among the Partners in proportion to the allocation of Profits, Losses and other items to such Partners hereunder, provided that any gain recognized from any disposition of a Partnership asset which is treated as ordinary income because it is attributable to the recapture of any depreciation or amortization shall be allocated among the Partners in the same ratio as the prior allocations of Profits, Losses or other

items which included such depreciation or amortization, but not in excess of the gain otherwise allocable to each such Partner.

(iii) Conformity of Reporting . The Partners are aware of the income tax consequences of the allocations made by this Section 3.2 and hereby agree to be bound by the provisions of this Section 3.2 in reporting their shares of Partnership income, loss, credits and other items for income tax purposes, except in the case of manifest error to the Partners.

ARTICLE 4

DISTRIBUTIONS

4.1 Cash Flow Distributions . The Partnership shall distribute Cash Flow to the Partners as and when determined by the General Partner in the General Partner’s reasonable discretion. Distributions of Cash Flow shall be made to the Partners in the following order of priority:

(a) Distributions of Cash Flow to the Partners derived from distributions to the Partnership by Ka`upulehu Makai pursuant to Sections 4.1(a), (b), (c) or (d) of the November 26, 2013 Limited Liability Partnership Agreement of Ka`upulehu Makai (“KM Partnership Agreement”) shall be distributed to the Partners of this Partnership in the proportion that each Partner’s Initial Capital Contributions or Additional Capital Contributions to this Partnership funded the Partnership’s Initial Capital Contribution Account or Additional Capital Contribution Account with Ka`upulehu Makai until each Partner’s Additional Capital Contributions, if any, and Initial Capital Contributions have been returned in full. For example, distributions to the Partnership by Ka`upulehu Makai pursuant to Sections 4.1(c) and (d) of the KM Partnership Agreement representing the return of the Ka`upulehu Makai partners’ Initial Capital Contributions (together with the Second Priority Return thereon) shall be distributed 100% to the General Partner whose $4,140,000 Initial Capital Contribution to this Partnership was contributed as Initial Capital to Ka’upulehu Makai until the distributions pursuant to Section 4.1(d) of the KM Partnership Agreement representing return of Partner Initial Capital Contributions total $4,140,000, and 0% to the Limited Partner whose Initial Capital Contributions to this Partnership were $0.

(b) Distributions of Cash Flow to the Partners derived from distributions to the Partnership pursuant to Section 4.1(e) of KM Partnership Agreement, i.e. distributions not representing return of any Capital Contributions, or distributions from any other source, shall be distributed to the Partners in proportion to their Sharing Ratios.

4.2 Liquidating Distributions . Distributions to the Partners of cash or property arising from a liquidation of the Partnership shall be made as provided in Section 10.3(d)(ii).

4.3 Other Distributions . To the extent that cash is available to the Partnership without a requirement of borrowing or the making of Additional Capital

Contributions from the Partners, the Partners intend that the Partnership make reasonable efforts to make annual distributions to compensate the Partners for any federal or state tax liability related to the Partnership’s taxable income allocated to the Partners for the prior calendar year.

ARTICLE 5

ACCOUNTING AND RECORDS

5.1 Fiscal Year . The fiscal year shall be the twelve (12) month period ending September 30th of each year.

5.2 Method of Accounting . Books of account shall be maintained in accordance with federal income tax accounting principles; provided, however , that for purposes of making allocations and distributions hereunder, Capital Accounts, and profits and losses and other items, shall be determined in accordance with federal income tax accounting principles consistent with those assumed in connection with entering into this Agreement, with the adjustments required by Treasury Regulation section 1.704-1(b) to properly maintain capital accounts.

5.3 Books and Records and Inspection . The General Partner shall maintain full and proper ledgers and other books of account in accordance with the Act. At all times, such ledgers, books and records and other information regarding the affairs of the Partnership shall be available at the Partnership’s principal place of business for inspection, examination, photocopying or audit by any Partner, or the duly authorized representative thereof, during reasonable business hours and upon reasonable advance notice for any purpose reasonably related to such Partner’s interest as a Partner.

5.4 Financial Statements and Tax Information . The General Partner shall cause the Partnership to send to each other Partner (i) a balance sheet for the Partnership as of the close of the fiscal year, (ii) a profit and loss statement for the Partnership for such fiscal year, (iii) information as is required to be furnished to the Partners by law, and (iv) other information as any Partner may reasonably request.

5.5 Taxation.

(a) Tax Elections and Reporting . The General Partner may make any tax election approved in writing by all of the Limited Partners and allowed the Partnership under the Code or the tax laws of any state or other jurisdiction having taxing jurisdiction over the Partnership.

(b) Partnership Tax Returns . All tax returns shall be prepared by or under the direction of the General Partner. Each Partner shall provide such information, if any, as may be needed by the Partnership for purposes of preparing such tax and information returns, provided that such information is readily available from regularly maintained accounting records.

(c) Tax Audits . The General Partner shall be the tax matters partner, as that term is defined in Code Section 6231(a)(7) (the “ Tax Matters Partner ”) with all of the rights, rights, duties and powers provided for in Code Section 6221 through 6232, inclusive. The Tax Matters Partner, as an authorized representative of the Partnership, shall direct the defense of any claims made by the Internal Revenue Service to the extent that such claims relate to the adjustment of Partnership items at the Partnership level and, in connection therewith, to retain and cause the Partnership to pay the fees and expenses of counsel and other advisors chosen by the Tax Matters Partner. The Tax Matters Partner shall promptly deliver to each Partner a copy of all notices and communications with respect to income or similar taxes received from the Internal Revenue Service or other taxing authority relating to the Partnership which might materially adversely affect such partners, and shall keep such Partner advised of all significant developments in such matters coming to the attention of the Tax Matters Partner.

ARTICLE 6

MANAGEMENT

6.1 General . The General Partner shall have sole responsibility, authority and control with respect to the management, conduct and operation of the business and affairs of the Partnership, including any actions authorized herein or by applicable law, subject only to any restrictions imposed by this Agreement, including Section 6.2. Except as otherwise expressly provided in this Agreement, no Partner other than the General Partner shall have the right or authority to act for or bind the Partnership.

6.2 Authority and Duties of the General Partner .

(a) Authority of the General Partner . Except as expressly provided in this Agreement, including the restrictions on authority set forth in this Section 6.2, and subject at all times to the Purpose of the Partnership, the General Partner is hereby granted the right, power and authority to do on behalf of the Partnership all things which are necessary, proper or desirable to carry out its duties and responsibilities under Section 6.1 including, without limitation, the authority to exercise all management rights appurtenant to the Membership Interest described in Section 1.6 above.

(b) Duties of the General Partner . The General Partner shall perform the General Partner’s duties and obligations under this Agreement and under applicable law in order to carry out the Purpose of the Partnership in an orderly and expeditious manner. The General Partner shall have the duty to conduct the affairs of the Partnership as a fiduciary for the exclusive benefit of the Partners, consistent with the terms of this Agreement, and to use all Partnership funds and assets in the best interests of the Partners.

(c) Restrictions on Authority . In addition to any other provision of this Agreement requiring the consent of certain Partners to designated actions, the following acts require the prior written approval of all Partners (the “ Major Decisions ”):

(i) the amendment of this Agreement;

(ii) the amendment of the Certificate of Limited Partnership (other than an amendment to reflect a change that has been approved by all of the Partners, or to reflect a change made by the General Partner with respect to an action within the reasonable or sole discretion of the General Partner, or to reflect a change authorized pursuant to this Agreement);

(iii) the dissolution of the Partnership;

(iv) the admission of any Partner;

(v) the determination of the compensation to be paid to the General Partner and any increase or decrease therein;

(vi) the redemption of any Partnership Interest;

(vii) the merger or consolidation of the Partnership with any other organization or the sale of all or substantially all of the Partnership’s assets;

(viii) the Partnership’s acquisition of any new business or new line of business;

(ix) the making of any federal or state tax elections for the Partnership;

(x) the approval of the Partnership’s federal and state tax returns;

(xi) the approval of any settlement in any tax audit of the Partnership;

(xii) the approval of any in-kind distributions to any Partner;

(xiii) the approval of the Partnership’s retention of any employees (the Partners agree that any employees should be employees of one or more management, professional or consulting companies retained by the Partnership);

(xiv) the filing of Bankruptcy by the Partnership under any chapter or the taking any act that would constitute a Bankruptcy of the Partnership;

(xv) the institution, prosecution and settlement of any legal proceeding (including arbitration) in the Partnership’s name, excluding collection and summary possession proceedings related to tenants of the Partnership; or

(xvi) the entry into any contract by the Partnership with the General Partner or an affiliate of the General Partner;

(xvii) the approval of any material modifications of the Partnership’s insurance programs; or

(xviii) any action that may result in a default or breach of any contract to which the Partnership is a party.

(d) Meetings with Limited Partners . The General Partner shall meet with the Limited Partners on a quarterly basis, or on request of the Limited Partners, to report on and discuss the status of zoning, permits, approvals, easements, engineering, planning, development, construction, operation, marketing, sales and other matters relating to the Projects.

(e) Reports . The General Partner shall provide the Limited Partners with reports as follows:

(i) An annual report of all income and all expenses of the Partnership within ninety (90) days of the end of the calendar year, which shall constitute a compilation report by an independent accounting firm reasonably satisfactory to the Limited Partners.

(ii) Copies of the Partnership’s annual federal and state income tax returns together with a copy of that certain IRS form commonly referred to as a “Schedule K-1” within sixty (60) days following the end of each calendar year.

6.3 Reimbursement of Expenses . The Partnership shall pay and reimburse the General Partner for all expenses properly paid by the Partnership. If, for any period, the Partnership has insufficient funds to pay all of its expenses, including such reimbursable amounts, the Partnership shall instead pay to the respective party as much of such amount as possible from available funds, prioritized in the discretion of the General Partner. Any difference between the amount of reimbursements required to be paid and the amount actually reimbursed shall be carried forward as an obligation of the Partnership, and shall bear interest at a rate per annum equal to the Base Rate of Bank of Hawaii and shall be paid out of the first available funds in accordance with the priorities set forth in the preceding sentence.

6.4 Compensation of the General Partner . The General Partner shall not be entitled to compensation for services rendered as General Partner unless such compensation is approved by all of the Partners.

negligence. The Partnership shall indemnify, defend and hold harmless each Exculpated Party for any and all claims or threats thereof, expenses and liabilities or threats thereof (including, without limitation, attorneys’ fees and costs of investigation and defense relating to the Partnership) which such party may incur by reason of being a General Partner or a shareholder, constituent partner, officer, director, managers, members or employee of a General Partner (regardless of the disclosure or lack of disclosure of such status) or by virtue of taking any action pursuant to this Agreement in such capacity unless such claim, expense or liability is caused by an act or omission performed or omitted by the Person seeking indemnification in a manner constituting willful misconduct, fraud, breach of its fiduciary duty of loyalty, or gross negligence.

ARTICLE 7

THE GENERAL PARTNER

7.1 General Partner Not Liable for Partnership Obligations . An obligation of the Partnership, whether arising in contract, tort or otherwise, is solely the obligation of the Partnership. The General Partner shall not be personally liable, directly or indirectly, by way of contribution or otherwise, for such an obligation solely by reason of being or acting as a General Partner. This applies despite anything inconsistent in this Agreement.

7.2 Ceasing to be a General Partner .

(a) Events of Cessation . A General Partner shall cease to be a general partner of the Partnership upon the earliest of the following events:

(i) a withdrawal by the General Partner from the Partnership;

(ii) the Transfer of all of the General Partner’s Interest in the Partnership to the extent permitted by ARTICLE 9;

(iii) the Bankruptcy of the General Partner;

(iv) the death of the General Partner, or the entry by a court of competent jurisdiction of an order adjudicating the General Partner incompetent to manage his or her estate;

(v) for cause;

(vi) the termination of the Partnership under Section 10.4; or

(vii) any other event that causes the General Partner to cease to be a general partner because the Act mandates cessation upon such other event, notwithstanding an agreement by the Partners to the contrary.

shall cease to be a General Partner in the Partnership and shall instead become a Limited Partner (or solely a Limited Partner, if already a Limited Partner) in the Partnership with all of the rights and subject to all of the limitations of a Limited Partner hereunder, and shall retain its Capital Account and financial rights with respect to allocations and distributions in the manner provided in this Agreement.

7.3 Admission of a New General Partner . Except as provided in ARTICLE 9, a new General Partner may be admitted to the Partnership only with the consent of all of the Partners; provided, however , that if such admission is in connection with a General Partner ceasing to be a General Partner pursuant to Sections 7.2(a)(iii), 7.2(a)(iv), 7.2(a)(v) or 7.2(a)(vii), the consent of the affected General Partner (as General Partner) shall not be required.

ARTICLE 8

LIMITED PARTNERS

8.1 No Management or Control . Except as otherwise provided herein, the Limited Partners, in their capacity as limited partners in the Partnership, shall take no part in the management, control, conduct, or operation of the Partnership and shall have no right or authority to act for or bind the Partnership. The Limited Partners shall have no voting, consent or approval rights other than those rights expressly set forth in this Agreement.

8.2 Liability and Indemnification of Limited Partners .

(a) Liability of Limited Partners . Except as required by applicable law, the liability of each Limited Partner (in its capacity as a limited partner in the Partnership) for the losses, debts, and obligations of the Partnership shall be limited to the unpaid capital contributions such Partner is required to make to the Partnership pursuant to this Agreement.

(b) Indemnification of Limited Partners . The Partnership shall, solely from assets of the Partnership and without recourse to any Partner, indemnify and hold harmless each Limited Partner, its respective affiliates and its respective agents, officers, employees, directors and shareholders (collectively, the “ Limited Partner Indemnitees ”) from and against any and all claims, liabilities, damages, losses, costs and expenses (including amounts paid in satisfaction of judgments, in compromises and settlements or as fines and penalties, and legal or other costs and expenses of investigating or defending against any claim or alleged claim, in each case whether incurred in connection with judicial, administrative or arbitration proceedings) of any nature whatsoever, known or unknown, liquidated and unliquidated, that are incurred by an Limited Partner Indemnitee and arise out of or in connection with the business of the Partnership.

ARTICLE 9

NEW PARTNERS; TRANSFERABILITY

9.1 Admission of New Partners for New Value . A new Partner may be admitted to the Partnership with the consent of all Partners, on such terms and conditions as the Partners may determine in their discretion.

9.2 Prohibition on Transfer . Except as otherwise specifically provided in Sections 9.3 and 9.4, no Partner shall have the right to do any of the following without the prior unanimous written consent of all Partners, which consent any Partner may withhold in its discretion:

(a) sell, assign, pledge, hypothecate, exchange or otherwise transfer for consideration all or any part of the Partner’s Partnership Interest, or

(b) gift, bequeath or otherwise transfer for no consideration (whether or not by operation of law, except in the case of bankruptcy) all or any part of the Partner’s Partnership Interest.

9.3 Permitted Transfers . Notwithstanding Section 9.2, each Partner may sell, give or bequeath all or any part of the Partner’s Partnership Interest to any other Partner without restriction of any kind. Furthermore, each Partner may sell, give or bequeath all or any part of the Partner’s Partnership Interest to any entity owned or controlled by the Partner. The rights accorded each Partner under this Section 9.3 may also be exercised by any Partner who may have succeeded to all or any portion of a Partner’s Partnership Interest.

9.4 Right of First Refusal .

(a) Except with respect to permitted transfers described in Section 9.3, if a Partner desires to sell all or any portion of such Partner’s Partnership Interest (the “ Offered Interest ”), the selling Partner shall obtain from the purchaser a bona fide written offer (the “ Offer ”) to purchase such interest, stating the terms and conditions upon which the purchase is to be made and the consideration offered therefor which must be payable in money. The selling Partner shall give written notification to the remaining Partners, by certified mail with return receipt requested or personal delivery, of the selling Partner’s intention to transfer the Offered Interest, furnishing to the remaining Partners a copy of the Offer.

(b) The remaining Partners, and each of them, on a basis pro rata to their Percentage Interest or on a basis pro rata to the Percentage Interest of those remaining Partners exercising their right of first refusal, may elect to purchase all (but not less than all) of the Offered Interest upon the same terms and conditions as stated in the Offer by giving written notification to the selling Partner, by certified mail with return receipt requested or personal delivery, of their intention to do so within forty-five (45) days after receiving written notice from the selling Partner (the “ Option Period ”). If none of the remaining Partners notifies the selling Partner of the election to exercise the right of first refusal within said Option Period, the right of first refusal will terminate and

the selling Partner may thereafter consummate the sale of the Offered Interest, but only to the purchaser identified in the Offer and on the terms contained in the Offer, and provided that the sale must be consummated within sixty (60) days following the expiration of the Option Period.

(c) If any one or more of the remaining Partners gives written notice to the selling Partner of their desire to exercise their right of first refusal and to purchase the Offered Interest upon the same terms and conditions as are stated in the Offer, the remaining Partners shall have the right to designate the time, date and place of closing, provided that the date of closing shall be within sixty (60) days after the expiration of the Option Period.

9.5 Other Voluntary or Involuntary Transfers .

(a) Right to Allocations and Distributions Only . A transferee of all or a portion of a Partner Interest, whether voluntarily, involuntarily or by action of law, shall entitle the transferee to receive the transferring Partner’s share of Profits, Losses and other items pursuant to ARTICLE 3 and such Partner’s share of distributions pursuant to ARTICLE 4. Such transferee, however, shall not be admitted as a Partner, and shall not be entitled to vote or to the other rights of a Partner, other than the right to receive allocations of profits and losses and distributions, and the transferring Partner shall not be relieved of any of its obligations hereunder, unless the transferee is admitted to the Partnership as a substituted Limited Partner as provided in Section 9.5(a).

(b) Substituted Limited Partners . A transferee of a Partner Interest pursuant to Section 9.5 may become a substituted Limited Partner only if the transferee executes an appropriate agreement to be bound by the terms and conditions of this Agreement, and the admission of the transferee as a substituted Limited Partner has been consented to by all Partners, which consent any Partner may withhold in its discretion.

9.6 Prohibited Transfers . Any purported sale, Assignment, Transfer or other disposition of all or any portion of a Partner Interest in the Partnership that is not permitted hereby shall be null and void and shall constitute a default hereunder.

9.7 Disassociation of a Partner . Upon the death, bankruptcy, withdrawal or other dissociation of a Partner as provided in the Act, the Partner is not entitled to be paid for the Partner’s Partnership Interest and is not entitled to receive any Distributions in excess of those to which such Partner would have been entitled had such event not occurred, and the Partner shall have not have further rights as a Partner.

9.8 Offset Against Purchase Price . The Partnership may offset from the purchase price payable to any transferring Partner any and all amounts owed by such Partner to the Partnership or another Partner hereunder, and may condition the admission of any substitute partner about payment of the amounts owed.

9.9 New Partners and Substitution of Partners . A transferee of a Partnership Interest under Sections 9.2 (with consent), 9.3, 9.4, and 9.5(b) (with

consent) shall become a Substitute Partner. Admission of a new Partner under Section 9.1 or of a Substitute Partner shall not cause dissolution of the Partnership.

9.10 Amendments to Reflect Permitted Change of Partners . This Agreement and the Certificate of Limited Partnership shall be amended to reflect permitted additions, substitutions and withdrawals of Partners, as applicable.

ARTICLE 10

DISSOLUTION AND TERMINATION

10.1 No Termination . Except as expressly provided in this Agreement, no Partner shall have the right, and each Partner hereby agrees not, to dissolve, terminate or liquidate the Partnership. No Partner shall have the right, and each Partner hereby agrees not, to petition a court for the dissolution, termination or liquidation of the Partnership except as such rights are provided in this Agreement or are available under applicable law notwithstanding any agreement herein to the contrary.

10.2 Events of Dissolution . The Partnership shall be dissolved upon the first to occur of the following:

(a) December 31, 2050;

(b) the approval of each Partner, but only on the effective date of dissolution specified by such Partners at the time of such approval;

(c) a General Partner ceases to be a general partner of the Partnership under Section 7.2, unless at the time there is at least one (1) other General Partner or, if within ninety (90) days after the withdrawal, all remaining Partners agree in writing to continue the business of the Partnership and to admit one or more new General Partners;

(d) the sale, exchange, condemnation or involuntary transfer of all or substantially all of the assets of the Partnership, provided that this Section 10.2(d) shall not apply if part of the consideration received by the Partnership in connection with any such event includes deferred payment obligations and the General Partner reasonably determines that it is in the best interest of the Partners to keep the Partnership in existence for the sole purpose of collecting amounts payable under such obligations and distributing such amounts in accordance with the terms of this Agreement, upon the satisfaction of which obligations the Partnership shall dissolve;

(e) entry of a decree of judicial dissolution under the Act; or

(f) any other event that causes a dissolution of the Partnership because the Act mandates dissolution upon the occurrence of such other event, notwithstanding any agreement among the Partners to the contrary.

10.3 Procedures upon Dissolution .

(a) General . If the Partnership dissolves, it shall commence winding up pursuant to the appropriate provisions of the Act and the procedures set forth in this Section 10.3. Notwithstanding the dissolution of the Partnership, prior to the termination of the Partnership, the business of the Partnership and the affairs of the Partners, as such, shall continue to be governed by this Agreement.

(b) Control of Winding Up . The winding up of the Partnership shall be conducted under the direction of (i) the General Partner, or (ii) if there is no General Partner, then a Person selected by all of the Limited Partners (such Person hereinafter referred to as the “ Liquidator ”); provided, however , that any Partner who caused the dissolution of the Partnership in contravention of this Agreement shall not participate in the control of the winding up of the Partnership and provided further, that if the dissolution is caused by entry of a decree of judicial dissolution pursuant to Section 10.2(e), the winding up shall be carried out in accordance with such decree.

(c) Manner of Winding Up . The Partnership shall engage in no further business following dissolution other than that necessary for the orderly winding up of the business and distribution of assets. The maintenance of offices shall not be deemed a continuation of the business for purposes of this Section 10.3(c). Upon dissolution of the Partnership, the Liquidator shall (i) cause to be filed or delivered any required or desirable notices or filings evidencing such dissolution, and (ii) determine the time, manner and terms of any sale or sales of Partnership property pursuant to such winding up, consistent with its fiduciary responsibility and having due regard to the activity and condition of the relevant market and general financial and economic conditions.

(d) Application of Assets . In the case of a dissolution of the Partnership, the Partnership’s assets shall be applied as follows:

(i) Creditors . First, to payment of the liabilities of the Partnership owing to third parties (including affiliates of the Partners) and to Partners. After payment of any such known liabilities, the Liquidator shall set up such reserves as are reasonably necessary for any contingent or unforeseen liabilities or obligations of the Partnership. Such reserves may be paid over by the Liquidator to an escrow holder or trustee, to be held in escrow or trust for the purpose of paying any such contingent or unforeseen liabilities or obligations, and, at the expiration of such period as the Liquidator may deem advisable, such reserves shall be distributed to the Partners or their assigns in the manner set forth in Section 10.3(d)(ii).

(ii) Partners . Second, to the Partners in accordance with Section 4.1 above. All distributions pursuant to this Section 10.3(d)(ii) shall be made no later than the end of the Partnership taxable year during which the liquidation of the Partnership occurs (or, if later, within 90 days after the date of such liquidation).

10.4 Termination of the Partnership . Upon the completion of the liquidation of the Partnership and the distribution of all Partnership assets, the Partnership’s affairs

shall terminate and the Liquidator shall cause to be executed and filed a Certificate of Cancellation of Partnership’s Certificate of Limited Partnership pursuant to the Act, as well as any and all other documents required to effectuate the termination of the Partnership.

ARTICLE 11

SECURITIES LAWS

11.1 Securities Laws Representations . Each Partner, by executing this Agreement, represents and warrants to the Partnership and to the General Partner that such Partner (i) is aware that the acquisition of its Interest in the Partnership has not been registered under the Securities Act of 1933, as amended, or qualified under the securities laws of any state or other jurisdiction, (ii) is acquiring its Interest in the Partnership solely for its own account and not for the account of any other Person, for investment only, and not with a view to or for sale in connection with any distribution of such Interest, (iii) understands that resale, pledge, Assignment or other Transfer of its Interest in the Partnership is limited by this Agreement and in any event may not be effected unless (A) the transfer is registered and qualified under applicable securities laws, or is effected as a non public offering that is exempt from the registration and qualification requirements of applicable securities laws, and (B) the Person acquiring such Interest represents and warrants to the Partnership and to the General Partner that such Person is acquiring its Interest in the Partnership solely for its own account and not for the account of any other Person, for investment only, and not with a view to or for sale in connection with any distribution of such Interest, (iv) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of acquiring its Interest in the Partnership, (v) acknowledges that there is no guarantee that the Partnership will be a financial success, and is able to bear the economic risk of the loss of its Interest in the Partnership, and (vi) acknowledges that the General Partner is relying on the foregoing representations.

ARTICLE 12

MISCELLANEOUS PROVISIONS

12.1 Arbitration . Any claim or controversy arising from this Agreement which cannot be resolved by the Partners shall be settled by arbitration in Honolulu, Hawaii under the rules of the Dispute Prevention and Resolution, and any judgment from such arbitration may be entered in any court having jurisdiction.

12.2 Amendment . Except for an amendment reflecting the withdrawal or admission of a Partner to the Partnership in accordance with the terms of this Agreement, or as otherwise provided herein, this Agreement may be amended only with the prior written consent of each Partner.

notice is to be given, if sent during regular business hours of the recipient, (iii) on the fourth day after mailing, if mailed by first class registered or certified mail, or (iv) on the next day (or second day) if sent by a nationally recognized courier for next day (or second day) service; in all cases addressed to the recipient at its address as shown on the records of the Partnership. If the specified date is not a business day, then notice shall be deemed given on the next business day. Notices to the Partnership shall be similarly given, at its principal place of business, with a copy to the General Partner.

12.4 Consequential Damages . Neither the Partnership nor any Partner shall be liable to any other Partner or the Partnership for special, indirect or consequential damages resulting or arising out of this Agreement, including loss of profit, provided however , that this Section 12.4 shall not apply with respect to claims, expenses and liabilities of any Exculpated Party pursuant to Section 6.5.

12.5 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument. The submission of a signature page transmitted by facsimile or by other electronic transmission such as in portable document format (“pdf’) shall have the full force and effect of originals.

12.6 Governing Law . The laws of the State of Hawaii (other than its conflicts of laws principles) shall govern the construction, interpretation and effect of this Agreement.

12.7 Binding Effect . This Agreement shall be binding on all successors and assigns of the Partners and inure to the benefit of the respective permitted successors and permitted assigns of the Partners, except to the extent of any express contrary provision in this Agreement.

12.8 Partial Invalidity . If any term, provision, covenant, or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, such provision shall be construed and enforced to the maximum extent possible, and the remainder of this Agreement shall remain in full force and effect.

12.9 Captions . Titles or captions of Sections or Articles contained in this Agreement are inserted only as a matter of convenience or for reference, and shall not affect the meaning of the text.

12.10 Entire Agreement . This instrument contains the entire agreement of the Partners relating to the rights granted and obligations assumed in this instrument. Any oral representations or modifications concerning this instrument shall be of no force or effect unless contained in a subsequent written modification signed by the party to be charged.

obtain any rights under such provisions or solely by reason of such provisions shall be able to make any claims in respect of any debts, liabilities, or obligations against the Partnership or any of the Partners.

12.12 No Right to Partition . No Partner shall have the right to bring an action for partition against the Partnership. Each of the Partners hereby irrevocably waives any and all rights which it may have to maintain an action to partition Partnership property or to compel any sale or transfer thereof.

12.13 No Title to Partnership Property . All property owned by the Partnership, whether real, personal or mixed, and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually, shall have any ownership interest in such property.

12.14 Additional Documents . Each party hereto agrees to execute, with acknowledgment or affidavit, if required or deemed appropriate, any and all documents and writings that may be necessary or expedient in connection with the creation of the Partnership and the achievement of its Purpose.

12.15 Persons Not Named . Unless named in this Agreement, or unless admitted to the Partnership as a General Partner or Limited Partner, as provided in this Agreement, no Person shall be considered a Partner. Any distribution by the Partnership to the Person shown on the Partnership records as a Partner or its legal representative or the assignee of the right to receive Partnership distributions as herein provided, shall relieve the Partnership and the General Partner of all liability to any other Person who may be interested in such distribution.

[Signature page follows]

IN WITNESS WHEREOF, the Partners have executed this Agreement as of the Effective Date.

GENERAL PARTNER:		LIMITED PARTNER:

Barnwell Hawaiian Properties, Inc., a Delaware corporation		Noble Enterprises, Inc., a Nevada corporation


By	/s/ Alexander C. Kinzler	By:	/s/ Terry Johnston
	Alexander C. Kinzler, Its President		Terry Johnston, Its President

EXHIBIT “A”

Partners	Initial Capital Contribution	Sharing Ratio

GENERAL PARTNER

Barnwell Hawaiian Properties, Inc.	$4,140,000	75.0%


LIMITED PARTNER

Noble Enterprises, Inc.	$0	25.0%

Exhibit No. 10.8

LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT OF

KKM MAKAI, LLLP

(a Hawaii Limited Liability Limited Partnership)

TABLE OF CONTENTS

			Page

ARTICLE 1 GENERAL TERMS			1

1.1	Formation		1

1.2	Name		1

1.3	Filing of Certificate of Limited Partnership		1

1.4	Principal Place of Business		1

1.5	Purpose		1

1.6	Term of Partnership		2

1.7	Filings of Other Certificates		2

1.8	Other Activities of the Partners		2

1.9	Definitions		2

	(a)	“Act”	2

	(b)	“Capital Account”	2

	(c)	“Carrying Value”	2

	(d)	“Cash Flow”	3

	(e)	“Code”	3

	(f)	“Discretion””	3

	(g)	“Effective Date”	3

	(h)	“Fair Market Value”	3

	(i)	“General Partner”	4

	(j)	“Interest”	4

	(k)	“Limited Partners”	4

	(l)	“Partner”	4

	(m)	“Partnership”	4

	(n)	“Person”	4

	(o)	“Profits” and “Losses”	4

	(p)	“Purpose”	5

	(q)	“Sharing Ratio”	5

	(r)	“Transfer”	5

	(s)	“Treasury Regulations”	5

TABLE OF CONTENTS

(continued)

				Page


ARTICLE 2 CAPITALIZATION				5

2.1	Capital Accounts			5

2.2	Initial Capital Contributions			6

2.3	Additional Contributions, Loans and Withdrawals of Capital			6

	(a)	Additional Capital Contributions		6

		(i)	General Partner-Requested Contributions	6

		(ii)	Option to Fund Additional Capital	6

		(iii)	Contributions by New Partners	6

		(iv)	No Other Contribution Obligations	7

		(v)	No Duty to Restore Capital Account	7

	(b)	Loans		7

	(c)	Withdrawals and Interest		7

ARTICLE 3 PROFIT AND LOSS ALLOCATIONS				7

3.1	Allocations of Profits and Losses			7

	(a)	General Rule		7

	(b)	Deficit Capital Account and Related Rules		7

	(c)	Change in Partners’ lnterests		8

3.2	Tax Allocations			8

	(a)	Generally		8

	(b)	Special Rules		8

		(i)	Elimination of Book/Tax Disparities	8

		(ii)	Allocation of Items Among Partners	8

		(iii)	Conformity of Reporting	9

ARTICLE 4 DISTRIBUTIONS				9

4.1	Cash Flow Distributions			9

4.2	Liquidating Distributions			9

4.3	Other Distributions			9

TABLE OF CONTENTS

(continued)

			Page


ARTICLE 5 ACCOUNTING AND RECORDS			9

5.1	Fiscal Year		9

5.2	Method of Accounting		10

5.3	Books and Records and Inspection		10

5.4	Financial Statements and Tax Information		10

5.5	Taxation		10

	(a)	Tax Elections and Reporting	10

	(b)	Partnership Tax Returns.	10

	(c)	Tax Audits	10

ARTICLE 6 MANAGEMENT			11

6.1	General		11

6.2	Authority and Duties of the General Partner		11

	(a)	Authority of the General Partner	11

	(b)	Duties of the General Partner	11

	(c)	Restrictions on Authority	11

	(d)	Restrictions on General Partner’s Authority with Respect to Ka`upulehu Makai	13

	(e)	Meetings with Limited Partners	13

	(f)	Reports	13

	(g)	Actions Approved by Partners	14

6.3	Reimbursement of Expenses		14

6.4	Compensation of the General Partner		14

6.5	Liability and Indemnification of the General Partners		14

ARTICLE 7 THE GENERAL PARTNER			15

7.1	General Partner Not Liable for Partnership Obligations		15

7.2	Ceasing to be a General Partner		15

	(a)	Events of Cessation	15

	(b)	Conversion of General Partner Interest	15

7.3	Admission of a New General Partner		15

TABLE OF CONTENTS

(continued)

				Page


ARTICLE 8 LIMITED PARTNERS				16

8.1	No Management or Control			16

8.2	Liability and Indemnification of Limited Partners			16

	(a)	Liability of Limited Partners		16

	(b)	Indemnification of Limited Partners		16

ARTICLE 9 NEW PARTNERS; TRANSFERABILITY				16

9.1	Admission of New Partners for New Value			16

9.2	Prohibition on Transfer			16

9.3	Permitted Transfers			17

9.4	Right of First Refusal			17

9.5	Other Voluntary or Involuntary Transfers			18

	(a)	Right to Allocations and Distributions Only		18

	(b)	Substituted Limited Partners		18

9.6	Prohibited Transfers			18

9.7	Disassociation of a Partner			18

9.8	Offset Against Purchase Price			18

9.9	New Partners and Substitution of Partners			18

9.10	Amendments to Reflect Permitted Change of Partners			18

ARTICLE 10 DISSOLUTION AND TERMINATION				19

10.1	No Termination			19

10.2	Events of Dissolution			19

10.3	Procedures upon Dissolution			19

	(a)	General		19

	(b)	Control of Winding Up		20

	(c)	Manner of Winding Up		20

	(d)	Application of Assets		20

		(i)	Creditors	20

		(ii)	Partners	20

10.4	Termination of the Partnership			20

TABLE OF CONTENTS

(continued)

		Page


ARTICLE 11 SECURITIES LAWS		21

11.1	Securities Laws Representations	21

ARTICLE 12 MISCELLANEOUS PROVISIONS		21

12.1	Arbitration	21

12.2	Amendment	21

12.3	Notices	21

12.4	Consequential Damages	22

12.5	Counterparts	22

12.6	Governing Law	22

12.7	Binding Effect	22

12.8	Partial Invalidity	22

12.9	Captions	22

12.10	Entire Agreement	22

12.11	No Rights in Third Parties	22

12.12	No Right to Partition	23

12.13	No Title to Partnership Property	23

12.14	Additional Documents	23

12.15	Persons Not Named	23

LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT OF

KKM MAKAI, LLLP

(a Hawaii Limited Liability Limited Partnership)

This Limited Liability Limited Partnership Agreement, dated as of November 27, 2013, is entered into by and among Noble Enterprises, Inc., a Nevada corporation (“Noble”), as General Partner; Barnwell Hawaiian Properties, Inc., a Nevada corporation, (“Barnwell”); and Noble as a Limited Partner, as set forth on Exhibit “A” attached hereto and made a part hereof.

RECITAL

The parties desire to form a limited liability limited partnership under the Hawaii Uniform Limited Partnership Act (the “ Act ” ) in order that such partnership may engage in the activities described in Section 1.5 below;

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereby agree as follows:

ARTICLE 1

GENERAL TERMS

1.1 Formation. The parties hereby form a limited liability limited partnership (the “ Partnership ” ) under the Act as of the Effective Date set forth in Section 1.6.

1.2 Name. The name of the Partnership shall be KKM Makai, LLLP.

1.3 Filing of Certificate of Limited Partnership. The General Partner shall file a certificate of limited partnership pursuant to the Act.

1.4 Principal Place of Business. The Partnership’s principal office and place of business shall be 1100 Alakea Street, Suite 2900, Honolulu, Hawaii 96813. The principal office and place of business may be changed from time to time in the General Partner’s discretion.

1.5 Purpose. The purpose of the Partnership (the “ Purpose ” ) is to serve as the general partner of Ka`upulehu Makai, LLLP, a Hawaii limited liability limited partnership ( “ Ka`upulehu Makai ” ) which holds, or will hold, a 60% interest as member in three (3) limited liability companies – WB Ka`upulehu, LLC, WB Kukio Resorts, LLC and WB Manini`owali, LLC (collectively referred to below as “Companies” and individually as “Company”) – which limited liability companies in turn own and are developing four luxury residential communities – Kaupulehu, Increment 1; Kaupulehu, Increment 2; Kukio Resort and Manini`owali Resort on the Kona-Kohala coast of the Island of Hawaii (the “Projects”). The Partnership shall have any and all powers that are necessary or convenient to carry out the purposes of the Partnership, to the extent the same may be legally exercised by a limited liability limited partnership under the Act.

1.6 Term of Partnership. The term of the Partnership shall commence on the later of (i) the date the certificate of limited partnership is filed pursuant to the Act, and (ii) the date of execution and delivery of this Agreement (the “ Effective Date ”), and shall continue until terminated in accordance with ARTICLE 10.

1.7 Filings of Other Certificates. The General Partner shall cause to be executed and filed all certificates, statements or other instruments as the General Partner may deem necessary or advisable.

1.8 Other Activities of the Partners. The General Partner, the Limited Partners, and their respective affiliates, may each at any time engage in and possess interests in other business ventures of any type and description, independently or with others, whether such ventures are competitive with the Partnership or otherwise. Neither the Partnership nor any other Partner shall by virtue of this Agreement have any right, title or interest in or to such independent ventures or to the income or profits derived therefrom, nor shall engaging in such activities constitute a breach of any obligations hereunder.

1.9 Definitions. Capitalized terms used in this Agreement shall have the meanings specified in this Section 1.9, except as expressly stated otherwise. The singular shall include the plural and any gender shall include all genders. “Includes” or “including” shall mean “including, without limitation.”

(a) “Act” means the Hawaii Uniform Limited Partnership Act, HRS chapter 425E, as amended from time to time; provided, however , that if any amendment or successor law is applicable to the Partnership only upon election, then “Act” shall refer to the amended or successor law only upon election by all Partners.

(b) “Capital Account” has the meaning given in Section 2.1.

(c) “Carrying Value” means, with respect to any asset of the Partnership, the asset’s adjusted basis as of the relevant date for federal income tax purposes, except as follows:

or Partnership property as consideration for an interest in the Partnership, and (C) the liquidation of the Partnership within the meaning of Treasury Regulation section 1.704-1(b)(2)(iv)(f)(5)(ii);

(d) “Cash Flow” means, for any period, the amount, computed on a cash basis, of:

provided that any cash received, expenses incurred and disbursements made with respect to the liquidation of the Partnership shall not be taken into account in computing Cash Flow.

(e) “Code” means the Internal Revenue Code of 1986, as amended from time to time.

(f) “Discretion”” means in the person’s sole and absolute discretion unless otherwise provided.

(g) “Effective Date” has the meaning given in Section 1.6.

(h) “Fair Market Value” of any asset held by the Partnership, or the Partnership Interest held by a Partner, as the case may be, shall be determined as follows:

(ii) with respect to any other Partnership assets, the value that the General Partner reasonably determines to reflect the fair market value of such asset; and

(iii) with respect to a Partnership Interest being sold pursuant to Section 9.1, the value agreed upon by the Purchasing Party and the Selling Party.

(i) “General Partner” means any Person who has been admitted to the Partnership as general partner as a successor to the duties or interest of a general partner, in such Person’s capacity as a general partner. The initial General Partner is Noble Enterprises, Inc., a Nevada corporation.

(j) “Interest” means, in the context of a “ Partner’s Interest ,” the entire legal and equitable ownership interest of a Partner in the Partnership at any particular time. When used in the context of a General Partner, “ Interest ” means the Partnership Interest held by the Partner in its capacity as a General Partner. When used in the context of a Limited Partner, “ Interest ” means the Partnership Interest held by the Partner in its capacity as a Limited Partner.

(k) “Limited Partners” means any Person who has been admitted to the Partnership as a limited partner in accordance with the terms of this Agreement in such Person’s capacity as a limited partner. The initial Limited Partners are Barnwell Hawaiian Properties, Inc., a Delaware corporation, and Noble Enterprises, Inc., a Nevada corporation.

(l) “Partner” means any General Partner or Limited Partner.

(m) “Partnership” means the Limited Liability Limited Partnership created by this Agreement.

(n) “Person” means any individual, partnership, corporation, association, business, trust, government or political subdivision, agency, or other entity.

(o) “Profits” and “Losses” means, for each fiscal year or part thereof, the Partnership’s taxable income or loss for such year determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss) with the adjustments set forth for proper maintenance of capital accounts in Treasury Regulation section 1.704-1(b), including the following adjustments:

(ii) if any property is distributed in kind to any Partner, the difference between its Fair Market Value and its Carrying value at the time of

distribution shall be treated as Profit or Loss, as the case may be, recognized by the Partnership; and

(iii) the amount of any adjustment to the Carrying Value of any partnership asset pursuant to Section 1.9(c)(ii) shall be taken into account as Profit or Loss from the disposition of such asset.

(p) “Purpose” has the meaning given in Section 1.5.

(q) “Sharing Ratio” means the percentages of each Partner as set forth in Exhibit “A” attached hereto and made a part hereof, or any different percentages for such Partners or any additional Partners as certified in a writing (which shall constitute a permissible amendment to this Agreement) delivered to each Partner by the General Partner which reflects:

(r) “Transfer” means, in the context of a Transfer of an Interest, the sale, assignment, pledge, hypothecation, transfer or other disposition (voluntarily or involuntarily, by gift or otherwise, and whether as security or otherwise) by a Partner of all or a portion of the Partner’s Interest.

(s) “Treasury Regulations” means the regulations issued by the Treasury Department pursuant to the Code.

ARTICLE 2

CAPITALIZATION

2.1 Capital Accounts. A separate capital account (a “ Capital Account ” ) shall be maintained for each Partner. Each Partner’s Capital Account shall be:

(a) increased by (i) the amount of such Partner’s cash contributions to the Partnership, (ii) the Fair Market Value of any assets contributed to the Partnership

by such Partner, net of liabilities secured by such assets that the Partnership is considered to assume or take subject to under Code Section 752, and (iii) all profits and items of income or gain allocated to such Partner in accordance with ARTICLE 3; and

provided, however , that the Capital Accounts shall in all events be determined and maintained in accordance with the rules set forth in section 1.704-1(b) of the Treasury Regulations.

2.2 Initial Capital Contributions . The total initial capital contribution by the Partners to the Partnership (the “ Initial Capital Contribution ” ) shall be as set forth in Exhibit “A” attached hereto and made part hereof. Each Partner shall receive, as of the Effective Date, a Capital Account credit for such contribution in such amount; provided, however , that the timing of the obligation to fund the Initial Capital Contribution shall be governed by the timing provisions for the initial capital contributions set forth in the Limited Liability Limited Partnership Agreement of Ka’upulehu Makai.

2.3 Additional Contributions, Loans and Withdrawals of Capital .

(a) Additional Capital Contributions .

(iii) Contributions by New Partners . A new Partner may be admitted to the Partnership for new value in accordance with Sections 7.3 or 9.1. Any

new Partner shall make such capital contributions (“New Partner Capital Contributions”) to the Partnership upon its admission as a Partner as determined by the unanimous vote of the Partners in their discretion. New Partner Capital Contributions shall be treated as Initial Capital Contributions for the purposes of Section 4.1 unless otherwise specified upon admission of the new Partner.

ARTICLE 3

PROFIT AND LOSS ALLOCATIONS

3.1 Allocations of Profits and Losses.

(a) General Rule . Profits and Losses of the Partnership shall be allocated to the Partners in proportion to their Sharing Ratios, provided that during the period Barnwell is receiving 100% of all distributions pursuant to Section 4.1(b) below, representing the return of its Initial Capital Contribution, such Profits and Losses shall be allocated one hundred percent (100%) to Barnwell and zero percent (0%) to the other Partners.

(b) Deficit Capital Account and Related Rules . Notwithstanding Section 3.1(a), allocations shall be made to the Partners as set forth in Treasury Regulation

sections 1.704-1 (b) and 1.704-2 (relating to allocations of partnership income or loss) as such regulations relate to limitations on loss allocations determined by reference to a Partner’s negative Capital Account balance for which it is not economically responsible, allocations of gross income in connection with “qualified income offsets” (such as distributions causing excess negative Capital Account balances), and allocations attributable to the presence of nonrecourse debt. If any such allocations are made which are inconsistent with the desired allocations in accordance with Sharing Ratios as described in Section 3.1(a), other items of income, gain, loss and deduction for such fiscal year and subsequent fiscal years shall be reallocated among the Partners, to the extent possible, so as to reverse the effect of any such disproportionate allocations.

3.2 Tax Allocations .

(b) Special Rules .

any disposition of a Partnership asset which is treated as ordinary income because it is attributable to the recapture of any depreciation or amortization shall be allocated among the Partners in the same ratio as the prior allocations of Profits, Losses or other items which included such depreciation or amortization, but not in excess of the gain otherwise allocable to each such Partner.

ARTICLE 4

DISTRIBUTIONS

(a) First, to the Partners in proportion to their Additional Capital Contributions until each Partner’s Additional Capital Contributions have been returned in full;

(b) Second, to the Partners in proportion to their Sharing Ratios, provided, however, that at such time as the aggregate distributions to the members of the Companies (as the term “Companies” is defined in Section 1.5 above) total $45 million, then the next $1 million in distributions from this Partnership to its Partners shall be distributed to the Partners in proportion to their respective Initial Capital Contributions until each Partner’s Initial Capital Contributions have been returned in full.

4.2 Liquidating Distributions . Distributions to the Partners of cash or property arising from a liquidation of the Partnership shall be made in accordance with Section 10.3(d)(ii) below.

4.3 Other Distributions . To the extent that cash is available to the Partnership without a requirement of borrowing or the making of Additional Capital Contributions from the Partners, the Partners intend that the Partnership make reasonable efforts to make annual distributions to compensate the Partners for any federal or state tax liability related to the Partnership’s taxable income allocated to the Partners for the prior calendar year.

ARTICLE 5

ACCOUNTING AND RECORDS

5.1 Fiscal Year . The fiscal year shall be August 31st of each year.

5.5 Taxation .

materially adversely affect such partners, and shall keep such Partner advised of all significant developments in such matters coming to the attention of the Tax Matters Partner.

ARTICLE 6

MANAGEMENT

6.2 Authority and Duties of the General Partner .

(i) the amendment of this Agreement;

(iii) the dissolution of the Partnership;

(iv) the admission of any Partner;

(v) the sale or assignment of all or any portion of the General Partner’s Interest or a direct or indirect interest in General Partner, after which Terry Johnston no longer controls the General Partner, provided, however, that the General Partner shall retain its rights to sell or assign its Interest subject to compliance with the “right of first refusal” provisions of Section 9.4 of this Agreement;

(vi) the determination of the compensation to be paid to the General Partner and any increase or decrease therein;

(vii) the redemption of any Partnership Interest;

(viii) the merger or consolidation of the Partnership with any other organization or the sale of all or substantially all of the Partnership’s assets;

(ix) the Partnership’s acquisition of any new business or new line of business;

(x) the making of any federal or state tax elections for the Partnership;

(xi) the approval of the Partnership’s federal and state tax returns;

(xii) the approval of any settlement in any tax audit of the Partnership;

(xiii) the approval of any in-kind distributions to any Partner;

(xiv) the approval of the Partnership’s retention of any employees (the Partners agree that any employees should be employees of one or more management, professional or consulting companies retained by the Partnership);

(xv) the filing of Bankruptcy by the Partnership under any chapter or the taking any act that would constitute a Bankruptcy of the Partnership;

(xvi) the institution, prosecution and settlement of any legal proceeding (including arbitration) in the Partnership’s name, excluding collection and summary possession proceedings related to tenants of the Partnership; or

(xvii) the entry into any contract by the Partnership with the General Partner or an affiliate of the General Partner;

(xviii) the approval of any material modifications of the Partnership’s insurance programs;

(xix) any action that may result in a default or breach of any contract to which the Partnership is a party; or

(xx) the approval of any amendment of any provision of the Limited Liability Limited Partnership Agreement of Ka`upulehu Makai.

(d) Restrictions on General Partner’s Authority with Respect to Ka`upulehu Makai . The General Partner shall have sole responsibility, authority and control with respect to the exercise of any and all management, voting and other rights of the Partnership as the general partner of Ka`upulehu Makai, except that, in the exercise of such authority, the General Partner shall not cause the Partnership, in its capacity as General Partner of Ka`upulehu Makai, to propose, support, approve or vote for any action that requires the consent of any Limited Partner of Ka`upulehu Makai without first consulting with each Limited Partner of this Partnership with a Sharing Ratio of twenty percent (20.0%) or more.

(e) Meetings with Limited Partners . The General Partner shall meet with the Limited Partners on a quarterly basis, or on request of the Limited Partners, to report on and discuss the status of zoning, permits, approvals, easements, engineering, planning, development, construction, operation, marketing, sales and other matters relating to the Projects.

(f) Reports . The General Partner shall provide each Limited Partner with reports as follows:

(ii) Copies of all reports provided by the general partner to the limited partners under the Limited Liability Limited Partnership Agreement of Ka`upulehu Makai (see, e.g. section 6.2(g) thereof, entitled “Reports”).

(iii) Copies of the Partnership’s annual federal and state income tax returns together with a copy of that certain IRS form commonly referred to as a “Schedule K-1” within sixty (60) days following the end of each calendar year.

(iv) Proposed Budgets and Operating Plans for Ka`upulehu Makai to be provided to the Limited Partners at least two (2) months prior to the expiration of the Budget and Operating Plan for the prior year (or other period of time covered by the Budget and Operating Plan then in effect).

(v) Copies of all notices and information provided to any Limited Partner of Ka`upulehu Makai in connection with seeking the Limited Partner’s consent to any “Major Decision” as the term “Major Decision” is defined in the Limited Liability Limited Partnership Agreement of Ka`upulehu Makai, LLLP, copies to be provided at the same time they are provided to the Limited Partners of Ka`upulehu Makai.

(g) Actions Approved by Partners .

(i) Each Limited Partner is deemed to have consented to the Budget and Operating Plan for 2014, 2015 and 2016 set forth in the Limited Liability Limited Partnership Agreement of Ka`upulehu Makai (see e.g., Exhibit G thereto, entitled “Approved Budget and Operating Plan”).

(ii) Each Partner is deemed to have consented to the transfer of the 5.20% limited partner interest of Noble to such transferees as Noble specifies in writing, and the admission of such transferees as Substituted Limited Partners pursuant to Section 9.5(b), subject to each transferee’s executing of an appropriate agreement to be bound by the terms and conditions of this Agreement; and provided, however, that any subsequent transfer by any such transferee shall be subject to the provisions of ARTICLE 9.

6.5 Liability and Indemnification of the General Partners . Each General Partner and the shareholders, constituent partners, officers, directors, managers, members and employees of each General Partner and its affiliates (individually, an “ Exculpated Party ”) shall not be liable, responsible or accountable in damages or otherwise to the Partnership or any of the Partners for any act or omission performed or omitted (i) in good faith on behalf of the Partnership, (ii) in a manner reasonably believed by the General Partner to be within the scope of the authority granted to the General Partner by this Agreement, and (iii) in a manner not constituting willful misconduct, fraud, breach of the General Partner’s fiduciary duty of loyalty or gross negligence. The Partnership shall indemnify, defend and hold harmless each Exculpated Party for any and all claims or threats thereof, expenses and liabilities or threats thereof (including, without limitation, attorneys’ fees and costs of investigation and defense relating to the Partnership) which such party may incur by reason of being a General Partner or a shareholder, constituent partner, officer, director, managers, members or employee of a General Partner (regardless of the disclosure or lack of disclosure of such status) or by virtue of taking any action pursuant to this Agreement in such capacity unless such claim, expense or liability is caused by an act or omission performed or omitted by the Person seeking indemnification in a manner constituting willful misconduct, fraud, breach of its fiduciary duty of loyalty, or gross negligence.

ARTICLE 7

THE GENERAL PARTNER

7.2 Ceasing to be a General Partner .

(a) Events of Cessation . A General Partner shall cease to be a general partner of the Partnership upon the earliest of the following events:

(i) a withdrawal by the General Partner from the Partnership;

(ii) the Transfer of all of the General Partner’s Interest in the Partnership to the extent permitted by ARTICLE 9;

(iii) the Bankruptcy of the General Partner;

(iv) the death of the General Partner, or the entry by a court of competent jurisdiction of an order adjudicating the General Partner incompetent to manage his or her estate;

(v) for cause;

(vi) the termination of the Partnership under Section 10.4; or

(b) Conversion of General Partner Interest . If a General Partner ceases to be a General Partner in the Partnership pursuant to Sections 7.2(a)(i), 7.2(a)(iii), 7.2(a)(iv), 7.2(a)(v), or 7.2(a)(vii), then as of the date of such event, the General Partner shall cease to be a General Partner in the Partnership and shall instead become a Limited Partner (or solely a Limited Partner, if already a Limited Partner) in the Partnership with all of the rights and subject to all of the limitations of a Limited Partner hereunder, and shall retain its Capital Account and financial rights with respect to allocations and distributions in the manner provided in this Agreement.

7.2(a)(iv), 7.2(a)(v)or 7.2(a)(vii), the consent of the affected General Partner (as General Partner) shall not be required.

ARTICLE 8

LIMITED PARTNERS

8.2 Liability and Indemnification of Limited Partners .

ARTICLE 9

NEW PARTNERS; TRANSFERABILITY

(a) sell, assign, pledge, hypothecate, exchange or otherwise transfer for consideration all or any part of the Partner’s Partnership Interest, or

(b) gift, bequeath or otherwise transfer for no consideration (whether or not by operation of law, except in the case of bankruptcy) all or any part of the Partner’s Partnership Interest.

9.3 Permitted Transfers . Notwithstanding Section 9.2, (a) each Partner shall have the right to transfer all or any portion of its Partnership Interest to any immediate family members of the Partner, to any trust for the benefit of such immediate family members, or to any charitable trust controlled by the Partner, (b) each Partner may sell, give or bequeath all or any part of the Partner’s Partnership Interest to any other Partner without restriction of any kind, and (c) each Partner may sell, give or bequeath all or any part of the Partner’s Partnership Interest to any entity owned or controlled by the Partner. The rights accorded each Partner under this Section 9.3 may also be exercised by any Partner who may have succeeded to all or any portion of a Partner’s Partnership Interest.

9.4 Right of First Refusal .

remaining Partners shall have the right to designate the time, date and place of closing, provided that the date of closing shall be within sixty (60) days after the expiration of the Option Period.

9.5 Other Voluntary or Involuntary Transfers .

(a) Right to Allocations and Distributions Only . A transferee of all or a portion of a Partner Interest, whether voluntarily, involuntarily or by action of law, shall entitle the transferee to receive the transferring Partner’s share of Profits, Losses and other items pursuant to ARTICLE 3 and such Partner’s share of distributions pursuant to ARTICLE 4. Such transferee shall not, however, be admitted as a Partner, and shall not be entitled to vote or to the other rights of a Partner, other than the right to receive allocations of profits and losses and distributions, and the transferring Partner shall not be relieved of any of its obligations hereunder, unless the transferee is admitted to the Partnership as a substituted Limited Partner as provided in Section 9.5(a).

9.9 New Partners and Substitution of Partners . A transferee of a Partnership Interest under Sections 9.2 (with consent), 9.3, 9.4, and 9.5(b) (with consent) shall become a Substitute Partner. Admission of a new Partner under Section 9.1 or of a Substitute Partner shall not cause dissolution of the Partnership.

ARTICLE 10

DISSOLUTION AND TERMINATION

10.2 Events of Dissolution . The Partnership shall be dissolved upon the first to occur of the following:

(a) December 31, 2050;

(b) the approval of each Partner, but only on the effective date of dissolution specified by such Partners at the time of such approval;

(e) entry of a decree of judicial dissolution under the Act; or

10.3 Procedures upon Dissolution .

(d) Application of Assets . In the case of a dissolution of the Partnership, the Partnership’s assets shall be applied as follows:

(ii) Partners . Second, to the Partners in accordance with Section 4.1 above except that the second priority in distributions to Partners shall be the return of the Partners’ Initial Capital Contributions without regard to any $45 million in Company distributions threshold, with subsequent distributions being made in proportion to the Partners’ Sharing Ratios, then to the Partners in proportion to their Sharing Ratios. All distributions pursuant to this Section 10.3(d)(ii) shall be made no later than the end of the Partnership taxable year during which the liquidation of the Partnership occurs (or, if later, within 90 days after the date of such liquidation).

10.4 Termination of the Partnership . Upon the completion of the liquidation of the Partnership and the distribution of all Partnership assets, the Partnership’s affairs shall terminate and the Liquidator shall cause to be executed and filed a Certificate of Cancellation of Partnership’s Certificate of Limited Partnership pursuant to the Act, as well as any and all other documents required to effectuate the termination of the Partnership.

ARTICLE 11

SECURITIES LAWS

11.1 Securities Laws Representations . Each Partner, by executing this Agreement, represents and warrants to the Partnership and to the General Partner that such Partner (i) is aware that the acquisition of its Interest in the Partnership has not been registered under the Securities Act of 1933, as amended, or qualified under the securities laws of any state or other jurisdiction, (ii) is acquiring its Interest in the Partnership solely for its own account and not for the account of any other Person, for investment only, and not with a view to or for sale in connection with any distribution of such Interest, (iii) understands that resale, pledge, Assignment or other Transfer of its Interest in the Partnership is limited by this Agreement and in any event may not be effected unless (A) the transfer is registered and qualified under applicable securities laws, or is effected as a non-public offering that is exempt from the registration and qualification requirements of applicable securities laws, and (B) the Person acquiring such Interest represents and warrants to the Partnership and to the General Partner that such Person is acquiring its Interest in the Partnership solely for its own account and not for the account of any other Person, for investment only, and not with a view to or for sale in connection with any distribution of such Interest, (iv) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of acquiring its Interest in the Partnership, (v) acknowledges that there is no guarantee that the Partnership will be a financial success, and is able to bear the economic risk of the loss of its Interest in the Partnership, and (vi) acknowledges that the General Partner is relying on the foregoing representations.

ARTICLE 12

MISCELLANEOUS PROVISIONS

12.3 Notices . Any written notice or communication to any of the Partners required or permitted under this Agreement shall be deemed to have been duly given and received (i) on the date of delivery, if delivered personally, (ii) on the date of confirmation if sent by transmission (e.g., by facsimile or email) to the party to whom notice is to be given, if sent during regular business hours of the recipient, (iii) on the fourth day after mailing, if mailed by first class registered or certified mail, or (iv) on the next day (or second day) if sent by a nationally recognized courier for next day (or second day) service; in all cases addressed to the recipient at its address as shown on the records of the Partnership. If the specified date is not a business day, then notice

shall be deemed given on the next business day. Notices to the Partnership shall be similarly given, at its principal place of business, with a copy to the General Partner.

12.4 Consequential Damages . Neither the Partnership nor any Partner shall be liable to any other Partner or the Partnership for special, indirect or consequential damages resulting or arising out of this Agreement, including loss of profit, provided however, that this Section 12.4 shall not apply with respect to claims, expenses and liabilities of any Exculpated Party pursuant to Section 6.5.

12.6 Governing Law . The laws of the State of Hawaii (other than its conflicts of laws principles) shall govern the construction, interpretation and effect of this Agreement.

12.11 No Rights in Third Parties . The provisions of this Agreement are for the benefit of the Partnership and the Partners, and are not intended to be for the benefit of any Person to whom any debts, liabilities or obligations are owed, or who otherwise has any claim against the Partnership or any Partner, and no creditor or other Person shall obtain any rights under such provisions or solely by reason of such provisions shall be able to make any claims in respect of any debts, liabilities, or obligations against the Partnership or any of the Partners.

[Signature page follows]

IN WITNESS WHEREOF, the Partners have executed this Agreement as of the Effective Date.

GENERAL PARTNER:		LIMITED PARTNERS:

Noble Enterprises, Inc.,		Barnwell Hawaiian Properties, Inc.,
a Nevada corporation		a Delaware corporation


By:	/s/ Terry Johnston	By:	/s/ Alexander C. Kinzler
	Terry Johnston, Its President		Alexander C. Kinzler, Its President


		/s/ Ralph Street
		Ralph Street

		/s/ Kenneth Farey
		Kenneth Farey

		/s/ Christina Rae Horwood
		Christina Rae Horwood

		/s/ Richard T. Tuckey
		Richard T. Tuckey

		/s/ Elizabeth Anne Horwood
		Elizabeth Anne Horwood

		/s/ Judith Anne Roy
		Judith Anne Roy

		/s/ Jessica Anne Roy
		Jessica Anne Roy

EXHIBIT “A”

Partners	Initial Capital	Sharing Ratio
	Contribution

GENERAL PARTNER

Noble Enterprises, Inc.	$ 0	57.06%

LIMITED PARTNERS

Barnwell Hawaiian Properties, Inc.	$ 1,000,000	34.45%

Noble Enterprises, Inc.	$ 0	0.0%

Ralph Street	$ 0	.87%
4820 Excelsior Road
Victoria BC V9E 2E5

Kenneth Farey	$ 0	.43%
5471 Parker Avenue
Victoria BC V8Y 2N2

Christina Rae Horwood	$ 0	1.18%
c/o 300 – 1006 Fort Street
Victoria BC V8V 3K4

Richard T. Tuckey	$ 0	.43%
5084 Santa Clara Avenue
Victoria BC V8Y 1W1

Elizabeth Anne Horwood	$ 0	4.10%
c/o 300 – 1006 Fort Street
Victoria BC V8V 3K4

Judith Anne Roy	$ 0	.17%
c/o 300 – 1006 Fort Street
Victoria BC V8V 3K4

Jessica Anne Roy	$ 0	.17%
c/o 300 – 1006 Fort Street
Victoria BC V8V 3K4

Christina Rae Horwood	$ 0	.80%
c/o 300 – 1006 Fort Street
Victoria BC V8V 3K4

Judith Anne Roy	$ 0	.34%
c/o 300 – 1006 Fort Street
Victoria BC V8V 3K4

		100.00%

Exhibit 10.9

LOAN AGREEMENT

This Loan Agreement (the “ Agreement ”) is dated November 27, 2013 and is made by and among KKM MAKAI, LLLP, a Hawaii limited liability limited partnership (“ KKM ”), and KD KONA 2013 LLLP, a Hawaii limited liability limited partnership (“ KD Kona ”) (KKM and KD Kona are individually and collectively referred to as the “ Borrower ”) and AMERICAN SAVINGS BANK, F.S.B., a federal savings bank (“ Lender ”).

1. Loan Terms .

1.1 Loan Amount; Purpose and Related Information . Lender will make a loan to Borrower in the principal amount of FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00) (the “ Loan ”) to be used to finance: (a) a portion of KKM’s initial capital contribution to acquire a 60% general partnership interest (“ KKM’s GP Interest ”) in Ka’upulehu Makai, LLLP, a Hawaii limited liability limited partnership (“ KM LLLP ”) and (b) a portion of KD Kona’s initial capital contribution to acquire a 16% limited partnership interest (“ KD Kona’s LP Interest ”) in KM LLLP, which KM LLLP will then use, along with the initial capital contribution of KD Development, LLC, a Delaware limited liability company (“ KD Development ”), who is another limited partner of KM LLLP, to acquire the 60% membership interests owned by seller Westbrook United Land Investments, L.P. (“ WULI ”) in the following three limited liability companies (collectively, the “ Companies ”): (i) WB Ka’upulehu, LLC, a Delaware limited liability company (“ WB Ka’upulehu ”); (ii) WB Kukio Resorts, LLC, a Delaware limited liability company (“ WB Kukio ”); and (iii) WB Manini’owali, LLC, a Delaware limited liability company (“ WB Manini’owali ”). The remaining 40% interests in each of the Companies is owned by G&K Development, LLC, a Hawaii limited liability company (the “ Getty Member ”). The Loan will be available in one disbursement at the closing of the Loan, unless otherwise provided in this Agreement.

WB Ka’upulehu is the sole member of: (A) WB KD Member, LLC, a Delaware limited liability company, which is the sole member of WB KD Acquisition, LLC, a Delaware limited liability company (“ WB KD Acquisition LLC ”) and (B) WB KD Acquisition II, LLC, a Delaware limited liability company (“ WB KD Acquisition II LLC ”). WB Kukio, WB Manini’owali, WB KD Acquisition LLC and WB KD Acquisition II LLC are each referred to herein as a “ Developer Company ” and, collectively, as the “ Developer Companies ”. Each of the Developer Companies is an owner of underlying land and is involved in the development, ownership, marketing, financing and sale of four luxury residential communities on the Kona-Kohala coast of the Island of Hawaii (each, a “ Project ” and, collectively, the “ Projects ”) commonly known as: (1) “Kaupulehu, Increment 1” (“ Increment 1 ”) owned in fee simple by WB KD Acquisition LLC, subject to mortgage liens in favor of Bank of Hawaii and Kamehameha Schools; (2) “Kaupulehu, Increment 2” (“ Increment 2 ”), which WB KD Acquisition II LLC owns the leasehold interest pursuant to a ground lease with lessor Kamehameha Schools; (3) “Kukio Resort” owned in fee simple by WB Kukio; and (4) “Manini’owali Resort” owned in fee simple by WB Manini’owali.

The Loan will be evidenced by an Adjustable Rate Promissory Note of even date herewith (the “ Note ”) made by Borrower and payable to Lender in the original principal amount of the Loan.

1.2 Interest Rate . The initial interest rate for the Loan shall be Four and one-half percent (4.50%) per annum. The interest rate will be adjusted every twelve (12) months during the term of the Loan as set forth in the Note. Interest shall be computed as provided in the Note. The interest rate may be increased, as set forth in the Note and in this Agreement, in the event Borrower fails to perform its obligations under the Loan Documents.

1.3 Repayment of Loan . Monthly payments of accrued interest only shall be due on the first day of each calendar month. All unpaid principal and interest shall be due on December 1, 2015, unless sooner due as hereinafter provided.

a. Prepayment . Borrower may prepay the Loan in full or in part at any time, subject to the conditions set forth in the Note.

b. Late Charges . If any payment due under the Loan is not received by Lender within ten (10) calendar days of the date such payment is due, Borrower shall pay on demand a late charge in a sum equal to five percent (5%) of any amount overdue.

c. Default Interest Rate . Upon the occurrence and during the continuation of any default under this Agreement, all amounts due under the Loan will, at the option of Lender, bear interest at the default rate of interest set forth in the Note.

d. Mandatory Principal Payments . During the term of the Loan, Borrower agrees to make mandatory principal payments with respect to the Loan as follows:

i. A principal payment in an amount equal to 67% of an Increment 1 Percentage Payment as and when KD receives such payment pursuant to its rights under the Increment 1 PSA.

ii. A principal payment in an amount equal to 67% of an Increment 2 Percentage Payment as and when KD receives such payment pursuant to its rights under the Increment 2 PSA.

iii. A principal payment in an amount equal to 100% of each cash distribution made by KM LLLP to either or both Borrower pursuant to Borrower’s rights under the KM LLLP Partnership Agreement.

iv. A principal payment in an amount equal to $1,400,000.00 from the sales proceeds received by Accommodation Obligor from the sale of the House/Lot.

v. A principal payment in an amount equal to all of the Net Sales Proceeds from the sale of each of the Finished Lots “ Net Sales Proceeds ” means the gross sales price for a Finished Lot minus reasonable real estate commissions and other customary and standard closing costs not to exceed, in the aggregate, seven percent (7%) of the gross sales price of the Finished Lot. Lender shall have the right to review the closing statements for the sale of each Finished Lot to insure that Lender is being paid all of the Net Sales Proceeds, and to review such commissions and closing costs to be deducted in the calculation of Net Sales Proceeds.

1.4 Security for Loan . The security for the Loan shall be the following:

a. An absolute assignment in favor of Lender of sixty-seven percent (67%) of the right and interest of Kaupulehu Developments, a Hawaii general partnership (“ KD ”), in and to those certain percentage payments to be paid by WB KD Acquisition LLC to KD (each, an “ Increment 1 Percentage Payment ”) pursuant to the terms of that certain Purchase and Sale Agreement by and between KD and WB KD Acquisition LLC dated February 13, 2004 (“ Increment 1 PSA ”).

b. An absolute assignment in favor of Lender of sixty-seven percent (67%) of KD’s right and interest in and to those certain percentage payments to be paid by WB KD Acquisition II LLC to KD (each, an “ Increment 2 Percentage Payment ”) pursuant to the terms of that certain Amended and Restated Agreement as to Lot 4A, Increment 2 by and among KD, WB KD Acquisition LLC and WB KD Acquisition II LLC dated May 27, 2009 (the “ Increment 2 PSA ”).

c. The Mortgage, Security Agreement, Assignment of Leases and Rents, Fixture Filing, and Financing Statement of even date herewith made by Kaupulehu 2007, LLLP, a Hawaii limited liability limited company (“ Accommodation Obligor ”) in favor of Lender (the “ Accommodation Mortgage ”) granting a second mortgage lien (subject only to the first mortgage lien in favor of the Lender) encumbering three (3) lots of real property located at Kaupulehu, Hawaii (bearing Tax Map Key Nos. (3) 7-2-031: 022, 026 and 028), more particularly described in Exhibit “A” attached hereto and made a part hereof. The term “ Property ” shall mean such real property, together with all buildings, structures and other improvements now or hereafter located thereon (the “ Improvements ”), and the personal property described in the Accommodation Mortgage and the other Loan Documents (as defined below) (the “ Personalty ”). One (1) of the three (3) lots comprising the Property is improved with a residential house (the “ House Lot ”), and the remaining two (2) lots are finished for future construction of a house thereon (the “ Finished Lots ”).

d. The pledge of KKM’s GP Interest in KM LLLP.

e. The pledge KD Kona’s LP Interest in KM LLLP.

f. The pledge(s) of the 10% membership interests in each Company that KKM, KM LLLP or an assignee of KM LLLP directly receives in any of the Companies pursuant to the WULI Interest PSA (as defined below), as and when such interests are received by KKM, KM LLLP or such assignee (each, an “ Additional Interest Pledge ”).

g. An absolute assignment in favor of Lender in and to all of the cash distributions to be made from KM LLLP to either Borrower pursuant to the Limited Liability Limited Partnership Agreement of Ka’upulehu Makai, LLLP dated November 27, 2013 (the “ KM LLLP Partnership Agreement ”).

h. A perfected security interest in all furniture, fixtures, equipment and other personal property owned by Accommodation Obligor located on or used in connection with the day-to-day operation of the Property.

i. A perfected second lien security interest in Accommodation Obligor’s deposit accounts with the Lender, accounts receivable, general intangibles, documents of title, tradenames and licenses, inventory, furniture, fixtures and equipment, now or hereafter acquired located within and outside the State of Hawaii.

j. The pledge of Borrower’s Interest Reserve Account as more particularly described below.

k. The pledge of Borrower’s Pledged Account as more particularly described below.

1.5 Documentation . At or prior to the closing of the Loan, Borrower must deliver the following documents and other items, executed and acknowledged as appropriate, all in form and substance satisfactory to Lender:

a. the Loan Documents (which means this Agreement, the Note, the security agreement, financing statements, pledges, absolute assignment agreements and any other documents evidencing, securing, guaranteeing or governing the Loan (except for the Accommodation Mortgage and the security agreement to be made by Accommodation Obligor), as they may be extended, renewed or modified from time to time);

b. a satisfactory appraisal of each of the 3 lots comprising the Property done by an appraiser approved by Lender in accordance with the Uniform Standards of Professional Appraisal Practices and federal applications applicable to Lender, reflecting a market value for each such lot in an amount acceptable to Lender;

c. evidence of the liability and other insurance coverage of KM LLLP, the Developer Companies and such others as required under this Agreement or otherwise by Lender in writing;

d. true and correct copies of the organizational documents of Borrower, Borrower’s general partner and limited partners, each Guarantor, KM LLLP, each of the Companies, WB KD Acquisition LLC, WB KD Acquisition II LLC, and KD (collectively, the “ Affiliates ”), including any amendments and restatements thereof, evidence of such entities’ due formation and good standing (certificate of good standing), as well as due authorization and execution of the Loan Documents, as applicable, by such entities;

e. full payment of all fees, advances and costs, including but not limited to any loan or commitment fees, recording and filing fees, and escrow and title fees;

f. if required by Lender, a written opinion or opinions of legal counsel for Borrower and the Guarantors (as defined below), addressed to Lender, covering to 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 or violations of any agreements or laws, and (5) such other matters as Lender may require;

g. true and correct copy of the letter of intent signed and delivered by Hualalai Investors, LLC (“ Hualalai ”) to Borrower, concerning the joint development of Increment 1 and Increment 2 (the “ Joint Development LOI ”), such letter of intent to have substantially similar form and content as the letter of intent issued by Hualalai dated October 24, 2013;

h. the purchase and sale agreement and any amendments thereto for KM LLLP’s acquisition of WULI’s membership interests in the Companies (collectively, the “ WULI Interest PSA ”);

i. the purchase and sale agreements evidencing KD’s rights and entitlements to percentage payments in connection with the sale of all or any portion of the properties comprising Increment 1 and Increment 2;

j. on a best efforts basis, (i) the written consent to the pledge of KKM’s GP Interest in KM LLLP and (ii) the written consent to the pledge of KD Kona’s LP Interest in KM LLLP, by the remaining partners of KM LLLP;

k. a true and correct copy of the assignment of membership interests in each of the Companies from WULI to KM LLLP;

l. an estoppel certificate signed and delivered by the Getty Member in favor of KM LLLP and each of its partners, certifying that the Companies’ operating agreements are in full force and effect and unchanged, except as disclosed in said certificate, and that WULI is not in default under such operating agreements which KM LLLP will be responsible to cure; and

m. such other documents, property information and other assurances as Lender may require.

1.6 Additional Closing Conditions . The obligation of Lender to make the Loan under this Agreement is also subject to the satisfaction of the following conditions on or before the date on which the Lender shall make any disbursement of Loan proceeds to Borrower (the “ Closing Date ”):

a. Borrower shall have opened a demand deposit account (the “ Interest Reserve Account ”) with Lender and shall have funded an opening minimum balance of $1,000,000.00 (the “ Interest Reserve ”). Borrower shall have delivered to Lender irrevocable instructions for the Lender to automatically withdraw from the Interest Reserve a sufficient amount to pay for payments as and when they become due in accordance with the provisions of the Note. The Interest Reserve Account and the funds therein shall be pledged to Lender as security for the Loan; Borrower shall be restricted from withdrawing such funds or closing the Interest Reserve Account except as expressly set forth in the pledge agreement.

b. Borrower shall have opened a demand deposit account (the “ Pledged Account ”) with Lender and shall have funded an opening minimum balance of $1,000,000.00 (the “ Pledged Funds ”). The Pledged Account and the funds therein shall be pledged to Lender as security for the Loan; Borrower shall be restricted from withdrawing the Pledged Funds or closing the Pledged Account, provided that: (i) Borrower shall be entitled to withdraw $500,000

from the Pledged Account upon delivery to the Lender a true and correct copy of the fully-executed Joint Development LOI between Borrower or its affiliate and Hualalai in substantially similar form and content as the one Borrower received as a condition to closing of the Loan; and (ii) Borrower shall have the right to withdraw the remaining balance from the Pledged Account and to have the pledge of the Pledge Account released as security for the Loan upon delivery to Lender of a fully-executed joint development agreement between Borrower or its affiliate and Hualalai for the joint development of Increment 1 and Increment 2. The joint development agreement shall be materially consistent with the terms of the Joint Development LOI, unless the prior written consent of Lender is obtained, and in any event be in form and with content reasonably acceptable to Lender.

1.7 Guarantors . Repayment of the Loan shall be guaranteed (as more particularly described in that certain guaranty dated the date hereof (the “ Guaranty ”) by the following persons and/or entities, jointly and severally (each, a “ Guarantor ” and, collectively, the “ Guarantors ”): BARNWELL INDUSTRIES, INC., a Delaware corporation (“ Barnwell ”); NOBLE ENTERPRISES, INC., a Nevada corporation (“ Noble ”); and NEARCO, INC., a Washington corporation (“ Nearco ”).

1.8 Post-Closing Documentation . Within thirty (30) calendar days after the Closing Date, Borrower promises to deliver the following documents and other items, executed and acknowledged as appropriate, all in form and substance satisfactory to Lender:

a. the Accommodation Mortgage, encumbering the Property, and the security agreement relating to the collateral to be granted pursuant to Section 1.4.h. described hereinabove;

b. an American Land Title Association (“ ALTA ”) title insurance policy insuring Lender that the Accommodation Mortgage constitutes a valid and enforceable second lien on the Property subject and subordinate only to such liens or other matters as Lender has approved in writing, and with such endorsements as Lender may reasonably require;

c. a financing statement and personal property lien report, advising Lender that a search of the public records discloses no security agreements, chattel mortgages, financing statements, title retention agreements, notices or certificates of tax liens or other instruments or documents filed or recorded against Accommodation Obligor, except those which may have been approved by Lender in writing;

d. an Environmental Questionnaire and Disclosure Statement prepared and certified by Borrower, or, if Lender requires, an environmental survey of the Property prepared by an environmental consultant satisfactory to Lender;

e. a tax clearance certificate or certificates issued by the Department of Taxation of the State of Hawaii, certifying that all taxes due from Accommodation Obligor to the State of Hawaii have been paid;

f. if requested, a survey of the Property and the improvements thereon certified to Lender in accordance with the standards of the ALTA and the American Congress on Surveying & Mapping; and

g. evidence of the casualty and other insurance coverage as required under the Accommodation Mortgage or otherwise by Lender in writing.

2. Covenants of the Borrower .

Borrower promises to keep each of the following covenants:

2.1 Payment of Loan . Borrower will pay when due all sums which may be due under the Loan Documents.

2.2 Existence . Borrower shall preserve and maintain Borrower’s and KM LLLP’s legal existence and timely file all necessary and appropriate documents and exhibits and pay all appropriate fees and charges therewith. KKM, as general partner of KM LLLP, shall preserve and maintain the legal existence and timely file all necessary and appropriate documents and exhibits and pay all appropriate fees and charges related to the existence of KM LLLP and each of the Development Companies.

2.3 Compliance with Law and Title Encumbrances . Borrower shall comply, and shall cause KM LLLP and each of the other Affiliates to comply, as applicable, with all existing and future laws, ordinances, rules, regulations, orders, building restrictions and requirements of, and all permits and approvals from, and agreements with and commitments to, all governmental, judicial or legal authorities having jurisdiction over Borrower, KM LLLP, Accommodation Obligor, the Property, the Projects or the Developer Companies’ business conducted thereon or therefrom, and with all restrictive covenants and other title encumbrances encumbering the Projects or the Property, including without limitation the Environmental Laws (described below and in the Accommodation Mortgage), the Americans with Disabilities Act, the Federal Fair Housing Act, as amended, Terrorism Laws (meaning Executive Order 13224 issued by the President of the United States of America, the Terrorism Sanctions Regulations (Title 31, Part 595 of the U.S. Code of Federal Regulations), the Terrorism List Governments Sanctions Regulations (Title 31, Part 596 of the U.S. Code of Federal Regulations), and the Foreign Terrorist Organizations Sanctions Regulations (Title 31, Part 597 of the U.S. Code of Federal Regulations), and all other present and future federal, state and local laws, ordinances, regulations, policies and any other requirements of any governmental agency or body (including, without limitation, the United States Department of the Treasury Office of Foreign Assets Control) addressing, relating to, or attempting to eliminate, terrorist acts and acts of war, each as hereafter supplemented, amended or modified from time to time, and the present and future rules, regulations and guidance documents promulgated under any of the foregoing, or under similar laws, ordinances, regulations, policies or requirements of other States or localities), and any laws, ordinances, rules, regulations or governmental orders the violation of which subjects or may subject the Property or the Projects or any portion thereof or interest therein to forfeiture or seizure or Borrower, the Affiliates or Lender to any civil or criminal fines or penalties (all collectively, the “ Requirements ”).

2.4 Change in Nature of Business, Organizational Documents and Other Agreements . As long as this Agreement remains in effect, the Note remains outstanding and unpaid or any other amount is owing to Lender under any of the Loan Documents, the Borrower, will not, without the prior written consent of Lender, (a) change the nature of its business or the business

of KM LLLP or the Developer Companies, as conducted or proposed to be conducted on and as of the date hereof, or engage in any type of business not reasonably related to such business; (b) amend, modify, revise, supplement or otherwise change the terms of Borrower’s, KM LLLP’s, and any of the Companies’ or the Developer Companies’ Organizational Documents in a manner that violates any other provisions of the Loan Documents or which would adversely affect the Loan, the Borrower’s Loan repayment obligations or the Lender’s rights under the Loan Documents; and (c) amend, modify, revise, supplement or otherwise change the terms of the Increment 1 PSA, the Increment 2 PSA or the WULI Interest PSA. “ Organizational Documents ” means, with respect to a corporation, its articles of incorporation and bylaws and all amendments thereto, with respect to a limited liability company, its articles of organization and operating agreements and all amendments thereto, and with respect to a partnership or joint venture (of any kind), its partnership or joint venture agreement, and all amendments thereto.

2.5 Accounting Records . Borrower shall maintain for itself and for KM LLLP and the Companies accurate and proper accounting records and books, and provide Lender with access to such books and accounting records at Lender’s request during normal business hours.

2.6 Taxes and Other Liabilities . Borrower shall pay and discharge when due all of Borrower’s indebtedness, obligations, assessments and taxes, except such as Borrower may in good faith contest or as to which a bona fide dispute may exist, provided that, if requested, Borrower shall provide evidence satisfactory to Lender regarding Borrower’s ability to pay the disputed items in the event they are determined to be justly due.

2.7 Insurance . Borrower shall obtain, maintain and keep in force insurance of the types and in such amounts as are satisfactory to the Lender, and in no event less than amounts customarily carried in lines of business similar to the Borrower’s and the Developer Companies, including but not limited to, property and casualty, flood, commercial general liability and worker’s compensation insurance, and provide the Lender with a schedule or schedules or certificates of insurance from time to time setting forth all insurance then in effect along with copies of all such policies.

If real or personal properties are given to secure either the obligations under the Loan Documents or any guaranty given in support of such obligations, such properties shall be covered by property and casualty insurance acceptable to the Lender, and such policies shall contain a mortgagee’s clause and/or lender’s loss payable endorsement and shall require thirty (30) days’ prior written notice to the Lender of any cancellation or material change in coverage.

2.8 Preservation of Rights . Borrower shall obtain, preserve and maintain in good standing, as applicable, all licenses and governmental approvals, rights, privileges and franchises necessary or desirable for the operation of the Projects and the conduct of Borrower’s business thereon and therefrom.

2.9 Maintenance and Repair . Borrower shall (i) maintain the Projects, in good condition and repair, and (ii) pay when due all claims for labor performed and materials furnished therefor in connection with any improvements or construction activities.

2.10 Payment of Expenses . Borrower must pay all costs and expenses incurred by Lender in connection with the making, disbursement and administration of the Loan, including any releases or partial releases of the House/Lot or either of the Finished Lots from the lien of the Accommodation Mortgage, as well as any revisions, extensions, renewals or “workouts” of the Loan, and in the exercise of any of Lender’s rights or remedies under this Agreement. Such costs and expenses include title insurance, recording and escrow charges, fees for appraisal, environmental services, legal fees and expenses of Lender’s counsel and any other reasonable fees and costs for services, regardless of whether such services are furnished by Lender’s employees or by independent contractors. Borrower acknowledges that the loan fee does not include amounts payable by Borrower under this section. All such sums incurred by Lender and not immediately reimbursed by Borrower are considered additional loans to Borrower secured by the Accommodation Mortgage and bearing interest at the default rate provided in the Note.

2.11 Affirmative Covenants . For as long as the Loan is outstanding, Borrower will or will cause each entity identified below, unless otherwise permitted by Lender in writing, to do the following (and with respect to any reports and other materials to be delivered hereunder, such reports and other materials shall in each case be in form and with substance acceptable to Lender):

a. Barnwell shall provide Lender, within one hundred twenty (120) days of the close of Barnwell’s fiscal year, with annual 10-K and annual financial statements, audited by a firm of independent certified public accountants (“ CPA ”), together with an unqualified CPA opinion to the same.

b. Barnwell shall provide Lender, within sixty (60) days after the end of each quarter of each fiscal year (except for the fiscal year end quarter), a quarterly 10-Q, signed by Barnwell.

c. Borrower shall provide copies of its annual federal income tax returns and any extensions thereof, together with all supporting schedules, within sixty (60) days of the applicable filing date.

d. Borrower shall provide a sales activity and escrow report for the immediately prior fiscal quarter of all projects and properties directly or indirectly, partially or wholly owned by Borrower, certified as true and correct by Borrower, within sixty (60) days of the close of Borrower’s fiscal quarter.

e. Noble and Nearco shall provide annual financial statements or a net worth statement, prepared or issued by such corporation’s accountant or bank and certified as true and correct by the chief financial officer of such corporation, within one hundred twenty (120) days of the close of such corporation’s fiscal year.

f. Each of the Companies and KM LLLP shall provide Lender, within one hundred eighty (180) days of the close of each such entities fiscal year, with annual financial statements, prepared by a firm of CPA’s and certified as true and correct by the managing member or general partner of such entity.

g. Each of the Companies and KM LLLP shall provide a sales activity and escrow report for the immediately prior fiscal quarter of all projects and properties directly or indirectly, partially or wholly owned by such entities, certified as true and correct by the managing member or general partner of such entity, within sixty (60) days of the close of such entities fiscal quarter.

h. Promptly from time to time on request, Borrower shall provide or shall cause Guarantors, Companies and KM LLLP to provide Lender with any other financial or other information concerning any of their business, conditions and affairs as Lender may reasonably request.

i. Borrower shall conduct and carry on its business in substantially the same field of activity as has been originally planned and as documented in the application for the Loan.

j. Borrower will cause any loans to KM LLLP from a partner of KM LLLP or made between Borrower and KM LLLP to be subordinated to the Loan.

k. Borrower will cause Barnwell to maintain Barnwell’s financial condition at all times satisfactory to Lender, and maintain a Debt Service Coverage Ratio for the Loan of not less than 1.20 to one.

“ Debt Service Coverage Ratio ” means Adjusted EBITDA of Barnwell for the twelve (12) months preceding the date of calculation divided by Total Debt Obligations for the same period of time on a rolling four (4) quarters basis. “ Adjusted EBITDA ” means earnings before interest, taxes and non-cash expenses, plus (a) cash contributions from minority shareholders, minus (b) 50% of non-financed oil and gas capital expenditures, (b) 100% of other unfinanced capital expenditures, (c) cash dividends and cash distributions, (d) retirement plan contributions, and (e) stock repurchases. “ Total Debt Obligations ” is the total amount of the required principal and interest payments to Lender (excluding interest payment to be made from the Interest Reserve) and other parties that are unrelated to Barnwell over the twelve-month period preceding the date of calculation.

Borrower shall provide evidence of the maintenance of this Debt Service Coverage Ratio in form and content satisfactory to Lender annually and also at other times upon request by Lender.

i. Borrower will cause Barnwell to maintain a Total Liabilities to Consolidated Tangible Net Worth ratio not to exceed the following ratios:

(A) While the first mortgage loan between Barnwell and Accommodation Obligor, as borrowers, and Lender, as lender (the “ Kaupulehu 2007 Loan ”), remains outstanding:

(1) 2.65 to one for the fiscal year-ending September 30, 2014;

(2) 2.30 to one for the fiscal year-ending September 30, 2015;

and

(3) 2.00 to one for the fiscal year-ending September 30, 2016.

(B) Upon full repayment of the Kaupulehu 2007 Loan,

(1) 2.00 to one for fiscal year-ending September 30, 2014; and

(2) 1.85 to one thereafter.

“ Consolidated Tangible Net Worth ” means that amount, determined on a consolidated basis in accordance with GAAP, that is equal to the Barnwell’s Total Assets less intangible assets, minus Total Liabilities, plus the principal amount of subordinated debt outstanding. “ Total Assets ” means all assets of the Barnwell, on a consolidated basis, that should, in accordance with GAAP, be classified as assets on the Barnwell’s financial statements. “ Total Liabilities ” means all liabilities of the Barnwell, on a consolidated basis, that should, in accordance with GAAP, be classified as liabilities on the Barnwell’s financial statements.

2.12 Negative Covenants . As long as the Loan is outstanding, Borrower shall not, without Lender’s prior written consent, do any of the following:

a. Enter into any merger or consolidation or assign, transfer, sell (including by way of agreement of sale), lease, or otherwise dispose of all or a substantial part of its assets, except in the ordinary course of its business as planned and as documented in the application for the Loan.

b. Change the ownership of KM LLLP.

c. Declare cash dividends or bonuses to officers, directors, partners, members or owners of Borrower, unless after tax profit was made in the preceding fiscal year and all of Borrower’s debts are paid to current status.

d. Create, incur or permit to exist any liabilities for Borrower or KM LLLP resulting from borrowing, loans or advances, secured or unsecured, except for the liabilities of Borrower to Lender under this Agreement.

2.13 Notices . Borrower must promptly notify Lender in writing of:

a. Any litigation affecting Borrower or any Affiliate, or the Projects or the Property, and any general partner or controlling shareholder or managing member of Borrower or any Affiliate, where the amount claimed is $50,000.00 or more; or

b. Any notice that the Projects or the Property or Borrower’s or any Affiliates business fails in any respect to comply with any applicable law, regulation or court order; or

c. Any material adverse change in the physical condition of the Projects or the Property or Borrower’s or Affiliates’ financial condition or operations or other circumstance that adversely affects Borrower’s intended development and sale of the Projects or the Property or Borrower’s ability to repay the Loan.

2.14 Indemnity . Borrower agrees to indemnify, defend with counsel acceptable to Lender, and hold Lender harmless from and against all liabilities, claims, actions, damages, costs and expenses (including all legal fees and expenses of Lender’s counsel) arising out of or resulting from the ownership, management and operation of KM LLLP and the Companies, whether such claims are based on theories of derivative liability, comparative negligence or otherwise. Notwithstanding anything to the contrary in any other Loan Document, the provisions of this Section 2.14 shall survive the termination of this Agreement, repayment of the Loan and foreclosure of the Accommodation Mortgage or similar proceedings.

2.15 Performance of Acts . Upon request by Lender, Borrower must perform all acts which may be necessary or advisable to perfect any lien or security interest provided for in the Loan Documents or to carry out the intent of the Loan Documents.

2.16 Maintenance of Depository Relationship . Borrower shall, at all times while any portion of the Note remains unpaid, maintain a depository relationship with Lender, unless the same is contrary to state or federal law or regulations.

3. Representations and Warranties .

Borrower promises that each representation and warranty set forth below is true, accurate and correct.

3.1 Formation; Authority . If Borrower is anything other than a natural person (but not a trustee), it has complied with all laws and regulations concerning its organization, existence and the transaction of its business, and is in good standing in each state in which it conducts its business. Borrower is authorized to execute, deliver and perform its obligations under each of the Loan Documents.

3.2 Compliance With Law . There are no claims, actions, proceedings or investigations pending or threatened against Borrower, KM LLLP or any of the Companies or the Developer Companies.

3.3 No Violation . The execution and delivery of this Agreement and the other Loan Documents and the performance by Borrower of its obligations hereunder and thereunder will not result in a default under any other material agreement to which Borrower is a party, or violate any Requirements.

3.4 Litigation . There is, to the knowledge of Borrower, no action, suit, proceeding or investigation pending at law or in equity or before any federal, state, territorial, municipal or

other governmental department, commission, board, bureau, agency or instrumentality or threatened against or affecting Borrower which might materially adversely affect Borrower’s ability to operate its business or to perform its obligations under the Loan Documents.

3.5 Financial Information . All financial information which has been and will be delivered to Lender, including all information relating to the financial condition of Borrower, any Affiliate or any of their partners, shareholders, members, or other principals, the Projects and the Property, does and will fairly and accurately represent the financial condition being reported on. As of the date hereof, there has been no material adverse change in any financial condition reported at any time to Lender.

3.6 Borrower Not a “Foreign Person ”. Borrower is not a “foreign person” within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended from time to time.

3.7 Disclosure to Affiliates and Third Parties . Before each, if applicable, Affiliate or third party executing the Accommodation Mortgage, the pledge agreements or other instrument securing or guaranteeing the Loan, became obligated in connection with the Loan, Borrower made full disclosure to that person regarding Borrower’s financial condition and business operations and all other circumstances bearing upon Borrower’s ability to pay and perform its obligations under the Loan Documents.

3.8 Other Agreements . To Borrower’s knowledge, there is no default nor any event with the passage of time or notice or both which would result in a default under the Increment 1 PSA, the Increment 2 PSA, the WULI Interest PSA or any Organizational Document of Borrower or any Affiliate.

3.9 Commercial Loan . Borrower acknowledges and agrees that the Loan is for a commercial purpose and is not a consumer transaction under the Truth-in-Lending Act, 15 U.S.C. § 1601, et seq., and Regulation Z promulgated thereunder.

4. Default and Remedies .

4.1 Events of Default . Borrower will be in default under this Agreement upon the occurrence of any one or more of the following events (“ Event of Default ”):

a. Borrower fails to make any payment due under the Note or Borrower fails to make any payment demanded by Lender under any other Loan Document; or

b. Borrower fails to timely observe, perform and comply with any covenant contained in this Agreement other than those referred to in clause (a), and does not cure that failure within thirty (30) calendar days after written notice from Lender; or

c. A default is declared or occurs under any of the other Loan Documents (and, if a cure period is provided with respect to said default, said default is not fully cured within the period provided in said Loan Document for cure of said default); or

d. There shall be a sale, transfer, hypothecation, encumbrance, assignment or conveyance of the Property, or any portion thereof or interest therein, by Accommodation Obligor without the prior written consent of Lender, except as permitted under the Accommodation Mortgage and subject to payment of the release price and other conditions set forth in the Accommodation Mortgage; or

e. Borrower or any guarantor, or its managing general partner, if Borrower is a partnership, or its majority shareholder if Borrower is a corporation, or its manager or managing member if Borrower is a limited liability company, becomes insolvent or the subject of any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships; or

f. Borrower or any guarantor dissolves, terminates, or liquidates, or any of these events happens to Borrower’s managing general partner if it is a partnership or to its majority shareholder if it is a corporation, or its manager or managing member if Borrower is a limited liability company, or if Borrower is a trust, the trust is revoked or materially modified or there is a change or substitution of the trustee; or

g. Borrower or any guarantor dies or becomes permanently disabled, or any of these events happens to Borrower’s managing general partner, if it is a partnership, or managing member, if it is a limited liability company, its chief executive officer, if it is a corporation, or its trustee, if it is a trust; or

h. Any representation or warranty made or given by Borrower in this Agreement or any other Loan Document proves to be false or misleading in any material respect; or

i. Any guarantor revokes its guaranty or any guaranty becomes ineffective for any reason; or

j. Lender fails to have an enforceable lien on or security interest in the priority required hereunder in any property given as security for the Loan (except for liens approved by Lender in writing); or

k. A judgment in an amount greater than $50,000.00 in excess of any insurance coverage is entered against Borrower or any obligor under any of the Loan Documents, or any government authority takes action that materially adversely affects or Borrower’s or any co-maker’s ability to repay the Loan; or

l. Borrower, any co-maker or any person affiliated with Borrower or any co-maker fails to meet the conditions of, or fails to perform any obligation under, any other agreement Borrower or any co-maker has with Lender or any affiliate of Lender. For the purposes of this section, “affiliated with” means in control of, controlled by or under common control with; or

m. Borrower, any co-maker or any person affiliated with Borrower or any co-maker defaults in connection with any credit such person has with any lender, if the default consists of the failure to make a payment when due or gives the other lender the right to

accelerate the obligation. For the purposes of this section, “affiliated with” means in control of, controlled by or under common control with; or

n. There is a material adverse change in Borrower’s or any co-maker’s or any guarantor’s financial condition, or an event occurs or condition changes that materially impairs Borrower’s or any co-maker’s ability to repay the Loan.

o. A default is declared by Kamehameha Schools, as ground lessor, of Increment 2 for the failure of the ground lessee to obtain such ground lessor’s consent to the transfer of any interest in the ground lessee.

4.2 Remedies . If an Event of Default occurs under this Agreement, Lender may exercise any right or remedy which it has under any of the Loan Documents, or which is otherwise available at law or in equity or by statute, and all of Lender’s rights and remedies shall be cumulative. All of Borrower’s obligations under the Loan Documents shall become immediately due and payable without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind or character, all at Lender’s option, exercisable in its sole discretion.

Notwithstanding any provision in any of the Loan Documents to the contrary and in addition to the foregoing, in the event Borrower or any Affiliate shall violate any covenant contained in Section 2.11(a) through (g) of this Agreement, then Lender, at its sole option and upon written notice to Borrower, may increase the interest rate under the Note by one percent (1.0%) from the interest rate then in effect, and adjust the monthly payments due under the Note accordingly. If such violation is cured, then the interest rate shall be reduced to the interest rate then in effect under the provisions of the Note and the monthly payments due under the Note shall be readjusted accordingly.

Notwithstanding any provision in any of the Loan Documents to the contrary and in addition to the foregoing, in the event Borrower or any Guarantor shall violate any covenant contained in Section 2.11(h) through 2.11(1) of this Agreement, then the interest rate under the Note shall be increased, at Lender’s sole option and upon written notice to Borrower or any Guarantor, by one percent (1.0%) from the interest rate then in effect and the monthly payments due under the Note shall be adjusted accordingly. If such violation is not cured within 45 days after the increase in the interest rate, then the interest rate will be increased effective at the end of such 45 day period, at Lender’s sole option and upon written notice to Borrower or such Guarantor, by an additional one percent (1.0%) and the monthly payments due under the Note shall be adjusted accordingly. If such violation is cured, then the interest rate shall be reduced to the interest rate then in effect under the provisions of the Note and the monthly payments due under the Note shall be readjusted accordingly.

4.3 Lender’s Right of Setoff . Unless specifically addressed in the Loan Documents, at any time Lender may set off obligations owed by Lender to Borrower (such as balances in checking and savings accounts, including the Interest Reserve Account and the Pledged Account) against the amounts due under the Loan, whether or not an Event of Default shall have occurred or shall have been declared, and without first resorting to other collateral securing payment of the Loan.

4.4 Provisional Remedies, Self-Help and Foreclosure . No provision of this Article 4 limits the right of any party to this Agreement to exercise self-help remedies such as setoff, foreclosure against or sale of any real or personal property collateral or security, or obtaining provisional or ancillary remedies from a court of competent jurisdiction before, after, or during the pendency of any arbitration or other proceeding. The exercise of a remedy does not waive the right of either party to resort to arbitration or reference. At Lender’s option, foreclosure under a deed of trust or mortgage may be accomplished either by exercise of power of sale under the deed of trust or mortgage or by judicial foreclosure.

5. Miscellaneous Provisions .

5.1 No Waiver; Consents . No alleged waiver by Lender is effective unless in writing, and no waiver may be construed as a continuing waiver. No waiver is implied from any delay or failure by Lender to take action on account of any default under the Loan Documents. Consent by Lender to any act or omission by Borrower may not be construed as a consent to any other or subsequent act or omission.

5.2 No Third Parties Benefited . This Agreement is made and entered into for the sole protection and benefit of Lender and Borrower and their successors and assigns. No trust fund is created by this Agreement and no other persons or entities have any right of action under this Agreement or any right to the Loan funds.

5.3 Notices . All notices, demands, requests, correspondence or documents which are required or permitted to be given or served hereunder shall be in writing addressed to the appropriate party and personally delivered or sent by first class United States mail, postage prepaid, addressed to Borrower or Lender at the following addresses:

To Borrower:	KKM Makai, LLLP
	KD Kona 2013 LLLP
	1100 Alakea Street, Suite 2900
	Honolulu, Hawaii 96813

To Lender:	American Savings Bank, F.S.B.
	Commercial Real Estate Loans
	P.O. Box 2300
	Honolulu, Hawaii 96804-2300

Any party may designate a different address by giving notice thereof in accordance with this paragraph. Delivery of any or demand shall be deemed completed on the date of delivery or two (2) business days after the date of mailing, as applicable.

5.4 Attorneys’ Fees . If any lawsuit, reference or arbitration is commenced which arises out of, or which relates to this Agreement, the Loan Documents or the Loan, including any alleged tort action, regardless of which party commences the action, the prevailing party is entitled to recover from each other party such sums as the court, referee or arbitrator may adjudge to be reasonable attorneys’ fees in the action or proceeding, in addition to costs and expenses otherwise allowed by law. Any such attorneys’ fees incurred by either party in enforcing a judgment in its favor under this Agreement are recoverable separately from and in

addition to any other amount included in such judgment, and such attorneys’ fees obligations are intended to be severable from the other provisions of this Agreement and to survive and not be merged into any such judgment. In all other situations, including any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships, Borrower agrees to pay all of Lender’s costs and expenses, including attorneys’ fees, which may be incurred in any effort to collect or enforce the Loan or any part of it or any term of any Loan Document. Attorneys’ fees include the allocated costs for services of in-house counsel.

5.5 Loan Not Assumable . It is expressly understood by Borrower that the Loan is personal to Borrower and may not be assumed by any other person or entity.

5.6 Assignment of Loan . Lender may assign its rights and delegate its obligations under this Agreement or any of the other Loan Documents and further may assign, or sell participations in, all or any part of the Loan, the Loan Documents, or any other interest herein or in the Note to any person or entity, all without notice to or the consent of Borrower or any co-makers or guarantors. To the extent of any such assignment, Lender shall be relieved of its obligations with respect to the Loan and the assignee shall have the same rights, benefits and obligations as it would if it were Lender hereunder and a holder of the Note. Without the consent of or notice to Borrower, Lender may furnish any information (including, without limitation, financial information) concerning the Loan, the collateral for the Loan, or Borrower, any Affiliates, and any of their assets to third parties from time to time for legitimate business purposes.

5.7 Successors and Assigns . The terms of this Agreement shall bind and benefit the heirs, personal representatives, successors, successors in trust and assigns of the parties; provided, however, that Borrower may not assign this Agreement without the prior written consent of Lender, which consent may be withheld by Lender in its sole discretion for any reason or no reason.

5.8 Interpretation . The language of this Agreement must be construed as a whole according to its fair meaning, and not strictly for or against any party. The word “include(s)” means “include(s), without limitation,” and the word “including” means “including, but not limited to.”

5.9 Miscellaneous . This Agreement may not be modified or amended except by a written agreement signed by the parties. The invalidity or unenforceability of any one or more provisions of this Agreement in no way affects any other provision. If Borrower consists of more than one person or entity, each is jointly and severally liable to Lender for the faithful performance of this Agreement and the other Loan Documents. Time is of the essence in the performance of this Agreement and the other Loan Documents. This Agreement is governed by and construed in accordance with the laws of and decisions of the State of Hawaii and the United States of America and the rules and regulations promulgated thereunder, including without limitation the federal laws, rules and regulations for federal savings and loan associations and federal savings banks. This Agreement may be executed in one or more counterparts, each of which is, for all purposes deemed an original and all such counterparts taken together, constitute one and the same instrument.

5.10 Integration and Relation to Loan Commitment . The Loan Documents fully state all of the terms and conditions of the parties’ agreement regarding the matters mentioned in or incidental to this Agreement. The Loan Documents supersede all oral negotiations and prior writings concerning the subject matter of the Loan Documents.

5.11 Actions . Lender has the right, but not the obligation, to commence, appear in, and defend any action or proceeding which might affect its security or its rights, duties or liabilities relating to the Loan, the Property, or any of the Loan Documents. Borrower must pay promptly on demand all of Lender’s reasonable out-of-pocket costs, expenses, and legal fees and expenses of Lender’s counsel incurred in those actions or proceedings.

5.12 Relationships with Other Lender Customers . From time to time, Lender may have business relationships with Borrower’s customers, suppliers, contractors, tenants, partners, shareholders, officers or directors, with businesses offering products or services similar to those of Borrower, or with persons seeking to invest in, borrow from or lend to Borrower. Borrower agrees that in no event is Lender obligated to disclose to Borrower any information concerning any other Lender customer. Borrower further agrees that Lender may extend credit to those parties and may take any action it may deem necessary to collect any such credit, regardless of any effect the extension or collection of such credit may have on Borrower’s financial condition or operations.

5.13 Loan Commission . Lender is not obligated to pay any brokerage commission or fee in connection with or arising out of the Loan. Borrower must pay any and all brokerage commissions or fees arising out of or in connection with the Loan and Borrower agrees to indemnify, defend and hold harmless Lender against any claim for any such fees or commissions.

5.14 Standard of Conduct . Nothing contained in this Agreement, the Note, the Accommodation Mortgage or any other Loan Document shall limit the right of Lender to exercise its business judgment or to act, in the context of the granting or withholding of any consent required under the terms of this Agreement or any other Loan Document, or otherwise, in a subjective manner, whether or not “objectively” reasonable under the circumstances, as long as Lender’s exercise of its business judgment or action, as the case may be, is made or undertaken in good faith. Borrower and Lender intend by the foregoing to set forth and affirm their entire understanding with respect to the standard pursuant to which Lender’s duties and obligations are to be judged and the parameters within which Lender’s discretion may be exercised hereunder and under the other Loan Documents. As used herein, the term “good faith” means honesty in fact in the conduct and transaction concerned.

5.15 Counterparts . This document may be executed in counterparts. Each counterpart shall be executed by one or more of the parties to this document and the several counterparts shall constitute one document to the same effect as though the signature of all the parties were upon the same document.

5.16 Jury Waiver . Lender and Borrower hereby waive trial by jury in any action, proceeding, claim, or counterclaim, whether in contract or tort, at law or in equity, arising out of or in any way related to this Agreement or any of the Loan Documents.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, Borrower and Lender have executed these presents the day and year first above written.

	KKM MAKAI, LLLP,
	a Hawaii limited liability limited partnership

	By:	NOBLE ENTERPRISES, INC.,
		a Nevada corporation
		Its General Partner

	By:	/s/ Terry Johnston
		Name: Terry Johnston
		Its President

	By:
		Name:
		Its

	KD KONA 2013 LLLP,
	a Hawaii limited liability limited partnership

	By:	BARNWELL HAWAIIAN PROPERTIES,
		INC., a Delaware corporation Its General Partner

	By:	/s/ Alexander C. Kinzler
		Name: Alexander C. Kinzler
		Its President

	By:
		Name:
		Its



	AMERICAN SAVINGS BANK, F.S.B.

	By:	/s/ Alvin Takahashi
		Name: Alvin Takahashi
		Its Vice President


	By:	/s/ Ann M.K. Lee
		ANN M.K. LEE
		Its First Vice President

STATE OF HAWAII	)
	)	SS.
CITY AND COUNTY OF HONOLULU	)

On this the 27th day of November, 2013, before me personally appeared Terry Johnston o personally known to me OR x proved to me on the basis of satisfactory evidence who, being by me duly sworn or affirmed, did say that such persons executed the foregoing instrument as the free act and deed of such persons, and if applicable in the capacities shown, having been duly authorized to execute such instrument in such capacities.

	/s/ Edna Sagudang

	Edna Sagudang
	Notary Public, State of Hawaii
	My commission expires: 06/21/14

STATE OF HAWAII	)
	)	SS.
CITY AND COUNTY OF HONOLULU	)

On this the 27th day of November, 2013, before me personally appeared Alexander C. Kinzler o personally known to me OR x proved to me on the basis of satisfactory evidence who, being by me duly sworn or affirmed, did say that such persons executed the foregoing instrument as the free act and deed of such persons, and if applicable in the capacities shown, having been duly authorized to execute such instrument in such capacities.

	/s/ Edna Sagudang

	Edna Sagudang
	Notary Public, State of Hawaii
	My commission expires: 06/21/14

STATE OF HAWAII	)
	)	SS.
CITY AND COUNTY OF HONOLULU	)

On this the 27th day of November, 2013, before me personally appeared ALVIN TAKAHASHI and ANN M. K. LEE x personally known to me OR x proved to me on the basis of satisfactory evidence who, being by me duly sworn or affirmed, did say that such persons executed the foregoing instrument as the free act and deed of such persons, and if applicable in the capacities shown, having been duly authorized to execute such instrument in such capacities.

	/s/ Edna Sagudang

	Edna Sagudang
	Notary Public, State of Hawaii
	My commission expires: 06/21/14

EXHIBIT “A”

-PARCEL FIRST:- (TMK No. (3) 7-2-031-022)

All of that certain parcel of land situate at Kaupulehu, District of North Kona, Island and County of Hawaii, State of Hawaii, being LOT 30 of the “KAUPULEHU LOT 4-A, INCREMENT 1, PHASE 1 SUBDIVISION”, as shown on File Plan Number 2393, filed in the Bureau of Conveyances of the State of Hawaii, and containing an area of 1.271 acres, more or less.

Together with a non-exclusive easement for access purposes over Roadway Easements, as set forth and provided in Kaupulehu Lot 4-A Declaration of Access Easement, dated December 23, 2005, recorded in said Bureau as Document No. 2005-262404; subject to the terms and provisions contained therein.

Said Declaration was amended and/or supplemented by the following instruments:

1. Document No. 2007-170881.

2. Document No. 2009-131370.

Together with non-exclusive easements for access and utility purposes as set forth in the following: (a) Grant of Non-Exclusive Access and Utility Easements, dated May 25, 2009, recorded in said Bureau as Document No. 2009-149017; (b) Grant of Non-Exclusive Access and Utility Easements (Hualalai Resort/Easement A), dated May 25, 2009, recorded in said Bureau as Document No. 2009-149023; and (c) Grant of Non-Exclusive Roadway and Utility Easements (Kukio Frontage Road), dated May 25, 2009, recorded in said Bureau as Document No. 2009-149029; all subject to the terms and conditions contained therein.

BEING THE PREMISES ACQUIRED BY KAUPULEHU LOT 4-A, INCREMENT I, PHASE I, WARRANTY DEED WITH COVENANTS from WB KD ACQUISITION, LLC, a Delaware limited liability company, as Grantor, to KAUPULEHU 2007 LLLP, a Hawaii limited liability limited partnership, as Grantee, effective January 23, 2008, recorded in said Bureau as Document No. 2008-014897.

-PARCEL SECOND:- (TMK No. (3) 7-2-031-026)

All of that certain parcel of land situate at Kaupulehu, District of North Kona, Island and County of Hawaii, State of Hawaii, being LOT 34 of the “KAUPULEHU LOT 4-A, INCREMENT 1, PHASE 1 SUBDIVISION”, as shown on File Plan Number 2393, filed in the Bureau of Conveyances of the State of Hawaii, and containing an area of 1.074 acres, more or less.

Said Declaration was amended and/or supplemented by the following instruments:

1. Document No. 2007-170881.

2. Document No. 2009-131370.

BEING THE PREMISES ACQUIRED BY KAUPULEHU LOT 4-A, INCREMENT I, PHASE I WARRANTY DEED WITH COVENANTS from WB KD ACQUISITION, LLC, a Delaware limited liability company, as Grantor, to KAUPULEHU 2007 LLLP, a Hawaii limited liability limited partnership, as Grantee, effective September 26, 2007, recorded in said Bureau as Document No. 2007-172486.

-PARCEL THIRD:- (TMK No. (3) 7-2-031-028)

All of that certain parcel of land situate at Kaupulehu, District of North Kona, Island and County of Hawaii, State of Hawaii, being LOT 36 of the “KAUPULEHU LOT 4-A, INCREMENT 1, PHASE 1 SUBDIVISION”, as shown on File Plan Number 2393, filed in the Bureau of Conveyances of the State of Hawaii, and containing an area of 1.109 acres, more or less.

Said Declaration was amended and/or supplemented by the following instruments:

1. Document No. 2007-170881.

2. Document No. 2009-131370.

liability limited partnership, as Grantee, effective April 30, 2007, recorded in said Bureau as Document No. 2007-077140.

Exhibit No. 31.1

Certifications

I, Russell M. Gifford, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Barnwell Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 14, 2014	/s/ Russell M. Gifford
	Russell M. Gifford
	Chief Financial Officer

Exhibit No. 31.2

Certifications

I, Morton H. Kinzler, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Barnwell Industries, Inc.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 14, 2014	/s/ Morton H. Kinzler
	Morton H. Kinzler
	Chief Executive Officer

Exhibit No. 32

Barnwell Industries, Inc.

Certification Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Barnwell Industries, Inc. (the “Company”) on Form 10-Q for the quarter ended December 31, 2013 as filed with the Securities and Exchange Commission (the “Report”), each of the undersigned officers of the Company does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: February 14, 2014	/s/ Morton H. Kinzler
	Name: Morton H. Kinzler
	Title: Chief Executive Officer


Dated: February 14, 2014	/s/ Russell M. Gifford
	Name: Russell M. Gifford
	Title: Chief Financial Officer

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document.

A signed original of the written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.