Exhibit 10.5


 


RECOURSE GUARANTY


This RECOURSE  GUARANTY,
dated as of July 14, 2006 (this “Guaranty”), made by MAUI LAND & PINEAPPLE COMPANY, INC., a
Hawaii Corporation, having an address at 120 Kane Street, Kapalua, Maui, Hawaii
96732 (“ML&P”); THE RITZ-CARLTON
DEVELOPMENT COMPANY, INC., a Delaware corporation, having an office
at 6649 Westwood Boulevard, Suite 500, Orlando, Florida 32821 (“Ritz-Carlton”);
and EXCLUSIVE RESORTS DEVELOPMENT COMPANY,
LLC, a Delaware limited liability company, having an address at 1530
16th Street, Suite 500, Denver, Colorado 80202 (“Exclusive
Resorts”; ML&P, Ritz Carlton and Exclusive Resorts being referred to
herein individually as a “Principal” and collectively as “Principals”),
in favor of LEHMAN BROTHERS HOLDINGS INC.,
a Delaware corporation, having an office at 399 Park Avenue, New York, New York
10022 (“Lender”).


W I T N E S S E T H:


WHEREAS,
Lender is concurrently herewith making a loan to KAPALUA BAY, LLC, a Delaware
limited liability company (“Borrower”), in the maximum principal amount
of THREE HUNDRED SEVENTY MILLION and 00/100 DOLLARS ($370,000,000.00) (the “Loan”)
secured by a mortgage on certain real property and improvements more
particularly described on Exhibits A-1 and A-2 attached hereto (the “Real
Property”);


WHEREAS,
the Loan (i) has been made in accordance with the terms of a construction loan
agreement, dated as of the date hereof, between Borrower and Lender (the “Loan
Agreement”; capitalized terms used herein and not otherwise defined shall
have the meanings ascribed thereto in the Loan Agreement), (ii) is evidenced by
the Note and (iii) is secured by the Mortgage (the Loan Agreement, the Note,
the Mortgage and the other documents and instruments executed by Borrower or
Principal or delivered in connection with the Loan being collectively referred
to herein as the “Loan Documents”);


WHEREAS,
except as hereinafter set forth, Lender’s recourse under the Loan Documents is
limited to Borrower’s interest in and to the Project and the other collateral
given as security under the Mortgage and the other Loan Documents;


WHEREAS,
Borrower is personally liable for the Recourse Obligations;


WHEREAS,
Principal shall derive substantial economic benefit from the Loan; and


WHEREAS,
as a material condition to making the Loan, Lender requires that Principal, and
Principal has agreed, to guaranty the Recourse Obligations.


NOW,
THEREFORE, in consideration of the foregoing and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Principal agrees as follows:


1.             Each Principal, severally, hereby absolutely and
unconditionally guaranties the prompt satisfaction and discharge of any and all
of the Recourse Obligations, without defense, offset, counterclaim or right of
subrogation, each of which is hereby waived.











 


This Guaranty is and shall be construed as a continuing, absolute and
unconditional guaranty of payment, and not as a guaranty of collection.  It is expressly understood and agreed that
this is a continuing guaranty and that the obligations of Principal hereunder
are and shall be absolute under any and all circumstances, without regard to
the validity, regularity or enforceability of the Note (excluding the Recourse
Obligations) or the other Loan Documents, a true copy of each of which
documents Principal hereby acknowledges having received and reviewed.


 


Notwithstanding anything to the contrary contained
herein, in no event shall (i) ML&P be liable for an amount in excess of
fifty one percent (51%) of the sums due to Lender hereunder, (ii) Ritz-Carlton
be liable for an amount in excess of thirty-four percent (34%) of the sums due
to Lender hereunder or (iii) Exclusive Resorts be liable for an amount in
excess of fifteen percent (15%) of the sums due to Lender hereunder.


2.             Principal hereby waives: (a) notice
of acceptance of this Guaranty by Lender and of presentment, demand, protest,
notice of protest and of dishonor, notice of default and, except for the
notices set forth herein, all other notices of every kind or nature now or hereafter
provided by agreement or available at law; (b) the pleading of any statute of
limitations as a defense to the obligations hereunder; and (c) any right to
require or compel Lender, prior to exercising its rights hereunder to first
proceed against Borrower or any security for the Loan, or to pursue any other
remedy available to Lender.  Lender’s
failure to exercise, or delay in exercising, any right or power hereunder shall
not operate as a waiver thereof, nor shall any single or partial exercise by Lender
of any right, remedy or power hereunder preclude any other or future exercise
of any other right, remedy or power. 
Principal acknowledges that Lender may seek recovery of the Recourse
Obligations from Principal with the same force and effect as if Principal were
primary obligor under the Note and the other Loan Documents.


3.             Principal further agrees that the validity of this
Guaranty and the obligations of Principal hereunder shall in no way be
terminated, affected or impaired by reason of: (a) the assertion by Lender of
any rights or remedies which it may have under or with respect to the Note or
the other Loan Documents against any person obligated thereunder or against the
owner of the Project; (b) any failure to file or record any of the Loan Documents
or to take or perfect any security intended to be provided thereby; (c) the
release or exchange of the Real Property or any other collateral for the Loan;
provided that this Guaranty shall not, without the prior consent of Principals,
cover or pertain to any Recourse Obligations that relate to such released or
exchanged portion of the collateral arising from and after the release of such
released or exchanged collateral; (d) the commencement of a case under the
Bankruptcy Code by or against any Person obligated under the Note or the other
Loan Documents; or (e) any payment made on the Debt, whether made by Borrower
or Principal or any other Person, which is required to be refunded pursuant to
the Bankruptcy Code; it being understood that no payment so refunded shall be
considered as a payment in reduction of the Debt, nor shall it have the effect
of reducing the liability of Principal hereunder.  It is further understood that if Borrower
shall have taken advantage of, or be subject to the protection of, any
provision of the Bankruptcy Code, the effect of which is to prevent or delay
Lender from taking any remedial action against Borrower, including the exercise
of any option Lender has to declare the Debt due and payable on the happening
of any default or event by which, under the terms of the Loan Documents, the
Debt shall become due and payable, Lender may, as against Principal,
nevertheless, declare the











 


Recourse Obligations due
and payable and enforce any and all of its rights and remedies provided for
herein.


4.             Principal further agrees: (a) that
this Guaranty shall remain and continue in full force and effect,
notwithstanding any modification, extension or renewal of the Note or any of
the other Loan Documents; (b) that Lender shall not be under a duty to protect,
secure or insure any security or lien provided by the Loan Documents or other
collateral for the Loan; and (c) that other indulgence or forbearance may be
granted under any or all of the Loan Documents, without notice to or further
consent of Principal.  This Guaranty
shall terminate upon the complete payment of the Debt and fulfillment of any
outstanding obligations of Principals under this Guaranty.


5.             Except as may be permitted under
the Loan Agreement, Principal will not convey, transfer or assign, directly or
indirectly, any portion of the Mortgaged Property of any nature, whether real,
personal or mixed, tangible or intangible, or any interest therein, for less
than full and fair consideration.  Nothing
herein shall be construed to prohibit any dividend or distribution of earnings
in the ordinary course of Principal’s business.


6.             Any indebtedness of Borrower to
Principal now or hereafter existing (including, without limitation, any rights
of subrogation Principal may have as a result of any payment by Principal under
this Guaranty), together with any interest thereon, shall be, and such
indebtedness is hereby, deferred, postponed and subordinated to the prior
payment in full of the Debt.  Until payment
in full of the Debt (and including interest accruing on the Note after the
commencement of a proceeding by or against Borrower under the Bankruptcy Code
which interest the parties agree shall remain a claim that is prior and
superior to any claim of Principal notwithstanding any contrary practice,
custom or ruling in cases under the Bankruptcy Code generally), Principal
agrees not to accept any payment or satisfaction of any kind of indebtedness of
Borrower to Principal, (except under the Marketing Agreements, that certain Technical Services Agreement
dated September 1, 2004, between Borrower and Ritz-Carlton, that certain
Project Development Management Agreement dated October 1, 2004, between
Borrower and Ritz-Carlton and that certain Entitlement Services Letter
Agreement between Borrower and Kapalua Land Company dated August 16, 2005).  Further, if Principal shall now or at any
time in the future comprise more than one person, firm or corporation,
Principal agrees that until such payment in full of the Debt: (a) no one of
them shall accept payment from the others by way of contribution on account of
any payment made hereunder by such party to Lender; (b) no one of them will
take any action to exercise or enforce any rights to such contribution; and (c)
if any one of them should receive any payment, satisfaction or security for any
indebtedness of Borrower to any Principal or for any contribution by the others
of them for payment made hereunder by the recipient to Lender, such payment,
satisfaction or security shall be delivered to Lender in the form received,
endorsed or assigned as may be appropriate for application on account of, or as
security for, the Debt and until so delivered shall be held in trust for Lender
as security for the Debt.


7.               Principal hereby indemnifies
Lender from and against any and all claims, losses, damages and liabilities
growing out of or resulting from this Guaranty (including, without limitation,
enforcement of this Guaranty), except claims, losses, damages or liabilities
resulting from Lender’s gross negligence and willful misconduct.  Principal will upon written











 


demand pay to Lender the amount of any and all actual expenses,
including the reasonable fees and expenses of its counsel and of any experts
and agents, which Lender may incur in connection with (1) any amendment to this
Guaranty, (2) the administration of this Guaranty, (3) the exercise or
enforcement of any of the rights of Lender under this Guaranty, or (4) the
failure by Principal to perform or observe any of the provisions of this
Guaranty.


 


8.               To
induce Lender to execute the Loan Documents and to make the Loan and perform
its obligations thereunder, each Principal, in respect of itself, severally,
hereby represents and warrants to Lender in respect of itself as follows:


(i)            Principal is and always has been a
duly organized and validly existing limited liability company or corporation,
as the case may be, duly organized or incorporated under the laws of the state
of its formation or incorporation, as the case may be.


(ii)           Principal has full power and authority
to execute, deliver and perform this Guaranty, and such execution, delivery and
performance have been duly authorized by all requisite action on the part of
Principal.


(iii)          No consent, approval or authorization
of or declaration, registration or filing with any Governmental Authority or
nongovernmental Person, including any creditor, partner, or member of
Principal, is required in connection with the execution, delivery and
performance of this Guaranty that has not been obtained or waived.


(iv)          The execution, delivery and
performance of this Guaranty will not constitute a breach or default under any
other material agreement to which Principal is a party or may be bound.


(v)           There is no default under this
Guaranty, or any of the other Loan Documents, nor any condition which, after
notice or the passage of time or both, would constitute a default or an Event
of Default under said documents.


(vi)          Principal is solvent, and no
bankruptcy, reorganization, insolvency or similar proceeding under any state or
federal law with respect to Principal has been initiated.


(vii)         Neither Principal nor any Person
holding a direct or indirect interest in Borrower or Principal, as the case may
be, is (or will be) a person with whom Lender is restricted from doing business
under OFAC (including Persons named on OFAC’s Specially Designated and Blocked
Persons list) or under any statute, executive order (including the September
24, 2001, Executive Order Blocking Property and Prohibiting Transactions With
Persons Who Commit, Threaten to Commit, or Support Terrorism), or other
governmental action and is not and shall not knowingly engage in any dealings
or transactions or otherwise be associated with such Persons.  In addition, Principal hereby agrees to
provide Lender with any additional information that Lender deems necessary from
time to time in order to ensure compliance with all Laws concerning money
laundering and similar activities.











 


(viii)        Principal has disclosed to Lender all
material facts and has not failed to disclose any material fact that could
cause any representation or warranty made herein to be materially misleading.


(ix)           Each of the representations and
warranties made by Principal herein or in any of the other Loan Documents is
true, complete and correct in all material respects as of the date made.


9.               [Intentionally Deleted].


 


10.             The provisions of Article 23 of the
Loan Agreement are hereby incorporated by reference, except that all references
to “Borrower” therein shall be deemed to be “Principal” and Principal’s address
set forth in the first paragraph of this Guaranty shall be its address for
service of process.  All notices under
this Guaranty shall be provided to all Principals and Lender.


11.             This Guaranty constitutes the
entire agreement between Principal and Lender with respect to the matters
referred to herein, and no modification or waiver of any of the terms hereof
shall be effective unless in writing, signed by all parties hereto.


12.             This Guaranty shall inure to the
benefit of Lender and any subsequent holder of the Loan Documents and shall
bind Principal and its respective heirs, successors and assigns.


13.             This Guaranty shall be governed by
the internal laws of the State of New York.


14.             SUBMISSION TO JURISDICTION.  WITH RESPECT TO ANY SUIT, ACTION OR
PROCEEDINGS RELATING TO THIS GUARANTY (EACH, A “PROCEEDING”), GUARANTORS
IRREVOCABLY (A) SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE COURT
SITTING IN THE ISLAND AND COUNTY OF MAUI, HAWAII, FEDERAL COURT SITTING IN THE
STATE OF HAWAII, OR STATE OR FEDERAL COURT SITTING IN NEW YORK COUNTY, NEW
YORK, AND (B) WAIVE ANY OBJECTION WHICH THEY MAY HAVE AT ANY TIME TO THE LAYING
OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY
PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVE THE
RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT HAVE
JURISDICTION OVER SUCH PARTY.  NOTHING IN
THIS GUARANTY SHALL PRECLUDE LENDER FROM BRINGING A PROCEEDING IN ANY OTHER
JURISDICTION NOR WILL THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE
JURISDICTIONS PRECLUDE THE BRINGING OF A PROCEEDING IN ANY OTHER
JURISDICTION.  GUARANTORS FURTHER AGREE
AND CONSENT THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR
UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY PROCEEDING IN ANY STATE
COURT SITTING IN THE ISLAND AND COUNTY OF MAUI, HAWAII, FEDERAL COURT SITTING
IN THE STATE OF HAWAII, OR STATE OR FEDERAL COURT











 


SITTING IN NEW YORK COUNTY, NEW YORK, 
MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
DIRECTED TO GUARANTORS AT THE ADDRESSES INDICATED ABOVE, AND SERVICE SO MADE
SHALL BE COMPLETE UPON RECEIPT; EXCEPT THAT IF GUARANTORS SHALL REFUSE TO
ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME
SHALL HAVE BEEN SO MAILED.


 


15.           [Intentionally Deleted].


 


16.           Process in any suit, action or
proceeding of the nature referred to in Section 14 hereof may be served:
(a) by registered or certified mail, postage prepaid, to Principal at the
address set forth above or to such other address of which Principal shall have
given Lender written notice; or (b) if Principal shall not have made an
appearance within twenty one (21) days after service in accordance with clause
(a) of this Section, by hand delivery to the agent identified in Section 15
hereof, or such successor agent as shall have been identified in accordance
with Section 15 hereof.  Nothing
in this Section shall affect the Lender’s right to serve process in any manner
permitted by law, or limit Lender’s right to bring proceedings against
Principal in the courts of any other jurisdiction.


17.           If Principal shall advance or become
obligated to pay any sums in respect of the Recourse Obligations as provided
herein, or if for any reason whatsoever Borrower or any subsequent owner of the
Real Property is now or shall hereafter become indebted to Principal, Principal
agrees that the amount of such sums and of such indebtedness and all interest
thereon shall at all times be subordinate as to lien, time of payment and in
all other respects to all sums, including principal and interest and other
amounts, at any time owing to Lender under the Loan Documents.  For so long as this Agreement shall remain in
force and effect, Principal shall not exercise any such right of subrogation in
or under the Loan Documents, or any right to participate in any way therein, or
in the right, title or interest of Lender in or to the Real Property.


18.           Non-Waiver.  Neither failure nor delay on Lender’s part in
insisting upon strict performance of any term, condition, covenant or agreement
or exercising any right, power, remedy or privilege hereunder, shall operate as
or constitute a waiver thereof, nor shall a single or partial exercise thereof
preclude any other future exercise, or the exercise of any other right, power,
remedy or privilege.  By way of example,
and not by way of limitation, by accepting payment after the due date of any
amount payable under this Guaranty, Lender shall not be deemed to have waived
any right either to require prompt payment when due of all other amounts due
under this Guaranty, or to declare a default for failure to effect prompt
payment of any such other amount.


19.           No consent by Borrower shall be
required for any assignment or reassignment of Lender’s rights under this
Guaranty to any assignee of Lender’s interest in the Note or any part
thereof.  All references to “Lender”
hereunder shall be deemed to include such successors and assigns of Lender.


20.           Wherever possible, each provision of
this Guaranty shall be interpreted in such manner as to be effective and valid
under applicable Laws, but if any provision of this Guaranty shall be
prohibited by or invalid under applicable law, such provision shall be











 


ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Guaranty.


 


21.           TO THE FULLEST EXTENT PERMITTED BY
LAW, GUARANTORS HEREBY IRREVOCABLY WAIVE TRIAL BY JURY IN ANY ACTION,
COUNTERCLAIM OR JUDICIAL PROCEEDING BROUGHT BY BORROWER OR LENDER INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR IN
CONNECTION WITH THIS INSTRUMENT, THE LOAN, THE LOAN DOCUMENTS, AND ANY ACTS OR
OMISSIONS OF GUARANTORS IN CONNECTION THEREWITH.


 


22.           This Guaranty may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same guaranty.


 


[The next page is the signature
page]











 


IN WITNESS WHEREOF, Principal has duly executed and delivered this
Guaranty as of the date of this Guaranty.


 


 


	
  

  	
  MAUI LAND & PINEAPPLE COMPANY, INC.,

  
	
   

  	
  a Hawaii corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ ROBERT WEBBER

  	
   

  
	
   

  	
  Name:

  	
  R. WEBBER

  	
   

  
	
   

  	
  Title:

  	
         CFO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE RITZ-CARLTON DEVELOPMENT

  COMPANY, INC., a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ WILLIAM T. PHILLIPS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  WILLIAM T. PHILLIPS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  VICE-PRESIDENT

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXCLUSIVE
  RESORTS DEVELOPMENT

  COMPANY, LLC, a Delaware limited liability

  company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ TODD HARRIS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  TODD HARRIS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  SVP Member Services