**Exhibit 10.3**

 

**GOLF ACADEMY LEASE**

 

THISLEASE (the “Lease”) is made and entered into effective Oct 1, 2010 (the(Effective Date”), by and between **MAUI LAND &PINEAPPLE COMPANY, INC.**, a Hawaii corporation, whose address isP.O. Box 187, Kahului, Hawaii 96733-6687, (“Lessor”) and **TY MANAGEMENT CORPORATION**, a Hawaii corporation, whoseaddress is c/o Carlsmith Ball LLP, One Maui Plaza, Suite 400,Wailuku, Hawaii 96793-1086 (“Lessee”);

 

Inconsideration of the agreements hereinafter set forth, Lessor and Lessee dohereby agree as follows:

 

1.             Premises.  Lessor does hereby demise and let untoLessee, and Lessee does hereby lease and hire from Lessor, that certainbuilding commonly known as the “Kapalua Golf Academy” which is located on Lot1C of the Kapalua Development Subdivision and which is more particularly shownon Exhibit A attached hereto and incorporated herein by reference,subject, however, to the encumbrances set forth in said Exhibit A(hereinafter collectively called the “Premises” or the “Golf Academy”).  The Premises is subject to adjustment as setforth in Section 6 below.

 

2.             Term; Extension.

 

a.             Term.  This Lease shall be for an initial term (the “InitialTerm”) commencing on the Effective Date and ending on the date (the “TerminationDate”) that is ten (10) years after the Effective Date, unless such termshall be sooner terminated as hereinafter provided.  The Initial Term and the Extension Termdefined below are sometimes referred to herein as the “Term”.

 

b.             Extension.  Lessor shall notify Lessee at least six (6) monthsprior to the expiration of the Initial Term whether or not Lessor intends tosell or redevelop the Premises after expiration of the Initial Term.  If Lessor does not intend to sell orredevelop the Premises at the expiration of the Initial Term, Lessee shall beentitled to extend the term of this Lease for an additional ten (10) yearscommencing at the end of the Initial Term (the “Extension Term”).  The Extension Term shall be on the terms andconditions set forth in this Lease, except that during the Extension Term (i) Lessormay cancel this Lease on at least twelve (12) months advance notice if Lessordecides to redevelop the Premises, and (ii) during the Extension TermLessee shall pay Lessor rent for the Premises determined as follows:  Upon Lessor’s notice that it does not intendto redevelop or sell the Premises at the end of the Initial Term, Lessor andLessee shall negotiate in good faith for a period of thirty (30) days to reachagreement on the rental that shall be payable during the Extension Term (the “ExtensionTerm Rent”).  The Extension Term Rentshall be a fair market rent for the Premises and any land subject at that timeto the Grant of Golf Academy Easement between the parties that is datedconcurrently herewith (the “Grant of Golf Academy Easement”) based on itspermitted use under this Lease or said Grant as applicable and not its highestand best use.  If the parties reachagreement, the Extension Term Rent shall be documented in an amendment to thisLease.

 

If the parties are unable to reach agreement on theExtension Term Rent within the 30-day period, either party may send the othernotice (“Arbitration Note”) that it elects to have the Extension Term Rent bedetermined by arbitration as follows (the “Arbitration”).  The Arbitration shall be determined by asingle arbitrator mutually selected by the parties.  If the parties fail to agree upon a singlearbitrator within ten (10) days of the Arbitration Notice, either

 

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partymay petition a judge of the Second Circuit Court of the State of Hawaii toappoint an arbitrator meeting the qualifications of this Section and theperson thus appointed shall determine the Extension Term Rent.  The arbitrator must be a recognized Hawaiireal estate appraiser who is a member of the American Institute of Real EstateAppraisers (MAI) or Society of Real Estate Appraisers or any similar appraisalorganization and shall have all of the powers and duties prescribed by Chapter658A, as amended.  In determining theExtension Term Rent, the arbitrator must select a fair market rent for thePremises and any land subject at that time to the Grant of Golf AcademyEasement based on its permitted use under this Lease and said Grant and not itshighest and best use, and the selected rental may be either fixed periodicrents or percentage rent.  TheArbitration shall commence as soon as practicable after selection of thearbitrator and the arbitrator’s determination must be issued within sixty (60)days after his or her selection.  Thearbitrator’s determination of decision shall be final, conclusive and bindingupon both parties, subject to the minimum limitations stated in thisArbitration provision, unless such decision and award shall be vacated,modified or corrected, all as provided in Chapter 658A, Hawaii RevisedStatutes, as amended.  The cost of suchArbitration shall be borne equally by the parties, except that each party shallbear its own costs for attorneys’ fees and witness fees.

 

3.             Quiet Enjoyment.  Upon payment by Lessee of the rent,additional payments and all other charges to be borne by Lessee as set forth inthis Lease, and upon Lessee’s observance and performance of all of the terms,covenants and conditions hereinafter contained, Lessee shall peaceably andquietly enjoy the Premises for the term hereof without hindrance orinterruption by Lessor or any other persons lawfully claiming by, through orunder Lessor, except as expressly provided in this Lease.

 

4.             Rent.  No rent is payable under this Lease duringthe Initial Term.  If any other charge oradditional rent due hereunder shall not be received when due, then a late feein the amount of five percent (5%) of the amount due which shall be due Lessorfrom Lessee within ten (10) days of written demand therefore.

 

5.             Payments and Expenses To BeBorne By Lessee.  Lesseeshall pay the following:

 

a.             Real Property Taxes andAssessments.  Lessee willpay directly to the taxing authority before delinquency, all real propertytaxes and assessments of every description assessed against the Premises thatLessor or Lessee in respect thereof may be assessed or become liable, whetherassessed to or payable by Lessor or Lessee, during the term of this Lease, prorated for periods prior to the Effective Date and as of the Termination Date.  The regular assessment of real property taxesfor the County of Maui’s 2011 fiscal year that is agreed to be allocable to theGolf Academy is set forth in Schedule 7.1.1(a) of the Kapalua Bay GolfAcademy Sale, Purchase and Escrow dated as of the Effective Date, betweenLessor and Lessee (the “Bay Course PSA”). For future tax years, including during the Extension Term, the basis fordetermining Lessee’s liability for real property taxes and assessments for thePremises shall be determined as set forth in Section 3 of the Kapalua BayCourse Closing Agreement of even date herewith between Lessor and Lessee.

 

b.             Utility Charges and Service.  Lessee will pay, before delinquency, allcharges for potable water, irrigation water, gas, sewer service, refuse collection,electricity, telephone, cable television, and other utility and similar chargesarising from the use of the Premises. Unless caused by the negligence or willful misconduct of Lessor, Lessorshall not be responsible for any interruption or failure in the supply of anyutilities to the Premises.

 

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c.             Tax on Lease Payments.  Lessee shall pay to Lessor, as additionalrent, together with each payment of rent or any other payment requiredhereunder which is subject to the State of Hawaii general excise tax on grossincome, as it may be amended from time to time, or any successor or similartax, an amount which, when added to such rental or other payment (currently4.166% of each such payment), shall yield to the Lessor, after deduction of allsuch tax payable by Lessor with respect to all such rent and other payments, anet amount equal to that which Lessor would have realized from such paymentshad no such tax been imposed.

 

d.             Other Taxes.  Further Lessee shall be responsible for andshall pay before delinquency all municipal, state or county taxes assessedduring the term of this Lease against it by reason of the conduct of itsbusiness in the Premises or with respect to personal property of any kind,owned by or placed in, upon or about the Premises by and/or at the expense ofLessee.

 

e.             Kapalua Resort AssociationAssessments.  Lessee willpay directly when due all Kapalua Resort Association dues and assessmentspayable with respect to the Premises or the land subject to the Grant of GolfFacilities Easement of even date herewith which covers certain groundssurrounding and used in connection with the Golf Academy.

 

6.             Lot 1C-1.  Lessor has applied for approval of asubdivision of the land on which the Golf Academy is located (the “Subdivision”)into a parcel identified as Lot 1C-1, containing approximately 25.441 acres (“Lot1C-1”) and a parcel identified as Lot 1C-2 (“Lot 1C-2”), as shown on thepreliminary plat of said subdivision dated May 21, 2010, and prepared byWarren S. Unemori Engineering, Inc. A map of Lot 1C-1 is attached hereto as Exhibit B.   Lessor shall not make any material changesto the configuration of Lot 1C-1 without Lessee’s consent, which shall not beunreasonably withheld (it being acknowledged that minor adjustments toboundaries and acreages are a normal part of the subdivision and mappingprocess, and also that Lot 1C-1 must include all areas material to theoperation of the Golf Academy).  Lessorshall bear all costs of securing final approval of the Subdivision (“FinalApproval”), including without limitation surveyor and engineering fees, costsof any surveys or studies that are required as a condition of subdivisionapproval, and rollback taxes or assessments, and costs of satisfying with allconditions imposed on Final Approval, provided that Lessor shall have noobligation to satisfy unduly burdensome conditions, which for purposes of thisLease shall be deemed to include conditions (a) that would materiallyimpair the use of Lot 1C-1 for the Golf Academy purposes permitted under thisLease, (b) that individually or in the aggregate would require Lessor toincur a cost or liability (such as construction of on-site or off-siteinfrastructure) in excess of $250,000.00, (c) that require Lessor towiden, signalize, or add acceleration or deceleration lanes to HonoapiilaniHighway, or (d) require Lessor to make dedications of land to the State ofHawaii or County of Maui.  In the eventany such unduly burdensome conditions are imposed Lessor may suspend processingof the Subdivision until such time as the condition is waived, eliminated ormodified so as to not be unduly burdensome. Upon issuance of Final Approval, the “Premises” demised by this Leaseshall automatically be deemed amended to include all of Lot 1C-1, as approvedby the Final Approval, together with all buildings and other improvementslocated thereon, and any rights, easements or appurtenances belonging to thesame or held and enjoyed in connection therewith.  Upon such approval Lessor and Lessee shallamend the property descriptions attached as Exhibit A to this Leaseand to the recorded memorandum of this Lease to replace the descriptions with adescription of Lot 1C-1, provided that such amendment shall not affect Lessee’sright to customer use or certain shared use parking stalls on Lot 1C-2 asprovided in Section 10 below. Concurrently with that amendment,

 

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the parties shall amend the Grant of Golf AcademyEasement which covers the grounds surrounding the Golf Academy to releasetherefrom the lands included within Lot 1C-1.

 

7.             Acceptance Of Premises.  It is expressly understood and agreed that,except as set forth in the Bay Course PSA, Lessor has not made anyrepresentation or warranty, express or implied, regarding any aspect of thePremises including, but not limited to, the implied warranties ofmerchantability, fitness for a particular purpose, suitability, habitability,quality, physical condition, value or profitability, and Lessor herebydisclaims any and all liability for any and all such representations andwarranties except as set forth in the Bay Course PSA.  Lessee agrees that it has examined andinvestigated the Premises prior to the execution of this Lease and that Lesseehas relied solely upon such examinations and investigations and Lessor’s representationsand warranties set forth in the Bay Course PSA in leasing the Premises.  Without limiting the generality of theforegoing, Lessee acknowledges that Lessor has made no representation orwarranty, express or implied, concerning the Premises’ compliance withHazardous Materials Laws except as provided in the Bay Course PSA.  Lessee acknowledges and agrees that it isleasing the Premises in its “as is, where is” condition, with all faults, ifany, and subject to termination rights described herein, that except as setforth in the Bay Course PSA Lessee has assumed all risks regarding all aspectsof the Premises, and the condition thereof, including, without limitation:  (i) the risk of any physical conditionaffecting the Premises including, without limitation, the existence of anyHazardous Materials, the existence of any soils conditions, or the existence ofarcheological or historical conditions on the Premises; (ii) the risk ofany damage or loss to the Premises caused by any means including, withoutlimitations, tsunami, flood, earthquake or volcanic eruption; and(iii) the risk of use, zoning, habitability, merchantability or quality ofthe Premises or the suitability of the Premises for its use.  Except as otherwise described herein or inthe Bay Course PSA, Lessee expressly releases Lessor from any and all liabilityand claims that it may have against Lessor, its successors and assigns withregard to Hazardous Materials hereafter placed on the Premises by Lessee, andLessee hereby agrees to indemnify, defend and hold Lessor harmless from andagainst any and all claims and demands for loss or damage, including claims forpersonal injury, property damage or wrongful death, arising out of or inconnection with a release by Lessee during the Term of Hazardous Materials inviolation of Hazardous Materials Laws (collectively, “Lessee Hazmat Liability”).  Lessee shall not be responsible for anyHazardous Materials released in, on, under and about the Premises by Lessor orits subsidiaries (collectively “Lessor Hazmat Liability”).  Lessor shall be and remain liable for all,Lessor Hazmat Liability, on, under or about the Premises, and for all clean-upand remediation thereof.  Lessor shalland does hereby indemnify, defend and hold harmless Lessee and Lessee’smembers, officers, directors, agents, employees and invitees from and againstany and all claims, lawsuits, liabilities, costs, fees (including reasonableattorney’s fees) and expenses of every kind and nature relating to or risingfrom a Lessor Hazmat Liability.  Theprovisions of this paragraph 7 shall survive the termination of thisLease.

 

8.             Use; Continuation of GolfAcademy Operations By Lessee.  Prior to the date of this Lease, the Lessor’ssubsidiary Kapalua Land Company, Ltd. (“KLC”) operated and used thePremises for the operation of a golf school, driving range, putting greens,miniature golf course, practice facility and retail store selling golf clubs,bags, and similar equipment, all open to Kapalua resort guests and members ofthe public (the “Golf Academy Operations”). Lessee shall use and operate the Premises during the Term solely for oneor more of the activities included in the definition of the Golf AcademyOperations and for no other purpose without the prior written consent of Lessor,which consent may be withheld by Lessor in its sole discretion.  In connection with Lessee’s use and occupancyof the Premises, Lessee agrees as follows:

 

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a.             Golf Academy Standard.  Lessee shall operate the Golf Academy in astandard equal or superior to the standard in which KLC operated the GolfAcademy immediately prior to the Effective Date.   In light of its location at a major entranceto the Kapalua Resort, Lessee shall throughout the Term maintain the exteriorof the Golf Academy building and the Golf Academy landscaping along Office Roadin substantially the same appearance and condition as existing at thecommencement of this Lease, reasonable wear and tear excepted.

 

b.             Ritz-Carlton Agreement.  Lessee shall, at Lessee’s sole cost and expense,observe and perform all of the Lessor’s obligations with respect to the GolfAcademy under that certain Second Amended and Restated Golf Course UseAgreement dated March 27, 2007, as amended, and that certain SignatureEvents Agreement dated March 27, 2007 made by and among Lessor, W2005Kapalua/Gengate Hotel Realty, L.L.C. and The Ritz-Carlton Hotel Company, L.L.C.

 

c.             Declaration.  Lessee shall, at Lessee’s sole cost andexpense, observe and perform all of the Lessor’s obligations with respect tothe Golf Academy under the Amended and Restated Declaration of Covenants andRestrictions for the Kapalua Resort dated September 30, 1987, as amendedfrom time to time.  Any paymentobligations of Lessor under such Declaration shall be prorated for periods priorto the Effective Date and as of the Termination Date based on the actual numberof days in the respective billing periods when such dates occur and the actualnumber of days elapsed.

 

d.             Kapalua Club.  Lessee shall observe and perform all of theobligations applicable to the Golf Academy under that certain Golf Course UseAgreement (Kapalua Club) of even date herewith.

 

e.             Retail Sales.  The Premises shall not be used for retailsales of clothes and other merchandise, other than golf clubs, bags and othergolf equipment.

 

9.             Resort Trail.  Lot 1C-1 contains a paved pedestrian trail asshown on Exhibit B (the “Pedestrian Trail”) that leads from theresort’s Adventure Center Building to the tunnels beneath Honoapiilani Highway,where the trail connects to Lessor’s existing and planned trail network on themauka side of the highway.  Lessorreserves the non-exclusive right to use the Pedestrian Trail as a walkway forKapalua resort owners and guests. Lessor shall be responsible for maintainingthe Pedestrian Trail and may erect signage, gates, and barriers appropriate tosafe trail management.  Lessor shallindemnify, defend and hold Lessee harmless from and against any claims, lossesor liability, including reasonable attorneys fees and costs, arising from Lessor’suse or maintenance of the Pedestrian Trail, or the use of the Pedestrian Trailby third parties pursuant to Lessor’s reservation in this section, except tothe extent such claims, losses or liabilities are the result of Lessee’s grossnegligence or willful misconduct.

 

10.           Shared Use Parking atVillage Center Parking Lot.  Lessor agrees that Lessee’s customers shallhave shared use of the existing parking stalls within the upper parking lot onLot 1C-2 that is shown on the map attached as Exhibit D.

 

11.           Other Improvements.  Lesseeagrees to pay, as additional rent, a pro rata share of the cost of any majorrepair or replacement that Lessor and Lessee mutually agree should be made tothe Golf Academy.  For purposes of this Section 11,  “majorrepairs and replacements” shall mean any repair or replacement costing inexcess of $2,500 and the Lessee’s “pro rata

 

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share” of such repairs or replacements that are madeduring the Initial Term shall be calculated by multiplying the cost of therepair or replacement by a fraction, the numerator of which is the number ofyears (or portions thereof) remaining in the Initial Term and the denominatorof which is the number of years of the useful life of any such repair orreplacement computed on a straight-line basis. For any such repairs or replacements made during the Extension Term theLessee’s share shall be determined by mutual agreement of the parties or, ifthe parties are unable to reach agreement, by an arbitrator selected pursuantto Section 2(b) who shall make a final and binding determination ofthe Lessee’s share based on then-prevailing custom and practice under similarleases. Lessor shall pay the balance of such cost, after deducting Lessee’sshare of the same, within thirty (30) days of Lessor’s receipt of Lessee’swritten request for such reimbursement accompanied by such documentation as maybe reasonably requested by Lessor to confirm that the repairs and replacementshave been completed by Lessee free and clear of any liens for such work. Any sums not paid by Lessor to Lessee within ten (10) days of writtennotice from Lessee that the same is past due shall bear interest from the datedue until paid in full at the rate of twelve percent (12%) per year.  If Lessee exercises the Extension Term, thenon commencement of the Extension Term Lessee shall pay Lessor the Lessee’sshare with respect to the Extension Term of any repairs or replacements madeduring the Initial Term, which shall be determined by mutual agreement or byarbitration as provided above.  If Lessorexercises its right to terminate this Lease during the Extension Term, Lessorshall pay to Lessee an amount equal to the portion of Lessee’s share for anymajor repairs and replacements attributable to the period after suchtermination.

 

12.           Alterations and Improvements.

 

12.1         Lessee Obligations.  Lessee shall not make any alterations,improvements or additions in or to the Premises, nor make any repairs requiringany such alteration, improvements or additions, nor install any antennas, tradefixtures, exterior signs, interior or exterior lighting, plumbing fixtures,shade or awnings, without the prior written consent of Lessor, which consentshall not be unreasonably withheld, delayed or conditioned.  As a prerequisite to any such consent, Lesseeshall comply with and/or satisfy each of the following conditions unless any ofsuch conditions or requirements shall be waived by Lessor in its solediscretion:

 

a.             Lessee shall obtain Lessor’sapproval of Lessee’s construction contractor(s) and architect who shall belicensed in the State of Hawaii, and Lessee shall submit complete plans andspecifications for such alterations, improvements or additions to the Lessorfor Lessor’s prior written approval.

 

b.             Lessee, or its architect,shall, if plans and specifications are necessary, deliver to Lessor uponcompletion of construction a certification setting forth the total cost of suchconstruction and certifying that such construction has been completed incompliance with the approved plans and specifications therefor.

 

c.             Lessee shall furnish Lessorwith evidence that all governmental approvals necessary to commenceconstruction have been obtained, including, without limiting the generality ofthe foregoing, a building and/or grading permit.  Any work, (which is not a Lessorresponsibility) not acceptable to any governmental authority or agency havingor exercising jurisdiction over such work shall be promptly replaced, at Lessee’ssole expense, notwithstanding any failure by Lessor to object to any such work,and Lessor shall have no responsibility therefor.

 

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d.             In addition to any otherinsurance required under this Lease, during any construction Lessee and/or itscontractor shall maintain such commercial general liability and other insurancepolicies as may be reasonably specified by Lessor, all of which policies shallbe reasonably satisfactory to Lessor in form, content and amount of coverage,insuring Lessor, Lessee and such other parties as Lessor shall reasonablyspecify against loss or damage to third parties or their property from hazardsnormally insured against in the construction industry with respect toconstruction of the type to be undertaken by Lessee.  Lessee shall deliver to Lessor certificatesof insurance certifying that such insurance is in full force and effect priorto commencing the construction of any alterations, additions or improvement onthe Premises.

 

e.             Lessee shall reimburseLessor for any expense actually incurred by Lessor by reason of repair orreplacement of faulty work done by Lessee or its contractors.

 

f.              All work by Lessee shall bediligently and continuously pursued from the date of its commencement throughits completion.  Upon substantialcompletion of any construction, Lessee shall publish a “Notice of Completion”as required under Section 507-43(f) of the Hawaii Revised Statutesand file an affidavit of publication of said Notice in the Office of the Clerkof the Circuit Court of the Second Circuit, State of Hawaii, and shall providea certified “filed” stamped copy thereof to Lessor.

 

12.2         Lessor Obligations.  Except as otherwise required in this Lease,any and all capital repairs and replacements approved by Lessor in accordancewith Section 11, or required to comply with laws and legal requirements,will be made at the sole cost and expense of Lessor (“Lessor Work”).

 

13.           Protection AgainstConstruction Liens.  Lesseeshall promptly pay all contractors and materialmen, and shall keep the Premisesfree from any liens or encumbrances arising out of any work performed forLessee, materials furnished for Lessee or obligations incurred by Lessee.  Lessee agrees to indemnify, defend and savethe Lessor and the Premises harmless from and against any and all claims formechanics’, materialmen’s or other liens in connection with any work byLessee.  If a mechanics’ or materialmen’slien shall be filed against the Premises for, or purporting to be for, labor ormaterial alleged to have been furnished or to be furnished to or for Lessee,Lessee shall bond against or discharge said lien within ten (10) daysafter the filing of the application for the lien.  If Lessee shall fail to bond against ordischarge said lien as aforesaid, Lessor may pay the amount of such lien ordischarge the same by deposit or by bonding against such lien.  In the event that Lessor shall discharge suchlien as aforesaid, Lessor may require the lienor to prosecute an appropriateaction to enforce such claim, and if said lienor shall prevail in its claim,Lessor may pay the judgment recovered thereon. Any amount paid or expense incurred by Lessor pursuant to this paragraph13 shall be paid by Lessee to Lessor upon demand, together with interestthereon from the date of payment by Lessor at the rate provided in paragraph 39hereinbelow.

 

14.           Disclaimer.  Notwithstanding anything in this Leasecontained to the contrary, neither Lessor’s approval nor the approval of anyarchitect or engineer engaged by Lessor of any plans or specificationssubmitted to Lessor or such architect or engineer pursuant to the provisions ofthis Lease shall be deemed a warranty or other representation on Lessor’s partto any person that such plans or specifications or the improvements thereindescribed are legal or structurally safe or sound.

 

15.           Alterations Belonging toLessor.  All alterations, improvementsand additions to the Premises shall remain for the benefit of the Lessor andshall not be removed unless

 

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otherwise consented to in writing by Lessor, andshall be presumed to become an integral part of said Premises.

 

16.           Waste; Compliance with Law.  Lessee will not make or suffer any waste orstrip of the Premises.  Lessee will notuse the Premises or suffer the same to be used for any purpose or purposes inviolation of any condition or provision of this Lease, or of any law, ordinanceor regulation of any public authority, or of any policy of insurance upon saidPremises, or do or permit to be done any act which will occasion or constitutea ground for cancellation of any such insurance policy or for any increase in therate of insurance on said Premises, and will not commit or suffer to becommitted any nuisance upon said Premises or act which may disturb the quietenjoyment of others.

 

17.           Prohibited Conduct.  Lessee will not conduct or permit to beconducted any auction and/or sale by auction on the Premises or any fire saleor bankruptcy sale.

 

18.           Signs and Advertising.  Lessee will not, without the prior writtenapproval of Lessor, display, erect, install, paint or place any sign, logo,emblem, or other advertisement whatsoever in, on or about the exterior of thePremises.  Lessor acknowledges that thesignage on the Premises on the date of this Lease is approved by Lessor.

 

19.           Liens and Encumbrances.  Lessee will not commit or suffer any act orneglect whereby said Premises or any improvements thereon, or the estate ofLessee or the Lessor therein, shall at any time during said term become subjectto any attachment, judgment, lien, charge or encumbrance whatsoever, and willindemnify and hold the Lessor harmless from all loss, costs and expense,including attorneys’ fees, with respect thereto.

 

20.           Hazardous Materials.

 

a.             Use of Hazardous Materials.  Except as provided herein, Lessee shall notcause any Hazardous Material to be brought upon, kept or used in or about thePremises by Lessee in violation of Hazardous Materials Laws.  Lessee may use and store on the Premises suchitems as may be classified as Hazardous Materials but which are typically usedin Golf Academy operations (e.g. fertilizers, pesticides, herbicides,machinery lubricants, cleaning and maintenance supplies) provided that the sameare used, kept, stored and disposed of in full compliance with all applicableHazardous Materials Laws.  If Lesseebreaches the obligations stated in the preceding sentences, or if the presenceof Hazardous Material on the Premises caused by Lessee results in contaminationof the Premises in violation of Hazardous Materials Laws, then Lessee shallindemnify, defend and hold Lessor harmless from any and all claims, judgments,damages, penalties, fines, costs, liabilities or losses (including, withoutlimitation, diminution in value of the Premises, and sums paid in settlement ofclaims, attorneys’ fees, consultation fees and expert fees) which arise duringor after the Lease term as a result of such contamination.  This indemnification of Lessor by Lesseeincludes, without limitation, costs incurred in connection with anyinvestigation of site conditions or any clean-up, remedial, removal orrestoration work required by any federal, state or local governmental agency orpolitical subdivision because of a release of Hazardous Material by Lesseeduring the Term.  Without limiting theforegoing, with respect to any Hazardous Material on the Premises released byLessee during the Term which results in any contamination of the Premises inviolation of Hazardous Materials Laws, Lessee shall promptly take all actionsat its sole expense as are necessary to comply with Hazardous MaterialsLaws.  The foregoing indemnity shallsurvive the expiration or earlier termination of this Lease.

 

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b.             Definitions.  As used herein, the term “Hazardous Material”means any hazardous or toxic substance, material or waste, including, but notlimited to, those substances, materials and wastes listed in the United StatesDepartment of Transportation Hazardous Materials Table (49 CFR 172.101) or bythe United States Environmental Protection Agency as hazardous substances (40CFR Part 302) or as defined in the Hawaii Hazardous Waste Law (Haw. Rev.Stat. Chapter 342J) and amendments thereto, or such substances, materials andwastes that are or become regulated under any applicable local, state orfederal law.

 

c.             Disclosure.  Upon Lessor’s written request, Lessee shalldisclose to Lessor the names and amounts of all Hazardous Material, or anycombination thereof, which were stored, used or disposed of or on the Premises,or which Lessee intends to store, use or dispose of or on the Premises in thefuture.

 

d.             Inspection.  Lessor and its agents shall have the right,but not the duty, to inspect the Premises during normal business hoursfollowing 48 hours’ prior written notice to determine whether Lessee iscomplying with the provisions of this paragraph 17.  If Lessee is not in compliance with theprovisions of this paragraph 17, Lessor shall have the right to immediatelyenter upon the Premises to remedy any contamination caused by Lessee’s failureto comply notwithstanding any other provision of this Lease.  Lessor shall use reasonable efforts tominimize interference with Lessee’s business but shall not be liable for anyinterference caused thereby.

 

e.             Reports.  To the extent Lessee is required to file anyreports with the United States Environmental Protection Agency or any otherfederal, state, city or county agency having jurisdiction over HazardousMaterial, Lessee shall concurrently provide Lessor a copy of such report.

 

21.           Compliance With DisabilityAccess Laws.  Except asotherwise set forth herein, Lessee hereby covenants and agrees with Lessor thatLessee shall at all times during the term of this Lease comply with any and allgovernmental regulation of the Premises regarding access of disabled persons,including without limitation, Titles III and V of the Americans withDisabilities Act of 1990, 42 U.S.C. Sec. 12101 et seq. or any other similarfederal, state or local laws or ordinances and the regulations promulgatedthereunder (collectively, the “Disability Access Laws”); provided, however,(a) that Lessee shall only be required to pay for the costs of any suchcompliance if required as a result of any changes to the, or new, DisabilityAccess Laws after the Effective Date, and the costs of such compliance forconditions existing on the Effective Date will be the sole responsibility ofLessor.  Unless any such claim concernsthe physical condition of the Premises on the Effective Date or is the resultof Lessor failing to pay for the cost of compliance with Disability Access Lawsrelating to conditions existing on the Effective Date, (in which case theindemnity contained herein will be of Lessee by Lessor), Lessee shallindemnify, defend and hold Lessor harmless from and against any and all claimsand demands for loss or damage, including claims for discrimination, personalinjury, monetary damage or injunctive relief arising out of or in connection withany failure or alleged failure of Lessee’s operation of the Premises to complywith the Disability Access Laws, and Lessee shall reimburse Lessor for allcosts and expense, including reasonable attorneys’ and other professional orconsultants’ fees, paid or incurred by Lessor in connection with the defense ofany such claims including, but not limited to, all costs for research regardingsettlement or other preventive measures which Lessor may take prior to thefiling of such action or to attempt to prevent the filing of such an action.

 

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22.           Repairs and Upkeep by Lessee.  Lessee shall at all times during the termhereof and at its own expense, keep the Premises in good order, condition andrepair, reasonable wear and tear damage and destruction excepted, includingsuch repairs, and alterations as may be required by fire insurance companies,by law, ordinance or regulation of any public authority relating to the use oroccupancy of the Premises or otherwise. Lessee will, at its own expense, replace plate glass and other glass inthe Premises which may become damaged or broken.  If Lessee fails to commence repairs requiredby the terms hereof to be made by it within ten (10) days after writtennotice from Lessor of the necessity therefor and specifying the nature thereof,and if Lessee thereafter fails to prosecute such work diligently to completion,then Lessor shall have the right to make or complete and pay for such repairsand bill Lessee for the cost thereof or to terminate this Lease for breach ofcovenant in the event Lessor makes such repairs but Lessee does not pay Lessorpursuant to paragraph 22 herein.  Lessorshall have the right to enter upon the Premises at times reasonably establishedby Lessor and Lessee for the purpose of making such repairs and to erect anynecessary scaffolding or barricades. Failure on the part of Lessor to make repairs or alterations as hereinprovided shall in no event constitute a breach of this Lease.  That Lessee will keep the Premises, includingany loading or service areas, in a clean, orderly and sanitary condition andfree from obstructions, insects, rodents, vermin and other pests, and shallstore all trash and refuse within the Premises or in areas designated thereforby Lessor and share in the cost of having the same picked up regularly.

 

23.           Right of Access.  Lessor shall have access at all reasonabletimes to the Premises and each and every part thereof for purposes ofinspecting same; making repairs (if Lessor elects to undertake any repairs dueto Lessee’s failure to do so), and Lessor shall be allowed to take all materialinto and upon the Premises that may be required therefor without the sameconstituting an eviction of Lessee in whole or in part, without the leaserental and other fees and charges abating and without any liability to Lesseeor any loss or interruption of business of Lessee or any loss of occupation orquiet enjoyment of the Premises occasioned thereby; posting such notices as itmay deem necessary for its protection or for protection of the Premises; andfor the purpose of showing same to prospective tenants, purchasers, mortgagees,and/or others.

 

24.           Expenditures by Lessor onBehalf of Lessee.  If Lessorshall make any expenditure or incur any liability which Lessee is required tomake or pay under this Lease, the amount thereof shall be added to and deemed apart of the next succeeding payment of rent thereafter falling due, and saidamount shall bear interest at the rate provided in paragraph 39 hereinbelowfrom the date paid by Lessor until repaid by Lessee.  Lessor may, at its option and at any time,terminate this Lease for failure on the part of Lessee to pay such amountswithin thirty (30) days of written notice when due.

 

25.           Indemnity.  Lessee, as a material part of theconsideration to Lessor for this Lease, will and does hereby assume all risk ofbodily injury, wrongful death and/or property damage, business interruption oreconomic loss occasioned by any accident, fire or nuisance made or suffered byLessee or its officers, directors, agents, employees, contractors, invitees,customers, sublessees and licensees (herein collectively called “Lessee’sAffiliates”) in the Premises or resulting from any failure on the part ofLessee to maintain the Premises in a safe condition, and Lessee hereby waiveson its own behalf, and on behalf of Lessee’s Affiliates, all claims in respectthereof against Lessor and Lessor’s shareholders, employees, agents, licensees,contractors and invitees (herein collectively called “Lessor’s Affiliates”)except claims arising from the acts or omissions of Lessor or Lessor’sAffiliates, and acknowledges that this assumption of risk by Lessee has beenbargained for in determining rent and other obligations of Lessee under thisLease.  Lessee hereby agrees to indemnifyand save harmless Lessor and 

 

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Lessor’s Affiliates from and against any and allclaims for bodily injury, wrongful death and/or property damage, businessinterruption and economic loss by any person (including without limiting thegenerality of said term, Lessee’s Affiliates and Lessor’s Affiliates) arisingout of, caused by, occasioned by or resulting from any accident, fire ornuisance in the Premises or Lessee’s failure to maintain the Premises inaccordance with this Agreement, except where such injury, death or loss iscaused by the acts or omissions of Lessor or Lessor’s Affiliates.  Lessee further agrees to indemnify and saveharmless Lessor, and Lessor’s Affiliates, from and against any and allliability, loss, costs, charges, fines, penalties, obligations or expenses ofwhatsoever nature in connection with any and all claims by or on behalf of anyperson or persons, firm or firms, corporation or corporations, arising from theconduct or management of any work or thing whatsoever done by Lessee or Lessee’sAffiliates in or about the Premises during the Term, or from any transactionsof Lessee concerning the Premises, and will further indemnify and save Lessorand Lessor’s Affiliates harmless from any and all claims arising from anybreach or default on the part of Lessee in the performance of any covenant oragreement on the part of Lessee to be performed pursuant to the terms of thisLease, or arising from any act on the part of Lessee or Lessee’s Affiliates,and shall reimburse Lessor and Lessor’s Affiliates for all costs, reasonableattorneys’ fees, expenses and liabilities incurred in connection with any suchclaim or any action or proceeding brought thereon.  Lessee further agrees that in case of anyclaim, demand, proceeding, action or cause of action, threatened or actual,against Lessor or Lessor’s Affiliates resulting from the matters for whichLessee indemnifies Lessor hereunder, Lessee, upon the written request of Lessoror any of Lessor’s Affiliates, shall defend Lessor and Lessor’s Affiliates atLessee’s expense by counsel reasonably satisfactory to Lessor or Lessor’sAffiliates, as the case may be.  IfLessor or any of Lessor’s Affiliates does not request such defense or Lesseedoes not provide such defense, then Lessee will reimburse Lessor and Lessor’sAffiliates as aforesaid, and agrees to cooperate with Lessor and Lessor’sAffiliates in such defense, including, but not limited to, providing ofaffidavits and testimony upon request of Lessor or Lessor’s Affiliates.

 

26.           Assumption of Risk by Lessee.  Lessee, as a material part of theconsideration to Lessor for this Lease, will and hereby does assume all risk ofloss or damage to Lessee’s personal property, machinery, equipment, fixtures,supplies, merchandise, and other personal property, by whomsoever owned, storedor placed in, upon or about the Premises, and does hereby agree that Lessorshall not be responsible for loss or damage to any such property, unless causedby the willful act or gross neglect of Lessor or Lessor’s Affiliates, andLessee waives all claims in respect thereof and acknowledges that thisassumption of risk by Lessee has been bargained for in determining rent andother obligations of Lessee under this Lease. Without prejudice to the generality of the foregoing, Lessor shall notbe liable for loss or damage to any property entrusted to Lessor or Lessor’sAffiliates nor for loss or damage to any property at any time stored or kept inthe Premises, either from rain or from any other water which may leak, issue orflow from any part thereof, or from the pipes or plumbing of the same or fromany other place or quarter, nor for any loss or damage to property in thePremises caused by theft, or by accident involving escalators, or for damage ofany character.

 

27.           Property Insurance.

 

a.             In General.  Lessee shall at its own expense and at alltimes during the term keep all buildings, improvements, fixtures, and personalproperty by whomsoever installed or constructed, now existing or hereaftererected on the Premises, insured against (i) all of the risks covered by astandard ISO Commercial Property Special Causes of Loss Form written on areplacement cost basis, without deduction for depreciation, with an agreedvalue endorsement, (ii) a “difference in conditions” policy providingcoverage limits for risk of loss by 

 

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earthquake of $2,500,000 and flood of $2,500,000, (iii) suchother hazards or risks which a prudent businessman would insure against,including plate glass insurance and business interruption insurance in anamount sufficient to insure payment of rent, real property taxes andassessments, insurance and other fixed costs for not less than twelve (12)months during any interruption of Lessee’s business on the Premises from anyrisk covered under (i) and (ii) above, and (iv) in time of waragainst war damage, if available at reasonable cost.  This coverage shall be in an amount equal tothe full replacement cost of such buildings, improvements, fixtures andpersonal property and shall not have deductibles in excess of $250,000 AOP andflood, 5% wind, and 5% earthquake. Lessee hereby waives any and all rights of subrogation which it may haveagainst Lessor and any insurance carrier of Lessor.  Such insurance shall contain a standardmortgagee clause which shall provide that any reference to a mortgagee in suchpolicy shall mean and include all holders of mortgages of any interests in thePremises, in their respective order and preference as provided in theirrespective mortgages; provide that such insurance as to the interest of anymortgagee shall not be invalidated by any act or neglect of Lessor, Lessee orany person claiming by, through, or under any of them; and contain a waiver ofany provision invalidating such mortgagee clause by reason of the failure ofany mortgagee or Lessor, Lessee, or any person claiming by, through, or underany of them to notify the insurer of any hazardous use or vacancy, anyrequirement that any mortgagee pay any premium thereon, or any contributionclause.

 

b.             Use of Insurance Proceeds.  In case the buildings, improvements orfixtures required to be insured in subparagraph 27.a above or any part thereofshall be destroyed or damaged by fire or such other casualty required to beinsured against, then and as often as the same shall happen, all proceeds ofsuch insurance, including the interest therein of Lessor and the interesttherein of Lessee shall be made available for and used with all reasonabledispatch by Lessee in rebuilding, repairing, replacing or otherwise reinstatingthe buildings, improvements or fixtures so destroyed or damaged in a good andsubstantial manner according to the plan and elevation thereof or according tosuch modified plan for the same or substitute buildings, improvements orfixtures as shall be approved in writing by the Lessor in accordance withparagraphs 12 and 13 above.  If theavailable insurance proceeds shall be insufficient for rebuilding, repairing,replacing or otherwise reinstating such buildings, improvements or fixtures inthe manner provided in this paragraph above, then Lessor shall provide thebalance of all funds required to completely rebuild, repair, replace orotherwise reinstate such buildings, improvements or fixtures; provided,however, that Lessee shall be responsible for any deductible amounts orself-insured retentions and if Lessee fails to carry the types and amounts ofinsurance required by Section 27(a), then Lessee shall be responsible forany shortfall.

 

28.           Liability Insurance.

 

a.             In General.  Lessee shall maintain at its own expenseduring the term a policy or policies of “commercial general liability”insurance on an “occurrence” basis including coverage for bodily injury andproperty damage, personal injury and medical payments, naming Lessor as anadditional insured thereunder, with limits not less than those set forth insubparagraph 28.b below.  The commercialgeneral liability insurance shall specifically cover blanket contractualliability, fire damage legal liability, host liquor liability if liquor will besold, serviced or manufactured on the Premises, personal and advertisingliability, medical payments, premises and operations liability andproducts/completed operations liability. Lessee shall periodically, but not less frequently than annually,reevaluate the scope of the risks covered and the liability limits of suchinsurance policies and, if necessary, increase such coverage or liabilitylimits in order to provide coverage of risks and liability limits which aprudent businessman 

 

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would provide under similar circumstances.  Lessee shall also increase the liabilitylimits or the scope of the risks covered by such insurance policies to suchhigher levels or such broader scope of risks as Lessor may from time to time reasonablyspecify.

 

b.             Coverage Amounts.

 

MinimumLiability Coverage Amounts:

 

(i)            $ 5,000,000 Each Occurrence.

 

(ii)           $ 5,000,000 GeneralAggregate.

 

(iii)          $ 5,000,000 Products &Completed Operations Aggregate.

 

(iv)          $ 5,000,000 Personal andAdvertising Injury.

 

(v)           $ 1,000,000 Fire Damage (anyone fire).

 

(vi)          $ 10,000,000 UmbrellaCoverage.

 

(vii)         $ 10,000,000 ExcessCoverage.

 

29.           Worker’s Compensation andEmployer’s Liability Insurance.  Lessee shall maintain at its own expenseduring the term of this Lease a policy or policies of “worker’s compensation”insurance with minimum limits as required by Hawaii Revised StatutesTitle 21, Labor and Industrial Relations, and the rules andregulations promulgated thereunder, and a policy or policies of “employer’sliability” insurance with per accident and per disease limits not less than$5,000,000.00.  Both policies shall be inform and with coverages satisfactory to and approved by Lessor.  Lessee shall increase the liability limits orthe scope of the risks covered by such insurance policies to such higher levelsor such broader scope of risks as Lessor may from time to time reasonablyspecify.

 

30.           Auto Liability Insurance.  Lessee shall maintain at its own expenseduring the term of this Lease a policy or policies of “commercial autoliability” insurance naming Lessor as an additional insured thereunder, in formand with coverage satisfactory to and approved by Lessor, with a combinedsingle limit for bodily injury and property damage not less than$5,000,000.00.  The foregoing coveragemay be placed through a combination of primary, umbrella and excesscoverages.  The automobile liabilityinsurance shall specifically cover all automobiles and other vehicles used byLessee in connection with its operations at the Premises, whether owned ornon-owned, leased, rented, borrowed or hired.

 

31.           General InsuranceRequirements.

 

a.             Each policy of commercialproperty insurance and general liability insurance required in paragraphs 27and 28 above shall:

 

(1)           name Lessor as an additionalinsured and provide that the liability of the insurer thereunder shall not beaffected by, and that the insurer shall not claim, any right of set-off,counterclaim, apportionment, proration, or contribution by reason of, any otherinsurance obtained by or for Lessor, Lessee, or any person claiming by,through, or under any of them;

 

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(2)           contain no provisionrelieving the insurer from liability for loss occurring while the hazard tobuildings and personal property is increased, whether or not within theknowledge or control of, or because of any breach of warranty or condition orany other act or neglect by Lessor, Lessee, or any person claiming by, through,or under any of them;

 

(3)           be specifically endorsed toprovide that such policy may not be cancelled except upon the insurer giving atleast thirty (30) days’ prior written notice thereof to Lessor, Lessee, andevery mortgagee and other person having an interest in the Premises who hasrequested such notice of the insurer;

 

(4)           be written by an insurancecompany rated A or better, Class size VII or better, by the Best’sKey Rating Guide, based upon the rating system in effect on the date this Leaseis signed, and in form and with coverage satisfactory to and approved inwriting by Lessor.  In the event thatBest’s changes its rating system or ceases to provide ratings at some laterdate, then such insurance company shall have a rating from Best (or some othercomparable rating service if Best’s ceases to provide ratings) comparable tothe “A or better, Class VII or better” requirement of the immediatelypreceding sentence; and

 

(5)           be specifically endorsed toprovide that they are primary policies, not contributing with and not in excessof any coverage that Lessor may carry, notwithstanding anything to the contrarycontained in any policies obtained by Lessor.

 

b.             A certificate of insurancelisting all of the required coverages should be issued for Lessee.

 

32.           Assignment and Subletting.

 

a.             Lessee may, without Lessor’sconsent, sublet the Premises to any golf course operator to which Lessee leasesthe Kapalua Bay Golf Course (the “Bay Course”), and may also enter into amanagement agreement with such an operator that covers the Golf Academy and theBay Course.  Any such sublease ormanagement agreement shall be subject to all of the terms and conditions ofthis Lease.

 

b.             If Lessee sells the BayCourse, then concurrently with the close of that sale Lessee may assign thisLease to the purchaser of the Bay Course without Lessor’s consent.

 

c.             Except as provided inparagraphs (a) and (b) of this Section 32, Lessee will notsublet the whole or any part of said Premises or grant any concession therein,or part with possession of the whole or any part of the Premises, or assignthis Lease or any interest therein (nor may this Lease be assigned by operationof law) or hypothecate, mortgage or in any way create any lien on this Lease orthe Premises or any interest therein without the consent in writing of Lessorfirst being obtained, and any such attempt without the prior consent in writingof Lessor shall be void for all purposes and Lessor shall then have the rightand option to terminate this Lease as hereinafter provided.  Lessor may grant or withhold its consent inits sole discretion for any reason.  Itis further agreed that any consent given to any assignment, hypothecation,transfer of this Lease or parting of possession, or to any sublease of saidPremises or a portion thereof, shall not be construed as a consent to any otherfurther assignment, hypothecation, transfer, parting of possession orsubletting or as a waiver of Lessor’s right to object to any assignment,hypothecation, transfer parting of possession, or sublease to which Lessor’sconsent in writing has not been obtained. It is further agreed that 

 

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Lessee will remain liable in the event of anyassignment, mortgage or sublease for the payment of the rental hereunder andfor the observance and performance of all the terms, covenants and conditionsherein contained and on the part of Lessee to be observed and performed.  Any change in the present ownership orcontrol of Lessee’s business, directly or indirectly, whether as a result ofany sale of assets, transfer of stock, merger, consolidation or otherwise,shall be deemed an assignment within the meaning of this provision.

 

33.           [Reserved].

 

34.           Subordination.  Lessee hereby subordinates its rightshereunder to any encumbrances shown on Exhibit A and to the lien ofany mortgage or mortgages now or hereafter arranged by Lessor, to any bank,insurance company or other lending institution, against the land andimprovements of which the Premises are a part and/or upon any buildings now onor hereafter placed upon said land, for all loans or advances made or hereafterto be made upon said security, provided in every case the mortgagee ormortgagees named in said mortgage or mortgages shall agree in a writteninstrument acceptable to Lessee to recognize this Lease in the event offoreclosure by judicial proceedings or otherwise, if Lessee is not then indefault beyond applicable cure periods. Lessee hereby agrees to execute any instruments on a commerciallyreasonable form necessary or expedient to carry out the foregoing.

 

35.           Default and Remedies.  If Lessee shall fail to pay said rent or anypart thereof or any other monies which under the provisions of the Lease Lesseeshall be obligated to pay, on or before the dates the same have become due andpayable, no notice being required, demand made, or forfeiture declared, andsuch non-payment shall continue for ten (10) days, or fail in any otherrespect faithfully to observe or perform any condition or covenant in thisLease contained and on Lessee’s part to be observed and performed, includingLessee’s failure to achieve the Golf Academy Standard set forth inparagraph 8.a above, and any such failure shall continue for thirty (30)days following written notice from the Lessor to Lessee (or such longer time asis reasonably necessary so long as Lessee has commenced and is diligentlyprosecuting the cure); or if Lessee shall become insolvent or be adjudicatedbankrupt; or shall make any general arrangement or assignment for the benefitof creditors or shall seek protection under any bankruptcy laws; or permit alien to attach to the premises; or abandon the Premises; or suffer this Leaseor any estate or interest hereunder to be taken under any mesne process or anywrit of execution; or any other judicial order, and any such event is notdismissed and cured with sixty (60) days, then and in any such event:

 

a.             Right of Re-Entry; Termination.  The Lessor may at once enter into and uponthe Premises or any part thereof in the name of whole, and upon or without suchentry at Lessor’s option terminate this Lease, without service of notice oflegal process, and thereupon take possession of the Premises and allimprovements thereon, and thereby become wholly vested with all right, titleand interest of Lessee therein and may expel and remove from said PremisesLessee and/or those claiming under it, and their effects, all without service ofnotice or resort to any legal process and without being deemed guilty of anytrespass or becoming liable for any loss or damage which may be occasionedthereby, and without prejudice to any other remedy or right of action which theLessor may have for collection of arrears of rent for other or preceding breachof covenant by Lessee.  If this Lease orany short form thereof is recorded or filed of record in Hawaii, terminationmay be made effective by Lessor by mailing a written notice to Lessee or suchtermination and recording or filing an affidavit thereof.

 

b.             Summary Possession.  Whether or not Lessor shall have taken anyaction above permitted, Lessor may bring an action for summary possession incase of such 

 

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default, and in any such action, service of priornotice or demand is hereby expressly waived. Lessor may, at its option, assert its claim for unpaid rent in suchaction or may institute a separate action for the recovery of rent.

 

c.             Removal of Persons orProperty.  In theevent of such resumption of possession under this Lease, whether by summaryproceedings or by any other means, Lessor, or any receiver appointed by a courthaving jurisdiction, may dispossess and remove all persons and property fromthe Premises, and any property so removed may be stored in any public warehouseor elsewhere at the cost of and for the account of Lessee, and Lessor shall notbe responsible for the care or safekeeping thereof, and Lessee hereby waivesany and all loss, destruction, and/or damages or injury which may be occasionedin the exercise of any of the aforesaid acts.

 

d.             Damages, Attorneys’ Fees andCosts.  Lessor may recover from Lesseeall damages, reasonable attorneys’ fees and costs which may have been incurredby Lessor as a result of any default of Lessee hereunder, including the expenseof recovering possession.

 

e.             Right to Re-let.  Should Lessor elect to reenter for Lessee’sdefault, as provided hereinabove, or should it take possession pursuant tolegal proceedings or pursuant to any notice provided for by law, it may eitherterminate this Lease or it may, from time to time without terminating thisLease, and re-let said Premises or any part thereof for such term or terms(which may be for a term extending beyond the term of this Lease) and at suchrental or rentals and upon such other terms and conditions as Lessor in itssole discretion may deem advisable; upon each such re letting all rentalreceived by Lessor from such re-letting shall be applied, first, to thepayment of any indebtedness other than rent due hereunder from Lessee toLessor; second, to the payment of any costs and expenses of suchre-letting; third, to the payment of rent due and unpaid hereunder; andthe residue, if any, shall be held by Lessor and applied in payment of future rentas the same may become due and payable hereunder.  If such rentals received from such re-lettingduring any month be less than that to be paid during that month by Lesseehereunder, Lessee shall pay any such deficiency to Lessor.  Such deficiency shall be calculated and paidmonthly.  Termination may, but need notnecessarily, be made effective by the giving of written notice to Lessee ofintention to end the term of this Lease, specifying a day not earlier than three(3) days thereafter, and upon the giving of such notice, the term of thisLease and all right, title and interest of Lessee hereunder shall expire asfully and completely on the day so specified as if that day were the dateherein specifically fixed for the expiration of the term.  No re-entry or taking possession of saidPremises by Lessor shall be construed as an election on its part to terminatethis Lease unless a written notice of such intention is given to Lessee orunless the termination thereof be decreed by a court of competent jurisdiction.  Notwithstanding any such re-letting withouttermination, Lessor may at any time thereafter elect to terminate this Leasefor such previous default.  Should Lessorat any time terminate this Lease for Lessee’s default, in addition to any otherremedies it may have, Lessor may recover from Lessee all damages it may incurby reason of such default, including the cost of recovering possession of thePremises, reasonable attorneys’ fees, delinquent rent and other charges duethrough the date of termination and the discounted present value (computed at8%) at the time of such termination of the rent and charges reserved in thisLease for the remainder of the stated term, all of which amounts shall beimmediately due and payable from Lessee to Lessor.

 

36.           Remedies Cumulative.  The various rights, options, elections andremedies of Lessor contained in the Lease shall be construed as cumulative andno one of them as exclusive of any of the other, or of any right or priorityallowed by law.

 

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37.           Waiver of Breach.  The waiver by the Lessor of any breach of anyterm, covenant or condition herein contained shall not be deemed to be a waiverof any subsequent breach of the same or of any other terms, covenant orcondition herein contained; that the acceptance of rent by the Lessor shall notbe deemed to be a waiver of any of the terms, covenants or conditions of thisLease, or of the remedies of Lessor herein (including the remedy of forfeitureof this Lease); that no term, covenant, condition or remedy herein shall bedeemed to be waived by Lessor unless such waiver be in writing by Lessor.

 

38.           Attorneys Fees.  If either party hereto institutes any actionor proceeding in court to enforce any provision hereof or for damages or otherrelief by reason of any alleged breach of any provision hereof, the prevailingparty shall be entitled to receive from the losing party all costs, includingreasonable attorneys’ fees.  If anylitigation or legal expense incurred by either party hereto in connection withany litigation commenced by or against the other party (other than condemnationproceedings) in which it shall without fault be made by a party, then it willbe entitled to recover against the opposite party all of its costs includingreasonable attorneys’ fees.

 

39.           Delinquent Payments.  If any payment or payments called for underthis Lease is not paid on the date due, Lessor shall have the right, withoutwaiving any breach or default by Lessee or any of its other rights herein, todemand and receive the unpaid sum together with the interest accrued thereonfrom the date of delinquency at the rate of one percent (1%) per month untilpaid.

 

40.           No Accord And Satisfaction.  No payment by Lessee or receipt by Lessor ofa lesser amount than the monthly rent herein stipulated shall be deemed to beother than on account of rents due, nor shall any endorsement or statement onany check or any letter accompanying any check or payment of rent be deemed andaccord and satisfaction, and Lessor may accept such check or payment withoutprejudice to Lessor’s rights to recover the balance of such rent or otheramount or pursue any other remedy in this Lease.  In the event that the rent or any othermonies which are due hereunder by Lessee are delinquent, Lessor may, upon thereceipt of any payments, apply them to any account or period it shall determinein its discretion.

 

41.           Damage to Premises.  If there is a partial “material” or totaldestruction of the Premises and Lessor, in its sole discretion, elects not torebuild or repair the same, this Lease shall terminate as of the date of suchdestruction upon written notice from Lessor to Lessee of Lessor’s determinationnot to rebuild or repair, such notice to be given within thirty (30) days ofthe date of such destruction.  In theevent of such termination, Lessee shall forthwith surrender the Premises andshall be relieved of all liability for any further rental and Lessor shallrefund any unearned rent paid in advance by Lessee and shall be therebyreleased from any obligation or duty to Lessee. Lessee hereby waives any and all claims for damage and shall not beentitled to any damages for any loss occasioned by any such injury to ordestruction of said Premises or any of Lessee’s property.  As used herein, “material” partialdestruction will mean destruction to a portion of the Premises which will, inthe reasonable opinion of the parties, require 12 months or more tosubstantially complete the repair.

 

42.           Condemnation.  In the event the whole or any portion of thePremises shall be taken or condemned by any duly constituted authority or anycondemnation suit is instituted, Lessee will peaceably surrender and deliver upto Lessor possession of the portion of the Premises so taken or condemned andRent shall be appropriately abated.  Inthe event of a condemnation of a nonmaterial part of the Premises, such partialcondemnation shall not annul or void this Lease.  In the event of a condemnation of such partor such form, shape or reduced

 

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area as to render the Premises not effectivelyusable for the purpose for which the property is demised, or in the event of acondemnation of all of said Premises, this Lease shall terminate as of the datewhen the condemning authority has become entitled to, and does take actual possessionof the property condemned.  In the eventof any condemnation, it is understood and agreed that the Lessor shall beentitled to, and shall receive and retain, any award made as compensation foror in respect of the land, buildings, improvements and fixtures actually takenand also any award for or in respect of damages sustained to the land orportion of the buildings or other improvements and fixtures not taken by reasonof the severance there from of the land and/or portion of building actually taken.

 

43.           Surrender Upon Termination.  At the expiration of the term or anyextension thereof or any sooner termination of this Lease, Lessee shall quietlyquit and surrender the Premises to Lessor, without notice of any kind, noticebeing expressly waived, together with all improvements upon the Premises orbelonging to Lessor, by whomsoever made, in good repair, order and condition,except for reasonable wear and tear. Lessee’s obligation to observe and perform this covenant shall survivethe expiration or sooner termination of Lessee’s rights hereunder.

 

44.           Holding Over of Premises.  If upon termination of the Lease as hereinprovided, Lessee withholds possession of the Premises from Lessor from andafter the date of such termination without the written consent of Lessor, theLessor shall be entitled to monthly rent equal to $10,000.  The provisions herein concerning Lessee’sincreased liability in the event of wrongful withholding of the Premises fromthe Lessor shall not be deemed to be a waiver of any breach by Lessee of anycovenant herein contained or of any of Lessor’s rights herein, and shall notprejudice any other remedy or right of action which the Lessor may have forcollection of arrears of rent or for other or preceding breach of covenant byLessee.  Any holding over after theexpiration of the said term, or any extension or renewal thereof, with thewritten consent of the Lessor, shall be construed to be a tenancy from month tomonth only, and shall otherwise be on the same terms and conditions hereinspecified, so far as applicable.

 

45.           Lessor’s Right to Assign andTransfer Security.  Subject tothat certain Right of First Refusal of even date herewith between Lessor andLessee and that certain Right of First Offer of even date herewith betweenLessor and Lessee, Lessor may, without consent of Lessee, sell, assign,mortgage, transfer or hypothecate all of its right, title and interest in thisLease, in the improvements constructed on the property demised hereunder, orits interest in the property of which said Premises is a portion, to the extentof its right, title, and interest therein. In the event Lessor proposes to sell, assign, mortgage, transfer orhypothecate all or any portion of Lessor’s right, title or interest in thisLease and the prospective purchaser, assignee, mortgagee or other financialsource requires verification of Lessee’s financial condition on the income andexpense of Lessee’s obligations on the Premises, Lessee will furnish to Lessor,upon request, any and all financial statements or records reasonably necessaryto verify such financial condition and income and expense.

 

46.           Lessor’s Failure to Perform.  Lessor shall not be deemed to be in defaultin the performance of any obligation required by it under this Lease unless anduntil it has failed to perform such obligation within thirty (30) days afterwritten notice by Lessee to Lessor, specifying wherein Lessor has failed toperform such obligation; provided that if the nature of Lessor’s obligation issuch that more than thirty (30) days are required for its performance, Lessorshall not be in default if Lessor commences to cure the default within suchthirty (30) day period and thereafter diligently prosecutes the same tocompletion.  If Lessor fails to cure any 

 

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such default within the time periods so specified,Lessee may perform them on Lessor’s behalf and deduct the cost therefore fromRent and Additional Rent due hereunder.

 

47.           Time of Essence.  Time and exact performance are of the essenceof this Lease and all parts and paragraphs thereof.

 

48.           Force Majeure.  In the event that either party hereto shallbe delayed or hindered in or prevented from the performance of any act requiredhereunder by reason of strikes, failure of power, restrictive governmental lawsor regulations, governmental action or inaction, riots, insurrection, war orother reason of a like nature not the fault of the party delayed in performingwork or doing acts required under the terms of this Lease, then performance ofsuch act shall be excused for the period of the delay and the period for theperformance of such act shall be extended for a period equivalent to the periodof such delay.  It is understood,however, that this provision shall not operate to excuse Lessee from the promptpayment of rents or any other payments required by the terms of the Lease.

 

49.           Notices.

 

a.             Generally.  Any and all notices, demands, consents,approvals, offers, elections and other communications required or permittedunder this Lease shall be deemed adequately given if in writing addressed tothe recipient of the notice at the addresses set forth below (or to such otheraddresses as the parties may specify by due notice to the others) and the sameshall be delivered either (i) by hand, (ii) by mail, postage prepaidand registered or certified with return receipt requested, (iii) byFederal Express or similar expedited commercial carrier, with all freightcharges prepaid, or (iv) by facsimile transmission or email with a hardcopy to follow by Federal Express or similar expedited commercial carrier.

 

b.             Receipt of Notices.  All notices required or permitted to be senthereunder shall be deemed to have been given for all purposes of this Leaseupon the date of acknowledged receipt or upon the date of receipt of refusal.  Notices or other communications(i) given by mail will be presumed received on the fifth business dayafter they are mailed, (ii) given by Federal Express or similar expeditedcommercial carrier will be presumed received on the next business day afterthey are sent, (iii) given by facsimile transmission will be presumedreceived at the time indicated in the recipient’s automatic acknowledgment, and(iv) given by email will be presumed received on the day the email issent.  Whenever under this Agreement anotice is either received on a day which is not a business day or is requiredto be delivered on or before a specific day which is not a business day, theday of receipt or required delivery shall automatically be extended to the nextbusiness day.

 

c.             Addresses.  All such notices shall be addressed:

 

if to Lessor, to:

 

Maui Land & Pineapple Company, Inc.

P.O. Box 187

Kahului, Hawaii 96733-6687

Attention: Ryan Churchill

Email: rchurchill@mlpmaui.com

Facsimile: (808) 669-5454

 

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with a copy to:

 

Kiefer & Garneau, LLC

444 Hana Highway, Suite 204

Kahului, Hawaii 96732

Attention:  Richard J. Kiefer, Esq.

Email: RickKiefer@hawaii.rr.com

Telephone: (808) 871-9700

Facsimile: (808) 871-6017

 

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if to Lessee, to:

 

TY Management Corporation

c/o Fast Retailing Co., Ltd.

Midtown Tower

Akasaka 9-7-1, Minato-Ku

Tokyo, 107-6231 Japan

Attention: Hiroyuki Uchida

Email: hiroyuki.uchida@fastretailing.com

Telephone: (81-3) 6865-0040

Facsimile: (81-3) 6865-0061

 

with a copy to:

 

Carlsmith Ball LLP

One Main Plaza, Suite 400

2200 Main Street, P.O. Box 1086

Wailuku, Maui, HI  96793-1086

Attention:  B. Martin Luna, Esq.

Email: bml@carlsmith.com

Telephone: (808) 242-4535

Facsimile: (808) 244-4974

 

with a copy to:

 

Carlsmith Ball LLP

ASB Tower, Suite 2200

1001 Bishop Street

Honolulu, HI 96813

Attention: Robert E. Strand, Esq.

Email: rstrand@carlsmith.com

Telephone: (808) 523-2525

Facsimile: (808) 523-0842

 

d.             Address Changes.  By notice given as herein provided, theparties hereto and their respective successors and assigns shall have theright, from time to time and at any time during the term of this Lease, tochange their respective addresses effective upon receipt by the other partiesof such notice

 

50.           Waiver of Jury Trial andCounterclaims.  Lessor and Lesseehereby waive trial by jury in any action or proceeding brought by either of theparties hereto against the other party on any matters whatsoever arising out ofor in any way connected with this Lease, the relationship of landlord andtenant, Lessee’s use or occupancy of the Premises, and/or any claim of injuryor damage.  To facilitate the resolutionof questions of possession, if Lessor commences any proceedings for summarypossession, if for nonpayment of rent or for any other cause, Lessee will notinterpose any counterclaim of whatever nature or description in any suchproceedings.  Lessee shall have the rightto assert such claims in a separate action or actions brought by Lessee.

 

51.           All Agreements are ContainedHerein; No Party Deemed Drafter.  This Lease contains all of the terms,covenants, conditions, stipulations, agreements and provisions agreed 

 

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upon between the parties hereto in relation to thePremises and this Lease supersedes and cancels each and every other agreement,promise and/or negotiation between the parties with reference to thePremises.  Lessor and Lessee agree thatneither party shall be deemed to be the drafter of this Lease and in the eventthis Lease is ever construed by a court of law, such court shall not construe thisLease against either party as the drafter of this Lease.

 

52.           No Increase of Lessee’sEstate.  Lessee hereby waives andrelinquishes any and all rights given to a lessee under Chapter 516 of theHawaii Revised Statues (1968), as amended from time to time, or any similar lawwhich may be enacted at any time during the term giving Lessor the right toexpand Lessee’s leasehold estate under this Lease, which Lessee would not haveunder the terms of this Lease in the absence of such chapter or such law, it beingunderstood and agreed by and between Lessor and Lessee that the provisions ofsuch chapter or such law shall not apply to this Lease.  Any attempt by Lessee or any person claimingby or through Lessee to expand its estate under this Lease pursuant to suchchapter or such law shall be a breach of this Lease.

 

53.           Recordation.  This Lease shall not be recorded by Lessor orLessee.  Concurrently herewith, a shortform memorandum of this Lease in the form attached as Exhibit Cshall be recorded in the Bureau of Conveyances of the State of Hawaii.

 

54.           Headings.  The paragraph headings are inserted merelyfor convenience and are not to be construed as part of this Lease or in any wayaffecting it.

 

55.           Severability.  If any provision of this Lease shall be foundor held to be illegal, such illegality shall not affect the remainder of thisLease, which shall remain in full force and effect.

 

56.           Definitions.  Words in the singular or plural signify boththe plural and singular; the use of any gender shall include all genders; andeach of the terms “or” and “and” has the meaning of the other or both where thesubject matters, sense and context require such construction.

 

57.           Matters Upon LeaseTermination.

 

a.             Lease Termination Prorations.  All real property taxes and utility chargesfor the Premises shall be prorated for periods prior to the Effective Date andfollowing the Termination Date based on the actual number of days in therespective billing periods when such dates occur and the actual number of days elapsed.  On the Termination Date, Lessee shall deliverto Lessor cash in the amount of all deposits received by Lessee for the use ofthe Premises for periods following the Termination Date.  Lessee shall reimburse Lessor each month forany gift cards redeemable at the Golf Academy issued by Lessee at any timeprior to termination of the Lease (including prior to commencement of theLease) and accepted for redemption by Lessor within fifteen (15) days followingthe last day of the month in which such gift certificate is accepted forredemption by Lessor.  Any paymentsreceived by Lessor each month with respect to the use of the Premises forperiods following the Effective Date and prior to the Termination Date shall bepaid by Lessor to Lessee within fifteen (15) days following the last day of themonth in which the payment is received; provided, however, that Lessor mayoffset from any such payments the outstanding amount of any gift certificatesaccepted for redemption by Lessor.

 

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b.             Revenues and Expenses.

 

(1)           All other revenues andexpenses for the Golf Academy shall be allocated between Lessor and Lessee asprovided herein, effective as of the end of the day night audit process, but nolater than 5:00 a.m. Hawaiian Time, on the Termination Date (the “Cutoff Time”),determined in accordance with sound accounting principles, consistentlyapplied.  Except as otherwise expresslyprovided for in this Lease, Lessee shall be entitled to all revenue and shallbe responsible for all expenses for the period of time up to but not includingthe Cutoff Time, and Lessor shall be entitled to all revenue and be responsiblefor all expenses for the period of time from, after and including the CutoffTime.

 

(2)           Lessor shall promptly payand reimburse Lessee for the following: (i) petty cash funds and house banks on hand at the Golf Academy asof the Cutoff Time; (ii) guest ledger balance as of the Cutoff Time;(iii) unexpired portions of prepaid expenses for all contracts assumed byLessor, if any, to include (but not limited to) deposits, dues and memberships,maintenance agreements, advertising contracts, licensing agreements andsoftware support agreements; (iv) prepaid amounts of taxes andassessments; (v) prepaid amounts of city, county and state permit andlicense fees (if transferable) allocable to the period following the CutoffTime and any deposits assumed by Lessor in connection with any such permits andlicenses; and (vi) for all contracts that are assumed by Landlord upontermination, security deposits paid by Lessee to outside vendors and suppliersto the Golf Academy (provided such security deposits remain on deposit for thebenefit of Lessor).

 

c.             Reconciliation.  Except as otherwise provided herein, anyrevenue or expense amount that cannot be ascertained with certainty as of theTermination Date shall be prorated on the basis of the parties’ reasonableestimate of such amount, and shall be the subject of a final proration withinninety (90) days after Termination Date, or as soon thereafter as a preciseamount can be ascertained.  Lessor shallpromptly notify Seller when it becomes aware that any such actual amount hasbeen ascertained.  Once all revenue andexpense amounts have been ascertained, Lessor shall prepare a final prorationstatement which shall be subject to Lessee’s approval.  Upon Lessee’s acceptance and approval of anysuch final proration statement, such statement shall be conclusively deemed tobe accurate and final and Lessee and Lessor shall each make any furtheradjustments required by such final proration statement.  Lessee shall be entitled to an accountingfrom Lessor with respect to any such revenue and expense amount, which issubject to allocation between Lessor and Lessee.

 

d.             Customer Relation Data.  At Lease termination, Lessee shall retain one(1) set of customer relationship management (CRM) data for the GolfAcademy.

 

58.           Miscellaneous.  Any agreement hereafter made shall beineffective to change, modify, discharge or effect an abandonment of this Leasein whole or in part unless such agreement is in writing and signed by the partyagainst whom enforcement of the change, modification, discharge or abandonmentis sought.  The laws of the State ofHawaii shall govern the validity, performance and enforcement of thisLease.  Any action under or related tothis Lease shall be brought in a court of competent jurisdiction in the Stateof Hawaii.  The covenants and conditionsherein contained shall, subject to the provisions as to assignment, apply toand bind and inure to the benefit of the respective successors and permittedassigns of the parties hereto.

 

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INWITNESS WHEREOF, Lessor and Lessee have executed this Lease effective the dayand year first above written.

 
| ** ** | **MAUI  LAND & PINEAPPLE COMPANY, INC.** |
|------------|--------------------------------------------------------|
| ** ** | ** **                                             |
| ** ** | ** **                                             |
|       | By                                                     | /s/  RYAN CHURCHILL |
|       |                                                   | Name:  Ryan Churchill |
|       |                                                   | Its:  President & COO |
|       |                                                   |   |
|       |                                                   |   |
|       | By                                                     | /s/  TIM ESAKI |
|       |                                                   | Name:  Tim Esaki |
|       |                                                   | Its:  CFO |
|       |                                                   |   |
|       |                                                   |   | **Lessor** |
| ** ** | ** **                                             |
| ** ** | ** **                                             |
| ** ** | **TY  MANAGEMENT CORPORATION**, a  Hawaii corporation  |
| ** ** | ** **                                             |
| ** ** | ** **                                             |
|       | By                                                     | /s/  TADASHI YANAI |
|       |                                                   | Name:  Tadashi Yanai |
|       |                                                   | Title:  President |
|       |                                                   |   |
| ** ** | ** **                                             | ** ** | **Lessee** |

 

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