**Exhibit 10.2**

 

**BAY GOLF COURSE LEASE**

 

THISLEASE (the “Lease”) is made and entered into effective Oct 1, 2010 (the “EffectiveDate” or “Commencement Date”), by and between **TYMANAGEMENT CORPORATION**, a Hawaii corporation, whose address isc/o Carlsmith Ball LLP, One Maui Plaza, Suite 400, Wailuku, Hawaii96793-1086 (“Lessor”), and **KAPALUA PLANTATION GOLFLLC**a Hawaii limited liability company, whose address is P.O. Box 187,Kahului, Hawaii  96733-6687, (“Lessee”);

 

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

 

1.             Premises.  Lessor does hereby (a) demise and letunto Lessee, and Lessee does hereby lease and hire from Lessor, that certainreal property more particularly described on Exhibit A attached heretoand incorporated herein by reference commonly known as the “Kapalua Bay GolfCourse”, together with all buildings and other improvements located thereon,and any rights, easements or appurtenances belonging to the same or held andenjoyed in connection therewith, subject, however, to the encumbrances setforth in said Exhibit A and (b) sublease to Lessee the KapaluaGolf Academy (the “Golf Academy”) as more particularly described in thatcertain Golf Academy Lease and Grant of Golf Academy Easement, both of evendate herewith between Maui Land & Pineapple Company, Inc. (“MLP”)and Lessor (hereinafter collectively called the “Premises” or the “Golf Course”).

 

2.             Term.  This Lease shall be for a term (the “Term”)commencing on the Effective Date and ending on March 31, 2011 (the “TerminationDate”), unless such term shall be sooner terminated as hereinafter provided.

 

3.             QuietEnjoyment.  Upon payment by Lessee ofthe rent, additional payments and all other charges to be borne by Lessee asset forth in this Lease, and upon Lessee’s observance and performance of all ofthe terms, covenants and conditions hereinafter contained, Lessee shallpeaceably and quietly enjoy the Premises for the term hereof without hindranceor interruption by Lessor or any other persons lawfully claiming by, through orunder Lessor, except as expressly provided in this Lease.

 

4.             Rent.  No base or percentage rent is payable underthis Lease.  If any charge or additionalrent due hereunder shall not be received when due, then a late fee in theamount of five percent (5%) of the amount due which shall be due Lessor fromLessee within ten (10) days of written demand therefore.

 

5.             Paymentsand Expenses To Be Borne By Lessee. Lessee shall pay the following:

 

a.             RealProperty Taxes and Assessments. Lessee will pay directly to the taxing authority before delinquency, allreal property taxes and assessments of every description assessed against thePremises that Lessor or Lessee in respect thereof may be assessed or becomeliable, whether assessed to or payable by Lessor or Lessee, during the term ofthis Lease, pro rated for periods prior to the Commencement Date and as of theTermination Date.  The regular assessmentof real property taxes for the County of Maui’s 2011 fiscal year that is agreedto be allocable to the Golf Course is set forth in Schedule 7.1.1(a) ofthe Kapalua Bay Golf Course Sale, Purchase and Escrow Agreement datedSeptember     , 

 

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2010,between Lessor and Lessee’s parent company, Maui Land & PineappleCompany, Inc. (“MLP” or “Guarantor”).

 

b.             UtilityCharges and Service.  Lessee willpay, before delinquency, all charges for potable water, irrigation water, gas,sewer service, refuse collection, electricity, telephone, cable television, andother utility and similar charges arising from the use of the Premises.  Unless caused by the gross negligence orwillful misconduct of Lessor, Lessor shall not be responsible for anyinterruption or failure in the supply of any utilities to the Premises.

 

c.             Taxon Lease Payments.  In addition tothe rents reserved above, Lessee shall pay to Lessor, as additional rent,together with each payment of rent or any other payment required hereunderwhich is subject to the State of Hawaii general excise tax on gross income, asit may be amended from time to time, or any successor or similar tax, an amountwhich, when added to such rental or other payment (currently 4.166% of eachsuch payment), shall yield to the Lessor, after deduction of all such taxpayable by Lessor with respect to all such rent and other payments, a netamount equal to that which Lessor would have realized from such payments had nosuch tax been imposed.

 

d.             OtherTaxes.  Further Lessee shall beresponsible for and shall pay before delinquency all municipal, state or countytaxes assessed during the term of this Lease against it by reason of theconduct of its business in the Premises or with respect to personal property ofany kind, owned by or placed in, upon or about the Premises by and/or at theexpense of Lessee.

 

e.             OtherPayments.  Lessee will pay, beforedelinquency, all rents, fees, charges, assessments and expenses payable byLessor under the terms of the contracts and agreements described in Section 8.bof this Lease, prorated for periods prior to the Commencement Date and as ofthe Termination Date.

 

f.              SecurityDeposit.  Lessee, contemporaneouslywith the execution of this Lease, has deposited with Lessor the sum of$100,000.00 to be held by Lessor as security for the faithful performance byLessee of all of the terms, covenants and conditions of this Lease by Lessee tobe kept and performed during the term hereof. The security deposit may be commingled by Lessor with other funds of theLessor and shall bear no interest.  If,at any time during the term of this Lease, any charge or additional rentpayable by Lessee to Lessor hereunder shall be overdue and unpaid beyondapplicable cure periods, then Lessor may, at the option of Lessor (but Lessorshall not be required to) appropriate and apply any portion of said deposit tothe payment of any such overdue amount. In the event of the failure of Lessee to keep and perform any of theterms, covenants and conditions of this Lease to be kept and performed byLessee beyond applicable cure periods, then at the option of Lessor said Lessormay appropriate and apply said entire deposit, or so much thereof as may benecessary, to compensate Lessor for all loss or damage sustained or suffered byLessor due to such breach on the part of Lessee.  Should the entire deposit, or any portionthereof, be appropriated and applied by Lessor for the payment of overdueamounts due and payable to Lessor by Lessee hereunder, then Lessee shall, uponthe written demand of Lessee’s, forthwith remit to Lessor a sufficient amountin cash to restore said security to the amount held by Lessor prior to suchappropriation and application and Lessee’s failure to do so within ten (10) daysafter receipt of such demand shall constitute a default hereunder entitlingLessor to immediately invoke the remedies set forth in paragraph 35,including the termination of this Lease. Should Lessee comply with all of said terms, covenants and conditionsand promptly pay all of the amounts payable by Lessee to Lessor hereunder, thesaid deposit shall be returned in full to 

 

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Lesseeafter Lessee shall have vacated the Premises at the end of the term of thisLease or upon the earlier termination of this Lease.  In the event any bankruptcy, insolvency,reorganization or other creditor-debtor proceedings shall be instituted by oragainst Lessee, the security deposit shall be deemed to be applied first topayment of any amounts due Lessor for all periods prior to the institution ofsuch proceedings, and the balance, if any, of the security deposit may beretained by Lessor in partial liquidation of Lessor’s damages.  Lessor may transfer and/or deliver thesecurity, as such, to any purchaser of Lessor’s interest in the Premises andthereupon Lessor shall be discharged from any further liability in referencethereto.

 

6.             Guaranty.  This Lease and the terms, provisions andobligations contained herein, including, without limitation, the completion ofthe Approved Capital Improvements (defined in Section 11 below), will beguaranteed by MLP, pursuant to a guaranty agreement in the form attached heretoas Exhibit B.

 

7.             AcceptanceOf Premises.

 

a.             Premisesin “As Is, Where Is” Condition.  Itis expressly understood and agreed that Lessor has not made any representationor warranty, express or implied, regarding any aspect of the Premisesincluding, but not limited to, the implied warranties of merchantability,fitness for a particular purpose, suitability, habitability, quality, physicalcondition, value or profitability, and Lessor hereby disclaims any and allliability for any and all such representations and warranties.  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 in leasing thePremises.  Without limiting thegenerality of the foregoing, Lessee acknowledges that (x) it has made allinspections, investigations and analyses deemed necessary or appropriate todetermine compliance by the Premises with all Hazardous Materials Laws that mayapply to the Premises, and (y) Lessor has made no representation orwarranty, express or implied, concerning the Premises’ compliance withHazardous Materials Laws.  Lesseeacknowledges and agrees that it is leasing the Premises in its “as is, where is”condition, with all faults, if any, and subject to termination rights describedherein, that Lessee has assumed all risks regarding all aspects of thePremises, 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, Lesseeexpressly releases Lessor from any and all liability and claims that it mayhave against Lessor, its successors and assigns with regard to HazardousMaterials presently existing or hereafter placed on the Premises, and Lesseehereby agrees to indemnify, defend and hold Lessor harmless from and againstany 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(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-up and remediation thereof.  Lessor shall and does hereby indemnify,defend and hold harmless Lessee and Lessee’s members, officers, directors,agents, employees and invitees from and against any and all claims, lawsuits,liabilities, costs, fees (including reasonable 

 

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attorney’sfees) and expenses of every kind and nature relating to or rising from a LessorHazmat Liability.  The provisions of thisparagraph 7 shall survive the termination of this Lease.

 

b.             Adjacentand Nearby Property Uses.  Lessee,for itself and any person or entity claiming by, through or under it,understands and acknowledges that the Premises are adjacent to or nearby landsused for the operation of a pineapple plantation and other agriculture relatedactivities and such other uses as may be permitted by law on said lands, andthat Lessee desired and sought the Premises with the understanding that thePremises may be affected by nuisance or hazards to persons and property fromsuch operations and related activities. Lessee covenants and agrees for itself, its permitted assigns,transferees, and any other party claiming by, through or under it that itassumes all such risks associated with such location and that it shall defendand hold Lessor harmless from any liability, claims or expenses, includingattorneys’ fees, property damage, personal injury, or wrongful death arisingfrom such operations and activities, and further covenants and agrees that theowners and occupants of such lands shall have the right, in the nature of aneasement, to perpetually discharge, emit, diffuse, and inflict over and uponthe Premises noise, smoke, soot, dust, lights, noxious vapors, odors, and othernuisances of every description arising from or incidental to the operation ofthe foregoing and other activities, subject only to zoning and other legalrestrictions on use.

 

8.             Use;Continuation of Golf Course Operations By Lessee.  Prior to the date of this Lease, the Lessee’sultimate parent company was the owner of the Premises and used the Premises forthe operation of the 18-hole championship Kapalua Bay Golf Course, including aclubhouse, pro shop, driving range, practice facilities, a leased restaurantoperation and tennis gardens (the “Golf Course Operations”).  Lessee shall continue to use the Premisesduring the term hereof solely for the Golf Course Operations and for no otherpurpose without the prior written consent of Lessor, which consent may bewithheld by Lessor in its sole discretion. In connection with Lessee’s use and occupancy of the Premises, Lesseeagrees as follows:

 

a.             GolfCourse Standard.  So long as Lessorabides by all of its obligations hereunder, Lessee shall operate the GolfCourse in a manner that will ensure that the Golf Course would be reasonablyconsidered by an independent person knowledgeable about the operation of resortgolf courses in Hawaii to be consistent with the standards at which mid-rangeresort golf courses open to public play in the State of Hawaii are used,operated and maintained (the “Golf Course Standard”).  As of the Commencement Date, the mid-rangeresort golf courses open to public play in the State of Hawaii are stipulatedto include the Golf Course and the Wailea Resort’s Bay course, the MakenaResort’s North course, the Waikoloa Resort’s Beach Course, the Mauna LaniResort’s South course, the Princeville Resort’s Makai course, the RoyalKaanapali and the Kaanapali Kai golf courses.

 

b.             GolfCourse Agreements.  Lessee shall, atLessee’s sole cost and expense, observe and perform all of the Lessor’s obligationsunder (i) 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 MLP W2005Kapalua/Gengate Hotel Realty, L.L.C. and The Ritz-Carlton Hotel Company,L.L.C., (ii) that certain LPGA Tournament Agreement of even date made byand between MLP and Lessor, (iii) Agreement for Water Delivery (Bay GolfCourse) of even date made by and between MLP and Lessor, (iv) that certainKWC Water Transmission Agreement of even date herewith, (v) that certainGrant of Golf Course Facilities Easement of even date made by and between MLPand Lessor covering, among other things, the Site 6-0 Maintenance Facility,(vi) the 

 

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easementsand agreements listed in that certain Assignment of Easements and Agreementsdated of even date herewith made by MLP and Kapalua Land Company, Ltd. (“KLC”)in favor of Lessor, (vii) the Declaration of Covenants, Conditions andRestrictions (Bay Course) of even date made by MLP as Declarant, (viii) thecertain Golf Course Use Agreement (Kapalua Club) of even date between MLP andLessor, (ix) that certain Grant of Bay Course Private Water SystemAgreement of even date made by and between MLP and Lessor, (x) thatcertain Golf Academy Lease of even date made between MLP and Lessor, (xi) thatcertain Golf Academy Grant of Easement of even date between MLP and Lessor, and(xii) any other easements or agreements listed in Exhibit A.  During the term of this Lease, Lessee shallbe entitled to all rents, reimbursements or other payments otherwise due Lessorunder such agreements which shall be prorated for the periods prior to theCommencement Date and as of the Termination Date based on the actual number ofdays in the respective months when such dates occur and the actual number ofdays elapsed.  Lessee shall have no rightto amend the terms and conditions of any of the foregoing agreements orinstruments without the prior written consent of Lessor, which consent may bewithheld by Lessor in its sole discretion.

 

c.             RestaurantSublease.  Lessee shall, at Lessee’ssole cost and expense, observe and perform all of the Lessor’s obligations asLandlord under that certain Restaurant Lease dated November 8, 2004, asamended, with Calmaui, Inc., as Tenant (the “Restaurant Lease”).  During the term of this Lease, Lessee shallbe entitled to all rents and other periodic charges payable by Tenant under theRestaurant Lease which shall be prorated for the periods prior to theCommencement Date and as of the Termination Date based on the actual number ofdays in the respective months when such dates occur and the actual number ofdays elapsed.  Lessee shall have no rightto amend the Restaurant Lease without the prior written consent of Lessor,which consent may be withheld by Lessor in its sole discretion.

 

d.             Declarations.  Lessee shall, at Lessee’s sole cost andexpense, observe and perform all of the Lessor’s obligations, including paymentobligations, under (i) the Amended and Restated Declaration of Covenantsand Restrictions for the Kapalua Resort dated September 30, 1987, asamended from time to time, and (ii) the Declaration of Covenants,Conditions, and Restrictions (Bay Course) dated concurrently herewith.  Any payment obligations of Lessor under suchDeclarations shall be prorated for periods prior to the Commencement Date andas of the Termination Date based on the actual number of days in the respectivebilling periods when such dates occur and the actual number of days elapsed.

 

9.             OperationalPlans and Reports.

 

a.             AnnualPlans.  Lessee shall prepare andsubmit to Lessor for Lessor’s reasonable approval an annual plan for theoperation of the Golf Course by Lessee, which plan shall include Lessee’sprojected income and budgeted expenses for the year, including the number ofrounds projected to be played during such year broken down by each guest orother category, a schedule of the Lessor-approved capital improvements to becompleted in such year and such other information as may be reasonablyrequested by Lessor.  The annual plan forcalendar year 2010 has been submitted to Lessor and the Lessee’s plan for thefirst quarter of 2011 shall be submitted to Lessee by October 15,2010.  Along with each annual plan,Lessee shall also submit to Lessor a report on Lessee’s compliance with theGolf Course Standard described in paragraph 8(a) above.

 

b.             QuarterlyReports.  Within thirty (30) days ofthe end of each calendar quarter during the term of this Lease, Lessee shallprovide Lessor with a written report showing the operating results for suchquarter and year to date, including income and 

 

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expenses,the number of golf rounds played, including paid rounds by each guest or othercategory, expenditures made for capital improvements approved by Lessor, andsuch other information as Lessor may reasonably request.

 

10.           Reserved.

 

11.           CapitalImprovements.  Lessee has submittedto Lessor, and Lessor has approved, the schedule of capital improvements to theGolf Course attached hereto as Exhibit D (“Approved CapitalImprovements”).  Lessee shall completeall of the Approved Capital Improvements prior to the expiration of the Term orsuch earlier applicable completion deadline as is set forth in Exhibit D,provided however, that if Lessee is actually delayed in completing any of theApproved Capital Improvements by such deadlines by events beyond Lessee’sreasonable control, including without limitation permitting processes,governmental action, delay or inaction, or natural events, then the deadline tocomplete the delayed improvement(s) shall be extended for the period bywhich Lessee was actually delayed. Lessor shall reimburse Lessee for amounts paid by Lessee to complete theApproved Capital Improvements in amounts not to exceed the budgeted amounts setforth on Exhibit D within thirty (30) days of Lessor’s receipt ofLessee’s written request for such reimbursements accompanied by suchdocumentation as may be reasonably requested by Lessor to confirm that thecapital improvements have been completed by Lessee free and clear of all liensfor such work.  Any sums not paid byLessor to Lessee within ten (10) days of written notice from Lessee thatthe same is past due shall bear interest from the date due until paid in fullat the rate of twelve percent (12%) per year. Lessee shall have no obligation to undertake, and Lessor shall have noobligation to approve or reimburse, any other capital improvements to the GolfCourse during the Term.  This Section shallsurvive expiration of the Term.

 

12.           Alterationsand Improvements.

 

12.1         Lessee Obligation.  Except for the Approved Capital Improvements,Lessee shall not make any alterations, improvements or additions in or to thePremises, nor make any repairs requiring any such alteration, improvements oradditions, nor install any antennas, trade fixtures, exterior signs, interioror exterior lighting, plumbing fixtures, shade or awnings, without the prior writtenconsent of Lessor, which consent shall not be unreasonably withheld, delayed orconditioned.  As a prerequisite to anysuch consent, Lessee shall comply with and/or satisfy each of the followingconditions unless any of such conditions or requirements shall be waived byLessor in its sole discretion:

 

a.             Lesseeshall obtain Lessor’s approval of Lessee’s construction contractor(s) andarchitect who shall be licensed in the State of Hawaii, and Lessee shall submitcomplete plans and specifications for such alterations, improvements oradditions to the Lessor for Lessor’s prior written approval.

 

b.             Lessee,or its architect, shall, if plans and specifications are necessary, deliver toLessor upon completion of construction a certification setting forth the totalcost of such construction and certifying that such construction has beencompleted in compliance with the approved plans and specifications therefor.

 

c.             Lesseeshall furnish Lessor with evidence that all governmental approvals necessary tocommence construction have been obtained, including, without limiting thegenerality of the foregoing, a building and/or grading permit.  Any work, (which is not a Lessorresponsibility) not acceptable to any governmental authority or agency havingor 

 

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exercisingjurisdiction over such work shall be promptly replaced, at Lessee’s soleexpense, notwithstanding any failure by Lessor to object to any such work, andLessor shall have no responsibility therefor.

 

d.             Inaddition to any other insurance required under this Lease, during anyconstruction Lessee and/or its contractor shall maintain such commercialgeneral liability and other insurance policies as may be reasonably specifiedby Lessor, all of which policies shall be reasonably satisfactory to Lessor inform, content and amount of coverage, insuring Lessor, Lessee and such otherparties as Lessor shall reasonably specify against loss or damage to thirdparties or their property from hazards normally insured against in theconstruction industry with respect to construction of the type to be undertakenby Lessee.  Lessee shall deliver toLessor certificates of insurance certifying that such insurance is in fullforce and effect prior to commencing the construction of any alterations,additions or improvement on the Premises.

 

e.             Lesseeshall reimburse Lessor for any expense actually incurred by Lessor by reason ofrepair or replacement of faulty work done by Lessee or its contractors.

 

f.              Allwork by Lessee shall be diligently and continuously pursued from the date ofits commencement through its completion. Upon substantial completion of any construction, Lessee shall publish a “Noticeof Completion” as required under Section 507-43(f) of the HawaiiRevised Statutes and file an affidavit of publication of said Notice in theOffice of the Clerk of the Circuit Court of the Second Circuit, State ofHawaii, and shall provide a certified “filed” stamped copy thereof to Lessor.

 

12.2         LessorObligations.  Except as otherwiserequired in this Lease, any and all capital repairs and replacements approvedby Lessor in accordance with Section 11 or required to comply with lawsand legal requirements, will be made at the sole cost and expense of Lessor (“LessorWork”).

 

13.           ProtectionAgainst Construction 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 by Lessee,except to the extent such claims are the result of Lessor’s failure to meet itsfunding obligations under this Lease, in which case Lessor agrees to indemnify,defend and save Lessee and the Premises harmless from and against any and allsuch claims and for any liens in connection with any Lessor Work.  If a mechanics’ or materialmen’s lien shallbe filed against the Premises for, or purporting to be for, labor or materialalleged to have been furnished or to be furnished to or for Lessee, Lesseeshall bond against or discharge said lien within ten (10) days after thefiling of the application for the lien. If Lessee shall fail to bond against or discharge said lien asaforesaid, Lessor may pay the amount of such lien or discharge the same bydeposit or by bonding against such lien. In the event that Lessor shall discharge such lien as aforesaid, Lessormay require the lienor to prosecute an appropriate action to enforce suchclaim, and if said lienor shall prevail in its claim, Lessor may pay thejudgment recovered thereon.  Any amountpaid or expense incurred by Lessor pursuant to this paragraph 13 shall be paidby Lessee to Lessor upon demand, together with interest thereon from the dateof payment by Lessor at the rate provided in paragraph 39 hereinbelow.

 

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14.           Disclaimer. Notwithstanding anything in this Lease contained to the contrary,neither Lessor’s approval nor the approval of any architect or engineer engagedby Lessor of any plans or specifications submitted to Lessor or such architector engineer pursuant to the provisions of this Lease shall be deemed a warrantyor other representation on Lessor’s part to any person that such plans orspecifications or the improvements therein described are legal or structurallysafe or sound.

 

15.           Alterations Belonging to Lessor.  All alterations, improvements and additionsto the Premises shall remain for the benefit of the Lessor and shall not beremoved unless otherwise consented to in writing by Lessor, and shall bepresumed 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 inthe rate 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 be conducted any auction and/orsale by auction on the Premises or any fire sale or 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 course operations (e.g. fertilizers, pesticides,herbicides, machinery lubricants, cleaning and maintenance supplies) providedthat the same are used, kept, stored and disposed of in full compliance withall applicable Hazardous Materials Laws. If Lessee breaches the obligations stated in the preceding sentences, orif the presence of Hazardous Material on the Premises caused by Lessee resultsin contamination of the Premises in violation of Hazardous Materials Laws, thenLessee shall indemnify, defend and hold Lessor harmless from any and all claims,judgments, damages, penalties, fines, costs, liabilities or losses (including,without limitation, diminution in value of the Premises, and sums paid insettlement of claims, attorneys’ fees, consultation fees and expert fees) whicharise during or after the Lease term as a result of such contamination.  This indemnification of Lessor by Lesseeincludes, without 

 

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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 comply with Hazardous Materials Laws.  The foregoing indemnity shall survive theexpiration or earlier termination of this Lease.

 

b.             Definitions. As used herein, the term “Hazardous Material” means any hazardous ortoxic substance, material or waste, including, but not limited to, thosesubstances, materials and wastes listed in the United States Department ofTransportation Hazardous Materials Table (49 CFR 172.101) or by the UnitedStates Environmental Protection Agency as hazardous substances (40 CFR Part 302)or as defined in the Hawaii Hazardous Waste Law (Haw. Rev. Stat. Chapter 342J)and amendments thereto, or such substances, materials and wastes that are orbecome regulated under any applicable local, state or federal law.

 

c.             Disclosure. Upon Lessor’s written request, Lessee shall disclose to Lessor the namesand amounts of all Hazardous Material, or any combination thereof, which werestored, used or disposed of or on the Premises, or which Lessee intends tostore, use or dispose of or on the Premises in the future.

 

d.             Inspection. Lessor and its agents shall have the right, but not the duty, to inspectthe Premises during normal business hours following 48 hours’ prior writtennotice to determine whether Lessee is complying with the provisions of thisparagraph 17.  If Lessee is not incompliance with the provisions of this paragraph 17, Lessor shall have theright to immediately enter upon the Premises to remedy any contamination causedby Lessee’s failure to comply notwithstanding any other provision of thisLease.  Lessor shall use reasonableefforts to minimize interference with Lessee’s business but shall not be liablefor any interference caused thereby.

 

e.             Reports. To the extent Lessee is required to file any reports with the UnitedStates Environmental Protection Agency or any other federal, state, city orcounty agency having jurisdiction over Hazardous Material, Lessee shallconcurrently provide Lessor a copy of such report.

 

21.           Compliance With Disability Access Laws.  Except as otherwise set forth herein, Lesseehereby covenants and agrees with Lessor that Lessee shall at all times duringthe term of this Lease comply with any and all governmental regulation of thePremises regarding access of disabled persons, including without limitation,Titles III and V of the Americans with Disabilities Act of 1990, 42 U.S.C. Sec.12101 et seq. or any other similar federal, state or local laws or ordinancesand the regulations promulgated thereunder (collectively, the “DisabilityAccess Laws”); provided, however, (a) the costs of any such compliance, ifrequired as a result of any changes to the, or new, Disability Access Lawsafter the Effective Date, will be the sole responsibility of Lessor, and(b) Lessee shall not be obligated to undertake any renovations of orimprovements or modifications to the Golf Course to comply with the DisabilityAccess Laws except for the Approved Capital Improvements.  Unless any such claim concerns the physicalcondition of the Premises or is the result of Lessor failing to pay for thecost of any Landlord Work related to the compliance with Disability Access Laws(in which case the indemnity contained herein will be of Lessee by Lessor),Lessee shall indemnify, 

 

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defend and hold Lessor harmless from and against anyand all claims and demands for loss or damage, including claims fordiscrimination, personal injury, monetary damage or injunctive relief arisingout of or in connection with any failure or alleged failure of Lessee’s operationof the Premises to comply with the Disability Access Laws, and, unless causedby the failure of Lessor to pay for Approved Capital Improvements or for claimsrelated to the physical condition of the Premises arising after the EffectiveDate, Lessee shall reimburse Lessor for all costs and expense, includingreasonable attorneys’ and other professional or consultants’ fees, paid orincurred by Lessor in connection with the defense of any such claims including,but not limited to, all costs for research regarding settlement or otherpreventive measures which Lessor may take prior to the filing of such action orto attempt to prevent the filing of such an action.

 

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 and Lessor Workexcepted, including such repairs, and alterations as may be required by fireinsurance companies, by law, ordinance or regulation of any public authorityrelating to the use or occupancy of the Premises or otherwise.  Lessee will, at its own expense, replaceplate glass and other glass in the 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 reasonable times to the Premises andeach and every part thereof for purposes of inspecting same; making repairs (ifLessor elects to undertake any repairs due to Lessee’s failure to do so), andLessor shall be allowed to take all material into and upon the Premises thatmay be required therefor without the same constituting an eviction of Lessee inwhole or in part, without the lease rental and other fees and charges abatingand without any liability to Lessee or any loss or interruption of business ofLessee or any loss of occupation or quiet enjoyment of the Premises occasionedthereby; posting such notices as it may deem necessary for its protection orfor protection of the Premises; and for the purpose of showing same toprospective tenants, purchasers, mortgagees, and/or others.

 

24.           Expenditures by Lessor on Behalf of Lessee.  If Lessor shall make any expenditure or incurany liability which Lessee is required to make or pay under this Lease, theamount thereof shall be added to and deemed a part of the next succeedingpayment of rent thereafter falling due, and said amount shall bear interest atthe rate provided in paragraph 39 hereinbelow from the date paid by Lessoruntil repaid by Lessee.  Lessor may, atits option and at any time, terminate this Lease for failure on the part ofLessee to pay such amounts within thirty (30) days of written notice when due.

 

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25.           Indemnity. Lessee, as a material part of the consideration to Lessor for thisLease, will and does hereby assume all risk of bodily injury, wrongful deathand/or property damage, business interruption or economic loss occasioned byany accident, fire or nuisance made or suffered by Lessee or its officers,directors, agents, employees, contractors, invitees, customers, sublessees andlicensees (herein collectively called “Lessee’s Affiliates”) in the Premises orresulting from any failure on the part of Lessee to maintain the Premises in asafe condition, and Lessee hereby waives on its own behalf, and on behalf ofLessee’s Affiliates, all claims in respect thereof against Lessor and Lessor’sshareholders, employees, agents, licensees, contractors and invitees (hereincollectively called “Lessor’s Affiliates”) except claims arising from the actsor omissions of Lessor or Lessor’s Affiliates, and acknowledges that thisassumption of risk by Lessee has been bargained for in determining rent andother obligations of Lessee under this Lease. Lessee hereby agrees to indemnify and save harmless Lessor and Lessor’sAffiliates from and against any and all claims for bodily injury, wrongfuldeath and/or property damage, business interruption and economic loss by anyperson (including without limiting the generality of said term, Lessee’sAffiliates and Lessor’s Affiliates) arising out of, caused by, occasioned by orresulting from any accident, fire or nuisance in the Premises or Lessee’sfailure to maintain the Premises in accordance with this Agreement, exceptwhere such injury, death or loss is caused by the acts or omissions of Lessoror Lessor’s Affiliates.  Lessee furtheragrees to indemnify and save harmless Lessor, and Lessor’s Affiliates, from andagainst any and all liability, loss, costs, charges, fines, penalties,obligations or expenses of whatsoever nature in connection with any and allclaims by or on behalf of any person or persons, firm or firms, corporation orcorporations, arising from the conduct or management of any work or thingwhatsoever done by Lessee or Lessee’s Affiliates in or about the Premisesduring the Term, or from any transactions of Lessee concerning the Premises,and will further indemnify and save Lessor and Lessor’s Affiliates harmlessfrom any and all claims arising from any breach or default on the part ofLessee in the performance of any covenant or agreement on the part of Lessee tobe performed pursuant to the terms of this Lease, or arising from any act onthe part of Lessee or Lessee’s Affiliates, and shall reimburse Lessor andLessor’s Affiliates for all costs, reasonable attorneys’ fees, expenses andliabilities incurred in connection with any such claim or any action orproceeding brought thereon.  Lesseefurther agrees that in case of any claim, demand, proceeding, action or causeof action, threatened or actual, against Lessor or Lessor’s Affiliatesresulting from the matters for which Lessee indemnifies Lessor hereunder,Lessee, upon the written request of Lessor or any of Lessor’s Affiliates, shalldefend Lessor and Lessor’s Affiliates at Lessee’s expense by counsel reasonablysatisfactory to Lessor or Lessor’s Affiliates, as the case may be.  If Lessor or any of Lessor’s Affiliates doesnot request such defense or Lessee does not provide such defense, then Lesseewill reimburse Lessor and Lessor’s Affiliates as aforesaid, and agrees to cooperatewith Lessor and Lessor’s Affiliates in such defense, including, but not limitedto, providing of affidavits and testimony upon request of Lessor or Lessor’sAffiliates.

 

26.           Assumption of Risk by Lessee.  Lessee, as a material part of the considerationto Lessor for this Lease, will and hereby does assume all risk of loss ordamage to Lessee’s personal property, machinery, equipment, fixtures, supplies,merchandise, and other personal property, by whomsoever owned, stored or placedin, upon or about the Premises, and does hereby agree that Lessor shall not beresponsible for loss or damage to any such property, unless caused by thewillful act or gross neglect of Lessor or Lessor’s Affiliates, and Lesseewaives all claims in respect thereof and acknowledges that this assumption ofrisk by Lessee has been bargained for in determining rent and other obligationsof Lessee under this Lease.  Withoutprejudice to the generality of the foregoing, Lessor shall not be liable forloss or damage to any property entrusted to Lessor or Lessor’s Affiliates norfor loss or damage to any property at any time stored or kept in the Premises,either from rain or from any other water which may 

 

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leak, issue or flow from any part thereof, or fromthe pipes or plumbing of the same or from any other place or quarter, nor forany loss or damage to property in the Premises caused by theft, or by accidentinvolving escalators, or for damage of any character.

 

27.           Property Insurance.

 

a.             In General. Lessee shall at its own expense and at all times during the term keepall buildings, improvements, fixtures, and personal property by whomsoeverinstalled or constructed, now existing or hereafter erected on the Premises,insured against (i) all of the risks covered by a standard ISO CommercialProperty Special Causes of Loss Form written on a replacement cost basis,without deduction for depreciation, with an agreed value endorsement, (ii) a“difference in conditions” policy providing coverage limits for risk of loss byearthquake of $25,000,000 and flood of $20,000,000, (iii) such otherhazards or risks which a prudent businessman would insure against, includingplate glass insurance and business interruption insurance in an amountsufficient to insure payment of rent, real property taxes and assessments,insurance and other fixed costs for not less than twelve (12) months during anyinterruption of Lessee’s business on the Premises from any risk covered under (i) and(ii) above, and (iv) in time of war against war damage, if availableat reasonable cost.  This coverage shallbe in an amount equal to the full replacement cost of such buildings,improvements, fixtures and personal property and shall not have deductibles inexcess of $250,000 AOP and flood, 5% wind, and 5% earthquake.  Lessee hereby waives any and all rights ofsubrogation which it may have against Lessor and any insurance carrier ofLessor.  Such insurance shall contain astandard mortgagee clause which shall provide that any reference to a mortgageein such policy shall mean and include all holders of mortgages of any interestsin the Premises, 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.

 

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28.           Liability Insurance.

 

a.             In General. Lessee shall maintain at its own expense during the term a policy orpolicies of “commercial general liability” insurance on an “occurrence” basisincluding coverage for bodily injury and property damage, personal injury andmedical payments, naming Lessor as an additional insured thereunder, withlimits not less than those set forth in subparagraph 28.b below.  The commercial general liability insuranceshall specifically cover blanket contractual liability, fire damage legalliability, host liquor liability if liquor will be sold, serviced ormanufactured on the Premises, personal and advertising liability, medicalpayments, premises and operations liability and products/completed operationsliability.  Lessee shall periodically,but not less frequently than annually, reevaluate the scope of the riskscovered and the liability limits of such insurance policies and, if necessary,increase such coverage or liability limits in order to provide coverage ofrisks and liability limits which a prudent businessman would provide undersimilar circumstances.  Lessee shall alsoincrease the liability limits or the scope of the risks covered by suchinsurance policies to such higher levels or such broader scope of risks asLessor may from time to time reasonably specify.

 

b.             Coverage Amounts.

 

MinimumLiability Coverage Amounts:

 

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

 

(ii)           $ 5,000,000 General Aggregate.

 

(iii)          $ 5,000,000 Products & Completed OperationsAggregate.

 

(iv)          $ 5,000,000 Personal and Advertising Injury.

 

(v)           $ 1,000,000 Fire Damage (any one fire).

 

(vi)          $ 10,000,000 Umbrella Coverage.

 

(vii)         $ 10,000,000 Excess Coverage.

 

29.           Worker’s Compensation and Employer’s LiabilityInsurance.  Lessee shall maintain atis own expense during the term of this Lease a policy or policies of “worker’scompensation” insurance with minimum limits as required by Hawaii RevisedStatutes Title 21, Labor and Industrial Relations, and the rules andregulations promulgated thereunder, and a policy or policies of “employer’s liability”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 coverage may be placed througha combination of primary, umbrella and excess coverages.  The automobile liability insurance shallspecifically cover all 

 

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automobiles and other vehicles used by Lessee inconnection with its operations at the Premises, whether owned or non-owned,leased, rented, borrowed or hired.

 

31.           General Insurance Requirements.

 

a.             Each policy of commercial property insurance and generalliability insurance required in paragraphs 27 and 28 above shall:

 

(1)           name Lessor as an additional insured and provide that theliability of the insurer thereunder shall not be affected by, and that theinsurer shall not claim, any right of set-off, counterclaim, apportionment,proration, or contribution by reason of, any other insurance obtained by or forLessor, Lessee, or any person claiming by, through, or under any of them;

 

(2)           contain no provision relieving the insurer from liabilityfor loss occurring while the hazard to buildings and personal property isincreased, whether or not within the knowledge or control of, or because of anybreach of warranty or condition or any other act or neglect by Lessor, Lessee,or any person claiming by, through, or under any of them;

 

(3)           be specifically endorsed to provide that such policy maynot be cancelled except upon the insurer giving at least thirty (30) days’prior written notice thereof to Lessor, Lessee, and every mortgagee and otherperson having an interest in the Premises who has requested such notice of theinsurer;

 

(4)           be written by an insurance company rated A or better, Class size VIIor better, by the Best’s Key Rating Guide, based upon the rating system ineffect on the date this Lease is signed, and in form and with coverage satisfactoryto and approved in writing by Lessor.  Inthe event that Best’s changes its rating system or ceases to provide ratings atsome later date, then such insurance company shall have a rating from Best (orsome other comparable rating service if Best’s ceases to provide ratings)comparable to the “A or better, Class VII or better” requirement of theimmediately preceding sentence; and

 

(5)           be specifically endorsed to provide that they are primarypolicies, not contributing with and not in excess of any coverage that Lessormay carry, notwithstanding anything to the contrary contained in any policiesobtained by Lessor.

 

b.             A certificate of insurance listing all of the requiredcoverages should be issued for Lessee.

 

32.           Assignment and Subletting.  Lessee will not sublet the whole or any partof said Premises or grant any concession therein, or part with possession ofthe whole or any part of the Premises, or assign this Lease or any interesttherein (nor may this Lease be assigned by operation of law) or hypothecate,mortgage or in any way create any lien on this Lease or the Premises or anyinterest therein without the consent in writing of Lessor first being obtained,and any such attempt without the prior consent in writing of Lessor shall bevoid for all purposes and Lessor shall then have the right and option toterminate this Lease as hereinafter provided. Lessor may grant or withhold its consent in its sole discretion for anyreason. It is 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 

 

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possession or subletting or as a waiver of Lessor’sright to object to any assignment, hypothecation, transfer parting ofpossession, or sublease to which Lessor’s consent in writing has not beenobtained.  It is further agreed thatLessee will remain liable in the event of any assignment, mortgage or subleasefor the payment of the rental hereunder and for the observance and performanceof all the terms, covenants and conditions herein contained and on the part ofLessee to be observed and performed.  Anychange in the present ownership or control of Lessee’s business, directly orindirectly, whether as a result of any sale of assets, transfer of stock,merger, consolidation or otherwise, shall be deemed an assignment within themeaning of this provision; provided however, and notwithstanding anything tothe contrary contained herein, no sale of assets, transfer of stock, merger orconsolidation by Guarantor shall constitute an assignment hereunder.

 

33.           Transfer of Control.  It is understood and agreed that Lessor mustat all times be satisfied with the operator of the Premises from the standpointof said operator’s experience, management ability and/or financial capacity,and that upon any merger or transfer of stock, directly or indirectly,involving a change in control of either of Lessee, Lessor shall have the rightand option to terminate this Lease.

 

34.           Subordination. Lessee hereby subordinates its rights hereunder to any encumbrancesshown on Exhibit A and to the lien of any mortgage or mortgages nowor hereafter arranged by Lessor, to any bank, insurance company or otherlending institution, against the land and improvements of which the Premisesare a part and/or upon any buildings now on or hereafter placed upon said land,for all loans or advances made or hereafter to be made upon said security,provided in every case the mortgagee or mortgagees named in said mortgage ormortgages shall agree in a written instrument acceptable to Lessee to recognizethis Lease in the event of foreclosure by judicial proceedings or otherwise, ifLessee is not then in default beyond applicable cure periods.  Lessee hereby agrees to execute anyinstruments on a commercially reasonable form necessary or expedient to carryout the foregoing.

 

35.           Default and Remedies.  If Lessee shall fail to pay any amount whichunder the provisions of the Lease Lessee shall be obligated to pay, on orbefore the dates the same have become due and payable, no notice beingrequired, demand made, or forfeiture declared, and such non-payment shallcontinue for ten (10) days, or fail in any other respect faithfully toobserve or perform any condition or covenant in this Lease contained and onLessee’s part to be observed and performed, including Lessee’s failure to achievethe Golf Course Standard set forth in paragraph 8.a above or to submit theannual operational plans described in paragraph 9.a above for Lessor’sapproval, and any such failure shall continue for thirty (30) days followingwritten notice from the Lessor to Lessee (or such longer time as is reasonablynecessary so long as Lessee has commenced and is diligently prosecuting thecure); or if Lessee shall become insolvent or be adjudicated bankrupt; or shallmake any general arrangement or assignment for the benefit of creditors orshall seek protection under any bankruptcy laws; or permit a lien to attach tothe premises; or abandon the Premises; or suffer this Lease or any estate orinterest hereunder to be taken under any mesne process or any writ of execution;or any other judicial order,  and anysuch event is not dismissed and cured with sixty (60) days, then and in anysuch 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 

 

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said Premises Lessee and/or those claiming under it,and their effects, all without service of notice or resort to any legal processand without being deemed guilty of any trespass or becoming liable for any lossor damage which may be occasioned thereby, and without prejudice to any otherremedy or right of action which the Lessor may have for collection of arrearsof rent for other or preceding breach of covenant by Lessee.  If this Lease or any short form thereof isrecorded or filed of record in Hawaii, termination may be made effective byLessor by mailing a written notice to Lessee or such termination and recordingor 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 default, and in any such action, service of prior notice or demandis hereby expressly waived.  Lessor may,at its option, assert its claim for unpaid rent in such action or may institutea separate action for the recovery of rent.

 

c.             Removal of Persons or Property.  In the event of such resumption of possessionunder this Lease, whether by summary proceedings or by any other means, Lessor,or any receiver appointed by a court having jurisdiction, may dispossess andremove all persons and property from the Premises, and any property so removedmay be stored in any public warehouse or elsewhere at the cost of and for theaccount of Lessee, and Lessor shall not be responsible for the care orsafekeeping thereof, and Lessee hereby waives any and all loss, destruction,and/or damages or injury which may be occasioned in the exercise of any of the aforesaidacts.

 

d.             Damages, Attorneys’ Fees and Costs.  Lessor may recover from Lessee all damages,reasonable attorneys’ fees and costs which may have been incurred by Lessor asa result of any default of Lessee hereunder, including the expense of recoveringpossession.

 

e.             Right to Re-let. Should Lessor elect to reenter for Lessee’s default, as providedhereinabove, or should it take possession pursuant to legal proceedings orpursuant to any notice provided for by law, it may either terminate this Leaseor it may, from time to time without terminating this Lease, and re-let saidPremises or any part thereof for such term or terms (which may be for a termextending beyond the term of this Lease) and at such rental or rentals and uponsuch other terms and conditions as Lessor in its sole discretion may deemadvisable; upon each such re letting all rental received by Lessor from suchre-letting shall be applied, first, to the payment of any indebtednessother than rent due hereunder from Lessee to Lessor; second, to thepayment of any costs and expenses of such re-letting; third, to thepayment of rent due and unpaid hereunder; and the residue, if any, shall beheld by Lessor and applied in payment of future rent as the same may become dueand payable hereunder.  If such rentalsreceived from such re-letting during any month be less than that to be paidduring that month by Lessee hereunder, Lessee shall pay any such deficiency toLessor. Such deficiency shall be calculated and paid monthly. Termination may, butneed not necessarily, be made effective by the giving of written notice toLessee of intention to end the term of this Lease, specifying a day not earlierthan three (3) days thereafter, and upon the giving of such notice, theterm of this Lease and all right, title and interest of Lessee hereunder shallexpire as fully and completely on the day so specified as if that day were thedate herein 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 competentjurisdiction.  Notwithstanding any suchre-letting without termination, Lessor may at 

 

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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.

 

37.           Waiver of Breach. The waiver by the Lessor of any breach of any term, covenant orcondition herein contained shall not be deemed to be a waiver of any subsequentbreach of the same or of any other terms, covenant or condition hereincontained; that the acceptance of rent by the Lessor shall not be deemed to bea waiver of any of the terms, covenants or conditions of this Lease, or of theremedies of Lessor herein (including the remedy of forfeiture of this Lease);that no term, covenant, condition or remedy herein shall be deemed to be waivedby Lessor unless such waiver be in writing by Lessor.

 

38.           Attorneys Fees. If either party hereto institutes any action or proceeding in court toenforce any provision hereof or for damages or other relief by reason of any allegedbreach of any provision hereof, the prevailing party shall be entitled toreceive from the losing party all costs, including reasonable attorneys’fees.  If any litigation or legal expenseincurred by either party hereto in connection with any litigation commenced byor against the other party (other than condemnation proceedings) in which itshall without fault be made by a party, then it will be entitled to recoveragainst the opposite party all of its costs including reasonable 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 total destruction of the Premisesand Lessor, in its sole discretion, elects not to rebuild or repair the same,this Lease shall terminate as of the date of such destruction upon writtennotice from Lessor to Lessee of Lessor’s determination not to rebuild orrepair, such notice to be given within thirty (30) days of the date of suchdestruction.  In the event of suchtermination, Lessee shall 

 

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forthwith surrender the Premises and shall berelieved of all liability for any further rental and Lessor shall refund anyunearned rent paid in advance by Lessee and shall be thereby released from anyobligation or duty to Lessee.  Lesseehereby waives any and all claims for damage and shall not be entitled to anydamages for any loss occasioned by any such injury to or destruction of saidPremises or any of Lessee’s property.  Asused herein, “material” partial destruction will mean destruction to a portionof the Premises which will, in the reasonable opinion of the parties, require12 months or more to substantially complete the repair.

 

42.           Condemnation. In the event the whole or any portion of the Premises shall be taken orcondemned by any duly constituted authority or any condemnation suit isinstituted, Lessee will peaceably surrender and deliver up to Lessor possessionof the portion of the Premises so taken or condemned and Rent shall beappropriately abated.  In the event of acondemnation of a nonmaterial part of the Premises, such partial condemnationshall not annul or void this Lease.  Inthe event of a condemnation of such part or such form, shape or reduced area asto render the Premises not effectively usable for the purpose for which theproperty is demised, or in the event of a condemnation of all of said Premises,this Lease shall terminate as of the date when the condemning authority hasbecome entitled to, and does take actual possession of the propertycondemned.  In the event of anycondemnation, it is understood and agreed that the Lessor shall be entitled to,and shall receive and retain, any award made as compensation for or in respectof the land, buildings, improvements and fixtures actually taken and also anyaward for or in respect of damages sustained to the land or portion of thebuildings or other improvements and fixtures not taken by reason of theseverance 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, the Lessor shall be entitled to monthlyrent equal to $125,000.00 per month plus the Hawaii general excise tax thereonand all other payments required to be made by Lessee under this Lease.  The provisions herein concerning Lessee’sliability in the event of wrongful withholding of the Premises from the Lessorshall not be deemed to be a waiver of any breach by Lessee of any covenantherein contained or of any of Lessor’s rights herein, and shall not prejudiceany other remedy or right of action which the Lessor may have for collection ofarrears of amounts payable by Lessee under this Lease or for other or precedingbreach of covenant by Lessee.  Anyholding over after the expiration of the said term, or any extension or renewalthereof, with the written consent of the Lessor, shall be construed to be atenancy from month to month only, and shall otherwise be on the same terms andconditions herein specified, so far as applicable.

 

45.           Lessor’s Right to Assign and Transfer Security.  Lessor may, without consent of Lessee, sell,assign, mortgage, transfer or hypothecate all of its right, title and interestin this Lease, in the improvements constructed on the property demisedhereunder, or its interest in the property of which said Premises is a portion,to the extent of its right, title, and interest therein.  In the event Lessor proposes to sell, assign,mortgage, transfer or hypothecate 

 

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all or any portion of Lessor’s right, title or interestin this Lease and the prospective purchaser, assignee, mortgagee or otherfinancial source requires verification of Lessee’s financial condition on theincome and expense of Lessee’s obligations on the Premises, Lessee will furnishto Lessor, upon request, any and all financial statements or records reasonablynecessary to verify such financial condition and income and expense.

 

46.           Lessor’s Failure to Perform.  Except with respect to Lessor’s obligation toreimburse costs of Approved Capital Improvements as set forth inSection 11, Lessor shall not be deemed to be in default in the performanceof any obligation required by it under this Lease unless and until it hasfailed to perform such obligation within thirty (30) days after written noticeby Lessee to Lessor, specifying wherein Lessor has failed to perform suchobligation; provided that if the nature of Lessor’s obligation is such thatmore than thirty (30) days are required for its performance, Lessor shall notbe in default if Lessor commences to cure the default within such thirty (30)day period and thereafter diligently prosecutes the same to completion.  If Lessor fails to cure any such defaultwithin the time periods so specified, Lessee may perform them on Lessor’sbehalf and deduct the cost therefore from Rent and Additional Rent duehereunder.

 

47.           Time of Essence. Time and exact performance are of the essence of this Lease and allparts and paragraphs thereof.

 

48.           Force Majeure. In the event that either party hereto shall be delayed or hindered in orprevented from the performance of any act required hereunder by reason ofstrikes, failure of power, restrictive governmental laws or regulations,governmental action or inaction, riots, insurrection, war or other reason of alike nature not the fault of the party delayed in performing work or doing actsrequired under the terms of this Lease, then performance of such act shall beexcused for the period of the delay and the period for the performance of suchact shall be extended for a period equivalent to the period of such delay.  It is understood, however, that thisprovision shall not operate to excuse Lessee from the prompt payment of rentsor any other payments required by the terms of the Lease.

 

49.           Notices.  Anynotice from either party to the other shall be in writing and shall be given bydelivering the same to such other party or by mailing the same by United Statescertified mail in an envelope with sufficient postage prepaid thereon addressedto such party at the addresses shown on page 1 of this Lease.  For the purpose of this paragraph, eitherparty may change its address by notice to the other.

 

50.           Waiver of Jury Trial and Counterclaims.  Lessor and Lessee hereby waive trial by juryin any action or proceeding brought by either of the parties hereto against theother party on any matters whatsoever arising out of or in any way connectedwith this Lease, the relationship of landlord and tenant, Lessee’s use oroccupancy of the Premises, and/or any claim of injury or damage.  To facilitate the resolution of questions ofpossession, if Lessor commences any proceedings for summary possession, if fornonpayment of rent or for any other cause, Lessee will not interpose anycounterclaim of whatever nature or description in any such proceedings.  Lessee shall have the right to assert suchclaims in a separate action or actions brought by Lessee.

 

51.           All Agreements are Contained Herein; No Party DeemedDrafter.  This Lease contains all ofthe terms, covenants, conditions, stipulations, agreements and provisionsagreed upon between the parties hereto in relation to the Premises and thisLease supersedes and cancels each and every other agreement, promise and/ornegotiation between the parties with reference to the Premises.  Lessor and Lessee agree that neither partyshall be deemed to 

 

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be the drafter of this Lease and in the event thisLease 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’s Estate.  Lessee hereby waives and relinquishes any andall rights given to a lessee under Chapter 516 of the Hawaii RevisedStatues (1968), as amended from time to time, or any similar law which may beenacted at any time during the term giving Lessor the right to expand Lessee’sleasehold estate under this Lease, which Lessee would not have under the termsof this Lease in the absence of such chapter or such law, it being understoodand agreed by and between Lessor and Lessee that the provisions of such chapteror such law shall not apply to this Lease. Any attempt by Lessee or any person claiming by or through Lessee toexpand its estate under this Lease pursuant to such chapter or such law shall bea breach of this Lease.

 

53.           Recordation. This Lease shall not be recorded by Lessor or Lessee.  At the request of either party, a short formmemorandum of this Lease sufficient to give notice of the leasehold estate herebycreated shall be recorded in the Bureau of Conveyances of the State ofHawaii.  Lessor shall prepare the shortform memorandum of the Lease and Lessee shall execute and deliver the same toLessor within seven (7) days of tender thereof by Lessor.

 

54.           Headings. The paragraph headings are inserted merely for convenience and are notto be construed as part of this Lease or in any way affecting it.

 

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

 

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

 

57.           Matters Upon Lease Termination.

 

a.             Certain Prorations.

 

(i)            Lease Termination Prorations.  All real property taxes and utility chargesfor the Premises shall be prorated for periods prior to the Commencement Dateand following the Termination Date based on the actual number of days in therespective billing periods when such dates occur and the actual number of dayselapsed and the agreed allocations to the Premises as described inSection 5(a).  On the TerminationDate, Lessee shall deliver to Lessor cash in the amount of all depositsreceived by Lessee for the use of the Premises for periods following theTermination Date.  Lessee shall reimburseLessor each month for any gift cards issued by MLP, Kapalua Land Company, Ltd.or Lessee at any time prior to termination of the Lease (including prior tocommencement of the Lease) and accepted for redemption by Lessor within fifteen(15) days following the last day of the month in which such gift certificate isaccepted for redemption by Lessor.  Anypayments received by Lessor each month with respect to the use of the Premisesfor periods following the Commencement Date and prior to the Termination Dateshall be paid by Lessor to Lessee within fifteen (15) days following the lastday of the month in which the payment is received; provided, however, thatLessor may offset from any such payments the outstanding amount of any giftcertificates accepted for redemption by Lessor.

 

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(ii)           Pro Shop Inventory. Upon the termination of the Lease, the representatives of Lessor andLessee shall prepare an inventory at the Golf Course (which inventory shall bebinding on Lessor and Lessee) of (x) all of guests’ golf clubs and luggagechecked or left in the care of the Golf Course by guests then or formerly atthe Golf Course, (y) parcels, laundry or other property of guests checkedor left in the care of the Golf Course by guests then or formerly at the GolfCourse, and (z) all items contained in the Golf Course “lost and found”.  Lessor shall be responsible for all of suchitems listed in the inventory from and after the delivery of such items byLessee to Lessor and shall indemnify, defend and hold Lessee harmless from andagainst any claim, liability, cost or expense (including reasonable attorneys’fees) incurred by Lessee relating to the loss of or damage to such items listedin the inventory from and after their delivery to Lessor.  The provisions of this paragraph 57(a)(ii) shallsurvive termination of this Lease.

 

(iii)          Equipment Leases. Upon the Termination Date, Lessor shall have the right, but not theobligation, to the extent assignable, to receive an assignment of Lessee’srights under (x) any of the equipment leases for golf course maintenanceequipment, golf carts and related accessories and other personal property thensubject to lease or (y) the tennis operation agreement with Peter BurwashInternational, Inc. upon Lessor’s written agreement to assume Lessee’sobligations under such equipment leases after the Termination Date.  Lessee shall provide Lessor with completecopies of each such equipment lease not less than 60 days prior to theTermination Date and Lessor shall notify Lessee in writing not less than 30days prior to the Termination Date which, if any, of the equipment leases orthe agreement Lessor shall assume on the Termination Date and Lessee shall, tothe extent assignable, assign the same to Lessor.  Lessee shall also remove from the Premisesany equipment not assigned to or purchased by the Lessor.

 

b.             Revenues and Expenses.

 

(1)           All other revenues and expenses for the Golf Course shallbe allocated between Lessor and Lessee as provided herein, effective as of theend of the day night audit process, but no later than 5:00 a.m. HawaiianTime, on the Termination Date (the “Cutoff Time”), determined in accordancewith sound accounting principles, consistently applied.  Except as otherwise expressly provided for inthis Lease, Lessee shall be entitled to all revenue and shall be responsiblefor all expenses for the period of time up to but not including the CutoffTime, and Lessor shall be entitled to all revenue and be responsible for allexpenses for the period of time from, after and including the Cutoff Time.

 

(2)           Lessor shall promptly pay and reimburse Lessee for thefollowing:  (i) petty cash funds andhouse banks on hand at the Golf Course as of the Cutoff Time; (ii) guestledger balance as of the Cutoff Time; (iii) unexpired portions of prepaidexpenses for all contracts assumed by Lessor, if any, to include (but notlimited to) deposits, dues and memberships, maintenance agreements, advertisingcontracts, licensing agreements and software support agreements; (iv) prepaidamounts of taxes and assessments; (v) prepaid amounts of city, county andstate permit and license fees (if transferable) allocable to the periodfollowing the Cutoff Time and any deposits assumed by Lessor in connection withany such permits and licenses; (vi) for all contracts that are assumed byLandlord upon termination, security deposits paid by Lessee to outside vendorsand suppliers to the Golf Course (provided such security deposits remain ondeposit for the benefit of Lessor); and (vii) if and when received byLessor, uncollected rents due from the Restaurant Lease, subleases and otheroccupancy agreements allocable to the period before the Cutoff Time.

 

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c.             Reconciliation. Except as otherwise provided herein, any revenue or expense amount thatcannot be ascertained with certainty as of the Termination Date shall beprorated on the basis of the parties’ reasonable estimate of such amount, andshall be the subject of a final proration within ninety (90) days afterTermination Date, or as soon thereafter as a precise amount can beascertained.  Lessor shall promptlynotify Seller when it becomes aware that any such actual amount has beenascertained.  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 GolfCourse.

 

e.             Pro-Shop Lease. At Lease termination, provided such termination was not the result of anuncured breach or default of this Lease by Lessee, and provided that thePlantation Golf Course Lease dated March 27, 2009 has not been terminateddue to the default of the Lessee thereunder, Lessor and Lessee (or, at Lessee’selection, Kapalua Land Company, Ltd. (“KLC”) provided that KLC is also thelessee under the Plantation Golf Course pro shop lease) shall execute the proshop lease attached hereto as Exhibit C.

 

58.           Miscellaneous. Any agreement hereafter made shall be ineffective to change, modify,discharge or effect an abandonment of this Lease in whole or in part unlesssuch agreement is in writing and signed by the party against whom enforcementof the change, modification, discharge or abandonment is sought.  The laws of the State of Hawaii shall governthe validity, performance and enforcement of this Lease.  Any action under or related to this Leaseshall be brought in a court of competent jurisdiction in the State ofHawaii.  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.

 
| ** ** | **TY  MANAGEMENT CORPORATION, a Hawaii corporation** |
|------------|------------------------------------------------------|
|       |                                                 |   |
|       |                                                 |   |
|       | By                                                   | /s/ TADASHI YANAI |
|       |                                                 | Name:  Tadashi Yanai |
|       |                                                 | Title:  President |
|       |                                                 |   |
| ** ** |                                                 | **Lessor** |

 

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| ** ** | **KAPALUA  PLANTATION GOLF LLC**                              |
|------------|---------------------------------------------------------------|
| ** ** | ** **                                                    |
|       | By   Maui Land & Pineapple  Company, Inc., |
|       | Its Sole Member                                               |
|       |                                                          |
|       |                                                          |
|       | By                                                            | /s/ RYAN L. CHURCHILL |
|       |                                                          | Name:  Ryan L. Churchill |
|       |                                                          | Title:  President & COO |
|       |                                                          |
|       |                                                          |
|       | By                                                            | /s/ TIM T. ESAKI |
|       |                                                          | Name:  Tim T. Esaki |
|       |                                                          | Title:  CFO |
| ** ** |                                                          | **Lessee** |

 

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