Document:

EXHIBIT 10.1
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                        LOT 3 OPTION AGREEMENT

     This LOT 3 OPTION AGREEMENT (this "Agreement") is made as of
August 5, 2003 (the "Effective Date"), by and between NB LOT 3, LLC, a
Delaware limited liability company ("NB 3"), the address of which is 900
North Michigan Avenue, Suite 1400, Chicago, Illinois 60611, and MAUI BEACH
RESORT LIMITED PARTNERSHIP, a Delaware limited partnership ("Optionee"),
the address of which is 900-999 West Hastings Street, Vancouver, British
Columbia V6C 2W2.

RECITALS:
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     A.    NB 3 is the record fee simple owner of that certain parcel of
land situate at Kaanapali, District of Lahaina, Island and County of Maui,
State of Hawaii, being Lot 102, area 26.692 acres, as shown on Map 86,
filed in the Office of the Assistant Registrar of the Land Court of the
State of Hawaii (the "Land Court") with Land Court Application No. 1744 of
Pioneer Mill Company, Limited, and being land(s) described in Transfer
Certificate of Title No. 630,552 issued to NB 3 (the "Property").

     B.    Pursuant to and in accordance with that certain Property
Purchase Agreement and Option dated as of August 4, 2003 (the "Lot 4
Purchase Agreement"), entered into by and among NB Lot 4, LLC, a Delaware
limited liability company (the "Lot 4 Seller"), Optionee and NB 3, NB 3
agreed to grant to Optionee an option to purchase the Property from NB 3,
on and subject to the terms and conditions set forth in this Agreement.

AGREEMENT:
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     In consideration of One Hundred Dollars ($100.00) paid by Optionee to
NB 3, the Recitals set forth above, which by this reference are
incorporated herein, the mutual promises and agreements set forth below,
and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, NB 3 and Optionee hereby agree as follows:

     1.    GRANT OF OPTION.  NB 3 hereby grants to Optionee the exclusive
right and option, upon and subject to the terms and conditions set forth
herein (the "Option"), to purchase the Property, together with all of
Seller's right, title and interest in and to the following property and
other rights and interests (the "Additional Property"): (a) all buildings,
structures, fixtures and other improvements, if any, located on or under
the Property; and (b) all easements, rights-of-way, covenants,
restrictions, reservations, privileges, licenses and other rights and
interests, if any, appurtenant to the Property or running with the land
comprising the Property.

     2.    TERM.  The term of the Option shall be two (2) years,
commencing on the Effective Date and expiring at 4:00 p.m. (Hawaii Standard
Time) on the date which is two years after the Effective Date (the
"Expiration Date").

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     3.    EXERCISE OF OPTION.  Provided that this Agreement shall not
have been earlier terminated pursuant to Section 19 below, Optionee may
exercise the Option at any time prior to 4:00 p.m., Hawaii Standard Time,
on the Expiration Date by (i) delivering to NB 3 and the Escrow Agent (as
defined below) written notice stating that Optionee is exercising the
Option (the "Notice of Exercise"), and (ii) delivering to the Escrow Agent
the Deposit (as defined below) in accordance with Section 5 of this
Agreement. Notwithstanding anything to the contrary in this Agreement or
the Lot 4 Purchase Agreement, but without limiting Section 19 of this
Agreement, the rights of Optionee under this Agreement shall terminate if
Optionee fails to timely deliver the Notice of Exercise and the Deposit in
accordance with this Section 3. Further upon such failure, both NB 3 and
Optionee shall be released from all further obligations under this
Agreement, except for the continuing indemnity obligations under the Right-
of-Entry Agreement and Section 30 of this Agreement and the confidentiality
obligations under Section 31 of this Agreement.

     4.    CALCULATION OF PURCHASE PRICE.

     The purchase price (the "Purchase Price") to be paid by Optionee to
NB 3 for the Property pursuant to this Agreement shall be the Base Price
(as defined in subsection 4(a) below), adjusted as provided in subsection
4(b) below.

           (a)   BASE PRICE.

                 (i)  The "Base Price" shall be the sum of (A) Twenty-Two
     Million Five Hundred Thousand U.S. Dollars (U.S. $22,500,000.00) plus
     (B) Sixty Thousand U.S. Dollars (U.S. $60,000.00), subject to the
     adjustment under subsection 4(b)(i), multiplied by the amount by
     which the Maximum Unit Count (as defined below) is greater than 350.
     As used herein, the "Maximum Unit Count" shall be the sum of (x) the
     maximum number of Units (as defined in Section 4(a)(ii) below) which
     may be developed on the Property pursuant to any development plan(s)
     for the Property prepared and submitted by or on behalf of Optionee,
     its successors and assigns, to the County of Maui (the "County") and
     for which a special management area use permit ("SMA Permit") has
     been issued by the County (or to the extent an SMA Permit is not
     required, for which building permit(s) have been issued by the
     County) ("Approved Development Plan"), and (y) the amount by which
     the maximum number of Units which may be developed on "Lot 4"
     (referenced in Section 13 below, and being the real property
     described in and covered by the Lot 4 Purchase Agreement) exceeds
     700, either pursuant to an Approved Development Plan for Lot 4
     submitted by or through Optionee, its successors and assigns, as the
     owner of Lot 4, or pursuant to any amendment or termination of the
     Lot 4 Unit Count Declaration (as defined in Section 10 (c)(xviii)
     below) caused or permitted by or through Optionee, its successors and
     assigns, as the owner of the Property.

                 (ii) As used in this Agreement, a "Unit" shall mean a
     single hotel room or suite hotel room, apartment unit, condominium
     unit, or dwelling of any kind; provided, however, that each single
     hotel room, suite hotel room, apartment unit, condominium unit or
     dwelling incorporating the "lock-off' design (which permits the unit
     owner to use a portion thereof as

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     a separate unit, and which is sometimes referred to as a "lock-off
     unit" or "convertible apartment unit") shall be counted as two Units
     for purposes of determining the total number of Units, regardless of
     whether such unit has more than one bedroom.

     (b)   ADJUSTMENTS TO BASE PRICE.

           (i)   CONSUMER PRICE INDEX ADJUSTMENT.

                 (A)  If the Current Index (as defined below) is higher
           than the Comparison Index (as defined below) at the time of any
           calculation or recalculation of the Purchase Price, then the
           Base Price shall be increased by multiplying the $60,000.00
           figure specified in subsection 4(a)(i) above by a fraction, the
           numerator of which is the Current Index and the denominator of
           which is the Comparison Index. For example, if the Comparison
           Index is 125 and the Current Index as of the first anniversary
           date is 130, the $60.000.000 figure would increase to U.S.
           $62,400.00. As used herein: "C.P.I." means the Consumer Price
           Index for All Urban Consumers (Base Year 1984-86 = 100) for
           Hawaii/City and County of Honolulu, published by the United
           States Department of Labor, Bureau of Labor Statistics;
           "Current Index" means the C.P.I. published as of the date of
           any calculation or recalculation of the Purchase Price or, if
           not published as of that date, then the date nearest to and
           immediately preceding such date; and "Comparison Index" means
           the C.P.I. published as of the earlier of (1) the date of the
           Notice of Exercise or (2) January 1, 2005 or, if not published
           as of that date, then the date nearest to and immediately
           preceding such date.

                 (B)  If the C.P.T. is changed so that the base year
           differs from the base year that was used to determine the
           C.P.I. as of the Effective Date, then the C.P.I. shall be
           converted in accordance with the conversion factor published by
           the United States Department of Labor, Bureau of Labor
           Statistics. If the C.P.I. is discontinued or revised, the
           C.P.I. shall be replaced with such governmental index or
           computation as shall obtain substantially the same result as
           would otherwise have been obtained if the original C.P.I. had
           not been discontinued or revised.

           (ii)  CHANGES IN UNIT COUNT.  Upon issuance of an SMA Permit or
     building permit for an Approved Development Plan for either of Lot 4
     or the Property after Closing, or upon any amendment or termination
     of the Lot 4 Unit Count Declaration, as referenced in subsection
     4(a)(i) above, after Closing, an adjustment will be made by NB 3 and
     Optionee to the Purchase Price paid at Closing if and to the extent
     applicable based upon a recalculation of the Base Price pursuant to
     subsection 4(a)(i) above and the then-current Maximum Unit Count
     resulting from such Approved Development Plan or such amendment or
     termination. If, based upon any such recalculation, the Base Price is
     greater than the Base Price used to determine the Purchase Price at
     Closing, Optionee shall pay to NB 3, upon demand of NB 3, an
     additional amount equal to the increase in Base Price (adjusted in
     accordance with subsection 4(b)(i) above). Optionee shall give
     written notice to NB 3 promptly upon each issuance of an SMA Permit
     or building permit for an Approved Development Plan for Lot 4 or the
     Property, and promptly upon any amendment or termination of the Lot 4

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     Unit Count Declaration. The terms and conditions of this Purchase
     Price adjustment and payment obligation shall be set forth in an
     agreement (the "Price Adjustment Agreement"), substantially in the
     form attached as EXHIBIT "I" to this Agreement or such other form as
     may be agreed in writing by NB 3 and Optionee prior to Optionee's
     delivery of the Notice of Exercise, which Price Adjustment Agreement
     shall be executed and delivered at Closing by NB 3 and Optionee, and
     reference thereto will be included in the Lot 3 Unit Count
     Declaration (as defined in Section 14(c) below).

           (iii) SECURITY.  Optionee's performance in full of its
     obligations under the Price Adjustment Agreement shall be secured by
     a mortgage (the "Price Adjustment Mortgage") in favor of NB 3 and
     covering the Property and the Additional Property, substantially in
     the form of the Lot 4 Mortgage (as defined in Section 19(a) below),
     to be executed by Optionee and recorded at Closing, and by a UCC
     Financing Statement relating to the Property and the Additional
     Property, substantially in the form of the UCC Financing Statement
     filed in connection with the Lot 4 Mortgage, to be filed at Closing.
     NB 3 shall subordinate its interests under the Price Adjustment
     Mortgage to a mortgage given by Optionee and recorded at Closing in
     favor of an unaffiliated lender to secure acquisition financing for
     the Property in an amount not to exceed 60% of the Purchase Price
     paid to NB 3 at Closing pursuant to this Agreement. Provided that
     Optionee is not then in default under the Price Adjustment Agreement
     or the Price Adjustment Mortgage, the Price Adjustment Mortgage shall
     be released from the Property at such time as an Approved Development
     Plan has been obtained for the Property, or from such subdivided
     portion(s) of the Property for which an Approved Development Plan has
     been obtained; provided, however, that such Approved Development Plan
     is for the full and final intended use of the Property, or the
     subdivided portion thereof covered by the Approved Development Plan,
     and provided further that such Approved Development Plan shall not
     anticipate, or otherwise provide for, future development of any
     portion of the Property (or such subdivided portion) in any manner
     which will or could increase the number of Units which may be
     developed on the Property. No such release (or partial release) of
     the Price Adjustment Mortgage shall be construed to release Optionee
     from its continuing liability and obligations under the Price
     Adjustment Agreement; provided, however, following completion of
     construction (as evidenced by issuance of certificates of occupancy)
     of all improvements covered by any Approved Development Plan, if such
     Approved Development Plan is for the full and final intended use of
     the Property, or the subdivided portion thereof covered by the
     Approved Development Plan, and if such Approved Development Plan, or
     any development or ownership documents (including, without
     limitation, condominium or time share declarations) relating to the
     land covered thereby, shall not anticipate, provide for, or otherwise
     reserve any rights relating to, future development of any portion of
     the Property (or such subdivided portion) in any manner which will or
     could increase the number of Units which may be developed on the
     Property, then, at the written request of Optionee, NB 3 shall
     release and discharge Optionee, in writing, from all such liabilities
     and obligations to the extent related to the Property (or subdivided
     portion thereof) that is the subject of such Approved Development
     Plan.

     5.    PAYMENT OF PURCHASE PRICE.  The Purchase Price, calculated as
of the date of the Notice of Exercise, shall be payable by Optionee to NB 3
as provided below. All amounts payable hereunder shall be paid in United
States dollars by electronic or wire transfer of

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or immediately available funds, in accordance with written instructions
delivered by NB 3 Escrow Agent to Optionee, or in such other form as is
acceptable to NB 3. Except as otherwise provided in this Agreement, all
interest accruing on such deposits shall accrue for the benefit of
Optionee.

     (a)   DEPOSIT.  As a condition precedent to Optionee's proper and
effective exercise of the Option pursuant to Section 3 above, Optionee
shall deposit into Escrow, prior to 4:00 p.m., Hawaii Standard Time, on the
Expiration Date (and in no event later than two business days after
Optionee's delivery of the Notice of Exercise pursuant to Section 3 above),
the sum of THREE MILLION AND NO/100 U.S. DOLLARS (U.S. $3,000,000.00) (the
"Deposit"), to be held and disbursed by Escrow Agent in accordance with
subsection 5(b) below. The Deposit shall not be refundable to Optionee,
except only as provided in Sections 11 and 19(b) of this Agreement.

     (b)   DISBURSAL OF DEPOSIT TO NB 3.  Immediately upon Optionee's
exercise of the Option, as evidenced by delivery of the Notice of Exercise
to Escrow Agent and NB 3 and delivery of the Deposit to Escrow Agent, in
accordance with Sections 3 and 5(a) above, Escrow Agent shall release and
disburse the Deposit to NB 3 (and shall release and disburse to Optionee
all interest, if any, accrued on the Deposit prior to disbursal of the
Deposit to NB 3). At Closing, the Deposit shall be applied toward the
Purchase Price. All interest accrued on the Deposit after the date of
disbursal to NB 3 pursuant to this subsection 5(b) shall accrue for the
benefit of NB 3 and shall not be applied to the Purchase Price, nor shall
such interest be payable to Optionee in or 19(b) of this the event of any
refund of the Deposit to Optionee pursuant to Sections 11 Agreement.
Optionee and NB 3 expressly, specifically, and irrevocably direct and
authorize Escrow Agent to release and disburse the Deposit as provided in
this subsection 5(b). Escrow Agent is hereby relieved of liability for so
releasing and disbursing the Deposit to NB 3.

     (c)   ADDITIONAL CASH AT CLOSING.  On or before one business day
prior to the Closing Date (as defined below), Optionee shall deposit into
Escrow the balance of the Purchase Price, plus or minus the net amount to
be paid by, or credited to, Optionee at Closing under Section 9 of this
Agreement.

6.   TITLE.

     (a)   DEED.  At Closing, NB 3 shall convey the Property (and any
Additional Property) to Optionee by a limited warranty deed (the "Deed"),
substantially in the form attached as EXHIBIT "2" to this Agreement, or in
such other form as may be agreed in writing by NB 3 and Optionee prior to
Optionee's delivery of the Notice of Exercise, which Deed shall convey to
Optionee fee simple title subject only to the Permitted Exceptions (as
defined in subsection 6(b) below). Optionee agrees to and shall take title
to the Property at Closing subject to the Permitted Exceptions.

     (b)   PERMITTED EXCEPTIONS.  Attached as EXHIBIT "3" to this
Agreement is a copy of a preliminary title report dated as of February 13,
2003 (the "Lot 3 Title Report") covering the Property, issued by Title
Guaranty of Hawaii, Inc. Optionee acknowledges that, as provided in

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and pursuant to the Lot 4 Purchase Agreement, it has received copies of all
recorded documents and maps referenced in the Lot 3 Title Report, other
than documents related to the Amfac Mortgages (as defined in Section
9(a)(ii) below). Attached as EXHIBIT "4" to this Agreement is a list of
exceptions, reservations, easements, and other items which NB 3 proposes
shall be recited or referenced in the Deed as permitted encumbrances or
exceptions to title and exclusions from NB 3's limited warranty under the
Deed. If Optionee disapproves of any items listed in Exhibit "4" or any
other exceptions or defects discovered by Optionee through its
investigation of the state of the title to the Property, Optionee may, at
its discretion, inform NB 3 of such disapproval by delivering written
notice (the "Title Notice") thereof to NB 3 no later than sixty calendar
days prior to the Expiration Date (and in no event later than ten days
prior to Optionee's delivery of the Notice of Exercise). The Title Notice
shall specify in detail the disapproved item(s), exception(s) and defect(s)
(the "title defect"). Upon receipt of the Title Notice, NB 3 shall, at its
option, notify Optionee in writing, delivered to Optionee no later than
twenty calendar days prior to the Expiration Date, either: (i) that NB 3
shall agree to cure or otherwise remove the title defect from title and the
Deed prior to the Closing Date; or (ii) that NB 3 shall not or cannot cure
or otherwise remove the title defect, in which case, if Optionee delivers
the Notice of Exercise, Optionee shall be deemed to have rescinded its
disapproval of the title defect. Optionee agrees that NB 3 has no
obligation to cure any title defect, except that NB 3 shall discharge from
the Property the Amfac Mortgages and any other mortgages, deeds of trust,
attachments and monetary liens (excepting, however, any mortgages and liens
affecting the grantee's interest under the Grant of Lot 4 Access Easement
(as defined in Section 10(c)(xx) below)) ("Monetary Liens"). Except for
Monetary Liens, Optionee shall be deemed to have approved all items listed
in Exhibit "4" and all other exceptions and defects affecting or
encumbering the title to the Property existing as of the date of Optionee's
effective exercise of the Option and not expressly and specifically
disapproved in the manner provided above in this subsection 6(b). All such
approved items are referred to in this Agreement as the "Permitted
Exceptions."

     (c)   TITLE INSURANCE.  Prior to Optionee's delivery of the Notice of
Exercise, Optionee may, at its option and expense, obtain a binding
commitment (the "title commitment"), from a title insurance company (the
"title company") licensed in the State of Hawaii, to issue at Closing an
owner's policy of title insurance (the "title policy") with respect to the
Property, with such extended coverage and endorsements as Optionee may
require and in such amount as Optionee shall direct but not to exceed the
Purchase Price, free of all Monetary Liens but subject to the Permitted
Exceptions. Without limiting the terms of Section 19(b) of this Agreement,
any failure of Optionee to obtain the title commitment, the title policy,
or any other policy of title insurance or title assurances, shall not in
any way affect Optionee's obligations under this Agreement.

     (d)   ASSIGNMENT OF WASTEWATER CAPACITY.  At Closing, NB 3 shall
cause Kaanapali Development Corp., a Hawaii corporation ("KDC") (being an
affiliate of NB 3), to deliver to Optionee an assignment of a portion of
KDC's reserved wastewater capacity at the Lahaina Wastewater Treatment
Plant, for use relating to the Property and for no other purpose, which
wastewater capacity to be assigned shall be such amount as required by the
County of Maui for Optionee's development on the Property of 550 Units or
such lesser number of Units as shall be

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approved by appropriate governmental authorities for development on the
Property. Such assignment shall be substantially in the form attached as
EXHIBIT "5" to this Agreement, or in such other form as may be agreed in
writing by NB 3 and Optionee prior to Optionee's delivery of the Notice of
Exercise (the "Assignment of Wastewater Capacity"). Optionee shall agree to
and accept such assignment as indicated in the Assignment of Wastewater
Capacity.

     7.    ESCROW.

     (a)   OPENING.  Immediately upon or (at the request of Optionee)
before delivering the Notice of Exercise, NB 3 and Optionee shall open an
escrow account ("Escrow") with Title Guaranty Escrow Services, Inc. (main
office - 235 Queen Street, Honolulu, Hawaii) ("Escrow Agent"), for the
transaction pursuant to this Agreement. Delivery to Escrow Agent of a fully
executed copy of this Agreement shall constitute the opening of Escrow.

     This Agreement shall constitute joint escrow instructions to Escrow
Agent. NB 3 and Optionee agree to execute such additional instructions not
inconsistent with the provisions of this Agreement which may be required by
Escrow Agent. NB 3 and Optionee agree that, as between NB 3 and Optionee,
if there is any conflict between the terms of this Agreement and the
provisions of any additional escrow instructions required by Escrow Agent,
the terms of this Agreement shall control.

     (b)   CANCELLATION.  If the Closing fails to occur due to NB 3's
default, including without limitation due to the failure of the conditions
set forth in subsections I I (a), (b) or (d) of this Agreement or due to
the failure of the conditions set forth in subsections I I (c) or (e) of
this Agreement for reasons within the reasonable control of NB 3, NB 3
shall pay all Escrow Cancellation Charges. If the Closing fails to occur
due to Optionee's default or due to the failure of the conditions set forth
in subsections 11(c) or (e) of this Agreement for reasons within the
reasonable control of Optionee, Optionee shall pay all Escrow Cancellation
Charges. If the Closing fails to occur for any other reason, including
without limitation due to the failure of the conditions set forth in
subsections 1 I (c) or (e) for reasons beyond the reasonable control of NB
3 or Optionee, NB 3 and Optionee shall each pay one-half of the Escrow
Cancellation Charges. As used herein, the term "Escrow Cancellation
Charges" means all fees, charges, and expenses charged by Escrow Agent to
NB 3 or Optionee in connection with the Escrow, including all expenses
charged in connection with issuance of the Lot 3 Title Report and other
title matters. Nothing contained in this subsection 7(b) is intended to
limit either NB 3 or Optionee from exercising the remedies available upon
default as set forth in this Agreement.

     8.    CLOSING.

     (a)   CLOSING DATE.  As used in this Agreement, the term "Closing"
means the time when the Deed is recorded at the Land Court, and all other
events or actions to occur on the Closing Date in accordance with this
Agreement (including without limitation those to occur upon satisfaction or
waiver of the conditions set forth in Section I1 of this Agreement) are
consummated. The "Closing Date" shall be the date that is fourteen calendar
days after the

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Option is effectively exercised pursuant to this Agreement (or the first
business day thereafter if such date is not a business day).

     (b)   CLOSING DOCUMENTATION.  On or before two business days prior to
the Closing Date, NB 3 and/or Optionee, as appropriate, shall deliver to
Escrow Agent the following documents:

           (i)   NB 3'S CLOSING DOCUMENTS.  NB 3 shall deliver to Escrow
     Agent the following documents (the "NB 3 Closing Documents"):

                 (A)  the Deed, executed and acknowledged by NB 3 and
           in recordable form;

                 (B)  the Assignment of Wastewater Capacity, executed and
           acknowledged by KDC;

                 (C)  the Lot 3 Unit Count Declaration (as defined in
           Section 14(c) below), executed and acknowledged by NB 3 and in
           recordable form;

                 (D)  the Assignment of SMA Requirements Agreement (as
           defined in Section 14(b) below), executed and acknowledged by
           NB 3;

                 (E)  the Assignment of Water Quality Monitoring Right of
           Entry (as defined in Section 15 below), executed and acknow-
           ledged by NB 3;

                 (F)  the Trade Name License Agreement (as defined in
           Section 36 below), executed by the Service Mark Holder (as
           defined in Section 36 below);

                 (G)  such affidavit and indemnity, executed and
           acknowledged by NB 3, in such form as shall be reasonably
           agreed by NB 3 and the title company to cause the title company
           to delete from the title policy, if any, all exceptions for
           mechanics', materialmen's and similar liens and leases,
           occupancy agreements and parties in possession (excepting the
           Water Quality Monitoring Right of Entry (as defined in Section
           10 (c)(xvii) below) the Lot 3/Lot 4 Access Roadway Construction
           Agreement (as defined in Section 10 (c)(xxi) below), and those
           relating to use of the Public Open Space Area pursuant to the
           Public Open Space Declaration (as defined in Section 10(c)(v)
           below), and further excepting any liens which may affect the
           Property relating to or as a result of Optionee's activities on
           the Property, pursuant to Section 10 of this Agreement or
           otherwise);

                 (H)  the NB 3 Certificates (as defined in Section 18(a)
           below);

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                 (I)  a certificate of the corporate secretary of the
           Managing Member (as defined in Section 18(a) below), stating
           that the NB 3 Resolutions (as defined in Section 18 (a) below)
           were duly adopted by the Managing Member's board of directors
           and evidencing the incumbency of the officers executing this
           Agreement and the NB 3 Closing Documents on behalf of the
           Managing Member, as NB.3's managing member;

                 (J)  a certificate of good standing from the State of
           Hawaii Department of Commerce and Consumer Affairs showing KDC
           to be duly authorized to do business in the State of Hawaii and
           in good standing under the laws of the State of Hawaii;

                 (K)  a certificate of the corporate secretary of KDC
           stating that its board of directors has duly adopted
           resolutions authorizing the execution, acknowledgement and
           delivery of, and the performance of such corporation's
           obligations under, the Assignment of Wastewater Capacity
           and evidencing the incumbency of the officers acting on behalf
           of such corporation;

                 (L)  such other evidence of the authority of NB 3, the
           Managing Member, KDC, the Service Mark Holder and/or their
           respective members, officers and representatives acting on
           their behalf as the title company may reasonably request in
           connection with Closing;

                 (M)  an affidavit or certification, executed by NB 3, in
           compliance with Internal Revenue Code, Section 1445(c) and the
           applicable regulations;

                 (N)  either (i) a properly executed Hawaii Form N-289
           certifying that NB 3 is a Hawaii resident or NB 3 has a
           permanent place of business in Hawaii or is qualified to do
           business in Hawaii, or (ii) a certificate or other evidence as
           contemplated by the State Withholding Provisions (as defined
           in subsection 8(c) below).

                 If NB 3 fails to deliver any such Form N-289 or other
           evidence, Optionee shall not be excused from its obligation to
           consummate the transactions contemplated herein, but rather may
           deduct and withhold from the Purchase Price an amount equal to
           five percent (5%) of the sales price of the Hawaii real
           property conveyed in connection with the transactions
           contemplated herein, as defined and required by the State
           Withholding Provisions. As described in subsection 8 (c) below,
           any amount so withheld shall be deemed to have been paid by
           Optionee as a part of the Purchase Price. Should NB 3 deliver
           evidence to Optionee that the Hawaii Department of Taxation has
           authorized a partial or total reduction

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           in the amount required to be withheld from the Purchase Price
           pursuant to the State Withholding Provisions, Optionee may
           withhold only the amount required by the Department of Taxation
           to be withheld, if any, and any amount so withheld shall be
           deemed to have been paid by Optionee as part of the Purchase
           Price;

                 (O)  a tax clearance certificate from the Hawaii
           Department of Taxation, in compliance with Hawaii Revised
           Statutes Section 237-43;

                 (P)  the Fill Agreement (as defined in Section 14(f)
           below), executed by PMCo (as defined in Section 14(f) below)
           and/or such of the Amfac-Related Entities (as defined in
           Section 20 below) as is applicable; and

                 (Q)  such other documents or instruments as the title
           company may reasonably request to consummate Closing in
           accordance with this Agreement.

           (ii)  OPTIONEE'S CLOSING DOCUMENTS.  Optionee shall deliver to
     Escrow Agent the following documents (the "Optionee Closing
     Documents"):

                 (A)  the Deed, executed and acknowledged by Optionee (or
           the Permitted Assignee or Successor, as those terms are
           hereinafter defined, as applicable) and in recordable form;

                 (B)  the Assignment of Wastewater Capacity, executed and
           acknowledged by Optionee (or the Permitted Assignee or
           Successor, as applicable);

                 (C)  the Lot 3 Unit Count Declaration, executed and
           acknowledged by Optionee (or the Permitted Assignee or
           Successor, as applicable) and in recordable form;

                 (D)  the Assignment of SMA Requirements Agreement,
           executed and acknowledged by Optionee (or the Permitted
           Assignee or Successor, as applicable);

                 (E)  the Assignment of Water Quality Monitoring Right of
           Entry, executed and acknowledged by Optionee (or the Permitted
           Assignee or Successor, as applicable);

                 (F)  the Trade Name License Agreement, executed by
           Optionee (or the Permitted Assignee or Successor, as
           applicable);

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                 (G)  the Optionee Certificates (as defined in Section
           18(b) below);

                 (H)  a certificate of the corporate secretary of the
           General Partner (as defined in Section 18(b) below) stating
           that Optionee's Resolutions (as defined in Section 18 (b)
           below) were duly adopted by the General Partner's board of
           directors and evidencing the incumbency of the officers
           executing this Agreement and the Optionee Closing Documents on
           behalf of the General Partner, as Optionee's general partner;

                 (I)  If the Permitted Assignee or Successor that takes
           title to the Property (or its general partner or managing
           member or the General Partner) is a corporation, a certificate
           of the corporate secretary of each such corporation stating
           that the Optionee Resolutions were duly adopted by the board of
           directors of each such corporation and evidencing the
           incumbency of the officers executing the Optionee Closing
           Documents on behalf of each such corporation;

                 (J)  such other evidence of the authority of Optionee or
           the Permitted Assignee or Successor and/or their respective
           officers and representatives as the title company or NB 3 may
           reasonably request in connection with this Agreement and
           Closing;

                 (K)  the Fill Agreement, executed by Optionee (or the
           Permitted Assignee or Successor, as applicable); and

                 (L)  such other documents or instruments as the title
           company may reasonably request to document and consummate
           Closing in accordance with this Agreement.

     (c)   CLOSING OF ESCROW.  On the Closing Date, if the conditions
precedent set forth in Section 11 of this Agreement are satisfied or waived
in writing by the party benefiting from such conditions, Escrow Agent shall
disburse to NB 3 the Purchase Price (less the Deposit to the extent the
Deposit was earlier disbursed to NB 3 pursuant to Section 5(b) above, and
also less NB 3's share of the closing costs, Escrow Agent's fees, and
applicable prorated items according to Section 9 of this Agreement), shall
record the Deed and the Lot 3 Unit Count Declaration at the Land Court, and
shall deliver the NB 3 Closing Documents to Optionee and the Optionee
Closing Documents to NB 3. NB 3 acknowledges and agrees that Optionee may
be required to withhold a portion of the Purchase Price pursuant to Section
235-68 of the Hawaii Revised Statutes (the "State Code") (Section 235-68 of
the State Code, together with any regulations now or hereafter promulgated
thereunder, being collectively referred to herein as the "State Withholding
Provisions"). Any amount properly so withheld by Optionee, in accordance
with subsection 8(b)(i)(O) above, shall be deemed to have been paid by
Optionee as part of the Purchase Price.

                                  11

<PAGE>

     (d)   POSSESSION.  Possession of the Property shall be delivered to
Optionee at Closing, subject only to such rights to the Property
constituting or arising out of the Permitted Exceptions.

     9.    CLOSING COSTS AND PRORATIONS.  Except as otherwise specifically
provided in this Agreement, Optionee shall be responsible for all closing
costs incurred by Optionee, and NB 3 shall be responsible for all closing
costs incurred by NB 3, including each of their respective attorney's fees.

     (a)   NB 3's CLOSING COSTS.  At Closing (if not earlier paid), NB 3
shall pay the following:

           (i)   the cost of the Lot 3 Title Report and the cost of the
     base (i.e., standard coverage) portion of the title policy referenced
     in Section 6(c) of this Agreement, if any (excluding the cost of any
     extended coverage or endorsements);

           (ii)  recording fees and other costs, if any, for the release
     of the Property from all Monetary Liens, including without limitation
     (A) Additional Security Mortgage, Security Agreement, and Financing
     Statement dated November 1, 2000, recorded at the Bureau of
     Conveyances of the State of Hawaii (the "Bureau") as Document No.
     2000-156571 and at the Land Court as Document No. 2662799, as
     amended, and (B) Mortgage, Security Agreement and Financing Statement
     dated November 14, 2002, recorded at the Bureau as Document No.
     2002-203004 and at the Land Court as Document No. 2860723, and
     (C) UCC Financing Statement recorded at the Bureau as Document
     No. 2002-203005 (collectively, the "Amfac Mortgages");

           (iii) recording fees and other costs, if any, for any releases,
     discharges or other curative documents or actions which NB 3 commits
     to deliver and/or take in accordance Section 6(b) of this Agreement;

           (iv)  any rollback taxes and special assessments assessed
     against the Property as of the Closing Date or payable at Closing in
     connection with the transfer of the Property to Optionee;

           (v)   any conveyance tax payable in connection with the sale by
     NB 3 of the Property to Optionee; and

           (vi)  one-half (%2) of Escrow Agent's fees.

                                  12

<PAGE>

     (b)   OPTIONEE'S CLOSING COSTS.  At Closing, Optionee shall pay the
following:

           (i)   all costs of any extended coverage (ALTA or otherwise) or
     endorsements under the title policy, if any, as well as all costs of
     any additional policy or policies of title insurance requested by
     Optionee or Optionee's lender, if any, in connection with this
     transaction, and any endorsements or extended coverage thereto;

           (ii)  all costs and charges in connection with any survey or
     staking of the Property requested by Optionee or Optionee's lender,
     if any, in connection with this transaction;

           (iii) all recording fees (except as otherwise specified in
     Section 9(a) above); and

           (iv)  one-half (1/2) of Escrow Agent's fees.

     (c)   OTHER CLOSING COSTS.  Escrow Agent shall apportion all other
closing costs, if any, in a manner customary for real estate transactions
of this nature in the State of Hawaii.

     (d)   REAL PROPERTY TAXES.  All real property taxes applicable to the
Property (other than rollback taxes and special assessments, if any) shall
be prorated between NB 3 and Optionee as of the Closing Date. If the
current year's taxes have not been determined as of the Closing Date,
proration shall be based on the previous year's taxes, with such proration
to be final in all respects.

     (e)   OTHER PRORATIONS.  Other customary prorations, if any, shall be
prorated between NB 3 and Optionee as of the Closing Date.

     10.   DUE DILIGENCE PERIOD.  Optionee shall be entitled to a period
of time (the "Due Diligence Period") to investigate and evaluate, at
Optionee's expense, the title and condition of the Property, the
suitability of the Property for Optionee's intended purposes, and all other
matters relevant to Optionee's acquisition, ownership, development, and use
of the Property. The Due Diligence Period shall begin on the Effective Date
and expire upon Optionee's delivery of the Notice of Exercise or any
earlier termination of this Agreement.

     (a)   During the Due Diligence Period, provided that Optionee is not
in default under this Agreement, Optionee shall have the right, subject to
the provisions of this Section 10 and at Optionee's sole cost and expense,
to conduct such independent investigations, including soils tests, surveys,
environmental site assessments, and other customary engineering tests and
physical examinations of the Property, development or other permit analyses
and feasibility studies, as Optionee, in its discretion, deems necessary or
appropriate concerning Optionee's ownership and intended use or development
of the Property or the suitability of the Property for use or development.
Prior to conducting any tests, surveys, assessments, or other physical

                                  13

<PAGE>

examinations on or otherwise affecting the Property before Closing,
Optionee shall notify NB 3 of Optionee's intent to conduct such
examinations, and of the nature and extent thereof, and shall obtain NB 3's
written consent (which consent shall not be unreasonably withheld or
delayed) prior to the commencement of any such physical examination.

     (b)   Provided that Optionee is not in default under this Agreement,
NB 3 shall grant to Optionee and its agents a nonexclusive license to enter
upon the Property, during the Due Diligence Period, for the purpose of
conducting tests, surveys, assessments, and other physical examinations on
or otherwise affecting the Property pursuant to this Section 10. Prior to
any such entry by Optionee on the Property, NB 3 and Optionee shall execute
a right-of-entry agreement (the "Right-of-Entry Agreement") in the form
attached as EXHIBIT "6" to this Agreement, which Right-of-Entry Agreement
shall contain, among other things, insurance requirements and Optionee's
release and indemnification of NB 3 and Amfac-Related Entities. Optionee
agrees to and shall comply with all of the terms and conditions in the
Right-of-Entry Agreement.

     (c)   By signing this Agreement, Optionee acknowledges that, in
addition to all other due diligence examinations and investigations
performed or to be performed by or on behalf of Optionee, and Optionee's
knowledge of the Property derived therefrom, Optionee is specifically aware
of the following items relating to or potentially affecting the Property,
and, prior to Optionee's delivery of the Notice of Exercise, shall have
reviewed, considered and, upon delivery of the Notice of Exercise, accepted
and agreed to the effects thereof on Optionee's purchase, acquisition,
ownership and intended use, development and sale of the Property:

           (i)   1988 NORTH BEACH SMA.  Special Management Area Use Permit
     and Shoreline Setback Variance (88-SMI-023, 88/SSV-002) issued
     by the County of Maui Planning Commission (Planning Director's
     Reports dated May 24, 1988 and July 19, 1988, and Supplemental
     Director's Report dated July 19, 1988, adopted by the County of
     Maui Planning Commission at its meeting on July 19, 1988 as its
     Findings of Fact, Conclusions of Law, Decision and Order), with
     respect to land generally described therein as the Kaanapali North
     Beach properties (the "Kaanapali North Beach Properties"), of
     which the Property is part (the "1988 North Beach SMA").  Optionee
     acknowledges having received a copy of the 1988 North Beach SMA.

           (ii)  1998 KOR SMA SETTLEMENT AGREEMENT.  Settlement Agreement
     dated September 29, 1998, between Kaanapali North Beach Venture,
     Amfac Property Investment Corp. dba Amfac Maui, Kaanapali Ownership
     Resorts, L.P., and Amfac/JMB Hawaii, LLC, as Developers, and Robert
     Buchanan, David Chenoweth, Elizabeth Chenoweth, Randy Draper, James
     Johnson and Joanne Johnson, as Intervenors (the "1998 KOR SMA
     Settlement

                                  14

<PAGE>

     Agreement"). Optionee acknowledges having received a copy of
     the 1998 KOR SMA Settlement Agreement.

           (iii) 1998 KOR SMA.  Special Management Area Use Permit
     (SM 1970006) issued by the County of Maui Planning Commission
     (County of Maui Planning Commission Findings of Fact, Conclusions of
     Law, Decision and Order (Docket No. 88/SMI-023, 88/SSV-002,
     SM970006), effective December 14, 1998) (the "1998 KOR SMA").
     Optionee acknowledges having received a copy of the 1998 KOR SMA.

           (iv)  SHORELINE SETBACK AREA DECLARATION.  Unilateral and
     Irrevocable Declaration of Perpetual Rights and Uses and Perpetual
     Restrictions (North Beach Shoreline Setback Area) dated December 29,
     1998, recorded at the Bureau as Document No. 99-005138 and at the
     Land Court as Document No. 2513420; Amendment to Unilateral and
     Irrevocable Declaration of Perpetual Rights and Uses and Perpetual
     Restrictions (North Beach Shoreline Setback Area) dated December 6,
     2000, recorded at the Bureau as Document No. 2000-170916 and at the
     Land Court as Document No. 2668965 (the "Shoreline Setback Area
     Declaration"). Optionee acknowledges having received a copy of the
     Shoreline Setback Area Declaration.

           (v)   PUBLIC OPEN SPACE DECLARATION.  Unilateral and
     Irrevocable Declaration of Perpetual Rights and Uses and Perpetual
     Restrictions (North Beach Public Open Space/Recreation Area)
     dated December 29, 1998, recorded at the Bureau as Document
     No. 99-005139 and at the Land Court as Document No. 2513421,
     as amended by instrument dated December 6, 2000, recorded at the
     Bureau as Document No. 2000-170915 and at the Land Court as
     Document No. 2668964 (the "Public Open Space Declaration").
     Optionee acknowledges having received a copy of the Public Open
     Space Declaration.

           (vi)  NORTH BEACH UNIT COUNT AND DRAINAGE DECLARATION.
     Unilateral Declaration of Restrictions; Joinder Agreement (North
     Beach Unit Count and Drainage) dated February 15, 2001, recorded at
     the Bureau as Document No. 2001-022448 and at the Land Court as
     Document No. 2683897 (the "North Beach Unit Count and Drainage
     Declaration"). Optionee acknowledges that a copy of the North Beach
     Unit Count and Drainage has been delivered to Optionee.

                                  15

<PAGE>

           (vii) SMA REQUIREMENTS AGREEMENT.  Kaanapali North Beach/
     Kaanapali Ocean Resort SMA Requirements Agreement dated December 6,
     2000, between Amfac Property Investment Corp., Kaanapali Ownership
     Resorts, L.P., Amfac Property Development Corp., Pioneer Mill
     Company, Limited, and SVO Pacific, Inc. (the "SMA Requirements
     Agreement"); Assignment and Assumption of Kaanapali North
     Beach/Kaanapali Ocean Resort SMA Requirements Agreement dated
     December 21, 2000, between Amfac Property Investment Corp., Amfac
     Hawaii, LLC, a Hawaii limited liability company ("AHI") and KDC;
     Assignment and Assumption of Kaanapali North Beach/Kaanapali Ocean
     Resort SMA Requirements Agreement dated November 22, 2002,
     between AHI, KDC, NB Lot 2, LLC, NB Lot 4, LLC, and NB 3;
     Assignment and Assumption of Kaanapali North Beach/Kaanapali Ocean
     Resort SMA Requirements Agreement; Agreement Regarding SMA
     Requirement dated as of August 5, 2003, between the Lot 4
     Seller and Optionee pursuant to the Lot 4 Purchase Agreement.
     Optionee acknowledges having received copies of the SMA Requirements
     Agreement and the referenced assignments.

           (viii) LOT 2 UNIT COUNT DECLARATION.  Declaration of Covenants,
     Conditions and Restrictions; Joinder dated December 6, 2000,
     recorded at the Bureau as Document No. 2000-170918 and at the Land
     Court as Document No. 2668974; Amendment to Declaration of Covenants,
     Conditions and Restrictions Joinder dated January 31, 2003, recorded
     at the Bureau as Document No. 2003-018974 and at the Land Court as
     Document No. 2887174 (the "Lot 2 Unit Count Declaration"). Optionee
     acknowledges having received a copy of the Lot 2 Unit Count
     Declaration.

           (ix)  KOR UNIT COUNT DECLARATION.  Declaration of Restrictions
     (Unit Count) dated February 15, 2001, recorded at the Bureau as
     Document No. 2001-032604 and at the Land Court as Document
     No. 2688326 (the "KOR Unit Count Declaration"). Optionee
     acknowledges having received a copy of the KOR Unit Count
     Declaration.

           (x)   NORTH BEACH CCRs.  Declaration of Covenants, Conditions,
     Easements and Restrictions for Kaanapali North Beach dated
     December 6, 2000, recorded at the Bureau as Document No. 2000
     170917 and at the Land Court as Document No. 2668967; Designation of
     Successor Declarant and Assignment of Declarant's Rights and
     Interests Under Declaration of Covenants, Conditions, Easements and
     Restrictions for Kaanapali North Beach dated

                                  16

<PAGE>

     December 21, 2000, recorded at the Bureau as Document No. 2001-022804
     and at the Land Court as Document No. 2684122 (the "North Beach
     CCRs"). Optionee acknowledges having received a copy of the North
     Beach CCRs.

           (xi)  NORTH BEACH CCRs SUPPLEMENTAL DECLARATION.  Supplemental
     Declaration to Declaration of Covenants, Conditions, Easements and
     Restrictions for Kaanapali North Beach dated as of August 5, 2003,
     recorded at the Bureau and at the Land Court (the "North Beach CCRs
     Supplemental Declaration"), pursuant to the Lot 4 Purchase Agreement.
     Optionee acknowledges having received a copy of the North Beach CCRs
     Supplemental Declaration.

           (xii) SHORELINE ZONE PLAN.  Kaanapali North Beach Shoreline
     Zone Plan, revised November 1997, Revision No. 2 December 1998,
     approved by County of Maui Planning Commission at its January 26,
     1999 meeting (the "Shoreline Zone Plan"). Optionee acknowledges
     having received a copy of the Shoreline Zone Plan.

           (xiii) EMPLOYEE HOUSING CONCEPT PLAN.  Kaanapali North Beach
     Employee Housing Concept Plan, revised January 1998 (the "Employee
     Housing Concept Plan"). Optionee acknowledges having received a copy
     of the Employee Housing Concept Plan.

           (xiv) DRAINAGE MASTER PLAN.  Drainage Master Plan Kaanapali --
     North Beach (Mauka and Makai) dated April 2000, prepared by Sato &
     Associates, Inc. (the "Drainage Master Plan"). Optionee acknowledges
     having received a copy of the Drainage Master Plan.

           (xv)  RECREATIONAL AND PARK PLAN.  Kaanapali North Beach
     Recreational and Park Plan dated December 1990 (the
     "Recreational and Park Plan"). Optionee acknowledges having received
     a copy of the Recreational and Park Plan.

           (xvi) DESIGN GUIDELINES.  Design Manual Kaanapali Beach Resort,
     North Beach (Revised December 1996), prepared by The Odermatt
     Group, and approved by letter dated December 31, 1996, from David W.
     Blane, Director of Planning, County of Maui (the "Design
     Guidelines"). Optionee acknowledges having received a copy of the
     Design Guidelines.

           (xvii) WATER QUALITY MONITORING RIGHT OF ENTRY.  License and
     Right of Entry Agreement dated May 21, 2002, between KDC, AHI and
     SVO Pacific, Inc. (the "Water Quality Monitoring Right of

                                  17

<PAGE>

     Entry"); Partial Assignment and Assumption of License and Right of
     Entry Agreement (Water Quality Monitoring) dated as of August 5,
     2003, between the Lot 4 Seller and Optionee pursuant to the Lot 4
     Purchase Agreement; Optionee acknowledges having received a copy of
     the Water Quality Monitoring Right of Entry and the referenced
     assignment.

           (xviii) LOT 4 UNIT COUNT DECLARATION.  Declaration of
     Restrictions (Lot 4 Unit Count) dated as of August 5, 2003, recorded
     at the Bureau and at the Land Court (the "Lot 4 Unit Count
     Declaration"), made by Optionee for the benefit of NB 3 pursuant to
     the Lot 4 Purchase Agreement. Optionee acknowledges having received a
     copy of the Lot 4 Unit Count Declaration.

           (xix) LOT 3 RESTRICTIVE COVENANT.  Declaration of Restrictions
     (Permit Applications) dated as of August 5, 2003, recorded at the
     Bureau and at the Land Court (the "Lot 3 Restrictive Covenant"), made
     by NB 3 in favor of Optionee pursuant to the Lot 4 Purchase Agreement
     Optionee acknowledges having received a copy of the Lot 3
     Restrictive Covenant.

           (xx)  GRANT OF LOT 4 ACCESS EASEMENT.  Grant of Easement and
     Agreement (Access, Entry Feature and Landscaping) dated as of
     August 5, 2003, recorded at the Bureau and at the Land Court (the
     "Grant of Lot 4 Access Easement"), between NB 3 and Optionee pursuant
     to the Lot 4 Purchase Agreement. Optionee acknowledges having
     received a copy of the Grant of Lot 4 Access Easement.

           (xxi) LOT 3/LOT 4 ACCESS ROADWAY CONSTRUCTION AGREEMENT.
     Lot 3/Lot 4 Access Roadway Construction Agreement dated as of
     August 5, 2003 (the "Lot 3/Lot 4 Access Roadway Construction
     Agreement"), between the Lot 4 Seller and Optionee pursuant to
     the Lot 4 Purchase Agreement. Optionee acknowledges having received a
     copy of the Lot 3/Lot 4 Access Roadway Construction Agreement.

           (xxii) KAANAPALI WATER CORPORATION TARIFF.  Kaanapali Water
     Corporation Rules and Regulations Governing Water Service to
     Consumers and Water Rate Schedules (KWC Tariff No. 1), effective
     June 9, 1980 (the "KWC Tariff'). Optionee acknowledges having
     received a copy of the KWC Tariff.

                                  18

<PAGE>

           (xxiii) PARTIAL CANCELLATION OF RESERVED EASEMENT RIGHTS.
     Partial Cancellation of Reserved Easement Rights dated as of
     August 5, 2003, recorded at the Bureau (the "Partial Cancellation of
     Reserved Rights"), made by certain of the Amfac-Related Entities
     pursuant to the Lot 4 Purchase Agreement.  Optionee acknowledges
     having received a copy of the Partial Cancellation of Reserved
     Rights.

           (xxiv) AIRPORT OPERATIONS; RESIDUE.  Portions of the Property
     and adjacent properties were previously used as an airport and, thus,
     have been subject to extensive activities related to the operation of
     an airport. As such, the Property may have been exposed to oils,
     fuels, and other residue from airport activities and operations, any
     of which may have a present and continuing effect on the Property
     and/or adjacent properties.

           (xxv) AGRICULTURAL OPERATIONS, RESIDUE.  Portions of the
     Property and adjacent properties have been subject to extensive
     agricultural production and related agricultural activities, and, as
     such, the Property may have been exposed to organic waste,
     herbicides, and other residue from agricultural activities and
     operations, any of which may have a present and continuing effect on
     the Property and/or adjacent Properties. Optionee acknowledges having
     received a copy of a list, prepared by Hawaiian Agricultural
     Research Corporation, previously known as Hawaiian Sugar
     Planters' Association, of chemicals historically used by sugar
     plantations in the operation of cane fields. NB 3 makes no
     representations or warranties, however, that all or any of such
     chemicals have been used on the Property, or that the Property has
     not been exposed to chemicals not identified or included on the
     list.

     Optionee further acknowledges that, with respect to the foregoing
items, NB 3 does not make any warranties or representations concerning such
matters or the completeness or accuracy thereof, except only as expressly
set forth in Section 18(a)(xii) of this Agreement.

     (d)   During the Due Diligence Period, provided that Optionee is not
in default under this Agreement, NB 3 shall make available to Optionee (for
review and copy, at Optionee's expense), during regular business hours and
at such locations as NB 3 shall reasonably determine, such studies,
reports, correspondence, agreements, documents, and other items (excluding
privileged or confidential items, if any) materially relating to the
Property and known by Tamara G. Edwards, senior vice president of NB 3,
and/or John L. Higham, vice-president of NB 3 (after reasonably diligent
and good faith investigations of the files and records of NB 3, KDC, and
AHI, and reasonably diligent inquiries of the current employees and
consultants of

                                  19

<PAGE>

NB 3, KDC, and AHI responsible for the management, operation and
development of, and records relating to, the Property) to be in the custody
or possession of NB 3, KDC, or AHI, and such other items (excluding
privileged or confidential items, if any) reasonably requested by Optionee
and reasonably obtainable by NB 3 during the Due Diligence Period (at no
cost to NB 3, except to the extent the cost is paid directly by Optionee).
Optionee acknowledges that with respect to such items, NB 3 does not make
any warranties or representations concerning such items or the completeness
or accuracy thereof, except only as expressly set forth in Section 18
(a)(xii) of this Agreement.

     Upon the written request of Optionee, NB 3 shall prepare and deliver,
to such individuals, entities and/or authorities as Optionee shall
reasonably identify as having information materially relating to the
Property and Optionee's investigation thereof pursuant to this Agreement, a
letter authorizing each of such parties to communicate and cooperate with
Optionee, at Optionee's expense, with respect to Optionee's investigation
of the Property pursuant to this Agreement, to the extent of such party's
knowledge and information; provided, however, that such letter shall
specifically exclude from any authorized communication privileged or
confidential items.

     As used in this Agreement, the phrase "privileged or confidential
items" means any documents or other materials or information:  (i) that are
or may reasonably be considered privileged communications between NB 3 (or
any of the Amfac-Related Entities) and its counsel; (ii) that are subject
to a presently effective confidentiality agreement; (iii) that contain
information about assets or business activities of NB 3 or any of the
Amfac-Related Entities that cannot reasonably be separated from information
about the Property; or (iv) that are appraisals, valuations or any
information about or relating to inquiries or offers to purchase the
Kaanapali North Beach Properties, including the Property, or any part
thereof.

     (e)   Upon Optionee's delivery of the Notice of Exercise, Optionee
will be deemed to have satisfied itself with the condition of the Property
(as set forth in Section 10 below) and to have waived any right to
terminate this Agreement based on the condition of the Property or such
other matters referenced in this Section 10 or in Section I 1 below. Upon
any termination of this Agreement, all studies, reports, and information
obtained by Optionee from or through NB 3 concerning the Property, or
otherwise provided by NB 3 pursuant to this Agreement, shall be immediately
returned by Optionee to NB 3.

     (f)   Optionee shall have the right to contact and communicate with
appropriate County officials and employees regarding potential development
of the Property; provided, however, that until the later to occur of
Closing and release of the Lot 4 Mortgage (as defined in Section 19(a)
below), Optionee will use reasonable and diligent good faith efforts to
consult with, and keep NB 3 advised, as to material contacts or
communication with such officials and employees relating to or affecting
entitlements for, or development of, the Property or Lot 4.

     11.   CONDITIONS TO CLOSING.  Without limiting the terms of
Section 10 above and Section 19(b) below, Optionee's obligation to purchase
the Property pursuant to this Agreement is conditioned upon each of the
following:

                                  20

<PAGE>

           (a)   NB 3's representations and warranties contained in or
     made pursuant to this Agreement being true and accurate as of the
     Closing Date, and NB 3 not being otherwise in material default under
     this Agreement.

           (b)   The state of NB 3's title at Closing being as required by
     this Agreement, and NB 3 having possession of the Property on the
     Closing Date subject only to such rights to the Property constituting
     or arising out of Permitted Exceptions.

           (c)   The title company shall confirm as of Closing its
     intention to issue the title policy in accordance with the title
     commitment, if any, obtained by Optionee in accordance with Section
     6(c) above; provided that Optionee shall act in diligent good faith
     to cause such confirmation by the title company, and shall not cause
     through its act or omission any rejection by the title company of the
     title commitment or such confirmation.

           (d)   NB 3 shall have executed, acknowledged where appropriate,
     and/or delivered to the Escrow Agent the NB 3 Closing Documents, in
     accordance with this Agreement.

           (e)   There shall occur no material adverse change in the
     physical condition of the Property from the date that Optionee
     effectively exercises the Option through the Closing Date.

     If any of the conditions set forth in this Section 11 are not
satisfied as of the Closing Date, and provided Optionee is not then in
default hereunder, Optionee shall have the right to: (i) waive the
condition(s) in question and proceed with Closing in accordance with this
Agreement; or (ii) terminate this Agreement by written notice to NB 3;
provided, however, that such right shall be cumulative with, and not to the
exclusion of, any other rights and remedies of Optionee under this
Agreement arising out of the failure to satisfy any such condition. Upon
termination of this Agreement in accordance with this Section 11 due to the
failure of the conditions set forth in subsections 11 (c) or (e), for
reasons beyond the reasonable control of NB 3, both NB 3 and Optionee shall
be released from all further obligations under this Agreement, except for
the continuing indemnity obligations under the Right-of-Entry Agreement and
Section 30 of this Agreement and the confidentiality obligations under
Section 31 of this Agreement. Upon termination of this Agreement in
accordance with this Section 11 for any reason, the Deposit (including
interest, if any, accrued thereon prior to disbursal of the Deposit to NB
3) shall be returned to Optionee, and all studies, reports and information
obtained by Optionee from or through NB 3 concerning the Property or
otherwise provided by NB 3 pursuant to this Agreement, shall be immediately
returned by Optionee to NB 3.

     12.   CONDITION OF PROPERTY "AS IS".

     (a)   ACKNOWLEDGMENT OF PROPERTY CONDITION. Upon Optionee's delivery
of the Notice of Exercise, Optionee acknowledges that it will have made
such independent investigations as Optionee deems necessary or appropriate
concerning Optionee's intended use, development and/or sale of the Property
or the suitability of the Property for use, development

                                  21

<PAGE>

and/or sale, including, but not limited to, investigations, and analyses of
applicable Regulations (as defined in subsection 12(b) below) and Permits
(as defined in subsection 12(b) below).

     (b)   OPTIONEE ACQUIRING PROPERTY "AS IS".  Excepting only the
representations and warranties of NB 3 as and to the extent expressly set
forth in Section 18(a) of this Agreement ("NB 3's Representations and
Warranties"), Optionee is relying solely upon its own inspection,
investigation, and analyses of the Property in entering into this Agreement
and consummating the Closing, and Optionee is not relying in any way upon
any representations, statements, agreements, warranties, studies, reports,
descriptions, guidelines, or other information or material furnished by
NB 3 or its representatives, whether oral or written, express or implied,
of any nature whatsoever. Subject only to NB 3's Representations and
Warranties, OPTIONEE IS ACQUIRING THE PROPERTY "AS IS," in its state and
condition as of Closing. Subject only to NB 3's Representations and
Warranties, no patent or latent condition affecting the Property in any way
shall affect Optionee's obligations hereunder, nor shall any such condition
give rise to any right of damage or rescission against NB 3 or any Amfac-
Related Entities. Such conditions may include, without limitation, the
effect of (including non-compliance with) any applicable laws, statutes,
rules, regulations, ordinances, limitations, restrictions or requirements
concerning the use, density, location, construction or suitability for use
or development of the Property or any existing or proposed development or
condition thereof (collectively the "Regulations"), including but not
limited to zoning, land use, development plan, subdivision, building,
construction, Hazardous Materials (as defined below), archaeological,
historical, environmental, endangered or threatened species, or other such
Regulations and any Regulations governing the maintenance, operation,
nonuse or closing of groundwater wells, the diversion, discharge or runoff
of water, or any other matters relating to water use, consumption and
development on or affecting the Property or other properties; the necessity
or availability of any special management area permits, development plan
amendments, rezoning, zoning variances, conditional use permits, building
permits, environmental impact statements, subdivision maps, condominium
public reports, timeshare or subdivision registrations, and all other
governmental permits, approvals, licenses, consents, authorizations,
waivers or acts (collectively the "Permits"); the necessity and existence
of all dedications, fees, charges, costs, or assessments which may be
imposed by the County, the State of Hawaii, and any other governmental or
quasi governmental agencies or entities in connection with use or
development of the Property; the economic value of the Property; the size,
dimensions, location, and topography of the Property, including its
location within any flood zone, tsunami inundation zone or designated
wetlands; the availability or adequacy of access to the Property, or of
water, sewage, gas, electrical, or other utilities serving the Property;
the presence or adequacy of infrastructure or other improvements on, near,
or concerning the Property; the extent or condition of any grading or other
site work relating to the Property or as may be hereafter required for any
future development or redevelopment of the Property; any surface, soil,
subsoil, geologic, drainage, or groundwater conditions or other physical
conditions and characteristics of or affecting the Property, such as
hazardous ground conditions, aircraft overflight, traffic, climate,
drainage, air, water or minerals; water rights, if any, appertaining to the
Property, including the continuation or validity of any past or present
diversion, use and/or consumption of water on, from or affecting the
Property; the identity of the Property as a habitat for endangered or
threatened species of fauna or flora; the

                                  22

<PAGE>

existence on or under the Property of any "Hazardous Materials," which, as
used in this Agreement, shall include any and all substances regulated by,
or defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," or "toxic substances" under any
and all federal, state or local environmental, water pollution, hazardous
substance, toxic material or waste law, ordinance, rule, regulation,
judgment, order, decree or injunction applicable to the Property,
including, without limitation, the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601,
et seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
Section 6901, et seq, the Hazardous Materials Transportation Act, as
amended, 49 U.S.C. Section 1801, et seq., the Clean Water Act, as amended,
33 U.S.C. Section 1251, et seq., the Toxic Substances Control Act. as
amended, 15 U.S.C. Section 2601 et seq. the Safe Drinking Water Act, as
amended, 42 U.S.C. Sections 300f through 300j, and the Hawaii Environmental
Response Law, Hawaii Revised Statutes, Chapter 128D (collectively
"Hazardous Materials Laws"); the existence or condition of any surface or
underground storage tanks on or under the Property; all items and matters
disclosed by the Boundary Survey or any other survey of the Property; and
all other matters concerning the condition, use, development, or sale of
the Property. Excepting only NB 3's Representations and Warranties, NB 3
makes no representation or warranty concerning the Property or any of the
matters described above.

     13.   NORTH BEACH CCRS.  Optionee acknowledges that the Property
(together also with "Lot I", "Lot 2", "Lot 4", and "Kahekili Park" of the
Kaanapali North Beach Properties, approximately as shown on the map
attached as EXHIBIT "7" to this Agreement) is subject to the North Beach
CCRs, and subject to the jurisdiction of the Kaanapali North Beach Master
Association, Inc. (the "North Beach Association") formed pursuant to the
North Beach CCRs, and related articles of incorporation and bylaws.
Optionee, for itself and on behalf of its successors and assigns, agrees,
as of Closing, to comply with, satisfy, and be bound by all of the terms,
conditions and obligations (including, without limitation, assessment
payment obligations) in or under the North Beach CCRs as and to the extent
applicable to ownership, development, and/or use of the Property. Optionee
further acknowledges that KDC (being an affiliate of NB 3) is the current
holder of the interests of the "Declarant" in and under the North Beach
CCRs. Optionee further acknowledges that, in accordance with the Lot 4
Purchase Agreement and as provided in the North Beach CCRs Supplemental
Declaration, the "Land Points" for the Property and Lot 4 under the North
Beach CCRs are subject to reallocation among the Property and Lot 4 in
recognition of the density implications of development of the Property and
Lot 4.

     14.   USE AND DEVELOPMENT OF PROPERTY.

     (a)   PERMITS AND REGULATIONS.  Optionee shall be responsible for
obtaining, at its cost and expense, all Permits (as defined in Section
12(b) above) which may from time to time be required for Optionee's use,
development or sale of the Property, or portions thereof, including the
payment or other satisfaction of all fees, costs, charges, exactions, and
other impositions in connection with such Permits, and for compliance, at
its cost and expense, with all Regulations (as defined in Section 12(b)
above) which may from time to time relate or apply to Optionee's use,
development or sale of the Property. NB 3 makes no representations,
assurances, or

                                  23

<PAGE>

warranties in any way relating to the necessity or availability of any
Permits which may be required or desired in connection with any use,
development or sale of the Property, including any subdivision of the
Property or any other proposed use or development of the Property by
Optionee. NB 3 shall not be required to provide any assistance or support
for, or joinder in, any application or action by Optionee relating to
Permits required or desired for Optionee's use, development or sale of the
Property, or otherwise in any way relating to Optionee's use of the
Property; provided only that NB 3 agrees that it will not actively oppose,
object to, intervene in, or otherwise interfere with any application for
any and all Permits as Optionee requires for development of the Property
consistent and in compliance with this Agreement, the North Beach CCRs, and
the SMA Requirements Agreement, and otherwise consistent with permitted or
accessory uses in residential, resort or hotel land use or zoning
districts.

     (b)   SMA REQUIREMENTS.  Optionee acknowledges that the Kaanapali
North Beach Properties, including the Property, or applicable portions
thereof, are subject to the terms, conditions and requirements contained in
the following (collectively, the "SMA Requirements"): The 1988 North Beach
SMA; the 1998 KOR SMA Settlement Agreement; the 1998 KOR SMA; the Shoreline
Setback Area Declaration; the Public Open Space Declaration; the North
Beach Unit Count and Drainage Declaration; and the Lot 2 Unit Count
Declaration. Optionee, for itself and on behalf of its successors and
assigns, agrees, as of Closing and at its sole responsibility and expense,
to comply with and satisfy all SMA Requirements relating or applicable to
ownership, development, and/or use of the Property. Without limiting the
foregoing, at Closing all rights, interests and obligations of NB 3 under
the SMA. Requirements Agreement, to the extent such rights, interests and
obligations pertain to the Property, shall be assigned to Optionee, and
Optionee shall accept and assume all such rights, interests, and
obligations of NB 3 in and under the SMA Requirements Agreement, to the
extent they relate or are applicable to the Property, pursuant to an
agreement (the "Assignment of SMA Requirements Agreement") substantially in
the form attached as EXHIBIT "8" to this Agreement or in such other form as
may be agreed in writing by NB 3 and Optionee prior to Optionee's delivery
of the Notice of Exercise. Further without limiting the foregoing or
subsection 14 (a) above, Optionee shall be responsible for complying with
and satisfying, at its expense, any and all affordable housing and/or
employee housing requirements relating to the Property, pursuant to the SMA
Requirements or as may otherwise be imposed in connection with development
and/or use of the Property.

     (c)   LOT 3 UNIT COUNT DECLARATION.  Optionee shall not, without the
prior written consent of NB 3 (which consent may be withheld or conditioned
at the sole and absolute discretion of NB 3), develop, or construct, or
otherwise apply for or obtain any Permit for the development or
construction of, more than 550 Units (as defined in Section 4(a)(ii) above)
on the Property. Optionee, as the owner of Lot 3, further shall not,
without the prior written consent of the Lot 4 Seller (which consent may be
withheld or conditioned at the sole and absolute discretion of the Lot 4
Seller), amend the Lot 4 Unit Count Declaration in any way which will or
may reduce the Unit count limitation recited therein to less than 700
Units, prior to a full release of the Lot 4 Mortgage in accordance with the
terms thereof. At Closing, NB 3 and Optionee shall execute, deliver, and
record a declaration of restrictions (the "Lot 3 Unit Count Declaration"),
substantially in the form attached as EXHIBIT "9" to this Agreement or in
such

                                  24

<PAGE>

other form as may be agreed in writing by NB 3 and Optionee prior to
Optionee's delivery of the Notice of Exercise, reciting the provisions of
this subsection 14(c) and subsection 14(e) below as covenants running with
and encumbering the Property for the benefit of NB 3 and the Lot 4 Seller.

     (d)   INDEMNITY.  Optionee agrees to and shall indemnify, defend and
hold harmless NB 3 and Amfac-Related Entities from and against any and all
claims, demands, losses, liabilities, obligations, penalties, fines,
actions, causes of action, judgments, suits, proceedings, costs,
disbursements, and expenses (including, without limitation, reasonable
attorneys' and experts' reasonable fees and costs) of any kind or nature
whatsoever which may at any time be imposed upon, incurred or suffered by,
or asserted or awarded against, NB 3 or any Amfac Related Entities related
to or arising out of any failure by Optionee after the Closing to satisfy
and comply with the SMA Requirements, the SMA Requirements Agreement, the
North Beach CCRs, and the Water Quality Monitoring Right of Entry, as and
to the extent they relate or are applicable to the Property, or the Lot 3
Unit Count Declaration and the Assignment of SMA Requirements Agreement.

     (e)   NO OPPOSITION TO LOT 4 DEVELOPMENT.  In the event the Lot 4
Seller or any of the Amfac-Related Entities shall become the owner of Lot
4, either through foreclosure of the Lot 4 Mortgage or pursuant to a deed
in lieu of such a foreclosure, Optionee agrees and covenants that it shall
not oppose, object to, intervene in, or otherwise interfere with any
application for any and all permits, consents or approvals from such
governmental or quasi-governmental authorities as the Lot 4 Seller or the
applicable Amfac-Related Entities, their respective successors and assigns,
may deem necessary or desirable for the development of Lot 4 for purposes
consistent with permitted or accessory uses in residential, multiple
family, hotel, resort, resort commercial, neighborhood business, or similar
land use or zoning districts; provided, however, that the foregoing
covenant by Optionee shall not preclude Optionee from opposing, objecting
to, intervening in, or otherwise interfering with any application for any
such permit as and to the extent such permit would materially and adversely
affect or impact (i) the drainage for the Property, or (ii) the obligations
of Optionee under the SMA Requirements Agreement or any SMA Permit issued
by the County with respect to the Property.

     (f)   DELETED.

     (g)   PUBLIC OPEN SPACE DECLARATION.  Optionee acknowledges that a
substantial (ten acre) portion of the Property (being Easement 257
affecting the Property) is subject to the Public Open Space Declaration and
contains the Public Open Space referenced in the North Beach CCRs.
Optionee, for itself and on behalf of its successors and assigns, agrees to
comply with, satisfy, and be bound by all of the terms, conditions and
obligations in or under the Public Open Space Declaration, as and to the
extent applicable to ownership, development and/or use of the Property.
Without limiting the foregoing, Optionee further acknowledges that access
to the Public Open Space Area is provided across the Property, and Optionee
covenants and agrees that it shall allow and provide for continued access
to the Public Open Space Area, in accordance

                                  25

<PAGE>

with the Public Open Space Declaration and the North Beach CCRs, and that
its use and development of the Property shall be subject thereto.

     (h)   LOT 3/LOT 4 ACCESS ROADWAY CONSTRUCTION AGREEMENT.  Optionee
acknowledges that the Property is and shall be subject to the Lot 3/Lot 4
Access Roadway Construction Agreement, pursuant to which certain roadway
improvements shall or may be constructed within Easement 267 affecting the
Property, for primary vehicular access between Honoapiilani Highway and Lot
4. Optionee further acknowledges and agrees that such construction may
occur prior to or after Closing, pursuant to and in accordance with the Lot
3/Lot 4 Access Roadway Construction Agreement.

     (i)   DESIGN GUIDELINES.  Optionee acknowledges that KDC has
prepared, and has provided to Optionee, a proposed update to the Design
Guidelines ("Draft Update") pursuant to the SMA Requirements Agreement.
Optionee further acknowledges and agrees that KDC intends to and may submit
(either prior to or after Closing) the Draft Update to the County, and that
the Draft Update may be revised prior to or in connection with such
submittal at the discretion of KDC (provided only that, unless this
Agreement has terminated, any such revisions shall be delivered to
Optionee, and any such revisions after Optionee's delivery of the Notice of
Exercise materially affecting development of the Property by Optionee shall
be subject to the prior approval of Optionee, which approval shall not be
unreasonably withheld or delayed).

     15.   WATER QUALITY MONITORING RIGHTS OF ENTRY.  Pursuant to the
Water Quality Monitoring Right of Entry, SVO Pacific, Inc. ("SVOP"), as the
owner of Lot 1, has a nonexclusive license and right of entry upon the
Property, and NB 3 has nonexclusive license and right of entry upon Lot 1,
for the purpose of conducting certain water quality monitoring activities
in accordance with the 1998 KOR Settlement Agreement and the 1998 KOR SMA.
At Closing, NB 3 shall assign to Optionee, and Optionee shall assume and
accept from NB 3 all of its rights and obligations under the Water Quality
Monitoring Right of Entry as such rights and obligations relate to the
Property, by executing and delivering at Closing a document (the
"Assignment of Water Quality Monitoring Right of Entry"), substantially in
the form attached as EXHIBIT "10" to this Agreement or in such other form
as may be agreed in writing by NB 3 and Optionee prior to Optionee's
delivery of the Notice of Exercise. Optionee further agrees that it shall,
after Closing and at the request of NB 3, grant to the Lot 4 Seller, to the
extent of its interests in Lot 4, a nonexclusive license and right of entry
upon the Property for the purpose of conducting water quality monitoring
activities relating to development of Lot 4, in accordance with the 1998
KOR Settlement Agreement and the 1998 KOR SMA, on substantially the same
terms as provided in the Water Quality Monitoring Right of Entry.

     16.   [RESERVED]

     17.   ACKNOWLEDGMENT OF ADJACENT ACTIVITIES; WAIVER.  Optionee
acknowledges that the Property and any improvements constructed thereon
have been, and/or may continue to be, affected periodically by noise, dust,
smoke, soot, ash, odor, noxious vapors, transmission of surface water
runoff, or other adverse environmental conditions and nuisances,

                                  26

<PAGE>

including but not limited to those attributable to winddrift and other
weather factors (hereafter called the "Surrounding Use Effects"),
attributable to historical or currently existing agricultural use of, and
operations on, the Property and/or lands in the vicinity of the Property,
which include, but are not limited to: (a) cane milling, burning,
harvesting, tending, as well as fertilization and pest and weed control;
(b) diversified agriculture operations; (c) cattle and other livestock
grazing; (d) quarrying; (e) grading, improvement and maintenance of
adjacent and surrounding properties, including roadways; (t) electrical
transmission lines and facilities within or in the vicinity of the
Property; and (g) irrigation of any and all surrounding lands with
reclaimed water, treated effluent, or other non-potable water sources
(hereafter called, collectively, the "Surrounding Operations"). Optionee,
for itself and its successors and assigns, hereby expressly acknowledges
the risks associated with such Surrounding Operations and the annoyances,
inconveniences, and Surrounding Use Effects and nuisances created thereby,
and expressly waives all rights to any claim against NB 3 and Amfac-Related
Entities arising out of or in connection with such activities, annoyances,
inconveniences and nuisances, including but not limited to (i) any right to
seek damages attributable thereto, or (ii) the abatement or elimination
thereof; and Optionee hereby further covenants and agrees for itself and
any person or entity claiming by or through it and their respective
successors and assigns, that neither NB 3 nor any of the Amfac-Related
Entities shall be responsible or liable to Optionee, or any person or
entity claiming by or through it and their respective successors and
assigns, for the consequences of the Surrounding Use Effects. Without
limiting the foregoing, Optionee further understands and acknowledges that
the Hawaii Right to Farm Act (HRS Chapter 165) and Hawaii law limit the
circumstances under which farming operations may be deemed to be a
nuisance.

     18.   WARRANTIES AND REPRESENTATIONS.

     (a)   NB 3's WARRANTIES.  NB 3 makes the following representations
and warranties which shall be true and correct as of the Effective Date and
as of the Closing Date:

           (i)   ORGANIZATION.  NB 3 is a limited liability company duly
     organized, validly existing and in good standing under the laws of
     the State of Delaware, and NB 3's Managing Member is KLC Holding
     Corp., a corporation duly organized, validly existing and in good
     standing under the laws of the State of Delaware (the "Managing
     Member"). NB 3 and the Managing Member are qualified to do business
     in the State of Hawaii. At or prior to Closing, NB 3 shall deliver to
     Escrow Agent (A) certificates of good standing from the State of
     Delaware, showing NB 3 and the Managing Member to be in legal
     existence and good standing under the laws of the State of Delaware,
     and (B) certificates of good standing from the State of Hawaii
     Department of Commerce and Consumer Affairs showing NB 3 and the
     Managing Member to be duly authorized to do business in the State of
     Hawaii and in good standing under the laws of the State of Hawaii
     (collectively, the "NB 3 Certificates").

           (ii)  AUTHORIZATION.  NB 3 has full power and authority to
     execute and deliver this Agreement, the NB 3 Closing Documents and
     all other documents to be executed and delivered by NB 3 under this
     Agreement and the authority to perform its obligations

                                  27

<PAGE>

     under this Agreement, the NB 3 Closing Documents and such other
     documents. At or prior to Closing, NB 3 shall deliver to Escrow Agent
     resolutions of the Managing Member's board of directors authorizing
     the execution of this Agreement by NB 3 and the sale of the Property
     and the performance of NB 3's other obligations pursuant to the terms
     of this Agreement and authorizing the person(s) executing instruments
     or agreements relating to such sale to execute, acknowledge and
     deliver this Agreement and the NB 3 Closing Documents on behalf of
     the Managing Member, as the managing member of NB 3 (the "NB 3
     Resolutions").

           (iii) CONFLICTING OBLIGATIONS.  To NB 3's Knowledge, neither
     the execution or delivery of this Agreement and the NB 3 Closing
     Documents, nor the consummation of the transactions contemplated
     herein or therein, will conflict with, or result in a breach of,
     (a) any contract, license or undertaking to which NB 3 is a party,
     (b) any judgment, order, decree, or injunction to which NB 3 is
     subject, (c) any laws or regulations applicable to NB 3 or the
     Property, or (d) any easements, covenants, restrictions,
     reservations, liens and other matters affecting title to the Property
     as of Closing.

           (iv)  PROCEEDINGS.  Except as may arise after the Effective
     Date, no legal or administrative suit, action or proceeding is
     pending or, to NB 3's Knowledge, threatened against NB 3 or the
     Property which (a) would adversely affect the NB 3's ability to
     consummate the transactions as contemplated in this Agreement, (b)
     alleges that the Property does not conform to the requirements of any
     currently applicable Permits, laws, regulations, or judicial or
     administrative judgment, orders, decree, or injunction, (c) alleges
     that the Property violates or does not conform with any easements,
     covenants, restrictions, reservations, liens and other matters
     affecting title to the Property, or (d) could result in a lien,
     attachment or lis pendens affecting all or any portion of the
     Property.

           (v)   CONTRACTS; MECHANIC'S LIENS.  Except as described or
     referenced in this Agreement, to NB 3's Knowledge, there are no
     unrecorded contracts affecting the Property which will continue to
     affect the Property after Closing. NB 3 shall cause to be discharged
     all mechanics' or materialmen's liens, if any, arising from any labor
     or material furnished to the Property prior to Closing (except those
     which relate to Optionee's activities on or relating to the Property
     pursuant to Section 10 (b) of this Agreement or pursuant to the Lot
     3/Lot 4 Access Roadway Construction Agreement).

           (vi)  CONDEMNATION, ZONING, ASSESSMENTS.  Except as may arise
     after the Effective Date, to NB 3's Knowledge, there are no pending
     or threatened condemnation, zoning, or other formal land use
     regulation proceedings which could materially affect the Property,
     nor has NB 3 received written notice from an authorized taxing
     authority of any special assessment proceedings affecting the
     Property.

           (vii) LEASES.  Except as may exist or arise under the SMA
     Requirements, the North Beach CCRs, or the Water Quality Monitoring
     Right of Entry, to NB 3's

                                  28

<PAGE>

     Knowledge, there are no leases, tenancy agreements, licenses or
     occupancy agreements affecting or relating to the Property or any
     unrecorded agreements granting any third party the right to use or
     occupy the Property, or any part thereof, which will remain in effect
     after Closing.

           (viii) FURTHER ENCUMBRANCES.  Except as expressly permitted
     under this Agreement or the Lot 4 Purchase Agreement, from and after
     the Effective Date NB 3 shall not cause or permit the Property or any
     part thereof to be encumbered in any manner which would remain in
     effect after Closing, without the prior written consent of Optionee.

           (ix)  HAZARDOUS MATERIALS.  Except as may result or arise after
     the Effective Date, to NB 3's Knowledge, (a) there are no Hazardous
     Materials present on or under the Property in any quantity or manner
     that violates any Hazardous Materials Laws in effect as of the
     Effective Date, and (b) from and after December 1, 1988, NB 3 has not
     received any written notice that the Property is in violation of any
     Hazardous Materials Laws.

           (x)   LAND USE REQUIREMENTS.  To NB 3's Knowledge, neither NB 3
     nor any of the Amfac-Related Entities is in material default under
     any of the SMA Requirements, the SMA Requirements Agreement, the
     North Beach CCRs, or the Water Quality Monitoring Right of Entry, as
     and to the extent affecting the Property, nor, to NB 3's Knowledge,
     has an event occurred which, with notice or the expiration of a grace
     or cure period, would result in a material default by NB 3 or any of
     the Amfac-Related Entities under any of the SMA Requirements, the SMA
     Requirements Agreement, the North Beach CCRs or the Water Quality
     Monitoring Right of Entry as and to the extent affecting the
     Property.

           (xi)  WASTEWATER CAPACITY.  KDC holds rights to reserved
     wastewater capacity at the Lahaina Wastewater Treatment Plant
     sufficient to assign to Optionee, pursuant to this Agreement, rights
     to such wastewater capacity as may be required by the County of Maui
     for Optionee's development on the Property of 350 Units.

           (xii) COMPLETENESS OF DOCUMENTS.  To NB 3's Knowledge, all
     documents delivered by NB 3 to Optionee as provided in this Agreement
     are true and complete originals or copies of the originals of such
     documents.

           (xiii) TRADE NAME LICENSE AGREEMENT.  The party that shall
     execute the Trade Name License Agreement as the Service Mark Holder
     shall be the holder of the federally registered service mark with
     respect to the term and word "Kaanapali" and shall have full
     authority to execute and deliver the Trade Name License Agreement and
     to license the use of such service mark.

     As used in this Section 18, the term "NB 3's Knowledge" means the
actual knowledge of Tamara G. Edwards, Senior Vice President of NB 3, and
John L. Higham, vice-president of NB 3 (such

                                  29

<PAGE>

individuals being most responsible for accurate information relating to the
matters set forth above), after reasonably diligent and good faith
investigations of the files and records of NB 3 and the other Amfac
Companies (as defined in Section 20 below), and reasonably diligent
inquiries of the current employees and consultants of NB 3 and the other
Amfac Companies responsible for the management, operation and development
of the Property and records relating to the Property, KDC's reserved
wastewater capacity at the Lahaina Wastewater Treatment Plant and the items
listed in Section 10(c) of this Agreement.

     The representations and warranties of NB 3 set forth in this Section
18(a) shall survive Closing for a period of two years, and, upon the
expiration of such two-year period said representations and warranties
shall be of no further force and effect, Optionee shall have no further
rights or remedies thereunder, and NB 3 shall have no further liability
with respect thereto.

     (b)   OPTIONEE'S WARRANTIES.  Optionee makes the following
representations and warranties which shall be true and correct as of the
Effective Date and as of the Closing Date:

           (i)   ORGANIZATION.  Optionee is a limited partnership duly
     organized, validly existing and in good standing under the laws of
     the State of Delaware, and Optionee's general partner is Northwest
     Maui Corporation, a corporation duly organized, validly existing and
     in good standing under the laws of the State of Delaware (the
     "General Partner"). Optionee and the General Partner are qualified to
     do business in the State of Hawaii. At or prior to Closing, Optionee
     shall deliver to Escrow Agent (A) a certificate of good standing from
     the State of Delaware showing Optionee to be in legal existence and
     in good standing under the laws of the State of Delaware, and (B) a
     certificate of good standing from the State of Delaware showing the
     General Partner to be in legal existence and in good standing under
     the laws of the State of Delaware, and (C) certificates of good
     standing from the State of Hawaii Department of Commerce and Consumer
     Affairs showing Optionee and the General Partner to be duly
     authorized to do business in the State of Hawaii and in good standing
     under the laws of the State of Hawaii (collectively "Optionee's
     Certificates").

           (ii)  AUTHORIZATION.  Optionee has full power and authority to
     execute and deliver this Agreement, and Optionee (or the Permitted
     Assignee or Successor, as the case may be) shall have full power and
     authority to execute and deliver the Optionee Closing Documents and
     all other documents to be executed and delivered by Optionee (or the
     Permitted Assignee or Successor) under this Agreement and the
     authority to perform Optionee's obligations under this Agreement. At
     or prior to Closing, Optionee shall deliver to Escrow Agent a
     resolution of the board of directors of the General Partner (or the
     Permitted Assignee or Successor) authorizing the purchase of the
     Property and the performance of Optionee's other obligations pursuant
     to the terms of this Agreement and authorizing the person(s)
     executing instruments or agreements relating to such purchase to
     execute, acknowledge and deliver the Optionee's Closing Documents on
     behalf of the

                                  30

<PAGE>

     General Partner, as the general partner of Purchaser (or the
     Permitted Assignee or Successor) (the "Optionee Resolutions").

           (iii) BINDING OBLIGATIONS; CONFLICTING AGREEMENTS.  This
     Agreement and all documents required hereby to be executed by
     Optionee are and shall be valid, legally binding obligations and
     enforceable against Optionee in accordance with their terms.  Each of
     the persons signing this Agreement and all such other documents on
     behalf of Optionee (or the Permitted Assignee or Successor) is and
     shall be authorized to do so. To Optionee's knowledge, neither the
     execution or delivery of this Agreement, the Optionee Closing
     Documents or such other documents, nor the consummation of the
     transactions contemplated herein, will conflict with, or result in a
     breach of, (a) any contract, license, or undertaking to which
     Optionee is a party, (b) any judgment, order, decree, or
     injunction to which Optionee is subject, and (c) any laws or
     regulations applicable to Optionee.

           (iv)  PROCEEDINGS; VIOLATIONS.  No legal or administrative
     suit, action or proceeding is pending or, to Optionee's knowledge,
     threatened against Optionee which would adversely affect its ability
     to consummate the transactions as contemplated in this Agreement.

     19.   DEFAULT AND REMEDIES.

           (a)   OPTIONEE'S DEFAULT/NB 3's REMEDIES.  In the event of
     Optionee's default in the performance of any obligation or covenant
     under this Agreement prior to Optionee's effective exercise of the
     Option, NB may terminate this Agreement and further avail itself of
     any and all remedies available to it at law or in equity. In the
     event of Optionee's default in the performance of any obligation or
     covenant under this Agreement after Optionee's exercise of the Option
     and which causes Closing not to take place in accordance with this
     Agreement, NB 3 shall be released from any obligation to sell or
     otherwise convey the Property to Optionee, and NB 3 shall be entitled
     to retain the Deposit paid by Optionee under this Agreement,
     including all accrued interest, as liquidated damages for such
     default. In the event of Optionee's default in the performance of
     Optionee's obligations under this Agreement which does not prevent
     Closing from occurring, or of any other obligation or covenant of
     Optionee under this Agreement after the Closing Date, NB 3 may avail
     itself of any and all remedies available to it at law or in equity.
     NB 3 shall have no right to seek punitive damages from Optionee by
     reason of a default hereunder, and NB 3 hereby expressly waives any
     such right. Without limiting the foregoing, the occurrence of an
     "Event of Default" under that certain Mortgage, Security Agreement
     and Financing Statement dated as of August 5, 2003, recorded at the
     Bureau and also at the Land Court (the "Lot 4 Mortgage"), shall
     constitute a default by Optionee under this Agreement, and NB 3 may,
     in addition to, but not to the exclusion of, all other rights and
     remedies of NB 3 under this Agreement and all other rights and
     remedies of the Lot 4 Seller under the Lot 4 Mortgage, terminate the
     Option and this Agreement, after which Optionee shall have no further
     or continuing rights hereunder.

                                  31

<PAGE>

     (b)   NB 3's DEFAULT/OPTIONEE'S REMEDIES.  In the event of NB 3's
default in the  performance of any obligation or covenant under this
Agreement which causes the Closing not to take place in accordance with
this Agreement, Optionee, at its election, may: (i) avail itself of the
equitable remedy of specific performance (to the extent reasonably capable
of performance); or (ii) in addition to, but not to the exclusion of,
Optionee's rights and remedies under subsection 19 (b)(iv) hereinbelow,
terminate this Agreement (except for indemnity obligations under the Right-
of-Entry Agreement and Section 30 of this Agreement and confidentiality
obligations under Section 31 of this Agreement) by written notice to NB 3,
whereupon the Deposit, including all interest accrued thereon prior to
disbursal of the Deposit to NB 3, shall be returned to Optionee; or (iii)
waive the default and proceed with the purchase of the Property in
accordance with this Agreement; or (iv) avail itself of any other remedy
available to it at law or in equity (provided, however, that the liability
of NB 3 and any of the Amfac-Related Entities for damages shall not exceed
Optionee's Actual Damages (as hereinafter defined), it being understood and
agreed that Optionee shall not be entitled to recover (A) consequential
damages of any kind, including but not limited to lost profits and/or lost
business opportunities, (B) special damages, or (C) punitive damages and/or
exemplary damages, or (D) any other damages in excess of Optionee's Actual
Damages, however defined, alleged, plead or denominated). In the event of
NB 3's default in the performance of any obligation or covenant of NB 3
under this Agreement which does not prevent the Closing from occurring, or
of any other obligation or covenant of NB 3 under this Agreement after the
Closing Date, Optionee may avail itself of any and all remedies available
to it at law or in equity (provided, however, that the liability of NB 3
and any of the Amfac-Related Entities for damages and/or penalties shall
not exceed, in the aggregate, the amount of the Purchase Price).
Notwithstanding anything to the contrary contained in this Agreement or
elsewhere, no parent, owner, affiliate, stockholder, member, director,
officer, or board member of NB 3 or any of the Amfac-Related Entities shall
have any personal liability pursuant to or in connection with this
Agreement or the sale of the Property. For the purposes of this Section
19(b), "Optionee's Actual Damages" shall mean and be limited to
reimbursement to Optionee for all out of pocket costs and expenses actually
paid or incurred by Optionee for negotiation of this Agreement and for
investigation of the Property and preparation for the Closing pursuant to
this Agreement (in an aggregate amount not exceeding $200,000.00), plus
other actual damages, if any, available to Optionee not exceeding, in the
aggregate, an additional $500,000.00.

     (c)   FEES AND COSTS.  In any action at law or equity between NB 3
and Optionee occasioned by a default hereunder, the prevailing party shall
be entitled to collect its reasonable attorney's fees and court costs
actually incurred in the action from the non-prevailing party.

     20.   AMFAC-RELATED ENTITIES.  As used in this Agreement, "Amfac-
Related Entities" shall mean NB 3, AHI, KDC, PMCo, Oahu MS Development
Corp., a Hawaii corporation, Amfac Property Investment Corp., a Hawaii
corporation, KLC Holding Corp., a Delaware corporation, Kaanapali Land,
LLC, a Delaware limited liability company, NB Lot 2, LLC, a Delaware
limited liability company, and NB Lot 4, LLC, a Delaware limited liability
company (collectively, the "Amfac Companies"), and any officer, director,
member, representative, employee, and/or agent thereof.

                                  32

<PAGE>

     21.   TRANSFER OR ASSIGNMENT OF THIS AGREEMENT.  Optionee shall not
voluntarily or by operation of law assign, sell, or transfer any right,
interest or obligation under this Agreement without NB 3's express prior
written consent, which consent may be given or withheld in the sole and
absolute discretion of NB 3; provided, however, that NB 3 shall not
withhold its consent to an assignment of all of Optionee's rights,
interests and obligations under this Agreement to any corporation, limited
partnership, limited liability company or other business organization which
Optionee uses or causes to be formed, and in which Intrawest Corporation, a
corporation continued under the Canada Business Corporations Act, holds
(directly or indirectly through subsidiaries) an ownership interest, for
the purpose of purchasing, holding and developing the Property (a
"Permitted Assignee"), provided that the Permitted Assignee shall expressly
assume in writing all of Optionee's obligations under this Agreement.
Except as otherwise expressly provided in writing signed by NB 3, no
assignment by Optionee shall be construed or interpreted as a release of
Optionee from any of its obligations under this Agreement, including the
observance and performance of all terms, conditions and obligations
contained in this Agreement, or from any liability for the failure to so
observe or perform. Any attempted assignment of any or all of Optionee's
rights, interests or obligations under this Agreement without NB 3's prior
written consent shall be null and void. Each reference to "Optionee" in
this Agreement shall also refer to a Permitted Assignee and any other
assignee of Optionee's rights, interests and obligations under this
Agreement to which NB 3 consents in writing (a "Successor"). NB 3 may
assign its rights and obligations hereunder, to an affiliated entity in
connection with a transfer of the Property thereto, without the approval or
consent of Optionee.

     22.   BINDING EFFECT.  All of the obligations of Optionee as
contained in this Agreement shall be binding upon and enforceable against
each person or entity identified as Optionee herein, and their respective
heirs, successors and assigns. All of the obligations of NB 3 as contained
in this Agreement shall be binding upon and enforceable against each person
or entity identified as NB 3 herein, and their respective successors and
assigns, and against any person or entity to whom all or any portion of the
Property may be transferred before the Closing.

     23.   TIME OF ESSENCE.  Time is of the essence of each and every
provision of this Agreement.

     24.   NOTICES.  Any notice, consent, waiver, demand, request, or
other instrument or communication to be given to or served upon any party
hereto in connection with this Agreement must be in writing, and may be
given by personal delivery or by certified or registered mail or by
facsimile transmission followed by confirming "hard copy," and shall be
deemed to have been given and received upon receipt, in the case of notice
by personal delivery or facsimile transmission, or seven calendar days
after a certified or registered letter containing such notice, properly
addressed, with postage prepaid, is deposited in the United States mail.
Such notices shall be given to the parties hereto at the following
addresses:

                                  33

<PAGE>

           If to NB 3:      NB Lot 3, LLC
                            900 North Michigan Avenue, Suite 1400
                            Chicago, Illinois 60611
                            Attention:  Gary Nickele
                            Fax No.:  (312) 915-1023

           With a Copy to:  Scott D. Radovich
                            Case Bigelow & Lombardi
                            737 Bishop Street, Suite 2600
                            Honolulu, Hawaii 96813
                            Fax No.: (808) 523-1888

           If to Optionee:  Intrawest Corporation
                            200 Burrard Street, Suite 800
                            Vancouver, B.C. V6C 3L6
                            Attention:  Gary Raymond and Ross Meacher
                            Fax No.: (604) 669-0605

           With a copy to:  Jacobs Chase Frick Kleinkopf & Kelley, LLC
                            1050 17th Street, Suite 1500
                            Denver, CO 80265
                            Attention:  Steven Cohen, Esquire
                            Fax No.:  303-685-4869

     Any party hereto may, at any time by giving five days' written notice
to the other party hereto, designate any other address in substitution of
or in addition to the foregoing address to which such notice shall be
given.

     25.   ENTIRE AGREEMENT.  This Agreement constitutes the entire
agreement between NB 3 and Optionee relating to the transactions covered by
this Agreement, and all prior and contemporaneous agreements,
representations, negotiations, and understandings of NB 3 and Optionee,
oral or written, related thereto are hereby superseded and merged herein.
No agent, representative, salesman, or officer of either NB 3 or Optionee
has any authority to make, or has made, any statements, agreements, or
representations, either oral or in writing, express or implied, modifying,
adding to, or changing the terms and conditions of this Agreement, and
neither NB 3 nor Optionee has relied upon any representations not set forth
in this Agreement. No dealings between NB 3 and Optionee or custom shall be
permitted to contradict, add to, or modify the terms of this Agreement. No
waiver or amendment of the provisions of this Agreement shall be effective
unless in writing and signed by both NB 3 and Optionee. This Section 25
shall not be construed or interpreted as affecting the validity of any
instrument executed by NB 3 and Optionee in the form of any of the exhibits
attached to this Agreement, or as otherwise required to consummate the
transaction as contemplated by this Agreement.

                                  34

<PAGE>

     26.   SURVIVAL.  Except for Sections 1, 2, 3, 5, 6, 7, 8, 9, and 11,
which shall be merged into the Deed, all provisions of this Agreement shall
survive Closing.

     27.   NO WAIVER.  No waiver by NB 3 or Optionee of a breach of any of
the terms, covenants, or conditions of this Agreement by the other shall be
construed or held to be a waiver of any succeeding or preceding breach of
the same or any other term, covenant, or condition contained herein. No
waiver of any default by NB 3 or Optionee hereunder shall be implied
through any omission by the other to take any action on account of such
default if such default persists or is repeated, and no express waiver
shall affect a default other than as specified in such waiver. The consent
or approval by either NB 3 or Optionee to or of any act by the other
requiring consent or approval shall not be deemed to waive or render
unnecessary the consenting party's consent or approval to or of any
subsequent similar acts by the other party.

     28.   COUNTERPARTS.  This Agreement may be executed in one or more
counterparts. It shall be fully executed when each party whose signature is
required has signed at least one counterpart even though no one counterpart
contains the signature of all the parties. Each executed counterpart shall
be deemed an original, but all of which together shall constitute one and
the same Agreement.

     29.   FACSIMILE SIGNATURES.  NB 3 and Optionee agree that facsimile
signatures on this Agreement and any addenda or other documents related to
this Agreement shall be binding and effective for all purposes and treated
in the same manner as physical signatures.  Notwithstanding the foregoing,
NB 3 and Optionee agree that they will promptly forward physically signed
copies of this Agreement and such other documents to Escrow Agent. However,
this Agreement and any other documents containing facsimile signatures
shall remain binding and effective even if the original documents are not
received by Escrow Agent. The parties understand that they are required to
physically sign the Deed, the Lot 3 Unit Count Declaration, and any other
document affecting an interest in real property, for recordation purposes.

     30.   BROKERAGE.  NB 3 and Optionee each represents to the other that
each has not entered into any agreement, incurred any obligation, or knows
of any facts which might result in an obligation from any party to pay a
sales or brokerage commission or finder's fee in connection with the
purchase and sale contemplated by this Agreement. Optionee agrees to and
shall indemnify, defend, and hold harmless NB 3 and Amfac-Related Entities
from and against any loss, liability, cost, claim, demand, damage, action,
cause of action, and suit arising out of or in any manner relating to the
employment, engagement or use by Optionee of any consultant, advisor,
broker, or sales or marketing agent in connection with the purchase and
sale contemplated by this Agreement. NB 3 agrees to and shall indemnify,
defend, and hold harmless Optionee from and against any loss, liability,
cost, claim, demand, damage, action, cause of action, and suit arising out
of or in any manner relating to the employment, engagement or use by NB 3
or Amfac-Related Entities of any consultant, advisor, broker, or sales or
marketing agent in connection with the purchase and sale contemplated by
this Agreement. This Section 30 shall be binding on Optionee and NB 3
whether or not Closing occurs, and shall survive Closing.

                                  35

<PAGE>

     31.   CONFIDENTIALITY.  Optionee and NB 3 agree to maintain the
confidentiality as to the terms and conditions of this Agreement, except
such disclosures to attorneys, accountants, consultants, lenders,
investors, and others as are reasonably required in order to consummate the
transactions contemplated in this Agreement, or otherwise required by
governmental authority or a court with appropriate jurisdiction. Optionee
and NB 3 shall instruct their respective consultants, affiliates,
professionals, lenders, and others engaged by them in connection with the
transactions contemplated in this Agreement to abide by the confidentiality
provisions of this Section 31. All information, studies, and reports
relating to the Property obtained by Optionee, either by the observations
and examinations of its agents and representatives or as disclosed to it by
or through NB 3 that does not pertain to other property owned by Optionee,
shall remain confidential, and if the transaction contemplated herein fails
to close for any reason, all such information, reports, and studies
obtained by Optionee from or through NB 3 shall be immediately returned by
Optionee to NB 3, and all copies thereof destroyed, and Optionee shall make
no further distributions, disclosures or other use of any such information,
reports, and studies. All press releases and other publicity and public
communications relating to this Agreement, and the method of release
thereof, shall require prior approval of NB 3, which approval shall not be
unreasonably withheld or delayed. This Section 31 shall be binding on
Optionee and NB 3 whether or not Closing occurs, and shall survive Closing.

     32.   NO JOINT VENTURE.  It is hereby acknowledged by Optionee and
NB 3 that any relationship between them created hereby is not intended to
be and shall not in any way be construed to be that of a partnership, joint
venture, or principal and agent. It is hereby further acknowledged that any
rights reserved herein by NB 3 with respect to the Property or any
documents or matters related thereto is solely for the purpose of either
securing NB 3's interest in this transaction or protecting NB 3's property
interests and values. Any approvals or other action by NB 3 pursuant to
this Agreement, or any document related thereto, is solely for NB 3's
benefit, and no person or entity may rely upon NB 3's approvals or actions
hereunder for any other purpose.

     33.   FURTHER ASSURANCES.  Each of the parties shall execute and
deliver all additional papers, documents, and other assurances, and shall
do all acts and things, reasonably necessary in connection with the
performance of their respective obligations hereunder to carry out the
intent of this Agreement.

     34.   CAPTIONS.  Captions given to various sections in this
Agreement, and terms used for definition purposes herein, are for
convenience and reference purposes only and are not intended to and shall
not modify or affect the meaning, construction, or interpretation of any of
the substantive provisions hereof.

     35.   APPLICABLE LAW.  This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Hawaii.

                                  36

<PAGE>

     36.   USE OF KAANAPALI NAME.  Purchaser acknowledges that the term
and word.  "Kaanapali" is a federally registered service mark of Seller or
certain of the Amfac-Related Entities ("Service Mark Holder"). Purchaser
shall not, without the prior written consent of the Service Mark Holder,
which consent may be withheld or conditioned in the sole and absolute
discretion of the Service Mark Holder, use the word "Kaanapali", or any
trade name, trade mark, service mark, or logotype held or used by Seller or
Amfac-Related Entities related thereto, in connection with the acquisition,
ownership, use, development, or sale of the Property. At the Closing,
Seller shall cause the Service Mark Holder to execute and deliver to
Purchaser, and Purchaser shall execute and deliver to the Service Mark
Holder, an agreement (the "Trade Name License Agreement"), in the form
attached as EXHIBIT "11" to this Agreement or such other form as may be
agreed in writing by NB 3 and Optionee prior to Optionee's delivery of the
Notice of Exercise, pursuant to which the Service Mark Holder shall license
to Purchaser the right to use, or otherwise agree with Purchaser as to use
of, the word "Kaanapali" and the trade name "Kaanapali North Beach" for
such purposes, and on such terms and conditions, as shall be set forth in
the Trade Name License Agreement.

     37.   NO RECORDATION.  This Agreement shall not be recorded by NB 3
or Optionee, and any violation of this provision by Optionee shall, at the
option of NB 3 to be exercised by written notice from NB 3 to Optionee,
cause this Agreement to be null and void, except only as provisions hereof
which, under the terms hereof, are to survive termination of this
Agreement. Notwithstanding the foregoing, a short form memorandum of this
Agreement (the "Memorandum of Lot 3 Option Agreement"), in the form
attached hereto as EXHIBIT "12", will be recorded as an encumbrance on
title to Lot 3; provided, however, that upon any termination of this
Agreement, NB 3 and Optionee agree to promptly execute, acknowledge and
record a cancellation of the Memorandum of Lot 3 Option Agreement
effectively releasing and removing the Memorandum of Lot 3 Option Agreement
from title to Lot 3.

     38.   INCORPORATION OF EXHIBITS.  Exhibits "1", "2", "3", "4", "5",
"6", "7", "8", "9", "10", "11" and "12" to this Agreement are incorporated
into this Agreement by this reference.

                                  37

<PAGE>

     NB 3 and Optionee have executed this Agreement as of the Effective
Date.

                            NB LOT 3, LLC, a Delaware limited liability
                            company

                            By:   KLC Holding Corp.,
                                  a Delaware corporation
                                  Its Managing Member

                                  By:  /s/ Tamara G. Edwards
                                       ------------------------------
                                       Name:  TAMARA G. EDWARDS
                                       Title: SENIOR VICE PRESIDENT

                                                        NB 3

                            MAUI BEACH RESORT LIMITED PARTNERSHIP,
                            a Delaware limited partnership

                            By:   NORTHWEST MAUI CORPORATION,
                                  a Delaware corporation
                                  Its General Partner

                                  By:  /s/ Andrew Voysey
                                       ------------------------------
                                       Name:  ANDREW VOYSEY
                                       Title: President

                                                        Optionee

                                  38

<PAGE>

                                                   NB Lot 3, LLC

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

     On AUG 4 2003, before me personally appeared TAMARA G. EDWARDS, to me
personally known, who, being by me duly sworn or affirmed, did say that
such person(s) executed the foregoing instrument as the free act and deed
of such person(s), and if applicable, in the capacities shown, having been
duly authorized to execute such instrument in such capacities.

                      /s/ Jauis G. Yee
                      ------------------------------
                      Notary Public, in and for said
                      County and State

                      Type or Print Name:  Jauis G. Yee
                      My Commission expires: [ illegible ]

                                  39

<PAGE>

                                                   NB Lot 3, LLC

PROVINCE OF BRITISH COLUMBIA)
                            ) SS.
CANADA                      )

     On JULY 31, 2003, before me personally appeared ANDREW VOYSEY, to me
personally known, who, being by me duly sworn or affirmed, did say that
such person(s) executed the foregoing instrument as the free act and deed
of such person(s), and if applicable, in the capacities shown, having been
duly authorized to execute such instrument in such capacities.

                      /s/ Phillip C. Marshall
                      ------------------------------
                      Notary Public, in and for said
                      Province
                      Type or Print Name:  Phillip C. Marshall
                      My commission does not expires: ________

PHILLIP C. MARSHALL
BARRISTER & SOLICITOR
SUITE 2300, 1055 DUNSMUIR ST.
P.O. BOX 49122, VANCOUVER, B.C. V7X 1J1
TELEPHONE (604) 683-6498

                                  39

<PAGE>

CANADA                      )
PROVINCE OF BRITISH COLUMBIA)
CITY OF VANCOUVER,          ) S.S.
CONSULATE GENERAL OF THE    )
UNITED STATES OF AMERICA    )

I, Christine Harold Aluyen, Consul of the United States of America, at
Vancouver, in the Province of British Columbia, duly commissioned and
qualified, do hereby certify that PHILLIP CHARLES MARSHALL, before whom the
annexed document has been executed, was at the time he signed the annexed
certificate a Notary Public at VANCOUVER, in the Province of British
Columbia, Canada.

                            IN WITNESS WHEREOF I have here unto
[ AFFIXED SEAL ]            set my hand and affixed the Seal of the
                            Consulate General at Vancouver
                            on August 1, 2003.

                 /s/ Christine Harold Aluyen
                 --------------------------------------
                 Christine Harold Aluyen
                 Consul of the United States of America<PAGE>
                                                                    Exhibit 10.1

                           PURCHASE AND SALE AGREEMENT

                                     BETWEEN

                            THE BON-TON STORES, INC.

                                       AND

                             HSBC BANK NEVADA, N.A.

                            DATED AS OF JUNE 20, 2005

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                              <C>
ARTICLE  1  DEFINITIONS.....................................................      4
     Section 1.1  Definition of Terms Used in the Agreement.................      4

ARTICLE  2  PURCHASE OF ACCOUNT PORTFOLIO ASSETS............................      9
     Section 2.1  Purchase..................................................      9
     Section 2.2  Preliminary Information...................................      9
     Section 2.3  Purchase Price............................................      9

ARTICLE  3  THE CLOSING AND POST-CLOSING ADJUSTMENTS........................     11
     Section 3.1  Place and Date of Closing.................................     11
     Section 3.2  Bank's Deliveries at Closing..............................     11
     Section 3.3  Bon-Ton's Deliveries at Closing...........................     11
     Section 3.4  Final Closing Statement...................................     12

ARTICLE  4  REPRESENTATIONS AND WARRANTIES..................................     14
     Section 4.1  General Representations and Warranties of Bon-Ton.........     14
     Section 4.2  Representations and Warranties of Bon-Ton Regarding
                    the Accounts and the Indebtedness.......................     15
     Section 4.3  General Representations and Warranties of Bank............     16

ARTICLE  5  CONDITIONS PRECEDENT............................................     17
     Section 5.1  Conditions to Obligations of Bank.........................     17
     Section 5.2  Conditions to Obligations of Bon-Ton......................     18

ARTICLE  6  ADDITIONAL AGREEMENTS AND COVENANTS.............................     19
     Section 6.1  Account Payments..........................................     19
     Section 6.2  No Sale of Assets.........................................     19
     Section 6.3  Tax on Sale...............................................     19
     Section 6.4  Public Announcements......................................     20
     Section 6.5  Confidentiality...........................................     21
     Section 6.6  Notices to Account Debtors; Use of Account Debtor List....     22
     Section 6.7  Conversion of Accounts....................................     22
     Section 6.8  Credit Bureau Reporting...................................     22
     Section 6.9  Further Assistance........................................     22

ARTICLE  7  INDEMNIFICATION.................................................     23
     Section 7.1  Indemnification by Bon-Ton................................     23
</TABLE>

                                        2
<PAGE>

<TABLE>
<S>                                                                              <C>
     Section 7.2  Indemnification by Bank...................................     23
     Section 7.3  Procedures................................................     24
     Section 7.4  Limitations on Indemnification............................     25
     Section 7.5  Survival; Remedies........................................     25

ARTICLE  8  MISCELLANEOUS...................................................     26
     Section 8.1  Waiver....................................................     26
     Section 8.2  No Joint Venture..........................................     26
     Section 8.3  Payment Terms.............................................     26
     Section 8.4  Entire Agreement..........................................     26
     Section 8.5  Notices...................................................     27
     Section 8.6  Modification..............................................     28
     Section 8.7  Governing Law.............................................     28
     Section 8.8  Severability..............................................     28
     Section 8.9  Assignment................................................     28
     Section 8.10  Accounting Terms.........................................     28
     Section 8.11  Singular and Plural......................................     29
     Section 8.12  Headings.................................................     29
     Section 8.13  Expenses.................................................     29
     Section 8.14  Counterparts.............................................     29
     Section 8.15  Waiver of Jury Trial; Consent to Jurisdiction............     29
</TABLE>

                                        3
<PAGE>

                           PURCHASE AND SALE AGREEMENT

      This Purchase and Sale Agreement is made and entered into as of the 20th
day of June, 2005 by and between THE BON-TON STORES, INC. ("Bon-Ton"), with its
principal place of business at 2801 East Market Street, York, Pennsylvania 17402
and HSBC Bank Nevada, N.A. ("Bank" or "HSBC"), with its principal place of
business at 1111 Town Center Drive, Las Vegas, NV 89144.

                                   WITNESSETH

      WHEREAS, Bon-Ton desires to sell the portfolio of accounts and related
indebtedness that arose from the sale of goods and services to its customers and
accountholders; and

      WHEREAS, Bank desires to purchase from Bon-Ton such accounts and related
indebtedness and related assets on the terms and conditions set forth herein;

      NOW, THEREFORE, in consideration of the premises, the mutual agreements
set forth herein, the benefits to be derived herefrom, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

SECTION 1.1  DEFINITION OF TERMS USED IN THE AGREEMENT.

The following terms shall have the following meanings when used in this
Agreement:

(a)   "Account" means (a) any account, account receivable, Indebtedness, other
      receivable, contract right, chose in action, general intangible, chattel
      paper, instrument, document, note, and proceeds thereof, wherever located,
      whether now owned or hereafter acquired by Bon-Ton, arising out of the
      sale of Merchandise or Cross-Marketing Merchandise to an Account Debtor
      pursuant to a Credit Card Agreement, (b) all Account Documentation
      evidencing the same, (c) any and all rights and remedies as to
      stoppage-in-transit, reclamation, return and repossession of Merchandise
      and Cross-Marketing Merchandise financed pursuant thereto, (d) all rights
      as to any Merchandise, Cross-Marketing Merchandise, goods or other
      property, contracts of indemnity, guaranties or sureties, proceeds of
      insurance and other proceeds at any time standing as security therefor;
      provided, that "Account" shall not include any Account as of the Cut-Off
      Time, (i) that is a Bankruptcy Account, (ii) as to which the

                                        4
<PAGE>

      Account Debtor is deceased ("Deceased Account"), (iii) disputed
      Indebtedness with respect to any Account as to which Bon-Ton has notice of
      actual or possible fraud from the Account Debtor ("Fraud Account"), (iv)
      that is a Lost or Stolen Account, (v) that is paying under a Consumer
      Credit Counseling Service or similar debt management payment plan
      ("CCCS/DMP Account"), (vi) that is subject to any pending litigation
      ("Pending Litigation Account") or (vii) as to which the Account Debtor is
      on the U.S. Office of Foreign Assets Control Specially Designated
      Nationals list ("OFAC Accounts").

(b)   "Account Debtor" means any Person who is or who may become obligated
      pursuant to an Account and whose Account has not been purged from
      Bon-Ton's systems.

(c)   "Account Debtor List" means the list of Account Debtors, including names
      and addresses.

(d)   "Account Documentation" means any and all documentation relating to
      Accounts to the extent such documentation is in Bon-Ton's possession or
      control as of the Cut-Off Time, and all rights and privileges accruing
      under such documentation, including, without limitation, applications for
      Accounts, outstanding solicitations for Accounts, pending applications for
      Accounts, Credit Card Agreements, sales orders and finance copies thereof,
      billing statements, all Account Debtor records including all lists and
      compilations in whatever form of the Accounts, the Account Debtors, and
      the Credit Card Agreements, and all correspondence, memoranda, magnetic
      tapes, disks, or hardcopy formats, and all other written material relating
      to Accounts.

(e)   "Account Marks" means, with respect to any Person, the name, trademarks,
      and service marks used by such Person in connection with the Accounts.

(f)   "Account Portfolio Assets" means all of the following: (i) the Accounts;
      (ii) the Indebtedness; (iii) any and all rights to process such Accounts;
      (iv) the Account Documentation; (v) all rights and privileges accruing
      under the Account Documentation on and after the Cut-Off Time; and (vi)
      all rights with respect to the Related Contracts.

(g)   "Accrued Interest" means interest accruing to an Account between the last
      Account billing date prior to the Cut-Off Time and the Cut-Off Time.

(h)   "Affiliate" means, with respect to any Person, any entity that controls,
      is controlled by, or is under common control with such Person. For the
      purpose of this definition, "control" of a Person shall mean the
      possession, directly or indirectly, of the power to direct or cause the
      direction of its management or policies, whether through the ownership of
      voting securities, by contract, or otherwise.

                                        5
<PAGE>

(i)   "Agreement" means this Purchase and Sale Agreement, including all addenda,
      exhibits, and schedules hereto.

(j)   "Agreement Confidential Information" has the meaning assigned to it in
      Section 6.5(a).

(k)   "Assumption Agreement" means the agreement to be executed by Bank and
      Bon-Ton and delivered at Closing pursuant to Sections 3.2(a) and 3.3(a) of
      this Agreement in substantially the form of Exhibit B.

(l)   "Bankruptcy Account" means an account as to which the Account Debtor is a
      Bankrupt Account Debtor provided that (A) Bon-Ton has received
      notification from any source of the commencement of such Bankrupt Account
      Debtor's bankruptcy case, on or prior to the Closing Date, or (B) Bon-Ton
      or Bank determines within sixty (60) days after the Closing Date that such
      Account Debtor became a Bankrupt Account Debtor prior to the Closing Date
      based upon a reliable data base.

(m)   "Bankrupt Account Debtor" means an Account Debtor who (i) has filed for
      bankruptcy under the Bankruptcy Code prior to the Closing Date and whose
      bankruptcy case has not been closed or dismissed and (ii) opened the
      subject Account prior to the commencement of such bankruptcy case.

(n)   "Bankruptcy Code" means the provisions of Title 11 of the United States
      Code, 11 U.S.C. Sections 101 et seq.

(o)   "Bill of Sale" means the agreement to be executed by Bank and Bon-Ton and
      delivered at Closing pursuant to Sections 3.2(b) and 3.3(b) of this
      Agreement in substantially the form of Exhibit C.

(p)   "Bon-Ton" means the Bon-Ton Stores, Inc., a Pennsylvania corporation, and
      its subsidiaries.

(q)   "Bon-Ton's Revolving Credit Business" means Bon-Ton's business with
      respect to the Account Portfolio Assets.

(r)   "Bon-Ton Indemnified Parties" has the meaning assigned to it in Section
      7.2.

(s)   "Business Day" means any day that is not a Saturday, a Sunday, or a day on
      which banks or Bon-Ton are required or permitted to be closed in the State
      of Nevada or the Commonwealth of Pennsylvania.

(t)   "Bank Confidential Information" has the meaning assigned to it in Section
      6.5(a).

                                        6
<PAGE>

(u)   "Bank Indemnified Parties" has the meaning assigned to it in Section 7.1.

(v)   "Charged-Off Account" means an Account that is 180 days or more past due
      or which has otherwise been charged off by Bon-Ton.

(w)   "Closing" means the transfer of the Account Portfolio Assets from Bon-Ton
      to Bank in exchange for payment of the Purchase Price upon satisfaction or
      written waiver of the conditions precedent by the appropriate Party as set
      forth in this Agreement.

(x)   "Closing Date" means the date on which the Closing takes place, which date
      shall be June 20, 2005 if all conditions precedent to the Closing have
      been met, satisfied or waived, or such other date as is mutually agreed
      between the Parties.

(y)   "Closing Tape" means a standard master file tape or tapes of the Accounts
      to be transferred as of the Cut-Off Time, which tape or tapes shall
      include at least the following information for each Account identified on
      such Closing Tape: Account number; Account Debtor's name and address;
      origination date; current billed interest, current billed fees; credit
      limit; and current balance.

(z)   "Confidential Information" has the meaning assigned to it in Section
      6.5(a).

(aa)  "Conversion Date" has the meaning assigned to it in Section 6.7.

(bb)  "Credit Card Agreement" means the credit agreement between an Account
      Debtor and Bon-Ton pursuant to which an Account Debtor may be permitted to
      purchase, from time to time, Merchandise and Cross-Marketing Merchandise
      on credit.

(cc)  "Credit Card Program Agreement" means the Credit Card Program Agreement
      between Bank and Bon-Ton executed concurrent with this Agreement

(dd)  "Cross-Marketing Merchandise" means those goods and services, including
      accessories, extended warranties and delivery services sold in connection
      therewith, sold by any Person other than Bon-Ton in connection with the
      Program.

(ee)  "Cross-Reference File" means a file provided by Bon-Ton post-closing
      setting forth the account numbers of any accounts retained by Bon-Ton.

(ff)  "Cut-Off Time" means the close of Bon-Ton's business on the Business Day
      before the Closing Date.

                                        7
<PAGE>

(gg)  "Estimated Purchase Price" has the meaning assigned to it in Section 2.3.

(hh)  "Federal Funds Interest Rate" means the average of the high and low
      "Federal Funds" interest rates for the Business Day immediately preceding
      the Final Settlement Date, as such rate is reported on the Final
      Settlement Date in the Money Rates Column of The Wall Street Journal or as
      determined in such other mutually acceptable manner as the Parties agree
      if The Wall Street Journal is no longer reporting such rate.

(ii)  "Final Closing Statement" means the final closing statement described in
      Section 3.4, satisfactory in form and substance to the Parties, which
      closing statement sets forth the Purchase Price and which reflects all
      adjustments from the Preliminary Closing Statement as are agreed to by the
      Parties with respect to such Accounts.

(jj)  "Final Settlement Date" shall have the meaning assigned to it in Section
      3.4(a).

(kk)  "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
      as amended.

(ll)  "Indebtedness" means an obligation incurred by an Account Debtor in
      respect of an Account, including, without limitation, any charges for
      Merchandise and Cross-Marketing Merchandise, sales tax, and all finance
      charges, late charges, and other similar charges and fees added to an
      Account, as such charges are accrued pursuant to Bon-Ton's accounting
      practices and net of any credit balances.

(mm)  "Indemnified Party" shall have the meaning assigned to it in Section
      7.3(a).

(nn)  "Indemnifying Party" shall have the meaning assigned to it in Section
      7.3(a).

(oo)  "Interim Servicing Agreement" shall have the meaning assigned to it in
      Section 6.7.

(pp)  "Lost or Stolen Account" means an account as to which the related credit
      card or account number has been reported to Bon-Ton as lost or stolen.

(qq)  "Merchandise" means those goods and services, including accessories,
      extended warranties and delivery services sold in connection therewith,
      sold by Bon-Ton and its subsidiaries.

(rr)  "Party" means, when used in the singular, either Bank or Bon-Ton, as the
      context requires; when used in the plural, Bank and Bon-Ton.

(ss)  "Person" shall mean any individual, sole proprietorship, partnership,
      limited liability

                                       8
<PAGE>

      company, joint venture, trust, unincorporated organization, association,
      corporation, institution, public benefit corporation, entity, or
      government (whether federal, state, county, city, municipal, or otherwise,
      including, without limitation, any instrumentality, division, agency,
      body, or department thereof).

(tt)  "Preliminary Closing Statement" means a draft closing statement that is
      prepared by Bon-Ton and presented to Bank pursuant to Section 2.2.

(uu)  "Prepetition Indebtedness" means Indebtedness arising under the Account of
      a Bankrupt Account Debtor that arose prior to the commencement of such
      Bankrupt Account Debtor's bankruptcy case.

(vv)  "Program" means Bon-Ton's revolving credit program.

(ww)  "Purchase Price" means the purchase price to be paid by Bank to Bon-Ton
      for the Account Portfolio Assets finally determined pursuant to Section
      3.4 of this Agreement.

(xx)  "Related Contracts" means the agreements set forth on Exhibit D.

(yy)  "Securitization Trust" means the Bon-Ton Receivable Master Note Trust.

(zz)  "Taxes" means any federal, state, local, or foreign net income, gross
      income, gross receipts, windfall profit, severance, property, production,
      sales, use, license, excise, franchise, employment, payroll, withholding,
      alternative or add-on minimum, ad valorem, value added, transfer, stamp,
      or environmental tax, or any other tax, custom, duty, governmental fee or
      other like assessment or charge of any kind whatsoever, together with any
      interest or penalty, addition to tax or additional amount imposed by any
      governmental authority.

(aaa) "Total Receivables Purchased" shall be the amount calculated on Exhibit A.

                                    ARTICLE 2
                      PURCHASE OF ACCOUNT PORTFOLIO ASSETS

SECTION 2.1  PURCHASE.

On the Closing Date, effective as of the Cut-Off Time, and subject to the terms
and conditions of this Agreement, Bon-Ton shall sell, assign, and transfer to
Bank, and Bank shall purchase from Bon-Ton for the Purchase Price, all of
Bon-Ton's right, title, and interest in the Account Portfolio Assets as of the
Cut-Off Time.

                                        9
<PAGE>

Subject to the terms herein, commencing on the Cut-Off Time and continuing
thereafter, Bank shall assume the obligations of Bon-Ton, and Bon-Ton shall
assign its rights to Bank, under the Related Contracts and the terms of
Bon-Ton's Account Documentation.

SECTION 2.2  PRELIMINARY INFORMATION.

On the second Business Day prior to the Closing Date, Bon-Ton shall deliver to
Bank a Preliminary Closing Statement that shall calculate the estimated Purchase
Price for the Account Portfolio Assets being transferred on the Closing Date,
which Preliminary Closing Statement shall be based on the information available
to Bon-Ton prior to the Closing Date. The form of both the Preliminary Closing
Statement and the Final Closing Statement, showing the manner in which the
Purchase Price is to be calculated in accordance with Bon-Ton's established
accounting practices, is attached hereto as Exhibit A.

SECTION 2.3  PURCHASE PRICE.

The estimated Purchase Price (the "Estimated Purchase Price") shall be
calculated using the Preliminary Closing Statement. The Estimated Purchase Price
shall be subject to post-closing adjustments in accordance with Section 3.4,
with the result being the final Purchase Price.

SECTION 2.4  TRANSACTIONAL ALLOCATION FOR U.S. FEDERAL INCOME TAX PURPOSES

Bank and Bon-Ton agree that the Purchase Price shall be allocated for U.S.
federal income tax purposes among the Account Portfolio Assets (and adjusted as
soon as possible thereafter following any post-closing adjustments) in
accordance with Section 1060 of the Internal Revenue Code of 1986 and the
regulations promulgated thereunder as set forth in Schedule 2.4. As promptly as
practicable following the Closing Date, the Parties mutually shall determine the
value of the Indebtedness and the Account Portfolio Assets and the values
determined by such valuation shall be deemed to be final and conclusive as to
their fair market values. Bank and Bon-Ton will file all applicable tax returns
and other required tax related schedules and documents (including Form 8594, if
applicable) in accordance with those fair market values and allocations, and
will not adopt or otherwise assert tax positions inconsistent therewith.
Notwithstanding the foregoing, in the event the Internal Revenue Service
challenges any position taken by any Party hereto, the Party against which a
challenge is made may settle or litigate such challenge without the consent of,
or liability to, the other Party.

                                       10
<PAGE>

                                    ARTICLE 3
                    THE CLOSING AND POST-CLOSING ADJUSTMENTS

SECTION 3.1  PLACE AND DATE OF CLOSING.

The Closing shall take place through the wire transfer of the Estimated Purchase
Price and facsimile exchange, together with subsequent overnight courier
exchange, of the required closing documents on the Closing Date, or as otherwise
mutually agreed by the Parties.

SECTION 3.2  BANK'S DELIVERIES AT CLOSING.

On the Closing Date, upon satisfaction or waiver of the conditions precedent in
Section 5.1 of this Agreement, Bank shall deliver to Bon-Ton:

      (a)   the Assumption Agreement;

      (b)   the Bill of Sale;

      (c)   the Estimated Purchase Price;

      (d)   the Credit Card Program Agreement and Interim Servicing Agreement;
            and

      (e)   all such additional instruments, documents, or certificates as may
            be necessary for the consummation at such Closing of the
            transactions contemplated by this Agreement.

SECTION 3.3  BON-TON'S DELIVERIES AT CLOSING.

In order to transfer and assign all of the right, title, and interest of Bon-Ton
in the Account Portfolio Assets as of the Cut-Off Time, upon satisfaction or
waiver of the conditions precedent in Section 5.2 of this Agreement and upon
receipt of the Estimated Purchase Price, Bon-Ton shall deliver the following to
Bank:

      (a)   the Assumption Agreement;

      (b)   the Bill of Sale;

      (c)   the Closing Tape, together with a format of such tape, and a
            description of the fields on such tape;

                                       11
<PAGE>

      (d)   all UCC-1 financing statements required by Section 5.1(d) of this
            Agreement;

      (e)   the Credit Card Program Agreement and Interim Servicing Agreement;

      (f)   the Account Documentation;

      (g)   documentation reasonably deemed necessary by Bank to evidence the
            termination of previous encumbrances of the Accounts or the
            Indebtedness due to Bon-Ton's securitization of the Account
            Portfolio Assets; and

      (h)   all such additional instruments, documents, or certificates as may
            be necessary for the consummation at such Closing of the
            transactions contemplated by this Agreement.

SECTION 3.4  FINAL CLOSING STATEMENT.

      (a)   Within sixty (60) days after the Closing Date, or at such other time
            as is mutually agreed to by the Parties, Bank shall prepare (with
            the assistance of Bon-Ton with respect to items under Bon-Ton's
            control) and deliver to Bon-Ton a Final Closing Statement or other
            mutually acceptable documentation showing the changes to the
            Preliminary Closing Statement. Bon-Ton shall review such Final
            Closing Statement within thirty (30) days and shall promptly notify
            Bank of any discrepancies. The Parties shall confer until they are
            in agreement on the Final Closing Statement. In the event the
            Parties are unable to reach agreement on the Final Closing Statement
            within ten (10) Business Days of the date Bank has been notified of
            any discrepancies by Bon-Ton, with respect to the funds that are the
            subject of the discrepancy, either Party shall by written notice to
            the other Party, have the right to require that promptly thereafter
            the Parties shall jointly hire a nationally recognized public
            accounting firm as the Parties mutually agree, to resolve any
            discrepancies in the Final Closing Statement, and shall equally
            share the costs of such resolution. The accounting firm selected
            shall not at the time of selection or for six months prior thereto
            (or at any time during its engagement hereunder) be performing
            services for the Bank, Bon-Ton or any of their respective
            Affiliates. The final resolution and decision issued by such
            accounting firm shall be binding upon the Parties. The Parties shall
            use their commercially reasonable efforts to cause the accounting
            firm to complete its work and render its report in respect thereof
            to the Parties no later than thirty (30) days following the
            engagement of the accounting firm. The date when Bon-Ton and Bank
            reach agreement on the Final Closing Statement or, in the absence of
            such agreement the date when final resolution and decision is
            issued, is referred to in this Agreement as the "Final Settlement
            Date."

                                       12
<PAGE>

      (b)   If the Final Closing Statement establishes an increase in the
            Purchase Price for the Account Portfolio Assets over that calculated
            based on the Preliminary Closing Statement for any reason, including
            the addition of Accounts between the Cut-Off Time and the Final
            Settlement Date, the amount of any such increase shall be delivered
            to Bon-Ton by Bank within three (3) Business Days after the Final
            Settlement Date. If the Final Closing Statement establishes a
            decrease in the Purchase Price for the Account Portfolio Assets over
            that calculated based on the Preliminary Closing Statement for any
            reason, including the removal of Accounts that are determined not to
            have met the definition of "Account" as of the Cut-Off Time based
            upon information received and verified prior to the Final Settlement
            Date, the amount of such decrease shall be delivered by Bon-Ton to
            Bank within three (3) Business Days after the Final Settlement Date.
            Any payment made to any Party pursuant to this Section 3.4(b) shall
            include interest calculated on a daily basis from the Closing Date
            to the date such payment is made at the Federal Funds Interest Rate.

      (c)   If a receivable that was included in the Preliminary Closing
            Statement does not satisfy the definition of "Account" as of the
            Cut-Off Time based upon information received and verified prior to
            the Final Settlement Date and is therefore excluded from the Final
            Closing Statement, such exclusion shall be effective retroactively
            as of the Cut-Off Time, and Bank shall remit to Bon-Ton within three
            (3) Business Days after Bank and Bon-Ton agree to the Final Closing
            Statement the amount of any payment Bank received from an Account
            Debtor on such receivable on or after the Cut-Off Time net of any
            amount previously credited to such receivable by Bank which after
            the Cut-Off Time was determined to be a check for insufficient
            funds, stop-payment or any amount required to be refunded by Bank to
            or on behalf of any Account Debtor. Within ten (10) Business Days
            after Bank and Bon-Ton agree to the Final Closing Statement, Bank
            shall deliver to the Bon-Ton any assignment, acknowledgment, or
            other document necessary to evidence Bon-Ton's continuing right,
            title, and interest in such receivable.

      (d)   If a receivable that was excluded from the Preliminary Closing
            Statement satisfies the definition of "Account" as of the Cut-off
            Time based upon information received and verified prior to the Final
            Settlement Date, and is therefore included in the Final Closing
            Statement, such inclusion shall be effective retroactively as of the
            Cut-Off Time, and Bon-Ton shall remit to Bank within three (3)
            Business Days after Bank and Bon-Ton agree to the Final Closing
            Statement the amount of any payment Bon-Ton received from an Account
            Debtor on such receivable on or after the Cut-Off Time net of any
            amount previously credited to such receivable by Bon-Ton which after
            the Cut-

                                       13
<PAGE>

            Off Time was determined to be a check for insufficient funds,
            stop-payment or any amount required to be refunded by Bon-Ton to or
            on behalf of any Account Debtor. Within ten (10) Business Days after
            Bank and Bon-Ton agree to the Final Closing Statement, Bon-Ton shall
            deliver to the Bank any assignment, acknowledgment, or other
            document necessary to evidence Bank's continuing right, title, and
            interest in such receivable.

      (e)   Any payment made to any Party pursuant to this Section 3.4(c) and
            3.4(d) shall include interest calculated on a daily basis from the
            Closing Date to the date such payment is made at the Federal Funds
            Interest Rate.

      (f)   If Indebtedness arising from Cross-Marketing Merchandise is included
            in the Preliminary Closing Statement and such Indebtedness
            ("Disputed Indebtedness") is subject to a bonafide dispute by the
            Account Debtor as of the Final Settlement Date, such Disputed
            Indebtedness shall be excluded from the Final Closing Statement. The
            Disputed Indebtedness exclusion shall be effective retroactively as
            of the Cut-Off Time, and Bank shall remit to the Bon-Ton within
            three (3) Business Days after Bank and Bon-Ton agree on the Final
            Closing Statement the amount of any payment Bank received from an
            Account Debtor on Account of such Disputed Indebtedness, net of any
            amount previously credited to such Disputed Indebtedness by Bank
            which after the Cut-Off Time was determined to be a check for
            insufficient funds, stop-payment or any amount required to be
            refunded by Bank to or on behalf of any Account Debtor. Within ten
            (10) Business Days after Bank and Bon-Ton agree on the Final Closing
            Statement, Bank shall deliver to the Bon-Ton any assignment,
            acknowledgment or other document necessary to evidence such
            Bon-Ton's continuing right, title and interest in such Disputed
            Indebtedness. Any payment made to any Party pursuant to this Section
            3.4(f) shall include interest calculated on a daily basis from the
            Closing Date to the date such payment is made at the Federal Funds
            Interest Rate.

                                       14
<PAGE>

                                    ARTICLE 4
                         REPRESENTATIONS AND WARRANTIES

SECTION 4.1  GENERAL REPRESENTATIONS AND WARRANTIES OF BON-TON.

As of the Closing Date, Bon-Ton represents and warrants to Bank as set forth
below:

      (a)   ORGANIZATION. Bon-Ton is a corporation duly organized, validly
            existing, and in good standing under the laws of the Commonwealth of
            Pennsylvania. Bon-Ton has the requisite corporate power and
            authority to own and operate its properties and to carry on its
            business as it is now being conducted.

      (b)   AUTHORITY RELATIVE TO THIS AGREEMENT. Bon-Ton has the requisite
            corporate power to execute and deliver this Agreement and to
            consummate the transactions contemplated hereby. The execution and
            delivery of this Agreement by Bon-Ton and the consummation of the
            transactions contemplated hereby have been, or will be prior to the
            Closing, duly authorized by all necessary corporate action on the
            part of Bon-Ton. This Agreement has been duly executed and delivered
            by Bon-Ton and constitutes a legal, valid, and binding obligation of
            Bon-Ton and is enforceable against Bon-Ton in accordance with its
            terms except (i) that such enforcement may be subject to bankruptcy,
            conservatorship, receivership, insolvency, moratorium, or similar
            laws affecting creditors' rights generally; and (ii) that the remedy
            of specific performance and injunctive and other forms of equitable
            relief are subject to certain equitable defenses and to the
            discretion of the court before which any proceedings therefor may be
            brought.

      (c)   NO PENDING LITIGATION. There is no pending or, to the knowledge of
            Bon-Ton, threatened suit, action, injunction, investigation,
            inquiry, or other proceeding against Bon-Ton before any court or
            government agency, which has resulted or will probably result in an
            order staying or judgment restraining or prohibiting the
            transactions contemplated hereby or subjecting Bon-Ton to material
            liability on the grounds that it has breached any law or regulation
            or otherwise acted improperly in connection with the transactions
            contemplated hereby.

      (d)   NO BROKER. Bon-Ton has not, directly or indirectly, employed any
            broker, finder, financial advisor, or intermediary in connection
            with the transactions contemplated by this Agreement who would be
            entitled to a brokerage, finders', or other fee or commission
            payable by Bank upon the execution of this Agreement or consummation
            of the transactions contemplated hereby.

                                       15
<PAGE>

      (e)   PRIVACY. Bon-Ton has complied in all material respects with the
            applicable requirements of the implementing regulations of Title V
            of the Gramm-Leach Bliley Act of 1999, specifically, 16 Code of
            Federal Regulations, Chapter I, Subchapter C, Part 313.11. Bon-Ton
            has maintained a privacy policy with respect to its handling of the
            personal information of individual consumers submitted by such
            consumers to Bon-Ton through any medium, including the Internet.
            Bon-Ton's privacy policy has been available on its Internet website.
            Bon-Ton has complied in all material respects with the provisions of
            such privacy policy.

SECTION 4.2  REPRESENTATIONS AND WARRANTIES OF BON-TON REGARDING THE ACCOUNTS
             AND THE INDEBTEDNESS.

As of the Closing Date, Bon-Ton represents and warrants to Bank with respect to
the Accounts and associated Indebtedness, that:

      (a)   TITLE TO ACCOUNTS. Except for the transfer by Bon-Ton of
            Indebtedness into the Securitization Trust, there has been no prior
            sale by Bon-Ton of the Accounts. Except for liens, encumbrances,
            pledges and transfers related to the Securitization Trust, Bon-Ton
            has not granted any encumbrances with respect to any Account,
            pledged any such Account, nor taken any action to transfer ownership
            of the Accounts to anyone other than Bank; as of the Closing,
            Bon-Ton has full right and authority to sell and assign each such
            Account to Bank pursuant to this Agreement.

      (b)   ACCURACY OF CLOSING TAPE. Each Account is as described in the
            Closing Tape in all material respects, and when delivered by Bon-Ton
            to Bank, the information contained in the Closing Tape shall be
            correct in all material respects.

      (c)   CHANGE IN TERMS. Except as may have been required by law or as set
            forth in this Agreement, Bon-Ton did not change as a result of the
            contemplated sale of Accounts to Bank, the manner in which it
            accepted or evaluated Credit Card applications, opened Accounts,
            collected Accounts, or administered Accounts in the period from
            January 1, 2005 to the Closing Date such that the value of the
            Accounts was adversely affected.

      (d)   COMPLIANCE WITH LAWS. (i) Bon-Ton's Revolving Credit Business has
            been conducted in material compliance with all applicable laws,
            rules, regulations, and orders; (ii) each of the Accounts have been
            originated, maintained and serviced in all material respects in
            accordance with applicable laws; (iii) each of the Accounts and the
            interest rates, fees, and charges in connection therewith have,

                                       16
<PAGE>

            at all times during Bon-Ton's ownership of such Accounts, complied
            in all material respects with all applicable laws; (iv) each Account
            and the related Indebtedness is, to the knowledge of Bon-Ton, the
            legal, valid and binding obligation of the Account Debtor and any
            guarantor named therein, subject to disputes and chargebacks in the
            ordinary course of business consistent with past practice; and (v)
            Bon-Ton has all permits, licenses, certificates of authority,
            orders, and approvals of, and has, or will prior to the Closing Date
            have made all filings, applications and registrations with, federal,
            state, and local governmental or regulatory bodies that are required
            in order to permit Bon-Ton to carry on Bon-Ton's Revolving Credit
            Business as it is presently conducted and all such permits,
            licenses, certificates of authority, orders, and approvals are in
            full force and effect, except where the failure to comply with such
            applicable laws or to have such permits, licenses, certificates of
            authority, orders and approvals or the failure of same to be in full
            force and effect would not reasonably be expected to have a material
            adverse effect on the Account Portfolio Assets.

      (e)   CREDIT CARD AGREEMENT. Bon-Ton has heretofore delivered to Bank a
            true and complete copy of each form of Credit Card Agreement and any
            changes in terms or amendments thereto used in connection with the
            Credit Card Program Agreement, which would be in effect as of the
            Cut-Off Time with respect to any Account.

      (f)   EFFECTIVENESS OF TRANSFER. The execution and delivery of the
            Assumption Agreement and the Bill of Sale in accordance with this
            Agreement and the filing of the UCC-1 financing statement referred
            to in Section 5.1(d) are sufficient to transfer Bon-Ton's title to
            the Accounts and the related Indebtedness to Bank. Upon such
            transfer, Bank will be vested with all of Bon-Ton's right, title,
            and interest in and to the Account Portfolio Assets that relate to
            such Accounts free and clear of any lien, pledge, claim, security
            interest, encumbrance, charge, or restriction of any kind existing
            on the Account Portfolio Assets.

      (g)   PROCESSING. During the period of Bon-Ton's ownership of the
            Accounts, each Account has been processed in material conformance
            with all of the requirements of the respective Account Documentation
            and applicable law and Bon-Ton's written policies with respect to
            that Account. All Accounts presently are, and during the period of
            Bon-Ton's ownership of the Accounts always have been, processed by
            Bon-Ton or an Affiliate of Bon-Ton or third party contractor of
            Bon-Ton.

SECTION 4.3  GENERAL REPRESENTATIONS AND WARRANTIES OF BANK.

                                       17
<PAGE>

As of the Closing Date, Bank represents and warrants to Bon-Ton as set forth
below:

      (a)   ORGANIZATION. Bank is a national bank, duly organized and validly
            existing, and in good standing under the laws of the United States.
            Bank has the requisite corporate power and authority to own and
            operate its properties and to carry on its business as it is now
            being conducted.

      (b)   AUTHORITY RELATIVE TO THIS AGREEMENT. Bank has the requisite
            corporate power to execute and deliver this Agreement and to
            consummate the transactions contemplated hereby. The execution and
            delivery of this Agreement by Bank and the consummation of the
            transactions contemplated hereby have been, or will be prior to the
            Closing, duly authorized by all necessary corporate action on the
            part of Bank. This Agreement has been duly executed and delivered by
            Bank and constitutes a legal, valid, and binding obligation of Bank
            and is enforceable against Bank in accordance with its terms except
            that (i) such enforcement may be subject to bankruptcy,
            conservatorship, receivership, insolvency, moratorium, or similar
            laws affecting creditors' rights generally; and (ii) the remedy of
            specific performance and injunctive and other forms of equitable
            relief are subject to certain equitable defenses and to the
            discretion of the court before which any proceedings therefore may
            be brought.

      (c)   PERMITS LICENSES AND APPROVALS. Bank has all permits, licenses,
            certificates of authority, orders, and approvals of, and has, or
            will prior to the Closing Date have made all filings, applications
            and registrations with, federal, state, and local governmental or
            regulatory bodies that are required in order to permit Bank to
            acquire, and conduct business with respect to, the Account Portfolio
            Assets and all such permits, licenses, certificates of authority,
            orders, and approvals are in full force and effect, except where the
            failure to comply with such applicable laws or to have such permits,
            licenses, certificates of authority, orders and approvals or the
            failure of same to be in full force and effect would not reasonably
            be expected to have a material adverse effect on the Account
            Portfolio Assets.

      (d)   NO PENDING LITIGATION. There is no pending or, to the knowledge of
            Bank, threatened suit, action, injunction, investigation, inquiry,
            or other proceeding against Bank before any court or government
            agency, which has resulted or will probably result in an order
            staying or judgment restraining or prohibiting the transactions
            contemplated hereby or subjecting Bank to material liability on the
            grounds that it has breached any law or regulation or otherwise
            acted improperly in connection with the transactions contemplated
            hereby.

      (e)   NO BROKER. Bank has not, directly or indirectly, employed any
            broker, finder,

                                       18
<PAGE>

            financial advisor, or intermediary in connection with the
            transactions contemplated by this Agreement who might be entitled to
            a brokerage, finders', or other fee or commission upon the execution
            of this Agreement or consummation of the transactions contemplated
            hereby.

                                    ARTICLE 5
                              CONDITIONS PRECEDENT

SECTION 5.1  CONDITIONS TO OBLIGATIONS OF BANK.

The obligation upon Bank to consummate the transactions contemplated herein
shall be subject to the fulfillment on or prior to the Closing Date of the
following conditions (any of which may be waived by Bank), which conditions
Bon-Ton agrees to use its commercially reasonable efforts to fulfill (Bank
agrees to use commercially reasonable efforts to cooperate with Bon-Ton as
Bon-Ton may reasonably request in order to facilitate the satisfaction of these
conditions):

      (a)   CLOSING DOCUMENTS. Bon-Ton shall have executed and delivered this
            Agreement and the documents set forth in Section 3.3 of this
            Agreement to which it is a party, and each such document shall be in
            full force and effect.

      (b)   COMPLIANCE WITH COVENANTS. Bon-Ton shall have performed, and be in
            compliance with, in all material respects all of its agreements and
            covenants to be performed by Bon-Ton on or prior to the Closing Date
            under this Agreement.

      (c)   ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
            warranty of Bon-Ton contained in this Agreement shall be true in all
            material respects on and as of the Closing Date as if made on such
            date.

      (d)   FINANCING STATEMENTS. At or before the Closing Date, Bon-Ton shall
            have executed and delivered to Bank such financing statements, as
            are prepared by Bank for filing, which are reasonably necessary to
            give notice of Bank's interest in the Account Portfolio Assets
            transferred by Bon-Ton. Such financing statements may be filed by
            Bank, in its discretion, at the appropriate place or places for the
            financing statements to be filed for such purpose.

      (e)   HSR ACT. On or prior to the Closing Date, any applicable waiting
            period under the HSR Act shall have expired or been terminated.

      (f)   SECURITIZATION. Bon-Ton shall have terminated its securitization of
            the Account Portfolio Assets and shall have presented evidence of
            such termination to Bank's

                                       19
<PAGE>

            reasonable satisfaction.

SECTION 5.2  CONDITIONS TO OBLIGATIONS OF BON-TON.

The obligation upon Bon-Ton to consummate the transactions contemplated herein
shall be subject to the fulfillment on or prior to the Closing Date of the
following conditions (any of which may be waived by Bon-Ton), which conditions
Bank agrees to use its commercially reasonable efforts to fulfill (Bon-Ton
agrees to use commercially reasonable efforts to cooperate with Bank as Bank may
reasonably request in order to facilitate the satisfaction of these conditions):

      (a)   CLOSING DOCUMENTS. Bank shall have executed and delivered this
            Agreement and the documents set forth in Section 3.2 of this
            Agreement, and each such document shall be in full force and effect.

      (b)   PURCHASE PRICE. The Estimated Purchase Price shall have been
            delivered to Bon-Ton pursuant to Bon-Ton's written instructions.

      (c)   COMPLIANCE WITH COVENANTS. Bank shall have performed, and be in
            compliance with, in all material respects all their respective
            agreements and covenants to be performed by Bank on or prior to the
            Closing Date under this Agreement.

      (d)   ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
            warranties of Bank contained in this Agreement shall be true in all
            material respects on and as of the Closing Date as if made on such
            date.

      (e)   HSR ACT. On or prior to the Closing Date, any applicable waiting
            period under the HSR Act shall have expired or been terminated.

      (f)   OPINION. Bon-Ton shall have received the opinion of Wolf, Block,
            Schorr and Solis-Cohen LLP, dated the Closing Date, in form
            reasonably acceptable to Bon-Ton that the transfer of the Accounts
            pursuant to this Agreement is a "true sale" for purposes of the
            Bankruptcy Code.

                                    ARTICLE 6
                       ADDITIONAL AGREEMENTS AND COVENANTS

SECTION 6.1  ACCOUNT PAYMENTS.

                                       20
<PAGE>

After the Conversion Date, Bon-Ton agrees that it will remit or forward, as soon
as practicable, but in any event no later than three (3) Business Days after the
receipt thereof, to Bank any payment or the amount of any payment, as the case
may be, on an Account that has been transferred to Bank (in the case of a
remittance, net of any amount required to be refunded by Bon-Ton to or on behalf
of any Account Debtor, to the extent such amount has not been previously
remitted or refunded), and will promptly forward any other document pertaining
to an Account received from or on behalf of an Account Debtor after the
Conversion Date. Bank agrees that it will remit or forward, as soon as
practicable, but in any event no later than three (3) Business Days after
receipt thereof, to Bon-Ton any payment or the amount of any payment, as the
case may be, received on an account that is not an Account (in the case of a
remittance, net of any amount previously remitted representing a check returned
for insufficient funds or any amount required to be refunded by Bank to or on
behalf of the obligor on any such account, to the extent such amount has not
been previously remitted or refunded).

SECTION 6.2  NO SALE OF ASSETS.

Prior to the Closing Date, without the prior written consent of Bank, Bon-Ton
shall not sell, lease, assign, transfer, encumber, or otherwise dispose of any
of the Account Portfolio Assets except pursuant to this Agreement and in the
ordinary course of Bon-Ton's business pursuant to the Program. Nothing in this
Section 6.2 shall refer or apply to any transactions related to Bon-Ton's
securtization of the Accounts.

SECTION 6.3  TAX ON SALE.

      (a)   RESPONSIBILITY FOR TAXES - BON-TON. Bon-Ton shall be liable for and
            pay (i) any Taxes relating to the Account Portfolio Assets that
            accrue or otherwise relate to any taxable year or period (or portion
            thereof) ending on or prior to the Closing Date (except that Taxes
            attributable to transactions or events occurring during the period
            after the Cut-Off Time and ending on the Closing Date shall be
            apportioned to Bon-Ton only if such transactions or events are
            properly includible in Bon-Ton's consolidated tax return and shall
            otherwise be apportioned to the Bank), and (ii) any Taxes imposed on
            the Bon-Ton as a result of the sale of the Account Portfolio Assets
            to the Bank. For purposes of this Agreement, Taxes attributable to a
            portion of a taxable year or period shall be determined on a
            "closing of the books" basis as of the Closing Date, except that
            Taxes imposed on a periodic basis (such as property Taxes) shall be
            allocated on a daily basis.

                                       21
<PAGE>

      (b)   RESPONSIBILITY FOR TAXES - BANK. Bank shall be liable for and pay
            any Taxes relating to the Account Portfolio Assets that accrue or
            otherwise relate to any taxable year or period beginning after the
            Cut-Off Time; except for (i) Taxes imposed upon Bon-Ton as a result
            of the sale of the Account Portfolio Assets to the Bank and (ii) any
            other Taxes for which Bon-Ton is responsible as set forth in Section
            6.3(a)(i).

      (c)   INFORMATION REPORTING. Unless otherwise provided herein, Bon-Ton
            shall be responsible for any applicable 2005 IRS or state
            information reporting for events (including cancellation of
            indebtedness) or payments related to the Account Portfolio Assets
            which occur during the period beginning January 1, 2005 and ending
            on the Cut-Off Time. Bank shall be responsible for any applicable
            2005 IRS or state information reporting for events (including
            cancellation of indebtedness) or payments related to the Account
            Portfolio Assets which occur subsequent to the Cut-Off Time.

SECTION 6.4  PUBLIC ANNOUNCEMENTS.

The Parties shall consult with each other before they or any of their respective
Affiliates or agents issue any press releases or otherwise make any public
statements with respect to this Agreement and the transactions contemplated
hereby, and none of them nor any Affiliate of any of them shall issue any such
press release or make any public statement prior to receiving express written
approval of the other Party, which approval shall not be unreasonably withheld
or delayed, except, in each case, as may be required by applicable law or
regulation, in which case such Party or Affiliate thereof shall consult with the
other Party prior to such release or statement to the extent practicable.

                                       22
<PAGE>

SECTION 6.5  CONFIDENTIALITY.

      (a)   This Agreement, the Interim Servicing Agreement, the performance of
            the Parties hereunder and thereunder and the transactions
            contemplated hereby and thereby, shall be confidential ("Agreement
            Confidential Information") and no Party or its officers, directors,
            shareholders, employees, attorneys, accountants, advisors, lenders,
            agents, successors, assigns or personal representatives shall
            disclose the Agreement Confidential Information to any other Person
            except as otherwise required by law or to enforce their rights with
            respect to the Agreement Confidential Information. Bank shall not
            disclose any confidential or proprietary information of Bon-Ton (the
            "Bon-Ton Confidential Information") to any Person who is not a
            partner, officer, employee, counsel, or agent of Bank except with
            the consent of Bon-Ton or pursuant to a subpoena or order issued by
            a court of competent jurisdiction or by a judicial or administrative
            or legislative body or committee with jurisdiction over Bank.
            Bon-Ton shall not disclose any confidential or proprietary
            information of Bank (the "Bank Confidential Information") to any
            Person who is not a partner, officer, employee, counsel, or agent of
            Bon-Ton except with the consent of Bank or pursuant to a subpoena or
            order issued by a court of competent jurisdiction or by a judicial
            or administrative, or legislative body or committee with
            jurisdiction over Bon-Ton. The Agreement Confidential Information,
            the Bon-Ton Confidential Information, and the Bank Confidential
            Information are hereinafter collectively referred to as the
            "Confidential Information."

      (b)   In the event that a Party receives a request to disclose any
            Confidential Information of the other Party under such subpoena or
            order, such Party shall (i) notify the other Party within five (5)
            Business Days after receipt of such request; (ii) consult with that
            Party on the advisability of taking steps to resist or narrow such
            request; and (iii) if disclosure is required or deemed advisable,
            cooperate with that Party in any attempt that such Party may make to
            obtain an order or other reliable assurance that confidential
            treatment will be accorded to designated portions of the
            Confidential Information.

                                       23
<PAGE>

      (c)   Information will not be deemed Confidential Information if (i) the
            information is already lawfully in the possession of or was
            independently developed by the Party with respect to which the
            Confidential Information is not concerned and is not otherwise
            subject to an agreement as to confidentiality; (ii) the information
            becomes generally available in the public domain other than as a
            result of a disclosure by such Party or such Party's officers,
            employees, counsel, or agents in violation of the terms of this
            Agreement; (iii) the information is lawfully acquired from a Person
            other than the Party with respect to which it is concerned or
            Persons known to be in breach of an obligation of secrecy to such
            Party; or (iv) the information is contained in or derived from any
            Account Documentation delivered by Bank or is otherwise Account
            information Bank or Bank's counsel or underwriters determine is
            reasonably required to be disclosed in connection with the
            securitization and sale of interests in the Accounts or
            Indebtedness.

SECTION 6.6  USE OF ACCOUNT DEBTOR LIST.

Following the consummation of the transaction contemplated herein on the Closing
Date, subject to the terms of the Credit Card Program Agreement, Bon-Ton shall
relinquish all rights to the Account Debtor List. Nothing in this Section 6.6
shall prevent Bon-Ton from retaining and using any information regarding its
retail customers who also happen to be Account Debtors.

SECTION 6.7  CONVERSION OF ACCOUNTS.

Concurrently with this Agreement, the parties shall execute an interim servicing
agreement (the "Interim Servicing Agreement"), whereby Bon-Ton shall continue to
provide services for the Accounts until their transfer to Bank (currently
estimated to occur on or before November 1, 2005 - the "Conversion Date"). After
the Conversion Date, with respect to all Account Portfolio Assets, Bank shall be
responsible for all Account Debtor service issues, any and all losses resulting
from service issues, and for refunding credit balances at its expense to the
extent such credit balances were taken into account in computing the Purchase
Price as a reduction thereof. In addition, with respect to all Account Portfolio
Assets, Bank assumes and agrees to pay, perform in accordance with the terms of,
and be bound by Bon-Ton's obligations that are to be performed after the Closing
Date with respect to, the Related Contracts and the Accounts and under the
Account Documentation, including without limitation, any Cross-Marketing
Merchandise, whether or not arising after the Cut-Off time. Bank agrees that it
will conduct the conversion of Account Portfolio Assets onto its systems as
promptly as practicable following the Closing Date and compensate Bon-Ton for
their costs of conversion in an amount as set forth in the Credit Card Program
Agreement.

                                       24
<PAGE>

SECTION 6.8  CREDIT BUREAU REPORTING.

Upon Closing, with the cooperation of Bank, Bon-Ton will notify the three major
credit reporting bureaus (Equifax, Experian and TransUnion) that the designation
on all Accounts shall reflect that the Accounts were transferred.

SECTION 6.9  FURTHER ASSISTANCE.

The Parties will use all commercially reasonable efforts to obtain the
satisfaction of the conditions set forth in Article 5 hereof and to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable to carry out all of their respective obligations
under this Agreement and to consummate and make effective the transactions
contemplated by this Agreement, including, but not limited to, (i) assisting
Bank in the orderly transition of the Account Portfolio Assets being acquired by
Bank, (ii) giving prompt notice to the other Party regarding any customer
service or Federal Fair Credit Billing Act complaints filed by an Account Debtor
which affects such other Party and (iii) delivering Account Documentation and
such other information as Bank may reasonably request in connection with the
servicing of the Accounts to the extent and in the same form and condition that
Bon-Ton maintains such information. Without limiting the foregoing, each Party
shall make or cause to be made, as promptly as practicable (which filing shall
be made in any event within five (5) days after the date of this Agreement), all
filings with governmental entities that are necessary to obtain all
authorizations, consents, orders and approvals for the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby,
including all filings required under the HSR Act, if necessary. Each Party shall
use its commercially reasonable efforts to respond to any requests for
additional information made by any governmental entities with respect to all
filings required under applicable laws. Bank shall take all actions necessary to
obtain any required approvals of any governmental entities under applicable
laws, to resist in good faith, at its cost and expense, any assertion that the
transactions contemplated hereby constitute a violation of any laws and to
eliminate any impediment under any law that may be asserted by any governmental
entity so as to enable the Closing to occur as soon as reasonably possible, all
to the end of expediting consummation of the transactions contemplated hereby.

SECTION 6.10 CROSS-REFERENCE FILE.

Bon-Ton agrees to provide Bank with the Cross-Reference File no later than
fifteen (15) days after the Closing Date. The account numbers set forth in the
Cross-Reference File shall be used solely for the purpose of Bank's conversion
and servicing of the Account Portfolio Assets or as required by applicable law.

                                       25
<PAGE>

                                    ARTICLE 7

                                 INDEMNIFICATION

SECTION 7.1  INDEMNIFICATION BY BON-TON.

Bon-Ton agrees to indemnify and hold harmless Bank and its officers, directors,
employees, partners, agents and Affiliates (the "Bank Indemnified Parties"),
from any liability, loss, cost, or expense, including reasonable attorneys'
fees, (collectively, "Losses") which shall result from and be caused by (i) the
breach of any of Bon-Ton's representations or warranties contained in this
Agreement, (ii) the breach by Bon-Ton of any of its covenants or agreements
contained in this Agreement, or (iii) Bon-Ton's acts or omissions or failure to
satisfy any of its obligations or liabilities to third parties with respect to
the Account Portfolio Assets incurred on or prior to the Closing Date, provided;
that in no event shall Bon-Ton be obligated under this Article 7 to indemnify
the Bank Indemnified Parties against any liability, loss, cost, expense,
damages, including without limitation punitive damages, and any interest thereon
which shall result solely from the willful or negligent acts or omissions of the
Bank Indemnified Parties, but provided nevertheless that if Bank and Bon-Ton are
jointly sued by a third party and Bank and Bon-Ton are held to be liable as
joint tortfeasors by a court of competent jurisdiction, then the allocation of
loss between Bank and Bon-Ton shall be as determined by such court. Nothing in
this Section 7.1 shall limit any indemnification obligation that may arise as a
result of Bon-Ton's servicing of the Accounts under the Interim Servicing
Agreement.

SECTION 7.2  INDEMNIFICATION BY BANK.

Bank agrees to indemnify and hold harmless Bon-Ton and its officers, directors,
employees, partners, agents and Affiliates (the "Bon-Ton Indemnified Parties"),
from any Losses which shall result from and be caused by (i) the breach of any
of Bank's representations or warranties contained in this Agreement, (ii) the
breach by Bank of any of its covenants or agreements contained in this
Agreement, (iii) Bank's acts or omissions or failure to satisfy any of its
obligations or liabilities to third parties with respect to the Account
Portfolio Assets on or after the Closing Date, provided, that in no event shall
Bank be obligated under this Article 7 to indemnify the Bon-Ton Indemnified
Parties against any liability, loss, cost, expense, damages, including without
limitation punitive damages, and any interest thereon which shall result solely
from the willful or negligent acts or omissions of the Bon-Ton Indemnified
Parties; but provided nevertheless that if Bank and Bon-Ton are jointly sued by
a third party and Bank and Bon-Ton are held to be liable as joint tortfeasors by
a court of competent jurisdiction, then the allocation of loss between Bank and
Bon-Ton shall be as determined by such court.

SECTION 7.3  PROCEDURES.

      (a)   In the event any claim is made, or any suit or action is commenced,
            against a Party with respect to which such Party may seek
            indemnification under this

                                       26
<PAGE>

            Article 7 from another Party, then such Party shall give notice
            thereof to the Party from whom indemnification is sought hereunder.
            The Party against which such claim is made, or any suit or action is
            commenced, will hereinafter be referred to as the "Indemnified
            Party"; the Party to which such notice is given will hereinafter be
            referred to as the "Indemnifying Party." Such notice must be given
            within ten (10) days of the Indemnified Party's notice of any such
            claim, suit or action (subject to Section 7.4(a)). The Indemnifying
            Party shall be entitled to participate in the defense thereof and,
            to the extent the Indemnifying Party notifies the Indemnified Party
            in writing, to assume, at the Indemnifying Party's expense, the
            defense thereof, with counsel reasonably satisfactory to such
            Indemnified Party. After notice from the Indemnifying Party to such
            Indemnified Party of its election so to assume the defense thereof,
            the Indemnifying Party will not be liable, except as provided in
            Section 7.3(b), to such Indemnified Party under this Section 7.3 for
            any legal or other expenses subsequently incurred by such
            Indemnified Party in connection with the defense thereof.

      (b)   The Indemnified Party shall have the right to employ its own counsel
            if the Indemnified Party elects, with the consent of the
            Indemnifying Party, to assume such defense, but the fees and
            expenses of such counsel shall be at the Indemnified Party's
            expense, unless (i) the employment of such counsel, at the
            Indemnifying Party's expense, shall have been authorized in writing
            by the Indemnifying Party, (ii) the Indemnifying Party shall not
            have employed counsel to take charge of the defense within thirty
            (30) days after the Indemnifying Party shall have elected to assume
            the defense of such action, or (iii) there is a reasonable basis on
            which the Indemnified Party's interests may differ from those of the
            Indemnifying Party (in which case the Indemnifying Party shall not
            have the right to direct the defense of such action on behalf of the
            Indemnified Party), in any of which events such reasonable fees and
            expenses shall be borne by the Indemnifying Party.

      (c)   The Indemnified Party shall have the right to reject any settlement
            approved by the Indemnifying Party if the Indemnified Party waives
            its right to indemnification hereunder or if the settlement requires
            any obligation other than the payment of money. The Indemnified
            Party shall have the right to settle any third party claim over the
            objection of the Indemnifying Party; provided, that if the
            Indemnifying Party is contesting such claim in good faith and has
            assumed the defense of such claim from the Indemnified Party, the
            Indemnified Party waives any right to indemnity therefor. Any such
            settlement or compromise of, or any final judgment or decree entered
            on or in, any claim, suit or action which the Indemnified Party
            defended or participated in the defense of in accordance herewith,
            shall be deemed to have been consented to by, and shall be binding
            upon, the

                                       27
<PAGE>

            Indemnified Party as fully as if the Indemnifying Party had assumed
            the defense thereof and a final judgment or decree had been entered
            in such suit or action, or with regard to such claim, by a court of
            competent jurisdiction for the amount of such settlement,
            compromise, judgment or decree.

      (d)   In the event that the Indemnifying Party reimburses the Indemnified
            Party for any third party claim, the Indemnified Party shall remit
            to the Indemnifying Party any reimbursement that the Indemnified
            Party subsequently receives for such third party claim.

SECTION 7.4  LIMITATIONS ON INDEMNIFICATION.

      (a)   If the Indemnified Party fails to give notice of any claim being
            made or any suit or action being commenced in respect of which
            indemnification under this Article 7 may be sought within ten (10)
            days of the Indemnified Party's receipt of notice thereof, such
            failure shall not limit the liability of the Indemnifying Party;
            provided, that this provision shall not be deemed to limit the
            Indemnifying Party's rights to recover for any loss, cost, or
            expense that it can establish resulted from such failure to give
            prompt notice.

      (b)   The language set forth in this Article 7 governs the obligations of
            the Parties with respect to the subject matter thereof, but shall
            not be deemed to limit the rights which any Party might otherwise
            have at law or in equity.

      (c)   Notwithstanding anything to the contrary set forth in Article 7,
            neither Bon-Ton nor Bank shall have any obligation to indemnify an
            Indemnified Party in respect of any breach of a representation or
            warranty under Section 7.1(i) or 7.2(i), as applicable, unless and
            until $200,000 in Losses have been incurred in the aggregate by the
            Indemnified Party in respect of breaches of representations and
            warranties under Section 7.1(i) or 7.2(i), as the case may be,
            Bon-Ton or Bank, as applicable, shall indemnify the Indemnified
            Party in accordance with this Article 7 to the extent of the full
            amount of such Losses in excess of such $200,000.

      (d)   The Indemnifying Party shall not be liable for any Losses relating
            to any matter to the extent the Indemnified Party has been fully
            compensated for such matter pursuant to the post Closing adjustments
            in Purchase Price arising in respect of Section 3.4. In no event
            shall an indemnified Party be indemnified for any incidental,
            consequential, punitive or special damages, except to the extent
            that such damages are recovered by a non-party to this Agreement.

                                       28
<PAGE>

SECTION 7.5  SURVIVAL; REMEDIES.

      (a)   It is understood and agreed that the representations and warranties
            set forth in this Agreement, or in any certificate or instrument
            delivered in connection with this Agreement, shall survive the
            Closing for a period of twelve (12) months. The obligations of the
            Parties pursuant to Sections 6.4 and 6.5 with respect to public
            announcements and Confidential Information shall survive delivery
            and transfer of the Account Portfolio Assets to Bank, and shall
            inure to the benefit of Bank, Bon-Ton and any assignee thereof.
            Without limiting the foregoing, all obligations of an Indemnifying
            Party to indemnify an Indemnified Party under this Article 7 shall
            survive the Closing.

      (b)   The indemnification rights and remedies set forth in Article 7 of
            this Agreement are the exclusive remedy available to the Parties
            hereunder for breach of this Agreement, including such rights as are
            afforded by Section 7.4(b) above; provided, that any claim or action
            based on termination caused by the failure of any Party to fulfill
            the conditions precedent set forth in this Agreement shall be
            brought solely against such Party.

                                    ARTICLE 8
                                  MISCELLANEOUS

SECTION 8.1  WAIVER.

Failure or delay on the part of any Party to exercise any right provided for
herein, shall not act as a waiver thereof, nor shall any single or partial
exercise of any right by a Party preclude the exercise of any other right or the
further exercise of such right thereof. In no event shall a term or provision of
this Agreement be deemed to have been waived, modified, or amended, unless said
waiver, modification or amendment is in writing and signed by all of the Parties
hereto.

SECTION 8.2  NO JOINT VENTURE.

Nothing in this Agreement shall be deemed to create a partnership or joint
venture between any of the Parties. Except as expressly set forth herein, no
Party shall have any authority to bind or commit the other Parties.

SECTION 8.3  PAYMENT TERMS.

All payments to be made by any Party pursuant to the terms of this Agreement
shall be made by wire transfer in lawful money of the United States, immediately
available funds, to a bank

                                       29
<PAGE>

account in a member bank of the Federal Reserve System designated by the Party
to which such payment is to be made. The wire instructions for payments to
Bon-Ton are set forth in Exhibit A.

SECTION 8.4  ENTIRE AGREEMENT.

Each Party acknowledges that no representations, agreements, or promises were
made to it by the other Party or any of the other Party's employees other than
those representations, agreements, or promises specifically contained in this
Agreement. This Agreement (a) sets forth the entire understanding among the
Parties hereto, (b) supersedes all negotiations, prior discussions and
agreements, and (c) shall be binding on and shall inure to the benefit of each
Party and their respective successors and assigns, except as otherwise provided
herein. The terms and provisions of this Agreement are for the purpose of
defining the relative rights and obligations of the Parties with respect to the
transactions contemplated hereby and no Person shall be a third party
beneficiary of any of the terms and provisions of this Agreement.

SECTION 8.5  NOTICES.

All notices, requests, demands and other communications which are required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given upon the delivery or the fifth Business Day after
mailing thereof, as the case may be, sent by registered or certified mail,
return receipt requested, postage prepaid, by fax if immediately followed by
registered or certified mail, or by a nationally recognized overnight delivery
service to:

      If to Bon-Ton:

      The Bon-Ton Stores, Inc.
      2801 East Market Street
      York, Pennsylvania  17402
      Attention: Treasurer
      Facsimile: 717-751-3240

      with a copy to:

      Wolf, Block, Schorr and Solis-Cohen LLP
      250 Park Avenue
      New York, New York  10177
      Attention: Herbert Henryson II
      Facsimile: 212-672-1192

                                       30
<PAGE>

      If to Bank:

      HSBC Bank Nevada, N.A.
      1111 Town Center Drive
      Las Vegas, Nevada  89144
      Attention: President
      Facsimile: (702)243-1260

      with a copy to:

      HSBC Retail Services
      2700 Sanders Road
      Prospect Heights, IL 60070

      Attention: General Counsel
      Facsimile: 847-564-6001

SECTION 8.6  MODIFICATION.

This Agreement may not be modified except by a writing signed by each Party.

SECTION 8.7  GOVERNING LAW.

This Agreement shall be governed by and be construed in accordance with the laws
of the State of Delaware without regard to internal principles of conflict of
laws.

SECTION 8.8  SEVERABILITY.

Any term or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity of unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement in such jurisdiction or in
any other jurisdiction. If any provision of this Agreement is deemed to be so
broad as to be unenforceable, such provision shall be interpreted to be only so
broad as is enforceable.

SECTION 8.9  ASSIGNMENT.

Neither this Agreement nor any of the rights or obligations hereunder shall be
assignable by any Party without the written consent of the other Parties.

                                       31
<PAGE>

SECTION 8.10 ACCOUNTING TERMS.

Accounting terms used herein and not otherwise defined herein shall be construed
in accordance with United States Generally Accepted Accounting Principles (GAAP)
and definitions consistently applied.

SECTION 8.11 SINGULAR AND PLURAL.

Words used herein in the singular, where the context so permits, shall be deemed
to include the plural and vice versa. The definitions of words in the singular
herein shall apply to such words when used in the plural where the context so
permits and vice versa.

SECTION 8.12 HEADINGS.

The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.

SECTION 8.13 EXPENSES.

Except as otherwise specifically provided herein, all costs and expenses in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the Parties, as the case may be, depending upon which Party incurred
such costs and expenses.

SECTION 8.14 COUNTERPARTS.

This Agreement may be executed in two or more counterparts, each of which
counterparts shall be deemed to be an original, and all such counterparts shall
constitute one and the same instrument.

SECTION 8.15 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION.

      (a)   The Parties hereto waive all right to trial by jury in any action or
            proceeding to enforce or defend any rights pursuant hereto.

      (b)   Each Party (i) consents and submits to the jurisdiction of the
            Courts of the State of Delaware and of the Courts of the United
            States for the District of Delaware for all purposes of this
            Agreement, including, without limitation, any action or proceeding
            instituted for the enforcement of any right, remedy, obligation or
            liability arising under or by reason hereof and (ii) consents and
            submits to the venue of such action or proceeding in the City of
            Wilmington (or such judicial

                                       32
<PAGE>

            district of a Court of the United States as shall include the same).

      IN WITNESS WHEREOF, the Parties have caused their respective duly
authorized representatives to execute this Agreement as of the date first
written above.

THE BON-TON STORES, INC.                    HSBC BANK NEVADA, N.A.

By: /s/ H. Todd Dissinger                   By: /s/ Asin Majeed
   _______________________________             ______________________________

Name: H. Todd Dissinger                     Name: Asin Majeed
     _____________________________               ____________________________

Title: VP and Treasurer                     Title: Executive Vice President
      ____________________________                ___________________________

                                       33

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