Document:

Exhibit 10.2

 

BAY GOLF COURSE LEASE

 

THIS
LEASE (the “Lease”) is made and entered into effective Oct 1, 2010 (the “Effective
Date” or “Commencement Date”), by and between TY
MANAGEMENT CORPORATION, a Hawaii corporation, whose address is
c/o Carlsmith Ball LLP, One Maui Plaza, Suite 400, Wailuku, Hawaii
96793-1086 (“Lessor”), and KAPALUA PLANTATION GOLF
LLC a Hawaii limited liability company, whose address is P.O. Box 187,
Kahului, Hawaii  96733-6687, (“Lessee”);

 

In
consideration of the agreements hereinafter set forth, Lessor and Lessee do
hereby agree as follows:

 

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

 

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

 

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

 

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

 

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

 

a.             Real
Property Taxes and Assessments. 
Lessee will pay directly to the taxing authority before delinquency, all
real property taxes and assessments of every description assessed against the
Premises that Lessor or Lessee in respect thereof may be assessed or become
liable, whether assessed to or payable by Lessor or Lessee, during the term of
this Lease, pro rated for periods prior to the Commencement Date and as of the
Termination Date.  The regular assessment
of real property taxes for the County of Maui’s 2011 fiscal year that is agreed
to be allocable to the Golf Course is set forth in Schedule 7.1.1(a) of
the Kapalua Bay Golf Course Sale, Purchase and Escrow Agreement dated
September     , 

 

 

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

 

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

 

c.             Tax
on Lease Payments.  In addition to
the rents reserved above, Lessee shall pay to Lessor, as additional rent,
together with each payment of rent or any other payment required hereunder
which is subject to the State of Hawaii general excise tax on gross income, as
it may be amended from time to time, or any successor or similar tax, an amount
which, when added to such rental or other payment (currently 4.166% of each
such payment), shall yield to the Lessor, after deduction of all such tax
payable by Lessor with respect to all such rent and other payments, a net
amount equal to that which Lessor would have realized from such payments had no
such tax been imposed.

 

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

 

e.             Other
Payments.  Lessee will pay, before
delinquency, all rents, fees, charges, assessments and expenses payable by
Lessor under the terms of the contracts and agreements described in Section 8.b
of this Lease, prorated for periods prior to the Commencement Date and as of
the Termination Date.

 

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

 

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

 

6.             Guaranty.  This Lease and the terms, provisions and
obligations contained herein, including, without limitation, the completion of
the Approved Capital Improvements (defined in Section 11 below), will be
guaranteed by MLP, pursuant to a guaranty agreement in the form attached hereto
as Exhibit B.

 

7.             Acceptance
Of Premises.

 

a.             Premises
in “As Is, Where Is” Condition.  It
is expressly understood and agreed that Lessor has not made any representation
or warranty, express or implied, regarding any aspect of the Premises
including, but not limited to, the implied warranties of merchantability,
fitness for a particular purpose, suitability, habitability, quality, physical
condition, value or profitability, and Lessor hereby disclaims any and all
liability for any and all such representations and warranties.  Lessee agrees that it has examined and
investigated the Premises prior to the execution of this Lease and that Lessee
has relied solely upon such examinations and investigations in leasing the
Premises.  Without limiting the
generality of the foregoing, Lessee acknowledges that (x) it has made all
inspections, investigations and analyses deemed necessary or appropriate to
determine compliance by the Premises with all Hazardous Materials Laws that may
apply to the Premises, and (y) Lessor has made no representation or
warranty, express or implied, concerning the Premises’ compliance with
Hazardous Materials Laws.  Lessee
acknowledges and agrees that it is leasing the Premises in its “as is, where is”
condition, with all faults, if any, and subject to termination rights described
herein, that Lessee has assumed all risks regarding all aspects of the
Premises, and the condition thereof, including, without limitation:  (i) the risk of any physical condition
affecting the Premises including, without limitation, the existence of any
Hazardous Materials, the existence of any soils conditions, or the existence of
archeological or historical conditions on the Premises; (ii) the risk of
any damage or loss to the Premises caused by any means including, without
limitations, tsunami, flood, earthquake or volcanic eruption; and
(iii) the risk of use, zoning, habitability, merchantability or quality of
the Premises or the suitability of the Premises for its use.  Except as otherwise described herein, Lessee
expressly releases Lessor from any and all liability and claims that it may
have against Lessor, its successors and assigns with regard to Hazardous
Materials presently existing or hereafter placed on the Premises, and Lessee
hereby agrees to indemnify, defend and hold Lessor harmless from and against
any and all claims and demands for loss or damage, including claims for
personal injury, property damage or wrongful death, arising out of or in
connection with a release by Lessee during the Term of Hazardous Materials in
violation of Hazardous Materials Laws (collectively, “Lessee Hazmat Liability”).  Lessee shall not be responsible for any
Hazardous Materials released in, on, under and about the Premises by Lessor
(collectively “Lessor Hazmat Liability”). 
Lessor shall be and remain liable for all, Lessor Hazmat Liability, on,
under or about the Premises, and for all clean-up and remediation thereof.  Lessor shall and does hereby indemnify,
defend and hold harmless Lessee and Lessee’s members, officers, directors,
agents, employees and invitees from and against any and all claims, lawsuits,
liabilities, costs, fees (including reasonable 

 

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attorney’s
fees) and expenses of every kind and nature relating to or rising from a Lessor
Hazmat Liability.  The provisions of this
paragraph 7 shall survive the termination of this Lease.

 

b.             Adjacent
and Nearby Property Uses.  Lessee,
for itself and any person or entity claiming by, through or under it,
understands and acknowledges that the Premises are adjacent to or nearby lands
used for the operation of a pineapple plantation and other agriculture related
activities and such other uses as may be permitted by law on said lands, and
that Lessee desired and sought the Premises with the understanding that the
Premises may be affected by nuisance or hazards to persons and property from
such operations and related activities. 
Lessee covenants and agrees for itself, its permitted assigns,
transferees, and any other party claiming by, through or under it that it
assumes all such risks associated with such location and that it shall defend
and hold Lessor harmless from any liability, claims or expenses, including
attorneys’ fees, property damage, personal injury, or wrongful death arising
from such operations and activities, and further covenants and agrees that the
owners and occupants of such lands shall have the right, in the nature of an
easement, to perpetually discharge, emit, diffuse, and inflict over and upon
the Premises noise, smoke, soot, dust, lights, noxious vapors, odors, and other
nuisances of every description arising from or incidental to the operation of
the foregoing and other activities, subject only to zoning and other legal
restrictions on use.

 

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

 

a.             Golf
Course Standard.  So long as Lessor
abides by all of its obligations hereunder, Lessee shall operate the Golf
Course in a manner that will ensure that the Golf Course would be reasonably
considered by an independent person knowledgeable about the operation of resort
golf courses in Hawaii to be consistent with the standards at which mid-range
resort golf courses open to public play in the State of Hawaii are used,
operated and maintained (the “Golf Course Standard”).  As of the Commencement Date, the mid-range
resort golf courses open to public play in the State of Hawaii are stipulated
to include the Golf Course and the Wailea Resort’s Bay course, the Makena
Resort’s North course, the Waikoloa Resort’s Beach Course, the Mauna Lani
Resort’s South course, the Princeville Resort’s Makai course, the Royal
Kaanapali and the Kaanapali Kai golf courses.

 

b.             Golf
Course Agreements.  Lessee shall, at
Lessee’s sole cost and expense, observe and perform all of the Lessor’s obligations
under (i) that certain Second Amended and Restated Golf Course Use
Agreement dated March 27, 2007, as amended, and that certain Signature
Events Agreement dated March 27, 2007 made by and among MLP W2005
Kapalua/Gengate Hotel Realty, L.L.C. and The Ritz-Carlton Hotel Company,
L.L.C., (ii) that certain LPGA Tournament Agreement of even date made by
and between MLP and Lessor, (iii) Agreement for Water Delivery (Bay Golf
Course) of even date made by and between MLP and Lessor, (iv) that certain
KWC Water Transmission Agreement of even date herewith, (v) that certain
Grant of Golf Course Facilities Easement of even date made by and between MLP
and Lessor covering, among other things, the Site 6-0 Maintenance Facility,
(vi) the 

 

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

 

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

 

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

 

9.             Operational
Plans and Reports.

 

a.             Annual
Plans.  Lessee shall prepare and
submit to Lessor for Lessor’s reasonable approval an annual plan for the
operation of the Golf Course by Lessee, which plan shall include Lessee’s
projected income and budgeted expenses for the year, including the number of
rounds projected to be played during such year broken down by each guest or
other category, a schedule of the Lessor-approved capital improvements to be
completed in such year and such other information as may be reasonably
requested by Lessor.  The annual plan for
calendar year 2010 has been submitted to Lessor and the Lessee’s plan for the
first quarter of 2011 shall be submitted to Lessee by October 15,
2010.  Along with each annual plan,
Lessee shall also submit to Lessor a report on Lessee’s compliance with the
Golf Course Standard described in paragraph 8(a) above.

 

b.             Quarterly
Reports.  Within thirty (30) days of
the end of each calendar quarter during the term of this Lease, Lessee shall
provide Lessor with a written report showing the operating results for such
quarter and year to date, including income and 

 

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

 

10.           Reserved.

 

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

 

12.           Alterations
and Improvements.

 

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

 

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

 

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

 

c.             Lessee
shall furnish Lessor with evidence that all governmental approvals necessary to
commence construction have been obtained, including, without limiting the
generality of the foregoing, a building and/or grading permit.  Any work, (which is not a Lessor
responsibility) not acceptable to any governmental authority or agency having
or 

 

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exercising
jurisdiction over such work shall be promptly replaced, at Lessee’s sole
expense, notwithstanding any failure by Lessor to object to any such work, and
Lessor shall have no responsibility therefor.

 

d.             In
addition to any other insurance required under this Lease, during any
construction Lessee and/or its contractor shall maintain such commercial
general liability and other insurance policies as may be reasonably specified
by Lessor, all of which policies shall be reasonably satisfactory to Lessor in
form, content and amount of coverage, insuring Lessor, Lessee and such other
parties as Lessor shall reasonably specify against loss or damage to third
parties or their property from hazards normally insured against in the
construction industry with respect to construction of the type to be undertaken
by Lessee.  Lessee shall deliver to
Lessor certificates of insurance certifying that such insurance is in full
force and effect prior to commencing the construction of any alterations,
additions or improvement on the Premises.

 

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

 

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

 

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

 

13.           Protection
Against Construction Liens.  Lessee
shall promptly pay all contractors and materialmen, and shall keep the Premises
free from any liens or encumbrances arising out of any work performed for
Lessee, materials furnished for Lessee or obligations incurred by Lessee.  Lessee agrees to indemnify, defend and save
the Lessor and the Premises harmless from and against any and all claims for
mechanics’, materialmen’s or other liens in connection with any work by Lessee,
except to the extent such claims are the result of Lessor’s failure to meet its
funding obligations under this Lease, in which case Lessor agrees to indemnify,
defend and save Lessee and the Premises harmless from and against any and all
such claims and for any liens in connection with any Lessor Work.  If a mechanics’ or materialmen’s lien shall
be filed against the Premises for, or purporting to be for, labor or material
alleged to have been furnished or to be furnished to or for Lessee, Lessee
shall bond against or discharge said lien within ten (10) days after the
filing of the application for the lien. 
If Lessee shall fail to bond against or discharge said lien as
aforesaid, Lessor may pay the amount of such lien or discharge the same by
deposit or by bonding against such lien. 
In the event that Lessor shall discharge such lien as aforesaid, Lessor
may require the lienor to prosecute an appropriate action to enforce such
claim, and if said lienor shall prevail in its claim, Lessor may pay the
judgment recovered thereon.  Any amount
paid or expense incurred by Lessor pursuant to this paragraph 13 shall be paid
by Lessee to Lessor upon demand, together with interest thereon from the date
of payment by Lessor at the rate provided in paragraph 39 hereinbelow.

 

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

 

15.           Alterations Belonging to Lessor.  All alterations, improvements and additions
to the Premises shall remain for the benefit of the Lessor and shall not be
removed unless otherwise consented to in writing by Lessor, and shall be
presumed to become an integral part of said Premises.

 

16.           Waste; Compliance with Law.  Lessee will not make or suffer any waste or
strip of the Premises.  Lessee will not
use the Premises or suffer the same to be used for any purpose or purposes in
violation of any condition or provision of this Lease, or of any law, ordinance
or regulation of any public authority, or of any policy of insurance upon said
Premises, or do or permit to be done any act which will occasion or constitute
a ground for cancellation of any such insurance policy or for any increase in
the rate of insurance on said Premises, and will not commit or suffer to be
committed any nuisance upon said Premises or act which may disturb the quiet
enjoyment of others.

 

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

 

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

 

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

 

20.           Hazardous Materials.

 

a.             Use of Hazardous Materials.  Except as provided herein, Lessee shall not
cause any Hazardous Material to be brought upon, kept or used in or about the
Premises by Lessee in violation of Hazardous Materials Laws.  Lessee may use and store on the Premises such
items as may be classified as Hazardous Materials but which are typically used
in golf course operations (e.g. fertilizers, pesticides,
herbicides, machinery lubricants, cleaning and maintenance supplies) provided
that the same are used, kept, stored and disposed of in full compliance with
all applicable Hazardous Materials Laws. 
If Lessee breaches the obligations stated in the preceding sentences, or
if the presence of Hazardous Material on the Premises caused by Lessee results
in contamination of the Premises in violation of Hazardous Materials Laws, then
Lessee shall indemnify, defend and hold Lessor harmless from any and all claims,
judgments, damages, penalties, fines, costs, liabilities or losses (including,
without limitation, diminution in value of the Premises, and sums paid in
settlement of claims, attorneys’ fees, consultation fees and expert fees) which
arise during or after the Lease term as a result of such contamination.  This indemnification of Lessor by Lessee
includes, without 

 

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limitation, costs incurred in connection with any
investigation of site conditions or any clean-up, remedial, removal or
restoration work required by any federal, state or local governmental agency or
political subdivision because of a release of Hazardous Material by Lessee
during the Term.  Without limiting the
foregoing, with respect to any Hazardous Material on the Premises released by
Lessee during the Term which results in any contamination of the Premises in
violation of Hazardous Materials Laws, Lessee shall promptly take all actions
at its sole expense as are necessary comply with Hazardous Materials Laws.  The foregoing indemnity shall survive the
expiration or earlier termination of this Lease.

 

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

 

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

 

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

 

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

 

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

 

9

 

defend and hold Lessor harmless from and against any
and all claims and demands for loss or damage, including claims for
discrimination, personal injury, monetary damage or injunctive relief arising
out of or in connection with any failure or alleged failure of Lessee’s operation
of the Premises to comply with the Disability Access Laws, and, unless caused
by the failure of Lessor to pay for Approved Capital Improvements or for claims
related to the physical condition of the Premises arising after the Effective
Date, Lessee shall reimburse Lessor for all costs and expense, including
reasonable attorneys’ and other professional or consultants’ fees, paid or
incurred by Lessor in connection with the defense of any such claims including,
but not limited to, all costs for research regarding settlement or other
preventive measures which Lessor may take prior to the filing of such action or
to attempt to prevent the filing of such an action.

 

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

 

23.           Right of Access. 
Lessor shall have access at all reasonable times to the Premises and
each and every part thereof for purposes of inspecting same; making repairs (if
Lessor elects to undertake any repairs due to Lessee’s failure to do so), and
Lessor shall be allowed to take all material into and upon the Premises that
may be required therefor without the same constituting an eviction of Lessee in
whole or in part, without the lease rental and other fees and charges abating
and without any liability to Lessee or any loss or interruption of business of
Lessee or any loss of occupation or quiet enjoyment of the Premises occasioned
thereby; posting such notices as it may deem necessary for its protection or
for protection of the Premises; and for the purpose of showing same to
prospective tenants, purchasers, mortgagees, and/or others.

 

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

 

10

 

25.           Indemnity. 
Lessee, as a material part of the consideration to Lessor for this
Lease, will and does hereby assume all risk of bodily injury, wrongful death
and/or property damage, business interruption or economic loss occasioned by
any accident, fire or nuisance made or suffered by Lessee or its officers,
directors, agents, employees, contractors, invitees, customers, sublessees and
licensees (herein collectively called “Lessee’s Affiliates”) in the Premises or
resulting from any failure on the part of Lessee to maintain the Premises in a
safe condition, and Lessee hereby waives on its own behalf, and on behalf of
Lessee’s Affiliates, all claims in respect thereof against Lessor and Lessor’s
shareholders, employees, agents, licensees, contractors and invitees (herein
collectively called “Lessor’s Affiliates”) except claims arising from the acts
or omissions of Lessor or Lessor’s Affiliates, and acknowledges that this
assumption of risk by Lessee has been bargained for in determining rent and
other obligations of Lessee under this Lease. 
Lessee hereby agrees to indemnify and save harmless Lessor and Lessor’s
Affiliates from and against any and all claims for bodily injury, wrongful
death and/or property damage, business interruption and economic loss by any
person (including without limiting the generality of said term, Lessee’s
Affiliates and Lessor’s Affiliates) arising out of, caused by, occasioned by or
resulting from any accident, fire or nuisance in the Premises or Lessee’s
failure to maintain the Premises in accordance with this Agreement, except
where such injury, death or loss is caused by the acts or omissions of Lessor
or Lessor’s Affiliates.  Lessee further
agrees to indemnify and save harmless Lessor, and Lessor’s Affiliates, from and
against any and all liability, loss, costs, charges, fines, penalties,
obligations or expenses of whatsoever nature in connection with any and all
claims by or on behalf of any person or persons, firm or firms, corporation or
corporations, arising from the conduct or management of any work or thing
whatsoever done by Lessee or Lessee’s Affiliates in or about the Premises
during the Term, or from any transactions of Lessee concerning the Premises,
and will further indemnify and save Lessor and Lessor’s Affiliates harmless
from any and all claims arising from any breach or default on the part of
Lessee in the performance of any covenant or agreement on the part of Lessee to
be performed pursuant to the terms of this Lease, or arising from any act on
the part of Lessee or Lessee’s Affiliates, and shall reimburse Lessor and
Lessor’s Affiliates for all costs, reasonable attorneys’ fees, expenses and
liabilities incurred in connection with any such claim or any action or
proceeding brought thereon.  Lessee
further agrees that in case of any claim, demand, proceeding, action or cause
of action, threatened or actual, against Lessor or Lessor’s Affiliates
resulting from the matters for which Lessee indemnifies Lessor hereunder,
Lessee, upon the written request of Lessor or any of Lessor’s Affiliates, shall
defend Lessor and Lessor’s Affiliates at Lessee’s expense by counsel reasonably
satisfactory to Lessor or Lessor’s Affiliates, as the case may be.  If Lessor or any of Lessor’s Affiliates does
not request such defense or Lessee does not provide such defense, then Lessee
will reimburse Lessor and Lessor’s Affiliates as aforesaid, and agrees to cooperate
with Lessor and Lessor’s Affiliates in such defense, including, but not limited
to, providing of affidavits and testimony upon request of Lessor or Lessor’s
Affiliates.

 

26.           Assumption of Risk by Lessee.  Lessee, as a material part of the consideration
to Lessor for this Lease, will and hereby does assume all risk of loss or
damage to Lessee’s personal property, machinery, equipment, fixtures, supplies,
merchandise, and other personal property, by whomsoever owned, stored or placed
in, upon or about the Premises, and does hereby agree that Lessor shall not be
responsible for loss or damage to any such property, unless caused by the
willful act or gross neglect of Lessor or Lessor’s Affiliates, and Lessee
waives all claims in respect thereof and acknowledges that this assumption of
risk by Lessee has been bargained for in determining rent and other obligations
of Lessee under this Lease.  Without
prejudice to the generality of the foregoing, Lessor shall not be liable for
loss or damage to any property entrusted to Lessor or Lessor’s Affiliates nor
for loss or damage to any property at any time stored or kept in the Premises,
either from rain or from any other water which may 

 

11

 

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

 

27.           Property Insurance.

 

a.             In General. 
Lessee shall at its own expense and at all times during the term keep
all buildings, improvements, fixtures, and personal property by whomsoever
installed or constructed, now existing or hereafter erected on the Premises,
insured against (i) all of the risks covered by a standard ISO Commercial
Property Special Causes of Loss Form written on a replacement cost basis,
without deduction for depreciation, with an agreed value endorsement, (ii) a
“difference in conditions” policy providing coverage limits for risk of loss by
earthquake of $25,000,000 and flood of $20,000,000, (iii) such other
hazards or risks which a prudent businessman would insure against, including
plate glass insurance and business interruption insurance in an amount
sufficient to insure payment of rent, real property taxes and assessments,
insurance and other fixed costs for not less than twelve (12) months during any
interruption of Lessee’s business on the Premises from any risk covered under (i) and
(ii) above, and (iv) in time of war against war damage, if available
at reasonable cost.  This coverage shall
be in an amount equal to the full replacement cost of such buildings,
improvements, fixtures and personal property and shall not have deductibles in
excess of $250,000 AOP and flood, 5% wind, and 5% earthquake.  Lessee hereby waives any and all rights of
subrogation which it may have against Lessor and any insurance carrier of
Lessor.  Such insurance shall contain a
standard mortgagee clause which shall provide that any reference to a mortgagee
in such policy shall mean and include all holders of mortgages of any interests
in the Premises, in their respective order and preference as provided in their
respective mortgages; provide that such insurance as to the interest of any
mortgagee shall not be invalidated by any act or neglect of Lessor, Lessee or
any person claiming by, through, or under any of them; and contain a waiver of
any provision invalidating such mortgagee clause by reason of the failure of
any mortgagee or Lessor, Lessee, or any person claiming by, through, or under
any of them to notify the insurer of any hazardous use or vacancy, any
requirement that any mortgagee pay any premium thereon, or any contribution
clause.

 

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

 

12

 

28.           Liability Insurance.

 

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

 

b.             Coverage Amounts.

 

Minimum
Liability Coverage Amounts:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

29.           Worker’s Compensation and Employer’s Liability
Insurance.  Lessee shall maintain at
is own expense during the term of this Lease a policy or policies of “worker’s
compensation” insurance with minimum limits as required by Hawaii Revised
Statutes Title 21, Labor and Industrial Relations, and the rules and
regulations promulgated thereunder, and a policy or policies of “employer’s liability”
insurance with per accident and per disease limits not less than
$5,000,000.00.  Both policies shall be in
form and with coverages satisfactory to and approved by Lessor.  Lessee shall increase the liability limits or
the scope of the risks covered by such insurance policies to such higher levels
or such broader scope of risks as Lessor may from time to time reasonably
specify.

 

30.           Auto Liability Insurance.  Lessee shall maintain at its own expense
during the term of this Lease a policy or policies of “commercial auto
liability” insurance naming Lessor as an additional insured thereunder, in form
and with coverage satisfactory to and approved by Lessor, with a combined
single limit for bodily injury and property damage not less than $5,000,000.00.  The foregoing coverage may be placed through
a combination of primary, umbrella and excess coverages.  The automobile liability insurance shall
specifically cover all 

 

13

 

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

 

31.           General Insurance Requirements.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

32.           Assignment and Subletting.  Lessee will not sublet the whole or any part
of said Premises or grant any concession therein, or part with possession of
the whole or any part of the Premises, or assign this Lease or any interest
therein (nor may this Lease be assigned by operation of law) or hypothecate,
mortgage or in any way create any lien on this Lease or the Premises or any
interest therein without the consent in writing of Lessor first being obtained,
and any such attempt without the prior consent in writing of Lessor shall be
void for all purposes and Lessor shall then have the right and option to
terminate this Lease as hereinafter provided. 
Lessor may grant or withhold its consent in its sole discretion for any
reason. It is further agreed that any consent given to any assignment, hypothecation,
transfer of this Lease or parting of possession, or to any sublease of said
Premises or a portion thereof, shall not be construed as a consent to any other
further assignment, hypothecation, transfer, parting of 

 

14

 

possession or subletting or as a waiver of Lessor’s
right to object to any assignment, hypothecation, transfer parting of
possession, or sublease to which Lessor’s consent in writing has not been
obtained.  It is further agreed that
Lessee will remain liable in the event of any assignment, mortgage or sublease
for the payment of the rental hereunder and for the observance and performance
of all the terms, covenants and conditions herein contained and on the part of
Lessee to be observed and performed.  Any
change in the present ownership or control of Lessee’s business, directly or
indirectly, whether as a result of any sale of assets, transfer of stock,
merger, consolidation or otherwise, shall be deemed an assignment within the
meaning of this provision; provided however, and notwithstanding anything to
the contrary contained herein, no sale of assets, transfer of stock, merger or
consolidation by Guarantor shall constitute an assignment hereunder.

 

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

 

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

 

35.           Default and Remedies.  If Lessee shall fail to pay any amount which
under the provisions of the Lease Lessee shall be obligated to pay, on or
before the dates the same have become due and payable, no notice being
required, demand made, or forfeiture declared, and such non-payment shall
continue for ten (10) days, or fail in any other respect faithfully to
observe or perform any condition or covenant in this Lease contained and on
Lessee’s part to be observed and performed, including Lessee’s failure to achieve
the Golf Course Standard set forth in paragraph 8.a above or to submit the
annual operational plans described in paragraph 9.a above for Lessor’s
approval, and any such failure shall continue for thirty (30) days following
written notice from the Lessor to Lessee (or such longer time as is reasonably
necessary so long as Lessee has commenced and is diligently prosecuting the
cure); or if Lessee shall become insolvent or be adjudicated bankrupt; or shall
make any general arrangement or assignment for the benefit of creditors or
shall seek protection under any bankruptcy laws; or permit a lien to attach to
the premises; or abandon the Premises; or suffer this Lease or any estate or
interest hereunder to be taken under any mesne process or any writ of execution;
or any other judicial order,  and any
such event is not dismissed and cured with sixty (60) days, then and in any
such event:

 

a.             Right of Re-Entry; Termination.  The Lessor may at once enter into and upon
the Premises or any part thereof in the name of whole, and upon or without such
entry at Lessor’s option terminate this Lease, without service of notice of
legal process, and thereupon take possession of the Premises and all
improvements thereon, and thereby become wholly vested with all right, title
and interest of Lessee therein and may expel and remove from 

 

15

 

said Premises Lessee and/or those claiming under it,
and their effects, all without service of notice or resort to any legal process
and without being deemed guilty of any trespass or becoming liable for any loss
or damage which may be occasioned thereby, and without prejudice to any other
remedy or right of action which the Lessor may have for collection of arrears
of rent for other or preceding breach of covenant by Lessee.  If this Lease or any short form thereof is
recorded or filed of record in Hawaii, termination may be made effective by
Lessor by mailing a written notice to Lessee or such termination and recording
or filing an affidavit thereof.

 

b.             Summary Possession.  Whether or not Lessor shall have taken any
action above permitted, Lessor may bring an action for summary possession in
case of such default, and in any such action, service of prior notice or demand
is hereby expressly waived.  Lessor may,
at its option, assert its claim for unpaid rent in such action or may institute
a separate action for the recovery of rent.

 

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

 

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

 

e.             Right to Re-let. 
Should Lessor elect to reenter for Lessee’s default, as provided
hereinabove, or should it take possession pursuant to legal proceedings or
pursuant to any notice provided for by law, it may either terminate this Lease
or it may, from time to time without terminating this Lease, and re-let said
Premises or any part thereof for such term or terms (which may be for a term
extending beyond the term of this Lease) and at such rental or rentals and upon
such other terms and conditions as Lessor in its sole discretion may deem
advisable; upon each such re letting all rental received by Lessor from such
re-letting shall be applied, first, to the payment of any indebtedness
other than rent due hereunder from Lessee to Lessor; second, to the
payment of any costs and expenses of such re-letting; third, to the
payment of rent due and unpaid hereunder; and the residue, if any, shall be
held by Lessor and applied in payment of future rent as the same may become due
and payable hereunder.  If such rentals
received from such re-letting during any month be less than that to be paid
during that month by Lessee hereunder, Lessee shall pay any such deficiency to
Lessor. Such deficiency shall be calculated and paid monthly. Termination may, but
need not necessarily, be made effective by the giving of written notice to
Lessee of intention to end the term of this Lease, specifying a day not earlier
than three (3) days thereafter, and upon the giving of such notice, the
term of this Lease and all right, title and interest of Lessee hereunder shall
expire as fully and completely on the day so specified as if that day were the
date herein specifically fixed for the expiration of the term.  No re-entry or taking possession of said
Premises by Lessor shall be construed as an election on its part to terminate
this Lease unless a written notice of such intention is given to Lessee or
unless the termination thereof be decreed by a court of competent
jurisdiction.  Notwithstanding any such
re-letting without termination, Lessor may at 

 

16

 

any time thereafter elect to terminate this Lease
for such previous default.  Should Lessor
at any time terminate this Lease for Lessee’s default, in addition to any other
remedies it may have, Lessor may recover from Lessee all damages it may incur
by reason of such default, including the cost of recovering possession of the
Premises, reasonable attorneys’ fees, delinquent rent and other charges due
through the date of termination and the discounted present value (computed at
8%) at the time of such termination of the rent and charges reserved in this
Lease for the remainder of the stated term, all of which amounts shall be
immediately due and payable from Lessee to Lessor.

 

36.           Remedies Cumulative.  The various rights, options, elections and
remedies of Lessor contained in the Lease shall be construed as cumulative and
no one of them as exclusive of any of the other, or of any right or priority
allowed by law.

 

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

 

38.           Attorneys Fees. 
If either party hereto institutes any action or proceeding in court to
enforce any provision hereof or for damages or other relief by reason of any alleged
breach of any provision hereof, the prevailing party shall be entitled to
receive from the losing party all costs, including reasonable attorneys’
fees.  If any litigation or legal expense
incurred by either party hereto in connection with any litigation commenced by
or against the other party (other than condemnation proceedings) in which it
shall without fault be made by a party, then it will be entitled to recover
against the opposite party all of its costs including reasonable attorneys’
fees.

 

39.           Delinquent Payments.  If any payment or payments called for under
this Lease is not paid on the date due, Lessor shall have the right, without
waiving any breach or default by Lessee or any of its other rights herein, to
demand and receive the unpaid sum together with the interest accrued thereon
from the date of delinquency at the rate of one percent (1%) per month until
paid.

 

40.           No Accord And Satisfaction.  No payment by Lessee or receipt by Lessor of
a lesser amount than the monthly rent herein stipulated shall be deemed to be
other than on account of rents due, nor shall any endorsement or statement on
any check or any letter accompanying any check or payment of rent be deemed and
accord and satisfaction, and Lessor may accept such check or payment without
prejudice to Lessor’s rights to recover the balance of such rent or other
amount or pursue any other remedy in this Lease.  In the event that the rent or any other
monies which are due hereunder by Lessee are delinquent, Lessor may, upon the
receipt of any payments, apply them to any account or period it shall determine
in its discretion.

 

41.           Damage to Premises. 
If there is a partial “material” or total destruction of the Premises
and Lessor, in its sole discretion, elects not to rebuild or repair the same,
this Lease shall terminate as of the date of such destruction upon written
notice from Lessor to Lessee of Lessor’s determination not to rebuild or
repair, such notice to be given within thirty (30) days of the date of such
destruction.  In the event of such
termination, Lessee shall 

 

17

 

forthwith surrender the Premises and shall be
relieved of all liability for any further rental and Lessor shall refund any
unearned rent paid in advance by Lessee and shall be thereby released from any
obligation or duty to Lessee.  Lessee
hereby waives any and all claims for damage and shall not be entitled to any
damages for any loss occasioned by any such injury to or destruction of said
Premises or any of Lessee’s property.  As
used herein, “material” partial destruction will mean destruction to a portion
of the Premises which will, in the reasonable opinion of the parties, require
12 months or more to substantially complete the repair.

 

42.           Condemnation. 
In the event the whole or any portion of the Premises shall be taken or
condemned by any duly constituted authority or any condemnation suit is
instituted, Lessee will peaceably surrender and deliver up to Lessor possession
of the portion of the Premises so taken or condemned and Rent shall be
appropriately abated.  In the event of a
condemnation of a nonmaterial part of the Premises, such partial condemnation
shall not annul or void this Lease.  In
the event of a condemnation of such part or such form, shape or reduced area as
to render the Premises not effectively usable for the purpose for which the
property is demised, or in the event of a condemnation of all of said Premises,
this Lease shall terminate as of the date when the condemning authority has
become entitled to, and does take actual possession of the property
condemned.  In the event of any
condemnation, it is understood and agreed that the Lessor shall be entitled to,
and shall receive and retain, any award made as compensation for or in respect
of the land, buildings, improvements and fixtures actually taken and also any
award for or in respect of damages sustained to the land or portion of the
buildings or other improvements and fixtures not taken by reason of the
severance there from of the land and/or portion of building actually taken.

 

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

 

44.           Holding Over of Premises.  If upon termination of the Lease as herein
provided, Lessee withholds possession of the Premises from Lessor from and
after the date of such termination, the Lessor shall be entitled to monthly
rent equal to $125,000.00 per month plus the Hawaii general excise tax thereon
and all other payments required to be made by Lessee under this Lease.  The provisions herein concerning Lessee’s
liability in the event of wrongful withholding of the Premises from the Lessor
shall not be deemed to be a waiver of any breach by Lessee of any covenant
herein contained or of any of Lessor’s rights herein, and shall not prejudice
any other remedy or right of action which the Lessor may have for collection of
arrears of amounts payable by Lessee under this Lease or for other or preceding
breach of covenant by Lessee.  Any
holding over after the expiration of the said term, or any extension or renewal
thereof, with the written consent of the Lessor, shall be construed to be a
tenancy from month to month only, and shall otherwise be on the same terms and
conditions herein specified, so far as applicable.

 

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

 

18

 

all or any portion of Lessor’s right, title or interest
in this Lease and the prospective purchaser, assignee, mortgagee or other
financial source requires verification of Lessee’s financial condition on the
income and expense of Lessee’s obligations on the Premises, Lessee will furnish
to Lessor, upon request, any and all financial statements or records reasonably
necessary to verify such financial condition and income and expense.

 

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

 

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

 

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

 

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

 

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

 

51.           All Agreements are Contained Herein; No Party Deemed
Drafter.  This Lease contains all of
the terms, covenants, conditions, stipulations, agreements and provisions
agreed upon between the parties hereto in relation to the Premises and this
Lease supersedes and cancels each and every other agreement, promise and/or
negotiation between the parties with reference to the Premises.  Lessor and Lessee agree that neither party
shall be deemed to 

 

19

 

be the drafter of this Lease and in the event this
Lease is ever construed by a court of law, such court shall not construe this
Lease against either party as the drafter of this Lease.

 

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

 

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

 

54.           Headings. 
The paragraph headings are inserted merely for convenience and are not
to be construed as part of this Lease or in any way affecting it.

 

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

 

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

 

57.           Matters Upon Lease Termination.

 

a.             Certain Prorations.

 

(i)            Lease Termination Prorations.  All real property taxes and utility charges
for the Premises shall be prorated for periods prior to the Commencement Date
and following the Termination Date based on the actual number of days in the
respective billing periods when such dates occur and the actual number of days
elapsed and the agreed allocations to the Premises as described in
Section 5(a).  On the Termination
Date, Lessee shall deliver to Lessor cash in the amount of all deposits
received by Lessee for the use of the Premises for periods following the
Termination Date.  Lessee shall reimburse
Lessor each month for any gift cards issued by MLP, Kapalua Land Company, Ltd.
or Lessee at any time prior to termination of the Lease (including prior to
commencement of the Lease) and accepted for redemption by Lessor within fifteen
(15) days following the last day of the month in which such gift certificate is
accepted for redemption by Lessor.  Any
payments received by Lessor each month with respect to the use of the Premises
for periods following the Commencement Date and prior to the Termination Date
shall be paid by Lessor to Lessee within fifteen (15) days following the last
day of the month in which the payment is received; provided, however, that
Lessor may offset from any such payments the outstanding amount of any gift
certificates accepted for redemption by Lessor.

 

20

 

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

 

(iii)          Equipment Leases. 
Upon the Termination Date, Lessor shall have the right, but not the
obligation, to the extent assignable, to receive an assignment of Lessee’s
rights under (x) any of the equipment leases for golf course maintenance
equipment, golf carts and related accessories and other personal property then
subject to lease or (y) the tennis operation agreement with Peter Burwash
International, Inc. upon Lessor’s written agreement to assume Lessee’s
obligations under such equipment leases after the Termination Date.  Lessee shall provide Lessor with complete
copies of each such equipment lease not less than 60 days prior to the
Termination Date and Lessor shall notify Lessee in writing not less than 30
days prior to the Termination Date which, if any, of the equipment leases or
the agreement Lessor shall assume on the Termination Date and Lessee shall, to
the extent assignable, assign the same to Lessor.  Lessee shall also remove from the Premises
any equipment not assigned to or purchased by the Lessor.

 

b.             Revenues and Expenses.

 

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

 

(2)           Lessor shall promptly pay and reimburse Lessee for the
following:  (i) petty cash funds and
house banks on hand at the Golf Course as of the Cutoff Time; (ii) guest
ledger balance as of the Cutoff Time; (iii) unexpired portions of prepaid
expenses for all contracts assumed by Lessor, if any, to include (but not
limited to) deposits, dues and memberships, maintenance agreements, advertising
contracts, licensing agreements and software support agreements; (iv) prepaid
amounts of taxes and assessments; (v) prepaid amounts of city, county and
state permit and license fees (if transferable) allocable to the period
following the Cutoff Time and any deposits assumed by Lessor in connection with
any such permits and licenses; (vi) for all contracts that are assumed by
Landlord upon termination, security deposits paid by Lessee to outside vendors
and suppliers to the Golf Course (provided such security deposits remain on
deposit for the benefit of Lessor); and (vii) if and when received by
Lessor, uncollected rents due from the Restaurant Lease, subleases and other
occupancy agreements allocable to the period before the Cutoff Time.

 

21

 

c.             Reconciliation. 
Except as otherwise provided herein, any revenue or expense amount that
cannot be ascertained with certainty as of the Termination Date shall be
prorated on the basis of the parties’ reasonable estimate of such amount, and
shall be the subject of a final proration within ninety (90) days after
Termination Date, or as soon thereafter as a precise amount can be
ascertained.  Lessor shall promptly
notify Seller when it becomes aware that any such actual amount has been
ascertained.  Once all revenue and
expense amounts have been ascertained, Lessor shall prepare a final proration
statement which shall be subject to Lessee’s approval.  Upon Lessee’s acceptance and approval of any
such final proration statement, such statement shall be conclusively deemed to
be accurate and final and Lessee and Lessor shall each make any further
adjustments required by such final proration statement.  Lessee shall be entitled to an accounting
from Lessor with respect to any such revenue and expense amount, which is
subject to allocation between Lessor and Lessee.

 

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

 

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

 

58.           Miscellaneous. 
Any agreement hereafter made shall be ineffective to change, modify,
discharge or effect an abandonment of this Lease in whole or in part unless
such agreement is in writing and signed by the party against whom enforcement
of the change, modification, discharge or abandonment is sought.  The laws of the State of Hawaii shall govern
the validity, performance and enforcement of this Lease.  Any action under or related to this Lease
shall be brought in a court of competent jurisdiction in the State of
Hawaii.  The covenants and conditions
herein contained shall, subject to the provisions as to assignment, apply to
and bind and inure to the benefit of the respective successors and permitted
assigns of the parties hereto.

 

[Remainder of page intentionally left blank.]

 

22

 

IN
WITNESS WHEREOF, Lessor and Lessee have executed this Lease effective the day
and year first above written.

 

	
   

  	
  TY
  MANAGEMENT CORPORATION, a Hawaii corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ TADASHI YANAI

  
	
   

  	
   

  	
  Name:
  Tadashi Yanai

  
	
   

  	
   

  	
  Title:
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Lessor

  

 

23

 

	
   

  	
  KAPALUA
  PLANTATION GOLF LLC

  
	
   

  	
   

  
	
   

  	
  By
   Maui Land & Pineapple
  Company, Inc.,

  
	
   

  	
  Its Sole Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ RYAN L. CHURCHILL

  
	
   

  	
   

  	
  Name:
  Ryan L. Churchill

  
	
   

  	
   

  	
  Title:
  President & COO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ TIM T. ESAKI

  
	
   

  	
   

  	
  Name:
  Tim T. Esaki

  
	
   

  	
   

  	
  Title:
  CFO

  
	
   

  	
   

  	
  Lessee

  

 

24Exhibit 10.3

 

GOLF ACADEMY LEASE

 

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

 

In
consideration of the agreements hereinafter set forth, Lessor and Lessee do
hereby agree as follows:

 

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

 

2.             Term; Extension.

 

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

 

b.             Extension.  Lessor shall notify Lessee at least six (6) months
prior to the expiration of the Initial Term whether or not Lessor intends to
sell or redevelop the Premises after expiration of the Initial Term.  If Lessor does not intend to sell or
redevelop the Premises at the expiration of the Initial Term, Lessee shall be
entitled to extend the term of this Lease for an additional ten (10) years
commencing at the end of the Initial Term (the “Extension Term”).  The Extension Term shall be on the terms and
conditions set forth in this Lease, except that during the Extension Term (i) Lessor
may cancel this Lease on at least twelve (12) months advance notice if Lessor
decides to redevelop the Premises, and (ii) during the Extension Term
Lessee shall pay Lessor rent for the Premises determined as follows:  Upon Lessor’s notice that it does not intend
to redevelop or sell the Premises at the end of the Initial Term, Lessor and
Lessee shall negotiate in good faith for a period of thirty (30) days to reach
agreement on the rental that shall be payable during the Extension Term (the “Extension
Term Rent”).  The Extension Term Rent
shall be a fair market rent for the Premises and any land subject at that time
to the Grant of Golf Academy Easement between the parties that is dated
concurrently herewith (the “Grant of Golf Academy Easement”) based on its
permitted use under this Lease or said Grant as applicable and not its highest
and best use.  If the parties reach
agreement, the Extension Term Rent shall be documented in an amendment to this
Lease.

 

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

 

 

party
may petition a judge of the Second Circuit Court of the State of Hawaii to
appoint an arbitrator meeting the qualifications of this Section and the
person thus appointed shall determine the Extension Term Rent.  The arbitrator must be a recognized Hawaii
real estate appraiser who is a member of the American Institute of Real Estate
Appraisers (MAI) or Society of Real Estate Appraisers or any similar appraisal
organization and shall have all of the powers and duties prescribed by Chapter
658A, as amended.  In determining the
Extension Term Rent, the arbitrator must select a fair market rent for the
Premises and any land subject at that time to the Grant of Golf Academy
Easement based on its permitted use under this Lease and said Grant and not its
highest and best use, and the selected rental may be either fixed periodic
rents or percentage rent.  The
Arbitration shall commence as soon as practicable after selection of the
arbitrator and the arbitrator’s determination must be issued within sixty (60)
days after his or her selection.  The
arbitrator’s determination of decision shall be final, conclusive and binding
upon both parties, subject to the minimum limitations stated in this
Arbitration provision, unless such decision and award shall be vacated,
modified or corrected, all as provided in Chapter 658A, Hawaii Revised
Statutes, as amended.  The cost of such
Arbitration shall be borne equally by the parties, except that each party shall
bear its own costs for attorneys’ fees and witness fees.

 

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

 

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

 

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

 

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

 

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

 

 

c.             Tax on Lease Payments.  Lessee shall pay to Lessor, as additional
rent, together with each payment of rent or any other payment required
hereunder which is subject to the State of Hawaii general excise tax on gross
income, as it may be amended from time to time, or any successor or similar
tax, an amount which, when added to such rental or other payment (currently
4.166% of each such payment), shall yield to the Lessor, after deduction of all
such tax payable by Lessor with respect to all such rent and other payments, a
net amount equal to that which Lessor would have realized from such payments
had no such tax been imposed.

 

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

 

e.             Kapalua Resort Association
Assessments.  Lessee will
pay directly when due all Kapalua Resort Association dues and assessments
payable with respect to the Premises or the land subject to the Grant of Golf
Facilities Easement of even date herewith which covers certain grounds
surrounding and used in connection with the Golf Academy.

 

6.             Lot 1C-1.  Lessor has applied for approval of a
subdivision of the land on which the Golf Academy is located (the “Subdivision”)
into a parcel identified as Lot 1C-1, containing approximately 25.441 acres (“Lot
1C-1”) and a parcel identified as Lot 1C-2 (“Lot 1C-2”), as shown on the
preliminary plat of said subdivision dated May 21, 2010, and prepared by
Warren S. Unemori Engineering, Inc. 
A map of Lot 1C-1 is attached hereto as Exhibit B.   Lessor shall not make any material changes
to the configuration of Lot 1C-1 without Lessee’s consent, which shall not be
unreasonably withheld (it being acknowledged that minor adjustments to
boundaries and acreages are a normal part of the subdivision and mapping
process, and also that Lot 1C-1 must include all areas material to the
operation of the Golf Academy).  Lessor
shall bear all costs of securing final approval of the Subdivision (“Final
Approval”), including without limitation surveyor and engineering fees, costs
of any surveys or studies that are required as a condition of subdivision
approval, and rollback taxes or assessments, and costs of satisfying with all
conditions imposed on Final Approval, provided that Lessor shall have no
obligation to satisfy unduly burdensome conditions, which for purposes of this
Lease shall be deemed to include conditions (a) that would materially
impair the use of Lot 1C-1 for the Golf Academy purposes permitted under this
Lease, (b) that individually or in the aggregate would require Lessor to
incur a cost or liability (such as construction of on-site or off-site
infrastructure) in excess of $250,000.00, (c) that require Lessor to
widen, signalize, or add acceleration or deceleration lanes to Honoapiilani
Highway, or (d) require Lessor to make dedications of land to the State of
Hawaii or County of Maui.  In the event
any such unduly burdensome conditions are imposed Lessor may suspend processing
of the Subdivision until such time as the condition is waived, eliminated or
modified so as to not be unduly burdensome. 
Upon issuance of Final Approval, the “Premises” demised by this Lease
shall automatically be deemed amended to include all of Lot 1C-1, as approved
by the Final Approval, together with all buildings and other improvements
located thereon, and any rights, easements or appurtenances belonging to the
same or held and enjoyed in connection therewith.  Upon such approval Lessor and Lessee shall
amend the property descriptions attached as Exhibit A to this Lease
and to the recorded memorandum of this Lease to replace the descriptions with a
description of Lot 1C-1, provided that such amendment shall not affect Lessee’s
right to customer use or certain shared use parking stalls on Lot 1C-2 as
provided in Section 10 below. 
Concurrently with that amendment,

 

 

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

 

7.             Acceptance Of Premises.  It is expressly understood and agreed that,
except as set forth in the Bay Course PSA, Lessor has not made any
representation or warranty, express or implied, regarding any aspect of the
Premises including, but not limited to, the implied warranties of
merchantability, fitness for a particular purpose, suitability, habitability,
quality, physical condition, value or profitability, and Lessor hereby
disclaims any and all liability for any and all such representations and
warranties except as set forth in the Bay Course PSA.  Lessee agrees that it has examined and
investigated the Premises prior to the execution of this Lease and that Lessee
has relied solely upon such examinations and investigations and Lessor’s representations
and warranties set forth in the Bay Course PSA in leasing the Premises.  Without limiting the generality of the
foregoing, Lessee acknowledges that Lessor has made no representation or
warranty, express or implied, concerning the Premises’ compliance with
Hazardous Materials Laws except as provided in the Bay Course PSA.  Lessee acknowledges and agrees that it is
leasing the Premises in its “as is, where is” condition, with all faults, if
any, and subject to termination rights described herein, that except as set
forth in the Bay Course PSA Lessee has assumed all risks regarding all aspects
of the Premises, and the condition thereof, including, without limitation:  (i) the risk of any physical condition
affecting the Premises including, without limitation, the existence of any
Hazardous Materials, the existence of any soils conditions, or the existence of
archeological or historical conditions on the Premises; (ii) the risk of
any damage or loss to the Premises caused by any means including, without
limitations, tsunami, flood, earthquake or volcanic eruption; and
(iii) the risk of use, zoning, habitability, merchantability or quality of
the Premises or the suitability of the Premises for its use.  Except as otherwise described herein or in
the Bay Course PSA, Lessee expressly releases Lessor from any and all liability
and claims that it may have against Lessor, its successors and assigns with
regard to Hazardous Materials hereafter placed on the Premises by Lessee, and
Lessee hereby agrees to indemnify, defend and hold Lessor harmless from and
against any and all claims and demands for loss or damage, including claims for
personal injury, property damage or wrongful death, arising out of or in
connection with a release by Lessee during the Term of Hazardous Materials in
violation of Hazardous Materials Laws (collectively, “Lessee Hazmat Liability”).  Lessee shall not be responsible for any
Hazardous Materials released in, on, under and about the Premises by Lessor or
its subsidiaries (collectively “Lessor Hazmat Liability”).  Lessor shall be and remain liable for all,
Lessor Hazmat Liability, on, under or about the Premises, and for all clean-up
and remediation thereof.  Lessor shall
and does hereby indemnify, defend and hold harmless Lessee and Lessee’s
members, officers, directors, agents, employees and invitees from and against
any and all claims, lawsuits, liabilities, costs, fees (including reasonable
attorney’s fees) and expenses of every kind and nature relating to or rising
from a Lessor Hazmat Liability.  The
provisions of this paragraph 7 shall survive the termination of this
Lease.

 

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

 

 

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

 

b.             Ritz-Carlton Agreement.  Lessee shall, at Lessee’s sole cost and expense,
observe and perform all of the Lessor’s obligations with respect to the Golf
Academy under that certain Second Amended and Restated Golf Course Use
Agreement dated March 27, 2007, as amended, and that certain Signature
Events Agreement dated March 27, 2007 made by and among Lessor, W2005
Kapalua/Gengate Hotel Realty, L.L.C. and The Ritz-Carlton Hotel Company, L.L.C.

 

c.             Declaration.  Lessee shall, at Lessee’s sole cost and
expense, observe and perform all of the Lessor’s obligations with respect to
the Golf Academy under the Amended and Restated Declaration of Covenants and
Restrictions for the Kapalua Resort dated September 30, 1987, as amended
from time to time.  Any payment
obligations of Lessor under such Declaration shall be prorated for periods prior
to the Effective Date and as of the Termination Date based on the actual number
of days in the respective billing periods when such dates occur and the actual
number of days elapsed.

 

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

 

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

 

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

 

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

 

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

 

 

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

 

12.           Alterations and Improvements.

 

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

 

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

 

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

 

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

 

 

d.             In addition to any other
insurance required under this Lease, during any construction Lessee and/or its
contractor shall maintain such commercial general liability and other insurance
policies as may be reasonably specified by Lessor, all of which policies shall
be reasonably satisfactory to Lessor in form, content and amount of coverage,
insuring Lessor, Lessee and such other parties as Lessor shall reasonably
specify against loss or damage to third parties or their property from hazards
normally insured against in the construction industry with respect to
construction of the type to be undertaken by Lessee.  Lessee shall deliver to Lessor certificates
of insurance certifying that such insurance is in full force and effect prior
to commencing the construction of any alterations, additions or improvement on
the Premises.

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

16.           Waste; Compliance with Law.  Lessee will not make or suffer any waste or
strip of the Premises.  Lessee will not
use the Premises or suffer the same to be used for any purpose or purposes in
violation of any condition or provision of this Lease, or of any law, ordinance
or regulation of any public authority, or of any policy of insurance upon said
Premises, or do or permit to be done any act which will occasion or constitute
a ground for cancellation of any such insurance policy or for any increase in the
rate of insurance on said Premises, and will not commit or suffer to be
committed any nuisance upon said Premises or act which may disturb the quiet
enjoyment of others.

 

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

 

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

 

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

 

20.           Hazardous Materials.

 

a.             Use of Hazardous Materials.  Except as provided herein, Lessee shall not
cause any Hazardous Material to be brought upon, kept or used in or about the
Premises by Lessee in violation of Hazardous Materials Laws.  Lessee may use and store on the Premises such
items as may be classified as Hazardous Materials but which are typically used
in Golf Academy operations (e.g. fertilizers, pesticides, herbicides,
machinery lubricants, cleaning and maintenance supplies) provided that the same
are used, kept, stored and disposed of in full compliance with all applicable
Hazardous Materials Laws.  If Lessee
breaches the obligations stated in the preceding sentences, or if the presence
of Hazardous Material on the Premises caused by Lessee results in contamination
of the Premises in violation of Hazardous Materials Laws, then Lessee shall
indemnify, defend and hold Lessor harmless from any and all claims, judgments,
damages, penalties, fines, costs, liabilities or losses (including, without
limitation, diminution in value of the Premises, and sums paid in settlement of
claims, attorneys’ fees, consultation fees and expert fees) which arise during
or after the Lease term as a result of such contamination.  This indemnification of Lessor by Lessee
includes, without limitation, costs incurred in connection with any
investigation of site conditions or any clean-up, remedial, removal or
restoration work required by any federal, state or local governmental agency or
political subdivision because of a release of Hazardous Material by Lessee
during the Term.  Without limiting the
foregoing, with respect to any Hazardous Material on the Premises released by
Lessee during the Term which results in any contamination of the Premises in
violation of Hazardous Materials Laws, Lessee shall promptly take all actions
at its sole expense as are necessary to comply with Hazardous Materials
Laws.  The foregoing indemnity shall
survive the expiration or earlier termination of this Lease.

 

 

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

 

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

 

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

 

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

 

21.           Compliance With Disability
Access Laws.  Except as
otherwise set forth herein, Lessee hereby covenants and agrees with Lessor that
Lessee shall at all times during the term of this Lease comply with any and all
governmental regulation of the Premises regarding access of disabled persons,
including without limitation, Titles III and V of the Americans with
Disabilities Act of 1990, 42 U.S.C. Sec. 12101 et seq. or any other similar
federal, state or local laws or ordinances and the regulations promulgated
thereunder (collectively, the “Disability Access Laws”); provided, however,
(a) that Lessee shall only be required to pay for the costs of any such
compliance if required as a result of any changes to the, or new, Disability
Access Laws after the Effective Date, and the costs of such compliance for
conditions existing on the Effective Date will be the sole responsibility of
Lessor.  Unless any such claim concerns
the physical condition of the Premises on the Effective Date or is the result
of Lessor failing to pay for the cost of compliance with Disability Access Laws
relating to conditions existing on the Effective Date, (in which case the
indemnity contained herein will be of Lessee by Lessor), Lessee shall
indemnify, defend and hold Lessor harmless from and against any and all claims
and demands for loss or damage, including claims for discrimination, personal
injury, monetary damage or injunctive relief arising out of or in connection with
any failure or alleged failure of Lessee’s operation of the Premises to comply
with the Disability Access Laws, and Lessee shall reimburse Lessor for all
costs and expense, including reasonable attorneys’ and other professional or
consultants’ fees, paid or incurred by Lessor in connection with the defense of
any such claims including, but not limited to, all costs for research regarding
settlement or other preventive measures which Lessor may take prior to the
filing of such action or to attempt to prevent the filing of such an action.

 

 

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

 

23.           Right of Access.  Lessor shall have access at all reasonable
times to the Premises and each and every part thereof for purposes of
inspecting same; making repairs (if Lessor elects to undertake any repairs due
to Lessee’s failure to do so), and Lessor shall be allowed to take all material
into and upon the Premises that may be required therefor without the same
constituting an eviction of Lessee in whole or in part, without the lease
rental and other fees and charges abating and without any liability to Lessee
or any loss or interruption of business of Lessee or any loss of occupation or
quiet enjoyment of the Premises occasioned thereby; posting such notices as it
may deem necessary for its protection or for protection of the Premises; and
for the purpose of showing same to prospective tenants, purchasers, mortgagees,
and/or others.

 

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

 

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

 

 

Lessor’s Affiliates from and against any and all
claims for bodily injury, wrongful death and/or property damage, business
interruption and economic loss by any person (including without limiting the
generality of said term, Lessee’s Affiliates and Lessor’s Affiliates) arising
out of, caused by, occasioned by or resulting from any accident, fire or
nuisance in the Premises or Lessee’s failure to maintain the Premises in
accordance with this Agreement, except where such injury, death or loss is
caused by the acts or omissions of Lessor or Lessor’s Affiliates.  Lessee further agrees to indemnify and save
harmless Lessor, and Lessor’s Affiliates, from and against any and all
liability, loss, costs, charges, fines, penalties, obligations or expenses of
whatsoever nature in connection with any and all claims by or on behalf of any
person or persons, firm or firms, corporation or corporations, arising from the
conduct or management of any work or thing whatsoever done by Lessee or Lessee’s
Affiliates in or about the Premises during the Term, or from any transactions
of Lessee concerning the Premises, and will further indemnify and save Lessor
and Lessor’s Affiliates harmless from any and all claims arising from any
breach or default on the part of Lessee in the performance of any covenant or
agreement on the part of Lessee to be performed pursuant to the terms of this
Lease, or arising from any act on the part of Lessee or Lessee’s Affiliates,
and shall reimburse Lessor and Lessor’s Affiliates for all costs, reasonable
attorneys’ fees, expenses and liabilities incurred in connection with any such
claim or any action or proceeding brought thereon.  Lessee further agrees that in case of any
claim, demand, proceeding, action or cause of action, threatened or actual,
against Lessor or Lessor’s Affiliates resulting from the matters for which
Lessee indemnifies Lessor hereunder, Lessee, upon the written request of Lessor
or any of Lessor’s Affiliates, shall defend Lessor and Lessor’s Affiliates at
Lessee’s expense by counsel reasonably satisfactory to Lessor or Lessor’s
Affiliates, as the case may be.  If
Lessor or any of Lessor’s Affiliates does not request such defense or Lessee
does not provide such defense, then Lessee will reimburse Lessor and Lessor’s
Affiliates as aforesaid, and agrees to cooperate with Lessor and Lessor’s
Affiliates in such defense, including, but not limited to, providing of
affidavits and testimony upon request of Lessor or Lessor’s Affiliates.

 

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

 

27.           Property Insurance.

 

a.             In General.  Lessee shall at its own expense and at all
times during the term keep all buildings, improvements, fixtures, and personal
property by whomsoever installed or constructed, now existing or hereafter
erected on the Premises, insured against (i) all of the risks covered by a
standard ISO Commercial Property Special Causes of Loss Form written on a
replacement cost basis, without deduction for depreciation, with an agreed
value endorsement, (ii) a “difference in conditions” policy providing
coverage limits for risk of loss by 

 

 

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

 

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

 

28.           Liability Insurance.

 

a.             In General.  Lessee shall maintain at its own expense
during the term a policy or policies of “commercial general liability”
insurance on an “occurrence” basis including coverage for bodily injury and
property damage, personal injury and medical payments, naming Lessor as an
additional insured thereunder, with limits not less than those set forth in
subparagraph 28.b below.  The commercial
general liability insurance shall specifically cover blanket contractual
liability, fire damage legal liability, host liquor liability if liquor will be
sold, serviced or manufactured on the Premises, personal and advertising
liability, medical payments, premises and operations liability and
products/completed operations liability. 
Lessee shall periodically, but not less frequently than annually,
reevaluate the scope of the risks covered and the liability limits of such
insurance policies and, if necessary, increase such coverage or liability
limits in order to provide coverage of risks and liability limits which a
prudent businessman 

 

 

would provide under similar circumstances.  Lessee shall also increase the liability
limits or the scope of the risks covered by such insurance policies to such
higher levels or such broader scope of risks as Lessor may from time to time reasonably
specify.

 

b.             Coverage Amounts.

 

Minimum
Liability Coverage Amounts:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

29.           Worker’s Compensation and
Employer’s Liability Insurance.  Lessee shall maintain at its own expense
during the term of this Lease a policy or policies of “worker’s compensation”
insurance with minimum limits as required by Hawaii Revised Statutes
Title 21, Labor and Industrial Relations, and the rules and
regulations promulgated thereunder, and a policy or policies of “employer’s
liability” insurance with per accident and per disease limits not less than
$5,000,000.00.  Both policies shall be in
form and with coverages satisfactory to and approved by Lessor.  Lessee shall increase the liability limits or
the scope of the risks covered by such insurance policies to such higher levels
or such broader scope of risks as Lessor may from time to time reasonably
specify.

 

30.           Auto Liability Insurance.  Lessee shall maintain at its own expense
during the term of this Lease a policy or policies of “commercial auto
liability” insurance naming Lessor as an additional insured thereunder, in form
and with coverage satisfactory to and approved by Lessor, with a combined
single limit for bodily injury and property damage not less than
$5,000,000.00.  The foregoing coverage
may be placed through a combination of primary, umbrella and excess
coverages.  The automobile liability
insurance shall specifically cover all automobiles and other vehicles used by
Lessee in connection with its operations at the Premises, whether owned or
non-owned, leased, rented, borrowed or hired.

 

31.           General Insurance
Requirements.

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

32.           Assignment and Subletting.

 

a.             Lessee may, without Lessor’s
consent, sublet the Premises to any golf course operator to which Lessee leases
the Kapalua Bay Golf Course (the “Bay Course”), and may also enter into a
management agreement with such an operator that covers the Golf Academy and the
Bay Course.  Any such sublease or
management agreement shall be subject to all of the terms and conditions of
this Lease.

 

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

 

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

 

 

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

 

33.           [Reserved].

 

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

 

35.           Default and Remedies.  If Lessee shall fail to pay said rent or any
part thereof or any other monies which under the provisions of the Lease Lessee
shall be obligated to pay, on or before the dates the same have become due and
payable, no notice being required, demand made, or forfeiture declared, and
such non-payment shall continue for ten (10) days, or fail in any other
respect faithfully to observe or perform any condition or covenant in this
Lease contained and on Lessee’s part to be observed and performed, including
Lessee’s failure to achieve the Golf Academy Standard set forth in
paragraph 8.a above, and any such failure shall continue for thirty (30)
days following written notice from the Lessor to Lessee (or such longer time as
is reasonably necessary so long as Lessee has commenced and is diligently
prosecuting the cure); or if Lessee shall become insolvent or be adjudicated
bankrupt; or shall make any general arrangement or assignment for the benefit
of creditors or shall seek protection under any bankruptcy laws; or permit a
lien to attach to the premises; or abandon the Premises; or suffer this Lease
or any estate or interest hereunder to be taken under any mesne process or any
writ of execution; or any other judicial order, and any such event is not
dismissed and cured with sixty (60) days, then and in any such event:

 

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

 

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

 

 

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

 

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

 

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

 

e.             Right to Re-let.  Should Lessor elect to reenter for Lessee’s
default, as provided hereinabove, or should it take possession pursuant to
legal proceedings or pursuant to any notice provided for by law, it may either
terminate this Lease or it may, from time to time without terminating this
Lease, and re-let said Premises or any part thereof for such term or terms
(which may be for a term extending beyond the term of this Lease) and at such
rental or rentals and upon such other terms and conditions as Lessor in its
sole discretion may deem advisable; upon each such re letting all rental
received by Lessor from such re-letting shall be applied, first, to the
payment of any indebtedness other than rent due hereunder from Lessee to
Lessor; second, to the payment of any costs and expenses of such
re-letting; third, to the payment of rent due and unpaid hereunder; and
the residue, if any, shall be held by Lessor and applied in payment of future rent
as the same may become due and payable hereunder.  If such rentals received from such re-letting
during any month be less than that to be paid during that month by Lessee
hereunder, Lessee shall pay any such deficiency to Lessor.  Such deficiency shall be calculated and paid
monthly.  Termination may, but need not
necessarily, be made effective by the giving of written notice to Lessee of
intention to end the term of this Lease, specifying a day not earlier than three
(3) days thereafter, and upon the giving of such notice, the term of this
Lease and all right, title and interest of Lessee hereunder shall expire as
fully and completely on the day so specified as if that day were the date
herein specifically fixed for the expiration of the term.  No re-entry or taking possession of said
Premises by Lessor shall be construed as an election on its part to terminate
this Lease unless a written notice of such intention is given to Lessee or
unless the termination thereof be decreed by a court of competent jurisdiction.  Notwithstanding any such re-letting without
termination, Lessor may at any time thereafter elect to terminate this Lease
for such previous default.  Should Lessor
at any time terminate this Lease for Lessee’s default, in addition to any other
remedies it may have, Lessor may recover from Lessee all damages it may incur
by reason of such default, including the cost of recovering possession of the
Premises, reasonable attorneys’ fees, delinquent rent and other charges due
through the date of termination and the discounted present value (computed at
8%) at the time of such termination of the rent and charges reserved in this
Lease for the remainder of the stated term, all of which amounts shall be
immediately due and payable from Lessee to Lessor.

 

36.           Remedies Cumulative.  The various rights, options, elections and
remedies of Lessor contained in the Lease shall be construed as cumulative and
no one of them as exclusive of any of the other, or of any right or priority
allowed by law.

 

 

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

 

38.           Attorneys Fees.  If either party hereto institutes any action
or proceeding in court to enforce any provision hereof or for damages or other
relief by reason of any alleged breach of any provision hereof, the prevailing
party shall be entitled to receive from the losing party all costs, including
reasonable attorneys’ fees.  If any
litigation or legal expense incurred by either party hereto in connection with
any litigation commenced by or against the other party (other than condemnation
proceedings) in which it shall without fault be made by a party, then it will
be entitled to recover against the opposite party all of its costs including
reasonable attorneys’ fees.

 

39.           Delinquent Payments.  If any payment or payments called for under
this Lease is not paid on the date due, Lessor shall have the right, without
waiving any breach or default by Lessee or any of its other rights herein, to
demand and receive the unpaid sum together with the interest accrued thereon
from the date of delinquency at the rate of one percent (1%) per month until
paid.

 

40.           No Accord And Satisfaction.  No payment by Lessee or receipt by Lessor of
a lesser amount than the monthly rent herein stipulated shall be deemed to be
other than on account of rents due, nor shall any endorsement or statement on
any check or any letter accompanying any check or payment of rent be deemed and
accord and satisfaction, and Lessor may accept such check or payment without
prejudice to Lessor’s rights to recover the balance of such rent or other
amount or pursue any other remedy in this Lease.  In the event that the rent or any other
monies which are due hereunder by Lessee are delinquent, Lessor may, upon the
receipt of any payments, apply them to any account or period it shall determine
in its discretion.

 

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

 

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

 

 

area as to render the Premises not effectively
usable for the purpose for which the property is demised, or in the event of a
condemnation of all of said Premises, this Lease shall terminate as of the date
when the condemning authority has become entitled to, and does take actual possession
of the property condemned.  In the event
of any condemnation, it is understood and agreed that the Lessor shall be
entitled to, and shall receive and retain, any award made as compensation for
or in respect of the land, buildings, improvements and fixtures actually taken
and also any award for or in respect of damages sustained to the land or
portion of the buildings or other improvements and fixtures not taken by reason
of the severance there from of the land and/or portion of building actually taken.

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

49.           Notices.

 

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

 

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

 

c.             Addresses.  All such notices shall be addressed:

 

if to Lessor, to:

 

Maui Land & Pineapple Company, Inc.

P.O. Box 187

Kahului, Hawaii 
96733-6687

Attention: 
Ryan Churchill

Email: 
rchurchill@mlpmaui.com

Facsimile: 
(808) 669-5454

 

 

with a copy to:

 

Kiefer & Garneau, LLC

444 Hana Highway, Suite 204

Kahului, Hawaii 96732

Attention:  Richard J. Kiefer, Esq.

Email: 
RickKiefer@hawaii.rr.com

Telephone: 
(808) 871-9700

Facsimile: 
(808) 871-6017

 

 

if to Lessee, to:

 

TY Management Corporation

c/o Fast Retailing Co., Ltd.

Midtown Tower

Akasaka 9-7-1, Minato-Ku

Tokyo, 107-6231 Japan

Attention: 
Hiroyuki Uchida

Email: 
hiroyuki.uchida@fastretailing.com

Telephone: 
(81-3) 6865-0040

Facsimile: 
(81-3) 6865-0061

 

with a copy to:

 

Carlsmith Ball LLP

One Main Plaza, Suite 400

2200 Main Street, P.O. Box 1086

Wailuku, Maui, HI  96793-1086

Attention:  B. Martin Luna, Esq.

Email: 
bml@carlsmith.com

Telephone: 
(808) 242-4535

Facsimile: 
(808) 244-4974

 

with a copy to:

 

Carlsmith Ball LLP

ASB Tower, Suite 2200

1001 Bishop Street

Honolulu, HI 
96813

Attention: 
Robert E. Strand, Esq.

Email: 
rstrand@carlsmith.com

Telephone: 
(808) 523-2525

Facsimile: 
(808) 523-0842

 

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

 

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

 

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

 

 

upon between the parties hereto in relation to the
Premises and this Lease supersedes and cancels each and every other agreement,
promise and/or negotiation between the parties with reference to the
Premises.  Lessor and Lessee agree that
neither party shall be deemed to be the drafter of this Lease and in the event
this Lease is ever construed by a court of law, such court shall not construe this
Lease against either party as the drafter of this Lease.

 

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

 

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

 

54.           Headings.  The paragraph headings are inserted merely
for convenience and are not to be construed as part of this Lease or in any way
affecting it.

 

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

 

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

 

57.           Matters Upon Lease
Termination.

 

a.             Lease Termination Prorations.  All real property taxes and utility charges
for the Premises shall be prorated for periods prior to the Effective Date and
following the Termination Date based on the actual number of days in the
respective billing periods when such dates occur and the actual number of days elapsed.  On the Termination Date, Lessee shall deliver
to Lessor cash in the amount of all deposits received by Lessee for the use of
the Premises for periods following the Termination Date.  Lessee shall reimburse Lessor each month for
any gift cards redeemable at the Golf Academy issued by Lessee at any time
prior to termination of the Lease (including prior to commencement of the
Lease) and accepted for redemption by Lessor within fifteen (15) days following
the last day of the month in which such gift certificate is accepted for
redemption by Lessor.  Any payments
received by Lessor each month with respect to the use of the Premises for
periods following the Effective Date and prior to the Termination Date shall be
paid by Lessor to Lessee within fifteen (15) days following the last day of the
month in which the payment is received; provided, however, that Lessor may
offset from any such payments the outstanding amount of any gift certificates
accepted for redemption by Lessor.

 

 

b.             Revenues and Expenses.

 

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

 

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

 

c.             Reconciliation.  Except as otherwise provided herein, any
revenue or expense amount that cannot be ascertained with certainty as of the
Termination Date shall be prorated on the basis of the parties’ reasonable
estimate of such amount, and shall be the subject of a final proration within
ninety (90) days after Termination Date, or as soon thereafter as a precise
amount can be ascertained.  Lessor shall
promptly notify Seller when it becomes aware that any such actual amount has
been ascertained.  Once all revenue and
expense amounts have been ascertained, Lessor shall prepare a final proration
statement which shall be subject to Lessee’s approval.  Upon Lessee’s acceptance and approval of any
such final proration statement, such statement shall be conclusively deemed to
be accurate and final and Lessee and Lessor shall each make any further
adjustments required by such final proration statement.  Lessee shall be entitled to an accounting
from Lessor with respect to any such revenue and expense amount, which is
subject to allocation between Lessor and Lessee.

 

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

 

58.           Miscellaneous.  Any agreement hereafter made shall be
ineffective to change, modify, discharge or effect an abandonment of this Lease
in whole or in part unless such agreement is in writing and signed by the party
against whom enforcement of the change, modification, discharge or abandonment
is sought.  The laws of the State of
Hawaii shall govern the validity, performance and enforcement of this
Lease.  Any action under or related to
this Lease shall be brought in a court of competent jurisdiction in the State
of Hawaii.  The covenants and conditions
herein contained shall, subject to the provisions as to assignment, apply to
and bind and inure to the benefit of the respective successors and permitted
assigns of the parties hereto.

 

[Remainder of page intentionally left blank.]

 

 

IN
WITNESS WHEREOF, Lessor and Lessee have executed this Lease effective the day
and year first above written.

 

	
   

  	
  MAUI
  LAND & PINEAPPLE COMPANY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  RYAN CHURCHILL

  
	
   

  	
   

  	
  Name:
  Ryan Churchill

  
	
   

  	
   

  	
  Its:
  President & COO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  TIM ESAKI

  
	
   

  	
   

  	
  Name:
  Tim Esaki

  
	
   

  	
   

  	
  Its:
  CFO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Lessor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TY
  MANAGEMENT CORPORATION, a

  Hawaii corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  TADASHI YANAI

  
	
   

  	
   

  	
  Name:
  Tadashi Yanai

  
	
   

  	
   

  	
  Title:
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Lessee

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