HOTEL GROUND LEASE
(THE ▇▇▇▇-▇▇▇▇▇▇▇, KAPALUA)
BETWEEN
MAUI LAND & PINEAPPLE COMPANY, INC. (LESSOR)
AND
NI HAWAII RESORT, INC. (LESSEE)
HOTEL GROUND LEASE
THIS HOTEL GROUND LEASE is made this 9th day of January,
1996 but effective as of January 1, 1996 (the "Effective Date"),
except for Sections 3.1 and 3.4(a) which shall be effective
January 1, 1995, by and between MAUI LAND & PINEAPPLE COMPANY,
INC., a Hawaii corporation, whose principal place of business is
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇, and whose post office
address is ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, hereinafter
called the "Lessor", and NI HAWAII RESORT, INC., a Hawaii
corporation whose address is ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇, hereinafter called the "Lessee". This instrument is
sometimes referred to herein as "this Lease", and may be referred
to as the "Lease."
W I T N E S S E T H:
In consideration of the respective and mutual covenants of
Lessor and Lessee and the rent set forth in this Lease below,
Lessor and Lessee hereby agree to all of the following terms,
conditions and covenants.
ARTICLE I
Definitions
1.1 Use of Defined Terms. For purposes of construing and
interpreting this Lease, the terms defined in Section 1.2 and 1.3
when written with initial capital letters in this Lease shall
have the meaning given such terms in those sections. The terms
defined in Sections 1.2 and 1.3 may be used in the singular or
plural or in varying tenses or forms, but such variation shall
not affect the meaning of such terms set forth in those sections
so long as those terms are written in initial capital letters.
When such terms are used in this Lease but are written without
initial capital letters, such terms shall have the meaning they
have in common usage; provided, however, that where legal,
technical or trade terms are used and the context in which such
terms are used indicates that such terms are to be given their
legal, technical or trade usage meanings, such terms shall be
given such legal, technical or trade usage meanings.
1.2 Term. "Term" shall mean the term of this Lease which
shall commence as of the Effective Date of this Lease, except for
Sections 3.1 and 3.4 which shall be effective January 1, 1995,
and terminate at midnight on December 31, 2094.
(a) Affiliated Concessionaires. An "Affiliated
Concessionaire" is a Concessionaire in which any one of (i)
Lessee, (ii) Lessee's general or limited partners, if any, (iii)
Affiliates of Lessee or Lessee's general or limited partners,
(iv) any shareholder of Lessee, of Lessee's general or limited
partners or an Affiliate of Lessee or its general or limited
partners holding alone or in the aggregate more than twenty-five
percent (25%) of the stock of any one such entity, (v) employees
or agents of Lessee, Lessee's general or limited partners or
Affiliate of Lessee or Lessee's general or limited partners, or
(vi) immediate family members of officers of Lessee, Lessee's
general or limited partners, or any Affiliates of Lessee or its
general or limited partners, (vii) immediate family members of
shareholders owning alone or in the aggregate more than twenty-
five percent (25%) of the stock of any one of Lessee, Lessee's
general or limited partners or any Affiliate of Lessee or
Lessee's general or limited partners or (viii) Affiliates of the
persons or entities set forth in clauses (i) through (vii) above,
have an ownership-interest, whether equitable or otherwise.
(b) Affiliates. An "Affiliate" of a person or entity is a
person or entity that directly or indirectly controls, is
controlled by, or is under common control with, such person or
entity. The term "control", as used in the immediately preceding
sentence means, with respect to an entity that is a corporation,
the right to the exercise, directly or indirectly, of more than
fifty percent (50%) of the voting rights attributable to the
shares of the controlled corporation, and with respect to a
person or entity that is not a corporation, the possession,
directly or indirectly, of the power to direct or cause the
direction of the management or policies of the controlled person
or entity.
(c) AIA General Conditions. The "AIA General Conditions"
shall mean the standard general conditions of the standard form
AIA construction agreement.
(d) Amendment and Restatement of Tennis Operating
Agreement. The "Amendment and Restatement of Tennis Operating
Agreement" shall mean the unrecorded agreement effective as of
January 1, 1996, and any amendment thereto, between Kapalua Land
Company, Ltd. and Lessee with respect to tennis play.
(e) Commencement of Construction. "Commencement of
Construction" shall mean "visible commencement of operations" as
that term is defined in Section 507-41 of the Hawaii Revised
Statutes in effect on the date of this Lease.
(f) Completed. A structure, improvement, building or room
which is "Completed" is a structure, improvement, building or
room for which a "certificate of occupancy" has been issued by
the appropriate governmental authority. The "Completion" of a
structure, improvement, building or room shall mean the issuance
of a "certificate of occupancy" by the appropriate governmental
agency for such structure, improvement, building or room.
(g) Concessionaire. "Concessionaire" shall mean a person
or entity, including without limitation a shopkeeper, retailer or
provider of services which has entered into a sublease,
concession agreement, contract, license or similar agreement with
Lessee for the transaction of business on or from the Premises or
the operation of the Hotel.
(h) Declaration of Covenants, Conditions, and Restrictions.
"Declaration of Covenants, Conditions, and Restrictions" shall
mean the Declaration described in Exhibit "A".
(i) Estimated Monthly Percentage Rent. "Estimated Monthly
Percentage Rent" shall be the amount computed by multiplying the
Gross Revenues for the month by the percentage rate under Section
3.4.
(j) Golf Course Use Agreement. The "Golf Course Use
Agreement" shall mean the unrecorded agreement effective January
1, 1996, and any amendment thereto, between Lessor and Lessee,
with respect to golf course use.
(k) Gross Annual Percentage Rent. "Gross Annual Percentage
Rent" shall have the definition set forth in Section 3.4.
(l) Gross Revenues. "Gross Revenues" shall have the
definition set forth in Section 3.2.
(m) Hotel. "Hotel" shall mean the hotel known as of
January 1, 1996 as The ▇▇▇▇-▇▇▇▇▇▇▇, Kapalua, together with
lobbies, kitchens, dining rooms, bars, swimming pool,
landscaping, parking areas, roadways, walkways and all other
facilities and improvements now or hereafter constructed and
situated on the Premises.
(n) Hotel Operating Agreement. ".Hotel Operating
Agreement" shall mean an agreement between Lessee and Hotel
Operator for the operation and management of the Hotel.
(o) Hotel Operator. "Hotel Operator" shall mean Kapalani,
L.P., a Delaware limited partnership, or its successor or
successors as permitted by Section 8.8(b).
(p) Hotel Room. "Hotel Room" shall mean the smallest room
or combination of rooms in the Hotel which may be rented to
overnight guests.
(q) Kapalua Resort Area. The "Kapalua Resort Area" shall
mean the existing and proposed development of the Kapalua area on
Maui, more particularly set forth in the Kapalua Master Plan as
filed with the County of Maui Planning Department and amended
from time to time.
(r) Land. Land" shall mean the land included in the
Premises exclusive of any improvements existing at any time on
such land.
(s) Lease Year, Rental Year and Year. The terms Lease
Year," "Rental Year," and "Year" as used herein shall mean a time
period of 12 calendar months.
(t) Lessor's Cost of Money. "Lessor's Cost of Money" for
any period during the Term shall mean an annual rate of interest
equal to the lesser of: (i) two percent (2%) over the prime
interest rate for such period of time, which shall be the prime
interest rate then in effect or announced by Manufacturers
Hanover Trust Company or any successor thereto or other major
national bank directed by Lessor if such bank ceases to announce
a prime rate, or (ii) the maximum per annum rate of interest
permitted to be charged by then applicable law.
(u) Person. "Person" shall mean an individual,
partnership, corporation, trust, unincorporated association,
joint stock company, or other entity or association.
(v) Preconditions for Construction. The "Preconditions for
Construction" shall mean all of the conditions set forth in
subsections 4.2(a) through 4.2(d).
(w) Premises. The "Premises" shall mean the land described
in Exhibit "A" (including the Tennis Site) attached hereto and
incorporated herein by reference and all rights, easements,
privileges and appurtenances belonging or appertaining to such
land on the date hereof or at any time thereafter.
(x) Qualified Purchaser. Qualified Purchaser" shall have
the definition set forth in Section 11.7(a).
(y) Quiet Hours. "Quiet Hours" shall mean the hours
between 10 p.m. and 7 a.m. each day.
(z) Record and File. To "Record" a document shall mean to
record such document in the Bureau of Conveyances of in the State
of Hawaii. To "File" a document shall mean to file such document
in the Office of the Assistant Registrar of the Land Court of the
State of Hawaii.
(aa) Tennis Center. "Tennis Center" shall mean the
approximate ten-court tennis center on the Tennis Site.
(ab) Tennis Site. "Tennis Site" shall mean that portion of
the Premises on which the Tennis Center is built.
ARTICLE II
Demise and Quiet Enjoyment;
Interrelationship of Interests
2.1 Demise. In consideration of the Lessee's agreement to,
and acceptance of, the terms, conditions and covenants of this
Lease and the rent set forth in this Lease below, Lessor hereby
leases the Premises to Lessee for the Term, subject to all of the
terms and conditions of this Lease.
2.2 Quiet Enjoyment. Upon observance and performance by
Lessee of the covenants and conditions of this Lease and the
Declaration of Covenants, Conditions and Restrictions, Lessor
hereby covenants with the Lessee that the Lessee shall peaceably
hold and enjoy the Premises for the Term without hindrance or
interruption by the Lessor or any other person or persons
claiming by, through, or under Lessor except as in this Lease
expressly provided.
2.3 Interrelationship of Interests. The Lessor and the
Lessee covenant and agree that the interest of the Lessee in the
Hotel on the Premises and the interest of the Lessee in this
Lease are not separately transferable by the Lessee. Thus, under
no circumstances, may the Hotel be separated from the leasehold
interest in the Premises; and the Hotel may only be transferred
or encumbered together with the leasehold interest in the
Premises. During the Term of this Lease, Lessee shall own all
right, title, and interest in and to all improvements on the
Premises and shall retain all rights to depreciation deductions
and tax credits arising from the ownership of such improvements.
However, upon termination of this Lease, title to all
improvements in the Premises shall thereupon revert to the Lessor
subject to Section 10.1.
ARTICLE III
Rental
3.1 Lessee to Pay Net Rent. Throughout the Term, Lessee
shall pay to Lessor the annual minimum and percentage rents set
forth in Sections 3.3 and 3.4 in the manner set forth in this
Article, net of any and all taxes, rates, assessments, charges,
impositions, and expenses payable under this Lease and without
deductions of any kind whatsoever. Minimum and percentage rent
shall not be reduced or abated except as expressly provided in
this Lease.
3.2 Gross Revenues, Defined. The term "Gross Revenues"
shall mean all revenues, receipts and income of any kind derived
directly or indirectly by the Lessee in the form of cash,
property or services (i.e., barter, "contra," accounts, and such
alternatives to cash payments, which together with property and
services, shall be valued at their fair market value) from or in
connection with the Hotel or the Tennis Center (including any
loss of income insurance proceeds paid to the Lessee or the
Lessor in the event of casualty to the Hotel, or as a result of
the occurrence of any other event making use of all or a portion
of the Hotel impossible or impractical), and rentals or other
payments under the Amendment and Restatement of Tennis Operating
Agreement and/or the Golf Course Use Agreement, and from any
condominium units managed by the Lessee in the Kapalua Resort
Area, and from Concessionaires (but not including their gross
receipts), whether on a cash basis or credit, paid or collected,
determined in accordance with generally accepted accounting
principles and Uniform System; excluding, however: (i) funds
furnished by the Owner under the Hotel Operating Agreement, (ii)
interest accrued on amounts in the reserve under the Hotel
Operating Agreement, (iii) federal, state and municipal excise,
sales, use and room taxes collected directly from patrons and
guests or as part of the sales price of any foods, services or
displays, such as gross receipts, admissions, cabaret or similar
or equivalent taxes and paid over to federal, state or municipal
governments, (iv) gratuities, (v) proceeds of insurance
(excluding loss of income insurance proceeds which shall be
included as a part of Gross Revenues) and condemnation, (vi)
value of free or any discounted portion of rooms or services
under the Amendment and Restatement of Tennis Operating Agreement
and/or the Golf Course Use Agreement or complimentary policies of
the Hotel approved by the Lessor, (vii) any loan proceeds, and
(viii) proceeds from the sale of the Hotel or the improvements
and furniture, fixtures and equipment owned by the Lessee.
When there are Affiliated Concessionaires operating at the
Hotel, if the rental rate to any Affiliated Concessionaire is
lower than the rental rate which is being charged another third
party, non-Affiliated Concessionaires operating a business
similar to those of the Affiliated Concessionaires in a location
at the Hotel similar to that of the Affiliated Concessionaire,
the Gross Revenues from such Affiliated Concessionaire shall be
deemed to be the same as the rental rate being charged such other
Concessionaire, and Gross Revenues shall be computed as so
determined. If there is no third party non-Affiliated
Concessionaire operating a similar business in a similar location
to that of an Affiliated Concessionaire, then for purposes of
determining Gross Revenues, the Gross Revenues from such
Affiliated Concessionaire shall be determined according to rental
rates that would have been charged to a non-Affiliated
Concessionaire in an "arm's length" negotiation to acquire the
same concession for the same business in the same location as
given such Affiliated Concessionaire.
Gross Revenues shall be reduced for actual bad debts
reasonably determined to be uncollectible by the Lessee, which
reduction shall not include payments for any bad debt reserve or
sinking fund or similar fund or reserve, for bad debts. If any
debts previously deducted as uncollectible shall subsequently be
collected, such collected amounts shall be included in Gross
Revenues in the fiscal year collected after deducting reasonable
collection expenses actually incurred.
"Gross Revenues" shall be determined on an annual basis,
except that in computing Estimated Monthly Percentage Rent, Gross
Revenues shall be determined either just for that month or on a
quarterly basis, as the case may be.
3.3 Minimum Rent. Commencing January 1, 1996, and
continuing through the Term of this Lease, the Lessee shall pay a
minimum rent of the higher of $5,000 per year, payable in
arrears, or the percentage rent payable under Section 3.4, below.
3.4 Percentage Rent.
(a) For each calendar year or portion thereof during the
period from January 1, 1995 through December 31, 1998, the
percentage rent shall be an amount equal to 2.5% of the Gross
Revenues for that year, or a prorated amount for any portion of
such year.
(b) For each year during the period from January 1, 1999,
through December 31, 2094, the percentage rent shall be an amount
equal to 1% of Gross Revenues for that year; provided, however,
if the total Gross Revenues for any twelve (12) consecutive
calendar months during this period exceeds $60,000,000, the
percentage rent for the remainder of the Term shall increase,
effective the first month following such twelve (12) consecutive
months, to an amount equal to 1.5% of Gross Revenues.
(c) Records and Annual Statement. Lessee shall maintain
and keep full and accurate records on the Premises of all
business under the control of Lessee done or transacted in, upon
or from the Premises which may reasonably assist Lessor in
determining the percentage rent to be paid by Lessee under this
Lease, and shall retain and preserve such records on the
Premises(or the Island of Maui) for at least five (5) years after
submission of the annual audited statement provided for in this
paragraph and permit Lessor upon reasonable advance notice to
inspect such records at any and all reasonable times during
business hours. Lessor shall also be given access at the Hotel
upon reasonable advance notice at any and all reasonable times
during business hours to any other books or records of Lessee,
and to any other books or records of Concessionaires, including
but not limited to Affiliated Concessionaires, that may be
necessary to enable Lessor to make a full and proper audit of the
Gross Revenues derived from all business done in, upon or from
the Premises. The Lessee shall submit to the Lessor on or before
the expiration of ninety (90) days following the end of each
calendar year of the Term after the commencement of the 1st
Rental Year of the Term, a complete statement (the "Annual
Statement") audited and signed by a certified public accountant
firm of recognized national and industry stature, entirely at
Lessee's sole expense; provided, however, Lessor and Lessee agree
and acknowledge that Lessee may fulfill such requirement for an
audited Annual Statement if Lessee provides to Lessor the audited
and signed Annual Statement given by the then current Hotel
Operator to Lessee pursuant to the terms of any hotel operating
agreement by and between the then current Hotel Operator and
Lessee. The Annual Statement shall be certified and signed by an
officer of Lessee, showing in reasonable detail satisfactory to
the Lessor Gross Revenues, prior to the deductions and exclusions
from Gross Revenues permitted under Section 3.2, and a reasonably
detailed statement of the deductions and exclusions from Gross
Revenues claimed by the Lessee, for the preceding year, and the
amount of Gross Annual Percentage Rent due under this Lease for
such year. The Lessor agrees to treat all such information,
records and reports as confidential and, except in response to a
valid court subpoena or proceeding, shall not divulge any of the
same to third parties without the prior written consent of the
Lessee, which consent may be unreasonably withheld. In addition
to the Annual Statement, Lessor shall have the right to audit, at
Lessor's expense except as provided in the immediately following
sentence, all records of Lessee and Concessionaires relating to
the Hotel and the concessions, and statements furnished by the
Lessee for purposes of determining percentage rent. If such an
audit shall reveal errors or improper entries or similar facts
which result in a difference in annual percentage rent exceeding
two percent (2%), all costs of such audit shall be borne by the
Lessee. The Lessor's right to audit shall include the right to
take such steps as are generally deemed proper in auditing
practices and shall include the right to audit Concessionaires,
including but not limited to Affiliated Concessionaires. Lessee
shall cooperate in any audit made by Lessor. After completion of
the audit, whichever party is then owing money for an adjusting
refund to the other by the audit shall pay the amount shown to be
due for such refund by the within fourteen (14) days after
completion of the audit by cash payment to Lessor (together with
interest in accordance with Section 11.13 from the date the
moneys should have been paid) or by credit against the next
monthly rents due if to Lessee. Completion of the audit shall be
deemed to occur at the time of delivery of the auditor's report
to both Lessor and the Lessee. If the Lessor is due an adjusting
refund, the Lessee shall pay the same in cash to the Lessor
(together with interest in accordance with Section 11.13 from the
date the rent adjustment should have been paid) at the time of
delivery of the Annual Statement.
(d) Accounting Method. Lessee shall keep its books of
account in accordance with generally accepted accounting
principles.
3.5 Access to Guest Lists. Lessee understands that Lessor
may desire from time to time to distribute information with
respect to the Kapalua Resort Area ("KRA Advertising") to former
guests of the Hotel. Lessor understands that (i) Lessee is
vitally interested in the image of the Hotel and the Kapalua
Resort Area presented to former and prospective guests of the
Hotel, and (ii) Lessee's guest lists constitute valuable and
confidential trade secrets of Lessee. Accordingly, Lessor shall
not be entitled to such guest lists but may require Lessee to
distribute, at Lessor's cost, any KRA Advertising to the persons
listed on Lessee's guest lists provided that such KRA Advertising
consists of advertising and promotion of the Kapalua Resort Area
or projects located therein, is of a first-class nature and
quality consistent with the Kapalua luxury resort image, and does
not refer to any hotel other than the Hotel or to any villa,
condominium and/or apartment rental program other than that
operated by Lessee. Any questionnaires must be general without
naming the Hotel.
3.6 Gross Excise Tax. In addition to the rents, taxes and
all other charges of every description payable hereunder, the
Lessee shall pay the Lessor, as additional rent, together with
each payment of rent or any other payment required hereunder, an
amount equal to the amount of excise taxes payable by the Lessor
pursuant to the State of Hawaii General Excise Tax Law, as it may
be amended from time to time, or any successor or similar law,
assessed or based on gross income of every description actually
or constructively received (to the extent taxed) by the Lessor
under this Lease, including without limiting the generality of
the foregoing: (i) the rents payable hereunder; (ii) any amount
directly or constructively received by the Lessor (to the extent
so taxed) by reason of payment by the Lessee to the Lessor,
governmental agency or others of real property taxes, insurance
premiums or any other charges or costs hereunder, (iii) amounts
paid to Lessor pursuant to this provision. Said amount payable
to Lessor shall take the character of the gross income on which
it is based and shall be an amount which, when added to such
rental or other payment, shall yield to the Lessor, after
deduction of all such tax payable by the Lessor with respect to
all such rent and other payments, a net amount equal to that
which the Lessor would have realized from such payments had no
such tax been imposed.
3.7 Payment.
(a) Percentage Rent. Annual percentage rent for each year
for which such rent is due as provided in Section 3.4 shall be
paid in monthly installments of "Estimated Monthly Percentage
Rent", computed for each month of such year, due on the 12th day
of the month after the month for which the Estimated Monthly
Percentage Rent is computed. Any adjusting payments required
will be made at the calendar year end at the time of delivery to
Lessor of the Annual Statement. If the Lessee is due an
adjusting refund from the Lessor, the Lessor will make a like
credit against the next monthly rents unless the Lessor disputes
the Annual Statement. If the Lessor is due an adjusting refund,
the Lessee shall pay the same in cash to the Lessor (together
with interest in accordance with Section 11.13 from the date the
rent adjustment should have been paid) at the time of delivery of
the Annual Statement.
(b) Currency; Agent. All rent and all other charges
payable by Lessee under this Lease shall be paid in lawful
currency of the United States of America to the Lessor or to such
agent as shall be designated by the Lessor in written notice to
the Lessee at least twelve (12) days prior to any rent payment
due date.
3.8 Late Payment. If Lessee fails to pay the percentage
rent within ten (10) days after such rent is due, Lessor shall be
entitled to a "late charge" equal to four percent (4%) of the
rent due to compensate Lessor for the administrative burden of
handling the late payment of rent. In addition, interest shall
be charged on such rent in accordance with Section 11.13.
3.9 Off-Site Improvements; Loan; Employee Housing.
(a) Lessor has completed all off-site improvements
described in Exhibit "B" attached hereto and incorporated herein
by reference (the "Off-Site Improvements"), all in accordance
with applicable government requirements. Lessor and Lessee
shall, subject to Lessor's and Lessee's approval, join in any
grant of easements which may be necessary to bring any utility
services from the boundaries of the Land to the improvements
thereon. Lessor expressly acknowledges and agrees that it shall
maintain, at Lessor's sole expense, all Off-Site Improvements
owned by Lessor.
(b) Lessor borrowed a principal amount of FOUR MILLION
SEVEN HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($4,750,000) for
the costs of the Off-Site Improvements (the "Off-Site
Improvements Loan"). The rights of the Lender under the Off-Site
Improvement Loan are held by Lessee. The Off-Site Improvements
Loan is evidenced by that certain non-recourse open account as
provided in Exhibit "C" which is attached hereto and incorporated
herein by this reference. The Off-Site Improvements Loan is
secured by the rent under this Lease and shall be repaid by
Lessee offsetting rent under this Lease in accordance with the
terms set forth in Exhibit "C." Until the earlier to occur of 1)
such Off-Site Improvements Loan being paid in full or deemed paid
in full; or 2) January 1, 1999, Lessee shall have a first
priority claim on all such rent for the purpose of effecting such
offset, and Lessee agrees not to assign, pledge or otherwise
encumber its right to such rents without making any such
assignment, pledge or other encumbrance expressly subject to the
first priority of such offset. The Lessee may offset rent under
this Lease in whole or in part against any payments due
thereunder.
ARTICLE IV
Construction of Improvements
4.1 Construction Requirements. Prior to Commencement of
Construction on the Premises of any construction for material
extension and/or alterations on the outside dimension of the
Hotel in excess of ONE MILLION AND NO/100 DOLLARS ($1,000,000)
("Construction"), Lessee shall comply with all of the conditions
set forth in Sections 4.1(a) and 4.1(b) and all of the other
conditions (the "Preconditions for Construction") set forth in
Sections 4.2(a) through 4.2(d); provided, however, this section
4.1 shall not apply to any interior additions and/or improvements
to the Hotel of THREE MILLION AND NO/100 DOLLARS ($3,000,000) or
less, interior renovations, any exterior maintenance, and any
furniture, fixtures, and equipment.
(a) Lessor's Approval. Lessee shall inform Lessor of the
nature of any Construction which Lessee is then planning to
construct on the Premises prior to Commencement of Construction
thereof. Lessee shall, prior to commencing any Construction,
submit a copy of the layout, location, elevation and renderings
("Plans") for such Construction for Lessor's approval, which
shall not be unreasonably withheld. Lessor shall approve or
disapprove the Plans within thirty (30) days after Lessee
delivers them to Lessor. If Lessee does not receive written
disapproval of the Plans within such thirty (30) day period, the
Plans shall be deemed approved by the Lessor. If Lessor
disapproves in writing of such Plans, Lessor shall, within such
thirty (30) day period, give the Lessee in reasonable detail the
reasons why.
All such Plans shall also conform to the provisions of the
Declaration of Covenants, Conditions and Restrictions pertaining
to the Premises.
(b) Lessee's Notification of Architect and Contractor. The
Lessee shall notify the Lessor of the identity of the architect
and contractor to be utilized for the Construction.
4.2 Pre-Conditions for Construction. Prior to construction
on the Premises of any Construction, Lessee shall comply with all
of the conditions set forth in Sections 4.2(a) through 4.2(d)
(the "Preconditions for Construction").
(a) Performance and Payment Bonds. Lessee shall deposit
with the Lessor certificates or other satisfactory evidence that
the contractor has procured one or more customary payment and
performance bonds for a total amount not less than one hundred
percent (100%) of the total cost of the Construction, naming the
Lessor and Lessee as co-obligees, in customary form and content
and with a surety or sureties approved by Lessor and authorized
to do business in Hawaii, guaranteeing the full and faithful
performance of the construction contract for such construction
free and clear of all mechanics' and materialmen's liens and the
full payment of all subcontractors, labor and materialmen.
(b) Governmental Approvals. Lessee shall furnish Lessor
with evidence (which may be in form of an opinion of counsel
reasonably satisfactory to Lessor) that all governmental
approvals necessary to commence the construction have been
obtained including without limitation the issuance of a building
permit for such construction.
(c) Financing Commitments. Lessee shall provide Lessor
with a construction budget for proposed construction projects and
evidence that there are funds available and committed to Lessee
sufficient to pay for one hundred percent (100%) of the total
direct and indirect costs of construction of the entire
construction. Such evidence may include, but not be limited to,
an executed copy of the building loan agreement or its
equivalent, and an executed copy of Acceptable Loan Commitments
for interim financing for such construction and any permanent
financing necessary to permit the Lessee to finance the repayment
of the interim loan. If any financing which is proposed under
Section 5.7 permits secondary financing, such fact shall be
grounds for disapproval of such proposed financing by Lessor.
(d) Construction Liability Insurance. In addition to the
requirements of part A of Article VI and the requirements of
parts B and C of Article VI, beginning with the Commencement of
Construction and continuing until all construction is completed,
Lessee shall maintain a comprehensive general liability insurance
policy in customary form and content and with an insurance
company authorized to do business in Hawaii and insuring the
Lessor and Lessee against at least all of the following: loss or
damage to third parties or their property from excavation, pile
driving, loss of subterranean support, boiler explosion as well
as all other hazards normally insured against in the construction
industry. Prior to the Commencement of Construction, Lessee
shall deliver to Lessor certificates of insurance certifying that
such insurance is in full force and effect.
4.3 Change Orders.
(a) Throughout the course of any Construction for which
Lessee is required under this Lease to comply with the
requirements of Sections 4.1(a) and 4.1(b) above, any proposed
substantial and material variation in such Plans previously
approved by Lessor shall be made pursuant to supplemental plans
and specifications and "change orders", as that term is defined
in the AIA General Conditions, and Lessee shall submit for the
Lessor's approval in the same manner as in Section 4.1(a) and
retention copies of any and all such supplemental plans and
specifications and proposed change orders and obtain such
approval before undertaking any such Construction.
(b) If the Lessee proposes to enter into an "additive
change order" as that term is used in the AIA General Conditions,
which additive change order would have the effect of depleting
entirely the amount provided for contingencies in the
construction budget, then prior to the execution of such additive
change order, Lessee shall make funding arrangements reasonably
satisfactory to Lessor to fund the additional sums required to
cover the amount by which the construction budget, after all
contingencies have been depleted or committed, is increased by
the additive change order. Lessee must make such funding
arrangements reasonably satisfactory to lessor prior to the
execution of any such additive change order.
4.4 Force Majeure. If any performance or condition
required to be completed by Lessor or Lessee under the terms of
this Lease is delayed by war, riots, insurrection, earthquake,
fire, flood, Acts of God, or other similar disaster, by
governmental ruling, regulation or law, by strike in the State of
Hawaii or on the Island of Maui, or by general transportation or
shipping strikes, or by strikes or shortages which affect the
delivery of materials critical to construction on the Premises,
which conditions are not within such party's control and are not
such party's fault, then the time for the completion of such
performance or such condition shall be extended by a time period
equal to the duration of such delay; provided, however, that the
Lessee's obligations to pay any and all sums due under this
Lease, including but not limited to percentage rent, shall not be
affected by any such extension and the time for payment of such
sums shall not be so extended; and provided further, that in no
event shall the Term be so extended.
4.5 Minimum Interference During Construction.
(a) During the portion of the Term while any construction
on the Premises is underway, Lessee shall take all steps and
precautions reasonably possible to provide that Lessee's
construction activities do not interfere with the operation of
the Kapalua Resort Area or result in inconvenience to guests,
tenants and residents in the Kapalua Resort Area, including but
not limited to the following:
(i) Except under emergency conditions, Lessee shall
obtain the Lessor's approval, which approval will not be
unreasonably withheld, for any anticipated disruption of water,
electricity, sewerage, traffic or other utility services to such
guests, tenants or residents at least fourteen (14) days prior to
such disruption. Lessee shall minimize the frequency and
duration of such disruptions and shall notify (through the Hotel
Operator, if a hotel, and through the condominium association, if
a condominium project) all affected utility users at least ten
(10) days prior to such disruption.
(ii) If Lessee's construction activities result in
damage to water or sewer lines, electrical systems, streets or
other utility systems, Lessee shall immediately notify Lessor of
such damage. If such damage occurs, Lessor may either (1)
require that Lessee immediately repair such damage at Lessee's
sole expense or (2) repair such damage and require that Lessee
pay all of Lessor's reasonable expenses. Lessor and Lessee agree
that in addition to repair or payment of expenses as set forth in
the immediately preceding sentence, if such damage to any utility
facilities results in an interruption in utility services not
approved and announced as provided in clause (i) above, Lessee
shall also pay for such interruption any actual damages incurred.
(iii) If piles must be driven during any construction
on the Premises, Lessee shall take all reasonable precautions to
reduce noise and shall use the quietest pile driving equipment
reasonably available in Hawaii under the then current state of
technology and shall engage in such activity only between the
hours of 9 o'clock a.m. and 4 o'clock p.m.
(iv) Lessee shall institute noise and dust controls at
all times during the construction to minimize the emission of
noise and dust on or from the Premises, including but not limited
to observing and requiring compliance with the Lessor's Quiet
Hours.
Lessee shall incorporate appropriate provisions in its
construction contract to implement the conditions set forth in
subsections (i) through (iv) above, including without limitation,
a provision requiring that Lessee's contractor comply with
Lessee's noise and dust controls. Lessee agrees that Lessee's
covenant to indemnify Lessor set forth in Section 11.9 below
shall include the indemnification of Lessor for any liability or
expenses arising from dust, noise, or utility interruptions
caused by construction on the Premises.
(b) If Lessor has any construction activities of its own
which affect the Premises, Lessor shall also comply with the
provisions of Section 4.5(a).
4.6 Risk of Obtaining Governmental Approvals for
Construction. It is specifically understood and agreed that the
risk of obtaining all governmental approvals needed for
construction, including but not limited to the risk of down-
zoning of the Premises, is on the Lessee. Failure to obtain such
approvals and Lessee's resulting inability to construct any
improvements shall in no event terminate the Lessee's obligation
to make the payments required in this Lease, including but not
limited to the obligation for rent, or extend the time for or
reduce the amount of any rental or other payment due under the
Lease.
4.7 Delivery of Plans and Specifications Upon Completion.
After completion of any construction on the Premises required to
be made under the Preconditions for Construction, Lessee shall
provide Lessor with a copy of a complete set of plans and
specifications for the entirety of such construction certified by
a licensed professional architect as showing the completed
construction "as built", all at Lessee's sole expense.
ARTICLE V
5.1 Right to Mortgage. Lessee may, from time to time, with
the consent of Lessor, which consent shall not be unreasonably
withheld, hypothecate, mortgage, pledge or alienate Lessee's
leasehold estate and rights hereunder as security for payment of
any indebtedness of Lessee to any bank, insurance company or
other established lending or financial institution or
institutions. The holder or holders of any such lien, as well as
any lenders of loans made pursuant to Section 5.7 hereof shall be
referred to herein as "Leasehold Mortgagees." A Leasehold
Mortgagee or its assignees may enforce such lien and acquire
title to the leasehold estate in any lawful way and, pending
foreclosure of such lien, the Leasehold Mortgagee or its assigns
may take possession of and operate the Premises, performing all
obligations to be performed by Lessee, and upon foreclosure of
such lien by power of sale or judicial foreclosure, the Leasehold
Mortgagee may sell and assign the leasehold estate hereby created
but any such purchaser or assignee must be a qualified assignee
within the meaning of Section 11.7(a) below ("Qualified
Purchaser"). Any Person acquiring such leasehold estate shall be
liable to perform the obligations imposed on Lessee by this Lease
only during the period such Person has ownership of said
leasehold estate or possession of the Premises.
5.2 Notice to and Rights of Leasehold Mortgages.
(a) When giving notice to Lessee with respect to any
default hereunder, Lessor shall also serve a copy of each such
written notice upon any Leasehold Mortgagee who shall have given
Lessor a written notice specifying its name and address. If
Lessee shall default in the performance of any of the terms,
covenants, agreements and conditions of this Lease on Lessee's
part to be performed, any Leasehold Mortgagee shall have the
right, within the grace period available to Lessee for curing
such default, plus such additional grace periods which may be
allotted to the Leasehold Mortgagee, to cure or make good such
default or to cause the same to be cured or made good whether the
same consists of the failure to pay rent or the failure to
perform any other obligation and Lessor shall accept such
performances on the part of any Leasehold Mortgagee as though the
same had been done or performed by the Lessee.
(b) In case of a default by Lessee in the payment of money,
Lessor will take no action to effect a termination of this Lease
by reason thereof unless such default has continued beyond forty
(40) days after Lessor shall have served a copy of such written
notice upon Lessee and any Leasehold Mortgagee, it being the
intent hereof and the understanding of the parties that any
Leasehold Mortgagee shall be allowed up to, but not in excess of,
forty-five (45) days to cure any default of Lessee in the payment
of rent or in the making of any other monetary payment required
under the terms of this Lease in addition to the ten (10) days
granted to Lessee to make such payments.
(c) In the case of any other default by Lessee, Lessor will
take no action to effect a termination of this Lease by reason
thereof unless Lessee or any Leasehold Mortgagee fails, within
forty-five (45) days after written notice from Lessor to any
Leasehold Mortgagee of Lessor's intention to terminate the Lease:
(i) to commence to cure such default, if such default
is susceptible of being cured by the Leasehold Mortgagee without
the Leasehold Mortgagee obtaining possession of the Premises;
(ii) to commence and diligently pursue efforts to
obtain possession of the Premises (including possession by a
receiver) and to cure such default in the case of a default which
is susceptible of being cured when the Leasehold Mortgagee has
obtained possession thereof; or
(iii) to institute foreclosure proceedings and to
complete such foreclosure proceedings or otherwise acquire
Lessee's interest under this Lease, or the right of possession
hereunder, with reasonable and continuous diligence in the case
of a default which is not so susceptible of being cured by the
Leasehold Mortgagee,
provided it is the intention hereof and the understanding of the
parties that any Leasehold Mortgagee shall be allowed up to, but
not in excess of, forty-five (45) days in addition to the time
period granted to Lessee pursuant to Section 9.1(b) to commence
action under this Section 5.2(c)(i)-(iii); and provided, further,
that a Leasehold Mortgagee shall not be required to continue such
possession or continue such foreclosure proceedings if the
default which prompted the service of such a notice has been
cured.
(d) The time available to a Leasehold Mortgagee to initiate
foreclosure proceedings as aforesaid shall be deemed extended by
the number of days of delay occasioned by judicial restriction
against such initiation or occasioned by other circumstances
beyond the Leasehold Mortgagee's control.
(e) During the period that a Leasehold Mortgagee shall be
in possession of the Premises and/or during the pendency of any
foreclosure proceedings instituted by a Leasehold Mortgagee, the
Leasehold Mortgagee shall pay or cause to be paid the rent
specified in Article III above and all other charges of
whatsoever nature payable by Lessee hereunder which have been
accrued and are unpaid and which will thereafter accrue during
said period. Following the acquisition of Lessee's leasehold
estate by the mortgagee or a Qualified Purchaser, either as a
result of foreclosure or acceptance of an assignment in lieu of
foreclosure, or the right of possession hereunder, the Leasehold
Mortgagee or party acquiring title to Lessee's leasehold estate
shall, as promptly as possible, commence the cure of all defaults
(other than money defaults, it being understood that any such
money defaults would have already been cured and that thereafter
all rent and other money items would be kept current) hereunder
to be cured and thereafter diligently process such cure to
completion, except such defaults which cannot in the exercise of
reasonable diligence be cured or performed by the Leasehold
Mortgagee or party acquiring title to Lessee's leasehold estate,
whereupon Lessor's right to effect a termination of this Lease
based upon the default in question shall be deemed waived. Any
default not susceptible of being cured by the Leasehold Mortgagee
or party acquiring title to Lessee's leasehold estate shall be,
and shall be deemed to have been waived by Lessor upon completion
of the foreclosure proceedings or acquisition of Lessee's
interest in this Lease by any Qualified Purchaser (who may, but
need not be, the Leasehold Mortgagee) at the foreclosure sale, or
who otherwise acquires Lessee's interest from the Leasehold
Mortgagee or by virtue of a Leasehold Mortgagee's exercise of its
remedies. Any such purchaser, or successor of purchaser, shall
be liable to perform the obligations imposed on Lessee by this
Lease incurred or accruing only during such purchaser's or
successor's ownership of the leasehold estate or possession of
the Premises.
(f) Nothing herein shall preclude Lessor from exercising
any of Lessor's rights or remedies with respect to any other
default by Lessee during any period of any such forbearance,
subject to the rights of any Leasehold Mortgagee as herein
provided.
(g) All notices by Lessor to Leasehold Mortgagees shall be
given by registered or certified mail, return receipt requested,
addressed to the Leasehold Mortgagees at the address last
specified to Lessor by the Leasehold Mortgagees, and any such
notice shall be deemed to have been given and served as provided
in Section 11.5.
(h) If two or more Leasehold Mortgagees each exercise their
rights hereunder and there is a conflict which renders it
impossible to comply with all such requests, the Leasehold
Mortgagee whose Leasehold Mortgage would be senior in priority if
there were a foreclosure shall prevail. If any Leasehold
Mortgagee pays any rental or other sums due hereunder which
relate to periods other than during its actual ownership of the
leasehold estate, such Leasehold Mortgagee shall be subrogated to
any and all rights which may be asserted against Lessor with
respect to such periods of time.
5.3 New Lease if No Bankruptcy. If this Lease is
terminated or cancelled for any reason where the Leasehold
Mortgagee has not been given an opportunity to cure pursuant to
Section 5.2 and if Section 5.8 below is not applicable, any
mortgagee shall have the right, within thirty (30) days after the
receipt of notice of such termination, to demand a new Lease
covering the Premises for a term to commence on the date of
procurement by Lessor of possession of the Premises and to expire
on the same date as this Lease would have expired if it had
otherwise continued uninterrupted until its scheduled date of
termination, and containing all of the same rights, terms,
covenants, considerations, unexpired options, and obligations as
set forth in this Lease. Such new lease shall be executed and
delivered by Lessor to the Leasehold Mortgagee within thirty (30)
days after receipt by Lessor of written notice from the Leasehold
Mortgagee of such election and upon payment by the Leasehold
Mortgagee of all sums owing by Lessee under the provisions of
this Lease (less any rent and other income actually collected by
Lessor in the meantime from subtenants or other occupants of the
Premises) and upon performance by the Leasehold Mortgagee of all
other obligations of Lessee under the provisions of this Lease
with respect to which performance is then due and which are
susceptible of being cured by a Leasehold Mortgagee. After such
termination of this Lease and prior to the expiration of the
period within which the Leasehold Mortgagee may elect to obtain
such new lease from Lessor, Lessor shall refrain from terminating
any existing subleases and from executing any new subleases
without the prior written consent of all Leasehold Mortgagees,
and Lessor shall account to the Leasehold Mortgagee for all rent
collected from subtenants during such period. Any new lease
granted to a Leasehold Mortgagee shall enjoy the same priority as
this Lease over any mortgage or other lien created by Lessor, in
its capacity as Lessor, before or after the date of such new
lease.
5.4 Consent of Mortgagee. Without the prior written
consent of all Leasehold Mortgagees, neither this Lease nor the
leasehold estate created by this Lease shall be surrendered,
cancelled, modified or amended (except with respect to
termination pursuant to any eminent domain proceedings concerning
the whole of the Premises, as provided in Article VII below),
unless the mortgagee has had an opportunity to cure any default
of Lessee pursuant to Section 5.2 and has failed to do so. No
agreement purporting to surrender, cancel, terminate, modify or
amend this Lease without such consent shall be valid or
effective.
5.5 No Merger. No merger of Lessee's leasehold estate into
Lessor's fee title shall result or be deemed to result by reason
of ownership of Lessor's or Lessee's estates by the same party or
by reason of any other circumstances, without the prior written
consent of the Leasehold Mortgagee, unless such merger results
from a default by Lessee where the Leasehold Mortgagee has been
given an opportunity to cure and has failed to do so.
5.6 Financing by Lessor. Any mortgage made by Lessor
(referred to herein as "Lessor Mortgage") covering its interest
in the Premises shall be subject to the rights of Lessee and any
Leasehold Mortgagees in the Premises, as set forth in this Lease.
Lessor agrees that any such Lessor Mortgage shall include a
clause stating that such Lessor Mortgage is so subject as set
forth above, but any such Lessor Mortgage shall automatically be
subject to this Lease regardless of whether or not any such
clause is in fact included in such Lessor Mortgage. The basic
substance of the foregoing provisions shall be included in the
short form Lease described in Section 11.23. If any proceedings
are brought for the foreclosure of, or in the event of exercise
of the power of sale under, any Lessor Mortgage or if Lessor
sells, conveys or otherwise transfers its interest in the
Premises, Lessee hereby agrees to attorn to whatever party
legally succeeds to the interest of Lessor in the Premises.
5.7 Subordination. Lessor agrees that it will, at Lessee's
request, and from time to time, subordinate all of Lessor's fee
estate in the Premises and all of Lessor's estate and interest in
this Lease to any first Leasehold Mortgage; provided, however,
that at no time shall Lessor be required to subordinate its
interests in either the fee estate or in this Lease to an
aggregate principal amount in excess of SIXTY-FIVE MILLION AND
NO/100 DOLLARS ($65,000,000.00). Any such Leasehold Mortgage
shall provide that Lessor shall have absolutely no liability or
obligation for the repayment of such loan or for the performance
of any obligations under any such Leasehold Mortgage and shall
further provide that Lessor shall have authority to cure any
default of Lessee prior to any foreclosure pursuant to provisions
of Section 5.9. Any foreclosure of any such Leasehold Mortgage
must be by judicial foreclosure. Lessee and its Affiliates shall
not directly or indirectly be a purchaser at any foreclosure sale
of any such Leasehold Mortgage. Lessor and Lessee agree that (i)
if any Leasehold Mortgage to which this Lease is made subordinate
under this Section 5.7 is foreclosed and the fee estate sold at
foreclosure and (ii) if proceeds in excess of the total amount
claimed by the Leasehold Mortgagee result from such sale and are
made available by the Leasehold Mortgagee to Lessor and Lessee
under the terms of the Leasehold Mortgage, then such excess
proceeds shall be made available first to Lessor to the extent of
the appraised fair market value of Lessor's fee estate in the
Premises as of the date the Leasehold Mortgagee commenced
foreclosure and the balance of such proceeds shall be made
available to Lessee. The appraised fair market value of the
Lessor's fee estate in the Premises shall be as determined by the
court appointed appraiser pursuant to the judicial foreclosure
proceedings which are required by this Section 5.7.
5.8 Option for New Lease if Bankruptcy.
(a) If there is an actual or deemed rejection of the Lease
(or of the new lease hereinafter described), under any provision
of the Bankruptcy Code (Title 11, United States Code) or any
successor law having similar effect, which results in a
termination of the Lease (or such new lease), Lessor agrees that
the senior leasehold mortgagee (the "Mortgagee") shall have the
right, for a period of sixty (60) days subsequent to such
termination, to demand from Lessor a new lease of the Premises
(the "New Lease"). The New Lease shall be for a term commencing
on the date the Lease was terminated and expiring on the date
stated in the Lease as the fixed date for the expiration thereof.
The rental and all provisions, covenants and conditions of the
New Lease shall be the same as the rental, provisions, covenants
and conditions of the Lease as of the date of termination
thereof, except that the liability of the Mortgagee under the New
Lease shall not extend beyond the period of its occupancy
thereunder. As the Lessee under the New Lease, the Mortgagee
(with respect to the Lessor) shall have the same right, title and
interest in and to the buildings and improvements on the Premises
as the Lessee had under the Lease immediately prior to its
termination.
(b) If the Mortgagee shall elect to demand such New Lease,
the Mortgagee shall, within such period, deliver written notice
to the Lessor of such election; and thereupon, within fifteen
(15) days thereafter, the Lessor and the Mortgagee shall execute
and deliver such New Lease upon said term, rental, provisions,
covenants and conditions, and the Mortgagee shall, at the time of
the execution and delivery of such New Lease, pay to the Lessor
all rental, charges, and taxes, owing by the Lessee to the Lessor
under the terms of the Lease immediately prior to the termination
of the Lease together with reasonable attorneys' fees and
expenses incurred by the Lessor in connection with the rejection
and termination of the Lease and the preparation, execution and
delivery of the New Lease, and all rentals, charges and taxes
owing by the Mortgagee, as lessee under such New Lease. The
Mortgagee shall also indemnify and hold the Lessor harmless from
and against all claims, damages, losses and expenses, including
reasonable attorneys' fees arising out of or in connection with
the termination of the Lease and the issuance of the New Lease.
The Lessor may, at its option, require the Mortgagee to obtain an
appropriate order from the Bankruptcy Court.
(c) The Lessor shall be under no obligation to accept rent
from or otherwise agree to an attornment from any subtenants of
the Premises whose rental agreements or subleases shall have
terminated upon the termination of the Lease. If the Mortgagee
demands such New Lease as provided herein, the New Lease will be
issued by Lessor subject to (and together with a quitclaim
assignment of Lessor's interests in) any and all subleases or
rights or tenants in possession and the Mortgagee shall have the
rights and obligations as landlord or sublessor with respect to
such sublessees or tenants and the same obligations to indemnify
and hold the Lessor harmless from any and all expenses connected
with and Claims from such sublessee or tenants, as the Lessee had
under the Lease (to the same extent and effect as if the Lease
had been assigned to the Mortgagee). The Mortgagee shall be
given credit for any net rents and income actually collected and
accepted by the Lessor from such sublessees or tenants of the
Premises.
(d) Any and all mortgages, or other lien, on the Lessor's
interest in the Premises, subsequent to the date of filing or
recording, to the extent permitted by law, shall be subject and
subordinate to this Lease. Any New Lease issued pursuant to the
provisions hereof, to the extent permitted by law, shall be
superior and prior to any such mortgage or other lien.
5.9 Lessor's Right to Cure Lessee's Mortgage Defaults.
(a) Every mortgage of the Lessee's interests under this
Lease shall provide that:
(i) In case of Lessee's default under such mortgage,
should the Leasehold Mortgagee determine to institute foreclosure
proceedings, the Leasehold Mortgagee shall give notice of such
intended foreclosure to the Lessor and Lessee, by registered mail
sent to Lessor's and Lessee's last known addresses, at least
sixty (60) days prior to the commencement of such foreclosure
proceedings (i.e., filing of the complaint for foreclosure with a
court of competent jurisdiction), and Lessor may, but shall not
be obligated to, cure any such default then capable of being
cured by Lessor in accordance with Section 5.9(b) below; and
(ii) If Lessor commences to cure all current defaults
of Lessee then curable by Lessor (including bringing all monetary
defaults immediately current to date) and diligently prosecutes
such cure, then Leasehold Mortgagee shall waive its right to
foreclose (including any right to accelerate the note secured by
the mortgage, it being understood that Lessor shall have the
foregoing right to cure all monetary and other defaults before
the Leasehold Mortgagee accelerates the note secured by the
mortgage) and any default under the mortgage shall be deemed
cured; and
(iii) If Lessor cures such default and succeeds to the
Lessee's right, title and interest in and to this Lease and the
Hotel in accordance with Section 5.9(b) below, then the Leasehold
Mortgagee shall thereafter, and without changing the terms and
conditions of the mortgage, treat Lessor as the mortgagor under
the mortgage and Lessor shall execute such reasonable documents
that the Leasehold Mortgagee may require.
(b) If the Lessor elects to cure such default, then:
(i) Lessor shall notify Lessee of Lessor's intent to
cure such default at least thirty (30) days prior to the
commencement of such cure;
(ii) If Lessee decides to contest in good faith the
Leasehold Mortgagee's foreclosure proceedings, Lessee shall
notify Lessor of such intent at least ten (10) days prior to the
commencement of such foreclosure proceedings; and
(iii) If Lessee fails to notify Lessor of Lessee's
intent to contest in good faith the Leasehold Mortgagee's
foreclosure proceedings in accordance with Section 5.9(b)(ii)
above, Lessor may, fifteen (15) days after the filing of the
complaint of foreclosure, commence to cure such default
(including bringing all monetary defaults immediately current to
date) and the Leasehold Mortgagee shall stipulate to a dismissal
of the foreclosure proceedings (including waiving any right to
accelerate the note secured by the mortgage because of such
default) and any default under the mortgage shall be deemed
cured; and
(iv) If Lessee fails to pay or otherwise cause to be
cured any final judgment filed against Lessee in a foreclosure
proceeding contested in good faith by Lessee within ten (10) days
after such final judgment is filed, Lessor may, fifteen (15) days
after the filing of such final judgment, commence to cure such
default (including bringing any monetary default immediately
current to date) and in such event and notwithstanding such final
judgment, the Leasehold Mortgagee shall waive any acceleration of
the note secured by the mortgage arising because of the default
and shall stipulate to a satisfaction of the final judgment and
any default shall be deemed cured; and
(v) If Lessor is entitled to cure Lessee's default
pursuant to this Section 5.9(b) and does cure such default, then
Lessor shall by written demand to Lessee require Lessee to pay to
Lessor all sums paid by Lessor to the Leasehold Mortgagee or
others to cure such default plus all costs and expenses,
including reasonable attorney's fees, paid or incurred by Lessor
in connection therewith, including but not limited to all costs
of Lessor's defense to such foreclosure proceeding or in any such
action as well as all costs for research regarding settlement or
other preventive measures which Lessor may take prior to the
filing of such an action, or to attempt to prevent the filing of
such an action, together with interest at Lessor's Cost of Money
from the date Lessor actually paid such sums; and
(vi) If payment is not made by Lessee to Lessor within
fourteen (14) days from the date of such written demand, then:
(1) Lessee shall be deemed to have assigned to Lessor
all the Lessee's right, title and interest in and to this
Lease, the Hotel and the Tennis Center subject to the
mortgage; and
(2) In such event, Lessor shall, in the name of the
Lessee (and for this purpose Lessor is hereby appointed the
attorney-in-fact of the Lessee and this power of attorney
shall be deemed to be a power of attorney coupled with an
interest), execute such documents as may be required to
assign all of the Lessee's right, title and interest in and
to this Lease, the Hotel, and the Tennis Center subject to
the mortgage (including all of the Hotel's and Tennis
Center's furniture, furnishings, equipment and at Lessor's
option, any sublease, license or contract related to the
Hotel including the Hotel Operating Agreement or to the
Tennis Center) to Lessor.
ARTICLE VI
A. Insurance of Buildings.
6.1 Fire and Hazard Insurance. In order to secure the
rents due the Lessor, the Lessee shall, at its own expense, at
all times during the Term keep all buildings, other improvements
and fixtures, by whomsoever installed or constructed, existing on
the Premises on the date of the Lease or at any time thereafter,
insured against (a) the "all risks" coverage (including, if
available and without exorbitant costs, earthquake, flood,
boiler, machinery, and war insurance), and (b) such other hazards
or risks which are covered by customary insurance by similar
hotels in the area (including the Kaanapali area of Maui). All
such insurance shall be in an amount equal to the full
replacement cost of such buildings, improvements and fixtures
without deduction for depreciation, with an "agreed amount
endorsement" and with an "inflation guard" endorsement. All such
insurance shall be with an insurance company or companies
authorized to do business in Hawaii, naming Lessor, any mortgagee
of Lessor, and any mortgagee of Lessee, as additional insureds as
their interests may appear. Loss shall be adjusted with Lessee.
6.2 Payment of Insurance proceeds. Every policy of the
insurance described in Section 6.1 shall be issued to cover and
insure all the several interests in the buildings, improvements,
fixtures and rent required to be insured in Section 6.1 of the
Lease, the Lessor and any Mortgagees under any mortgage of this
Lease, as their respective interests are defined in this section
below, and shall be made payable in case of loss or damage to the
respective parties as their interests may appear. The respective
interest of the Lessor, the Lessee and any Mortgagees in any
proceeds of the insurance required in Section 6.1 above payable
for insured loss or damage shall be fixed and determined as of
the date of such loss or damage.
6.3 Use of Insurance Proceeds. In case the buildings,
improvements or fixtures required to be insured in Section 6.1 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 shall be
available for and used with all reasonable dispatch by the 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 as shall be approved
under Section 4.2(a), and to pay the rent due the Lessor. 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 section above, then the Lessee shall provide the balance of
all funds required to completely rebuild, repair, replace or
otherwise reinstate such buildings, improvements or fixtures.
Lessee shall undertake promptly to reinstate the building or
buildings, or portions thereof, so destroyed or damaged according
to the original plan and elevation thereof, or according to such
modified plan as shall be approved by Lessor pursuant to Section
4.2(a). If a casualty under this Section 6.1 shall occur in the
last ten (10) years of the Term of this Lease, the Lessee shall
have the option of notifying the Lessor that the Lessee does not
intend to rebuild the buildings, improvements, or fixtures so
destroyed, but rather elects to terminate the Lease as of the
date of the casualty, by giving Lessor written notice at least
thirty (30) days after the date of the casualty, and then Lessee
will, at its own expense, pay all real property taxes and any
assessments then outstanding and shall pay over all insurance
proceeds to the Lessor, except if requested by Lessor, Lessee
shall use the insurance proceeds to promptly remove from the
Premises, all buildings, improvements and trade fixtures, and
restore the Land then remaining to good, orderly and sanitary
condition and even grade, and upon so doing the Lessee shall then
surrender any remaining balance of the insurance proceeds (if
any), surrender this Lease and Lessee shall be relieved of
further performance under this Lease. If the available insurance
proceeds shall be insufficient, then Lessee shall provide the
balance of all funds required to remove from the Premises, all
buildings, improvements and trade fixtures, and restore the Land
then remaining to good, orderly and sanitary condition and even
grade.
6.4 Uninsured Casualty and Abatement of Rent. If a portion
of the Hotel, as it exists from time to time, the value of which
exceeds ten percent (10%) of the value of the entire Hotel, shall
be rendered untenantable by casualty not required by this Lease
to be insured against, Lessee shall not have any obligation to
rebuild, repair or otherwise reinstate such buildings. If Lessee
shall undertake to reinstate the building or buildings, or
portions thereof, so destroyed or damaged according to the
original plan and elevation thereof, or according to such
modified plan, then such plans shall be subject to approval by
the Lessor pursuant to Section 4.1(a). If the Lessee does not
rebuild, repair or otherwise reinstate such buildings, Lessee
will at its own expense, pay all real property taxes and any
assessments then outstanding and, if requested by Lessor,
promptly remove from the Premises all buildings, improvements and
trade fixtures and restore the Land then remaining to good,
orderly and sanitary condition and even grade, and upon so doing
the Lessee shall then surrender this Lease and thereby be
relieved of further performance under this Lease.
B. Liability Insurance.
6.5 Lessee to Obtain Liability Insurance. The Lessee shall
maintain at its own expense during the Term a policy or policies
of comprehensive general liability insurance naming the Lessor
(and its wholly-owned subsidiaries) and the Lessee as insureds
thereunder with respect to liability for personal injury, death
and property damage arising from use, management, ownership or
occupation of the Premises in form and with coverage reasonably
satisfactory to and reasonably approved by the Lessor (including
a broad form CGL endorsement and full liquor law or dramshop
liability coverage as well as business automobile liability
coverage including non-owned and hired automobile liability
coverages), with minimum limits of not less than TWENTY-FIVE
MILLION DOLLARS ($25,000,000) for injury to more than one person
in any one accident, and for property damage in any one accident,
in any insurance company or companies authorized to do business
in Hawaii. Lessee shall periodically, but not less frequently
than annually, reevaluate the scope of the risks covered and the
liability limits of such insurance 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 for property being put to uses similar to those of the
Premises.
C. General Insurance Requirements.
6.6 Policy Provisions. Each policy of comprehensive
general liability or hazard insurance required in parts A and B
of this Article above and in Section 4.2(d) of Article IV shall,
to the extent available and customary for hotels on Maui:
(a) provide that the liability of the insurer thereunder
shall not be affected by, and that the insurer shall not claim,
any right of setoff, 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;
(b) contain no provision relieving the insurer from
liability for loss occurring while the hazard to buildings,
improvements and fixtures 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;
(c) provide that such policy may not be cancelled, changed
or modified (except to increase coverage), whether or not
requested by Lessee, except upon the insurer giving at least
thirty (30) days' prior written notice thereof to Lessor, Lessee,
every mortgagee of any interest in the Premises, and every other
person in interest who has requested such notice of the insurer;
(d) contain a waiver by the insurer of any right of
subrogation to any right of Lessor or Lessee against any of them
or any person claiming by, through, or under any of them; and
(e) in the case of hazard insurance, contain a standard
mortgagee clause which shall:
(i) 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;
(ii) 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
(iii) waive 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.
6.7 Certificates of Insurance. Lessee shall deposit and
maintain with Lessor current certificates of insurance issued by
the insurance carriers certifying that Lessee has in effect all
the insurance required in parts A and B of this Article with
certificates of renewal delivered by Lessee to Lessor at least
thirty (30) days prior to the expiration date of such policies.
All such certificates shall specify that the Lessor (and where
applicable, its wholly-owned subsidiaries) is a named insured and
that the policies to which they relate cannot be cancelled or
modified on less than thirty (30) days (or ten (10) days in the
case of failure to pay premiums) prior written notice to Lessor.
ARTICLE VII
Condemnation
7.1 Total Condemnation. If at any time during the Term,
all of the Premises shall be taken or condemned by any authority
having the power of eminent domain, then the estate and interest
of the Lessee in the Premises shall at once cease and determine.
The Term of the Lease shall cease as of the day possession is
taken by such authority and all rents shall be paid up to that
date.
7.2 Partial Condemnation.
(a) If at any time or times during the Term any part of the
Premises shall be taken or condemned by any authority having the
power of eminent domain, then and in every such case the estate
and interest of the Lessee in any part of the Premises so taken
or condemned shall at once cease and determine, and this Lease
shall terminate as to the portion taken.
(b) Continued Operations. If after a partial condemnation,
this Lease is not terminated pursuant to Section 7.2(c), then:
(i) Taking or condemnation of a part of the Premises,
whether of the Land or any buildings or improvements on the Land,
shall not affect the provisions for determination or payment of
percentage rent set forth in this Lease.
(ii) If an economically viable hotel of the same
quality at the time of any condemnation can be restored, rebuilt
or otherwise repaired on the remaining portion of the Premises at
a cost not exceeding the condemnation award paid with respect to
buildings or improvements so taken or condemned, then all such
amounts shall be available for and used with all reasonable
dispatch by the Lessee in rebuilding, repairing or otherwise
reinstating or replacing such portion of such building or
improvement taken or condemned on the balance of the Land, to the
extent of such condemnation award, in a good and substantial
manner according to such plan as shall be approved by the Lessor
in accordance with Section 4.1(a). The provisions of this
paragraph relate only to the handling of condemnation proceeds
attributable to the partial taking of any building or
improvements and do not in any way alter the provisions of
Section 7.3(a) with respect to condemnation proceeds paid for the
taking of all or any portion of the Land.
(c) Termination of Lease. If only part of the Premises
shall be so taken or condemned, Lessee shall have the right and
option to terminate this Lease if:
(i) The balance of the Premises is unsuitable for
construction and operation of an economically viable hotel of the
same quality as the Hotel, or
(ii) a portion of the Hotel, as it exists from time to
time, the value of which exceeds twenty-five percent (25%) of the
value of the entire Hotel shall be taken or condemned.
If Lessee elects to terminate, Lessee will notify Lessor and upon
such notification Lessee's obligation to pay rent shall cease, and
Lessee shall pay all real property taxes and assessments then due
and, if requested by Lessor, remove all buildings and other
improvements then remaining on the Premises and restore the Land
then remaining to good and orderly condition and even grade, and
terminate this Lease. Upon such termination the Lessee shall be
relieved of all further obligations under this Lease, the Lessor
shall refund to the Lessee any unearned portion of the rent paid in
advance prior to the effective date of such termination and Lessee
shall receive the Lessee,s interest in such condemnation
compensation and damages.
7.3 Compensation and Damages.
(a) Land. In every case of taking or condemnation of all or
any part of the Premises, all compensation and damages payable for
or on account of the taking of all or any part of the Land shall be
payable to and be the sole property of the Lessor, and neither
Lessee nor any mortgagee of the Lessee's interest under this Lease
shall have any interest or claim to such compensation or damages or
any part thereof whatsoever.
(b) Improvements. Subject to this Section 7.3 all
compensation and damages payable for or on account of the taking of
all of any buildings and other improvements erected on the Land and
any plans and other preparations therefor shall be payable to the
Lessee and any mortgagee of the Lessee's interest under this Lease,
in accordance with their respective interests, after deducting the
Lessor's interest; provided, however, if the mortgage was approved
by the Lessor and comes under Section 5.7, the Mortgagee shall be
entitled to be paid the then outstanding balance of the mortgage
before deducting the Lessor's interest. The Lessor's interest
therein shall be a proportionate amount of such compensation and
damages in the ratio which the expired portion of the Term starting
with the Effective Date bears to the total Term (less the portion
prior to the Effective Date).
7.4 Condemnation of Leasehold Interest. In the event at any
time or times during the Term a leasehold interest in the Premises
or any part of such interest shall be taken or condemned, then and
in every such case, notwithstanding the foregoing provisions of
this Article VII, Lessee shall have the option to terminate and/or
be fully released and discharged from all further liabilities and
obligations under this Lease by paying to Lessor all compensation
and damages for the taking or condemnation of such leasehold
interest (exclusive of all compensation and damages for any taking
or condemnation of the Hotel), or, if Lessee does not elect to
terminate this Lease, then such taking or condemnation shall not
result in any reduction in minimum or percentage rent under this
Lease, nor excuse the Lessee from the full and faithful performance
of any or all of its covenants and obligations under this Lease for
the payment of money, nor excuse or relieve the Lessee from the
performance of its covenants and obligations under this Lease
except to the extent that, and for so long as, the performance of
such covenants and obligations shall be rendered impossible by
reason of the loss by the Lessee of possession of such part of the
Premises subject to such taking or condemnation. In every such
case of taking or condemnation of all or a part of the Lessee's
leasehold interest, the Lessee shall be entitled to claim and
recover from the condemning authority its damages sustained by
reason of such taking, and all compensation and damages payable for
or on account of such taking or condemnation of any part of such
leasehold interest shall be payable to and be the sole property of
the Lessee unless Lessee elects to terminate this Lease as set
forth above.
7.5 Loss of Business Damages. Notwithstanding the foregoing
provisions of this Article VII, if and only if such claim for
damages is not adverse to any interest of Lessor, the Lessee and/or
the Hotel Operator shall have the right to claim and recover from
the condemning authority but not from the Lessor, such compensation
as may be separately awarded or recoverable by the Lessee and/or
the Hotel Operator in its own right on account of any and all
damage to its business by reason of any condemnation and for or on
account of any cost or loss to which the Lessee and/or the Hotel
Operator might be put in removing its furnishings and equipment.
7.6 Conveyance as Condemnation. The term "condemnation" as
used in this Lease shall include any conveyance made under threat
or imminence of condemnation by any public or private authority
having the power of eminent domain.
ARTICLE VIII
Maintenance and Use of Premises
8.1 Taxes and Assessments. Lessee shall pay throughout the
Term, beginning as of the Effective Date of this Lease, directly to
the appropriate taxing or other applicable authority at least three
(3) days before the same become delinquent, all real property taxes
and assessments of every description attributable to the Premises
or any part thereof or improvement thereon, or for which the Lessor
or Lessee in respect thereof, are now or may during the term be
assessed or become liable, whether assessed to or payable by Lessor
or Lessee ( with the property taxes for the first and last Lease
years prorated if applicable); provided, however, that with respect
to any assessment made under any betterment or improvement law
which may be payable in installments, Lessee shall be required to
pay only such installments of principal and interest as shall
become due and payable during the Term. Lessee's covenant for the
payment of the taxes set forth in the preceding sentence shall
include the payment of any new tax (except federal or state net
income taxes) which supplements or replaces either the real
property tax or increases in real property taxes and is assessed
upon the Premises or any part thereof or upon the rents received
under this Lease by Lessor or upon Lessor in respect of any of the
preceding items. Lessee shall also pay the gross excise tax on
such taxes and assessments in accordance with Section 3.6. Subject
to all of the conditions set forth in this sentence, Lessee may
contest in good faith at Lessee's sole expense by appropriate
proceedings, as maybe allowed by law, the validity or amount of any
tax or assessment required in this paragraph to be paid by the
Lessee, which conditions are as follows: (a) such actions must be
commenced before any such tax or assessment becomes delinquent, (b)
the action commenced by the Lessee must be an action which either
stays the collectibility of such tax or prevents the sale of the
Premises in satisfaction of such tax or assessment or lien securing
such tax or assessment, or in the alternative to the previous two
types of actions, an action in which Lessee pays such tax or
assessment while such action ensues, (c) Lessee complies with all
requirements of such action, including but not limited to the
posting of bond or payment of such tax or assessment while such
action ensues, (d) Lessee gives notice to Lessor of Lessee's
intention to contest such tax or assessment not less than ten (10)
days before such taxes or assessments become delinquent, and (e)
prior to undertaking such action, Lessee gives security, reasonably
satisfactory to Lessor in both quality and quantity, to Lessor for
payment of such taxes; provided, however, that notwithstanding the
foregoing, Lessee shall pay all such taxes, rates, assessments or
charges, together with all interest, penalties or fines accrued
thereon or imposed in connection therewith, immediately upon the
commencement of proceedings to foreclose any lien which attached to
the Premises or any part thereof as security for such taxes, rates,
assessments or charges. If the Lessee shall fail to pay any taxes
or assessments as provided in this paragraph and elects not to
dispute such taxes or assessments in accordance with the provisions
above, then the Lessor may at any time thereafter pay the same,
together with any interest, penalties, fines and costs accrued
thereon or imposed in connection therewith, and Lessee shall repay
to the Lessor upon demand therefor the full amount so paid by the
Lessor, together with interest at Lessor's Cost of Money accruing
from the date such payments were due until Lessor is reimbursed for
such payments by Lessee.
8.2 Lessee to Pay All Rates and Charges. Lessee shall pay
directly before such charges and rates become delinquent, all
utility charges, water and sewer rates, garbage rates, Kapalua
Resort Association and Kapalua Marketing Association assessments,
and other charges and outgoings of every description attributable
to the Premises or any part thereof or improvement thereon, or for
which Lessor or Lessee in respect thereof may during the Term be
assessed or become liable, whether assessed to or payable by Lessor
or Lessee and whether such charges and rates are imposed by
governmental authority, public or private utility together with the
gross excise tax, if applicable, as required by Section 3.6.
Anything in this Lease to the contrary notwithstanding, Lessee
shall not be required to pay any tax or assessment in the nature of
an income, state, or inheritance tax imposed because of Lessor's
receipt of rental payments from Lessee or because of Lessor's
ownership of the fee title to the Premises or because of Lessor's
interest in the Lease or in the Premises.
8.3 Improvements Required by Law. The Lessee shall at its
own expense during the whole of the Term of this Lease make, build,
maintain and repair all fences, roads, curbs, sidewalks, sewers,
drains, parkways and parking areas and other improvements on the
Premises which may be required by law to be made, built, maintained
or repaired upon or adjoining or in connection with or for the use
of the Premises or any part thereof except for improvements which
are to be located on property owned or leased by others. Without
limiting the foregoing sentence, Lessee agrees that all such
improvements shall be subject to the Lessor's right of approval as
provided in Article IV above.
8.4 Repair and Maintenance. In order to preserve the high
aesthetic standards in the Kapalua Resort Area, the Lessee will at
its own expense keep the Premises, all landscaping, all structural
and non-structural portions of all buildings and other improvements
existing on the Premises at any time during the Term, in good
order, condition, maintenance and repair including without
limitation repainting the exterior of the Hotel as required to
maintain the appearance of the Hotel and complying with the
landscaping and other maintenance requirements and covenants
imposed upon the Lessor as Grantor under the Preservation and
Conservation Easement described in Exhibit "A" hereof. All repairs
which would constitute Construction shall be subject to the
Preconditions for Construction in Sections 4.2(a) and 4.2(b).
Repairs which constitute Construction but which return the Premises
to their original condition and aesthetic appearance as shown in
plans and specifications previously approved by Lessor shall not
require Lessor's prior consent but shall meet without limitation
the Preconditions for Construction. Any change of color of
exterior painting of the Hotel must be approved by Lessor,
8.5 Observance of Laws. The Lessee shall during the Term
keep the Premises in a strictly clean and sanitary condition and
observe and perform all laws, ordinances, rules and regulations
whether now or hereafter made by any governmental authority for the
time being applicable to the Premises or the use thereof, and
except with respect to the negligence or wilful misconduct of
Lessor or Lessor's agents, employees or contractors, Lessee shall
indemnify the Lessor against all actions, suits, claims and damages
by whomsoever brought or made by reason of the nonobservance or
nonperformance of such laws, ordinances, rules and regulations or
this covenant.
8.6 Inspection of Premises. The Lessee shall permit the
Lessor and its agents upon reasonable advance notice and at
reasonable times during the Term to enter and examine the state of
repair and condition of the Premises. If any significant safety
hazard defect comes to Lessor's attention, Lessor may give notice
of such defect to Lessee and within sixty (60) days after such
notice, Lessee shall repair and make good such defect if required
by the terms of this Lease to be repaired and made good by the
Lessee; provided, however, that if such repair or correction may be
made within a reasonable period of time but cannot reasonably be
made within sixty (60) days, then such repair or correction shall
be deemed to be made if begun within the sixty (60) day period and
thereafter continuously and diligently undertaken to completion by
Lessee. If the Lessee shall refuse or neglect to commence and
complete such repairs within the time period provided in the
preceding sentence, the Lessor may make such repairs or cause the
same to be made and shall not be responsible to the Lessee or any
persons claiming by or through Lessee for any loss or damage that
may be caused to the property or business of the Lessee or such
persons claiming by or through Lessee by reason of such repairs,
except for Lessor's negligence or willful misconduct and if the
Lessor shall make such repairs or cause the same to be made, the
Lessee shall pay forthwith on demand to the Lessor the cost of such
repairs, with interest at Lessor's Cost of Money.
8.7 Waste and Unlawful Use. The Lessee will not make or
suffer any strip or waste or unlawful, improper or offensive use of
the Premises or any part thereof.
8.8 Use of Premises.
(a) Operation of Hotel. The Lessee will use the Premises for
the purposes of, and for no other purpose than, maintaining and
operating the Hotel, the Tennis Center, and the rental and
management of villas, condominiums and apartments, including all
facilities and related commercial retail operations, operated by
Lessee or Concessionaires, reasonably related to a resort hotel
operation; provided, however, Lessee agrees not to engage in the
business of renting villas, condominiums and apartments so long as
Lessor is actually renting villas, condominiums and apartments in
the Kapalua Resort Area. Lessee agrees that Lessee will maintain
and operate a hotel at the Premises at quality standards generally
found in those full service resort hotels in the State of Hawaii
with at least a 4-Diamond rating from the American Automobile
Association as of January 1, 1996. Lessee covenants that it will
in good faith diligently and continuously operate the Hotel in
accordance with reasonable business practices. Any commercial
operations on the Premises, whether conducted by Lessee or a
Concessionaire, involving any unreasonably noisy, dangerous or
obnoxious activities or the leasing or rental of unreasonably
noisy, dangerous or obnoxious equipment, including without
limitation water ski rides or instruction and rental of "jet skis",
mopeds or similar items, shall require the prior written approval
of Lessor and Lessor may unreasonably withhold such approval or
require the termination of any such commercial operations then in
existence on the Premises. Since only a hotel operation is
intended as aforesaid, the area on the Premises occupied by
commercial retail operations (exclusive of the area occupied by any
and all restaurants, laundries, health clubs and other similar
facilities proximately related to the operation of a hotel to a
standard provided in this Lease) shall not exceed the initial area
(plus up to ten (10%) percent more) agreed upon in the initial
construction of the Hotel. The Lessee shall use its best efforts
to ensure that any concession, commercial activity, or other Hotel
activity shall be in keeping with the first-class image of the
Kapalua Resort Area.
(b) Hotel Operating Agreement. Lessee agrees that proper
management and operation of the Hotel is necessary to maximize
Lessor's percentage rent. Accordingly, Lessee shall enter into a
Hotel Operating Agreement for the management and operation of the
Hotel by Hotel Operator with the consent of Lessor, which consent
shall not be unreasonably withheld if the Hotel Operating Agreement
expressly provides that the Hotel Operator has read this Lease and
agrees to observe and where applicable perform the terms and
conditions of this Lease in connection with the operation of the
Hotel. Such agreement(s) shall be maintained for the term of the
Lease, with any successor Hotel Operator being subject to Lessor's
consent.
Hotel Operator shall have the right to assign its rights and
obligations under the Hotel Operating Agreement to The ▇▇▇▇-▇▇▇▇▇▇▇
Hotel Company L.L.C., a Delaware limited liability company, or to
any assignee who (a) acquires all, or substantially all, of the
assets of The ▇▇▇▇-▇▇▇▇▇▇▇ Hotel Company, L.L.C. or Hotel Operator;
(b) assumes its obligations, including those pursuant to the Hotel
Operating Agreement; (c) enters into an agreement with Owner that
the assignee will continue to operate the Hotel as a luxury hotel
as part of the ▇▇▇▇-▇▇▇▇▇▇▇ chain or to the ▇▇▇▇-▇▇▇▇▇▇▇ Standards
as defined in the Hotel Operating Agreement or at quality standards
generally found in those full service resort hotels in the State of
Hawaii with at least a 4-Diamond rating from the American
Automobile Association as of January 1, 1996; and (d) has
sufficient financial capability and experience to carry out its
obligations under the Hotel Operating Agreement.
The following criteria shall be applied to determine the
reasonableness of Lessor in consenting to any Hotel Operator
selected by Lessee, or as to any Affiliate or any proposed assignee
selected by Hotel Operator: (a) whether as its primary business,
it owns, leases or operates any casino or gambling facility if such
business, ownership, leasing or operation might reasonably impair
the ability of the Lessee, the Hotel Operator or their respective
Affiliates, as applicable, to obtain or retain any necessary
regulatory approvals for the operation of the Hotel; (b) whether it
owns or operates a distillery, winery or brewery or a
distributorship of alcoholic beverages if such ownership or
operation might reasonably impair the ability of the Lessee, the
Hotel Operator or their respective Affiliates, as applicable, to
obtain or retain liquor licenses for the Hotel; (c) whether it has
sufficient financial capability and experience to carry out its
obligations under the Hotel Operating Agreement; and (d) whether it
has the capability to operate the Hotel to a quality standard
generally found in those full service resort hotels in the State of
Hawaii with at least a 4-Diamond rating from the American
Automobile Association as of January 1, 1996.
Hotel Operator acknowledges and agrees that any assignment,
sublease, transfer, alienation or attempts thereto, whether
voluntary, involuntary, or by operation of law in contravention to
this Lease, are void and is a forfeiture and termination of the
Hotel Operating Agreement and Owner may exercise any of the
remedies reserved to it under Article 11 of the Hotel Operating
Agreement. Hotel Operator may assign its rights to receive Fees or
portions thereof to any person as security for indebtedness.
(c) Prohibited Uses. Lessee shall not use the Premises for
commercial retail operations (except as otherwise provided in this
Lease), a realty sales office (except for a Kapalua Land Company
realty sales office) and shops selling items bearing the Kapalua
logo, which is a stylized butterfly with a pineapple in the center,
unless operated or licensed by Kapalua Land Company.
(d) Nuisance. At all times during the Term, but especially
during Quiet Hours, Lessee covenants that it will use its best
efforts to prevent the escape from the Premises of loud noises,
obnoxious bright lights, odors, dust, smoke or other noxious agents
which could disrupt the quiet, sleep and peaceful enjoyment of the
Kapalua Resort Area of guests of other hotels or other residents of
the Kapalua Resort Area.
8.9 Liens. Lessee shall keep the Premises at all times free
and clear of all liens, charges and encumbrances of every nature,
other than such mortgages as may be permitted under this Lease, and
will indemnify and save harmless the Lessor from all loss, cost and
expense, including reasonable attorneys' fees, with respect to any
such liens, charges and encumbrances.
8.10 Kapalua Resort Association. Lessee shall become a
member of the Kapalua Resort Association (the "KRA") in accordance
with KRA's articles and bylaws. As a member of KRA, Lessee shall
comply with the articles and bylaws of the KRA and pay a pro rata
portion of the annual KRA budget in monthly installments as
provided in the articles and bylaws of the KRA. Lessor reserves
all voting rights in KRA as it pertains to the Land and Lessee
shall have all voting rights in KRA as it pertains to the Hotel
(excluding the Land).
8.11 Kapalua Marketing Association. The Lessee shall become
a member of the Kapalua Marketing Association ("KMA") and shall pay
its pro rata share up to one-half percent (0.5%) of the Gross
Revenues for the applicable years as Lessee's contribution towards
KMA's annual budget so long as the Kapalua Bay Hotel is a member of
KMA and pays the same percentage of its gross revenues (as defined
under its lease).
8.12 Visitor Statistics. For purposes of Lessor's
forecasting and planning for the development of the Kapalua Resort
Area, on the 30th day of each month of the Term, Lessee shall
provide Lessor the following information regarding operation of the
Hotel for the preceding month:
(a) the number of available room days at the Hotel;
(b) the number of room days occupied broken down into
rented, complimentary and staff occupied categories;
(c) the average occupancy rate for the hotel rooms in
the Hotel;
(d) the average number of guests per room at the Hotel;
and
(e) the percentage of the total number of the Hotel's
guests who are in tour groups.
Lessor shall have the right to inspect Lessee's records to verify
the information set forth above, but shall not share this
information with any other hotel in the Kapalua Resort Area or with
any other third party without Lessee's consent (except the Hawaii
Visitors Bureau, Pannell, Kerr, ▇▇▇▇▇▇▇, and similar organizations
which compile visitor statistics but without identifying individual
properties), which consent may be unreasonably withheld by Lessee.
8.13 Covenant to Operate Hotel. Lessee understands that
Lessor's expectation of lease rent revenues, especially percentage
rent, is predicated on Lessee operating a successful hotel on the
Premises which maximizes long-term revenues. Accordingly, Lessee
covenants and agrees that it will in good faith diligently and
continuously operate (or cause to be operated) a hotel on the
Premises 365 days each year in accordance with reasonable business
practices and the standards of Section 8.8(a) with the goal of
maximizing long-term revenues. During the time of any failure to
operate continuously the Hotel, Lessor shall, in addition to any
other remedies available to it under this Lease, be entitled to
receive a rental which shall be no less than the average of that
payable during the preceding three full Rental Years.
Notwithstanding the foregoing, Lessee shall have the right from
time to time to close the Hotel or parts thereof for such
reasonable periods of time as may be required to make repairs,
alterations, remodeling, or for any reconstruction. Lessee will
use its best efforts to ensure that any such period of time will
not exceed six months with the exception of any reconstruction of
the Hotel as described in Sections 6.3, 6.4, and 7.2, subject to
any delay caused by force majeure.
8.14 Name of Hotel. Lessee will not change the name of the
Hotel without the prior written consent of Lessor, which consent
shall not be unreasonably withheld.
ARTICLE IX
9.1 Events and Consequences of Default. This Lease is
entered into upon the express condition that if any one or more of
the events of default set forth in Sections 9.1(a) through 9.1(d)
shall occur, the Lessor may, subject to requirements of notice and
opportunity to cure any default to be given to Mortgagees of the
Lessee's interests under this Lease and any subordination rights
under Section 5.1 and as provided in Section 5.3 and subject to the
limited liability provided in Section 9.3, upon the occurrence of
such event of default or at any time thereafter during the
continuance of such default, may then or at any time thereafter
bring an action for summary possession of the Premises or any part
thereof as provided by law, all without prejudice to any other
remedy or right of action which the Lessor may have for arrears of
rent or for any preceding or other breach of contract. If this
Lease is Filed or Recorded, such termination of this Lease may but
need not necessarily be made effective by Filing if the Lease is
Filed or Recording if the Lease is Recorded an order of a court of
the State of Hawaii cancelling this Lease. The events of default
are as follows:
(a) Failure to Pay Rent. (i) The Lessee shall fail to make
full payment of any payment of rent or any other payments required
under this Lease within ten (10) days after the date such payment
is due, whether such payment shall or shall not have been legally
demanded, and (ii) such payment shall not have been cured in full
together with the late payment due thereon under Section 3.8 and
the interest thereon due under Section 11.13, within ten (10) days
after written notice of such default by Lessor to Lessee; or
(b) Breach of Covenant. The Lessee shall fail to observe or
perform any of the covenants contained in this Lease and on the
part of the Lessee to be observed and performed, and such failure
shall continue for a period of thirty (30) days after written
notice of such failure given by the Lessor to the Lessee without
substantial action having been initiated by Lessee within such
period to diligently and continuously continue to remedy such
failure; or
(c) Abandonment. The Lessee shall abandon the Premises; or
(d) Bankruptcy, Insolvency or Taking. The making by Lessee
of any general assignment for the benefit of creditors; the filing
by or against Lessee of a petition to have Lessee adjudged a
bankrupt or the petition for reorganization or arrangement under
any law relating to bankruptcy unless, in the case of a petition
filed against Lessee, the same is dismissed within ninety (90)
days; the appointment of a trustee or receiver to take possession
of substantially all of Lessee's assets located at the Premises or
of Lessee's interest in this Lease, where possession is not
restored to Lessee within ninety (90) days; or the attachment,
execution or other judicial seizure of substantially all of
Lessee's assets located at the Premises or of Lessee's interest in
this Lease where such seizure is not discharged within ninety (90)
days.
9.2 Acceptance of Rent Not Waiver. The acceptance of rent by
the Lessor or its agent shall not be deemed to be a waiver by
Lessor of any breach by the Lessee of any covenant contained in
this Lease or of the right of the Lessor to terminate this Lease
and reenter the Premises. The express waiver by the Lessor of any
breach shall not operate to extinguish the covenant or condition
the breach of which has been waived nor be deemed to be a waiver by
the Lessor of its right to declare a forfeiture of this lease for
any breach thereof.
9.3 Limited Liability of Lessee. Notwithstanding anything to
the contrary herein, from and after the Effective Date the Lessee
shall not be responsible for any liability under this Lease arising
after any termination under Section 9.1 or any foreclosure sale
pursuant to Section 5.1 other than to bring the rents and any other
money charges current up to that date plus one year's rent
(including one year's real property taxes) based on the rent paid
for the immediately preceding full Rental Year; or unless from and
after the Effective Date the Lessee shall give Lessor at least one
year's notice of its election to terminate this Lease, in which
case the Lessee shall pay the rent and other money charges due as
of that termination date and have no future liability under this
Lease. In either case, title to the improvements on the Premises
(including the Hotel, the Tennis Center and all of the Hotel's and
Tennis Center's furniture, furnishings, equipment and at Lessor's
option, any sublease, license or contract related to the Hotel
including the Hotel Operating Agreement or to the Tennis Center)
shall automatically revert to Lessor and if requested by Lessor,
the Lessee shall quitclaim any interest it has in any such
improvements on the Premises to the Lessor and if Lessee shall
refuse, then the Lessor is hereby appointed the attorney-in-fact of
the Lessee to execute such quitclaim documents in the name of the
Lessee to the Lessor, and such power of attorney shall be deemed to
be a power of attorney coupled with an interest; and, if a casualty
is involved, Lessee shall pay over any insurance proceeds to the
Lessor. If a termination of this Lease occurs in the last twenty
(20) years of the Term, Lessor shall have the option of requiring
the Lessee to remove the improvements pursuant to Section 10.1.
ARTICLE X
Surrender
10.1 Surrender. Subject to the terms of Section 6.4 dealing
with termination of the Lease in the event of an uninsured
casualty, and Article VII, dealing with termination of the Lease in
the event of condemnation under certain conditions, at the end of
the Term or sooner termination of this Lease, the Lessee shall
peaceably deliver to the Lessor possession of the Premises. Lessee
shall, at its expense and within ninety (90) days after the end of
said Term or other termination date, at Lessor's option, remove all
buildings, improvements located on the Premises and all debris
resulting from such removal and restore the Land to even grade and
good and orderly condition, with the Lessee receiving any salvage
value of the materials if Lessee's contractor does such removal.
ARTICLE XI
General Provisions
11.1 Breach. Lessee covenants and agrees that Lessee will,
at its cost and expense, keep the section of the Honokahua Beach
immediately fronting the Premises in a clean and orderly condition,
free of litter and rubbish to the water's edge.
11.2 Assumption of Risk. The Lessee shall and does hereby
assume all risk of loss or damage to furnishings, furniture,
fixtures, supplies, merchandise and other property, by whomsoever
owned, stored, placed or affixed in the Premises for events
occurring from the date hereof, including any damage from
construction, and does hereby agree that the Lessor shall not be
responsible for loss or damage to any such property, and except
with respect to the negligence or wilful misconduct of Lessor or
Lessor's agents, employees or contractors, the Lessee hereby agrees
to indemnify and save harmless the Lessor from and against any and
all claims for such loss or damage.
11.3 Holding Over. If the Lessee shall, without the consent
of the Lessor, remain in possession of the Premises after the
expiration of the Term without executing any extension or renewal
of this Lease, Lessee shall be deemed to occupy the Premises as a
tenant from month-to-month subject to all of the terms and
conditions of the Lease, to the extent such terms and conditions
are applicable to a month-to-month tenancy except that each month's
rent shall be one twelfth (1/12) of one thousand percent (1000%) of
the amount of the annual percentage rent, if any, paid for the year
preceding the expiration date. This section shall not apply to any
reasonable extension of the Lease required by Lessor's election to
require the Lessee to remove improvements pursuant to Section 10.1
or any other provision of this Lease.
11.4 Acceptance of Nearby or Adjacent Land Use.
(a) Pineapple and Similar Agricultural Operations. Lessee
understands and agrees that Lessor's subsidiary Maui Pineapple
Company, Limited, is engaged in the operation of a pineapple
plantation and similar agricultural operations within the areas
adjacent to the Premises and that the operations, milling and other
activities incident to a pineapple plantation or similar
agricultural activities may result in the creation of nuisances
during the Term and that Maui Pineapple Company, Limited holds a
perpetual right and easement over and upon the Premises for
nuisances of every description arising from activities incidental
to the operation of a pineapple plantation or similar agricultural
activities by Haul Pineapple Company, Limited, its successors and
assigns. The Lessee shall not hold or attempt to hold the Lessor
or Maui Pineapple Company, Limited responsible for the creation of
such nuisances, arising out of or in connection with such pineapple
or similar agricultural operations. Lessor will use its best
efforts to inform the Lessee, at Lessee's request, of any
harvesting schedule for such pineapple operations. All such
pineapple operations shall be done in accordance with applicable
state and federal regulations.
(b) Golf Courses. Lessee understands and agrees that the
Premises are adjacent to golf courses operated by Lessor or its
subsidiaries; that Lessee desired and sought such location with the
understanding that this location may result in nuisances or hazards
to persons and property on the Premises including without
limitation those caused by stray golf balls. Lessee covenants that
during the Term of this Lease, Lessee agrees to such nuisances and
hazards and shall assume all risks associated with such location,
including but not limited to the risk of property damage or
personal injury suffered by Lessee (but not by a guest) arising
from stray golf balls.
11.5 Notices. Any notice or demand to be given to or served
upon either the Lessor or the Lessee in connection with this Lease
shall be in writing and shall be given or served for all purposes
by being sent by certified mail, postage prepaid, return receipt
requested, addressed to such party at its post office address
specified above or at such other post office address as such party
may from time to time designate in writing to the other party, or
by being delivered personally to any officer of such party within
the State of Hawaii, and any such notice or demand shall be deemed
conclusively to have been given or served on the date indicated on
the return receipt or upon the date of such personal delivery.
11.6 Article and Paragraph Headings. The article and
paragraph headings in this Lease are inserted only for convenience
and reference and shall in no way define, limit or describe the
scope or intent of any provision of this Lease.
11.7 Assignments and Subleases.
(a) Except as otherwise herein provided in Section 5.1,
Lessee shall not assign, mortgage, pledge, hypothecate or encumber
this Lease or the leasehold estate hereby created or any interest
herein, or sublet the Premises or any portion thereof, or license
the use of all or any portion of the Premises, without the prior
consent of Lessor, which consent shall not be unreasonably
withheld. Subject to receipt of such consent, this Lease may be
assigned or transferred in whole or in part, by Lessee provided
that the provisions of Section 11.7(d) have been completed and
Lessor has elected not to proceed with the purchase of the Hotel
and/or this Lease; provided, however, any proposed assignee, during
the Term of this Lease, (i) may not as its primary business own,
lease or operate any casino or gambling facility if such business,
ownership, leasing or operating might reasonably impair the ability
of the Lessee or the Hotel Operator, as applicable, to obtain or
retain any necessary regulatory approvals for the operation of the
Hotel; (ii) may not own or operate a distillery, winery or brewery
or a distributorship of alcoholic beverages if such ownership or
operation might reasonably impair the ability of the Lessee or the
Hotel Operator, as applicable, to obtain or retain liquor licenses
for the Hotel; and (iii) must have sufficient financial capability
to carry out its obligations under this Lease. The consent by
Lessor to one assignment, subletting, mortgage, pledge,
hypothecation or encumbrance shall not be deemed to be a consent to
any further assignment, subletting, mortgage, pledge, hypothecation
or encumbrance. In the absence of an express agreement in writing
to the contrary and executed by Lessor or except as otherwise
provided herein, no assignment, mortgage, pledge, hypothecation,
encumbrance, subletting or license hereof or hereunder shall act as
a release of Lessee from any of the provisions, covenants and
conditions of this Lease on the part of Lessee to be kept and
performed, the assignor shall remain primarily liable hereunder and
any amendment of this Lease subsequent thereto shall not release
the assignor or sublessor from said liability. If the Lessee (or
a multiple Lessee) is a corporation, a change or changes in the
ownership, whether voluntary, involuntary, by operation of law, or
otherwise, which aggregates fifty percent (50%) or more of the
total capital stock of Lessee or fifty percent (50%) or more of the
voting capital stock of Lessee, shall be deemed an assignment of
this Lease. If the Lessee (or a multiple Lessee) is a partnership,
then any change of control, whether voluntarily, involuntarily, by
operation of law, or otherwise, including any addition or
withdrawal of a general partner of the partnership or of any
partnership which is a partner in the partnership (including in the
case of a corporate general partner, a change of control using the
test of the preceding sentence), shall be deemed an assignment of
this Lease. Any Person who satisfies the requirements for
assignment under Section 11.7(a) shall be considered a "Qualified
Purchaser."
(b) Lessee shall be entitled to assign and transfer this
Lease to any corporation or entity that is an Affiliate of Lessee
or (subject to obtaining consent required in connection with any
change of ownership or control that constitutes an assignment
pursuant to Section 11.7(a)) to the surviving corporation in the
event of a consolidation or merger to which Lessee shall be a
party; provided, however, that such subsidiary, affiliated firm or
surviving corporation shall in writing expressly assume all of the
provisions, covenants and conditions of this Lease on the part of
Lessee to be kept and performed; and provided, further, that no
such assignment or transfer shall act as a release of Lessee from
any of the provisions, covenants and conditions of this Lease on
the part of Lessee to be kept and performed.
(c) Except as provided in Section 5.1 or otherwise herein,
any assignment, mortgage, pledge, hypothecation, encumbrance,
subletting or license of this Lease, the leasehold estate hereby
created, or the Premises or any portion thereof, either voluntary
or involuntary, whether by operation of law or otherwise, without
the prior required written consent of Lessor, shall be null and
void, and shall at the option of Lessor terminate this Lease.
(d) If at any time Lessee intends to sell, assign or transfer
the Hotel and/or this Lease, or any portion which is fifty percent
(50%) or more thereof, Lessee shall give written notice of such
intention stating Lessee's intention to sell, assign or transfer
the Hotel and/or this Lease to (i) Maui Land & Pineapple Company,
Inc., so long as Maui Land & Pineapple Company, Inc., is the owner
of the Premises at such time written notice of such intention
stating Lessee's intention to sell, assign or transfer the Hotel
and/or this Lease is given and/or (ii) The ▇▇▇▇-▇▇▇▇▇▇▇ Company,
L.L.C. so long as Kapalani, L.P. or The ▇▇▇▇-▇▇▇▇▇▇▇ Company,
L.L.C. is the Hotel Operator at such time written notice of such
intention stating Lessee's intention to sell, assign or transfer
the Hotel and/or this Lease is given. Within fourteen (14) days of
receipt of such written notice from Lessee stating Lessee's
intention to sell, assign or transfer the Hotel and/or this Lease,
Maui Land & Pineapple Company, Inc. shall provide written notice of
its desire to negotiate with Lessee for the sale, assignment or
transfer of the Hotel and/or this Lease to Maui Land & Pineapple
Company, Inc. If no such written notice from Maui Land & Pineapple
Company, Inc. stating its desire to negotiate with Lessee for the
sale, assignment or transfer of the Hotel and/or this Lease is
received by Lessee in such fourteen (14) day period then Lessee
shall be entitled, at any time after such failure, to sell, assign
or transfer the Hotel and/or this Lease to any other party. Maui
Land & Pineapple Company, Inc. understands, acknowledges and agrees
that notwithstanding Maui Land & Pineapple Company, Inc.'s decision
to negotiate with Lessee for the sale, assignment or transfer of
the Hotel and/or this Lease, The ▇▇▇▇-▇▇▇▇▇▇▇ Company, L.L.C. will
have the same rights, including the same time period, to elect to
negotiate (perhaps in addition to Maui Land & Pineapple Company,
Inc.) with Lessee for the sale, assignment or transfer of the Hotel
and/or this Lease.
If Maui Land & Pineapple Company, Inc. elects to enter into
negotiations with Lessee for the sale, assignment or transfer of
the Hotel and/or this Lease and provides written notice to Lessee
within such fourteen (14) day period, the parties shall enter into
good faith negotiations for the sale, assignment or transfer of the
Hotel and/or this Lease. Within thirty (30) days from the date of
Maui Land & Pineapple Company, Inc.'s written notice to Lessee of
its desire to negotiate with Lessee for the sale, assignment or
transfer by Lessee of the Hotel and/or this Lease, Maui Land &
Pineapple Company, Inc. shall submit in writing to Lessee a firm
and binding offer by Maui Land & Pineapple Company, Inc. of the
terms and conditions of a proposed sale, assignment or transfer of
the Hotel and/or this Lease by Lessee to Maui Land & Pineapple
Company, Inc. (the "Maui Land & Pineapple Company, Inc.'s Offer").
Maui Land & Pineapple Company, Inc.'s Offer shall include, at a
minimum, (i) the purchase price of the proposed sale, assignment or
transfer which purchase price shall be paid by cash or cash
equivalent, (ii) closing date, (iii) due diligence period, (iv) any
and all contingencies or conditions which must be completed by
Lessee prior to the closing date or any date prior to the closing
date and (v) a representation that Maui Land & Pineapple Company,
Inc.'s Offer will remain firm and binding on Maui Land & Pineapple
Company, Inc. for a period of thirty (30) days from the day of
receipt of Maui Land & Pineapple Company, Inc.'s Offer. Maui Land
& Pineapple Company, Inc. understands, acknowledges and agrees that
notwithstanding Maui Land & Pineapple Company, Inc.'s Offer, The
▇▇▇▇-▇▇▇▇▇▇▇ Company, L.L.C. will have the same rights, including
the same time period, to submit a firm and binding offer (the "RC's
Offer"). Lessee, in its sole and absolute discretion, shall
determine whether to accept Maui Land & Pineapple Company, Inc.'s
Offer. Lessee shall be under no obligation to accept either Maui
Land & Pineapple Company, Inc.'s Offer or RC's Offer. However, if
Lessee selects either Maui Land & Pineapple Company, Inc.'s Offer
or RC's Offer then the other party's offer is deemed reject by
Lessee.
If no written acceptance of Maui Land & Pineapple Company,
Inc.'s Offer is received by Maui Land & Pineapple Company, Inc. in
the thirty (30) day period following Lessee's receipt of Maui Land
& Pineapple Company, Inc.'s Offer, Lessee is deemed to reject Maui
Land & Pineapple Company, Inc.'s Offer. Upon the earlier of (i)
such thirty (30) day period or (ii) written notice by Lessee to
Maui Land & Pineapple Company, Inc. that Lessee rejects Maui Land
& Pineapple Company, Inc.'s Offer (the "Lessee's Review Period"),
Lessee may proceed to sell, assign or transfer the Hotel and/or
this Lease to any other party.
If Lessee rejects both Maui Land & Pineapple Company, Inc.'s
Offer and RC's Offer, Lessee may sell, assign or transfer or agree
to sell, assign or transfer to a third party provided that such
third party sale is completed within fifteen (15) months following
the end of the Lessee's Review Period, and provided, further, that
the purchase price paid by such third party (which shall be paid in
cash or cash equivalent) is no less than ninety-five percent (95%)
of the highest purchase price (based on present value determination
using a discount rate of ten percent (10%)) of either Maui Land &
Pineapple Company, Inc.'s Offer or RC's Offer (the "Best Offer").
If the cash or cash equivalent purchase price (based on
present value determination using a discount rate of ten percent
(10%)) of the third party is less than ninety-five percent (95%) of
the purchase price contained in the Best Offer, the entity offering
the Best Offer (the "Best Offer Entity") shall have the right
within thirty (30) days after receipt of written notice from Lessee
to elect to purchase the Hotel and/or Lease (as the case may be)
(the "Best Offer Entity Review Period") on terms identical to those
set forth in the third party offer as set forth in the notice from
Lessee, with no exception unless expressly agreed by Lessee in its
sole and absolute discretion; provided, however, that if any of the
terms and conditions of the proposed transfer are not reasonably
susceptible to performance by the Best Offer Entity (for example,
third party guarantees of debt, property exchanges, stock
exchanges, etc.), Lessee shall, in its notice to the Best Offer
Entity, propose alternative terms and conditions which are the
substantial economic equivalent of such terms and conditions and
which reasonably can be expected to be performed by the Best Offer
Entity. If the Best Offer Entity timely elects to purchase the
Hotel and/or Lease (as the case may be) within the Best Offer
Entity Review Period then upon acceptance, the Best Offer Entity
shall deposit, with an escrow company in the State of Hawaii
mutually acceptable to the Best Offer Entity and Lessee, a sum of
TEN MILLION DOLLARS ($10,000,000) which shall be nonrefundable if
the transaction with the Best Offer Entity fails to close as the
result of a breach by the Best Offer Entity of any term or
condition of the purchase agreement (or any alternate term or
condition as set forth above). In the event of such failure to
close by the Best Offer Entity, rights under this Section 11.7(d)
are null and void.
If the Best Offer Entity fails to give written notice of the
Best Offer Entity's election to purchase within the Best Offer
Entity Review Period or fails to provide a deposit of TEN MILLION
DOLLARS ($10,000,000) within the Best Offer Entity Review Period,
Lessee shall be entitled to sell, assign or transfer the Hotel
and/or this Lease to the third party to which Lessee's notice
applied and upon the terms and conditions set forth in such notice
within fifteen (15) months following the end of the Lessee's Review
Period. Lessee may not, however, sell or agree to sell during such
period to the third party on more favorable terms and conditions
without offering the more favorable terms and conditions to the
Best Offer Entity again under this paragraph.
If the third party transaction to which Lessee's notice to the
Best Offer Entity applied does not close for any reason then Lessee
shall have the remainder of the fifteen (15) months from the end of
Lessee's Review Period to sell, assign or transfer or agree to
sell, assign or transfer to another third party provided that such
third party sale is completed within fifteen (15) months following
the end of Lessee's Review Period, and provided, further, that the
purchase price paid by the third party (which shall be paid in cash
or cash equivalent) is no less than ninety-five percent (95%) of
the highest purchase price (based on present value determination
using a discount rate of ten percent (10%)) of the Best Offer
Entity. If no sale, assignment or transfer of the Hotel and/or
this Lease is completed within fifteen (15) months following the
end of Lessee's Review Period, then, subject to the above
provisions, the rights of Maui Land & Pineapple Company, Inc. and
The ▇▇▇▇-▇▇▇▇▇▇▇ Company, L.L.C. under this Section 11.7(d) shall
commence again if any time after the end of the fifteen (15) months
following the end of Lessee's Review Period, Lessee intends to
sell, assign or transfer the Hotel and/or the Lease or any portion
thereof.
Within five (5) days of executing a letter of intent with a
prospective purchaser, Lessee shall notify Maui Land & Pineapple
Company, Inc. of the identity of such prospective purchaser.
Maui Land & Pineapple Company, Inc. understands, acknowledges
and agrees that the provisions of this Section 11.7(d) are for the
benefit of only Maui Land & Pineapple Company, Inc. so long as Maui
Land & Pineapple Company, Inc. is the fee simple owner of the
Premises and/or The ▇▇▇▇-▇▇▇▇▇▇▇ Company, L.L.C. so long as
Kapalani, L.P. or The ▇▇▇▇-▇▇▇▇▇▇▇ Company, L.L.C. is the Hotel
Operator, and the provisions of this Section 11.7(d) shall not
inure to the benefit of its successors or assigns unless agreed to
otherwise by Lessee in its sole discretion.
(e) If the Lease is assigned or transferred in whole or in
part to an entity other than Lessee's Affiliate, Lessor shall not
be required to subordinate its interests in either the fee estate
or in this Lease pursuant to Section 5.7 if the consideration
received by Lessee for such assignment or transfer is ONE HUNDRED
TEN MILLION AND NO/100 DOLLARS ($110,000,000) or more. If Lessee
receives consideration for any assignment or transfer of ONE
HUNDRED TEN MILLION AND NO/100 DOLLARS ($110,000,000) or more,
Lessee shall obtain a release, in a form mutually acceptable to
Lessee and Lessor, for any existing amount to which Lessor has
subordinated its fee simple interest at the time of the assignment
or transfer and Section 5.7 shall be null and void for the
remaining Term of the Lease.
(f) Notwithstanding the foregoing, Lessee may, without the
consent of Lessor, operate the Hotel as a hotel and license,
sublease or enter into concession agreements for use of a portion
of the Premises for commercial use normally found in hotels in
accordance with this Lease but in compliance with Section 8.8(a).
11.8 Attorneys' Fees. If any action, suit or proceeding is
brought by any party hereto with respect to this Lease, the
prevailing party in any such action, suit or proceeding shall be
entitled to recover from the other party or parties, in addition to
such other relief as the court may award, all reasonable attorneys'
fees and costs of suit incurred by the prevailing party in
connection with such action, suit or proceeding.
11.9 Indemnity.
(a) Lessee shall defend, indemnify and hold the Lessor
harmless from and against any and all claims and demands for loss
or damage, including claims for property damage, personal injury or
wrongful death, arising out of or in connection with the use or
occupancy of the Premises by the Lessee or any other person
claiming by, through or under Lessee, or any accident or fire on
the Premises, or any nuisance made or suffered thereon, or any
failure of the Lessee to maintain the Premises in a safe condition,
and the Lessee shall reimburse the Lessor for all costs and
expenses, including reasonable attorneys' fees, paid or incurred by
the Lessor in connection with defense of any such claims, including
but not limited to all costs of Lessor's defense to any such claim
or in any such action as well as 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.
(b) Lessor shall defend, indemnify and hold the Lessee
harmless from and against any and all claims and demands for loss
or damage, including claims for property damage, personal injury or
wrongful death, arising out of or in connection with the use or
occupancy of the Premises by the Lessor or any other person
claiming by, through or under Lessor, or any accident or fire on
the Premises, or any nuisance made or suffered thereon, or any
failure of the Lessor to maintain the Premises in a safe condition,
and the Lessor shall reimburse the Lessee for all costs and
expenses, including reasonable attorneys' fees, paid or incurred by
the Lessee in connection with defense of any such claims, including
but not limited to all costs of Lessee's defense to any such claim
or in any such action as well as all costs for research regarding
settlement or other preventive measures which Lessee may take prior
to the filing of such action or to attempt to prevent the filing of
such an action.
11.10 Multiple Lessees. If more than one Lessee is entering
into this Lease, then all such Lessees shall be jointly and
severally bound by the Lessee's covenants in this Lease and any
notice given to any one such Lessee by Lessor shall be deemed to be
notice upon all such Lessees.
11.11 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 Statutes (1968), as amended from time to
time, or any similar law which may be enacted at any time during
the Term giving Lessee the right to expand Lessee's leasehold
estate under this Lease, which the 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.
11.12 Calendar Periods. Unless explicitly provided otherwise
in this Lease, all references in this Lease to periods of time,
including without limitation days, months, quarters, and years,
shall mean calendar periods of time.
11.13 Interest on All Late Payments. All payments required
to be made by Lessee to Lessor or by Lessor to Lessee under this
Lease which are not paid within ten (10) days of the due date for
such payments required in the Lease shall bear interest at a rate
equal to Lessor's Cost of Money accruing from the due date until
such overdue payments are paid in full.
11.14 Neither Lessor nor Lessee Deemed Drafter. All
provisions of this Lease have been negotiated by Lessor and Lessee
at "arm's length" and with full representation of their respective
legal counsel and Lessor and Lessee agree that neither party shall
be deemed to be the drafter of this Lease and further that in the
event that this Lease is ever construed by a court of law, such
court shall not construe this Lease or any provision of this Lease
against either party as the drafter of the Lease.
11.15 Successors and Assigns. All the terms, covenants and
conditions of this Lease shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Lessor and
Lessee to the same extent as said terms, covenants and conditions
inure to the benefit of and are binding upon the Lessor and the
Lessee, respectively.
11.16 Lessor's Right to Sell Fee. Subject to the right of
first refusal contained in Section 12.1, Lessee agrees that nothing
in this Lease shall be construed to prevent the Lessor from
selling, assigning or otherwise transferring all or any part of the
Lessor's fee simple interest in the Premises subject to this Lease.
In the event of Lessor's transfer of all of Lessor's fee simple
interest in the Premises subject to this Lease, Lessee agrees that,
so long as the assignee assumes in writing this Lease, any and all
obligations of Lessor under this Lease not then accrued shall
terminate upon the effective date of such sale and Lessee hereby
releases Lessor from any-obligations or covenants under this Lease
which have not accrued prior to such effective date.
11.17 Entire Agreement. This Lease constitutes the full and
complete agreement of Lessor and Lessee and all other prior oral
and written agreements shall be deemed to have merged into this
Lease and have no further force or effect. This Lease may be
amended only in writing, signed by both Lessor and Lessee.
11.18 Consent. Where the consent or approval of the Lessor
or Lessee is required by any provision of this Lease, all such
approvals or consents shall be in writing and unless expressly so
provided to the contrary, such consent shall not be unreasonably
withheld or delayed.
11.19 Amendment. This Lease may only be amended in writing
executed by both Lessor and Lessee.
11.20 Estoppel Certificates. Within ten (10) days of written
notice from Lessor or Lessee, Lessor or Lessee shall execute,
acknowledge and deliver to the other a statement in writing (i)
certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification
and certifying that this Lease, as so modified, is in full force
and effect) and the date to which the rent and other charges are
paid in advance, if any, and (ii) acknowledging that there are not,
to the other's knowledge, any uncured defaults on the part of the
other hereunder, or specifying such defaults if any are claimed,
such statement may be conclusively relied upon by any prospective
purchaser or encumbrancer of the Premises.
11.21 Time of the Essence. Time is of the essence of this
Lease.
11.22 Conveyance and Hotel Room Taxes. Lessee shall be
responsible for paying any conveyance tax that maybe required to be
paid as a result of this Lease and any hotel room taxes (including
but not limited to taxes under the Hawaii Transient Accommodations
Tax Law).
11.23 Short-Form Lease. Lessor and Lessee shall execute and
Record or File a short form of this Lease at the same time as this
Lease is executed.
ARTICLE XII
Special Provisions
12.1 Lessee's Right of First Refusal.
(a) Sale of Fee Simple Title and/or Lease. If at any time
the Lessor shall receive an offer to purchase the fee simple title
to the Premises and/or its interest in this Lease, and the Lessor
intends to accept such offer, or Lessor otherwise intends to sell,
assign, or transfer the fee simple title and/or its interest in the
Lease (other than by way of Lessor's Mortgage, which pursuant to
Section 5.6 shall be subject to the rights of Lessee under this
Section 12.1), then the Lessor shall give Lessee written notice of
such offer or intention stating (i) Lessor's intention to sell,
assign or transfer the Premises and/or this Lease to such purchaser
and (ii) all of the terms and conditions of such offer, proposal or
agreement; if Lessor has a proposed written agreement or offer,
Lessor shall include a copy of such agreement or offer with such
notice to Lessee. If any of the terms and conditions of the
proposed transfer are not reasonably susceptible to performance by
Lessee (for example, third-party guarantees of debt, property
exchanges, stock exchanges, etc.), Lessor shall, in its notice to
Lessee, propose alternative terms and conditions which are the
substantial economic equivalent of such terms and conditions and
which reasonably can be expected to be performed by Lessee. Lessee
shall have the right within sixty (60) days after receipt of such
notice within which to elect to purchase the Premises and/or this
Lease (as the case may be) on terms identical (or alternate terms
and conditions as set forth above) to those set forth in the notice
from Lessor; with the only exception that the consummation of
Lessee's purchase from Lessor shall occur on the later of the
sixtieth day following the date of Lessee's acceptance or the date
set forth in Lessor's notice to Lessee. If Lessee fails to give
notice to Lessee's election to purchase within sixty (60) days of
receipt of Lessor's notice or elects not to so purchase, Lessor
shall be entitled, at any time after such failure or election, to
sell the Premises and/or this Lease (as provided in Lessor's notice
to Lessee) to the purchaser with respect to whom Lessor's notice to
Lessee applied and upon the terms and conditions set forth in such
notice within one hundred twenty (120) days after such failure of
or election by Lessee, subject to Lessee's consent as set forth
above. Lessor may not, however, sell or agree to sell during that
120-day period or thereafter to a purchaser on more favorable terms
and conditions without offering the more favorable terms and
conditions to Lessee again under this paragraph.
(b) Sale of Interests in Addition to Fee Simple Title and/or
Lease. Lessor agrees that if the offer to purchase and/or intent
to sell the fee simple title to the Premises and/or Lessor's
interest in this Lease is part of a transaction which includes the
sale, assignment, transfer or conveyance of any other interest
(whether real or personal property or intangible), Lessor will
offer the fee simple title to the Premises and/or Lessor's interest
in this Lease to Lessee as a separate and independent transaction
from any other interests which Lessor intends to sell, assign,
transfer or otherwise convey; provided, however, that neither this
Section 12.1(b) nor Section 12.1(a) shall apply if the fee simple
title to the Premises and/or Lessor's interest in this Lease is
sold, assigned, transferred or conveyed as part of a sale,
assignment, transfer or conveyance of the interests of Lessor
and/or its Affiliates in multiple parcels, and such transaction
involves in the aggregate one-half or more of the total number of
acres of real property within the Kapalua Resort Area to which Maui
Land & Pineapple Company and/or its Affiliates held fee simple
title as of December 31, 1995. The purchase price for the separate
and independent interest in the fee simple title to the Premises
and/or Lessor's interest in this Lease shall be the lesser of (i)
the price allocated by the proposed transaction to the fee simple
title to the Premises and/or Lessor's interest in this Lease as
part of an offer involving more than the sale of such interest or
(ii) the fair market value of the fee simple title to the Premises
and/or Lessor's interest in this Lease as determined by appraisal.
Lessee shall notify Lessor of its intent to proceed to appraisal,
and Lessor and Lessee shall each, within twenty (20) days of
Lessee's notification to Lessor of Lessee's intent to proceed to
appraisal, appoint an Appraiser who is a Member of the Appraisers'
Institute. The Appraiser appointed by Lessor shall be referred to
as "Lessor's MAI" while the Appraiser appointed by Lessee shall be
referred to as "Lessee's MAI." Lessor's MAI and Lessee's MAI shall
then determine the fair market value of Lessor's fee estate in the
Premises for the purpose set forth herein. If within fifteen (15)
days following the appointment of Lessor's MAI and Lessee's MAI,
Lessor's MAI and Lessee's MAI are unable to agree on the fair
market value of Lessor's fee estate in the Premises, then the
Lessor and Lessee shall within ten (10) days appoint a third
appraiser who is a Member of the Appraisers' Institute ("Joint
MAI"), and the majority of Lessor's MAI, Lessee's MAI, and Joint
MAI shall determine the fair market value of Lessor's fee estate in
the Premises within fifteen (15) days of the appointment of the
Joint MAI. If either the Lessor or the Lessee fails or refuses to
appoint their respective Appraiser within the time provided
aforesaid, the other party shall appoint the two Appraisers who
shall then determine the value of this Lease. If either the Lessor
or the Lessee fails or refuses to appoint a Joint MAI as aforesaid,
the Lessee shall apply to the Court having proper jurisdiction over
this subject matter for the appointment of such Joint MAI who shall
also be a Member of the Appraisers' Institute whereupon the
majority of the three so appointed shall determine the fair market
value of Lessor's fee estate in the Premises. The Appraisers shall
reduce to writing and deliver to each party a statement of the fair
market value of the Lessor's fee estate in the Premises and such
value shall serve as fair market value of the Lessor's fee estate
in the Premises for any excess proceeds. Lessor and Lessee shall
each pay for the cost of their respective appraiser and shall each
pay one-half (1/2) of the cost of the Joint MAI, if such appraiser
is needed.
For the purposes of this Section 12.1, any offer or sale,
assignment or transfer by Lessor to any Affiliate of Lessor shall
not be subject to Lessee's right of first refusal.
12.2 Noncompetition. Lessor shall not itself develop, or
permit a third party to develop, another luxury oceanfront hotel
within the Kapalua Resort Area within four (4) years and nine (9)
months after the Effective Date, except for: (a) the Kapalua Bay
Hotel site (including the existing hotel, any expansions,
replacements or the like), (b) the adjacent Site 29 property; and
(c) specialized housing such as for a health spa, international
center not containing a luxury oceanfront hotel, and similar
developments including condominium projects.
12.3 Signage. During the Term hereof, Lessor shall use its
best efforts to cause KRA (or where it is in Lessor's control) to
erect and maintain within the Kapalua Resort Area appropriate
directional signage for the Hotel as reasonably requested by the
Lessee. To the extent controllable by Lessor, such rights shall
not be subject to termination by a transfer of the rights of the
Lessor. Any such signage shall be in compliance with KRA
regulations and any applicable government rules and regulations and
shall be compatible With the signage theme in the Kapalua Resort
Area.
12.4 No License of Butterfly Logo. Lessor does not grant to
Lessee or the Hotel Operator any right or license, non-exclusive or
otherwise, to use the butterfly logo depicted on Exhibit "C" of the
Golf Course Use Agreement in connection with the operation,
advertising and promotion of the Hotel or any condominium units in
the Kapalua Resort Area owned or managed by the Lessee or the Hotel
Operator and/or the merchandising, manufacture, promotion, sale and
distribution of goods or services related thereto, at the Hotel or
such condominium units, or in connection with anything else. Any
such license shall be in the sole and absolute discretion of the
Lessor and neither the Lessee nor the Hotel Operator shall use the
butterfly logo without the prior written consent of the Lessor,
which consent may be unreasonably and arbitrarily withheld.
12.5 Subdivision of Easement. As described in Exhibit "A,"
Lessor agrees to use its good faith best efforts to accomplish a
subdivision of that certain portion of land owned by Lessor over
and across which Lessee is granted a right and license for access
purposes running from Easement Second as described in Exhibit "A"
to Lot 2-A-i-B-2 and being depicted on the sketch attached to, and
forming a part of, Exhibit "A." Upon accomplishing such
subdivision, Lessor shall grant a non-exclusive easement to Lessee
of such land for "access and utility purposes" (as that term is
defined in Exhibit "A" hereto) on terms and conditions consistent
with the terms and conditions of the "Easements" granted in Exhibit
"A."
IN WITNESS WHEREOF, the Lessor and Lessee have caused these
presents to be executed as of the day and year first above written.
MAUI LAND & PINEAPPLE COMPANY, NI HAWAII RESORT, INC.,
INC., a Hawaii corporation a Hawaii corporation
By /S/ ▇▇▇ ▇▇▇▇▇ By /S/ ▇▇▇▇ ▇▇▇▇▇▇▇
Its EXECUTIVE VICE-PRESIDENT Its
By /S/ ▇▇▇▇ ▇. ▇▇▇▇▇
Its
"Lessor" "Lessee"