SALE, PURCHASE AND ESCROW AGREEMENT

 

1.1.4                                   All of Seller’s right, title and interest in and to (i) all assignable equipment leases, service contracts, management agreements and other contracts and agreements listed and described on Exhibit C relating to the upkeep, repair, maintenance or operation of the Land, Improvements or Personal Property which will extend beyond the Closing Date (as defined in Section 6.1) and (ii) all assignable existing warranties and guaranties issued to Seller in connection with the Improvements or the Personal Property (collectively, the “ Contracts ”); and

 

1.1.5                                   All of Seller’s right, title and interest in and to that certain restaurant lease, between Plantation Club Associates, as landlord, and Roy E. Dunn, as tenant, (the “ Restaurant Lessee ”), dated February 7, 1991, as amended by that certain (i) Amendment and Assignment of Plantation Golf Course Clubhouse Lease; Consent of Landlord dated June 19, 1992, (ii) lease extension letter dated March 8, 1996; (iii) Second Amendment to Lease dated May 6, 2002; (iv) Third Amendment to Lease dated February 18, 2003; (v) Fourth Amendment to Lease dated February 14, 2005; and (vi) letter from Roy E. Dunn regarding exercise of an option to renew dated December 2, 2005 (as amended, the “ Restaurant Lease ”).

 

1.2                               Excluded Assets .  The following items  (collectively, the “ Excluded Assets ”) shall not be included in the definition of “Golf Course,” shall be specifically excluded from the transfer contemplated herein and shall not be conveyed to Purchaser pursuant to the terms hereof:

 

1.2.1                                   All property owned by Seller or any of its affiliates, not normally located at the Golf Course and used, but not exclusively, in connection with the operation of the Golf Course;

 

1.2.2                                   All (a) computer software and accompanying documentation (including all future upgrades, enhancements, additions, substitutions and modifications thereof), other than that which is commercially available, which are used by Seller or any affiliate thereof in connection with the property management system, the reservation system, and all future electronic systems developed by Seller or any affiliate thereof for use with respect to the Golf Course, (b) all manuals, brochures, directives, policies, programs and other information issued by Seller, or any of its affiliates, or otherwise used in the operation of the Golf Course, (c)  employee records which must remain confidential either under applicable legal requirements or under reasonable corporate policies of Seller or any affiliate thereof, (d) any right, title or interest in or any goodwill associated with any name containing the name “Kapalua” or any combination or variation thereof and any related trademarks and any other related words, names, devices, symbols, logos, slogans, designs, brands, service marks, trade names, other distinctive features, or any combination of the foregoing, whether registered or unregistered, used by Seller or any of its affiliates, (e) all trade secrets, confidential information and all other information, materials, and copyrightable or patentable subject matter developed, acquired, licensed or used by Seller or any affiliate thereof, including, without limitation, materials relating to sales and marketing programs, revenue and inventory management programs, processes or systems, brand and pricing strategies, business and technology plans, and research and development reports, and (f) any information or agreements considered confidential or proprietary in nature under an agreement between Seller or any of its affiliates and any other parties, including, but not limited to, lenders, vendors, suppliers or prior owners.  The foregoing shall apply regardless of the form or medium involved ( e.g. , paper, electronic, tape, tangible or intangible);

 

1.2.3                                   All inventory for retail sale, all rental clubs, driving range balls, and any other inventory or items owned by Seller and sold from the golf pro shop located on the Land;

 

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1.2.4                                   All personal property owned by the Restaurant Lessee under the Restaurant Lease, including, without limitation, the furnishings and moveable equipment situated in the Restaurant Lease premises, all glassware, china, utensils, inventories and the liquor license;

 

1.2.5                                   Any capital reserve, personal property reserve and/or tax and insurance escrow for the Golf Course, whether held for the benefit of the holder of a mortgage, loan, deed of trust or other security instrument with respect to the Golf Course; and

 

1.2.6                                   Working capital associated with or set aside with respect to the Golf Course.

 

1.3                               Golf Course Defined .  The property described in Section 1.1 is referred to collectively as the “ Golf Course .”

 

ARTICLE 2

PURCHASE PRICE

 

2.1                               Price .  Seller shall sell and Purchaser shall purchase the Golf Course for a total purchase price of Fifty Million Dollars ($50,000,000) (the “ Purchase Price ”), as allocated, pursuant to the agreement of Seller and Purchaser, between real and personal property in accordance with Schedule 1 attached hereto and made a part hereof.  Purchaser shall, at least two (2) business days prior to Closing (as defined below), deliver to Escrow Agent, by bank wire transfer of immediately available funds, a sum equal to the Purchase Price.

 

ARTICLE 3

CONDITIONS TO THE PARTIES’ OBLIGATIONS

 

3.1                               Conditions to Purchaser’s Obligation to Purchase .  Purchaser’s obligation to purchase is expressly conditioned upon the satisfaction, or waiver in writing by Purchaser, of each of the following:

 

3.1.1                                   Performance by Seller .  Performance in all material respects of the obligations and covenants of, and deliveries required of, Seller hereunder.

 

3.1.2                                   Delivery of Title and Possession .  Delivery at the Closing of (i) the Deed (as defined in Section 4.2.1) and other documents to be delivered by Seller pursuant to Section 4.2 below, and (ii) possession as provided in Section 15.1.

 

3.1.3                                   Title Insurance .  Delivery at the Closing of the current form of eight (8) American Land Title Association extended coverage owner’s policies of title insurance (the “ Title Policy ”), or an irrevocable commitment to issue the same issued by First American Title Insurance Company (the “ Title Company ”), consistent in all material respects with a commitment for title insurance issued by Title Company, together with copies of all documents referred to as exceptions therein, containing as encumbrances only those certain encumbrances described in the Deed (as defined below) as “Permitted Encumbrances” and those certain encumbrances described in the New Easements (as defined below) (collectively, the “ Title Commitment ”).

 

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3.1.4                                Seller’s Representations .  The representations and warranties by Seller set forth in Section 11.1 being true and correct in all material respects as of the Closing.

 

3.1.5                                Existing Ground Lease .  Seller having terminated and released of record that certain Plantation Course Lease, dated May 7, 1992 between MLP, as Lessor, and KLC, as Lessee, recorded in the Bureau of Conveyances of the State of Hawaii as Document No. 92-079742, as amended by that certain (i) Amendment of the Plantation Course Lease to Withdraw Lot 51 dated December 4, 1995, recorded in the Bureau of Conveyances of the State of Hawaii as Document No. 95-166080, and (ii) as partially assigned by Assignment of Lease dated December 19, 1995, recorded in the Bureau of Conveyances of the State of Hawaii as Document No. 96-000274 (the “ Ground Lease Termination ”).

 

3.1.6                                Lease Agreement .  Execution and delivery by Kapalua Plantation Golf LLC of a lease agreement (the “ Lease Agreement ”), wherein it will lease the Golf Course after the Closing Date, substantially in the form attached hereto as Exhibit E .

 

3.1.7                                License Agreements .

 

(a)                                   Execution and delivery by MLP of a license agreement (the “ Seller’s License Agreement ”), wherein certain intellectual property rights associated with the “Kapalua” name will be licensed to Purchaser, substantially in the form attached hereto as Exhibit F .

 

(b)                                  Execution and delivery by Purchaser of a license agreement (the “Purchaser’s License Agreement ”), wherein certain intellectual property rights associated with the “Plantation” name will be licensed to MLP (or KLC), substantially in the form of Exhibit G .

 

(c)                                   The Seller’s License Agreement, and the Purchaser’s License Agreement, are hereinafter sometimes collectively called the “ License Agreement .”

 

3.1.8                                   Partial Assignment and Assumption of Second Amended and Restated Golf Course Use Agreement .  Execution and delivery by MLP (or an affiliate) of a Partial Assignment and Assumption of Second Amended and Restated Golf Course Use Agreement (the “ Partial Assignment and Assumption of Second Amended and Restated Golf Course Use Agreement ”), the terms, substantially in the form attached hereto as Exhibit H .

 

3.1.9                                   Water Delivery Agreement .  Execution and delivery by MLP of an Agreement for the Delivery of Water (Kapalua Plantation Golf Course) (the “ Water Supply Agreement ”) pursuant to which water for use in the operation of the Golf Course will be provided, substantially in the form attached hereto as Exhibit I .

 

3.1.10                             Golf Facilities Easement .  Execution and delivery by MLP of a Grant of Easement (Golf Course Facilities) regarding the use of the Maintenance Facility, Storage Facility and Dumping Ground on Lot 42 (the “ Golf Facilities Easement ”) in substantially the form attached hereto as Exhibit J .

 

3.1.11                             Assignment of Easements .  Execution and delivery by MLP of an Assignment of Easements and Agreements regarding the STP easement, the golf path encroachment

 

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agreements and other easements (the “ Assignment of Easements” ) in substantially the form attached hereto as Exhibit K .

 

3.1.12                             CC&Rs .  Execution and delivery by MLP of covenants, conditions and restrictions regarding future utility and similar easements and restrictions on the use and development of the Golf Course (the “ CC&Rs ”), in substantially the form attached hereto as Exhibit L .

 

3.1.13                             Right of First Offer .  Execution and delivery by MLP of a right of first offer agreement (the “ ROFO Agreement ”) with respect to that certain golf course commonly referred to as “The Bay Course” and all improvements, structures and fixtures thereon in substantially the form attached hereto as Exhibit M .

 

3.1.14                             Right of First Refusal .  Execution and delivery by MLP of a right of first refusal agreement (the “ ROFR Agreement ”) with respect to the Golf Course and all improvements, structures and fixtures thereon in substantially the form attached hereto as Exhibit N .

 

3.1.15                             Assignment of Contracts .  Execution and delivery by MLP and KLC of an Assignment of Contracts (the “ Assignment of Contracts ”) in substantially the form attached hereto as Exhibit O .

 

3.1.16                             Assignment of Restaurant Lease .  Execution and delivery by MLP of an Assignment of Landlord’s Interest in Restaurant Lease (the “ Assignment of Restaurant Lease ”) in substantially the form attached hereto as Exhibit P .

 

3.1.17                             Related Agreements .  The execution and/or delivery by Seller, as applicable, of those certain agreements listed in Section 4.2 below.

 

3.1.18                             Post-Closing Agreement .  Execution and delivery by MLP of a Post-Closing Agreement (the “ Post-Closing Agreement” ) in substantially the form attached hereto as Exhibit Q .

 

3.1.19                             Restaurant Lease Estoppel Certificate .  Execution and delivery by the Restaurant Lessee of an estoppel certificate executed by the Restaurant Lessee in the Form of Exhibit R .

 

3.1.20                             Ritz-Carlton Estoppel Certificate .  Execution and delivery of estoppel certificates for the Second Amended and Restated Golf Course Use Agreement (the “ Ritz-Carlton Estoppel Certificate ”) executed by W2005 Kapalua/Gengate Hotel Realty, L.L.C. and The Ritz-Carlton Hotel Company, L.L.C. in substantially the forms attached hereto as Exhibit S-1 and Exhibit S-2 , respectively (collectively, the “ Ritz-Carlton Estoppel Certificate ”).

 

3.1.21                             Association Estoppel Certificates .  Two (2) copies of an estoppel certificate executed by the Kapalua Resort Association (the “ Kapalua Resort Association Estoppel Certificate ”) substantially in the form of Exhibit T-1 attached hereto and two (2) copies of an estoppel certificate executed by the Plantation Estates Lot Owners’ Association (the “ Plantation Estoppel Certificate ”) substantially in the form of Exhibit T-2 attached hereto.

 

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3.1.22                             Nondisturbance Agreement .  Execution and delivery of a Nondisturbance Agreement executed by Wells Fargo Bank, N.A. with respect to the Water Supply Agreement and the Lot 42 Agreement (the “ Nondisturbance Agreement ”) in substantially the form attached hereto as Exhibit U .

 

3.1.23                             Reliance Letter .  Execution and delivery of a reliance letter executed by Bureau Veritas North America, Inc. (the “ Reliance Letter ”) in substantially the form attached hereto as Exhibit V .

 

3.1.24                             Will Serve Letter .  Execution and delivery of a “will serve” letter (the “ Will Serve Letter ”) signed by Kapalua Water Company, Ltd. in the form of Exhibit W .

 

3.1.25                             Agreement Regarding Kapalua Club .  Execution and delivery by MLP of a Golf Course Use Agreement (Kapalua Club) (the “ Agreement Regarding Kapalua Club ”) in substantially the form attached hereto as Exhibit X .

 

3.1.26                             Wells Fargo Mortgage Release .  Execution and delivery of a recordable partial release of that certain mortgage in favor of Wells Fargo Bank, N.A. affecting the Real Property.

 

3.1.27                             UCC-1 Termination .  Execution and delivery of a UCC amendment terminating that certain Wells Fargo UCC-1 Financing Statement in favor of Wells Fargo Bank, N.A. as to the Golf Course.

 

3.1.28                             New Easements .  Execution, delivery and recordation of the following new easements (collectively, the “ New Easements ”):  (a) Grant of Underground Waterline Easement from Seller to Kapalua Water Company, Ltd., affecting certain existing designated waterline easements within the Land in substantially the form attached hereto as Exhibit EE-1 ; (b) Grant of Reservoir, Waterline and Well Development Easement from Seller to Purchaser in substantially the form attached hereto as Exhibit EE-2 ; (c) Grant of Underground Waterline Easement from Plantation Club Associates to Purchaser in substantially the form attached hereto as Exhibit EE-3 ; (d)  Grant of Underground Waterline Easement from Honolua Ridge LLC to Purchaser in substantially the form attached hereto as Exhibit EE-4 ; (e) (Reserved); (f)  Grant of Drainage Easement from Seller to Purchaser in substantially the form attached hereto as Exhibit EE-6 ; (g) Grant of Drainage Easement from Plantation Club Associates to Purchaser in substantially the form attached hereto as Exhibit EE-7 ; (h) Grant of Drainage Easement from KLC to Purchaser in substantially the form attached hereto as Exhibit EE-8 ; (i) Grant of Drainage Easement from Purchaser to Seller in substantially the form attached hereto as Exhibit EE-9 ; and (j) Grant of Trail Easement from Purchaser to Kapalua Resort Association in substantially the form attached hereto as Exhibit EE-10 .

 

3.1.29                             Side Letter Regarding Lease .  Execution and delivery by Kapalua Plantation Golf LLC of a side letter regarding the Lease extension (the “ Lease Side Letter ”) in substantially the form attached hereto as Exhibit FF .

 

3.2                                  Conditions to Seller’s Obligation to Sell .  Seller’s obligation to sell is expressly conditioned upon satisfaction or waiver by Seller in writing of each of the following:

 

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3.2.1                                   Performance by Purchaser .  Performance in all material respects of the obligations and covenants of, and deliveries required of, Purchaser hereunder.

 

3.2.2                                   Receipt of Purchase Price .  Receipt of the Purchase Price and any adjustments due Seller under Article 7 at the Closing in the manner herein provided.

 

3.2.3                                   Purchaser’s Representations .  The representations and warranties by Purchaser as set forth in Section 11.2 being true and correct in all material respects as of the Closing.

 

3.2.4                                   Related Agreements .  The execution and/or delivery, as applicable, by Purchaser of those certain agreements listed in Section 4.1 below.

 

ARTICLE 4

PURCHASER’S DELIVERIES AND SELLER’S DELIVERIES TO ESCROW AGENT

 

4.1                               Purchaser’s Deliveries .  Purchaser shall, at or before the Closing, deliver to Escrow Agent each of the following:

 

4.1.1                                   Purchase Price .  The Purchase Price as set forth in Article 2.

 

4.1.2                                   Closing Statement .  An executed settlement statement reflecting the prorations and adjustments required under Article 7.

 

4.1.3                                   Lease Agreement .  Four (4) executed counterparts of the Lease Agreement, the memorandum thereof and the guaranty thereof.

 

4.1.4                                   License Agreement .  Four (4) executed counterparts of (a) the Purchaser’s License Agreement and (b) the Seller’s License Agreement.

 

4.1.5                                   Partial Assignment and Assumption of Second Amended and Restated Golf Course Use Agreement .  Four (4) executed counterparts of the Partial Assignment and Assumption of Second Amended and Restated Golf Course Use Agreement.

 

4.1.6                                   Water Supply Agreement .  Four (4) executed counterparts of the Water Supply Agreement.

 

4.1.7                                   Golf Facilities Easement .  Four (4) executed counterparts of the Golf Facilities Easement.

 

4.1.8                                   Assignment of Easements .  Four (4) executed counterparts of the Assignment of Easements.

 

4.1.9                                   ROFO Agreement .  Four (4) executed counterparts of the ROFO Agreement and of the memorandum thereof.

 

4.1.10                             ROFR Agreement .  Four (4) executed counterparts of the ROFR Agreement and of the memorandum thereof.

 

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4.1.11                             Assignment of Contracts .  Four (4) executed counterparts of the Assignment of Contracts.

 

4.1.12                             Assignment of Restaurant Lease .  Four (4) executed counterparts of the Assignment of Restaurant Lease.

 

4.1.13                             Post-Closing Agreement .  Four (4) executed counterparts of the Post-Closing Agreement.

 

4.1.14                             Agreement Regarding Kapalua Club .  Four (4) executed counterparts of the Agreement Regarding Kapalua Club.

 

4.1.15                             New Easements .  Four (4) executed counterparts of each of the New Easements.

 

4.1.16                             Lease Side Letter .  Four (4) executed counterparts of the Lease Side Letter.

 

4.1.17                             Authorization Documents Required by the Title Company .  Such documents or instruments reasonably required by the Title Company concerning Purchaser’s due authorization and execution of the closing documents required to convey the Golf Course pursuant to this Agreement or reasonably requested by Escrow Agent required to close the transactions contemplated hereby.

 

4.2                               Seller’s Deliveries .  Either or both of MLP and/or KLC, as applicable, at or before the Closing, shall deliver to Escrow Agent each of the following:

 

4.2.1                                   Deed .  Four (4) executed copies of the Warranty Deed (the “ Deed ”) with respect to the Real Property in substantially the form of Exhibit Y , pursuant to which Seller shall convey title to the Real Property subject only to the following (collectively, the “ Permitted Encumbrances ”): (i) non-delinquent real property taxes and all assessments and unpaid installments thereof which are not delinquent; (ii) the Restaurant Lease, and the rights of possession of the Restaurant Lessee thereunder; (iii) all exceptions to title contained or disclosed in the Title Commitment; (iv) any other lien, encumbrance, easement or other exception or matter voluntarily imposed or consented to in writing by Purchaser prior to or as of the Closing; and (v) the New Easements.

 

4.2.2                                   Bill of Sale .  Four (4) executed copies of a bill of sale (the “ Bill of Sale ”) in substantially the form of Exhibit Z , with respect to the Personal Property.

 

4.2.3                                   Lease Agreement .  Four (4) executed counterparts of the Lease Agreement, the memorandum thereof and the guaranty thereof.

 

4.2.4                                   License Agreement .  Four (4) executed counterparts of (a) the Purchaser’s License Agreement and (b) the Seller’s License Agreement.

 

4.2.5                                   Partial Assignment and Assumption of Second Amended and Restated Golf Course Use Agreement .  Four (4) executed counterparts of the Partial Assignment and Assumption of Second Amended and Restated Golf Course Use Agreement.

 

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4.2.6                                   Water Supply Agreement .  Four (4) executed counterparts of the Water Supply Agreement.

 

4.2.7                                   Golf Facilities Easement .  Four (4) executed counterparts of the Golf Facilities Easement.

 

4.2.8                                   Assignment of Easements .  Four (4) executed counterparts of the Assignment of Easements.

 

4.2.9                                   CC&Rs .  Four (4) executed originals of the CC&Rs.

 

4.2.10                             ROFO Agreement .  Four (4) executed counterparts of the ROFO Agreement and of the memorandum thereof.

 

4.2.11                             ROFR Agreement .  Four (4) executed counterparts of the ROFR Agreement and of the memorandum thereof.

 

4.2.12                             Assignment of Contracts .  Four (4) executed counterparts of the Assignment of Contracts, and (whether through the closing escrow or through such other method of delivery as the parties may establish) original executed leases (or copies if originals are not in Seller’s possession) and tenant files in the possession of Seller and the contracts assigned thereby, together with any and all consents that may be required from the counterparties to such leases and Contracts.

 

4.2.13                             Assignment of Restaurant Lease .  Four (4) executed counterparts of the Assignment of Restaurant Lease.

 

4.2.14                             Notice to Tenant .  A notice signed by Seller addressed to the Restaurant Lessee in the form of Exhibit AA .

 

4.2.15                             Restaurant Lease Estoppel Certificate .  Two (2) copies of the Restaurant Lease Estoppel Certificate.

 

4.2.16                             Association Estoppel Certificates .  Two (2) copies of the Kapalua Resort Association Estoppel Certificate and two (2) copies of the Plantation Estoppel Certificate.

 

4.2.17                             Ritz-Carlton Estoppel Certificate .  Two (2) copies of the Ritz-Carlton Estoppel Certificate executed by Seller, W2005 Kapalua/Gengate Hotel Realty, L.L.C. and The Ritz-Carlton Hotel Company, L.L.C.

 

4.2.18                             Nondisturbance Agreement .  Four (4) copies of the Nondisturbance Agreement executed by Wells Fargo Bank, N.A. with respect to the Water Supply Agreement and the Lot 42 Agreement.

 

4.2.19                             Reliance Letter .  Two (2) copies of the Reliance Letter executed by Bureau Veritas North America, Inc.

 

4.2.20                             Will Serve Letter .  Two (2) copies of the Will Serve Letter signed by Kapalua Water Company, Ltd.

 

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4.2.21                             FIRPTA/HARPTA Affidavits .  One (1) executed copy of an affidavit in the form of Exhibits BB-1 and BB-2 with respect to the Foreign Investment in Real Property Tax Act and one (1) executed copy of an affidavit in the form of Exhibits CC-1 and CC-2 .

 

4.2.22                             Notice of Mortgage, Pledge or Purchase (Hawaii Tax Form D-37) .  One (1) executed Hawaii Tax Form D-37 unless previously filed by Purchaser with the Hawaii Department of Taxation.

 

4.2.23                             Conveyance Tax Certificate (Hawaii Tax Form P-64A) for the Deed .  One (1) executed Hawaii Tax Form P-64A.

 

4.2.24                             Assignment of Trade Names (Hawaii DCCA Form T-4) .  One (1) executed Hawaii DCCA Form T-4 for “The Plantation Club Golf Course” trade name and one (1) executed Hawaii DCCA Form T-4 for “The Plantation Course” trade name.

 

4.2.25                             Ground Lease Termination .  Two (2) executed Ground Lease Terminations.

 

4.2.26                             Wells Fargo Mortgage Release .  An executed and recordable partial release of that certain mortgage in favor of Wells Fargo Bank, N.A. affecting the Real Property.

 

4.2.27                             UCC-1 Termination .  A UCC amendment terminating that certain Wells Fargo UCC-1 Financing Statement in favor of Wells Fargo Bank, N.A. as to the Golf Course.

 

4.2.28                             Post-Closing Agreement .  Four (4) executed counterparts of the Post-Closing Agreement.

 

4.2.29                             Agreement Regarding Kapalua Club .  Four (4) executed counterparts of the Agreement Regarding Kapalua Club.

 

4.2.30                             Closing Statement .  An executed settlement statement reflecting the prorations and adjustments required under Article 7.

 

4.2.31                             New Easements .  Four (4) executed counterparts of each of the New Easements.

 

4.2.32                             Lease Side Letter .  Four (4) executed counterparts of the Lease Side Letter.

 

4.2.33                             Authorization Documents Required by the Title Company .  Such documents or instruments reasonably required by the Title Company concerning Seller’s due authorization and execution of the closing documents required to convey the Golf Course pursuant to this Agreement, including Form B and Form D or reasonably requested by Escrow Agent required to close the transactions contemplated hereby.

 

4.3                               Failure to Deliver .  The failure of Purchaser or Seller to make any delivery required in accordance with this Article 4, which is not waived by the other party, shall constitute a default hereunder by Purchaser or Seller, as applicable; provided, however, that:

 

(a)                                   Seller’s failure to deliver either of those items described in Sections 4.2.16 and 4.2.17 shall not constitute a default hereunder by Seller nor give rise to any

 

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Purchaser termination rights hereunder and the applicable provisions of the Post-Closing Agreement shall apply with respect to such event; and

 

(b)                                  If Seller is unable to deliver any of those items described in Sections 4.2.18, 4.2.26, or 4.2.27 by the Closing Date, the Closing Date shall be extended until such date as Seller is able to deliver such items, provided that if Seller does not deliver such items by the 30 th  day after the initially-scheduled Closing Date, Purchaser may at any time thereafter elect to terminate this Agreement.  Upon termination pursuant to this Section 4.3(b), Seller shall pay to Purchaser an amount, not to exceed $1,000,000, equal to Purchaser’s total actual legal fees and due diligence expenses incurred in connection with this purchase, and thereafter neither Seller nor Purchaser shall have any further liability or obligations in connection with this Agreement or such termination.  Seller and Purchaser acknowledge and agree that they have freely agreed to such a payment as liquidated damages which are fair and reasonable under the particular circumstances of this transaction, and not as a penalty.

 

ARTICLE 5

INVESTIGATION OF REAL PROPERTY

 

5.1                                  Delivery of Documents .  Seller has delivered to Purchaser, the following:

 

5.1.1                                   Title Commitment .  A copy of the Title Commitment.

 

5.1.2                                   Leases and Contracts .  Copies of the Restaurant Lease and any service contracts, equipment leases, maintenance agreements and other contracts, if any, listed in the Assignment of Contracts.

 

5.1.3                                   Plans and Specifications .  To the extent in Seller’s possession, copies of all plans and specifications for the Improvements.

 

5.1.4                                   Reports .  To the extent in Seller’s possession, copies of all environmental reports, geological reports, engineering reports and archeological reports (if any) prepared by third parties.

 

5.1.5                                   Permits .  To the extent in Seller’s possession, copies of all governmental permits, certificates of occupancy, site plan approvals, zoning approvals and other approvals, including, without limitation, all development permits, approvals, agreements and entitlements, in each case regarding the Real Property.

 

5.1.6                                   Operating Statements .  To the extent in Seller’s possession, copies of operating statements with respect to the Golf Course generated by Seller in its ordinary course of business with respect to the previous three (3) calendar years.

 

5.1.7                                   Property Tax Bills .  To the extent in Seller’s possession, a copy of the current property tax bill and any assessment notices for the current tax fiscal year.

 

5.1.8                                   Notices of Violation, Litigation .  To the extent in Seller’s possession, copies of any notices of uncured violations issued by any governmental authority as well as copies of any

 

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pleadings relating to litigation regarding the Golf Course to the extent any of the foregoing could be binding upon the Golf Course or Purchaser following Closing.

 

If requested by Seller, Purchaser shall provide written verification of its receipt of those items listed in this Section 5.1.

 

5.2                                  Physical Inspection of the Real Property .

 

5.2.1                                   Seller shall allow Purchaser and Purchaser’s engineers, architects or other employees, consultants and agents reasonable access to the Real Property during normal business hours for the limited purposes provided herein.

 

5.2.2                                   Purchaser and its engineers, architects and other employees, consultants and agents may exercise such access solely for the purposes of (i) reviewing contracts, tenant files, books and records relating to the Real Property (other than any privileged, proprietary or confidential records), soil reports, environmental studies and reports, surveys, and building and systems plans; (ii) reviewing soils records relating to operating and capital expenses and other instruments and correspondence relating to the Real Property; and (iii) inspecting the physical condition of the Real Property and conducting non-intrusive physical and environmental tests and inspections thereof.  PURCHASER SHALL NOT CONDUCT OR ALLOW ANY PHYSICALLY INTRUSIVE TESTING OF, ON OR UNDER THE REAL PROPERTY WITHOUT FIRST OBTAINING SELLER’S WRITTEN CONSENT (WHICH SELLER MAY GIVE OR WITHHOLD IN ITS SOLE DISCRETION) AS TO THE TIMING AND SCOPE OF THE WORK TO BE PERFORMED AND THE PARTIES ENTERING INTO AN AMENDMENT HERETO MEMORIALIZING SUCH SCOPE OF WORK AND ANY ADDITIONAL AGREEMENTS OF THE PARTIES WITH RESPECT TO SUCH TESTING.

 

5.2.3                                   Purchaser agrees that, in the exercise of the right of access granted hereby, it will not unreasonably interfere with or permit unreasonable interference with any person occupying or providing service at the Golf Course.  Purchaser agrees that it or its agents will not communicate with any tenants without the consent of Seller.

 

5.2.4                                   Purchaser agrees to indemnify, defend and hold harmless Seller and its affiliates, subsidiaries, shareholders, officers, directors and agents from any loss, injury, damage, claim, lien, cost or expense, including reasonable attorneys’ fees and costs (collectively, “ Claims ”), arising out of or relating to the exercise by Purchaser or its employees, consultants, agents or representatives of the right of access under this Agreement, including, without limitation, any entry on the Golf Course in the course of performing the inspections, testings, or inquiries provided for in this Agreement, excluding, however, any Claim arising out of (i) the gross acts or omissions of Seller or its affiliates, agents or employees or (ii) the mere discovery of an existing condition at or affecting the Golf Course.  The indemnity in this Section 5.2.4 shall survive the Closing or any earlier termination of this Agreement.

 

5.2.5                                   Purchaser agrees to give Seller prior notice, not less than forty-eight (48) hours prior to the date of any requested inspection or test (or earlier if required by law or pursuant to the provision of any leases), of its intent to conduct any inspections or tests so that Seller will have the opportunity to have a representative present during any such inspection or test, the right to do so which Seller expressly reserves.  Purchaser agrees to cooperate with any reasonable request by Seller in connection with the timing of any such inspection or test.  Subject to the provisions of

 

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Section 5.2, Seller agrees to use commercially reasonable efforts to facilitate and cooperate with Purchaser’s conduct of its investigations of or at the Real Property at no material cost to Seller.

 

5.2.6                                   Purchaser agrees that any inspection, test or other study or analysis of the Real Property shall be performed at Purchaser’s expense and in strict accordance with applicable law.

 

5.2.7                                   Purchaser agrees at its own expense to promptly repair or restore the Real Property, or, at Seller’s option, to reimburse Seller for any reasonable repair or restoration costs, if any inspection or test requires or results in any damage to or alteration of its condition.  The obligations set forth in this Section 5.2.7 shall survive the Closing or earlier termination of this Agreement.

 

5.3                                  No Obligation to Cure .  Nothing contained in this Agreement or otherwise shall require Seller to remove or correct any exception or matter disapproved by Purchaser or to spend any money or incur any expense in order to do so; provided, however, that Seller agrees to remove any lien or mortgage the amount of which is liquidated and which has been placed on the Real Property with the approval or consent of Seller and any mechanics lien placed on the Real Property pursuant to works of improvement duly authorized by Seller, provided that Seller may remove any such mechanics lien by causing or enabling the Title Company to irrevocably commit to issuing the Title Policy to Purchaser and its lender, if any, without taking exception for any such lien.

 

ARTICLE 6

THE CLOSING

 

6.1                                  Date and Manner of Closing .  Escrow Agent shall close the escrow (the “ Closing ”) as soon as all conditions to closing contained in this Agreement have been satisfied, which shall in any event be not later than 10:00 a.m. Hawaii time on March 27, 2009 (the “ Closing Date ”), time being of the essence, subject only to Seller’s express rights provided in Section 4.3(b) and Section 13.4, by recording and delivering all documents and funds as set forth in Article 8.

 

ARTICLE 7

PRORATION, FEES, COSTS AND ADJUSTMENTS

 

7.1                                  Revenue and Expense Allocations .

 

7.1.1                                   The following items shall be allocated or prorated at Closing as follows:

 

(a)                                   Real property taxes for the then current tax fiscal year based upon the latest available tax bills or assessment information.  Such proration shall be calculated based upon the actual number of days in the tax year, with Seller being responsible for that portion of such tax year occurring on and prior to the Closing Date and Purchaser being responsible for that portion of such tax year occurring after the Closing Date.

 

(b)                                  Special taxes, assessments or water and sewer capacity charges, if any, upon the Golf Course shall be paid by Seller at Closing.

 

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(c)                                   Fuel, electricity, water, sewer, gas, electric, telephone and other utility charges and assigned deposits.  Such proration shall be calculated based upon the actual number of days in the current billing period, with Seller being responsible for that portion of such billing period occurring on and prior to the Closing Date and Purchaser being responsible for that portion of such billing period occurring after the Closing Date.

 

(d)                                  Purchaser shall receive credit at the Closing for the following:  (i) security deposit received by Seller for the Restaurant Lease in the amount of Ten Thousand Dollars ($10,000); (ii) the prorated portion of any advance rents allocable to the period after the Closing Date and received by Seller from the Restaurant Lessee; and (iii) any unpaid utility charges (including, but not limited to, telephone, electric power, steam, heat, gas, cable TV, water and sewer and any other utility charges) prorated for the period prior to the Closing Date.

 

(e)                                   Seller shall be responsible for and pay for all other taxes attributable to the ownership and operation of the Golf Course for the period of time prior to the Closing Date.

 

7.1.2                                   Following the Closing, all employees of Seller shall remain employees of Seller and Purchaser shall have no responsibility with respect to such employees.  Without limiting the generality of the foregoing:

 

(a)                                   Seller shall be responsible for all wages and other amounts owed to employees of Seller providing services for the Golf Course and all wages and amounts due to employees that do not provide services exclusively on account of the Golf Course.

 

(b)                                  With respect to hourly employees, Seller shall be responsible for (a) wages of hourly employees; (b) employment and withholding taxes for such employees; and (c) accrued vacation and required contributions to health, pension and other benefit plans for such employees.

 

(c)                                   With respect to salaried employees, Seller shall be responsible for salaries, employment and withholding taxes, accrued vacation and other employment benefits for salaried employees.

 

(d)                                  Seller shall hold expenses for pension expenses for eligible employees.

 

(e)                                   Seller shall be responsible for (a) seve