Exhibit 10.37

 

STATE OF HAWAII

 

DEPARTMENT OF TRANSPORTATION

 

HARBORS DIVISION

 

HARBOR LEASE NO. H-92-22

 

SEA-LAND SERVICE, INC.

 

SHORESIDE FACILITIES FOR OPERATION

AND HANDLING OF CARGO CONTAINERS

 

SAND ISLAND CONTAINER COMPLEX

 

HONOLULU HARBOR, OAHU, HAWAII

 

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STATE OF HAWAII

 

HARBOR LEASE NO. H-92-22

 

TABLE OF CONTENTS

 

PARAGRAPH		BASIC PROVISIONS AND EXHIBITS		PAGE
1		AREA LEASED		1
2		USE OF PREMISES		2
3		DEFINITIONS		3
4		GENDER AND NUMBER		3
5		HEADINGS NOT TO BE USED TO CONSTRUE DOCUMENT		3
6		EFFECTIVE DATE AND LEASE TERM		3
7		ANNUAL RENTAL		3
8		RENTAL REOPENING		4
9		MINIMUM ANNUAL GUARANTEE (MA-G)		6
10		LESSEE’S DUTIES AND RESPONSIBILITIES		8
11		TIME AND METHOD OF PAYMENT		8
12		INTEREST; SERVICE CHARGE		8
13		MINERALS AND WATERS		9
14		PREHISTORIC AND HISTORIC REMAINS		9
15		EASEMENTS		9
16		CONSTRUCTION OF IMPROVEMENTS; ENVIRONMENTAL ASSESSMENT		9
17		IMPROVEMENT BOND		11
18		CONTRACTOR’S INSURANCE		11
19		SIGNS		11
20		UTILITIES		11
		COVENANTS
21		TAXES, ASSESSMENTS, ETC.		12
22		UTILITY SERVICES		12
23		COVENANT AGAINST DISCRIMINATION		12
24		SANITATION, ETC.		12
25		WASTE AND UNLAWFUL, IMPROPER OR OFFENSIVE USE OF PREMISES		12
26		COMPLIANCE WITH LAWS		12
27		INSPECTION OF PREMISES		13
28		IMPROVEMENTS		13
29		REPAIRS TO IMPROVEMENTS		13
30		LIENS		13
31		ASSIGNMENTS, ETC.		13
32		SUBLETTING		14
33		MORTGAGE		15
34		INDEMNITY		15
35		COST OF LITIGATION		15
36		LIABILITY INSURANCE		15
37		FIRE AND EXTENDED COVERAGE INSURANCE		16
38		PERFORMANCE BOND		17
39		JUSTIFICATION OF SURETIES		17

 

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PARAGRAPH		COVENANTS		PAGE
40		WAIVER, MODIFICATION, REIMPOSITION OF BOND PROVISION		18
41		LESSOR’S LIEN		18
42		SECURITY INTEREST, MORTGAGE, ETC.		18
43		BREACH		19
44		RIGHT OF HOLDER OF RECORD OF A SECURITY INTEREST		20
45		EXCUSED PERFORMANCE		21
46		CONDEMNATION		22
47		RIGHT TO ENTER		22
48		ACCEPTANCE OF RENT NOT A WAIVER		23
49		EXTENSION OF TIME		23
50		SURRENDER		23
51		SURRENDER FOR PUBLIC PURPOSES		23
52		TERMINATION OF LEASE BY LESSEE		24
53		INVALID PROVISION – SEVERABILITY		24
IN WITNESS WHEREOF. . .				25
ACKNOWLEDGMENT PAGE				26

 

EXHIBIT “A” - MAP

 

EXHIBIT “B” - Metes and Bounds Description

 

EXHIBIT “C” - Assignments, Etc.

Attachment 1

Attachment 2

Attachment 3

 

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STATE OF HAWAII

DEPARTMENT OF TRANSPORTATION

HARBORS DIVISION

 

LEASE NO. H–92–22

 

THIS INDENTURE OF LEASE, made this 12th day of January, 1996, by and between the STATE OF HAWAII, by its Director of Transportation, hereinafter called the “LESSOR,” and SEA-LAND SERVICE, INC., whose business address is P. O. Box 1420, Honolulu, Hawaii 96806, hereinafter called the “LESSEE,”

 

WITNESSETH:

 

1. AREA LEASED. THAT THE LESSOR, for and in consideration of the rent to be paid and of the terms, covenants and conditions herein contained, all on the part of the LESSEE to be kept, observed and performed, does hereby demise and lease unto the LESSEE and the LESSEE does hereby lease and hire from the LESSOR, those certain parcels and easements, situated at Sand Island Container Yard Complex, Honolulu Harbor, Oahu, Hawaii, which parcels and easements are hereinafter called the “premises,” and more particularly shown on the map designated Exhibit “A” and described under Exhibit “B,” which are attached hereto and made parts hereof. The parcels and easements are designated as follows:

 

(a)

Parcel I: Exclusive use by the LESSEE for the construction of an office building containing an area of 10,262.75 square feet.

 

(b)

Parcel II: Exclusive use by the LESSEE for the construction of a gate house containing an area of 320 square feet.

 

(c)

Parcel III: Exclusive use by the LESSEE for the construction of a guard house containing an area of 53.73 square feet.

 

(d)

Parcel IV: Exclusive use by the LESSEE for the construction and installation of a mechanical pad containing an area of 352 square feet.

 

(e)

Parcel VI: Exclusive use by the LESSEE for maintenance and repair facility containing an area of 10,200 square feet and existing structure containing an area of 7,920 square feet.

 

(f)

Easement A: Nonexclusive use by the LESSEE for the construction and installation of underground powerline containing an area of 404.04 square feet.

 

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(g)

Easement B: Exclusive use by the LESSEE for the construction and installation of a transformer pad containing an area of 485.64 square feet.

 

(h)

Easement C: Nonexclusive use by the LESSEE for the construction and installation of underground powerline containing an area of 972.06 square feet:

 

(i)

Easement D: Nonexclusive use by the LESSEE for the construction and installation of underground 2-inch waterline containing an area of 1,149.22 square feet.

 

(j)

Easement E: Nonexclusive use by the LESSEE for the construction and installation of underground 4-inch sewerline containing an area of 1,083.96 square feet.

 

(k)

Easement F: Nonexclusive use by the LESSEE for the construction and installation of underground powerline containing an area of 360.28 square feet.

 

(l)

Easement G: Nonexclusive use by the LESSEE for the construction and installation of underground powerline containing an area of 231.42 square feet.

 

(m)

Easement H: Nonexclusive use by the LESSEE for the construction and installation of underground powerline containing an area of 165.11 square feet.

 

(n)

Easement I: Nonexclusive use by the LESSEE for the construction and installation of underground 6-inch sewerline containing an area of 3,030.14 square feet.

 

(o)

Easement J: Exclusive easement for repair and maintenance of cesspool containing an area of 200 square feet.

 

(p)

Easement K: Wharf crane containing an area of 21,190 square feet and crane rails containing an area of 5,063 square feet.

 

2. USE OF PREMISES. The premises shall be used solely for the construction, installation, maintenance, use and repair of office building, gate house, guard house, mechanical pad, transformer pad, subsurface powerlines, subsurface sewerlines, wharf cranes and crane rails for the operation and handling of cargo containers.

 

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3. DEFINITIONS. As used herein, unless specifically indicated otherwise or clearly repugnant to the context:

 

(a)

“LESSOR” means the Director of Transportation of the State of Hawaii or his representative;

 

(b)

“LESSEE” means SEA-LAND SERVICE, INC. herein, its successors or permitted assigns, according to the context hereof;

 

(c)

“Holder of record of a security interest” means a person who is the owner or possessor of a security interest in the premises and who has filed with the Department of Transportation and with the Bureau of Conveyances of the State of Hawaii a copy of such interest;

 

(d)

“Premises” means the parcels and easements hereby demised;

 

4. GENDER AND NUMBER. The use of any gender includes all genders; the singular includes the plural and the plural includes the singular;

 

5. HEADINGS NOT TO BE USED TO CONSTRUE DOCUMENT. The marginal headings throughout this lease are for the convenience of the LESSOR and the LESSEE and are not intended to construe the intent or meaning of any of the provisions hereof.

 

6. EFFECTIVE DATE AND TERM OF LEASE. The lease shall be for a period of thirty-five (35) years commencing on the date the lease is filed with the Federal Maritime Commission pursuant to Section 5(a) of the Shipping Act of 1984, 46 U.S.C. Section 1704(a) and approval pursuant to Section 15 of the Shipping Act, 1916.

 

Any subsequent amendment hereto shall be filed with the Federal Maritime Commission as provided in Section 5(a) and become effective on the date of filing.

 

7. ANNUAL RENTAL. The rental for the first (1st) through the fifth (5th) years of the lease shall be TWO HUNDRED NINETY-FIVE THOUSAND SIX HUNDRED NINE AND NO/100 DOLLARS ($295,609.00); from the sixth (6th) through the tenth (10th) years, the rental shall be THREE HUNDRED EIGHTY-FOUR THOUSAND TWO HUNDRED NINETY-TWO AND NO/100 DOLLARS ($384, 292.00) ; and from the eleventh (11th) through fifteenth (15th) years, the rental shall be FOUR HUNDRED NINETY-NINE THOUSAND FIVE HUNDRED EIGHTY AND NO/100 DOLLARS ($499,580.00) . The annual rental for subsequent years shall be determined under paragraph 8 to be set forth in amendments hereto filed and effective as provided in paragraph 6.

 

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The annual rental shall be waived for one year (1) from the effective date of that certain Construction Right-of-Entry Agreement dated September 1, 1991 made by and between the LESSOR and the LESSEE or upon initiation of operation, whichever occurs first.

 

8.

RENTAL REOPENING.

 

(a)

Period. The annual rental hereinabove reserved shall be reopened and redetermined at the expiration of the fifteenth (15th) and twenty-fifth (25th) years of said term. The appraiser (s) referred to below shall also determine an appreciation rate to be applied on the latter five-year (5) portion of each ten-year (10) period, which rate shall not be less than thirty percent (30%).

 

(b)

Determination of rental upon reopening of the annual rental. The rental for any ensuing period shall be the fair market rental at the time of reopening. Except as provided herein, the provisions in Chapter 658, Hawaii Revised Statutes, shall be followed. At least six (6) months prior to the time of reopening, the fair market rental and the appreciation rate shall be determined by an appraiser whose services shall be contracted for by the LESSOR, and the LESSEE shall be promptly notified by certified mail, return receipt requested, of the fair market rental and appreciation rate as determined by LESSOR’S appraiser; provided, that should the LESSEE fail to notify LESSOR in writing within thirty (30) days after receipt thereof that LESSEE disagrees with the fair market rental and appreciation rate as determined by LESSOR’S appraiser and that LESSEE has appointed its own appraiser to prepare an independent appraisal report, then the fair market rental and appreciation rate as determined by LESSOR’S appraiser shall be deemed to have been accepted by LESSEE and shall be the fair market rental as of the date of reopening and the appreciation rate to be used. If LESSEE has notified LESSOR in writing and appointed his appraiser as stated hereinabove, LESSEE’S appraiser shall complete his appraisal and the two appraisers shall then exchange their reports within forty-five (45) days from the date of LESSEE’S appointment of the appraiser.

 

The two appraisers shall review each other’s reports and make every effort to resolve whatever differences they may have. However, should

 

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differences still exist fourteen (14) days after the exchange, the two appraisers shall within seven (7) days thereafter appoint a third appraiser who shall also prepare an independent appraisal report based on the review of the two appraisal reports prepared and any other data. Copies thereof shall be furnished to the first two appraisers within forty-five (45) days of the appointment. Within twenty (20) days after receiving the third appraisal report, all three shall meet and determine the fair market rental and appreciation rate in issue. The fair market rental and appreciation rate as determined by a majority of the appraisers shall be final and binding upon both LESSOR and LESSEE, subject to vacation, modification or correction in accordance with the provisions of Sections 658-8 and 658-9, Hawaii Revised Statutes. The LESSEE shall pay for its own appraiser and the cost of the services of the third appraiser shall be borne equally by the LESSOR and the LESSEE. All appraisal reports shall become part of the public record of the LESSOR.

 

In the event that the appraisers are unable to determine the fair market rental before the reopening date, or by the foregoing prescribed time, whichever is later, the LESSEE shall pay the fair market rental as determined by LESSOR’S new appraised value until the new rent is determined and the rental paid by LESSEE shall then be subject to retroactive adjustments as appropriate to reflect the fair market rental determined as set forth hereinabove. However, LESSEE or LESSEE’S appraiser’s failure to comply with the procedures set forth above shall constitute a waiver of LESSEE’S right to contest the new rent, and the LESSEE shall pay the rent as determined by LESSOR’S appraiser without any retroactive adjustments. Alternatively, LESSOR may treat such failure as a breach of this lease and terminate the lease.

 

The value of improvements constructed, installed and owned by the LESSEE within the premises shall not be considered in determining the fair market rental.

 

The LESSOR and the LESSEE shall evidence such redetermination or annual ground rental made hereunder a written instrument signed by the LESSOR and the LESSEE. The LESSOR shall submit to the Federal Maritime Commission for its information a statement of the amount of the

 

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annual ground rental as so determined hereinabove.

 

9. MINIMUM ANNUAL GUARANTEE (MAG) . In addition to the lease rental payable in accordance with paragraph 8 above, the LESSEE, as a terminal operator, shall pay to LESSOR any and all tariffs, fees, costs, assessments, charges, surcharges, and any other payments required or otherwise applicable under Chapter 19-44 of the Hawaii Administrative Rules (hereinafter “Sand Island Container Facility tariff”) . In the event that the aggregate amount of charges incurred by the LESSEE for services provided by the LESSOR pursuant to the Sand Island Container Facility tariff in any year commencing with the effective date of this lease and for each subsequent year thereafter, is less than the minimum annual guaranteed amount of FOUR HUNDRED FIFTY FOUR THOUSAND THREE HUNDRED TEN AND NO/100 DOLLARS ($454 .310. 00 (the “MAG”), the LESSEE shall pay the LESSOR the difference between such amounts incurred by the LESSEE based on the Sand Island Container Facility tariff and the MAG. If the amounts incurred by the LESSEE during one (1) calendar year of the lease term pursuant to the Sand Island Container Facility tariff exceeds the MAG, the LESSEE shall pay the total amount due pursuant to the Sand Island Container Facility tariff to the LESSOR with the LESSEE receiving credit for any MAG payments made during the lease year. The obligation to pay the MAG shall commence on the effective date of this lease. Prorated adjustments will be made for less than full years. Determination of the Sand Island Container Facility tariff shall be in accordance with the Hawaii Administrative Rules, Commercial Harbors and Tariff, as the same may be amended from time to time.

 

In calculating and fixing the MAG, the MAG shall be equal to the sum of:

 

(a)

the amortized cost of short-term and long-term container terminal improvements requested by the LESSEE or required by this lease paid for by the LESSOR and

 

(b)

an allocated portion of the operational expenses of the LESSOR as follows:

 

(1)