LOT 3 OPTION AGREEMENT

Real Estate Option Right of First Refusal Agreement

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Title: LOT 3 OPTION AGREEMENT
Governing Law: Hawaii Date: 6/23/2005

LOT 3 OPTION AGREEMENT, Parties: kaanapali land llc

EXHIBIT 10.1

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LOT 3 OPTION AGREEMENT

This LOT 3 OPTION AGREEMENT (this "Agreement") is made as of

August 5, 2003 (the "Effective Date"), by and between NB LOT 3, LLC, a

Delaware limited liability company ("NB 3"), the address of which is 900

North Michigan Avenue, Suite 1400, Chicago, Illinois 60611, and MAUI BEACH

RESORT LIMITED PARTNERSHIP, a Delaware limited partnership ("Optionee"),

the address of which is 900-999 West Hastings Street, Vancouver, British

Columbia V6C 2W2.

RECITALS:

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A. NB 3 is the record fee simple owner of that certain parcel of

land situate at Kaanapali, District of Lahaina, Island and County of Maui,

State of Hawaii, being Lot 102, area 26.692 acres, as shown on Map 86,

filed in the Office of the Assistant Registrar of the Land Court of the

State of Hawaii (the "Land Court") with Land Court Application No. 1744 of

Pioneer Mill Company, Limited, and being land(s) described in Transfer

Certificate of Title No. 630,552 issued to NB 3 (the "Property").

B. Pursuant to and in accordance with that certain Property

Purchase Agreement and Option dated as of August 4, 2003 (the "Lot 4

Purchase Agreement"), entered into by and among NB Lot 4, LLC, a Delaware

limited liability company (the "Lot 4 Seller"), Optionee and NB 3, NB 3

agreed to grant to Optionee an option to purchase the Property from NB 3,

on and subject to the terms and conditions set forth in this Agreement.

AGREEMENT:

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In consideration of One Hundred Dollars ($100.00) paid by Optionee to

NB 3, the Recitals set forth above, which by this reference are

incorporated herein, the mutual promises and agreements set forth below,

and other good and valuable consideration, the receipt and sufficiency of

which are hereby acknowledged, NB 3 and Optionee hereby agree as follows:

1. GRANT OF OPTION. NB 3 hereby grants to Optionee the exclusive

right and option, upon and subject to the terms and conditions set forth

herein (the "Option"), to purchase the Property, together with all of

Seller's right, title and interest in and to the following property and

other rights and interests (the "Additional Property"): (a) all buildings,

structures, fixtures and other improvements, if any, located on or under

the Property; and (b) all easements, rights-of-way, covenants,

restrictions, reservations, privileges, licenses and other rights and

interests, if any, appurtenant to the Property or running with the land

comprising the Property.

2. TERM. The term of the Option shall be two (2) years,

commencing on the Effective Date and expiring at 4:00 p.m. (Hawaii Standard

Time) on the date which is two years after the Effective Date (the

"Expiration Date").

<PAGE>

3. EXERCISE OF OPTION. Provided that this Agreement shall not

have been earlier terminated pursuant to Section 19 below, Optionee may

exercise the Option at any time prior to 4:00 p.m., Hawaii Standard Time,

on the Expiration Date by (i) delivering to NB 3 and the Escrow Agent (as

defined below) written notice stating that Optionee is exercising the

Option (the "Notice of Exercise"), and (ii) delivering to the Escrow Agent

the Deposit (as defined below) in accordance with Section 5 of this

Agreement. Notwithstanding anything to the contrary in this Agreement or

the Lot 4 Purchase Agreement, but without limiting Section 19 of this

Agreement, the rights of Optionee under this Agreement shall terminate if

Optionee fails to timely deliver the Notice of Exercise and the Deposit in

accordance with this Section 3. Further upon such failure, both NB 3 and

Optionee shall be released from all further obligations under this

Agreement, except for the continuing indemnity obligations under the Right-

of-Entry Agreement and Section 30 of this Agreement and the confidentiality

obligations under Section 31 of this Agreement.

4. CALCULATION OF PURCHASE PRICE.

The purchase price (the "Purchase Price") to be paid by Optionee to

NB 3 for the Property pursuant to this Agreement shall be the Base Price

(as defined in subsection 4(a) below), adjusted as provided in subsection

4(b) below.

(a) BASE PRICE.

(i) The "Base Price" shall be the sum of (A) Twenty-Two

Million Five Hundred Thousand U.S. Dollars (U.S. $22,500,000.00) plus

(B) Sixty Thousand U.S. Dollars (U.S. $60,000.00), subject to the

adjustment under subsection 4(b)(i), multiplied by the amount by

which the Maximum Unit Count (as defined below) is greater than 350.

As used herein, the "Maximum Unit Count" shall be the sum of (x) the

maximum number of Units (as defined in Section 4(a)(ii) below) which

may be developed on the Property pursuant to any development plan(s)

for the Property prepared and submitted by or on behalf of Optionee,

its successors and assigns, to the County of Maui (the "County") and

for which a special management area use permit ("SMA Permit") has

been issued by the County (or to the extent an SMA Permit is not

required, for which building permit(s) have been issued by the

County) ("Approved Development Plan"), and (y) the amount by which

the maximum number of Units which may be developed on "Lot 4"

(referenced in Section 13 below, and being the real property

described in and covered by the Lot 4 Purchase Agreement) exceeds

700, either pursuant to an Approved Development Plan for Lot 4

submitted by or through Optionee, its successors and assigns, as the

owner of Lot 4, or pursuant to any amendment or termination of the

Lot 4 Unit Count Declaration (as defined in Section 10 (c)(xviii)

below) caused or permitted by or through Optionee, its successors and

assigns, as the owner of the Property.

(ii) As used in this Agreement, a "Unit" shall mean a

single hotel room or suite hotel room, apartment unit, condominium

unit, or dwelling of any kind; provided, however, that each single

hotel room, suite hotel room, apartment unit, condominium unit or

dwelling incorporating the "lock-off' design (which permits the unit

owner to use a portion thereof as

<PAGE>

a separate unit, and which is sometimes referred to as a "lock-off

unit" or "convertible apartment unit") shall be counted as two Units

for purposes of determining the total number of Units, regardless of

whether such unit has more than one bedroom.

(b) ADJUSTMENTS TO BASE PRICE.

(i) CONSUMER PRICE INDEX ADJUSTMENT.

(A) If the Current Index (as defined below) is higher

than the Comparison Index (as defined below) at the time of any

calculation or recalculation of the Purchase Price, then the

Base Price shall be increased by multiplying the $60,000.00

figure specified in subsection 4(a)(i) above by a fraction, the

numerator of which is the Current Index and the denominator of

which is the Comparison Index. For example, if the Comparison

Index is 125 and the Current Index as of the first anniversary

date is 130, the $60.000.000 figure would increase to U.S.

$62,400.00. As used herein: "C.P.I." means the Consumer Price

Index for All Urban Consumers (Base Year 1984-86 = 100) for

Hawaii/City and County of Honolulu, published by the United

States Department of Labor, Bureau of Labor Statistics;

"Current Index" means the C.P.I. published as of the date of

any calculation or recalculation of the Purchase Price or, if

not published as of that date, then the date nearest to and

immediately preceding such date; and "Comparison Index" means

the C.P.I. published as of the earlier of (1) the date of the

Notice of Exercise or (2) January 1, 2005 or, if not published

as of that date, then the date nearest to and immediately

preceding such date.

(B) If the C.P.T. is changed so that the base year

differs from the base year that was used to determine the

C.P.I. as of the Effective Date, then the C.P.I. shall be

converted in accordance with the conversion factor published by

the United States Department of Labor, Bureau of Labor

Statistics. If the C.P.I. is discontinued or revised, the

C.P.I. shall be replaced with such governmental index or

computation as shall obtain substantially the same result as

would otherwise have been obtained if the original C.P.I. had

not been discontinued or revised.

(ii) CHANGES IN UNIT COUNT. Upon issuance of an SMA Permit or

building permit for an Approved Development Plan for either of Lot 4

or the Property after Closing, or upon any amendment or termination

of the Lot 4 Unit Count Declaration, as referenced in subsection

4(a)(i) above, after Closing, an adjustment will be made by NB 3 and

Optionee to the Purchase Price paid at Closing if and to the extent

applicable based upon a recalculation of the Base Price pursuant to

subsection 4(a)(i) above and the then-current Maximum Unit Count

resulting from such Approved Development Plan or such amendment or

termination. If, based upon any such recalculation, the Base Price is

greater than the Base Price used to determine the Purchase Price at

Closing, Optionee shall pay to NB 3, upon demand of NB 3, an

additional amount equal to the increase in Base Price (adjusted in

accordance with subsection 4(b)(i) above). Optionee shall give

written notice to NB 3 promptly upon each issuance of an SMA Permit

or building permit for an Approved Development Plan for Lot 4 or the

Property, and promptly upon any amendment or termination of the Lot 4

<PAGE>

Unit Count Declaration. The terms and conditions of this Purchase

Price adjustment and payment obligation shall be set forth in an

agreement (the "Price Adjustment Agreement"), substantially in the

form attached as EXHIBIT "I" to this Agreement or such other form as

may be agreed in writing by NB 3 and Optionee prior to Optionee's

delivery of the Notice of Exercise, which Price Adjustment Agreement

shall be executed and delivered at Closing by NB 3 and Optionee, and

reference thereto will be included in the Lot 3 Unit Count

Declaration (as defined in Section 14(c) below).

(iii) SECURITY. Optionee's performance in full of its

obligations under the Price Adjustment Agreement shall be secured by

a mortgage (the "Price Adjustment Mortgage") in favor of NB 3 and

covering the Property and the Additional Property, substantially in

the form of the Lot 4 Mortgage (as defined in Section 19(a) below),

to be executed by Optionee and recorded at Closing, and by a UCC

Financing Statement relating to the Property and the Additional

Property, substantially in the form of the UCC Financing Statement

filed in connection with the Lot 4 Mortgage, to be filed at Closing.

NB 3 shall subordinate its interests under the Price Adjustment

Mortgage to a mortgage given by Optionee and recorded at Closing in

favor of an unaffiliated lender to secure acquisition financing for

the Property in an amount not to exceed 60% of the Purchase Price

paid to NB 3 at Closing pursuant to this Agreement. Provided that

Optionee is not then in default under the Price Adjustment Agreement

or the Price Adjustment Mortgage, the Price Adjustment Mortgage shall

be released from the Property at such time as an Approved Development

Plan has been obtained for the Property, or from such subdivided

portion(s) of the Property for which an Approved Development Plan has

been obtained; provided, however, that such Approved Development Plan

is for the full and final intended use of the Property, or the

subdivided portion thereof covered by the Approved Development Plan,

and provided further that such Approved Development Plan shall not

anticipate, or otherwise provide for, future development of any

portion of the Property (or such subdivided portion) in any manner

which will or could increase the number of Units which may be

developed on the Property. No such release (or partial release) of

the Price Adjustment Mortgage shall be construed to release Optionee

from its continuing liability and obligations under the Price

Adjustment Agreement; provided, however, following completion of

construction (as evidenced by issuance of certificates of occupancy)

of all improvements covered by any Approved Development Plan, if such

Approved Development Plan is for the full and final intended use of

the Property, or the subdivided portion thereof covered by the

Approved Development Plan, and if such Approved Development Plan, or

any development or ownership documents (including, without

limitation, condominium or time share declarations) relating to the

land covered thereby, shall not anticipate, provide for, or otherwise

reserve any rights relating to, future development of any portion of

the Property (or such subdivided portion) in any manner which will or

could increase the number of Units which may be developed on the

Property, then, at the written request of Optionee, NB 3 shall

release and discharge Optionee, in writing, from all such liabilities

and obligations to the extent related to the Property (or subdivided

portion thereof) that is the subject of such Approved Development

Plan.

5. PAYMENT OF PURCHASE PRICE. The Purchase Price, calculated as

of the date of the Notice of Exercise, shall be payable by Optionee to NB 3

as provided below. All amounts payable hereunder shall be paid in United

States dollars by electronic or wire transfer of

<PAGE>

or immediately available funds, in accordance with written instructions

delivered by NB 3 Escrow Agent to Optionee, or in such other form as is

acceptable to NB 3. Except as otherwise provided in this Agreement, all

interest accruing on such deposits shall accrue for the benefit of

Optionee.

(a) DEPOSIT. As a condition precedent to Optionee's proper and

effective exercise of the Option pursuant to Section 3 above, Optionee

shall deposit into Escrow, prior to 4:00 p.m., Hawaii Standard Time, on the

Expiration Date (and in no event later than two business days after

Optionee's delivery of the Notice of Exercise pursuant to Section 3 above),

the sum of THREE MILLION AND NO/100 U.S. DOLLARS (U.S. $3,000,000.00) (the

"Deposit"), to be held and disbursed by Escrow Agent in accordance with

subsection 5(b) below. The Deposit shall not be refundable to Optionee,

except only as provided in Sections 11 and 19(b) of this Agreement.

(b) DISBURSAL OF DEPOSIT TO NB 3. Immediately upon Optionee's

exercise of the Option, as evidenced by delivery of the Notice of Exercise

to Escrow Agent and NB 3 and delivery of the Deposit to Escrow Agent, in

accordance with Sections 3 and 5(a) above, Escrow Agent shall release and

disburse the Deposit to NB 3 (and shall release and disburse to Optionee

all interest, if any, accrued on the Deposit prior to disbursal of the

Deposit to NB 3). At Closing, the Deposit shall be applied toward the

Purchase Price. All interest accrued on the Deposit after the date of

disbursal to NB 3 pursuant to this subsection 5(b) shall accrue for the

benefit of NB 3 and shall not be applied to the Purchase Price, nor shall

such interest be payable to Optionee in or 19(b) of this the event of any

refund of the Deposit to Optionee pursuant to Sections 11 Agreement.

Optionee and NB 3 expressly, specifically, and irrevocably direct and

authorize Escrow Agent to release and disburse the Deposit as provided in

this subsection 5(b). Escrow Agent is hereby relieved of liability for so

releasing and disbursing the Deposit to NB 3.

prior to the Closing Date (as defined below), Optionee shall deposit into

Escrow the balance of the Purchase Price, plus or minus the net amount to

be paid by, or credited to, Optionee at Closing under Section 9 of this

Agreement.

6. TITLE.

(a) DEED. At Closing, NB 3 shall convey the Property (and any

Additional Property) to Optionee by a limited warranty deed (the "Deed"),

substantially in the form attached as EXHIBIT "2" to this Agreement, or in

such other form as may be agreed in writing by NB 3 and Optionee prior to

Optionee's delivery of the Notice of Exercise, which Deed shall convey to

Optionee fee simple title subject only to the Permitted Exceptions (as

defined in subsection 6(b) below). Optionee agrees to and shall take title

to the Property at Closing subject to the Permitted Exceptions.

(b) PERMITTED EXCEPTIONS. Attached as EXHIBIT "3" to this

Agreement is a copy of a preliminary title report dated as of February 13,

2003 (the "Lot 3 Title Report") covering the Property, issued by Title

Guaranty of Hawaii, Inc. Optionee acknowledges that, as provided in

<PAGE>

and pursuant to the Lot 4 Purchase Agreement, it has received copies of all

recorded documents and maps referenced in the Lot 3 Title Report, other

than documents related to the Amfac Mortgages (as defined in Section

9(a)(ii) below). Attached as EXHIBIT "4" to this Agreement is a list of

exceptions, reservations, easements, and other items which NB 3 proposes

shall be recited or referenced in the Deed as permitted encumbrances or

exceptions to title and exclusions from NB 3's limited warranty under the

Deed. If Optionee disapproves of any items listed in Exhibit "4" or any

other exceptions or defects discovered by Optionee through its

investigation of the state of the title to the Property, Optionee may, at

its discretion, inform NB 3 of such disapproval by delivering written

notice (the "Title Notice") thereof to NB 3 no later than sixty calendar

days prior to the Expiration Date (and in no event later than ten days

prior to Optionee's delivery of the Notice of Exercise). The Title Notice

shall specify in detail the disapproved item(s), exception(s) and defect(s)

(the "title defect"). Upon receipt of the Title Notice, NB 3 shall, at its

option, notify Optionee in writing, delivered to Optionee no later than

twenty calendar days prior to the Expiration Date, either: (i) that NB 3

shall agree to cure or otherwise remove the title defect from title and the

Deed prior to the Closing Date; or (ii) that NB 3 shall not or cannot cure

or otherwise remove the title defect, in which case, if Optionee delivers

the Notice of Exercise, Optionee shall be deemed to have rescinded its

disapproval of the title defect. Optionee agrees that NB 3 has no

obligation to cure any title defect, except that NB 3 shall discharge from

the Property the Amfac Mortgages and any other mortgages, deeds of trust,

attachments and monetary liens (excepting, however, any mortgages and liens

affecting the grantee's interest under the Grant of Lot 4 Access Easement

(as defined in Section 10(c)(xx) below)) ("Monetary Liens"). Except for

Monetary Liens, Optionee shall be deemed to have approved all items listed

in Exhibit "4" and all other exceptions and defects affecting or

encumbering the title to the Property existing as of the date of Optionee's

effective exercise of the Option and not expressly and specifically

disapproved in the manner provided above in this subsection 6(b). All such

approved items are referred to in this Agreement as the "Permitted

Exceptions."

Exercise, Optionee may, at its option and expense, obtain a binding

commitment (the "title commitment"), from a title insurance company (the

"title company") licensed in the State of Hawaii, to issue at Closing an

owner's policy of title insurance (the "title policy") with respect to the

Property, with such extended coverage and endorsements as Optionee may

require and in such amount as Optionee shall direct but not to exceed the

Purchase Price, free of all Monetary Liens but subject to the Permitted

Exceptions. Without limiting the terms of Section 19(b) of this Agreement,

any failure of Optionee to obtain the title commitment, the title policy,

or any other policy of title insurance or title assurances, shall not in

any way affect Optionee's obligations under this Agreement.

(d) ASSIGNMENT OF WASTEWATER CAPACITY. At Closing, NB 3 shall

cause Kaanapali Development Corp., a Hawaii corporation ("KDC") (being an

affiliate of NB 3), to deliver to Optionee an assignment of a portion of

KDC's reserved wastewater capacity at the Lahaina Wastewater Treatment

Plant, for use relating to the Property and for no other purpose, which

wastewater capacity to be assigned shall be such amount as required by the

County of Maui for Optionee's development on the Property of 550 Units or

such lesser number of Units as shall be

<PAGE>

approved by appropriate governmental authorities for development on the

Property. Such assignment shall be substantially in the form attached as

EXHIBIT "5" to this Agreement, or in such other form as may be agreed in

writing by NB 3 and Optionee prior to Optionee's delivery of the Notice of

Exercise (the "Assignment of Wastewater Capacity"). Optionee shall agree to

and accept such assignment as indicated in the Assignment of Wastewater

Capacity.

7. ESCROW.

(a) OPENING. Immediately upon or (at the request of Optionee)

before delivering the Notice of Exercise, NB 3 and Optionee shall open an

escrow account ("Escrow") with Title Guaranty Escrow Services, Inc. (main

office - 235 Queen Street, Honolulu, Hawaii) ("Escrow Agent"), for the

transaction pursuant to this Agreement. Delivery to Escrow Agent of a fully

executed copy of this Agreement shall constitute the opening of Escrow.

This Agreement shall constitute joint escrow instructions to Escrow

Agent. NB 3 and Optionee agree to execute such additional instructions not

inconsistent with the provisions of this Agreement which may be required by

Escrow Agent. NB 3 and Optionee agree that, as between NB 3 and Optionee,

if there is any conflict between the terms of this Agreement and the

provisions of any additional escrow instructions required by Escrow Agent,

the terms of this Agreement shall control.

(b) CANCELLATION. If the Closing fails to occur due to NB 3's

default, including without limitation due to the failure of the conditions

set forth in subsections I I (a), (b) or (d) of this Agreement or due to

the failure of the conditions set forth in subsections I I (c) or (e) of

this Agreement for reasons within the reasonable control of NB 3, NB 3

shall pay all Escrow Cancellation Charges. If the Closing fails to occur

due to Optionee's default or due to the failure of the conditions set forth

in subsections 11(c) or (e) of this Agreement for reasons within the

reasonable control of Optionee, Optionee shall pay all Escrow Cancellation

Charges. If the Closing fails to occur for any other reason, including

without limitation due to the failure of the conditions set forth in

subsections 1 I (c) or (e) for reasons beyond the reasonable control of NB

3 or Optionee, NB 3 and Optionee shall each pay one-half of the Escrow

Cancellation Charges. As used herein, the term "Escrow Cancellation

Charges" means all fees, charges, and expenses charged by Escrow Agent to

NB 3 or Optionee in connection with the Escrow, including all expenses

charged in connection with issuance of the Lot 3 Title Report and other

title matters. Nothing contained in this subsection 7(b) is intended to

limit either NB 3 or Optionee from exercising the remedies available upon

default as set forth in this Agreement.

8. CLOSING.

(a) CLOSING DATE. As used in this Agreement, the term "Closing"

means the time when the Deed is recorded at the Land Court, and all other

events or actions to occur on the Closing Date in accordance with this

Agreement (including without limitation those to occur upon satisfaction or

waiver of the conditions set forth in Section I1 of this Agreement) are

consummated. The "Closing Date" shall be the date that is fourteen calendar

days after the

<PAGE>

Option is effectively exercised pursuant to this Agreement (or the first

business day thereafter if such date is not a business day).

(b) CLOSING DOCUMENTATION. On or before two business days prior to

the Closing Date, NB 3 and/or Optionee, as appropriate, shall deliver to

Escrow Agent the following documents:

(i) NB 3'S CLOSING DOCUMENTS. NB 3 shall deliver to Escrow

Agent the following documents (the "NB 3 Closing Documents"):

(A) the Deed, executed and acknowledged by NB 3 and

in recordable form;

(B) the Assignment of Wastewater Capacity, executed and

acknowledged by KDC;

Section 14(c) below), executed and acknowledged by NB 3 and in

recordable form;

(D) the Assignment of SMA Requirements Agreement (as

defined in Section 14(b) below), executed and acknowledged by

NB 3;

(E) the Assignment of Water Quality Monitoring Right of

Entry (as defined in Section 15 below), executed and acknow-

ledged by NB 3;

(F) the Trade Name License Agreement (as defined in

Section 36 below), executed by the Service Mark Holder (as

defined in Section 36 below);

(G) such affidavit and indemnity, executed and

acknowledged by NB 3, in such form as shall be reasonably

agreed by NB 3 and the title company to cause the title company

to delete from the title policy, if any, all exceptions for

mechanics', materialmen's and similar liens and leases,

occupancy agreements and parties in possession (excepting the

Water Quality Monitoring Right of Entry (as defined in Section

10 (c)(xvii) below) the Lot 3/Lot 4 Access Roadway Construction

Agreement (as defined in Section 10 (c)(xxi) below), and those

relating to use of the Public Open Space Area pursuant to the

Public Open Space Declaration (as defined in Section 10(c)(v)

below), and further excepting any liens which may affect the

Property relating to or as a result of Optionee's activities on

the Property, pursuant to Section 10 of this Agreement or

otherwise);

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

below);

<PAGE>

(I) a certificate of the corporate secretary of the

Managing Member (as defined in Section 18(a) below), stating

that the NB 3 Resolutions (as defined in Section 18 (a) below)

were duly adopted by the Managing Member's board of directors

and evidencing the incumbency of the officers executing this

Agreement and the NB 3 Closing Documents on behalf of the

Managing Member, as NB.3's managing member;

(J) a certificate of good standing from the State of

Hawaii Department of Commerce and Consumer Affairs showing KDC

to be duly authorized to do business in the State of Hawaii and

in good standing under the laws of the State of Hawaii;

(K) a certificate of the corporate secretary of KDC

stating that its board of directors has duly adopted

resolutions authorizing the execution, acknowledgement and

delivery of, and the performance of such corporation's

obligations under, the Assignment of Wastewater Capacity

and evidencing the incumbency of the officers acting on behalf

of such corporation;

(L) such other evidence of the authority of NB 3, the

Managing Member, KDC, the Service Mark Holder and/or their

respective members, officers and representatives acting on

their behalf as the title company may reasonably request in

connection with Closing;

(M) an affidavit or certification, executed by NB 3, in

compliance with Internal Revenue Code, Section 1445(c) and the

applicable regulations;

(N) either (i) a properly executed Hawaii Form N-289

certifying that NB 3 is a Hawaii resident or NB 3 has a

permanent place of business in Hawaii or is qualified to do

business in Hawaii, or (ii) a certificate or other evidence as

contemplated by the State Withholding Provisions (as defined

in subsection 8(c) below).

If NB 3 fails to deliver any such Form N-289 or other

evidence, Optionee shall not be excused from its obligation to

consummate the transactions contemplated herein, but rather may

deduct and withhold from the Purchase Price an amount equal to

five percent (5%) of the sales price of the Hawaii real

property conveyed in connection with the transactions

contemplated herein, as defined and required by the State

Withholding Provisions. As described in subsection 8 (c) below,

any amount so withheld shall be deemed to have been paid by

Optionee as a part of the Purchase Price. Should NB 3 deliver

evidence to Optionee that the Hawaii Department of Taxation has

authorized a partial or total reduction

<PAGE>

in the amount required to be withheld from the Purchase Price

pursuant to the State Withholding Provisions, Optionee may

withhold only the amount required by the Department of Taxation

to be withheld, if any, and any amount so withheld shall be

deemed to have been paid by Optionee as part of the Purchase

Price;

(O) a tax clearance certificate from the Hawaii

Department of Taxation, in compliance with Hawaii Revised

Statutes Section 237-43;

(P) the Fill Agreement (as defined in Section 14(f)

below), executed by PMCo (as defined in Section 14(f) below)

and/or such of the Amfac-Related Entities (as defined in

Section 20 below) as is applicable; and

(Q) such other documents or instruments as the title

company may reasonably request to consummate Closing in

accordance with this Agreement.

(ii) OPTIONEE'S CLOSING DOCUMENTS. Optionee shall deliver to

Escrow Agent the following documents (the "Optionee Closing

Documents"):

(A) the Deed, executed and acknowledged by Optionee (or

the Permitted Assignee or Successor, as those terms are

hereinafter defined, as applicable) and in recordable form;

(B) the Assignment of Wastewater Capacity, executed and

acknowledged by Optionee (or the Permitted Assignee or

Successor, as applicable);

acknowledged by Optionee (or the Permitted Assignee or

Successor, as applicable) and in recordable form;

(D) the Assignment of SMA Requirements Agreement,

executed and acknowledged by Optionee (or the Permitted

Assignee or Successor, as applicable);

(E) the Assignment of Water Quality Monitoring Right of

Entry, executed and acknowledged by Optionee (or the Permitted

Assignee or Successor, as applicable);

(F) the Trade Name License Agreement, executed by

Optionee (or the Permitted Assignee or Successor, as

applicable);

<PAGE>

(G) the Optionee Certificates (as defined in Section

18(b) below);

(H) a certificate of the corporate secretary of the

General Partner (as defined in Section 18(b) below) stating

that Optionee's Resolutions (as defined in Section 18 (b)

below) were duly adopted by the General Partner's board of

directors and evidencing the incumbency of the officers

executing this Agreement and the Optionee Closing Documents on

behalf of the General Partner, as Optionee's general partner;

(I) If the Permitted Assignee or Successor that takes

title to the Property (or its general partner or managing

member or the General Partner) is a corporation, a certificate

of the corporate secretary of each such corporation stating

that the Optionee Resolutions were duly adopted by the board of

directors of each such corporation and evidencing the

incumbency of the officers executing the Optionee Closing

Documents on behalf of each such corporation;

(J) such other evidence of the authority of Optionee or

the Permitted Assignee or Successor and/or their respective

officers and representatives as the title company or NB 3 may

reasonably request in connection with this Agreement and

Closing;

(K) the Fill Agreement, executed by Optionee (or the

Permitted Assignee or Successor, as applicable); and

(L) such other documents or instruments as the title

company may reasonably request to document and consummate

Closing in accordance with this Agreement.

precedent set forth in Section 11 of this Agreement are satisfied or waived

in writing by the party benefiting from such conditions, Escrow Agent shall

disburse to NB 3 the Purchase Price (less the Deposit to the extent the

Deposit was earlier disbursed to NB 3 pursuant to Section 5(b) above, and

also less NB 3's share of the closing costs, Escrow Agent's fees, and

applicable prorated items according to Section 9 of this Agreement), shall

record the Deed and the Lot 3 Unit Count Declaration at the Land Court, and

shall deliver the NB 3 Closing Documents to Optionee and the Optionee

Closing Documents to NB 3. NB 3 acknowledges and agrees that Optionee may

be required to withhold a portion of the Purchase Price pursuant to Section

235-68 of the Hawaii Revised Statutes (the "State Code") (Section 235-68 of

the State Code, together with any regulations now or hereafter promulgated

thereunder, being collectively referred to herein as the "State Withholding

Provisions"). Any amount properly so withheld by Optionee, in accordance

with subsection 8(b)(i)(O) above, shall be deemed to have been paid by

Optionee as part of the Purchase Price.

<PAGE>

(d) POSSESSION. Possession of the Property shall be delivered to

Optionee at Closing, subject only to such rights to the Property

constituting or arising out of the Permitted Exceptions.

9. CLOSING COSTS AND PRORATIONS. Except as otherwise specifically

provided in this Agreement, Optionee shall be responsible for all closing

costs incurred by Optionee, and NB 3 shall be responsible for all closing

costs incurred by NB 3, including each of their respective attorney's fees.

(a) NB 3's CLOSING COSTS. At Closing (if not earlier paid), NB 3

shall pay the following:

(i) the cost of the Lot 3 Title Report and the cost of the

base (i.e., standard coverage) portion of the title policy referenced

in Section 6(c) of this Agreement, if any (excluding the cost of any

extended coverage or endorsements);

(ii) recording fees and other costs, if any, for the release

of the Property from all Monetary Liens, including without limitation

(A) Additional Security Mortgage, Security Agreement, and Financing

Statement dated November 1, 2000, recorded at the Bureau of

Conveyances of the State of Hawaii (the "Bureau") as Document No.

2000-156571 and at the Land Court as Document No. 2662799, as

amended, and (B) Mortgage, Security Agreement and Financing Statement

dated November 14, 2002, recorded at the Bureau as Document No.

2002-203004 and at the Land Court as Document No. 2860723, and

No. 2002-203005 (collectively, the "Amfac Mortgages");

(iii) recording fees and other costs, if any, for any releases,

discharges or other curative documents or actions which NB 3 commits

to deliver and/or take in accordance Section 6(b) of this Agreement;

(iv) any rollback taxes and special assessments assessed

against the Property as of the Closing Date or payable at Closing in

connection with the transfer of the Property to Optionee;

(v) any conveyance tax payable in connection with the sale by

NB 3 of the Property to Optionee; and

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

<PAGE>

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

following:

(i) all costs of any extended coverage (ALTA or otherwise) or

endorsements under the title policy, if any, as well as all costs of

any additional policy or policies of title insurance requested by

Optionee or Optionee's lender, if any, in connection with this

transaction, and any endorsements or extended coverage thereto;

(ii) all costs and charges in connection with any survey or

staking of the Property requested by Optionee or Optionee's lender,

if any, in connection with this transaction;

(iii) all recording fees (except as otherwise specified in

Section 9(a) above); and

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

closing costs, if any, in a manner customary for real estate transactions

of this nature in the State of Hawaii.

(d) REAL PROPERTY TAXES. All real property taxes applicable to the

Property (other than rollback taxes and special assessments, if any) shall

be prorated between NB 3 and Optionee as of the Closing Date. If the

current year's taxes have not been determined as of the Closing Date,

proration shall be based on the previous year's taxes, with such proration

to be final in all respects.

(e) OTHER PRORATIONS. Other customary prorations, if any, shall be

prorated between NB 3 and Optionee as of the Closing Date.

10. DUE DILIGENCE PERIOD. Optionee shall be entitled to a period

of time (the "Due Diligence Period") to investigate and evaluate, at

Optionee's expense, the title and condition of the Property, the

suitability of the Property for Optionee's intended purposes, and all other

matters relevant to Optionee's acquisition, ownership, development, and use

of the Property. The Due Diligence Period shall begin on the Effective Date

and expire upon Optionee's delivery of the Notice of Exercise or any

earlier termination of this Agreement.

(a) During the Due Diligence Period, provided that Optionee is not

in default under this Agreement, Optionee shall have the right, subject to

the provisions of this Section 10 and at Optionee's sole cost and expense,

to conduct such independent investigations, including soils tests, surveys,

environmental site assessments, and other customary engineering tests and

physical examinations of the Property, development or other permit analyses

and feasibility studies, as Optionee, in its discretion, deems necessary or

appropriate concerning Optionee's ownership and intended use or development

of the Property or the suitability of the Property for use or development.

Prior to conducting any tests, surveys, assessments, or other physical

<PAGE>

examinations on or otherwise affecting the Property before Closing,

Optionee shall notify NB 3 of Optionee's intent to conduct such

examinations, and of the nature and extent thereof, and shall obtain NB 3's

written consent (which consent shall not be unreasonably withheld or

delayed) prior to the commencement of any such physical examination.

(b) Provided that Optionee is not in default under this Agreement,

NB 3 shall grant to Optionee and its agents a nonexclusive license to enter

upon the Property, during the Due Diligence Period, for the purpose of

conducting tests, surveys, assessments, and other physical examinations on

or otherwise affecting the Property pursuant to this Section 10. Prior to

any such entry by Optionee on the Property, NB 3 and Optionee shall execute

a right-of-entry agreement (the "Right-of-Entry Agreement") in the form

attached as EXHIBIT "6" to this Agreement, which Right-of-Entry Agreement

shall contain, among other things, insurance requirements and Optionee's

release and indemnification of NB 3 and Amfac-Related Entities. Optionee

agrees to and shall comply with all of the terms and conditions in the

Right-of-Entry Agreement.

addition to all other due diligence examinations and investigations

performed or to be performed by or on behalf of Optionee, and Optionee's

knowledge of the Property derived therefrom, Optionee is specifically aware

of the following items relating to or potentially affecting the Property,

and, prior to Optionee's delivery of the Notice of Exercise, shall have

reviewed, considered and, upon delivery of the Notice of Exercise, accepted

and agreed to the effects thereof on Optionee's purchase, acquisition,

ownership and intended use, development and sale of the Property:

(i) 1988 NORTH BEACH SMA. Special Management Area Use Permit

and Shoreline Setback Variance (88-SMI-023, 88/SSV-002) issued

by the County of Maui Planning Commission (Planning Director's

Reports dated May 24, 1988 and July 19, 1988, and Supplemental

Director's Report dated July 19, 1988, adopted by the County of

Maui Planning Commission at its meeting on July 19, 1988 as its

Findings of Fact, Conclusions of Law, Decision and Order), with

respect to land generally described therein as the Kaanapali North

Beach properties (the "Kaanapali North Beach Properties"), of

which the Property is part (the "1988 North Beach SMA"). Optionee

acknowledges having received a copy of the 1988 North Beach SMA.

(ii) 1998 KOR SMA SETTLEMENT AGREEMENT. Settlement Agreement

dated September 29, 1998, between Kaanapali North Beach Venture,

Amfac Property Investment Corp. dba Amfac Maui, Kaanapali Ownership

Resorts, L.P., and Amfac/JMB Hawaii, LLC, as Developers, and Robert

Buchanan, David Chenoweth, Elizabeth Chenoweth, Randy Draper, James

Johnson and Joanne Johnson, as Intervenors (the "1998 KOR SMA

Settlement

<PAGE>

Agreement"). Optionee acknowledges having received a copy of

the 1998 KOR SMA Settlement Agreement.

(iii) 1998 KOR SMA. Special Management Area Use Permit

(SM 1970006) issued by the County of Maui Planning Commission

(County of Maui Planning Commission Findings of Fact, Conclusions of

Law, Decision and Order (Docket No. 88/SMI-023, 88/SSV-002,

SM970006), effective December 14, 1998) (the "1998 KOR SMA").

Optionee acknowledges having received a copy of the 1998 KOR SMA.

(iv) SHORELINE SETBACK AREA DECLARATION. Unilateral and

Irrevocable Declaration of Perpetual Rights and Uses and Perpetual

Restrictions (North Beach Shoreline Setback Area) dated December 29,

1998, recorded at the Bureau as Document No. 99-005138 and at the

Land Court as Document No. 2513420; Amendment to Unilateral and

Irrevocable Declaration of Perpetual Rights and Uses and Perpetual

Restrictions (North Beach Shoreline Setback Area) dated December 6,

2000, recorded at the Bureau as Document No. 2000-170916 and at the

Land Court as Document No. 2668965 (the "Shoreline Setback Area

Declaration"). Optionee acknowledges having received a copy of the

Shoreline Setback Area Declaration.

(v) PUBLIC OPEN SPACE DECLARATION. Unilateral and

Irrevocable Declaration of Perpetual Rights and Uses and Perpetual

Restrictions (North Beach Public Open Space/Recreation Area)

dated December 29, 1998, recorded at the Bureau as Document

No. 99-005139 and at the Land Court as Document No. 2513421,

as amended by instrument dated December 6, 2000, recorded at the

Bureau as Document No. 2000-170915 and at the Land Court as

Document No. 2668964 (the "Public Open Space Declaration").

Optionee acknowledges having received a copy of the Public Open

Space Declaration.

(vi) NORTH BEACH UNIT COUNT AND DRAINAGE DECLARATION.

Unilateral Declaration of Restrictions; Joinder Agreement (North

Beach Unit Count and Drainage) dated February 15, 2001, recorded at

the Bureau as Document No. 2001-022448 and at the Land Court as

Document No. 2683897 (the "North Beach Unit Count and Drainage

Declaration"). Optionee acknowledges that a copy of the North Beach

Unit Count and Drainage has been delivered to Optionee.

<PAGE>

(vii) SMA REQUIREMENTS AGREEMENT. Kaanapali North Beach/

Kaanapali Ocean Resort SMA Requirements Agreement dated December 6,

2000, between Amfac Property Investment Corp., Kaanapali Ownership

Resorts, L.P., Amfac Property Development Corp., Pioneer Mill

Company, Limited, and SVO Pacific, Inc. (the "SMA Requirements

Agreement"); Assignment and Assumption of Kaanapali North

Beach/Kaanapali Ocean Resort SMA Requirements Agreement dated

December 21, 2000, between Amfac Property Investment Corp., Amfac

Hawaii, LLC, a Hawaii limited liability company ("AHI") and KDC;

Assignment and Assumption of Kaanapali North Beach/Kaanapali Ocean

Resort SMA Requirements Agreement dated November 22, 2002,

between AHI, KDC, NB Lot 2, LLC, NB Lot 4, LLC, and NB 3;

Assignment and Assumption of Kaanapali North Beach/Kaanapali Ocean

Resort SMA Requirements Agreement; Agreement Regarding SMA

Requirement dated as of August 5, 2003, between the Lot 4

Seller and Optionee pursuant to the Lot 4 Purchase Agreement.

Optionee acknowledges having received copies of the SMA Requirements

Agreement and the referenced assignments.

(viii) LOT 2 UNIT COUNT DECLARATION. Declaration of Covenants,

Conditions and Restrictions; Joinder dated December 6, 2000,

recorded at the Bureau as Document No. 2000-170918 and at the Land

Court as Document No. 2668974; Amendment to Declaration of Covenants,

Conditions and Restrictions Joinder dated January 31, 2003, recorded

at the Bureau as Document No. 2003-018974 and at the Land Court as

Document No. 2887174 (the "Lot 2 Unit Count Declaration"). Optionee

acknowledges having received a copy of the Lot 2 Unit Count

Declaration.

(ix) KOR UNIT COUNT DECLARATION. Declaration of Restrictions

(Unit Count) dated February 15, 2001, recorded at the Bureau as

Document No. 2001-032604 and at the Land Court as Document

No. 2688326 (the "KOR Unit Count Declaration"). Optionee

acknowledges having received a copy of the KOR Unit Count

Declaration.

(x) NORTH BEACH CCRs. Declaration of Covenants, Conditions,

Easements and Restrictions for Kaanapali North Beach dated

December 6, 2000, recorded at the Bureau as Document No. 2000

170917 and at the Land Court as Document No. 2668967; Designation of

Successor Declarant and Assignment of Declarant's Rights and

Interests Under Declaration of Covenants, Conditions, Easements and

Restrictions for Kaanapali North Beach dated

<PAGE>

December 21, 2000, recorded at the Bureau as Document No. 2001-022804

and at the Land Court as Document No. 2684122 (the "North Beach

CCRs"). Optionee acknowledges having received a copy of the North

Beach CCRs.

(xi) NORTH BEACH CCRs SUPPLEMENTAL DECLARATION. Supplemental

Declaration to Declaration of Covenants, Conditions, Easements and

Restrictions for Kaanapali North Beach dated as of August 5, 2003,

recorded at the Bureau and at the Land Court (the "North Beach CCRs

Supplemental Declaration"), pursuant to the Lot 4 Purchase Agreement.

Optionee acknowledges having received a copy of the North Beach CCRs

Supplemental Declaration.

(xii) SHORELI

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