According to DFS, the state will rebid the statewide duty-free concession later this year and dismiss its lawsuit for back rent against DFS.

DFS’s current lease began June 1, 2001 and was scheduled to expire May 31, 2006. But the company ran into trouble when the number of travelers, particularly from Japan, fell sharply after the Sept. 11 terrorist attacks.

Talks began in April to restructure or terminate the contract after DFS agreed to pay the state $25 million, about half the outstanding rent.

The initial 60-day discussion period terminated last month was extended by 30 days then extended again to Aug. 9.

Today, however, the duty-free retailer DFS said it had agreed to pay rent under its current lease of $40 million, compared with current concession terms calling for a $60 million annual minimum.

The minimum guarantee could be reduced further next year.

DFS must also bring rents current on retail concessions at Honolulu International Airport and Kona International Airport.

The company also must bid on the new concession lease expected to run from Oct. 1, 2003 through May 31, 2006.

"We believe the outcome is a fair reflection of the current status of the duty free business, which has been deeply affected by the decline in Asian travel to Hawaii, resulting in continued and severe declines in our business," said Edward Brennan, chairman and chief executive of DFS Group.