MUTUAL INDEMNIFICATION AGREEMENT
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(KDCH, DMB and A&B)
This Mutual Indemnification Agreement (the "Agreement") is made as of
June 14, 2006, by and among (a) KUKUI`ULA DEVELOPMENT COMPANY (HAWAII),
LLC, a Hawaii limited liability company (the "KDCH Guarantor"), (b) DMB
KUKUI`ULA LLC, an Arizona limited liability company, and DMB COMMUNITIES LLC, an
Arizona limited liability company (jointly and severally, the "DMB Guarantors"),
and (c) ALEXANDER & BALDWIN, INC., a Hawaii corporation (the "A&B Guarantor").
The KDCH Guarantor, the DMB Guarantors, and the A&B Guarantor, are each referred
to herein as a "party", and collectively as the "parties" or the "Guarantors."
RECITALS:
A. KDCH Guarantor is planning, developing, permitting, subdividing, and
constructing on approximately 1,000 acres of real property situated at Koloa,
County and Island of Kauai, State of Hawaii, a mixed use resort community known
as "KUKUI`ULA", and in connection with the planning, development, permitting,
subdivision, construction, and sales of certain planned improvements at
Kukui`ula the KDCH Guarantor has requested that TRAVELERS CASUALTY AND SURETY
COMPANY OF AMERICA, ST. PAUL FIRE AND MARINE INSURANCE COMPANY, and any of their
present or future direct or indirect parent companies, and any of the respective
present or future direct or indirect affiliates or subsidiaries of such
companies and parent companies (collectively herein called the "Sureties")
furnish certain bonds, undertakings, guaranties and/or contractual obligations
in connection with the planning, development, permitting, subdivision,
construction, and sales of Kukui`ula (collectively called the "Bonds").
B. DMB Kukui`ula LLC, an Arizona limited liability company ("DMB
Kukui`ula"), is the managing member of KDCH Guarantor.
C. DMB Communities II LLC, an Arizona limited liability company, is the
sole member of DMB Kukui`ula.
D. DMB Communities LLC, an Arizona limited liability company ("DMB
Communities" is the majority member of DMB Communities II LLC.
E. A&B Guarantor is the ultimate parent company of KDC, LLC, a Hawaii
limited liability company, who is a member of KDCH Guarantor holding a 50%
membership interest therein.
F. As an inducement for and as a condition of Sureties' agreement to
issue the requested Bonds to KDCH Guarantor, the Sureties have required and the
KDCH Guarantor, the DMB Guarantors, and the A&B Guarantor have each executed
that certain General Contract of Indemnity (Commercial Contract - Form B) dated
as of June 13, 2006, in favor of Sureties (the "Contract of Indemnity").
G. By virtue of the Contract of Indemnity, the Guarantors have jointly
and severally promised the Sureties, that (1) all premiums for each of the Bonds
issued by Sureties will be paid as such premium falls due (collectively the
"Premiums"), and (2) to indemnify and exonerate Sureties from and against any
and all loss, costs and expense of whatever kind, including unpaid premiums,
interest, court costs and counsel fees, as well as any expense incurred or
sustained by reason of making any investigation which it may incur or sustain as
a result of or in connection with the furnishing of the Bonds, the assumption of
obligations of the Sureties and/or the enforcement of the Contract of Indemnity
(collectively called a "Loss").
In consideration of the matters described above, and of the mutual
benefits and obligations set forth in this Agreement, the KDCH Guarantors, the
DMB Guarantors, and the A&B Guarantor each covenants and agrees as follows:
AGREEMENT:
1. Agreement Among Guarantors. The KDCH Guarantor, the DMB Guarantors
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and the A&B Guarantor agree among themselves that:
a. the KDCH Guarantor shall at all times remain fully liable
for 100% of all payments required to be made to the Sureties under the Contract
of Indemnity on account of the Premiums and/or any Loss, irrespective of the
amounts actually paid by any of the Guarantors to the Sureties or of any amounts
recovered by the Sureties from any of the Guarantors (subject to and except as
provided otherwise in this Agreement); and
b. the DMB Guarantors and the A&B Guarantor shall each be
proportionately liable (60% for the DMB Guarantors, 40% for the A&B Guarantor
(respectively, a "Pro Rata Obligation")) for all payments required to be made to
the Sureties under the Contract of Indemnity if KDCH fails to timely pay the
same to Sureties, irrespective of the amounts actually paid by any of the
Guarantors to the Sureties or of any amounts recovered by the Sureties from any
of the Guarantors (subject to and except as provided otherwise in this
Agreement).
The Guarantors desire through this Agreement to protect themselves against any
event or circumstance which results in any Guarantor paying or becoming
obligated to pay to the Sureties more than its respective Pro Rata Obligation in
relation to the overall amounts paid or owed to the Sureties under the Contract
of Indemnity.
2. Payment to the Sureties. If demand is made by the Sureties upon any
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or all parties pursuant to the Contract of Indemnity, then subject to and except
as otherwise provided in this Agreement:
a. the KDCH Guarantor shall pay to the Sureties 100% of the
aggregate amount being demanded by the Sureties within five (5) business days
after any such demand; and
b. in the event that the KDCH Guarantor fails to pay such
demand in its entirety within said 5-business day period, then the DMB
Guarantors and the A&B Guarantor shall concurrently pay the aggregate amount so
demanded in the following proportions: The DMB Guarantors shall pay for 60% of
the total amount to be paid, and the A&B Guarantor shall pay for 40% of the
total amount to be paid.
The foregoing obligations shall not preclude any party from negotiating with the
Sureties in an attempt to reduce the payment to be made by such party, on the
express and continuing conditions that such reduction does not result in any
other party being required to pay more than such party would have been obligated
to pay had such separate negotiation not occurred. In the event any of the
parties is successful with such negotiation, the amount payable to the Sureties
shall be reduced and each party shall pay only its Pro-Rata Obligation of the
total reduced amount to be paid to the Sureties.
3. Indemnification.
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a. Subject to Section 2 above and Section 4 below, the KDCH
Guarantor shall indemnify and hold harmless the DMB Guarantors and the A&B
Guarantor to the extent that the DMB Guarantors and/or the A&B Guarantor pays
any portion of the aggregate amounts owed by the Guarantors collectively to the
Sureties as described in Section 2 above.
b. Subject to Section 2 above and Section 4 below, the DMB
Guarantors shall indemnify and hold harmless the A&B Guarantor to the extent
that the A&B Guarantor pays more than 40% of the aggregate amounts owed by the
Guarantors collectively to the Sureties as described in Section 2 above.
c. Subject to Section 2 above and Section 4 below, the A&B
Guarantor shall indemnify and hold harmless the DMB Guarantors to the extent
that the DMB Guarantors pay more than 60% of the aggregate amounts owed by the
Guarantors collectively to the Sureties as described in Section 2 above.
d. Any amounts payable by the KDCH Guarantor, the DMB
Guarantors or the A&B Guarantor to any other party pursuant to this Section 3
shall be paid within ten (10) business days after the delivery of written demand
therefor by such other party. Any party making any payment directly to the
Sureties pursuant to this Section 3 shall send proof of such payment to the
other parties. Any payment not made within said ten (10) business day period
shall bear interest at the rate of 15% per annum, accruing from the date of
demand until the date paid.
4. Excluded Obligations. The obligations of the parties under Section 3
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above shall be subject to the following: In no event shall any party be liable
for any liability to the Sureties resulting from any breach by any of the other
parties under the Contract of Indemnity.
5. Term of Agreement. This Agreement shall continue in force so long as
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the Contract of Indemnity remains in existence and any Bonds issued pursuant
thereto have not been fully discharged.
6. Joint and Several Liability of the DMB Guarantors. The obligations
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of each of the DMB Guarantors hereunder shall be joint and several.
7. Hawaii Law. This Agreement shall be governed by and construed under
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the laws of the State of Hawaii.
8. No Waiver. The waiver by one party of the performance of any
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condition or promise shall not be considered a waiver by such party of any other
condition or promise under this Agreement. The waiver by any party of the time
for performing any act shall not constitute a waiver of the time for performing
any other act or the same act required to be performed at a later time.
9. Attorneys' Fees. The prevailing party in any action brought by one
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party against another shall be entitled to recover all costs and expenses,
including reasonable attorneys' fees, incurred by the prevailing party in
enforcing any of the terms and provisions of this Agreement.
10. Interpretation of Agreement. This Agreement has been reviewed by
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counsel to each of the parties. No negotiations concerning or modifications made
to prior drafts of this Agreement shall be construed in any manner to limit,
reduce or impair the rights, remedies, duties and obligations of the parties
under this Agreement or to restrict or expand the meaning of any of the
provisions of this Agreement or to construe any of the provisions of this
Agreement in any party's favor.
11. Partial Invalidity. If any provision hereof is held invalid or not
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enforceable to its fullest extent, such provision shall be enforced to the
extent permitted by law, and the validity of the remaining provisions hereof
shall not be affected thereby.
12. Assignees. This Agreement shall be binding upon and inure to the
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benefit of the KDCH Guarantor, the DMB Guarantors, and the A&B Guarantor and
each of their respective successors and assigns; provided that no such
assignment shall relieve any party of any liability under this Agreement.
13. Amendments. No amendment to this Agreement shall be valid unless
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made in writing and signed by or on behalf of the KDCH Guarantor, the DMB
Guarantors, and the A&B Guarantor.
14. Counterparts. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument, and in making proof of this Agreement,
it shall not be necessary to produce or account for more than one such
counterpart.
15. Notices. All notices, requests, demands or documents which are
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required or permitted to be given or served hereunder shall be in writing and
sent by registered or certified mail, postage prepaid, or by courier service,
addressed as stated next to the signature of each party below. Such addresses
may be changed from time to time by the addressee by serving notice as
heretofore provided. Service of such notice or demand shall be deemed complete
on the date of actual delivery (or on the date of attempted delivery if
undeliverable or if delivery is refused).
[SIGNATURES APPEAR ON FOLLOWING PAGES]
IN WITNESS WHEREOF, the KDCH Guarantor, the DMB Guarantors, and the A&B
Guarantor have executed this Agreement as of the day and year first above
written.
KDCH Guarantor: KUKUI`ULA DEVELOPMENT COMPANY
(HAWAII), LLC, a Hawaii limited liability company
BY: DMB KUKUI`ULA LLC, an Arizona limited
liability company
Its Managing Member
BY: DMB COMMUNITIES II LLC, an Arizona
limited liability company
Its Sole member
BY: DMB ASSOCIATES, INC., an
Arizona corporation
Its Manager
By /s/ Andrew Beams
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Name: Andrew Beams
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Title: VP
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Address for Notices:
7600 East Doubletree Ranch Road
Scottsdale, Arizona 85258
Attn: General Counsel
Fax No. (480) 367-9788
DMB Guarantors:
DMB Kukui`ula: DMB KUKUI`ULA LLC, an Arizona limited liability
company
BY: DMB COMMUNITIES II LLC, an Arizona limited
liability company
Its Sole member
BY: DMB ASSOCIATES, INC., an Arizona
corporation
Its Manager
By /s/ Andrew Beams
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Name: Andrew Beams
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Title: VP
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Address for Notices:
7600 East Doubletree Ranch Road
Scottsdale, Arizona 85258
Attn: General Counsel
Fax No. (480) 367-9788
DMB Communities: DMB COMMUNITIES, LLC, an Arizona limited liability
company
BY: DMB ASSOCIATES, INC., an Arizona corporation,
Its Manager
By /s/ Andrew Beams
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Name: Andrew Beams
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Title: VP
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Address for Notices:
7600 East Doubletree Ranch Road
Scottsdale, Arizona 85258
Attn: General Counsel
Fax No. (480) 367-9788
A&B Guarantor: ALEXANDER & BALDWIN, INC.
a Hawaii corporation
By /s/ Nelson N. S. Chun
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Name: Nelson N. S. Chun
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Title: Senior Vice President
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By /s/ Alyson J. Nakamura
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Name: Alyson J. Nakamura
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Title: Secretary
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Address for Notices:
822 Bishop Street
Honolulu, HI 96813
Attn: Chief Legal Officer
Fax No. (808) 525-6678