MUTUAL INDEMNIFICATION AGREEMENT
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(KDCH, DMB and A&B)
This Mutual Indemnification Agreement (the "Agreement") is made as of
August 30, 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 SAFECO INSURANCE COMPANY OF
AMERICA, GENERAL INSURANCE COMPANY OF AMERICA, FIRST NATIONAL INSURANCE COMPANY
OF AMERICA, SAFECO NATIONAL INSURANCE COMPANY, and any other persons or entities
which any of them may procure to act as surety or co-surety on any bonds or any
other person or entity who executes a bond at the request of any of them
(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 Indemnity Agreement dated as of August 30, 2006, in favor of
Sureties (the "Indemnity Agreement").
G. By virtue of the Indemnity Agreement, 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 reasonable attorneys' 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
Indemnity Agreement (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.
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The KDCH Guarantor, the DMB Guarantors 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 Indemnity
Agreement 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 Indemnity Agreement 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 Indemnity
Agreement.
2. Payment to the Sureties.
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If demand is made by the Sureties upon any or all parties pursuant to the
Indemnity Agreement, 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.
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The obligations of the parties under Section 3 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
Indemnity Agreement.
5. Term of Agreement.
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This Agreement shall continue in force so long as
the Indemnity Agreement remains in existence and any Bonds issued pursuant
thereto have not been fully discharged.
6. Joint and Several Liability of the DMB Guarantors.
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The obligations of each of the DMB Guarantors hereunder shall be joint and
several.
7. Hawaii Law.
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This Agreement shall be governed by and construed under the laws of the State of
Hawaii.
8. No Waiver.
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The waiver by one party of the performance of any 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.
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The prevailing party in any action brought by one 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.
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This Agreement has been reviewed by 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.
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If any provision hereof is held invalid or not 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.
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This Agreement shall be binding upon and inure to the 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.
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No amendment to this Agreement shall be valid unless made in writing and signed
by or on behalf of the KDCH Guarantor, the DMB Guarantors, and the A&B
Guarantor.
14. Counterparts.
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This Agreement may be executed in two or more 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.
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All notices, requests, demands or documents which are 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/ A. Beams
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Name: Andrew Beams
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Title: Vice President
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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/ A. Beams
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Name: Andrew Beams
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Title: Vice President
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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/ Mary S. Alexander
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Name: Mary S. Alexander
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Title: Vice President
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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, Hawaii 96813
Attn: Chief Legal Officer
Fax No. (808) 525-6678