Hazardous Material Indemnity Agreement

HAZARDOUS MATERIALS INDEMNITY AGREEMENT AND AMENDMENT


THIS HAZARDOUS MATERIALS INDEMNITY AGREEMENT (the "Agreement") is made as of July 25, 1997, by C. BREWER HOMES, INC. (the "Indemnitor") for the benefit of BANK OF HAWAII (the "Bank").


A. The Bank made available to Borrower a revolving infrastructure construction facility (the "Infrastructure Facility") evidenced by a revolving note dated August 31, 1995 in the amount of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00) (the "Infrastructure Note") made pursuant to a Revolving Loan Agreement (Infrastructure) dated August 31, 1995 (the "Infrastructure Loan Agreement").


B. The Bank made available to Borrower a revolving building construction facility (the "Building Facility") evidenced by a revolving note dated August 31, 1995 in the amount of TWENTY-FIVE MILLION AND NO/100 DOLLARS ($25,000,000.00) (the "Building Note") made pursuant to a Revolving Loan Agreement (Building) dated August 31, 1995 (the "Building Loan Agreement").


C. Repayment of the Infrastructure Note and the Building Note were secured by the following collateral documents (collectively, the "Collateral Documents"):


1. First Mortgage, Security Agreement and Financing Statement made by Borrower, as mortgagor, in favor of the Bank, as mortgagee, recorded in the Bureau of Conveyances of the State of Hawaii as Document No. 95-115642, as amended by that certain Amendment to First Mortgage, Security Agreement and Financing Statement recorded in said Bureau as Document No. 96-130600 (the "Mortgage") encumbering the real property attached thereto (the "Initial Mortgaged Premises").


2. Financing Statement made by Borrower, as debtor, in favor of the Bank, as secured party, recorded in said Bureau as Document No. 95-115643.


3. An unrecorded Assignment of Sales Contracts, Escrow Deposits and Escrow Agreement made by Borrower in favor of Bank dated August 31, 1995.


4. An unrecorded Hazardous Materials Indemnity Agreement dated August 31, 1995, made by Borrower in favor of Bank (the "First Hazardous Indemnity Agreement") with respect to the Initial Mortgaged Premises.


D. Borrower requested, and Bank agreed, to modify and amend the terms of the Infrastructure Note, the Building Note, the Infrastructure Loan Agreement, the Building Loan Agreement and the Collateral Documents pursuant to (as applicable) the following: (1) that certain unrecorded First Loan Modification Agreement (Infrastructure Facility) dated September 5, 1996 and effective as of September 9, 1996; (2) that certain unrecorded First Loan Modification Agreement (Building Facility) dated September 5, 1996 and effective as of September 9, 1996; (3) that certain unrecorded


Second Loan Modification Agreement (Infrastructure Facility) dated May 21, 1997 and effective as of April 30, 1997; and (4) that certain unrecorded Second Loan Modification Agreement (Building Facility) dated May 21, 1997 and effective April 30, 1997 (collectively, the "Modifications"). Hereinafter, all references to the Infrastructure Note, the Building Note, the Infrastructure Loan Agreement, the Building Loan Agreement and the Collateral Documents shall refer to the Infrastructure Note, the Building Note, the Infrastructure Loan Agreement, the Building Loan Agreement and the Collateral Documents as respectively amended by the Modifications.


E. The Modifications, among other things, established several tranches under the Infrastructure Facility and the Building Facility.


F. Borrower has requested and the Bank has agreed to restructure the Borrower's indebtedness to the Bank under the Infrastructure Facility and the Building Facility (collectively, the "Original Indebtedness") into six (6) facilities (the "Facilities") with no separate tranches.


G. Contemporaneously with the execution of this Agreement, the Indemnitor, as maker, has executed and delivered to Bank, as payee, six (6) Promissory Notes (collectively, the "Notes") in the following principal face amounts: (i) FOUR MILLION AND NO/100 DOLLARS ($4,000,000.00); (ii) NINE MILLION AND NO/100 DOLLARS ($9,000,000.00); (iii) SIX MILLION AND NO/100 DOLLARS ($6,000,000.00); (iv) THREE MILLION TWO HUNDRED THOUSAND AND NO/100 DOLLARS ($3,200,000.00); (v) FOUR MILLION SIX HUNDRED TWENTY THOUSAND AND NO/100 DOLLARS ($4,620,000.00); and (vi) FOUR MILLION SIX HUNDRED TWENTY-THREE THOUSAND FOUR HUNDRED EIGHT AND NO/100 DOLLARS ($4,623,408.00), in evidence of the Facilities made or to be made by Bank to Indemnitor.


H. The Facilities are secured in part by the Mortgage, as further amended by that certain Second Amendment to Mortgage (the "Second Amendment"). The Second Amendment, among other things, secures repayment under the Notes by a mortgage on the real property (the "Mortgaged Property") described in Exhibit A attached hereto and made a part hereof. Hereinafter, the term "Mortgage" shall refer to the Mortgage as amended by the Second Amendment.


I. Bank has required, as a condition of restructuring the Original Indebtedness and making the Facilities available, that the Indemnitor indemnify and hold Lender harmless against and from any liability or expenses which Bank may incur, whether as beneficiary of the Mortgage, mortgagee in possession, by foreclosure of the Mortgage or as subsequent owner of the Mortgaged Property, by reason of the threat or presence of any hazardous substance at or near the Mortgaged Property.


NOW, THEREFORE, in consideration of the premises, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Indemnitor, intending to be legally bound, hereby agrees as follows:


A. HAZARDOUS MATERIALS INDEMNITY AGREEMENT.


1. RECITALS. The foregoing recitals are incorporated into this Agreement by this reference.


2. DEFINITIONS.


(a) "Hazardous Materials Laws" means and includes all federal, state or local laws, ordinances or regulations, now or hereafter in effect, relating to environmental conditions, industrial hygiene or Hazardous Materials on, within, under or about the Mortgaged Property, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, ET SEQ., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, ET SEQ., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, ET SEQ., the Clean Water Act, 33 U.S.C. Section 1251, ET SEQ., the Clean Air Act, 42 U.S.C. Section 7401, ET SEQ., the Toxic Substances Control Act, 15 U.S.C. Sections 2601 through 2629, the Safe Drinking Water Act, 42 U.S.C. Sections 300f through 300j, and any similar state or local laws or ordinances and the regulations now or hereafter adopted, published and/or promulgated pursuant thereto.


(b) "Hazardous Materials" means and includes any and all radioactive materials, asbestos, organic compounds known as polychlorinated biphenyls, chemicals known to cause cancer or reproductive toxicity, pollutants, contaminants, hazardous wastes, toxic substances, and any and all other substances or materials defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," or "toxic substances" under, or for the purposes of, the Hazardous Materials Laws.


(c) "Hazardous Discharge" means any event involving the use, deposit, disposal, spill, release or discharge of any Hazardous Material on, within or under the Mortgaged Property.


3. REPRESENTATIONS AND WARRANTIES. Indemnitor represents and warrants that:


(a) Indemnitor has no knowledge of any Hazardous Discharge at, upon, under or within the Mortgaged Property or any contiguous real estate;


(b) Indemnitor has not caused or permitted to occur, and with respect to the Mortgaged Property shall not permit to exist, any condition which may cause a Hazardous Discharge at, upon, under or within the Mortgaged Property or on any contiguous real estate;


(c) Neither Indemnitor, nor to the best knowledge of Indemnitor, any other person has been, is or will be involved in operations at or near the Mortgaged


Property which operations could lead to (i) the imposition of liability on Indemnitor or on any subsequent or former owner of the Mortgaged Property under the Hazardous Materials Laws or (ii) the creation of a lien on the Mortgaged Property under the Hazardous Materials Laws; and


(d) Indemnitor has not permitted, and will not permit, any tenant or occupant of the Mortgaged Property to engage in any activity that could result in liability under the Hazardous Materials Laws on such tenant or occupant, on Indemnitor or on any other owner of the Mortgaged Property.


4. COVENANTS.


(a) Indemnitor shall comply strictly and in all respects with the requirements of the Hazardous Materials Laws and shall notify Bank immediately in the event of any Hazardous Discharge or discovery of any Hazardous Materials at, upon, under or within the Mortgaged Property. Indemnitor shall promptly forward to Bank copies of all orders, notices, permits, applications or other communications and reports in connection with any Hazardous Discharge or the presence of any Hazardous Materials or any other matters relating to the Hazardous Materials Laws as they may affect the Mortgaged Property.


(b) Promptly upon the written request of Bank from time to time, Indemnitor shall provide to Bank, at Indemnitor's expense, an environmental site assessment or environmental audit report prepared by an environmental engineering firm acceptable to Bank, to assess with a reasonable degree of certainty the presence or absence of any Hazardous Materials and the potential costs in connection with abatement, cleanup or removal of any Hazardous Materials found on, under, at or within the Mortgaged Property.


5. INDEMNITY.


(a) Except with respect to any Hazardous Discharge caused by the willful or negligent actions of the Bank on any taking of possession of the Mortgaged Property, Indemnitor shall at all times indemnify and hold harmless Bank against and from any and all claims, suits, actions, debts, damages (including foreseeable and unforeseeable consequential damages), costs, losses, obligations, judgments, charges, and expenses (including attorneys' fees), of any nature whatsoever suffered or incurred by Bank, whether as mortgagee, mortgagee in possession, or as successor-in-interest to Indemnitor by foreclosure deed or deed in lieu of foreclosure, with respect to:


(i) any Hazardous Discharge, the threat of a Hazardous Discharge or the presence of any Hazardous Materials affecting the Mortgaged Property whether or not the same originates or emanates from the Mortgaged Property or any contiguous real estate, including any loss of value of the Mortgaged Property as a result of any of the foregoing;


(ii) any and all enforcement, clean-up, removal, mitigation or other governmental or regulatory actions instituted in respect of the Mortgaged Property pursuant to the Hazardous Materials Laws and any costs incurred by any other person or damages from injury to, destruction of, or loss of natural resources, including reasonable costs of investigating and assessing such injury, destruction or loss incurred pursuant to any Hazardous Materials Laws;


(iii) any and all claims made or threatened by any third party against the Bank seeking damages, contribution, cost recovery, compensation, injunctive relief or similar relief resulting from any Hazardous Discharge or from the existence of any Hazardous Materials on, within or under the Mortgaged Property;


(iv) the Bank's investigation and handling (including the defense) of any claims relating to Hazardous Materials on or about the Mortgaged Property;


(v) liability for personal injury or personal property damage arising under any statutory or common law tort theory, including, without limitation, damages assessed for the maintenance of a public or private nuisance or for the carrying on of an abnormally dangerous activity at or near the Mortgaged Property; and/or


(vi) any other environmental matter affecting the Mortgaged Property within the jurisdiction of the Environmental Protection Agency, any other federal agency, or any state or local environmental agency.


Indemnitor's obligations under this Agreement shall arise upon the discovery of the presence of any Hazardous Materials whether or not the Environmental Protection Agency, any other federal agency or any state or local environmental agency has taken or threatened any action in connection with the presence of any Hazardous Materials.


(b) In the event of any Hazardous Discharge, the threat of a discharge of any Hazardous Materials, or the presence of any Hazardous Materials affecting the Mortgaged Property, whether or not the same originates or emanates from the Mortgaged Property or any contiguous real estate, Indemnitor shall comply with all of the requirements of the Hazardous Materials Laws and related regulations and any other environmental law or regulation and/or cause such work to be performed at the Mortgaged Property and/or take any and all other actions as are necessary or advisable in order to abate the Hazardous Discharge and/or remove the Hazardous Materials.


(c) Indemnitor acknowledges that Bank has agreed to restructure the Original Indebtedness and make the Facilities available in reliance upon the Indemnitor's representations, warranties and covenants in this Agreement. For this reason, it is the intention of Indemnitor and Bank that the provisions of this Agreement shall supersede any provisions in any and all documents evidencing or securing the Facilities (the "Loan Documents") which in any way limit the personal liability of Indemnitor and that Indemnitor shall be personally liable for any obligations arising under this Agreement even if the amount of liability exceeds the Facilities. All of the


representations, warranties, covenants and indemnities of this Agreement shall survive: the repayment of the Notes, the release or foreclosure of the Mortgage, any deed (assignment) of the Mortgaged Property in lieu of foreclosure, and the transfer of any or all right, title and interest in and to the Mortgaged Property by Indemnitor to any party, whether or not affiliated with Indemnitor.


6. ATTORNEYS' FEES. If Bank, or someone on Bank's behalf, retains the services of any attorney in connection with this Agreement, Indemnitor shall pay Bank's costs and attorneys' fees thereby incurred. Bank may employ an attorney of Bank's own choice.


7. INTEREST. If Bank incurs any obligations, costs or expenses under this Agreement, Indemnitor shall pay the same to Bank immediately on demand, and if such payment is not received within ten (10) days, interest on such amount shall, after the expiration of the ten (10) day period, accrue at the Default Rate under the Facilities until such amount is paid in full.


8. JOINT AND SEVERAL LIABILITY. If this Agreement is executed by more than one party as Indemnitor, the liability of such parties is joint and several. Indemnitor's obligations hereunder are joint and several with any other person now or hereafter obligated under the Loan Documents. A separate action or actions may be brought and prosecuted against Indemnitor, whether or not action is brought against any other person or whether or not any other person is joined in such action or actions.


9. CONSENT TO JURISDICTION. Indemnitor consents to the exercise of personal jurisdiction over Indemnitor by any federal or state court in the State of Hawaii.


10. NOTICE. All notices, demands, requests and other communications required hereunder shall be in writing and shall be deemed to have been properly given if personally delivered or sent by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the party for whom it is intended at such party's address hereinafter set forth:


If to Indemnitor:


C. BREWER HOMES, INC.
P.O. Box 1437
Wailuku, Hawaii 96793
ATTN:


If to Bank:


BANK OF HAWAII
P.O. Box 2900
Honolulu, Hawaii 96846
ATTN: Mr. Gene Tsuji


Notice shall be deemed given upon receipt. Any party may designate a change of address by written notice to the other, given as provided herein.


11. WAIVERS. Indemnitor waives trial by jury in any action brought on, under or by virtue of this Agreement and waives any right to require Bank at any time to pursue any remedy in Bank's power whatsoever. The failure of Bank to insist upon strict compliance with any of the terms hereof shall not be considered to be a waiver of any such terms, nor shall it prevent Bank from insisting upon strict compliance with this Agreement at any time thereafter.


12. SEVERABILITY. If any clause or provision herein contained operates or would prospectively operate to invalidate this Agreement in whole or in part, then such clause or provision shall be held for naught as though not contained herein, and the remainder of this Agreement shall remain operative and in full force and effect.


13. INCONSISTENCIES AMONG THE LOAN DOCUMENTS. Nothing contained herein is intended to modify in any way the obligations of Indemnitor under the Notes or any other Loan Document. Any inconsistencies among the Loan Documents shall be construed, interpreted and resolved so as to benefit Bank, and Bank's election of which interpretation or construction is for Bank's benefit shall govern.


14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon Indemnitor's successors and assigns and shall inure to the benefit of Bank and Bank's successors and assigns.


15. CONTROLLING LAWS. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Hawaii.


B. AMENDMENT TO FIRST HAZARDOUS INDEMNITY AGREEMENT. Indemnitor acknowledges and agrees that the "Notes" and "Loans" referred to in the First Hazardous Indemnity Agreement shall respectively mean the Notes and the Facilities described herein.


IN WITNESS WHEREOF, Indemnitor has executed this Agreement and Amendment as of the date first above written.


"INDEMNITOR"


C. BREWER HOMES, INC.,
a Delaware corporation


By /s/ SETH A. BAKES
SETH A. BAKES
Its President and Chief Executive
Officer
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