-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, URDpLx+AXbGdUUKy4iR+Xf/FQb3wBa9xx0Vt3TOUqEW7w9cxihrkoGVD4MpxECCE LLj5yT37ebkAM5sawJEr6w== 0000839437-96-000015.txt : 19960619 0000839437-96-000015.hdr.sgml : 19960619 ACCESSION NUMBER: 0000839437-96-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960330 FILED AS OF DATE: 19960515 SROS: CSX FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMFAC JMB HAWAII INC CENTRAL INDEX KEY: 0000839437 STANDARD INDUSTRIAL CLASSIFICATION: 6510 IRS NUMBER: 990217738 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-24180 FILM NUMBER: 96566733 BUSINESS ADDRESS: STREET 1: 900 N MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60611 BUSINESS PHONE: 3124404800 MAIL ADDRESS: STREET 1: 900 N MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60611 FORMER COMPANY: FORMER CONFORMED NAME: 900 AQH FINANCE INC DATE OF NAME CHANGE: 19881113 10-Q 1 Securities and Exchange Commission 450 Fifth Street, N.W. Judiciary Plaza Washington, D.C. 20549 Re: AMFAC/JMB FINANCE, INC. Commission File No. 36-3611183 Form 10-Q Gentlemen: Enclosed, for the above-mentioned registrant, are eight copies one of which is manually executed of registrant's current report on Form 10-Q for the quarter ended March 31, 1996. Please acknowledge receipt of the Form 10-Q filing, by signing and returning the self-addressed stamped postcard. Thank You. Very truly yours, AMFAC/JMB FINANCE, INC. By: Northbrook Corporation Parent Company By: _____________________ Gary Smith Vice President and Principal Accounting Officer Securities and Exchange Commission 450 Fifth Street, N.W. Judiciary Plaza Washington, D.C. 20549 Re: AMFAC/JMB HAWAII, INC. Commission File No. 33-24180 Form 10-Q Gentlemen: Enclosed, for the above-mentioned registrant, are eight copies one of which is manually executed of registrant's current report on Form 10-Q for the quarter ended March 31, 1996. Please acknowledge receipt of the Form 10-Q filing, by signing and returning the self-addressed stamped postcard. Thank You. Very truly yours, AMFAC/JMB HAWAII, INC. By: Northbrook Corporation Parent Company By: _____________________ Gary Smith Vice President and Principal Accounting Officer SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Act of 1934 For the quarter ended March 31, 1996 Commission File Number 33-24180 AMFAC/JMB HAWAII, INC. (Exact name of registrant as specified in its charter) Hawaii 99-0217738 (State of organization) (I.R.S. Employer Identification No.) AMFAC/JMB FINANCE, INC. (Exact name of registrant as specified in its charter) Illinois 36-3611183 (State of organization) (I.R.S. Employer Identification No.) 900 N. Michigan Ave., Chicago, Illinois 60611 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code 312-440-4800 See Table of Additional Registrants Below. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of May 13, 1996, each of Amfac/JMB Hawaii, Inc. and Amfac/JMB Finance, Inc. had 1,000 shares of Common Stock outstanding. All such Common Stock is owned by its respective parent and not traded on a public market. ADDITIONAL REGISTRANTS (1) Address, including, zip code, Exact name of State or other IRS and telephone number, registrant as jurisdiction of Employer including area code of specified in its incorporation or Identification registrant's principal Charter organization Number executive offices Amfac Property Hawaii 99-0150751 900 North Michigan Avenue Development Corp. Chicago, Illinois 60611 312/440-4800 Amfac Property Hawaii 99-0202331 900 North Michigan Avenue Investment Chicago, Illinois 60611 Corp. 312/440-4800 Amfac Sugar and Hawaii 99-0185633 900 North Michigan Avenue Agribusiness, Chicago, Illinois 60611 Inc. 312/440-4800 Kaanapali Water Hawaii 99-0185634 900 North Michigan Avenue Corporation Chicago, Illinois 60611 312/440-4800 Amfac Agri- Hawaii 99-0176334 900 North Michigan Avenue business, Inc. Chicago, Illinois 60611 312/440-4800 Kekaha Sugar Hawaii 99-0044650 900 North Michigan Avenue Company, Chicago, Illinois 60611 Limited 312/440-4800 The Lihue Hawaii 99-0046535 900 North Michigan Avenue Plantation Chicago, Illinois 60611 Company, 312/440-4800 Limited Oahu Sugar Hawaii 99-0105277 900 North Michigan Avenue Company, Chicago, Illinois 60611 Limited 312/440-4800 Pioneer Mill Hawaii 99-0105278 900 North Michigan Avenue Company, Chicago, Illinois 60611 Limited 312/440-4800 Puna Sugar Hawaii 99-0051215 900 North Michigan Avenue Company, Chicago, Illinois 60611 Limited 312/440-4800 H. Hackfeld Hawaii 99-0037425 900 North Michigan Avenue & Co., Ltd. Chicago, Illinois 60611 312/440-4800 Waiahole Hawaii 99-0144307 900 North Michigan Avenue Irrigation Chicago, Illinois 60611 Company, 312/440-4800 Limited Waikele Golf Hawaii 99-0304744 900 North Michigan Avenue Club, Inc. Chicago, Illinois 60611 312/440-4800 1) The Additional Registrants listed are wholly-owned subsidiaries of the registrant and are guarantors of the registrant's Certificate of Land Appreciation Notes due 2008. TABLE OF CONTENTS PART I FINANCIAL INFORMATION Item 1. Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 21 PART II OTHER INFORMATION Item 1. Legal Proceedings 31 Item 6. Exhibits and Reports on Form 8-K 31 PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements AMFAC/JMB HAWAII, INC. Consolidated Balance Sheets March 31, 1996 and December 31, 1995 (Dollars in Thousands) (Unaudited) A S S E T S
March 31, December 31, 1996 1995 -------------- -------------- A S S E T S Current assets: Cash and cash equivalents $10,561 11,745 Receivables-net 5,960 8,720 Inventories 56,558 49,641 Prepaid expenses 2,888 3,102 -------- -------- Total current assets 75,967 73,208 -------- -------- Investments 45,192 45,080 -------- -------- Property, plant and equipment: Land and land improvements 335,578 336,069 Machinery and equipment 56,882 56,882 Construction in progress 1,941 1,428 -------- -------- 394,401 394,379 Less accumulated dep. and amortization 29,358 27,762 -------- -------- 365,043 366,617 -------- -------- Deferred expenses 13,901 14,225 Other assets 28,369 28,468 -------- -------- $ 528,472 527,598 ========== ========== L I A B I L I T I E S Current liabilities: Accounts payable $ 7,345 8,562 Accrued expenses 11,474 13,268 Current portion of long-term debt 1,730 67,730 Current portion of deferred inc. taxes 13,333 10,902 Other amounts due affiliates 24,931 22,862 -------- -------- Total current liabilities 58,813 123,324 -------- -------- Amounts due to affiliates 84,348 76,911 Acc.postretirement benefit obligation 60,122 61,037 Long-term debt 92,279 26,765 Other long-term liabilities 36,419 34,366 Deferred income taxes 97,614 98,691 Certificate of Land Appreciation Notes 220,692 220,692 -------- -------- Commitments and contingencies (notes 2, 3, 4, 6, 7, 8 and 9) Total liabilities 650,287 641,786 -------- -------- S T O C K H O L D E R S' E Q U I T Y (D E F I C I T ) Common stock, no par value Authorized, issued and outstanding 1,000 shares 1 1 Additional paid-in capital 7,808 11,495 Retained earnings (deficit) (129,624) (125,684) --------- --------- Total stockholders' equity (deficit) (121,815) (114,188) --------- --------- $ 528,472 527,598 ============ =========== The accompanying notes are an integral part of the consolidated financial statements.
AMFAC/JMB HAWAII, INC. Consolidated Statements of Operations Three Months Ended March 31, 1996 and 1995 (Dollars in Thousands) (Unaudited)
Three Months Ended March 31 -------------------- 1996 1995 ------- ------- Revenue: Agriculture $ 5,688 1,299 Property 9,368 12,846 ------- ------- 15,056 14,145 ------- ------- Cost of sales: Agriculture 4,113 569 Property 5,339 8,057 ------- ------- 9,452 8,626 Selling, general and administrative 3,149 4,075 Depreciation and amortization 1,596 1,714 ------- ------- Total costs and expenses 14,197 14,415 Operating income(loss) 859 (270) ------- ------- Non-operating income (expenses): Amortization of financing costs (316) (511) Interest expense (6,908) (6,006) Interest income 92 351 ------- ------- (7,132) (6,166) ------- ------- Loss before taxes (6,273) (6,436) ------- ------- Income tax benefit (2,333) (2,409) ------- ------- Net loss $(3,940) (4,027) ======== ======== The accompanying notes are an integral part of the consolidated financial statements.
AMFAC/JMB HAWAII, INC. Consolidated Statements of Cash Flows Three Months Ended March 31, 1996 and 1995 (Dollars in Thousands) (Unaudited)
1996 1995 -------- -------- Cash flows from operating activities: Net loss $(3,940) (4,027) Items not requiring (providing) cash: Depreciation and amortization 1,596 1,714 Amortization of deferred expenses 316 511 Equity in earnings of investments 23 39 Income tax benefit (2,333) (2,409) Changes in: Receivables - net 2,760 525 Inventories (6,407) (6,472) Prepaid expenses 214 58 Accounts payable (1,217) 5,183 Accrued expenses (933) (2,933) Other amounts due affiliates 1,208 799 Other long-term liabilities 1,344 241 -------- -------- Net cash used in operating activities (7,369) (6,771) -------- -------- Cash flows from investing activities: Property additions (514) (243) Property disposals and retirements - net -- 7 Investments in joint ventures and partnerships (135) (7) Short-term investments -- 23,013 Other assets 99 (923) Other long-term liabilities (224) (245) -------- -------- Net cash provided by (used in) investing activities (774) 21,602 -------- -------- AMFAC/JMB HAWAII, INC. Consolidated Statement of Cash Flows - Continued Three Months Ended March 31, 1996 and 1995 (Dollars in Thousands) (Unaudited) 1996 1995 -------- -------- Cash flows from financing activities: Deferred expenses 8 -- Net repayments of long-term debt (486) (948) Amounts due to affiliates 7,437 7,696 --------- -------- Net cash provided by financing activities 6,959 6,748 --------- -------- Net increase (decrease) in cash and cash equivalents (1,184) 21,579 Cash and cash equivalents, beginning of year 11,745 31,702 --------- -------- Cash and cash equivalents, end of period $10,561 53,281 ========= ======== Supplemental disclosure of cash flow information: Cash paid for interest (net of amounts capitalized) $ 5,250 10,032 ========= ======== Schedule of non-cash investing and financing activities: Transfer of property actively held for sale to real estate inventories and accrued costs relating to real estate sales $ 510 3,911 ========= ======== Accompanying notes are an integral part of the consolidated financial statements.
AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements March 31, 1996 and 1995 (Dollars in Thousands) Readers of this quarterly report should refer to the Company's audited financial statements for the fiscal year ended December 31, 1995, which are included in the Company's 1995 Annual Report, as certain footnote disclosures which would substantially duplicate those contained in such audited financial statements have been omitted from this report. (1) BASIS OF ACCOUNTING On November 17, 1988, the stockholders of Amfac, Inc. ("Amfac") agreed to the merger ("Merger") of Amfac with an affiliate of JMB Realty Corporation ("JMB"). The Merger was consummated on November 18, 1988. Amfac/JMB Hawaii (the "Company") was a wholly-owned subsidiary of Amfac, a subsidiary of Northbrook Corporation ("Northbrook"). In May 1995, Amfac was merged into Northbrook, with Northbrook being the surviving corporation. The Company has two primary business segments. The agriculture segment ("Agriculture") is responsible for the Company's activities related to the cultivation and processing of sugar cane and other agricultural products. The real estate segment ("Property") is responsible for land development activities related to the Company's owned land in the State of Hawaii, and the management and operation of the Company's golf course facilities. The consolidated financial statements as of December 31, 1995 and for the three months ended March 31, 1996 include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company's policy is to consider all amounts held with original maturities of three months or less in U.S. Government obligations, certificates of deposit and money market funds (approximately $1,700 and $3,700 at March 31, 1996 and December 31, 1995, respectively) as cash equivalents, which approximates market. These amounts include $1,724 and $1,623 at March 31, 1996 and December 31, 1995, respectively, which were restricted primarily to fund debt service on certain long- term debt (see note 4). As part of the Company's agriculture operations, the Company enters into commodities futures contracts and options in sugar as deemed appropriate to reduce the risk of future price fluctuations in sugar. These futures contracts and options are accounted for as hedges and, accordingly, gains and losses are deferred and recognized in cost of sales as part of the production cost. Investments in certain partnerships and joint ventures, if any, over which the Company exercises significant influence are accounted for by the equity method. Revenues include the Company's equity in net income or loss from such investments. To the extent the Company engages in such activities as a general partner, the Company is contingently liable for the obligations of its partnership and joint venture investments. AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements - Continued (Dollars in Thousands) Project costs associated with the acquisition, development and construction of real estate projects are capitalized and classified as construction in progress. Such capitalized costs are not in excess of the project's estimated net realizable value. Land actively held for sale and any related development costs transferred from construction in progress are reported as inventories in the accompanying consolidated balance sheets and are stated at the lower of cost or fair value less costs to sell. For financial reporting purposes, the Company uses the effective interest rate method and accrues interest on the Certificate of Land Appreciation Notes due 2008 ("COLAS") at 4% per annum, which is the "Mandatory Base Interest" (see note 3). Interest is capitalized to qualifying assets (principally real estate under development) during the period that such assets are undergoing activities necessary to prepare them for their intended uses. Such capitalized interest is charged to cost of sales as revenue from the real estate development is recognized. No material amounts have been capitalized for the three months ended March 31, 1996 and 1995. The Company and its subsidiaries report their taxes as part of the consolidated tax return of the Company's parent, Northbrook. The Company and its subsidiaries have entered into a tax indemnification agreement with Northbrook which indemnifies the Company and its subsidiaries for responsibility for all past, present and future federal and state income tax liabilities (other than income taxes which are directly attributable to cancellation of indebtedness income caused by the repurchase or redemption of securities as provided for in or contemplated by the Repurchase Agreement) (see note 3). Current and deferred taxes have been allocated to the Company as if the Company were a separate taxpayer in accordance with the provisions of SFAS No. 109-Accounting for Income Taxes. However, to the extent the tax indemnification agreement does not require the Company to actually pay income taxes, current taxes payable or receivable have been reflected as deemed contributions or distributions, respectively, to additional paid-in capital in the accompanying consolidated financial statements. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements - Continued (Dollars in Thousands) (2) AMOUNTS DUE TO AFFILIATES - FINANCING The maturity date of the approximately $15,097 of remaining acquisition-related financing owed to affiliates has been extended to June 1, 1997 and bears interest at a rate per annum based upon the prime interest rate (8.25% at March 31, 1996), plus one percent. Affiliates also provided financing of approximately $7,700 during March 1995 with a maturing date of June 1, 1997; such borrowing was repaid in May 1995. On June 1, 1995, the Company borrowed $52,000 from Northbrook to redeem Class A COLAS pursuant to the Redemption Offer (see note 3). The Company has also borrowed approximately $7,385 and $9,814 at March 31, 1996 and December 31, 1995, respectively, to fund COLA Base Interest payments and working capital needs. The loans from Northbrook are payable interest only, mature on June 1, 1997 and carry an interest rate per annum equal to the prime interest rate plus two percent. Pursuant to the Indenture relating to the COLAS, the amounts borrowed from Northbrook are considered "Senior Indebtedness" to the COLAS. (3) CERTIFICATE OF LAND APPRECIATION NOTES The COLAS are unsecured debt obligations of the Company. Interest on the COLAS is payable semi-annually on February 28 and August 31 of each year. The COLAS mature on December 31, 2008, and bear interest after the Final Issuance Date (August 31, 1989) at a rate of 10% per annum ("Base Interest") of the outstanding principal balance of the COLAS on a cumulative, non-compounded basis, of which 6% per annum is contingent ("Contingent Base Interest") and payable only to the extent of Net Cash Flow (Net Cash Flow for any period is generally an amount equal to 90% of the Company's net cash revenues and receipts after payment of cash expenditures, including the Qualified Allowance (as defined) other than federal and state income taxes and after the establishment by the Company of reserves). In each calendar year, principal reductions may be made from remaining Net Cash Flow, if any, in excess of all current and unpaid deferred Contingent Base Interest and will be made at the election of the Company (subject to certain restrictions). The COLAS will bear additional contingent interest in any year, after any principal reduction, equal to 55% of remaining Net Cash Flow. Upon maturity, holders of COLAS will be entitled to receive the remaining outstanding principal balance of the COLAS plus unpaid mandatory Base Interest plus additional interest equal to the unpaid Contingent Base Interest, to the extent of the Maturity Market Value (Maturity Market Value generally means 90% of the excess of the Fair Market Value (as defined) of the Company's assets at Maturity over its liabilities incurred in connection with its operations), plus 55% of the remaining Maturity Market Value. AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements - Continued (Dollars in Thousands) On March 14, 1989, Amfac/JMB Finance ("Finance"), a wholly-owned subsidiary of Northbrook and the Company entered into an agreement (the "Repurchase Agreement") concerning Finance's obligations to repurchase, on June 1, 1995 and 1999, the COLAS upon request of the holders thereof. The COLAS were issued in two units consisting of one Class A and one Class B COLA. As specified in the Repurchase Agreement, the repurchase of the Class A COLAS may have been requested by the holders of such COLAS on June 1, 1995 at a price equal to the original principal amount of such COLAS ($.5) minus all payments of principal and interest allocated to such COLAS. The cumulative interest paid per Class A COLA through June 1, 1995 was $.135. The repurchase of the Class B COLAS may be requested of Finance by the holders of such COLAS on June 1, 1999 at a price equal to 125% of the original principal amount of such COLAS ($.5) minus all payments of principal and interest allocated to such COLAS. Through the date of this report, the cumulative interest paid per Class A and Class B COLA is approximately $.155 and $.155, respectively. On March 14, 1989, Northbrook entered into a keep-well agreement with Finance, whereby it agreed to contribute sufficient capital or make loans to Finance to enable Finance to meet its COLA repurchase obligations described above. Notwithstanding Finance's repurchase obligations, the Company may elect to redeem any COLAS requested to be repurchased at the specified price. On March 15, 1995, pursuant to the indenture that governs the terms of the COLAS (the "Indenture"), the Company elected to offer to redeem (the "Redemption Offer") all Class A COLAS from the registered holders, thereby eliminating Finance's obligation to satisfy the Class A COLA repurchase options requested by such holders as of June 1, 1995. Pursuant to the Redemption Offer, and in accordance with the terms of the Indenture, the Company was therefore obligated to purchase any and all Class A COLAS submitted pursuant to the Redemption Offer at a price of $.365 per Class A COLA. In conjunction with the Company's Redemption Offer, the Company made a tender offer (the "Tender Offer") to purchase up to approximately $68,000 principal value of the Class B COLAS at a price of $.220 per Class B COLA from COLA holders electing to have their Class A COLAS repurchased. The two offers to repurchase the COLAS terminated on April 17, 1995 in accordance with their terms and with the Indenture. Approximately 229,000 Class A COLAS were submitted for repurchase pursuant to the Redemption Offer and approximately 99,000 Class B COLAS were submitted for repurchase pursuant to the Tender Offer, requiring an aggregate payment by the Company of approximately $105,450 on June 1, 1995. The Company used its available cash to purchase Class B COLAS pursuant to the Tender Offer and borrowed $52,000 from Northbrook to purchase Class A COLAS pursuant to the Redemption Offer. AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements - Continued (Dollars in Thousands) As a result of the repurchases, the Company retired approximately $164,045 in face value of COLA debt and recognized a financial statement gain in the second quarter of 1995 of approximately $32,544 (net of income taxes of $20,807, the write-off of deferred financing costs of $10,015, the write-off of accrued contingent base interest of $5,667 and expenses of $894). Such gain is treated as cancellation of indebtedness income for tax purposes and, accordingly, the income taxes related to the Class A Redemption Offer (approximately $9,106) will not be indemnified by the tax agreement with Northbrook (see note 1). The terms of the Indenture relating to the COLAS place certain restrictions on the Company's declaration and payment of dividends. Such restrictions generally relate to the source, timing and amounts which may be declared and/or paid. The COLAS also impose certain restrictions on, among other things, the creation of additional indebtedness for certain purposes, the Company's ability to consolidate or merge with or into other entities, and the Company's transactions with affiliates. (4) LONG-TERM DEBT In June 1991, the Company obtained a five-year $66,000 loan from the Employees' Retirement System of the State of Hawaii ("ERS"). An initial funding of $60,000 was received in June 1991. The remaining balance of $6,000 was added to the principal balance on July 1, 1992 in payment of the first year of accrued interest on the loan. The nonrecourse loan is secured by a first mortgage on the Kaanapali Golf Courses, and is considered "Senior Indebtedness" (as defined in the Indenture relating to the COLAS). The loan bore interest at a rate per annum equal to the greater of (i) the base interest rate announced by the Bank of Hawaii on the first of July for each subsequent year or (ii) ten percent per annum through June 30, 1993 and nine percent per annum thereafter. The loan is payable interest only on a quarterly basis. The annual interest payments are in excess of the cash flow generated by the Kaanapali Golf Courses and the Company ceased making required debt service payments in April 1995. The Company has been working with the ERS to renegotiate the terms of the loan including an extension of the June 1996 maturity date. The principal balance was included in the current portion of long- term debt as of December 31, 1995 in the accompanying consolidated financial statements. In conjunction with the Company's renegotiations, the Company made an interest payment of $1,650 in August 1995. In April 1996, the Company reached an agreement to amend the loan with the ERS, extending the maturity date for five years. In exchange for the loan extension, the ERS received the right to participate in the "Net Disposition Proceeds" (as defined) related to the sale of the golf courses or the refinancing or maturity of the loan. The ERS share of the Net Disposition Proceeds increases from 30% through June 30, 1997, to 40% for the period from July 1, 1997 to June 30, 1999 and to 50% thereafter. The loan amendment effectively adjusts the interest rate as of January 1, 1995 to 9.5% until June 30, 1996. After June 30, 1996, the loan bears interest at a rate per annum equal to the five-year treasury rate on July 1, 1996 (5.97% at March 31, 1996) plus 2 1/4%. The loan amendment requires the Company to pay interest at the rate of 7% for the period from January 1, 1995 to June 30, 1996, 7.5% from July 1, 1996 to June 30, 1997, 7.75% from July 1, 1997 to June 30, 1998 and 8.5% thereafter ("Minimum Pay Rates"). The Company made a payment in April 1996 for $4,119, representing the minimum interest payment due for the period April 1995 to April 1996. The AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements - Continued (Dollars in Thousands) scheduled minimum interest payments are paid quarterly on the principal balance of the $66,000 loan. The difference between the interest expense accrued and the minimum interest payment accrues interest and is payable on an annual basis from excess cash flow, if any, generated from the Kaanapali Golf Courses. Although the outstanding loan balance remains nonrecourse, the amendment makes the minimum interest payments and the ERS's share of appreciation, if any, recourse to the Company. Such payments would become nonrecourse if the Company were to elect to tender an executed deed to the property to the ERS. In January 1993, The Lihue Plantation Company, Limited ("Lihue") obtained a ten-year $13,250 loan used to fund the acquisition of Lihue's power generation equipment. The $13,250 loan, constituting "Senior Indebtedness" under the COLAS' Indenture, consists of two ten-year amortizing term loans of $10,000 and $3,250, respectively, payable in quarterly installments commencing July 1, 1993 in the principal amount of $250, and $81 (plus interest), respectively. The $10,000 and $3,250 loans have outstanding balances of $7,250 and $945, respectively, as of March 31, 1996 and bear interest at a rate equal to the prime rate (8.25% at March 31, 1996) plus three and one half percent and the prime rate plus four and one-half percent, respectively. Lihue has purchased an interest rate agreement which effectively caps the prime rate for the first five years of the loan agreement at eight percent. The loan is secured by the Lihue power generation equipment, sugar inventories and receivables, certain other assets and real property of the Company and has limited recourse to the Company and certain other subsidiaries. In October 1993, Waikele Golf Club, Inc. ("WGCI"), a wholly-owned subsidiary of the Company which owns and operates the Waikele Golf Course, obtained a five-year $20,000 loan facility from two lenders. The loan consists of two $10,000 amortizing loans. Each loan bears interest only for the first two years and interest and principal payments based upon an assumed 20-year amortization period for the remaining three years. The loans bear interest at prime plus 1/2% and LIBOR (5.5% at March 31, 1996) plus 3%, respectively. The loan is secured by WGCI's assets (the golf course and related improvements and equipment), is guaranteed by the Company, and is considered "Senior Indebtedness" (as defined in the Indenture relating to the COLAS). As of March 31, 1996 scheduled annual principal maturities are $303 in 1996, $405 in 1997, and the balance of $19,106 in 1998. AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements - Continued (Dollars in Thousands) (5) SEGMENT INFORMATION Agriculture and Property comprise separate industry segments of the Company. "Operating Income-Other" consists primarily of unallocated overhead expenses and "Total Assets- Other" consists primarily of cash and deferred expenses. Total assets at the balance sheet dates, capital expenditures, operating income (loss) and depreciation and amortization during the three months ended March 31, 1996 and 1995 are set forth below by each industry segment:
March 31, December 31, 1996 1995 --------- --------- Total Assets: Property $200,491 199,999 Agriculture 307,143 304,170 Other 20,838 23,429 --------- --------- $528,472 527,598 ========= ========= Three Months Three Months Ended Ended March 31, March 31, 1996 1995 ----------- ----------- Capital Expenditures: Agriculture $ 341 72 Property 173 171 --------- --------- $ 514 243 ========= ========= Three Months Three Months Ended Ended March 31, March 31, 1996 1995 ------------ ------------ Operating income (loss): Agriculture $ 395 (624) Property 1,412 1,781 Other (948) (1,427) --------- --------- $ 859 (270) ========== ========= Depreciation and amortization: Agriculture $1,029 1,203 Property 518 464 Other 49 47 --------- --------- $1,596 1,714 ========= =========
AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements - Continued (Dollars in Thousands) (6) TRANSACTIONS WITH AFFILIATES The Company incurred interest expense of approximately $2,024 for the three months ended March 31, 1996 and approximately $418 for the three months ended March 31, 1995 in connection with the acquisition and additional financing, obtained from an affiliate, approximately $6,889 of such interest was unpaid as of March 31, 1996. With respect to any calendar year, JMB or its affiliates are entitled to a Qualified Allowance in an amount equal to: (i) approximately $6,200 during each of the calendar years 1989 through 1993, and (ii) thereafter, 1-1/2% per annum of the Fair Market Value (as defined) of the gross assets of the Company and its subsidiaries (other than cash and cash equivalents and Excluded Assets (as defined)). However, such amount shall be paid for each year only following the payment of a specified level of Base Interest to the holders of the COLAS. Any portion of the Qualified Allowance not paid for any year shall accumulate without interest. Any Qualified Allowance subsequent to 1989 has been deferred and is payable only to the extent future Net Cash Flows are sufficient to pay the holders of the COLAS a specified level of return and, accordingly, no such amounts have been reflected in the accompanying consolidated financial statements. The Company, its subsidiaries, and their joint ventures reimburse Northbrook, JMB and their affiliates for direct expenses incurred on their behalves, including salaries and salary-related expenses incurred in connection with the management of the Company's (or subsidiaries' or joint ventures') operations. The total of such costs was approximately $125 during the three months ended March 31, 1995 and approximately $154 for the three months ended March 31, 1996, $742 of which was unpaid as of March 31, 1996. In addition, as of March 31, 1996, the other amounts due to affiliates includes $9,106 of income taxes payable related to the Class A COLA Redemption Offer (see note 3). Also, the Company pays a non-accountable reimbursement of approximately $30 per month to JMB and its affiliates for general overhead expenses, all of which was paid as of March 31, 1996. JMB Insurance Agency, Inc. earns insurance brokerage commissions in connection with providing the placement of insurance coverage for certain of the properties and operations of the Company. Such commissions are comparable to those available to the Company in similar dealings with unaffiliated third parties. The total of such commissions for the three months ended March 31, 1995 was approximately $242 and approximately $235 for the three months ended March 31, 1996 all of which was paid as of March 31, 1996. Northbrook and its affiliates allocate certain charges for services to the Company based upon the estimated level of services, of which $8,194 was unpaid as of March 31, 1996. These services and costs are intended to reflect the Company's separate costs of doing business and are principally related to the inclusion of the Company's employees in the Northbrook pension plan, payment of severance and termination benefits and reimbursement for insurance claims paid on behalf of the Company. AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements - Continued (Dollars in Thousands) All amounts described above, deferred or currently payable, do not bear interest and are expected to be paid in future periods. (7) EMPLOYEE BENEFIT PLANS The Company participates in benefit plans covering substantially all its employees, which provide benefits based primarily on length of service and compensation levels. These plans are administered by Northbrook in conjunction with other plans providing benefits to employees of Northbrook and its affiliates. One of the Company's defined benefit plans, the Retirement Plan for the Employees of Amfac, Inc. (the "Plan"), terminated effective December 31, 1994. The settlement of the Plan occurred in May 9, 1995. The Company replaced this plan with the "Core Retirement Award Program", a defined contribution plan that commenced on January 1, 1995. In the new plan an Eligible Employee (as defined) is credited with an annual contribution equal to 3% of the employee's qualified compensation. The new plan's cost to the Company and the benefits provided to the participants are comparable to the former Plan. (8) COMMITMENTS AND CONTINGENCIES The Company is involved in various matters of litigation and other claims. Management, with knowledge of facts and after consultation with legal counsel, is of the opinion that the Company's liability (if any), when ultimately determined, will not have a material adverse effect on the Company's financial position. The Company's Property segment has contractual commitments (related to project costs) of approximately $3,100 as of March 31, 1996. Additional development expenditures are dependent upon the Company's ability to obtain financing for such costs and on the timing and extent of property development and sales. As of March 31, 1996 certain portions of the Company's land not currently under development or used in sugar operations are mortgaged as security for approximately $1,128 of performance bonds related to property development. AMFAC/JMB HAWAII, INC. Notes to Consolidated Financial Statements - Concluded (Dollars in Thousands) (9) INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of December 31, 1995 are as follows: Deferred tax assets: Postretirement benefits $(23,804) Interest accruals (3,149) Other accruals (3,074) --------- Total gross deferred tax assets (30,027) --------- Deferred tax liabilities: Accounts receivable, related to profit on sales of sugar 3,332 Inventories, principally due to sugar production costs, capitalized interest and purchase 4,716 accounting adjustments Plant and equipment, principally due to differences in depreciation and purchase accounting adjustments 7,696 Land and land improvements, principally due to purchase accounting adjustments 101,204 Deferred gains, due to installment gains for income tax purposes 8,492 Investments in unconsolidated entities, principally due to purchase accounting adjustments 14,180 -------- Total deferred tax liabilities 139,620 -------- Net deferred tax liability $109,593 ========= (10) ADJUSTMENTS In the opinion of the Company, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation have been made to the accompanying figures as of March 31, 1996 and for the three months ended March 31, 1996 and 1995. AMFAC/JMB FINANCE, INC. Balance Sheets March 31, 1996 and December 31, 1995 (Dollars in thousands, except per share information) (Unaudited)
A s s e t March 31, December 31, 1996 1995 ----------- ----------- Cash $ 1 1 ========= ========== L i a b i l i t y a n d S t o c k h o l d e r ` s E q u i t y Repurchase obligation (note 2) Common stock, $1 par value; authorized, issued and outstanding - 1,000 shares $ 1 1 ========== ========== The accompanying notes are an integral part of these balance sheets.
AMFAC/JMB FINANCE, INC. Notes to the Balance Sheets (Unaudited) (Dollars in Thousands) (1) ORGANIZATION AND ACCOUNTING POLICY Amfac/JMB Finance, Inc. ("Finance") was incorporated November 7, 1988 in the State of Illinois. Finance has had no financial operations. All of the outstanding shares of Finance are owned by Northbrook Corporation ("Northbrook"). (2) REPURCHASE OBLIGATIONS On March 14, 1989, Finance and a subsidiary of Northbrook (Amfac/JMB Hawaii, Inc.) entered into an agreement (the "Redemption Agreement") concerning Finance's obligation (on June 1, 1995 and 1999) to repurchase, upon request of the holders thereof, the Certificate of Land Appreciation Notes due 2008 ("COLAS"), to be issued by Amfac/JMB Hawaii, Inc. in conjunction with the acquisition of Amfac/JMB Hawaii, Inc.. A total aggregate principal amount of $384,737 of COLAS were issued during the offering, which terminated on August 31, 1989. The COLAS were issued in two units consisting of one Class A and one Class B COLA. As specified in the Repurchase Agreement, the repurchase of the Class A COLAS may have been requested of Finance by the holders of such COLAS on June 1, 1995 at a price equal to the original principal amount of such COLAS ($.500) minus all payments of principal and interest allocated to such COLAS. The cumulative interest paid per Class A COLA through June 1, 1995 was $.135. The repurchase of the Class B COLAS may be requested of Finance by the holders of such COLAS on June 1, 1999 at a price equal to 125% of the original principal amount of such COLAS ($.500) minus all payments of principal and interest allocated to such COLAS. To date, the cumulative interest paid per Class A and Class B COLA is approximately $.155 and $.155, respectively. On March 14, 1989, Northbrook entered into a keep-well agreement with Finance, whereby it agreed to contribute sufficient capital to Finance to enable Finance to meet the COLA repurchase obligations described above. Notwithstanding Finance's repurchase obligations, Amfac/JMB Hawaii, Inc. may elect to redeem any COLAS requested to be repurchased at the specified purchase price all in accordance with the terms in the Indenture. On March 15, 1995, pursuant to the indenture that governs the terms of the COLAS (the "Indenture"), Amfac/JMB Hawaii, Inc. elected to exercise its right to redeem, and therefore was obligated to repurchase, any and all Class A COLAS submitted pursuant to the Redemption Offer at a price of $.365 per Class A COLA. PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources All references to "Notes" herein are to Notes to Consolidated Financial Statements contained in this report. On December 5, 1988, the Company commenced an offering to the public of COLAS pursuant to a Registration Statement on Form S-1 under the Securities Act of 1933. A total of 384,737 COLAS were issued prior to the termination of the offering on August 31, 1989. The net proceeds received from the sale of the COLAS totaled approximately $352 million (after deduction of organization and offering expenses of approximately $33 million). Such net proceeds have been used to repay a portion of the acquisition-related financing, which was incurred to pay certain costs associated with the Merger including a portion of the Merger consideration paid to shareholders of Amfac. On March 14, 1989, Amfac/JMB Finance ("Finance"), a wholly-owned subsidiary of Northbrook Corporation ("Northbrook"), and the Company entered into an agreement (the "Repurchase Agreement") concerning Finance's obligations (on June 1, 1995 and 1999) to repurchase the COLAS upon request of the holders thereof. The COLAS were issued in two units consisting of one Class A and one Class B COLA. As specified in the Repurchase Agreement, the repurchase of the Class A COLAS may have been requested by the holders of such COLAS on June 1, 1995 at a price equal to the original principal amount of such COLAS ($500) minus all payments of principal and interest allocated to such COLAS. The cumulative interest paid per Class A COLA through June 1, 1995 was $135. The repurchase of the Class B COLAS may be requested of Finance by the holders of such COLAS on June 1, 1999 at a price equal to 125% of the original principal amount of such COLAS ($500) minus all payments of principal and interest allocated to such COLAS. Through the date of this report, the cumulative interest paid per Class A and Class B COLA is approximately $155 and $155, respectively. On March 14, 1989, Northbrook entered into a keep-well agreement with Finance, whereby it agreed to contribute sufficient capital or make loans to Finance to enable Finance to meet its COLA repurchase obligations described above. Notwithstanding Finance's repurchase obligations, the Company may elect to redeem any COLAS requested to be repurchased at the specified price. On March 15, 1995, pursuant to the indenture that governs the terms of the COLAS (the "Indenture"), the Company elected to offer to redeem (the "Redemption Offer") all Class A COLAS from its registered holders. Pursuant to the Redemption Offer, and in accordance with the terms of the Indenture, the Company was therefore obligated to purchase any and all Class A COLAS submitted pursuant to the Redemption Offer at a price of $365 per Class A COLA. In conjunction with the Company's Redemption Offer, the Company made a tender offer (the "Tender Offer") to purchase up to approximately $68 million principal value of the Class B COLAS at a price of $220 per Class B COLA from COLA holders electing to have their Class A COLAS repurchased. The two offers to repurchase the COLAS terminated on April 17, 1995 in accordance with their terms and with the Indenture. Approximately 229,000 Class A COLAS were submitted for repurchase pursuant to the Redemption Offer and approximately 99,000 Class B COLAS were submitted for repurchase pursuant to the Tender Offer, requiring an aggregate payment of the Company of approximately $105 million on June 1, 1995. The Company used its available cash to purchase Class B COLAS pursuant to the Tender Offer and borrowed $52 million from Northbrook to purchase Class A COLAS pursuant to the Redemption Offer. As described above, the Company borrowed $52 million from Northbrook to redeem Class A COLAS pursuant to the Redemption Offer (see Note 3). The Company has also borrowed approximately $7.4 million and $9.8 million at March 31, 1996 and December 31, 1995, respectively, to fund COLA Base Interest payments and working capital needs. The loans from Northbrook are payable interest only, mature on June 1, 1997 and carry an interest rate per annum equal to the prime interest rate plus two percent. Pursuant to the Indenture relating to the COLAS, the amounts borrowed from Northbrook are considered "Senior Indebtedness" to the COLAS. As a result of the repurchases, the Company retired approximately $164 million face value of COLA debt and recognized a financial statement gain in the second quarter of 1995 of approximately $32.5 million (net of income taxes of $20.8 million, the write-off of deferred financing costs of $10.0 million, the write-off of accrued contingent base interest of $5.7 million and expenses of $.9 million). Such gain is treated as cancellation of indebtedness income for tax purposes and, accordingly, the income taxes related to the Class A Redemption Offer (approximately $9.1 million) will not be indemnified by the tax agreement with Northbrook (see Note 1). Pursuant to the terms of the Indenture, relating to the COLAS, the Company is required to maintain a Value Maintenance Ratio of 1.05 to 1.00. Such ratio is equal to the relationship of the Company's Net Asset Value (defined as the excess of (i) Fair Market Value of the gross assets of the Company over (ii) the amount of the liabilities (excluding liabilities resulting from generally accepted accounting principles enacted subsequent to the date of the Indenture) of the Company other than the outstanding principal balance of the COLAS, any unpaid Mandatory and Contingent Base Interest, and certain other liabilities, to the sum of (x) the outstanding principal amount of the COLAS, plus (y) any unpaid Base Interest, plus (z) the outstanding principal balance of any Indebtedness incurred to redeem COLAS. The COLA Indenture requires the Company to obtain independent appraisals of the fair market value of the gross assets used to calculate the Value Maintenance Ratio as of December 31 in each even-numbered calendar year. Accordingly, the Company obtained independent appraisals of substantially all of its gross real estate assets as of December 31, 1994; the appraised values of such assets ranged in total from approximately $600-$650 million. In odd-numbered years (during which time appraisals are not required), the Fair Market Value of the gross assets of the Company used to compute the Value Maintenance Ratio is determined by the Company's management. To the extent that management believes that the aggregate Fair Market Value of the Company's assets exceeds by more than 5% the Fair Market Value of such assets included in the most recent appraisal, the Company must obtain an updated appraisal supporting such increase. As of December 31, 1995, management does not believe that the aggregate Fair Market Value of the Company's assets has increased by more than 5% from the appraisal values obtained as of December 31, 1994. Based on such values, and after consideration of the other components of the computation, the Company was in compliance with the Value Maintenance Ratio as of December 31, 1994 and December 31, 1995. It should be noted that the concept of Fair Market Value is intended to represent the value that an independent arm's-length purchaser, seeking to utilize such asset for its highest and best use, would pay after taking into consideration the risks and benefits associated with such use or development, current restrictions on development (including zoning limitations, permitted densities, environmental restrictions, restrictive covenants, etc.) and the likelihood of changes to such restrictions; provided, however, that with respect to any Fair Market Value determination of all of the assets of the Company, such assets shall not be valued as if sold in bulk to a single purchaser. There can be no assurance that the Company's properties can be ultimately sold at prices equivalent to their appraised values. In June 1991, the Company obtained a five-year $66,000 loan from the Employees' Retirement System of the State of Hawaii ("ERS"). An initial funding of $60,000 was received in June 1991. The remaining balance of $6,000 was added to the principal balance on July 1, 1992 in payment of the first year of accrued interest on the loan. The nonrecourse loan is secured by a first mortgage on the Kaanapali Golf Courses, and is considered "Senior Indebtedness" (as defined in the Indenture relating to the COLAS). The loan bore interest at a rate per annum equal to the greater of (i) the base interest rate announced by the Bank of Hawaii on the first of July for each subsequent year or (ii) ten percent per annum through June 30, 1993 and nine percent per annum thereafter. The loan is payable interest only on a quarterly basis. The annual interest payments are in excess of the cash flow generated by the Kaanapali Golf Courses and the Company ceased making required debt service payments in April 1995. The Company has been working with the ERS to renegotiate the terms of the loan including an extension of the June 1996 maturity date. The principal balance was included in the current portion of long- term debt as of December 31, 1995 in the accompanying consolidated financial statements. In conjunction with the Company's renegotiations, the Company made an interest payment of $1,650 in August 1995. In April 1996, the Company reached an agreement to amend the loan with the ERS, extending the maturity date for five years. In exchange for the loan extension, the ERS received the right to participate in the "Net Disposition Proceeds" (as defined) related to the sale of the golf courses or the refinancing or maturity of the loan. The ERS share of the Net Disposition Proceeds increases from 30% through June 30, 1997, to 40% for the period from July 1, 1997 to June 30, 1999 and to 50% thereafter. The loan amendment effectively adjusts the interest rate as of January 1, 1995 to 9.5% until June 30, 1996. After June 30, 1996, the loan bears interest at a rate per annum equal to the five-year treasury rate on July 1, 1996 (5.97% at March 31, 1996) plus 2 1/4%. The loan amendment requires the Company to pay interest at the rate of 7% for the period from January 1, 1995 to June 30, 1996, 7.5% from July 1, 1996 to June 30, 1997, 7.75% from July 1, 1997 to June 30, 1998 and 8.5% thereafter ("Minimum Pay Rates"). The Company made a payment in April 1996 for $4,119, representing the minimum interest payment due for the period April 1995 to April 1996. The scheduled minimum interest payments are paid quarterly on the principal balance of the $66,000 loan. The difference between the interest expense accrued and the minimum interest payment accrues interest and is payable on an annual basis from excess cash flow, if any, generated from the Kaanapali Golf Courses. Although the outstanding loan balance remains nonrecourse, the amendment makes the minimum interest payments and the ERS's share of appreciation, if any, recourse to the Company. Such payments would become nonrecourse if the Company were to elect to tender an executed deed to the property to the ERS. In October 1993, Waikele Golf Club, Inc. ("WGCI"), a wholly-owned subsidiary of the Company that owns and operates the Waikele Golf Course, obtained a five-year $20 million loan facility from two lenders. The loan consists of two $10 million amortizing loans. Each loan bears interest only for the first two years and interest and principal payments based upon an assumed 20-year amortization period for the remaining three years. The loans bear interest at prime plus 1/2% and LIBOR (5.5% at March 31, 1996) plus 3%, respectively. The loan is secured by WGCI's assets (the golf course and related improvements and equipment), is guaranteed by the Company, and is considered "Senior Indebtedness" (as defined in the Indenture relating to the COLAS). Pursuant to an agreement entered into with the City of Honolulu in 1991 relating to the development of the Company's Waikele project, if the Company sells the Waikele golf course, depending on the price and certain other contingencies, a payment of up to $15 million might be required to be made to the City to be used to assist in the City's affordable housing developments. A significant portion of the Company's cash needs result from the nature of the real estate development business, which requires significant investment in preparing development plans, seeking land urbanization and other governmental approvals, and completing infrastructure improvements prior to the realization of sales proceeds. The Company has funded its cash requirements to date primarily through the use of short- term bank borrowings, long-term financing secured by its golf courses on Maui and Oahu, borrowings from affiliates and revenues generated from the development and sale of its properties and investments. Funding of the Company's future cash requirements is dependent upon obtaining appropriate financing and revenues generated from the development and sale of its properties. Although under current market conditions development financing is difficult to obtain, the Company is not currently seeking this type of financing based upon the stage of development of its various land holdings in Hawaii. In order to generate additional cash flows for the Company, management has identified certain land parcels that are not included in the Company's long-term development plans. The Company continues to pursue an aggressive land sales program for these non-strategic assets. During the three months ended March 31, 1996, the Company generated approximately $.7 million from non-strategic land sales and an additional $2.4 million from the sale of 10 lots at its Kaanapali Golf Estates development on the island of Maui. During 1995, the Company generated approximately $30.8 million in land sales, most of which related to non-strategic parcels. In addition, the Company received an approximate $1.0 million deposit, which represents the purchase price for 10 acres on Oahu. At March 31, 1996, the Company had cash and cash equivalents of approximately $10.6 million. The Company intends to use its cash reserves, sales proceeds and financing or joint venture arrangements to meet its short-term and long-term liquidity requirements, which include funding the development costs remaining at Waikele, West Maui and Kauai, agricultural deficits, payment of interest expense and the repayment of principal on debt obligations (as necessary). The Company's long-term liquidity is dependent upon its ability to obtain additional financing and the consummation of certain property sales. There can be no assurance that additional long-term financing can be obtained or property sales consummated. The Company's land holdings on Maui and Kauai are its primary sources of future land sale revenues. However, due to current market conditions, the difficulty in obtaining land use approvals and the high development costs of required infrastructure, the planned development of these land holdings and the ability to generate cash flow from them are expected to be long-term in nature. Accordingly, if no such financing can be obtained or additional property sales consummated, the Company will defer (to the extent possible) development costs and capital expenditures to meet liquidity requirements. Additionally, the Company's plans for property sales may also be adversely impacted by the inability of potential buyers to obtain financing. The Company does not expect to generate a sufficient level of Net Cash Flow to pay Base Interest in excess of four percent for 1996. The Company continues to implement certain cost savings measures and to defer development project costs and capital expenditures for longer-term projects. The Company's Property segment is anticipated to expend an additional approximately $12.4 million in project costs during the remainder of 1996. During 1995, the Company has restructured its sugar operations, including consolidation of the operations at its two Kauai plantations and changing to a seasonal mode of operations at each of its plantations (consistent with other global sugar operations). The Company anticipates that cost savings related to the sugar operations will be associated with these changes. The price of raw sugar that the Company receives is based upon the price of domestic sugar (less delivery and administrative costs) as currently controlled by U.S. Government price supports legislation. On April 4, 1996, President Clinton signed the Federal Agriculture Improvement and Reform Act of 1996 ("the Act"). The Act keeps the loan rate at 18 cents per pound. However, the Act includes certain other adjustments to the sugar program including making crop loans recourse to the producer and repealing marketing allotments which may over time depress the domestic price of raw sugar. There can be no assurance that in the future, the government price support will not be reduced or eliminated entirely. Such a reduction or an elimination of price supports could have a material adverse affect on the Company's agriculture operations, and possibly could cause the Company to evaluate the cessation of its remaining sugar cane operations. In August 1993, the Company announced its plans to phase out the sugar operations at its Oahu Sugar Company by mid- 1995, such phase out coinciding with the expiration of its major land lease on Oahu. Oahu Sugar, which operated almost entirely on leased land, had incurred losses in its sugar operations in prior years and expected those losses to continue in the future. For several months, Oahu Sugar had negotiated with the plantation's major lessor to reach an agreement on concessions in rent and other lease terms required by Oahu Sugar to continue its agricultural operations. To grant such concessions, the lessor required a long-term commitment from the plantation that it would continue its sugar operations. Because of the plantation's losses, along with the future uncertainties posed by the domestic agriculture price support legislation and international trade policy, Oahu Sugar could not agree to such a long-term commitment to stay in operation. Oahu Sugar completed the final harvest of its crop in April 1995. The Company has shut down Oahu Sugar and any estimated future costs related to the shut down are not expected to have a material adverse effect on the financial condition of the Company. The Company is currently examining options for developing the fee simple land it owns adjacent to the Oahu Sugar mill site, including seeking the necessary government approvals for a light industrial subdivision for a portion of the property, as discussed below. RESULTS OF OPERATIONS GENERAL: The Company and its subsidiaries report their taxes as a part of the consolidated tax return of the Company's parent, Northbrook. The Company and its subsidiaries entered into a tax indemnification agreement with Northbrook, which indemnifies them for responsibility for all past, present and future federal and state income tax liabilities (other than income taxes which are directly attributable to cancellation of indebtedness income caused by the repurchase or redemption of securities as provided for in or contemplated by the Repurchase Agreement). Effective January 1, 1993, the Company adopted SFAS No. 109 - Accounting for Income Taxes ("SFAS No. 109"). This statement establishes financial accounting and reporting standards for the effects of income taxes that result from an enterprise's activities during the current and preceding years. SFAS No. 109 changed the Company's previous practice in that it requires the accrual of deferred taxes and the recording of a provision for taxes in the separate financial statements of members of a consolidated tax group, including the recognition of deferred tax assets and liabilities for the tax effects of differences between assigned values and tax bases of assets acquired and liabilities assumed in the Merger (see Note 1). Accordingly, current and deferred taxes have been allocated to the Company as if the Company were a separate taxpayer. However, in general, the tax indemnification agreement does not require the Company to actually pay income taxes; current taxes payable or receivable (excluding income taxes which are directly attributable to cancellation of indebtedness income caused by the repurchase or redemption of securities as provided for in or contemplated by the Repurchase Agreement) have been reflected as deemed contributions and distributions, respectively, to additional paid in capital in the accompanying consolidated financial statements. Accrued expenses decreased as of March 31, 1996 as compared to December 31, 1995, primarily due to the timing of COLA interest payments and reclassification of deferred interest on the ERS loan to non-current off-set by interest accrued on affiliated financing. Current portion of long-term debt decreased and long-term debt increased as of March 31, 1996 as compared to December 31, 1995, due primarily to the reclassification of the ERS loan from current to long-term (see Note 4). Current deferred income taxes increased at March 31, 1996 as compared to December 31, 1995 due primarily to an increase in agricultural inventory costs which are deductible for tax purposes. Non current deferred income taxes decreased at March 31, 1996 as compared to December 31, 1995 due primarily to deferred interest on the ERS loan. The current portion of amounts due affiliates increased as of March 31, 1996 as compared to December 31, 1995 primarily due to accrued interest on additional affiliated financing. Other long-term liabilities increased as of December 31, 1996 as compared to December 31, 1995 primarily due to the difference between the interest expense accrued and minimum interest payments required under the amended terms of the ERS loan. (see Note 4). Interest expense increased for the three months ended March 31, 1996 as compared to the three months ended March 31, 1995 primarily due to interest expense related to additional affiliated financing partially off-set by the early retirement of Class A and Class B COLAS. AGRICULTURE: The Company's Agriculture segment is responsible for activities related to the cultivation, processing and sale of sugar cane and other agricultural products. Agriculture's revenues are primarily derived from the Company's sale of its raw sugar. The Company's sugar plantation subsidiaries sell their raw sugar production to the Hawaiian Sugar and Transportation Company ("HSTC"), which is an agricultural cooperative owned by the major Hawaii producers of raw sugar (including the Company), under a marketing agreement. HSTC sells the raw sugar production to the California and Hawaii Sugar Company ("C&H") pursuant to a long-term supply contract. The terms of the supply contract do not require a specified level of production by the Hawaii producers; however, HSTC is obligated to sell and C&H is obligated to purchase any raw sugar produced. HSTC returns to its raw sugar suppliers proceeds based upon the domestic sugar price less delivery and administrative charges. The Company recognizes revenues and related cost of sales upon delivery of its raw sugar to C&H. The price of raw sugar that the Company receives is based upon the price of domestic sugar (less delivery and administrative costs) as currently controlled by U.S. Government price supports legislation. On April 4, 1996, President Clinton signed the Federal Agriculture Improvement and Reform Act of 1996 ("the Act"). The Act keeps the loan rate at 18 cents per pound. However, the Act includes certain other adjustments to the sugar program including making crop loans recourse to the producer and repealing marketing allotments which may over time depress the domestic price of raw sugar. There can be no assurance that in the future, the government price support will not be reduced or eliminated entirely. Such a reduction or an elimination of price supports could have a material adverse affect on the Company's agriculture operations, and possibly could cause the Company to evaluate the cessation of its remaining sugar cane operations. As part of the Company's agriculture operations, the Company enters into commodities futures contracts and options in sugar as deemed appropriate to reduce the risk of future price fluctuations in sugar. These futures contracts and options are accounted for as hedges and, accordingly, gains and losses are deferred and recognized in cost of sales as part of the production cost. In September 1992, Hurricane Iniki struck the Island of Kauai causing considerable damage and loss to the people and businesses on Kauai. The Company has two sugar plantations on Kauai, both of which sustained considerable damage. The Company's real estate assets on Kauai suffered little damage, since most of the Company's development expenditures up to that time had been focused on the islands of Oahu and Maui. The Company settled its insurance claims in 1995 for the damage suffered and collected approximately $30 million in proceeds over the approximately three year period. Receivables decreased as of March 31, 1996 as compared to December 31, 1995 primarily due to the timing of payments for deliveries of raw sugar and the collection of certain insurance claims outstanding as of December 31, 1995. Inventories increased as of March 31, 1996 as compared to December 31, 1995 primarily due to the capitalization of planting and other costs and the timing of the harvesting of sugar cane. Agricultural revenues and cost of sales increased for the three months ended March 31, 1996 as compared to the three months ended March 31, 1995 primarily due to the timing of shipments of raw sugar to C&H. Agricultural operating income for the three months ended March 31, 1996 as compared to an operating loss for the three months ended March 31, 1995 is primarily due to the amortization of unrecognized gains related to postretirement benefit obligations. PROPERTY: The Company's Property segment is responsible for the following: land planning and development activities; obtaining land use, zoning and other governmental approvals; selling or financing developed and undeveloped land parcels; and the management and operation of the Company's golf course facilities. The Company expended approximately $.1 and $.2 million for the three months ended March 31, 1996 and 1995, respectively, for planned project costs at Waikele. Such costs include construction of roadways, utilities and related infrastructure improvements and the golf course and clubhouse, all of which are substantially complete. On a cumulative project-to-date basis, the Company has generated revenues at Waikele totaling approximately $230 million. Such sales have included commercial property and parcel sales to home builders. For the three months ended March 31, 1996, the Company generated approximately $3.1 million of land sales. Property sales and cost of sales decreased for the three months ended March 31, 1996 as compared to the three months ended March 31, 1995 primarily due to the receipt of proceeds related to certain contingent participation rights at Waikele in 1995 and the decreased sales volume of non-strategic land parcels, offset in part by increased sales at the Kaanapali Golf Estates in 1996. The Company is currently examining options for developing the approximately 60 acres of fee simple land it owns at the mill site of Oahu Sugar Company, and has begun the process of seeking community input and the necessary government approvals for a light industrial subdivision on an approximately 31-acre portion of the property, which excludes property containing the sugar mill and adjacent buildings. In connection with the development of this property, the Company has received state land use urbanization for the entire 60-acre site. In addition, the Company has received an "industrial" city development plan designation for 25.5 acres of the proposed 31- acre light industrial subdivision, and has obtained City Council approval of "industrial" designation for the remaining 5.5 acres, which designation must also be approved by the Mayor. In March 1991, the Company received final land use approval from the State for development of approximately 240 residential lots on approximately 125 acres of land known as "South Beach Mauka" and located adjacent to the existing Kaanapali Beach Resort. In connection with this land use approval, the Company is committed to providing additional housing on Maui in the affordable price range, and to participating in the funding of the design and construction of the planned bypass highway extending from Lahaina to Kaanapali. The Company has entered into a development agreement with the State Department of Transportation covering the Company's participation in the design and construction of the bypass highway development. It is anticipated that, upon the receipt of government approvals, the Company will expend up to $3.5 million (in the aggregate) in the design of the bypass highway and/or the widening of the existing highway. Financial participation by the Company of up to $6.7 million for the construction of the bypass highway is subject to certain conditions related to certain future land use designations and zoning of Company lands. The development and construction of the bypass highway is expected to be a long- term project. During 1993, the Company obtained final land use approval from the State, and certification through the State's Housing Finance Development Corporation ("HFDC"), for the development of a project on approximately 300 acres of Company land known as "Puukolii Village", which is also located near Kaanapali Beach Resort. In connection with this land use approval, the Company is committed to providing additional housing on Maui in the affordable price range. The final land use approval and the HFDC development agreement contain certain conditions which must be satisfied in order for the Company to develop Puukolii Village, including realigning the access road (which will benefit uses for adjacent Company lands in future periods). Moreover, development of certain portions of Puukolii Village cannot commence until after completion of the state-planned Lahaina bypass highway (mentioned above). The proposed development of Puukolii Village is anticipated to satisfy the Company's affordable housing requirements in connection with the South Beach Mauka land use approval as well as the North Beach property (described below). The Company anticipates commencing construction of infrastructure of Puukolii Village in the later half of 1996. The planned development of the Company's land on Maui is expected to be long term in nature. As Maui is less populated than Oahu and more dependent on the resort/tourism industry, much of the Company's land is intended for resort and resort- related uses. Due to overall economic conditions and trends in tourism, recent demand for these land uses has been relatively weak. The Company's currently available homesite product on Maui, which is targeted to the second home buyer, has experienced slow sales activity to date. The Company's competitors on Maui have also experienced slow sales activity in the second home market. The Company is continuing to evaluate its planned products and the timing of development of its land holdings in light of the current weak market demand and the capital resources needed for future development. The Company is marketing Kaanapali Golf Estates, a new residential community, which is part of South Beach Mauka adjacent to the Kaanapali Beach Resort in West Maui. During the three months ended March 31, 1996, the Company sold 10 homesites for approximately $2.4 million which includes 8 homesites to a developer who plans to construct and sell houses on these lots. Between April 1 and May 15, 1996, the Company sold an additional 6 homesites for approximately $2.2 million. The Company currently has approximately 8 homesites on the market, which are priced from approximately $400,000 to $1 million. In 1995, the Company has subdivided an ocean front parcel in Kaanapali into six single family homesites of approximately one acre each. The individual lot prices range from $1.9 million to $2.4 million. Sales of two of the lots in the project closed in December 1995, generating total sales proceeds of approximately $4.1 million. The Company is marketing the remaining 4 lots. In early 1986, the Company entered into a joint venture agreement with Tobishima Pacific Inc., a wholly- owned subsidiary of a Japanese company, the purpose of which is to plan, manage and develop approximately 96 acres of beachfront property at Kaanapali (known as "North Beach"). The joint venture (in which the Company has a 50% interest) has State land use and County zoning approvals for the subdivision and development of the infrastructure improvements necessary to accommodate up to 3,200 hotel and/or condominium units on this site. This North Beach property constitutes nearly all of the remaining developable beachfront acreage at Kaanapali. In October 1992, the Company completed construction of a 3-acre park on the North Beach site, which is part of the master plan for this property and was a requirement imposed by the County in obtaining certain permits. The development of North Beach continues to be tied to the completion of the aforementioned Lahaina bypass highway or other traffic mitigation measures satisfactory to the Maui County Planning Commission. The Company is currently reviewing alternatives in providing other traffic mitigation measures. In February 1996, the Maui County Council adopted a Community Plan ordinance for West Maui that does not include any amendments to the current Community Plan designation of the Company's North Beach property (thus rejecting the CAC recommendations that two-third's of North Beach be downzoned to "Park"). The ordinance was signed by the Mayor of the County of Maui in late February 1996. Further, the Department of the Army has determined that there are two wetlands sites on the North Beach property, totaling approximately 21,800 square feet. The Company has retained experts to evaluate these sites and to insure compliance with all laws. While there can be no assurance as to the ultimate determinations with respect to the wetlands issue, the Company does not anticipate that these sites will materially adversely affect the development plans for North Beach. In June 1994, the Company submitted a Land Use Boundary Amendment Petition with the State of Hawaii Land Use Commission ("LUC") and a General Plan Amendment Application with the County of Kauai for the urbanization of approximately 552 acres of land on Kauai currently in sugar cane cultivation. The proposed project is planned to be a mixed use master planned community which will include a variety of both affordable and market rate residential units, commercial and industrial projects and a number of community and public based facilities. The filing of these land use applications is the first step required in converting agriculture zoned land into urban zoned land. There are a number of additional reports, studies, applications and permits that will be required before final land use approvals are obtained. In May 1995, the County of Kauai approved the Company's General Plan Amendment Application, subject to a number of conditions (to be addressed during the subsequent zoning amendment process). In December 1995, the LUC granted the Company the land use amendments sought by the Company subject to a number of conditions. In April 1996, the Kauai County Council approved the Company's application to rezone the project. The Mayor of the County of Kauai has not yet approved the rezoning. While the Company is optimistic that the proposed project will continue to receive favorable support, it is anticipated that the approval process will require at least 3 - 5 years. The entitlement process in Hawaii has historically been a very difficult and arduous process and there is no guarantee that all approvals will be obtained. Once construction commences, subject to market conditions, the project is expected to span over 20 years. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company and/or certain of its affiliates have been named as defendants in several pending lawsuits, most of which constitute routine litigation arising from the ordinary course of business. While it is impossible to predict the outcome of the litigation that is now pending (or threatened) and for which the potential liability is not covered by insurance, the Company is of the opinion that the ultimate liability from any of the litigation will not materially adversely affect the Company's financial condition.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a)The following documents are included as an exhibits to this report. 4.1* Indenture, including the form of COLAS, among Amfac/JMB Hawaii,Inc., its subsidiaries as Guarantors and Continental Bank National Association, as Trustee (dated as of March 14, 1989). 4.2** Amendment dated as of January 17, 1990 to the Indenture relating to the COLAS. 4.3*** $28,097,832 Promissory Note from Amfac, Inc. to Amfac/JMB Hawaii, Inc. extended and reissued effective December 31, 1993. 4.4**** The five year $66,000,000 loan with the Employees'Retirement System of the State of Hawaii to Amfac/JMB Hawaii, Inc. as of June 25, 1991. 4.5*****$15,000,000 Credit Agreement dated March 31, 1993 among AMFAC/JMB Hawaii, Inc. and Continental Bank N.A. 4.6******$10,000,000 loan agreement between Waikele Golf Club, Inc. and ORIX USA Corporation. $10,000,000 loan agreement between Waikele Golf Club, Inc. and Bank of Hawaii. 4.7*******$52,000,000 Promissory Note to Northbrook Corporation from Amfac/JMB Hawaii, Inc. effective May 31, 1995 is filed herewith. 4.8 Agreement for delivery and sale of raw sugar between Hawaii Sugar Transportation Corporation, as seller, and C&H, as Buyer, dated June 4, 1993. 4.9 Standard Sugar Marketing Contracts between Hawaiian Sugar Transportation Company and Hawaii Sugar Growers dated June 4, 1993. 10.1* Escrow Deposit Agreement. 10.2* General Lease S-4222, dated January 1, 1969, by and between the State of Hawaii and Kekaha Sugar Company, Limited. 10.3* Grove Farm Haiku Lease, dated January 25, 1974 by and between Grove Farm Company, Incorporated and The Lihue Plantation Company, Limited. 10.4* General Lease S-4412, dated October 31, 1974, by and between the State of Hawaii and the Lihue Plantation Company, Limited. 10.5* General Lease S-4576, dated March 15, 1978, by and between the State of Hawaii and The Lihue Plantation Company, Limited. 10.6* General Lease S-3827, dated July 8, 1964, by and between the State of Hawaii and East Kauai Water Company, Ltd. 10.7* Amended and Restated Power Purchase Agreement, dated as of July 14, 1978, by and between The Lihue Plantation Company, Limited and Citizens Utilities Company. 10.8* U.S. Navy Waipio Peninsula Agricultural Lease, dated May 26, 1964, between The United States of America (as represented by the U.S. Navy) and Oahu Sugar Company, Ltd. 10.9* Amendment to the Robinson Estate Hoaeae Lease, dated May 15, 1967, by and between various Robinsons, heirs of Robinsons, Trustees and Executors, etc. and Oahu Sugar Company, Limited amending and restating the previous lease. 10.10* Amendment to the Campbell Estate Lease, dated April 16, 1970, between Trustees under the Will and of the Estate of James Campbell, Deceased, and Oahu Sugar Company, Limited amending and restating the previous lease. 10.11* Bishop Estate Lease No. 24,878, dated June 17, 1977, by and between the Trustees of the Estate of Bernice Pauahi Bishop and Pioneer Mill Company, Limited. 10.12* General Lease S-4229, dated February 25, 1969, by and between the State of Hawaii, by its Board of Land and Natural Resources and Pioneer Mill Company, Limited. 10.13* Honokohau Water License, dated December 22, 1980, between Maui Pineapple Company Ltd. and Pioneer Mill Company, Limited. 10.14* Water Licensing Agreement, dated September 22, 1980, by and between Maui Land & Pineapple Company, Inc. and Amfac, Inc. 10.15* Joint Venture Agreement, dated as of March 19, 1986, by and between Amfac Property Development Corp. and Tobishima Properties of Hawaii, Inc. 10.16* Development Agreement, dated March 19, 1986, by and between Kaanapali North Beach Joint Venture and Amfac Property Investment Corp. and Tobishima Pacific, Inc. 10.17 Keep-Well Agreement between Northbrook Corporation and Amfac/JMB Finance, Inc. 10.18* Repurchase Agreement, dated March 14, 1989, by and between Amfac/JMB Hawaii, Inc. and Amfac/JMB Finance, Inc. 10.19* Amfac Hawaii Tax Agreement, dated November 21, 1988 between Amfac/JMB Hawaii, Inc., and Amfac Property Development Corp.; Amfac Property Investment Corp.; Amfac Sugar and Agribusiness, Inc.; Kaanapali Water Corporation; Amfac Agribusiness, Inc.; Kekaha Sugar Company, Limited; The Lihue Plantation Company, Limited; Oahu Sugar Company, Limited; Pioneer Mill Company, Limited; Puna Sugar Company, Limited; H. Hackfeld & Co., Ltd.; and Waiahole Irrigation Company, Limited. 10.20* Amfac-Amfac Hawaii Tax Agreement, dated February 27, 1989 between Amfac, Inc. and Amfac/JMB Hawaii, Inc. 10.21* Services Agreement, dated November 18, 1988, between Amfac/JMB Hawaii, Inc., and Amfac Property Development Corp.; Amfac Property Investment Corp.; Amfac Sugar and Agribusiness, Inc.; Kaanapali Water Corporation; Amfac Agribusiness, Inc.; Kekaha Sugar Company, Limited; The Lihue Plantation Company, Limited; Oahu Sugar Company, Limited; Pioneer Mill Company, Limited; Puna Sugar Company, Limited; H. Hackfeld & Co., Ltd.; and Waiahole Irrigation Company, Limited and JMB Realty Corporation. 19.0*******$35,700,000 agreement for sale of C&H and certain other C&H assets, to A&B Hawaii, Inc. in June of 1993. Pursuant to item 6.01 (b)(4) of Regulation SK, the registrant hereby undertakes to provide the commission upon its request a copy of any agreement with respect to long-term indebtedness of the registrant and its consolidated subsidiaries that does not exceed 10 percent of the total assets of the registrant and its subsidiaries on a consolidated basis.
* Previously filed as exhibits to the Company's Registration Statement of Form S-1 (as amended) under the Securities Act of 1933 (File No. 33-24180) and hereby incorporated by reference. ** Previously filed as exhibits to the Company's Form 10-K report under the Securities Act of 1934 (File No. 33- 24180) filed on March 27, 1989 and hereby incorporated by reference. *** Previously filed as exhibits to the Company's Form 10-K report under the Securities Act of 1934 (File No. 33- 24180) filed on March 27, 1991 and hereby incorporated by reference. **** Previously filed as exhibits to the Company's Form 10-Q report under the Securities Act of 1934 (File No. 33- 24180) filed on August 13, 1991 and hereby incorporated by reference. ***** Previously filed as exhibit to the Company's Form 10- Q report under the Securities Act of 1934 (File No. 33-24180) filed on May 14, 1993 and hereby incorporated by reference. ****** Previously filed as exhibit to the Company's Form 10-Q report under the Securities Act of 1934 (File No. 33- 24180) filed November 11, 1993 and hereby incorporated by reference. ******* Previously filed as exhibit to the Company's Form 10-K report under the Securities Act of 1934 (File No. 33- 24180) filed March 27, 1994 and hereby incorporated by reference. ******** Previously filed as an exhibit to the Company's Form 10-Q report under the Securities Act of 1934 (File No. 33- 24180) filed May 12, 1995 and hereby incorporated by reference. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMFAC/JMB HAWAII, INC. By: Gary Smith Vice President Date: May 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date: May 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMFAC/JMB FINANCE, INC. By: Gary Smith Vice President Date:May 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:May 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMFAC PROPERTY DEVELOPMENT CORP. By: Gary Smith Vice President Date:May 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:May 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMFAC PROPERTY INVESTMENT CORP. By: Gary Smith Vice President Date:May 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:May 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMFAC SUGAR AND AGRIBUSINESS, INC. By: Gary Smith Vice President Date:May 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:May 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KAANAPALI WATER CORPORATION By: Gary Smith Vice President Date:May 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:May 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMFAC AGRIBUSINESS, INC. By: Gary Smith Vice President Date:May 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:May 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KEKAHA SUGAR COMPANY, LIMITED By: Gary Smith Vice President Date:May 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:May 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE LIHUE PLANTATION COMPANY, LIMITED By: Gary Smith Vice President Date:May 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:May 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OAHU SUGAR COMPANY, LIMITED By: Gary Smith Vice President Date:May 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:May 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PIONEER MILL COMPANY, LIMITED By: Gary Smith Vice President Date:May 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:May 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PUNA SUGAR COMPANY, LIMITED By: Gary Smith Vice President Date:May 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:May 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. H. HACKFELD & CO., LTD. By: Gary Smith Vice President Date:May 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:May 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WAIAHOLE IRRIGATION COMPANY, LIMITED By: Gary Smith Vice President Date:May 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:May 13, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WAIKELE GOLF CLUB, INC. By: Gary Smith Vice President Date:May 13, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity and on the date indicated. Gary Smith Principal Accounting Officer Date:May 13, 1996 EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN SUCH REPORT. 0000839437 AMFAC/JMB HAWAII, INC. 3-MOS DEC-31-1996 MAR-31-1996 10,561 0 8,848 0 56,558 75,967 394,401 29,358 528,472 58,813 312,971 0 0 1 (121,815) 528,472 15,056 15,148 9,452 14,197 316 0 6,908 6,273 2,333 (3,940) 0 0 0 (3,940) (3.94) (3.94)
EX-1 3 AGREEMENT FOR DELIVERY AND SALE OF RAW SUGAR between HAWAIIAN SUGAR TRANSPIRATION COMPANY, INC. and CALIFORNIA AND HAWAIIAN SUGAR COMPANY TABLE OF CONTENTS Page ARTICLE I - DEFINITIONS 1 SECTION 1.01 CERTAIN DEFINED TERMS 1 ARTICLE II - PURCHASE AND SALE OF RAW SUGAR SECTION 2.01 GENERAL 4 SECTION 2.02 AIEA REFINERY REQUIREMENT 5 SECTION 2.03 PLACEMENT OF SUGAR UNDER LOAN 5 ARTICLE III - SUGAR PRICING 5 SECTION 3.01 BASIS PRICE 5 SECTION 3.02 ADJUSTMENTS TO BASIS PRICE 5 SECTION 3.03 NO. 14 CONTRACT NO LONGER REPRESENTATIVE 6 SECTION 3.04 PAYMENT FOR RAW SUGAR 7 SECTION 3.05 LATE PAYMENTS 7 SECTION 3.06 CASH ADVANCES 7 SECTION 3.07 PRICING FOR SUGAR DELIVERED TO THIRD PARTY REFINERS 7 ARTICLE IV - DELIVERY OF SUGAR 9 SECTION 4.01 PLACE OF DELIVERY 9 SECTION 4.02 SCHEDULE OF DELIVERIES 10 SECTION 4.03 GENERAL TERMS OF SHIPPING 11 ARTICLE V - DISCHARGE OF VESSEL AT CROCKETT REFINERY 12 SECTION 5.01 NOTICE OF READINESS 12 SECTION 5.02 DISCHARGE OF VESSEL 12 SECTION 5.03 CHARGES CONNECTED WITH DISCHARGE AT THE CROCKETT REFINERY 13 SECTION 5.04 SETTLEMENT WITH DELIVERY VESSEL 14 SECTION 5.05 MAINTENANCE OF DOCKS 14 ARTICLE VI-WEIGHING AND QUALITY DETERMINATIONS 15 SECTION 6.01 WEIGHT 15 SECTION 6.02 TRANSFER OF TITLE AND RISK OF LOSS 15 SECTION 6.03 SAMPLING AND TESTING PROCEDURES 15 SECTION 6.04 QUALITY PREMIUMS AND DISCOUNTS 16 ARTICLE VII - EXCUSE FROM PERFORMANCE AND TERMINATION 17 SECTION 7.01 FORCE MAJEURE 17 SECTION 7.02 EVENTS OF DEFAULT 19 SECTION 7.03 DEFAULTS UNDER STANDARD SUGAR MARKETING CONTRACTS 20 ARTICLE VIII - MISCELLANEOUS 21 SECTION 8.01 ARBITRATION 22 SECTION 8.02 INTERPRETATION OF AGREEMENT 23 SECTION 8.03 ENTIRE AGREEMENT 24 SECTION 8.04 NOTICES 24 SECTION 8.05 AMENDMENT 24 SECTION 8.06 NO STRICT CONSTRUCTIONS 24 SECTION 8.07 SUCCESSORS AND ASSIGNS 24 SECTION 8.08 SEVERABILITY 24 SECTION 8.09 FURTHURING ASSURANCES 24 SECTION 8.10 GOVERNING LAW 24 SECTION 8.11 COUNTERPARTS 25 AGREEMENT FOR THE DELIVERY AND SALE OF RAW SUGAR THIS AGREEMENT FOR THE DELIVERY AND SALE OF RAW SUGAR, (this "Agreement"), dated as of June 4, 1993 is made between Hawaiian Sugar Transportation Company, Inc., and agricultural association organized under the laws of the State of Hawaii ("Seller"), and California and Hawaiian Sugar Company, a California corporation ("Buyer"). RECITALS WHEREAS, concurrently herewith, Seller is entering into contracts for the supply and marketing of raw sugar with certain of the present growers of sugarcane in Hawaii; WHEREAS, Buyer desires to contract for a supply of raw sugar for processing at its raw sugar refineries located at Crockett, California and at Aiea, Oahu, Hawaii; WHEREAS, Seller desires to sell and deliver, and Buyer desires to purchase and receive raw sugar form Seller on the terms and conditions set forth below; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, Seller and Buyer agree as follows: ARTICLE I DEFINITIONS SECTION 1.01 CERTAIN DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Adjusted Basis Price" shall have the meaning set forth in Secion 3.02(a). "Aiea Quality Raw Sugar" shall mean raw centrifugal cane sugar produced from sugarcane grown in Hawaii, with a polarization of not less than 99.1 degrees, whole raw color of not more than 1200 ICUMSA color units at a pH of 7, ash of not more than 0.25%, dextran of not more than 100 mau and starch of not more than 150 ppm. "Aiea Refinery" shall mean the sugar refinery located at Aiea Hawaii which heretofore has been owned and operated by Buyer and the liquid sugar refining facility to be constructed by Buyer at Aiea, Hawaii adjacent to the existing sugar refinery. "Arbitrators" shall have the meaning set forth in Section 8.01(a). "Available Quantity of Raw Sugar" shall have the meaning set forth in Section 4.02. "Basis Price" shall have the meaning set forth in Section 3.01. "Bills of Lading" with respect to any delivery of Raw Sugar hereunder, shall mean the bills of lading or dock receipts, issued in connection with such delivery. "Buyer" shall have the meaning set forth in the preamble. "Business Days" shall mean any day on which commercial banks in San Francisco, California and Honolulu, Hawaii are required by law to be open for business. "Commercial Pounds" shall mean the actual physical weight in pounds, avoirdupois. "Crockett Refinery" shall mean the sugar refinery located in Crockett, California, which heretofore has been owned and operated by C&H. "Date of Arrival" shall mean (i) for a shipment of Raw Sugar to the Crockett Refinery, the date on which a Vessel tenders its Notice of Readiness in accordance with Section 5.01(a),and (ii) for a shipment of Raw Sugar to the Aiea Refinery, the last Market Day of the calendar week within which the shipment is delivered to the Aiea Refinery. "Delivery Schedule" for any period hereunder, shall mean the schedule of deliveries of Raw Sugar for such period established pursuant to the terms of Section 4.02. "Despatch Amount" shall have the meaning set forth in Section 5.03(a). "Domino" shall mean Domino Sugar Company, which, together with C&H is a party to the Domino Agreement. "Domino Agreement" shall mean the Agreement for the sale of Raw Sugar dated as of June 22, 1987 between C&H and Amstar Sugar Corporation (now know as Domino), as amended by a letter agreement between such parties dated August 6, 1990, as amended. "Estimated Value" shall have the meaning set forth in Section 3.04(a). "Event of Default" shall have the meaning set forth in Section 7.02. "Event of Force Majeure" shall mean an event that causes a permanent or temporary interruption in, on the one hand, the sale and delivery of Raw Sugar hereunder by Seller, or on the other hand, the purchase and receipt of Raw Sugar hereunder by Buyer, which is beyond the reasonable control of Seller or Buyer, respectively, and, except as to subparts (a), (b), and (c), of this definition, could not, by the exercise of due diligence, have been avoided by Seller or Buyer, respectively, and shall include, without limitation: (a) an act of God, including, without limitation, fire, flood, earthquake, landslide, storm, hurricane, epidemic, typhoon, and influx of pests, or similar occurrence; (b) war whether declared or undeclared, blockade, port closing, revolution, insurrection, civil disturbances, sabotage, or acts of public enemies; (c) strike, boycott, lockout or other labor disturbance; (d) explosion, breakage or other damage to or failure or breakdown of facilities or equipment related to, in the case of Seller, the storage or transportation of Raw Sugar (including the loss or substantial impairment of the sugar delivery Vessels owned, controlled or regularly employed under this Agreement by Seller), or, in the case of Buyer, the storage or refining of Raw Sugar at the Crockett Refinery or the Aiea Refinery; (e) power failure, unavailability of ocean transportation, shortage or lack of water, fuel or materials resulting from another Event of Force Majeure or the acts or omissions of a person or entity not under the control or direction of Seller or Buyer, as the case may be; (f) an order, judgment, ruling, decision or other act or failure to act of any governmental, civil or military or judicial authority, including, without limitation, any adoption of, or change in, any law, regulation or other legal requirement; and (g) as to Seller, an event of Force Majeure under any Standard Sugar Marketing Contract as provided for at Section 7.01(a)(iii). "Exchange" shall mean the Coffee, Sugar & Cocoa Exchange. "Final Net Price" shall have the meaning set forth in Section 3.02(b). "Final Invoice Amount" shall have the meaning set forth in Section 3.04(c). "Fine Cleaning" shall refer to that stage of the Vessel discharging procedures normally and customarily employed at the Crockett Refinery in which shovels and brooms are used to discharge the Raw Sugar from a Vessel, but shall not include the washing down or cleaning of a Vessel. "Hawaii Growers" shall mean the growers of sugarcane in Hawaii who have entered into or hereafter enter into a Standard Sugar Marketing Contract or other agreement with Seller for the delivery of Raw Sugar to Seller, and the successors and assigns of such growers. "Hawaii Terminal Facilities" shall mean each of the Raw Sugar storage facilities in Hawaii used by the Seller to store Raw Sugar. "Jones Act Vessel" shall mean an ocean transportation vessel which shall meet and comply with the requirements of the Jones Act, 46 U.S.C. 688. "Long Tons, Commercial" shall mean 2,240 Commercial Pounds. "Market Day" shall mean any day on which the Exchange is open for the trading of commodity futures contracts. "Nearest Futures Month" for any date shall mean the first succeeding month, from the month in which such date occurs, for which a No. 14 Contract is traded on the Exchange. "No.11 Contract" shall mean the Sugar No. 11 Contract, as its terms may be amended from time to time, which is traded on the Exchange. "No.14 Contract" shall mean the Sugar No. 14 Contract, as its terms may be amended from time to time, which is traded on the Exchange. "Notice of Readiness" shall have the meaning set forth in Section 5.01. "Outturn Weight" shall have the meaning set forth in Section 6.01 "Price Discount" shall have the meaning set forth in Section 3.02(c). "Prime Rate" shall mean the "prime or "base" rate announced from time to time by Bank of America N.T. & S.A. at its principal office in San Francisco, California in respect of 90-day loans to its corporate borrowers. "Pro Forma Invoice Amount" shall have the meaning set forth in Section 3.04(a). "Raw Sugar" shall mean raw centrifugal cane sugar which polarizes at not less than 94 degrees and during such periods as sugar may be processed or consumed only under a quota or allotment plan decreed by any United States government department or agency, then Raw Sugar shall include only sugar that may be processed and consumed without penalty on the date of delivery to Buyer. "Raw Value" of any quantity of Raw Sugar shall mean its equivalent in terms of ordinary commercial raw sugar testing 96 degrees by the polariscope. The conversion is to be done for Raw Sugar testing more than 92 degrees by the polariscope by multiplying (i) the number of pounds, avoirdupois, thereof by (ii) the quantity obtained by adding (A) 0.93 to (B) the quantity obtained by multiplying 0.0175 by the number of degrees and fractions of a degree of polarization above 92 degrees for such Raw Sugar. "Seller" shall have the meaning set forth in the preamble. "Settlement Price" shall mean the closing settlement price for any commodity futures contract set at the end of trading on any Market Day by the Exchange for such commodity futures contract. "Standard Sugar Marketing Contracts" shall mean any contract between Seller and a Hawaii Grower under which Seller is to acquire or market sugar of Hawaiian origin. "Stand-By Fee" shall have the meaning set forth at Section 7.01(b)(iii). "STRV" shall mean short tons, Raw Value of 2,000 pounds, avoidupois. "Standard Quality" shall refer to Raw Sugar within the quality ranges set forth in Exhibit D. "Sugar Price Support Programs" shall mean any program of the United States government, presently in effect or hereafter enacted, which, as its primary purpose, provides an economic subsidy and/or price support or other similar form of support to U.S. domestic growers of sugarcane. "Vessel" (i) in the case of a delivery of Raw Sugar to the Crockett Refinery, shall mean a ship that is capable of efficient discharge with Buyer's current discharging equipment and procedures, that meets with Buyer's approval, which shall not be unreasonably withheld, and that meets or exceeds the requirements of the Bulk Sugar Charter U.S.A.-April 1962 as amended from time to time and subject to such conditions as the Board of Managers of the Exchange may from time to time determine are appropriate to make such charter fair and equitable and, (ii) in the case of a delivery to the Aiea Refinery, any vehicle. Without limiting the foregoing, the MOKU PAHU and the SUGAR ISLANDER as well as any other vessel that can be discharged at rates and efficiencies at least equal to those such vessels, shall be deemed a "Vessel" for purposes of this Agreement. ARTICLE II PURCHASE AND SALE OF RAW SUGAR SECTION 2.01 GENERAL Seller agrees to sell and deliver, except as provided in Section 2.03, and Buyer agrees to purchase and receive all Raw Sugar received by Seller under Standard Sugar Marketing Contracts or otherwise from the Hawaii Growers for a period commencing on June 4, 1993 and ending on June 3, 2003. The parties agree that any Raw Sugar delivered to the Hawaii Terminal Facilities on or prior to June 3, 2003 shall be subject to the terms of this Agreement. However, Seller shall have no liability under this Agreement for failing to deliver or sell Raw Sugar if such failure arises from a default by any of the Hawaii Growers under the terms of the Standard Sugar Marketing Contracts. Furthermore, nothing in this Agreement shall obligate either Seller or any of the Hawaii Growers to cultivate sugarcane or produce Raw Sugar for sale to Buyer. SECTION 2.02 AIEA REFINERY REQUIREMENTS Seller shall sell and deliver to Buyer at the Aiea Refinery Buyer's requirements for Aiea Quality Raw Sugar, up to a maximum of 40,000 STRV of Aiea Quality Raw Sugar in each calendar year beginning with the 1994 calendar year, provided, however, that Seller shall have no obligation to deliver more Aiea Quality Raw Sugar to Buyer than that received by Seller from the Hawaii Growers and provided further that nothing herein shall require Seller or any of the Hawaii Growers to cultivate sugarcane or produce Aiea Quality Raw Sugar. Unless directed or agreed in writing by Buyer only Aiea Quality Raw Sugar shall be delivered to the Aiea Refinery. SECTION 2.03 PLACEMENT OF SUGAR UNDER LOAN Nothwithstanding Section 2.01, in each calendar year hereunder Seller shall be permitted to place up to 5% of the Raw Sugar received by Seller within such year under loan in accordance with the terms of the existing or any future Sugar Price Support Programs, with the express right, in Seller's sole discretion, to forfeit such Raw Sugar to the U.S. government agency administering such loan programs (which as of the date of this Agreement is the Commodity Credit Corporation) in lieu of repayment of such loan. To the extent that Seller or any Hawaii Grower shall forfeit Raw Sugar to any U.S. government agency as provided for herein, there shall be no requirement to sell and deliver or replace the forfeited Raw Sugar to Buyer; provided, however, that nothing in this Section 2.03 shall relieve Seller of its obligations under Sections 2.02 and 4.02. ARTICLE III SUGAR PRICING SECTION 3.01 BASIS PRICE (a) With respect to each shipment of Raw Sugar delivered by Seller to Buyer at the Crockett Refinery hereunder, a basis price ("Basis Price") shall be established for each Commercial Pound of Raw Sugar equal to the simple average of the daily Settlement Prices for the No. 14 Contract, for the Nearest Futures Month, for each of the fifteen (15) consecutive Market Days immediately preceding and including the Date of Arrival of the delivery Vessel at Buyer's Crockett Refinery or, if the Date of Arrival is not a Market Day, the next succeeding Market Day. (b) With respect to each shipment of Raw Sugar delivered by Seller to Buyer at the Aiea Refinery, a basis price ("Basis Price") shall be established for each Commercial Pound of Raw Sugar equal to the simple average of the daily Settlement Prices for the No. 14 Contract, for the Nearest Futures Month, for each of the fifteen (15) consecutive market Days immediately preceding and including the Date of Arrival of Seller's delivery Vessel at Buyer's Aiea Refinery. (c) All Basis Prices shall be calculated to the nearest one-thousandth of a cent ($.00001) per Commercial Pound. SECTION 3.02 ADJUSTMENT TO BASIS PRICE (a) The "Adjusted Basis Price" with respect to each shipment of Raw Sugar delivered by Seller to Buyer at the Aiea Refinery or the Crockett Refinery shall be equal to the Basis Price less the sum of (i) the Price Discount, (ii) the despatch rate set forth in Section 5.03(a)(i), and (iii) the stevedoring rate as determined pursuant to Section 5.03(b). (b) The "Final Net Price" with respect to each shipment of Raw Sugar delivered by Seller to Buyer at the Aiea Refinery or the Crockett Refinery shall be equal to the Basis Price: (i) increased or decreased, as the case may be, by the net quality premium or discount calculated pursuant to the terms of Section 6.04, and following such adjustment, (ii) decreased by the Price Discount, and, following such adjustments, (iii) with respect to (a) Raw Sugar delivered to the Crockett Refinery, increased or decreased, as the case may be, by the net amount per Commercial Pound of the charges relating to discharge of the delivery Vessel calculated pursuant to the terms of Section 5.03 and (b) Raw Sugar delivered to the Aiea Refinery, decreased by the sum of the despatch rate plus the stevedoring rate determined pursuant to Section 5.03(b). Examples of the calculation of the Final Net Price are set forth in Schedule 1. (c) The "Price Discount" shall be equal to $.0125 per Commercial Pound, unless during any calendar year beginning on or after January 1, 1994 Seller shall deliver in excess of 550,000 STRC of Raw Sugar at which time the Price Discount shall be reduced to $.0075 per Commercial Pound, for all Raw Sugar delivered to Buyer in excess of 550,000 STRV during such calendar year, up to 750,000 STRV; provided, however, that for any calendar year beginning on or after January 1, 1994 during which Hamakua Sugar Company produces Raw Sugar, the 550,000 STRV threshold shall be increased by the number of tons of Raw Sugar delivered by Hamakua Sugar Company to Seller for purposes of determining when the Price Discount shall be reduced to $.0075 per Commercial Pound and provided, further that for any calendar year beginning on or after January 1, 1994 in which Alexander and Baldwin, Inc., or any subsidiary thereof (collectively, "A&B") delivers Raw Sugar to any person(s) other than Seller, the 550,000 STRV threshold as otherwise adjusted pursuant to this Section shall be reduced by the number of tons of Raw Sugar delivered by A&B to such person(s). The Price Discount for Raw Sugar delivered by Seller to Buyer in excess of 750,000 STRV in any calendar year shall be $.0125 per Commercial Pound. SECTION 3.03 NO. 14 CONTRACT NO LONGER REPRESENTATIVE (a) If at any time during the term of this Agreement, the No. 14 Contract price no longer represents the U.S. duty-paid, domestic price of Raw Sugar, the parties may agree that any Raw Sugar which remains unpriced hereunder shall be priced by using (i) the No. 11 Contract rules, adjusted as required to reflect the U.S. duty-paid, domestic price of Raw Sugar, (ii) any successor contract to the No. 14 Contract which Seller and Buyer mutually agree represents the U.S. duty-paid, domestic price for Raw Sugar as of such date, or (iii) such other pricing mechanism as may be mutually acceptable to both Buyer and Seller. (b) If, after good faith negotiations, Seller and Buyer are unable to agree upon whether the No. 14 Contract continues to represent the U.S. duty-paid domestic price of Raw Sugar or upon an alternative pricing mechanism, either-party may submit such matter to Arbitration in accordance with Section 8.01, and the Arbitrators appointed for such proceeding shall have the power to establish an alternative pricing mechanism. (c) Seller and Buyer agree that, among other reasons not specified herein, the No. 14 Contract price shall no longer be deemed to be representative of the U.S. duty-paid, domestic price of Raw Sugar if either of the following events shall occur: (i) the total open interests in No. 14 Contracts falls below 2,000 lots for twenty (20) consecutive Market Days, or (ii) a sugar futures contract other than the No. 14 Contract, which shall purport to represent the duty-paid, domestic price of Raw Sugar, and shall be generally recognized by the U.S. domestic sugar industry as such, trades on the Exchange in a greater volume than the No. 14 Contract for ten (10) consecutive Market Days. SECTION 3.04 PAYMENT FOR RAW SUGAR. (a) In connection with a delivery of Raw Sugar, Seller shall present to Buyer a pro forma invoice in an amount (the "Pro Forma Invoice Amount") equal to the Estimated Value of the Raw Sugar delivered. The Raw Sugar's Estimated Value shall be equal to the product of (i) the Raw Sugar's Outturn Weight multiplied by (ii) the Adjusted Basis Price for such Raw Sugar. The pro forma invoice shall be presented to Buyer by Seller no later than eight (8) days after the Date of Arrival and shall be in sufficient detail to demonstrate compliance with the pricing terms of this Agreement. Buyer shall pay such Pro Forma invoice Amount to Seller (or persons designed by Seller) by the end of the tenth day following the Date of Arrival for such delivery or, if such day is not a Business Day, on the next following Business Day. Such payment shall be made in immediately available funds to a bank specified from time to time in writing by Seller to Buyer. (b) In the event that the Outturn Weight of any shipment of Raw Sugar shall not be available to Seller prior to the time the pro forma invoice must be submitted to Buyer, Seller shall be permitted to substitute the weight reflected on the Bill of Lading into the calculation of the Pro Forma Invoice Amount and Buyer shall pay the Pro Forma Invoice Amount so calculated. If, prior to the final pricing determination described in subsection (c), the actual Outturn Weight becomes available, Seller may (or upon Buyer's request shall) submit an interim invoice to Buyer with a revised Pro Forma Invoice Amount based on the actual Outturn Weight requesting payment or making a refund, as the case may be. (c) Promptly after the final pricing determinations have been made and the final weights, polarizations and quality tests have been performed or ascertained, which shall in no event be later than sixty (60) days after the Date of Arrival, Seller shall calculate the "Final Invoice Amount" by multiplying (i) the Raw Sugar's final Outturn Weight by (ii) the Final Net Price. When such calculations are complete, Seller shall present to Buyer a final invoice which shall request payment or provide for a refund, as the case may be for the difference between the Pro Forma Invoice Amount, as adjusted by any interim invoices which may have been rendered by Seller, and the Final Invoice Amount. Such final invoice shall be in sufficient detail to demonstrate compliance with the pricing terms of this Agreement. (d) Each payment to Seller or Buyer required under subsections (b) or (c) shall be made by the end of the second Business Day following the presentation of such interim or final invoice, as the case may be; provided, however, that in no event shall any payment be due prior to the time the Pro Forma Invoice Amount, payable with respect to such shipment of Raw Sugar, shall be due pursuant to subsection (a). Such payments shall be made in immediately available funds to a bank specified from time to time in writing by Seller to Buyer. SECTION 3.05 LATE PAYMENTS In the event that either Buyer or Seller shall fail to pay any amount payable hereunder to the other party in full when due, such unpaid amount shall bear interest at a rate per annum equal to 133% of the Prime Rate in effect at such time, which shall accrue from the date any amount is first due hereunder until the date such amount is paid in full. SECTION 3.06 CASH ADVANCES Buyer agrees to make advances to Seller pursuant to the terms and conditions of Exhibit E hereto which is hereby incorporated herein by reference and shall be binding on each of the parties hereto as if each and every term were set forth herein. SECTION 3.07 PRICING FOR SUGAR DELIVERED TO THIRD PARTY REFINERS. (a) In the event that Buyer shall direct Seller to deliver any Raw Sugar to Domino, or other third party refinery designated by Domino, in satisfaction of Buyer's obligations under the Domino Agreement (as permitted by Section 4.01), the pricing terms to the Seller of such delivery or deliveries, including quality premiums and discounts, demurrage and despatch, shall be determined solely in accordance with the Domino Agreement. None of the pricing terms of this Agreement, including but not limited to the Price Discount, shall be applied to any such delivery. In connection with such deliveries, Seller shall look to Buyer, rather than Domino or such third party refinery for payment of the amount payable for such Raw Sugar under the Domino Agreement and Buyer agrees to make such payment or payments, and to do so to the extent practicable, in accordance with the payment provisions of Section 3.04 applicable to Raw Sugar delivered to the Crockett Refinery. (b) In the event that Buyer shall direct Seller to deliver any Raw Sugar to any United States refinery or refiner other than the Crockett Refinery, the Aiea Refinery, Domino or a third party refiner designated by Domino (as permitted by Section 4.01), the pricing terms of such delivery or deliveries, to the extent not otherwise negotiated by Buyer in accordance with the last sentence of this subsection, shall be determined solely in accordance with the terms of the No. 14 Contract. None of the pricing terms of this Agreement, including, but not limited to, the Price Discount, shall be applied to any such delivery. In connection with such deliveries, Seller shall look to Buyer, rather than such other United States refiner, for payment of the amount payable for such payment or payments, and to do so, to the extent practicable, in accordance with the payment provisions set forth in Section 3.04 applicable to Raw Sugar delivered to the Crockett Refinery. For all deliveries of Raw Sugar to a third party refiner hereunder, Buyer agrees that it shall use its best efforts to cause the terms of the "Domino General Contract Provisions" to govern such deliveries to the extent that such provisions conflict or are inconsistent with the terms of the No. 14 Contract. ARTICLE IV DELIVERY OF SUGAR SECTION 4.01 PLACE OF DELIVERY. (a) Buyer and Seller agree that, except as provided in subsection (c) below, Raw Sugar shall only be delivered by Seller to Buyer at the Crockett Refinery or the Aiea Refinery. Except as provided in (b) below, the actual place of delivery between the Crockett Refinery and the Aiea Refinery shall, subject to the quantity limitations of Section 2.02, be at the election of Buyer which election shall be exercised by written notice as described below. On or before the 15th day of October of each year hereunder, Buyer shall provide to Seller its best estimate of the quantity of Raw Sugar Buyer will require for the Aiea Refinery during each month of the immediately following calendar year. Buyer shall give written notice to Seller of its election to receive Raw Sugar at Aiea on or before the 10th day of each month from December through September following delivery of Seller's Initial Delivery Schedule under Section 4.02(a). Such notice shall set forth the quantity of Raw Sugar to be delivered by Seller to the Aiea Refinery for the three consecutive calendar months following such notice, and Buyer's best estimate of the quantity of Raw Sugar Buyer will require for the Aiea Refinery for the balance of the calendar year. No adjustments shall be made by Buyer to the quantity of Raw Sugar to be delivered to the Aiea Refinery for the three consecutive calendar month period following delivery of Buyer's notice except as made necessary by Force Majeure or as mutually agreed by the parties. (b) Seller shall be obligated to deliver to the Aiea Refinery Raw Sugar produced on the Island of Oahu unless Seller is unable to supply Buyer's requirement for Aiea Quality Raw Sugar (up to an annual maximum of 40,000 tons beginning with the 1994 calendar year) with Raw Sugar produced on Oahu. Seller's obligation to deliver to the Aiea Refinery, Aiea Quality Raw Sugar produced outside of the island of Oahu shall be subject to marine facilities existing on the island of Oahu that can, with reasonable efficiency, receive raw sugar cargoes for transshipment to the Aiea Refinery. (c) Buyer and Seller acknowledge that there may be times during the term of this Agreement where economic or operational circumstances cause Buyer to desire that certain quantities of the Raw Sugar to be delivered by Seller not be delivered to the Crockett Refinery or the Aiea Refinery, but rather be delivered to (i) Domino in satisfaction of Buyer's obligation under the Domino Agreement or (ii) a different sugar refiner on the Gulf Coast or the East Coast of the United States. In recognition of this possibility, Buyer and Seller agree that, in addition to having the option of directing Seller to deliver Raw Sugar either to the Crockett Refinery or to the Aiea Refinery, Buyer shall have the right to direct Seller to deliver up to 100,000 Long Tons, Commercial of the Raw Sugar to Domino or to any other United States sugar refiner, provided that the quantity to be delivered represents a commercially practical quantity, and that the Raw Sugar is to be delivered to a location designated by the No. 14 Contract. In connection therewith, Seller acknowledges that under the terms of the Domino Agreement, Domino has the right to require that raw sugar delivered under such agreement to be delivered to a refiner located in the continental United States other than Domino. Buyer shall give Seller written notice of the exercise of such option to direct the delivery of Raw Sugar to a third party refiner prior to the date the delivery Vessel departs from the last Hawaii Terminal Facility at which Raw Sugar is loaded aboard the Vessel. (d) The scheduling of all deliveries of Raw Sugar hereunder, including deliveries to third party United States sugar refiner, shall be done in accordance with the terms of Section 4.02. SECTION 4.02 SCHEDULE OF DELIVERIES. (a) Initial Delivery Schedules. On or before the 15th day of October of each year hereunder, Seller, after consultation with Buyer, shall deliver to Buyer a delivery schedule (the "Initial Delivery Schedule"), based upon the general delivery principles of Section 4.02(e), for the Raw Sugar it will have available for delivery to Buyer during the immediately succeeding calendar year taking into account Seller's beginning inventory stocks, the quantity of Raw Sugar expected to be delivered to Seller by the Hawaii Growers during such year under the Standard Sugar Marketing Contract or otherwise, the quantity of Raw Sugar Seller anticipates it will place under loan pursuant to Section 2.03, Seller's need to load and deliver Raw Sugar to Buyer in a commercially practicable manner, and such other factors consistent with this Agreement as may be appropriate for such purpose (the "Available Quantity of Raw Sugar"), provided, however, that the consideration of such factors shall not have the effect of reducing Seller's general obligation to sell to Buyer Raw Sugar actually received from the Hawaii Growers under Section 2.01 or the obligations at Section 2.02. For purposes of the preceding sentence and subsection (b) and (d), a proposed delivery of Raw Sugar shall be deemed to be "commercially impracticable" and thus permit Seller to exclude such Raw Sugar from the Available Quantity of Raw Sugar for such year if it would cause an undue disruption in the efficient and economic shipping operations of Seller. Examples of circumstances in which delivery hereunder would be deemed "commercially impracticable" would include, but not be limited to, deliveries that would require Seller to (1) load a delivery Vessel at more that three ports, (2) employ two or more delivery Vessels in concurrent, active Raw Sugar service, (3) deliver less and 23,000 Long Tons, Commercial of Raw Sugar aboard the MOKU PAHU or less than two-thirds of a full cargo to the Crockett Refinery on any other Vessel, and (4) deliver to the Crockett Refinery on more than four occasions in any one calendar year, less than 30,000 Long Tons, Commercial, of Raw Sugar aboard the MOKU PAHU or less than 90% of a full cargo on any other Vessel. (b) Revised Delivery Schedules. On or before the 15th day of each month from December through September following delivery of an Initial Delivery Schedule, Seller, after consultation with Buyer, shall deliver to Buyer an update of the Initial Delivery Schedule with such adjustments, if any, as may be appropriate to reflect new information regarding the Available Quantity of Raw Sugar and Buyer's requirements for the Crockett Refinery and the Aiea Refinery; provided, however, that no adjustments shall be made to the Three Month Best Efforts Supply Commitment as described in the following subsection except as made necessary by Force Majeure or Buyer's direction to deliver Raw Sugar to a third party refiner pursuant to Section 4.01(c) or the mutual agreement of the parties, in which case Seller's obligations shall be reduced in an equitable manner to be determined at such time after consideration by Seller and Buyer of all the facts and circumstances connected with such event. Initial Delivery Schedules as updated are referred to herein as Revised Delivery Schedules. (c) Three Month Best Efforts Supply Commitment. Seller shall use its best efforts to deliver to Buyer the Raw Sugar scheduled under a Revised Delivery Schedule for delivery during each of the three consecutive calendar months commencing with the calendar month next following the month in which the Revised Delivery Schedule is delivered to Buyer. (d) Deliveries During First Calendar Year. Seller's schedule of deliveries of Raw Sugar to Buyer during the period from the date of this Agreement through December 31, 1993 is attached hereto as Schedule 2. Seller shall use its best efforts to deliver to Buyer and Raw Sugar scheduled for delivery during the first three calendar months of Schedule 2. On or before the 15th day of each month commencing with the first month beginning after the date of this Agreement and ending with the month of September 1993, Seller, after consultation with Buyer, shall deliver to Buyer an update of Schedule 2, with such adjustments, if any, as may be appropriate to reflect any changes in the Available Quantity of Raw Sugar (as otherwise defined under Section 4.02(a)) and Buyer's requirements for the Crockett Refinery and the Aiea Refinery; provided, however, that no adjustments shall be made to the three month best efforts supply commitment described in the following sentence, except as made necessary by Force Majeure or Buyer's direction to deliver Raw Sugar to a third party refiner pursuant to Section 4.01(c) or the mutual agreement of the parties, in which case Seller's obligations shall be reduced in an equitable manner to be determined at such time after consideration by Seller and Buyer of all the facts and circumstances connected with such event. Seller shall use its best efforts to deliver to Buyer the Raw Sugar Scheduled for delivery under such updated schedules during each of the three consecutive calendar months commencing with the calendar month next following the month in which an updated schedule is delivered to Buyer. (e) General Delivery Principles. The parties agree that they will work with each other to accommodate Buyer's need to have an orderly supply of Raw Sugar to keep the Aiea Refinery and the Crockett Refinery operating on an efficient commercial basis and Seller's need to schedule shipments with regard to the availability and efficient use of Jones Act Vessels, provided, however, that Seller shall in any event have the right to schedule the delivery of Raw Sugar to Buyer at a rate equal to the maximum delivery capacity of the MOKU PAHU. Notwithstanding anything herein to the contrary. Buyer shall have no obligation to buy or take delivery of more than 125% of the Raw Sugar Scheduled for delivery during any period subject to a "best efforts" supply commitment under Subsections (b) or (d). (f) Arrival Dates. For each shipment of Raw Sugar to the Crockett Refinery, Seller shall declare the arrival date thereof not less than 14 days prior to the day the Vessel is expected to arrive. Delivery shall be considered timely if Seller's delivery Vessel tenders Notice of Readiness in accordance with Section 5.01 within 5 days of the declared arrival date. (g) Status of Arrival. Following declaration of the arrival date pursuant to Subsection (f), Seller shall keep Buyer informed as to the status of the expected arrival of the delivery Vessel and matters pertinent thereto, including the Vessel's loading schedule, the Vessel's expected departure date for the Crockett Refinery, and 72 hours, 48 hours and 24 hours in advance, the expected time of arrival of the Vessel at the Pilot Station of the Port of San Francisco. (h) Supplemental Information. On the first Business Day of each calendar week, Seller shall give written notice to Buyer of the quantity of Raw Sugar on hand at each Hawaii Terminal Facility, the quantity of Raw Sugar produced by each Hawaii Grower during the immediately preceding calendar week, the quantity of Raw Sugar each Hawaii Grower currently plans to produce during each of the sixteen consecutive calendar weeks beginning with the week in which such notice is given, together with such other information as may be known to Seller, or reasonably should be known, regarding matters material to the then current Delivery Schedule. SECTION 4.03 GENERAL TERMS OF SHIPPING. (a) All Raw Sugar delivered to the Crockett Refinery shall be delivered on a Vessel as defined under Article I of this Agreement. (b) The MOKU PAHU shall not be employed by Seller in nonsugar service between April 1 and October 31 of any calendar year or at any time when there is, or is expected to be, an aggregate of more than 23,000 Long Tons, Commercial of Raw Sugar in storage at any three Hawaii Terminal Facilities, without the prior written consent of Buyer, which consent shall not be unreasonably withheld. (c) Following completion of loading a Vessel at the Hawaii Terminal Facility for a delivery to the Crockett Refinery, Seller shall provide to Buyer the total weight of the Raw Sugar loaded on such delivery Vessel as determined at the Hawaii Terminal Facilities. (d) Seller shall furnish to Buyer information as to the delivery Vessel's stowage as soon as possible after completion of loading of its Raw Sugar cargo. (e) Seller shall not load any Raw Sugar which it shall know to be damaged on the Vessel designated for delivery. (f) For deliveries to the Crockett Refinery, Seller shall present a Bill of Lading to Buyer not sooner than seven days nor later than two days prior to the later to occur of either: (i) the expected Date of Arrival of the delivery Vessel; (ii) the expected date the Raw Sugar being delivered hereunder shall be available for discharge, when any Raw Sugar or other shipment is being discharged from another vessel at the time Seller's Vessel shall arrive. (g) For deliveries to the Aiea Refinery, Seller shall present a bill of lading to Buyer on the day of delivery. ARTICLE V DISCHARGE OF VESSEL AT CROCKETT REFINERY SECTION 5.01 NOTICE OF READINESS. (a) At the time Seller's delivery Vessel arrives at the Pilot Station of the Port of San Francisco, it shall tender a notice of readiness to Buyer (or its authorized agent) (the "Notice of Readiness"), and Buyer (or its authorized agent) shall accept such Notice of Readiness, whether or not such arrival shall be during normal business hours. (b) For deliveries to the Aiea Refinery, Seller (or its authorized agent) shall advise Buyer or its arrival at the Aiea Refinery location and readiness for unloading, Buyer shall use best efforts to unload Seller's delivery Vessel in a prompt and efficient manner. SECTION 5.02 DISCHARGE OF VESSEL. (a) Buyer shall be responsible in all respects for the discharge of Raw Sugar in connection with each delivery. All such discharging, shall be done at Buyer's own expense, subject to the reimbursement provisions for deliveries of Raw Sugar to the Crockett Refinery set forth in Section 5.03. Discharging of Raw Sugar delivered to the Crockett Refinery shall be performed in accordance with the standards generally prevailing at the time of such delivery under the No. 14 Contract, except that to the extent certain discharging standards are specifically addressed by this Agreement, then the provisions of this Agreement shall control. (b) Buyer shall, at its own expense, cause Seller's Vessel to be Fine Cleaned under the supervision of the master of the Vessel unless Buyer gives Seller notice not later than three (3) days before the commencement of discharge of its election not to Fine Clean the Vessel. If Buyer so elects, the Vessel shall not be Fine Cleaned, a corresponding credit shall be taken against the stevedoring allowance payable by Seller with respect to such delivery pursuant to Section 5.03(b), and Buyer shall pay Seller interest on the Estimated Value of the Raw Sugar left aboard the Vessel until such time as the Vessel is Fine Cleaned or placed in non-sugar service. The rate of such interest shall be the weighted average interest rate of the outstanding cash advances from Buyer to Seller during the period such Raw Sugar is left aboard the Vessel or if no such cash advance is outstanding, the Prime Rate. If Buyer shall elect not to Fine Clean the Vessel for any delivery, the Vessel shall in any event be cleaned such that no more than fifteen (15) Long Tons, Commercial of Raw Sugar is left following such cleaning in any hold of the Vessel and no more than ninety (90) Long Tons, Commercial of Raw Sugar is left in the Vessel in total. Seller may override Buyer's election not to Fine Clean the delivery Vessel by giving notice to Buyer prior to commencement of discharge if (i) Seller expects the Vessel's next cargo to be delivered to a third party, (ii) the Vessel is to undergo maintenance or repair requiring any hold to be Fine Cleaned, or (iii) the Vessel is delivering its last Raw Sugar cargo within the calendar year. SECTION 5.03 CHARGES CONNECTED WITH DISCHARGE AT THE CROCKETT REFINERY. The various charges and fees connected with the discharge and offloading of Seller's Raw Sugar cargo from each delivery Vessel at the Crockett Refinery shall be allocated between Seller and Buyer as follows: (a) Lay-Time, Demurrage and Despatch. (i) With respect to each delivery of Raw Sugar by Seller to the Crockett Refinery or Aiea Refinery, Seller shall pay Buyer an amount equal to $0.00133 per Commercial Pound of Raw Sugar discharged by Buyer (the "Despatch Amount"). (ii) Lay-time shall commence at the start of the first regular stevedore working period following Seller's notice to Buyer that the delivery Vessel is safely berthed alongside Buyer's dock and ready in all respects to begin discharging but not sooner than four hours after the time Notice of Readiness for such delivery is tendered in accordance with Section 5.01; provided, however, that if Buyer actually begins to discharge the delivery Vessel before such time, lay-time shall commence when such discharging begins. Buyer shall be allowed 72 hours lay-time during Saturday's, Sundays, stevedore holidays, and stevedore stop work meetings. (iii) Except as provided in subpart (iv) of this Section 5.03(a) if the delivery Vessel is ready to proceed to the discharging berth and Buyer does not provide a berth, lay-time shall commence at the beginning of the first regular stevedore working period starting not sooner than four hours following tender of Notice of Readiness pursuant to Section 5.01 (iv) In the event that any of the Seller's delivery Vessels shall tender a Notice of Readiness in accordance with Section 5.01 but shall be unable to ready itself for discharge at the Crockett Refinery because another of Seller's delivery Vessels shall be discharging, or readying itself for discharge, at the Crockett Refinery dock at such time, lay-time with respect to such waiting Vessel shall not commence before such time as Seller's discharging Vessel shall have been shifted off-berth and the waiting Vessel shall be shifted on-berth and be ready to begin discharging its cargo. (v) In the event discharge is prevented or stopped by adverse weather conditions, lay-time shall be extended for a corresponding period in the determination of demurrage. (vi) Lay-time for discharging shall not commence, or if commenced shall be suspended during any period in which discharging is prevented or delayed by an Event of Force Majeure. (vii) Demurrage shall be payable by Buyer to Seller at a rate of $950 per hour for each hour (calculated to the nearest quarter hour) by which the time taken to complete discharge exceeds the expiration of lay-time. (viii) Notwithstanding the foregoing, if Seller delivers Raw Sugar to the Crockett Refinery on any Vessel other than the MOKU PAHU laytime shall be determined in accordance with the Bulk Sugar Charter USA - April 1962, as amended from time to time, and demurrage and despatch shall be both calculated at the rate of $5,000 per 24-hour day (partial days pro rata). (b) Stevedoring. (i) Actual stevedoring charges shall be paid by the Buyer and an allowance for stevedoring shall be charged to Seller at the rate per Commercial Pound provided for in the No. 14 Contract. (ii) In the event that Buyer elects not to perform Fine Cleaning on Seller's Vessel for a particular delivery, the stevedoring allowance to be paid by Seller for such delivery shall be reduced by 4%. (c) Dockage. Dockage charges shall be paid by Seller and shall be charged by Buyer at the customary rate for the Port of San Francisco from time to time. (d) Wharfage Charges, Dues and Taxes. All wharfage charges, dues and taxes, including sales taxes, charged with respect to Seller's sale and delivery of Raw Sugar shall be paid by Buyer with no offset against any amounts to be paid to Seller hereunder in respect of delivered Raw Sugar. (e) Ship's Clerk. All amounts relating to work performed by the ship's clerk during the discharge of the Vessel shall be paid by Seller for Seller's own account, with no offset against any amounts to be paid to Buyer. SECTION 5.04 SETTLEMENT WITH DELIVERY VESSEL. Seller shall pay the freight, discharge all liens, and make all settlements with the delivery Vessel and its owners. If an arbitration should arise under the charter party or contract of affreightment applicable to a shipment of Raw Sugar hereunder, Buyer shall upon Seller's request, consent to become a party to such arbitration and shall be bound by any award against Seller in such proceeding. SECTION 5.05 MAINTENANCE OF DOCKS. (a) Buyer shall be responsible for maintaining the docks and dock access area at the Crockett Refinery in a manner sufficient to allow docking and the efficient unloading and servicing of Vessels of a size and draft which are customary for Vessels which prior to the date of this agreement had been used by Buyer for the delivery of Raw Sugar to the Crockett Refinery. At a minimum Buyer shall maintain the dock and dock access area at the Crockett Refinery such that the Vessels employed for delivery by Seller shall be able to, in the opinion of the master of such Vessels, proceed to, depart from and always lie safely afloat at the dock and dock access area at a draft of such dock of at least 35 feet. Seller shall be permitted to refuse to dock a Vessel if, in the sole judgment of the master of the Vessel, the dock or dock access area is inadequate for safe and proper docking thereof, whether or not the inadequate docking conditions shall be excused under any other provisions of this Agreement, including an Event of Force Majeure. Seller shall proceed to dock its Vessel as soon thereafter as practicable upon Buyer's remedying the unsafe or improper conditions. Notwithstanding the inability of Buyer to begin the discharge of Seller's Raw Sugar due to the dock conditions at the Crockett Refinery, lay-time shall commence at the beginning of the next regular stevedore working period starting not sooner than four hours after tender of Notice of Readiness pursuant to Section 5.01, unless the commencement of lay-time is suspended under Section 5.03(a). (b) Buyer shall maintain all unloading facilities at the Aiea Facility, in a manner sufficient to allow the prompt and efficient unloading of Seller's Vessels delivering Raw Sugar to the Aiea Refinery. ARTICLE VI WEIGHING AND QUALITY DETERMINATIONS SECTION 6.01 WEIGHT. All Raw Sugar shipped in each Vessel for delivery to Buyer shall be deemed to be of the same mark and shall be weighed, sampled and tested for polarization and refining quality as one mark. The net landed weight of each shipment hereunder shall be determined at time of discharge on the certified refinery scale of the Crockett Refinery or the Aiea Refinery (the "Outturn Weight"), as the case may be, by public weighers employed by Seller in the presence of a representative of Buyer. The scales to be used shall be tested for accuracy in the manner customary at the designated refinery. SECTION 6.02 TRANSFER OF TITLE AND RISK OF LOSS. Title and risk of loss to Raw Sugar to be delivered by Seller to the Crockett Refinery, the Aiea Refinery, or a third party refiner under this Agreement shall pass from Seller to Buyer when it is placed on the designated refinery receiving scale. SECTION 6.03 SAMPLING AND TESTING PROCEDURES. (a) Raw Sugar delivered to the Crockett Refinery shall be sampled and tested as follows: (i) Upon the discharge of Raw Sugar, samples of Raw Sugar shall be drawn in the presence of representative of Seller and Buyer by means of Buyer's automatic continuous sampling device, which shall in all cases meet or exceed the standards for such equipment generally prevailing in the U.S. domestic sugar industry. Samples from each 700,000 Commercial Pounds of Raw Sugar discharged from Seller's Vessel shall be taken and mixed, and prepared for polarization and quality evaluation purposes, in accordance with the "Raw Sugar Sampling Procedure" specified in Exhibit A. However, if Seller and Buyer agree that the Raw Sugar is in such condition that the automatic sampling device will not extract a representative sample, the samples shall be drawn manually and the procedures for mixing samples shall be altered so as to provide samples for polarization and quality evaluation which are representative. (ii) Three polarizations shall be made for each sample, one by Seller's laboratory, one by Buyer's laboratory and one by the New York Sugar Trade Laboratory. The average of the two nearest polarizations shall be used as the final test of each sample or if the two are equidistant from the median, then the median shall be taken as the final test of each sample. Each laboratory shall utilize the methods set forth in "Sugar Analysis, ICUMSA Methods," F. Schneider, Peterborough, England, 1979, Page 25, Raw Sugar, for the Polarization Analysis of Raw Sugar Samples. (iii) For testing refining quality, samples shall be prepared at the completion of discharge in accordance with the procedure described in Exhibit B. One sample shall be forwarded to Seller's laboratory, one to the New York Sugar Trade Laboratory and one to Buyer's laboratory. Each laboratory shall follow the applicable procedures specified in Exhibit B and shall use the equipment and methods described therein for testing the whole Raw Sugar for moisture, ash, color, and dextran, and for testing affined Raw Sugar prepared from the whole Raw Sugar for grain size and color. An average test result shall be used to determine each such quality factor. Such average shall be determined for each quality specification separately and shall be the average of the two nearest test results of the three laboratories which shall perform such testing procedures pursuant to this Section, but if the two are equidstant from the median, then the median shall be used. (iv) The charges for testing Raw Sugar pursuant to this Section shall be borne by Buyer and Seller, with each paying its own chemist and one-half of the fee of the New York Sugar Trade Laboratory. (b) Raw Sugar deliveries to the Aiea Refinery shall be sampled in the manner heretofore customary at the Aiea Refinery and shall be tested in the same manner as Raw Sugar delivered to the Crockett Refinery, except that a single test of each sample shall be performed by the Hawaiian Sugar Planters' Association in lieu of the three tests required with respect to Raw Sugar delivered to the Crockett Refinery, whole raw color shall be tested at a pH of 7, and starch content shall be tested as specified in Exhibit B. The cost of such testing shall be paid one-half by Seller and one-half by Buyer. SECTION 6.04 QUALITY PREMIUM AND DISCOUNTS. Pursuant to the terms of Section 3.02(b), the Basis Price shall be adjusted for polarization and quality allowances, premiums and discounts as follows: (a) The allowance per Commercial Pound for each degree of polarization above or below 96 degrees shall be determined pursuant to the following tables, it being understood that allowances for fractions of a degree under the "Ratable Adjustments" table shall be in proportion: Ratable Adjustments For the full degree from 96 up to and including 97, add 0.5% of the Basis Price. For the full degree above 97 up to and including 98, add an additional 1.2% of the Basis Price. For the full degree above 98 up to and including 99, add an additional 1.2% of the Basis Price. For the full degree above 99 up to and including 100, add an additional 0.6% of the Basis Price. For the full degree below 96 to and including 95, deduct 5.50% of the Basis Price. For the full degree below 95 to and including 94, deduct an additional 2.75% of the Basis Price. Step Adjustment For polarizations of 98 and above, add 1.05% to the Basis Price to the ratable adjustment determined under the preceding table. (b) The percentage discount or premium per Commercial Pound for quality factors other than polarization shall be determined in accordance with the terms of the No.14 Contract as in effect on the date of delivery; provided, however, that a premium of $2.00 per STRV shall be paid for Aiea Quality Raw Sugar delivered to the Aiea Refinery and a deduction of $4.00 per STRV shall be charged for Raw Sugar received at the Aiea Refinery that fails to satisfy the criteria for Aiea Quality Raw Sugar. The applicable terms of the No.14 Contract as in effect on the date of this Agreement are attached hereto as Exhibit C. ARTICLE VII EXCUSE FROM PERFORMANCE AND TERMINATION SECTION 7.01 FORCE MAJEURE. (a) In addition to adjustments provided for at Article IV, the obligations of Seller to sell and deliver Raw Sugar hereunder shall be qualified in all cases to the following extent: (i) In the event that an Event of Force Majeure shall destroy any Raw Sugar that Seller had designated for delivery to Buyer, or damage such Raw Sugar such that it shall no longer be of sufficient quality to satisfy the requirements of this Agreement, and such event shall cause the quantity of Raw Sugar available to Seller for delivery to Buyer for the period in which such Raw Sugar was to have been delivered to be less than Seller's delivery obligation for such period, then at Seller's option, its delivery obligation for such period shall be reduced to the quantity of Raw Sugar actually available to Seller for delivery to Buyer for such period. (ii) In the event that an Event of Force Majeure shall prevent Seller from (a) receiving Raw Sugar in Hawaii from the Hawaii Growers, (b) loading any cargo of Raw Sugar on any delivery Vessel, (c) transporting any cargo of Raw Sugar to Crockett Refinery or Aiea Refinery, (d) discharging the Vessel employed for such delivery upon arrival at the Crockett Refinery or Aiea Refinery, or (e) taking any other required action hereunder, and such event shall cause Seller to deviate from the Delivery Schedule in effect at such time, then Seller's obligation to deliver Raw Sugar to Buyer in accordance with such Delivery Schedule shall be suspended from the duration of such event. At the time such Event of Force Majeure shall terminate, Seller and Buyer shall meet to renegotiate in good faith the terms of the Delivery Schedule for the remainder of the period in which such event shall occur. If such an Event of Force Majeure shall carry over from one calendar year to the next, Seller's obligation to deliver Raw Sugar to Buyer for the concluded calendar year shall, at Seller's option, terminate in its entirety. If such an Event of Force Majeure shall commence and terminate within the same calendar year, the total quantity of Raw Sugar Seller shall be obligated to deliver to Buyer during such year shall remain unaffected, unless it shall be deemed by Seller to be "commercially impracticable" (as defined in Section 4.02(a)) to arrange for the delivery of such quantity to Buyer taking into account Seller's shipping constraints in the remainder of such calendar year in which case Seller's obligation to deliver Raw Sugar for such period shall be reduced in an equitable manner to be determined at such time after consideration by Seller and Buyer of all of the facts and circumstances connected with such event. (iii) In the event that any Hawaii Grower shall be excused from its obligation to deliver Raw Sugar to Seller under a Standard Sugar Marketing Contract due to the occurrence of any event of force majeure thereunder, and such event shall cause the quantity of Raw Sugar available to Seller for delivery to Buyer for the period in which such Raw Sugar was to have been delivered to be less than Seller's delivery obligation for such period, then the quantity of Raw Sugar Seller shall be obligated to deliver to Buyer for such period shall be reduced to the quantity of Sugar actually available to Seller for delivery to Buyer for such period. (b) The obligations of Buyer to receive and purchase Raw Sugar hereunder shall be qualified in all cases to the following extent: (i) In the event that an Event of Force Majeure shall prevent Buyer from (x) receiving or off-loading any shipment of Raw Sugar delivered by Seller hereunder to the Crockett or Aiea Refinery, (y) refining, processing or storing such Raw Sugar, or (z) taking any other required action hereunder, and such event shall cause Buyer to deviate from the Delivery Schedules in effect at such time, then Buyer's obligations to purchase and accept delivery of Raw Sugar from Seller shall be suspended for the duration of such event. At the time such Event of Force Majeure shall terminate, Buyer and Seller shall meet to renegotiate in good faith the terms of the Delivery Schedules for the remainder of the period in which such event shall occur. If such an Event of Force Majeure shall carry over from one calendar year to the next, Buyer's obligation to purchase Raw Sugar from Seller for the concluded calendar year shall, at Buyer's option, terminate in its entirety. If such an Event of Force Majeure shall commence and terminate within the same calendar year, the total quantity of Raw Sugar Buyer shall be obligated to purchase from Seller during such year shall remain unaffected, unless it shall be deemed by Buyer to be commercially impracticable to accept delivery of such quantity from Seller in the remainder of such calendar year, in which case Buyer's obligation to purchase Raw Sugar for such period shall be reduced in an equitable manner to be determined at such time after consideration by Buyer and Seller of all of the facts and circumstances connected with such event. (ii) Notwithstanding the terms of subparagraph (i) above, if following arrival of Seller's delivery Vessel at the Pilot Station of the port of the designated refinery, Seller's delivery Vessel shall be unable to discharge by reason of an Event of Force Majeure and Buyer gives Seller notice that it will pay Seller a Stand-By Fee, then Seller shall keep the delivery Vessel available to discharge its cargo at the designated refinery for the period stated in Buyer's notice; provided, however, that after the tenth (10th) day with respect to which the Stand-By Fee is payable, Seller may, at its option, sell such Sugar, for its own account, to any third party without further obligation to Buyer with respect to such shipment. The Stand-By Fee shall be $5,000 per day for each day with respect to which demurrage would be payable assuming the Event of Force Majeure had not occurred. In the event that Raw Sugar is sold by Seller to a third party pursuant to this subsection, Seller's delivery obligation shall be reduced for the applicable period by the quantity so sold. An equitable adjustment shall be made to the applicable Delivery Schedule to reflect the additional time it may take to make any unforeseen deliveries to a third party pursuant to this subsection. In addition, the parties hereto agree that Seller may enter into contractual arrangements to sell and deliver its Raw Sugar to third parties during the expected duration of an Event of Force Majeure that prevents Buyer from taking delivery of Raw Sugar hereunder. (iii) An Event of Force Majeure shall not excuse Buyer from its obligation to make cash advances to Seller pursuant to the terms of Section 3.06, until such time as Buyer's obligations have been suspended under this subsection (b) for a period in excess of twelve (12) months. (c) If either party hereto is prevented from performing its obligations hereunder in full or in part as a result of the occurrence of an Event of Force Majeure, such party shall give prompt written notice thereof to the other (but in no event more than ten (10) days after the affected party is aware that its performance will be prevented), which notice shall specify the nature of such occurrence, the steps being taken and intended to be taken to remove the disability, and an estimate of the date when full performance will be resumed hereunder. The affected party shall keep the other party informed of all material developments with respect to such Event of Force Majeure. (d) In the event that (i) Buyer shall fail to give notice on timely basis that it is unable to take delivery of Raw Sugar at the Crockett Refinery due to the occurrence of an Event of Force Majeure, (ii) Seller shall attempt to make delivery of Raw Sugar at the Crockett Refinery without knowledge of such disability, and (iii) Seller shall make such delivery to another refinery, as permitted by subsection (b), then Buyer shall be required to compensate Seller for the difference between (A) the actual cost incurred in making the delivery to the alternative refinery and (B) the cost it would have incurred in making delivery to the alternative refinery had it proceeded there directly, for the purpose of compensating Seller for the incremental steaming time, if any, required for the delivery Vessel to travel the additional distance, if any, to such alternative refinery by reason of Buyer's failure to give timely notice. (e) If the occurrence of an Event of Force Majeure is expected to excuse either party from the performance of its obligations hereunder for a period in excess of twelve (12) months, then the other party may terminate this Agreement, provided, however, that if within such twelve month period the Board of Directors of the non-performing party shall have approved a business plan to enable such party to resume full performance within forty-eight months (48) of the occurrence of the Event of Force Majeure (including approval of such capital expenditures as may be required by such plan), then the other party may not terminate this Agreement unless the non-performing party fails to diligently pursue such plan or resume full performance within 48 months of the occurrence of such Event of Force Majeure. SECTION 7.02 EVENTS OF DEFAULT. (a) Events of Default. Any of the following events shall constitute an "Event of Default" under this Agreement: (i) Payments. Buyer shall fail to pay any amount payable under this Agreement when due, such failure shall continue for seven Business Days after written notice has been delivered by Seller to Buyer as to such delinquency, and the aggregate amount in delinquency shall exceed $1,000,000; provided, however, that such seven Business Day period shall be suspended for any period during which Buyer shall be contesting in good faith its liability with respect to any such amount if Buyer provides security for the payment or payments Seller alleges are due which security shall be determined pursuant to Section 8.01(b). (ii) Failure to Make Cash Advances. Buyer shall fail to make any cash advance to Seller required under Exhibit E hereto and such failure shall continue for fifteen Business Days after written notice has been delivered by Seller to Buyer with respect to such failure, and the aggregate amount of the default shall exceed $1,000,000. (iii) Inability to Pay Debts. Either party hereto shall admit in writing its inability to, or shall fail generally or be generally unable to, pay its debts, including its payrolls, as such debts become due, or shall make an assignment for the benefit of, or enter into a composition with, its creditors. (iv) Voluntary Bankruptcy. Either party hereto shall petition or apply to any tribunal for, or consent to the appointment of, or taking possession by, a trustee, receiver, custodian, liquidator or similar official of such party or any substantial part of its assets, or commence any proceedings relating to such party under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or other liquidation law of any jurisdiction. (v) Involuntary Bankruptcy. An order for relief shall be entered in an involuntary case under the bankruptcy laws of the United States, or an order, judgment, or decree shall be entered appointing a trustee, receiver, custodian, liquidator or similar official or adjudicating either party hereto bankrupt or insolvent, or ordering or approving either party's liquidation or reorganization, or any significant modification of the rights of its creditors or approving the petition in any such proceedings, and such order, judgment or decree remains in effect for 90 days; or an involuntary petition or complaint shall be filed against either party hereto under the bankruptcy laws of the United States, or seeking the appointment of a trustee, receiver, custodian, liquidator or similar official, and such petition or complaint shall not have been dismissed within 90 days of the filing thereof. (vi) Covenants and Agreements. Either party hereto shall in any material respect breach any material term, covenant or agreement contained herein on its part to be performed or observed other than a breach described in (i) and (ii) above, and any such breach shall remain unremedied for 60 days (unless such party shall be diligently attempting to remedy such breach at the expiration of such 60 day period, then such longer period as reasonably necessary to diligently cure but in no event more than 120 days) after written notice thereof shall have been given to the breaching party by the non- breaching party, provided, however, that such cure period, shall be suspended for any period during which the party in breach shall be contesting in good faith its liability with respect to the breach if it provides such security for performance as determined pursuant to Section 8.01(b). (b) Effect of Event of Default. If any Event of Default shall occur and be continuing, (i) the non-defaulting party shall be entitled to terminate this Agreement upon written notice to the defaulting party hereunder; and (ii) notwithstanding whether the action referred to in clause (i) shall be taken, the nondefaulting party shall be entitled to exercise all other rights and remedies available to such party under applicable law including the right to sue for damages arising from any default or breach of this Agreement. SECTION 7.03 DEFAULTS UNDER STANDARD SUGAR MARKETING CONTRACTS (a) Seller shall promptly notify Buyer in writing of any breach under any Standard Sugar Marketing Contract. Seller shall further consult with Buyer prior to taking any legal action to enforce the terms of any Standard Sugar Marketing Contract, including, but not limited to, the initiation of arbitration proceedings. Seller shall promptly notify Buyer in writing of any claim asserted against Seller under any Standard Sugar Marketing Contract, including but not limited to the initiation of any arbitration proceeding, and shall, upon Buyer's request, promptly provide Buyer, with a copy of any documents or other materials received by Seller in connection with such claim. Seller, upon Buyer's request, shall keep Buyer informed of all material developments relating to any such claim. Notwithstanding the foregoing and prior to an assignment pursuant to (b) below, Seller shall not be obligated to provide such documentation or information if such information or documents are determined by Seller's counsel to be privileged. (b) Seller agrees, upon Buyer's written request, to assign to Buyer any rights, claims or remedies which Seller may have which arise out of any breach of a Standard Sugar Marketing Contract to the extent that the subject matter thereof is related to or may affect, directly or indirectly, Seller's performance under this Agreement, including, but not limited to any right, claim or remedy relating to an obligation owed to Seller by a party to a Standard Sugar Marketing Contract which if breached could result in Seller's performance under this Agreement being different from the performance that could have been rendered if such obligation were not breached. Seller agrees to fully cooperate with Buyer in the prosecution of any actions brought or pursued by Buyer under any Standard Sugar Marketing Contract. ARTICLE VIII MISCELLANEOUS SECTION 8.01 ARBITRATION. (a) Except for any controversy or disagreement arising out of or relating to the interpretation or enforcement of this Section 8.01, any controversy or disagreement arising out of or relating to this Agreement or any breach hereof shall be submitted by the parties to arbitration in San Francisco, California, under the Commercial Arbitration Rules of the American Arbitration Association for commercial arbitration and, to the extent not inconsistent therewith or with the terms hereof, the laws of the State of California. Such arbitration shall be undertaken by three disinterested arbitrators (the "Arbitrators") one of whom shall be selected by Buyer, one by Seller, and one of whom shall be chairman of the arbitral tribunal and shall be chosen by agreement between the first and second Arbitrators. The Buyer and Seller shall select such Arbitrators within fifteen (15) days after the party desiring arbitration notifies the other party in writing. Such notice demanding arbitration shall state specifically the question or questions to be submitted for decision or the point or points in controversy and shall include such party's selection of an Arbitrator. If, at the expiration of fifteen (15) days from receipt of such notice, the party receiving such notice has not informed the party demanding the arbitration of its selection of a second arbitrator, the party making the demand may make such selection. The first and second Arbitrators shall select a third Arbitrator within fifteen (15) days from the date of the appointment of the second Arbitrator. If the first and second Arbitrators cannot agree as to a third Arbitrator, such third Arbitrator may be appointed upon ten days' notice upon application of either party to the chief of presiding judge, or judge acting as chief or presiding judge, of the Superior Court of California in and for the County of Contra Costa. The arbitral tribunal shall set the date, time and place for each hearing, shall give to each of the parties at least 10 days' advance written notice of the date, time and place of the initial hearing and shall proceed without delay to hear and determine the matters in dispute. Each of the parties hereto may be represented by counsel or other authorized representative at any hearing. The party intending to be so represented shall notify the Arbitrators and the other party of the name and address of the representative at least three days prior to the date set for the hearing. Such arbitration shall be conducted in such manner as the Arbitrators Rules. Each party shall bear any expenses incurred by it prior to arbitration, including legal and accounting fees, if any, with respect to any disagreement hereunder. If the matter is submitted to arbitration, the Arbitrators shall designate the party or parties to bear the expenses of such arbitration and/or the respective amounts to be borne by each party. In making such an allocation of costs, the Arbitrators shall be expressly instructed by the parties that, absent extraordinary circumstances, the prevailing party in such a proceeding shall be entitled to reimbursement for its reasonable attorneys' fees and other reasonable expenses incurred in connection therewith by the non-prevailing party. The Arbitrators shall have the authority to resolve any dispute under this Agreement that is submitted to them, including, without limitation the right to determine (a) whether any party is in breach of any of its obligations under this Agreement, (b) whether such breach has resulted in damage to another party to this Agreement, (c) the amount of money necessary to compensate such damage, and (d) any equitable relief appropriate under the circumstances. The Arbitrators shall render their written decision in respect of the controversy at issue within 90 days after the date on which a notice demanding arbitration is first given. The determination of the Arbitrators as to any matter submitted to arbitration shall be conclusive and binding upon the parties hereto. Each party shall immediately make such changes in the conduct of such party's business or such payment of damages, as the case may be, as required by such determinations and award, if any. Judgment upon any award rendered by the Arbitrators may be entered in any court having jurisdiction over the parties and the subject matter. In the event that either party hereto shall be required to take any action to enforce any such judgment, such party shall be entitled to reimbursement for its reasonable attorneys' fees and other reasonable expenses incurred in connection therewith by the nonprevailing party. A written transcript of the proceedings shall be prepared at the expense of the party requesting such transcript, if any, or if both parties hereto shall so request, they shall share the cost equally. Discovery in such proceedings shall be limited to the taking of depositions and document production. Unless ordered by the Arbitrators, the submission of interrogatories will not be permitted. The Arbitrators shall have the power to enforce the discovery rights and obligations set forth in this Section. The books and papers of the parties hereto, so far as they relate to matters submitted to arbitration, shall be open to the investigation of the Arbitrators. The parties hereto agree that they will cooperate in good faith in such proceedings in order to work toward the prompt resolution of the subject conflict. (b) In the event that a dispute to be resolved by arbitration is alleged to involve an Event of Default under Section 7.02(a)(vi), upon application of the party alleging such Event of Default, the Arbitrators shall promptly, but in no event more that fifteen days after such application, determine what security for performance, if any, should be given by the party alleged to be in breach pending a final resolution of the dispute. Such security may consist of a deposit of money in escrow, or such other collateral or measure as the Arbitrators may determine to be appropriate security for the continued performance of the party alleging such breach and otherwise fair and reasonable under all circumstances. Such determination shall be subject to review from time to time upon application of either party. If the dispute is alleged to involve an Event of Default under Section 7.02(a)(i) then the Buyer shall with fifteen (15) days after written notice by the Seller deposit into escrow the amount of the payments(s) alleged by Seller to be in delinquency with instructions to the escrow holder to pay so much of such amount to Seller as the Arbitrators may direct and return the remainder to Buyer. (c) In an arbitration proceeding conducted pursuant to this Section, the chairman of arbitral tribunal shall be a citizen of the United States who shall (i) be admitted to practice law in one of the states of the United States, (ii) shall have had at least 20 years' experience as an attorney or a judge and (iii) have expertise in the area of commercial law. Experience with respect to transactions involving the purchase and sale of commodities shall be regarded as a highly desirable, but not essential, attribute in selection of a chairman of the arbitral tribunal. SECTION 8.02 INTERPRETATION OF AGREEMENT. Any reference in this Agreement to an Article, a Section, and Appendix or an Exhibit is a reference to an article hereof, a section hereof, an appendix hereto or an exhibit hereto, respectively, and to a subsection or a clause is, unless otherwise stated, a reference to a subsection or a clause of the Section or subsection in which the reference appears. The words "hereof", "herein", "hereto", "hereunder", and the like mean and refer to this Agreement as a whole and not merely to the specific Article, Section, subsection or clause in which the respective word appears. References to agreement and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of this Agreement. References to statutes or regulations are to be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation referred to. The captions and headings used in this Agreement are for convenience of reference only and shall not affect the construction of this Agreement. SECTION 8.03 ENTIRE AGREEMENT. This Agreement, including the exhibits hereto, and the other agreements and documents expressly referred to herein, embodies the entire agreement and understanding of the parties hereto in respect of the transaction contemplated by such agreement. There are no restrictions, promises, inducements, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or therein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such transactions. SECTION 8.04 NOTICES. Any notice, request, instruction or other documents to be given hereunder by any party hereto to the other party hereto shall be in writing, shall be deemed to have been duly given or delivered when (i) delivered personally, (ii) telecopied (receipt confirmed, with a copy sent by certified or registered mail), (iii) telexed (and the appropriate answerback received, with a copy sent by certified or registered mail), or (iv) sent by certified or registered mail, postage prepaid, return receipt requested, or by Federal Express or other overnight delivery service, to the address of the party set forth below or to such address as the party to whom notice is to be given may provide in a written notice to the other party hereto: (a) To Seller: Hawaiian Sugar Transportation Company c/o C. Brewer and Company, Limited 827 Fort Street Honolulu, Hawaii 96813 Telex: 723-8972 Telecopier: (808) 544-6182 Telephone: (808) 536-4461 Attention: President with copies to: Hawaiian Sugar Transportation Company c/o JMB Realty Corp. 900 North Michigan Avenue, 20th Floor Chicago, Illinois 60611-1575 Telecopier: (312) 915-2409 Telephone: (312) 915-2396 Attention: First Vice President (b) To Buyer: California and Hawaiian Sugar Company 830 Loring Avenue Crockett, California 94525 Telecopier: (510) 787-1135 Telephone: (510) 787-2121 Attention: President with copies to: California and Hawaiian Sugar Company 830 Loring Avenue Crockett, California 94525 Telecopier: (510) 787-2058 Telephone: (510) 787-4209 Attention: General Counsel SECTION 8.05 AMENDMENT. No amendment or waiver of any provision of this Agreement nor consent to any departure thereof by any party in any event shall be effective unless the same shall be in writing and signed by the party against which enforcement is sought and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 8.06 NO STRICT CONSTRUCTIONS. This Agreement has been prepared jointly by the parties hereto and shall not be strictly construed against either of such parties. SECTION 8.07 SUCCESSORS AND ASSIGNS. All of the covenants and provisions of this Agreement by or for the benefit of Seller or Buyer shall bind and inure to the benefit of their respective successors and assigns hereunder; provided, however, that no assignment of this Agreement or any portion thereof shall relieve the assigning party of any of its duties or obligations hereunder and in addition Buyer shall guarantee the performance of such assignee of its obligations hereunder. Notwithstanding the foregoing, Buyer shall not make any assignment of this Agreement or any portion thereof except in connection with a sale or transfer of the Crockett Refinery or Aiea Refinery or the borrowing of money. In addition, any such assignee shall agree in writing for the benefit of Seller to assume all of Buyer's obligations under this Agreement. SECTION 8.08 SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, illegal, void or unenforceable under applicable law, such term, provision, covenant or restriction shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such term, provision, covenant or restriction were so excluded and shall be enforceable in accordance with its terms to the fullest extent permitted by law. SECTION 8.09 FURTHER ASSURANCES. Each of the parties shall, without further consideration, use reasonable efforts to execute and deliver to the other such additional documents and take such other action, as the other may reasonably request to carry out the intent of this Agreement and the transactions contemplated hereby. SECTION 8.10 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of California (without reference to its conflict of law rules) as applied to agreements among California residents entered into and to be performed entirely within California. SECTION 8.11 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed an original, and all of which taken together shall constitute but one and the same agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed all as of the date first above written. SELLER HAWAIIAN SUGAR TRANSPORTATION COMPANY By___________________________________ Title BUYER CALIFORNIA AND HAWAIIAN SUGAR COMPANY By___________________________________ President - Harold R. Somerset SCHEDULE 1 SAMPLE CALCULATION - FINAL NET PRICE
Example 1 Example 2 Example 3 Example 4 Example 5 Purchase of Hawaiian Raws (See Note A) Basis Price Basis Price Basis Price Basis Price Basis Price (Supply Agr. Terms) & Volume & Volume & Volume & Volume & Volume Pol 97.990** 98.000** 98.010** 99.000** 99.400** #14 Setm't Basis Price $21.00 $21.40 $21.50 $21.70 $21.75 - - -------------------------------------------------------------------------------- Pol Premium $0.016880 0.027500 0.027620 0.039500 0.041900 Pol Premium $$0.35448 $0.58850 $0.59383 $0.85715 $0.91133 Price,inc. pol premium $21.354480 $21.988500 $22.557150 $22.557150 $22.661325 #14 Price/Commercial ton $427.09 $439.77 $441.88 $451.14 $453.23 Deduct Discount $25.00 $25.00 $25.00 $25.00 $25.00 Price B4 Refiner's Delivery Charge $402.09 $414.77 $416.88 $426.14 $428.23 Add Aiea Prem. $2.00B Refiner's Delivery Charges Stevedoring $12.26 L/T(See Note C) $10.95 $10.95 $10.95 $10.95 $10.95 Despatch $2.66 $2.66 $2.66 $2.66 $2.66 Dockage (See Note C) $0.25 $0.25 $0.25 $0.25 $0.25 Less Fine Cleaning Credit($0.44) ($0.44) ($0.44) ($0.44) $0.00 Total Allowances - Comm. $13.42 $13.42 $13.42 $13.42 $13.61 Price per Comm. ton - - -after Del Ch. $388.67 $401.35 $403.46 $412.72 $416.62 ** Excludes quality premium and/or penalties. Note A: All examples apply to Crockett except example 5 applies to Aiea and Aiea Quality Raw Sugar. Note B: Aiea Quality Raw Sugar premium Note C: Rate subject to change as provided in Section 5.03 Note D: There shall be no premium or penalty for variance from Standard Quality for Raw Sugar polarizing at 99 degrees or higher except for Dextran and except for Aiea Premium.
SCHEDULE 1 SAMPLE POL PREMIUM CALCULATIONS
POL Adj. to #14 Basis Price Ex. 1 Ex. 2 Ex. 3 Ex. 4 Ex. 5 Premium POL @ POL @ POL @ POL @ POL @ Adj. 97.990 98.000 98.010 99.000 99.400 Table Above: 96 to and incl. 97 deg 0.50 0.50000 0.50000 0.50000 0.50000 0.50000 97 to and incl. 98 deg 1.20 1.18800 1.20000 1.20000 0.20000 1.20000 Step Adj-98 deg & above 1.05 0.00000 1.05000 1.05000 1.05000 1.05000 98 to and incl. 99 deg 1.20 0.00000 0.00000 0.01200 1.20000 1.20000 99 to and incl 100 deg 0.60 0.00000 0.00000 0.00000 0.00000 0.24000 ------------------------------------------------- Total Premium Adj. 4.55 1.68800 2.75000 2.76200 3.95000 4.19000
SCHEDULE 2 1993 RAW SUGAR DELIVERY BY SCHEDULE MOKU PAHU ARRIVE COMMERCIAL VOYAGE # CROCKETT TONS --------- -------- ---------- 145 JUN 10 37,000 146 JUN 29 38,000 147 JUL 18 34,000 148 AUG 8 37,500 149 AUG 29 37,500 150 SEP 19 37,500 151 OCT 10 37,500 152 OCT 31 37,500 153 NOV 21 37,500 154 DEC 12 37,500 155 JAN 2 37,500 Notwithstanding anything herein to the contrary, if A&B- Hawaii, Inc., or McBryde Sugar Company, Limited, delivers Raw Sugar to anyone other than Seller at any time during the period from the effective date of this Agreement to December 31, 1993, the Raw Sugar deliveries scheduled under this Schedule 2 shall be subject to an equitable adjustment. EXHIBIT A RAW SUGAR SAMPLING PROCEDURES Sampling of Raw Sugar cargoes delivered to the Crockett Refinery shall be accomplished using a suitably designed mechanical sampler. The sampler may operate either continuously or batchwise and may be either fully automatic or semi-automatic. The design and location of the sampler shall assure collection of a representative sample of the total Raw Sugar stream passing the sampler. The sample discharged from the sampler shall be emptied into a suitable collection can. The Raw Sugar in the collection can shall be mixed and a portion put in smaller container as described below. Samples of Raw Sugar shall be collected whenever Raw Sugar is being discharged. In order to obtain representative samples, the entire discharge of a Raw Sugar cargo must be sampled. Furthermore, since an individual sample representing the composite of three 700,000 lb. increments is tested for polarization, it is necessary that each of the samples drawn by the sampler be representative of the individual 700,000 lb. increment. In order to accomplish this, the sample cans are to be changed after each 700,000 lbs. has been weighed over the scale. The sample collection cans shall be sealed containers of a design that preserves the integrity of the sample and hold between 25 and 30 pounds of Raw Sugar. When Raw Sugar discharging is discontinued for an overnight or weekend period, if a full increment has not been discharged, the sample collecting can containing the Raw Sugar shall be removed from the sampling mechanism, a cover affixed tightly and the sample taken to a suitably secure room for storage. When discharge is resumed, the can shall be put back in the sampling mechanism for continuing sample collection. At the end of the cargo discharge the last sample collected shall be considered a full 700,000 lb. increment if more than 350,000 lbs. have passed through the scale. If the quantity passed through the scale is 350,000 lbs. or less, the sample collected for this amount shall be mixed with the sample collected from the preceding full 700,000 lb. increment. The sample collecting can's contents shall be dumped into a funnel which has been placed in a mixer. The sugar is to be pushed through the 1/4-inch screen in the funnel. The mixer is to be run for four minutes. After mixing, the Raw Sugar is to be tightly packed into a one-gallon size can, leaving no headspace. The neck of the can is to be wiped free of sugar crystals and the lid tightly sealed. A one gallon can for each 700,000 lb. increment is to be set aside for the preparation of a polarization sample. After three (3) such gallon size samples have been accumulated, they are all to be dumped into a funnel which as been placed in the mixer. The sugar is pushed through the 1/4 inch screen in the funnel. The mixer is to be run for four minutes. This blend represents 2,100,000 lbs. of the cargo. This procedure is repeated for every three (3) successive 700,000 lb. samples collected. At the end of the cargo discharge, the last group of samples collected shall be considered a full 2,100,000 lbs. if two or more 700,000 lbs. increments have been collected. If the sample collected represents less that two 700,000 lbs. increments, they will be mixed with the samples collected from the preceding 2,100,000 lbs. increment. After mixing, the Raw Sugar is to be tightly packed into 8 oz. size containers leaving no headspace. The neck of the container shall be wiped free of sugar crystals and the cover of the container tightly sealed. These 8 oz. size containers for each 2,100,000 lb. increment shall be distributed for polarization as follows: One for the New York Sugar Trade Laboratory One for the Buyer's Laboratory One for the Seller's Laboratory Two retained by Buyer In addition to the sample for polarization, an additional sample from each 700,000-lb. increment must also be taken. Thus additional samples will be used in preparing the sample for the raw sugar quality evaluation tests. The size of the additional sample depends on the weight of sugar being delivered. The following schedule may be used as a guide. No. 700,000 Lb. Amount Collected No. Long Tons Increments Per Increment - - ------------- --------------- ----------------- 650-1,100 2-4 9 1- Quart Size Cont. 1,100-1,700 3-6 7 1- Quart Size Cont. 1,700-3,575 5-12 7 1- Quart Size Cont. 3,576-7,025 11-23 2 1- Quart Size Cont. 7,026-13,900 22-45 2 16- Quart Size Cont. 13,901-25,000 44-80 2 8 Oz. Size Cont. Over 25,000 Over 80 1 8 Oz. Size Cont. At the completion of the cargo discharge the following procedure shall be followed to prepare the quality evaluation samples for testing: One-half of the number of samples collected for the quality evaluation tests shall be emptied into the mixer and the mixer is to be run for four minutes. Two (2) one gallon-size sample containers shall be filled from this mix and reserved. Any raw sugar remaining in the mixer shall be discarded. The above procedure shall be followed for the remaining half of the samples collected. The reserved four (4) gallon sample size sample containers shall be emptied into the mixer and the mixer is to be run for four minutes. Four (4) one gallon size sample containers are to be filled from this mix and the covers tightly affixed. The filled sample containers shall be distributed as follows: * One for the New York Sugar Trade Laboratory * One for the Buyer's Laboratory * One of the Seller's Laboratory * One retained by Buyer Each laboratory shall follow the procedures specified in Exhibit B and shall use the equipment and methods described therein for testing the whole raw sugar for moisture, color, ash and dextran and for testing affined raw sugar prepared from the whole raw sugar for grain size and color. EXHIBIT B METHODS OF ANALYSIS The following apparatus are listed to indicate types of equipment which are suitable for the following procedures: MOISTURE TEST Weighing dishes Cat. #08-732 Vacuum oven Cat. #13-264A GRAIN SIZE TEST Extraction flask, 250 ml. Cat. #09-650 D Vacuum flask, 1000 ml. Cat. #10-180 F Screens (or sieves) Cat. #04-881 Mechanical shaker Cat. #04-909 The supplier for the above equipment is the Fisher Scientific Company, 52 Fadem Road, Springfield, N.J. 07081. Catalog numbers are taken from the 1991/2 catalog. Equivalent equipment may be substituted as availability and circumstances dictate. AFFINATION PROCEDURE Mixer: Kitchen-Aid -- Model K-5, with flat beaters, #K- 5-A-B, manufactured by Kitchen-Aid, Inc., 2303 Pipestone Rd., Benton Harbor, Michigan 49022. Centrifugal Machine: Model K with 8" basket with draining chamber, manufactured by International Equipment Co., Needham, MA -- If 8" basket is unavailable, an 11" basket may be substituted. The inside of the basket is to be faced with a metal screen #00 mesh 0.020" dia., 625 holes/sq. inch. Can be purchased from Ferguson Perforation & Wire Co., 140 Earnest Street, Providence, RI. TEST PROCEDURES -- WHOLE RAW SUGAR I. MOISTURE -- DETERIORATION FACTOR 1. Weigh a moisture dish to plus/minus 0.0001 g. A metal dish with a tight fitting cover should be used. 2. Place approximately 5 g. of a representative sample into the dish, cover quickly and weigh to plus/minus 0.0001 g. as rapidly as possible. 3. Remove cover and place dish and cover in a vacuum oven that has been preheated to 70C. The sample should be heated for 4 hours at 70C at a minimum of 28 inches of vacuum. Air should be bled into the vacuum chamber at a rate of 100 ml./min. The oven temperature should be controlled to a +/- 1C. The air for bleeding is to be predried by passing through a desiccant such as barium oxide or sulfuric acid. 4. After four hours, reduce vacuum by eliminating vacuum source and increasing the air flow through the desiccant. Replace cover and remove sample from oven. 5. Place in a desiccator and cool to room temperature. The sample and dish should be weighed as soon as possible after reaching room temperature. 6. Immediately when cool, weigh to plus/minus 0.0001 g. 7. The percent moisture is calculated by the following formula: Weight loss X 100 = % moisture ----------- Starting Weight 8. The laboratory will report % moisture to the nearest hundredth of a percent for each sample. 9. The Deterioration Factor is calculated in the following way: % Moisture = Deterioration Factor ------------------------------- 100 - Settlement Polarization II. ASH 1. Weigh a pre-ignited and cooled crucible of 50 ml. capacity to plus/minus 0.0001 g. (A platinum dish may be used in the place of the crucible.) 2. Weigh approximately 4 g. of a representative sample to plus/minus 0.0001 g. in the weighed crucible. 3. Add approximately 1 ml. of 1:1 sulfuric acid, in drops, to the sample until completely wetted, and heat until the sample is well carbonized. (A 275 watt Fisher infra- radiator placed about six inches above the sample is recommended for this purpose.) Approximately 20 minutes of heating under the lamp is adequate to prevent splattering when the crucible is placed in the furnace. This procedure must be performed under a laboratory hood. 4. Transfer the carbonized sample to a furnace at 555 plus/minus 30C and heat until the carbon is burnt off. A heating period of about two hours is sufficient for this ignition. 5. Remove the crucible, and after cooling it to near room temperature, add approximately 0.5 ml of 1:1 sulfuric acid solution, in drops, in such a manner as to wet the material remaining in the crucible. 6. Heat the crucible so that the sulfuric acid solution is evaporated without loss of liquid or solid material through splattering from the crucible. A hot plate is used for this purpose. This procedure must be performed under a laboratory hood. 7. Place the crucible inside the furnace at 555 plus/minus 30C and heat for two hours. 8. Remove the crucible from the furnace and cool it to room temperature in a desiccator. Weigh crucible and contents to plus/minus 0.0001 g. 9. The percent ash is calculated in the following way: Weight of Ash X 100 = % Ash -------------- Starting Weight 10. The laboratory will report % ash for each sample to the nearest hundredth of a percent. III. COLOR -- ICUMSA METHOD 4 (1978) (MODIFIED) 1. Prepare a 25% solids solution (25 g. of sample + 75 ml. distilled water) of the sugar to be tested. 2. Filter the solution through 47 mm. Millipore filter apparatus using a Whatman GF/C 47 mm. glass microfibre filter. Collect the filtrate in a clean dry filter flask. (Note: The sample may require changing the filters more than once to collect all of the filtrate.) 3. Transfer the filtrate to a clean dry 150 ml. beaker. Adjust the pH of the filtrate to 8.5 plus/minus .1 (7.0 for Raw Sugar delivered to the Aiea Refinery) with 0.5N HCL or 0.5N NaOH. 4. Remove entrained air under vacuum or in an ultrasonic cleaner if necessary. 5. Place the solution into one of a previously matched pair of 1 cm. absorption cells. (The other cell will contain distilled water and can be used as a zero reference when changing wavelengths.) Determine the absorbance (or-log of the transmittance) at 420 nm. and at 720 nm. Record both values. 6. Calculate the color of the solution as follows: Color = (Absorbance* at 420 nm. - 2 x absorbance at 720 nm.) x 1000 ------------------------------------------------------------ .2764 If the sample is too dark to analyze, further dilution with distilled water and possible Ph readjustment will be needed. In this case the calculation would be as follows: Color = (Absorbance* at 420 nm. - 2 x absorbance at 720 nm.) x 1000 ------------------------------------------------------------ Specific gravity x Brix x cell length (cm.) ---- 100 *(- log of transmittance) can be substituted if there is no absorbance function on the spectrophotometer. IV. DEXTRAN Equipment and Reagents: (1) Ion exchange resins; Amberlite IR-120 (H) and any one of the following: Duolite A-368, Duolite A-392, Amberlite IRA-93, or Amberlite IRA-68. These resins normally are supplied wet and should be washed with at least twice their weight in distilled water, drained dry, then washed briefly with acetone for no longer than 2 minutes, the solvent being immediately removed, as before. The resins are air-dried or oven-dried at low temperature, approximately 30C., and stored closed container. (2) Acid-washed Johns Manville Supercel; Supercel (50 plus/minus 5 g.) is added to 1 liter of distilled water. Concentrated hydrochloric acid (50 plus/minus 5 ml.) is added and the mixture stirred for 5 minutes. After filtration the Supercel cake is washed with distilled water until the Ph of the washings equals that of the distilled water. The Supercel is dried for 6 hours at 100C. and stored in a closed container. (3) Trichloroacetic acid-J.T. Baker Reagent #1-0414 (TCA): Trichloracetic acid (10.0 plus/minus 0.1 g.) is dissolved in distilled water and diluted to 100 ml. This reagent will keep for two weeks. (Note: This reagent attacks protein and should not be allowed to come into contact with skin. Do not pipette TCA by mouth or store it in plastics.) (4) Starch-removing enzyme: Mycolase enzyme, GB Fermentation Industries, Inc. 1 N. B'Way, Des Plaines, IL 60016. Or alpha-Amylase type X-A Fungal Crude from Aspergillus oryzae, (Catalog No. A-0273), Sigma Chemical Company, P.O. Box 14508, St. Louis, MO 63178. (5) Alcohol: Anhydrous, 200 proof, J.T. Baker Reagent #9401-1. (6) 25 ml. volumetric flasks, Corning NO. 5660 or equivalent. (At the end of each analysis the flasks should be washed with acid-cleaning solution, rinsed with distilled water, and dried for future use.) (7) Nessler Tubes, Kimble No. 45310A-100 or equivalent. Wash and dry the tubes the same way as described in point #6 above. (8) Filtering flasks, 1000 ml. size, Pyrex No. 5340 or equivalent. (9) Burette, 50 ml. size, Pyrex No. 2317 (right hand) or equivalent. (10) 12.5 ml. Class A volumetric transfer pipette (custom ordered). (11) Pipette filler, rubber bulb type or equivalent. (12) Millipore funnel #XX 1004720 and 0.45 um. Millipore filter #HAWG 047 AO and absorbent pads. (13) Vacuum pump with multiple outlet connections for filtration (manifold). (14) UV-visible spectrophotometer, two matched 5 cm. size cells, and two matched 1 cm. size cells. (15) Jars, wide mouth, 4 oz. size, flint glass with screw caps. (16) Hot plate stirrer, Corning Producer's Customary Raw Sugar Terminal-351 or equivalent, and stirring bars. Hot plate may be used for incubation providing a water bath is improvised. Procedure: (1) Weigh 23.5 g. whole raw sugar sample into a wide mouth jar, add 35 ml. of distilled water, insert a magnetic bar, cover, and place on a magnetic stirrer to dissolve. (2) Add 0.05 g. of Mycolase enzyme or alpha-Amylase to the above sample and incubate at 55C. for one hour, in an oven or a water bath with agitation every 15 minutes. (3) Following the incubation add to the sample 5 g. of Amberlite IRA-120(H) and 5 g. of one of the following: Duolite A-368, Duolite A-392, Amberlite IRA-93, or Amberlite IRA-68 and stir for 30 minutes. (4) Add 1 g. of acid-washed Supercel to the sample, mix, and filter through a Millipore absorbent pad only into a 100 ml. size Nessler tube placed inside a one liter size filtering flask. Rinse sample jar with approximately 10 ml. of distilled water, allowing the washings to go through the funnel into the Nessler tube. Follow this with two small washing of the funnel and contents, taking care not to exceed 100 ml. of total filtrate volume. (5) The sample and washing in the Nessler tube are diluted to the 100 ml. mark with distilled water and then 10 ml. of TCA is added. The Nessler tube is stoppered and shaken. (6) Filter the above through a 0.45 um Millipore filter covered with an absorbent pad into a clean Nessler tube inside a one liter size filtering flask, collecting at least 30 ml. of filtrate. (7) Pipette 12.5 ml. of the filtrate into each of the two 25 ml. volumetric flasks, designating the first as the control and the second as the sample, respectively. (Note: use safety pipette filler.) Clean the pipette for the next use by rinsing it with distilled water. (8) To the first flask ("the control") add distilled water to the 25 ml. mark while swirling the flask, stopper and shake. (9) To the second flask (the sample) add anhydrous 200 proof alcohol dropwise (from a 50 ml. size burette) to the 25 ml. mark while swirling the flask. Stopper and mix by inverting the flask gently three to five times. (10) Let the sample stand for 60 plus/minus 2 minutes from the time of completion of the mixing step. (11) During the above waiting period fill two clean 5 cm. size matched cells with distilled water and the control respectively. After zeroing the spectrophotometer at 720 nanometers with the cell containing distilled water, read the absorbance of the control which is designated as B. (12) Then save the control by pouring it back into its 25 ml. size flask for possible future use. Clean the empty cell by rinsing it several times with distilled water and dry it by rinsing with acetone. (13) At the expiration time of the 60 minutes period fill the clean 5 cm. size cell with the sample. After zeroing the spectrophotometer at 720 nm. with the cell containing distilled water read the absorbance of the sample which is designated as A. Report results as follows: (A - B) x 1000 When the absorbance of the sample exceeds 0.7 in value both the control and the sample should reread immediately in 1 cm. size cells respectively. (After zeroing the spectrophotometer at 720 nm. with distilled water in a 1 cm. size cell.) Report results as follows: (A - B) x 1000 The results represent dextran content expressed in milli- absorbance units (m.a.u.) Note: (1) To achieve reproducible results this procedure must be followed precisely. (2) Equivalent equipment and/or reagents may be substituted for those specified in this procedure only after comparability with the designated equipment and and/or reagents has been demonstrated. This applies particularly to the alcohol reagent. V. STARCH (Applies Only to Aiea Refinery Deliveries) Reagents and Equipment 1. Amylopectin, Sigma A 7780 or equivalent, from corn (maize). Do not substitute material from potato, rice, wheat, or other sources. 2. Potassium Iodate, Reagent grade. 3. Potassium Iodide, Reagent grade. 4. Sodium hydroxide, 1.00 N. solution. 5. Hydrochloric acid, 1.00 N. solution. 6. Benzoic acid, saturated solution, prepared from Reagent grade material. 7. Phosphoric acid, 75%. 8. Ethanol, 95%. The spectrophotometer used should be capable of light transmission measurement at 560 nm. with the narrowest practical bandwidth. The instrument should be fitted with a grating, prism, or interference filter monchromator -- i.e., not colored glass or gelatin filters. All glassware must be clean and free from yeast spores. Preparation of Standard Amylopectin 1. Determine the moisture content of the amylopectin by drying 10 gm. overnight at 70C in a vacuum oven. Wet wt. - Dry wt. % moisture in amylopectin = ------------------------ x 100% Wet wt. Discard the dried amylopectin after determining the moisture content. For the calibration curve, use only unheated amylopectin, and adjust the weighed amount for the calculated moisture content. 2. Determine how much amylopectin is needed to obtain the equivalent of 500 mg. of dry amylopectin. For example, if the moisture content were 10.5% 500 mg. dry amylopectin = 500 / (1.00 - 0.105) = 558.66 mg. (wet) amylopectin. 3. Weigh out the equivalent of 500 mg. of amylopectin. Transfer to a 250 ml. Erlenmeyer flask with 10 ml. of ethanol, and disperse the amylopectin by swirling. Add 50 ml. of 1.00 N sodium hydroxide and a boiling chip. Heat to boiling with continuous stirring. Boil gently for 15 minutes, then allow to cool. Add 50 ml. of 1.00 N hydrochloric acid, and again allow to cool. Transfer to a 500 ml. volumetric flask and make up to volume with saturated benzoic acid. This solution contains nominally 0.1% (1,000 ppm) of amylopectin. 4. Prepare dilutions of freshly prepared standard amylopectin using saturated benzoic acid solution. Prepare standards of nominal 5, 10, 25, 40, and 50 ppm amylopectin. For the first three standards, use 1,000 ml. volumetric flasks, and for the other two, use 100 ml. flasks. Preparation of Reagents 1. Prepare stock solutions of potassium iodide (30.0 gm./l.) and potassium iodate (2.14 gm./l.). 2. To prepare the test reagent, pipet 25 ml. of each stock solution, freshly prepared, into a 500 ml. volumetric flask. Make up to volume with distilled water. All pipetting should be done with rubber bulbs, to prevent possible contamination by saliva enzymes which might hydrolyze amylopectin in the standards or starch in the test samples. Analysis of Raw Sugar 1. Prepare a 10.0% sugar solution by weight. 2. Into a 125 ml. Erlenmeyer flask, add 20 ml. of sugar solution, 10 ml. of freshly prepared test reagent, and 10 drops of 75% phosphoric acid. Swirl to mix. 3. Within four to five minutes after mixing, read the absorbance in a 1 cm. cell on a spectrophotometer at 560 nm. using water as a reference blank. All absorbance are to be multiplied by 1,000. If the absorbance is greater than 0.7, repeat using a raw sugar solution more dilute than 10% solids. 4. Correct for the original color of the raw sugar sample by repeating step 2 above, but substituting distilled water for the test reagent. Measure the absorbance at 560 nm. and subtract this figure from that obtained in step 3 above. 5. Repeat steps 2 and 3 using the five amylopectin standards in place of the sugar to prepare a standard curve. Do not use a proportionality constant from the slope (ppm amylopectin per unit absorbance) as a "factor", because this does not allow a distinction to be made between interpolation and extrapolation. 6. Determine the starch content as amylopectin of the raw sugar sample by interpolation. Multiply by 10 to correct for the solids content of the raw sugar sample solution. If the raw sugar sample was more dilute than 10 Brix, this factor of 10 should be changed to 100 / (actual Bx). Then divide by 10,000 to convert from ppm to percent. Report the result as Percent starch on Solids to three decimal places, i.e., to the nearest thousandth of one percent. 7. If the starch content of the raw sugar falls beyond the standard curve, do not extrapolate. Instead, repeat the determination using a 5% raw sugar solution instead of a 10% solution. Example of Calculation 1. From Steps 1 and 2 under "Analysis of Raw Sugar" (above), absorbance reading from 10 Brix raw sugar solution, test reagent, and phosphoric acid = 0.450. Multiply by 1,000 obtaining 450. 2. From Step 4, absorbance reading for raw sugar solution, water, and phosphoric acid = 0.019. Multiply by 1,000 obtaining 19. 3. Subtracting, 450 -19 = 431. This figure should be used on your calibration curve to find the corresponding ppm of amylopectin. Assume the value from your curve is 25 ppm. Then (25) (10) Percent Starch on Solids = ------------- = 0.025% (10,000) TEST PROCEDURES -- AFFINED RAW SUGAR I. PREPARATION OF THE SAMPLE 1. Place 1000 g. of well-mixed raw sugar in the mixer. Turn the mixer on to speed #1 (low speed). 2. Gradually add 380 ml. of 64.0 Brix granulated sugar syrup at room temperature. (A 64.0 Brix syrup made from high quality sugar syrup may be substituted for a syrup made from granulated sugar). The syrup is added slowly from a dispensing burette and must be added at a uniform rate of approximately 4-1/2 minutes. 3. The raw sugar and syrup continue to mix for an additional one minute. The total mixing period is 5-1/2 minutes. 4. Transfer the entire magma at once from the mixer to the laboratory centrifugal machine. 5. Bring the centrifuge up to 3000 rpm in 15 seconds and spin at 3000 rpm for exactly two minutes. If an 11" basket is employed, to maintain the same G force, bring the centrifuge up to 2550 rpm in 15 seconds, and spin a 2550 rpm for exactly two minutes. 6. Remove the sugar from the basket and spread it on a clean surface in a thin layer not to exceed 1/4 inch thick. 7. Immediately after spreading, take representative portions totaling approximately 100 g. from all areas in the spread layer and immerse in 75 ml. of anhydrous methanol contained in a 250 ml. extraction flask. This portion of the sample is to be used for the grain size test. 8. The remaining portion of the spread sample which is to be used for color is mixed periodically (by hand) during drying so that at the end of drying, the sample is well mixed. 9. If the sample is not to be tested immediately, it should be stored in sealed jars. II. GRAIN SIZE A. Method A 1. The flask containing the sample previously collected for the Grain Size Test is swirled vigorously for two minutes so that the sugar is well mixed with the anhydrous methanol solvent. 2. Drain the solvent from the flask in the manner indicated in Diagram 1. After the solvent has drained, break vacuum, shake the extraction flask and place back over the vacuum flask. Repeat two or three times. 3. After draining, return flask to an upright position, and 50 ml. of anhydrous methanol and repeat swirling and draining procedure. 4. Repeat swirling and draining procedure twice, using a 50 ml. portion of sugar-saturated 99.7 isopropyl alcohol each time. (Caution: Do not use near an open flame.) 5. Spread drained sugar on absorbent filter paper and allow to air dry. No lumping or caking should occur on drying. Soft conglomerates, if any, should be broken by gentle hand pressure. If lumping is observed after drying, discard the sample. Begin again, starting with the affination procedure. Whenever a solvent is used for testing, the test should be conducted underneath a laboratory hood and away from any flame or any other heat source. 6. Weigh (to plus/minus 0.1 g) the entire amount of affined raw sugar which has been washed with solvent and dried. 7. Assemble the screen with a 14 mesh Tyler as the top screen, followed by the Tyler 20 and Tyler 28 mesh screens. A pan, and additional screens if necessary, are added to make up a set of screens that will fit on a mechanical shaker. 8. Place the weighed amount on the 14 mesh Tyler screen. 9. Place the set of screen on a mechanical shaker and run for five minutes. 10. The amount of sample passing through the 28 mesh Tyler screen is determined as follows: Weight through 28 mesh screen x 100 = % Through 28 mesh Tyler Screen - - ------------------------------ Starting weight. 11. The laboratory shall report the % through the 28 mesh Tyler screen to the nearest percent. B. Method B (Alternative Method) 1. The flask containing the sample previously collected for the grain size test is swirled vigorously for two minutes so that the sugar is ell mixed with the anhydrous methanol solvent. 2. Drain the solvent from the flask in the manner indicated in Diagram 1. If a pump is used to provide the vacuum source, it must be rated explosion proof such as a Sargent-Welch dual-seal No. 1405-W-01 or equivalent. Additionally, the pump must be vented outside of the laboratory environment, for example to a laboratory fume hood. After the solvent has drained, break vacuum, shake the extraction flask and place back over the vacuum flask. Repeat two or three times. 3. Repeat the above swirling and draining procedure twice, beginning each methanol wash by returning the flask to its upright position and adding 50 ml. of anhydrous methanol. 4. Repeat the swirling and draining procedure for a fourth and final time again by adding 50 ml. of anhydrous methanol. Extreme care must be taken to ensure that the sugar is sufficiently dried by the vacuum. This is accomplished by draining the solvent and subjecting the sugar to the vacuum for a longer period of time than the previous washes. The sequence of breaking the vacuum, shaking the flask and placing back over the vacuum flask should be repeated a number of times during this last drying step. If the sugar is sufficiently dried the majority of crystals will not adhere to the sides of the flask or can be dislodged with a minimum of shaking or tapping. The average length of time to complete this fourth anhydrous methanol wash should be 40 to 50 minutes. 5. Spread drained sugar on absorbent filter paper and allow to air dry. No lumping or caking should occur on drying. Soft conglomerates, if any, should be broken be gentle hand pressure. If lumping is observed after drying, discard the sample, begin again, starting with the affination procedure. Whenever a solvent is used for testing, the test should be conducted underneath a laboratory hood and away from any flame or any other heat source. 6. Weigh (to plus/minus 0.1 g.) the entire amount of affined raw sugar which has been washed with solvent and dried. 7. Assemble the screens with a 14 mesh Tyler as the top screen, followed by the Tyler 20 and Tyler 28 mesh screens. A pan, and additional screens if necessary, are added to make up a set of screen that will fit on a mechanical shaker. 8. Place the weighed amount on the 14 mesh Tyler screen. 9. Place the set of screens on a mechanical shaker and run for five minutes. 10. The amount of sample passing through the 28 mesh Tyler screen is determined as follows: Weight through 28 meshscreen x 100 = % Through 28 mesh Tyler Screen - - ----------------------------- Starting Weight 11. The laboratory shall report the % through the 28 mesh screen to the nearest percent. III. COLOR -- ICUMSA METHOD 4 (MODIFIED) 1. Prepare a 50% solids solution (50 grams of sample + 50 ml. distilled water) of the sugar to be tested. 2. Filter the solution through a 47 mm. millipore filter apparatus using a Whatman GF/C 47 glass microfibre filter. Collect the filtrate in a clean dry filter flask. (Note: The sample may require changing the filters more than once to collect all the filtrate.) 3. Transfer the filtrate to a clean dry 150 ml. beaker. Adjust the pH of the filtrate to 8.5 plus/minus .1 with 0.5N Hcl or 0.5N NaOH. 4. Remove entrained air under vacuum or in an ultrasonic cleaner if necessary. 5. Place the solution into one of a previously matched pair of 1 cm. absorption cells. (The other cell will contain distilled water and can be used as a zero reference when changing wavelengths.) Determine the absorbance (or -log of the transmittance) at 420 nm. and at 720 nm. Record both values. 6. Calculate the color of the solution as follows: Color =(Absorbance* at 420 nm. - 2 x absorbance at 720 nm.) x 1000 ----------------------------------------------------------- .6159 If the sample is too dark to analyze, further dilution with distilled water and possible pH readjustment will be needed. In this case the calculation would be as follows: Color = (Absorbance* at 420 nm. - 2 x absorbance at 720 nm.) x 1000 ----------------------------------------------------------- Specific gravity x Brix x cell length (cm.) ---- 100 *(or -log of transmittance) can be substituted if there is no absorbance function on the spectrophotometer. EXHIBIT C PREMIUMS AND PENALTIES The percentage discount or premium per pound for variances from Standard Quality shall be determined pursuant to the following table. Discounts and premiums for variances from Standard Quality shall be applied separately for each specification. Fractions shall be in proportion. There shall be no premium or penalty for variance from Standard Quality for Raw Sugar polarizing at 99 or higher, except for dextran. For the purposes of determining whether Raw Sugar meets the specifications for Standard Quality and calculating the premiums and discounts hereunder, an average test result shall be used. Such average shall be determined for each quality specification separately and with respect to Raw Sugar delivered to the Crockett Refinery, shall be the average of the two nearest test results of the three laboratories, but if the two are equidistant from the median, then the median shall be used. SPECIFICATIONS MOISTURE Factor of Safety For each .01 in excess of.30 deduct 0.09 percent of Basis Price. ASH Ash content (Percent For each .01 percent of ash content in of raw sugar) excess of derived maximum standard ash content, deduct 0.015 percent of Basis Price; for each .01 percent of ash content below derived minimum standard ash content, add 0.00625 percent of Basis Price. GRAIN SIZE Percent through 28 mesh For each 1 percent above 52 percent, Tyler (30 mesh U.S.) sieve deduct 0.06 percent of Basis Price. For each 1 percent below 22 percent, add 0.025 percent of Basis Price. COLOR - AFFINED RAW ICUMSA Color Units For each 10 units above 1500 up to Method 4 (1978) Modified and including 1800, deduct 0.0135 percent of Basis Price. For each 10 units above 1800 up to and including 2100, deduct an additional 0.027 percent of Basis Price. For each 10 units above 2100 up to and including 2400, deduct an additional 0.0405 percent of Basis Price. For each 10 units above 2400, deduct an additional 0.0540 percent of Basis Price. For each 10 units below 800, add 0.0081 percent of Basis Price. COLOR - WHOLE RAW For each 25 units above 6000 up to ICUMSA COLOR UNITS and including 7000, deduct 0.0015 METHOD 4 (1978) MODIFIED percent of Basis Price. For each 25 units above 7000 up to and including 8000, deduct an additional 0.0030 percent of Basis Price. For each 25 units above 8000 up to and including 9000, deduct an additional 0.0045 percent of Basis Price. For each 25 units above 9000, deduct an additional 0.0060 percent of Basis Price. For each 25 units below 3000, add 0.0009 percent of Basis Price. DEXTRAN For each 1 unit above 250 up to and including 350, deduct 0.007 percent of Basis Price. For each 1 unit above 350 up to and including 450, deduct an additional 0.009 percent of Basis Price. For each 1 unit above 450 up to and including 550, deduct an additional 0.011 percent of Basis Price. For each 1 unit above 550, deduct an additional 0.013 percent of Basis Price. EXHIBIT D STANDARD QUALITY RANGE FACTOR STANDARD QUALITY RANGE - - ------- ---------------------- MOISTURE Factor of Safety (High number indicates low quality) Not exceeding 0.30 ASH Ash Content..............Maximum and minimum standard ash content is (percent of derived by multiplying percent non-sucrose raw sugar) solids by the factor listed below which corresponds to the final polarization of the cargo. MAXIMUM MINIMUM Up to and including 98.0 .25 .17 Over 98.0 up to and including 98.2 .26 .18 Over 98.2 up to and including 98.4 .27 .19 Over 98.4 up to and including 98.6 .28 .20 Over 98.6 up to and including 98.8 .29 .21 Over 98.8 up to but not including 99.0 .30 .22 GRAIN SIZE Percent through 28 mesh Tyler (30 mesh U.S.) sieve. (High number indicates low quality).....Between 52 and 22 COLOR-AFFINED RAW ICUMSA Color Units Method 4 (1978) Modified (High number indicates low quality).....Between 800 and 1500 COLOR-WHOLE RAW ICUMSA Color Units Method 4 (1978) (High number indicates low quality)......Between 3000 and 6000 DEXTRAN.............................Not Exceeding 250 M.A.U. For the purposes of determining whether Raw Sugar meets the foregoing specifications for Standard Quality, an average test result shall be used. Such average shall be determined for each quality specification separately and shall be the average of the two nearest test results of the three laboratories, but if the two are equidistant from the median, then the median shall be used. EXHIBIT E CASH ADVANCES (and Security Agreement) 1. Definitions. In addition to the terms defined elsewhere in this Exhibit E or the Agreement of which it is a part (the "Sugar Agreement"), the following terms have the meanings indicated for the purposes hereof: "Acceptable Inventory" means Raw Sugar in good order and sound condition produced from sugar cane grown in Hawaii which: (a) has been acquired by Borrower from patrons of Borrower pursuant to Standard Sugar Marketing Contracts; (b) has been acquired by Borrower, in the case of the first request for an Advance, since June 3, 1993; (c) is owned by Borrower free and clear of al security interest, liens, encumbrances, and rights of others, except for "Permitted Liens" (as that term is hereinafter defined), if any; (d) is not covered by a negotiable document of title unless such document has been delivered to Lender; and (e) is held by Borrower as inventory (as defined in the UCC) at the Hawaii Storage Facilities or is in transit to Lender's refinery in Crockett, California. "Advance Basis Price" means the simple average of the daily Settlement Prices for the No. 14 Contract, for the Nearest Fixtures Month, for each day of the Test Period ending immediately before the date of such Advance, less the applicable Price Discount. "Availability Period" means the period commencing on the date of this Agreement and ending on the earlier of ten years from the date hereof, or termination of this Agreement. "Borrower" means Hawaiian Sugar Transport Company, Inc., an agricultural cooperative organized under the laws of the State of Hawaii. "Credit Facility" means the line of credit described in Paragraph 2.1 of this Exhibit. "Event of Debt Default" has the meaning provided at Section 7.01. "Final Net Price" means such price as defined in Section 3.02(b) of this Agreement. "Hawaii Storage Facilities" mean the facilities used by Borrower to store raw sugar, the locations of which are described on Schedule 1 hereto. "Interest Rate" means at any time the rate of interest from time to time paid by Lender for moneys borrowed for and dedicated to financing loans hereunder, or in the absence thereof, the weighted average rate of interest paid by Lender on commercial paper issued by Lender, outstanding in the immediately preceding calendar year quarter and maturing no more than six months after the date of issue or, in the event that Lender does not have commercial paper outstanding during such quarter the average rate of interest on loans obtained by Lender and maturing not more than six months after the date of such loans during such preceding calendar quarter. "Lender" means California and Hawaiian Sugar Company, a California corporation. "Permitted Liens" means liens in favor of Lender; Producers Liens; liens for current taxes, assessments or other governmental charges which are not delinquent or remain payable without penalty; liens of carriers, warehousemen, mechanics, bailees, materialmen and landlords incurred in the ordinary course of business for sums not in default or which are being diligently contested in good faith; and liens consented to by Lender (Provided, however, that Lender may request on thirty (30) days prior written notice that thereafter waiver of producer's liens be obtained). "Producer's Liens" means liens in favor of the growers of agricultural products arising pursuant to Hawaiian statutes, as now in effect or hereafter amended. "Reference Rate" means the "prime", "base" or "reference" rate announced from time to time by Bank of America NT & SA at its principal office in San Francisco, California in respect of its ninety (90) day loans to its prime corporate borrowers, whether or not loans are actually made at such rate. "Test Period" means any of the following twelve periods within a calendar year. The first period in each year shall commence on January 1 and end at midnight on the Saturday preceding the last Sunday of January provided, however, that in the case of the 1993 calendar year, the first period shall commence on the date hereof and end at midnight on the Saturday preceding the last Sunday of the month in which such period commences. Each succeeding period shall commence at the end of the preceding period and continue until midnight on the Saturday preceding the last Sunday of the next succeeding calendar month; provided, however, however, that the last period in each calendar year shall commence midnight on the Saturday preceding the last Sunday in November and continue through December 31 of such year. "UCC" means the Hawaiian Uniform Commercial Code as in affect from time to time. 2. The Credit Facility. 2.1 The Credit Facility. From time to time during the Availability Period Lender, upon Borrower's request, will make advances to Borrower (each an "Advance") on the tenth of each month in an amount not to exceed ninety percent (90%) of the "Advance Basis Price" for each Commercial Pound of Acceptable Inventory receipted by Borrower at the Hawaiian Storage Facilities during the immediately preceding Test Period. 2.2 Interest. Advances under the Credit Facility shall bear interest at a rate per annum equal to the Interest Rate. 2.3 Payment of Advances Under the Credit Facility. During the Availability Period Advances and interest shall be repaid when and to the extent Borrower becomes entitled to payment on account of the sale of such Acceptable Inventory to Lender pursuant to the Sugar Agreement. Borrower shall repay the entire principal balance of Advances and unpaid interest under the Credit Facility on the last day of the Availability Period except to the extent that there is Acceptable Inventory yet undelivered having a value in excess of outstanding Advances and interest. More specifically, (1) Lender shall first apply the amount of Borrower's pro forma invoice under Section 3.04 of the Sugar Agreement and then pay any excess to Borrower; and (2) Lender shall then apply the amount of the Final Net Price under Section 3.04 of the Sugar Agreement (less any payment under (1)) and then pay any excess to the Borrower. All amounts payable to Borrower to be applied pursuant to this Section shall first be applied to accrued and unpaid interest and thereafter to reduce the amount of any outstanding Advances. 2.4 Interest Not to Exceed Maximum. In the event that the interest due on the Advances for a month exceeds or shall be deemed to have exceeded the maximum rate allowed by law, the amount of interest which shall accrue during such month shall be reduced to the maximum amount of interest permitted by law. If the amount of interest payable in any month has been reduced or deemed to have been reduced pursuant to the first sentence of this Section 2.4, the amount of interest payable in any subsequent month or months shall be automatically increased or deemed to have been increased by an amount necessary to compensate Lender for such reduction, provided that (i) such increase or deemed increase shall not increase the rate of interest for such month or months by any amount which exceeds the maximum rate of interest permitted by law, (ii) at no time shall the aggregate amount by which the interest paid for the account of Borrower has been increased pursuant to this sentence exceed the aggregate amount by which interest paid for its account would have been paid had the interest not been reduced pursuant to the first sentence of this Section 2.4, and (iii) upon payment in full of the principal outstanding on the loan, any deficit arising under the first sentence of this Section 2.4 which has not been compensated under this sentence by the date of such payment in full shall be excused and no further compensation shall become due with respect to such deficit. 2.5 Default Rate. Upon the occurrence and during the continuation of any Event of Debt Default, and without constituting a waiver of any such Event of Debt Default, advances under the Credit Facility shall at the option of Lender bear interest at a rate per annum which is one percentage point (1%) higher than the Reference Rate. 2.6 Requests for Advances. Each request for an Advance shall be made in writing, setting forth the amount of Acceptable Inventory, the Hawaii Storage Facilities at which such Acceptable Inventory is stored and the Advance Basis Price thereof and certifying that all conditions precedent for making an Advance have been satisfied and shall be in the form of Exhibit 2.6 to this Exhibit E or in any other manner acceptable to Lender. 2.7 Disbursements and Payments. Each disbursement by Lender and each payment by Borrower under this Agreement shall be made in the funds and at such bank as Borrower may from time to time select. 2.8 Evidence of Indebtedness. Principal, interest and all other sums due Lender under this Agreement shall be evidenced by entries in records maintained by Lender, and, if required by Lender, by a promissory note or notes. Each payment on and any other credits with respect to principal, interest and all other sums due under this Agreement shall be evidenced by entries to records maintained by Lender. Lender will provide copies of such records to Borrower quarterly or at such other reasonable times as may be requested by Borrower. 2.9 Interest Calculation. Except as otherwise stated in this Agreement, all interest and fees, if any, payable under this Agreement shall be computed on the basis of a three hundred sixty-five (365) day year and actual days elapsed. Upon request by Borrower, Lender shall deliver not later than ten (10) days after the end of the preceding calendar quarter, Lender's calculation of the Interest Rate for each calendar quarter. Borrower shall have the right, at its cost and expense, to audit and employ such audit procedures as are reasonably necessary to verify the accuracy of Lender's calculation of the Interest Rate. 3. Collateral. 3.1 Grant of Security. Borrower hereby grants to Lender a continuing Security interest in and lien upon all of the following property of Borrower, wherever located, now owned or hereafter acquired or arising (the "Collateral"): (a) all Acceptable Inventory and documents of title concerning or related to such inventory; and (b) all proceeds, products, rents and profits of any and all of the foregoing Collateral and, to the extent not otherwise included therein, all payments under insurance (whether or not Lender is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral. 3.2 Security for Obligations. The security interest granted under this Exhibit secures repayment of credit extended pursuant to, and performance of all obligation of Borrower in, this Exhibit, as the same may be amended, modified or supplemented from time to time, whether such obligations now exist or hereafter arise (the "Obligations"). 3.3 Inspection of Collateral. Lender may, after giving reasonable notice to Borrower and during normal business hours, inspect the Hawaii Storage Facilities which contain Collateral and may conduct or perform such tests and examinations as Lender shall determine necessary to verify the weight and quality of the inventory included in the Collateral. 3.4 Lender Appointed Attorney-in-Fact. Subject to the limitations on Lender set forth in Section 7.2 of this Exhibit, Borrower hereby irrevocably appoints Lender as Borrower's attorney-in-fact, with full authority in the place and stead of Borrower and in the name of Borrower, Lender or otherwise, from time to time in Lender's discretion upon the occurrence and during the continuance of an Event of Debt Default, to take any action and to execute any instrument which Lender may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation: (a) to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of Borrower where permitted by law; (b) to obtain and adjust insurance required to be paid to Lender pursuant to Section 6.7 hereof; (c) to ask, demand, collect, sue for, recover, compound, receive and give acquaintance and receipts for moneys due and to become due under or in respect of any of the Collateral; (d) to receive, endorse and collect any drafts or other instruments, documents and chattel paper, in connection with clauses (a) and (b) above; and (e) to file any claims or take any action or institute any proceedings which Lender may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of Lender with respect to any of the Collateral. 4. Conditions to Availability of Credit. Lender's obligation to extend credit under this Agreement is subject to satisfaction of the following conditions and Lender's receipt of the following, each of which must be in form and substance satisfactory to Lender: 4.1 Conditions to First Advance. Before the first Advance: (a) financing statements, notices and such other documentations as Lender may reasonably request to perfect Lender's security interest in the Collateral; (b) evidence that the execution, delivery and performance by Borrower of this Agreement and the execution, delivery and performance by Borrower and any guarantor or subordinating creditor of any instrument or agreement required under this Agreement, as appropriate, have been duly authorized; and (c) evidence that Borrower has obtained the insurance coverage required under Section 6.7 of this Agreement. 4.2 Conditions to Each Advance. Before each Advance, including the first: (a) on reasonable request, evidence satisfactory to Lender that the security interest and liens to favor of Lender are valid, enforceable and prior to the rights and interest of other except Permitted Liens or those consented to in writing by Lender; (b) all representations and warranties of Borrower shall be true, complete and correct as of the date of such Advance; and (c) the amount of the Advance, together with prior unpaid Advances and accrued and unpaid interest, does not exceed ninety percent (90%) of the then effective "Advance Basis Price" applied to the then existing Collateral. 5. Representations and Warranties. Borrower represents and warrants (and each request for an extension of credit under this Agreement shall be deemed a representation and warranty made on the date of such request) that: 5.1 Organization. Borrower is an agricultural cooperative duly organized and existing under the laws of the State of Hawaii and the execution, delivery and performance of this Agreement and of any instrument or agreement required by this Agreement are within Borrower's powers, have been duly authorized, and are not in conflict with the terms of any charger, bylaw or other organization papers of Borrower. 5.2 No Conflicts. The execution, delivery and performance of this agreement and of any instrument or agreement required by this Agreement are not in conflict in any material respect with any law or any indenture, agreement or undertaking to which Borrower is a party or by which Borrower is bound or affected except conflicts which would not adversely affect Lender's rights and interests hereunder. 5.3 Enforceability. This Agreement is a legal, valid and binding agreement of Borrower, enforceable against Borrower in accordance with its terms, and any instrument or agreement required under this Agreement, when executed and delivered, will be similarly legal, valid, binding and enforceable except as such enforceability may be limited by equitable principles and by applicable bankruptcy, insolvency or reorganization laws or laws and judicial decisions of general application affecting creditors rights and remedies. 5.4 Good Standing. Borrower is duly incorporated and in good standing in the State of Hawaii. 5.5 Compliance with Laws. Borrower is in compliance in all material respects with all federal, state and local laws, rules and regulations affecting the business of Borrower except to the extent that noncompliance would not adversely affect Lender's rights hereunder. 5.6 Ownership of Collateral. All Collateral is owned by Borrower free and clear of all security interests, liens, encumbrances and rights of others except for Permitted Liens. 5.7 Location of Inventory. Except as permitted by Section 6.3 of this Exhibit, all of the Acceptable Inventory is located at the Hawaii Storage Facilities or will be in transit to Lender's Crockett refinery. 5.8 Perfected Security Interest in Collateral. The grant of a security interest herein in the Collateral pursuant to this Agreement together with steps for perfection create a valid and perfected first priority security interest in the Collateral securing the payment of the Obligations, subject only to Permitted Liens. 5.9 No Event of Debt Default. No event has occurred and is continuing or would result from the extension of credit under this Agreement which constitutes or would constitute an Event of Debt Default or which, upon a lapse of time or notice or both, would become an Event of Default. 6. Covenants. So long as credit is available under this Agreement and until full and final payment of all of Borrower's obligations under this Agreement and any instrument or agreement required under this Agreement, Borrower shall, unless Lender waives compliance in writing: 6.1 Notices of Certain Events. Promptly give written notice to Lender of: (a) all litigation affecting Borrower where the amount claimed is One Million Dollars ($1,000,000) or more; (b) any substantial dispute which may exist between Borrower and any governmental regulatory body or law enforcement authority; (c) any Event of Debt Default or any event which, upon a lapse of time or notice or both, would become an Event of Debt Default; (d) the occurrence of any reportable event under section 4043(b) of ERISA for which the Pension Benefit Guaranty Corporation requires thirty (30) days' notice; any action by Borrower to terminate or withdraw from an ERISA Plan or the filing of any notice of intent to terminate under section 4041 of ERISA; any notice of noncompliance made with respect to an ERISA Plan under section 4041(b) of ERISA; or the commencement of any proceeding with respect to an ERISA Plan under section 4042 of ERISA; and (e) any other matter which has resulted or might result in a material and adverse change in Borrower's financial condition or operations. 6.2 Liens. Not create, assume or suffer to exist any security interest, lien (including the lien or an attachment, judgment or execution) or encumbrance, securing a charge or obligation, on or of any of the Collateral, except for Permitted Liens. 6.3 Inventory. Borrower shall keep the Acceptable Inventory (other than Inventory in transit to Lender or Lender's designee) (i) at the Hawaii Storage Facilities or (ii) at such other location which shall have been disclosed in writing to Lender not less than thirty (30) days prior to the date of the removal or relocation of such Inventory to such location, except that no such location may be outside of the United States. Borrower shall, as to any Inventory which is in the possession (or otherwise under the control) of any agent or bailee of Borrower at the time of the occurrence of and Event of Debt Default, instruct such agent or bailee to hold such Acceptable Inventory for the account of Lender. 6.4 Sale of Collateral. Not sell, lease or otherwise dispose of the Collateral, except to Lender or otherwise dispose of the Collateral, except to Lender or otherwise pursuant to or as permitted in the Sugar Agreement. 6.5 Records and Reports. Borrower shall maintain at each of he Hawaii Storage Facilities accounting records of the Advances. Upon request by Lender, Borrower shall promptly furnish to Lender from time to time copies of such records and statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Lender may reasonably request, all in reasonable detail. 6.6 Further Assurance. Borrower agrees that at any time and from time to time, at the expense of Borrower, Borrower will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that Lender may reasonably request, in order to perfect, preserve the priority and perfection of, and otherwise to protect, any security interest granted or purported to be granted hereby or by this Agreement or to enable Lender to exercise and enforce its rights and remedies hereunder with respect to any Collateral. 6.7 Insurance. (a) Borrower shall, at its own expense, maintain insurance against loss or damage to the Collateral (including liability insurance) in such amounts, against such risks, in such form and with such insurers, as shall be reasonably satisfactory to Lender from time to time. The insurance coverage maintained by Lender with respect to raw sugar stored and transported by Lender currently is deemed satisfactory by Lender and comparable coverage will be deemed satisfactory by Lender. Each policy of property damage insurance shall bear standard first mortgage endorsement in favor of Lender and shall provide that, upon notification by Lender to the appropriate insurer that an Event of Debt Default has occurred and is continuing, all losses shall be paid directly to Lender. Each policy of insurance shall in addition (i) name Borrower and Lender as insured parties thereunder (without any representation or warranty by or obligation upon Lender) as their interests may appear, (ii) contain the agreement by the insurer that any loss thereunder shall be payable to Lender, notwithstanding any action, inaction or breach of representation or warranty by Borrower, (iii) provide that there shall be no recourse against Lender for payment of premiums or other amounts with respect thereto, and (iv) provide that at least ten (10) days' prior written notice of cancellation or of lapse shall be given to Lender by the insurer. Borrower shall furnish to Lender insurance certificates, in form and substance satisfactory to Lender, evidencing compliance by Borrower with the terms of this Section 6.7, and, if so requested by Lender, shall deliver to Lender originals or duplicate copies of such policies and, as often as Lender may reasonably request, a report of a reputable insurance broker with respect to such insurance. Further, Borrower shall, at the request of Lender at any time after an Event of Default has occurred and is continuing, duly execute and deliver instruments of assignment of such insurance policies and cause the respective insurers to acknowledge notice of such assignment. Marine insurance coverage shall be no less than that required by No.14 Contract. (b) At least thirty (30) days prior to the expiration of each insurance policy, upon written request of Lender, Borrower shall furnish Lender with evidence satisfactory to Lender of the payment of the premium and the reissuance of a policy continuing insurance in force as required by this Agreement. In the event Borrower fails to provide, maintain, keep in force or deliver and furnish to Lender policies of insurance required by this Section 6.5, Lender, upon fifteen (15) days' prior written notice to Borrower, may procure such insurance or single interest insurance for such risks covering Lender's interest, and Borrower will pay all premiums thereof promptly upon demand by Lender, together with interest thereon at rate per annum equal to the Interest Rate, from the date of expenditure by Lender until reimbursement by Borrower. (c) Each such policy or certificate therefor issued by an insurer shall to the extent obtainable contain a provision that no act or omission of Borrower which would otherwise result in forfeiture or reduction of the insurance therein provided shall affect or limit the obligation of the insurance company so as to pay the amount of any loss sustained. (d) All policies of insurance required to be furnished by Borrower pursuant to this Section 6.5 shall have attached thereto the Lender's Loss Payable Endorsement or its equivalent, or a loss payable clause acceptable to Lender. 6.8 Change in Name, Structure or Location. Borrower shall notify Lender in writing prior to any change in (a) Borrower's name, (b) Borrower's business or legal structure, or (c) Borrower's place of business or chief executive office if Borrower has more than one place of business. 7. Events of Debt Default and Remedies. 7.1 Events of Debt Default. The occurrence of any of the following "Events of Debt Default" shall terminate any obligation on the part of Lender to extend credit under this Agreement, without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind or character: (a) Borrower fails to pay, when due, any installment of interest or principal or any other sum due under this Agreement in accordance with the terms hereof; (b) any representation or warranty herein or in any agreement, instrument or certificate executed pursuant hereto or in connection with any transaction contemplated hereby proves to have been false or misleading in any material respect when made and shall not have been corrected by Borrower within thirty (30) days after written notice to Borrower specifying the misrepresentations; (c) Lender fails to have a valid and enforceable perfected security interest in or lien on the Collateral or such security interest or lien fails to be prior to the rights and interest of other except Permitted Liens; (d) Borrower fails to pay its debts generally as they come due, or files any petition, proceeding, case or action for relief under any bankruptcy, reorganization, insolvency or moratorium law, or any other law or laws for the relief of, or relating to, debtors; (e) an involuntary petition is filed under any bankruptcy or similar statute against Borrower, or a receiver, trustee, liquidator, assignee, custodian, sequestrator or other similar official is appointed to take possession of the properties of Borrower and not dismissed in sixty (60) days; (f) Lender, in good faith, considers any Collateral to be unsafe or in danger of misuse to the extent that Lender's prospect of or right to payment or performance under this Exhibit or any instrument or agreement required hereunder is materially impaired, and, within thirty (30) days after written notice to Borrower specifying Lender's reasons for so considering, Borrower has not remedied such reasons or established that such reasons are without foundation; or (g) any default occurs under any other obligation of Borrower to Lender under this Exhibit and is not cured within thirty (30) days after written notice to Borrower of such default. 7.2 Remedies. Upon the occurrence and during the continuance of (i) any Event of Debt Default under Section 7.1(c),(d) or (e), or (ii) any other Event of Debt Default and an Event of Default under the Sugar Agreement, Lender shall not be obliged to make any further Advances and all Advances shall become immediately due and payable, together with interest thereon, and: (a) Lender may decline to make any further Advances and may declare all Advances immediately due and payable, together with interest thereon. (b) Lender may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or other wise available to it, all of the rights and remedies of a secured party against a debtor in default under the UCC (whether or not the UCC applies to the affected Collateral) and also may (i) require Borrower to, and Borrower hereby agrees that it will at its expense and upon request of Lender forthwith, assemble all or part of the Collateral as directed by Lender and make it available to Lender at a place to be designated by Lender (provided, however, that Lender acknowledges that Acceptable Inventory in the Hawaiian Storage Facilities satisfies this requirement), (ii) without notice or demand or legal process, enter upon any premises of Borrower and take possession of the Collateral, and (iii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of Lender's offices for elsewhere, at such time or times, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as Lender may deem commercially reasonable. Borrower agrees that, to the extent notice of sale shall be required by law, at least ten (10) days' notice to Borrower of the time and place of any public sale or the time after which any private sale is to be made shall constitute commercially reasonable notification. As any sale of the Collateral, if permitted by law, Lender may bid (which bid may be, in whole or in part, in the form of cancellation of indebtedness) for and purchase the Collateral or any portion thereof for the account of Lender. Lender shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Lender may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Lender shall have the right to assign, transfer and deliver the Collateral so sold to the purchaser or purchasers at any such sale, and such purchasers shall hold the same, absolutely free from any right or claim of Borrower of whatsoever kind. To the extent permitted by law, Borrower hereby specifically waives all right of redemption, stay or appraisal what it has or may have under any rule of law or statute now existing or hereafter in force. (c) Borrower agrees that any sale of the Collateral conducted by Lender in accordance with the provisions of Section 7.2 shall be deemed to be a commercially reasonable sale under section 9504 of the UCC. (d) All cash proceeds received by Lender in respect of any sale of, collection from or other realization upon all or any part of the Collateral may, in the discretion of Lender, be (i) held by Lender as collateral for, (ii) then or at any time thereafter applied as follows: First: To the payment of the costs and expenses of such sale, collection or other realization, and all expenses, liabilities and advances made or incurred by Lender in connection therewith and in connection with this Agreement, in accordance with Section 8.6; Second: After payment or cash collat- eralization in full of the amounts specified in the preceding subparagraph, to the payment of the obligations; and Third: After payment or cash collat- eralization in full of the amounts specified in the preceding subparagraphs, to the payment to or upon the order of Borrower, or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, or any surplus then remaining from such cash proceeds. If the sale of all or any part of the Collateral is made on credit or for future delivery, Lender shall not be required to apply any portion of the sale price to the Obligations until such amount actually is received by Lender, and any Collateral so sold may be retained by Lender until the sale price is paid in full by the purchaser or purchasers thereof. Lender shall not incur any liability in case any such purchaser or purchasers shall fail to pay for the Collateral so sold; and, in case of any such failure, the Collateral may be sold again. (e) Without limitation, as an alternative to exercising any of the rights herein conferred upon it, Lender may proceed by a suit or suits at law or in equity to foreclose the security interest granted under this Agreement and to sell the Collateral, or any portion thereof, pursuant to a judgment or decree of a court or courts of competent jurisdiction. (f) Borrower may elect by notice to Lender that Lender shall, in lieu of proceeding under the above provisions, take possession of the Collateral in partial satisfaction of the secured indebtedness if free of any liens other than Permitted Liens and if the Permitted Liens are senior to the security interest of Lender and are not being contested. The extent of the satisfaction would be the amount by which the final amount payable by Lender to Borrower exceeds the reasonable expenses (including attorneys fee and costs incurred in obtaining possession) of Lender in obtaining possession and effecting the storage, transportation and other actions required of Borrower under the Sugar Agreement as conditions precedent to a right of payment by Borrower and any amounts necessary to satisfy any such Permitted Liens. 7.3 Cure. If, notwithstanding the occurrence of any Event of Debt Default, there is no Event of Default under the Sugar Agreement and Borrower cures that and any other then- existing Event of Debt Default (even though not yet matured because of lack of notice or the non-expiration of the periods specified on Section 7.1), this Agreement shall resume its effectiveness. 8. Miscellaneous. 8.1 Destruction of Borrower's Documents. Lender shall be under no obligation to return any schedules, invoices, statements, budgets, forecasts, reports or other papers delivered by Borrower and shall destroy or otherwise dispose of same at such time as Lender, in its discretion, deems appropriate. 8.2 Lender May Perform. If Borrower fails to perform any agreement contained herein promptly after a notice from Lender demanding performance, Lender may itself perform, or cause performance of, such agreement, and the expenses so incurred in connection therewith shall be payable by Borrower under Section 8.8 hereof, together with interest thereon at the rate specified in Section 2.5 from the date Lender incurs such expense until the date Lender is reimbursed therefor. If Lender does so without prior demand, the amounts payable by Borrower shall be reduced by the expenses Borrower would have avoided by performance. 8.3 Lender's Duties. The powers conferred on Lender hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, Lender shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. Lender shall be under no obligation to take any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral, but may do so at its option, and all expenses incurred in connection therewith shall be for the sole account of Borrower and shall be included in the Obligations. Notwithstanding the foregoing, nothing in this Section shall release Lender from any obligations or liability under the Sugar Agreement. SCHEDULE 1 HAWAII TERMINAL FACILITIES Exhibit 2.6 to Exhibit E CALIFORNIA AND HAWAIIAN SUGAR COMPANY 1390 WILLOW PASS ROAD CONCORD, CA 94520 May 20, 1993 C and H Sugar Co. SAMPLE INVOICE We debit your Account as Follows: FORM 0048-ACCOUNTS RECEIVABLE TERMS: NET CASH Amount Moku Pahu V. 141 Hawaiian Sugar Delivered to Crockett Pounds Discharged: 69411053 34705.53 ST Pol: 99.275 Basis Price-Avg. #14 Sett 3/9-3/29: 21.619333 Pol Premium: 96 - 97: 1 @.5% 0.108097 97 - 98: 1 @1.2% 0.259432 97 - 98: 1 @1.05% 0.227003 98 - 99: 1 @1.20% 0.259432 99 - 99.275 @.6% 0.035672 --------- Price Including Pol 22.508969 Less Discount 1.250000 Net Price 21.258969 cents/lb. 69,411,053 pounds @ 21.258969 cents/lb. $14,756,073.93 Less: Delivery charges: Stevedoring @ $10.95/ST ($380,025.52) Despatch @ $2.66/ST ($92,316.70) Dockage @ $.25/ST ($8,676.38) Ship's Clerk ($4,000.00) Plus: Fine Cleaning Credit @ $.438/ST $15,201.02 TOTAL DUE HSTC $14,286,256.35 Less: ProForma Payment/Advances NET DUE HSTC CREDIT DISTRIBUTION A/C EX-2 4 HAWAIIAN SUGAR TRANSPORTATION COMPANY STANDARD SUGAR MARKETING CONTRACT TABLE OF CONTENTS Page ARTICLE I - DEFINITIONS 1 ARTICLE II - OBLIGATION TO DELIVER AND RECEIVE SUGAR 4 ARTICLE III - DELIVERY OF SUGAR 4 SECTION 3.01 PLACE OF DELIVERY AND DELIVERY COSTS 4 SECTION 3.02 DELIVERY SCHEDULES 5 SECTION 3.03 MANNER OF DELIVERY 5 SECTION 3.04 TRANSFER OF TITLE AND RISK OF LOSS 5 ARTICLE IV - WEIGHING AND QUALITY DETERMINATIONS 6 SECTION 4.01 WEIGHT 6 SECTION 4.02 QUALITY DETERMINATIONS, PREMIUMS AND DISCOUNTS 6 SECTION 4.03 TEST PERIODS 6 ARTICLE V - PAYMENT FOR SUGAR 7 SECTION 5.01 SALE OF RAW SUGAR 7 SECTION 5.02 PAYMENT FOR SUGAR 7 SECTION 5.03 CAPITAL RESERVES 9 SECTION 5.04 OVERPAYMENTS 10 SECTION 5.05 METHOD OF PAYMENT 10 SECTION 5.06 AUDITOR 10 ARTICLE VI - FORCE MAJEURE 10 SECTION 6.01 FORCE MAJEURE 10 SECTION 6.02 NOTICE 10 ARTICLE VII - THIRD PARTY BENEFICIARY 11 SECTION 7.01 INTENDED BENEFICIARY 11 SECTION 7.02 AMENDMENT AND WAIVER 11 ARTICLE VIII - GENERAL 11 SECTION 8.01 TERM 11 SECTION 8.02 ARBITRATION 11 SECTION 8.03 MISCELLANEOUS 13 STANDARD SUGAR MARKETING CONTRACT THIS STANDARD SUGAR MARKETING CONTRACT (this "Contract"), dated as of June 4, 1993, is made between Hawaiian Sugar Transportation Company, Inc., an agricultural cooperative association organized under the laws of the State of Hawaii (the "Association"), and Oahu Sugar Company, Limited a Hawaii corporation organized under the laws of the State of Hawaii (the "Producer"). RECITALS WHEREAS, the Association is organized to market raw sugar produced from sugarcane grown in the State of Hawaii and the byproducts thereof for the producers thereof on a cooperative basis; WHEREAS, the Producer is a producer of raw sugar from sugarcane grown in the State of Hawaii; WHEREAS, concurrently herewith the Association is entering into an Agreement for the Delivery and Sale of Raw Sugar with California and Hawaiian Sugar Company, a corporation organized under the laws of the State of California ("C&H"), pursuant to which the Association has agreed to sell raw sugar to C&H (the "C&H Raw Sugar Agreement"); WHEREAS, C&H and A&B-Hawaii, Inc., a Hawaii corporation ("ABHI"), the Producer and each of the other principal producers of raw sugar from sugarcane grown in the State of Hawaii (the "Principal Producers") are concurrently herewith entering into a Purchase Agreement pursuant to which the Producer has agreed to enter into this Contract; WHEREAS, each of the Principal Producers is concurrently herewith also entering into a Standard Sugar Marketing Contract with the Association in substantially the form of this Contract (the "Standard Sugar Marketing Contract"); and WHEREAS, the Producer desires to sell and deliver, and the Association desires to purchase and receive, raw sugar on the terms and conditions set forth below; NOW THEREFORE, in consideration of the premises and of the mutual covenants and agreement herein contained, the Association and the Producer hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.01 CERTAIN DEFINED TERMS. As used in this Contract, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Business Day" shall mean any Day on which commercial banks in San Francisco, California and Honolulu, Hawaii are required by law to be open for business. "C&H" shall have the meaning set forth in the third recital hereof. "C&H Raw Sugar Agreement" shall have the meaning set forth in the third recital hereof. "Contract Year" shall mean a calendar year. "Event of Force Majeure" shall mean an event that causes a permanent or temporary interruption in, on the one hand, the sale and delivery of Sugar hereunder by the Producer or, on the other hand, the purchase and receipt of Sugar hereunder by the Association, which is beyond the reasonable control of the Producer or the Association, respectively, and could not, by the exercise of due diligence, have been avoided by the Producer or the Association, respectively, and shall include, without limitation: (a) an act of God, including, without limitation, fire, flood, earthquake, landslide, storm, hurricane, typhoon, epidemic, an influx of pests or similar occurrence; (b) war, whether declared or undeclared, blockade, port closing, revolution, insurrection, civil disturbances, sabotage, or acts of public enemies; (c) strike, boycott, lockout or other labor disturbance; (d) explosion, breakage, or other damage to or failure or breakdown of facilities or equipment related to, in the case of the Producer, the growing or processing of sugarcane by the Producer or, in the case of the Association, the storage or transporting of raw sugar by the Association, the storage or transporting of raw sugar by the Association (including the loss or substantial impairment of the sugar delivery vessels owned, controlled or regularly employed by the Association); (e) power failure, unavailability of ocean transportation, shortage or lack of water, fuel or materials resulting from another Event of Force Majeure or the acts or omissions of a person or entity not under the control or direction of the Producer or the Association, as the case may be; and (f) an order, judgment, ruling, decision or other act or failure to act of any governmental, civil or military or judicial to act of any governmental, civil or military or judicial authority, including, without limitation, any adoption of, or change in, any law, regulation or other legal requirement. "Final Net Price Per Pound" shall refer to the payment described in Section 5.02(d). "Final Payment" shall refer to the payment described in Section 5.02(d). "Initial Delivery Schedule" shall have the meaning set forth in Section 3.02(a). "Initial Per Unit Allocation" shall refer to the payments described in Section 5.02(a) "Molasses" shall refer to the final or blackstrap molasses produced, by or for the account of a Patron in connection with the production of raw sugar by or for the account of such Patron. "Patrons" shall mean all of the producers of raw sugar from sugarcane grown in the State of Hawaii, including the Producer, who are parties to Standard Sugar Marketing Contracts. "Prime Rate" shall mean the "prime" or "base" rate announced from time to time by Bank of America N.T. & S.A. at its principal office in San Francisco, California in respect of 90-day loans to its corporate borrowers. "Producer's Customary Raw Sugar Terminal" shall have the meaning set forth in Section 3.01(a). "Raw Sugar Terminal" shall refer to each of the raw sugar terminals located in Hawaii which heretofore has been used by C&H to store raw sugar. "Raw Value" of any quantity of Sugar shall mean its equivalent in terms of ordinary commercial raw sugar testing 96 degrees by the polariscope. This conversion is to be done for Sugar testing more than 92 degrees by the polariscope by multiplying (i) the number of pounds, avoirdupois, thereof by (ii) the quantity obtained by adding (A) 0.93 to (B) the quantity obtained by multiplying (X) 0.0175 by (Y) the number of degrees and fractions of a degree of polarization above 92 degrees for such Sugar. "Revised Delivery Schedule" shall refer to the schedules described in Section 3.02(a) and Section 3.02(b). "Standard Sugar Marketing Contract" shall have the meaning set forth in the fifth recital hereof. "Sugar" shall mean any grade or type of saccharine product other than molasses produced from sugarcane grown in Hawaii. "Sugar of a Contract Year" shall mean, for any Contract Year, all Sugar produced by the Patrons to which the Association has taken title in accordance with Section 3.04 during such Contract Year. "Supplemental Per Unit Allocation" shall refer to the payments described in Section 5.02(b). "Test Period" shall mean any of the periods described in Section 4.03. "Total Payment" shall have the meaning set forth in Section 5.02(e). ARTICLE II OBLIGATION TO DELIVER AND RECEIVE SUGAR (a) Basic Obligation. Unless otherwise set forth in a rider attached hereto, for the term of this Contract the Producer agrees to sell and deliver to the Association, and the Association agrees to purchase and receive from the Producer, all of the Sugar produced by the Producer from sugarcane grown in the State of Hawaii. All Sugar delivered to the Association shall be delivered in the form of raw centrifugal cane sugar polarizing at not less than 94 degrees and shall be in good order and sound condition. (b) Limitation. Nothing in this Contract shall, however, obligate the Producer to cultivate sugarcane or, except as set forth in Section 3.02(c), to produce Sugar for sale to the Association. Nor shall the Association have any liability under this Agreement for failing to purchase and receive Sugar if such failure arises from a default by C&H under the terms of the C&H Raw Sugar Agreement. Further, if the C&H Raw Sugar Agreement terminates during the term hereof, this Contract shall be amended as appropriate. ARTICLE III DELIVERY OF SUGAR SECTION 3.01 PLACE OF DELIVERY AND DELIVERY COSTS. (a) Place of Delivery. All Sugar to be delivered by the Producer pursuant to this Contract shall be delivered to the Raw Sugar Terminal customarily used by the Producer (the "Producer's Customary Raw Sugar Terminal"), or to such other place or places within the State of Hawaii, as may be directed by the Association. (b) Delivery Costs. All costs incurred in delivering the Producer's Sugar to the Association in accordance with subsection (a) above shall be borne by the Producer, except that if the Association shall direct the Producer to deliver any portion of its Sugar to a place or places within the State of Hawaii other than the Producer's Customary Raw Sugar Terminal, then the Association shall charge or pay to the Producer, as the case may be, an amount equal to the difference between (i) the delivery costs for such Sugar from the Producer's mill to the place of actual delivery and (ii) the delivery costs which would have been incurred if the Sugar had been delivered to the Producer's Customary Raw Sugar Terminal. Such charge or payment with respect to delivery costs incurred during any Test Period hereunder shall be set forth together with supporting detail in a statement presented by the Producer to the Association promptly following the end of such Test Period, and shall be due and payable on the tenth (10th) day of the month next following such Test Period. (c) Emergency Storage. Whenever conditions make it necessary in the judgment of the Association for Sugar to be put into emergency storage in Hawaii, the Association may direct the Producer to deliver its Sugar into emergency storage facilities, which may include facilities at the Producer's mill. All costs connected with the use of such emergency storage shall be separately accumulated and shall be apportioned among all of the Patrons of the Association on such fair and equitable basis as may be agreed upon by the Association and such Patrons. SECTION 3.02 DELIVERY SCHEDULES. (a) Initial and Revised Delivery Schedules. On or before the first day of October and each Contract Year, the Producer shall furnish the Association with a delivery schedule setting forth the quantity of Sugar it expects to deliver to the Association during each calendar week of the immediately succeeding Contract Year (the "Initial Delivery Schedule"). On the next to the last Business Day of each calendar week the Producer shall furnish the Association with an update of the delivery schedule last furnished to the Association, with such adjustments, if any, as may be appropriate to reflect new information pertinent to the quantities of Sugar the Producer expects to deliver in each calendar week of the Contract Year; provided, however, that no adjustments shall be made to the Sixteen Week Best Efforts Supply Commitment described in Section 3.02(c) except as made necessary by an Event of Force Majeure. Initial Delivery Schedules as updated are referred to herein as "Revised Delivery Schedules". (b) Delivery Schedules for 1993 Contract Year. On or before the next to the last Business Day of the first calendar week beginning after the date of this Contract, the Producer shall furnish the Association with a delivery schedule setting forth the quantity of Sugar it expects to delivery to the Association during each calendar week of the 1993 Contract Year. On the next to the last Business Day of each succeeding calendar week of the 1993 Contract Year, the Producer shall furnish the Association with updated delivery schedules ("Revised Delivery Schedules") conforming in all respects to Revised Delivery Schedules as described in Section 3.02(a). (c) Sixteen Week Best Efforts Supply Commitment. The Producer shall use its efforts to deliver the Sugar scheduled under a Revised Delivery Schedule for delivery during each of the sixteen consecutive calendar weeks commencing with the calendar week next following the week in which the Revised Delivery Schedule is delivered to the Association. (d) The Producer shall exercise due diligence and reasonable care in the preparation of delivery schedules hereunder and shall furnish the Association with such other information as the Association may reasonably request regarding the Producer's expected deliveries of Sugar to the Association. SECTION 3.03 MANNER OF DELIVERY. (a) Suitable Vehicles. The Producer shall deliver all Sugar to the Association in bulk and by vehicles equipped for the transportation of raw sugar. (b) Commingled Sugar. When Sugar produced by the Producer is commingled with Sugar from other Patrons for transportation to the designated point of delivery, the Producer's share of any such shipment shall be determined by a method to be mutually agreed upon by the Producer and the Association. SECTION 3.04 TRANSFER OF TITLE AND RISK OF LOSS. Notwithstanding any other provision hereof, title and risk of loss to Sugar subject to this Contract shall pass from the Producer to the Association: (i) when such Sugar is loaded by the Producer aboard ground transportation equipment for movement to the Producer's Customary Raw Sugar Terminal or any alternative delivery point designated by the Association or (ii) if emergency storage at the Producer's mill has been authorized by the Association pursuant to Section 3.01(c), as Sugar is put into such storage pursuant to the Association's authorization. Upon such passage of title, all such Sugar shall become the property of and shall be subject to the order of the Association and any and all warehouse receipts or other documents of title or accountability related to such Sugar shall be delivered to and issued in the name of the Association. ARTICLE IV WEIGHING AND QUALITY DETERMINATIONS SECTION 4.01 WEIGHT. The Association shall weigh, or cause to be weighed, all Sugar delivered to the Association by the Producer. The methods of weighing shall be in accordance with the established practice for each place of delivery, or as may be agreed upon between the Association and the Patrons. Weighing shall be subject to check by representatives of the Producer. SECTION 4.02 QUALITY DETERMINATIONS PREMIUMS AND DISCOUNTS. (a) Sampling and Testing. All Sugar delivered by the Producer to the Association shall be sampled in accordance with the procedures last employed by C&H as of the date of this Contract and shall be tested by the Association or its designee in accordance with the procedures set forth in the C&H Raw Sugar Agreement, as amended from time to time. (b) Premiums and Discounts. Quality premiums and discounts for all Sugar delivered by the Producer to the Association shall be calculated in accordance with the provisions of the C&H Sugar Agreement, as amended from time to time, except that the "Basis Price" for purposes of such calculations shall mean the weighted average of the Basis Prices determined under the C&H Raw Sugar Agreement with respect to all Sugar delivered by the Association to C&H under such Agreement. A premium for Aiea Quality Raw Sugar shall be paid only on Aiea Quality Raw Sugar that is delivered to C&H's Aiea refinery pursuant to the authorization or direction of the Association. The Association shall allocate among the Patrons the opportunity to deliver Aiea Quality Raw Sugar to the C&H Refinery on a fair and equitable basis that takes into account the ability to produce Aiea Quality Raw Sugar in a manner that will enable the Association to fulfill its obligations under the C&H Raw Sugar Agreement and the costs to the Association of fulfilling such obligation. (c) Costs. The cost of all test and determinations required by this Section 4.02 shall be borne by the Association. (d) Commingling. The quality determination referred to in this Section shall be made before the Producer's Sugar is commingled with the Sugar of other Patrons. However, if more than one Patron shall have its sugarcane ground at the same mill, the sugarcane may at the option of such Patrons be commingled prior to grinding or milled separately and the juices and other after-products therefrom commingled. In such case, the quality determinations referred to in the Section 4.02 shall be made with respect to the resulting commingled Sugar and the Sugar of each of the Patrons whose sugarcane or sugarcane juices or other after-products were commingled shall be deemed equal in quality for purposes of this Section. SECTION 4.03 TEST PERIODS. (a) Separate Determinations. Quality determinations shall be made and premiums and discounts computed separately for the Sugar delivered by the Producer to the Association in each of the Test Periods in each Contract Year hereunder. (b) Twelve Periods. There shall be twelve Test Periods in each Contract Year. The first Test Period in each Contract Year shall commence on January 1 and end at midnight on the Saturday preceding the last Sunday of such month provided, however, that in the case of the 1993 Contract Year, the first Test Period shall commence on the date hereof and end at midnight on the Saturday preceding the last Sunday of the month in which such Test Period commences. Each succeeding Test Period shall commence at the end of the preceding Test Period and continue until midnight on the Saturday preceding the last Sunday of the next succeeding calendar month; provided, however, that the last Test Period in each Contract Year shall commence at midnight on the Saturday preceding the last Sunday in November and continue through December 31 of such year. (c) Advice to Producer. Quality determinations shall be made and discounts and premiums computed for each Test Period with respect to all Sugar of the Producer delivered to the Association during such Test Period. Promptly following the close of each Test Period there shall be furnished by the Association to the Producer full information as to the quantity and quality of all of the Sugar of the Producer for which quality determinations were made during such Test Period. ARTICLE V PAYMENT FOR SUGAR SECTION 5.01 SALE OF RAW SUGAR. The Producer acknowledges that all of the raw Sugar delivered to the Association by the Producer and the other Patrons shall be sold by the Association under or subject to the terms of the C&H Raw Sugar Agreement. SECTION 5.02 PAYMENT FOR SUGAR. The Association shall make payment to the Producer, as full return and payment for all Sugar of the Contract Year delivered by the Producer to the Association, in amounts and at times as follows: (a) Initial Per Unit Allocation. The Association shall, at the end of each Test Period, compute the total number of pounds, Raw Value, of all Sugar delivered by the Producer to the Association during such Test Period. In addition, at such time the Association shall also estimate the Final Net Price Per Pound (as described in Section 5.02(d)) to be realized from all sales of Sugar during the Contract Year. Ninety percent (90%), of the amount so determined or such larger or smaller percentage as the Board of Directors of the Association, in its sole discretion, may from time to time determine, shall be the Initial Per Unit Allocation per pound, Raw Value, payable by the Association with respect to all Sugar of the Contract Year delivered during such Test Period. The product of such Initial Per Unit Allocation multiplied by the number of pounds, Raw Value, of Sugar delivered by the Producer to the Association during such Test Period shall be paid on the tenth (10th) day of the month following the close of the Test Period. (b) Supplemental Per Unit Allocations. Supplemental Per Unit Allocations may be paid to the Producer from time to time with respect to Sugar of the Contract Year which has theretofore qualified for an Initial Per Unit Allocation in such amounts and at such times during each Contract Year as determined in the sole discretion of the Board of Directors of the Association provided that in the judgment of the Association, such payments can be made without risk of overpayment to the Patrons and without prejudicing the financial position of the Association. (c) Equal Per Unit Allocations. Notwithstanding subsections (a) and (b)above, Initial Per Unit Allocations and Supplemental Per Unit Allocations shall be paid to the Patrons in such manner that the aggregate amount of Initial Per Unit Allocations and Supplemental Per Unit Allocations paid to each Patron, including the Producer, per pound of Sugar, Raw Value, shall at all times be as nearly equal as is practicable; provided, however, that if the Board of Directors determines that payment to the Producer of aggregate Initial Per Unit Allocations and Supplemental Per Unit Allocations per pound of Sugar, Raw Value, equal to such allocations per pound paid to the other Patrons may create a risk of overpayment to the Producer, it may direct that Initial Per Unit Allocations or Supplemental Per Unit Allocations otherwise payable to the Producer be reduced so as to avoid such overpayment, provided that to the extent any such reduction exceeds the overpayment that could have occurred but for such reductions, the Producer shall be paid at the time of Final Payment such excess together with interest at a rate equal to the Prime Rate. (d) Final Payment. Within 60 days following the date on which the Association shall complete the sale of all of the Sugar of the Contract Year for each Contract Year, the Final Payment for the Sugar of the Contract Year shall be made to the Producer in an amount computed as follows: (i) The net sum of all quality premiums and discounts applicable to all Sugar of the Contract Year, calculated in accordance with Section 4.02, shall be determined. If the total of such premiums and discounts is a negative figure, the sum thereof shall be added to the Total Payment for Sugar of the Contract Year as determined pursuant to subsection (e) below. If the total of such premiums and discounts is a positive figure, the sum thereof shall be subtracted from the Total Payment for Sugar of the Contract Year. In either event, the resulting amount shall then be divided by the number of pounds of Sugar of the Contract Year (the "Final Net Price per Pound"). (ii) Such Final Net Price Per Pound shall then be multiplied by the number of pounds of Sugar of the Contract Year delivered by the Producer to the Association. From the result thereof there shall then be deducted: (A) The aggregate amount of all Initial Per Unit Allocations paid by the Association to the Producer with respect to Sugar of the Contract Year; and (B) The aggregate amount of all Supplemental Per Unit Allocations paid by the Association to the Producer with respect to Sugar of the Contract Year. (iii)The amount so determined shall, subject to the adjustments required by subsections (f) and (g) below, be the Final Payment due from the Association to the Producer with respect to the Sugar of the Contract Year. (e) Total Payment. The total payment to be made by the Association for all of the Sugar of any Contract Year to all Patrons who delivered Sugar to the Association pursuant to a Standard Sugar Marketing Contract during such year shall be calculated as follows: (i) There shall first be added together: (A) The gross proceeds received by the Association from the sale of all Sugar of the Contract Year. In determining the gross proceeds from the sale of Sugar of the Contract Year the Association shall consider that all sales of Sugar are sales of Sugar of a given Contract Year until such time as the total amount of Sugar sold or otherwise accounted for and not allocated to a prior Contract Year is equivalent to the total amount of Sugar of the given Contract Year. Sale of Sugar thereafter shall be considered to be sales of Sugar of the subsequent Contract Year. (B) All other receipts of the Association in the nature of income received or accrued during the Contract Year, which, insofar as practicable by the application of proper accounting principles, are attributable to Sugar of the Contract Year, but not including any proceeds from the sale or other disposition by the Association of molasses. (ii) From the sum of the items described in subsection (i) above, there shall be deducted all marketing, operating distribution, transportation and other expenses of the Association of whatever kind or nature, whether paid or accrued, including, without limitation, depreciation, bonuses, contribution to pension, insurance and disability plans, charitable contributions, and all other types of expenses which by the application of proper accounting principles are allocable to Sugar of the Contract Year. The remainder determined pursuant to the foregoing calculation shall constitute the Total Payment for the Sugar of the Contract Year. (f) Terminal Costs. The Association shall determine, separately for each Raw Sugar Terminal, all costs incurred during each Contract Year for receiving, weighing, sampling, sorting, loading, wharfage, loading laytime, and any other expenses relating to Sugar of the Contract Year after its delivery at such terminal and prior to completion of loading and the commencement of ocean transportation. The sum so determined shall be dived by the number of pounds of Sugar of the Contract Year delivered at each terminal by all Patrons. If the amount per pound so computed for any Raw Sugar Terminal exceeds the Contract Year's average of such costs for all Raw Sugar Terminals, then the Final Payment for all Sugar of the Contract Year delivered at such terminal shall be reduced by the amount of such excess, and if the amount per pound so computed for any Raw Sugar Terminal is less than the average of such costs for all Raw Sugar Terminals, then the Final Payment for all Sugar of the Contract Year delivered at such terminal shall be similarly increased. For purposes of the foregoing computations, Sugar delivered pursuant to Section 3.01 to a place other than the Producer's Customary Raw Sugar Terminal shall be deemed to have been delivered to such terminal and the costs incurred with respect to such terminal shall include the costs that would have been incurred had such sugar actually been delivered to the terminal. (g) Quality Premiums and Discounts. The quality premiums and discounts applicable to the Producer's Sugar of a Contract Year, calculated in accordance with Section 4.02, shall be accumulated until the time for Final Payment for Sugar of the Contract Year, at which time the sum thereof, after adjustment to reflect the payment of Initial and Supplemental Per Unit Allocations on a Raw Value basis, shall be added to the amount of the Final Payment to be made by the Association to the Producer, or shall be deducted by the Association from the Final Payment otherwise payable to the Producer, as the case may be. SECTION 5.03 CAPITAL RESERVES. If during any Contract Year the Board of Directors of the Association has determined to withhold a sum from the members of the Association for the purpose of a capital reserve, as permitted by the Bylaws of the Association, then the portion of such sum allocable to the Producer shall be subtracted from such payment or payments due hereunder to the Producer for such Contract Year as the Board of Directors of the Association may determine. The Association shall maintain records of all sums so withheld by it from the patronage allocation of the Producer and shall advise the Producer in writing of the dollar amount of any sum so withheld. SECTION 5.04 OVERPAYMENTS. If for any reason the aggregate amount of the Initial Per Unit Allocations and the Supplemental Per Unit Allocations paid to the Producer for Sugar of a Contract Year exceeds the total net amount due to such Producer for such Contract Year as computed under Section 5.02, less any sum directed to be withheld from such Producer pursuant to Section 5.03 for capital reserves of the Association, then the Association may, at its option, either (i) invoice such Producer for the amount of the overpayment so determined and the Producer shall promptly, and in any event with five (5) Business Days, pay the Association such amount following receipt of such invoice or (ii) deduct such overpayment from any amount or amounts payable to the Producer with respect to Sugar of the next succeeding Contract Year, or both. SECTION 5.05 METHOD OF PAYMENT. The Association shall make all payments by check or wire transfer; provided, however, that at all times the Association shall have the option of making any payment due hereunder, in whole or in part, by means of an unsecured note due within thirty days, bearing a rate of interest to be mutually agreed upon between the Association and the Producer. SECTION 5.06 AUDITOR. The Producer may at his own expense employ a certified public accountant satisfactory to the Association to audit such accounts of the Association as may be necessary in order to ascertain the correctness of an amounts allocated by the Association to the Producer under this Contract. The Association agrees to extend necessary facilities to such auditor. ARTICLE VI FORCE MAJEURE SECTION 6.01 FORCE MAJEURE. In the event that an Event of Force Majeure shall prevent the Producer or the Association from taking any action required hereunder, then the Producer's or the Association's obligations, as the case may be, shall be suspended for the duration of such event. SECTION 6.02 NOTICE. If the Producer or the Association shall be prevented from performing its obligations hereunder in full or in part as a result of the occurrence of an Event of Force Majeure, such party shall give prompt notice thereof to the other (but in no event more than ten (10) days after the disabled party is aware that its performance will be prevented) which notice shall specify the nature of such occurrence, the steps being taken and intended to be taken to remove the disability, and an estimate of the date when full performance will be resumed hereunder. The disabled party shall keep the other party informed of a material developments with respect to such Event of Force Majeure. ARTICLE VII THIRD PARTY BENEFICIARY SECTION 7.01 INTENDED BENEFICIARY. The Producer and the Association acknowledge and agree the C&H is an intended third party beneficiary of this Contract and shall be entitled to enforce any and all obligations of the Producer under this Contract. SECTION 7.02 AMENDMENT AND WAIVER. This Contract, including the riders and exhibits hereto, if any, may be amended, any right, obligation or condition hereunder waived, and any departure from any provision hereof permitted, only upon the prior written consent of C&H, which consent shall not be unreasonably withheld. ARTICLE VIII GENERAL SECTION 8.01 TERM. The term of the Contract shall commence June 4, 1993 and shall end on June 3, 2003. SECTION 8.02 ARBITRATION. (a) General. Except for any controversy or disagreement arising out of or relating to the interpretation or enforcement of this Section 8.02 any controversy or disagreement arising out of or relating to this Contract or any breach hereof shall be submitted by the parties to arbitration in Honolulu, Hawaii, under the Commercial Arbitration Rules of the American Arbitration Association for commercial arbitration and, to the extent not inconsistent therewith or with the terms hereof, the laws of the State of Hawaii. Such arbitration shall be undertaken by three disinterested arbitrators (the "Arbitrators") one of whom shall be selected by the Producer, one by the Association, and one of whom shall be the chairman of the arbitral tribunal and shall be chosen by agreement between the first and second Arbitrators. The Producer and the Association shall select such Arbitrators within fifteen (15) days after the party desiring arbitration has notified the other party in writing. Such notice demanding arbitration shall state specifically the question or questions to be submitted for decision or the point or points in controversy and shall include such party's selection of an Arbitrator. If, at the expiration of fifteen (15) days from receipt of such notice, the party receiving such notice has not informed the party demanding the arbitration of its selection of a second arbitrator, the party making the demand may make such selection. The first and second Arbitrators shall select a third Arbitrator within fifteen (15) days from the date of the appointment of the second Arbitrator. If the first and second Arbitrators cannot agree as to a third Arbitrator, such third Arbitrator may be appointed upon ten days' notice upon application of either party to the chief or presiding judge, or judge acting as chief of presiding judge, of the First Circuit Court of the State of Hawaii. The arbitral tribunal shall set the date, time and place for each hearing, shall give to each of the parties at least 10 days' advance written notice of the date, time and place of the initial hearing and shall proceed without delay to hear and determine the matters in dispute. Each of the parties hereto may be represented by counsel or other authorized representative at any hearing. The party intending to be so represented shall notify the Arbitrators and the other party of the name and address of the representative at least three days prior to the date set for the hearing. Such arbitration shall be conducted in such manner as the Arbitrators shall determine, consistent with the above referred to Commercial Arbitration Rules. A written transcript of the proceedings shall be prepared at the expense of the party requesting such transcript, if any, or if both parties hereto shall so request, they shall share the cost equally. (b) Expenses. Each party shall bear any expenses incurred by it prior to arbitration, including legal and accounting fees, if any, with respect to any disagreement hereunder. If the matter is submitted to arbitration, the Arbitrators shall designate the party or parties to bear the expenses of such arbitration and/or the respective amounts to be borne by each party. In making such an allocation of costs, the Arbitrators shall be expressly instructed by the parties that, absent extraordinary circumstances, the prevailing party in such a proceeding shall be entitled to reimbursement for its reasonable attorneys' fees and other reasonable expenses incurred in connection therewith by the non-prevailing party. (c) Remedies. The Arbitrators shall have the authority to resolve any dispute under this Contract that is submitted to them, including, without limitation the right to determine (a) whether any party is in breach of any of its obligations under this Contract, (b) whether such breach has resulted in damage to another party to this Contract (c) the amount of money necessary to compensate such damage, and (d) any equitable relief appropriate under the circumstances. The Arbitrators shall render their written decision in respect of the controversy at issue within 90 days after the date on which a notice demanding arbitration is first given. The determination of the Arbitrators as to any matter submitted to arbitration shall be conclusive and binding upon the parties hereto. Each party shall immediately make such changes in the conduct of such party's business or such payment of damages, as the case may be, as required by such determination and award, if any. (d) Enforcement. Judgment upon any award rendered by the Arbitrators may be entered in any court having jurisdiction over the parties and the subject matter. In the event that either party hereto shall be required to take any action to enforce any such judgment, such party shall be entitled to reimbursement for its reasonable attorneys' fees and other reasonable expenses incurred in connection therewith by the non-prevailing party. (e) Discovery. Discovery in such proceedings shall be limited to the taking of depositions and document production. Unless ordered by the Arbitrators, the submission of interrogatories will not be permitted. The Arbitrator shall have the power to enforce the discovery rights and obligations set forth in this Section. The books and papers of the parties hereto, so far as they relate to matters submitted to arbitration, shall be open to the investigation of the Arbitrators. (f) Chairman. In an arbitration proceeding conducted pursuant to this Section, the chairman of the arbitral tribunal shall be a citizen of the United States who shall (i) be admitted to practice law in one of the states of the United States, (ii) shall have had at least 20 years' experience as an attorney or a judge and (iii) have expertise in the area of commercial law. (g) Notice to C&H. The party initiating an arbitration shall give C&H a copy of the notice demanding arbitration at the same time it serves the other party with such notice. C&H shall be entitled to intervene in such arbitration and, to the extent its interest are affected, to participate in such arbitration. (h) Cooperation. The parties hereto agree that they will cooperate in good faith in such proceedings in order to work toward the prompt resolution of the subject dispute. SECTION 8.03 MISCELLANEOUS (a) Interpretation of Agreement. Any reference in this Contract to an Article, a Section, an Appendix or an Exhibit is a reference to an article hereof, a section hereof, an appendix hereto or an exhibit hereto, respectively, and to a subsection or a clause is, unless otherwise stated, a reference to a subsection or a clause of the Section or subsection in which the reference appears. The words "hereof", "herein", "hereto", "hereunder" and the like mean and refer to this Contract as a whole and not merely to the specific Article, Section, subsection or clause in which the respective word appears. References to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of this Contract. References to statutes or regulations are to be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation referred to. The captions and headings used in the Contract are for the convenience of reference only and shall not affect the construction of this Contract. (b) Execution and Effect of Amendments. If approved by not less than sixty-seven percent (67%) of the votes of the Patrons who are parties to Standard Sugar Marketing Contracts, with such Patrons voting as hereinafter described, and if approved by the written consent of C&H, as provided under Section 7.02, the Board of Directors of the Association may adopt amendments so approved to all, and not less than all, of the Standard Sugar Marketing Contracts, including this Contract; provided, however, that if the Association enters into any contract or agreement contingent on the continuance of any of the terms of the Standard Sugar Marketing Contract, then, so long as such contract or agreement remains in effect, the Standard Sugar Marketing Contract shall not be amended in any way that might be in violation of any commitment of the Association in connection with such contract or agreement; and provided further that no amendment extending the period of, changing materially the payment provisions of, or imposing supply commitments under the Standard Sugar Marketing Contract shall be adopted without the approval of all of the Patrons who are parties to the Standard Sugar Marketing Contracts. In voting on any proposed amendment to the Standard Sugar Marketing Contract, each Patron shall be entitled to one vote for each Raw Value ton of Sugar of the preceding two (2) Contract Years credited to such Patron in the Association's final accounting for such Contract Years. If a Patron was not a party to the Standard Sugar Marketing Contract for the whole of such period, it shall be entitled to votes equal to the product of the tons of Sugar which were supplied by such Patron, during the immediately preceding twelve months multiplied by two (2). Upon the adoption of any amendment to the Standard Sugar Marketing Contract, in the manner provided herein, the provisions of such amendment shall, from and after the specified effective date of such amendment, be treated for all purposes as provisions of the Standard Sugar Marketing Contract, and shall be binding on all parties to the Standard Sugar Marketing Contract. (c) Entire Agreement. This Contract, including the riders and exhibits hereto, if any, together with the provisions of the C&H Raw Sugar Agreement and the other agreements and documents expressly referred to herein, embodies the entire agreement and understanding of the parties hereto in respect of the transactions contemplated by such agreements. There are no restrictions, promises, inducements, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or therein. This Contract supersedes all prior agreements and understandings between the parties with respect to such transactions. (d) Notices. Any notice, request, instruction or other document to be given hereunder by any party hereto (or C&H) to the other party hereto (or to C&H) shall be in writing, shall be deemed to have been duly given or delivered when (i) delivered personally, (ii) telecopied (receipt confirmed, with a copy sent by certified or registered mail), (iii) telexed (and the appropriate answer back received, with a copy sent by certified or registered mail), or (iv) sent by certified or registered mail, postage prepaid, return receipt requested, or by Federal Express or other overnight delivery service, to the address of the party (or C&H) set forth below or to such address as the person to whom notice is to be given shall provide in a written notice to the other party (or C&H). (i) To the Association: Hawaiian Sugar Transportation Company c/o C. Brewer and Company, Limited 827 Fort Street Honolulu, Hawaii 96813 Telecopier: (808) 544-6182 Telephone: (808) 536-4461 Attention: President with copies to: Hawaiian Sugar Transportation Company 830 Loring Avenue Crockett, CA 94525-1199 Telecopier: (510) 787-3196 Telephone: (510) 787-4242 Attention: Vice President - Operations (ii) To the Producer: c/o Amfac/JMB Hawaii, Inc. 900 N. Michigan Avenue Chicago, IL 60611 Telecopier:_____________________ Telephone:______________________ Attention: President with copies to: Telecopier:_____________________ Telephone:______________________ Attention: General Counsel (iii) To C&H: C&H Sugar Company 830 Loring Avenue Crockett, CA 94525-1199 Telecopier: (510) 787-2058 Telephone: (510) 787-4205 Attention: President With copies to: C&H Sugar Company 830 Loring Avenue Crockett, CA 94525-1199 Telecopier: (510) 787-2058 Telephone: (510) 787-4209 Attention: General Counsel (e) No Strict Constructions. This Contract has been prepared jointly by representatives of the parties hereto and shall not be strictly construed against either party. (f) Successors and Assigns. All the covenants and provisions of this Contract by or for the benefit of the Producer or the Association shall bind and inure to the benefit of their respective successors and assigns; provided, however, that no assignment of this Contract or any portion hereof shall relieve the assigning party of any of its duties or obligations hereunder. Neither party shall assign this Contract without the written consent of the other party and C&H. (g) Severability. If any term, provision, covenant or restriction of this covenant is held by a court of competent jurisdiction or other authority of arbitral tribunal to be invalid, illegal, void or unenforceable under applicable law, such term, provision, covenant or restriction shall be excluded from this Contract and the balance of the Contract shall be interpreted as if such term, provision, covenant or restriction were so excluded and shall be enforceable in accordance with its terms to the fullest extent permitted by law. (h) Further Assurances. Each of the parties shall, without further consideration, use reasonable efforts to execute and deliver to the other such additional documents and take such other action, as the other may reasonably request to carry out the intent of this Contract and the transaction contemplated hereby. (i) Governing Law. This Contract shall be governed by, and construed in accordance with, the internal laws of the State of Hawaii (without reference to its conflict of law rules) as applied to agreements among Hawaii residents entered into and to be performed entirely within Hawaii. (j) Counterparts. This Contract may be executed in any number of counterparts, each of which when so executed shall be deemed an original, and all of which taken together shall constitute but one and the same agreement. (k) Approval of Bylaws. The Producer agrees to be and is bound by the Bylaws of the Association, including all amendments thereto. In the event of a conflict between this Agreement and the Bylaws, the terms of this Agreement shall prevail with respect to the subject matter hereof. DATE: June 4, 1993 ASSOCIATION HAWAIIAN SUGAR TRANSPORTATION COMPANY, INC. By:_____________________ Title: President PRODUCER [HAWAII GROWER] By:_____________________ Title:__________________ IN WITNESS WHEREOF, the parties hereto have caused this Contract to by duly executed as of the date first above written. ASSOCIATION HAWAIIAN SUGAR TRANSPORTATION COMPANY, INC. By:_____________________ Title:__________________ PRODUCER OAHU SUGAR COMPANY, LTD. By:_____________________ Title:__________________ IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly executed as of the date first above written. ASSOCIATION HAWAIIAN SUGAR TRANSPORTATION COMPANY, INC. By:_____________________ Title:__________________ PRODUCER LIHUE PLANTATION COMPANY, LTD. By:_____________________ Title:__________________ IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly executed as of the date first above written. ASSOCIATION HAWAIIAN SUGAR TRANSPORTATION COMPANY, INC. By:_____________________ Title:__________________ PRODUCER KEKAHA SUGAR COMPANY, LTD. By:_____________________ Title:__________________ IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly executed as of the date first above written. ASSOCIATION HAWAIIAN SUGAR TRANSPORTATION COMPANY, INC. By:_____________________ Title:__________________ PRODUCER PIONEER MILL COMPANY, LIMITED By:_____________________ Title:__________________ IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly executed as of the date first above written. ASSOCIATION HAWAIIAN SUGAR TRANSPORTATION COMPANY, INC. By:_____________________ Title:__________________ PRODUCER OLOKELE SUGAR COMPANY, LTD. By:_____________________ Title:__________________ IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly executed as of the date first above written. ASSOCIATION HAWAIIAN SUGAR TRANSPORTATION COMPANY, INC. By:_____________________ Title:__________________ PRODUCER MAUNA KEA AGRIBUSINESS CO., INC. By:_____________________ Title:__________________ IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly executed as of the date first above written. ASSOCIATION HAWAIIAN SUGAR TRANSPORTATION COMPANY, INC. By:_____________________ Title:__________________ PRODUCER KA'U AGRIBUSINESS CO., INC. By:_____________________ Title:__________________ IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly executed as of the date first above written. ASSOCIATION HAWAIIAN SUGAR TRANSPORTATION COMPANY, INC. By:_____________________ Title:__________________ PRODUCER WAIALUA SUGAR COMPANY, INC. By:_____________________ Title:__________________ IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly executed as of the date first above written. ASSOCIATION HAWAIIAN SUGAR TRANSPORTATION COMPANY, INC. By:_____________________ Title:__________________ PRODUCER GAY & ROBINSON, INC. By:_____________________ Title:__________________ STANDARD SUGAR MARKETING CONTRACT RIDER 5.02 WHEREAS, the transfer before the close of the 1993 Contract Year from the Association's Standard Sugar Transportation Contract to the Association's Standard Sugar Marketing Contract of the costs of ocean transportation of Sugar delivered by the Patrons to the Association would result in the Patrons bearing different per ton costs for the ocean transportation of Sugar delivered to the Association depending upon when during such year the Patrons delivered Sugar to the Association; WHEREAS, the Association and the Patrons desire that all Sugar delivered to the Association during the course of a Contract Year bear the same per on cost of ocean transportation without regard to when within such year such Sugar is delivered to the Association; and WHEREAS, the desired allocation of ocean transportation costs is in accordance with the past practice of the Hawaiian sugar industry and is fair and equitable to all Patrons of the Association; THE PARTIES AGREE AS FOLLOWS: The cost of ocean transportation of the Sugar of the 1993 Contract Year shall be borne by the Patrons, including the Producer, on a pooled basis pursuant to the existing Standard Sugar Transportation Contracts between the Association and its Patrons. All amounts payable under the Standard Sugar Transportation Contract between the Producer and the Association with respect to Sugar of the 1993 Contract Year shall be deducted from amounts payable under this Contract. If the Association does not require 1993 Contract Year Sugar delivered by the Producer to be transported pursuant to such Standard Sugar Transportation Contract, the Association shall charge to the Producer an amount equal to the cost of ocean transportation which would otherwise have been borne by the Producer. DATE:_________________ ASSOCIATION HAWAIIAN SUGAR TRANSPORTATION COMPANY, INC. By:____________________ Title:_________________ PRODUCER [HAWAII GROWER] By:____________________ Title:_________________ -----END PRIVACY-ENHANCED MESSAGE-----