EXHIBIT 10.46
AMENDED AND RESTATED FARMING CONTRACT FOR THE LOT X ORCHARD
This Farming Contract (this "Contract"), as amended and restated as of
January 1, 1998, is entered into on the date set forth below by and among Mauna
Loa Macadamia Partners, L.P., a Delaware limited partnership ("Owner") and Ka'u
Agribusiness Co., Inc., a Hawaii corporation ("Manager").
R E C I T A L S:
WHEREAS, Owner is the legal and beneficial owner of a macadamia
orchard, commonly known as Lot X, consisting of 78.44 tree acres of mature trees
in Keaau, Hawaii County, Hawaii (the "Lot X Orchard");
WHEREAS, Manager is experienced and capable in all aspects of the
business of farming and harvesting macadamia nuts;
WHEREAS, Owner desires to engage the expert services of Manager to
farm, harvest and husk macadamia nuts at the Lot X Orchard, and Manager desires
to perform such services for Owner as provided herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements set forth herein, the parties agree as follows:
1. TERM. This Contract shall be deemed to have commenced for all
purposes as of August 1983 and shall continue in full force and effect until
December 31, 2006, unless terminated earlier as provided herein. At the end of
the stated term of this Contract, the parties agree to negotiate in good faith
with a view toward extending this Contract on terms and conditions that are
agreeable to such parties at that time. This Contract may also be terminated as
provided in Section 7.
2. FARMING SERVICES.
a. Manager will perform all farming services that shall be
necessary or desirable from time to time in order to provide for the economical
growth and yield of the Lot X Orchard in accordance with proven and sound
agricultural practices. Manager will perform such services to the best of its
skill and ability, and in a manner consistent with the practices employed by
them in the planting, cultivation and harvesting of other macadamia orchards
under their management and control. Owner acknowledges that Manager makes no
guarantee as to the future yields from the Lot X Orchard, and Owner recognizes
and assumes the agricultural risks associated with the cultivation and
harvesting of macadamia nuts, and the natural risks in the
areas (but specifically excluding the environmental risks specified in Section
8), including but not limited to wind, rain, hurricane, and volcanic risks.
b. Without limiting the generality of the foregoing description
of its services, Manager will perform the following services: Manager will
provide and maintain all necessary or desirable windbreak trees and replacement
macadamia trees; Manager will perform all necessary or desirable cultivation,
weed and pest control, irrigation, fertilization, pruning and hedging,
replanting, disposal, and related services; Manager will harvest, transport and
husk the nuts from the Lot X Orchard in accordance with proven and sound
harvesting practices; and Manager will deliver the harvested nuts to the
processing plant designated by Owner. All of these services will be performed
at Owner's expense as set forth herein.
c. Manager will provide such centralized office and other
support services and facilities as may be necessary or appropriate in order to
provide adequate support for all field operations hereunder, including but not
limited to staff management, accounting, purchasing, industrial relations, and
engineering, agricultural, garage, and warehouse services and facilities.
d. Manager will keep the Lot X Orchard planted with macadamia
and appropriate windbreak trees during the entire term of this Contract, and
Manager will provide such replacement trees as may be necessary from time to
time due to tree damage, illness, or mortality. Owner recognizes that, due to
unpredictable climatic conditions and agricultural and natural risks, the amount
of future tree damage, illness and mortality is uncertain and Manager gives no
warranties or guaranties whatsoever concerning the future rates thereof.
Replacement trees will be grafted trees of recommended commercial varieties and
will be ready for field planting. The cost of replacement trees will be charged
to Owner as a direct cost pursuant to Section 5(a) without xxxx-up over the
respective Manager's internal cost; no charge will be made for replacement trees
if replanting is required because of Manager's negligence.
3. PERSONNEL AND EQUIPMENT.
a. Manager shall employ, train, and supervise all such
personnel as shall be necessary or desirable for the efficient farming,
harvesting, and husking of macadamia nuts in the Lot X Orchard as described
herein. Manager may subcontract to others any portion of the work required
hereunder if such work would normally be subcontracted on similar terms. Owner
shall have no obligation to any party under any subcontract but shall expressly
be made a third-party beneficiary of each and every subcontract. Manager shall
at all times remain primarily responsible for the satisfactory performance of
all work and services and may not transfer or assign such responsibility without
the prior written consent of Owner, except as provided in Section 12 below.
b. Manager shall comply with all requirements of federal and
state law with respect to the employment of personnel, including but not limited
to all insurance coverages required under workers' compensation laws. Manager
hereby indemnifies and agrees to hold Owner harmless from and against any and
all claims, obligations, liabilities, or demands with respect to and arising out
of the performance of Manager's obligations under this Contract and the
employment of Manager's personnel and agents at the Lot X Orchard.
4. ACCOUNTING AND REPORTS.
a. Manager shall keep full and accurate records and accounts in
accordance with generally accepted accounting principles showing all costs,
advances, payments, expenditures and liabilities, and all other information and
data which shall be necessary for the computation of the fees to be paid by
Owner hereunder. Manager will provide Owner with any and all financial or other
information relating to this Contract that Owner shall reasonably request from
time to time. To the extent that information is provided to Owner hereunder and
is not otherwise in the public domain, Owner agrees to keep such information
confidential and not to disclose the same to any person, except as may be
required by law or in connection with any litigation between Manager and Owner.
Owner agrees to return to Manager any copies of trade secrets, proprietary
market share information or test marketing results within a reasonable time
after such information is provided to Owner. Owner will have the right to
inspect the books and records of Manager, insofar as they relate to any dealings
with or interest of Owner, at any time during normal business hours.
b. In order to assist Owner in its financial planning, Manager
will provide Owner with an estimated operating cost budget for each calendar
year. As soon as practicable after the end of each calendar month, Manager will
provide a cost statement to Owner describing all costs incurred during such
month with respect to the Lot X Orchard.
c. As soon as practicable after the end of each calendar year,
Manager will provide a written report to Owner describing in reasonable detail
its conduct of operations during such year at the Lot X Orchard and any material
plans or developments with respect to the next year for the Lot X Orchard. Each
annual report shall also include a statement, certified by Manager's regular
independent auditors, which shall fairly reflect Manager's method of determining
Owner's costs for such preceding calendar year and shall report the actual
Manager's Costs (as defined below) which were incurred for the preceding
calendar year by Manager. The report shall also include a statement of all
monthly adjustments made to reimbursement payments pursuant to Section 5(b) and
the balance outstanding at the end of the year.
d. The statement referred to in (c) above with respect to
Manager's Costs for any calendar year shall be conclusive and binding unless the
conflicts committee ("Conflicts Committee") of the Board of Directors of Mauna
Loa Resources Inc. ("MLR"), the
3.
managing general partner of Owner, or any successor managing general partner of
Owner, shall object thereto within 120 days after receiving Manager's annual
report containing such statement. Owner shall have the right to engage a
certified public accounting firm of its selection to review Manager's Costs, and
the right to assert claims based on such review at any time during such 120-day
period. If such review and assertion shall result in a downward adjustment of
Manager's Costs by an amount in excess of 5% of the initial computation thereof,
Manager shall promptly reimburse Owner for all of its expenses incurred in
connection with the engagement of such accounting firm and the assertion of such
claim relating to Manager.
5. REIMBURSEMENT OF MANAGER'S COSTS; FARMING FEE.
a.
(i) Owner will reimburse Manager on a quarterly basis
consistent with Manager's quarterly accounting periods for Manager's Costs.
Payment with respect to each quarter will be made within 30 days after billing
date. In the event that any payment hereunder is not made within 30 days after
it becomes due, the unpaid amount shall thereafter bear interest at the Bank of
Hawaii prime rate (but not to exceed the highest rate permitted by the usury
laws of the State of Hawaii).
(ii) The term "Manager's Costs" shall not include any
capital expenditures or any other costs or expenses which are stated in this
Contract to be payable by Manager, nor shall it include any costs that Manager
may incur in order to repair any damage caused by its own negligence or required
as a result of the representations and warranties made in Section 8. The term
"Manager's Costs" shall include, to the extent that they are actually incurred
by Manager during the relevant year in connection with specific services or work
necessary or desirable under this Contract, direct costs of Manager for labor,
equipment use, materials and contract services received. The term "Manager's
Costs" shall also include overhead costs allocated to operations at the Lot X
Orchard including, but not limited to, employee fringe benefits, administrative
overhead and general field costs of Manager such as salaries, expendable tools
and supplies, agricultural research, building and equipment depreciation and
repair, and insurance. The term "Manager's Costs" shall also include the costs
to Manager of husking Owner's macadamia nuts produced at the Lot X Orchard and a
capital utilization charge of 9% of Manager's net book value of farming,
harvesting and husking equipment used in the operations of the Lot X Orchard,
prorated to adjust for any use of such equipment otherwise than for Owner. The
net book value of Manager's farming, harvesting and husking equipment shall be
the historical costs of such equipment less accumulated depreciation and
amortization (exclusive of any effect of "push down" accounting) resulting from
changes in the ownership of Manager, its parent company or any other affiliate
of Manager. Further, the "Manager's Cost" shall be based on Manager's
historical cost exclusive of the effects of such push down accounting.
Manager's administrative overhead costs consists of such costs related to
services provided to the
4.
macadamia farming operations by Manager's corporate staff including, but not
limited to, managerial and administrative personnel, industrial relations
department, accounting department, industrial engineering department, warehouse
personnel, draftsman, production superintendent, electrical superintendent,
factory superintendent and maintenance superintendent. Manager's overhead costs
shall also include a proportionate share of service charges allocated to Manager
by X. Xxxxxx and Company, Limited ("X. Xxxxxx"), computed on a basis consistent
with prior years and consistent with the service charges levied on all other
subsidiaries of X. Xxxxxx. Schedule A sets forth a list of direct and overhead
cost centers that comprise the "Manager's Costs," and procedures for allocating
overhead costs and computing equipment capital recovery costs.
(iii) In addition to the reimbursement of Manager's
Costs, Owner shall pay to Manager on February 15 of each calendar year a farming
fee ("Farming Fee") of two and one-half (2.5%) of Owner's Gross Profit from
Farming Operations (as defined below) attributable to the Lot X Orchard for the
immediately preceding calendar year. For purposes of this Contract, "Gross
Profit from Farming Operations" shall have the meaning set forth for that term
in the Schedule B attached hereto.
(iv) For purposes of this Contract, all payments made
by Owner to Manager, including but not limited to the reimbursement of Manager's
Costs, the Farming Fees and other fees, shall be increased by the amount of any
applicable Hawaii general excise tax that Manager is obligated to pay by reason
of such payments.
b. Unless otherwise provided to the contrary herein, in the
event that any adjustment is made in any amount paid hereunder, whether as a
result of revised estimates, audited figures or otherwise, an appropriate credit
or charge shall be included in the next succeeding reimbursement payment, but no
additional current payments need be made by either party.
6. OWNERSHIP OF LAND.
a. Except as specifically provided herein with regard to the
obligations contained herein, Manager will not be obligated or liable for
matters that are customarily the responsibility of a landowner including, but
not limited to, payment of taxes and assessments, insurance against liabilities
and compliance with laws, ordinances and governmental regulations relating to
the ownership of leasing of land but specifically excluding those laws,
ordinances and governmental regulations, permits and approvals set forth in
Section 8 hereof. When requested by Owner, Manager shall cooperate with Owner
in the making of any surveys, the processing of any tax appeals and the
procurement of any permits, licenses, insurance coverages and other items which
are necessary or desirable for Owner's proper and lawful ownership, lease, or
use of the Lot X Orchard.
5.
b. Owner, with the assistance of Manager but at Owner's
expense, will procure and maintain insurance with respect to the trees in the
Lot X Orchard, so long as such insurance is available at commercially reasonable
rates, against the following named perils: fire, lightning, and windstorm.
6.
7. TERMINATION.
a. The parties may terminate this Contract at any time by
mutual agreement in writing. In the event that any party shall be in default
(as defined below), the non-defaulting party may terminate this Contract at any
time by delivering written notice of such termination to the defaulting party.
In addition, Manager may terminate this Contract upon 30 days' prior written
notice to Owner in the event that MLR is replaced as the managing general
partner of Owner with a person or entity not affiliated with MLR. It is
expressly agreed, however, that this Contract will remain in full force and
effect after and notwithstanding the voluntary withdrawal of MLR as managing
general partner of Owner, and whether a substitute general partner succeeds to
its obligations or not. Unless terminated earlier, this Contract shall
terminate at the close of business on December 31, 2006.
b. A party shall be in "default" under this Contract in the
event that (i) it is in default under the 1989 Nut Purchase Contract; (ii) files
any voluntary proceeding for dissolution or under any federal or state
bankruptcy, insolvency, receivership or similar law; (iii) any such proceeding
is commenced against it involuntarily and is not dismissed within 60 days;
(iv) it makes any composition with or assignment for the benefit of its
creditors; (v) it enters into any corporate reorganization or acquisition
without making adequate provision for the performance of its obligations under
this Contract; (vi) it fails to perform any of its obligations under this
Contract and it fails to correct such non-performance within 30 days after
written demand for performance is made by the other party; or (vii) regardless
of whether written demand for performance pursuant to Section (vi) above is
made, it repeatedly fails to perform its obligations under this Contract.
c. In the event of the destruction of any part or all of the
Lot X Orchard, Owner shall restore the destroyed property to its initial
condition if such restoration can be performed from the proceeds of property
insurance payments received by Owner. If such restoration is not performed,
this Contract shall terminate as to the destroyed property only. In the event
any part or all of the Lot X Orchard is condemned, this Contract shall terminate
as to the condemned property only.
8. REPRESENTATIONS AND WARRANTIES; INDEMNITY. Manager represents,
covenants, and warrants that (i) since Manager (or the Manager's predecessors in
interest) began farming each respective parcel of land comprising the Lot X
Orchard, Manager has performed, and will, from and after the date hereof,
perform all farming and harvesting services with respect to the Lot X Orchard as
specified in Section 2 of this Contract in compliance with all governmental
laws, ordinances, regulations, permits and approvals applicable to Hawaii farm
land; (ii) Manager has not released any hazardous substances onto or under the
Lot X Orchard or any adjoining properties in violation of the Regulations (as
defined below); (iii) to the best of Manager's knowledge as of the date of this
Contract, there are no hazardous substances on or
7.
beneath the soil surface of the Lot X Orchard or any adjoining properties and
(iv) there are no underground storage tanks located on the Lot X Orchard. As
used herein, the term "hazardous substances" shall include all substances
defined as such or as "hazardous materials", "hazardous chemicals" or
"hazardous wastes" (or any broader definition of any of such terms that is
used by a state or local authority which has jurisdiction over the Lot X
Orchard ) by Federal and Hawaii law. Manager hereby represents, covenants,
and warrants to Owner that Manager has not received any notice: (a) from any
governmental agency or entity, including, but not limited to, the Hawaii
State Department of Health, Hawaii State Office of Environmental Quality
Control, Hawaii State Board of Land and Natural Resources, Hawaii Board of
Agriculture, the Regional Water Quality Control Board, or the U.S.
Environmental Protection Agency, proposing, suggesting or threatening
remedial action or alleging a violation of any applicable governmental laws,
ordinances, regulations, permits or approvals ("Regulations") including any
Regulations relating, directly or indirectly, to the physical or
environmental condition of the Lot X Orchard, or any adjoining properties or
(b) from any former owner, former farming manager, lienholder of former or
present tenant or other use of the Lot X Orchard alleging a specific instance
or condition of hazardous substances on or beneath the soil surface of the
Lot X Orchard or any adjoining properties and seeking indemnification
therefor. Manager shall defend, indemnify, protect, and hold Owner harmless
from and against any and all losses, damages (whether actual, punitive or
otherwise), liabilities, actions, causes of action (whether legal, equitable
or administrative), claims, judgments, costs and expenses (including
attorneys' fees and disbursements, and court costs) which Owner may suffer or
incur as a direct or indirect consequence of any breach or inaccuracy of the
foregoing representations, covenants and warranties or the presence of any
"hazardous substance" on or beneath the soil surface of the Lot X Orchard, or
any adjoining properties owned by Manager as of the effective date of this
Contract. Owner's rights of indemnity shall not be directly or indirectly
limited, prejudiced, impaired, or eliminated in any way by any finding or
allegation that Owner's conduct is active, passive or subject to any other
classification due to Manager's capacity as agent for Owner in connection
with the macadamia nut farming operations under this Contract. Manager shall
employ counsel reasonably satisfactory to Owner, at Manager's sole cost and
expense, to prosecute, negotiate and defend any such claim, action or cause
of action. Owner shall have the right at Manager's cost and expense to
monitor the defense of any such claim, action or cause of action including,
upon ten (10) days' written notice to Manager stating the reasons therefor
and in Owner's reasonable discretion, the hiring of co-counsel, and Manager
shall cooperate in all reasonable respects in connection therewith. Owner
shall further have the right, power and authority to compromise or settle any
such claim, action, or cause of action without admitting actual liability
subject to the prior written approval of Manager, which approval shall not be
unreasonably withheld and which will be provided within 30 days after
Manager's receipt of all documents evidencing such settlement or compromise.
If Manager disapproves any proposed settlement during such time period,
Manager shall specify the reasons for such disapproval in writing. Manager
shall pay any indebtedness arising under said indemnity to Owner at the time
Owner shall be required to pay such amount to a third party, together with
interest from such date
8.
at the rate equal to the Bank of Hawaii prime rate (but not to exceed the
highest rate permitted by the usury laws of the State of Hawaii). This Section
8 shall survive termination of this Contract.
9. NOTICE.
a. For convenience of operation hereunder, Owner and Manager
shall designate a representative to serve as the channel of communication for
delivering information to and securing necessary action by its principals. Any
party may change its representative from time to time by delivering written
notice of such change to the other party. Until further notice is given, each
party's representative shall be the person listed in the notice address below.
b. Any and all notices, demands, or other communications
(collectively, "notice") required or desired to be given hereunder by either
party shall be in writing and shall be validly given or made to the other party
or its authorized representative at the addresses set forth below, if served
either personally or if deposited in the United States mail, certified or
registered, postage prepaid, or if sent by telex.
Owner: Mauna Loa Macadamia Partners, L.P.
c/o Mauna Loa Resources Inc.
P. X. Xxx 0000
Xxxxxxxx, Xxxxxx 00000
Attention: President
Manager: Ka'u Agribusiness Co., Inc.
c/o X. Xxxxxx and Company, Limited
P. X. Xxx 0000
Xxxxxxxx, Xxxxxx 00000
Attention: Office of the General Counsel
c. If notice is delivered personally, service shall
conclusively be deemed to have been made at the time of such delivery. If such
notice is given by mail, service shall conclusively be deemed to have been made
72 hours after deposit thereof in the mail as provided for above. If such
notice is given by telex, service shall conclusively be deemed to have been made
24 hours after the transmission thereof and receipt of the proper response code.
Any party may change its address for the purpose of receiving notices as herein
provided by a written notice given to the other party.
10. FORCE MAJEURE. Neither of the parties hereto shall be liable or
accountable to the other party for any delay in complying or any failure to
comply with any of the terms, provisions or conditions of this Contract in the
event that such failure shall have been caused by
9.
an act of God, strike, lockout, public enemy, war, civil commotion, riot,
condemnation, judicial or governmental order or other requirements of law which
directly prohibit the performance by either party of its obligations hereunder
(such as, but not limited to, governmental regulations concerning the hazards of
marketing or consumption of macadamia nuts other than the hazards referred to in
Section 8 hereof) or the refusal or failure of any governmental office or
officer to grant any permit or order necessary for compliance herewith by either
party hereto, nor shall either of the parties hereto be liable or accountable to
the other party for any damages arising from any such delay or failure.
11. WAIVER. The failure of either party to enforce its rights upon
any default on the part of the other party shall not be construed as a waiver
thereof, nor shall any custom or practice which may grow up between the parties
in the course of administering this Contract be construed to waive or to lessen
the right of either party to demand performance by the other party or exercise
its rights in the event of default. No provision of or default under this
Contract may be waived except by a notice in writing signed by the party making
the waiver. A waiver by either party of a particular default shall not be
deemed to be a waiver of any other subsequent default.
12. ASSIGNMENT. Neither of the parties hereto may assign any of its
rights or obligations under this Contract without the prior written consent of
the other party, except that Manager may assign this Contract to an affiliate of
X. Xxxxxx without such prior written consent and except that Owner may assign
this Contract without such prior written consent in connection with any
dissolution of Owner resulting from the withdrawal of MLR (or any successor
general partner that is an affiliate of X. Xxxxxx) as general partners of
Owner. No consent or approval required under this Contract shall be
unreasonably withheld.
13. ARBITRATION. Except as provided in Section 8, all claims,
demands, disputes, differences, controversies, disagreements and
misunderstandings (hereinafter called "disputes") arising out of, or in
connection with, or in relation to this Contract shall be submitted to and
determined only by arbitration in the following manner: Either the Manager or
Owner shall serve upon the other a written notice stating that such party
desires to have the dispute reviewed by a board of three (3) arbitrators and
naming the person whom such party has designated to act as an arbitrator.
Within 15 days after receipt of such notice, the other party shall designate a
person to act as arbitrator and shall notify the party requesting arbitration of
such designation and the name of the person so designated. The two (2)
arbitrators designated as aforesaid shall promptly select a third arbitrator,
and if they are not able to agree upon said third arbitrator, then either
arbitrator on 5 days' written notice to the other, shall apply to any Judge of
the First Circuit Court of the State of Hawaii to designate and appoint said
third arbitrator. If the party upon whom said request for arbitration is served
shall fail to designate its arbitrator within 15 days after receipt of such
notice, then the arbitrator designated by the party requesting arbitration shall
act as the sole arbitrator and shall be deemed to be the single mutually
approved
10.
arbitrator to resolve the dispute. The decision and award of a majority of the
arbitrators, or of such sole arbitrator, shall be final and binding upon the
parties and enforceable in accordance with the provisions of Chapter 658, Hawaii
Revised Statutes, as it may from time to time be amended. Manager and Owner
shall pay one-half (1/2) of the arbitrator's fees and expenses and its own fees
and expenses.
14. AFFILIATES. As used herein, "affiliates" of Manager shall mean
X. Xxxxxx and subsidiaries of X. Xxxxxx.
15. ENTIRE AGREEMENT. This Contract represents the entire agreement
and understanding of the parties with respect to the subject matter hereof. The
parties specifically acknowledge and agree that no joint venture or lease is
created hereby and that neither party is hereby appointed as the agent of the
other party.
16. GOVERNING LAW. This Contract will primarily be performed in and
shall be governed and construed in accordance with the laws of the State of
Hawaii. Each of the parties consents to the jurisdiction of the courts of the
State of Hawaii or any federal court sitting in Hawaii and agrees that Hawaii is
an appropriate venue for any action that may be brought under this Contract.
IN WITNESS WHEREOF, Owner and Manager have caused this Contract to be
effective as of the 1st day of January, 1998.
MAUNA LOA MACADAMIA PARTNERS, L.P.
By: MAUNA LOA RESOURCES INC.,
Managing General Partner
By /s/ XXXX X. XXXXXX
--------------------------
Owner
KA'U AGRIBUSINESS CO., INC.
By: /s/ J. XXXX XXXXX
------------------------------
By: /s/ X. X. XXXXXXX
------------------------------
Manager
11.
SCHEDULE A
COST CENTERS AND OVERHEAD ALLOCATIONS
1. DIRECT COST CENTERS.
Manager has established the following cost centers with respect to
direct costs of labor, equipment use, materials, and contract services. Other
direct cost centers may be established for future direct operations.
Pest Control
Pruning
Bracing and Replanting
Field Repair and Maintenance
Weed Control
Fertilizing
Other Field Operations
Irrigation
Water Delivery
Preparation for Harvesting
Manual Harvesting
Shake Harvesting
Shovel Harvesting
Mechanical Harvesting
Storm Damage Repair
Husking
Transportation
2. OVERHEAD COST CENTERS.
Manager has established the following cost centers with respect to
overhead costs related to labor, equipment, materials, contract services, and
fixed charges. Other overhead cost centers may be established for future
operations. The costs applicable to these cost centers will be determined prior
to recovery from any third party.
a. Agricultural Employee Benefits
b. General Field Overhead
Agricultural Research
Agricultural Warehousing
Unabsorbed Garage Overhead
Nursery
c. Administrative Overhead
3. ALLOCATION OF OVERHEAD COSTS.
a. Overhead costs for agricultural employee benefits of Manager in
(2)(a) above will be allocated on the basis of the labor dollars charged to the
direct cost centers for all of Manager's macadamia operations.
b. Overhead costs of the items in (2)(b) above, with the exception
of tree insurance, property tax costs and orchard amortization which are
identifiable with specific orchards, will be allocated on the basis of the total
dollars charged to the direct cost centers, including allocated charges for
employee benefits (as computed per (3)(a) above) for all of Manager's macadamia
operations.
c. Administrative overhead costs in (2)(c) above will be allocated
on the basis of the total dollars charges to the direct cost centers, including
allocated charges for employee benefits (as computed per (3)(a) above) and
overhead costs (as computed per (3)(b) above) for all of Manager's macadamia
operations.
d. For (3)(a), (3)(b), (3)(c) above, Manager will charge Owner the
proportionate share applicable to the Orchards which will be made on the basis
of the dollars charged to its direct cost centers, as defined separately in
(3)(a), (3)(b), (3)(c) above, in relation to the total dollars charged to such
direct cost centers for all macadamia orchards Manager is farming during
Manager's fiscal year. An example, which is not based on actual figures, is
shown below to illustrate the described allocation procedure.
All Other
Macadamia
Owner's Orchards
Total Orchard Farmed by
----- ------- Manager
-------
Direct Costs Per (2)(a) $ 5,000 $ 1,300 $ 3,700
Including Labor $ 3,000 600 2,400
Allocation % Per (2)(a) 100% 20% 80%
Allocation of Fringe Benefits 1,000 200 800
-------- ------- -------
Direct Costs & Fringe Benefits 6,000 1,500 4,500
Allocation % Per (3)(b) 100% 25% 75%
3.
Allocation of Overhead Costs 1,200 300 900
-------- ------- -------
Direct Costs and Fringe Benefits & Overhead Costs 7,200 1,800 5,400
Allocation % Per (3)(c) 100% 25% 75%
Allocation of Administrative Overhead Costs 300 75 225
-------- ------- -------
Total Costs Per (3)(a), (b) & (c) Allocation $ 7,500 $ 1,875 $ 5,625
-------- ------- -------
-------- ------- -------
4. COMPUTATION OF EQUIPMENT CAPITAL RECOVERY COSTS.
The equipment capital recovery cost, which is determined monthly by
multiplying the total net book value of Manager's farming, harvesting and
husking equipment at the end of Manager's monthly accounting periods by 9% per
annum, will be allocated to the Lot X Orchards on the basis of the equipment
dollars charged each month to the direct cost centers (see (1) above) for the
Lot X Orchard relation to the total equipment dollars charged each month to such
direct costs centers for all macadamia orchards Manager is farming for the
monthly accounting period then ended. An example, which is not based on actual
figures, is shown below to illustrate the described allocation procedure.
Net Book Value of
Manager's Farming
Equipment at 9% Per Annum Equipment Capital Recovery
Accounting Month End ------------ Cost for the Accounting Month
-------------------- -----------------------------
$2,000 x .75% = $15
4.
All Other
Macadamia
Owner's Orchards
Total Orchard Farmed by
----- ------- Manager
-------
Equipment $ in (1) for the month $ 140 $ 35 $ 105
Allocation % Per (4) 100% 25% 75%
Allocation of Equipment Capital Recovery Costs $ 15 $ 3.75 $ 11.25
------- ------- -------
------- ------- -------
5.
SCHEDULE B
CALCULATION OF GROSS PROFIT FROM FARMING OPERATIONS
The Farming Fee is two and one-half percent (2.5%) of the gross profit from
the farming operations of the Partnership ("Gross Profit from Farming
Operations"), attributable to the Lot X Orchard. The formula for calculating
Gross Profit from Farming Operations is:
Gross Revenues from Farming Operations
- Gross Expenses from Farming Operations
--------------------------------------
= Gross Profit from Farming Operations
Set forth below are the terms and definitions related to that calculation.
Agribusiness Companies AGRIBUSINESS COMPANIES includes Ka'u Agribusiness Co.,
Inc. and Mauna Kea Agribusiness Co., Inc.
Capital Transaction CAPITAL TRANSACTION means a sale, condemnation,
exchange, or other disposition (or series of related
dispositions) of assets, other than in the ordinary
course of business, with a fair market value in excess
of 10% of the fair market value of all assets of the
Partnership, as determined by the Managing Partner
utilizing such reasonable valuation methods as it deems
appropriate. In the event the proceeds of any Capital
Transaction are to be paid in more than one
installment, then each such installment shall be
treated as a separate Capital Transaction for purposes
of this Contract and this Schedule, except for the
purpose of determining whether more than 10% of the
Partnership assets have been disposed of. "Capital
Transaction" shall not include a deemed transfer
1.
of the Partnership's assets and liabilities to the
Partnership, as a new partnership, upon a termination
of the Partnership pursuant to Section 708(b)(1)(B) of
the Code and Section 1.708-1(b)(1)(ii) and (iv) of the
Treasury Regulations, as in effect for terminations
occurring on or after May 9, 1997.
Farming Contracts FARMING CONTRACTS includes Original June 1986 Farming
Contract, Original December 0000 Xxxxxxx Xxxxxxxx, Xxx
Xxxxxxx Contract, and Lot X Farming Contract.
Farming Fees FARMING FEES means fees payable to the Agribusiness
Companies pursuant to the Farming Contracts.
Farming Operations FARMING OPERATIONS includes the (i) acquisition,
ownership, management, operation, development, leasing,
sale, and disposition of macadamia xxxxxxx xxxxxxxxxx
and the sale or other disposition of macadamia nuts
grown on such properties; and (ii) anything incidental
to the foregoing.
Gross Expenses from
Farming Operations GROSS EXPENSES FROM FARMING OPERATIONS means all
expenditures of the Partnership, computed by the
accrual method of accounting, whether incurred directly
or indirectly, with respect to the Partnership's
Farming Operations during the relevant period,
including: (i) farming and husking costs (including
costs and equipment utilization charges payable to the
2.
Agribusiness Companies under the Farming Contracts),
(ii) lease rents, real property tax, and insurance
(including without limitation orchard insurance), (iii)
gross excise tax on Gross Revenues from Farming
Operations, and (iv) reserves established for potential
expenditures attributable to Farming Operations. Gross
Expenses from Farming Operations does not include (i)
payments of principal and interest on indebtedness of
the Partnership, (ii) general and administrative
expenses (including without limitation a Management
Fee), (iii) capital expenditures of the Partnership,
(iv) depreciation or amortization, (v) expenditures in
connection with a Capital Transaction, or (vi) Farming
Fees.
Gross Revenues from
Farming Operations GROSS REVENUES FROM FARMING OPERATIONS means all
receipts of the Partnership attributable to Farming
Operations, computed by the accrual method of
accounting, including: (i) revenues payable by Mauna
Loa under Nut Purchase Contracts and (ii) cash amounts
released from reserves established for Gross Expenses
from Farming Operations. Gross Revenues from Farming
Operations does not include (i) interest income, (ii)
loan proceeds, (iii) net recoveries under insurance
policies, (iv) other net receipts representing a
recovery for the loss or destruction of Partnership
assets, (v) proceeds of a Capital
3.
Transaction, or (vi) capital contributions to the
Partnership.
Lot X Orchard LOT X ORCHARD means that macadamia nut orchard,
commonly known as Lot X, consisting of 78.44 tree acres
of mature trees in Keaau, Hawaii County, Hawaii.
Lot X Farming
Contract LOT X FARMING CONTRACT means that farming contract
originally dated September 15, 1983, between Keaau
Macadamia X Corporation (assigned by indenture dated
August 31, 1991 to the Partnership) and Mauna Loa
(assigned to Ka'u Agribusiness Co., Inc. on December 5,
1997), under which the Lot X Orchard will be farmed,
the term of which was extended until December 31, 2006
by that Assignment and Extension of Farming Contract by
and among the Partnership, Mauna Loa, and Ka'u
Agribusiness Co., Inc.
Lot X Nut Purchase
Contract LOT X NUT PURCHASE CONTRACT is that contract under
which the Partnership will sell all of the macadamia
nuts produced from the Lot X Orchard to Mauna Loa.
Management Fee MANAGEMENT FEE means the fee paid to the Managing
Partner pursuant to Section 4.1 of the Agreement of
Limited Partnership of Mauna Loa Macadamia Partners,
L.P., amended and restated as of October 12, 1989.
4.
Managing Partner MANAGING PARTNER means the managing general partner of
the Partnership, Mauna Loa Resources, Inc., a Hawaii
corporation, or its successor as managing general
partner of the Partnership.
Mauna Loa MAUNA LOA means Mauna Loa Macadamia Nut Corporation, a
Hawaii corporation.
New Farming Contract NEW FARMING CONTRACT means that 30-year contract, under
which the Agribusiness Companies farm the New Orchards,
which contract commenced on October 1, 1989 and will
continue until June 30, 2019.
New Ka'u Orchards NEW KA'U ORCHARDS is defined in the New Farming
Contract and described in Schedule A attached to the
New Farming Contract.
New Keaau Orchards NEW KEAAU ORCHARDS is defined in the New Farming
Contract, described in Schedule A-1 attached to the New
Farming Contract.
New Mauna Kea
Orchards NEW MAUNA KEA ORCHARDS is defined in the New Farming
Contract and described in Schedule A attached to the
New Farming Contract.
New Orchards NEW ORCHARDS is defined in this Contract. New Orchards
include New Ka'u Orchards, New Mauna Kea Orchards, and
New Keaau Orchards.
5.
New Nut Purchase
Contract NEW NUT PURCHASE CONTRACT means that contract under
which the Partnership will sell all of the macadamia
nuts produced from the New Orchards to Mauna Loa under
a 30-year nut purchase contract that commenced in 1989.
Nut Purchase Contracts NUT PURCHASE CONTRACTS includes the Original Nut
Purchase Contracts, the New Nut Purchase Contract, and
the Lot X Nut Purchase Contract.
Original December 1986
Farming Contract ORIGINAL DECEMBER 1986 FARMING CONTRACT means that
20-year contract (as amended and restated) under which
Ka'u Agribusiness Co., Inc. farms the Original December
1986 Orchards, which contract commenced in December
1986 and will continue until December 31, 2006.
Original June 1986
Farming Contract ORIGINAL JUNE 1986 FARMING CONTRACT means that 20-year
contract (as amended and restated) under which Ka'u
Agribusiness Co., Inc. farms the Original June 1986
Orchards, which contract commenced in June 1986 and
will continue until December 31, 2006.
Original Nut Purchase
Contracts ORIGINAL NUT PURCHASE CONTRACTS means those contracts
under which the Partnership will sell all of the
macadamia nuts produced from the
6.
Original Orchards to Mauna Loa under two 20-year nut
purchase contracts that commenced in 1986.
Original Orchards ORIGINAL ORCHARDS includes Original June 1986 Orchards
and Original December 1986 Orchards.
Original June 1986
Orchards ORIGINAL JUNE 1986 ORCHARDS means the approximately
2,423 tree acres of macadamia orchards commonly known
as Keaau Lot VIII, By Dickes and Ka'u Sisal, which the
Partnership acquired in June 1986 from Mauna Loa and
one of its affiliates. Those orchards are described
in and covered by the June 12, 1986 Farming Contract
between the Partnership, Mauna Loa, and Ka'u
Agribusiness Co., Inc.
Original December
1986 Orchards ORIGINAL DECEMBER 1986 ORCHARDS means the approximately
266 tree acres of macadamia orchards in which the
Partnership acquired certain interests (ownership
interests in the macadamia trees and leasehold
interests in the underlying land) in December 1986 from
Ka'u Agribusiness Co., Inc. Those orchards are
described in and covered by the December 22, 1986
Farming Contract between the Partnership and Ka'u
Agribusiness Co., Inc.
7.
