MANAGEMENT AGREEMENT
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THIS MANAGEMENT AGREEMENT (the "Agreement") is made and entered into as of
October 14, 2002 by and between Xxxxxxx Holdings, Inc., a corporation formed
under the laws of the Commonwealth of Puerto Rico (the "Company"), and Xxxxx
Nursery Farms, Inc., a corporation formed under the laws of the Commonwealth of
Puerto Rico (the "Manager").
RECITALS
WHEREAS, the Manager is an investor in the Company, a newly formed Puerto
Rico corporation established to fund and operate an agricultural business in
Salinas, Puerto Rico;
WHEREAS, the Manager possesses substantial expertise in the agricultural
industry in Puerto Rico and is willing to manage the Company, upon the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations set forth in this Agreement, the parties hereto agree
as follows:
1. Engagement of Manager. The Company hereby appoints Manager and Manager
hereby accepts the appointment, subject to the terms of this Agreement, to
manage the Company, and to implement the Company's internal and strategic
policies and procedures ("Management Services").
2. Availability. During the term of this Agreement, the Manager shall be
available for consultation and advice as needed by the Company in connection
with the Management Services contemplated by this Agreement.
3. Management Services.
3.1. Management Services. The Manager will at its own expense in exchange
for the fee set forth in Section 4.1 (i) combine its experience, know-how,
synergies and resources in the development, preparation and implementation of
the Company's business policies and organization relating to human resources,
administration, operations, financing, marketing and commercialization,
strategic planning, and business development in the Company's agricultural
business, and (ii) perform all management and administrative services related to
the day to day operations of the Company, including all marketing and sales
efforts of the Company's products. The Management Services shall be limited to
the following:
(a) consultation in establishing and developing the Company's
strategic business policies and objectives;
(b) planting, harvesting and selling the Company's agricultural
products;
(c) negotiation and purchasing of equipment from vendors;
(d) commercial consultation regarding new services, new
products, strategies and commercial procedures;
(e) financial consultation identifying sources of financing and
treasury management;
(f) administration of human resources matters, including
recruiting of the Company's employees;
(g) administration of all recordkeeping, bookkeeping, accounting
payroll and tax matters on behalf of the Company;
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(h) sales, purchases, receipt and disbursement of funds on
behalf of the Company;
(i) marketing, merchandising and selling the products of the
Company;
(j) administration of legal matters; and
(k) administration of public relations matters.
3.2. Annual Strategic Business Plan and Budget. On an annual basis, the
Manager will present a strategic business plan and budget (each, an "Annual
Strategic Business Plan and Budget") to the Board of the Company for review and
approval, substantially in the form of Exhibit A hereto. After the Board
approves each Annual Strategic Business Plan and Budget, the Manager shall,
subject to the By-Laws of the Company, cause the Company to be managed and its
business to be conducted during the ensuing year in accordance with the goals
and conditions set forth in each Annual Strategic Business Plan and Budget, as
it may be modified by the Board.
3.3. Personnel Remuneration. The Company shall be solely responsible for
(i) employing all personnel required for the production phase of the
agricultural operations of the Company and having available funds for the prompt
payment of all salaries, wages, benefits, expenses and any other compensation or
remuneration of such employees (which shall be selected by the Manager), and
(ii) for the investments established in the Annual Strategic Business Plan and
Budget. Such employees shall never be deemed employees of the Manager. The
Manager shall be solely responsible for employing all personnel required for the
provision of the Management Services as described in Section 3.1, including
sales and marketing personnel, and for paying for all such personnel (except for
Xxxx Xxxxxx, as set forth in Section 4.1).
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3.4. General Authority. In connection with the performance of the
Management Services, the Manager is empowered to take appropriate actions and to
give directives and instructions, as Manager deems necessary or advisable, so
long as the foregoing are not in violation with applicable law and not
inconsistent with the corporate governance documents of the Company. The Manager
shall have authority, discretion and control in all matters relating to
performance of the Management Services in accordance with this Section 3,
including the Annual Strategic Business Plan and Budget. Unless required by
applicable law, this Agreement or a specific directive of the Board of the
Company, the Manager will not require the prior approval of the Board of the
Company to perform its duties under this Agreement. To facilitate the
performance of the Manager's responsibilities hereunder, the Company shall cause
its personnel (i) to cooperate fully with the Manager; (ii) to comply with the
Manager's policies and procedures; (iii) to provide all information requested by
the Manager; and (iv) to allow the Manager full and complete access to the
Company's books and records. The Company also agrees to maintain such insurance
policies as the Manager may reasonably recommend.
4. Remuneration for the Management of the Company.
4.1. Compensation.
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(a) Management Fee. In consideration for rendering the Management Services,
the Company shall pay to the Manager (i) a monthly fee of Two Thousand Dollars
($2,000) to cover its general administrative expenses, (ii) on a monthly basis,
the amount necessary to reimburse the Manager for that proportion of Xxxx
Xxxxxx' compensation and related payroll expenses, including, without
limitation, any contribution made by the Manager to Xxxx Xxxxxx' 401k type plan
or other fringe benefits, that is equivalent to the working time that he devoted
to the affairs of the Company during the previous calendar month, and (iii) a
commission of seventeen percent (17%) of gross collected revenues from the sale
of agricultural products other than grass for which the commission shall be
fifteen percent (15%) of gross collected revenues payable monthly. Shipping or
delivery charges billed to clients (even if at a profit) shall not be subject to
the commissions set forth in Section 4.1(a)(iii) above. Notwithstanding the
foregoing, on sales to persons related to any of the stockholders of the
Company, the Manager shall be entitled to a reduced commission equivalent to
eighty percent (80%) of the above described commission percentages. For purposes
of this Section 4.1(a) only, "persons related to any of the stockholders" shall
mean any natural person which is a first degree blood relative of any of the
stockholders of the Company, or any legal person of which such blood relative or
any of the stockholders of the Company owns, individually or jointly with
another stockholder of the Company, directly or indirectly, twenty-five percent
(25%) or more of its outstanding equity interests.
(b) Payment. The Management Fee shall be paid by the Company to the Manager
in readily available United States Dollars, to the bank account that the Manager
shall designate from time to time. The payment of each monthly installment of
the Management Fee shall be made within thirty (30) calendar days after the last
day of each month.
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4.2 Reimbursement of Expenses; Independent Contractor. All obligations or
expenses incurred by the Manager for the account of, on behalf of, and at the
expense of the Company shall be paid out of the revenues and other funds of the
Company. The Manager shall not require the approval of the Board of the Company
to incur obligations or expenses on behalf of the Company unless such
obligations or expenses exceed by more than 10% the projected obligations and
expenses for any given line item in the Annual Strategic Business Plan and
Budget. The Manager shall not be reimbursed for expenses related to the
provision of the Management Services (such as, but not limited to, office
rental, overhead and sales and administration expenses) but is entitled to incur
necessary expenses on behalf of the Company (such as, but not limited to, the
hiring of consultants and other independent contractors). It is understood that
the Company will not pay for shipping expenses. All deliveries shall be FOB the
Company's facilities or charged to customers separately from the amount charged
for the products, unless otherwise agreed by the parties. The Manager will not
be obligated to make any advance to or for the account of the Company or to pay
any sums or expenses of the Company, except out of funds held in accounts
maintained by the Company, nor will the Manager be obligated to incur any
liability or obligation for the account of the Company without assurance that
the necessary funds for the discharge of the liability or obligation will be
provided. The Manager will be an independent contractor, and nothing contained
in this Agreement will be deemed or construed (a) to create a partnership or
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joint venture between the Company and the Manager, (b) to cause the Manager to
be responsible in any way for the debts, liabilities or obligations of the
Company, any of its subsidiaries or any other party, or (c) to constitute the
Manager or any of its employees as employees, officers, or agents of the Company
or any of its subsidiaries. These provisions are separate from and unrelated to
those obligations of Manager, or any of its affiliates or related persons, in
their capacity as stockholders of the Company.
5. Term. The initial term (the "Initial Term") of this Agreement shall be
for a five (5) year period commencing as of the date of this Agreement.
Thereafter, this Agreement shall be automatically renewed for successive terms
of five (5) years (each, an "Additional Term") unless terminated in accordance
with Section 7(ii). The word "term," as used with reference to the duration of
this Agreement, shall include both the Initial Term and any Additional Term.
Upon commencement of any Additional Term, the monthly fee described in Section
4.1(a)(i) will be adjusted as agreed at that time among the parties to the
Agreement; provided, that if no such agreement is reached the adjustment shall
be equal to the increase in the federal Consumer Price Index since the year of
commencement of the prior term of this Agreement.
6. Confidentiality.
(a) The Company and the Manager agree that the matters covered by this
Agreement, including the nature and value of the Management Services and the
Payments hereunder are strictly confidential and shall not be disclosed to third
parties (other than auditors, attorneys and consultants (who shall be bound by
the confidentiality provisions of this Agreement) or as required by law or
deemed advisable by counsel to either party, including applicable federal and
state securities laws) unless required by judicial decree.
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(b) The Company agrees that it (i) shall not disclose Confidential
Information (as defined below) to any person (other than its directors, officers
and employees), except to the extent required by law, including applicable
federal and state securities laws, and (ii) shall take all reasonable
precautions to prevent inadvertent disclosure or use of such Confidential
Information by any of its directors, officers or employees.
For purposes of this Section 6(b), the term "Confidential Information"
means information provided by the Manager to the Company under this Agreement
that the Manager notifies the Company is proprietary or confidential.
(c) In the event of receipt of a request by any governmental authority to
disclose Confidential Information or information contained in this Agreement,
the party directly or indirectly in receipt of such request shall immediately
notify the other party in writing.
7. Termination. This Agreement may be terminated (i) by either party, in
the event of bankruptcy, insolvency or dissolution of the other party; (ii) by
any party by written notice given to the other party no less than six (6) months
prior to the expiration date of the then current term; (iii) by the Manager, in
the event that the Company fails to make any Payment due for a period of sixty
(60) days; and (iv) subject to the provisions of Section 11.13 of this
Agreement, by the non-breaching party, in the event of a material breach (other
than as set forth in (iii) above) by the other party of any provision of this
Agreement after 60 days written notice of the alleged breach and failure to cure
by the breaching party.
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8. Other Activities of Manager and Stockholders of the Company; Investment
Opportunities. The Company acknowledges and agrees that the Manager will not
devote the Manager's (or any employee, officer, director, affiliate or associate
of the Manager) full time and business efforts to the duties of the Manager
specified in this Agreement, but only so much of such time and efforts as the
Manager reasonably deems necessary.
The Manager and the Company further agree and represent that neither of
them, or any of their affiliates will become engaged in the business of growing
sod, trees and palms within Puerto Rico, except as set forth in this Agreement;
provided, however, that Manager and its affiliates may engage in the business of
growing trees and palms anywhere in Puerto Rico and sell such trees and palms so
long as the aggregate land under cultivation for this purpose does not exceed 50
"cuerdas." The provisions of this Section 8 shall terminate and have no force
and effect upon the termination of (i) this Agreement, (ii) that certain Lease
Agreement between the Company and Criadores xx Xxxxxxx, X.X. dated the date
hereof (the "Lease Agreement") or (iii) that certain Stockholders' Agreement
between the Company, the Manager, Xxxxxxx Xxxx and Xxxx Xxxxxx dated the date
hereof. To the extent not previously terminated, the provisions of this Section
8 will terminate on the date that precedes the Final Termination Date of the
Lease Agreement by three years if on or prior to said date the landlord has not
agreed to extend the expiring term of the Lease Agreement for a period of not
less than five years. For purposes of the preceding sentence, the Final
Termination Date of the Lease Agreement shall mean the last day of the final
term of the Lease Agreement (including any renewal options contemplated therein)
or any renewal or extension of such final term that may have been agreed upon
the parties.
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9. Standard of Care. The Manager (including any person or entity acting for
or on behalf of the Manager) will not be liable for any losses or other
liabilities sustained by the Company caused by the Manager's mistakes of fact,
errors of judgment or acts or omissions of any kind, unless caused by the
negligence or willful misconduct of the Manager.
10. Indemnification.
(a) The Manager will indemnify and hold harmless the Company and its
present and future officers and directors ("Company Indemnified Parties") to the
fullest extent permitted by law for any losses incurred by the Company
Indemnified Parties as a result of any negligent actions taken by Manager or any
of its employees in connection with Manager's obligations hereunder. The Manager
will reimburse the Company Indemnified Parties on a monthly basis for any cost
of defending any action or investigation (including reasonable attorneys' fees
and expenses) subject to an undertaking from any such Indemnified Party to repay
the Manager if such party is ultimately and finally determined not to be
entitled to indemnity.
(b) The Company will indemnify and hold harmless the Manager and its
present and future officers, employees, agents and directors ("Manager
Indemnified Parties") to the fullest extent permitted by law for any losses
(including attorneys' fees and expenses) resulting from carrying out its
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obligation hereunder, except for any losses resulting from any willful or
negligent actions taken by the Manager. The Company agrees to advance expenses
of defending any action or investigation on a monthly basis in the same manner
as provided in subsection (a) above.
11. General Provisions.
11.1. Expenses. Except as otherwise expressly provided in this Agreement,
each party to this Agreement shall bear its respective expenses incurred in
connection with the preparation of this Agreement, including all fees and
expenses of agents, representatives, counsel, and accountants. In the event of
termination of this Agreement, the obligation of each party to pay its own
expenses will be subject to any rights of such party arising from a breach of
this Agreement by another party.
11.2. Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
If to the Company: Xxxxxxx Holdings, Inc.
----------------- La Colina X-00
Xxx Xxxxxxx
Xxxxxxxx, Xxxxxx Xxxx 00000
Attention: Xxxxxxx Xxxx, P.E.
Facsimile No.: (000) 000-0000
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If to the Manager: Xxxxx Nursery Farms, Inc.
----------------- Call Xxx 0000
Xxxxxx, Xxxxxx Xxxx 00000-0000
Attention: Mr. J. Xxxxxxxx Xxxxxxxxx
Facsimile No.: (000) 000-0000
with a copy to: Adsuar Xxxxx Xxxxx & Xxxxxx, P.S.C.
-------------- 000 Xxxxx Xxxxxx Xxx.
Xxxxx 0000
Hato Rey, P.R. 00918
Attention: Xxxxxxx Xxxxx, Esq.
Facsimile No.: (000) 000-0000
11.3. Further Assurances. The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement.
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11.4. Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement will operate
as a waiver of such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by
a party will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement.
11.5. Entire Agreement and Modification. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.
11.6. Assignments. The Manager may assign any or all of its rights and
delegate any or all of its responsibilities under this Agreement to any
subsidiary or any affiliate of the Manager ("Transferee"). In the event of any
such assignment or delegation by the Manager to a Transferee, the Manager will
give the Company thirty (30) days prior notice and the Transferee must agree to
assume the obligations so delegated by the Manager. The Manager or any
Transferee is permitted to subcontract with third parties to provide any of the
Management Services (i) if such relationship is economically efficient, and (ii)
copies of all agreements reflecting the retention of such third parties are
submitted to the Company prior to reimbursement for such fees.
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11.7. Successors and No Third Party Rights. This Agreement will apply to,
be binding in all respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their successors and assigns.
11.8. Severability. If any provision of this Agreement is held invalid or
unenforceable by any arbitral panel or court of competent jurisdiction, the
other provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or degree
will remain in full force and effect to the extent not held invalid or
unenforceable.
11.9. Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
11.10. Governing Law. This Agreement including matters of construction,
validity and performance, will be governed by and construed in accordance with
the laws of the Commonwealth of Puerto Rico without regard to conflicts of laws
principles.
11.11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
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11.12. Survival. Any provision of this Agreement which contemplates the
performance or existence of obligations after the date hereof, and any and all
representations and warranties set forth in this Agreement, shall not be deemed
to be merged into or waived by the execution and delivery of the instruments
contemplated hereby, but shall expressly survive and shall be binding upon the
party or parties obligated thereby in accordance with the terms of this
Agreement, subject to any limitations expressly set forth in this Agreement.
11.13. Dispute Resolution/Arbitration.
11.13.1 The parties agree with the principle that disputes, claims and
controversies arising out of or related to this Agreement (including the
performance, enforcement, breach, or termination thereof, and any remedies
relating thereto) (each, a "Dispute") should be regarded as business problems to
be resolved promptly through business-oriented negotiations before resorting to
arbitration. The parties agree to use their best efforts and to attempt in good
faith to resolve any Dispute promptly by negotiation between the executives of
the parties who have authority to settle the Dispute. Either party may give the
other party written notice of any Dispute not resolved in the normal course of
business ("Notice of Dispute"). Within fifteen (15) days after receipt of the
Notice of Dispute by the receiving party ("Date of Notice"), the receiving party
shall submit to the other a written response, which shall include a statement of
such party's position. Within thirty (30) days after the Date of Notice, the
parties shall meet at a mutually acceptable time and place, and thereafter as
often as they reasonably deem necessary, to attempt to resolve the Dispute. All
reasonable requests for information made by one party to the other will be
honored.
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11.13.2 All negotiations pursuant to this Section 11.13 shall be
confidential and shall be treated as compromise and settlement negotiations for
purposes of applicable rules of evidence.
11.13.3 In the event the Dispute has not been resolved by negotiation
within 45 days of the Date of Notice, then such Dispute shall be settled by
binding arbitration according to the rules of the American Arbitration
Association, before an Arbitral Panel composed of three Arbitrators. One of such
Arbitrators shall be selected by a majority of the remaining members of the
Board of Directors of the Company, excluding those Directors appointed by the
Manager, another by the Manager and the third one by two Arbitrators selected by
the Company and the Manager. The Arbitration shall be legally binding, shall
take place in San Xxxx, Puerto Rico. The arbitral award or order ("Award") shall
be given in writing, shall detail the disputed matters and the reasons upon
which the Award is based. The Award of the Arbitrators shall be final and
binding upon the parties and shall not be subject to appeal to any court or
other authority. Judgment upon the award or order may be entered in any court of
competent jurisdiction, and application may be made to any such court for
enforcement thereof. Each party shall bear its own costs and expenses in
connection with the Arbitration, but shall share equally in the costs and fees
of the Arbitration proceedings. Each party accepts and submits to the arbitral
jurisdiction referenced above and to any court of competent jurisdiction with
regard to enforcement of the Award. Process in any such action or proceeding may
be served on any party anywhere in the world.
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11.14. Force Majeure. In the event either party is unable to perform
material obligations pursuant to this Agreement, or if any of its obligations
should become impeded, restricted, or interfered with because of natural
disaster, war, revolutions, civil commotion, terrorist acts, embargo, acts of
Governments in the exercise of its sovereignty, labor disputes, including,
without limitation, strikes, slowdowns, picket lines or boycotts, or any other
circumstances which are beyond the reasonable control of the affected party,
without the existence of fault or negligence by its part, such party shall
remain, as long as it notifies the other party immediately, freed from its
obligations, and, the other party shall remain equally freed in the same manner
from the fulfillment of its obligations until such delay, restriction or
interference has ceased, as long as the affected party does everything
reasonably possible to comply with its obligations hereunder, considering the
circumstances.
11.15. Prevailing Party. Subject to the requirements of Section 11.13
hereof, the non-prevailing party in any legal proceedings arising out of this
Agreement shall pay the reasonable legal and accounting fees, costs and expenses
incurred by the prevailing party in presenting, arguing and resolving any such
dispute, including the enforcement of any decision or the collection of any
award.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
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The Company: The Manager:
XXXXXXX HOLDINGS, INC. XXXXX NURSERY FARMS, INC.
By: /s/ Xxxx X. Xxxxxx By: /s/ J. Xxxxxxxx Xxxxxxxxx
-------------------------- -----------------------------
Name: Xxxx X. Xxxxxx Name: J. Xxxxxxxx Xxxxxxxxx
Title: President Title: President
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