EXHIBIT 10.45
AMENDED AND RESTATED 1989 FARMING CONTRACT
This 1989 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"),
Ka'u Agribusiness Co., Inc., a Hawaii corporation ("Ka'u") and Mauna Kea
Agribusiness Co., Inc., a Hawaii corporation ("Mauna Kea") (each a "Manager" and
collectively, the "Managers").
R E C I T A L S:
WHEREAS, Owner is legal and beneficial owner or lessee of
approximately 1,260 tree acres of macadamia xxxxxxx xxxxxxxxxx located on the
island of Hawaii (the "New Orchards") consisting of approximately 714 tree acres
of macadamia xxxxxxx xxxxxxxxxx located in the Ka'u area of the island (the "New
Ka'u Orchards"), approximately 326 tree acres of macadamia xxxxxxx xxxxxxxxxx
located in the Xxxxx Xxx xxxx xx xxx xxxxxx (xxx "Xxx Xxxxx Xxx Orchards"), and
approximately 220 tree acres of macadamia xxxxxxx xxxxxxxxxx located in the
Keaau area of the island (the "New Keaau Orchards"), as more fully described in
Schedule A attached hereto;
WHEREAS, the Managers are experienced and capable in all aspects of
the business of farming and harvesting macadamia nuts;
WHEREAS, Owner desires to engage the expert services of the Managers
to farm, harvest and husk macadamia nuts at the New Orchards, and the Managers
desire 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 October 1, 1989 and shall continue in full force and effect until
June 30, 2019, 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. The Managers 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 New Orchards in accordance with proven and sound
agricultural practices, it being
understood and agreed that the obligations and duties to provide farming
services, personnel, equipment and the representations and warranties specified
in this Section 2, Section 3 and Section 8 shall apply to Ka'u only with respect
to the Keaau and Ka'u Orchards and shall apply to Mauna Kea only with respect to
the Mauna Kea Orchards. The Managers will perform such services to the best of
their skills and abilities, 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 Managers
make no guarantee as to the future yields from the New Orchards, 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, the Managers will perform the following services: The Managers
will provide and maintain all necessary or desirable windbreak trees and
replacement macadamia trees; the Managers will perform all necessary or
desirable cultivation, weed and pest control, irrigation, fertilization, pruning
and hedging, replanting, disposal, and related services; the Managers will
harvest, transport and husk the nuts from the New Orchards in accordance with
proven and sound harvesting practices; and the Managers 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. The Managers 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. The Managers will keep the New Orchards planted with
macadamia and appropriate windbreak trees during the entire term of this
Contract, and 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 the Managers give
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 a Manager's negligence.
2.
3. PERSONNEL AND EQUIPMENT.
a. The Managers 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 New Orchards as described
herein. The Managers 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. The Managers
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 paragraph 12
below.
b. The Managers 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.
The Managers hereby indemnify and agree 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 the Managers' obligations under this Contract
and the employment of the Managers' personnel and agents at the New Orchards.
4. ACCOUNTING AND REPORTS.
a. Each 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. Each 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 any Manager and Owner. Owner agrees to return to each 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 each 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, each
Manager will provide Owner with an estimated operating cost budget for each
calendar year with respect to such portion of the New Orchards for which such
Manager is responsible as described in Section 2. As soon as practicable after
the end of each calendar month, each Manager will provide a cost statement to
Owner describing all costs incurred during such month with respect
3.
to such portion of the New Orchards for which such Manager is responsible as
described in Section 2.
c. As soon as practicable after the end of each calendar year,
each Manager will provide a written report to Owner describing in reasonable
detail its conduct of operations during such year at the portion of the New
Orchards for which it is responsible and any material plans or developments with
respect to the next year for such portion of the New Orchards. Each annual
report shall also include a statement, certified by such Manager's regular
independent auditors, which shall fairly reflect such 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 such 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 managing general partner of Owner, or any
successor managing general partner of Owner, shall object thereto within 120
days after receiving a Manager's annual report containing such statement. Owner
shall have the right to engage a certified public accounting firm of its
selection to review the Manager's Costs of each Manager, 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 of
each Manager by an amount in excess of 5% of the initial computation thereof,
such 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 such Manager.
5. REIMBURSEMENT OF EACH MANAGER'S COSTS; FARMING FEE.
a. (i) Owner will reimburse each Manager on a quarterly
basis consistent with such Manager's quarterly accounting periods for the
Manager's Costs attributable to such Manager. 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 a Manager, nor shall it include any costs which
Manager may incur in order to repair any damage
4.
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 each Manager during the relevant year
in connection with specific services or work necessary or desirable under this
Contract, direct costs of the 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 New Orchards including, but not
limited to, employee fringe benefits, administrative overhead and general field
costs of such 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 a Manager
of husking Owner's macadamia nuts produced at the New Orchards and a capital
utilization charge of 9% of such Manager's net book value of farming, harvesting
and husking equipment used in the operations of the New Orchards, prorated to
adjust for any use of such equipment otherwise than for Owner. The net book
value of a 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 such Manager, its parent company or any other
affiliate of such Manager. Further, the "Manager's Costs" shall be based on the
Manager's historical cost exclusive of the effects of such push down accounting.
Each Manager's administrative overhead costs consists of such costs related to
services provided to the macadamia farming operations by such 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. Each Manager's overhead costs shall also include a
proportionate share of service charges allocated to such 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 B sets forth a list of direct and overhead cost centers
which comprise the "Manager's Costs," and procedures for allocating overhead
costs and computing equipment capital recovery costs.
(iii) In addition to the reimbursement of each Manager's
Costs, Owner shall pay to the Managers 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 New Orchards for
the immediately preceding calendar year, it being understood and agreed that (A)
the Managers will determine for each calendar year the manner in which the
Farming Fee for such year will be allocated among the Managers, and (B) Owner
shall pay each Manager its allocated portion of the Farming Fee for a particular
year in accordance with a written instruction provided to Owner by the Managers,
which instruction shall be executed by each of the Managers. For purposes of
this Contract, "Gross Profit from Farming Operations" shall have the meaning set
forth for that term in the Schedule C attached hereto.
5.
(iv) For purposes of this Contract, all payments made
by Owner to the Managers, 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 which the Managers are
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, the Managers 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, each 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 New Orchards.
b. Owner, with the assistance of the Managers but at Owner's
expense, will procure and maintain insurance with respect to the trees in the
New Orchards, so long as such insurance is available at commercially reasonable
rates, against the following named perils: fire, lightning and windstorm.
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, Managers 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 June 30, 2019.
6.
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
New Orchards, 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 New Orchards is condemned, this Contract shall terminate
as to the condemned property only.
8. REPRESENTATIONS AND WARRANTIES; INDEMNITY. Managers represent,
covenant and warrant that (i) since the Managers (or the Managers' predecessors
in interest) began farming each respective parcel of land comprising the New
Orchards, the Managers have performed, and will, from and after the date hereof,
perform all farming and harvesting services with respect to the New Orchards 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) Managers have not released any hazardous substances onto or under the
New Orchards 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 beneath the soil surface of
the New Orchards or any adjoining properties; and (iv) there are no underground
storage tanks located on the New Orchards. 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 New Orchards) by Federal and Hawaii law. Managers
hereby represent, covenant and warrant to Owner that Managers have 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
7.
relating, directly or indirectly, to the physical or environmental condition of
the New Orchards, or any adjoining properties or (b) from any former owner,
former farming manager, lienholder of former or present tenant or other use of
the New Orchards alleging a specific instance or condition of hazardous
substances on or beneath the soil surface of the New Orchards or any adjoining
properties and seeking indemnification therefor. Managers 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 substances" on or beneath the soil surface of
the New Orchards, or any adjoining properties owned by Managers 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.
Managers shall employ counsel reasonably satisfactory to Owner, at Managers'
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 Managers stating the reasons therefor and
in Owner's reasonable discretion, the hiring of co-counsel, and Managers 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 Managers, 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. Managers 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 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 each
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.
8.
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
Managers: Ka'u Agribusiness Co., Inc. or
Mauna Kea 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 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.
9.
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 each 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 partner 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 Managers 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 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.
The Managers 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 each Manager shall
mean X. Xxxxxx and subsidiaries of X. Xxxxxx.
10.
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.
11.
IN WITNESS WHEREOF, Owner and the Managers 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
-----------------------------
MAUNA KEA AGRIBUSINESS CO., INC.
By: /s/ J. XXXX XXXXX
-----------------------------
By: /s/ X. X. XXXXXXX
-----------------------------
Managers
12.
SCHEDULE A
Description of New Orchards at Ka'u
The New Orchards at Ka'u consist of (i) an ownership interest in the
trees consisting of approximately 327 tree acres of macadamia orchards and a
leasehold interest in the approximately 528 gross acres of underlying land,
which land consists of the parcel or parcels of property described as the "MLO
Area" in that certain Co-Ownership and Partition Agreement dated effective July
1, 1989 by and between Mauna Loa Orchards, L.P. ("MLO") and Ka'u Agribusiness
and (ii) a leasehold interest in the trees constituting approximately 387 tree
acres of macadamia orchards and in approximately 896 gross acres of underlying
land, which land consists of (a) the parcel or parcels of property described as
the "MLO Area" in that certain Co-Ownership and Partition Agreement dated
effective July 1, 1989 among MLO, Mauna Loa and Ka'u Agribusiness, (b) the
parcel or parcels of property described as the "MLO Area" in that certain
Co-Ownership and Partition Agreement dated effective July 1, 1989 between MLO
and Ka'u Agribusiness, (c) the parcel or parcels of property described in that
certain Xxxx of Sale dated as of July 1, 1989 from Mauna Loa to MLO and (d) the
parcel or parcels or property described as the "Xxxxxx Area" in that certain Use
Agreement dated December 7, 1980, as amended, by and between Xxxxxxx X. Xxxxxx
and Ka'u Sugar Company, Inc.
Description of New Orchards at Xxxxx Xxx
Xxx Xxx Xxxxxxxx xx Xxxxx Xxx consist of an ownership interest in the
trees constituting approximately 326 tree acres of macadamia orchards and a
leasehold interest in the approximately 584 gross acres of underlying land,
which land consists of the parcel or parcels of property described as the "MLO
Area" in that certain Co-Ownership and Partition Agreement dated effective July
1, 1989 between MLO and Mauna Kea Agribusiness.
Description of New Orchards at Keaau
(attached as Schedule A-1)
SCHEDULE B
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 such 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%
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 each of Manager's monthly accounting periods by
9% per annum, will be allocated to the Orchards managed by such Manager on the
basis of the equipment dollars charged each month to the direct cost centers
(see (1) above) for the Orchards relation to the total equipment dollars charged
each month to such direct cost 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
3.
Owner's All Other
Total Orchard Macadamia
----- ------- Orchards
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
====== ======= =======
4.
SCHEDULE C
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 New Orchards. 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.
