A Contract Joint Venture is different from an Equity JV: the parties cooperate under a long-term contract without necessarily becoming shareholders of one another.

For the agarwood platform, this can be particularly useful where the foreign investor wants to fund and commercialize the project while the Philippine partner controls the local plantation/farm operations.

Recommended structure

FOREIGN STRATEGIC INVESTOR
        │
        │ Capital / Technology / Market
        ▼
┌─────────────────────────────┐
│     CONTRACT JV PLATFORM    │
│                             │
│ No automatic equity transfer│
└─────────────────────────────┘
        ▲
        │
        │ Farm / Operations /
        │ Local resources
        │
PHILIPPINE FARM / OPERATING PARTNER
        │
        ▼
  AGARWOOD PRODUCTION
        │
        ▼
  HARVEST → EXTRACTION
        │
        ▼
    OUD / EXTRACTS
        │
        ▼
 INTERNATIONAL MARKET

1. Basic commercial arrangement

Foreign Investor provides

US$10M project financing, potentially through staged funding, plus:

extraction technology
technical expertise
international marketing
luxury-brand development
export channels
management support
quality-control systems

The parties then share the economic results according to the Contract JV Agreement.

2. Why use a Contract JV?

This model can be attractive when the investor does not need direct ownership of the plantation assets.

Instead:

Investor owns the capital and technology; Philippine partner operates the production platform; both share the economic results.

It can also allow the parties to keep different assets separate.

For example:

Asset	Owner
Investor’s cash	Foreign Investor
Foreign technology	Foreign Investor
Philippine farm assets	Philippine Partner / lawful owner
Plantation operations	Contract JV
Harvest	Contractually allocated
Extraction equipment	Investor/JV, as agreed
Brand	Investor or designated company
Finished products	Contractually allocated

3. US$10M Contract JV funding

Rather than transferring US$10M immediately:

Phase	Funding
Site preparation & establishment	US$1.5M
Nursery & planting	US$1.5M
Plantation expansion	US$2.0M
Induction & farm management	US$1.0M
Extraction facility	US$2.0M
Downstream manufacturing	US$1.0M
Working capital	US$0.5M
Contingency	US$0.5M
Total	US$10M

Each tranche is released after agreed milestones.

4. Contract JV term

I would consider a 15–20 year initial term, particularly because agarwood is a biological asset and the economics depend on the plantation cycle.

Example:

20-year Contract JV

with:

5-year development period
10-year production/commercial period
5-year optional extension

The agreement should establish what happens to trees, equipment, inventory and improvements when the contract expires.

5. Economic sharing

Instead of equity ownership, use a contractual revenue/profit waterfall.

Example

PRODUCT SALES
      ↓
COGS
      ↓
OPERATING COSTS
      ↓
TAXES
      ↓
RESERVES
      ↓
INVESTOR CAPITAL RECOVERY
      ↓
DISTRIBUTABLE JV PROFIT
      ↓
     60/40
      ↙  ↘
Investor  Philippine Partner

For illustration, an initial arrangement could be:

Foreign Investor — 60%

Philippine Partner — 40%

But the percentage should be negotiated based on the actual capital, assets, operating costs, risks and contribution of each party.

6. Better model: differentiated sharing

For agarwood, I prefer different economic sharing at different stages rather than a permanent flat 60/40 split.

Stage 1 — Capital recovery

A larger percentage of distributable cash goes toward recovering the foreign investor’s US$10M.

Stage 2 — Return threshold

Once the investor has recovered the agreed capital plus an agreed return:

profits move toward the normal sharing ratio.

Stage 3 — Mature operation

Example:

50% Investor / 50% Philippine Partner

or another negotiated ratio.

This gives the Philippine partner a stronger incentive to maximize long-term farm productivity.

7. Farm Management Fee

The Philippine partner could receive a separate Farm Management Fee.

For example:

Annual farm-management fee

plus

performance incentive

plus

profit share.

This creates three income streams:

Management Fee + Performance Incentive + JV Profit Share

The fee should be commercially reasonable and transparently documented.

8. Foreign Investor’s Offtake Rights

A particularly strong feature is an Offtake Agreement.

The investor or its designated buyer receives the right to purchase agreed production:

agarwood chips
resinous wood
oud oil
extracts
hydrosol
other approved products

at a pricing formula established in advance.

For example:

Reference market price

minus/plus

quality adjustment

minus/plus

processing adjustment

Contract JV purchase price

This gives the investor visibility over the downstream supply chain.

9. Technology arrangement

The investor can retain ownership of its technology.

FOREIGN TECHNOLOGY OWNER
          │
          │ License
          ▼
      CONTRACT JV
          │
          ▼
 Philippine Agarwood
 Production Platform

The license could cover:

extraction processes
equipment know-how
formulations
analytical methods
traceability software
manufacturing processes
trademarks

The Contract JV should not automatically acquire ownership of the underlying IP.

10. Plantation model

The Philippine partner manages:

Nursery

↓

Planting

↓

Tree maintenance

↓

Induction

↓

Resin development

↓

Harvest

↓

Primary processing

The investor can audit the process and verify production.

11. Tree-equivalent accounting

For an agarwood Contract JV, I recommend creating a Tree Asset Register.

Every production block receives:

Block ID
GPS/location record
planting date
number of trees
species
planting density
mortality
induction date
treatment records
estimated resin development
harvest date
harvested biomass
extraction batch

This creates a contractual basis for determining:

who financed which trees → what was harvested → what product resulted → how revenue is allocated.

12. Contract JV governance

Even without equity ownership, establish a JV Management Committee.

6 members

Party	Members
Foreign Investor	3
Philippine Partner	3

Major decisions require:

4/6 approval

or another negotiated threshold.

13. Reserved matters

Neither party should unilaterally be able to:

materially change the project
sell major JV assets
change the production system
enter competing arrangements
transfer contractual rights
change the agreed product allocation
incur major project debt
materially alter the budget
dispose of inventory outside the agreed channels

14. Exclusivity

The Philippine partner could grant the investor:

exclusive rights to finance and commercialize production from the contracted plantation area.

But exclusivity should be carefully limited by:

geographic area
duration
products
minimum investment
minimum purchase commitments
performance requirements

This prevents an investor from obtaining unlimited exclusivity without actually funding or commercializing the project.

15. Performance obligations

The Contract JV should contain measurable KPIs.

Philippine Partner

tree survival rate
hectares planted
trees planted
farm-maintenance compliance
induction completion
harvest targets
quality standards

Foreign Investor

capital funding
technology delivery
equipment procurement
market development
minimum purchase/offtake
technical support

Failure to meet material obligations can trigger:

cure period → suspension → damages → termination

depending on the breach.

16. Default protection

Investor default

If investor fails to fund an agreed tranche:

funding notice
cure period
suspension
dilution is generally not applicable in a pure Contract JV
alternative financing rights
termination if uncured

Philippine partner default

If partner:

diverts harvest
sells outside the JV
falsifies tree records
materially neglects plantations
breaches exclusivity

then the investor can have:

audit rights
suspension of funding
step-in rights
termination
damages
recovery of eligible invested capital

17. Step-in Rights

This is particularly important.

If the Philippine operator materially fails to perform, the foreign investor should be able to step in temporarily or appoint a replacement operator, subject to the contract and applicable Philippine law.

Example:

Philippine Partner
       │
       │ material default
       ▼
Cure Period
       │
       │ unresolved
       ▼
Investor Step-In
       │
       ▼
Temporary Farm Manager
       │
       ▼
Restore Operations

This protects the investor’s US$10M investment without necessarily transferring ownership of the land.

18. Land structure

The Contract JV can be particularly useful where the Philippine partner has lawful access to plantation land.

Conceptually:

PHILIPPINE LANDOWNER
       │
       │ lawful lease/use agreement
       ▼
PHILIPPINE FARM OPERATOR
       │
       │ Contract JV
       ▼
FOREIGN INVESTOR

The foreign investor does not need to own the land merely to participate economically in the project.

However, the precise structure must be reviewed against Philippine constitutional land restrictions and any forestry/natural-resource rules applicable to the particular land and activity.

19. Contract JV vs Equity JV

Feature	Contract JV	Equity JV
Shares issued	❌ No	✅ Yes
Foreign investor owns company	Not necessarily	Yes
Profit sharing	Contractual	Usually dividends
Land ownership	Can remain separate	Depends on structure
Investor control	Contractual	Corporate governance
Flexibility	High	Medium
Complexity	Medium	Higher
Best for	Farm/production partnerships	Integrated corporate platform
Investor exit	Contract termination/assignment	Share sale
Technology	License	License/contribution

20. Best Structure for Your Agarwood Project

For the US$10M platform, I would actually consider a hybrid structure:

                FOREIGN INVESTOR
                    US$10M
                       │
             ┌─────────┴─────────┐
             │                   │
        EQUITY INVESTMENT    CONTRACT JV
             │                   │
             ▼                   ▼
     EXTRACTION / BRAND      PLANTATION
          COMPANY               │
             │                   │
             └─────────┬─────────┘
                       ▼
               AGARWOOD SUPPLY
                       │
                       ▼
                OUD EXTRACTION
                       │
                       ▼
             LUXURY OUD PRODUCTS
                       │
                       ▼
                 GLOBAL MARKET

Why I prefer this hybrid

The foreign investor can have equity ownership where corporate ownership is commercially useful, while the plantation can operate through a long-term Contract JV/farm-management arrangement.

That avoids forcing land, farming operations, extraction, technology and international branding into one legal structure.

Recommended Contract JV economics

For a preliminary term sheet, I would use:

Investor capital: US$10M

Initial term: 20 years

Development period: 5 years

Investor: capital + technology + international market

Philippine partner: plantation + operations + local resources

Management fee: paid to Philippine operator

Investor capital recovery: priority waterfall

Post-recovery profit share: negotiated 50/50 or 60/40

Offtake: investor receives first-right/contracted purchase rights

Technology: remains investor-owned and licensed

Traceability: mandatory tree-to-product registry

Governance: equal Management Committee representation

Default: cure + step-in + termination mechanisms

Exit: buyout/assignment/renewal/termination provisions

Land: kept legally separate from foreign investment wherever appropriate

This is potentially a very strong structure for a Philippine agarwood plantation network, particularly if the objective is to combine the foreign investor’s US$10M with multiple Philippine landowners or farm operators without creating a separate equity corporation for every plantation.

Recommended structure

1. Basic commercial arrangement

Foreign Investor provides

Philippine Contract Partner provides

2. Why use a Contract JV?

3. US$10M Contract JV funding

4. Contract JV term

5. Economic sharing

Example

6. Better model: differentiated sharing

Stage 1 — Capital recovery

Stage 2 — Return threshold

Stage 3 — Mature operation

7. Farm Management Fee

8. Foreign Investor’s Offtake Rights

9. Technology arrangement

10. Plantation model

Nursery

Planting

Tree maintenance

Induction

Resin development

Harvest

Primary processing

11. Tree-equivalent accounting

12. Contract JV governance

6 members

13. Reserved matters

14. Exclusivity

15. Performance obligations

Philippine Partner

Foreign Investor

16. Default protection

Investor default

Philippine partner default

17. Step-in Rights

18. Land structure

19. Contract JV vs Equity JV

20. Best Structure for Your Agarwood Project

Why I prefer this hybrid

Recommended Contract JV economics