================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: September 30, 1998 Commission File Number: 0-19746
EcoScience Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
04-2912632
(I.R.S. Employer Identification Number)
10 Alvin Court, East Brunswick, New Jersey 08816
(Address of principal executive offices, including zip code)
732-432-8200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES _X_ NO ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 10, 1998
- - ----- --------------------------------
Common Stock, par value $0.01 per share 11,619,278
Total Number of Sequentially Numbered Pages: 28 Exhibit Index on Page: 22
================================================================================
<PAGE>
ECOSCIENCE CORPORATION
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
Unaudited
Page
----
Part I. - Financial Information
Item 1. Consolidated Financial Statements:
o Consolidated Balance Sheets:
September 30, 1998 and June 30, 1998..................... 3
o Consolidated Statements of Operations:
Three Months Ended September 30, 1998 and 1997........... 4
o Consolidated Statements of Cash Flows:
Three Months Ended September 30, 1998 and 1997........... 5
o Notes to Consolidated Financial Statements................ 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk..... 19
Part II. - Other Information............................................... 20
Signatures................................................................... 27
2
<PAGE>
ECOSCIENCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
----------------------------
September 30 June 30
----------------------------
1998 1998
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................................. $ 2,252 $ 2,608
Restricted cash ........................................................... -- 2,500
Short-term investments .................................................... 385 533
Accounts receivable, less reserves of $379
at September 30, and $451 at June 1998, ................................. 2,546 6,949
Inventories ............................................................... 8,298 5,318
Other current assets ...................................................... 3,548 4,594
-------- --------
Total current assets .................................................... 17,029 22,502
-------- --------
Property and equipment, net ................................................... 57,024 50,568
Intangible assets, net ........................................................ 1,516 1,542
Other noncurrent assets ....................................................... 2,887 3,160
-------- --------
Total assets ....................................................... $ 78,456 $ 77,772
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Short-term borrowings ..................................................... $ 11,757 $ 5,191
Current portion of long-term debt ......................................... 3,548 5,486
Accounts payable .......................................................... 7,289 6,895
Accrued expenses and other current liabilities ............................ 4,615 4,664
-------- --------
Total current liabilities ............................................... 27,209 22,236
-------- --------
Noncurrent liabilities:
Long-term debt, less current maturities ................................... 45,923 43,621
Other long-term liabilities ............................................... 2,668 2,964
-------- --------
Total noncurrent liabilities ............................................ 48,591 46,585
-------- --------
Minority interest in limited partnership ...................................... 6,949 8,641
Commitments and contingencies
Stockholders' investment:
Preferred stock, $0.01 par value, 1,000,000 shares authorized;
none issued and outstanding ............................................. -- --
Common stock, $0.01 par value, 25,000,000 shares authorized; 11,619,278 and
11,618,178 shares issued and outstanding
at September 30, 1998 and June 30, 1998, respectively ................... 116 116
Additional paid-in capital .................................................... 52,557 56,143
Accumulated deficit ........................................................... (56,975) (55,955)
Unrealized gain on short-term investments ..................................... 9 6
-------- --------
Total stockholders' investment .......................................... (4,293) 310
-------- --------
Total liabilities and stockholders' investment ..................... $ 78,456 $ 77,772
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
ECOSCIENCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30
1998 1997
-------- --------
<S> <C> <C>
Net revenue .................................... $ 8,711 $ 7,271
Cost of revenue ................................ 10,423 6,511
-------- --------
Gross profit ................................... (1,712) 760
-------- --------
Operating expenses:
Research and development .................... 128 100
Selling, general and administrative ......... 3,884 2,211
-------- --------
Total operating expenses .............. 4,012 2,311
-------- --------
Operating loss ................................. (5,724) (1,551)
-------- --------
Other (expense) income:
Interest, net ............................... (1,240) (458)
Other, net .................................. 61 21
-------- --------
Total other expense, net .............. (1,179) (437)
-------- --------
Income before taxes, and minority interest ..... (6,903) (1,988)
-------- --------
Provision for income taxes ................ -- (69)
-------- --------
Income before minority interest ........... (6,903) (1,919)
Minority interest ......................... 2,693 1,322
-------- --------
Net loss ....................................... ($ 4,210) ($ 597)
======== ========
Earnings loss per share:
Basic
Net loss per share ....................... ($0.36) ($0.05)
======== ========
Weighted average common shares outstanding 11,619 11,601
======== ========
Diluted
Net loss per share ....................... ($0.36) ($0.05)
======== ========
Aggregate diluted shares ................. 11,619 11,601
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
ECOSCIENCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss ......................................................... ($ 4,210) ($ 597)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization .............................. 1,064 515
Minority interest in limited partnerships .................. (2,693) (1,321)
Foreign exchange loss ...................................... 98 4
Changes in current assets and liabilities:
Accounts receivable, net ............................ 4,403 680
Inventories ......................................... (2,980)
(750)
Other current assets ................................ 1,238 (911)
Accounts payable and accrued expenses ............... 245 3,733
-------- --------
Net cash (used in) provided by operating activities ........ (2,835) 1,353
-------- --------
Cash flows from investing activities:
Purchases of property and equipment .............................. (7,275) (8,371)
Proceeds from sales of short-term investments .................... 151 --
Proceeds from release of restricted cash ......................... 2,500 --
Decrease (increase) in other noncurrent assets ................... 11 (95)
Decrease in loan receivable ................................... 12 --
Payments of long-term construction liabilities ................ (296) (5,250)
-------- --------
Net cash used in investing activities ...................... (4,897) (13,716)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of stock .................................. 5 --
Proceeds from long-term debt ........................... 3,297 8,113
Net borrowings (payments) under line of credit ................... 6,566 (726)
Payments on long-term debt and capital leases .................... (2,969) (3,759)
Debt issue costs .............................................. (124) (856)
Minority interest contribution to limited partnership ......... 1,001 9,391
S Corp Stockholder Distributions .............................. (400) (110)
-------- --------
Net cash provided by financing activities .................. 7,376 12,053
-------- --------
Decrease in cash and cash equivalents ................................. (356) (310)
Cash and cash equivalents at beginning of period ...................... 2,608 2,178
-------- --------
Cash and cash equivalents at end of period ............................ $ 2,252 $ 1,868
======== ========
Total unrestricted and restricted cash, cash equivalents and short-term
investments at end of period .................................... $ 2,637 $ 5,650
======== ========
Supplemental cash flow information
Cash paid for:
Interest ............................................... $ 821 $ 576
Income taxes ........................................... 3 28
Non-cash investing and financing activities:
Purchase of equipment under capitalized leases ......... 36 20
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
ECOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
Unaudited
1. OPERATIONS
EcoScience Corporation ("EcoScience") and its wholly owned subsidiaries
(collectively, the "Company"), Agro Power Development, Inc. and subsidiaries
("APD"), Agro Dynamics, Inc. and Agro Dynamics Canada Inc. (collectively,
"AGRO") and EcoScience Produce Systems Corp. ("EPSC") are engaged in the
technical marketing, sales, development and commercialization of products and
services for the following major markets: (i) intensive agriculture; (ii)
specialty agriculture; (iii) postharvest fruits and vegetables; and (iv)
biological insect control for professional pest control operators ("PCOs"). The
Company provides (i) greenhouse vegetables; (ii) sophisticated growing systems
to greenhouse operators; (iii) technologically advanced sorting, grading and
packing systems to produce packers; (iv) equipment, coatings and disease control
products, including natural biologicals for protecting fruits and ornamentals in
storage and transit to market; and (v) a unique biological pest control product
to PCOs.
The Company derives most of its revenues from the sale of: (i) greenhouse
vegetables to retail supermarkets and wholesale distribution companies; (ii)
growing systems and products to the North American intensive farming and
horticulture industries; (iii) sorting, grading and packing systems to the
produce packing industry; and (iv) postharvest coating products to the fresh
fruit market throughout the western hemisphere.
The Company is subject to a number of risks similar to those of other
companies in similar stages of development, including dependence on key
individuals, competition from other products and companies, the necessity to
develop, register and manufacture commercially usable products, the ability to
achieve profitable operations and the need to raise additional funds through
public or private debt or equity financing.
The Company believes that its $2,252,000 of cash and cash equivalents and
$385,000 of short-term investments as of September 30, 1998, along with revenues
from product sales, and funds available under its revolving line of credit,
$3,322,000 as of September 30, 1998, will be sufficient to fund the Company's
working capital needs, planned capital expenditures, restructuring program
initiatives and related obligations, and to service its indebtedness through
September 30, 1999, provided that the Company can resolve its near term cash
flow problems. The Company did not make interest payments due to its Lender on
October 30, 1998 and November 10, 1998 and has delayed payments to vendors. The
Company may need to raise additional funds to finance its ongoing operations and
expected growth after September 30, 1999, although there can be no assurances
that such funds will be available on terms favorable to the Company.
6
<PAGE>
2. MERGER WITH AGRO POWER DEVELOPMENT, INC.
On September 30, 1998, the Company issued 9,421,487 shares of the Company's
common stock, $.01 per value, (the "Common Stock") to the holders of the common
stock of Agro Power Development, Inc., a privately held corporation, pursuant to
an Agreement and Plan of Merger, in which APD was merged with and into a newly
formed, wholly owned subsidiary of the Company ( The "Merger"). The stockholders
of APD received 30,619.067 shares of the Company's common stock for each
outstanding share of Common Stock of APD. In addition, on September 30, 1998,
the Company issued 99,000 shares of common stock to certain shareholders of APD
for their entire 50% interest in Village Farms of Morocco, S.A., a Moroccan
company, as provided for in the Agreement and Plan of Merger. After the Merger,
the stockholders of APD own approximately 80% of the outstanding shares of the
Company, on a fully diluted basis.
7
<PAGE>
3. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared by the Company and reflect all adjustments, consisting of only normal
recurring adjustments, which are, in the opinion of management, necessary for a
fair presentation of financial results for the three months ended September 30,
1998 and 1997, in accordance with generally accepted accounting principles for
interim financial reporting and pursuant to Article 10 of Regulation S-X.
Certain information and footnote disclosures normally included in the Company's
annual audited consolidated financial statements have been condensed or omitted
pursuant to such rules and regulations.
The results of operations for the three months ended September 30, 1998 and
1997 are not necessarily indicative of the results of operations to be expected
for a full fiscal year. These interim consolidated financial statements should
be read in conjunction with the audited consolidated financial statements for
the fiscal year ended June 30, 1998, which are included in the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission.
The accompanying interim consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries, APD, AGRO and EPSC.
All material intercompany transactions and balances have been eliminated in
consolidation. The financial statements for the three months ended September 30,
1997 contain certain reclassifications to conform with the current year basis of
presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and disclosures of
contingent assets and liabilities as of the dates of the financial statements,
and the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
4. INVENTORIES
Inventories are stated at the lower of first-in, first-out (FIFO) cost or
market and consist of the following:
September 30, June 30,
(In thousands) 1998 1998
------ ------
Raw materials .............. $ 54 $ 74
Crop inventory ............. 4,758 2,992
Finished goods ............. 3,486 2,252
------ ------
$8,298 $5,318
====== ======
Finished goods include material, labor and manufacturing overhead costs.
8
<PAGE>
5. DEBT
On April 28, 1997, the Company and its lender entered into a revolving line
of credit agreement, under which the Company may borrow up to the lesser of
$3,000,000 or the sum of (i) 85% of eligible account receivables, as defined,
and (ii) eligible inventory at stratified rates from 25% to 50% up to a maximum
of the lesser of $1,200,000 or 66.67% of the amount of eligible accounts
receivable. Funds borrowed under the revolving line of credit bear interest at a
rate of prime (8.50% at September 30, 1998) plus 2.0% and are secured by all the
assets of the Company and all of the outstanding common stock of AGRO owned by
the Company. Interest on funds borrowed under the revolving line of credit is
payable monthly in arrears and repayment of principal was originally due on
April 27, 1998, and was subject to automatic renewal, as provided. The Company
and its lender entered into a series of four amendments to the loan documents
that extended the maturity date of the revolving line of credit to December 28,
1998. The revolving line of credit imposes a financial covenant on the Company
that requires a minimum tangible net worth of $750,000. The Company was not in
compliance with the minimum tangible net worth covenant and has requested a
waiver from the lender.
In June 1997, the Company also negotiated a $60,000,000 combined credit
facility through Village Farms International Finance Association, a subsidiary
of APD (the "VFIFA Facility") with a bank (the "Lender"). The combined VFIFA
Facility consists of a term loan, construction loan and revolving line of credit
commitment. The proceeds from the borrowings under the VFIFA Facility are loaned
by VFIFA to its members. APD has guaranteed all obligations under the VFIFA
Facility. Advances under the VFIFA Facility are secured by the assets of APD,
VFIFA and any underlying borrower. The maturity date of the VFIFA Facility is
July 31, 2010. The facility has restrictive covenants which limit certain
distributions and provide required financial covenants. APD was not in
compliance with Section 8.13 of the Agreement, which requires a minimum 25%
ratio of equity to senior long term debt at September 30, 1998. The lender has
waived this covenant violation through December 1, 1998. The Company and the
lender have discussed a number of alternatives to get back in compliance after
December 1, 1998 (i.e. equity infusion, restructuring partnership agreements,
etc.). Management believes that the classification of $44,609,000 of debt under
this debt agreement as long-term debt as of September 30, 1998 is appropriate
based on continuing discussions. The Company was unable to make an interest
payment of $819,000 due on October 30, 1998 and an interest payment of $103,000
due on November 10, 1998 under it's the VFIFA Facility due to cash flow
constraints; however, the Company expects to generate sufficient cash flow from
operations in first four months of 1999 to become current on its debt service
requirements.
6. NET INCOME (LOSS) PER SHARE
In December 1997, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS 128"), which makes certain
changes to the manner in which earnings per share ("EPS") is reported. The
adoption of this standard has required restatement of prior years' earnings per
share.
Dilutive securities had no effect on net loss for all periods reported. Any
outstanding options and warrants would be anti-dilutive due to the net losses
reported.
9
<PAGE>
ECOSCIENCE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
EcoScience is engaged in the technical marketing, sales, development and
commercialization of products and services for the following major markets: (i)
intensive agriculture; (ii) specialty agriculture; (iii) postharvest fruits and
vegetables; and (iv) biological insect control for professional pest control
operators ("PCOs").
Merger with Agro Power Development, Inc.
On September 30, 1998, the Company issued 9,421,487 shares of Common Stock
to the holders of the common stock of Agro Power Development, Inc., a privately
held corporation, pursuant to an Agreement and Plan of Merger, in which APD was
merged with and into a newly formed, wholly owned subsidiary of the Company. The
stockholders of APD received 30,619.067 shares of the Company's Common Stock for
each outstanding share of common stock of APD. In addition, on September 30,
1998, the Company issued 99,000 shares of Common Stock to certain shareholders
of APD for their entire 50% interest in Village Farms of Morocco, S.A., a
Moroccan company, as provided for in the Agreement and Plan of Merger, After the
Merger, the stockholders of APD own approximately 80% of the outstanding shares
of the Company, on a fully diluted basis.
The companies combined to form an integrated, environmentally focused,
consumer products driven agri-business, capitalizing on expertise in naturally
derived food technologies, intensive production and marketing of high value,
quality fresh produce, innovative bio-rational pest and disease control
technologies, and sophisticated growing and postharvest systems and products.
The Company is committed to improving the quality of its products by bridging
nature, technology and the environment, utilizing the highest standards.
EcoScience believes APD will provide the combined entity greater international
presence, increased marketing capability, management depth and the operating
level needed to accelerate revenue growth and increase shareholder value.
Intensive agriculture (with current emphasis on greenhouse vegetables)
Through the Merger with Agro Power Development, Inc. ("APD"), and by virtue
of APD becoming a wholly-owned subsidiary, EcoScience is now additionally
engaged in the production and marketing of greenhouse grown premium vegetables,
specifically beefsteak tomatoes, cluster on-the-vine tomatoes, and colored bell
peppers.
The Company is, in terms of total acreage controlled by a single entity,
the largest producer and marketer of premium quality, greenhouse grown tomatoes
in the United States. APD, a wholly owned subsidiary of EcoScience Corporation,
develops, constructs and operates highly intensive agricultural greenhouse
projects and markets and sells the
10
<PAGE>
vegetable production of these facilities, as well as fresh vegetables produced
by other greenhouse growers, under its Village Farms(R) brandname as a consumer
product, primarily to retail supermarkets and dedicated wholesale distribution
companies. In 1997, APD sold approximately 28.2 million pounds of tomatoes grown
at APD greenhouses, and sold an additional 3.8 million pounds of tomatoes under
APD's Village Farms(R) and Home Choice(TM) brand name pursuant to marketing
arrangements with third party producers. The tomatoes sold by APD represented
approximately 0.70% of the fresh tomatoes sold in the United States in 1997.
APD currently operates eight greenhouse facilities in the United States,
including one facility which is currently under construction, and is
approximately sixty percent (60%) complete. If the construction of the new
facility is completed according to plan, APD's greenhouse facilities will
represent approximately 217 acres (9,443,000 square feet) of growing capacity,
and four of these facilities, each of which has or is expected to have
approximately forty-one (41) acres of growing capacity, will be among the
largest greenhouses in the United States. By producing, harvesting, packaging
and directly marketing all of its products, APD eliminates numerous
intermediaries (i.e. repackers, brokers and wholesalers) utilized by traditional
field producers of fresh vegetables. In order to develop additional sources of
supply and revenue, APD has entered into agreements to market and sell fresh
vegetables produced by two other greenhouse operations, which currently comprise
a total of approximately 26 acres. If these marketing arrangements remain in
effect, and if its new greenhouse is completed according to plan, APD will
control the marketing of approximately 243 acres (10,574,419 square feet) of
greenhouse vegetable production.
The Company experienced significant growth during the first six (6) months
of calendar year 1998, particularly in the intensive agriculture division
represented by APD. During this period, APD completed construction and started
up approximately 101 additional acres of greenhouse production in beefsteak (42
acres) and cluster on-the-vine (59 acres) tomatoes. This increase in acreage
represents an approximate 137% increase in production capacity over the 73.5
acres for 1997. In addition, APD began construction on an additional 41 acre
greenhouse to grow and sell colored bell peppers (Presidio Phase I Project.).
The first 26 acres of this greenhouse went into operation in October 1998,
thereby increasing production capacity by approximately 173% for 1998 as
compared to 1997. Sales and revenues always lag increases in production
capacity, but expenses for startup, infrastructure and personnel occur in
advance of revenues. The operating results for the quarter ended September 30,
1998 reflect a significant portion of these expenses in advance of anticipated
revenues.
Secondarily, the timing of the 101 additional acres that started up in
April and May of 1998 came in at a time when market prices were on the decline
going into the summer season and the crop cycle was coming to a close (to ready
greenhouses for the next and normal starting cycle), thereby preventing the
Company from recovering all of the up front crop expenditures in an abbreviated
crop cycle or harvest period. In addition, due to delays in project approval
which impacted the crop cycle in Virginia (42 acre startup), the Company
11
<PAGE>
elected to cut short the growing cycle on the Virginia greenhouse and begin a
new crop that would come into harvest in December 1998, when the higher winter
pricing is available in the marketplace. Also the New York greenhouse had
construction delays and was late in installing infrastructure and required
systems further impacting operating performance. This decision increased
operating costs during the quarter ended September 30, 1998 as further detailed
herein.
The Company's believes that its greenhouse operations are all currently on
the optimal production schedule for the first time in company history compared
with prior years results when three of seven operations were out of cycle (101
of the 175 acres in operation). The Company anticipates future production and
sales increases consistent with the additional production capacity added during
1998, beginning with the quarter ending December 31, 1998.
Specialty Agriculture
The Company engineers, designs, markets and distributes sophisticated
growing systems and services to the greenhouse and plant nursery market in the
United States, Canada and Mexico. The Company's primary products for this market
are: (i) advanced growing systems based on Stonewool(R) inert growing medium,
manufactured by Grodania A/S; (ii) computerized environmental, irrigation and
fertilization control systems manufactured by H. Hoogendorn Automation B.V.; and
(iii) multiple greenhouse consumable products.
PostHarvest Fruits and Vegetables
The fruit and vegetable production industry requires specialized services,
equipment and products for the harvesting, processing and storage of produce.
The Company provides equipment, coatings and disease control products to the
fruit, vegetable and ornamental packing markets. The Company's primary products
for this market are: (i) technologically advanced sorting, grading and packing
systems for produce packers, manufactured by Aweta, B.V.; and (ii) equipment,
coatings and disease control products for the protection of fruits and
ornamentals in storage and transit to market including PacRite(R) and Indian
River Gold(TM) coatings manufactured by EPSC, and the Bio-Save(R) PostHarvest
BioProtectant line of natural biological products, which was developed by the
Company's research and development efforts.
Biological Insect Control
In the biological insect control market, the Company, with collaborative
partners, has been focused on developing and selling cost effective
bio-insecticide alternatives to synthetic chemical insecticides for use in
specific applications, including sensitive use environments such as homes,
restaurants, schools and food processing facilities. The Company's primary
product for this market is Bio-Blast(R) Biological Termiticide, a unique
biological pest control product manufactured by EcoScience.
The Company sells Bio-Blast to PCO's through a marketing collaboration with
Terminix International Company L.P. ("Terminix"). In fiscal 1997, the Company
initiated the U.S. commercial launch of Bio-Blast in collaboration with
Terminix. Additionally, EcoScience
12
<PAGE>
has initiated an extensive testing, development and marketing program with
Maruwa BioChemical Co., Ltd. ("Maruwa") for biological products in Japan. The
Company commenced shipments of Bio-Blast to Maruwa in fiscal 1997.
The Company's technology is used for the development and application of
natural microbial pest control agents and coatings to sustain the freshness of
fruits. The Company's technology enables it to provide technical support for
growers and packers of specialty crops. The Company conducts research on the use
of microbial agents to control plant diseases and insect pests, as well as on
new applications for natural coatings to sustain the nutritional and overall
qualities in fresh fruit. The Company expects to conduct tests to determine the
possibility of extending the range of performance and applicability for both its
Bio-Save line of products and its Bio-Blast insect control product.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1998 vs.
Three Months Ended September 30, 1997
The Company's net revenues increased by $1,440,000 or 20% to $8,711,000 for
the three months ended September 30, 1998 from $7,271,000 for the same period in
1997. This increase was primarily due to the increases in product sales in the
Intensive Agriculture greenhouse vegetable market of $689,000, PostHarvest
Fruits and Vegetables market of $549,000 and the Specialty Agriculture market of
$202,000.
The following table sets forth the Company's net revenues by market for the
three months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Ended September 30,
----------------------------------------
Increase
(In thousands) 1998 1997 (Decrease)
------ ------ ----------
<S> <C> <C> <C>
Intensive Agriculture ........... $4,561 $3,872 $ 689
Specialty Agriculture ........... 2,278 2,076 202
PostHarvest Fruits and Vegetables 1,872 1,323 549
Biological Insect Control ....... 0 0 0
------ ------ ------
Consolidated .................... $8,711 $7,271 $1,440
====== ====== ======
</TABLE>
In April 1998, Aweta B.V. sustained fire damage to its manufacturing
facility and certain contents therein. As a result of the fire, there will be a
delay in the shipment and installation of certain sorting, grading and packing
equipment with the primary effect being a shifting of revenue and corresponding
operating profits from the quarters ending June 30, 1998 and September 30, 1998
to the quarter ending December 31, 1998 or thereafter. The Company is attempting
to balance the effects of the temporary decrease in Aweta's production capacity
and the Company's customers' installation and production requirements. The
Company, however, cannot be assured that delayed delivery and installation of
equipment to the
13
<PAGE>
customer will meet the customer's requirements which could result in the
possible loss of certain customer orders and corresponding loss of revenue and
operating profit. The result of the postponement of shipments caused by the fire
had an adverse effect on the Company's operating results for the fourth quarter
of fiscal 1998; however, in those periods where delivery is expected to be made,
there will be a favorable impact on operating results.
Cost of revenues increased $3,912,000 or 60% to $10,423,000 for the three
months ended September 30, 1998 from $6,511,000 for the same period in 1997,
primarily due to product sales increases and a change in product mix. For
intensive agriculture (APD) cost of goods sold increased $2,103,000 or 61% to
$5,526,000 for the three months ended September 30, 1998 from $3,423,000 for the
same period in 1997, primarily due to the significant growth in production
during 1998 associated with the three (3) new facilities in Virginia, Texas and
New York, which combined for substantially all of the increase in cost of goods
sold.
Gross profit on net revenues decreased ($2,472,000) to ($1,712,000) for the
three months ended September 30, 1998 from $760,000 for the same period in 1997,
while gross profit percentage on product sales decreased to (20%) for the three
months ended September 30, 1998 from 10% for the same period in 1997. The
decrease in gross profit percentage was primarily due to startup costs in
intensive agriculture. The gross profit for intensive agriculture (APD
greenhouse vegetables) decreased ($2,643,000) to ($2,744,000) for the three
months ended September 30, 1998 from ($101,000) for the same period in 1997,
primarily due to the startup of the three (3) new greenhouses in Virginia, Texas
and New York. These facilities combined for a total ($1,855,000) decrease in
gross profit. Gross profit on the new greenhouse facilities was lower than
anticipated because the timing of the construction completion and startup did
not coincide with the optimal cropping cycle (seed, plant, grow, harvest) of
these facilities during the first year of operations. Additionally, the Company
incurred the front end costs (seed, plant, labor) of two (2) cropping cycles at
these facilities to get their optimal cropping cycle. The first cycle at all
three new facilities was abbreviated in order to optimize future periods.
Therefore, the seeding, planting and associated labor costs were incurred twice
during the first nine months of 1998, the first in April and May 1998 and the
second during the quarter ended September 30, 1998. These costs were naturally
spread across lower production/sales due to the abbreviated growing cycle and
therefore significantly lowered gross profit on these facilities. The Company
believes that all greenhouse operations are currently on their optimal cropping
cycles and the Company expects gross profit to improve as a result of the
allocations of costs of sales over greater production volumes through a full
harvest on each facility.
Secondarily, the timing of the 101 additional acres that started up in
April and May of 1998 came in at a time when market prices were on the decline
going into the summer season and the crop cycle was coming to a close (to ready
greenhouses for the next and normal starting cycle), thereby preventing the
Company from recovering the up front crop expenditures in an abbreviated crop
cycle or harvest period. In addition, due to delays in project approval which
impacted the crop cycle in Virginia (42 acre startup), the Company elected to
cut short the growing cycle on the Virginia greenhouse and begin a new crop that
would come into harvest in December 1998 when the higher winter pricing is
available in the marketplace. Also the New York greenhouse had construction
delays and was late in installing infrastructure and required systems further
impacting operating performance. This decision increased operating costs during
the quarter ended September 30, 1998 as further detailed herein.
14
<PAGE>
Research and development expenses increased $28,000 or 28% to $128,000 for
the three months ended September 30, 1998 from $100,000 for the same period in
1997, due primarily to increases in personnel and related costs. The Company has
and will continue to incur ongoing research and development expenses for its
Bio-Save PostHarvest BioProtectant, Bio-Blast Biological Termiticide and other
select programs.
Selling, general and administrative expenses increased $1,673,000 or 76% to
$3,884,000 for the three months ended September 30, 1998 from $2,211,000 for the
same period in 1997, primarily due to non-recurring merger costs of $1,190,000,
and increases in personnel and related costs to support increased levels of
business activity.
Operating loss increased ($4,173,000) to ($5,724,000) for the three months
ended September 30, 1998 compared to a ($1,551,000) operating loss for the same
period in 1997. The decrease in operating income resulted primarily from a
($2,472,000) decrease in gross profits for the three months ended September 30,
1998 compared to the same period in 1997, and a $1,701,000 increase in operating
expenses.
Other expense increased by $742,000 to $1,179,000 for the three months
ended September 30, 1998 compared to $437,000 for the same period in 1997,
primarily due to increased interest expense. Interest expense increased by
$782,000 reflecting the higher level of debt outstanding during the three months
ended September 30, 1998 compared to the same period in 1997.
The Company's net loss increased ($3,613,000) or ($0.31) per diluted share
to ($4,210,000) or ($0.36) per diluted share for the three months ended
September 30, 1998 compared to a loss of ($597,000) or ($0.05) per diluted share
for the same period in 1997.
Election to Change Fiscal Year
The Company has elected to change its Fiscal Year from the 12 month period
ending June 30 to a 52/53 week. The new fiscal year end date will be the Sunday
nearest December 31 of each year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations have been funded through revenues from product
sales, public and private placements of its equity securities, bank loans and
lease financings, licensing, collaborative research and development
arrangements, and investment income.
Cash and cash equivalents were $2,252,000 at September 30, 1998 compared to
$2,608,000 at June 30, 1998. Cash, cash equivalents and short-term investments
totaled $2,637,000 at September 30, 1998 compared to $3,141,000 at June 30,
1998. Cash used in operating activities totaled $2,835,000 for the three months
ended September 30, 1998 and principally consisted of a net loss of
($4,210,000), a decrease in minority interest of $2,693,000 and an increase in
inventory of $2,980,000, offset by decreases in accounts receivable of
$4,403,000 and depreciation and amortization of $1,064,000. Cash provided by
financing activities totaled $7,376,000 for the three months ended September 30,
1998, which consisted principally of proceeds from debt of $3,297,000, net
borrowings under line of credit of $6,566,000 and
15
<PAGE>
minority interest contributions of $1,001,000, offset by payments of debt of
$2,969,000 and S Corp stockholder distributions of $400,000. Cash used in
investment activities for the three months ended September 30, 1998 totaled
$4,897,000, which consisted principally of purchases of property and equipment
of $7,275,000, associated with the construction of an additional 26 acres of
greenhouses, partially offset by a release of restricted cash of $2,500,000 to
pay down debt of $1,500,000 and working capital of $1,000,000. The Company's
working capital and current ratio were ($10,180,000) and 0.6 to 1, respectively,
at September 30, 1998 compared to $266,000 and 1 to 1, respectively, at June 30,
1998.
The Company is experiencing a significant liquidity problem at the present
time due to the startup and crop cycle of the approximate 127 additional
greenhouse acres. Consequently, the Company has delayed payments to significant
vendors and suppliers of goods and services vital to its business activities.
Further, the Company did not pay a maturing interest payment to its bank when
due on October 30, 1998 and November 10, 1998. The Company expects to continue
to delay vendor and supplier payments as well as bank interest payments through
December 1998 as the production and sales improve during this period. While the
liquidity position of the Company is critical, Company management has been in
contact with major suppliers as well as its Lenders and are working
cooperatively together to manage this cash flow problem.
Debt increased by $6,930,000 to $61,228,000 at September 30, 1998 compared
to $54,298,000 at June 30, 1998. The increase was due primarily to the financing
of Village Farms of Presidio, a subsidiary of APD, Greenhouse Project Phase I
and seasonal needs at September 30, 1998. In September 1998, the Company and one
of its lenders agreed to extend the due date for the $3,000,000 revolving line
of credit to December 28, 1998 from July 28, 1998.
The Company expects to incur administrative, business development and
commercialization expenditures in the future as it advances the development,
manufacturing and marketing of its Bio-Blast and Bio-Save products, and other
select development programs in its bio-technology operations. In addition, the
Company expects to incur incremental costs associated with its plans to expand
product lines offerings. The Company may also use cash to acquire technology,
products or companies that support the strategy of the Company.
The Company plans to finance its cash needs principally with existing cash
reserves, represented by approximately $2,252,000 of cash and cash equivalents
and $385,000 of short-term investments as of September 30, 1998. The Company
believes that such cash reserves, along with cash generated from product sales,
and funds available under its revolving line of credit, will be sufficient to
fund the Company's working capital needs, planned capital expenditures,
restructuring program initiatives and related obligations, and to service its
indebtedness through September 30, 1999, provided that the Company can resolve
its near term cash flow problems. The Company may need to raise additional funds
to finance its ongoing operations and expected growth after September 30, 1999,
although there can be no assurances that such funds will be available on terms
favorable to the Company.
SEASONALITY
The timing of the Company's operating revenues may vary as a result of the
seasonal nature of its businesses. In addition, operating revenues may be
affected by the timing of new
16
<PAGE>
product launches, acquisitions, sales orders, sales product mix and other
economic factors. Operating revenues may be concentrated in the calendar first
and second quarter as a result of the North American growing and harvesting
seasons. Although the Company believes that the historical trend in quarterly
revenues for the first and second quarters of each year are generally higher
than the third and fourth quarters; there can be no assurance that this will
occur in future periods. Accordingly, quarterly or other interim results should
not be considered indicative of results to be expected for any other quarter or
for the full fiscal year.
THE MERGER AND FULFILLMENT OF NASDAQ LISTING REQUIREMENTS
The National Association of Securities Dealers, Inc., has among its
continued listing requirements three criteria, fulfillment of any one of which
qualifies an issuer for continued listing on the Nasdaq SmallCap Market. An
issuer must have (i) net tangible assets of at least $2,000,000; (ii) a market
capitalization of at least $35,000,000; or (iii) net income (for the last fiscal
year or for two of the last three fiscal years) of at least $500,000.
Results for the period ended September 30, 1998, indicate that the Company
no longer meets the net tangible assets test. In addition, the Company does not
meet the minimum net income test. As of November 10, 1998, 11,619,278 shares of
the Company's Common Stock were outstanding. The reported closing price of the
Company's Common Stock on October 2, 1998 was $3 5/8, resulting in a market
capitalization of approximately $42,120,000. It is possible that the Company may
not be able to maintain the required level of market capitalization due to
possible fluctuations in the market price for its Common Stock, which may result
in Nasdaq's delisting of the Common Stock from the Nasdaq SmallCaps Market.
YEAR 2000
The Company has completed an initial assessment of its Year 2000 status. A
plan has been developed that is expected to address the Company's exposure to
the Year 2000 issue. As a part of that plan, the Company will inventory and test
its information technology ("IT") and non-IT systems. Major customers and
vendors will be contacted in order to assess their status as to Year 2000
compliance. The Year 2000 plan is expected to be implemented and completed by
approximately the end of the first quarter 1999. While some of the Company's IT
and non-IT systems will need to be upgraded or replaced, the financial impact of
making the required system changes is not expected to be material to the
Company's financial position, results of operations or cash flow.
FORWARD LOOKING STATEMENTS
This report contains forward looking statements that describe the Company's
business prospects including those that relate to the merged companies. These
statements involve risks and uncertainties including, but not limited to,
regulatory uncertainty, level of demand for the Company's products and services,
product acceptance, industry wide competitive factors, seasonality factors,
timing of completion of major equipment projects, political, economic or other
conditions, and the results of the merger in terms of effective operations,
market acceptance and corporate position. Furthermore, market trends are subject
to changes which could adversely affect future results.
17
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Merger may affect the following aspects of the Company's operations:
(i) changes in the Company's debt to equity ratio; (ii) costs associated with
the transaction and restructuring changes; (iii) market risk; and (iv) credit
risk.
The Merger changed the Company's debt to equity ratio from minor to
significant, which could expose the Company to, among other things, risks
associated with interest rate fluctuations. Based on an the unaudited combined
balance sheet as of September 30, 1998, the Company is highly leveraged as a
result of debt levels and the negative stockholders equity of ($4,293,000).
Additional and unanticipated expenses may be incurred relating to the
integration of the businesses of the Company and APD, including sales and
marketing, and administrative functions. Although the Company and APD expect
that the elimination of duplicative expenses, as well as other efficiencies
related to the integration of their respective businesses may offset additional
expenses over time, there can be no assurance that such net benefit will be
achieved in the near term or at all.
The Company is subject to a number of risks similar to those of other
companies in similar stages of development, including dependence on key
individuals, competition from other products and companies, the necessity to
develop, register and manufacture commercially usable products, the ability to
achieve profitable operations, the impact of supply and demand on market prices
for products produced and sold by APD, the impact of crop disease and
pestilence, the impact of the perishableness of products produced and sold by
APD, weather and other events impacting crop yields and greenhouse structure
damage, the impact of customer concentrations, the need to raise additional
funds through public or private debt or equity financing, especially due to the
substantial amount of capital investment required for greenhouse operations, and
the success of the Company to achieve an effective merged entity and the result
of that entity in terms of effective operations, market acceptance and corporate
position.
Financial instruments which potentially subject the Company to
concentrations of credit risk consist of accounts receivable and other
receivables. The Company primarily invests its available funds into United
States Government securities as well as investments with high quality financial
institutions. The Company performs ongoing evaluations of its customers'
financial condition and, generally, requires no collateral from its customers.
The Company maintains reserves and allowances for potential credit losses; which
to date, such credit losses have been insignificant and within management's
expectations. The merged entity is subject to a higher level of risk of this
nature due to the higher level of business activity and a higher level of
customer concentration.
18
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
In connection with the Merger, on September 30, 1998 the Company
issued 9,421,487 shares of the Company's Common Stock $.01 par value
(the "Merger shares"), to the holders of the Class A Common Stock,
$1.00 per share, of Agro Power Development, Inc., a New York
corporation ("APD"). Pursuant to the Merger, APD merged with and into
Agro Acquisition Corporation, a wholly-owned subsidiary of the
Company.
Also in connection with the Merger, on September 30, 1998 the Company
issued 33,000 shares of the Company's Common Stock, $.01 par value
(the "Moroccan shares"), to each of Michael A. DeGiglio, Thomas
Montanti and Albert Vanzeyst (together the "Moroccan Shareholders") in
exchange for the Moroccan Shareholders' 50% interest in Village Farms
of Morocco, S.A., a Moroccan company. The Merger Shares and Moroccan
Shares were issued to the APD Shareholders pursuant to an exemption
under section 4(2) of the Securities Act of 1933, as such issuances
did not involve any public offering.
Item 3. Defaults Upon Senior Securities
The Company has failed to make an interest payment in the amount of
$884,000 which was due on October 30, 1998 and an interest payment of
$103,000 which was due November 10, 1998 under the VFIFA Facility. In
addition, as of September 30, 1998 the Company was not in compliance
with the covenant of Section 8.13 of the APD Guaranty under VFIFA
Facility, which requires the Company to maintain on a quarterly basis,
a ratio of equity to senior long-term debt, calculated on a
consolidated basis, of not less than 25%. The bank has waived the
covenant violation through December 1, 1998.
Item 4. Submission of Matters to a Vote of Security Holders
A Special Meeting of Stockholders in Lieu of the Annual Meeting of
Stockholders of the Company was held on September 10, 1998. The
stockholders elected Michael A. DeGiglio and David J. Ryan to the
class of Directors whose terms expire at the 2000 Annual Meeting. The
tabulation of votes with respect to the election of such directors is
as follows:
19
<PAGE>
Total Votes Withheld
Total Votes for Each Director From Each Director
----------------------------- ------------------
Michael A. DeGiglio 8,530,838 1,344,902
David J. Ryan 8,334,998 1,540,442
The stockholders approved the issuance of 9,520,487 shares (after
giving rise to the approved reverse stock split referenced below) of
the Company's Common Stock to the holders of the Class A Common Stock
of APD pursuant to the Merger, with 5,576,060 shares voted in favor of
the issuance, 851,850 shares voted against the issuance and 356,730
shares abstaining.
The stockholders approved an amendment to the Company's Certificate of
Incorporation to effect a one for five reverse stock split of the
Company's Common Stock, with 5,906,738 shares voted in favor of the
reverse split, 528,429 shares votes against the reverse split and
28,373 shares abstaining.
The Stockholders approved an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of the
Company's Common Stock from 25,000,000 shares to 100,000,000 shares,
and to increase the number of authorized shares of the Company's
Preferred Stock from 1,000,000 shares to 10,000,000 shares, with
5,526,406 shares voted in favor of the amendment, 890,076 shares voted
against the amendment and 47,059 shares abstaining.
The Stockholders approved and ratified an amendment to the Company's
1991 Stock Option Plan to increase the number of shares of Common
Stock which may be granted under the 1991 Stock Option Plan from
1,300,000 shares to 1,800,000 shares (without giving effect to the
reverse stock split referenced above), with 8,666,915 shares voted in
favor of the amendment, 1,138,850 shares voted against the amendment
and 69,675 shares abstaining.
The stockholders ratified the selection of Arthur Andersen, LLP as the
Company's independent public accountants for the current fiscal year,
with 9,745,420 shares voted in favor of such ratification, 104,340
shares voted against such ratification and 25,680 shares abstaining.
Item 5. Other Information
The Company has amended its By Laws to change its Fiscal Year end from
the twelve month period ended June 30 to a 52-53 week fiscal year. The
year end date of such fiscal year shall be on the Sunday nearest
December 31, of each year. For the transition period the fiscal year
end date will be January 3, 1999.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ECOSCIENCE CORPORATION
Date: November 12, 1998 By: /s/ Michael A. DeGiglio
--------------------------------------------
Michael A. DeGiglio
President and Chief Executive Officer
(Principal Executive Officer
Date: November 12, 1998 By: /s/ David M. Suchniak
--------------------------------------------
David M. Suchniak
Senior Vice President and
Chief Financial Officer
(Principal Accounting and Financial Officer)
21
<PAGE>
ECOSCIENCE CORPORATION
EXHIBIT INDEX
Item 6. Exhibits and Reports on Form 8-K
Exhibit Exhibit
Number Description
- - --------------------------------------------------------------------------------
10.60 Agreement Regarding Future Projects between Cogentrix Energy,
Inc. and Agro Power Development, Inc., effective as of February
6, 1996. *
10.61 Ground Lease dated September 4, 1997 between the Buffalo
Enterprise Development Corporation and Agro Power Development,
Inc.
10.62 Commercial Greenhouse Lease and Operating Agreement dated July
22, 1992 between Oxbow Power of North Tonawanda, New York, Inc.
and Village Farms of Wheatfield, Inc. *
10.63 Operating Agreement dated as of November 14, 1997 between
Greenhost, Inc. and Village Farms of Virginia, Inc for Birchwood,
Virginia greenhouse facility. *
10.64 Lease Agreement dated as of September 21, 1993 between Cogentrix
of Pennsylvania, Inc. and Keystone Village Farms, Inc. for
Ringgold, Pennsylvania greenhouse facility. *
10.65 Amended Ground Lease effective March 14, 1997 between the
Presidio County Commissioners Court and Agro Power Development,
Inc.
10.66 Lease Agreement dated as of January 29, 1998 between Ripe Touch
Greenhouses, Inc., and Village Farms of Colorado, Inc. *
10.67 Agreement of Limited Partnership of Village Farms of Texas, L.P.,
dated as of February 6, 1996. *
22
<PAGE>
Exhibit Exhibit
Number Description
- - --------------------------------------------------------------------------------
10.68 Marketing and Sales Agreement between Village Farms, LLC and
Village Farms of Texas, L.P., dated February 13, 1996.
10.69 Management, Operating and Maintenance Contract between Village
Farms of Delaware LLC and Village Farms of Texas, L.P. dated
February 13, 1996.
10.70 Agreement of Limited Partnership of Pocono Village Farms, L.P.,
dated as of March 10, 1997.
10.71 Agreement of Limited Partnership of Village Farms of Marfa, L.P.,
dated as of June 4, 1997. *
10.72 Management, Operating and Maintenance Contract between Village
Farms of Marfa and Village Farms of Delaware, LLC, dated June 4,
1997.
10.73 Marketing and Sales Agreement between Village Farms of Marfa,
L.P. and Village Farms of Delaware dated June 4, 1997.
10.74 Amended and Restated Agreement of Limited Partnership of Village
Farms of Buffalo, L.P., dated as of September 4, 1997. *
10.75 Management, Operating and Maintenance Contract between Village
Farms of Delaware and Village Farms of Buffalo, dated September
4, 1997 and amendment thereto dated as of April 17, 1998.
10.76 Marketing and Sales Agreement between Village Farms of Delaware
and Village Farms of Buffalo, L.P. dated September 4, 1997.
10.77 Management, Operation, Maintenance, Marketing and Sales Agreement
between Pocono Village Farms, L.P. and Village Farms of Delaware.
10.78 Marketing Agreement by and between Foster Farms, Inc. and Agro
Power Development, Inc. dated January 1, 1995.
10.79 Credit Agreement (Line of Credit Facility) by and between CoBank,
ACB, as Agent and as a Syndication Party and Village Farms
International Financing Association dated as of June 24, 1997.
23
<PAGE>
Exhibit Exhibit
Number Description
- - --------------------------------------------------------------------------------
10.80 Promissory Note (Line of Credit Facility) of Village Farms
International Financing Association dated June 24, 1997 in
principal amount of $10,000,000.
10.81 First Amendment to Credit Agreement (Line of Credit Facility)
[Regarding EcoScience Merger] by and between Village Farms
International Finance Association and CoBank, ACB dated September
29, 1998.
10.82 Second Amendment to Credit Agreement (Line of Credit Facility) by
and between CoBank, Village Farms International Finance
Association and Agro Power Development Inc. dated September 29,
1998.
10.83 Line of Credit Security Agreement by and between Village Farms
International Finance Association, and CoBank, ACB dated June 24,
1997 with a line of credit of $10,000,000.
10.84 Credit Agreement (Construction Loan Funding) by and between
CoBank, ACB as Agent and Syndicated Party and Village Farms
International Financing Association dated as of June 24, 1997.
10.85 First Amendment to Credit Agreement (Construction Loan Funding)
[Regarding EcoScience Merger] by and between Village Farms
International Finance Association and CoBank, ACB dated September
29, 1998.
10.86 Promissory note (Construction Loan Funding) of Village Farms
International Financing Association dated June 24, 1997 in
principal amount of $30,000,000.
10.87 Construction Loan Security Agreement by and between Village Farms
International Finance Association, and CoBank, ACB dated June 24,
1997.
10.88 Credit Agreement (Term Loan Funding) by and between CoBank, ACB
as Agent and Syndication Party and Village Farms International
Financing Association dated as of June 24, 1997.
10.89 Promissory Note (Term Loan Funding) of Village Farms
International Financing Association dated June 24, 1997 in
principal amount of $50,000,000.
24
<PAGE>
Exhibit Exhibit
Number Description
- - --------------------------------------------------------------------------------
10.90 Guaranty of Agro Power Development, Inc. dated as of June 24,
1997 to Construction Lenders, Term Lenders and Line of Credit
Lenders.
10.91 First Amendment to Credit Agreement (Term Loan Funding)
[Regarding EcoScience Merger] by and between Village Farms
International Finance Association and CoBank, ACB dated September
29, 1998.
10.92 Second Amendment to Credit Agreement (Term Loan Funding) by and
between CoBank, Village Farms International Finance Association
and Agro Power Development Inc. dated September 29, 1998.
10.93 Term Loan Security Agreement by and between Village Farms
International Finance Association, and CoBank, ACB dated June 24,
1997.
10.94 Amendment to Loan Documents by and between CoBank, Village Farms
International Finance Association and Agro Power Development,
Inc. dated September 29, 1998.
10.95 First Amendment to Guarantor Security and Pledge Agreement
[Regarding EcoScience Merger] by and between Agro Power
Development, Inc. and CoBank, ACB dated September 29, 1998.
10.96 First Amendment to Guaranty of Agro Power Development, Inc.
[Regarding EcoScience Merger] by and between Agro Power
Development, Inc. and The Lender Group dated September 29, 1998.
10.97 Promissory Note dated March 7, 1997 issued to Cogentrix Energy,
Inc. in the principal amount of $643,197.
10.98 Promissory Note dated January 31, 1997 issued to Village Farms of
Texas, L.P. in the principal amount of $1,838,420 by Cogentrix
Energy, Inc.
10.99 Agreement of Limited Partnership of Village Farms of Presidio,
L.P. dated as of August 31, 1998.
10.100 Commercial Greenhouse Design and Construction Contract between
Agro Power Development, Inc. and Dalsem Kassenbouw B.V. dated as
of August 31, 1998.
10.101 Commercial Design and Construction Contract between Village Farms
of Presidio, L.P. and Agro Power Development, Inc. dated as of
August 31, 1998.
25
<PAGE>
Exhibit Exhibit
Number Description
- - --------------------------------------------------------------------------------
10.102 Commercial Packing House Design and Construction Contract dated
July 10, 1998 between Agro Power Development, Inc. and NC
Sturgeon, Inc.
10.103 Marketing and Sales Agreement between Village Farms of Presidio,
L.P. and Village Farms, Inc. dated as of August 31, 1998.
10.104 Management, Operation and Maintenance Contract dated as of August
31, 1998 among New Amsterdam Joint Venture, L.L.C. and Village
Farms of Presidio, L.P.
10.105 $1,375,000 Promissory Note and Security Agreement dated March 10,
1997 among Agro Power Development, Inc., Village Farms of
Delaware LLC, Village Farms LLC and Cogentrix Delaware Holdings,
Inc.
10.106 Loan Agreement by and between Pocono Village and First Pioneer
Farm Credit, ACA, dated March 5, 1997.
10.107 Installment Promissory Note for $2,200,000.00 from Pocono Village
to First Pioneer Farm Credit, ACA, dated March 10, 1997.
10.108 Construction Loan Agreement between Pocono Village and First
Pioneer Farm Credit, dated March 10, 1997.
10.109 Security Agreement between Pocono Village and First Pioneer Farm
Credit, ACA, dated March 10, 1997.
10.110 Agreement dated July 1, 1998 between Agro Power Development, Inc.
and The Greenery International. *
10.111 Employment Agreement dated June 8, 1998 between Agro Power
Development, Inc. and David M. Suchniak.
* Information has been omitted from this Exhibit and is
subject to a request for confidential treatment.
26
EXHIBIT 10.60
AGREEMENT REGARDING FUTURE PROJECTS
THIS AGREEMENT is made and effective as of February 6, 1996 by and between
COGENTRIX ENERGY, INC., a North Carolina corporation ("Cogentrix"), and AGRO
POWER DEVELOPMENT, INC. a New York corporation ("Agro Power").
Agro Power is in the business of, among other things, developing, owning
and operating greenhouse projects. Agro Power and its Affiliates (as hereinafter
defined) own all of the interests of, and are the sole member of, Village Farms
of Delaware, L.L.C. ("VF Delaware") and Village Farms, L.L.C. ("VF"), both of
which are limited liability companies organized under Delaware law. At the
request of Agro Power, contemporaneous with the execution and delivery of this
Agreement, wholly-owned subsidiaries of Cogentrix have entered into an Agreement
of Limited Partnership with VF Delaware and VF and contributed all of the cash
equity investment to the limited partnership created thereby to fund, in part,
the development and operation of a venlo style greenhouse located in the
vicinity of Fort Davis, Texas for the purpose of producing and selling beefsteak
tomatoes (the "Fort Davis Project"). In order to induce Cogentrix to permit such
subsidiaries to execute such Agreement of Limited Partnership and contribute
such funds to the Fort Davis Project, Agro Power has agreed to grant to
Cogentrix a right of first option on all Future Projects (as hereinafter
defined) on the terms set forth herein. Without the agreement of Agro Power to
grant to Cogentrix this option, Cogentrix would not have allowed its
subsidiaries to enter into the Agreement of Limited Partnership or make the
related contributions to the Fort Davis Project.
Accordingly, in consideration of the premises, the mutual covenants and
conditions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Cogentrix and Agro
Power hereby agree as follows:
1. As used in this Agreement, the following terms shall have the following
meanings (such definitions to be equally applicable to both the singular and the
plural forms of the terms defined):
(a) "Affiliate" of any designated Person, means each Person which,
directly or indirectly, controls or is controlled by or is under common
control with such designated Person and, without limiting the generality of
the foregoing, shall include (a) any Person which beneficially owns or
holds fifty percent (50%) or more of any class of voting securities of such
designated Person or ten percent (10%) or more of the equity interest in
such designated Person and (b) any Person of which such designated Person
beneficially owns and holds fifty percent (50%) or more of any class of
voting securities or in which such designated Person beneficially owns or
holds ten percent (10%) or more of the equity interest. For the purposes of
this definition, the terms "controls", "controlled by" and "under common
control with," as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of voting securities or by contract or otherwise.
Notwithstanding the foregoing, (i) neither Cogentrix
- 1 -
<PAGE>
nor Agro Power, nor any of their affiliates or subsidiaries shall be deemed
to be Affiliates of one another solely as a result of the participation in
the Fort Davis Project or any Future Project, and (ii) EcoScience
Corporation, Inc. shall not be deemed to be an Affiliate of Agro Power.
(b) "Business Day" means a day other than a Saturday, a Sunday or any
other day on which commercial banks in North Carolina or New Jersey are
authorized or required by law or executive order to be closed.
(c) "Cash Equity Investment" means an Equity Investment acquired
solely for cash or cash equivalents.
(d) "Future Project" means the development, acquisition, owning or
agreement to operate by Agro Power or any of its Affiliates, of any
greenhouse facility at which fruit or vegetables are grown and which is
developed, acquired, or first owned or operated after the date hereof,
wherever located, other than the projects described on Schedule 1 attached
hereto and incorporated herein by reference.
(e) "Equity Investment" means common stock, preferred stock or other
shares of capital stock, interests in a limited liability company,
partnership interests in a limited or general partnership, or any similar
right to participate in the profits or losses of any Person or any other
security (other than debt that has no conversion features) including, but
not limited to, (i) any note, debenture or other instrument that is
convertible (at the option of the Person issuing it or the Person holding
it) into, or grants the right or option to acquire, any foregoing and (ii)
any note, debenture or other instrument that is subordinated to senior
debt.
(f) "Internal Rate of Return" (whether or not capitalized) means the
return on investment calculated in accordance with Schedule 2, attached
hereto and incorporated herein by reference.
(g) "Non-APD Equity Investment" means an Equity Investment made by any
Person other than Agro Power or any Affiliate of Agro Power.
(h) "Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or agency or other entity of whatever
nature.
2. (a) Agro Power hereby grants, itself and on behalf of and as agent for
its Affiliates, to Cogentrix an option to acquire not less than (i) one hundred
percent (100%) of the Non-APD Equity Investment in all Future Projects and (ii)
at least fifty percent (50%) of the Equity Investment in all Future Projects
whether or not Agro Power or its Affiliates otherwise desires or intends to
permit Non-APD Equity Investment in a Future Project. If Cogentrix exercises its
option under this Agreement, it must exercise the option with respect to all of
the Non-APD Equity Investment offered to it by Agro Power.
- 2 -
<PAGE>
(b) Any Equity Investment in any Future Project (other than a Future
Project that is solely the purchase of an existing greenhouse or an
agreement to manage such a greenhouse) offered or available to be made by
Cogentrix hereunder shall be for a Cash Equity Investment and shall
provide, and Agro Power shall (and shall cause its Affiliates to) structure
each such Cash Equity Investment to provide, Cogentrix with a preferential
return on each such Cash Equity Investment that is no less favorable than
the following:
First, Cogentrix and any other holder of a Cash Equity Investment
(including Agro Power, if applicable) in such Future Project (collectively,
the "Cash Equity Investors") will receive (sharing on a pro rata basis
based on their relative Cash Equity Investment in the Future Project)
ninety percent (90%) of all cash distributions to equity holders from such
Future Project until such time as such Cash Equity Investors have received
cash distributions from such Future Project that provide the Cash Equity
Investors with a [information omitted and subject to request for
confidential treatment]% Internal Rate of Return on their Cash Equity
Investment in such Future Project.
Thereafter, the Cash Equity Investors will receive (sharing on a pro
rata basis based on their relative Cash Equity Investment in the Future
Project) sixty-five and seven tenths percent (65.7%) of all cash
distributions to equity holders from such Future Project until such time as
such Cash Equity Investors have received cash distributions from such
Future Project that provide the Cash Equity Investors with, in the case of
the first Future Project offered to Cogentrix, [Information omitted and
subject to request for Confidential Treatment] Internal Rate of Return on
their Cash Equity Investment in such Future Project, and, in the case of
the second Future Project offered to Cogentrix, a [information omitted and
subject to request for confidential treatment]% Internal Rate of Return on
their Cash Equity Investment in such Future Project and, with respect to
all other Future Projects, a [information omitted and subject to request
for confidential treatment]% Internal Rate of Return on their Cash Equity
Investment in such Future Project.
Thereafter, such Cash Equity Investors in such Future Project will
receive fifty percent (50%) of all cash distributions to equity holders
from such Future Project.
For these purposes, Internal Rate of Return will be calculated at each
calendar quarter end and shall be calculated on an after-tax basis (which
shall mean after deducting Cogentrix's share of the notional project
Federal and state income tax (assuming for tax purposes that any investment
is made in a stand-alone tax-paying entity)).
3. Agro Power shall provide Cogentrix with a written description of each
Future Project in which Cogentrix may invest hereunder and of the terms of
Cogentrix's proposed Equity Investment which shall include a summary (in
reasonable detail) of the material terms of such Future Project and the bases
and assumptions used in creating related forecasts. At reasonable times and on
reasonable notice, Agro Power shall permit Cogentrix and its representatives
access to the project site, responsible personnel, records, contracts and such
other information as Cogentrix may reasonably request to confirm the summary
provided to it by Agro Power and to otherwise inspect and investigate the Future
Project in order to allow Cogentrix to make an informed decision of whether to
exercise its option hereunder with respect to such Future Project. Furthermore,
Agro
- 3 -
<PAGE>
Power shall provide Cogentrix and its representatives with reasonable access to
all third parties whose services or products are material to the Future Project.
Cogentrix shall have forty-five (45) days after its receipt of such written
description to complete its investigation of the Future Project and notify Agro
Power of its desire to make a Cash Equity Investment in the Future Project. If
Cogentrix gives notice to Agro Power that it desires to pursue a Cash Equity
Investment in the Future Project within such period, then Cogentrix and Agro
Power and their respective Affiliates shall negotiate in good faith towards the
execution of definitive agreements related to such Cash Equity Investment, it
being understood that at any time prior to the execution of such definitive
agreements, for any reason, Cogentrix may notify Agro Power of its decision to
terminate discussions with respect to such Future Project and any such notice
must be in writing and state the reason for its decision.
4. If Cogentrix does not exercise its right under Section 2 hereof to make
a Cash Equity Investment in a Future Project within the time allowed for it to
exercise such right under Section 3 hereof, then Agro Power or such Affiliate
may offer the Equity Investment in such Future Project to another Person but
only on terms no more favorable to such Person than those offered to Cogentrix.
Agro Power shall not, and shall not permit any of its Affiliates to, permit
Non-APD Equity Investments to be made in any Future Project on terms and
conditions more favorable than the terms and conditions offered to Cogentrix
hereunder.
5. Cogentrix shall have the option provided in this Agreement until the
earlier of:
(a) Such time as Cogentrix and its Affiliates have made Cash Equity
Investments in an initial aggregate amount of $20 million in Future
Projects, or
(b) if Cogentrix declines to acquire the interest being offered to it
in any Future Project offered by Agro Power or one of its Affiliates under
Section 2 hereof (which is a Future Project of the type described in
Section 2(b)) which provides at least the Internal Rate of Return described
in Section 2(b) [Information omitted and subject to request for
Confidential Treatment] on Cogentrix's proposed Cash Equity Investment
(using reasonable assumptions and forecasts) by the end of the fifth year
of operations and thereafter a Person (other than Agro Power or one of its
Affiliates) makes such Equity Investment in such Future Project on the same
or less favorable terms and conditions as were offered to Cogentrix.
6. Nothing in this Agreement shall require Cogentrix or any of its
Affiliates to participate in any Future Projects or acquire any Equity
Investments. Cogentrix and any of its Affiliates may decline at any time an
offer to make an Equity Investment in a Future Project for any or no reason,
without any liability or obligation to Agro Power or any of its Affiliates,
whether arising under contract, tort or any other legal theory, including, but
not limited to, liability for lost profits or other consequential, incidental,
special, exemplary or indirect damages that may be incurred or suffered by Agro
Power (even if Cogentrix has been advised of the possibility of such damages).
7. Except as contemplated by this Agreement, if Cogentrix makes or agrees
to make a Cash Equity Investment in any fruit or vegetable greenhouse project
(other than a greenhouse project which involves a cogeneration or power facility
developed by a third party in which
- 4 -
<PAGE>
Cogentrix has made an Equity Investment) which competes with any then existing
greenhouse project owned, operated or managed by Agro Power or one of its
Affiliates, then the option granted to Cogentrix hereunder shall expire.
8. Any provision of this Agreement which is invalid, prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such invalidity,
prohibition or unenforceability in any such jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
9. Neither this Agreement nor any rights or obligations hereunder, in whole
or in part, shall be assigned or otherwise transferred without Cogentrix's or
Agro Power's prior written consent. Cogentrix may exercise its option hereunder
with respect to any or all Future Projects itself or through one or more of its
now existing or hereafter formed or acquired Affiliates.
10. Any notice required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given and/or delivered (a) when
personally delivered, (b) when sent by telefax, (c) the second day following the
day on which the same has been delivered prepaid to a national courier service
(in the case of notices within the continental United States) or the third day
following the day on which the same has been delivered to an international
courier service (in the case of notices to be delivered across national
boundaries) or (d) in the case of notices within the United States, three (3)
days after the deposit in the mail, registered or certified, return receipt
requested and postage prepaid, in each case addressed to the party to whom such
notice is to be given at the following address(es), or at the most recent
address(es) specified by written notice given to the other party in the same
manner provided in this section; provided, however, that notice of an address
change shall not be effective until actually received:
Cogentrix: Cogentrix Energy, Inc.
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273-8110
Attention: General Counsel
Telefax: (704) 529-1006
Agro Power: Agro Power Development, Inc.
10 Alvin Court
East Brunswick, New Jersey 08816
Attention: President
Telefax: (908) 254-1710
11. Cogentrix and Agro Power shall keep (and shall cause their respective
Affiliates to keep) this Agreement and its terms confidential except in
connection with the enforcement of their rights hereunder and except as required
by law.
12. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of North Carolina, other than its rules regarding
choice of law.
- 5 -
<PAGE>
13. Each party hereto shall be deemed to be an independent contractor with
respect to the performance of its obligations and duties hereunder. Nothing in
this Agreement or the arrangement for which it is written shall constitute or
create a joint venture, partnership, agency or any other similar arrangement
between the parties. No party hereto shall have the authority to assume or
create obligations on behalf of the other party, and no party hereto shall take
any action which has the effect of creating the appearance of its having such
authority.
14. No failure of either party to enforce any provision hereof or to resort
to any remedy or to exercise any one or more alternate remedies and no delay in
enforcing, resorting to or exercising any remedy shall constitute a waiver by
that party of its right subsequently to enforce the same or any other provision
hereof or to resort to any one or more of such rights or remedies on account of
any such ground then existing or which may subsequently occur.
15. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same agreement.
16. Each party shall bear its own expenses in connection with this
Agreement and the rights and obligations granted and imposed hereunder except
that, in connection with the enforcement of this Agreement in an arbitral or
court proceeding, the prevailing party shall be entitled to reimbursement of its
reasonable attorney fees and expenses incurred in connection with such
enforcement.
17. This Agreement contains the final, complete and exclusive statement of
the agreement between the parties with respect to the transactions contemplated
herein and all prior written agreements and all prior and contemporaneous oral
agreements with respect to the subject matter hereof are merged herein. This
Agreement may not be amended, supplemented or modified (or any right or power
granted hereunder waived) except by a written instrument signed by the parties
hereto (or, in the case of a waiver, signed by the party to be bound thereby).
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assignees.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
duplicate originals as of the date first above written.
COGENTRIX ENERGY, INC. AGRO POWER DEVELOPMENT, INC.
By:____________________________ By:____________________________
Name:__________________________ Name:__________________________
Title:_________________________ Title:_________________________
- 6 -
<PAGE>
SCHEDULE 1
TO
AGREEMENT REGARDING FUTURE PROJECTS
1. The following types of greenhouse project developments are specifically
excluded from the option granted by Agro Power to Cogentrix under the
Agreement Regarding Future Projects.
A. Any greenhouse project developed by a third party in which
participation by Agro Power or its Affiliates is solely as a lessee
under a lease agreement or a management operator under a management
agreement, neither of which involves an Equity Investment by Agro
Power or any of its Affiliates.
B. Any greenhouse project developed by a third party in which
participation by Agro Power or its Affiliates is solely as a marketing
agent under a marketing agreement and which involves no Equity
Investment by Agro Power or any of its Affiliates.
C. Any operating greenhouse project acquired by Agro Power or its
Affiliates which involves no Equity Investment by Agro Power or any of
its Affiliates.
D. Any greenhouse project identified and developed by a third party
developer in which Agro Power has been invited to participate in such
development effort with no Equity Investment by Agro Power or any of
its Affiliates, and in which the greenhouse development was initiated
by such third party developer.
2. Agro Power is currently working on the following third party greenhouse
developments which are excluded:
Developer Location
--------- --------
1. AAS Services, Inc. & Sagamore Corp. Pennsylvania
2. Bently Simonson, Inc. California
3. ATDM Corp. New York
4. Independent Energy Investors Colorado
5. R.D. Environmental Oregon
6. Gahagan & Associates Maine
3. The following greenhouse projects and marketing agreements which are
currently being developed internationally with the following partners in
the following locations are excluded:
Partner Location
------- --------
1. Village Farms of Morocco Casablanca, Morocco
2. International APD (IAPD) United Kingdom
3. Gas Prom Russia
<PAGE>
SCHEDULE 2
TO
AGREEMENT REGARDING FUTURE PROJECTS
Calculation of Internal Rate of Return
Internal Rate of Return Calculation
The calculation of the Internal Rate of Return in connection with determining
the First Priority Return and Second Priority Return will be based upon the cash
inflows and cash outflows for Cogentrix GP and Cogentrix LP. The Internal Rate
of Return shall be computed utilizing Microsoft Excel software version 5.0. The
Internal Rate of Return shall be computed utilizing the @XIRR function in Excel.
For purposes of calculating the Internal Rate of Return, the cash inflows and
cash outflows to Cogentrix GP and Cogentrix LP shall consist solely of the
following:
Partner Contributions
All contributions made by Cogentrix GP and Cogentrix LP will be reflected
as a cash inflow as of the date such contribution was received by the
Partnership. Cogentrix GP and Cogentrix LP will be credited for a partner
contribution at any time such Partner funds cash into the Partnership. In
addition, to the extent Cogentrix Energy, Inc. or any of its Affiliates
funds cash directly into the Partnership or pays amounts to other persons
to fulfill obligations under the Partnership Agreement or any of the
Project Documents or Project Loan Documents or incurs costs or fees
associated with securing an obligation to make a contribution to the
Partnership, then such funding into the Partnership or such other payments
and/or such costs or fees will be deemed a capital contribution by
Cogentrix GP and Cogentrix LP as of the day on which such funding or
payment is made or such costs or fees are incurred.
Distributions to Partners
All cash distributions will be reflected as a cash outflow on a net
After-Tax basis (based on allocations of the Partnership's taxable income
(loss) in accordance with Section 4.1) as of the date such cash
distribution was received by the Partner. In addition, any construction
profits received by Cogentrix Energy, Inc. in excess of $400,000 shall be
considered a distribution to Cogentrix GP and Cogentrix LP (in an aggregate
amount equal to such excess) for purposes of the Internal Rate of Return
calculation.
The Internal Rate of Return calculation shall be performed by Agro Power as of
the end of each calendar quarter and is subject to the approval of Cogentrix GP
and Cogentrix LP.
All capitalized terms used in this Schedule 1.1(a) and not otherwise defined
herein shall have the meaning set forth in the Agreement of Limited Partnership
dated February 6, 1996 by and among Cogentrix of Fort Davis I, Inc., Cogentrix
of Fort Davis II, Inc., Village Farms of Delaware, L.L.C. and Village Farms,
L.L.C.
Exhibit 10.61
GROUND LEASE
Between
THE BUFFALO ENTERPRISE DEVELOPMENT CORPORATION
Landlord,
and
AGRO POWER DEVELOPMENT, INC.
Tenant.
Dated: As of September 4, 1997
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT is made as of the 4th day of September, 1997 between
THE BUFFALO ENTERPRISE DEVELOPMENT CORPORATION, a not-for profit local
development corporation organized under the laws of the State of New York,
having its principal office and place of business at 620 Main Street, Buffalo,
New York 14202 (the "Landlord") and AGRO POWER DEVELOPMENT, INC., a New Jersey
corporation, having an office at 10 Alvin Court, East Brunswick, New Jersey
08816 (the "Tenant").
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Unless otherwise defined herein, the following
terms shall have the respective meanings specified below:
(a) "Affiliate" shall mean Tenant or any party controlled by or
controlling Tenant.
(b) "Assignment" shall mean any permitted assignment to a third party
by Tenant of all of its rights and obligations under this Lease.
(c) "Assignee" shall mean the assignee under an Assignment.
(d) "Commencement of Work" shall mean the date on which the excavation
work in connection with the construction of the Improvements has begun. To
"Commence Work" shall have the correlative meaning.
(e) "Commencement Date" shall mean the date hereof.
(f) "Completion Date" shall mean (1) the date upon which the
Improvements have been substantially completed in accordance with generally
accepted construction practices and have been certified to Landlord as such
by Tenants, based on certificates of completion reasonably satisfactory to
Landlord and a permanent and unconditional certificate of occupancy has
been issued therefor, and (2) with respect to the change, alteration or new
construction of the Improvements, or any Restoration of the Improvements,
that point in time when the Improvements have been substantially completed
in accordance with generally accepted construction practices and have been
certified as such by Landlord and a permanent and unconditional certificate
of occupancy has been issued for the completed work.
(g) "Construction Period" shall mean the period commencing with the
Commencement of Work for the Improvements, or Restoration, as the case may
be, and ending with the Completion Date of the Improvements or Restoration,
as the case may be.
(h) "Contract" shall mean that certain Contract for Sale of Land for
Redevelopment dated July 2, 1997 by and between City of Buffalo and
Landlord.
<PAGE>
(i) "Default" shall mean any condition or event which constitutes or
would, after notice or lapse of time, or both, constitute an Event of
Default.
(j) "Demised Premises" shall mean the Land and all Easements, rights
and rights of way and licenses, but shall not include the Improvements or
Tenant's fixtures.
(k) "Development Costs" shall mean the costs of developing and
constructing the Improvements.
(l) "Easements" shall mean those easements under, over and across the
property of the Landlord adjacent to the Land which are reasonably
necessary for access to the Land and to furnish services (including
utilities) to the Improvements.
(m) "Event of Default" shall mean any of the acts or omissions defined
in Section 16.1 of this Lease.
(n) "Governmental Authorities" means all federal, state and municipal
governments, courts, departments, commissions, boards, and officers having
jurisdiction over the Demised Premises, the Improvements or the
construction thereof, or over, Landlord, Tenant or any Subtenant.
(o) "Governmental Requirement(s)" means all present and future laws,
ordinances, orders, rules, regulations and requirements of any Governmental
Authority having jurisdiction over the Improvements or the Demised Premises
or the use of either of them or this Lease and all building permits and
other licenses and approvals required by the appropriate Governmental
Authorities in connection with the Improvements or this Lease.
(p) "Hazardous Materials" shall have the meaning ascribed to it in
Section 5.3.
(q) "Impositions" shall mean all taxes, all assessments, water, sewer,
or other rents and charges, excises, levies, fees (including, without
limitation, licenses, permits, inspections, authorizations and similar
fees), and all other governmental charges, whether general or special,
ordinary or extraordinary, foreseen or unforeseen, which relate to the
ownership of the Land and the Improvements or the use or occupancy of the
Land and the Improvements.
(r) "Improvements" shall mean construction of a 18+/- acre greenhouse
facility to be used solely for agricultural purposes, concrete pad, parking
areas, driveways, utilities and all other appropriate appurtenances and
improvements, including, but not limited to, retention pond, distribution
and heating plant facilities used solely for the purpose of servicing the
aforesaid greenhouse facility and underground conduits and piping related
thereto.
(s) "Land" shall mean that certain parcel of real property described
in Exhibit A attached hereto.
(t) "Landlord" shall mean the Landlord named herein or any assignee or
other successor in interest of the named Landlord, which at the time is the
owner of the Land.
2
<PAGE>
(u) "Lease" shall mean this agreement between the Landlord and the
Tenant, including any renewals or amendments.
(v) "Leasehold Estate" shall mean the leasehold estate created by this
Lease.
(w) "Leasehold Mortgage" shall mean any mortgage or other real
property security instrument by which Tenant may encumber, hypothecate or
mortgage all or any part of the Leasehold Estate pursuant to the terms of
this Lease.
(x) "Leasehold Mortgagee" shall mean the holder of any Leasehold
Mortgage.
(y) "Municipality" shall mean the City of Buffalo.
(z) "Plans and Specifications" shall mean the site plan, construction
plans, drawings and related drawings for the Improvements which are in
sufficient detail to obtain a building permit from the Municipality.
(aa) "Project" shall mean the construction and operation of the
Improvements.
(ab) "Rent" shall mean all amounts payable by Tenant to Landlord
pursuant to this Lease.
(ac) "Restoration" shall have the meaning ascribed to it in Section
8.2.
(ad) "Sublease" shall mean a sublease of space in the Improvements
between a Subtenant and Tenant.
(ae) "Subtenant" shall mean the subtenant under a Sublease for space
in the Improvements.
(af) "Tenant" shall mean the Tenant herein named or any assignee or
other successor in interest of the Tenant, which at the time in question is
the owner of the Leasehold Estate; but the foregoing provisions of this
subsection shall not be construed to relieve the Tenant or any assignee or
other successor in interest of the Tenant from the full and prompt payment,
performance and observance of the covenants, obligations, conditions to be
paid, performed and observed by the Tenant under this Lease.
(ag) "Unavoidable Delay" shall mean delays due to strikes, act of God,
inability to obtain labor or materials, Governmental Requirements, removal
of Hazardous Materials discovered at any time after the Commencement Date,
enemy action, civil commotion, fire, unusual inclement weather, unavoidable
casualty or similar causes beyond the reasonable control of Tenant.
3
<PAGE>
ARTICLE II
PREMISES; TERM OF LEASE; RENT
Section 2.1. Demise. The Landlord does hereby demise and lease to Tenant,
and Tenant does hereby hire and take from Landlord, the Demised Premises.
Section 2.2. Term. A. This Lease shall have an initial term (the "Initial
Term") of Fifteen (15) years beginning on the Commencement Date and ending on
the day immediately preceding the fifteenth (15th) anniversary of the
Commencement Date.
B. Provided Tenant is not then in default hereunder at the time the option
herein is exercised and at the commencement of the "Renewal Term" (hereinafter
defined), Tenant may, at Tenant's option, extend the Initial Term for a period
of Five (5) years commencing on the first day occurring after the end of the
Initial Term ("Renewal Term Commencement Date") and ending on the day
immediately preceding the 5th anniversary of the Renewal Commencement Date
("Renewal Term"). Tenant shall give Landlord notice of the exercise of Tenant's
option at least One Hundred Eighty (180) days prior to the expiration of the
Initial Term.
C. The Initial Term and the Renewal Term provided herein, if any, are
hereinafter collectively referred to as the "Term".
Section 2.3. Payment of Rent. Tenant agrees to pay to Landlord, at the
address provided for in Article XVII, each year during the Term of this Lease,
annual base rental in the sum of Thirty Thousand and 00/100 Dollars
($30,000.00). The annual base rent shall be payable in equal quarterly
installments in advance of Seven Thousand Five Hundred and 00/100 Dollars
($7,500.00), each installment to be due on the first day of each and every third
month of each "Lease Year" during the Term (Lease Year shall mean the 12-month
period commencing on the first day of the first full month following the
Commencement Date and each successive 12-month period thereafter during the
Term) provided, however, if the Commencement Date shall not occur on the first
day of a month, (i) the initial quarterly installment shall be due on the first
day of the first full month following the Commencement Date, and Tenant shall
pay to Landlord on the Commencement Date as rent for the partial month in which
the Commencement Date shall occur a sum equal to one monthly installment of the
annual base rent payable prorated to reflect the number of days in said partial
month, and (ii) the last quarterly installment due during the Term shall be
adjusted to reflect a payment due which is equal to a quarterly installment less
the prorated portion of the last calendar month which is not within the Term.
Section 2.4. Additional Rent. As additional rent, Tenant shall pay all
Impositions and all other sums due and payable hereunder. In the event of
Tenant's failure after any applicable grace or cure period to pay any sums,
costs, expenses or deposits which Tenant in any of the provisions of this Lease
assumes or agrees to pay and/or deposit, Landlord shall have (in addition to all
other rights and remedies) all of the rights and remedies provided for herein or
by law in the case of non-payment of rent.
Section 2.5. Net Lease. This Lease is a net lease and the Rent shall be
paid (i) without notice or demand, and without counterclaim, set-off, defense,
suspension or deferment,
4
<PAGE>
of any kind, and without deduction, abatement or diminution of any kind. Except
as otherwise expressly provided herein, this Lease shall not terminate, and
Tenant shall not have any right to terminate or avoid this Lease or be entitled
to the abatement (in whole or in part) of any rents hereunder or any reduction
thereof, nor shall the obligations and liabilities of Tenant hereunder be in any
way affected for any reason. The obligations of Tenant hereunder shall be
separate and independent covenants and agreements. Nothing in this Lease shall
prevent Landlord from suing the Tenant for damages or specific performance. Each
payment made by Tenant to Landlord pursuant to this Lease shall be final, and
Tenant shall not seek to recover all or any part of such payment from Landlord
for any reason whatsoever.
Section 2.6. Late Fee. In the event an installment of rent due hereunder is
not paid within ten (10) days after it becomes due, a late fee equal to ten
percent (10%) of the amount due will be charged.
ARTICLE III
DEVELOPMENT OF THE LAND
Section 3.1. Tenant's Obligation to Develop Land.
(a) Scope of Development. Tenant will improve the Land by constructing
thereon the Improvements pursuant to Plans and Specifications prepared by
Tenant. Landlord hereby grants and acknowledges its approval of such Plans and
Specifications and agrees that the approval rights set forth in Sections 3. 1
(c) and (d) hereof shall not apply to the initial construction of the
Improvements.
(b) Schedule of Performance. The Land shall be developed by Tenant in
accordance with the time schedule set forth in Exhibit B attached hereto (the
"Schedule of Performance"), subject to Unavoidable Delays. Tenant shall submit
to Landlord on or before each deadline set forth in the Schedule of Performance
satisfactory evidence of the satisfaction of such deadline. The satisfaction of
the matters set forth in the Schedule of Performance by the dates set forth
therefor is an essential part of this Lease, time being of the essence. In the
event that Landlord grants an extension of any such date, Landlord shall not be
deemed thereby to be waiving any other rights hereunder or implying the
extension of any other dates.
(c) Approvals for Alterations, Additions or Modifications of Improvements.
During the Term of this Lease, Tenant shall be entitled to perform or undertake
alterations, additions, improvements or construction (each an "Alteration") to,
in connection with, or in the Improvements and on the Land in accordance with
plans and specifications prepared by Tenant. Prior to undertaking any
Alteration, Tenant shall prepare and submit site plans, construction plans,
drawings and related documents to Landlord for written approval. Landlord shall
either approve or disapprove in writing any of the items submitted for approval
to Landlord within 30 days of Landlord's receipt thereof. Any disapprovals shall
be accompanied by a written explanation setting forth in detail the reasons for
disapproval. Failure by Landlord to express disapproval of any such item within
such 30 day period shall constitute Landlord's approval of such item. The
criteria used by Landlord in approving or disapproving any such item shall be
(1) quality of general design evaluated pursuant to customary industry
standards, and (2) the suitability of the landscaping on the Land to the
adjacent land owned by Landlord. In
5
<PAGE>
the event Landlord disapproves of any such item, Tenant shall cause such item to
be appropriately revised as soon as possible after receipt of a notice of
disapproval and resubmit the same to Landlord for approval pursuant to this
Section 3.1. Landlord and Tenant agree to cooperate reasonably each with the
other in resolving any objections of the other to such item and/or requested
modifications by the other. The provisions of this Section 3.1 with respect to
notice, time for and method of approval shall apply to any such revised item
resubmitted to Landlord for approval. Upon approval of any such item, whether
directly or through Landlord's failure to disapprove the item within the time
set forth in this Section 3.1, upon Tenant's request Landlord shall execute and
return a copy of such item to Tenant marked approved by Landlord with the date
of such approval.
It is understood and agreed that any approval issued by Landlord pursuant
hereto shall not constitute approval from any Governmental Authority which may
be required.
(d) Changes to Plans and Specifications. Tenant may make changes and
modifications which are not material to the plans and specifications for any
Alteration or to resolve a minor inconsistency or ambiguity without obtaining
Landlord's prior approval. No material modification or alteration may be made to
the plans and specifications for any Alteration without the prior written
consent of Landlord.
(e) Reports and Information. During the Construction Period, Tenant shall
provide to Landlord copies of all documents and correspondence relative solely
to the construction of the Improvements which it provides to the Leasehold
Mortgagee, it being understood and agreed that such documents and correspondence
shall not include the financial aspects of the construction or the Tenant.
Copies of all soils reports, surveys, hazardous wastes or toxic reports,
feasibility studies and other similar written materials prepared for Tenant with
respect to the Land shall be delivered to Landlord within ten (10) days after
receipt by Tenant.
(f) Obligation to Develop Land. Subject to Unavoidable Delays, Tenant
agrees to: (1) Commence Work on the Improvements, on or before the first day of
the 2nd full calendar month following the Commencement Date, in accordance with
the timetable set forth therefor in the Schedule of Performance and in
compliance with all Governmental Requirements and, (2) to diligently proceed to
substantially complete the lien-free completion of the Improvements in a good
and workmanlike manner and substantially in compliance with the Plans and
Specifications and other drawings pursuant to the Schedule of Performance on or
before the first day of the 12th full calendar month following the Commencement
of Work.
(g) Efforts to Sublease. To the extent Subleases are permitted hereunder,
Tenant shall at all times use diligent and commercially reasonable efforts to
enter into Subleases with Subtenants at market rentals which shall obligate the
Subtenant thereunder to pay or reimburse Tenant as sublessor thereunder for
Impositions, insurance, utilities, maintenance and other items of expense
(either on a net basis or above specified levels) relating to such Sublease
space, on terms reasonably consistent with general market conditions.
6
<PAGE>
(h) Use of Plans. The contracts with any architect, other design
professional or any general contractor shall provide, in form and substance
reasonably satisfactory to Landlord, for the assignment thereof to Landlord as
security to Landlord for Tenant's performance hereunder, and Landlord shall be
furnished with any such contract, together with the further agreement of the
parties thereto, that if this Lease is terminated due to Tenant's default,
Landlord may, at its election, use any Plans and Specifications to which Tenant
is then entitled pursuant to any such contract upon the payment of any sums due
to any party thereto. The above-described assignment and the Landlord's right to
elect to use the Plans and Specifications as described above shall be
subordinate to and shall not defeat or in any way interfere with the rights of
the Leasehold Mortgagee in and to any such contracts and Plans and
Specifications so assigned and Landlord shall execute such agreements as the
Leasehold Mortgagee may reasonably request to confirm such subordination.
(i) As-Built Plans and Specifications. Upon the Completion Date, Tenant
shall provide Landlord with a complete and legible full-size set of all as-built
Plans and Specifications (including all operating manuals for mechanical
systems) regarding all of the Improvements, as such Plans and Specifications may
be amended from time to time, within 30 days after such as-built Plans and
Specifications are prepared or after such amendment, as the case may be.
Section 3.2. Construction.
(a) Conditions to Commencement of Construction. Tenant shall satisfy the
following conditions in accordance with the time schedule set forth in the
Schedule of Performance and in no event shall Tenant commence any construction
on the Improvements until the following conditions have been satisfied or waived
by Landlord, in addition to other conditions and requirements imposed by this
Lease:
(1) Tenant shall have obtained all permits and other governmental
approvals necessary to commence such construction; and
(2) If Tenant intends to employ a general contractor for the
construction of the Improvements, Tenant shall have entered into a complete
and binding contract which such general contractor and said contract shall
be required to comply with all applicable Governmental Requirements.
(b) Restrictions: Governmental Permits. No Improvements shall be
constructed or maintained unless the same conform to and are consistent with
applicable zoning for the Land, all other applicable Governmental Requirements
(including without limitation any conditional use permit or other license,
permit, or certificate required to be issued by Governmental Authorities in
connection with the Improvements). Before commencement of construction or
development of the Improvements, Tenant shall, at Tenant's sole cost and
expense, secure any and all applicable permits, licenses and other approvals
which may be required by any Governmental Authority having jurisdiction over
such construction, development or work. Landlord shall provide its reasonable
cooperation to assist Tenant in securing any permit, license or approval
required in connection with Section 3.2(b); provided that Tenant shall pay all
reasonable costs and expenses of Landlord associated therewith, if any.
7
<PAGE>
Notwithstanding the foregoing sentence, Landlord shall have no implied
obligation to cause such permits to be issued. Tenant shall provide a copy of
each such permit, license or other approval to Landlord prior to commencing the
subject work or activity.
(c) Construction Standards. Subject to Unavoidable Delay, all construction,
alteration or repair work permitted herein shall be accomplished expeditiously,
diligently and in accordance with good engineering practices. Tenant shall take
all reasonably necessary measures to minimize any damage, disruption or
inconvenience caused by such work and make adequate provision for the safety and
convenience of all persons affected thereby. Tenant shall pay (or cause to be
paid) all costs and expenses associated with such work and shall indemnify and
hold Landlord harmless from all damages, lawsuits and claims attributable to the
performance of such work. Dust, noise and other effects of such work shall be
controlled using commercially accepted methods customarily utilized in order to
control deleterious effects associated with construction projects in a populated
or developed area.
(d) Costs of Construction. The entire cost and expense of constructing any
and all Improvements shall be borne and paid by Tenant.
(e) Rights of Access. For the purposes of assuring compliance with this
Lease, representatives of Landlord shall have the right of access to the Land
without charges or fees, at normal construction hours, during the period of
construction subject to the rights of Subtenants. Nothing in this Lease,
however, shall be interpreted to impose an obligation upon Landlord to conduct
such inspections or any liability in connection therewith.
(f) Subcontracts. All subcontracts entered into by Tenant and/or the
general contractor relating to the construction of the Improvements shall comply
with all applicable Governmental Requirements.
ARTICLE IV
TAXES AND ASSESSMENTS
Section 4.1. Real Property Taxes. Tenant covenants and agrees to pay all
Impositions when due during the term of this Lease.
Section 4.2. Tenant's Right to Contest. Tenant shall have the right at its
own expense to contest the amount or validity, in whole or in part, of any
Imposition by appropriate proceedings diligently conducted in good faith but
only after payment of such Imposition unless such payment would operate as a bar
to such contest or interfere with the production thereof, in which event,
notwithstanding the provisions of Section 4.1 hereof, payment of such Imposition
shall be postponed.
Upon the termination of such proceedings, it shall be the obligation of
Tenant to pay or cause to be paid the amount of such Imposition or part thereof
as finally determined in such proceedings and the payment of which may have been
deferred during the prosecution of such proceedings, together with any costs,
fees (including counsel fees), interest, penalties or other liabilities in
connection therewith which are deemed a part of an Imposition.
8
<PAGE>
ARTICLE V
USE OF DEMISED PREMISES
Section 5.1. Use. Tenant shall use the Demised Premises for the Project
only and for no other purpose.
Section 5.2. Title to Improvements and Fixtures. Subject to the provisions
of Article XXI, the Improvements are and shall be the property of the Tenant or
any party taking title through the Tenant by means of a deed in lieu of
foreclosure or foreclosure during, and only during, the Term of this Lease. At
all times during the Term of this Lease, the Improvements shall not be conveyed,
transferred or assigned unless such conveyance, transfer or assignment shall be
in compliance with the provisions of Article X, and at all such times the holder
of the Leasehold Estate shall be the owner of the Improvements.
Section 5.3. Environmental Compliance. Tenant shall comply with, and shall
include covenants in the Subleases with all of its Subtenants to cause them to
comply with, federal, state and local laws, ordinances or regulations relating
to: (1) industrial hygiene, (2) the environmental conditions on, under or about
the Demised Premises including, but not limited to, soil and groundwater
conditions, and (3) the use, generation, manufacture, production, storage or
disposal on, under, or about the Demised Premises or transportation to or from
the Demised Premises of flammable explosives, radioactive materials, hazardous
wastes, toxic substances or related injurious materials, whether injurious by
themselves or in combination with other materials (collectively, "Hazardous
Materials"). For the purpose of this Lease, Hazardous Materials shall include
but not be limited to substances defined as "hazardous substances," "hazardous
materials," or "toxic substances" in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et
seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
seq.; Articles 15 and 27 of the New York State Environmental Conservation Law;
and in the regulations adopted and publications promulgated from time to time
pursuant to said laws.
ARTICLE VI
REPAIRS COMPLIANCE WITH LAWS, ALTERATIONS
Section 6.1. Repairs. Tenant shall at all times during the Term of this
Lease, at Tenant's sole cost and expense, keep the Demised Premises, the
Improvements and all sidewalks, driveways, parking lots and curbs adjacent
thereto in good order, condition and repair, ordinary wear and tear excepted,
and in such condition as may be required by law and by the terms of any
insurance policies carried by Tenant, whether or not such repair shall be
interior or exterior, and whether or not such repair shall be of a structural
nature, and whether or not the same can be said to be within the present
contemplation of the parties hereto.
Section 6.2. Compliance with Laws. Tenant shall at all times during the
Term of the Lease, at Tenant's own cost and expense, perform and comply with all
laws, rules, orders, ordinances, regulations, and requirements now or hereafter
enacted or promulgated, of every Governmental Authority, and of any agency
thereof, relating to the Demised Premises, or the Improvements, or the
facilities or equipment therein, or the streets, sidewalks, vaults, vault
9
<PAGE>
spaces, curbs and gutters adjoining the Demised Premises, or the appurtenances
to the Demised Premises, or the franchises and privileges connected therewith,
whether or not such laws, rules, orders, ordinances, regulations, or
requirements so involved shall necessitate structural changes, improvements,
interference with use and enjoyment of the Demised Premises, replacements, or
repairs, extraordinary as well as ordinary, and Tenant shall so perform and
comply, whether or not such laws, rules, orders, ordinances, regulations or
requirements shall now exist or shall hereafter be enacted or promulgated, and
whether or not such laws, rules, orders, ordinances, regulations or requirements
can be said to be within the present contemplation of the parties hereto.
Tenant shall have the right, provided it does so with due diligence and
dispatch, to contest by appropriate legal proceedings, without cost or expense
to Landlord, the validity of any law, rule, order, ordinance, regulation or
requirement of the nature hereinabove referred to in this Article VI. Tenant may
postpone compliance with such law, rule, order, ordinance, regulation, or
requirement until the final determination of such proceedings, only so long as
such postponement of compliance will not subject Landlord to any criminal
prosecution, or any other liability of any kind against the reversion of the
Demised Premises or the Improvements thereon which may arise by reason of
postponement or failure of compliance with such law, rule, order, ordinance,
regulation, or requirement, and Tenant shall indemnify and hold Landlord
harmless from the same. No provisions of this Lease shall be construed so as to
permit Tenant to postpone compliance with such law, rule, order, ordinance,
regulation or requirement if any sovereign, municipal, or other governmental
authority shall threaten to carry out any work to comply with the same or to
foreclose or sell any lien affecting all or any part of the Demised Premises
which shall have arisen by reason of such postponement or failure of compliance.
Section 6.3. Alterations. Tenant shall have the right to make any
alteration. addition or modification to the Demised Premises or the Improvements
provided such alteration, addition or modification is (i) in compliance with all
applicable Governmental Requirements, (ii) consistent with and a part of the
stated use and purpose of the Improvements set forth in Section 1.1 and (iii)
constructed pursuant to and in accordance with Article III provided, however,
the requirements contained in (iii) shall not apply in the case of an interior
alteration costing less than $250,000.00 including labor and materials.
ARTICLE VII
INSURANCE
Section 7.1. Public Liability. Tenant shall secure and maintain
comprehensive general public liability insurance for bodily injury, death, or
property damage occurring on, in or about the Demised Premises, which insurance
shall have total combined single limits of not less than Five Million Dollars
($5,000,000) per occurrence. Such insurance shall have no deductible. If, by
reason of changed circumstances or economic conditions the insurance amounts
referred to in this Lease become inadequate in Landlord's judgment reasonably
exercised, Tenant shall increase the amounts of such insurance promptly upon
Landlord's request.
Section 7.2. Coverage Requirements. Any insurance carried or secured by
Tenant in connection with the Demised Premises shall be carried in favor of
Landlord, Tenant and the Leasehold Mortgagee as the parties insured and shall
fully protect Landlord, Tenant and
10
<PAGE>
Leasehold Mortgagee as their respective interests may appear. Such insurance
shall be written by companies that are nationally recognized and authorized to
do business in New York State and acceptable to Landlord, such acceptance not to
be unreasonably withheld.
Section 7.3. Cancellation; Non-Renewal. Every policy referred to in Section
7.1 of this Lease shall, to the extent obtainable, provide that (a) no
cancellation, non-renewal, reduction or material amendment in the coverage
afforded under said policies will be effective until at least 30 days' prior
written notice of such cancellation, non-renewal, reduction or material
amendment has been given to Landlord in accordance with Article XVII of this
Lease and (b) that the interests of the Landlord shall not be invalidated by any
act or negligence of Tenant or Landlord or any person or entity having an
interest in the Demised Premises, by occupancy or use of the Demised Premises
for purposes more hazardous than permitted by such policy, or by any foreclosure
or other proceedings relating to the Demised Premises. Tenant shall promptly
advise Landlord of any policy cancellation, reduction, non-renewal or amendment
which adversely affects Landlord.
Section 7.4. Copies of Policies. Prior to the effective date for any
insurance required by this Article, Tenant shall deliver to Landlord either
certified copies of the policies for such insurance or certificates of insurance
reasonably satisfactory to Landlord evidencing the existence of all insurance
coverages that are required to be maintained by Tenant under this Article. Any
insurance required under this Article may be provided under such blanket
policies as are then customary for other properties owned, leased or occupied by
Tenant, provided that the coverage allocated to or available for the Demised
Premises, and the interest of the Landlord thereon, is not less than the
coverage required by this Article as separately stated.
ARTICLE VIII
DESTRUCTION AND RESTORATION
Section 8.1. Tenant's Restoration of Improvements. In case of damage to or
destruction of the Improvements or any part thereof by fire or other cause,
Tenant, at its option and its sole cost and expense, shall either (i) restore
the same as nearly as possible to their value, condition and character
immediately prior to such damage or destruction, or (ii) terminate the Lease.
Tenant shall notify Landlord of its election to restore the Improvements or
terminate the Lease before the 30th day after the fire or other casualty. In the
event Tenant elects to restore the Improvements, such restoration shall be
commenced with due diligence and in good faith, and prosecuted with due
diligence and in good faith, Unavoidable Delays excepted. In the event Tenant
elects to terminate the Lease, Tenant shall, at Landlord's option, raze the
Improvements so damaged or destroyed. The duty imposed by this provision, if so
exercised by Landlord, to raze the Improvements shall include, but not be
limited to, the duty to demolish and remove all basements and foundations, fill
all excavations, return the surface to grade and leave the premises safe and
free from debris and hazards. Nothing contained in this section shall modify
Landlord's right to acquire title to the Improvements as otherwise set forth in
this Lease.
Section 8.2. Application of Insurance Proceeds. In the event Tenant elects
to restore the Improvements pursuant to Section 8.1, all insurance proceeds paid
as provided herein, on account of any damage, loss or destruction, less the
actual cost, fees and expenses, incurred by Tenant, Landlord or any Leasehold
Mortgage in connection with the adjustment of any such
11
<PAGE>
damage, loss or destruction, which costs and expenses shall be paid to Landlord
or any Leasehold Mortgagee, as the case may be, shall be applied, (subject to
reasonable provisions for the disbursement thereof included in any Leasehold
Mortgage) toward the payment of the cost of restoration, repairs, replacements,
rebuilding or alterations, including the cost of demolition and temporary
repairs and for the protection of property pending completion of permanent
restoration, repairs, replacements, rebuilding or alterations (all of which
temporary repairs, protection of property and permanent restoration, repairs,
replacement, rebuilding or alterations are hereinafter collectively referred to
as the "Restoration"), and, subject to reasonable terms for disbursement
included in any Leasehold Mortgage, shall be paid out from time to time to
Tenant or in accordance with its directions, as such Restoration progresses,
upon the written request of Tenant which shall be accompanied by all
certificates, invoices. and releases that may then be necessary to protect
Landlord and the Demised Premises from any lien, charge or liability and by the
written approval of the Leasehold Mortgagee, if any, or Landlord if there is
then no Leasehold Mortgagee.
Upon compliance with the foregoing provisions of this Section, out of such
insurance money there shall be paid to Tenant or to such person(s) as may be
reasonably designated by Tenant the respective amount stated in such request to
have been paid by Tenant or to be due to such person(s), as the case may be.
If the insurance money, less the actual cost, fees and expenses, if any,
incurred by Landlord, Tenant and/or the Leasehold Mortgagee in connection with
the adjustment of the loss (the "Net Insurance Proceeds"), shall be insufficient
in the reasonable judgment of Landlord to pay the entire cost of such
Restoration, Tenant shall, to Landlord's reasonable satisfaction, arrange to pay
the deficiency prior to commencement or continuation of construction.
Additionally, if the estimated cost of such Restoration exceeds the Net
Insurance Proceeds by either (a) 5% of the then market value of the Improvements
at the time of such Restoration, or (b) 10% of the value of Tenant's equity in
the Improvements, Landlord may require Tenant, at Tenant's sole cost and
expense, to furnish Landlord with a performance bond and surety bond or other
assurances of completion as shall be satisfactory to Landlord.
Subject to the reasonable terms for disbursement included in any Leasehold
Mortgage, upon the completion and payment in full of the Restoration and the
expiration of all applicable lien periods, and so long as there is no default
under the terms, conditions, covenants and agreements of this Lease, any balance
of the insurance proceeds remaining to be paid shall be paid to Tenant or to
Leasehold Mortgagee, as their interests may appear.
Section 8.3. No Release of Tenant's Obligations. No destruction of, or
damage to the Improvements or any part thereof by fire or any other cause shall
permit Tenant to surrender this Lease or shall relieve Tenant from its
obligations to pay the full Rent payable under this Lease or from any of its
other obligations under this Lease, and Tenant waives any rights now or
hereafter conferred upon it by statute or otherwise to quit or surrender this
Lease or the Demised Premises or any suspension, diminution, abatement or
reduction of rent on account of any such destruction or damage, including
specifically the provisions of Section 227 of the New York Real Property Law.
12
<PAGE>
ARTICLE IX
FEE MORTGAGES
Section 9.1. Current Mortgage. Landlord currently represents that the Land
is not currently subject to any mortgage.
Section 9.2. Future Mortgages. Landlord covenants that any mortgage
encumbering the Land during the term hereof shall contain a provision
substantially similar to the following:
"That neither the mortgagee, its successors
or assigns, nor any purchaser at a
foreclosure sale under such mortgage, nor any
transferee under a deed in lieu of
foreclosure under such mortgage shall have
any greater rights with respect to [this
Lease] than the rights granted to the
landlord under the terms of [this Lease]."
ARTICLE X
ASSIGNMENT, SUBLETTING, ETC.
Section 10.1. Prohibited Transfers.
(a) No Rights to Successors. No voluntary or involuntary successor in
interest shall acquire any rights or powers under this Lease.
(b) No Assignment. Tenant may not assign this Lease or any interest herein,
or otherwise sell, transfer or convey any right, title or interest Tenant may
have in the Demised Premises, without first obtaining the written consent of
Landlord which consent may be withheld by Landlord in its sole and absolute
discretion. Notwithstanding the immediately preceding sentence to the contrary,
Landlord's consent shall not be required for an assignment of this Lease to an
"Affiliated Entity" (hereinafter defined). An Affiliated Entity shall be any
corporation, partnership, joint venture or trust, at least 50% of the
outstanding stock or partnership or joint venture interest or beneficial
interest, as the case may be, of which is owned by Tenant. Notwithstanding any
assignment to an Affiliated Entity, Tenant shall remain liable under this Lease
and Landlord shall be permitted to enforce the provisions of this Lease against
Tenant without proceeding in any way against any other person or entity,
provided however, the aforesaid liability of Tenant shall terminate upon the
occurrence of the Completion Date except as to liability of Tenant under the
Lease which has accrued prior to the Completion Date.
(c) Transfers Requiring Approval and Exceptions. If Tenant is a
partnership, joint venture, trust or corporation, any direct or indirect sale,
assignment or other transfer of 50% or more of the partnership or joint venture
interest (whether in one transaction or as a result of a series of transactions)
or any direct or indirect sale, assignment or other transfer of the beneficial
interest in the case of a trust (whether in one transaction or as a result of a
series of transactions) or any direct or indirect sale, assignment or other
transfer of 50% or more of the outstanding voting stock, or of any class of
voting stock if there is more than one such class, of such a corporation
(whether in one transaction or as a result of a series of transactions) shall
constitute an Assignment by Tenant of this Lease for the purposes of this
Section and shall not be
13
<PAGE>
permitted to occur without first obtaining the written consent of Landlord
pursuant to Section 10.2.
Section 10.2. Landlord's Consent to Assignments.
(a) Generally. If Tenant receives the prior written consent of Landlord, it
may assign all, but only all, of its right, title and interest in this Lease and
the Improvements.
(b) Limitation on Damages. If Tenant judicially contests any disapproval,
it is agreed that no damages shall be payable to Tenant in any such action.
(c) No Waiver. Landlord's approval of or consent to any proposed Assignment
shall not be a waiver of any right to object to further or future subleasings or
Assignments, and Landlord's consent to each such successive Assignment must be
first obtained in writing from Landlord.
(d) Assumption of Tenant's Obligations. Before any proposed Assignment can
be effective for any purpose under this Lease, including but not limited to an
assignment to an Affiliated Entity, the proposed Assignee must assume in writing
the performance of all of the terms, covenants and conditions on the part of
Tenant to be performed hereunder from and after the date of such Assignment.
Section 10.3. Assignment Invalid. Any transfer or Assignment to which
Landlord has consented shall be void and shall confer no right of occupancy upon
the proposed Assignee unless and until a written assumption pursuant to Section
10.2(d) by the proposed Assignee is received by Landlord.
Section 10.4. Permitted Subletting.
(a) Generally. Tenant may not enter into a Sublease without first obtaining
Landlord's prior written consent which consent may be withheld by Landlord in
its sole and absolute discretion. Any Subleases to which Landlord has consented
shall be expressly subject to the terms of this Lease and the following
additional criteria (together with any other criteria established by Landlord in
its sole and absolute discretion):
(1) Independent Subtenants. Except as otherwise provided in
subparagraph (c) hereof, all Subleases shall be with independent third
parties who are not Affiliates and shall be based on arm's-length
negotiations between Tenant and such independent third parties.
(2) Subordination of Subleases. All Subleases shall provide that they
shall be subject and subordinate not only to this Lease, but also to any
new lease made by Landlord as provided in Article XI.
(3) Consistent with Nature of Project. All Subleases shall be for use
which is consistent with the nature of the Improvements.
14
<PAGE>
(4) Right of Disapproval. It is agreed that Landlord shall not be
liable for any damages in connection with its disapproval of any Sublease.
(b) Notwithstanding any permitted subletting, Tenant shall, at all times,
remain liable for the performance of all of the covenants and agreements under
this Lease on its part to be so performed.
(c) Notwithstanding anything contained in this Article to the contrary,
Landlord's consent shall not be required for a subletting to an Affiliated
Entity provided such sublease is in compliance with subparagraphs (a)(2) and
(a)(3) hereof..
ARTICLE XI
LEASEHOLD MORTGAGES
Section 11.1. Leasehold Mortgages. Tenant shall have the right at any time
and from time to time to mortgage its interest in this Lease under one or more
Leasehold Mortgages, and to assign this Lease and any Sublease(s) as collateral
security for such Leasehold Mortgage(s). If Tenant shall mortgage this Lease and
if the Leasehold Mortgagee shall send to Landlord a true copy of the Leasehold
Mortgage together with written notice specifying the name and address of the
Leasehold Mortgagee, Landlord agrees that so long as any such Leasehold Mortgage
shall remain unsatisfied of record or until written notice of satisfaction is
given by the holder thereof to Landlord, the following provisions shall apply:
(a) There shall be no cancellation, surrender or modification of this Lease
by joint action of Landlord and Tenant without the prior consent in writing of
the Leasehold Mortgagee.
(b) Landlord shall, upon serving Tenant with any notice of Default (which
notice shall specify the nature of the Default) or termination, simultaneously
serve a copy of such notice upon the Leasehold Mortgagee. The Leasehold
Mortgagee shall thereupon have the same period as provided the Tenant, after
service of such notice upon it, to remedy or cause to be remedied the defaults
complained of, and the Landlord shall accept such performance by or at the
instigation of such Leasehold Mortgagee as if the same had been done by Tenant;
provided however, upon the occurrence of an Event of Default under Section
16.1(a), Leasehold Mortgagee shall have thirty (30) days after written notice
from Landlord to remedy or cause to have remedied such default thereunder.
Section 11.2. Nullification of Defaults. Notwithstanding anything to the
contrary herein contained, if any Default shall occur which pursuant to any
provision of this Lease entitles Landlord to terminate this Lease and if, before
the expiration of thirty (30) days from the date of service of a copy of the
notice of termination upon a Leasehold Mortgagee pursuant to Section 11.1(b),
the leasehold Mortgagee shall have notified Landlord of its desire to nullify
such notice (such notification from the Leasehold Mortgagee being herein
referred to as a "Nullification Notice"), then in such event Landlord shall not
be entitled to terminate this Lease by reason of the Default specified in the
Nullification Notice and any notice of termination theretofore given shall be
void and of no effect, provided that within thirty (30) days after service of
the Nullification Notice the Leasehold Mortgagee shall have cured any monetary
Defaults
15
<PAGE>
then existing hereunder and shall either have (a) complied or commenced the work
of complying with any nonmonetary obligations then in default (and diligently
and continuously prosecutes same to completion) or (b) acquired or sold or
commenced the process of acquiring or selling Tenant's interest in this Lease by
foreclosure of the Leasehold Mortgage or otherwise.
Section 11.3. Curing of Defaults. If Landlord's notice of termination shall
have been nullified pursuant to Section 11.2, Landlord shall not have the right
subsequently to terminate this Lease so long as the Leasehold Mortgagee or its
nominee or successor continues to pay the Rent due hereunder and either (a) the
Leasehold Mortgagee or its nominee proceeds with reasonable diligence to
complete or cause the completion of the work of curing non-monetary Defaults
(and diligently and continuously prosecutes same to completion), or (b) the
Leasehold Mortgagee or its nominee proceeds with reasonable diligence to acquire
or sell Tenant's interest in this Lease by foreclosure or otherwise and
following such acquisition or sale, the Leasehold Mortgagee or its nominee or
any purchaser or assignee of Tenant's interest in this Lease proceeds with
reasonable diligence to complete or cause the completion of the work of curing
non-monetary Defaults, which are susceptible of cure by Leasehold Mortgagee or
its nominee. The giving of a notice of Default or termination by Landlord
pursuant to the provisions of this Article does not impair Landlord's right to
give, nor impair Tenant's and the Leasehold Mortgagee's right to receive, such
notices for other Defaults that may arise hereunder, and the giving of such
notices shall be subject to the provisions of this Article.
Section 11.4. Replacement Leases. Landlord agrees that, in the event of a
termination of this Lease, Landlord shall upon request of any Leasehold
Mortgagee (and whether or not a Nullification Notice may have been given) enter
into a new lease of the Land with the Leasehold Mortgagee or its nominee for a
term equal to what would have been the remainder of the term of this Lease if
this Lease had not been terminated, which new lease shall be effective as of the
date of such termination and shall be at the same Rent and upon the same terms,
provisions, covenants and agreements as are herein contained (including any
right to extend the term of this Lease and the provisions set forth in this
Article XI), subject only (a) to the same conditions of title as this Lease is
subject to on the date of the execution hereof and any liens or encumbrances or
other matters (i) which were caused or created by Tenant, (ii) which are
required by law or (iii) which the Tenant was obligated to discharge under the
terms of this Lease and (b) to the rights, if any, of parties then in possession
of any part of the Demised Premises, provided that:
(a) Said Leasehold Mortgagee shall make written request upon Landlord
for such new lease within thirty (30) days after the termination of this
Lease;
(b) Said Leasehold Mortgagee or its nominee executes and delivers such
new lease within thirty (30) days after the execution and delivery of the
new lease by Landlord to said Leasehold Mortgagee in response to the
request made pursuant to subparagraph (a) above;
(c) Said Leasehold Mortgagee or its nominee shall pay to Landlord at
the time of the execution and delivery of said new lease any and all sums
which would at the time of the execution and delivery thereof be due
pursuant to this Lease but for such termination, together with any costs
and expenses, including reasonable attorney's fees, which Landlord shall
have incurred by reason of such Default;
16
<PAGE>
(d) Said Leasehold Mortgagee or its nominee upon the execution of such
new lease cures within thirty (30) days thereof (unless such Default
requires work to be performed, acts to be done, or conditions to be removed
which cannot by their nature reasonably be performed, done or removed, as
the case may be, within such thirty (30) day period in which case no
Default shall be deemed to exist so long as Leasehold Mortgagee or its
nominee shall have commenced curing the same within such thirty (30) day
period and shall diligently and continuously prosecute the same to
completion) all non-monetary Defaults of which it has notice (and which are
susceptible of cure by Leasehold Mortgagee or its nominee) remaining
uncured under this lease as of the date of execution and delivery of the
new lease;
(e) Landlord shall not warrant possession of the Demised Premises to
the tenant under the new lease or title to the Improvements, but the tenant
under such new lease shall have the same right, title and interest in and
to the Improvements as Tenant had therein and thereto prior to the
termination of this Lease; and
(f) Such new lease shall be made expressly subject to the rights, if
any, of the Tenant under this Lease.
Section 11.5. Written Assurances. Landlord shall upon Tenant's request
execute, acknowledge and deliver to Tenant and/or each Leasehold Mortgagee an
agreement prepared at the cost and expense of Tenant and in form satisfactory to
such Leasehold Mortgagee, confirming all or any of the provisions of this
Article.
Section 11.6. Landlord's Costs and Expenses. The Leasehold Mortgagee
receiving any new lease pursuant to the provisions of this Article shall pay all
of Landlord's reasonable costs and expenses (including attorney's fees) incident
to Landlord's entering into such new lease.
Section 11.7. No Merger. So long as any Leasehold Mortgage is in existence,
unless all Leasehold Mortgagees shall otherwise expressly consent in writing,
the fee title to the Land and the Leasehold Estate shall not merge, but shall
remain separate and distinct, notwithstanding the acquisition of both fee title
to the Demised Premises and the Leasehold Estate by Landlord, or by Tenant, or
by any Leasehold Mortgagee, or by any other party.
Section 11.8. Priority. In the event that there is more than one Leasehold
Mortgage affecting the Leasehold Estate, the most senior Leasehold Mortgage has
priority in terms of exercising the rights of a Leasehold Mortgagee pursuant to
the provisions of this Article. Notwithstanding the immediately preceding
sentence to the contrary, the aforesaid rights may be exercised under a
Leasehold Mortgage, other than the most senior Leasehold Mortgage, provided a
written intercreditor agreement is submitted to Landlord which evidences the
authority of said Leasehold Mortgagee to exercise said rights.
Section 11.9. Leasehold Mortgage Assignment. Leasehold Mortgagee may assign
this Lease provided (i) an assumption agreement is executed by said assignee
pursuant to Section 10.2(d) and (ii) said assignee has a financial net worth
sufficient to discharge the obligations of Tenant hereunder as determined by
Landlord in its discretion reasonably exercised.
17
<PAGE>
Section 11.10. Option Rights. In the event Leasehold Mortgagee shall
acquire Tenant's leasehold interest hereunder, Leasehold Mortgagee shall have
all of Tenant's rights hereunder, including, but not limited to, Tenant's rights
under Article XXIX, and be subject to all obligations of Tenant under this Lease
except as may be otherwise expressly provided herein.
ARTICLE XII
REPRESENTATIONS BY LANDLORD
Section 12.1. Representations by Landlord. Tenant accepts the Demised
Premises in the existing condition, and Tenant agrees that except as may be
specifically set forth in this Lease, no representations, statement or
warranties, express or implied, have been made by or on behalf of Landlord in
respect thereof or in respect of the condition thereof or the use or occupation
that may be made thereof and that Landlord shall in no event whatsoever be
liable for any latent or patent defects therein. Notwithstanding the immediately
preceding sentence, Landlord represents, solely to Leasehold Mortgagee, (i) upon
information and belief without independent inquiry that the building permits for
the construction of the Improvements, have been issued by the Municipality and
(ii) attached hereto as Exhibit "E" is a copy of the resolution of the common
council of the Municipality evidencing the approval by the Municipality of the
Contract and this Lease.
ARTICLE XIII
LANDLORD NOT LIABLE FOR INJURY OR DAMAGE
Section 13.1. Landlord Not Liable. Except for injury, loss or damage caused
by the negligent acts of Landlord, its agents, servants, employees or
contractors, Landlord shall not in any event whatsoever be liable for any injury
or damage to any property or to any person happening on, in or about the Demised
Premises or the appurtenances thereto, nor for any injury or damage to the
Demised Premises, or to any property belonging to Tenant or any other person
which may be caused by any fire, breakage, leakage or defect or by water, rain
or snow that may leak into, issue or flow from any part of the Demised Premises
or which may arise from any other cause whatsoever.
ARTICLE XIV
INDEMNIFICATION OF LANDLORD AND TENANT
Section 14.1. Indemnification of Landlord. In addition to any other
indemnities to Landlord specifically provided in this Lease, Tenant shall
indemnify and save harmless Landlord against and from all liabilities, suits,
obligations, fines, damages, penalties, claims, costs, charges and expenses,
including reasonable attorneys fees, which may be imposed upon or incurred by or
asserted against Landlord, its agents or employees by reason of any of the
following occurring during the term of this Lease:
(a) any work or thing done in, on or about the Demised Premises or any
part thereof;
(b) any use, non-use, possession, occupation, alteration, repair,
condition, operation, maintenance or management of the Demised Premises, or
any part thereof or of any street, alley, sidewalk, curb, vault, passageway
or space adjacent thereto;
18
<PAGE>
(c) any negligence on the part of Tenant or any subtenant or any of
its or their agents, contractors, servants, employees or licensees;
(d) any accident, injury (including death) or damage to any person or
property occurring in, on or about the Demised Premises or any part thereof
or in, on or about any street, alley, sidewalk, curb, vault, passageway or
space adjacent thereto;
(e) any failure on the part of Tenant to perform or comply with any of
the covenants, agreements, terms or conditions contained in this Lease or
any easements, sublease, license or concession agreement on its part to be
performed or complied with;
(f) any liability which may be asserted against Landlord relating to
(i) the use of the Demised Premises or (ii) a default or breach under the
Contract but only to the extent that Tenant has "Contract Obligations" (as
defined in section 28.3) thereunder pursuant to Section 28.3 hereof; and
(g) any and all liabilities, claims and causes of action arising under
the terms and conditions of every sublease, license or concession
agreement.
The indemnities in favor of Landlord contained in this Section and any
other indemnity specifically provided to Landlord under this Lease shall survive
the termination of this Lease.
Section 14.2. Negligence of Landlord. Notwithstanding anything to the
contrary contained in this Lease, Tenant shall not indemnify Landlord or relieve
Landlord from responsibility to Tenant for any injury, loss or damage caused by
the negligent or improper acts or omissions of Landlord, its agents, servants,
employees or contractors or any acts or omissions of Landlord, its agents,
servants, employees or contractors in violation of the terms of this Lease.
Section 14.3. Indemnification of Tenant. Landlord shall indemnify and save
harmless Tenant against and from all liabilities, suits, obligations, fines,
damages, penalties, claims, costs, charges, and expenses, including reasonable
attorney's fees, which may be imposed upon or incurred by or asserted against
Tenant, its agents or employees, by reason of any default by Landlord under this
Lease or the Contract. The indemnities in favor of Tenant contained in this
Lease shall survive the termination of this Lease.
Section 14.4. Notice of Claim. Tenant or Landlord as the case may be, shall
be given notice of any claim which might give rise to its obligation to
indemnify Landlord or Tenant as the case may be pursuant to the terms of this
Lease.
ARTICLE XV
LANDLORD MAY CURE DEFAULTS
Section 15.1. Cure By Landlord. If Tenant shall be in default in the
performance of any of its obligations under this Lease beyond any applicable
notice or cure period, Landlord may do whatever is reasonably necessary to cure
such default for the account and at the expense of Tenant; and the amount of any
payment made or expense incurred by Landlord for such purpose, with interest
thereon at highest rate permitted by law, shall be
19
<PAGE>
deemed additional rent and shall be paid by Tenant to Landlord on demand,
provided however, that Landlord shall be under no obligation to cure said
default. Notwithstanding any provision of this Lease to the contrary, in the
event Landlord elects to exercise its rights under this Section 15. 1, Landlord
shall give five (5) days prior notice thereof to Tenant and Leasehold Mortgagee.
ARTICLE XVI
DEFAULTS, CONDITIONAL LIMITATIONS, REMEDIES, ETC.
Section 16.1. Events of Default. Each of the following events shall be an
"Event of Default" hereunder:
(a) Failure of Tenant to pay any installment of Rent or any part
thereof or any other payment of money, costs or expenses herein agreed to
be paid by Tenant, when due, and the continuance of such failure for a
period of ten (10) days after written notice from Landlord specifying such
failure;
(b) Failure of Tenant to observe or perform one or more of the other
terms, conditions, covenants or agreements of this Lease and the
continuance of such failure for a period of thirty (30) days after written
notice by Landlord specifying such failure;
(c) Tenant vacates or abandons the Premises;
(d) Except as may be otherwise permitted under the terms of this Lease
for the benefit of a Leasehold Mortgagee, this Lease or the Demised
Premises or any part of the Demised Premises are taken upon execution or by
other process of law directed against Tenant, or are taken upon or subject
to any attachment at the instance of any creditor or claimant against
Tenant, and the attachment is not discharged or disposed of within sixty
(60) days after its levy.
(e) Tenant files a petition in bankruptcy or insolvency or for
reorganization or arrangement under the bankruptcy laws of the United
States or under any insolvency act of any state, or admits the material
allegations of any such petition by answer or otherwise, or is dissolved or
makes an assignment for the benefit of creditors.
(f) Involuntary proceedings under any such bankruptcy law or
insolvency act or for the dissolution of Tenant are instituted against
Tenant, or a receiver or trustee is appointed for all or substantially all
of the property of Tenant, and such proceeding is not dismissed or such
receivership or trusteeship vacated within ninety (90) days after such
institution or appointment.
(g) Tenant fails to take physical possession of the Premises on the
Commencement Date.
(h) A default by Tenant under the "Option Contract" (hereinafter
defined).
Section 16.2. Termination Upon Default. Subject to the provisions of
Article XI and Article XXIX, if an Event of Default shall occur (and be
continuing), Landlord, at any time thereafter, may at its option give written
notice to Tenant stating that this Lease and the term hereby demised shall
expire and terminate on the date specified in such notice, and upon the date
specified in such notice, this Lease and the term hereby demised and all rights
of the Tenant
20
<PAGE>
under this Lease shall expire and terminate as if that date were the date herein
definitely fixed for the termination of the term of this Lease, and Tenant shall
quit and surrender the Demised Premises.
Section 16.3. Recovery of Demised Premises. Subject to the provisions of
Article XI and Article XXIX, if any Event of Default shall occur, Landlord may
without notice re-enter and repossess the Demised Premises expel Tenant and
those claiming through or under Tenant and remove the effects of both or either
using such force for that purpose as may be necessary and proper under
applicable law without being liable to indictment, prosecution or damages
therefor.
Section 16.4. Damages. In the event of the termination of this Lease, or
the re-entry or repossession of the Demised Premises (as above set forth)
Landlord shall be entitled to such remedies, rights and damages as are granted
by applicable law including, but not limited to, acceleration of Rent.
Section 16.5. Receipt of Monies. No receipt of monies by Landlord from
Tenant after termination of this Lease, or after the giving of any notice of
termination of this Lease, shall reinstate, continue or extend the term of this
Lease or affect any notice theretofore given to Tenant, or operate as a waiver
of the right of Landlord to enforce the payment of Rent and any other sum or
sums of money and other charges herein reserved and agreed to be paid by Tenant
then due or thereafter falling due, or operate as a waiver of the right of
Landlord to recover possession of the Land by proper remedy.
Section 16.6. Waiver. Subject to the provisions of Article XI, no failure
by Landlord or Tenant to insist upon the strict performance of any covenant,
agreement, term or condition of this Lease or to exercise any right or remedy
consequent upon a breach thereof, and no acceptance of full or partial Rent by
Landlord during the continuance of any such breach, shall constitute a waiver of
any such breach or of such covenant, agreement, term or condition. No covenant,
agreement, term or condition of this Lease to be performed or complied with by
Tenant or Landlord, and no breach thereof, shall be waived, altered or modified
except by a written instrument executed by both Landlord and Tenant. No waiver
of any breach shall affect or alter this Lease, but each and every covenant,
agreement, term and condition of this Lease shall continue in full force and
effect with respect to any other then existing or subsequent breach thereof.
Section 16.7. Acceleration of Rent. Subject to the provisions of Article
XI, if any Event of Default shall occur, Landlord may accelerate all Rent
required to be paid by Tenant under the terms of this Lease during the balance
of the Term and declare the same to be immediately due and payable by giving
Tenant notice of such acceleration and declaration.
Section 16.8. Right to Relet and Damages Upon Reentry. Subject to the
provisions of Article XI, should Landlord elect to reenter as provided in
Section 16.3, or should Landlord take possession pursuant to legal proceedings
or pursuant to any notice provided by law, Landlord may, from time to time,
without terminating this Lease, relet the Demised Premises or any part of the
Demised Premises in Landlord's or Tenant's name, but for the account of Tenant,
for such term or terms (which may be greater or less than the period which
21
<PAGE>
would otherwise have constituted the balance of the Term) and on such conditions
and upon such other terms (which may include concessions of free rent and
alteration and repair of the Demised Premises) as Landlord, in Landlord's sole
discretion, may determine, and Landlord may collect and receive the rent.
Landlord will in no way be responsible or liable for any failure to relet the
Demised Premises or any part of the Demised Premises, or for any failure to
collect any rent due upon such reletting. No such reentry or taking possession
of the Demised Premises by Landlord will be construed as an election on
Landlord's part to terminate this Lease unless a notice of such intention is
given to Tenant. No such reentry or repossession of the Demised Premises shall
relieve Tenant of its liability and obligations under this Lease, all of which
shall survive such reentry or repossession. Landlord reserves the right
following any such reentry or reletting to exercise Landlord's right to
terminate this Lease by giving Tenant such notice, in which event this Lease
will terminate as specified in such notice.
If Landlord does not elect to terminate this Lease as permitted in Section
16.2, but elects to take possession as provided in Section 16.3, Tenant will pay
to Landlord: (a) Rent and other sums as provided in this Lease, which would be
payable under this Lease if such repossession had not occurred, less (b) the net
proceeds, if any, of any reletting of the Premises after deducting all
Landlord's reasonable expenses in connection with such reletting, including,
without limitation, all repossession costs, brokerage commissions, attorneys'
fees, expenses of employees, alteration and repair costs and expenses of
preparation for such reletting. If, in connection with any reletting, the new
lease term extends beyond the existing Term, or the premises covered by such new
lease include other premises not part of the Premises, a fair apportionment of
the rent received from such reletting and the expenses incurred in connection
with such reletting as provided in this Section will be made in determining the
net proceeds from such reletting, and any rent concessions will be equally
apportioned over the term of the new lease. Tenant will pay such rent and other
sums to Landlord monthly on the day on which the Rent would have been payable
under this Lease if possession had not been retaken, and Landlord will be
entitled to receive such Rent from Tenant on each such day.
Section 16.9. Cumulative Rights. Each right and remedy of Landlord provided
for in this Lease shall be cumulative and shall be in addition to every other
right or remedy provided for in this Lease, and the exercise or beginning of the
exercise by Landlord of any one or more of the rights or remedies provided for
in this Lease shall not preclude the simultaneous or later exercise by Landlord
of any or all other rights or remedies provided for in this Lease.
Section 16.10. Costs and Expenses. Tenant shall pay to Landlord all costs
and expenses, including reasonable attorneys' fees, incurred by Landlord in
enforcing any of the covenants and provisions of this Lease and incurred in any
action brought on account of the provisions hereof, and all such costs,
expenses, and attorneys' fees may be included in and form a part of any judgment
entered in any proceeding brought by Landlord against Tenant on or under this
Lease.
ARTICLE XVII
NOTICES
Section 17.1. Notices. Whenever it is provided herein that notice, demand,
request or other communication shall or may be given to or served upon either of
the parties by
22
<PAGE>
the other, and whenever either of the parties shall desire to give or serve upon
the other any notice, demand, request or other communication with respect hereto
or to the Land, each such notice, demand, request or other communication shall
be in writing and, any law or statute to the contrary notwithstanding, shall be
effective for any purpose if given or served as follows:
(a) If by Landlord, by mailing the same to Tenant by registered or
certified mail postage prepaid, return receipt requested, addressed to
Tenant at 10 Alvin Court, East Brunswick, New Jersey 08816, Attn:
President, or at such other address as Tenant may from time to time
designate by notice given to Landlord by registered or certified mail.
(b) If by Tenant, by mailing the same to Landlord by registered or
certified mail, postage prepaid, return receipt requested, addressed to
Landlord at 620 Main Street Buffalo, New York 14202, Attn: President of the
Buffalo Enterprise Development Corporation, or at such other address as
Landlord may from time to time designate by notice given to Tenant by
registered or certified mail.
Every notice, demand, request or other communication hereunder shall be
deemed to have been given or served two (2) days following the post mark date.
ARTICLE XVIII
CONDEMNATION
Section 18.1. Effect of Condemnation. If at any time during the term of the
Lease, all or substantially all of the Demised Premises shall be taken for any
public or quasi-public purpose by any lawful power or authority by the exercise
of the right of condemnation or eminent domain or by agreement between Landlord,
Tenant and those authorized to exercise such right, this Lease and the term
hereby granted shall terminate and expire on the date of such taking, the Rent
shall be apportioned and paid to the date of such taking and any awards with
respect to such taking shall be apportioned between Landlord and Tenant as
provided in Section 18.2. If less than all, or substantially all, of the Demised
Premises shall be taken as aforesaid, this Lease and the term hereof shall
continue with abatement of the Rent in an amount equal to the product of (i) the
Rent that would otherwise be payable if there was no taking, multiplied by (ii)
a fraction, the numerator of which is the number of square feet of the Demised
Premises remaining after the taking and the denominator of which is the number
of square feet contained in the Demised Premises before any taking. The term
"all or substantially all of the Demised Premises" shall be deemed to mean such
portion of the Demised Premises as when so taken would leave remaining a balance
of the Demised Premises which, due either to the area or the location of the
part so taken in relation to the part not so taken, would not, under economic
conditions, zoning laws or building regulation then existing or prevailing,
readily accommodate an altered or new building or buildings of a nature and
floor area sufficient, together with such portion of the Demised Premises not
taken in the condemnation, to reasonably permit the economically viable use of
the Demised Premises by Tenant.
Section 18.2. Condemnation Awards. In the event of taking of all or
substantially all of the Demised Premises, the net award (or settlement in lieu
thereof) shall be payable to the Tenant and Landlord by paying to (a) the
Landlord, an amount equal to the value of Landlord's interest in the Demised
Premises, subject to this Lease (valued immediately prior
23
<PAGE>
to the taking), and (b) to the Tenant (or Leasehold Mortgagee if so required
pursuant to any Leasehold Mortgage) an amount equal to the value of Tenant's
interest under this Lease (valued immediately prior to the taking). In the event
the balance of the award is not sufficient to fully pay the aforesaid amounts
due to Landlord and Tenant, or the balance of award exceeds the aggregate of
such sums, then Landlord and Tenant shall share such balance of the amount in
the same proportion as the respective amounts due to each of them pursuant to
the provisions of this Section 18.2 bear to the total of said amounts.
Section 18.3. Partial Taking. In the event less than all or substantially
all of the Demised Premises, is taken, the total award shall be payable to
Tenant for utilization in the restoration and repair of the Demised Premises to
as near their former condition as circumstances will permit. After application
of the award for such restoration, any balance of the award shall be payable in
the same manner as set forth in Section 18.2.
Section 18.4. Date of Taking. For the purpose of this Article XVIII, the
Demised Premises or a part thereof, as the case may be, shall be deemed to have
been taken or condemned on the date on which actual possession of the Demised
Premises and/or a part thereof, as the case may be, is acquired by any lawful
power or authority or the date on which title vests therein, whichever is
earlier.
Section 18.5. Temporary Takings. In case of any governmental action, not
resulting in the taking or condemnation of any portion of the Demised Premises
but creating a right to compensation therefor, such as the changing of the grade
of any street upon which the Land abuts, this Lease shall continue in full force
and effect without reduction or abatement of Rent, and the award shall be paid
to Tenant as its sole property.
ARTICLE XIX
CERTIFICATES BY LANDLORD AND TENANT
Section 19.1. Tenant's Certificate. Tenant agrees at any time and from time
to time (as may be reasonable) upon not less than twenty (20) days' prior notice
by Landlord to execute, acknowledge and deliver to Landlord a statement in
writing certifying that this Lease is unmodified and in full force and effect
(or if there have been modifications, that the same are in full force and effect
as modified and stating the modifications) and the dates to which the Rent has
been paid in advance, if any, and stating whether or not to the best knowledge
of the signer of such certificate Landlord is in default in performance of any
covenant, agreement or condition contained in this Lease and, if so, specifying
each such default of which the signer may have knowledge.
Section 19.2. Landlord's Certificate. Landlord agrees at any time and from
time to time (as may be reasonable), upon not less than twenty (20) days' prior
notice by Tenant or Leasehold Mortgagee to execute, acknowledge and deliver to
Tenant and Leasehold Mortgagee a statement in writing certifying that this Lease
is unmodified and in full force and effect (or if there shall have been
modifications, that the same is in full force and effect as modified and stating
the modifications) and the dates to which the Rent has been paid in advance, if
any, and stating whether or not to the best knowledge of the signer of such
certificate
24
<PAGE>
Tenant is in default in the performance of any covenant, agreement or condition
contained in this Lease, and, if so, specifying each such default of which the
signer may have knowledge.
ARTICLE XX
CONSENTS
Section 20.1. Landlord-Tenant. It is understood and agreed that the
granting of any consent by either party to the other to perform any act
requiring consent under the terms of this Lease, or the failure on the part of
any party to object to any such action taken without consent, shall not be
deemed a waiver by the party of its rights to require such consent for any
further similar act.
ARTICLE XXI
SURRENDER AT END OF TERM
Section 21.1. Surrender. On the last day of the term hereof or upon any
earlier termination of this Lease (unless Tenant has acquired title to the
Demised Premises pursuant to Article XXIX), or upon a re-entry by Landlord upon
the Land pursuant to Article XVI hereof, Tenant shall well and truly surrender
and deliver up to Landlord the Demised Premises free and clear of all liens and
encumbrances other than those, if any, existing at the date hereof, or created
by Landlord or subsequent owners of the Demised Premises, and, without any
payment or allowance whatever by Landlord. Tenant hereby waives any notice now
or hereafter required by law with respect to vacating the Demises Premises on
any such termination date. Title to any Improvements on the Land at the
termination of this Lease shall pass to Landlord without the necessity of any
payment therefor. At the end of the Term, Tenant will promptly quit and
surrender the Demised Premises broom-clean, in good order and repair, ordinary
wear and tear excepted. If Tenant is not then in default, Tenant may remove from
the Demised Premises any trade fixtures, equipment and moveable furniture placed
in the Demised Premises by Tenant, whether or not the same are fastened to the
Improvements thereon; provided Tenant will not remove any trade fixtures or
equipment without Landlord's prior written consent if such fixtures or equipment
are used in the operation of the Demised Premises or removal of the same will
result in impairing the structural strength of the Improvements. Whether or not
Tenant is in default, Tenant will remove such Improvements, trade fixtures,
equipment and furniture as Landlord may request at its sole option and
discretion. Tenant will fully repair any damage occasioned by the removal of any
trade fixtures, equipment, furniture, alterations, additions and Improvements.
All trade fixtures, equipment, furniture, inventory, effects, alterations,
additions and Improvements not so removed will be deemed conclusively to have
been abandoned and may be appropriated, sold, stored, destroyed or otherwise
disposed of by Landlord without notice to Tenant or any other person and without
obligation to account for them; and Tenant will reimburse to Landlord on demand
all expenses incurred in connection with such property, including, but not
limited to, the cost of repairing any damage to the Premises caused by the
removal of such property. Tenant's obligation to observe and perform this
covenant will survive the expiration or other termination of this Lease.
25
<PAGE>
ARTICLE XXII
NO ORAL AGREEMENTS
Section 22.1. Agreements in Writing. This Lease contains all the promises,
agreements, conditions, inducements and understandings between Landlord and
Tenant relative to the Land and there are no promises, agreements, conditions,
understandings, inducements, warranties or representations, oral or written,
expressed or implied, between them other than as herein set forth.
ARTICLE XXIII
QUIET ENJOYMENT
Section 23.1. Quiet Enjoyment. Landlord covenants that, if and so long as
Tenant shall faithfully perform the agreements, terms, covenants and conditions
hereof, Tenant shall and may peaceably and quietly have, hold and enjoy the Land
for the term hereby granted without molestation or disturbance by or from
Landlord or any party claiming through Landlord.
ARTICLE XXIV
INVALIDITY OF CERTAIN PROVISIONS
Section 24.1. Partial Invalidity. If any term or provision of this Lease or
the application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Lease shall be valid and be enforced to the fullest
extent permitted by law.
ARTICLE XXV
RECORDING OF MEMORANDUM
Section 25.1. Memoranda. Landlord and Tenant will, upon the written request
of the other, join in the execution of a memorandum of lease in proper form for
recordation. Any recordation thereof and New York State transfer stamps due
thereon shall be at Tenant's sole cost and expense.
ARTICLE XXVI
SECURITY DEPOSIT
Tenant has deposited with Landlord the sum of Fifteen Thousand and 00/100
($15,000.00) Dollars ("Security Deposit") as an inducement to Landlord to
purchase the Demised Premises from the Municipality. In consideration thereof,
Tenant hereby agrees and stipulates that the Security Deposit is non-refundable.
Notwithstanding anything contained in the immediately preceding sentence to the
contrary, Landlord shall disburse the Security Deposit to Tenant for general
landscaping, fencing and exterior security relating to the Project upon
submission of receipted invoices to Landlord and the approval by Landlord of (i)
said invoices and (ii) the completion and quality of the aforesaid work.
26
<PAGE>
ARTICLE XXVII
ENTRY BY LANDLORD
Landlord, and Landlord's agents and employees may enter the Demised
Premises at any reasonable hour upon 24-hour prior notice to Tenant to (a)
inspect the same, (b) exhibit the same to prospective purchasers, lenders or
tenants, or (c) determine whether Tenant is complying with all Tenant's
obligations under this Lease.
ARTICLE XXVIII
INCORPORATION OF CONTRACT
Section 28.1. General Statement. It is understood and agreed by and between
Landlord and Tenant that Landlord's acquisition of the Demised Premises is
pursuant to the Contract and that the Demised Premises is subject to the
Contract.
Section 28.2. Incorporation. The Contract is hereby incorporated into and
made a part of the terms of this Lease.
Section 28.3. Tenant's Contract Obligations. Tenant hereby covenants and
agrees to perform and comply with all terms and conditions of the Contract
including but not limited to all covenants in the Contract relating to the
improvement, use and/or operation of the Demised Premises (collectively
"Contract Obligations") and hereby assumes all Contract Obligations set forth in
the Contract. Notwithstanding anything contained in this Article XXVIII to the
contrary, Tenant does not agree to perform or comply with any of the terms or
conditions of the Contract or obligations of the Contract set forth in Sections
1, 2, 3, 5(A) (excepting Section 5(A) Eleventh and 5(A) Twelfth), 5(D), 5(E)v,
and 5(E)vi thereof. Tenant hereby further covenants and agrees that it will
consent to, join in the execution of and/or subordinate its rights in this Lease
to the easements described in the Contract, a copy of the easement agreement
containing said easements being attached hereto as Exhibit "D".
ARTICLE XXIX
OPTION TO PURCHASE
Section 29.1. Option. In consideration of the sum of One Dollar and No More
($1.00 and No More) paid to Landlord, Landlord hereby grants, bargains, sells
and conveys to Tenant the option (the "Option") to purchase the Demised Premises
and all rights and appurtenances pertaining thereto, including without
limitation all of Landlord's right, title and interest in and to adjacent
streets, alleys, rights of way and easements at the applicable purchase price
("Purchase Price") determined in accordance with the provisions of Section 29.2
hereof. The term of the Option shall commence on the Commencement Date and shall
expire on the earlier to occur of (i) the last day of the Term of this Lease and
(ii) the termination of this Lease pursuant to the terms hereof ("Option Term").
Tenant may exercise the Option at any time during the Option Term upon notice to
Landlord given at any time during the Option Term. The date upon which the
Option is so exercised is hereinafter referred to as the "Exercise Date". If
Tenant shall so exercise the Option, the terms, covenants and conditions
hereinbefore and hereinafter set forth and as provided in the form contract
attached hereto as Exhibit "C" and made a part hereof shall become the contract
between the parties hereto ("Option Contract").
27
<PAGE>
Section 29.2. Option Purchase Price. The term "Purchase Price," as used
herein shall mean as follows:
(1) In the event the Exercise Date is on or after the Commencement
Date but prior to the 5th anniversary of the Commencement Date, the
Purchase Price shall be $450,000.00.
(2) In the event the Exercise Date is on or after the 5th anniversary
of the Commencement Date but prior to the 10th anniversary of the
Commencement Date, the Purchase Price shall be $500,000.00.
(3) In the event the Exercise Date is on or after the 10th anniversary
of the Commencement Date, the Purchase Price shall be $600,000.00.
(4) The parties hereby agree that in the event the Option is
exercised, the Tenant shall be entitled to and shall receive as a credit
against the applicable Purchase Price, the aggregate annual base rent
payments received by Landlord pursuant to Section 2.3 hereof as of the date
of closing.
Section 29.3. Option Termination. It is understood and agreed that the
Option contained in this Article XXIX is appendant to and a part of the Lease,
and shall automatically terminate if (i) it is not exercised within the Option
Term (ii) the Lease has been terminated pursuant to its terms or (iii) the Lease
Term has expired. It is understood and agreed by the parties hereto that the
Option shall not survive the Lease.
Section 29.4. Lease. In the event Tenant exercises the Option, all
provisions of this Lease shall remain in full force and effect until the closing
described in the Option Contract, provided, however, this provision shall not
operate to extend the Term. In the event Tenant has exercised the Option and is
not in default under the Option Contract, Landlord shall not exercise its right
and remedies under Section 16.2 or 16.3.
ARTICLE XXX
MISCELLANEOUS
Section 30.1. Captions. The captions of this Lease are for convenience of
reference only and in no way define, limit or describe the scope or intent of
this Lease or in any way affect this Lease.
Section 30.2. Table of Contents. The table of contents preceding this Lease
(if any) is for the purpose of convenience of reference only and is not to be
deemed or construed in any way as part of this Lease or as supplemental thereto
or amendatory thereof.
Section 30.3. Use of Terms. The use herein of the neuter pronoun in any
reference to Landlord or Tenant shall be deemed to include any individual
Landlord or Tenant, and the use herein of the words "successors and assigns" or
"successors or assigns" of Landlord or Tenant shall be deemed to include the
heirs, legal representatives and assigns of any individual Landlord or Tenant.
28
<PAGE>
Section 30.4. Amendment. This Lease cannot be changed or terminated orally,
but only by an instrument in writing executed by the party against whom
enforcement of any waiver, change, modification or discharge is sought. This
Lease shall be governed by the laws of the State of New York.
Section 30.5. Survival. The agreements, terms, covenants and conditions
herein shall bind and inure to the benefit of Landlord and Tenant and their
respective heirs, personal representatives, successors and (except as otherwise
provided herein) assigns.
Section 30.6. Consents. Unless specifically set forth in this Lease to the
contrary, the consent or approval of either party hereto required pursuant to
the provision of this Lease shall not be unreasonably withheld or delayed.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease of the day
and year first above written..
LANDLORD: THE BUFFALO ENTERPRISE
DEVELOPMENT CORPORATION
By:
---------------------------------
Name: Daniel S. Bicz
-------------------------------
Title: President
-------------------------------
TENANT: AGRO POWER, INC.
By:
---------------------------------
Name: Albert W. Vanzeyst
-------------------------------
Title: President
-------------------------------
29
<PAGE>
STATE OF NEW YORK )
COUNTY OF ERIE ) SS:
On the 21st day of August, 1997, before me personally came Daniel S.
Bicz, to me known, who being by me duly sworn, did depose and say that he
resides at 13 Marina Park, Buffalo, New York; that he is the President of The
Buffalo Enterprise Development Corporation, the corporation described herein and
who by said corporation executed the foregoing instrument; that he signed his
name thereto by order of the Board of Directors of said corporation.
---------------------------------
<PAGE>
STATE OF NEW YORK )
COUNTY OF ERIE ) SS:
On the 21st day of August, 1997, before me personally came Albert W.
Vanzeyst, to me known, who being by me duty sworn, did depose and say that he
resides at 2799 Marsh Wren Circle, Longwood, FL 32779 that he is the President
of Agro Power Development, Inc., the corporation described herein and who by
said corporation executed the foregoing instrument; that he signed his name
thereto by order of the Board of Directors of said corporation.
------------------------------------
Notary Public
<PAGE>
EXHIBIT A
ALL TRACT OR PARCEL OF LAND situate in the City of Buffalo, County of Erie,
State of New York, being part of Lots 55, 56, 59 and 197 in Township 10, Range 8
of the Buffalo Creek Indian Reservation-further distinguished as parts of
Subdivision Lots, 5, 6; 7, 8. 9, 10 and 11 in Block 2 an shown an a map filed in
the Erie County Clerk's Office under Cover Number 615 plus additional lands
further bounded and described as following:
BEGINNING at the point in the northeasterly line of South Park Avenue which
is 120 feet northwesterly of the interaction of the northwesterly line of Bertha
Street as shown on Map Cover 615 and the northeasterly line of South Park Avenue
formerly known an Abbott Road being (66 feet wide);
thence northwesterly along the northeasterly line of South Park Avenue a
distance of 810.21 feet to an angle point in the northeasterly line of South
Park Avenue,
thence continuing northwesterly along the northeasterly line of South Park
Avenue a distance of 739.55 feet to a point, said point being the southwesterly
corner of lands now or formerly owned by Niagara Mohawk Power Corporation, said
point being 604.55 feet east of the southeasterly line of the new channel line
of the Buffalo River as fixed by the Common Council of the City of Buffalo in
1914;
thence northeasterly at right angles and along the southerly line of lands of
Niagara Mohawk Power Corporation, a distance of-135.0 feet to a point, said
point being the southeasterly corner of lands of Niagara Mohawk Power
Corporation;
thence northerly and parallel with the northeasterly line of South Park Avenue
and along the easterly line of lands of Niagara Mohawk Power Corporation a
distance 60.00 feet to a point, said point being the northwesterly corner of
lands of Niagara Mohawk Power Corporation:
thence westerly along a line drawn at right angles to South Park Avenue and
along the northerly line of lands of Niagara Mohawk Power Corporation a distance
of 135.00 feet to a point in the northeasterly line of South Park Avenue;
thence northwesterly along the northeasterly line of South Park Avenue a
distance of 544.55 feet to a point, said point being in the southerly line of
the new channel of the Buffalo River as previously mentioned;
thence in an easterly direction along said channel line at an interior angle of
70(Degree) 32' 20" a distance of 393.90 feet to an angle point in said channel
line.
<PAGE>
EXHIBIT A (cont'd)
thence in a southeasterly direction along said channel line at an interior angle
of 145(Degree) 11' 40" a distance of 263.78 feet to an angle point in said
channel line;
thence continuing in a southeasterly direction along said channel line at an
interior angle of 149(Degree) 33' 20" a distance of 2031.71 feet to a point
thence southwesterly at an interior angle of 66(Degree) 56' 54" a distance of
789.38 feet to the point of beginning.
<PAGE>
EXHIBIT B
SCHEDULE OF PERFORMANCE
MILESTONE DAY
- - --------- ---
Notice to proceed........................................................... 0
Mobilization................................................................ 21
Site Work
Complete Grade & Subbase............................................. 60
Headhouse
Complete Design of Headhouse......................................... 45
Complete Foundation.................................................. 80
Complete Steel Erection.............................................. 160
Substantial Completion............................................... 220
Greenhouse
Complete Design of Greenhouse........................................ 45
Complete Foundation.................................................. 105
Complete Steel Erection.............................................. 155
Complete Roof Glazing................................................ 170
Start-Up/Testing............................................................ 210
Substantial Completion...................................................... 340
Final Completion............................................................ 365
Notice to proceed was issued on June 1, 1997.
<PAGE>
EXHIBIT C
OPTION CONTRACT
THIS OPTION CONTRACT (this "Agreement") dated the ______ day of
____________, 19___ by and between BUFFALO ENTERPRISE DEVELOPMENT CORPORATION, a
not-for-profit local development corporation organized under the laws of the
State of New York, having its principal office and place of business at 620 Main
Street, Buffalo, New York 14202 ("Seller") and AGRO POWER DEVELOPMENT, INC., a
New Jersey corporation, having an office at 10 Alvin Court, East Brunswick, New
Jersey 08816 ("Purchaser").
1. Sale. Seller agrees to sell and convey to Purchaser, and Purchaser
agrees to purchase from Seller, on the terms and conditions herein provided, the
following property, rights and interests (collectively, the "Property"):
(a) All of that certain tract of land located in the City of Buffalo,
County of Erie, and State of New York and legally described on Schedule A
attached hereto and made a part hereof ("Land").
(b) All buildings and other improvements, if any, located on the Land
("Improvements").
(c) All rights and appurtenances pertaining to the Land and the
Improvements, including without limitation, all of Seller's right, title
and interest in and to adjacent streets, alleys, rights of way and
easements.
2. Purchase Price. Purchaser agrees to pay to Seller the Purchase Price for
the Property, calculated pursuant to Section 29.2 of that certain ground lease
between Seller and Purchaser dated as of September 4, 1997 ("Ground Lease"), as
follows:
(a) Upon delivery of the "Deed" (as hereinafter provided and defined),
by delivery to Seller of the sum equal to the Purchase Price less the
credits set forth in Section 9 hereof.
3. Title Documents.
Purchaser may, at its option, and sole cost and expense, obtain the
following:
(i) a survey of the Land ("Survey").
(ii) a fully guaranteed tax and title search covering the Property
("Abstract") and a local tax certificate, where not covered by the
Abstract.
(iii) A commitment in favor of Purchaser for the most recent form of
ALTA owner's title insurance policy ("Commitment") issued by a title
insurance company
<PAGE>
acceptable to Purchaser ("Title Company") setting forth the state of title
to the Property including the state of facts shown on the Survey, if any.
4. Obligations of Seller Prior to Closing. During the period commencing on
the date hereof and ending on the Closing Date (as hereinafter defined), or
within such other period hereinafter contemplated in this Section, Seller agrees
as follows:
(a) Not to create, grant, accept or enter into any option to purchase,
right of first refusal, sale agreement, lease, use and occupancy
arrangement with respect to all or any portion of the Property without
Purchaser's prior written consent.
(b) Not to create or suffer a lien of any kind whatsoever on all or
any portion of the Property, it being understood and agreed by the parties
hereto that any lien which is a result of Purchaser's failure to perform
its obligations under the Ground Lease shall not be a breach of Seller's
agreement hereunder.
5. Closing. The date ("Closing Date") upon which the sale and purchase of
the Property ("Closing") shall take place on the thirtieth (30th) day following
the date on which the option to purchase has been exercised under the Ground
Lease but in no event later than the last day of the Term under the Ground
Lease, TIME BEING OF THE ESSENCE with respect to said date. The Closing shall
take place at 10:00 a.m. on the Closing Date at the offices of Saperston & Day,
P.C., 1100 M&T Center, Three Fountain Plaza, Buffalo, New York.
6. Conveyance and Exceptions.
(a) At the Closing, Seller shall convey to Purchaser its title to the
Property by a recordable quit claim deed with lien covenant ("Deed"),
subject to the following ("Permitted Exceptions"):
(i) any state of facts an accurate survey would show;
(ii) all easements, right of ways, and other encumbrances of any
kind, recorded or unrecorded, which may affect the Property;
(iii) all applicable federal, state and local regulations,
statutes, and laws;
(iv) all liens other than those created or suffered by Seller, it
being understood and agreed by the parties hereto that any lien which
is a result of Purchaser's failure to perform its obligations under
the Ground Lease shall not be a breach of Seller's agreement
hereunder.
(b) If the Commitment shall disclose encumbrances or exceptions to
title other than the Permitted Exceptions ("Unpermitted Exceptions"), or if
the Survey shall disclose any encroachment or other matter rendering title
to the Property unmarketable ("Survey Defect"), Seller may, at Seller's
sole option, cause the Unpermitted Exceptions to be removed from the
Commitment and Survey Defects to be removed prior to Closing.
2
<PAGE>
(c) In the event Seller does not so elect to remove the Unpermitted
Exceptions or Survey Defect, Purchaser, at its sole option and upon notice
to Seller, shall elect: (i) to terminate this Agreement; or (ii) to accept
the conveyance of the Property subject to the unremoved matters. If this
Agreement is terminated pursuant to clause (i) above, neither party shall
have any further liability or obligation hereunder.
7. Seller's Obligations at Closing. At the Closing, Seller shall furnish to
Purchaser the following, each of which shall be in a form reasonably
satisfactory to Purchaser's counsel:
(a) The Deed.
(b) A State of New York Board of Equalization and Assessment Real
Property Transfer Report for the Property and the transaction contemplated
herein.
(c) (i) Form TP-584 published by the New York Department of Taxation
and Finance ("Department") consisting of the New York State Combined Real
Property Transfer Tax Affidavit, Real Estate Tax Return and Credit Line
Mortgage Certificate; and (ii) if applicable, Form TP-584.1 published by
the Department consisting of the New York State Transfer Tax Return
Supplemental Schedules.
(d) A FIRPTA Affidavit executed by Seller.
(e) Possession of the Property.
(f) A certified copy of resolutions of Seller's Board of Directors
authorizing and directing the sale of the Property pursuant to this
Agreement.
(g) Such other documents as Seller is required to deliver by law or
pursuant to the terms of this Agreement.
8. Purchaser's Obligations at Closing. Provided that Seller shall perform
all of Seller's obligations under this Agreement, Purchaser shall deliver to
Seller at the Closing the following:
(a) The Purchase Price, minus the credits set forth in Section 9(b),
in the form of immediately available funds.
(b) Such other documents and payments as Purchaser is required to
deliver by law or pursuant to the terms of this Agreement.
9. Adjustments; Costs.
(a) Seller and Purchaser acknowledge and agree that Purchaser is
obligated to pay all "Impositions" as defined in the Ground Lease.
Accordingly, there shall be no proration of any Impositions.
3
<PAGE>
(b) Purchaser shall receive a credit against the Purchase Price in the
amount calculated pursuant to and in accordance with Section 29.2(4) of the
Ground Lease.
(c) Purchaser shall pay all recording costs, all New York State
Mortgage Taxes, if any, and the premium for the Title Policy, all
documentary, intangible, transfer and other taxes with respect to the Deed,
the Survey, all search continuation charges.
10. Representations and Warranties. To induce Purchaser to enter into this
Agreement, Seller represents and warrants to Purchaser as follows:
(a) Seller is not a "foreign person" as such term is defined in
Section 7701 of the Internal Revenue Code, as amended.
(b) There is no lease, option to purchase, right of first refusal to
purchase or agreement for the sale and purchase of all or any portion of
the Property to any person or entity, except for this Agreement and the
Ground Lease.
(c) Seller has full power and authority to enter into and consummate
the transaction contemplated by this Agreement without the consent or
approval of any third party, and when signed by Seller, this Agreement
constitutes a legal, valid and binding obligation of Seller, enforceable in
accordance with its terms.
Seller acknowledges that Purchaser will rely on Seller's representations
and warranties in connection with entering into this Agreement. All of the
foregoing representations and warranties shall merge into the Deed at the
Closing.
11. Conditions Precedent to Closing.
(a) Compliance by Seller and Purchaser with all terms and conditions
under this contract.
12. Broker. Each party hereto represents and warrants to the other party
that it has not utilized the services of any real estate broker, salesperson or
finder in connection with this Agreement or the transaction contemplated. Each
party hereto agrees to indemnify, defend and hold the other party harmless from
and against all other claims for brokerage commissions and finder's fees arising
from or attributable to the acts or omissions of the indemnifying party or any
party or entity acting or purportedly acting on behalf of the indemnifying
party.
13. Remedies Upon Default. If either party shall fail to keep or observe
any covenant, agreement or obligation to be kept or observed by such party under
this Agreement, the other party shall have the right, in addition to the
exercise of any other remedy available to it at law or in equity, (i) to
terminate this Agreement upon notice to the other party and recover damages; or
(ii) to enforce specific performance of this Agreement.
14. Notices. Any notice required or permitted to be given hereunder shall
be deemed given when personally delivered or deposited in the United States
mail, postage prepaid, certified or express mail, return receipt requested,
addressed to Seller or Purchaser, as the case may be, as follows:
4
<PAGE>
If to Seller: The Buffalo Enterprise Development Corporation
620 Main Street
Buffalo, New York 14202
Attention: President
With a copy to: Saperston & Day, P.C.
1100 M&T Center
Three Fountain Plaza
Buffalo, New York 14203
Attention: Gary L. Mucci
If to Purchaser. AGRO Power Development, Inc.
10 Alvin Court
East Brunswick, New Jersey 08816
Attention: President
With a copy to: Giordano, Halleran & Ciesla
125 Half Mile Road
Middletown, New Jersey 07748
Attention: Edward Radzely
Either party to this Agreement may change its address for notice purposes
by giving notice thereof to the other party hereto, except that such change of
address notice shall not be deemed to have been given until actually received by
the addressee thereof.
15. Ground Lease.
This Agreement and all rights and obligations hereunder shall automatically
terminate in the event the Ground Lease is terminated.
16. Purchaser's Representations.
(a) Purchaser shall be deemed to warrant and represent to Seller that, as
of the date of this Agreement, (i) Purchaser is familiar with the Property; (ii)
Purchaser is in possession of the Property pursuant to the Ground Lease; (iii)
Purchaser accepts the Property in "as is" condition, subject only to the express
representations and warranties made by Seller in this Agreement and the Ground
Lease; and (iv) Purchaser is entering into this Agreement voluntarily upon its
own judgment and is not relying upon any representation or warranty of Seller
other than as appears in this Agreement.
17. Remedies.
Each party shall have all rights and remedies available under New York law
both at law and equity in the event of a default by the other party hereunder.
18. Miscellaneous.
5
<PAGE>
(a) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
(b) This Agreement constitutes the entire agreement and understanding
between the parties hereto, and there are no agreements, representations or
warranties except those herein expressly set forth, and it is agreed that any
change in, addition to, amendment or modification of the terms hereof shall be
of no effect unless reduced to writing and executed by both parties hereto.
(c) The captions used in connection with the Sections of this Agreement are
for convenience of reference only and shall not be deemed to construe, limit or
expand the meaning or language of this Agreement.
(d) If the last day for performance of any obligation hereunder occurs on a
Saturday, Sunday or legal holiday, the time for performance shall be extended to
the next regular business day.
(e) If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the
provisions of this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
(f) Nothing in this Agreement, express or implied, is intended to confer
upon any person, other than the parties hereto and their respective successors
and assigns, any rights or remedies whatsoever.
(g) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
SELLER: BUFFALO ENTERPRISE DEVELOPMENT
CORPORATION
By:______________________________________
Its:_____________________________________
PURCHASER: AGRO POWER DEVELOPMENT, INC.
By:______________________________________
Its:_____________________________________
6
Exhibit 10.62
EXECUTION COPY
COMMERCIAL GREENHOUSE LEASE
and
OPERATING AGREEMENT
between
OXBOW POWER OF NORTH TONAWANDA,
NEW YORK, INC.
and
VILLAGE FARMS OF WHEATFIELD, INC.
July 22, 1992
<PAGE>
TABLE OF CONTENTS
RECITALS .............................................................2
AGREEMENT .............................................................2
ARTICLE I. DEFINITIONS..................................................2
ARTICLE II. EXTENT OF AGREEMENT..........................................6
ARTICLE III. TERM OF AGREEMENT............................................6
ARTICLE IV. CONSTRUCTION OF THE FACILITY, THE GREENHOUSE
AND THE PIPELINE.............................................7
ARTICLE V. GREENHOUSE LEASE.............................................10
ARTICLE VI. OPERATION OF THE GREENHOUSE..................................18
ARTICLE VII. OPERATING EXPENDITURES.......................................22
ARTICLE VII. SECURITY FOR PERFORMANCE.....................................24
ARTICLE IX. CLAM AND LAWSUITS............................................24
ARTICLE X. DELIVERY AND USE OF THERMAL ENERGY...........................24
ARTICLE XI. REPRESENTATIONS WARRANTIES AND
COVENANTS....................................................27
ARTICLE XII. DEFAULT AND REMEDIES.........................................29
ARTICLE XII. FORCE MAJEURE................................................31
ARTICLE XIV. ASSIGNMENT...................................................31
ARTICLE XV. NOTICES......................................................32
ARTICLE XVI. COMPLIANCE WITH LAWS AND REGULATIONS.........................32
ARTICLE XVII. NON-WAIVER...................................................34
ARTICLE XVIII. INDEPENDENT PARTIES..........................................34
ARTICLE XIX. APPROVAL BY PROJECT LENDER...................................34
ARTICLE XX. NON-DEDICATION OF FACILITY...................................34
i
<PAGE>
ARTICLE XXI. SURVIVAL OF OBLIGATIONS......................................34
ARTICLE XXII. FURTHER ASSURANCES...........................................34
ARTICLE XXIII. LIMITATION OF LIABILITY......................................34
ARTICLE XXIV. CONFIDENTIALITY..............................................35
ARTICLE XXV. INTERPRETATION...............................................35
ARTICLE XXVI. SEVERABILITY AND RENEGOTIATION...............................36
ARTICLE XXVIII. COUNTERPART'S................................................36
ARTICLE XXVIII. SUBORDINATION TO OWNER'S MORTGAGES...........................36
ARTICLE XXIX. RECORDING....................................................36
EXHIBIT A DESCRIPTION OF GREENHOUSE AND GREENHOUSE SITE
EXHIBIT B DETERMINATION OF NET PROCEEDS
EXHIBIT C SCHEDULE OF CANCELLATION CHARGES
EXHIBIT D SITE PLAN SHOWING PIPELINE AND POINT'S OF INTERCONNECTION
EXHIBIT E ESTIMATE OF TOTAL CAPITAL COSTS
EXHIBIT F SPECIFICATIONS FOR CONDENSATE
EXHIBIT G CONTENTS OF OPERATING PLAN
ii
<PAGE>
COMMERCIAL GREENHOUSE LEASE AND OPERATING AGREEMENT
This COMMERCIAL GREENHOUSE LEASE AND OPERATING AGREEMENT (this "Agreement")
is entered into as of July 22, 1992 by and between Oxbow Power of north
Tonawanda, New York, Inc., a Delaware corporation ("Owner"), and Village Farms
of Wheatfield, Inc., a New York corporation ("Operator").
RECITALS
WHEREAS, Owner intends to construct, own and operate a nominal 55-megawatt
natural gas-and oil-fired cogeneration facility located in the City of North
Tonawanda, Niagara County, New York (the "Facility"); and
WHEREAS, the Facility must be a "Qualifying Facility" under the federal
Public Utilities Regulatory Policies Act of 1978 ("PURPA"), and a "Qualifying
Cogeneration Facility" under New York law, in order to enjoy the benefit of a
certain agreement for the sale of electricity between Owner and Niagara Mohawk
Power Corporation; and
WHEREAS, in order to so qualify, certain thermal energy from the Facility
must be utilized outside the electricity generating process, in this case by
providing thermal energy to a greenhouse complex of approximately 12.5 enclosed
acres of growing area to be developed, constructed and owned by Owner and
located in the Town of Wheatfield, New York (the "Greenhouse"); and
WHEREAS, Owner and Operator desire that Operator lease and operate the
Greenhouse as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants herein,
and for other good and valuable consideration, Operator and Owner agree as
follows:
AGREEMENT
ARTICLE I. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.1 "Acceptance" shall have the meaning set forth in the Greenhouse
Construction Contract.
1.2 "Affiliate" shall mean any person, corporation, partnership or other
entity which directly or indirectly owns, is owned by or is under common
ownership with Owner, Operator or Project Lender as the case may be.
1.3 "Agreement" shall mean this Commercial Greenhouse Lease and Operating
Agreement, as it may be supplemented and amended from time to time, together
with any exhibits and attachments hereto.
1.4 "Auxiliary Boiler" shall mean the dual-fueled (natural gas- and
oil-fired) auxiliary boiler or back-up hot water heaters to be installed by
Owner in the Greenhouse to provide an alternative source of a sufficient
quantity of Thermal Energy for use in the Greenhouse.
1.5 "Condensate" shall mean water which results from the condensation of
Thermal Energy delivered to the Heat Exchange System. Condensate shall meet the
quality specifications set forth in Exhibit "F" to this Agreement.
1.6 "Date of Commercial Operation" shall mean the later of Substantial
Completion, Acceptance or December 1, 1993.
1.7 "Facility" shall mean the cogeneration plant to be constructed by Owner
in the City of North Tonawanda, Niagara County, New York, to produce electrical
and thermal energy, together with all appurtenant structures, equipment,
piping,, wiring, controls, interconnection facilities, and all additions and
replacements thereto, other than the Pipeline and Greenhouse.
1.8 "Fixed Rent" shall have the meaning set forth in Section 5.3 of this
Agreement.
1.9 "Force Majeure" shall mean any event beyond the reasonable control of
the Party seeking relief under Article XIII hereof, and which with the exercise
of reasonable diligence such Party, is unable to prevent, including but not
limited to the following: an act of God, act of the public enemy, war, blockade,
riot, civil disturbance, lightning, fire, storm, flood, earthquake, explosion,
sabotage, major equipment break-down if not due to the negligence of such Party,
delays in delivery of materials or work from contractors, subcontractors or
suppliers, including but not limited to fuel suppliers, beyond such Party's
reasonable control, action by the Utility, and any circumstance that would in
the reasonable opinion of such Party endanger persons or property. Economic
hardship and strikes, work stoppages and other labor disturbances shall not
constitute Force Majeure.
1.10 "Gas Sale Agreement' shall mean the Amended and Restated Off-Peak Firm
Natural Gas Sales Agreement dated November 5, 1991 between Owner and National
Fuel, as the same may be supplemented and amended from time to time.
1.11 "Governmental Authority" shall mean any federal, state or local or
administrative body or court or any person or entity authorized to make or
enforce laws or regulations.
1.12 "Greenhouse" shall mean the commercial greenhouse consisting of
approximately 12.5 enclosed acres of growing area, together with work and
storage buildings, heat, light, irrigation, growing and packing systems, to be
constructed and owned by Owner on the Greenhouse Site in the Town of Wheatfield,
Niagara County, New York.
1
<PAGE>
1.13 "Greenhouse Construction Contract" shall mean the contract between
Owner and the Greenhouse Contractor for the design, procurement and erection of
the Greenhouse.
1.14 "Greenhouse Contractor" shall mean the third party retained by Owner
to design, procure and erect the Greenhouse pursuant to the Greenhouse
Construction Contract.
1.15 "Greenhouse Site" shall mean the property on which the Greenhouse is
to be situated, as is more fully described in Exhibit "A" hereto.
1.16 "Hazardous Materials" means (i) any chemical, material, substance or
waste now or in the future defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste,' "special waste," `infectious
waste," "solid waste," or "toxic substances" or any other formulation intended
to define, list, classify or characterize substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
toxicity, reproductive toxicity, "TCLP toxicity," or "EP toxicity" or words of
similar import under any applicable local, state or federal law or under the
regulations adopted or publications promulgated pursuant thereto, (ii) any
flammable substances or explosives, (iii) any radioactive materials, (iv)
asbestos in any form which is or could become friable, (v) urea formaldehyde
foam insulation, (vi) pesticides, (vii) petroleum or petroleum products and
(viii) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority or poses a hazard
to the health and safety of Owner, Operator, the employees, agents and
contractors of either, the public or the environment, any persons in the
vicinity of the Greenhouse, or consumers of the products of the Greenhouse.
1.17 "Heat Exchange System" means the system of heat exchangers, piping,
values, pumps and controls which extract Thermal Energy from steam or hot water
delivered by the Pipeline and returns Condensate to the Pipeline for return to
the Facility.
1.18 "Initial Delivery Date" shall mean the date on which Owner first
delivers or is capable and offers in writing to deliver Thermal Energy, in other
than test or startup quantities, to the Greenhouse.
1.19 "Leased Premises" shall mean the Greenhouse and the Greenhouse Site.
1.20 "Lease Year" shall mean, except as to the first Lease Year, a period
of twelve (12) consecutive calendar months commencing January 1 of each such
year. The first Lease Year shall commence on the latest of December 1, 1993, the
date of Substantial Completion or the date of Acceptance, and shall continue
until December 31, 1994.
1.21 "Major Default" shall mean (i) with respect to Operator, (A) the
contractually unexcused failure of Operator to operate the Greenhouse materially
in accordance with the Operating Plan, (B) Operator's contractually unexcused
failure to pay Owner fixed or variable rental payments hereunder, after taking
into account any applicable grace period, (C) Operator's contractually unexcused
failure to use the Minimum Annual Quantity in any one-Year period, (D)
Operator's contractually unexcused failure to provide the financial assurance
required by Section 8.2 hereof, or (E) a contractually unexcused default by
Operator under Sections 12.1 (c) or 12.1(d) hereof, and (ii) with respect to
Owner, (A) Owner's contractually unexcused, failure to
2
<PAGE>
pay to Operator the amounts due pursuant to Sections 6.10(a) or 6.10(b) hereof,
or (B) a contractually unexcused default by Owner under Sections 10.4, 12.1(b)
or 12.1(c) hereof.
1.22 "Minimum Annual Quantity" shall have the meaning set forth in Section
10.2 of this Agreement.
1.23 "National Fuel" shall mean National Fuel Gas Distribution Corporation,
a New York regulated gas utility.
1.24 "Net Proceeds," "Permitted Expenses" and "Revenues" shall have the
meanings set forth in Exhibit "B" to this Agreement.
1.25 "Nursery Substantial Completion" shall have the meaning set forth in
the Greenhouse Construction Contract, including a requirements that the
Greenhouse nursery be sufficiently complete to allow plant propagation.
1.26 "Nursery Substantial Completion Deadline" shall have the meaning set
forth in the Greenhouse Construction Contract.
1.27 "Operating Plan" shall have the meaning set forth in Section 6.2 of
this Agreement.
1.28 "Overhead Charge" shall have the meaning set forth in Section 3.10 of
Exhibit B to this Agreement.
1.29 "Owner's Scope" shall mean those items of services, materials and
equipment furnished by Owner of the Greenhouse Contractor pursuant to the
Greenhouse design and construction specifications prepared by Operator and
approved by Owner, as set forth in Section 4.1 of this Agreement.
1.30 "Party" or "Parties" shall mean the signatories to this Agreement and
their permitted successors and assigns.
1.31 "Pipeline" shall mean the systems of valves, pipelines, and other
equipment by which Thermal Energy from the Facility is delivered to the
Greenhouse, and by which Condensate is returned from the Greenhouse to the
Facility.
1.32 "Point(s) of Interconnection" shall mean one or more designated points
at the Greenhouse immediately before the Heat Exchange System, where ownership
and control of Thermal Energy is transferred from Owner to Operator and
ownership and control of Condensate is transferred from Operator to Owner, as
are more specifically indicated on Exhibit D to this Agreement.
1.33 "Point of Meeting" shall mean the low pressure entry and exit points
of the Heat Exchange System and the Auxiliary Boiler and the steam extraction
point, where Thermal Energy is measured.
3
<PAGE>
1.34 "Power Purchase Agreement" shall mean the Agreement between Owner and
Utility dated May 14, 1987, as amended February 21, 1991, with respect to the
sale of electricity from the Facility, as the same may be further supplemented
and amended from time to time.
1.35 "Project Completion" shall mean the date on which the Project Lender
determines that completion of the Facility, the Pipeline and the Greenhouse has
occurred.
1.36 "Project Lender" shall mean the group of banks initially composed of
Citibank, N.A., BOT Financial Corporation, The Bank of Nova Scotia, National
Westminster Bank PLC and any other banks, insurance companies or other entities
or institutions which provide equity or debt financing or refinancing for the
construction of the Facility, the Pipeline or the Greenhouse.
1.37 "Qualifying Cogeneration Facility" shall mean a cogeneration facility
which meets those criteria promulgated by: (1) the Federal Energy Regulatory
Commission ("FERC") pursuant to the Public Utilities Regulatory Policies Act of
1978 ("PURPA"), and (ii) the State of New York, pursuant to Section 2.2-a of the
New York State Public Service Law, as any of those federal or state statutes and
regulations may be amended from time to time.
1.38 "Substantial Completion" shall have the meaning set forth in the
Greenhouse Construction Contract, including a requirement that the Greenhouse be
sufficiently complete to be suitable for the growing of plants.
1.39 "Substantial Completion Deadline" shall have the meaning set forth in
the Greenhouse Construction Contract.
1.40 "Thermal Energy" shall mean heat in the form of saturated steam or hot
water, free of contamination, supplied by Owner to Operator from the Facility or
supplied by Operator from the Auxiliary Boiler.
1.41 "Total Capital Cost" shall mean the total capital cost of the
Greenhouse and associated facilities relating to the Greenhouse, including but
not limited to the Greenhouse structure the Auxiliary Boiler, a $100,000
allowance for real estate costs, any and all capital additions to the foregoing,
and all financing fees and construction interest relating to the Greenhouse, but
excluding the capital cost of the Heat Exchange System, the steam and condensate
metering equipment, the Pipeline and any backup boilers installed at the
Facility. A list of the constituent elements of Total Capital Cost is set forth
in Exhibit "E" hereto.
1.42 "Utility" shall mean Niagara Mohawk Power Corporation, a New York
regulated electric utility.
1.43 "Variable Rent" shall have the meaning set forth in Section 5.4 of
this Agreement.
1.44 "Year" shall mean a calendar year, unless the context plainly
indicates otherwise.
ARTICLE II EXTENT OF AGREEMENT
4
<PAGE>
2.1 Extent of Agreement. This Agreement consists of this Agreement text,
the following exhibits, and any schedules, appendices and attachments thereto:
(a) Exhibit A: Description of Greenhouse and Greenhouse Site
(b) Exhibit B: Determination of Net Proceeds
(c) Exhibit C: Schedule of Cancellation Charges
(d) Exhibit D: Site Plan showing the Pipeline and Points of Interconnection
(e) Exhibit E: Estimate of Total Capital Cost
(f) Exhibit F: Specifications for Condensate
(g) Exhibit G: Contents of Operating Plan
Exhibits A-G and any schedules, appendices and attachments thereto are
hereby incorporated by reference in, and made a part of, this Agreement.
2.2- Conflicting Provisions. In the event of any conflict between the text
of this Agreement and the exhibits hereto, the text of this Agreement shall
control.
2.3 Complete Agreement. This Agreement contains the entire agreement of the
Parties hereto with respect to the subject matter hereof and supersedes any and
all prior agreements, proposals, negotiations or representations between them
with respect thereto.
ARTICLE III TERM OF AGREEMENT
3.1 Term.
(a) Unless earlier terminated by mutual consent or as a result of a Major
Default which is no, remedied during any applicable grace period, this Agreement
shall remain in full force and effect for the greater of a period of fifteen
(15) Lease Years or fifteen (15) Years after Project Completion.
(b) Upon expiration of the initial term, this Agreement may be renewed for
successive additional terms of five (5) years each, provided, however, that in
such event the Fixed Rent and Variable Rent payments and the Overhead Charge
hereunder shall be equitably adjusted to reflect then - current business and
market conditions. In the event the parties wish to renew this Agreement upon
expiration of the initial term or any renewal term, the Owner and the Operator
shall commence negotiations on the foregoing adjustments no later than twelve (I
2) months prior to the expiration of the then-current term, and shall complete
such negotiations no later than six (6) months prior to the expiration of such
term. If an amendment incorporating such adjustments and renewing this Agreement
is not executed by the date which is six (6) months prior to the expiration of
such term, this Agreement shall expire at the end of die then-current term.
5
<PAGE>
3.2 Early Termination. Owner may terminate this Agreement without cost or
obligations immediately upon written notice to Operator if any of the following
events occur prior to Substantial Completion: (a) Owner is unable with the
exercise of reasonable diligence to obtain or maintain the necessary site
approvals, environmental permits or other permits and licenses which in its sole
judgment are necessary to construct and operate the Facility or the Pipeline, or
to construct the Greenhouse, (b) the Utility cancels or terminates the Power
Purchase Agreement, or (c) the Project Lender withdraws financing for the
Facility, the Pipeline or the Greenhouse. In the event of such termination,
neither Party shall have any further liability or other obligation to the other
under this Agreement or by virtue of the termination except as set forth in
Article 24.
3.3 Cancellation for Convenience. Owner may cancel this Agreement for its
convenience at any time on or before Nursery Substantial Completion, upon thirty
(30) days prior written notice to Operator. In the event of such cancellation,
Owner shall pay to Operator a cancellation fee in accordance with the schedule
set forth in Exhibit C, and neither Party shall have any further obligation or
liability to the other under this Agreement or by virtue of the cancellation
except as set forth in Article 24. Nothing in this Section 3.3 shall be deemed
to qualify or limit Owner's ability to terminate this Agreement without cost or
obligation pursuant to Section 3.2 hereof.
ARTICLE V. CONSTRUCTION OF THE FACILITY, THE GREENHOUSE AND THE PIPELINE
4.1 Development and Construct on of Facility. Owner undertakes to continue
with due diligence its activities in connection with the design and Construction
of the Facility, in an orderly and businesslike manner. Owner will keep Operator
advised, on a periodic basis, of its progress toward design, construction and
operation of the Facility as well as its projection of the Initial Delivery
Date. In particular, Owner will provide written notice to Operator specifying
the anticipated Initial Delivery Date no less than sixty (60) days prior
thereto. All technical, operational and business decisions related to the
Facility and die Pipeline will be made by Owner, in its sole-discretion.
4.2 Greenhouse Design and Construction. Operator shall prepare and deliver
to Owner for its approval detailed specifications for the design and
construction of the Greenhouse. Owner shall solicit bids for Greenhouse design
and construction utilizing Operator's detailed specifications, and shall cause
the Greenhouse to be designed and erected by the Greenhouse Contractor pursuant
to the terms of the Greenhouse Construction Contract.
4.3 Evaluation of Bids. Operator shall submit to Owner a list of
prospective Greenhouse Contractors recommended by Operator. Owner shall solicit
proposals and manage all communications with prospective Greenhouse Contractors.
operator shall assist Owner in evaluating bids received from prospective
Greenhouse Contractors and will recommend one of the proposals for approval by
Owner.
4.4 Supervision of Greenhouse Construction.
6
<PAGE>
(a) Operator shall provide a full-time, qualified employee or contract
employee to act as construction manager or site representative to serve as an
on-site construction manager to oversee the design and construction of the
Greenhouse pursuant to the terms of the Greenhouse Construction Contract. Such
individual shall be present at the Greenhouse Site at all hours during which
Greenhouse construction activities reasonably may be expected to be under way
until Substantial Completion. Operator shall nominate, and notify Owner of the
name of, the individual to fulfill this role at least sixty (60) days prior to
commencement of Greenhouse Construction. Owner shall have the right to approve
or disapprove such nominee, but Owner's app-oval shall not be unreasonably
withheld. If Substantial Completion does not occur on or before October 1, 1993,
Operator may substitute the Greenhouse general manager to perform oversight of
design and construction of the Greenhouse and may thereupon withdraw the
construction manager.
(b) Operator shall report to Owner periodically as specified by Owner, but
not less than weekly, regarding the status of, and material developments
relating to, the design and construction of the Greenhouse. In performing the
construction management function, Operator shall follow Owner's directions and
instructions with respect to Greenhouse design and construction. However,
Operator's compliance with its obligations as construction manager this
subsection 4.4(b) shall not operate as a waiver of any rights of Operator set
forth in this Agreement.
4.5 Greenhouse Occupancy Date.
(a) Owner and Operator shall use all commercially reasonable efforts to
achieve Nursery Substantial Completion no later than October 1, 1993; provided,
however, that the Greenhouse Contractor's failure to achieve Nursery Substantial
Completion on or before October 1, 1993 shall not excuse Operator from its
obligations under this Agreement. Operator shall occupy, commence operation of,
and accept delivery of Thermal Energy for the then completed portion of the
Greenhouse upon Nursery Substantial Completion. However, if under the Greenhouse
Construction Contract Owner or Operator is entitled to occupy a portion or
portions of the Greenhouse prior to Nursery Substantial Completion, Operator
shall occupy such portion(s) upon notice from Owner that the same is or are
ready for occupancy. Any early occupancy of the Greenhouse by Operator shall be
rent-free until December 1, 1993.
4.6 Liquidated Damages for Failure to Achieve Schedule Guarantees.
(a) Owner guarantees that the Greenhouse Contractor will achieve (i)
Nursery Substantial Completion on or before October 1, 1993, and (ii)
Substantial Completion on or before December 1, 1993.
(b) As Operator's sole and exclusive remedy for the Greenhouse Contractor's
failure to achieve the foregoing schedule guarantees, Owner shall pay the
following liquidated damages:
(i) If the Greenhouse Contractor fails to achieve Nursery Substantial
Completion on or before the Nursery Substantial Completion Deadline and
Operator is prevented from commencing propagation of plants in the
Greenhouse nursery on or before October 1, 1993, the Owner shall pay to
Operator, as liquidated damages, fifty percent (50%) of the liquidated
7
<PAGE>
damages which are actually paid to Owner by the Greenhouse Contractor for
each day that Nursery Substantial Completion is delayed, beyond October 1,
1993.
(ii) If the Greenhouse Contractor fails to achieve Substantial
Completion on or before the Substantial Completion Deadline and Operator is
prevented from commencing planning in the Greenhouse on or before December
1, 1993, Owner shall pay to the Operator, as liquidated damages, in
addition to the sum set forth in Subsection 4.6(b)(i), fifty percent (50 %)
of the liquidated damages which are actually paid to Owner by the
Greenhouse Contractor for each day that Substantial Completion is delayed
beyond December 1, 1993.
(c) Owner and Operator hereby acknowledge and agree that the terms,
conditions and amounts fixed pursuant to this Section 4.6 for liquidated damages
are reasonable, considering the damages that Operator would sustain in the event
of the Greenhouse Contractor's failure to achieve the above schedule guarantees.
These amounts are agreed upon and fixed as liquidated damages because of the
difficulty of ascertaining as of the date hereof the exact amount of damages
that would be sustained in such event. However, Operator expressly acknowledges
that the payments of liquidated damages by Owner under this Agreement are
intended to be a passthrough of a portion of the liquidated damages payable to
Owner by the Greenhouse Contractor pursuant to the Greenhouse Construction
Contract. Owner's obligation to pay liquidated damages to Operator under this
Section 4.6 therefore is expressly conditioned upon, and subject to, Owner's
receipt of the corresponding liquidated damage payments from the Greenhouse
Contractor pursuant to the Greenhouse Construction Contract; however, if Owner
elects to offset all or a portion of the liquidated damages owed by the
Greenhouse Contractor against monies owed by the Owner under the Greenhouse
Construction Contract, Owner shall be deemed to have received the amount of
liquidated damages so offset for purposes of this sentence.
4.7 Pipeline.
(a) Owner will develop, design and construct the Pipeline, including all
necessary equipment to enable it to deliver Thermal Energy to Operator as
provided in Article X hereof.
(b) Owner shall construct the Pipeline to deliver Thermal Energy to and
return Condensate from the Greenhouse at the interconnection points specified in
Exhibit D hereto. Thermal Energy and Condensate shall be measured as provided in
Article X by meters located at the Point of Metering.
(c) Construction Schedule. Owner shall use its best efforts to cause
completion of that section of the Pipeline adjacent to the Leased Premises prior
to the commencement of construction of the Greenhouse. Owner shall keep Operator
apprised of the schedule for construction of the Pipeline. If Operator commences
operation of the Greenhouse before `the completion of the Pipeline, Owner shall
consult with Operator concerning the construction of the Pipeline so as to
minimize any impact of such construction on the operation of the Greenhouse.
4.8 Cooperation by Operator. Operator shall cooperate with and assist Owner
and the Greenhouse Contractor in the acquisition of all necessary permits and
approvals from appropriate
8
<PAGE>
Governmental Authorities in order to enable Owner and the Greenhouse Contractor
to develop, design, construct and operate the Facility, the Pipeline and the
Greenhouse.
ARTICLE V GREENHOUSE LEASE
5.1 Lease. Owner hereby leases to Operator, and Operator hereby leases from
for the term set forth in Section 3.1 hereof, the Leased Premises. In
consideration for this lease, Operator shall pay to Owner the Fixed Rent and
Variable Rent described in Sections 5.3 and 5.4 hereof.
5. 2 Use of Premises. The Leased Premises shall be utilized for a
commercial greenhouse to be operated in accordance with the Operating Plan and
for no other purpose.
5.3 Fixed Rent. Operator shall pay to Owner as Fixed Rent for the Leased
Premises, in manner set forth and as adjusted in this Section 5.3, the sum of
the Fixed Rent components described below.
(a) Fixed Rent Base Component.
(i) The annual Fixed Rent base component for all Lease Years up to and
including the Lease Year ending December 31, 1996 shall be $[information
omitted and subject to a request for confidential treatment] per Lease
Year, payable in twelve equal installments on or before the last day of
each calendar month of each Lease Year; provided, however, that if
Substantial Completion occurs on or before December 1, 1993, the annual
Fixed Rent base component for the first Lease Year only shall be
$[information omitted and subject to a request for confidential treatment],
payable in thirteen equal installments, with the first installment payable
on December 31, 1993. If Substantial Completion occurs after December 1,
1993, the Fixed Rent base component for the first Lease Year shall be
equitably pro-rated based upon the actual date of occupancy of the
Greenhouse.
(ii) Commencing January 1, 1997 and at the commencement of each Lease
Year thereafter, the Fixed Rent base component shall be adjusted. The new
or adjusted Fixed Rent base component shall be determined by multiplying
the Fixed Rent base component for the previous Lease Year by the ratio of
(a) the unit cost of natural gas fuel, including any surcharges, under the
Gas Sale Agreement for the Year ending on the November 30 immediately
before the date of adjustment ("UCG") to (b) $2.5147 per million BTUs,
which is the unit charge for natural gas fuel, including surcharges as
defined in the Gas Sale Agreement, for the twelve-month period ending
November 30, 1991 ("UCG1"). This adjustment is expressed by the following
formula:
AFRBC = $* x UCG2
----
UCG1
Where:
AFRBC = adjusted Fixed Rent base component
* information omitted and subject to a request for confidential
treatment
9
<PAGE>
In no event, however, shall the AFRBC increase by more than four percent (4%) or
less than one percent (1 %) over the Fixed Rent base component for the prior
Lease Year, at any given date of adjustment. The adjusted Fixed Rent base
component shall be paid in twelve equal installments on or before the last day
of each calendar month in the applicable Lease Year.
(b) Fixed Rent Capital Cost Component
(i) The annual Fixed Rent capital cost component for the first five
Lease Years shall be the percentage of Total Capital Costs ("TC") indicated
in the table below:
Lease Year Fixed Rent Capital Cost
---------- -----------------------
1 2.0833% of TC
2 3% of TC
3 4.5% of TC
4 4.75% of TC
5 5% of TC
(ii) For the sixth Lease Year and all Lease Years thereafter, the
annual Fixed Rent capital cost component shall be an amount calculated by
multiplying the annual Fixed Rent capital cost component for the
immediately preceding Lease Year by one and three one-hundredths (1.03).
(iii) During the first and second Lease Years, the annual Fixed Rent
capital cost component shall be paid in six (6) equal installments on the
first day of each month from July through December. During the third Lease
Year, the annual Fixed Rent capital cost component shall be paid in nine
(9) equal installments on the first day of each month from April through
December. Thereafter, the annual Fixed Rent capital cost component shall be
paid in twelve (12) equal monthly installments on the first day of each
month of the applicable Lease Year.
(iv) If Substantial Completion occurs after December 1, 1993 the Fixed
Rent capital cost component payments for the First Lease Year shall be
equitably pro-rated based upon the actual date of occupancy of the
Greenhouse.
5.4 Variable Rent Based on Net Proceeds. In addition to the Fixed Rent set
forth in Section 5.3, Operator shall pay to Owner as Variable Rent Owner's share
of Net Proceeds, as in accordance with Exhibit "B' to this Agreement.
5.5 Late Payment Charge. Any payment of Fixed Rent or Variable Rent which
is not made on or before the date due shall accrue interest from the date due at
the lesser of the fluctuating rate of interest announced publicly by Citibank,
N.A. in New York, New York as its base rate for the period in question, plus two
percent (25%), or the maximum interest rate permitted by law.
5.6 Repairs and Maintenance: Loss or Damage; Right of Entry.
10
<PAGE>
(a) Subject to the provisions of Section 5.12 hereof, Operator agrees that,
at Operator's sole expense, it will at all times after it occupies the Leased
Premises, keep the Leased Premises and all equipment and Fixtures therein or
used therewith clean (in accordance with industry practice), whole and in good
repair, reasonable wear and tear and damage from unavoidable casualty which is
actually covered and paid by insurance carried by Owner only excepted. In
addition, but without limiting the foregoing, operator specifically agrees (i)
to replace any glass broken during the period it occupies the Leased Premises,
and (ii) to repair or replace any item of materials or equipment within Owner's
Scope which is damaged or destroyed due to improper operation or maintenance or
Operator's negligence. Any repairs or replacements by Operator shall be
performed with materials and workmanship comparable to or better than the
original. If Operator fails to make any such repairs or replacements within a
reasonable time, or improperly makes such repairs or replacements, Owner may
(but shall not be obligated to) make such repairs or replacements, and Operator
shall reimburse Owner for the reasonable cost of same, upon demand, as
additional variable rent. Operator shall promptly report any damage or
destruction of materials or equipment within Owner's Scope and shall take all
reasonable steps to minimize further damage or destruction of same.
(b) Operator agrees to indemnify and hold harmless Owner, Owner's
Affiliates, and the shareholders, officers, directors, agents and employees of
each from and against any and all liability, loss or damage arising from any
nuisance made or suffered on the Leased Premises by Operator, its visitors,
invitees, agents or employees. All personal property of Operator and of third
parties which are the agents, invitees or guests of Operator on any part of the
Leased Premises shall be at the sole risk of Operator.
(c) Owner shall maintain and repair or replace, or cause to be maintained
and repaired or replaced by its insurer, any item of Greenhouse materials or
equipment within Owner's Scope, provided that such maintenance, repair or
replacement is necessitated by reason of normal wear and tear or due to a loss
actually covered and paid by insurance carried by Owner hereunder. Owner and or
its agents or contractors may enter upon the Leased Premises at any time to
inspect, maintain, repair or replace all or any part of the Leased Premises or
otherwise to effect the terms of this Agreement, provided, however that a
representative of Operator shall be present at all times that the Owner, its
agents or contractors so enter the Leased Premises. Any repair made by Owner or
Owner's insurer shall restore the damaged material or equipment to a condition
comparable to or better than that which existed immediately prior to such
damage.
5.7 Capital Improvements.
(a) Owner shall make, at Owner's expense, any commercially reasonable
capital improvements to the Greenhouse required by a change in applicable laws,
rules or regulations occurring after the date hereof the cost of such
improvements shall be added to Total Capital Costs for the purpose of
calculating the annual Fixed Rent capital cost component under Section 5.3
hereof.
(b) Operator may at any time request that Owner make alterations, additions
or capital improvements to the Greenhouse in order to maintain the Greenhouse's
competitive position in the marketplace. If such request is deemed reasonable by
Owner in its sole discretion, Owner shall make such alterations, additions or
capital improvements. However,
11
<PAGE>
Owner shall be compensated by Operator for such alterations, additions or
capital improvements through a mutually acceptable repayment arrangement or
adjustment to lease payments hereunder, which arrangement or adjustment shall be
established prior to the making of such improvements.
5.8 Operator's Alterations. Operator may not make any alteration, addition,
improvement, change or other modification to all or any part of the interior or
exterior of the Greenhouse or to the Greenhouse Site during the term of this
Agreement and any extension or renewal thereof without in each instance
obtaining Owner's prior written consent, which consent will not be unreasonably
withheld if the proposed modification is non-structural in nature. Together with
each request for such consent, Operator shall present to owner for its approval
reasonable plans and specifications for such proposed modification. This Section
5.8 shall not apply to changes or improvements in Greenhouse operations which do
not require modification of the Greenhouse structure or the Greenhouse Site.
5.9 Utilities.
(a) Operator shall arrange, and pay all bills for, electricity, water and
sewer services to the Greenhouse. Owner shall not be responsible for the quality
of the electricity, water and sewer provided by third parties to the Greenhouse.
Owner shall be responsible, for establishing physical connections for electric,
water and sewer service at Owner's expense.
(b) Owner shall supply Thermal Energy to heat the Greenhouse pursuant to
the Terms of, and for the compensation described in, this Agreement. During
those periods in which Owner is unable to provide a sufficient quantity of
Thermal Energy from the Facility, Operator shall provide Thermal Energy through
use of the Auxiliary Boiler; and notwithstanding Section 5.10(a) hereof, Owner
shall pay the cost of natural gas and fuel oil consumed by the Auxiliary Boiler
during, such periods, subject to the provisions of Sections 10.5 and 10.8
hereof.
(c) Operator shall be responsible to pay the cost of fuel oil consumed by
Operator's diesel generator and shall cause such fuel to be kept in a separate
tank from the fuel oil for the Auxiliary Boiler.
5.10 Taxes.
(a) Owner shall pay all real estate taxes assessed and imposed upon the by
federal, state or local governmental authorities, and all taxes imposed on
Owner's personal property located on the Leased Premises.
(b) Operator shall pay all taxes levied on its personal property located on
the Leased Premises.
5.11 Surrender of the Leased Premises.
(a) On the last day of the term, or upon any earlier termination of this
Agreement, or upon any re-entry by Owner upon the Leased Premises, Operator
shall well and truly surrender and deliver up the Leased Premises, including all
of Operator's modifications that may then exist therein, broom clean, into the
possession and use of Owner without fraud or delay and in good
12
<PAGE>
order, condition and repair, ordinary wear and tear excepted, free and clear of
all lettings and occupancies, and free and clear of all liens and encumbrances
occasioned by its operations. Operator shall remove all of Operator's property
from the Leased Premises and shall repair any damage to the I-eased Premises
resulting from such removal; provided, however, that Owner shall have the right
to (i) purchase any and all of Operator's equipment, materials, supplies and
inventory used in the Greenhouse for its then fair market value and (ii) obtain
an assignment from Operator of any lease of equipment used in the Greenhouse, to
the extent such lease is assignable by Operator.
(b) Operator expressly waives, for itself and for any person claiming
through or under Operator, any rights which Operator or such person may have
under the provisions of Section 2201 of the New York Civil Practice Law and
Rules and any similar successor law of same import then in force, in connection
with any holdover proceedings which Owner may institute to enforce the
provisions of this Section 5.11.
(c) If the Leased Premises shall not be surrendered upon the termination of
this Agreement, Operator hereby indemnities Owner against liability resulting
from delay by Operator in so surrendering the Leased Premises, including any
claims made by any succeeding tenant or prospective tenant founded upon such
delay.
(d) If Operator shall remain in possession of the Leased Premises after the
termination of this Agreement without the execution of a new lease agreement,
operator, at the option of Owner, and subject to all of the other terms of this
Agreement insofar as the same are applicable to a month-to-month tenancy, shall
be deemed to be occupying the Leased Premises as a tenant from month to month,
at a monthly rental equal to two times the monthly fixed rent last payable by
Operator hereunder, plus variable rent. Nothing contained in this Section 5.11
shall (x) imply any right of Operator to remain in the Leased Premises after the
termination of this Agreement, (y) imply any obligation of Owner to grant a new
lease or (z) be construed to limit any remedy that Owner may have against
Operator as a holdover tenant.
(e) The provisions of this Section 5. 11 shall survive the expiration of
this Agreement.
5.12 Damage or Destruction by Fire or Other Casualty.
(a) Operator shall notify Owner of any damage to the Leased Premises by
Fire or other casualty. If the Leased Premises shall be damaged by fire or other
casualty and Owner shall have notice thereof (whether from Operator or
otherwise), the damage (but excluding damage to Operator's property) shall be
repaired with due diligence by and at the expense of Owner to a condition
comparable to or better than that which existed immediately prior to such
damage. From the date that Owner receives actual notice of the occurrence of a
casualty until the date on which Owner shall have substantially completed the
repairs, Fixed Rent shall be abated in the proportion which the area of the part
of the Leased Premises which is not usable by Operator bears to the total area
of the Leased Premises. In the event Owner does not substantially complete the
repair of the Leased Premises within two hundred and seventy (270) days after
the occurrence of the casualty, Operator may terminate this Agreement by written
notice to Owner delivered within ten (10) days after expiration of the 270-day
period.
13
<PAGE>
(b) Anything in subsection (a) of this Section 5.12 to the contrary
notwithstanding if (i) the Leased Premises are totally damaged or, in Owner's
reasonable judgment, are rendered wholly untenantable or (ii) the Leased
Premises are damaged to the extent of fifty percent (50%) or more during the
last two years of the term of any renewal terms of this Agreement or (iii) if
the Leased Premises shall be so damaged by fire or other casualty that, in
Owner's reasonable opinion, substantial alteration, demolition, or
reconstruction of the Leased Premises shall be required; then in any of such
events, Owner, at Owner's option, may, not later than ninety (90) days following
any such damage, give Operator a notice in writing terminating this Agreement.
If Owner elects to terminate this Agreement, the term shall expire upon the
later of (I) the tenth (10th) day after such notice is given, or (ii), at
Operator's election, if a portion of the Greenhouse remains tenantable and
contains unharvested produce, the date the Operator completes the growing and
harvesting of such produce. Operator shall thereupon vacate the Leased Premises
and surrender the same to Owner in accordance with the applicable provisions of
this Agreement. Upon the termination of this Agreement under the conditions
provided in this subsection (b), Operator's liability for rent thereafter due
and payable shall cease and Owner shall be relieved of any obligation or
liability to Operator under this Agreement.
(c) If Owner does not elect to terminate this Agreement, Operator, at
Operator's expense, shall promptly perform all repairs or restorations not
required to be done by Owner and shall promptly upon completion of such repairs
re-enter the Leased Premises and commence operation of the Greenhouse in
accordance with the provisions of this Agreement. Owner shall not be liable for
delays occasioned by adjustment of losses with insurance carriers or by any
other cause so long as Owner shall proceed in good faith.
(d) Notwithstanding anything set forth herein to the contrary, Operator
shall be responsible for all repairs and replacements of damage and/or
destruction of all or any part of the Leased Premises necessitated by vandalism,
burglary or attempted burglary, or any other illegal or forcible entry into the
Leased Premises.
(e) Operator hereby expressly waives the provisions of Section 227 of the
Real Property Law or any like law which may hereinafter be enacted and agrees
that the provisions of this Section 5.12 shall govern and control in lieu
thereof, this Section being an express agreement governing any case of damage or
destruction of the Leased Premises by fire or other casualty.
5.13 Condemnation.
(a) If all or substantially all of the Greenhouse shall be taken by any
public or quasi-public authority under the power of eminent domain, condemnation
or expropriation or in the event of a conveyance in lieu thereof, then this
Agreement shall terminate as of the date on which possession of the Greenhouse
is required to be surrendered to the condemning authority, and Operator shall
have no claim against Owner for the value of the unexpired term of this
Agreement or for Operator's property or moving expenses.
(b) If there is a taking of less than substantially all of the
Greenhouse and it is commercially reasonable to repair the Greenhouse, this
Agreement shall continue in full force and effect except that the Fixed Rent
shall be reduced equitably in relation to the area of the
14
<PAGE>
Greenhouse so taken or conveyed and the other terms of this Agreement shall be
adjusted approximately, such reduction and adjustment commencing as of the date
Operator is required to surrender possession of such portion. Owner shall
promptly restore the Greenhouse, to the extent of condemnation proceeds
available for such purpose, as nearly as practicable to a condition comparable
to its condition at the time of such condemnation less the portion lost in the
taking or conveyance and Operator shall as promptly as practicable in accordance
with industry standards re-enter the Greenhouse and commence doing business in
accordance with the provisions of this Agreement. During the restoration period,
fixed rent shall be abated in the proportion which the area of the part of the
Greenhouse which is not usable by Operator bears to the total area of the
Greenhouse.
(c) In the event of any condemnation or taking as hereinbefore provided,
Operator shall not be entitled to any part of the award as damages or otherwise
for such condemnation arid Owner and any Owner's mortgagee shall receive the
full amount of such award as their respective interests may appear. Operator
hereby expressly waives any right or claim to any part hereof and assigns to
Owner any such right or claim to which Operator might become entitled. Operator
shall have the right to make a separate claim against the condemning (but not
against Owner or such mortgagee) for such compensation as may be separately
awarded or recoverable by Operator in Operator's own right for or on account of,
and limited to solely to, the value of the unexpired term and Operator's
property and moving expenses.
5.14 Estoppel Certificates.
Operator agrees at any time and from time to time, upon not less than ten
(10) days' prior notice from Owner, to execute, acknowledge and deliver, without
charge, to Owner, or to any person designated by Owner, a statement in writing
certifying that this Agreement is (or if there have been modifications,
identifying the same by the date thereof and the nature thereon, that Operator
has not received any notice of termination of this Agreement (or if Operator has
received such a notice, that it has been revoked, if such be the case), that to
the knowledge of Operator no event of default exists hereunder (or if any such
event of default exists hereunder (or if any such event of default does exist,
specifying the same and stating that the same has been cured, if such be the
case), that Operator to its knowledge has no claims or offsets against Owner
hereunder (or if Operator has any such claims or offsets, specifying the same),
and the dates to which the rent and the other sums and charges payable by
Operator hereunder have been paid.
ARTICLE VI. OPERATION OF THE GREENHOUSE
6.1 Right to Operate. Operator shall be the operator of the Greenhouse, and
shall conduct and direct all operations and marketing relating to the Greenhouse
and its produce, in accordance with the terms of this Agreement. Operator shall
conduct all such operations and marketing as would a prudent commercial
greenhouse operator under the same or similar circumstances, in a good and
workmanlike manner which reasonably maximizes Net Proceeds.
6.2 Operating Plan.
(a) Within ninety (90) days after execution of this Agreement, Operator
shall deliver to Owner a plan for the development and operation of the
Greenhouse (the "Operating Plan").
15
<PAGE>
Operator shall amend the Operating Plan periodically as necessary to reflect
changes in, or deviations from, the assumptions or programs outlined in the
operating Plan. Operator shall at all times operate the Greenhouse materially in
accordance with the Operating Plan. Prior to implementation of the Operating
Plan or any material amendment proposed by Operator, Operator shall present such
Operating Plan or amendment along with any reasonably requested supporting data
to Owner for its approval, which approval shall not be unreasonably withheld. If
Owner withholds approval of the Operating Plan or amendment, Owner and Operator
shall promptly meet and negotiate a mutually acceptable revision to such plan or
amendment.
(b) The Operating Plan shall consist of the information outlined in Exhibit
"G" hereto. The Operator shall update the Operating Plan annually and deliver a
copy of the updated Operating Plan to Owner for its approval by July 31 of each
Year. Owner shall either approve the Operating Plan within thirty (30) days of
receipt, or if Owner disapproves of such Operating Plan, Owner shall promptly
arrange a meeting with Operator to arrive at mutually acceptable revisions
thereto.
6.3 Costs and Liabilities; Operating Losses.
(a) Operator shall be responsible for, and shall pay when due, all costs
and expenses for materials, equipment, labor and resources to manage and operate
the Greenhouse, including but not limited to costs and expenses for supervision,
labor, training, production supplies, working capital, packaging, delivery,
electricity, wastewater disposal, stormwater control, telephone, advertising,
office supplies, insurance (other than insurance provided by Owner under Section
7.4), legal, accounting and solid waste disposal. Owner shall be responsible
for, and shall pay for, only those costs and expenses for services, material and
equipment included in Owner's Scope, and those costs and expenses expressly
agreed to be paid by Owner under Sections 5.6, 5.7 and 5.9 hereof.
(b) Operator shall be responsible for any operating losses relating to the
Greenhouse, and Operator shall at all times maintain sufficient cash reserves
and/or lines of credit for working capital to cover reasonably foreseeable
operating losses. Operator may carry forward certain net operating losses from
the Lease Year in which they are incurred to succeeding Lease Years for the
purpose of calculating Net Proceeds, but only as follows:
(i) If due solely to an event of Force Majeure Operator incurs the
loss of all or substantially all of its crop in any Lease Year, Operator
may carry forward that portion of its net operating loss which directly
results from such crop loss and deduct it as a Permitted Expense for the
purpose of calculating Net Proceeds in the two Lease Years next succeeding
the Lease Year in which the crop loss occurred (but not in subsequent
Years); provided that in the event of such two-year carry forward Operator
shall be entitled to deduct as a Permitted Expense, only one-third of its
Overhead Charge during the second year of such two-year carry forward
period; and
(ii) Operator may carry forward other net operating losses relating
solely to the Greenhouse and deduct them as Permitted Expenses for the
purpose of calculating Net Proceeds only in the Lease Year next succeeding
the Lease Year in which such loss occurred
16
<PAGE>
(and not in subsequent Lease Years); and such carry forward shall not
affect Operator's right to deduct its Overhead Charge as a Permitted
Expense.
No other carry forwards of net operating losses will be permitted
hereunder. All such carry forwards and deductions shall be made in
accordance with the terms and conditions set forth in Exhibit "B" hereto.
6.4 Reports to Owner. Operator shall deliver to Owner monthly reports
which, among other things, compare actual and projected production, revenues,
expenditures and cash flow to the Operating Plan then in effect. Operator shall
keep complete and correct books, accounts and records of operations, and shall
cause an independent accounting firm to perform an anneal review of its books
and records. Owner shall have the right to review Operator's books, accounts and
records of operations (including but not limited to those relating to
transactions with Operator's Affiliates) upon reasonable prior written notice
(but no more frequently than once each month), and to select and retain an
independent accounting firm to audit Operator's books, accounts and records of
operation, as is more fully set forth in Exhibit "B". At Owner's request,
Operator shall demonstrate to Owner's reasonable satisfaction that specific
transactions with Operator's Affiliates were undertaken on terms equal to or
better than comparable arm's length market transactions.
6.5 Reports to Governmental Authorities. Operator shall make all reports to
Governmental Authorities that are customarily made by an operator of a like
business or enterprise or as may be required by any Governmental Authority.
Operator shall promptly provide copies of all such reports (except Operator's
federal, state and local income tax returns) to Owner.
6.6 Liens and Encumbrances. Operator shall keep the Leased Premises and any
other property on the Leased Premises owned by Owner, free from all liens and
encumbrances occasioned by its operations, and in the event a lien or other
encumbrance is filed against the Leased Premises, Operator shall discharge the
same by payment or by posting an appropriate bond within fifteen (15) days
thereafter. Operator shall indemnify, defend and hold harmless Owner and Project
Lender, their respective Affiliates, and the shareholders, officers, directors,
agents and employees of each, from and against any and all liability, loss,
damage, costs, attorneys fees and other expenses incurred on account of claims
by any person performing work or furnishing material or supplies for Operator or
any person claiming under Operator. Owner may require that Operator provide to
Owner at Operator's expense a lien and completion bond in an amount equal to at
least one and one-half times the total estimated cost of any additions,
alterations, improvements or modifications proposed to be undertaken by Operator
to protect Owner against any liability for mechanics and materialmen's liens and
to ensure timely completion of the work.
6.7 Employees.
(a) To ensure adequate training of Greenhouse personnel, Operator shall
hire a general manager for the Greenhouse no later than April 1, 1993. In
addition, Operator shall hire one grower manager no later than August 1, 1993.
Operator shall hire all remaining Greenhouse
17
<PAGE>
personnel in a timely manner, in order to permit Operator to perform its
obligations under this Agreement.
(b) No persons working in connection with operation of the Greenhouse shall
be employees, agents or independent contractors of Owner, but shall be hired and
managed by Operator. The number of employees or independent contractors used by
Operator in conducting operations hereunder, their selection, and the hours of
labor and the compensation for services performed, shall be determined by
Operator except as expressly provided in subsection (a) above.
(c) Provided Operator is not then in default hereunder, Owner agrees that
upon the expiration or earlier termination of this Agreement and for a period of
one (1) year there-after, Owner shall not solicit for employment Operator's
then--current general manager or grower managers.
6.8 Matters for Owner to Decide or Take Action. Matters with respect to
which Owner shall decide and take action, shall include the following:
(a) Operating Plan. The approval of the Operating Plan as provided in
Section 6.2.
(b) Disposition of Equipment. The replacement, selling or other disposition
of any item of Owner's equipment.
(c) Courts and Agencies.
(i) Owner shall be primarily responsible for appearing before any
court or regulatory agency in matters pertaining to the Greenhouse, the
Greenhouse Site, the Pipeline or the Facility, provided that Operator shall
do all things reasonably requested to support Owner in connection
therewith.
(ii) Notwithstanding item (i) above, Operator shall be primarily
responsible for appearing before any court or regulatory agency in matters
pertaining exclusively to Operator's business licenses or other permits or
authorizations obtained in Operator's name. However, Operator shall provide
to Owner reasonable advance notice of such hearings and Owner may, at its
sole expense, attend such proceeding and be represented by counsel.
6.9 Permits. Operator shall obtain and maintain all business licenses and
other permits and authorizations necessary to be obtained or maintained in
Operator's name in order to operate the Greenhouse as contemplated herein, and
in the case of a termination of this Agreement or an assignment hereof by
Operator, Operator shall transfer such licenses, permits and authorizations to
the new operator of the Greenhouse to the extent such transfers are permitted by
law. In the event such transfer is made by Operator, Operator shall be released
and discharged from all obligations under such licenses, permits and
authorizations which arise from and after the date of such assignment.
6.10 Compensation of Operator. In compensation for its operating services
under this Agreement, Operator shall be entitled to receive:
18
<PAGE>
(a) Operator's actual, documented labor costs and out-of-pocket
expenses, up to a maximum amount of Forty-Five Thousand Dollars ($45,000), for
Operator's services in preparation of the Greenhouse design and construction
specifications and in evaluating bids for Greenhouse design and construction, as
described in Sections 4.1 and 4.2 of this Agreement. Such compensation shall be
paid in arrears twenty (20) days after receipt of Operator's
adequately-documented invoice, which Operator shall deliver to Owner within ten
(10) days after the end of each calendar month in which such services were
performed. However, in no event shall such amount exceed the amount Owner would
have paid had these services been billed upon a percentage of completion basis
calculated with respect the maximum payment due under this Section 6.10(a).
(b) Operator's actual, documented labor costs and out-of-pocket expenses,
up to a maximum of Eleven Thousand Dollars ($11,000) per month and Eighty-Eight
Thousand Dollars ($88,000) in the aggregate, for Operator's construction
supervisory services described in Section 4.4 hereof. Such services shall
commence on the date Greenhouse construction commences and end on the date
Greenhouse construction is completed, a period which the parties currently
expect to be no longer than eight (8) months in duration. Such compensation
shall be paid in arrears twenty (20) days after receipt of Operator's
adequately-documented invoice, which Operator shall deliver to Owner within ten
(10) days after the end of each calendar month during the construction period.
(c) Operator's share of Net Proceeds, determined and payable as set forth
in Exhibit "B" to this Agreement.
ARTICLE VII. OPERATING EXPENDITURES
7.1 Payments and Accounting. Except as herein otherwise specifically
provided, Operator shall bear and promptly pay and discharge all costs and
expenses incurred in the operation of the Greenhouse pursuant to the Operating
Plan and this Agreement, and shall account for the same in accordance with
Exhibit "B" and generally accepted accounting principles. Operator shall keep an
accurate record of all expenses and revenues.
7.2 Limitation of Expenditures. Operator shall not undertake to make any
expenditure in excess of $25,000 except in accordance with the Operating Plan;
provided, however, that, in case of explosion, fire, flood or other sudden
emergency, whether of the same or different nature, Operator may take such steps
and incur such expenses as in its reasonable opinion are required to safeguard
life and property, but Operator, as promptly as possible, shall report the
emergency and actions taken to Owner.
7.3 Operator's Insurance.
At all times during the term hereof, Operator shall, at its expense:
(a) Comply with the worker's compensation law of the State of New York, and
shall carry worker's compensation insurance granting the legally-required
compensation under the worker's compensation law of the State of New York.
Operator also shall carry employer's liability insurance with limits of not less
than $1,000,000 for all of Operator's employees engaged in work for Operator in
connection with this Agreement.
19
<PAGE>
(b) Maintain general liability insurance coverage of $1,000,000 per
occurrence, insuring for damages to property of third persons or injury to or
death of third persons arising out of Greenhouse operations, including
contractual liability, products and completed operations and independent
contractors. The deductible on such policy shall not exceed $10,000.
(c) Maintain automobile liability insurance of $100,000,000 per occurrence
for all owned, hired and leased vehicles.
(d) Maintain excess or umbrella liability insurance in excess of the
general liability, automobile liability and employers liability of $10,000,000
per occurrence.
All such insurance described in subsections (b), (c) and (d) above shall
name Owner and the Project Lender as additional insured parties as their
respective interests may appear. In addition, all insurance purchased pursuant
to this Section 7.3 shall contain a waiver by the insurance company of all
rights of subrogation with respect to Owner and the Project Lender. Operator
shall provide Owner with certificates evidencing the above insurance, and shall
require all of its contractors and subcontractors engaged in work on the
Greenhouse to comply with the requirements of this Section 7.3.
7.4 Owner's Insurance. At all times during the term hereof, Owner shall, at
Owner's expense, maintain insurance on all improvements on the Leased Premises
against damage by fire and such other hazards as are customarily included in
so-called "all risk" insurance coverage. Such insurance may be blanket with
other insurance maintained by Owner or Owner's affiliates. Project lender and
Operator shall be named as additional insureds on such policy, as their
respective interests may appear. All insurance purchased pursuant to this
Section 7.4 shall contain a waiver by the insurance company of all rights of
subrogation with respect to Operator.
7.5 Other Insurance Matters. Any party hereto individually may acquire such
additional insurance as it desires at its own expense to protect itself against
any liability not covered by the insurance specified above.
7.6 Indemnification by Operator. Operator shall indemnify and hold Owner,
the Project Lender, their respective Affiliates, and the shareholders, officers,
directors, agents and employees of each, harmless from and against any claim,
loss or liability arising out of the operation of the Greenhouse by Operator or
resulting from (i) any tort claim relating to operation of the Greenhouse, (ii)
any contract entered into by Operator and a third party, (iii) any debt incurred
by Operator, (iv) any insured loss in excess of insurance coverages; (v) any
loss insured against by Operator under Section 7.3 hereof which is within the
deductible of its insurance policy; (vi) Operator's negligence or willful
misconduct, or (vii) expenses in excess of revenues.
7.7 Indemnification by Owner. Owner shall indemnify, defend and hold
harmless Operator, Operator's lender, their respective Affiliates, and the
shareholders, officers, directors, agents and employees of each, from and
against (i) any claim, loss or liability arising solely from Owner's negligence
or willful misconduct in the operation of the Facility, or (ii) any loss insured
against by Owner under Section 7.4 hereof which is within the deductible of its
insurance policy. Owner's obligations of indemnification under this Section 7.7
shall not be deemed to limit Operator's obligations of indemnification under
Section 7.6 hereof.
20
<PAGE>
7.8 Transactions with Affiliates. Operator shall not enter into or
participate in any transactions with its Affiliates relating to the operation of
the Greenhouse except on terms and at rates no more favorable to such Affiliate
than those which could have prevailed in an arm's length transaction between
unrelated third parties.
ARTICLE VIII. SECURITY FOR PERFORMANCE
8.1 Security for Performance.
(a) As security for the performance of its obligations hereunder, on or
before April 1, 1993 Operator shall deliver to Owner a security deposit in the
form of cash or an irrevocable standby letter of credit in the amount of Two
Hundred Fifty Thousand Dollars ($250,000). If Operator elects to deliver a
letter of credit, such letter of credit shall be in a form and with a financial
institution reasonably acceptable to Owner.
(b) Such cash deposit or letter of credit may be drawn upon in whole or in
part by Owner to compensate it for its damages in the event Operator commits a
Major Default prior to the Date of Commercial Operation. In the event Owner
elects to draw down the letter of credit or cash deposit it shall be deemed to
waive any claim to monetary damages by virtue of such Major Default, but such
draw down shall be without prejudice to the exercise of Owner's other remedies
under Section 12.2 of this Agreement.
8.2 Line of Credit. On or before the Date of Commercial Operation, Operator
shall obtain a line of credit of not less than One Million Dollars ($1,000,000)
or shall establish cash reserves of not less than $1,000,000 for working capital
purposes from or with a financial institution reasonably acceptable to Owner. At
such time, Owner shall release the irrevocable letter of credit or cash security
posted pursuant to Section 8.1 above. In the event such line of credit is
subsequently terminated and not replaced, or such cash reserves are exhausted
and not replenished, Operator shall immediately deliver to Owner a letter of
credit or cash security meeting the requirements set forth in Section 8. 1. Such
replacement letter of credit or cash security shall remain in effect until such
time as the line of credit or cash reserves are replenished to the amount of
$1,000,000 or such lesser amount as may be reasonably satisfactory to Owner.
ARTICLE IX. CLAIMS AND LAWSUITS
Operator may settle any single damage claim or suit arising from its
operations hereunder if the expenditure does not exceed Twenty Five Thousand
Dollars ($25,000) and if the payment is in complete settlement of such claim or
suit and contains a full and complete release of liability as to Owner, Project
Lender, their respective Affiliates, and the shareholders, officers, directors,
agents and employees of each. If the amount required for Settlement exceeds the
above amount, then any settlement shall be only with approval of Owner (such
approval not to be reasonably withheld), unless covered by insurance.
ARTICLE X. DELIVERY AND USE OF THERMAL ENERGY
10.1 Obligation to Use Thermal Energy. Subject to the provisions of this
Article X, Owner shall deliver to Operator, and Operator shall accept from the
Facility and the Auxiliary Boiler, all Thermal Energy required by the
Greenhouse.
21
<PAGE>
10.2 Minimum Annual Quantity. Operator agrees to accept from the Facility
and use at the Greenhouse the minimum annual quantity of Thermal Energy
necessary to maintain the Facility's Qualifying Cogeneration Facility status
(the "Minimum Annual Quantity") and Operator shall be obligated to productively
use the Minimum Annual Quantity of Thermal Energy for an industrial or
commercial process or for a heating or cooling application in accordance with
the requirements of PURPA and any other applicable laws. Thermal Energy supplied
from the Auxiliary Boiler shall not be included in the determination of whether
Operator has satisfied the Minimum Annual Quantity operator will comply with any
commercially reasonable request by Owner to enable Owner to maintain the status
of the Facility as a Qualifying Cogeneration Facility, including but not limited
to the use of additional Thermal Energy produced by the Facility.
10.3 Scheduling. Operator shall notify Owner by 11:00 a.m. on any
applicable day, if during the twenty-four hour period commencing at 12:01 a.m.
the next morning Operator plans to use substantially more or less Thermal Energy
that it has used, on average, during each day in the preceding seven (7) day
period.
10.4. Continuous Supply. It is intended that Owner will provide a
continuous supply of Thermal Energy to Operator during such periods as the
Facility is not shut down, and Owner shall consult with Operator on a regular
basis as to the scheduling of Facility, Pipeline and Heat Exchange System
maintenance or other scheduled events and to notify Operator as soon as
practical of any nonscheduled events or circumstances which would reduce or
curtail its ability to supply Thermal Energy from the Facility. During such
periods of reduction or curtailment of Thermal Energy supply from the Facility,
Operator shall provide Thermal Energy through use of the Auxiliary Boiler, as
set forth in Section 5.9(b) hereof. Notwithstanding the foregoing, Owner shall
not be liable for any loss or damage to property resulting from any failure,
interruption, reduction or suspension of the supply of Thermal Energy hereunder
unless, and to the extent that, willful misconduct by Owner, its agents or
employees directly results in loss or damage which interrupts, reduces or
suspends the supply of Thermal Energy from the Auxiliary Boiler. Operator shall
not operate the Auxiliary Boiler during periods in which an adequate supply of
Thermal Energy is available from the Facility.
10.5 Maximum Rate Of Supply. Owner agrees that the size of piping and
related equipment at the Facility and to the Point of Interconnection and the
size of the Auxiliary Boiler will be sufficient, when both the Auxiliary Boiler
and the Facility are in operation, to deliver a combined capacity of 69 million
BTUs of Thermal Energy per hour, but Operator agrees that Owner shall not be
required to provide Thermal Energy at this maximum rate for more than 1,000
hours in any Year. In addition to this maximum hourly limitation, Owner shall
not be obligated to supply more than 160 billion BTUs of Thermal Energy per Year
from the Facility and the Auxiliary Boiler unless Owner and Operator agree upon
mutually acceptable pricing and other terms and conditions for such additional
Thermal Energy supply. Provided Owner remains capable of supplying the foregoing
annual maximum amount of Thermal Energy to Operator, Owner may sell or supply
additional Thermal Energy to third parties in Owner's sole discretion.
10.6 Return of Condensate. Condensate shall be returned to the Facility
after delivery of the Thermal Energy to the Greenhouse, free from all
contaminants. The operator shall be entitled to obtain steam or hot water for
its operations at the steam extraction point; provided that
22
<PAGE>
Operator shall use its best efforts to return at least ninety percent (90%) of
the Condensate resulting from Owner's supply of Thermal Energy hereunder. If
Condensate becomes contaminated while in use in Operator's process or otherwise
in Operator's control, Operator shall immediately notify Owner, and at
Operator's sole expense, immediately correct the source or cause of such
contamination.
10.7 Metering. Owner agrees to provide and maintain sealed flow,
temperature and pressure recording and totalizing meters at the Point of
Metering so as to record the Thermal Energy delivered to Operator and Condensate
returned to Owner. The delivery of Thermal Energy and return of Condensate
pursuant to this Agreement shall take place at the Point of Metering. All loss
of Thermal Energy after it passes the Point of Metering shall be at the sole
risk of Operator. Owner shall read the meters at least monthly, and Operator
shall be entitled to have a representative present to observe the meter reading
each month. Operator may, in addition, inspect the meter charts at other times
with prior notice to Owner. The accuracy of the meter shall be certified by an
independent third party at least once per year at the expense of Owner, and the
results of any test and calibration adjustments shall be furnished to Operator.
If Operator at any time disputes the accuracy or condition of any of Owner's
meters, it shall so advise Owner in writing. Owner, shall, within thirty (30)
days after receiving such notice, advise Operator in writing as to its position
concerning its meter's accuracy and the reasons for taking such position. If the
Parties are unable to resolve their disagreement through reasonable
negotiations, then either party may engage a mutually acceptable, qualified,
unaffiliated third party to test the meter. Should the meter be found in good
order, Operator shall bear the cost of inspection; otherwise the cost shall be
borne by Owner. For purposes of the preceding sentence, "good order" shall mean
any condition which does not require a billing adjustment as hereinafter
provided. Any repair or replacement shall be made as soon as practicable, based
on the third party's report. In the event a meter error is discovered, the
following conditions shall apply: (i) if the error in measurement does not
exceed two percent (2%), no adjustment in billing (for Thermal Energy deliveries
in excess of 160 billion BTUs in any year) shall be made, or (ii) if the meter
error exceeds two percent (2%), an adjustment in previous billings (if any) will
be made equivalent to the percentage difference in meter correction for the
second half of the period since the previous meter check, but in no case for a
period greater than three months prior to the date the error was discovered. In
the event Owner's meters are out of service, measurement shall be determined
through estimation by reference to quantities measured during periods under
similar conditions when Owner's meters were in service and measuring accurately.
10.8 Auxiliary Boiler Fuel Costs. Owner shall arrange for the supply of,
and pay any and all costs for, the natural gas and fuel oil consumed by the
Auxiliary Boiler in connection with the supply of Thermal Energy from the
Auxiliary Boiler during periods of reduction or curtailment of the Thermal
Energy supply from the Facility; provided, however, that Owner shall have no
obligation to pay such Auxiliary Boiler fuel costs after Owner has supplied 160
billion BTUs of Thermal Energy from any source during any Year. Operator shall
reimburse Owner promptly upon presentation of Owner's invoice, for the cost of
any natural gas and fuel oil paid for by Owner relating to deliveries of Thermal
Energy in excess of 160 billion BTUs in such Year. Owner shall so invoice
Operator based upon Owner's average cost of natural gas and average cost of fuel
oil during such Year.
ARTICLE XI. REPRESENTATIONS, WARRANTIES AND COVENANTS
23
<PAGE>
11.1 Representations, Warranties and Covenants of Operator. Operator
represents, warrants and covenants as follows:
(a) Operator is duly organized and in good standing under the laws of the
State of New York and is duly qualified to conduct its business in the State of
New York.
(b) Operator has taken all corporate action necessary for the authorization
of the execution, delivery and performance of this Agreement and upon delivery
this Agreement shall constitute the legal, valid and binding obligation of
Operator, enforceable against Operator in accordance with its terms, subject to
the qualification, however, that the enforcement of the rights and remedies
herein may be limited by (i) bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and (ii)
general equitable principles regardless of whether the issue of enforceability
is considered in a proceeding in equity or at law.
(c) Execution of this Agreement by Operator, and the performance by
Operator of its obligations hereunder, will not constitute a breach or violation
of any agreement or instrument by or under which Operator or any of its
properties are bound; nor will the execution or performance of this Agreement by
Operator violate any rule, court order or decree or law applicable to Operator.
(d) No suits, actions, arbitrations, legal or administrative proceedings
are pending or has been threatened against Operator that would affect the
validity or enforceability of this Agreement or the obligation of Operator to
fulfill its commitments hereunder or that could result in any material adverse
change in the business or financial condition of Operator.
(e) Operator has no knowledge of any fact or condition or of any pending or
threatened action or proceeding of any kind or character that would adversely
affect the development, construction, or operation of the Greenhouse, the
Pipeline or the Facility to the fullest extent permitted under applicable
permits, laws and regulations.
(f) Operator has not entered into any agreement that is in conflict with or
violates any of the terms of this Agreement or that, to the best of its
knowledge, is breached or violated by the execution or performance of this
Agreement by Operator or which would result in the creation or imposition of any
lien, charge or encumbrance against the Greenhouse, the Pipeline or the
Facility, including their machinery or equipment.
(g) No bankruptcy, insolvency, rearrangement, or similar action or
proceeding, whether voluntary or involuntary, is pending against Operator.
11.2 Representation, Warranties and Covenants of Owner. Owner represents,
warrants and covenants as follows:
(a) Owner is duly organized and in good standing under the laws of the
State of Delaware, and is duly qualified to conduct its business in the State of
New York.
24
<PAGE>
(b) Owner has taken all corporate action necessary for the authorization of
the execution, delivery and performance of this Agreement and upon delivery this
Agreement shall constitute the legal, valid and binding obligation of Owner,
enforceable against Owner in accordance with its terms, subject to the
qualifications, however, that the enforcement of the rights and remedies herein
may by limited by (i) bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and (ii) general
equitable principles regardless of whether the issue of enforceability is
considered in a proceeding in equity or at law.
(c) The execution of this Agreement by Owner, and the performance by Owner
of its obligations hereunder will not constitute a breach or violation of any
agreement or instrument by or under which Owner or any of its properties are
bound; nor will the execution or performance of this Agreement by Owner violate
any rule, court order or decree or law applicable to Owner.
(d) No suits, actions, arbitrations, legal or administrative proceedings
are pending or have been threatened against Owner that would affect the validity
or enforceability of this Agreement or the obligation of Owner to fulfill its
commitments hereunder or that could result in any adverse change in the business
or financial condition of Owner.
(e) Owner has no knowledge of any fact or condition or of any pending or
threatened action or proceeding of any kind or character that would adversely
affect the development, construction, or operation of the Greenhouse, the
Pipeline or the Facility to the fullest extent permitted under applicable
permits, laws and regulations.
(f) Owner has not entered into any agreement that is in conflict with or
violates any of the terms of this Agreement or that, to the best of its
knowledge, is breached or violated by the execution or performance of this
Agreement by Owner or which would result in the creation or imposition of any
lien, change or encumbrance against the Greenhouse, the Pipeline or the
Facility, including their machinery or equipment.
(g) No bankruptcy, insolvency, rearrangement, or similar action or
proceeding, whether voluntary or involuntary, is pending against Owner.
(h) Owner is the owner in fee of the Greenhouse Site. The Greenhouse Site
is encumbered by and subject to (i) that certain Mortgage, Security Agreement
and Assignment of Rents dated as of January 17, 1992 between Owner and Citibank,
N.A. as Collateral Agent, and (ii) that certain Short-Term Agricultural Lease
dated as of June 9, 1992 between Oxbow and Allen De Vantier.
(i) Owner has no actual knowledge of the presence of any Hazardous
Materials in, on, under or about the Greenhouse Site as of the date hereof.
ARTICLE XII. DEFAULT AND REMEDIES
12.1 Default. A Party shall be in default hereunder as follows:
(a) Operator shall be in default hereunder if Operator shall fail to pay
any installment of the Fixed Rent or Variable Rent payable under this Agreement,
or any additional rent or other
25
<PAGE>
charges for which provision is herein made, or any portion of any of the
foregoing, when the same shall become due and payable, and such failure shall
continue for seven (7) days after the due date therefor, in the case of Fixed
Rent or Variable Rent, or Fifteen (15) days after notice thereof from Owner to
Operator in the case of additional rent or other charges;
(b) Except as set forth in subsection 12.1(a), either Party shall be in
default hereunder if such Party breaches or fails to observe or perform any of
its obligations, covenants, conditions, services or responsibilities under this
Agreement, which failure shall continue for thirty (30) days after receipt of
written notice from the Party not in default specifying the nature of such
breach or failure and demanding that it be cured (unless such failure cannot be
completely cured within such thirty (30) day period, in which case such Party
shall be in default if it does not commence and diligently pursue appropriate
steps to cure such failure within thirty (30) days after receipt of such notice
and thereafter complete the cure no more than one hundred twenty (120) days
after receipt of such notice).
(c) Either Party shall be in default hereunder if by order of a court of
competent jurisdiction a receiver or liquidator or trustee of such Party or of
any of the property of such Party shall be appointed, and such receiver or
liquidator or trustee shall not have been discharged within a period of sixty
(60) days; or if by decree of such a court, such Party shall be adjudicated
bankrupt or insolvent or any substantial part of the property of such Party
shall have been sequestered, and such decree shall have continued undischarged
and unstayed for a period of sixty (60) days after the entry thereof; or if a
petition to declare bankrupt or to reorganize such Party pursuant to any of the
provisions of the Federal Bankruptcy Act, as it now exists or as it may
hereafter be amended, or pursuant to any other similar state statute applicable
to such Party, as now or hereafter in effect, shall be filed against such Party
and shall not be dismissed within sixty (60) days after such filing.
(d) Either Party shall be in default hereunder if such Party shall File a
voluntary Petition in bankruptcy under any provision of any federal or state
bankruptcy law or shall consent to the filing or reorganization petition against
it under any similar law; or, without limitation of the generality of the
foregoing, if a Party shall file a petition or answer or consent seeking relief
or assisting in seeking relief in a proceeding under any of the provisions of
the Federal Bankruptcy Act, as it now exists or as it may hereafter be amended,
or pursuant to any other similar state statute applicable to such Party, as now
or hereafter in effect, or an answer admitting the material allegations of a
petition filed against it in such a proceeding; or if a Party shall make an
assignment for the benefit of its creditors; or if a Party shall admit in
writing its inability to pay its debts generally as they become due; or if a
Party shall consent to the appointment of a receiver or receivers, or trustee or
trustees, or liquidator or liquidators of it or of all or any part of its
property.
12.2 Remedies for Default.
(a) In the event of any Major Default under this Agreement, the
non-defaulting Party shall be entitled, at its option, to terminate this
Agreement and may in addition to or in lieu of termination pursue its other
remedies hereunder and any remedy existing at law or equity. If the default is
not a Major Default, however, the Party not in default may not terminate this
Agreement but may pursue its other remedies hereunder and any other remedy
existing at law or
26
<PAGE>
in equity. Notwithstanding anything herein to the contrary, unless and until
this Agreement has been terminated, Operator shall not refuse to accept delivery
of or to use Thermal Energy as provided in Article X of this Agreement, nor
shall it refuse to make any payments required under this Agreement. Termination
of this Agreement shall not discharge or relieve either Party from any
obligations or liabilities which may have accrued under this Agreement prior to
such termination except as expressly provided otherwise hereunder. If Owner
elects to terminate this Agreement due to a Major Default by Operator, among
other remedies available to Owner, Owner shall have the right to immediately
take over operation of the Greenhouse with all of Operator's employees,
equipment and crops in place, and thereafter to assume Operator's contracts with
such employees and to purchase such equipment and crops at then-fair market
value.
(b) If Operator fails to use the Minimum Annual Quantity in any Year, Owner
shall be entitled to request further written assurances from Operator regarding
its ability and intent to use the Minimum Annual Quantity in succeeding Years of
operation. Operator shall respond in writing to Owner's request for further
assurances within thirty (30) days after receipt. If Operator's response is
unsatisfactory to Owner in Owner's reasonable discretion, Owner, without waiving
its right to other remedies at law or equity, shall be empowered to take such
actions as may be appropriate to preserve or reinstate the Facility's status as
a Qualifying Cogeneration Facility. Such actions may include, but would not be
limited to, efforts to obtain waivers from the appropriate state and federal
regulatory agencies, developing another customer or use for the Facility's
Thermal Energy or expanding the Greenhouse. If Owner obtains another customer or
use for the Facility's Thermal Energy, this Agreement shall be amended to reduce
Operator's entitlement to Thermal Energy hereunder in an amount reasonably
determined by Owner, but in no event more than the amount Owner has committed to
such other customer.
ARTICLE XIII. FORCE MAJEURE
If either Party shall be unable to carry out any obligation under this
Agreement due to an event of Force Majeure, this Agreement shall remain in
effect but such obligation shall be suspended for the period necessary as a
result of the event of Force Majeure, provided that:
(a) the non-performing Party gives the other Party prompt written notice
describing the particulars of the event of Force Majeure, including but not
limited to the nature of the occurrence and the expected duration of the
disability, and continues to furnish timely regular reports with respect thereto
during the period of Force Majeure and the disability;
(b) the suspension of performance is excused only to the extent required by
the event of Force Majeure; and
(c) the non-performing Party continues to perform its unexcused obligations
hereunder, and uses its best efforts to remedy its inability to perform those
obligations excused by the event of Force Majeure.
Force Majeure shall not excuse payment of monies owed. Furthermore,
Operator's obligation to use the Minimum Annual Quantity as specified in Section
10.2 shall not be excused or suspended by reason of Force Majeure affecting
Operator. In the event Operator fails to use
27
<PAGE>
the Minimum Annual Quantity due to an event of Force Majeure affecting Operator,
Owner shall not be entitled to seek monetary damages from Operator but shall be
entitled to exercise all other remedies set forth in Subsection 12.2(b) hereof.
ARTICLE XIV. ASSIGNMENT
Without the prior written consent of Owner, which consent shall not be
unreasonably withheld, Operator shall not (a) assign or otherwise transfer,
whether by operation of law or otherwise, this Agreement or the term and estate
hereby granted, (b) sublet all or part of the Greenhouse or Greenhouse Site or
allow the same to be used or occupied by others or used or occupied in a manner
inconsistent with the Operating Plan, (c) mortgage, pledge or encumber this
Agreement or all or part of the Greenhouse or Greenhouse Site in any manner by
reason of any act or emission on the part of Operator, or (d) suffer or permit
the transfer of majority ownership or control of Operator in one or more
transactions. Except as specified below, Owner shall not assign this Agreement
to any other person or entity without the prior express written consent of
Operator, which consent shall not be unreasonably withheld. However, Owner shall
have the right, without Operator's consent, to assign this Agreement to:
(a) any business entity which has acquired operational control of and
responsibility for the Facility during the term of this Agreement and which has
the financial capability to carry out Owner's obligations hereunder;
(b) any third party or parties as security in connection with obtaining or
arranging any debt or equity financing or refinancing for the Facility, the
Pipeline or the Greenhouse; or
(c) any successor entity in connection with the enforcement of the security
interest described in (b) above.
Operator agrees to provide any such assignee or financing (or refinancing)
party with such certificates and consents related to the effectiveness of this
Agreement and the assignment thereof as may be reasonably requested by Owner. In
the event an assignment is made and consented to (other than to a third party as
security in connection with a debt or equity financing or refinancing of the
Facility, the Pipeline or the Greenhouse) the assigning Party shall be released
and discharged from all obligations to the other Party thereafter arising, and
such assignee shall be substituted in place of the assigning Party herein.
ARTICLE XV. NOTICES
All notices, notifications, invoices, payments, or other communication
between the parties shall be given by hand delivery, overnight courier, telecopy
or certified or registered mail, postage prepaid, return receipt requested,
addressed as follows:
If to Operator: Village Farms of Wheatfield, Inc.
12 Elkins Road
East Brunswick, New Jersey 08816
Attention: President
Telecopy No.: (908) 254-1710
28
<PAGE>
If to Owner: Oxbow Power of North Tonawanda,
New York, Inc.
1601 Forum Place
West Palm Beach, FL 33401
Attention: President
Telecopy No.: (407) 687-5140
Either party may change its address for notice hereunder by giving the other
party notice as provided above. All communications delivered by hand, telecopy
or by overnight courier shall be deemed received upon delivery; or if mailed,
communications shall be deemed received three (3) days after the date of deposit
in the United States mail.
ARTICLE XVI. COMPLIANCE WITH LAWS AND REGULATIONS
16.1 Laws, Regulations and Orders. The performance of the parties hereunder
shall be, in all respects, in compliance with and subject to the laws of the
State of New York, to the valid rules, regulations, and orders of any duly
constituted regulatory body of said State, to all other applicable federal and
local laws, ordinances, rules, regulations and orders and to any and ail
licenses, permits or approvals issued by the federal, state or local government
relating to the Facility, the Pipeline or the Greenhouse.
16.2 Governing Law. This Agreement shall be interpreted and enforced
pursuant to the applicable laws of the United States of America and the laws of
the State of New York, excluding choice-of-law provisions which would direct the
application of the laws of another jurisdiction. The Parties agree that all
actions or proceedings arising in connection with this Agreement shall be tried
and litigated in the courts of the State of New York.
16.3 Hazardous Materials.
(a) Other than in accordance with all applicable laws, Operator shall not,
and shall not permit others to, generate, store, handle, process, dispose,
discharge, or otherwise use Hazardous Materials on, in, under, from, or about
the Leased Premises, or in a manner which could lead to the imposition on
Operator or Owner of any liability, judgment, order, or lien of any nature under
any applicable law.
(b) Operator shall promptly notify Owner in the event of any release of any
Hazardous Material at, in, on, under, from or about the Leased Premises which is
not permitted by applicable laws, which is required to be reported to a
governmental authority, or which could result in any cleanup obligation or
liability under applicable laws, and shall promptly clean up such release of
Hazardous Materials in accordance with all applicable laws and pay all costs,
damages, and penalties in connection with such release or cleanup of the
Hazardous Materials.
(c) Operator shall indemnify, defend and hold harmless Owner and the
Project Lender, their respective Affiliates, and the shareholders, directors,
officers and employees of each (the "Operator Indemnitees") from and against any
and all claims, judgments, damages, penalties, fines, costs, liabilities or
losses (including sums paid in settlement of claims, reasonable attorneys' fees,
consultant fees and expert fees) that arise from the use, presence, generation,
handling, processing, storage, discharge, disposal, release, removal, cleanup or
29
<PAGE>
otherwise in connection with Hazardous Materials utilized or present in or at
the Greenhouse or released on, over, under, from or about the Leased Premises
during the term of this Agreement. The obligation of Operator to indemnify,
defend and hold harmless the Operator Indemnitees shall not apply to those
matters as to which Owner undertakes to indemnify the Owner Indemnitees- under
Subsection 16.3(d) below.
(d) The Owner shall indemnify, defend and hold harmless Operator,
Operator's lender, their respective Affiliates, and the shareholders, directors,
officers and employees of each (the "Owner Indemnitees") from and against any
and all claims, judgments, damages, penalties, fines, costs, liabilities or
losses (including sums paid in settlement of claims, reasonable attorneys' fees,
consultant fees and expert fees) that arise from the use, presence, generation,
handling, processing, storage, discharge, disposal, release, removal, cleanup or
otherwise in connection with Hazardous Materials utilized on or present in or at
the Greenhouse Site or released on, over, under, from or about the Greenhouse
Site prior to the term of this Agreement.
ARTICLE XVII. NON-WAIVER
The failure of either Party to insist in any instance on strict performance
of any provision of this Agreement shall not be construed as a waiver of any
such provisions or the relinquishment of any rights thereunder in the future,
but the same shall continue in full force and effect.
ARTICLE XVIII. INDEPENDENT PARTIES
It is expressly understood that Operator is acting as an independent
contractor under this Agreement. Nothing contained in this Agreement shall be
deemed or construed for any purpose to establish, between Owner and Operator, a
partnership or joint venture, a principal-agent relationship, or any
relationship not specifically stated in this Agreement.
ARTICLE XIX. APPROVAL BY PROJECT LENDER
If the Project Lender requires any modifications of the provisions of this
Agreement, neither Owner nor Operator shall unreasonably withhold its approval
and execution of any such modifications.
ARTICLE XX. NON-DEDICATION OF FACILITY
Owner does not dedicate any part of the Facility, the Pipeline or the
Greenhouse for the sale of electrical or thermal energy to the public generally
and indiscriminately, for the exercise of a public franchise, or in the exercise
of a public utility function.
ARTICLE XXI. SURVIVAL OF OBLIGATIONS
Except as may be expressly provided in this Agreement or any written
termination agreements termination of this Agreement for any reason shall not
relieve either Party of any obligation accruing or arising prior to such
termination.
ARTICLE XXII. FURTHER ASSURANCES
30
<PAGE>
If either Party reasonably determines or is reasonably advised that any
further instruments or any other things or acts are necessary or desirable to
carry out the terms of the Agreement, the other Party shall execute and deliver
all such instruments and assurances and do all things or acts reasonably
necessary and proper to carry out the terms of this Agreement.
ARTICLE XXIII. LIMITATION OF LIABILITY
Notwithstanding anything to the contrary set forth herein, and except to
the extent such damages may be deemed included in the liquidated damages set
forth in Section 4.6 hereof, neither Party shall be liable to the other Party
for indirect, consequential, incidental, special or punitive damages, including
but not limited to damages for delay or loss of use, or damages for lost
profits, products or income.
ARTICLE XXIV. CONFIDENTIALITY
24.1 Obligation. Owner and Operator agree:
(a) to hold in confidence, except as may be reasonably necessary from time
to time to their performance hereunder, to obtain financing for the Facility,
Pipeline or Greenhouse or to fulfill requirements of Governmental Authorities;
and
(b) not to use for any purpose other than the purposes contemplated by this
Agreement;
all information supplied to Owner or Operator, as the case may be, by the other
Party and designated in writing as confidential.
24.2 Exceptions. The provisions of this Article XXIV shall not apply to
information within any one of the following categories or any combination
thereof.
(i) information which was in the public domain prior to the receiving
Party's receipt thereof from the disclosing Party or which subsequently
becomes part of the public domain by publication or otherwise except by the
receiving Party's wrongful act;
(ii) information which the receiving Party demonstrates was lawfully
in its possession prior to receipt thereof from the disclosing Party
through no breach of any confidentiality obligation; or
(iii) information received by the receiving Party from a third party
having no obligation of confidentiality with respect thereto.
24.3 Term of Obligation. The obligations of confidentiality and nonuse of
the Parties under this Article XXIV shall continue for a period of two (2) years
after the termination or expiration hereof.
ARTICLE XXV. INTERPRETATION
31
<PAGE>
The article and section headings in this Agreement are for convenience only
and shall not affect the construction of any terms of this Agreement. Releases
from and limitations on liability contained herein shall, unless specified to
the contrary therein, apply regardless of fault, negligence or strict liability
of the Party whose liability is released or limited thereby.
ARTICLE XXVI. SEVERABILITY AND RENEGOTIATION
Should any provision of this Agreement for any reason be declared invalid
or unenforceable by final and unappealable order of any court or regulatory body
having jurisdiction thereover, such decision shall not affect the validity of
the remaining portions, which remaining portions shall remain in force and
effect as if this Agreement had been executed with the invalid portion thereof
eliminated. In the event any such provision of this Agreement is so declared
invalid, the Parties shall promptly renegotiate in good faith new provisions to
eliminate such invalidity and to restore this Agreement as nearly as possible to
its original intent and effect.
ARTICLE XXVII COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
shall constitute an original but all of which, when taken together, shall
constitute only one legal instrument. This Agreement shall become effective when
copies hereof (when taken together) shall bear the signatures of both of the
Parties hereto.
ARTICLE XXVIII. SUBORDINATION TO OWNER'S MORTGAGES
This Agreement is subject and subordinate to all ground or underlying
leases and to all mortgages which may now or hereafter affect such leases or the
Leased Premises, and to all renewals, modifications, consolidations,
replacements and extensions of any such ground or underlying leases and
mortgages. This clause shall be self-operative and no further instrument of
subordination shall be required by any ground or underlying lessor or by any
mortgagee affecting any lease or the Leased Premises. In confirmation of such
subordination, Operator and shall execute promptly any certificate that Owner
may request. Owner agrees to obtain from any such ground or underlying lessor or
mortgagee an agreement that Operator's possession of the Leased Premises will
not be disturbed during the term hereof and any renewal terms provided Operator
is not in default hereunder.
ARTICLE XXIX. RECORDING
Operator shall not record this Agreement, nor permit this Agreement to be
recorded, without the written consent of Owner. If Owner requests, the parties
shall execute and acknowledge a short form of lease for recording purposes which
shall be recorded at Operator's expense.
IN WITNESS WHEREOF, the Parties have affixed their signatures as of the
date first set forth above.
OXBOW POWER OF NORTH TONAWANDA,
NEW YORK, INC.
32
<PAGE>
("Owner")
By:_________________________________
Bernard H. Cherry, President
VILLAGE FARMS OF WHEATFIELD, INC.
("Operator")
By:_________________________________
Name/Title:_________________________
EXHIBIT "A"
Legal Description of Leased Premises
1. Description of Greenhouse and Greenhouse Site. The Greenhouse will
consist of approximately twelve and one-half (12.5) acres of glass-enclosed
growing area and associated facilities. It will be designed with installed
equipment and gutter height appropriate for the crop to be sold by Operator.
The Greenhouse will be designed for "zero discharge" of water, and shall
include systems for runoff collection and storage, plant watering, shade and
temperature control. It will also include a roadway to a public road and all
necessary utility connections, including electricity, water, sewer, storm sewer
and natural gas service.
The Greenhouse will be equipped with an appropriately-sized natural gas-
and oil-fired Auxiliary Boiler to provide thermal energy during periods in which
such thermal energy is unavailable from the Facility. The Greenhouse also shall
be equipped with a heat exchanger which will be capable of supplying hot water
to the Greenhouse at a temperature of 210(Degree)-215(Degree) Fahrenheit at the
exit point of the heat exchanger.
The Greenhouse shall be as is more fully described in Owner's Scope.
2. Greenhouse Site. THAT TRACT OR PARCEL OF LAND, situate in the Town of
Wheatfield, County of Niagara and State of New York being part of Lot No. 3,
Township 13, Range 8 and more particularly bounded and described as follows:
BEGINNING at the point of intersection of the north line of said Lot No. 3
with the easterly line of Shawnee Road and running thence southerly along the
easterly line of Shawnee Road 778.86 feet to the northerly line of lands
conveyed by deed recorded in Niagara County Clerk's office in Liber 1794 of
deeds at page 355; thence easterly at an interior angle of 89 degrees, 53 feet,
46 inches and along the northerly line of lands so conveyed by deed recorded in
Liber 1794 of deeds at page 355, 1976.85 feet to its intersection with the
northwesterly line of lands now owned by Conrail Erie Lackawanna Railroad by
deeds recorded in Niagara County
33
<PAGE>
Clerk's Office in Liber 147 of deeds at pages 182 and 264; thence northeasterly
at an interior angle of 135 degrees, 7 feet, 39 inches and along the
northwesterly line of lands so owned by Conrail Erie Lackawanna Railroad by deed
aforesaid, 1103.94 feet to its intersection with the northerly line of said Lot
No. 3; thence westerly at an interior angle of 44 degrees, 52 feet, 21 inches
and along the northerly line of said Lot No. 3, 2757.78 feet to the point of
beginning.
INCLUDING all rights in and to Shawnee Road where the same is adjacent to
the above described premises.
EXCEPTING and reserving from the above described parcel that portion
therefor conveyed to Iroquis Gas Corporation by deed recorded in Niagara County
Clerk's Office in Liber 1501 of deeds at page 707.
ALSO ALL THAT TRACT OR PARCEL OF LAND, situated in the' Town of Wheatfield,
County of Niagara and State of New York being part of Lot No. 3, Township 13,
Range 8 and more particularly bounded and described as follows:
BEGINNING at a point in the westerly line of Townline Road distant
southerly 85 feet as measured thereon from the northerly line of Lot No. 3;
running thence southerly along the westerly line of Townline Road, 102 feet;
running thence westerly on a line parallel with the northerly line of said Lot
No. 3 to a point where said line intersects the southeasterly line of lands
conveyed to the City of Lockport by deed recorded in said clerk's office in
Liber 326 of deeds at page 236; thence northeasterly along the southeasterly
line of lands so conveyed to the City of Lockport by deed aforesaid 144.57 feet
to a point in said line which would be intersected by a line drawn parallel with
the north line of said Lot No. 3, and through the point of beginning; thence
east along said described line 561.35 feet to the point of beginning.
INCLUDING all rights in and to Townline Road where the same is adjacent to
the above described premises.
EXHIBIT "B"
Determination of Net Proceeds
1. Definitions.
1.1 "Net Proceeds" generally shall mean the net operating income of the
Greenhouse after deduction of operating expenses (other than (i) depreciation,
(ii) amortization of noncash items, if any, (iii) interest payments, or (iv)
payments of principal on any working capital account). Net Proceeds shall be
calculated as the difference between Revenues and Permitted Expenses. There
shall be excluded from the calculation of Net Proceeds any net operating losses
of Operator (determined in accordance with generally accepted accounting
principles) in connection with the Greenhouse, except that Operator may deduct
such net operating losses relating solely to the Greenhouse incurred in any
Lease Year as a Permitted Expense in certain succeeding Lease Years, as follows:
(i) If due solely to an event of Force Majeure Operator incurs the
loss of all or substantially all of its crop in any Lease Year, Operator
may carry forward that portion of its
34
<PAGE>
net operating loss which directly results from such crop loss and deduct it
as a Permitted Expense for the purpose of calculating Net Proceeds in the
two Lease Years next succeeding the Lease Year in which the crop loss
occurred (but not in subsequent Lease Years); provided that in the event of
such two-year carry for-ward Operator shall be entitled to deduct as a
Permitted Expense only one-third of its Overhead Charge during the second
year of such two-year carry forward period; and
(ii) Operator may carry forward other net operating losses relating
solely to the Greenhouse and deduct them as Permitted Expenses for the
purpose of calculating Net Proceeds only in the Lease Year next succeeding
the Lease Year in which such loss occurred (and not in subsequent Lease
Years); but such carry forward shall not affect Operator's right to deduct
its Overhead Charge as a Permitted Expense.
No other carry forwards of net operating losses will be permitted
hereunder.
1.2 "Permitted Expenses" shall mean those expenses of Greenhouse operation
and maintenance set forth in Section 3 of this Exhibit "B".
1.3 "Revenues" shall mean those items of income and gain set forth in
Section 1 of this Exhibit "B".
2. Revenues. Revenues shall include the following items of income and gain:
2.1 Sale of Produce. The gross proceeds from the sale of peppers, tomatoes,
flowers or other produce grown or prepared in or through the Greenhouse and the
gross proceeds from the sale of other goods in connection therewith.
2.2 Sale of Services. The gross proceeds from the sale of services by the
Operator through or in connection with the Greenhouse.
2.3 Disposition of Equipment. The gross proceeds from the sale by Operator
of surplus equipment owned by Owner, provided, however, that no such equipment
shall be sold without Owner's prior written consent; and further provided that
the gross proceeds from such surplus equipment sales shall be paid to Owner
immediately following such sale.
2.4 Interest Income. Interest earned on invested cash balances (excluding
interest paid, if any, on monies drawn from Operator's Working Capital account.)
2.5 Liquidated Damages. The liquidated damages, if any, paid by Owner to
Operator pursuant to Section 4.6 of this Agreement.
2.6 Insurance Proceeds. The proceeds of business interruption insurance
actually paid to Operator to the extent such proceeds are in compensation for
lost revenues.
2.7 Other Income. Other income received through or in connection with the
Greenhouse.
35
<PAGE>
3. Permitted Expenses. Permitted Expenses shall mean the Greenhouse operation
and maintenance expenses set forth in Sections 3.1 through 3.11 of this Exhibit
"B":
3.1 Salaries and Wages. Salaries and wages of Operator's employees directly
involved in the conduct of Greenhouse operations for the period on and after
October 1, 1993, including the cost of holiday, vacation, sickness and
disability benefits and other customary allowances paid to such employees.
3.2 Employee Benefits. Reasonable costs of established plans for employee
group life insurance, hospitalization, pension, retirement, stock purchase,
thrift, bonus and other benefit plans of a like nature, applicable to the
employees described in Section 3.1 of this Exhibit B.
3.3 Material. Material purchased or furnished by Operator for use in the
Greenhouse; provided, however, that the accumulation of surplus stocks of
material shall be avoided.
3.4 Transportation. Transportation of materials reasonably necessary for
Greenhouse operations.
3.5 Services. The cost of contract services, equipment and utilities
provided by outside sources and directly engaged for Greenhouse operations.
3.6 Fixed Rent. Fixed Rent paid to Owner under Section 5.3 of this
Agreement.
3.7 Repairs and Maintenance. All costs or expenses incurred by Operator in
the repair or maintenance of the Greenhouse, other than those paid by insurance.
3.8 Legal Expense. All reasonable expenses of handling, investigating and
settling litigation or claims, and of discharging liens, for which Operator is
responsible under, this Agreement, and other legal expenses reasonably necessary
for Greenhouse operations.
3.9 Insurance. Net premiums for (a) insurance required to be carried by
Operator under this Agreement and (b) if carried by Operator, business
interruption insurance.
3.10 Fixed Overhead Charge. A monthly fixed overhead charge (the "Overhead
Charge") equal to Twenty-Five Thousand Dollars ($25,000) per month for the first
Lease Year, and increasing thereafter by three percent (3%) each Lease Year. The
Overhead Charge shall cover personnel and general overhead costs associated with
Greenhouse management and operation (including salary and benefits of the
Greenhouse general manager), marketing, sales administration, travel and
entertainment, invoicing, billing, internal payroll, internal accounting,
advertising, and technical services and consulting by employees of Operator or
its affiliates.
3.11 Other Expenditures. Any other expenditure for Greenhouse operation or
maintenance properly incurred by Operator in accordance with this Agreement,
other than those set forth in Section 3.12 of this Exhibit "B".
3.12 Exclusions From Permitted Expenses. Permitted Expenses shall exclude
the following:
36
<PAGE>
(a) Development and startup expenses incurred by Operator, including but
not limited to salaries and wages for the period before October 1,
1993, initial training, equipment and other capital expenses, initial
relocation expenses, legal expenses (other than those set forth in
Section 3.8 of this Exhibit "B"), initial cost of licenses and
permits, financing fees and expenses and costs of corporate
organization;
(b) Variable Rent pursuant to Section 5.4 of this Agreement;
(c) Equipment lease expenses;
(d) Payments of interest, and payments of principal on any working capital
account;
(e) Any losses or expenses in connection with insured events, to the
extent the operator receives insurance proceeds with respect to such
losses or expenses; and
(f) Any losses or expenses with respect to which Operator receives
compensation by or through (i) any public or governmental body or
program or (ii) any private source unaffiliated with Operator.
4. Computation and Payment.
4.1 Computation and Distribution. Operator shall estimate and distribute
Net Proceeds for the then-completed quarter or quarters of the Lease Year on
June 30, September 30 and December 31 of each Lease Year. Within sixty (60) days
after the end of each Lease Year, Operator shall calculate actual Net Proceeds
for such Lease Year. If actual Net Proceeds exceed the estimated Net Proceeds
previously paid by Operator to Owner, Operator shall pay the difference to Owner
on or before the expiration of such sixty (60) day period. If actual Net
Proceeds are less than the estimated Net Proceeds previously paid by Operator to
Owner, Owner shall repay the difference to Operator within thirty (30) days
after receipt of notice from Operator.
4.2 Allocation of Net Proceeds. Net Proceeds shall be distributed to
Operator and Owner on the following basis:
(a) The first $* of Net Proceeds for each Lease Year shall be distributed
* to Operator and * to Owner.
(b) The next $* of Net Proceeds for each Lease Year shall be distributed *
to Operator and * to Owner.
(c) All Net Proceeds for each Lease Year in excess of $* shall be
distributed * to Operator and * to Owner.
information omitted and subject to a request for confidential
treatment
5. Accounting, Reporting and Audit Rights
37
<PAGE>
5.1 Statements. Operator shall furnish a statement to Owner on or before
the last day of each month for the costs and expenses of operations and
maintenance of the Greenhouse for the preceding month. Such statements will
identify all Permitted Expenses and Revenues, summarized by appropriate
classifications of income and expense, except that unusual charges and credits
shall be separately identified and fully described in detail.
5.2 Adjustment. Payments for Permitted Expenses shown on such statements
shall not prejudice the right of Owner to protest or question the correctness
thereof; provided, however, all statements rendered to Owner by Operator during
any Lease Year shall conclusively be presumed to be true and correct after
eighteen (18) months following the end of any such Lease Year, unless within the
said eighteen (18) month period Owner takes written exception thereto and makes
claim on Operator for adjustment. No adjustment favorable to Operator shall be
made unless it is made within the same prescribed period.
5.3 Audits. Owner, upon reasonable notice in writing to Operator, shall
have the right to require an audit, by an independent accounting firm selected
by Owner, of Operator's accounts and records relating to the Greenhouse for such
Lease Year within the eighteen (18) month period following the end of any Lease
Year; provided, however, the making of an audit shall not extend the time for
the taking of written exception to and the adjustments of account as provided
for in Paragraph 5.2 of this Exhibit B. In the event that such audit reveals
that Owner's share of Net Proceeds for such Lease Year have been miscalculated
by two percent (2%) or more, the expense of such audit shall be paid by Operator
and shall not be a Permitted Expense. Otherwise, Owner shall pay such audit
expense.
38
<PAGE>
EXHIBIT "C"
Schedule of Cancellation Charges
Cancellation Date Cancellation Charge
----------------- -------------------
Date of Contract Execution-September 30, 1992 $50,000
October 1, 1992- January 31, 1993 $100,000
February 1, 1993-June 30, 1993 $200,000
July 1, 1993 through Nursery Substantial Completion $500,000
39
<PAGE>
EXHIBIT "D"
Site Plan Showing Pipeline and Points of Interconnection
Omitted.
40
<PAGE>
EXHIBIT "E"
Estimate of Total Capital Costs
A. Greenhouse Financing Costs
1. Bank Legal Fees $ 60,775
2. Bank Consulting Fees 24,915*
3. Bank Placement Fees 218,549
4. Title Insurance 35,542
5. Builder's Risk, Property, Liability Ins. 35,840
6. Bank Commitment Fees 42,000*
7. NYS Mortgage Recording Tax 110,000*
8. Bank Interest Charges 675,000*
----------
Subtotal $1,116,931
B. Other Greenhouse Capital Costs
1. Greenhouse Development and Construction Mgmt. $ 264,114
2. Greenhouse Engineering, Procurement, Construction 9,600,000*
3. Greenhouse Land 100,000
Subtotal $9,964,114*
------------
C. Total Greenhouse Capital Cost ("TC") $11,081,0.45*
D. Projected Schedule of Fixed Rent Capital Cost % of TC Annual Cost
Component ------- -----------
Year 1 2.0833% $230,851 *
Year 2 3.00% $332,431 *
Year 3 4.50% $498,647*
Year 4 4.75% $526,350*
Year 5 5.00% $554,052*
- - ----------
* Good-faith estimate. To be adjusted to reflect actual cost.
41
<PAGE>
EXHIBIT "F"
Specifications for Condensate
The Condensate returned from the Greenhouse heat exchanger system shall comply
with the following limits:
Parameter Maximum Concentration
--------- ---------------------
Total Suspended Solids 0.2 mg/L
Total Hardness 0.2 mg/L
Total Dissolved Solids 1.0 ppm
Conductivity 10 micromhos/cm
Soluble Silica, as Si 0, 0.05 mg/L
Sodium, as CACO, 0.4 mg/L
pH 6.8 to 7.2
Oil and Grease Nil
Iron, as Fe 0.3 mg/L
42
<PAGE>
EXHIBIT "G"
Contents of Operating Plan
The Operating Plan shall include but shall not be limited to the following:
1. Crops to be produced
a. Variety of crop
b. Sowing and planting schedule
2. Estimated production budget
a. Growing supplies
b. Operating supplies
c. Capital expenditures
d. General plant expenditures
e. Labor
f. Fixed and variable costs
3. Revenue
a. Target yield by month
b. Target price by month
4. Marketing/Sales
a. Geographical area
b. Target accounts
c. Packaging
d. Transportation/Logistics
5. Management/Organization
a. General manager
b. Grower manager
c. Production personnel
d. Packaging personnel
6. Financial Projections
a. Banking relationship
b. Cash flow/profit projections
c. Internal/External accounting
7. Agro Power Development ("APD") Responsibility;
Marketing/Administration
43
Exhibit 10.63
OPERATING AGREEMENT
Dated as of Nov. 14, 1997
between
GREENHOST, INC.,
as Owner,
and
VILLAGE FARMS OF VIRGINIA, INC.
as Operator
Greenhouse Facility
Located in Birchwood, Virginia
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS; CONSTRUCTION OF REFERENCES................... 1
Section 1.01 Definitions............................................... 1
Section 1.02 Construction of References................................ 9
ARTICLE II OPERATION OF FACILITY..................................... 10
ARTICLE III RENT AND SERVICES......................................... 10
Section 3.01 Basic Rent................................................ 10
Section 3.02 Supplemental Rent......................................... 10
Section 3.03 Late Payment.............................................. 10
Section 3.04 Net Lease; No Setoff; Etc................................. 10
Section 3.05 Hot Water Charges......................................... 10
Section 3.06 Services Provided by, Owner............................... 11
ARTICLE IV DISCLAIMER OF WARRANTIES.................................. 11
ARTICLE V RESTRICTION ON LIENS...................................... 12
ARTICLE VI OPERATION AND MAINTENANCE, ALTERATIONS
MODIFICATIONS AND ADDITIONS............................... 12
Section 6.01 Operation and Maintenance................................. 12
Section 6.02 Repair and Replacement.................................... 12
Section 6.03 Alterations Required by Law............................... 13
Section 6.04 Plans and Specifications; Operating Manual................ 13
Section 6.05 Operational Alterations................................... 13
Section 6.06 Owner's Option to Pay costs of Alterations................ 13
Section 6.07 Reports of Alterations.................................... 14
Section 6.08 Title to Parts............................................ 14
Section 6.09 Removal of Parts.......................................... 15
Section 6.10 Parts Free and Clear of Liens............................. 15
Section 6.11 Permitted Contests........................................ 15
Section 6.12 Operating Logs............................................ 15
Section 6.13 Return of Facility........................................ 16
ARTICLE VII IDENTIFICATION............................................ 16
i
<PAGE>
ARTICLE VIII INSURANCE................................................. 17
Section 8.01 Coverage.................................................. 17
Section 8.02 Policy Provisions......................................... 18
Section 8.03 Evidence of Insurance..................................... 19
Section 8.04 No Duty of Owner to Verify................................ 19
ARTICLE IX LOSS, DESTRUCTION. CONDEMNATION OR DAMAGE................. 19
Section 9.01 Occurrence of Event of Loss............................... 19
Section 9.02 Repair of Loss or Destruction............................. 20
ARTICLE X INTEREST CONVEYED TO OPERATOR............................. 20
ARTICLE XI ASSIGNMENT AND SUBLEASE. LOCATION......................... 20
Section 11.01 Assignment and Sublease................................... 21
Section 11.02 Location.................................................. 21
Section 11.03 Mortgaging the Estate of Lessor........................... 22
ARTICLE XII INSPECTION AND REPORTS.................................... 22
Section 12.01 Condition and Operation................................... 22
Section 12.02 Annual Insurance Report................................... 22
Section 12.03 Financial Reports......................................... 23
Section 12.04 Budget Approval........................................... 24
Section 12.05 Liability................................................. 24
Section 12.06 Liens..................................................... 24
ARTICLE XIII EVENTS OF DEFAULT......................................... 25
ARTICLE XIV ENFORCEMENT............................................... 26
Section 14.01 Remedies.................................................. 26
Section 14.02 Survival of Operator's Obligations........................ 27
Section 14.03 Remedies Cumulative....................................... 27
ARTICLE XV RIGHT TO PERFORM FOR OPERATOR............................. 28
ARTICLE XVI INDEMNITIES............................................... 28
Section 16.01 General Indemnity......................................... 28
Section 16.02 Fees, Taxes and Other Charges............................. 29
Section 16.03 Survival.................................................. 31
Section 16.04 Waiver.................................................... 32
ARTICLE XVII COVENANTS AND REPRESENTATIONS OF OPERATOR................. 32
Section 17.01 Operation of Facility..................................... 32
Section 17.02 Affiliated Transactions................................... 32
Section 17.03 Waiver of Operating or Efficiency Standards............... 33
Section 17.04 Representations and Warranties of Operator................ 33
ARTICLE XVIII MISCELLANEOUS............................................. 33
Section 18.01 Further Assurances........................................ 33
ii
<PAGE>
Section 18.02 Quiet Enjoyment........................................... 34
Section 18.03 Notices................................................... 34
Section 18.04 Severability.............................................. 34
Section 18.05 Amendment................................................. 34
Section 18.06 Headings.................................................. 34
Section 18.07 Counterparts.............................................. 34
Section 18.08 Governing Law............................................. 34
Section 18.09 Binding, Effect; Successors and Assigns Survival.......... 34
Section 18.10 Divisible Operating Agreement............................. 35
Section 18.11 Effectiveness............................................. 35
ARTICLE XIX STEAM SALES AGREEMENT, FEE MORTGAGE AND
MASTER LEASE.............................................. 35
Section 19.01 Subject to Fee Mortgage and Master Lease.................. 35
Section 19.02 Cooperation with Lenders.................................. 36
Section 19.03 Steam Sales Agreement..................................... 36
Section 19.04 Storm Water Piping, Power Station Piping, Steam Equipment,
Steam Interconnection Facilities and Metering Devices..... 38
SCHEDULES
SCHEDULE 1.01(a) Description of Facility
SCHEDULE 1.01(b) Internal Rate of Return
SCHEDULE 3.01 Basic Rent
SCHEDULE 3.02 Supplemental Rent
iii
<PAGE>
OPERATING AGREEMENT dated as of __________, 1997 between GREENHOST, INC., a
Delaware corporation (the "Owner"), and VILLAGE FARMS OF VIRGINIA, INC., a
Delaware corporation (the "Operator").
W I T N E S S E T H :
WHEREAS, the Owner owns a greenhouse plant in Birchwood, Virginia and
leases the Site as defined below) from the Master Landlord (as defined below)
under the Master Lease (as defined below) and
WHEREAS, the Owner desires to lease the Plant (as defined below) and
sublease the Site (as defined below) to the Operator and the Operator desires to
lease the Plant and sublease the Site from the Owner and operate the Facility
(as defined below), all on the terms and conditions herein contained.
In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, the parties
hereto, intending to be legally bound hereby. agree as follows:
ARTICLE I
DEFINITIONS, CONSTRUCTION OF REFERENCES
Section 1.01. Definitions. As used in this Agreement. the following terms
shall have the following meanings (such definitions to be equally applicable to
both the singular and plural forms of the terms defined):
"Address" shall mean:
(a) with respect to the Owner, P. 0. Box 67, Sealston, Virginia 22547,
Attn: Chief Executive Officer: and
(b) with respect to the Operator, 10 Alvin in Court, East Brunswick,
New Jersey 08816. ATTN: President;
or such other address as such party shall give by notice to the other party
hereto.
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlling, controlled by or under common control with, such Person.
"Alterations" shall mean, with respect to the Facility, alterations.
improvements, modifications and additions to the Facility (but excluding any
replacement of Parts incorporated in the Facility).
"APD" shall mean Agro Power Development, Inc. a New York corporation.
"Basic Rent" shall mean the rent payable pursuant to Section 3.01 of this
Agreement.
<PAGE>
"Basic Rent Payment Date" shall mean the last day of each March, June,
September and December during the term of this Agreement and the Termination
Date, commencing March 31, 1998.
"Birchwood" means, as the context may permit or require, Birchwood Power
Partners, L.P. its successors and assigns, individually, and in its capacity as
all or any one or more of Master Landlord, or Lender.
"Board of Directors" with respect to the Operator or the Owner, means
either the Board of Directors or any duly authorized committee of that Board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Operator or Owner, as the case may be. to have
been duly adopted by its Board of Directors and to be in full force and effect
on the date of such certification.
"Borrower" means Greenhost, Inc., a Delaware corporation, in its capacity
as Borrower under the Loan Agreement.
"Budget" shall have the meaning specified in Section 12.04.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banks are authorized to be closed in New York, New York or
Charlotte, North Carolina.
"Capital Improvements Costs" shall mean the costs incurred by, the Owner
pursuant to the General Contractors Agreement.
"Cash Flow" shall mean for any Operating Year (a) the sum of (i) gross
revenues from the sale of Product, plus (ii) all amounts received by the
Operator pursuant to the Line of Credit Facility Agreement, plus, (iii)
insurance proceeds received by the Operator from policies of the type described
in subsection 8.01 (a)(iii) or any other insurance proceeds paid with respect to
the loss or damage to Product, plus, (iv) revenues received pursuant to Article
XVII plus (v) all other revenues and income of the Facility, minus (b) all
Greenhouse Expenses paid in the ordinary course of business (but excluding any
Greenhouse Expenses that are prepaid by the Operator).
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. ss. 9601 et seq.) as presently in effect and as the
same may hereafter be amended, together with any regulations pursuant thereto.
"Closing Date" shall mean the date this Agreement is executed and delivered
by the parties.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
comparable successor law.
"Collateral Pledge" means the Collateral Assignment of Note, Loan
Agreement, and the Deed of Trust, dated as of May 18, 1994, from Birchwood to
the Security Agent, as amended by that certain Amended and Restated Collateral
Assignment of Greenhouse Note, Loan Agreement
2
<PAGE>
and Mortgage, dated November 19, 1996 and as the same may be further amended,
modified or supplemented from time to time.
"Deed of Trust" means the Deed of Trust, Security Agreement and Assignment
of Leases and Rents, dated as of May 18, 1994, by and between Borrower, as
Grantor thereunder, Lawyers Title Insurance Corporation, as Trustee thereunder,
and Lender, as Beneficiary thereunder, pursuant to which Borrower has granted a
security interest in the Trust Property to secure the repayment of the
Indebtedness and performance of the Obligations, as amended by the Amendment to
Deed of Trust, Security Agreement and Assignment of Leases and Rents. dated
March 27, 1997, and as the same may be further amended. modified or supplemented
from time to time. and. unless the context otherwise requires, shall include the
Collateral Pledge.
"Default" means any event or condition which, with notice or lapse of time
or both, would become an Event of Default.
"Equipment" shall mean the equipment and other property described in Part I
of Schedule 1.01(a) of this Agreement together with any Parts which may from
time to time be incorporated in such equipment or other property and title to
which shall have vested in the Owner.
"Effective Date" shall have the meaning specified in Section 18.11.
"Environmental Regulations" means any and all laws, rules, orders,
regulations, statutes, ordinances, codes, decrees or requirements of any
Governmental Authority exercising jurisdiction over the Site, the Greenhouse
Facility (including ownership, construction or operation thereof), the Operator,
or the Borrower relating to the environment or natural resources, or to
emissions, discharges, or releases or threatened releases of Hazardous
Substances, or to protection of the environment or natural resources, or to
emissions, discharges, Releases or threatened Releases of Hazardous Substances,
including but not limited to the CERCLA, the Hazardous Materials Transportation
Act (49 U.S.C. ss. 1801 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. ss.6901 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 et
seq.), the Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. ss. 1251 et seq.), and the Safe Drinking Water
Act (42 U.S.C. ss. 300f et seq.), all as presently in effect and as the same may
hereafter be amended, any regulation pursuant thereto, and also including, but
not limited to, any obligations, duties, or requirements arising from or related
to Hazardous Substances under common law.
"Event of Default" shall have the meaning specified in Article XIII of this
Agreement.
"Event of Loss" shall mean (a) the actual or constructive total loss of all
or substantially all the Facility, or the condemnation, confiscation or seizure
of, or requisition of title to, or requisition by any Governmental Authority of
the use of all or substantially all the Facility, or (b) the loss, destruction
or damage of or condemnation confiscation or seizure of. or requisition by any
Governmental Authority of the use of such portion of the Facility as to render
the Facility unable to operate at substantially the same level of operation as
prior to the occurrence of such event, unless (x) it is feasible to restore
rebuild or replace the affected portion of the Facility and (y) in the opinion
of the Owner sufficient funds are or will be available to the Owner (1) to
3
<PAGE>
restore, rebuild or replace the affected portion of the Facility so that the
Facility will be able to operate at substantially the same level of operation as
prior to the occurrence of such event within twelve (12) months after the
occurrence of such event and (ii) to pay all Rent until such restoration
rebuilding or replacement is completed.
"Expense" shall have the meaning, specified in Section 16.01 of the
Operating Agreement.
"Facility" shall mean the Owner's rights in and to the Plant, the Site and
the Equipment.
"Fee Mortgagee" shall have the meaning set forth in Section 11.03(c)
hereof.
"Fees, Taxes and Other Charges" shall have the meaning specified in Section
16.02 of this Operating Agreement.
"Financing Parties Representative" means Credit Suisse, in its capacity as
administrative agent under the Power Station Loan Agreement (and its successors
thereto).
"GDP/IPD" shall have the meaning specified in Section 3.05 of this
Operating Agreement.
"General Contractors' Agreement" shall mean the agreement between APD, as
General contractor, and the Owner dated as of ____________, as the same may be
amended, modified or supplemented from time to time in accordance with the
provisions thereof, to provide certain capital improvements to the Facility.
"Greenhouse Expenses" shall mean the sum (without duplication) of (a)
direct labor costs paid, (b) seed expense paid, (c) packaging supplies expense
paid, (d) fertilizer and chemical expenses paid, (e) biological control,
including bees, expense paid, (f) freight expense paid, (g) growing, medium and
supplies expense paid, (h) carbon dioxide expense paid, (i) utility (including
hot water, electricity and natural gas) expense paid, (j) Management Fee paid,
(k) Basic Rent paid, (l) insurance premiums and property taxes paid, (m)
principal and interest paid with respect to the Line of Credit Facility
Agreement and (n) all other cash expenses paid relating, to the operation of the
Facility, to the extent contained in the Budget; provided, however, that there
shall be excluded from Greenhouse Expenses (a) all expenses to be paid from the
Management Fee, (b) all payments with respect to federal, state and local income
taxes, (c) payment of principal, interest and fees with respect all indebtedness
of the Operator for non capital expenditures other than the Line of Credit
Facility Agreement, (d) payment of principal, interest, lease payments and fees
with respect to the acquisition by the Operator of capital equipment, except to
the extent consented to in advance by the Owner in writing, and (e) expenses
paid by the Operator pursuant to Section 16.01.
"Greenhouse Facility" shall mean the approximately 38-acre greenhouse
located on the Site.
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulation or administrative functions of or pertaining
to government.
4
<PAGE>
"Hazardous Substances" shall mean and include those elements or compounds
which are contained in the lists of hazardous substances or wastes now or
hereafter adopted by the United States Environmental Protection Agency (the
"EPA") or the lists of toxic pollutants designated now or hereafter by Congress
or the EPA or which are defined as hazardous, toxic, pollutant, contaminant,
infectious or radioactive by CERCLA, by any Environmental Requirement. or by any
so called federal, state or local "Superfund" or "Superlien" laws, or by any
other Federal, state or local statute, law, ordinance, code, rule, regulation,
order or decree regulating, relating to, or imposing liability or standards of
conduct concerning, any hazardous, toxic or dangerous waste, substance or
material, as now or at any time hereafter in effect, including, without
limitation, the Air Pollution Control Act, Va. Code Ann. ss. 10.1-1300 et seq.,
the Solid Waste Management Act, Va. Code Ann. ss.10.1-1400 et seq., the State
Water Control Law, Va. Code Ann. ss.2.1-44.2 et seq., or any and all rules and
regulations now or hereafter promulgated under any or all of the foregoing,
together with any other substance the use, handling, generation, treatment,
storage, disposal, treatment, presence or Release of which could result in the
imposition of liability, under any of the aforementioned laws, statutes,
ordinances, codes, rules, regulations, orders or decrees.
"Incorporated in" shall have the meaning specified in Section 6.01 of the
Operating Agreement.
"Indemnitee" shall mean the Owner and the respective successors, assigns,
officers, directors, employees and agents of any thereof.
"Inspecting Parties" shall have the meaning specified in Section 12.01 of
this Operating Agreement.
"Internal Rate of Return" shall mean the return to capital calculated at
the end of each calendar quarter end in accordance with Schedule 1.01(b) hereto.
"Lender" means Birchwood, in its capacity as Lender under the Loan
Agreement.
"Lien" shall mean any lien, mortgage, encumbrance, pledge, charge, lease,
easement, servitude, right of others or security interest of any kind, include
any thereof arising under any conditional sale or other retention agreement.
"Line of Credit Facility Agreement" shall mean the Line of Credit Facility
Agreement between Village Farms International Finance Association and the
Operator, as the same may be amended, modified or supplemented from time to time
in accordance with the provisions thereof.
"Loan Agreement" means the Loan and Contribution Agreement, dated as of May
18, 1994, between the Owner, as Borrower, and Birchwood, as Lender, as amended
by the Greenhouse Restructure Amendment, dated March 27, 1997 and Lender, and as
the same may be further amended, modified or supplemented from time to time.
"Management Agreement" shall mean the Management, Operation, Maintenance.
Marketing and Sales Agreement to be entered into between the Operator and VF, as
it may be amended, supplemented or otherwise modified with the prior written
consent of the Owner and in effect from time to time, pursuant to which VF will
provide certain management, operation,
5
<PAGE>
maintenance, marketing and sales services to the Operator, which Management
Agreement shall be approved in advance by the Owner in writing.
"Management Fee" shall mean the management fee paid to VF pursuant to the
Management Agreement for (a) all internal accounting services of the Operator,
(b) salary and other benefits paid to the Operator's grower and sales
representatives, (c) all internal management services performed by principals of
the Operator or VF and (d) all direct out-of-pocket expenses (including travel
and living expenses) paid in connection with the performance of the services
described in clauses (a), (b) and (c).
"Master Landlord" means Birchwood (or its successors and assigns), in its
capacity as Master Landlord under the Master Lease.
"Master Landlord's Facilities" shall mean, collectively, the Steam
Interconnection Facilities, the Metering Devices and the Power Station Piping.
"Master Lease" means that certain Deed of Master Lease, dated as of May 18,
1994, between the Master Landlord, and the Master Tenant, as amended by the
Amendment to Master Lease dated March 27, 1997 and as the same may be further
amended, modified or supplemented from time to time.
"Master Tenant" means the Owner (or its successors and permitted assigns),
in its capacity as Master Tenant under the Master Lease.
"Metering Devices" shall mean all necessary meters and associated equipment
to be utilized in measuring the steam output of the Power Station and for
measuring the condensate return to the Power Station.
"Nonseverable" shall describe (i) with respect to any Alteration, an
Alteration which is a "nonseverable improvement" within the meaning of Revenue
Procedure 79-48 and (ii) with respect to any part not constituting an Alteration
or part of an Alteration, a part which cannot be readily removed from the
equipment without causing material damage to the Facility.
"Notes" means (i) the promissory note executed by Owner in the form of
Exhibit A to the Loan Agreement, payable to the order of Birchwood, in the
amount of twenty million seventy nine thousand dollars ($20,079,000), (ii) the
term note executed by Owner in the form of Exhibit A to the Term Loan and
Working, Capital Agreement payable to the order of Birchwood. in the amount of
Two Million Five Hundred Thousand Dollars ($2,500,000) and (iii) the working
capital note executed by Owner in the form of Exhibit B to the Term Loan and
Working Capital Agreement, payable to the order of Birchwood, in the amount of
Three Million Dollars ($3,000,000), and any and all renewals, reinstatements,
rearrangements, enlargements or extensions of such notes or of any promissory
note or notes given therefor.
"Officer's Certificate" means a certificate signed by a Responsible Officer
of the party required to give such certificate.
6
<PAGE>
"Operating Manual" shall mean such operating manuals as are ordinarily
maintained by the Operator with respect to the Facility and any such manuals
provided by any manufacturer of any component of the Facility.
"Operating Year" shall mean each period commencing on January 1 and ending
on December 1 during the term of this Operating Agreement.
"Operative Documents" shall mean this Operating Agreement and the Line of
Credit Facility Agreement.
"Operator" shall mean Village Farms of Virginia, Inc., a Delaware
corporation, and its permitted successors and permitted assigns.
"Overdue Rate" shall mean an interest rate equal to the rate announced from
time to time by First Union National Bank of North Carolina as its prime or
reference rate plus two percent (2%) per annum.
"Owner" shall mean Greenhost, Inc. a Delaware corporation, and its
successors and permitted assigns.
"Parts" shall have the meaning specified in Section 6.02.
"Permitted Liens" shall mean (a) the respective rights and interests of the
Owner and the Operator as provided in the Operative Documents, (b) liens for
taxes either not yet due or being contested in good faith and by appropriate
proceedings, so long as such proceedings shall not involve any danger of the
sale, forfeiture or loss of any part of the Facility, title thereto or any
interest therein and shall not interfere with the use or disposition of the
Facility or the payment of Rent, (c) materialmen's, mechanics', workers,
repairmen's, employees' or other similar Liens arising in the ordinary course of
business for amounts either not yet due or being contested in good faith and by
appropriate proceedings so long as such proceedings shall not involve any danger
of the sale, forfeiture or loss of any part of the Facility, title thereto or
any interest therein and shall not interfere with the use or disposition of the
Facility or the payment of Rent, and (d) Liens arising, out of judgments or
awards with respect to which at the time an appeal or proceeding for review is
being prosecuted in good faith and either which have been bonded or for the
payment of which adequate reserves shall have been provided.
"Person" shall mean individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Plans and Specifications" shall mean the plans and specifications for the
Plant and the Equipment identified as such. as the same may be revised from time
to time in accordance with the terms of this Agreement.
"Plant" shall mean those buildings and other properties specifically
described in Part 2 of Schedule 1.01(a) to the Operating Agreement, together at
all times with any and all Parts which may from time to time be incorporated in
the Plant.
7
<PAGE>
"Power Purchase Agreement" means the Power Purchase and Operating Agreement
dated as of July 13, 1990, between SEI Birchwood, Inc., a General partner of
Lender, and Virginia Power, as assigned by SEI Birchwood, Inc. to Lender, as
amended, modified or supplemented from time to time.
"Power Station" means the electric power generation facility located in
King, George County, Virginia, which Birchwood constructed and currently owns,
operates and maintains.
"Power Station Loan Agreement" means the Loan and Reimbursement Agreement
dated as of May 18, 1994, among, Lender, as the borrower thereunder, the "Banks"
and "Institutions" from time to time party thereto, and Credit Suisse, as
administrative agent for the Banks, providing for loans and other extensions of
credit to finance the construction and other costs of the Power Station, as
amended by that certain Greenhouse Restructure Amendment, dated March 27, 1997,
and as the same may be further amended. supplemented or otherwise modified from
time to time.
"Power Station Piping" shall mean the pump and piping system necessary for
the return of water from the detention pond on the Site to the Power Station.
"Product" shall mean tomatoes or any other agricultural product approved in
writing by the Owner.
"QF Application" means that certain Application of Birchwood Power
Partners, L.P. Certification of Qualifying Status as a Cogeneration Facility
filed with the Federal Energy Regulatory Commission on June 29, 1993, and all
amendments thereto.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment including without limitation the abandonment or discarding of
barrels, containers or other closed or open receptacles containing any Hazardous
Substances or pollutant or contaminant).
"Rent" shall mean Basic Rent and Supplemental Rent, collectively.
"Responsible Officer" shall mean the Chairman or Vice Chairman of the Board
of Directors, the Chairman or Vice Chairman of the Executive Committee of the
Board of Directors, the President, and Vice President (whether or not designated
by a number or a word or words added before or after the title "Vice President",
including an Assistant Vice President), the Secretary, an Assistant Secretary,
the Treasurer, an Assistant Treasurer or any other officer of any of them
customarily performing functions similar to those performed by any of the above
designated officers.
"Site" shall mean the land described in Part 3 of Schedule 1.01 (a) of the
Operating Agreement.
"Steam Equipment" shall mean the absorption chiller and heat exchange
systems, cooling tower, thermal storage tank, steam and condensate lines and the
other equipment required for the conversion of steam into a form usable in the
heating and cooling, of the Greenhouse Facility
8
<PAGE>
and the lines required to deliver the hot and chilled water from such equipment
to the Greenhouse Facility.
"Steam Interconnection Facilities" shall mean the lines and other devices
necessary to interconnect the steam and condensate lines of the Power Station
with the Steam Equipment.
"Steam Sales Agreement" means the agreement, dated as of May 18, 1994,
between Birchwood, as seller, and the Owner, as purchaser, as amended by that
certain Greenhouse Restructure Amendment. dated March 27, 1997. and as the same
may be further amended, modified or supplemented from time to time.
"Storm Water Piping" shall mean the pump and piping system and other
equipment necessary for the return of storm water runoff from the Greenhouse
Facility to the detention pond on the Site.
"Supplemental Rent" shall mean the rent payable pursuant to Section 3.02 of
this Agreement.
"Supplemental Basic Rent Payment Date" shall mean the last date of each
January, April, July and October during the term of this Agreement and the
Termination Date commencing April 30, 1998.
"Term" shall mean (a) the period commencing on January 1, 1998 and ending
on December 31, 2007 or (b) such shorter period as may result from earlier
termination of this Operating Agreement as provided herein.
"Term Loan and Working Capital Agreement" shall mean the Term Loan and
Working Capital Agreement dated as of November 19, 1996 between Birchwood, as
Lender, and Owner, as Borrower.
"Termination Date" shall mean the last day of the Term.
"Trust Property" has the meaning, given in Section 1.1 of the Deed of
Trust.
"VF" shall mean Village Farms, L.L.C. a Delaware limited liability company.
"Virginia Power" means Virginia Electric and Power Company, a Virginia
corporation, as purchaser of energy and capacity (or its successor and permitted
assigns) under the Power Purchase Agreement.
"Water Charge" shall have the meaning, specified in Section 3.05 of this
Operating Agreement.
Section 1.02.Construction of References. All references in this instrument
to designated sections and other subdivisions are to designated sections and
other subdivisions of this instrument, and the words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Operating, Agreement
as a whole and not to any particular section or other subdivision.
9
<PAGE>
Except as otherwise indicated, all the agreements or instruments herein
defined shall mean such agreements or instruments as the same may from time to
time be supplemented or amended or the terms thereof waived or modified to the
extent permitted by, and in accordance with, the terms thereof.
ARTICLE II
OPERATION OF FACILITY
As of the later to occur of (i) January 1, 1998 and (ii) Notice of
Substantial Completion (as defined in the General Contractor's Agreement) of the
Plant, subject to all the terms and conditions of this Agreement, the Owner
shall provide and lease the Facility, to the Operator, and the Operator shall
operate and lease, and hereby, as of the Effective Date does operate and lease,
the Facility from the Owner for the Term.
ARTICLE III
RENT AND SERVICES
Section 3.01. Basic Rent. Subject to adjustment as provided below, during
the Term, the Operator shall pay Basic Rent to the Owner in arrears on each
Basic Rent Payment Date for the Facility in an amount equal to the amount set
forth on Schedule 3.01 for such Basic Rent Payment Date (in the case of the last
Basic Rent Payment Date if such date is other than a Basic Rent Payment Date,
such Basic Rent shall be prorated based on the number of days during which the
Operator leased the Facility). Basic Rent shall be increased in accordance with
any agreement reached in connection with the payment by the Owner of the costs
of any Alterations in accordance with Section 6.06 hereof
Section 3.02. Supplemental Rent. In addition to Basic Rent, the Operator
shall pay to the Owner Supplemental Rent in an amount equal to the percentage of
Cash Flow set forth on Schedule 3.02 during the Term. Supplemental Rent shall be
payable for each calendar quarter on the Supplemental Rent Payment Date
immediately following the end of such calendar quarter.
Section 3.03. Late Payment. If any Rent or any other amount required to be
paid hereunder shall not be paid when due, the Operator shall pay to the Owner
interest (to the extent permitted by law) on such overdue amount from and
including the due date thereof to but excluding the date of payment thereof
(unless such payment shall be made after 11:00 A.M. local time, in which case
such date of payment shall be included) at the Overdue Rate. If any Rent shall
be paid on the date when due, but after 11:00 A.M., local time, at the place of
payment, interest shall be payable as aforesaid for one day.
Section 3.04. Net Lease: No Setoff, Etc. This Operating Agreement is a net
lease and, notwithstanding any other provision of this Operating Agreement, it
is intended that Rent and all other amounts payable by Operator hereunder to
Owner shall be paid without notice, demand, counterclaim, setoff, deduction or
defense and without abatement, suspension, deferment, diminution or reduction.
Section 3.05. Hot Water Charges. The Owner agrees to provide to the
Operator during the Term hot water for the operation of the Facility at a cost
to the Operator of $200,000.00 per annum, subject to increase as set forth
below, (the "Water Charge"). The Water Charge shall be
10
<PAGE>
due and payable in equal monthly installments in arrears on the last day of each
month during the Term (prorated for any partial ,years or months). Commencing
January 1, 1999, and annually on each January 1 thereafter during the Term, the
Water Charge shall be increased in accordance with increases, if any, in the
Gross Domestic Product/Implicit Price Deflator ("GDP/IPD"), as published by the
U.S. Department of Labor, Bureau of Labor Statistics. The new Water Charge for
each such period shall be calculated by the Owner by multiplying the Water
Charge in effect on the immediately preceding December 1 by a fraction, the
numerator of which shall be the GDP/IPD as first published for the preceding
year and the denominator of which shall be the GDP/IPD as first published for
the second preceding year (i.e., the new Water Charge for January 1, 1999 shall
equal the Water Charge in effect on December 31, 1998 multiplied by a fraction,
the numerator of which shall be the GDP/IPD for 1998 (first published in March
of 1999) and the denominator of which shall be the GDP/IPD for 1997 (first
published in March of 1998)). Due to the timing of the publication of the
GDP/IPD, the new Water Charge for each such period shall be calculated in April
of each such period and applied retroactively to be effective as of the prior
January 1. Upon calculation of the new Water Charge, the Operator agrees to
promptly pay the Owner the difference between the amounts due for Water Charges
for the months of January, February, and March of each such period based on the
adjusted Water Charge, and the amounts actuation, paid for water based on the
pre-adjusted Water Charge.
The Owner shall be responsible for contracting for any fuel necessary for
providing hot water.
The Owner shall invoice the Operator for hot water on a monthly basis. and
such invoices shall be savable within thirty (30) days of invoice.
Section 3.06. Services Provided by Owner. At the request of the Operator.
the Owner may at its option, provide, at the Operator's expense, general
maintenance services. The Owner shall charge the Operator an amount equal to its
actual cost in providing such services and shall invoice the Operator for such
services monthly as incurred. Such invoices shall be payable within thirty (30)
days of invoice.
ARTICLE IV
DISCLAIMER OF WARRANTIES
THE FACILITY IS BEING PROVIDED AND LEASED PURSUANT TO THIS AGREEMENT ON AN
"AS-IS, WHERE-IS" BASIS. THE OWNER HAS NOT MADE NOR SHALL BE DEEMED TO HAVE MADE
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED AS TO THE TITLE, VALUE,
MERCHANTABILITY, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN, OPERATION,
ABSENCE OF LATENT DEFECTS OR FITNESS FOR USE OF THE FACILITY (OR ANY PART
THEREOF), OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO THE FACILITY (OR ANY PART THEREOF). It is agreed that
except as expressly provided herein all risks incident to the matters discussed
in the preceding sentence, as between the Owner, on the one hand, and the
Operator, on the other, are to become by the Operator. The provisions of this
Article IV have been negotiated, and, except to the extent otherwise expressly
stated in this Agreement, the foregoing provisions are intended to be a complete
exclusion and negation of any representations or warranties by the
11
<PAGE>
Owner, express or implied, with respect to the Facility that may arise pursuant
to any law now or hereafter in effect, or otherwise.
ARTICLE V
RESTRICTION ON LIEN'S
The Operator shall not directly or indirectly create, incur, assume or
suffer to exist any Lien on or with respect to the Facility, title thereto or
any interest therein, except Permitted Liens. The Operator shall promptly, at
its own expense, take such action as may be necessary duly to discharge or
eliminate or bond in a manner satisfaction to the Owner any such Lien if the
same shall arise at any time. The Operator further agrees that it shall pay or
cause to be paid on or before the time or times prescribed by law (after giving
effect to any applicable grace period) any taxes, assessments, fees or charges
imposed on the Operator (or any affiliated or related group of which the
Operator is a member) under the laws of any jurisdiction that. if unpaid, might
result in any Lien prohibited by this Operating Agreement.
ARTICLE VI
OPERATION AND MAINTENANCE; ALTERATIONS,
MODIFICATIONS AND ADDITIONS
Section 6.01. Operation and Maintenance. The Operator. at its own expense,
shall at all times operate. maintain, service and repair the Facility in
accordance with (a) prudent commercial operating maintenance practices,
including all manufacturers' warranty requirements to the extent such
requirements are made known to the Operator, (b) the then current Operating
Manual, (c) except to the extent Section 6.11 hereof shall apply all applicable
requirements of law and of any court and of any Governmental Authority
(including without limitation all zoning, environmental protection, pollution,
sanitary and safety laws, and all Environmental Requirements) noncompliance with
which would have a material adverse effect on the Operator's right to operate
the Facility, the Operator's business or financial condition or the rights of
the Owner in the Facility or would, in the opinion of the Owner, involve a
material risk of any of the items enumerated in Section 6.11 (i) through (iv),
and (d) all requirements contained in permits and licenses relating to the
Facility in effect from time to time during the Term. In connection therewith,
the Operator shall (i) maintain the Facility in stood operating condition.
ordinary wear and tear excepted, (ii) cause the Facility to continue to have the
capacity and functional ability, to produce Product on a continuing basis. in
normal commercial operation, in a commercially efficient manner, (iii) comply
with the standards imposed by any insurance policies in effect at any time with
respect to the Facility or any part thereof, and (iv) bear the expense
associated with changes in permitting requirements relating to the Facility
during the Term.
Section 6.02. Repair and Replacement. Except after the occurrence of an
Event of Loss, and except as provided below, the Operator, at its own expense,
shall keep the Facility in good operating condition (reasonable wear and tear
excepted), and shall make all repairs, replacements and renewals of all
necessary, or useful appliances, parts, instruments, accessories and
miscellaneous property of whatever nature (collectively, the "Parts") necessary
to maintain the Facility in good operating condition. The Operator shall be
responsible for making (a) all structural and nonstructural repairs and
replacements to the Facility up to thirty thousand dollars ($30,000) in the
aggregate in each Operating Year and (b) all repairs and replacements, with the
12
<PAGE>
exception of (i) the Greenhouse structure, including the ventilation system;
(ii) the heating system, including pumps, boilers, expansion vessels and piping;
(iii) the curtain system; (iv) the CO2 system; (v) the irrigation system; and
(vi) the cold storage facility: provided that notwithstanding anything contained
herein to the contrary, the Operator shall be responsible for all repair and
replacements relating to normal wear and tear. The Owner shall be responsible
for making all necessary structural and nonstructural repairs in excess of
thirty thousand dollars ($30,000) in the aggregate in any Operating Year other
than repairs and replacements of items referred to in clause (b) above;
provided, however, that if such repairs or replacements are necessitated by the
negligent or willful acts of the Operator, its employees, agents or invitees,
then the cost of such repairs or replacements shall be borne by the Operator. In
the ordinary course of maintenance, service, repair or testing, the Operator may
remove any Parts, but the Operator shall cause such Parts to be replaced as
promptly as practicable. All replacement Parts shall be free and clear of all
Liens except Permitted Liens and shall be in at least as good operating
condition as. and shall have a value and utility at least equal to, the Parts
replaced, assuming such replaced Parts were in the condition and repair required
to be maintained by the terms hereof.
Section 6.03. Alterations Required by Law. The Owner shall make such
Alterations to the Facility as may be required from time to time to meet the
requirements of and be in conformity with all applicable requirements of law, of
any court and of any Governmental Authority and the Operator will maintain the
same in proper operating condition under such laws and requirements. except to
the extent Section 6.11 hereof shall apply. Upon completion of such Alterations,
the Basic Rent shall be automatically increased on an annual basis by an amount
sufficient to enable the Owner to recover (over ten (10) years) the cost paid in
connection with the Alterations.
Section 6.04. Plans and Specifications: Operating Manual. As soon as
practicable following the Effective Date, the Owner shall provide to the
Operator the Operating Manual and a set of Plans and Specifications (which shall
in the aggregate reflect the Facility as of the Effective Date). The Operator
shall maintain throughout the Term, and keep on file at the Facility, a current
Operating Manual and a set of Plans and Specifications (which shall in the
aggregate reflect all Parts incorporated in the Facility and all Alterations
made pursuant to this Article VI) with respect to the Facility. Upon any
expiration of the Term or the exercise of remedies pursuant to Article XIII
hereof, the Operator shall deliver to the Owner a complete set. current as of
the date of such return or exercise of remedies, of such Plans and
Specifications and all work drawings and similar documents with respect to the
operation of the Facility. The Plans and Specifications shall not be revised,
amended or modified in any manner which would adversely affect the operating
capacity, cost efficiency, utility, reliability or value of the Facility.
Section 6.05. Operational Alterations. In addition to the foregoing, the
Operator, at its own expense (subject to Section 6.06 hereof) may, from time to
time make such Alterations to the Facility as the Operator may deem desirable in
the proper conduct of its business, which shall be approved by the Owner in
advance, provided that such Alterations shall not adversely affect the operating
capacity, cost efficiency, utility, reliability or value of the Facility.
Section 6.06. Owner's Option to Pay Costs of Alterations. If requested to
do so by the Operator, the Owner may at its option pay for any Alteration title
to which will vest or has vested
13
<PAGE>
in the Owner pursuant to Section 6.08 hereof, subject to agreement as to
adjustments in Basic Rent in accordance with Section 3.01 hereof.
Section 6.07. Reports of Alterations. On or before March 15 of each
calendar year commencing in 1999 and on the date on which the Term shall expire.
the Operator shall furnish the Owner with a report stating the total cost (as
determined in accordance with the Operator's normal accounting practices) of all
Alterations which are Nonservable and which were not financed pursuant to
Section 6.06 hereof and which are not described in clause (i) or (ii) of Section
4(4).03(c) of Revenue Procedure 75-21 as modified by Revenue Procedure 79-48 and
which were made during, the period from the date of this Operating Agreement to
the end of the preceding calendar year in the case of the first such report or
during the period from the end of the period covered by the last previous report
to one month prior to such report in the case of subsequent reports and briefly
describing all such Alterations. Each such report shall be accompanied by an
Officer's Certificate stating that no Alteration has been made that would
adversely affect the operating capacity, cost efficiency, utility, reliability
or value of the Facility, or the ability of the Operator to perform its
obligations hereunder.
Section 6.08. Title to Parts. Title to each Part (including any Alteration)
incorporated in the Facility pursuant to this Article VI shall without further
act vest in the Owner and shall be deemed to constitute a part of the Facility
and be subject to this Operating Agreement in the following cases:
(a) such Part shall be in replacement of or in substitution for. and
not in addition to, any Part originally incorporated in the Equipment or
any Part title to which shall have vested in the Owner pursuant to this
Section 6.08;
(b) such Part shall be required to be incorporated in the Facility
pursuant to the terms of Sections 6.02 and 6.03 hereof,
(c) such Part shall be Nonseverable; or
(d) such Part shall be paid for by the Owner.
If such Part or Parts are incorporated in the Facility, pursuant to this
Article VI and are not within any of the categories set forth in clauses (a)
through (d) above, then title to such Part or Parts shall vest in the Operator,
subject to the rights of the Owner provided in Section 6.09 hereof.
All Parts (other than Parts the title to which is vested in the Operator in
accordance with the preceding sentence) at any time removed from the Facility
shall remain the property of the Owner no matter where located, until such time
as such Parts shall be replaced by Parts that have been incorporated in the
Facility and that meet the requirements for replacement Parts specified in
Section 6.02 hereof. On or before March 15 of each calendar year commencing in
1999 and on the date on which the Term shall expire, the Operator shall furnish
the Owner with a report which provides a breakout of the total cost (as
determined in accordance with the Operator's normal accounting practices) of all
Parts the title to which is vested in the Operator and all parts the title which
is vested in the Owners as provided in this Section 6.08 (other than those Parts
that were paid for by the Owner) and which were incorporated in the Facility
during the period
14
<PAGE>
from the date of this Operating Agreement to the end of the preceding calendar
year in the case of the first such report or during the period from the end of
the period covered by the last previous report to one month prior to such report
in the case of subsequent reports and briefly describing all such Parts. Each
such report shall be accompanied by an Officer's Certificate stating that no
Part has been incorporated in the Facility that would adversely affect the
operating capacity, cost efficiency, utility, reliability or value of the
Facility or the ability of the Operator to perform its obligations hereunder.
Immediately upon any replacement Part becoming incorporated in the Facility as
provided in Section 6.02 hereof, without further act, (a) title to the removed
Part shall thereupon vest in such Person as shall be designated by the Operator,
free and clear of all rights of the Owner, (b) title to such replacement Part
shall thereupon vest in the Owner and (c) such replacement Part shall become
subject to this Operating Agreement and be deemed part of the Facility for all
purposes hereof to the same extent as the parts originally incorporated in the
Facility.
Section 6.09. Removal of Parts. All Parts incorporated in the Facility to
which the Operator (or any other Person other than the Owner) shall have title
pursuant to the provisions of Section 6.08 hereof may, (a) subject to any night
of the Owner to use such Part as provided herein and (b) so long as such removal
shall be permitted by this Agreement and shall not result in any violation of
any law or governmental regulation and (c) so long as no Default or Event of
Default shall have occurred and be continuing, be removed at any time by the
Operator (or such other Person) and shall be removed by the Operator (or the
Operator shall cause such other Person so to remove such Parts) prior to the
delivery of the Facility to the Owner in accordance with the provisions of the
Operating Agreement, other than upon the termination of this Operating Agreement
pursuant to Article XIV hereof, and title to such Parts shall at all times
remain in the Operator (or such other Person).
Section 6.10. Parts Free and Clear of Liens. Any Part title to which shall
vest in the Owner pursuant to Section 6.08 hereof shall be free and clear of all
Liens except Permitted Liens.
Section 6.11. Permitted Contests. If, to the extent and for so long as (a)
a test, challenge, appeal or proceeding for review of any applicable requirement
of law or of a Governmental Authority relating to the operation or maintenance
of the Facility shall be prosecuted in good faith by the Operator or (b)
compliance with such requirement shall have been excused or exempted by a
nonconforming use permit, waiver extension or forbearance, the Operator shall
not be required to comply with such requirement but only if such test challenge,
appeal, proceeding or noncompliance shall not, in the opinion of the Owner,
involve a material risk of (i) foreclosure, sale, forfeiture or loss of, or
imposition of any Lien other than a Permitted Lien on, any part of the Facility
or of impairment of the operation of the Facility (ii) extending the ultimate
imposition of such requirement beyond the termination of the Term (unless there
shall have been furnished indemnification satisfactory to the Owner), (iii) any
material claim against the Owner (unless there shall have been furnished
indemnification satisfactory to the Owner) or (iv) the nonpayment of Rent.
Section 6.12. Operating, Loss. The Operator shall keep maintenance and
repair reports in sufficient detail to indicate the nature and date of major
work done. Such reports shall be kept on file by the Operator at its offices or
at the Facility for as long, as they would be kept by a
15
<PAGE>
prudent owner or operator of the Facility (but in no event less than three years
following the end of the Term), and shall be made available to the Owner upon
reasonable request.
Section 6.13. Return of Facility. Upon termination of this Agreement, the
Operator, at its own expense, shall return the Facility to the Owner by
surrendering the same into the possession of the Owner free and clear of all
Liens and in the condition required by Section 6.01 hereof.
ARTICLE VII
IDENTIFICATION
The Operator shall maintain throughout the Term in a prominent location at
each entrance to each of the buildings comprising the Facility at least one (1)
plate or other clear and durable marking stating "THE EQUIPMENT AND ALL RELATED
EQUIPMENT IN THIS FACILITY IS OWNED BY GREENHOST, INC." in letters not less than
one-half inch in height. On the Closing Date the Operator shall certify that it
has compiled with the preceding sentence. Except as provided herein or as
otherwise directed by the Owner, the Operator shall not allow the name of any
Person other than that of the Operator to be placed on any Part of the Facility
as a designation that might reasonably be interpreted as a claim of ownership or
right to possession or use thereof
ARTICLE VIII
INSURANCE
Section 8.01. Coverage.
(a) Subject to subsection 8.01(b), the Operator shall maintain:
(i) property damage insurance with respect to the Facility insuring
against loss or damage in an amount equal to the "full insurable value"
(which as used herein shall mean the full replacement value, including the
costs of debris removal, which amount shall be determined annually) from
(x) fire and normal extended coverage perils customarily included in
policies available with respect to property comparable to the Facility and
(y) flood, earthquake and other perils customarily included under
Difference in Conditions policies so available;
(ii) "boiler and machinery" insurance in an amount equal to the full
insurable value with respect to damage (not insured against pursuant to
subsection 8.01(a)(i) above) to the machinery, plant, equipment, storage
facilities or similar apparatus included in the Facility from risks
normally insured against under boiler and machinery policies.
(iii) comprehensive commercial general liability and property damage
insurance (including, but not limited to, coverage for any construction on
or about the Premises) covering the legal liability of Operator against all
claims for any bodily injury or death of persons and for damage to or
destruction of property occurring on, in or about the Premises and the
adjoining streets, sidewalks and passageways and arising, out of the use or
occupation of the Premises by Operator. Coverages provided by the foregoing
insurance policy shall include (but not be limited to) all of the coverages
commonly, referred to by the insurance industry as: Premises/Operations
Liability;
16
<PAGE>
Products/Completed Operations Liability, Owners and Contractors Protective
Liability; Blanket Contractual Liability; Broad Form Property Damage
Liability, Personal Injury, Stop-Gap or Employers' Contingent Liability
Explosion, Collapse and Underground Liability, Automobile Liability,
including coverage for Owned, Non-Owned, Hired, or Borrowed Vehicles and
"Mobile Equipment". The foregoing insurance shall apply as primary
insurance, irrespective of any insurance which Owner or Master Landlord may
carry and shall include a "Cross Liability" clause (Severability of
Interests). The foregoing insurance shall have a combined single limit of
not less than $5,000,000, with separate aggregate for product and general
liability, which policy shall be written on an occurrence basis;
(iv) (x) workers' compensation insurance or occupational disability
benefits insurance (in at least the statutory amounts) and such other forms
of insurance which the Operator is required by law to maintain or cause to
be maintained, covering, loss resulting from injury, sickness, disability
or death of the employees of the Operator and (y) employers' liability
insurance in an amount not less than $500,000 single limit.
(v) comprehensive automobile liability insurance against claims of
personal injury (including bodily injury and death) and property damage
covering all owned, leased, non-owned and hired vehicles with a
$1,000,000.00 minimum limit per occurrence for combined bodily injury and
property damage liability; and
(vi) such other insurance with respect to the Facility in such amounts
and against such insurable hazards as is usually carried by Persons
operating similar properties in the same general region, but any loss of
the type customarily covered by the policies described in subsections
8.01(a)(i), (ii) and (iii), whether actually covered in whole or in part by
such policies, shall be the responsibility of the Operator and the absence
of such coverage shall not relieve the Operator from any of its obligations
under any of the Operative Documents:
provided, however, that the amount of insurance coverage specified in
subsections 8.01 (a)(i) and (a)(ii) above with respect to the Facility
shall not in any event be less than the replacement cost of the Facility,
as determined by the Owner, including agreed amount waiving coinsurance.
All insurance policies carried in accordance with Section 8.01 shall be
maintained with Florists Mutual Insurance Company or any other insurers with a
Best rating of A minus or better and a Best size rating of IX or better (except
for policies underwritten by Lloyds of London and approved English companies
acceptable to the Owner) approved by the Owner and not disqualified from
insuring risks in Virginia.
Any insurance policies carried in accordance with this Section 8.01 shall
be subject to (i) exclusions of the sort existing in the insurance policies in
effect on the Closing Date and (ii) such deductible amounts and retentions as
shall not exceed the following amounts specified with respect to such policies:
(1) Property Damage $25,000;
17
<PAGE>
(2) Boiler and Machinery $25,000; and
(3) Public Liability $25,000.
Notwithstanding anything to the contrary in this Article VIII, the Operator
shall at all times ensure that the insurance it maintains with respect to the
Facility is not less extensive or inclusive in type or amount of coverage than
that maintained by it in accordance with its standard corporate minimum practice
with respect to other similar facilities.
(b) During the Term and unless the Owner gives the Operator sixty (60)
days prior written notice, the Owner shall provide the insurance coverage
specified in subsection 8.01 (a)(i) and 8.01 (a)(ii) at the Owner's cost.
Section 8.02. Policy Provisions. Any insurance policy maintained by the
Operator pursuant to Section 8.01 hereof shall:
(a) specific Birchwood, Master Landlord, Owner, Lender, Fee Mortgagee,
Master Landlord's affiliates, the Owner and Owner's affiliates (and such
others as Master Landlord or Owner shall from time to time designate) as
additional insured (the "Additional Insured"), as their respective
interests may appear:
(b) specific Fee Mortgagee as mortgagee and loss payee;
(c) provide. except in the case of public liability insurance and
workers' compensation insurance, that all loss or occurrence shall be
adjusted with the Operator and Owner, unless an Event of Default shall have
occurred and be continuing, in which case such loss or occurrence shall be
adjusted with the Owner, and payable (x) in respect of payments not
exceeding $25,000, provided no Default or Event of Default shall have
occurred or be continuing, to the Operator, and (y) in all other
circumstances, to the Owner:
(d) include effective waivers by the insurer of all claims for
insurance premiums or commissions or (if such policies provide for the
payment thereof) additional premiums or assessments against any Additional
Insured;
(e) provide that in respect of the interests of the Additional
Insured, such policies shall not be invalidated by any action or inaction
of the Operator or any other Person and shall insure the Additional Insured
regardless of. and any claims for the losses shall be payable
notwithstanding:
(i) the occupation or use of the Facility for purposes more
hazardous than permitted by the terms of the policy;
(ii) any foreclosure or other proceeding or notice of sale
relating to all or any portion of the Facility; or
(iii) any change in the title to or ownership of all or any
portion of the Facility.
18
<PAGE>
(f) provide that such insurance shall be primary insurance and that
the insurers under such insurance policies shall be liable under such
policies without right of contribution from any other insurance coverage
effected by or on behalf of any Additional Insured under any other
insurance policies covering a loss that is also covered under the insurance
policies maintained by the Operator pursuant to this Article VIII and shall
expressly provide that all provisions thereof, except the limits of
liability (which shall be applicable to all insureds as a group) and
liability for premiums (which shall be solely a liability of the Operator),
shall operate in the same manner as if there were a separate policy
covering each insured.
(g) provide that any cancellation thereof or material adverse change
therein shall not be effective as to each of the Additional insured until
at least sixty (60) days after receipt by such Additional Insured of
written notice thereof,
(h) waive any right of subrogation of the insurers against the
Additional Insured, and waive any right of the insurers to any setoff or
counterclaim or any other deduction, whether by attachment or otherwise, in
respect of any liability of the Additional Insured: and
(i) subject to Section 8.01 hereof. be reasonably satisfactory to the
Owner, Master Landlord and Fee Mortgagee in all other material respects.
Section 8.03. Evidence of Insurance. The Operator shall deliver to each of
the Additional Insured at least two (2) days before the Effective Date copies of
all policies of insurance required hereby and, on the date this Operating
Agreement is executed and on each December 31 thereafter during the Term,
certificates of insurance, copies of all policies of insurance evidencing the
provisions described in Section 8.02(a) hereof executed by the insurer by its
duly authorized agent, and a certification from the Operator's insurance agent
or broker to the effect that all premiums required to have been paid have been
paid in full.
Section 8.04. No Duty of Owner to Verify. No provision of this Article VIII
or any provision of any other Operative Document shall impose on the Owner any
duty or obligation to verify the existence or adequacy of the insurance coverage
maintained by the Operator nor shall the Owner be responsible for any
representation or warranty made by or on behalf of the Operator to any insurance
company or underwriter.
ARTICLE IX
LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE
Section 9.01. Occurrence of Event of Loss. If an Event of Loss shall occur,
the Operator shall give the Owner prompt written notice of such occurrence and
the date thereof unless the Owner agrees in writing within thirty (30) days
after such occurrence to restore, rebuild or replace the Facility in accordance
with the provisions contained in the definition of "Event of Loss," then this
Agreement shall terminate effective on the thirtieth day following the
occurrence of the Event of Loss. Any payments (except for payments under
insurance policies maintained by the Operator other than pursuant to Article
VIII hereto received at any time by the Owner or by the Operator from any
Governmental Authority or other Person as a result of the occurrence
19
<PAGE>
of an Event of Loss shall be retained by the Owner or promptly paid to the Owner
by the Operator; provided, however, that so long as no Default or Event of
Default shall have occurred and be continuing, the Operator may retain any
proceeds of requisition of use payments made by any Governmental Authority and
attributable to the Facility for a period equal to the then current Term.
Section 9.02. Repair of Loss or Destruction.
(a) In the event of loss or destruction of all or a portion of the
Facility which (x) does not constitute an Event of Loss or (y) constitutes
an Event of Loss but the Owner agrees to restore, rebuild or replace the
Facility, then the Owner shall give prompt notice thereof to the Operator,
and the Owner, at its own cost and expense, shall promptly repair, replace
and rebuild the Facility, at least to the extent of the value and as nearly
as practicable to the character of the Facility existing immediately prior
to such occurrence; provided, however, that the Operator shall pay the
difference, if any, between the insurance proceeds received by the Owner as
a result of such loss or destruction and the costs and expenses incurred by
the Owner in restoring, rebuilding or replacing the Facility if the loss or
destruction thereof resulted from the negligent, willful, reckless or
wanton act or failure to act of the Operator, its employees, agents,
invitees or independent contractors.
(b) Except as provided in Section 9.01, this Agreement shall not
terminate or be affected in any manner by reason of the destruction or
damage in whole or in part of the Facility, or by reason of the
untenantability of the Facility, and the Rent reserved in this Agreement
and all other charges payable hereunder shall be paid by the Operator in
accordance with the terms, covenants and conditions of this Agreement,
without abatement, diminution or reduction.
ARTICLE X
INTEREST CONVEYED TO OPERATOR
This Operating Agreement is an agreement of lease and does not convey to
the Operator any right, title or interest in or to the Facility except as an
Operator.
ARTICLE XI
ASSIGNMENT AND SUBLEASE; LOCATION
Section 11.01. Assignment and Sublease. The Owner shall be permitted to
assign this Agreement and any and all of its right, title or interest in, to or
under this Agreement, voluntarily or by operation of law, without the consent of
the Operator. The Operator may not sublease the Facility or any part thereof or
assign any of its rights or interest hereunder without the prior written consent
of the Owner; provided, however, that any such sublease or assignment by the
written consent of the Owner may, in its discretion, grant its consent (a) shall
not release the Operator from any of its obligations or liabilities of any
nature whatsoever arising under this Agreement; (b) shall be expressly subject
to and subordinate to this Agreement; (c) shall be accompanied by an
unconditional guarantee of the Operator's obligations under the Operating
20
<PAGE>
Agreement issued by a party having financial strength satisfactory to the Owner;
and (d) shall not be permitted if a Default or Event of Default has occurred and
is continuing.
Section 11.02. Location. The Operator shall not remove. or permit to be
removed, the Plant or Equipment or any part thereof from the Site without the
prior written consent of the Owner, except that the Operator or any other Person
may remove any Part in accordance with the provisions of Sections 6.02 and 6.09
hereof.
Section 11.03. Mortgaging the Estate of Lessor.
(a) Without limiting, the generality of Section 11.01(a) hereof,
Operator acknowledges receipt of a copy of the Deed of Trust and agrees
that, to the extent provided therein, any notice, demand or action which
Owner may give or take hereunder may, be given or taken by, Lender or any
other Fee Mortgagee with the same force and effect as if given or taken by
Owner, and that this Operating Agreement is and shall be subordinate to the
Deed of Trust and to any other such pledge, conveyance, deed of trust,
assignment, mortgage or ground lease now existing or hereafter executed
(herein, a "Fee Mortgage"), with no further instrument of subordination
being necessary, provided Fee Mortgagee may subordinate the same to this
Operating Agreement by executing and recording a written instrument
including to that effect.
(b) Operator hereby agrees that within ten (10) days after request
from Owner, or from any Fee Mortgagee, Operator shall execute a
subordination, non-disturbance and attornment agreement in a commercially
reasonable from subordinating this Operating Agreement to the interest of
Fee Mortgagee.
(c) The holder or beneficiary of any Fee Mortgage is herein referred
to as a "Fee Mortgagee". The term "Fee Mortgagee" as used in this Operating
Agreement shall also include the "Fee Mortgagee" as the term that is
defined in the Master Lease.
(d) Without limiting the effect of the preceding provisions of this
Article XI. Operator, in the event of any foreclosure or deed in lieu of
foreclosure or other final conveyance and transfer of Owner's interest as
aforesaid, shall, upon request of the grantee thereof, recognize and attorn
to the grantee thereof as "landlord" under this Operating Agreement.
(e) Operator acknowledges and agrees that no consent or approval of
Owner shall be effective unless and until each and every Fee Mortgagee has
likewise consented or approved the matter which was the subject of such
request for consent or approval. No consent by Master landlord or fee
Mortgagee to assignment of this Operating Agreement or of Operator's
interest under this Operating Agreement or in the Facility, or any part
thereof, or to any sublease shall be effective unless and until there have
been delivered to Master Landlord and Fee Mortgagee an agreement in
recordable form, executed by Operator and the proposed assignee or
subtenant, as the case may be, wherein and whereby any assignee assumes due
performance of this Operating Agreement to be done and performed for the
balance then remaining in the Term, and any subtenant acknowledges the
right of Master Landlord and Fee Mortgagee to continue or terminate
21
<PAGE>
any sublease, in Master Landlord's sole discretion, upon termination of the
Master Lease or this Operating Agreement, and such subtenant agrees to
recognize and attorn to Master Landlord in the event that Master Landlord
elects to continue such sublease. Until such time as Fee Mortgagee shall
notify Operator in writing to the contrary, Financing Parties
Representative shall have the right to exercise all rights and give all
consents and approvals of Fee Mortgagee under this Operating Agreement, and
Operator shall be entitled to rely on any action taken by Financing Parties
Representative. If Operator shall have received from Master Landlord, Owner
or a Fee Mortgagee written notice specifying the name and address last
furnished to Operator a copy of each request for Owner's consent or
approval as well as a copy of each notice of Owner's default at the same
time as and whenever any such request for Owner's consent or approval or
notice of Owner's default shall thereafter be given by Operator to Owner.
Operator shall give to Financing Parties Representative (on behalf of Fee
Mortgage) and to Lender a copy of each request for Owner's consent or
approval as well as a copy of each notice of owner's default at the same
time as and whenever any such request for Owner's consent or approval or
notice of Owner's default shall thereafter be given by Operator to Owner.
Operator shall accept performance by any Fee Mortgagee of any covenant,
condition or agreement on Owner's part to be performed hereunder with the
same force and effect as though performed by Owner.
ARTICLE XII
INSPECTION AND REPORTS
Section 12.01. Condition and Operation. The Owner and its authorized
representatives (the "Inspecting Parties") may inspect, as its own expense, the
Facility. After an Event of Default has occurred and is continuing, the
Inspecting Parties may also inspect, at their expense, the books and records of
the Operator relating to the Facility and make copies and abstracts therefrom.
The Operator shall furnish to the Inspecting Parties statements accurate in all
material respects regarding the condition and state of repair of the Facility,
all at such times and as often as may be reasonably requested. None of the
Inspecting Parties shall have any duty to make any such inspection or inquiry.
To the extent permissible, the Operator shall prepare and file in timely
fashion, or where the Owner shall be required to file, the Operator shall
prepare and deliver to the Owner within a reasonable time prior to the date for
filing, any reports with respect to the condition or operation of the Facility
that shall be required to be filed with any Governmental Authority.
Section 12.02. Annual Insurance Report. On or before March 15 of each year
during the Term, and within ten (10) days after any material adverse change in
the information set forth in the certificates provided pursuant to Section 8.03
hereof, the Operator shall deliver to the Owner a report of a Responsible
Officer of the Operator setting forth (a) a complete list of all insurance
policies obtained and maintained by the Operator pursuant to Article VIII, (b)
stating whether such insurance policies comply with the requirements of Article
VIII and (c) stating whether all premiums then due thereon have been paid.
Section 12.03. Financial Reports. During the Term, the Operator shall
provide to the Owner the following:
22
<PAGE>
(a) As soon as available, and in any event within thirty (30) days
after the end of each month, unaudited financial statements for the
Facility, including a balance sheet as at the end of such month and
statements of income and retained earnings and of cash flow for such month
and for the period from the beginning of the Operating Year. There shall be
included with such financial statements (i) a certificate of a Responsible
Officer stating in effect that, to the best of his knowledge and belief,
such financial statements are true and correct and have been prepared in
accordance with generally accepted accounting principles, consistently
applied, subject to changes resulting from year-end adjustments and (ii) a
certificate of a Responsible Officer setting forth in detail reasonably
satisfactory to the Owner a calculation of Cash Flow of the Facility for
such month and for the Operating Year through the end of such month.
(b) In addition, as soon as available and in any event within one
hundred twenty (120) days after the end of each Operating Year, financial
statements for the Facility, including a balance sheet as of the end of
such Operating Year, and statements of income and retained earnings and of
cash flow for such Operating Year, prepared in accordance with generally
accepted accounting principles consistently applied and accompanied by the
audit opinion of a recognized firm of independent certified public
accountants acceptable to the Owner. There shall be included with such
financial statements a certificate of a Responsible Officer setting forth
in detail reasonably satisfactory to the Owner a calculation of Cash Flow
of the Facility for such Operating Year. The Owner shall have the right at
any time to audit the certificate of Cash Flow required to be provided
hereunder. Such audit shall be performed by an independent certified public
accounting firm selected by the Owner and shall be at the Owner's expense,
unless such audit results in the upward adjustment of Cash Flow for any
Operating Year in an amount equal to two percent (2%) or more of the Cash
Flow reflected on the certificate provided to the Owner by the Operator, in
which case the cost of such audit shall be paid by the Operator and shall
not be considered Greenhouse Expenses. Any payments required to be made as
a result of any adjustment to the Cash Flow shall be made within ten (10)
Business Days following receipt of the results of the audit.
(c) The Owner shall have the right to review the books and records of
the Operating relating to the Facility for the purpose of verifying the
accuracy of the financial statements and calculations of Cash Flow provided
pursuant to Sections 12.03(a) and (b), and
(d) On or before January 31 of each year during the Term (commencing
on January 31, 1999), a certificate of a Responsible Officer of the
Operator stating that such Responsible Officer has made or caused to be
made a review of all transactions relating to the Facility and the
financial and operating condition of the Operator for the immediately
preceding Operating Year and that, based on such review, no Default or
Event of Default has occurred during such year (or, if a Default or Event
of Default shall have occurred, specifying the nature thereof and the
action the Operator has taken or prepares to take with respect thereto).
23
<PAGE>
Section 12.04. Budget Approval. No later than the forty-five (45) days
prior to the commencement of any Operating Year, the Operator shall present to
the Owner for its approval, which shall not be unreasonably withheld, its budget
for the Facility for the following Operating Year, prepared in detail
satisfactory to the Owner (the budget prepared pursuant to this Section 12.04
shall be referred to herein as the "Budget"). In the event the Owner withholds
its approval of any Budget, it shall provide to the Operator a written statement
of specific objections to the Budget. The Budget presented shall be deemed to be
approved with respect to all items except those to which the Owner has objected.
In the event the Operator disputes the Owner's objections, the Owner and the
Operator shall appoint a mutually agreeable independent advisor with experience
in the operation of greenhouse facilities, which advisor shall review the
disputed amounts and decide the appropriate level of expenditures for such
items. The decision of such advisor shall be binding upon the Owner and the
Operator and shall become part of the Budget for such Operating Year.
Section 12.05. Liability. The Operator shall, promptly after obtaining
knowledge thereof, give prompt written notice to the Owner of each accident
likely to result in material damages or claims for material damages against the
Operator or any other Person with respect to the Facility of $100,000 (if such
claims and damages are insured) or $25,000 (if not insured), and occurring in
whole or in part (whenever asserted) during the Term, and on request shall
furnish to the Owner information as to the time, place and nature thereof, the
names and addresses of the parties involved, any Persons injured, witnesses and
owners of any property damaged and such other information as may be known to it,
and shall promptly upon request furnish the Owner with copies of all
correspondence, papers, notices and documents whatsoever received by the
Operator in connection therewith.
Section 12.06. Liens. The Operator shall promptly, and in no event later
than five (5) Business Days after it shall have obtained knowledge of the
attachment of any Lien that it shall be obligated to discharge or eliminate
pursuant to Article V hereof, notify the Owner of the attachment of such Lien
and the full particulars thereof unless the same shall have been removed or
discharged by the Operator.
ARTICLE XIII
EVENTS OF DEFAULT
The following events shall constitute Events of Default (whether any such
event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any Governmental
Authority):
(a) the Operator shall fail to make any payment of Rent within five
(5) days after the same shall have become due; or
(b) the Operator shall fail to make any payment of any other amount
payable hereunder within ten (10) days after notice of such failure from
the Owner; or
24
<PAGE>
(c) the Operator shall fail to perform or observe any covenant,
condition or agreement to be performed or observed by it under Article VIII
or Article XI hereof within five (5) days after notice of such failure from
the Owner; or
(d) the Operator shall fail to perform or observe any covenant,
condition of agreement (not included in clause (a), (b) or (c) of this
Article XIII) to be performed or observed by it hereunder or under any
other Operative Document and such failure shall continue unremedied for a
period of thirty (30) days after written notice thereof from the Owner; or
(e) the filing of the Operator or APD of any petition for dissolution
or liquidation of the Operator or APD or the commencement by the Operator
or APD of a voluntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or the Operator or APD shall
have consented to the entry of an order for relief in an involuntary case
under any such law, or the failure of the Operator or APD generally to pay
its debts as such debts become due (within the meaning of the Bankruptcy
Reform Act of 1978, as amended), or the failure by the Operator or APD
promptly to satisfy or discharge any execution, garnishment or attachment
of such consequence as will impair its ability to carry out its obligations
under this Agreement, or the appointment of or taking possession by a
receiver, custodian or trustee (or other similar official) for the Operator
or APD or any substantial part of its property, or a general assignment by
the Operator or APD for the benefit of its creditors, or the entry by the
Operator or APD into an agreement of composition with its creditors, or the
Operator or APD shall have taken any corporate action in furtherance of any
of the foregoing; or the filing against the Operator or APD of an
involuntary petition in bankruptcy which results in an order for relief
being entered or, notwithstanding that an order for relief has not been
entered, the petition is not dismissed within forty-five (45) days of the
date of the filing of the petition, or the filing under any law relating to
bankruptcy, insolvency or relief of debtors of any petition against the
Operator or APD for reorganization, composition, extension or arrangement
with creditors which either (i) results in a finding or adjudication of
insolvency of the Operator or APD or (ii) is not dismissed within
forty-five (45) days of the date of the filing of such petition; or
(f) any representation or warranty by the Operator in any Operative
Document or in any certificate or document delivered pursuant thereto shall
have been materially false when made; or
(g) the occurrence of an Event of Default under the Line of Credit
Facility Agreement.
ARTICLE XIV
ENFORCEMENT
Section 14.01. Remedies. Upon the occurrence of any Event of Default and at
any time thereafter so long as the same shall be continuing, the Owner may, at
its option, by notice to the Operator, declare this Operating Agreement to be in
default, and at any time thereafter the Owner may do one or more of the
following as the Owner in its sole discretion shall determine:
25
<PAGE>
(a) the Owner may, by notice to the Operator, rescind or terminate
this Operating Agreement;
(b) the Owner may (i) demand that the Operator, and the Operator shall
upon the written demand of the Owner, return the Facility promptly to the
Owner in the manner and condition required by, and otherwise in accordance
with all of the provisions of, Article VI hereof as if the Facility were
being returned at the end of the Term, and the Owner shall not be liable
for the reimbursement of the Operator for any costs and expenses incurred
by the Operator in connection therewith, (ii) enter upon the Site and take
immediate possession of (to the exclusion of the Operator) the Facility or
remove the Plant or Equipment or both, by summary proceedings or otherwise,
all without liability to the Operator for or by reason of such entry or
taking of possession, whether for the restoration of damage to property
caused by such taking or otherwise and (iii) offer employment to the
Operator's employees;
(c) the Owner may sell all or any part of the Equipment and its rights
to the Plant and the Site at public or private sale, as the Owner may
determine, free and clear of any rights of the Operator and without any
duty to account to the Operator with respect to such action or inaction or
any proceeds with respect thereto;
(d) the Owner may lease to others all or any part of the Facility as
the Owner in its sole discretion may determine, free and clear of any
rights of the Operator and without any duty to account to the Operator with
respect to such action or for any proceeds with respect to such action or
inaction, except that the Operator's obligation to pay Rent with respect to
the Facility for periods commencing after the Operator shall have been
deprived of use of the Facility pursuant to this paragraph (d) shall be
reduced by the net proceeds, if any, actually received by the Owner from
leasing the Facility to any Person other than the Operator for the same
periods or any portion thereof;
(e) the Owner may demand that the Operator assign to the Owner (or to
a third party designated by the Owner to operate the Facility) all of the
Operator's rights under any agreement or contact entered into by the
Operator in connection with the operation of the Facility, including,
without limitation, the Management Agreement, and the Operator shall
execute and deliver to the Owner (or such third party) such assignments or
other instruments as the Owner may reasonably request in connection
therewith; and
(f) the Owner may exercise any other right or remedy that may be
available to it under applicable law or proceed by appropriate court action
to enforce the terms hereof or to recover damages for the breach hereof.
Section 14.02. Survival of Operator's Obligations. Except as provided in
subsection 14.01(d) above, no termination of this Operating Agreement, in whole
or in part, or repossession of all or any portion of the Facility or exercise of
any remedy under Section 14.01 hereof shall, except as specifically provided
therein, relieve the Operator of any of its liabilities and obligations
hereunder. In addition, the Operator shall be liable, except as otherwise
provided above, for any and all unpaid Rent due hereunder before, during or
after the exercise of any of
26
<PAGE>
the foregoing remedies, including all reasonable legal fees and expenses and
other costs and expenses incurred by the Owner by reason of the occurrence of
any Event of Default or the exercise of the Owner's remedies with respect
thereto, and including all costs and expenses incurred in connection with the
return of the Facility in the manner and condition required by, and otherwise in
accordance with the provisions or, Article VI hereof as if such Facility were
being returned at the end of the Term.
Section 14.03. Remedies Cumulative. To the extent permitted by, and subject
to the mandatory requirements of, applicable law, each and every right, power
and remedy herein specifically given to the Owner or otherwise in this Operating
Agreement shall be cumulative and shall be in addition to every other right,
power and remedy herein specifically given or no or hereafter existing at law,
in equity or by statute, and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from time to
time and as often and in such order as may be deemed expedient by the Owner, and
the exercise or the beginning of the exercise of any power or remedy shall not
be construed to be a waiver of the right to exercise at the same time or
thereafter any right, power or remedy. No delay or omission by the Owner in the
exercise of any right, power or remedy or in the pursuit of any remedy shall
impair any such right, power or remedy or be construed to be a waiver of any
default on the part of the Operator or to be an acquiescence therein. No express
or implied waiver by the Owner of any Event of Default shall in any way be, or
be construed to be, a waiver of any future or subsequent Event of Default.
ARTICLE XV
RIGHT TO PERFORM FOR OPERATOR
If the Operator shall fail to perform or comply with any of its agreements
contained herein, the Owner may perform or comply with such agreement, and the
amount of such payment and the amount of the expenses of the Owner incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at the Overdue
Rate, shall be payable by the Operator upon demand.
ARTICLE XVI
INDEMNITIES
Section 16.01. General Indemnity.
(a) Payment of Expenses by Operator. The Operator shall pay, and shall
indemnify and hold harmless each Indemnitee from and against, any and all
liabilities, obligations, losses, damages, penalties, claims, actions,
suits, costs, expenses and disbursements, including legal fees and
expenses, of whatsoever kind and nature (collectively, "Expenses" and
individually, an "Expense"), imposed on, incurred by or asserted against
any Indemnitee (whether because of an action or omission by such Indemnitee
or otherwise), in any way relating to or arising out of the occupation and
operation of the Facility by the Operator and the production and sale of
the Product.
(b) Exceptions. The indemnities contained in Section 16.01(a) hereof
with regard to any particular Indemnitee shall not extend to any Expense
(i) resulting from the
27
<PAGE>
willful misconduct or gross negligence of such Indemnitee (other than
willful misconduct or gross negligence imputed to such Indemnitee solely by
reason of its interest in the Facility), (ii) resulting solely from the
breach by such Indemnitee of any of its representations, warranties or
covenants in any of the Operative Documents, (iii) unless an Event of
Default shall have occurred and be continuing and Owner shall be exercising
remedies with respect thereto, to the extent such Expense shall relate to
acts or events not attributable to the Operator that occur after the Term,
(iv) so long as no Event of Default shall have occurred and be continuing,
to the extent attributable solely to the disposition or attempted
disposition of the Facility or any interest in any thereof, by or on behalf
of any Indemnitee, other than a transfer of the Facility pursuant to
Article XIV hereof or as required by any Operative Documents, (v)
constituting Fees, Taxes or Other Charges or (vi) which constitutes
internal, overhead expenses of the Indemnitee.
(c) Notice. If any party entitled to indemnity under this Section
16.01 or the Operator shall have received written notice of any liability
indemnified against under this Section 16.01, it shall give prompt notice
thereof to the Operator, or the party entitled to be indemnified, as the
case may be, but the failure to give such notice shall not affect any
obligation under this Section 16.01. In case of action, including any
investigatory proceeding, shall be brought against, or commenced with
respect to, any indemnitee in respect of which the Operator is required to
indemnify such Indemnitee pursuant to the provisions of this Section 16.01,
the Operator shall have the right to assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnitee and
the payment of all expenses. In the event the Operator assumes the defense
of any such action, any Indemnitee shall have the right to employ separate
counsel in such action and participate therein, but the fees and expenses
of such counsel shall be at the expense of such Indemnitee, unless (i) the
employment of such counsel has been specifically authorized by the
Operator, or (ii) the named parties to such action (including any impleaded
parties) include both such Indemnitee and the Operator and representation
of such Indemnitee and the Operator by the same counsel would be
inappropriate under applicable standards of professional conduct due to
actual or potential conflicting interests between them or (iii) the counsel
employed by the Operator and satisfactory to such Indemnitee has advised
such Indemnitee, in writing, that such counsel's representation of such
Indemnitee would be likely to involve such counsel in representing
differing interests which could adversely affect either the judgment or
loyalty of such counsel to such Indemnitee, whether it be a conflicting,
inconsistent, diverse or other interest (in which case the Operator shall
not have the right to assume the defense of such action on behalf of such
Indemnitee; it being understood, however, that the Operator shall not, in
connection with any one such action, or separate but substantially similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys, and of any local
counsel retained by such firm, at any one time for each such Indemnitee,
which firm shall be designated in writing by such Indemnitee). The Operator
shall not be liable for any settlement of any such action effected without
its consent, but if settled with the consent of the Operator or if there by
a final judgment, beyond further review or appeal, in any such action, the
Operator agrees to indemnify and hold harmless any Indemnitee from and
against any loss or liability by reason of such settlement or judgment.
28
<PAGE>
(d) Payment. The Operator covenants and agrees to pay all amounts
required to be paid under this Section 16.01 on demand by the relevant
Indemnitee.
Section 16.02. Fees, Taxes and Other Charges.
(a) Payment by Operator.
(i) The Operator hereby agrees to pay and assume liability for,
and on written demand to indemnify, protect, defend, save and hold
harmless each Indemnitee from and against, any and all governmental or
quasi-governmental fees (including without limitation license and
registration fees), taxes (including without limitation gross
receipts, franchise, sales, use, property, real or person, tangible or
intangible), interest equalization and stamp taxes, assessments,
levies, imposts, duties, charges or withholdings of any nature
whatsoever, together with any and all penalties, fines or interest
thereon ("Fees, Taxes and Other Charges") imposed against any
Indemnitee, the Operator or the Facility or any portion thereof by any
Federal, state or local governmental or taxing authority in the United
States of America or by any foreign government or any subdivision or
taxing authority thereof, upon or with respect to the occupation and
operation of the Facility by the Operator and the production and sale
of the Product.
(ii) Notwithstanding anything to the contrary set forth above,
the provisions of this Section 16.02 shall not apply to:
(A) Fees, Taxes and Other Charges on, or measured in whole
or in part by (y) the net income or gross income of an Indemnitee
or (z) the franchise, capital, conduct of business, net worth or
tax preference of an Indemnitee;
(B) Fees, Taxes and Other Charges to the extent on, levied
on, or measured by, any fees or compensation received by an
Indemnitee for services rendered in connection with this
Agreement;
(C) Fees, Taxes and Other Charges which result from any
Indemnitee engaged in activities not related to this Agreement;
(D) So long as no Event of Default has occurred and is
continuing, Fees, Taxes or other Charges imposed as a result of
the voluntary sale, transfer, assignment or other disposition of
any interest in the Facility by an Indemnitee, if such
disposition shall not be pursuant to or in connection with
Article XIV hereof;
(E) Fees, Taxes or Other Charges imposed solely with respect
to any period after the Term unless an Event of Default has
occurred and is continuing and the Owner shall be exercising
remedies with respect thereto;
29
<PAGE>
(F) Fees, Taxes or Other Charges imposed as the result of
any transfer or disposition of any interest in the Facility by
any Indemnitee resulting from bankruptcy or other proceedings for
the relief of debtors (voluntary or involuntary) in which the
transferor is the debtor; or
(G) Fees, Taxes and Other Charges imposed solely as a result
of the willful misconduct or gross negligence of the Indemnitee.
(iii) In case any report or return is required to be made with
respect to any obligations of the Operator under this Section 16.02 or
arising out of this Section 16.02, the Operator shall, to the extent
permitted by law, either make such report or return in such manner
(including the making thereof in the Owner's name) as will show the
ownership of the Equipment in the Owner and send a copy of such report
or return to the Owner, or shall notify the Owner of such requirement
and make such report or return in such manner as shall be reasonably
satisfactory to the Owner. Each Indemnitee agrees that it will
promptly forward to the Operator any notice, bill or any advice
received by it concerning any such Fees, Taxes and Other Charges and
will, at Operator's expense, use its best efforts and take such lawful
and reasonable steps as may be proposed by the Operator in writing to
minimize any of the same for which the Operator is responsible under
this Section 16.02.
(iv) The amount which the Operator shall be required to pay to or
for the account of any Indemnitee with respect to any Fees, Taxes and
Other Charges which are subject to indemnification under this Section
16.02 shall be an amount sufficient to restore the Indemnitee to the
same position the Indemnitee would have been in had such Fees, Taxes
and Other Charges not been incurred or imposed. If the payment by the
Operator under this Section 16.02 of an amount equal to such Fees,
Taxes and Other Charges would be more or less than the amount which
would be required to make such Indemnitee whole as a result of any tax
effect to an Indemnitee in connection with such payment of such Fees,
Taxes and Other Charges, including, without limitation (A) the
inclusion of any payment to be made by the Operator under this Section
16.02 in the taxable income of any Indemnitee in one year and the
deduction of the Fees, Taxes and Other Charges with respect to which
such payment is made from the taxable income of such Indemnitee in a
different year, (B) the nondeductibility of such Fees, Taxes and Other
Charges from the taxable income of such Indemnitee or (C) the
anticipated realization by such Indemnitee in a different year of tax
benefits resulting from the transaction giving rise to such Fees,
Taxes and Other Charges, the amount of the indemnity to be paid by the
Operator shall be adjusted to an amount which (after taking into
account all tax effects on such Indemnitee, any loss of use of money
resulting from differences in timing between the inclusion of such
indemnity in the taxable income of such Indemnitee and the anticipated
realization by such Indemnitee of tax benefits resulting from the
transaction to which such indemnity is related and the present value
of any anticipated future tax benefits to be realized by such
Indemnitee as a result of deducting such Fees, Taxes and Other Charges
or as a result of the transaction
30
<PAGE>
giving rise thereto) will be sufficient to place the Indemnitee in the
same position such Indemnitee would have been in had such Fees, Taxes
and Other Charges not been imposed. All computations for purposes
hereof shall be based on tax rates in effect on the date payment
pursuant to this Section 16.02 is made. Computations involving the
loss of use of money or calculations of present value shall be based
on the Overdue Rate as adjusted for applicable income tax effects and
compounded monthly on the Basic Rent Payment Dates. Each Indemnitee
shall in good faith use reasonable efforts to seek and claim all tax
benefits available with respect to items referred to herein.
(b) Refunds. If any Indemnitee shall obtain a refund or credit of
all or any part of any Fees, Taxes and Other Charges, payment of or
indemnity for which shall have been made by the Operator pursuant to
this Section 16.02, such Indemnitee shall, unless a Default or an
Event of Default shall have occurred and be continuing, promptly pay
to the Operator (i) the amount of such refund or credit (together with
any interest paid to such Indemnitee with respect to such refund or
credit) plus (ii) an amount equal to all tax benefits realized by such
Indemnitee as the result of the payment of the amounts referred to in
clause (i) above and this clause (ii).
Section 16.03. Survival. The obligations of the Operator under this Article
XVI shall survive the termination of this Agreement and are expressly made for
the benefit of and shall be enforceable by any Indemnitee, separately or
together, without declaring this Agreement to be in default and notwithstanding
any assignment by the Owner of this Operating Agreement or any of its rights
hereunder. The extension of applicable statutes of limitations by an Indemnitee
or the Operator shall not affect the survival of the Operator's or any
Indemnitee's obligations, as the case may be, under this Article XVI. The
obligations of the Indemnitees shall survive the termination of this Operating
Agreement. All payments required to be paid pursuant to Article XVI shall be
made directly to, or as otherwise requested by, the Indemnitee entitled thereof,
upon written demand by such Indemnitee. All such written demands shall specify
the amounts payable and the facts upon which the right to indemnification is
based.
Section 16.04. Waiver. The Operator hereby waives all tort claims and
causes of action in tort it may have at any time against any Indemnitee in any
way relating to or arising from or alleged to relate to or arise from any
Operative Document, except with regard to circumstances constituting an
exception to the Operator's obligation to indemnify pursuant to Section 16.01(b)
hereof.
ARTICLE XVII
COVENANTS AND REPRESENTATIONS OF OPERATOR
Section 17.01. Operation of Facility. During the Term, the Operator shall
use its best efforts to operate the Facility (including the sowing, growing,
harvesting and packaging of the Product) at its fullest productive capacity as
would a prudent commercial greenhouse operator under the same or similar
circumstances and to market the Product with substantially the same effort and
on the same terms as used for product produced at other facilities operated by
the Operator or its Affiliates. The Operator hereby agrees to give prompt
written notice to the Owner if at any time the Operator becomes aware that the
Facility is not being operated at its
31
<PAGE>
fullest productive capacity. The Operator further agrees that it will not use
the Facility for any purpose other than the production of tomatoes or, with the
Owner's consent, any other agricultural product.
Section 17.02. Affiliated Transactions.
(a) In the event the Operator uses the Facility to pack, store, grade,
separate or distribute Product grown in greenhouses other than the Facility
owned, leased, operated or managed by the Operator, then the Operator
agrees to charge such greenhouses a fee per pound that is satisfactory to,
and approved in advanced by, the Owner plus an amount equal to at least the
Operator's cost for boxes and packing materials. Without the prior written
consent of the Owner, the Operator shall not use the Facility for any
product other than the Product.
(b) In the event the Operator purchases any equipment, supplies or
other items from any Affiliate, such purchases shall be on terms no less
favorable than those available for unaffiliated parties.
(c) The Operator shall provide to the Owner on a monthly basis in
detail satisfactory to the Owner a list of all Product handled by the
Facility for greenhouses pursuant to subsection 17.02(a) and all items
purchased from Affiliates and the purchase price thereof pursuant to
subsection 17.02(b).
Section 17.03. Waiver of Operating or Efficiency Standards. Operator
shall use its reasonable best efforts to assist Owner in obtaining and
maintaining all necessary permits and approvals for the operation of the
greenhouse and shall fully cooperate with Birchwood in the event Birchwood seeks
a waiver of the operating or efficiency standards for a "Qualifying Facility"
under the Federal Power Act or the Federal Energy Regulatory Commission's
regulations, as any of the foregoing may be now or hereafter amended.
Section 17.04. Representations and Warranties of Operator. Operator hereby
warrants and represents to Owner, Master Landlord, and each Fee Mortgagee that:
(a) Operator has not entered into any contract or agreement with other
Persons regarding the provision of thermal supply relating to the
Greenhouse Facility, and Operator will not, without the consent of Owner
and Master Landlord, enter into any successor or additional contracts for
thermal energy or steam supply to the Greenhouse Facility.
(b) There is not pending or threatened against Operator or any of its
Affiliates, and Operator knows of no facts or circumstances that might give
rise to, any civil, criminal or administrative action, suit, demand, claim,
hearing, notice or demand letter, notice of violation, environmental lien,
investigation, or proceeding relating in any way to Environmental
Requirements.
(c) Neither this Operating Agreement nor any other instrument,
document, agreement, financial statement, financial projections or
certificate furnished to Owner or Master Landlord by or on behalf of
Operator or any affiliate of Operator in connection
32
<PAGE>
herewith contains an untrue statement of a material fact or omits to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or omits to state
any fact which may in the future have a material adverse effect on the
financial condition or business prospects of Operator.
ARTICLE XVIII
MISCELLANEOUS
Section 18.01. Further Assurances. The Operator shall cause the Operative
Documents and any amendments and supplements to any of them (together with any
other instruments, financing statements, continuation statements, records or
papers necessary in connection therewith) to be recorded and/or filed and
rerecorded and/or refiled in each jurisdiction as and to the extent required by
law in order to, and shall take such other actions as may from time to time be
necessary to, establish, perfect and maintain the Owner's right, title and
interest in and to the Facility, not subject to any Liens except Permitted
Liens. The Operator will promptly and duly execute and deliver to the Owner such
documents and assurances and take such further action as the Owner may from time
to time reasonably request in order to carry out more effectively the intent and
purpose of the Operative Documents and to establish and protect the rights and
remedies created or intended to be created in favor of the Owner, to establish,
perfect and maintain the Owner's right, title and interest in and to the
Facility, including without limitation if requested by the Owner at the expense
of the Operator, the recording or filing of counterparts or appropriate
memoranda of the Operative Documents, or of such financing statements or other
documents with respect thereto as the Owner may from time to time reasonably
request, and the Owner agrees promptly to execute and deliver such of the
foregoing financing statements or other documents as may require execution by
the Owner.
Section 18.02. Quiet Enjoyment. The Owner covenants that it will not
interfere in the Operator's quiet enjoyment of the Facility hereunder during the
Term, so long as (a) the Operator is in compliance with each term and condition
hereof and (b) no Event of Default has occurred or is continuing.
Section 18.03. Notices. Unless otherwise specifically provided herein, all
notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person shall be in writing and any such notice shall become effective three (3)
Business Days after being deposited in the mails, certified or registered with
appropriate postage prepaid for first-class mail or, if delivered by hand or in
the form of a telex or telegram, when received, and shall be directed to the
Address of such Person.
Section 18.04. Severability. Any provision of this Agreement that shall be
prohibited or unenforceable in any jurisdiction, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the Operator hereby waives any provision of law that renders
any provision hereof prohibited or unenforceable in any respect.
33
<PAGE>
Section 18.05. Amendment. Neither this Agreement nor any of the terms
hereof may be terminated, amended, supplemented, waived or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or modification
shall be sought.
Section 18.06. Headings. The Table of Contents and headings of the various
Articles and Sections of this Agreement are for convenience of reference only
and shall not modify, define or limit any of the terms or provisions hereof.
Section 18.07. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
Section 18.08. Governing Law. This Agreement has been delivered in, and
shall in all respects be governed by, and construed in accordance with, the laws
of the Commonwealth of Virginia applicable to agreements made and to be
performed entirely within such State, including all matters of construction,
validity and performance.
Section 18.09. Binding Effect; Successors and Assigns; Survival. The terms
and provisions of this Agreement, and the respective rights and obligations
hereunder of the Owner and the Operator, shall be binding upon their respective
successors and assigns (including, in the case of the Owner, any Person to whom
the Owner may transfer all or any portions of the Facility), and inure to the
benefit of their respective permitted successors and assigns. The obligations of
the Operator under this Agreement shall survive the termination of this
Agreement.
Section 18.10. Divisible Operating Agreement. It is the intention of the
parties hereto that this Agreement shall constitute the lease of both personal
property and real property and, to such extent, shall be deemed divisible. It is
the intention and understanding of the parties hereto that the Equipment
constitutes personal property and all the Site and Plant constitute real
property for all purposes of this Operating Agreement and the other documents
referred to herein and for all purposes of bankruptcy laws of the United States;
provided, however, that nothing herein shall affect the rights and obligations
of Owner or Operator under Section 18.01 hereof, it being understood that no
filing, refiling, recording, re-recording, registration or re-registration in
any office for the filing, recording or registration of interests in real
property shall constitute or be deemed to constitute evidence or an admission by
Owner or Operator that the Equipment is real property.
Section 18.11. Effectiveness. This Agreement shall become effective upon
the date (the "Effective Date") the last of the following events occurs:
(a) the Closing Date;
(b) the receipt of any necessary consent of the Owner's lenders
under the Owner's financing documents; and
(c) upon Notice of Substantial Completion (as defined in the
General Contractor's Agreement) of the Plant.
34
<PAGE>
ARTICLE XIX
STEAM SALES AGREEMENT, FEE MORTGAGE
AND MASTER LEASE
Section 19.01. Subject to Fee Mortgage and Master Lease. This Operating
Agreement is subject and subordinate to the Fee Mortgage and Master Lease. As
used in this Section 19.01, "Applicable Documents" shall mean, collectively, the
Master Lease, Fee Mortgage and Steam Sales Agreement. Operator shall not do or
permit to be done anything which would constitute a default under all or any one
or more of the Applicable Documents or cause all or any one or more of the
Applicable Documents to be terminated or forfeited; in the event Operator causes
or permits what Owner reasonably deems to be a default under all or any one or
more of the Applicable Documents, in addition to all other remedies available to
Owner, Owner shall be entitled to enter the Site, without Operator's consent,
and cure said default whereupon all expenses incurred by Owner thereby shall be
additional rent due and payable upon demand. Operator shall duly comply with all
obligations and undertakings of Master Tenant under the Master Lease with regard
to those obligations and undertakings related to the Site, except for the
payment of "Annual Rent" due Master Landlord under the Master Lease.
Notwithstanding anything herein contained to the contrary, the services,
reimbursements, indemnities, repairs, restoration and maintenance to which
Operator is entitled hereunder shall in no event exceed those to which Owner is
entitled under the Master Lease and the Steam Sales Agreement and for all such
services, reimbursements, indemnities, repairs, restoration and maintenance
Operator will look to the appropriate party under the Master Lease and the Steam
Sales Agreement, whichever is applicable, and no default of Owner shall occur
under this Operating Agreement on account of any failure to provide such
services, reimbursements, indemnities, repairs, restoration and maintenance.
Owner shall cooperate with Operator in enforcing such obligations. Operator and
Owner shall execute and deliver to Master Landlord and Fee Mortgagee,
contemporaneously with this Operating Agreement, an agreement in recordable
form, wherein and whereby Operator acknowledges the right of Master Landlord and
Fee Mortgagee to continue or terminate this Operating Agreement, in Master
Landlord's sole discretion, upon termination of the Master Lease, and Operator
agrees to recognize and attorn to Master Landlord in the event that Master
Landlord elects to continue this Operating Agreement.
Section 19.02. Cooperation with Lenders. Operator shall reasonable
cooperate with Owner and Master Landlord and their respective financiers and
equity investors (including but not limited to Fee Mortgagee) from time to time
in connection with Master Landlord's financing, development and/or refinancing
of the Power Station and the Greenhouse Facility, including, without limitation,
the furnishings of such information, the giving of such certificates and the
furnishing of such opinions of counsel and other matters as Master Landlord,
Owner, and their respective financiers and equity investors may reasonably
request. Operator shall provide such reasonable corporate information and
approvals to the entity(s) providing the funding for the Power Station as may be
required to have the Power Station financed or refinanced on a "project finance"
or nonrecourse financing basis where the lending equity's principal source of
payment is the revenues from the Power Station and will execute amendments to
this Operating Agreement which do not materially affect the Operator's rights
and obligations hereunder.
35
<PAGE>
Section 19.03. Steam Sales Agreement.
(a) Operator agrees to accept and use the thermal energy produced by the
Power Station which is delivered to the Steam Interconnection Points. Owner will
make available to Operator such steam, if any, as is provided by Birchwood to
Owner under the Steam Sales Agreement. Operator shall accept and use steam
necessary to meet the requirements set forth in the QF Application, a copy of
which has been provided to Operator. Owner shall notify Birchwood to give
Operator notice prior to delivery of any steam to the Steam Interconnection
Points. Title to and full responsibility for all steam generated by the Power
Station will pass to Operator upon its delivery at the Steam Interconnection
Points to Owner, and neither Owner nor Birchwood shall have any responsibility
for such steam thereafter.
(b) Without limiting the generality of the foregoing, Operator
unconditionally agrees that Operator will accept delivery of and use sufficient
steam based on per hour basis form Owner for heating and cooling purposes to
allow Birchwood to maintain the status of the Power Station as a "Qualifying
Facility" within the meaning of the Public Utility Regulatory Policies Act of
1978, as now or hereafter amended, on an annual basis, as described in the QF
Application. If Operator fails to accept such minimum requirements, then, in
addition to Owner's rights hereunder and as may be allowed by law, Birchwood
shall have the right, without Operator's approval, to sell steam from the Power
Station to any other person or entity to the extent required to maintain such
status, and such failure shall be deemed an Event of Default by Operator
hereunder. Operator shall not use alternative means of providing such heating or
cooling unless, and then only to the extent that, either (i) steam is not
delivered as contemplated in Section 19.03(a) hereof, or (ii) Operator is
accepting and using all the steam provided by Birchwood. Operator shall not
resell any thermal energy which it receives pursuant to this Operating Agreement
without the express written consent of Master Landlord.
(c) Operator agrees to provide Master Landlord at the Power Station all
storm water runoff from the Greenhouse Facility for use with the Power Station,
without additional cost to Owner or Master Landlord, by means of the Storm Water
Piping in a manner to be specified by Master Landlord. Operator shall not use or
divert any storm water runoff without the consent of Master Landlord.
(d) Without limiting any right or remedy which Owner or Birchwood might
have at law or in equity as a result of such breach, Operator agrees that breach
by Operator of any covenant contained in Sections 19.03(a), (b) or (c) hereof
will cause irreparable injury to Birchwood and to Owner and that Birchwood and
Owner have no adequate remedy at law in respect of such breach and, as a
consequence, Operator agrees that the covenants contained in Sections 19.03(a),
(b) or (c) hereof shall be specifically enforceable by Birchwood and by Owner,
and by either of them, against Operator and Operator waives and agrees not to
assert any defense against an action for specific performance of such covenants
except for a defense that such covenants have not been breached.
36
<PAGE>
(e) Owner shall direct Birchwood to give Operator notice simultaneously
with notice to Owner under the Steam Sales Agreement of any scheduled outages or
scheduled shutdown periods significantly affecting the steam delivery components
of the Power Station. Notification of such shutdowns may be made by telephone
and confirmed by written notice.
(f) Operator shall give Owner and Birchwood two (2) weeks notice of any
scheduled activities that will cause Operator's steam requirements from the
Power Station to cease for a period of more than twenty-four (24 ) hours, but
such notice shall not reduce or affect Operator's obligations hereunder to
accept steam. Notification of such activities shall be made by telephone and
confirmed by written notice.
(g) Condensate shall be returned by Operator to the Steam Interconnection
Points, and shall be of a quality suitable for use with the Power Station.
Condensate return may be monitored by Birchwood.
(h) As used in this Section 19.03, "Force Majeure" means causes beyond the
reasonable control of and without the fault or negligence of the party claiming
Force Majeure, including without limitation sabotage, strikes, acts of God,
accidents, appropriation or diversion of steam, steam equipment or materials or
commodities by rule or order of any governmental authority having jurisdiction
thereof, and necessity of temporary interruption on account of system operating
conditions, including disruptions in the transportation, receipt or delivery of
necessary materials and equipment or in Virginia Power's ability to take
electrical output from the Power Station. Economic hardship shall not be an
event of Force Majeure.
(i) If Operator or Owner is rendered wholly or party unable to perform its
obligations under this Section 19.03 because of Force Majeure, that party shall
be executed from whatever performance is affected by the Force Majeure to the
extent so affected, and only to the extent such performance is excused pursuant
to the provisions of Section 22.2 of the Steam Sales Agreement.
(j) Neither Operator nor Owner nor Birchwood shall be liable or responsible
for any loss, damage, injury or expense (including consequential damages and
costs of replacement of steam) resulting from or arising out of any delay in the
performance of, or the inability to perform, any duty or obligation under or
pursuant to or identified in this Section 19.03 in an event of Force Majeure
applicable to it, in accordance with and subject to the limitation set forth in
Section 19.03(i). The party suffering an event of Force Majeure shall use its
best efforts to remedy as soon as possible the cause(s) preventing the
performance of this Operating Agreement.
Section 19.04. Storm Water Piping, Power Station Piping, Steam Equipment,
Steam Interconnection Facilities and Metering Devices. Master Landlord owns and,
pursuant to the Steam Sales Agreement, shall maintain Master Landlord's
Facilities. An authorized representative of Birchwood will read the Metering
Devices at the end of each calendar month. Owner will designate Operator as the
recipient of a notice from Birchwood of the amounts of steam delivered to the
Steam Interconnection Points during such calendar month. Owner owns
37
<PAGE>
the Steam Equipment together with all equipment for the distribution within the
Greenhouse Facility of the heating and cooling provided by the Steam Equipment.
Operator, at Operator's sole cost, shall operate and maintain (except for Master
Landlord's maintenance obligations with respect to the Steam Equipment under the
Steam Sales Agreement) the Steam Equipment, shall operate and maintain all
equipment required for the distribution within the Greenhouse Facility of the
heating and cooling provided by the Steam Equipment, and shall purchase and
install all equipment required for the distribution within the Greenhouse
Facility of the heating and cooling provided by the Steam Equipment after the
date hereof. The Improvements are designed to facilitate the collection in the
Storm Water Piping of storm water runoff from the Improvements for use by Master
Landlord at the Power Station. Owner and Master Landlord shall be entitled to
use all storm water runoff without compensation to Operator, and Operator shall
not use or divert any storm water runoff without the consent of Owner, which
consent may be granted or withheld in the sole discretion of Owner.
IN WITNESS WHEREOF, the undersigned have caused this Operating Agreement to
be duly executed and delivered and their corporate seals to be hereunto affixed
and attested by their respective officers thereunto duly authorized as of the
day and year first above written.
Attest: GREENHOST, INC.
____________________________________ By:________________________________
, Secretary Name: Steve Gillis
Title: CFO
[Corporate Seal]
Attest: VILLAGE FARMS OF VIRGINIA, INC.
____________________________________ By:________________________________
, Secretary Name: J. Kevin Cobb
Title: Vice president
[Corporate Seal]
Unconditional Guarantee of Payment and Performance
APD is an Affiliate of the Operator and is under common ownership with the
Operator. To induce the Owner to enter into this Operating Agreement and in
consideration for the benefits to be derived by APD from the transactions
contemplated hereby, APD unconditionally guarantees the payment when due and
timely performance of any and all obligations of Operator under this Operating
Agreement; provided, however, that APD's liability under this provision shall be
limited to a maximum aggregate amount of $2,000,000.00 during the Term. Upon
default by the Operator in making payment hereunder or any other failure to
perform its obligations hereunder, APD shall make such payment or cause such
obligation to be performed (subject to the limitation of liability set forth in
the preceding sentence), promptly upon the demand of the Owner. Notwithstanding
the foregoing, in the event the Operator, for whatever reason, ceases to occupy
and/or operate the Greenhouse Facility, Owner agrees to use its commercially
reasonable efforts, but shall not be obligated, to find a replacement
tenant/operator
38
<PAGE>
for the Greenhouse Facility. Any replacement rent received by the Owner shall
mitigate APD's liability under this Guarantee. APD agrees that the Owner and/or
the Operator may from time to time extend or renew provisions of this Operating
Agreement for any period and may grant any releases, compromises or indulgences
with respect thereto (including, but not limited to, the failure or refusal to
exercise one or more of the right or remedies provided herein), without notice
to or consent of APD, and without affecting the liability of APD hereunder.
AGRO POWER DEVELOPMENT, INC.
By:____________________________
Name: Michael A. DeGiglio
Title: President
39
<PAGE>
SCHEDULE 1.01(a)
TO OPERATING AGREEMENT
Description of Facility
PART 1: Description of Equipment
The Equipment described on Annex A hereto.
PART 2: Description of Plant
The greenhouse plant including fixtures containing approximately 38
acres and the headhouse building located on the Site described in Part 3.
PART 3: Description of Site
The property described on Annex B hereto.
40
<PAGE>
ANNEX A to
Schedule 1.01(a)
Description of Equipment
o All existing Greenhost office equipment, furniture, fixtures and computers
(including radios and phone systems).
o 3 Caterpillar GP 18 forklifts
o 13 Electric Golf Carts
o EZ Go PC956 Personnel Carrier
o Security System and hardware
o John Deere 5300 4WD 50 HP Tractor with blade, mower and tiller
o 7 Trash Dumpsters
o Motorized sweeper
o All existing Greenhouse safety and maintenance equipment (excluding scissor
lifts), tools and spare parts.
41
<PAGE>
Description of Site
TRACT ONE:
All those certain pieces, or parcels of land lying and being in Potomac
Magisterial District, King George County, Virginia, and being designated as
Parcel "C" on plat of survey entitled "ALTA/ACSM Survey of the Land of Adrian &
Ethel S. Gilbert and A Portion of the Land of Frank B. & Laura S. Taylor", made
by Springfield Engineering Corporation, P.C. , dated February 7, 1991, last
revised February 3, 1994, and being more particularly described as follows:
PARCEL "C":
BEGINNING at a point in the southerly line of State Route # 665 (30' wide) said
point also being the northeasterly line of the land now or formerly Jack and
Nancy Reed, and running thence with said line of State Route #665 the following
courses and distances: N.80(0) 50' 09" E. 376.78 feet to a point; with the arc
of a curve to the left whose radius is 503.62 feet, and whose chord bearing and
chord are N. 62(0) 26' 24" E. and 317.88 feet, respectively, a distance of
323.41 feet to a point; with the arc of another curve to the left whose radius
is 2,426.45 feet, and whose chord bearing and chord are N. 39(0) 42' 43" E. and
366.45 feet, respectively, a distance of 366.80 feet to a point; N. 35(0) 22'
52" E. 524.45 feet to a point; with the arc of a curve to the right whose radius
is 4,934.53 feet, and whose chord bearing and chord are N. 37(0) 45' 47" E. and
410.16 feet, respectively, a distance of 410.28 feet to a point; N. 40(0) 08'
42" E. 257.85 feet to a point; and with the arc of a curve to the left whose
radius is 1,043.00 feet, and whose chord bearing and chord are N. 38(0) 12' 23"
E. and 70.57 feet, respectively, a distance of 70.58 feet to a point in the
westerly line of the land of the Solite Corporation; thence leaving said line of
State Route #665 and running with the said line of the land of the Solite
Corporation, the following courses and distances; S. 11(0) 13' 48" W. 218.27
feet to a point; with the arc of a curve to the left whose radius is 408.06
feet, and whose chord bearing and chord are S. 09(0) 49' 34" and 293.20 feet,
respectively, a distance of 299.1 feet to a point; S. 30(0) 52' 52" E. 494.72
feet to a point; S. 30(0) 04' 38" E. 555.68 feet to a point; thence leaving the
easterly line of the land of Solite Corporation S. 68(0) 14' 39" W. 2124.04 feet
to a point; thence N. 21(0) 20' 39" W. 733.81 feet to a point marking the point
and place of beginning, containing 42.31913 acres.
BEING a portion of the same property conveyed to Birchwood Power Partners, L.P.,
by deed from Curtis A. Gilbert and Ethel S. Gilbert, husband and wife, dated
February 11, 1994, recorded February 11, 1994, in the Clerk's Office, Circuit
Court, King George County, Virginia, in Deed Book 259, page 627.
TRACT TWO:
ALL that tract or parcel of land lying and being in the Potomac magisterial
District, King George County, Virginia, and being more particularly described as
follows:
TO FIND THE POINT OF BEGINNING, COMMENCE at the point of intersection of the
centerline of State Route No. 3 with the centerline of State Route No. 665;
running thence along the centerline of State Route No. 665 a distance of 2,027
feet, more or less, to a point; continuing thence along the centerline of State
Route No. 665 a distance of 1,030,.68 feet to an iron pin set;
42
<PAGE>
thence leaving the centerline of State Route No. 665; thence leaving the
centerline of State Route NO. 665 and running South 9 degrees 09 minutes 51
seconds East a distance of 15.00 feet to a point on the southerly line of State
Route No. 665, the northeasterly corner of the land now or formerly Jack and
Nancy Reed; thence leaving the southerly line of State Route No. 665 with the
easterly line of Jack and Nancy Reed South 21 degrees 20 minutes 39 second East
a distance of 733.81 feet to a point, which point is the northwesterly corner of
the land of Frank B. and Laura S. Taylor which marked the POINT OF BEGINNING;
FROM SAID POINT OF BEGINNING AS THUS ESTABLISHED, running thence with the
southerly line of land now or formerly Curtis A. and Ethel S. Gilbert North 68
degrees 14 minutes 39 seconds East, 2,124.04 feet to a point in the westerly
line of the land of Frank B. Taylor (Deed Book 138, page 516); thence with the
said line of Taylor and continued with the westerly line of the land now or
formerly C. T. Graves South 28 degrees 45 minutes 02 seconds East, 1,637.25 feet
to a point; thence leaving the said line of C. T. Graves and running through the
land of Frank B. and Laura S. Taylor South 72 degrees 31 minutes 12 seconds West
2,340,.35 feet to a point in the aforesaid easterly line of Jack and Nancy Reed;
thence with the said line of Jack and Nancy Reed North 21 degrees 20 minutes 39
seconds West 1,450.61 feet to the point of beginning, containing 78.50000 acres,
being a portion of the land of Frank B. and Laura S. Taylor (Deed Book 81, page
413) and being more particularly shown on a plat of survey prepared by
Springfield Engineering Corporation, P.C., engineers, planners, surveyors
landscape architects, dated August 23, 1993, and revised September 10, 1993, and
entitled "Plat of a Portion of the Land of Frank B. & Laura S. Taylor, Deed Book
81, page 413, Potomac Magisterial District, King George County, Virginia.
BEING the same property conveyed to Birchwood Power Partners, L.P., a Delaware
Limited partnership, by deed from Frank B. Taylor and Laura Smart Taylor, dated
March 18, 1994, recorded March 18, 1994, in the Clerk's Office, Circuit Court,
King George County, Virginia, in Deed Book 261, page 161.
43
<PAGE>
Schedule A-1
Access and Utility Easement Parcel
A 100 foot, perpetual easement for vehicular access to and from Tract One and
Tract Two for the installation, repair, replacement, maintenance and operation
of such gas, water, telephone, power, steam, and other utility lines and related
equipment as Birchwood Power Partners, L.P. or Dominion Growers of
Fredericksburg, Inc., deems necessary or appropriate to serve their respective
properties and any improvements now or hereafter located thereon (the "Access
and Utility Easement") at the location designated as the "100' Ingress-Egress
and Utility Easement" on that plat of survey entitled "Plat Showing A Portion of
the Property of Frank B. Taylor & Laura S. Taylor, Potomac Magisterial District,
King George County, Virginia, dated March 10, 1994, revised April 29, 1994, and
prepared by Andy L. Collis and being more particularly described in that certain
Access and Utility Easement among Frank S. Taylor (sic) and Laura S. Taylor,
Dominion Growers of Fredericksburg, Inc. and Birchwood Power Partners, L.P.,
dated as of April 21, 1994, recorded May 4, 1994, in Deed Book 262, page 765.
44
<PAGE>
Schedule A-2
Stormwater and Surface Water Runoff Easement Parcel
A PERPETUAL EASEMENT OVER, UNDER, UPON AND ACROSS the below described property
for the purposes of the discharge of stormwater and other surface water runoff
as more particularly set out in that certain easement agreement dated as of
April 22, 1994 between Dominion Growers of Fredericksburg, Inc. and Birchwood
Power Partners, L.P. recorded May 4, 1994, in the Clerk's Office of the Circuit
Court of King George, Virginia, in Deed Book 262, page 781, as amended and
restated by that certain amended and restated easement agreement dated as of May
18, 1994, between Dominion Growers of Fredericksburg, Inc. and Birchwood Power
Partners, L.P., recorded May 25, 1994, in the Clerk's Office of the circuit
Court of King George, Virginia, in Deed Book 263, page 491:
ALL that tract or parcel of land lying and being in the Potomac Magisterial
District, King George County, Virginia, containing 21.6610 acres, more or less,
and further described on a plat of survey made by Andy L. Collis, Land Surveyor,
dated March 10, 1994, and recorded among the land records of King George County,
Virginia, in Deed Book 261, at page 169.
45
<PAGE>
Schedule A
Land Description
All that tract or parcel of land lying and being in the Potomac
Magisterial District, King George County, Virginia, containing 21.6610 acres,
more or less, and further described on a plat of survey made by Andy L. Collis,
Land Surveyor, dated March 10, 1994, and recorded among the land records of King
George County, Virginia in Deed Book 261, page 169.
46
<PAGE>
Schedule A
Land Description
All that tract or parcel of land located in the Potomac Magisterial
District, King George County, Virginia, containing an area of 13.7155 acres,
more or less, and as shown on a plat of survey by Andy L. Collis, Land Surveyor,
dated January 3, 1995, and recorded in Plat Book 15, Page 268.
47
<PAGE>
Schedule A
All that tract of parcel of land, lying and being in the Potomac
Magisterial District, King George County, Virginia, containing 1.343 acres, as
shown on a plat of survey made by Andy L. Collis, Surveyor, dated October 31,
1994, and recorded in the Potomac Magisterial District in Deed Book 271, Page
879.
48
<PAGE>
Schedule A-3
At Greenhost request, Village Farms of Virginia, Inc. agrees to release a
portion of undeveloped property located north of the Greenhouse and west of the
point where the steam line crosses state route 665.
Greenhost will be responsible for the cost associated with the release of this
property including surveys.
Greenhost will restrict the use of this property from vegetable growing.
49
<PAGE>
SCHEDULE 1.01(b)
TO OPERATING AGREEMENT
Calculation of Internal Rate of Return
Internal Rate of Return Calculation
The calculation of the Internal Rate of Return in connection with determining
the Owner's Supplemental Rent will be based upon the cash outflows (Capital
Improvements Costs and Base Rent Discount) and cash inflows (Supplemental Rent)
of the Owner. The Internal Rate of Return shall be computed utilizing Microsoft
Excel software version 5.0. The Internal Rate of Return shall be computed
utilizing the @XIRR function in Excel. For purposes of calculating the Internal
Rate of Return, the cash inflows and cash outflows to the Owner shall consist
solely of the following:
Capital Improvement Costs
All Capital Improvement Costs made by the Owner will be reflected as a cash
outflow as of the date such costs were paid under the General Contractor's
Agreement.
In addition, for purposes of calculating the Internal Rate of Return, the Owner
will be credited with a cash outflow of $100,000 to reflect the base rent
discount on each March 31, June 30, September 30 and December 31 through the
term of the lease commencing March 31, 1998.
Supplemental Rent
The amount to be reflected as a cash inflow to the Owner for purposes of
calculating the Internal Rate of Return will be equal to the Supplemental Rent
received by the Owner as of the date such payment was received by the Owner
subject to an adjustment to reduce such cash received by 38.9%. As an example,
if the Owner receives $1 million on January 1, 1999, such amount will be
reflected as a cash inflow of $611,000 as of January 1, 1999 for purposes of
calculating the Internal Rate of Return.
50
<PAGE>
SCHEDULE 3.01
TO OPERATING AGREEMENT
SCHEDULE OF BASIC RENT
March 31, 1998 * March 31, 2003 *
June 30, 1998 * June 30, 2003 *
September 30, 1998 * September 30, 2003 *
December 31, 1998 * December 31, 2003 *
March 31, 1999 * March 31, 2004 *
June 30, 1999 * June 30, 2004 *
September 30, 1999 * September 30, 2004 *
December 31, 1999 * December 31, 2004 *
March 31, 2000 * March 31, 2005 *
June 30, 2000 * June 30, 2005 *
September 30, 2000 * September 30, 2005 *
December 31, 2000 * December 31, 2005 *
March 31, 2001 * March 31, 2006 *
June 30, 2001 * June 30, 2006 *
September 30, 2001 * September 30, 2006 *
December 31, 2001 * December 31, 2006 *
March 31, 2002 * March 31, 2007 *
June 30, 2002 * June 30, 2007 *
September 30, 2002 * September 30, 2007 *
December 31, 2002 * December 31, 2007 *
*Information omitted and subject to request for confidential treatment
51
<PAGE>
SCHEDULE 3.02
TO OPERATING AGREEMENT
SCHEDULE OF SUPPLEMENTAL RENT
Supplemental Rent shall be payable to the Owner on each Supplemental Basic Rent
Payment Date in an amount equal to the percentage (Supplemental Rent Percentage)
of cash flow for the calendar quarter preceding the Supplemental Basic Rent
Payment Date. The Supplemental Rent Percentage is defined as follows:
o Supplemental Rent Percentage shall equal *% as long as the Owner's Internal
Rate of Return shall be less than or equal to *%.
o Subsequent to the date that the Owner's Internal Rate of Return exceeds *%,
the Supplemental Rent Percentage shall equal *% through the end of the Term
of the Operating Agreement.
*Information omitted and subject to request for confidential treatment
52
Exhibit 10.64
LEASE AGREEMENT
Dated as of September 21, 1993
between
COGENTRIX OF PENNSYLVANIA, INC.,
as Lessor,
and
KEYSTONE VILLAGE FARMS, INC.
as Lessee
Greenhouse Facility
Located in Ringgold, Pennsylvania
<PAGE>
TABLE OF CONTENTS
(Lease Agreement)
PARTIES
ARTICLE I DEFINITIONS; CONSTRUCTION OF REFERENCES..................1
Section 1.01. Definitions..............................................1
Section 1.02. Construction of References...............................7
ARTICLE II LEASE OF FACILITY........................................7
ARTICLE III RENT AND SERVICES........................................7
Section 3.01. Basic Rent...............................................7
Section 3.02. Supplemental Rent........................................7
Section 3.03. Method of Payment........................................8
Section 3.04. Late Payment.............................................8
Section 3.05. Net Lease; No Setoff; Etc................................8
Section 3.06. Utilities................................................8
Section 3.07. Services Provided by Lessor..............................9
ARTICLE IV DISCLAIMER OF WARRANTIES.................................9
ARTICLE V RESTRICTION ON LIENS.....................................9
ARTICLE VI OPERATION AND MAINTENANCE; ALTERATIONS,
MODIFICATIONS AND ADDITIONS..............................9
Section 6.01. Operation and Maintenance................................9
Section 6.02. Repair and Replacement...................................10
Section 6.03. Alterations Required by Law..............................10
Section 6.04. Plans and Specifications; Operating Manual...............10
Section 6.05. Operational Alterations..................................11
Section 6.06. Title to Parts...........................................11
Section 6.07. Lessor's Option to Pay Costs of Alterations..............12
Section 6.08. Reports of Alterations...................................12
Section 6.09. Removal of Parts.........................................12
Section 6.10. Parts Free and Clear of Liens............................12
Section 6.11. Permitted Contests.......................................12
Section 6.12. Operating Logs...........................................13
Section 6.13. Return of Facility.......................................13
ARTICLE VII IDENTIFICATION...........................................13
i
<PAGE>
ARTICLE VIII INSURANCE................................................13
Section 8.01. Coverage.................................................13
Section 8.02. Policy Provisions........................................15
Section 8.03. Evidence of Insurance....................................16
Section 8.04. No Duty of Lessor to Verify..............................17
ARTICLE IX LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE................17
Section 9.01. Occurrence of Event of Loss..............................17
Section 9.02. Repair of Loss or Destruction............................17
Section 9.03. Other Dispositions.......................................18
ARTICLE X INTEREST CONVEYED TO LESSEE..............................18
ARTICLE XI ASSIGNMENT AND SUBLEASE; LOCATION........................18
Section 11.01. Assignment and Sublease..................................18
Section 11.02. Location.................................................18
ARTICLE XII INSPECTION AND REPORTS...................................19
Section 12.01. Condition and Operation..................................19
Section 12.02. Annual Insurance Report..................................19
Section 12.03. Financial Reports........................................19
Section 12.04. Budget Approval..........................................20
Section 12.05. Liability................................................21
Section 12.06. Liens....................................................21
ARTICLE XIII EVENTS OF DEFAULT........................................21
ARTICLE XIV ENFORCEMENT..............................................22
Section 14.01. Remedies.................................................22
Section 14.02. Survival of Lessee's Obligations.........................23
Section 14.03. Remedies Cumulative......................................23
ARTICLE XV RIGHT TO PERFORM FOR LESSEE..............................24
ARTICLE XVI INDEMNITIES..............................................24
Section 16.01. General Indemnity........................................24
Section 16.02. Fees, Taxes and Other Charges............................25
Section 16.03. Survival.................................................28
Section 16.04. Waiver...................................................28
ii
<PAGE>
ARTICLE XVII COVENANTS OF LESSEE......................................29
Section 17.01. Operation of Facility....................................29
Section 17.02. Affiliated Transactions..................................29
ARTICLE XVIII MISCELLANEOUS............................................29
Section 18.01. Further Assurances.......................................29
Section 18.02. Quiet Enjoyment..........................................30
Section 18.03. Facility as Security for Lessor's Obligations............30
Section 18.04. Notices..................................................30
Section 18.05. Severability.............................................30
Section 18.06. Amendment................................................30
Section 18.07. Headings.................................................31
Section 18.08. Counterparts.............................................31
Section 18.09. Governing Law............................................31
Section 18.10. Performance of Obligations to Lender.....................31
Section 18.11. Binding Effect; Successors and Assigns; Survival.........31
Section 18.12. Divisible Lease..........................................31
Section 18.13. Effectiveness............................................31
Section 18.14. Security Agreement.......................................32
SCHEDULES
SCHEDULE 1.01(a) Description of Facility
SCHEDULE 3.01 Basic Rent
SCHEDULE 3.02 Supplemental Rent
EXHIBITS
EXHIBIT 1.01 Lender Consent and Agreement
iii
<PAGE>
LEASE AGREEMENT dated as of September 21, 1993 between COGENTRIX OF
PENNSYLVANIA, INC., a Delaware corporation (the "Lessor"), and KEYSTONE VILLAGE
FARMS, INC., a Pennsylvania corporation (the "Lessee").
W I T N E S S E T H:
WHEREAS, the Lessor owns a greenhouse facility in Ringgold, Pennsylvania;
and
WHEREAS, the Lessor desires to lease the Facility (as defined below) to the
Lessee and the Lessee desires to lease the Facility from the Lessor, all on the
terms and conditions herein contained.
In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, the parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION OF REFERENCES
Section 1.01. Definitions. As used in this Agreement, the following terms
shall have the following meanings (such definitions to be equally applicable to
both the singular and plural forms of the terms defined):
"Address" shall mean:
(a) with respect to the Lessor, 9405 Arrowpoint Boulevard, Charlotte,
North Carolina 28273, ATTN: President; and
(b) with respect to the Lessee, 12 Elkins Road, East Brunswick, New
Jersey 08816, ATTN: Michael A. Degiglio; and
(c) with respect to the Lender, Banque Paribas, New York Branch, as
Agent, 787 Seventh Avenue, 32nd Floor, New York, New York 10019, ATTN:
Glenn Tobias, Specialized Industries Group.
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlling, controlled by or under common control with, such Person.
"Agent" shall mean Banque Paribas, New York Branch as agent for the Lender.
"Alterations" shall mean, with respect to the Facility, alterations,
improvements, modifications and additions to the Facility (but excluding any
replacement of Parts incorporated in the Facility).
"APD" shall mean Agro Power Development, Inc., a New York corporation.
"Basic Rent" shall mean the rent payable pursuant to Section 3.01. of this
Agreement.
<PAGE>
"Board of Directors" with respect to the Lessee or the Lessor, means either
the Board of Directors or any duly authorized committee of that Board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Lessee or Lessor, as the case may be, to have
been duly adopted by its Board of Directors and to be in full force and effect
on the date of such certification.
"Bonus" with respect to the Lessee's grower and sales representatives,
shall mean bonuses paid to such persons pursuant to bonus plans the specific
terms of which are approved by the Lessor in writing prior to the commencement
of the Lease Year in which such bonuses are paid.
"Budget" shall have the meaning specified in Section 12.04.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banks are authorized to be closed in New York, New York or
Charlotte, North Carolina.
"Cash Flow" shall mean for any Lease Year (a) the sum of (i) gross revenues
from the sale of Product, plus (ii) all amounts received by the Lessee pursuant
to the Line of Credit Facility Agreement, plus, (iii) insurance proceeds
received by the Lessor from policies of the type described in subsection
8.01(a)(iii) or any other insurance proceeds paid with respect to the loss or
damage to Product, plus, (iv) revenues received pursuant to Article XVII plus
(v) all other operating revenues of the Facility, minus (b) all Greenhouse
Expenses paid in the ordinary course of business (but excluding any Greenhouse
Expenses that are prepaid by the Lessee).
"Closing Date" shall mean the date this Agreement is executed and delivered
by the parties.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
comparable successor law.
"Default" means any event or condition which, with notice or lapse of time
or both, would become an Event of Default.
"Equipment" shall mean the equipment and other property described in Part 1
of Schedule 1.01(a) of this Agreement, together with any Parts which may from
time to time be incorporated in such equipment or other property and title to
which shall have vested in the Lessor.
"Effective Date" shall have the meaning specified in Section 18.13.
"Escrow Agent" shall have the meaning specified in Section 3.02. of this
Agreement.
"Event of Default" shall have the meaning specified in Article XIII of this
Agreement.
"Event of Loss" shall mean (a) the actual or constructive total loss of all
or substantially all the Facility, or the condemnation, confiscation or seizure
of, or requisition of title to, or requisition by any Governmental Authority of
the use of, all or substantially all the Facility, or
2
<PAGE>
(b) the loss, destruction or damage of or condemnation, confiscation or seizure
of, or requisition by any Governmental Authority of the use of, such portion of
the Facility as to render the Facility unable to operate at substantially the
same level of operation as prior to the occurrence of such event, unless (x) it
is feasible to restore, rebuild or replace the affected portion of the Facility
and (y) in the opinion of the Lender and the Lessor, sufficient funds are or
will be available to the Lessor (i) to restore, rebuild or replace the affected
portion of the Facility so that the Facility will be able to operate at
substantially the same level of operation as prior to the occurrence of such
event within twelve (12) months after the occurrence of such event and (ii) to
pay all Rent until such restoration, rebuilding or replacement is completed.
"Expense" shall have the meaning specified in Section 16.01. of the Lease.
"Facility" shall mean the Lessor's rights in and to the Plant, the Site and
the Equipment.
"Fees, Taxes and Other Charges" shall have the meaning specified in Section
16.02. of the Lease.
"Gas Supply Contract" shall mean the Gas Supply Contract dated June 15,
1989 among the Lessor, J.C. Enterprises and Cogentrix, Inc., as the same may be
amended, supplemented or otherwise modified from time to time.
"Greenhouse Expenses" shall mean the sum (without duplication) of (a)
direct labor costs paid (excluding the salary and benefits paid to the Lessee's
grower and sales representatives but including a Bonus paid with respect
thereto), (b) seed expense paid, (c) packaging supplies expense paid, (d)
fertilizer and chemical expenses paid, (e) biological control, including bees,
expense paid, (f) freight expense paid, (g) growing medium and supplies expense
paid, (h) carbon dioxide expense paid, (i) utility (including hot water,
electricity and natural gas) expense paid, (j) Management Fee paid, (k) Basic
Rent paid, (1) insurance premiums and property taxes paid, (m) principal and
interest paid with respect to the Line of Credit Facility Agreement and (n) all
other cash expenses paid relating to the operation of the Facility, to the
extent contained in the Budget; provided, however, that there shall be excluded
from Greenhouse Expenses (a) all expenses to be paid from the Management Fee,
(b) all payments with respect to federal, state and local income taxes, (c)
payment of principal, interest and fees with respect all indebtedness of the
Lessee for non capital expenditures other than the Line of Credit Facility
Agreement and (d) payment of principal, interest, lease payments and fees with
respect to the acquisition by the Lessee of capital equipment, except to the
extent consented to in advance by the Lessor in writing.
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Incorporated in" shall have the meaning specified in Section 6.02. of the
Lease.
"Indemnitee" shall mean the Lessor, the Lender and the respective
successors, assigns, officers, directors, employees and agents of any thereof.
"Inspecting Parties" shall have the meaning specified in Section 12.01. of
the Lease.
3
<PAGE>
"Insurance and Condemnation Proceeds Accounts" shall mean the account
referred to as the Insurance and Condemnation Proceeds Account established by
the Security Agent pursuant to the terms of the Security Deposit Agreement.
"Lease Security Agreement" shall have the meaning specified in Section
18.14. of the Lease.
"Lease Term" shall mean (a) the period commencing on December 1, 1993 and
ending on December 31, 2003, or (b) such shorter period as may result from
earlier termination of the Lease as provided herein.
"Lease Termination Date" shall mean the last day of the Lease Term.
"Lease Year" shall mean each period commencing on January 1 and ending on
December 31 during the term of this Lease; provided, however, that the first
Lease Year shall commence on December 1, 1993 and end on December 31, 1994.
"Lender" shall mean Banque Paribas, New York Branch, and each other banking
institution that is a party to the Loan Agreement, and their respective
successors and assigns.
"Lender Consent and Agreement" shall mean the Lender Consent and Agreement
in the form of Exhibit 1.01. hereto.
"Lessee" shall mean Keystone Village Farms, Inc., a Pennsylvania
corporation, and its permitted successors and permitted assigns.
"Lessor" shall mean Cogentrix of Pennsylvania, Inc., a Delaware
corporation, and its successors and permitted assigns.
"Lien" shall mean any lien, mortgage, encumbrance, pledge, charge, lease,
easement, servitude, right of others or security interest of any kind, including
any thereof arising under any conditional sale or other title retention
agreement.
"Line of Credit Facility Agreement" shall mean the Line of Credit Facility
Agreement dated as of December 1, 1993 between Cogentrix, Inc. and the Lessee,
as the same may be amended, modified or supplemented from time to time in
accordance with the provisions thereof.
"Loan Agreement" shall mean the Construction and Term Loan Agreement dated
as of June 15, 1989 between the Lessor and the Lender, as the same may be
amended, modified or supplemented from time to time in accordance with the
provisions thereof.
"Management Agreement" shall mean the Management Agreement to be entered
into between the Lessee and APD pursuant to which APD will provide certain
management services to the Lessee, which Management Agreement shall be approved
in advance by the Lessor in writing.
"Management Fee" shall mean the management fee paid to APD pursuant to the
Management Agreement for (a) all internal accounting services of the Lessee, (b)
salary and
4
<PAGE>
other benefits paid to the Lessee's grower and sales representatives, (c) all
internal management services performed by principals of the Lessee or APD and
(d) all direct out-of-pocket expenses (including travel and living expenses)
paid in connection with the performance of the services described in clauses
(a), (b) and (c). The Management Fee shall be two hundred fifty thousand dollars
($250,000.00) per year (except that for the first Lease Year, the Management Fee
shall be two hundred seventy-one thousand dollars ($271,000.00)) and shall
increase on an annual basis as of May 1 of each Lease Year following the first
Lease Year at a rate equal to the percentage increase in the gross national
product implicit price deflator, but in no event shall the increase in the
Management Fee exceed five percent (5%) per Lease Year. The Management Agreement
shall provide that the Management Fee be paid in twelve (12) equal monthly
installments in arrears during each Lease Year (except for the first Lease Year,
in which the Management Fee shall be paid in thirteen (13) equal monthly
installments in arrears.)
"Mortgage" shall mean the mortgage by the Lessor to the Lender dated as of
April 15, 1989, as amended from time to time.
"Nonseverable" shall describe (i) with respect to any Alteration, an
Alteration which is a "nonseverable improvement" within the meaning of Revenue
Procedure 79-48 and (ii) with respect to any part not constituting an Alteration
or part of an Alteration, a part which cannot be readily removed from the
equipment without causing material damage to the Facility.
"Notes" shall mean the term loan notes issued by the Lessor to the Lender
pursuant to the Loan Agreement.
"Officer's Certificate" means a certificate signed by a Responsible Officer
of the party required to give such certificate.
"Operating Manual" shall mean such operating manuals as are ordinarily
maintained by the Lessee with respect to the Facility and any such manuals
provided by any manufacturer of any component of the Facility.
"Operative Documents" shall mean this Lease Agreement, the Line of Credit
Facility Agreement and the Consent and Agreement.
"Overdue Rate" shall mean an interest rate equal to ten percent (10%) per
annum.
"Parts" shall have the meaning specified in Section 6.02.
"Permitted Liens" shall mean (a) the respective rights and interests of the
Lessor, the Lessee and the Lender as provided in the Operative Documents, (b)
liens for taxes either not yet due or being contested in good faith and by
appropriate proceedings, so long as such proceedings shall not involve any
danger of the sale, forfeiture or loss of any part of the Facility, title
thereto or any interest therein and shall not interfere with the use or
disposition of the Facility or the payment of Rent, (c) materialmen's,
mechanics', workers, repairmen's, employees' or other similar Liens arising in
the ordinary course of business for amounts either not yet due or being
contested in good faith and by appropriate proceedings so long as such
proceedings shall not involve any danger of the sale, forfeiture or loss of any
part of the Facility, title thereto or any interest therein and shall not
interfere with the use or disposition of the Facility or the payment of
5
<PAGE>
Rent, (d) Liens arising out of judgments or awards with respect to which at the
time an appeal or proceeding for review is being prosecuted in good faith and
either which have been bonded or for the payment of which adequate reserves
shall have been provided and (e) Liens created pursuant to the Security
Agreement.
"Person" shall mean individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Plans and Specifications" shall mean the plans and specifications for the
Plant and the Equipment identified as such, as the same may be revised from time
to time in accordance with the terms of this Agreement.
"Plant" shall mean those buildings and other properties specifically
described in Part 2 of Schedule 1.01.(a) to the Lease, together at all times
with any and all Parts which may from time to time be incorporated in the Plant.
"Product" shall mean tomatoes or any other agricultural product approved in
writing by the Lessor and the Lender.
"Rent" shall mean Basic Rent and Supplemental Rent, collectively.
"Rent Payment Date" shall mean the first day of each April, May, June,
July, August, September, October, November and December during the term of this
Agreement and the Lease Termination Date.
"Responsible Officer" shall mean the Chairman or Vice Chairman of the Board
of Directors, the Chairman or Vice Chairman of the Executive Committee of the
Board of Directors, the President, any Vice President (whether or not designated
by a number or a word or words added before or after the title "Vice President",
including any Assistant Vice President), the Secretary, any Assistant Secretary,
the Treasurer, any Assistant Treasurer or any other officer of any of them
customarily performing functions similar to those performed by any of the above
designated officers.
"Revenue Account" shall mean the account referred to as the Revenue Account
and established by the Security Agent pursuant to the terms of the Security
Deposit Agreement.
"Security Agent" shall mean First Union National Bank of North Carolina or
any bank acting as successor security agent under the Security Deposit
Agreement.
"Security Agreement" shall mean the Security Agreement to be dated as of
December 1, 1993 between Cogentrix, Inc. and the Lessee, as the same may be
amended, supplemented or otherwise modified from time to time.
"Security Deposit Agreement" shall mean the Security Deposit Agreement
dated as of June 15, 1989 by and among the Lessor, the Agent and the Security
Agent, as the same may be amended, supplemented or otherwise modified from time
to time.
6
<PAGE>
"Site" shall mean the land described in Part 3 of Schedule 1.01.(a) of the
Lease.
"Supplemental Rent" shall mean the rent payable pursuant to Section 3.02.
of this Agreement.
"Supplemental Rent Payment Date" shall mean for any Lease Year the March 31
following the end of such Lease Year.
Section 1.02. Construction of References. All references in this instrument
to designated sections and other subdivisions are to designated sections and
other subdivisions of this instrument, and the words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Lease as a whole and
not to any particular section or other subdivision.
Except as otherwise indicated, all the agreements or instruments herein
defined shall mean such agreements or instruments as the same may from time to
time be supplemented or amended or the terms thereof waived or modified to the
extent permitted by, and in accordance with, the terms thereof.
ARTICLE II
LEASE OF FACILITY
As of December 1, 1993, subject to all the terms and conditions of this
Agreement, the Lessor shall lease, and hereby as of the Effective Date does
lease, the Facility to the Lessee, and the Lessee shall lease, and hereby as of
the Effective Date does lease, the Facility from the Lessor for the Lease Term.
ARTICLE III
RENT AND SERVICES
Section 3.01. Basic Rent. Subject to adjustment as provided below, during
the Lease Term, the Lessee shall pay to the Lessor in arrears on each Rent
Payment Date Basic Rent for the Facility in an amount equal to the amount set
forth on Schedule 3.01. for such Rent Payment Date (in the case of the last Rent
Payment Date if such date is other than a Rent Payment Date, such Basic Rent
shall be prorated based on the number of days during which the Lessee leased the
Facility). Basic Rent shall be increased in accordance with any agreement
reached in connection with the payment by the Lessor of the costs of any
Alterations in accordance with Section 6.07. hereof.
Section 3.02. Supplemental Rent. In addition to Basic Rent, the Lessee
shall pay to the Lessor Supplemental Rent in an amount equal to the percentage
of Cash Flow set forth on Schedule 3.02. during the Lease Term. Supplemental
Rent shall be payable for each Lease Year on the Supplemental Rent Payment Date.
On or before the last day of each month of each Lease Year (commencing in
February, 1994), the Lessee shall pay into an escrow account established with a
bank satisfactory to the Lessor (the "Escrow Agent") an amount equal to (a) the
cumulative year-to-date Cash Flow for the Lease Year through the end of the
preceding month minus (b) amounts previously paid into the escrow account, all
as reflected on the certificate provided pursuant to Section 12.03(a)(ii). On
the Supplemental Rent Payment Date following the end of each Lease Year, the
Escrow Agent shall pay to the Lessor an amount equal to the
7
<PAGE>
Supplemental Rent for the preceding Lease Year required to be paid pursuant to
this Section 3.02, as reflected on the certificate required to be delivered
pursuant to Section 12.03(b), and shall pay the remaining amounts held in such
account with respect to the prior Lease Year to the Lessee.
Section 3.03. Method of Payment. Basic Rent and Supplemental Rent shall be
paid into the Revenue Account as provided in this Section 3.03 hereof; provided,
however, that after all indebtedness of the Lessor arising under the Loan
Agreement has been paid in full, such amounts shall be payable to the Lessor in
accordance with instructions to be provided by the Lessor. Each payment of Rent
shall be made by the Lessee in immediately available funds prior to 11:00 A.M.,
local time, at the place of payment on the scheduled date when such payment
shall be due, unless such scheduled date shall not be a Business Day, in which
case such payment shall be made on the preceding Business Day, with the same
force and effect as though made on such scheduled date.
Section 3.04. Late Payment. If any Rent or any other amount required to be
paid hereunder shall not be paid when due, the Lessee shall pay to the Lessor
interest (to the extent permitted by law) on such overdue amount from and
including the due date thereof to but excluding the date of payment thereof
(unless such payment shall be made after 11:00 A.M., local time, in which case
such date of payment shall be included) at the Overdue Rate. If any Rent shall
be paid on the date when due, but after 11: 00 A.M., local time, at the place of
payment, interest shall be payable as aforesaid for one day.
Section 3.05. Net Lease, No Setoff; Etc. This Lease is a net lease and,
notwithstanding any other provision of this Lease, it is intended that Rent
shall be paid without notice, demand, counterclaim, setoff, deduction or defense
and without abatement, suspension, deferment, diminution or reduction.
Section 3.06. Utilities. The Lessor agrees to provide to the Lessee the
following services at the prices set forth below:
(a) electricity at no additional charge;
(b) natural gas to be consumed by the Lessee, which shall be
separately metered, at a rate equal to the contract price in effect for
each billing period under the Gas Supply Contract, up to a maximum of
twenty-five thousand dollars ($25,000.00) per year ; provided, however,
that the Lessee shall not be required to pay for natural gas consumed as a
result of scheduled or unscheduled outages of the Lessor's electric power
plant located adjacent to the Facility;
(c) hot water, at a rate equal to $15,000 per Lease Year; and
(d) water, at a rate equal to fifty cents ($0.50) per one thousand
gallons.
The Lessor shall invoice the Lessee for such services monthly as incurred,
and such invoices shall be payable within thirty (30) days of invoice.
8
<PAGE>
Section 3.07. Services Provided by Lessor. At the request of the Lessee,
the Lessor shall also provide at the Lessee's expense general maintenance
services currently being provided to the Facility. The Lessor shall charge the
Lessee an amount equal to its actual cost in providing such services and shall
invoice the Lessee for such services monthly as incurred. Such invoices shall be
payable within thirty (30) days of invoice.
ARTICLE IV
DISCLAIMER OF WARRANTIES
THE FACILITY IS BEING LEASED PURSUANT TO THIS AGREEMENT ON AN "AS-IS,
WHERE-IS" BASIS. NEITHER THE LESSOR NOR THE LENDER HAS MADE OR SHALL BE DEEMED
TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
TITLE, VALUE, MERCHANTABILITY, COMPLIANCE WITH SPECIFICATIONS, CONDITION,
DESIGN, OPERATION, ABSENCE OF LATENT DEFECTS OR FITNESS FOR USE OF THE FACILITY
(OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE FACILITY (OR ANY PART THEREOF). It is
agreed that except as expressly provided herein all risks incident to the
matters discussed in the preceding sentence, as between the Lessor or the
Lender, on the one hand, and the Lessee, on the other, are to be borne by the
Lessee. The provisions of this Article IV have been negotiated, and, except to
the extent otherwise expressly stated in this Agreement, the foregoing
provisions are intended to be a complete exclusion and negation of any
representations or warranties by the Lessor or the Lender, express or implied,
with respect to the Facility, that may arise pursuant to any law now or
hereafter in effect, or otherwise.
ARTICLE V
RESTRICTION ON LIENS
The Lessee shall not directly or indirectly create, incur, assume or suffer
to exist any Lien on or with respect to the Facility, title thereto or any
interest therein, except Permitted Liens. The Lessee shall promptly, at its own
expense, take such action as may be necessary duly to discharge or eliminate or
bond in a manner satisfactory to the Lessor any such Lien if the same shall
arise at any time. The Lessee further agrees that it shall pay or cause to be
paid on or before the time or times prescribed by law (after giving effect to
any applicable grace period) any taxes, assessments, fees or charges imposed on
the Lessee (or any affiliated or related group of which the Lessee is a member)
under the laws of any jurisdiction that, if unpaid, might result in any Lien
prohibited by this Lease.
ARTICLE VI
OPERATION AND MAINTENANCE; ALTERATIONS,
MODIFICATIONS AND ADDITIONS
Section 6.01. Operation and Maintenance. The Lessee, at its own expense,
shall at all times operate, maintain, service and repair the Facility in
accordance with (a) prudent commercial operating maintenance practices,
including all manufacturers' warranty requirements to the extent such
requirements are made known to the Lessee, (b) the then current Operating
9
<PAGE>
Manual, (c) except to the extent Section 6.11 hereof shall apply, all applicable
requirements of law and of any court and of any Governmental Authority
(including without limitation all zoning, environmental protection, pollution,
sanitary and safety laws) noncompliance with which would have a material adverse
effect on the Lessee's right to operate the Facility, the Lessee's business or
financial condition or the rights of the Lessor in the Facility or would, in the
opinion of the Lessor, involve a material risk of any of the items enumerated in
Section 6.11 (i) through (iv), and (d) all requirements contained in permits and
licenses relating to the Facility in effect from time to time during the Lease
Term. In connection therewith, the Lessee shall (i) maintain the Facility in
good operating condition, ordinary wear and tear excepted, (ii) cause the
Facility to continue to have the capacity and functional ability to produce
Product on a continuing basis, in normal commercial operation, in a commercially
efficient manner, (iii) comply with the standards imposed by any insurance
policies in effect at any time with respect to the Facility or any part thereof,
and (iv) bear the expense associated with changes in permitting requirements
relating to the Facility during the Lease Term.
Section 6.02. Repair and Replacement. Except after the occurrence of an
Event of Loss, and except as provided below, the Lessee, at its own expense,
shall keep the Facility in good operating condition (reasonable wear and tear
excepted), and shall make all repairs, replacements and renewals of all
necessary or useful appliances, parts, instruments, accessories and
miscellaneous property of whatever nature (collectively, the "Parts") necessary
to maintain the Facility in good operating condition. The Lessee shall be
responsible for making (a) all structural and nonstructural repairs and
replacements to the Facility up to ten thousand dollars ($10,000) in the
aggregate in each Lease Year and (b) all repairs and replacements relating to
movable, grading, packaging and distribution equipment. The Lessor shall be
responsible for making all necessary structural and nonstructural repairs in
excess of ten thousand dollars ($10,000) in the aggregate in any Lease Year
other than repairs and replacements of items referred to in clause (b) above;
provided, however, that if such repairs or replacements are necessitated by the
negligent or willful acts of the Lessee, its employees, agents or invitees, then
the cost of such repairs or replacements shall be borne by the Lessee. In the
ordinary course of maintenance, service, repair or testing, the Lessee may
remove any Parts, but the Lessee shall cause such Parts to be replaced as
promptly as practicable. All replacement Parts shall be free and clear of all
Liens except Permitted Liens and shall be in at least as good operating
condition as, and shall have a value and utility at least equal to, the Parts
replaced, assuming such replaced Parts were in the condition and repair required
to be maintained by the terms hereof.
Section 6.03. Alterations Required by Law. The Lessor shall make such
Alterations to the Facility as may be required from time to time to meet the
requirements of and be in conformity with all applicable requirements of law, of
any court and of any Governmental Authority and the Lessee will maintain the
same in proper operating condition under such laws and requirements, except to
the extent Section 6.11 hereof shall apply. Upon completion of such Alterations,
the Basic Rent shall be automatically increased on an annual basis by an amount
equal to sixty-five dollars ($65.00) for every one thousand dollars ($1,000) of
costs paid by the Lessor in connection with the Alterations.
Section 6.04. Plans and Specifications; Operating Manual. As soon as
practicable following the Effective Date, the Lessor shall provide to the Lessee
the Operating Manual and a complete set of "as-built" Plans and Specifications
(which shall in the aggregate reflect the
10
<PAGE>
Facility as of the Effective Date). The Lessee shall maintain throughout the
Lease Term, and keep on file at the Facility, a current Operating Manual and a
complete set of "as-built" Plans and Specifications (which shall in the
aggregate reflect all Parts incorporated in the Facility and all Alterations
made pursuant to this Article VI) with respect to the Facility. Upon any
expiration of the Lease Term or the exercise of remedies pursuant to Article
XIII hereof, the Lessee shall deliver to the Lessor a complete set, current as
of the date of such return or exercise of remedies, of such Plans and
Specifications and all work drawings and similar documents with respect to the
operation of the Facility. The Plans and Specifications shall not be revised,
amended or modified in any manner which would adversely affect the operating
capacity, cost efficiency, utility, reliability or value of the Facility.
Section 6.05. Operational Alterations. In addition to the foregoing, the
Lessee, at its own expense (subject to Section 6.07 hereof), may from time to
time make such Alterations to the Facility as the Lessee may deem desirable in
the proper conduct of its business, which shall be approved by the Lessor in
advance, provided that such Alterations shall not adversely affect the operating
capacity, cost efficiency, utility, reliability or value of the Facility.
Section 6.06. Title to Parts. Title to each Part (including any Alteration)
incorporated in the Facility pursuant to this Article VI shall without further
act vest in the Lessor and shall be deemed to constitute a part of the Facility
and be subject to this Lease in the following cases:
(a) such Part shall be in replacement of or in substitution for, and
not in addition to, any Part originally incorporated in the Equipment or
any Part title to which shall have vested in the Lessor pursuant to this
Section 6.06;
(b) such Part shall be required to be incorporated in the Facility
pursuant to the terms of Sections 6.02 and 6.03 hereof;
(c) such Part shall be Nonseverable; or
(d) such Part shall be paid for by the Lessor.
If such Part or Parts are incorporated in the Facility pursuant to this
Article VI and are not within any of the categories set forth in clauses (a)
through (d) above, then title to such Part or Parts shall vest in the Lessee,
subject to the rights of the Lessor provided in Section 6.09 hereof.
All Parts (other than Parts the title to which is vested in the Lessee in
accordance with the preceding sentence) at any time removed from the Facility
shall remain the property of the Lessor, no matter where located, until such
time as such Parts shall be replaced by Parts that have been incorporated in the
Equipment and that meet the requirements for replacement Parts specified in
Section 6.02 hereof. Immediately upon any replacement Part becoming incorporated
in the Equipment as provided in Section 6.02 hereof, without further act, (a)
title to the removed Part shall thereupon vest in such Person as shall be
designated by the Lessee, free and clear of all rights of the Lessor, (b) title
to such replacement Part shall thereupon vest in the Lessor and (c) such
replacement Part shall become subject to this Lease and be deemed part of the
Facility for all purposes hereof to the same extent as the parts originally
incorporated in the Facility.
11
<PAGE>
Section 6.07. Lessor's Option to Pay Costs of Alterations. If requested to
do so by the Lessee, the Lessor may at its option pay for any Alteration title
to which will vest or has vested in the Lessor pursuant to Section 6.06 hereof,
subject to agreement as to adjustments in Basic Rent in accordance with Section
3.01 hereof.
Section 6.08. Reports of Alterations. On or before March 15 of each
calendar year commencing in 1995 and on the date on which the Lease Term shall
expire, the Lessee shall furnish the Lessor with a report stating the total cost
(as determined in accordance with the Lessee's normal accounting practices) of
all Alterations which are Nonseverable and which were not financed pursuant to
Section 6.07 hereof and which are not described in clause (i) or (ii) of Section
4(4).03(c) of Revenue Procedure 75-21 as modified by Revenue Procedure 79-48 and
which were made during the period from the date of this Lease to the end of the
preceding calendar year in the case of the first such report or during the
period from the end of the period covered by the last previous report to one
month prior to such report in the case of subsequent reports and briefly
describing all such Alterations. Each such report shall be accompanied by an
Officer's Certificate stating that no Alteration has been made that would
adversely affect the operating capacity, cost efficiency, utility, reliability
or value of the Facility or the ability of the Lessee to perform its obligations
hereunder.
Section 6.09. Removal of Parts. All Parts incorporated in the Facility to
which the Lessee (or any other Person other than the Lessor) shall have title
pursuant to the provisions of Section 6.06 hereof may, subject to any right of
the Lessor to use such Part as provided herein and so long as such removal shall
be permitted by this Agreement and shall not result in any violation of any law
or governmental regulation and so long as no Default or Event of Default shall
have occurred and be continuing, be removed at any time by the Lessee (or such
other Person) and shall be removed by the Lessee (or the Lessee shall cause such
other Person so to remove such Parts) prior to the delivery of the Facility to
the Lessor in accordance with the provisions of the Lease, other than upon the
termination of this Lease pursuant to Article XIV hereof, and title to such
Parts shall at all times remain in the Lessee (or such other Person).
Section 6.10. Parts Free and Clear of Liens. Any Part title to which shall
vest in the Lessor pursuant to Section 6.06 hereof shall be free and clear of
all Liens except Permitted Liens.
Section 6.11. Permitted Contests. If, to the extent and for so long as (a)
a test, challenge, appeal or proceeding for review of any applicable requirement
of law or of a Governmental Authority relating to the operation or maintenance
of the Facility shall be prosecuted in good faith by the Lessee or (b)
compliance with such requirement shall have been excused or exempted by a
nonconforming use permit, waiver, extension or forbearance, the Lessee shall not
be required to comply with such requirement but only if such test, challenge,
appeal, proceeding or noncompliance shall not, in the opinion of the Lessor,
involve a material risk of (i) foreclosure, sale, forfeiture or loss of, or
imposition of any Lien other than a Permitted Lien on, any part of the Facility
or of impairment of the operation of the Facility, (ii) extending the ultimate
imposition of such requirement beyond the termination of the Lease Term (unless
there shall have been furnished indemnification satisfactory to the Lessor),
(iii) any material claim against the Lessor (unless there shall have been
furnished indemnification satisfactory to the Lessor) or (iv) the nonpayment of
Rent.
12
<PAGE>
Section 6.12. Operating Logs. The Lessee shall keep maintenance and repair
reports in sufficient detail to indicate the nature and date of major work done.
Such reports shall be kept on file by the Lessee at its offices or at the
Facility for as long as they would be kept by a prudent owner or operator of the
Facility (but in no event less than three (3) years following the end of the
Lease Term), and shall be made available to the Lessor upon reasonable request.
Section 6.13. Return of Facility. Upon termination of this Agreement, the
Lessee, at its own expense, shall return the Facility to the Lessor by
surrendering the same into the possession of the Lessor free and clear of all
Liens and in the condition required by Section 6.01 hereof.
ARTICLE VII
IDENTIFICATION
The Lessee shall maintain throughout the Lease Term in a prominent location
at each entrance to each of the buildings comprising the Facility at least one
(1) plate or other clear and durable marking stating "THE EQUIPMENT AND ALL
RELATED EQUIPMENT IN THIS FACILITY IS OWNED BY COGENTRIX OF PENNSYLVANIA, INC.,"
in letters not less than one-half inch in height. On the Closing Date the Lessee
shall certify that it has complied with the preceding sentence. Except as
provided herein or as otherwise directed by the Lessor, the Lessee shall not
allow the name of any Person other than that of the Lessee to be placed on any
Part of the Facility as a designation that might reasonably be interpreted as a
claim of ownership or right to possession or use thereof.
ARTICLE VIII
INSURANCE
Section 8.01. Coverage.
(a) Subject to subsection 8.01(b), the Lessee shall maintain:
(i) property damage insurance with respect to the Facility
insuring against loss or damage from (x) fire and normal extended
coverage perils customarily included in policies available with
respect to property comparable to the Facility and (y) flood,
earthquake and other perils customarily included under Difference in
Conditions policies so available;
(ii) "boiler and machinery" insurance with respect to damage (not
insured against pursuant to subsection 8.01(a)(i) above) to the
machinery, plant, equipment, storage facilities or similar apparatus
included in the Facility from risks normally insured against under
boiler and machinery policies;
(iii) business interruption insurance with respect to
interruptions in the operation of the Facility;
(iv) comprehensive general public liability, including blanket
contractual, personal injury, product liability, property damage
13
<PAGE>
(including broad form property damage and explosion, collapse and
underground property damage) and loss of use of property of others,
insurance applicable to the Facility in such amounts as are usually
carried by Persons operating similar facilities presenting comparable
risks in the same general region but in any event with a combined
single limit of not less than $5,000,000, with separate aggregate for
product and general liability, which policy shall be written on an
occurrence basis;
(v) (x) workers' compensation insurance or occupational
disability benefits insurance (in at least the statutory amounts) and
such other forms of insurance which the Lessee is required by law to
maintain or cause to be maintained, covering loss resulting from
injury, sickness, disability or death of the employees of the Lessee
and (y) employers' liability insurance in an amount not less than
$500,000 single limit;
(vi) comprehensive automobile liability insurance against claims
of personal injury (including bodily injury and death) and property
damage covering all owned, leased, non-owned and hired vehicles with a
$1,000,000.00 minimum limit per occurrence for combined bodily injury
and property damage liability; and
(vii) such other insurance with respect to the Facility in such
amounts and against such insurable hazards as is usually carried by
Persons operating similar properties in the same general region, but
any loss of the type customarily covered by the policies described in
subsections 8.01(a)(i), (ii) and (iii), whether actually covered in
whole or in part by such policies, shall be the responsibility of the
Lessee and the absence of such coverage shall not relieve the Lessee
from any of its obligations under any of the Operative Documents;
provided, however, that the amount of insurance coverage specified in
subsections 8.01(a)(i) and (a)(ii) above with respect to the Facility shall
not in any event be less than the replacement cost of the Facility, as
determined by the Lessor, including agreed amount waiving coinsurance.
All insurance policies carried in accordance with Section 8.01 shall
be maintained with insurers with a Best rating of A minus or better and a
Best size rating of IX or better (except for policies underwritten by
Lloyds of London and approved English companies acceptable to the Lessor)
approved by the Lessor and not disqualified from insuring risks in
Pennsylvania.
Any insurance policies carried in accordance with this Section 8.01
shall be subject to (i) exclusions of the sort existing in the insurance
policies in effect on the Closing Date and (ii) such deductible amounts and
retentions
14
<PAGE>
as shall not exceed the following amounts specified with respect to such
policies:
(1) Property Damage....................................$10,000;
(2) Boiler and Machinery...............................$10,000;
and
(3) Public Liability...................................$10,000.
Notwithstanding anything to the contrary in this Article VIII, the
Lessee shall at all times ensure that the insurance it maintains with
respect to the Facility is not less extensive or inclusive in type or
amount of coverage than that maintained by it in accordance with its
standard corporate minimum practice with respect to other similar
facilities.
(b) During the Lease Term and unless the Lessor gives the Lessee sixty
(60) days prior written notice, the Lessor shall provide the insurance
coverage specified in subsection 8.01(a)(i) with respect to the building
only and the Lessee shall reimburse the Lessor for the cost of such
coverage.
Section 8.02. Policy Provisions. Any insurance policy maintained by the
Lessee pursuant to Section 8.01 hereof shall:
(a) specify the Lessor and the Lender as additional insureds, as their
respective interests may appear;
(b) provide, except in the case of public liability insurance and
workers' compensation insurance, that all loss or occurrence shall be
adjusted with the Lessee and Lessor, unless an Event of Default shall have
occurred and be continuing, in which case such loss or occurrence shall be
adjusted with the Lessor, and payable (x) in respect of payments not
exceeding $10,000, provided no Default or Event of Default shall have
occurred or be continuing, to the Lessee, and (y) in all other
circumstances (A) unless and until receipt of notice from the Lender
stating that the Loan Agreement shall have been satisfied and discharged,
to the Lender for deposit in the Insurance and Condemnation Proceeds
Account and (B) thereafter, to the Lessor;
(c) include effective waivers by the insurer of all claims for
insurance premiums or commissions or (if such policies provide for the
payment thereof) additional premiums or assessments against the Lessor and
the Lender;
(d) provide that in respect of the interests of the Lessor and the
Lender, such policies shall not be invalidated by any action or inaction of
the
15
<PAGE>
Lessee or any other Person and shall insure the Lessor and the Lender
regardless of, and any claims for the losses shall be payable
notwithstanding:
(i) the occupation or use of the Facility for purposes more
hazardous than permitted by the terms of the policy;
(ii) any foreclosure or other proceeding or notice of sale
relating to all or any portion of the Facility; or
(iii) any change in the title to or ownership of all or any
portion of the Facility.
(e) provide that such insurance shall be primary insurance and that
the insurers under such insurance policies shall be liable under such
policies without right of contribution from any other insurance coverage
effected by or on behalf of the Lessor or the Lender under any other
insurance policies covering a loss that is also covered under the insurance
policies maintained by the Lessee pursuant to this Article VIII and shall
expressly provide that all provisions thereof, except the limits of
liability (which shall be applicable to all insureds as a group) and
liability for premiums (which shall be solely a liability of the Lessee),
shall operate in the same manner as if there were a separate policy
covering each insured;
(f) provide that any cancellation thereof or material adverse change
therein shall not be effective as to the Lessor and the Lender until at
least sixty (60) days after receipt by the Lessor and the Lender of written
notice thereof;
(g) waive any right of subrogation of the insurers against the Lessor
and the Lender, and waive any right of the insurers to any setoff or
counterclaim or any other deduction, whether by attachment or otherwise, in
respect of any liability of the Lessor or the Lender;
(h) provide that the whole or any part of the right, title and
interest of the Lessor or the Lessee therein may be assigned to the Lender;
and
(i) subject to Section 8.01 hereof, be reasonably satisfactory to the
Lessor and the Lender in all other material respects.
Section 8.03. Evidence of Insurance. The Lessee shall deliver to the Lessor
and the Lender at least two (2) days before the Effective Date copies of all
policies of insurance required hereby and, on the date this Lease is executed
and on each December 31 thereafter during the Lease Term, certificates of
insurance, copies of all policies of insurance evidencing the provisions
described in Section 8.02(a) hereof executed by the insurer by its duly
authorized agent, and a certification from the Lessee's insurance agent or
broker to the effect that all premiums required to have been paid have been paid
in full.
16
<PAGE>
Section 8.04. No Duty of Lessor to Verify. No provision of this Article
VIII or any provision of any other Operative Document shall impose on the Lessor
any duty or obligation to verify the existence or adequacy of the insurance
coverage maintained by the Lessee nor shall the Lessor be responsible for any
representation or warranty made by or on behalf of the Lessee to any insurance
company or underwriter.
ARTICLE IX
LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE
Section 9.01. Occurrence of Event of Loss. If an Event of Loss shall occur,
the Lessee shall give the Lessor and Lender prompt written notice of such
occurrence and the date thereof. Unless the Lessor and the Lender agree in
writing within thirty (30) days after such occurrence to restore, rebuild or
replace the Facility in accordance with the provisions contained in the
definition of "Event of Loss," then this Agreement shall terminate effective on
the thirtieth day following the occurrence of the Event of Loss. Any payments
(except for payments under insurance policies maintained by the Lessee other
than pursuant to Article VIII hereof) received at any time by the Lessor or by
the Lessee from any Governmental Authority or other Person as a result of the
occurrence of an Event of Loss shall be retained by the Lessor or promptly paid
to the Lessor by the Lessee; provided, however, that so long as no Default or
Event of Default shall have occurred and be continuing, the Lessee may retain
any proceeds of requisition of use payments made by any Governmental Authority
and attributable to the Facility for a period equal to the then current Lease
Term.
Section 9.02. Repair of Loss or Destruction.
(a) In the event of loss or destruction of all or a portion of the
Facility which (x) does not constitute an Event of Loss or (y) constitutes
an Event of Loss but the Lessor and the Lender agree to restore, rebuild or
replace the Facility, then the Lessor shall give prompt notice thereof to
the Lessee, and the Lessor, at its own cost and expense, shall promptly
repair, replace and rebuild the Facility, at least to the extent of the
value and as nearly as practicable to the character of the Facility
existing immediately prior to such occurrence; provided, however, that the
Lessee shall pay the difference, if any, between the insurance proceeds
received by the Lessor as a result of such loss or destruction and the
costs and expenses incurred by the Lessor in restoring, rebuilding or
replacing the Facility if the loss or destruction thereof resulted from the
negligent, willful, reckless or wanton act or failure to act of the Lessee,
its employees, agents, invitees or independent contractors.
(b) Except as provided in Section 9.01, this Agreement shall not
terminate or be affected in any manner by reason of the destruction or
damage in whole or in part of the Facility, or by reason of the
untenantability of the Facility, and the Rent reserved in this Agreement
and all other charges payable hereunder shall be paid by the Lessee in
accordance with the terms, covenants and conditions of this Agreement,
without abatement, diminution or reduction.
17
<PAGE>
Section 9.03. Other Dispositions. Notwithstanding the foregoing provisions
of this Article IX, so long as a Default or an Event of Default shall have
occurred and be continuing, any amount that would otherwise be payable to or for
the account of, or that would otherwise be retained by, the Lessee pursuant to
this Article IX shall be paid to the Lender (or to the Lessor after the lien of
the Loan Agreement shall have been released) as security for the obligations of
the Lessee under this Lease and, at such time thereafter as no Default or Event
of Default shall be continuing, such amount shall be paid promptly to the Lessee
unless the Lessor shall have theretofore declared this Lease to be in default
pursuant to Section 14.01 hereof, in which event such amount shall be disposed
of by the Lender in accordance with the provisions of the Loan Agreement or by
the Lessor in accordance with the provisions of this Agreement, as the case may
be.
ARTICLE X
INTEREST CONVEYED TO LESSEE
This Lease is an agreement of lease and does not convey to the Lessee any
right, title or interest in or to the Facility except as a lessee.
ARTICLE XI
ASSIGNMENT AND SUBLEASE; LOCATION
Section 11.01. Assignment and Sublease. The Lessor shall be permitted to
assign any of its right, title or interest in, to or under this Agreement
without the consent of the Lessee if the assignee is (a) a lender or group of
lenders providing financing to the Lessor or (b) a purchaser of the Facility.
All other assignments of any right, title or interest in, to or under this
Agreement shall be made only with the prior written consent of the Lessee, which
consent shall not be unreasonably withheld. Except as provided below, the Lessee
may not sublease the Facility or any part thereof or assign any of its rights or
interest hereunder without the written consent of the Lessor, which consent
shall not be unreasonably withheld; provided, however, that any such sublease or
assignment by the Lessee (a) shall not release the Lessee from any of its
obligations or liabilities of any nature whatsoever arising under this Agreement
and the Lender Consent and Agreement; (b) shall be expressly subject to and
subordinate to this Agreement; (c) shall be accompanied by an unconditional
guarantee of the Lessee's obligations under the Lease issued by a party having
financial strength satisfactory to the Lessor; and (d) shall not be permitted if
a Default or Event of Default has occurred and is continuing. Notwithstanding
the foregoing, the Lessee shall be permitted to assign this Agreement without
the consent of the Lessor only in the event the Lessee is being merged into,
consolidated with or otherwise combined with other corporations a majority of
whose voting capital stock is owned by the shareholders of the Lessee on the
Effective Date, so long as following such merger, consolidation or combination,
the majority of voting capital stock of the surviving entity is owned by the
shareholders of the Lessee on the Effective Date. These provisions shall be
binding on any subsequent assignee or sublessee of the Lessee's or the Lessor's
rights or interest hereunder. The rights and obligations of the Lessor and the
Lessee hereunder shall inure to the benefit of, and be binding upon, the
permitted successors and permitted assigns of the Lessor and the Lessee,
respectively.
Section 11.02. Location. The Lessee shall not remove, or permit to be
removed, the Plant or Equipment or any part thereof from the Site without the
prior written consent of the
18
<PAGE>
Lessor, except that the Lessee or any other Person may remove any Part in
accordance with the provisions of Sections 6.02 and 6.09 hereof.
ARTICLE XII
INSPECTION AND REPORTS
Section 12.01. Condition and Operation. The Lender and the Lessor and their
authorized representatives (the "Inspecting Parties") may inspect, at their own
expense, the Facility. After an Event of Default has occurred and is continuing,
the Inspecting Parties may also inspect, at their expense, the books and records
of the Lessee relating to the Facility and make copies and abstracts therefrom.
The Lessee shall furnish to the Inspecting Parties statements accurate in all
material respects regarding the condition and state of repair of the Facility,
all at such times and as often as may be reasonably requested. None of the
Inspecting Parties shall have any duty to make any such inspection or inquiry.
To the extent permissible, the Lessee shall prepare and file in timely fashion,
or, where the Lessor shall be required to file, the Lessee shall prepare and
deliver to the Lessor within a reasonable time prior to the date for filing, any
reports with respect to the condition or operation of the Facility that shall be
required to be filed with any Governmental Authority.
Section 12.02. Annual Insurance Report. On or before March 15 of each year
during the Lease Term, and within ten (10) days after any material adverse
change in the information set forth in the certificates provided pursuant to
Section 8.03 hereof, the Lessee shall deliver to the Lessor and the Lender a
report of a Responsible Officer of the Lessee setting forth (a) a complete list
of all insurance policies obtained and maintained by the Lessee pursuant to
Article VIII, (b) stating whether such insurance policies comply with the
requirements of Article VIII and (c) stating whether all premiums then due
thereon have been paid.
Section 12.03. Financial Reports. During the Lease Term, the Lessee shall
provide to the Lessor and the Lender the following:
(a) As soon as available, and in any event within thirty (30) days
after the end of each month, unaudited financial statements for the
Facility, including a balance sheet as at the end of such month and
statements of income and retained earnings and of cash flow for such month
and for the period from the beginning of the Lease Year. There shall be
included with such financial statements (i) a certificate of a Responsible
Officer stating in effect that, to the best of his knowledge and belief,
such financial statements are true and correct and have been prepared in
accordance with generally accepted accounting principles, consistently
applied, subject to changes resulting from year-end adjustments and (ii) a
certificate of a Responsible Officer setting forth in detail reasonably
satisfactory to the Lessor a calculation of Cash Flow of the Facility for
such month and for the Lease Year through the end of such month.
(b) In addition, as soon as available and in any event within ninety
(90) days after the end of each Lease Year, financial statements for the
Facility, including a balance sheet as of the end of such Lease Year, and
statements of
19
<PAGE>
income and retained earnings and of cash flow for such Lease Year, prepared
in accordance with generally accepted accounting principles consistently
applied and accompanied by the review opinion of a recognized firm of
independent certified public accountants acceptable to the Lessor. There
shall be included with such financial statements a certificate of a
Responsible Officer setting forth in detail reasonably satisfactory to the
Lessor a calculation of Cash Flow of the Facility for such Lease Year. The
Lessor shall have the right at any time to audit the financial statements
and the certificate of Cash Flow required to be provided hereunder. Such
audit shall be performed by an independent certified public accounting firm
selected by the Lessor and shall be at the Lessor's expense, unless such
audit results in the upward adjustment of Cash Flow for any Lease Year in
an amount equal to two percent (2%) or more of the Cash Flow reflected on
the certificate provided to the Lessor by the Lessee, in which case the
cost of such audit shall be paid by the Lessee and shall not be considered
Greenhouse Expenses. Any payments required to be made as a result of any
adjustment to the Cash Flow shall be made within ten (10) Business Days
following receipt of the results of the audit.
(c) The Lessor shall have the right to review the books and records of
the Lessee relating to the Facility for the purpose of verifying the
accuracy of the financial statements and calculations of Cash Flow provided
pursuant to Sections 12.03(a) and (b). and
(d) On or before January 31 of each year during the Lease Term
(commencing on January 31, 1995), a certificate of a Responsible Officer of
the Lessee stating that such Responsible Officer has made or caused to be
made a review of all transactions relating to the Facility and the
financial and operating condition of the Lessee for the immediately
preceding Lease Year and that, based on such review, no Default or Event of
Default has occurred during such year (or, if a Default or Event of Default
shall have occurred, specifying the nature thereof and the action the
Lessee has taken or prepares to take with respect thereto).
Section 12.04. Budget Approval. No later than the forty-five (45) days
prior to the commencement of any Lease Year, the Lessee shall present to the
Lessor for its approval, which shall not be unreasonably withheld, its budget
for the Facility for the following Lease Year, prepared in detail satisfactory
to the Lessor (the budget prepared pursuant to this Section 12.04 shall be
referred to herein as the "Budget"). In the event the Lessor withholds its
approval of any Budget, it shall provide to the Lessee a written statement of
specific objections to the Budget. The Budget presented shall be deemed to be
approved with respect to all items except those to which the Lessor has
objected. In the event the Lessee disputes the Lessor's objections, the Lessor
and the Lessee shall appoint a mutually agreeable independent advisor with
experience in the operation of greenhouse facilities, which advisor shall review
the disputed amounts and decide the appropriate level of expenditures for such
items. The decision of such advisor shall be binding upon the Lessor and the
Lessee and shall become part of the Budget for such Lease Year.
20
<PAGE>
Section 12.05. Liability. The Lessee shall, promptly after obtaining
knowledge thereof, give prompt written notice to the Lessor and the Lender of
each accident likely to result in material damages or claims for material
damages against the Lessee or any other Person with respect to the Facility in
excess of $100,000 (if such claims and damages are insured) or $25,000 (if not
insured), and occurring in whole or in part (whenever asserted) during the Lease
Term, and on request shall furnish to the Lessor and the Lender information as
to the time, place and nature thereof, the names and addresses of the parties
involved, any Persons injured, witnesses and owners of any property damaged and
such other information as may be known to it, and shall promptly upon request
furnish the Lessor and the Lender with copies of all correspondence, papers,
notices and documents whatsoever received by the Lessee in connection therewith.
Section 12.06. Liens. The Lessee shall promptly, and in no event later than
five (5) Business Days after it shall have obtained knowledge of the attachment
of any Lien that it shall be obligated to discharge or eliminate pursuant to
Article V hereof, notify the Lessor and the Lender of the attachment of such
Lien and the full particulars thereof unless the same shall have been removed or
discharged by the Lessee.
ARTICLE XIII
EVENTS OF DEFAULT
The following events shall constitute Events of Default (whether any such
event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any Governmental
Authority):
(a) the Lessee shall fail to make any payment of Rent within five (5)
days after the same shall have become due; or
(b) the Lessee shall fail to make any payment of any other amount
payable hereunder within ten (10) days after notice of such failure from
the Lessor or the Lender; or
(c) the Lessee shall fail to perform or observe any covenant,
condition or agreement to be performed or observed by it under Article VIII
or Article XI hereof within five (5) days after notice of such failure from
the Lessor or the Lender; or
(d) the Lessee shall fail to perform or observe any covenant,
condition of agreement (not included in clause (a), (b) or (c) of this
Article XIII to be performed or observed by it hereunder or under any other
Operative Document and such failure shall continue unremedied for a period
of thirty (30) days after written notice thereof from the Lessor; or
(e) the filing by the Lessee or APD of any petition for dissolution or
liquidation of the Lessee or the commencement by the Lessee of a voluntary
case under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or the Lessee shall have consented to the entry of
an order for relief in an involuntary case under any such law, or the
failure of the
21
<PAGE>
Lessee generally to pay its debts as such debts become due (within the
meaning of the Bankruptcy Reform Act of 1978, as amended), or the failure
by the Lessee promptly to satisfy or discharge any execution, garnishment
or attachment of such consequence as will impair its ability to carry out
its obligations under this Agreement, or the appointment of or taking
possession by a receiver, custodian or trustee (or other similar official)
for the Lessee or any substantial part of its property, or a general
assignment by the Lessee for the benefit of its creditors, or the entry by
the Lessee into an agreement of composition with its creditors, or the
Lessee shall have taken any corporate action in furtherance of any of the
foregoing; or the filing against the Lessee of an involuntary petition in
bankruptcy which results in an order for relief being entered or,
notwithstanding that an order for relief has not been entered, the petition
is not dismissed within forty-five (45) days of the date of the filing of
the petition, or the filing under any law relating to bankruptcy,
insolvency or relief of debtors of any petition against the Lessee for
reorganization, composition, extension or arrangement with creditors which
either (i) results in a finding or adjudication of insolvency of the Lessee
or (ii) is not dismissed within forty-five (45) days of the date of the
filing of such petition; or
(f) any representation or warranty by the Lessee in any Operative
Document or in any certificate or document delivered pursuant thereto shall
have been materially false when made; or
(g) the occurrence of an Event of Default under the Line of Credit
Facility Agreement.
ARTICLE XIV
ENFORCEMENT
Section 14.01. Remedies. Upon the occurrence of any Event of Default and at
any time thereafter so long as the same shall be continuing, the Lessor may, at
its option, by notice to the Lessee, declare this Lease to be in default, and at
any time thereafter the Lessor may do one or more of the following as the Lessor
in its sole discretion shall determine:
(a) the Lessor may, by notice to the Lessee, rescind or terminate this
Lease;
(b) the Lessor may (i) demand that the Lessee, and the Lessee shall
upon the written demand of the Lessor, return the Facility promptly to the
Lessor in the manner and condition required by, and otherwise in accordance
with all of the provisions of, Article VI hereof as if the Facility were
being returned at the end of the Lease Term, and the Lessor shall not be
liable for the reimbursement of the Lessee for any costs and expenses
incurred by the Lessee in connection therewith, (ii) enter upon the Site
and take immediate possession of (to the exclusion of the Lessee) the
Facility or remove the Plant or Equipment or both, by summary proceedings
or otherwise, all without liability to the Lessee for or by reason of such
entry or taking of possession,
22
<PAGE>
whether for the restoration of damage to property caused by such taking or
otherwise and (iii) offer employment to the Lessee's employees;
(c) the Lessor may sell all or any part of the Equipment and its
rights to the Plant and the Site at public or private sale, as the Lessor
may determine, free and clear of any rights of the Lessee and without any
duty to account to the Lessee with respect to such action or inaction or
any proceeds with respect thereto;
(d) the Lessor may lease to others all or any part of the Facility as
the Lessor in its sole discretion may determine, free and clear of any
rights of the Lessee and without any duty to account to the Lessee with
respect to such action or for any proceeds with respect to such action or
inaction, except that the Lessee's obligation to pay Rent with respect to
the Facility for periods commencing after the Lessee shall have been
deprived of use of the Facility pursuant to this paragraph (d) shall be
reduced by the net proceeds, if any, actually received by the Lessor from
leasing the Facility to any Person other than the Lessee for the same
periods or any portion thereof; and
(e) the Lessor may exercise any other right or remedy that may be
available to it under applicable law or proceed by appropriate court action
to enforce the terms hereof or to recover damages for the breach hereof.
Section 14.02. Survival of Lessee's Obligations. Except as provided in
subsection 14.01(d) above, no termination of this Lease, in whole or in part, or
repossession of all or any portion of the Facility or exercise of any remedy
under Section 14.01 hereof shall, except as specifically provided therein,
relieve the Lessee of any of its liabilities and obligations hereunder. In
addition, the Lessee shall be liable, except as otherwise provided above, for
any and all unpaid Rent due hereunder before, during or after the exercise of
any of the foregoing remedies, including all reasonable legal fees and expenses
and other costs and expenses incurred by the Lessor and the Lender by reason of
the occurrence of any Event of Default or the exercise of the Lessor's remedies
with respect thereto, and including all costs and expenses incurred in
connection with the return of the Facility in the manner and condition required
by, and otherwise in accordance with the provisions of, Article VI hereof as if
such Facility were being returned at the end of the Lease Term.
Section 14.03. Remedies Cumulative. To the extent permitted by, and subject
to the mandatory requirements of, applicable law, each and every right, power
and remedy herein specifically given to the Lessor or otherwise in this Lease
shall be cumulative and shall be in addition to every other right, power and
remedy herein specifically given or now or hereafter existing at law, in equity
or by statute, and each and every right, power and remedy whether specifically
herein given or otherwise existing may be exercised from time to time and as
often and in such order as may be deemed expedient by the Lessor, and the
exercise or the beginning of the exercise of any power or remedy shall not be
construed to be a waiver of the right to exercise at the same time or thereafter
any right, power or remedy. No delay or omission by the Lessor in the exercise
of any right, power or remedy or in the pursuit of any remedy shall impair any
such right, power or remedy or be construed to be a waiver of any default on the
part of the
23
<PAGE>
Lessee or to be an acquiescence therein. No express or implied waiver by the
Lessor of any Event of Default shall in any way be, or be construed to be, a
waiver of any future or subsequent Event of Default.
ARTICLE XV
RIGHT TO PERFORM FOR LESSEE
If the Lessee shall fail to perform or comply with any of its agreements
contained herein, the Lessor may perform or comply with such agreement, and the
amount of such payment and the amount of the expenses of the Lessor incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at the Overdue
Rate, shall be payable by the Lessee upon demand.
ARTICLE XVI
INDEMNITEES
Section 16.01. General Indemnity.
(a) Payment of Expenses by Lessee. The Lessee shall pay, and shall
indemnify and hold harmless each Indemnitee from and against, any and all
liabilities, obligations, losses, damages, penalties, claims, actions,
suits, costs, expenses and disbursements, including legal fees and
expenses, of whatsoever kind and nature (collectively, "Expenses" and
individually, an "Expense"), imposed on, incurred by or asserted against
any Indemnitee (whether because of an action or omission by such Indemnitee
or otherwise), in any way relating to or arising out of the occupation and
operation of the Facility by the Lessee and the production and sale of the
Product.
(b) Exceptions. The indemnities contained in Section 16.01(a) hereof
with regard to any particular Indemnitee shall not extend to any Expense
(i) resulting from the willful misconduct or gross negligence of such
Indemnitee (other than willful misconduct or gross negligence imputed to
such Indemnitee solely by reason of its interest in the Facility), (ii)
resulting solely from the breach by such Indemnitee of any of its
representations, warranties or covenants in any of the Operative Documents,
(iii) unless an Event of Default shall have occurred and be continuing and
Lessor or Lender shall be exercising remedies with respect thereto, to the
extent such Expense shall relate to acts or events not attributable to the
Lessee that occur after the Lease Term, (iv) so long as no Event of Default
shall have occurred and be continuing, to the extent attributable solely to
the disposition or attempted disposition of the Facility or any interest in
any thereof, by or on behalf of any Indemnitee, other than a transfer of
the Facility pursuant to Article XIV hereof or as required by any Operative
Documents, (v) constituting Fees, Taxes or Other Charges or (vi) which
constitutes internal, overhead expenses of the Indemnitee.
24
<PAGE>
(c) Notice. If any party entitled to indemnity under this Section
16.01 or the Lessee shall have received written notice of any liability
indemnified against under this Section 16.01, it shall give prompt notice
thereof to the Lessee, or the party entitled to be indemnified, as the case
may be, but the failure to give such notice shall not affect any obligation
under this Section 16.01. In case any action, including any investigatory
proceeding, shall be brought against, or commenced with respect to, any
Indemnitee in respect of which the Lessee is required to indemnify such
Indemnitee pursuant to the provisions of this Section 16.01, the Lessee
shall have the right to assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnitee and the
payment of all expenses. In the event the Lessee assumes the defense of any
such action, any Indemnitee shall have the right to employ separate counsel
in such action and participate therein, but the fees and expenses of such
counsel shall be at the expense of such Indemnitee, unless (i) the
employment of such counsel has been specifically authorized by the Lessee,
or (ii) the named parties to such action (including any impleaded parties)
include both such Indemnitee and the Lessee and representation of such
Indemnitee and the Lessee by the same counsel would be inappropriate under
applicable standards of professional conduct due to actual or potential
conflicting interests between them or (iii) the counsel employed by the
Lessee and satisfactory to such Indemnitee has advised such Indemnitee, in
writing, that such counsel's representation of such Indemnitee would be
likely to involve such counsel in representing differing interests which
could adversely affect either the judgment or loyalty of such counsel to
such Indemnitee, whether it be a conflicting, inconsistent, diverse or
other interest (in which case the Lessee shall not have the right to assume
the defense of such action on behalf of such Indemnitee; it being
understood, however, that the Lessee shall not, in connection with any one
such action, or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys, and of any local counsel retained by such
firm, at any one time for each such Indemnitee, which firm shall be
designated in writing by such Indemnitee). The Lessee shall not be liable
for any settlement of any such action effected without its consent, but if
settled with the consent of the Lessee or if there be a final judgment,
beyond further review or appeal, in any such action, the Lessee agrees to
indemnify and hold harmless any Indemnitee from and against any loss or
liability by reason of such settlement or judgment.
(d) Payment. The Lessee covenants and agrees to pay all amounts
required to be paid under this Section 16.01 on demand by the relevant
Indemnitee.
Section 16.02. Fees, Taxes and Other Charges.
(a) Payment by Lessee.
25
<PAGE>
(i) The Lessee hereby agrees to pay and assume liability for, and
on written demand to indemnify, protect, defend, save and hold
harmless each Indemnitee from and against, any and all governmental or
quasi-governmental fees (including without limitation license and
registration fees), taxes (including without limitation gross
receipts, franchise, sales, use, property, real or personal, tangible
or intangible), interest equalization and stamp taxes, assessments,
levies, imposts, duties, charges or withholdings of any nature
whatsoever, together with any and all penalties, fines or interest
thereon ("Fees, Taxes and Other Charges") imposed against any
Indemnitee, the Lessee or the Facility or any portion thereof by any
Federal, state or local governmental or taxing authority in the United
States of America or by any foreign government or any subdivision or
taxing authority thereof, upon or with respect to the occupation and
operation of the Facility by the Lessee and the production and sale of
the Product.
(ii) Notwithstanding anything to the contrary set forth above,
the provisions of this Section 16.02 shall not apply to:
(A) Fees, Taxes and Other Charges on, or measured in whole
or in part by (y) the net income or gross income of an Indemnitee
or (z) the franchise, capital, conduct of business, net worth or
tax preference of an Indemnitee;
(B) Fees, Taxes and Other Charges to the extent on, levied
on, or measured by, any fees or compensation received by an
Indemnitee for services rendered in connection with this
Agreement;
(C) Fees, Taxes or Other Charges which result from any
Indemnitee engaged in activities not related to this Agreement;
(D) so long as no Event of Default has occurred and is
continuing, Fees, Taxes or other Charges imposed as a result of
the voluntary sale, transfer, assignment or other disposition of
any interest in the Facility by an Indemnitee, if such
disposition shall not be pursuant to or in connection with
Article XIV hereof;
(E) Fees, Taxes or Other Charges imposed solely with respect
to any period after the end of the Lease Term unless an Event of
Default has occurred and is continuing and the Lessor or the
Lender shall be exercising remedies with respect thereto;
26
<PAGE>
(F) Fees, Taxes or Other Charges imposed as the result of
any transfer or disposition of any interest in the Facility by
any Indemnitee resulting from bankruptcy or other proceedings for
the relief of debtors (voluntary or involuntary) in which the
transferor is the debtor; or
(G) Fees, Taxes and Other Charges imposed solely as a result
of the willful misconduct or gross negligence of the Indemnitee.
(iii) In case any report or return is required to be made with
respect to any obligations of the Lessee under this Section 16.02 or
arising out of this Section 16.02, the Lessee shall, to the extent
permitted by law, either make such report or return in such manner
(including the making thereof in the Lessor's name) as will show the
ownership of the Equipment in the Lessor and send a copy of such
report or return to the Lessor, or shall notify the Lessor of such
requirement and make such report or return in such manner as shall be
reasonably satisfactory to the Lessor. Each Indemnitee agrees that it
will promptly forward to the Lessee any notice, bill or any advice
received by it concerning any such Fees, Taxes and Other Charges and
will, at Lessee's expense, use its best efforts and take such lawful
and reasonable steps as may be proposed by the Lessee in writing to
minimize any of the same for which the Lessee is responsible under
this Section 16.02.
(iv) The amount which the Lessee shall be required to pay to or
for the account of any Indemnitee with respect to any Fees, Taxes and
Other Charges which are subject to indemnification under this Section
16.02 shall be an amount sufficient to restore the Indemnitee to the
same position the Indemnitee would have been in had such Fees, Taxes
and Other Charges not been incurred or imposed. If the payment by the
Lessee under this Section 16.02 of an amount equal to such Fees, Taxes
and Other Charges would be more or less than the amount which would be
required to make such Indemnitee whole as a result of any tax effect
to an Indemnitee in connection with such payment of such Fees, Taxes
or Other Charges, including, without limitation (A) the inclusion of
any payment to be made by the Lessee under this Section 16.02 in the
taxable income of any Indemnitee in one year and the deduction of the
Fees, Taxes and Other Charges with respect to which such payment is
made from the taxable income of such Indemnitee in a different year,
(B) the nondeductibility of such Fees, Taxes and Other Charges from
the taxable income of such Indemnitee or (C) the anticipated
realization by such Indemnitee in a different year of tax benefits
resulting from the transaction giving rise to such Fees, Taxes and
Other Charges, the amount of the indemnity to be paid by the Lessee
shall be adjusted to an amount which (after
27
<PAGE>
taking into account all tax effects on such Indemnitee, any loss of
use of money resulting from differences in timing between the
inclusion of such indemnity in the taxable income of such Indemnitee
and the anticipated realization by such Indemnitee of tax benefits
resulting from the transaction to which such indemnity is related and
the present value of any anticipated future tax benefits to be
realized by such Indemnitee as a result of deducting such Fees, Taxes
and Other Charges or as a result of the transaction giving rise
thereto) will be sufficient to place the Indemnitee in the same
position such Indemnitee would have been in had such Fees, Taxes and
Other Charges not been imposed. All computations for purposes hereof
shall be based on tax rates in effect on the date payment pursuant to
this Section 16.02 is made. Computations involving the loss of use of
money or calculations of present value shall be based on the Overdue
Rate as adjusted for applicable income tax effects and compounded
monthly on the Rent Payment Dates. Each Indemnitee shall in good faith
use reasonable efforts in filing its tax returns and in dealing with
taxing authorities to seek and claim all tax benefits available with
respect to items referred to herein.
(b) Refunds. If any Indemnitee shall obtain a refund or credit of all
or any part of any Fees, Taxes and Other Charges, payment of or indemnity
for which shall have been made by the Lessee pursuant to this Section
16.02, such Indemnitee shall, unless a Default or an Event of Default shall
have occurred and be continuing, promptly pay to the Lessee (i) the amount
of such refund or credit (together with any interest paid to such
Indemnitee with respect to such refund or credit) plus (ii) an amount equal
to all tax benefits realized by such Indemnitee as the result of the
payment of the amounts referred to in clause (i) above and this clause
(ii).
Section 16.03. Survival. The obligations of the Lessee under this Article
XVI shall survive the termination of this Agreement and are expressly made for
the benefit of and shall be enforceable by any Indemnitee, separately or
together, without declaring this Agreement to be in default and notwithstanding
any assignment by the Lessor of this Lease or any of its rights hereunder. The
extension of applicable statutes of limitations by an Indemnitee or the Lessee
shall not affect the survival of the Lessee's or any Indemnitee's obligations,
as the case may be, under this Article XVI. The obligations of the Indemnitees
shall survive the termination of this Lease. All payments required to be paid
pursuant to Article XVI shall be made directly to, or as otherwise requested by,
the Indemnitee entitled thereof, upon written demand by such Indemnitee. All
such written demands shall specify the amounts payable and the facts upon which
the right to indemnification is based.
Section 16.04. Waiver. The Lessee hereby waives all tort claims and causes
of action in tort it may have at any time against any Indemnitee in any way
relating to or arising from or alleged to relate to or arise from any Operative
Document, except with regard to circumstances constituting an exception to the
Lessee's obligation to indemnify pursuant to Section 16.01(b) hereof.
28
<PAGE>
ARTICLE XVII
COVENANTS OF LESSEE
Section 17.01. Operation of Facility. During the Lease Term, the Lessee
shall use its best efforts to operate the Facility (including the sowing,
growing, harvesting and packaging of the Product) at its fullest productive
capacity as would a prudent commercial greenhouse operator under the same or
similar circumstances and to market the Product with substantially the same
effort and on the same terms as used for product produced at other facilities
operated by the Lessee or its Affiliates. The Lessee hereby agrees to give
prompt written notice to the Lessor if at any time the Lessee becomes aware that
the Facility is not being operated at its fullest productive capacity.
Section 17.02. Affiliated Transactions.
(a) In the event the Lessee uses the Facility to pack, store, grade,
separate or distribute Product grown in greenhouses other than the Facility
owned, leased, operated or managed by the Lessee, then the Lessee agrees to
charge such greenhouses a fee per pound that is satisfactory to, and
approved in advanced by, the Lessor plus an amount equal to at least the
Lessee's cost for boxes and packing materials. Without the prior written
consent of the Lessor, the Lessee shall not use the Facility for any
product other than the Product.
(b) In the event the Lessee purchases any equipment, supplies or other
items from any Affiliate, such purchases shall be on terms no less
favorable than those available from unaffiliated parties.
(c) The Lessee shall provide to the Lessor on a monthly basis in
detail satisfactory to the Lessor a list of all Product handled by the
Facility for greenhouses pursuant to subsection 17.02(a) and all items
purchased from Affiliates and the purchase price thereof pursuant to
subsection 17.02(b).
ARTICLE XVIII
MISCELLANEOUS
Section 18.01. Further Assurances. The Lessee shall cause the Operative
Documents and any amendments and supplements to any of them (together with any
other instruments, financing statements, continuation statements, records or
papers necessary in connection therewith) to be recorded and/or filed and
rerecorded and/or refiled in each jurisdiction as and to the extent required by
law in order to, and shall take such other actions as may from time to time be
necessary to, establish, perfect and maintain (a) the Lessor's right, title and
interest in and to the Facility, not subject to any Liens except Permitted
Liens, (b) for the benefit of the Lender and other holders of Notes, the first
mortgage lien and first priority security interest in the Facility provided for
in the Loan Agreement and including any Parts made subject to this Lease or the
Loan Agreement or the Mortgage pursuant to Article VI hereof and (c) each of the
other rights and interests created by the Loan Agreement and the Mortgage or by
any other Operative Document in the Lessor or the Lender. The Lessee will
promptly and duly execute and deliver to
29
<PAGE>
each of the Lessor and the, Lender such documents and assurances and take such
further action as the Lessor may from time to time reasonably request in order
to carry out more effectively the intent and purpose of the Operative Documents
and to establish and protect the rights and remedies created or intended to be
created in favor of the Lessor and the Lender, to establish, perfect and
maintain the Lessor's right, title and interest in and to the Facility and, for
the benefit of the Lender, the first mortgage lien and first priority security
interest in the Facility provided for in the Loan Agreement and the Mortgage,
including without limitation if requested by the Lessor or the Lender at the
expense of the Lessee, the recording or filing of counterparts or appropriate
memoranda of the Operative Documents, or of such financing statements or other
documents with respect thereto as the Lessor or the Lender may from time to time
reasonably request, and the Lessor agrees promptly to execute and deliver such
of the foregoing financing statements or other documents as may require
execution by the Lessor.
Section 18.02. Quiet Enjoyment. The Lessor covenants that it will not
interfere in the Lessee's quiet enjoyment of the Facility hereunder during the
Lease Term, so long as (a) the Lessee is in compliance with each ten-n and
condition hereof and (b) no Event of Default has occurred or is continuing.
Section 18.03. Facility as Security for Lessor's Obligations. In order to
secure the indebtedness evidenced by the Notes, the Lessor provides in the Loan
Agreement and the Mortgage, among other things, for the creation in favor of the
Lender of a first mortgage lien and first priority security interest for the
benefit of the Lender and any other holder of Notes in the Plant and the Site
and for the assignment by the Lessor to the Lender of the right, title and
interest of the Lessor in and to this Agreement and the other Operative
Documents, to the extent provided in the Loan Agreement and the Mortgage. The
Lessee hereby agrees to execute and deliver to the Lender the Lender Consent and
Agreement.
Section 18.04. Notices. Unless otherwise specifically provided herein, all
notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
person shall be in writing and any such notice shall become effective three (3)
Business Days after being deposited in the mails, certified or registered with
appropriate postage prepaid for first-class mail or, if delivered by hand or in
the form of a telex or telegram, when received, and shall be directed to the
Address of such person.
Section 18.05. Severability. Any provision of this Agreement that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the Lessee hereby waives any provision of law that renders
any provision hereof prohibited or unenforceable in any respect.
Section 18.06. Amendment. Neither this Agreement nor any of the terms
hereof may be terminated, amended, supplemented, waived or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or modification
shall be sought and, for so long as the Loan Agreement is in effect, with the
prior written consent of the Lender.
30
<PAGE>
Section 18.07. Headings. The Table of Contents and headings of the various
Articles and Sections of this Agreement are for convenience of reference only
and shall not modify, define or limit any of the terms or provisions hereof.
Section 18.08. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
Section 18.09. Governing Law. This Agreement has been delivered in, and
shall in all respects be governed by, and construed in accordance with, the laws
of the State of New York applicable to agreements made and to be performed
entirely within such State, including all matters of construction, validity and
performance; provided, however, that matters relating to rights in real property
shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania.
Section 18.10. Performance of Obligations to Lender. The provisions of this
Agreement which require or permit action by, the consent, approval or
authorization of, the furnishing of any document, paper or information to, or
the performance of any other obligation to, the Lender shall not be effective,
and the Sections hereof containing such provisions shall be read as though there
were no such requirements of permissions, after all the Notes shall have been
paid in full in accordance with their terms.
Section 18.11. Binding Effect; Successors and Assigns; Survival. The terms
and provisions of this Agreement, and the respective rights and obligations
hereunder of the Lessor and the Lessee, shall be binding upon their respective
successors and assigns (including, in the case of the Lessor, any Person to whom
the Lessor may transfer all or any portions of the Facility), and inure to the
benefit of their respective permitted successors and assigns, and the rights
hereunder of the Lender shall inure (subject to such conditions as are contained
herein) to the benefit of their respective permitted successors and assigns. The
obligations of the Lessee under this Agreement shall survive the termination of
this Agreement.
Section 18.12. Divisible Lease. It is the intention of the parties hereto
that this Agreement shall constitute the lease of both personal property and
real property and, to such extent, shall be deemed divisible. It is the
intention and understanding of the parties hereto that all the Equipment
constitutes personal property and all the Site and Plant constitute real
property for all purposes of this Lease and the other documents referred to
herein and for all purposes of bankruptcy laws of the United States; provided,
however, that nothing herein shall affect the rights and obligations of Lessor
or Lessee under Section 18.01 hereof, it being understood that no filing,
refiling, recording, re-recording, registration or reregistration in any office
for the filing, recording or registration of interests in real property shall
constitute or be deemed to constitute evidence or an admission by Lessor or
Lessee that the Equipment is real property.
Section 18.13. Effectiveness. This Agreement shall become effective upon
the date (the "Effective Date") the last of the following events occurs:
(a) the Closing Date;
(b) the receipt of the Lender Consent and Agreement; and
31
<PAGE>
(c) the termination of the Lessor's arrangement with Ringgold
Nurseries, Inc. and VHB Greenhouse Management, Inc. and the vacation of the
Facility thereby.
The Lessor agrees to indemnify and hold harmless the Lessee from all
Expenses incurred by the Lessee as a result of the Lessor's termination of its
arrangement with Ringgold Nurseries, Inc. and VHB Greenhouse Management, Inc.;
provided, however, that the Lessor shall not indemnify the Lessee from Expenses
incurred by the Lessee as a result of discussions held by the Lessee with
employees of Ringgold Nurseries, Inc., VHB Greenhouse Management, Inc. or their
Affiliates. In addition, this Lease may be terminated by either party in the
event a mutually agreeable Line of Credit Facility Agreement has not been
executed by December 1, 1993.
Section 18.14. Security Agreement. On or before the Effective Date, the
Lessee shall execute a security agreement (the "Lease Security Agreement") in
favor of the Lessor granting the Lessor a security interest in all the Lessee's
property to secure the Lessee's obligations under the Lease, which security
interest shall be expressly subordinated to the security interest granted
pursuant to the Security Agreement.
32
<PAGE>
IN WITNESS WHEREOF, the undersigned have each caused this Lease Agreement
to be duly executed and delivered and their corporate seals to be hereunto
affixed and attested by their respective officers thereunto duly authorized as
of the day and year first above written.
Attest: COGENTRIX OF PENNSYLVANIA, INC.
_______________________________ By:____________________________________
_____________________ Secretary Name:
Title:
[Corporate Seal]
Attest: KEYSTONE VILLAGE FARMS, INC.
_______________________________ By:____________________________________
_____________________ Secretary Name: Michael A. Degiglio
Title: President
[Corporate Seal]
Unconditional Guarantee of Payment and Performance
APD is an Affiliate of the Lessee and is under common ownership with the
Lessee. To induce the Lessor to enter into this Lease Agreement and in
consideration for the benefits to be derived by APD from the transactions
contemplated hereby, APD unconditionally guarantees the payment when due and
timely performance of any and all obligations of Lessee under this Lease
Agreement. Upon default by the Lessee in making payment hereunder or any other
failure to perform its obligations hereunder, APD shall make such payment or
cause such obligation to be performed, promptly upon the demand of the Lessor.
APD agrees that the Lessor and/or the Lessee may from time to time extend or
renew provisions of this Lease Agreement for any period and may grant any
releases, compromises or indulgences with respect thereto (including, but not
limited to, the failure or refusal to exercise one or more of the right or
remedies provided herein), without notice to or consent of APD, and without
affecting the liability of APD hereunder.
AGRO POWER DEVELOPMENT, INC.
By:____________________________________
Name: Michael A. Degiglio
Title: President
33
<PAGE>
SCHEDULE 1.01(a)
TO LEASE AGREEMENT
Description of Facility
PART 1: Description of Equipment
Description of Equipment
1 Trailer w/Spray Equipment
18 Tube Trolleys
1 Tomato Grading Machine
PART 2: Description of Plant
The greenhouse facility containing approximately 9.7 acres and the
headhouse facility, each as reflected on Exhibit B hereto.
PART 3: Description of Site
That portion of the property described on Annex A hereto that is described
on the survey attached as Annex B hereto as the Greenhouse and the Headhouse.
34
<PAGE>
SCHEDULE 3.01
TO LEASE AGREEMENT
BASIC RENT
Basic Rent shall be payable as follows:
<TABLE>
<CAPTION>
1998 and
Rent Payment Date 1994 1995 1996 1997 Thereafter
----------------- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C>
April 1 * * * * *
May 1 * * * * *
June 1 * * * * *
July 1 * * * * *
August 1 * * * * *
September 1 * * * * *
October 1 * * * * *
November 1 * * * * *
December 1 * * * * *
----- ----- ----- ----- -----
TOTAL * * * * *
</TABLE>
*Information omitted and subject to request for confidential treatment
35
<PAGE>
SCHEDULE 3.02
TO LEASE AGREEMENT
SUPPLEMENTAL RENT
Supplemental Rent
First $100,000 Cash Flow Between $100,000 and Cash Flow in
of Cash Flow $600,000 Excess of $600,000
- - ---------------- -------------------------------- --------------------
*% *% *%
*Information omitted and subject to request for confidential treatment
36
Exhibit 10.65
AMENDED GROUND LEASE
This Amended Ground Lease ("Amended Lease") is executed as of the date set
forth on the signature page of this document by and between the County of
Presidio, Texas, acting by and through its duly authorized governing body, the
Presidio County Commissioners Court (the "Lessor") and Agro Power Development,
Inc., a New York corporation, acting by and through its duly authorized
corporate representative (the "Lessee"), and replaces the Lease Agreement
entered into by Lessor and Lessee on the 14th day of March, 1997 in its
entirety. To the extent that any Provision in the Lease is inconsistent with any
provision in this Amended Lease, the provisions in this Amended Lease shall
control The italicized provisions constitute the additions or amendments to the
terms of the original Lease.
This Amended Lease becomes effective on the date when both Lessor and
Lessee have acknowledged in writing that all conditions precedent to this
Amended Lease, found in Section 9.01 herein have been satisfied.
PURPOSE OF THE LEASE
The express purpose of this Amended Lease is for Lessor to provide land for
the development of a commercial greenhouse by Lessee, which will provide
agricultural based jobs and economic Development to the citizens of Presidio
County and the tri-county area. The premises are authorized Exclusively for a
commercial greenhouse operation and no other use is authorized on the premises
without the prior authorization of the Lessor's governing body, the Texas
Department of transportation and the Federal Aviation Administration.
The acreage covered by this Amended Lease is not now needed for
aeronautical purposes, nor is it expected to be needed for such use at any time
in the foreseeable future.
This Amended Lease is a surface lease only, together with the water rights
in the amounts specified in this lease. This lease in no way conveys or leases
any mineral interest in this property.
PROPERTY
The real property located in Presidio County consisting of a tract of
approximately One Hundred Fifty-Five (155) acres commonly referred to as the
"Southern Quandrant" of the Marfa Municipal Airport, as more particularly
described and set out in Exhibit "A" (the "Premises"), which is attached hereto
and incorporated herein for all purposes.
<PAGE>
LEASE TERMS
ARTICLE ONE
Section 1.01. LEASE OF PREMISES
In consideration of the mutual covenants, conditions and agreements which
follow, Lessor agrees to rent and lease to Lessee, and Lessee agrees to rent and
lease from Lessor the Premises, together with all improvements located on the
Premises and the right of access to and use of the streets and roads now or
hereafter adjoining the Premises. Lessee, by execution of this Amended Lease,
accepts the leasehold estate, subject only to the title matters described in
Exhibit "B" attached hereto and incorporated herein for all purposes.
Section 1.02 HABENDUM
TO HAVE AND TO HOLD the Premises, together with all and singular the
rights, privileges, and appurtenances thereto attaching or anywise belonging,
exclusively unto Lessee and its Successors in Interest, for the term set forth
in the Amended Lease, subject to the covenants, agreements, terms, provisions
and limitations herein set forth.
Section 1.03. TERM
Unless sooner terminated as may be provided herein, this Amended Lease
shall continue and remain in full force and effect for a term commencing on the
effective date hereof and ending Twenty-five (25) years thereafter (the "Term").
Lessee may extend the Term for one additional period of ten (10) years under the
same terms, conditions and provisions by giving written notice of such Intention
to the Lessor by mail no later than One Hundred Twenty (120) days prior to the
end of the Term (the "Extended Term").
Section 1.04. WARRANTY OF PEACEFUL POSSESSION
Lessor covenants that Lessee, on paying the Rent and performing and
observing all of the covenants and agreements herein contained and provided to
be performed by Lessee, shall and may peaceably and quietly have, hold, occupy,
use and enjoy the Premises during the Term and any Extended Term, and may
exercise all of its rights hereunder. Lessor agrees to warrant and forever
defend Lessee's right to such occupancy, use and enjoyment and the title to the
Premises against the claims of any and all Persons whomsoever lawfully claiming
the same, or any part thereof, subject only to the provisions of this Lease.
Section l.05. RESERVATION OF RIGHT OF FLIGHT
There is hereby reserved to the Lessor, its successors and assigns, for the
use and benefit of the public, a right of flight for the passage of aircraft in
the airspace above the surface of the premises herein leased This public right
of flight shall include the right to cause in said airspace any noise inherent
in the operation of any aircraft used for navigation or flight through the said
airspace or landing at, taking off from or operation on the Marfa Municipal
Airport.
<PAGE>
Section l.06. RESTRICTION PROHIBITING OBSTRUCTIONS TO AIR NAVIGATION
Lessee is strictly prohibited from causing the erection of structures or
growth of natural objects that would constitute an obstruction to air
navigation.
Section 1.07. RESTRICTION PROHIBITING INTERFERENCE WITH AIR NAVIGATION AND
COMMUNICATION
Lessee is strictly prohibited from engaging in any activity on the land
that would interfere with or be a hazard to the flight of aircraft over the land
or to and from the airport or interfere with fair navigation and to
communication facilities serving the airport.
Section l.08. INCORPORATION OF TITLE VI.CIVIL RIGHTS ASSURANCE OBLIGATIONS
Both Lessee and Lessor will comply with such state and federal rules and
regulations as are promulgated to assure that no person shall, on the grounds of
race, creed, color, national origin, sex, age, or handicap be excluded from
participating in any activity conducted under or benefitting from any funds
received under this Amended Lease. This assurance obligates the Lessor and
Lessee, and their successors in interest for the full Term and any applicable
Extended Term of the Amended Lease.
ARTICLE TWO
Section 2.01. DEFINITIONS
In addition to such other defined terms as may be set forth in this Amended
Lease, the terms below shall have the following meanings:
"Premises"- the Land and improvements described on Amended Exhibit "A".
"Rent"- the Base Rent amount.
"Lessee"- includes any Successor in Interest or Permitted Assignee. Any
such Successor in Interest or Permitted Assignee is bound by all the terms
and conditions contained herein including the exclusive use of the Premises
as a commercial greenhouse operation.
ARTICLE THREE
Section-3.0l. BASE RENT
Commencing with the effective date of this Amended Lease and continuing for
the first five (5) years of the Term, Lessee shall pay to Lessor a monthly lease
amount of One Thousand Dollars ($1,000.00). The first such payment of Base Rent
shall be due and payable on the Effective Date of this Amended Lease and like
installments shall be due and payable on the same numbered day of each month
thereafter during the first five (5) years of the Term.
<PAGE>
For the remaining twenty (20) years of the Term and any extended Term, the
Base Rent amount will be adjusted annually in accordance with the most recent
Consumer Price Index figures. In the event of a drop in the CPI, under no
circumstances will the lease payments fall below the base amount of One Thousand
Dollars ($1,000.00) a month.
ARTICLE FOUR
Section 4.01. LESSEE TO PAY COSTS
Lessee will develop and construct the greenhouse facilities on the Premises
at its own cost and expense. Lessee will insure an adequate drainage system so
as not to interfere with the primary purpose of the airport. Lessor shall not
have any financial obligation or other obligation of any kind under this Lease
except as specifically set forth herein.
Section 4.02. IMPROVEMENTS
All improvements built or constructed upon the Premises and all equipment
used in Connection therewith by Lessee shall be and remain the property of
Lessee and may be disassembled, taken down and removed by the Lessee at the end
of the Term or any Extended Term or upon earlier termination occasioned by an
Event of Default.
Section 4.03. RIGHT OF INSPECTION
Lessor reserves the right to enter and inspect the leased premises in order
to ensure that no Events of Default are occurring and in order to protect the
adjoining Marfa Municipal Airport. Lessee agrees to allow such entrance and
inspection by Lessor as is reasonable and agreed upon by Lessee and Lessor under
the circumstances.
In case of an emergency situation such as a fire, flood, or other calamity,
Lessee grants Lessor the authority to enter immediately onto the property and to
act to protect the best interests of the Marfa Municipal Airport and the
surrounding landowners without obtaining prior consent from Lessee. In all other
circumstances, Lessor will give Lessee written notice of their request to enter
and inspect the premises.
ARTICLE FIVE
Section 5.01. EVENTS OF DEFAULT
Any one of the following events shall be deemed to be an "Event of Default"
by Lessee under this Amended Lease.
A. Lessee shall fail to pay any sum required to be paid to Lessor under
the terms and provisions of this Amended Lease and such failure shall
not be cured within sixty (60) days after Lessee's receipt of written
notice from Lessor of such failure.
B. Lessee shall permanently close its commercial greenhouse operation on
the Premises, or shall stop doing business as a commercial greenhouse
without the
<PAGE>
prior consent of Lessor. If the greenhouse operation is closed for a
period of twelve (12) months, it shall be deemed to be permanently
closed for the purposes of this section.
C. Lessee shall change the nature or methods of the operation of the
commercial greenhouse in any manner which increases the use of water
from the underground wells on the property by twenty-five percent
(25%) or more over a base line of 160,000,000 gallons per year. This
provision shall not limit in any way the use or amount of water
consumed from other sources.
D. Lessee shall fail to perform any other covenant in this agreement,
other than those listed above, required to be performed under the
terms and provisions of this Amended Lease and such failure shall not
be cured within One Hundred Twenty (120) days after receipt of written
notice from Lessor of such failure, unless a longer time is granted by
duly authorized action of the governing body of Lessor.
E. A court having jurisdiction shall enter an order for relief in any
involuntary case commenced against Lessee, as debtor, under the
Federal Bankruptcy Code, as now or hereafter constituted, or the entry
of a decree or order by a court having jurisdiction over the Premises
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator, or other similar official of or for Lessee or any
substantial part of the properties of Lessee or ordering the winding
up or liquidation of the affairs of Lessee.
F. The commencement by Lessee of a voluntary case under the Federal
Bankruptcy Code, as now or hereafter constituted, or the consent or
acquiescence by Lessee to the commencement of a case under such Code
or law or to the appointment of or taking possession by custodian,
receiver, liquidator, assignee, trustee, sequestrator, or other
similar official of or for Lessee or any substantial part of the
properties of Lessee.
G. Lessee shall fail to comply with the provisions contained in Sections
1.05 through 1.08 of this Amended Lease, as required by the Federal
Aviation Administration and the Texas Department of Transportation,
and Lessee shall fail to initiate measures to cure such default within
ten (10) days of notice thereof
Section 5.02. LESSOR'S RIGHT TO EXPEL
Should any of the above Events of Default occur during the Term or any
Extended Term and Lessee fails to cure such event after receiving applicable
notice thereof, Lessor may, at its option, declare this Amended Lease and all
rights and interests created by it to be terminated. In the event that Lessor
terminates the Amended Lease, Lessee shall be given written notice to vacate the
premises by Lessor, and Lessee so agrees to vacate the Premises and to remove
all improvements and restore the Premises to its pre-Lease condition within Two
Hundred Seventy (270) days after receipt of such notice.
<PAGE>
Section 5.03. LIQUIDATED DAMAGES
Both Lessor and Lessee agree that Lessor would suffer damages as a result
of such Amended Lease termination. Lessee hereby agrees that a reasonable sum
for liquidated damages in the event of lease termination due to Lessee's default
would be a lump sum payment to Lessor of One-Third (1/3) of all remaining rents
due under the Term or the Extended Term of the Amended Lease. The time period
for computing the liquidated damages begins as of the date of default or of the
last lease payment, whichever is later in time. Venue for any suit to enforce
this provision lies exclusively in the district court of Presidio County, Texas.
Section 5.04. RIGHTS OF LESSOR CUMULATIVE
All rights and remedies of Lessor provided for in this Amended Lease shall
be construed and held to be cumulative, and no single right or remedy shall be
exclusive of any other which is consistent with the former. Lessor shall have
the right to pursue any or all of the rights or remedies set forth herein, as
well as any other consistent remedy or relief which may be available at law or
in equity, but which is not set forth herein. No waiver by Lessor of a breach of
any of the covenants, conditions or restrictions of this Amended Lease shall be
construed or held to be a waiver of any succeeding or preceding breach of the
same or of any other covenant, condition or restriction herein contained. The
failure of Lessor to insist in any one or more cases upon the strict performance
of any of the covenants of this Amended Lease, or to exercise any option herein
contained, shall not be construed as a waiver or relinquishment of future
breaches of such covenant or option.
ARTICLE SIX
Section 6.01. LESSOR DEFAULT
Should Lessor fail to perform any of the obligations or covenants contained
in this Amended Lease, and such failure shall not be cured within sixty (60)
days after receipt of written notice from Lessee of such failure, then Lessee
shall be entitled to enforce any one or more of the following rights and
remedies:
A. Lessee shall be entitled to cease paying all Rent and other amounts
owed to Lessor under this Amended Lease until such time as the default
is cured;
B. Lessee shall be entitled to require Lessor to specifically perform its
obligations under this Amended Lease or restrain or enjoin Lessor from
continuing the activities that constitute the default of Lessor; and
C. Lessee shall be entitled to exercise all other rights and remedies
available to Lessee under this Amended Lease or otherwise available to
Lessee at law or in equity as a consequence of the Lessor's default.
<PAGE>
Section 6.02. RIGHTS OF LESSEE CUMULATIVE
All rights and remedies of Lessee provided for in this Amended Lease shall
be construed and held to be cumulative, and no single right or remedy shall be
exclusive of any other which is consistent with the former. Lessee shall have
the right to pursue any or all of the rights or remedies set forth herein, as
well as any other consistent remedy or relief which may be available at law or
in equity, but which is not set forth herein. No waiver by Lessee of a breach of
any of the covenants, Conditions or restrictions of this Amended Lease shall be
construed or held to be a waiver of any succeeding or preceding breach of the
same or of any other covenant, condition or restriction herein contained. The
failure of Lessee to insist in any one or more cases upon the strict performance
of any of the covenants of this Amended Lease, or to exercise any option herein
contained, shall not be construed as a waiver or relinquishment of future
breaches of such covenant or option.
ARTICLE SEVEN
Section 7.01. ASSIGNMENT BY LESSEE
This Amended Lease is assignable by Lessee as collateral to secure
financing or to any other entity solely for operation of a commercial greenhouse
operation on the Premises ("Permitted Assignee").
Lessee is hereby authorized to assign its interest in this Amended Lease to
its affiliate Village Farms of Marfa, L. P., a limited partnership organized
under the laws of Delaware. Any Affiliate or Permitted Assignee of Lessee who
assumes Lessee's responsibilities under this Amended Lease hereby agrees to be
bound by and fully comply with all terms of the Amended Lease.
Section 7.02. SALE OR ASSIGNMENT BY LESSOR
Any sale or mortgage of the Premises of Lessor or any liens placed or
suffered by Lessor encumbering Lessor's interest shall be expressly subject and
subordinate to this Amended Lease, to all obligations of Lessor hereunder, and
to all the rights, titles, interests and estates of Lessee created or arising
hereunder.
ARTICLE EIGHT
Section 8.01. PAYMENT OF TAXES
As the public property of Lessor is to be leased to Lessee, a private
corporation, for the purpose of a private commercial enterprise, there is no
exemption from ad valorem taxation under the Texas Constitution. Both Lessor and
Lessee have agreed that a tax abatement is not appropriate under the
circumstances, and Lessee agrees to pay all assessed ad valorem taxes on the
Premises attributable to the leasehold interest of Lessee when due during the
Term and any extension of the Term.
<PAGE>
ARTICLE NINE
Section 9.01. CONDITIONS PRECEDENT TO THIS AMENDED LEASE
Notwithstanding any and all other provisions, this Amended Lease shall not
be effective or binding on the Lessee or the Lessor until the following
conditions have occurred or been completed to the satisfaction of Lessee and
Lessor, as evidenced by an acknowledgment signed and dated by both parties and
attached to this Amended Lease as Exhibit "C " and made a part hereof for all
purposes:
A. A complete corrected survey with plat and metes and bounds description
of the Premises shall be completed and added to the Amended Lease as
Exhibit "A".
B. An environmental site survey has been conducted on the Premises
showing the Premise to be free of all Hazardous Materials or other
contaminates.
C. Evidence of good title to the leasehold estate under this Amended
Lease is established to the satisfaction of the Lessee of the
leasehold estate. Such evidence may be a title policy commitment
issued by a reputable title insurance company insuring the leasehold
title of Lessee in such amount as necessary to satisfy the Lessee that
the leasehold title with all improvements is adequately insured
against adverse claims; or such other title evidence satisfactory to
the Lessee.
D. Satisfactory evidence that no easements or other encumbrances exist on
the property which would interfere with the intended use of the
Premises by Lessee.
E. This Amended Lease is further contingent upon Lessee's successful
closing of all financial borrowing necessary for Lessee to fund the
contemplated project.
F. This Lease is further contingent upon Lessor's obtaining written
consent to the Amended Lease from the Texas Department of
Transportation and the Federal Aviation Administration.
ARTICLE TEN
Section 10.01. NOTICES
Notices or communications to Lessor or Lessee required or appropriate under
this Amended Lease shall be in writing, sent by (a) personal delivery, or (b)
expedited delivery service with proof of delivery, or (c) registered or
certified United States mail, postage prepaid, or (d) prepaid telecopy
ifconfirmed by expedited delivery service or by mail in the manner previously
described, address is as follows:
if to Lessee: Chief Executive Officer
Agro Power Development, Inc.
10 Alvin Court
East Brunswick, New Jersey 08816
<PAGE>
if to Lessor: Presidio County Judge
Post Office Box 606
Marfa, Texas 79843
with a copy to: Presidio County Attorney
Post Office Drawer M
Marfa, Texas 79843
or to such other address or to the attention of such other person as hereafter
shall be designated in writing by such party. Any such notice or communication
shall be deemed to have been given either at the time of personal delivery or,
in the case of delivery service or mail, as of the date of deposit in the mail
in the manner provided herein, or in the case of telecopy, upon receipt.
Section 10.02. APPLICABLE LAW
This Amended Lease shall be construed under and in accordance with the laws
of the State of Texas, and all obligations of the parties created hereunder are
performable in Presidio County, Texas. Venue for any action arising out of this
Amended Lease shall lie exclusively in the state district court of Presidio
County, Texas.
Section 10.03. RIGHTS CUMULATIVE
All rights, options and remedies of Lessor and Lessee contained in this
Amended Lease shall be construed and held to be cumulative and no one of them
shall be exclusive of the other. Lessor and Lessee shall each have the right to
pursue any one or all of such remedies or any other remedy or relief which may
be provided by law or in equity whether or not stated in this Amended Lease.
Section 10.04. NONWAIVER
No waiver by Lessor or Lessee of a breach of any of the covenants,
conditions or restrictions of this Amended Lease shall constitute a waiver by
Lessor or Lessee of any subsequent breach of any of the covenants, conditions or
restrictions of this Amended Lease. The failure of Lessor or Lessee to insist in
any one or more cases upon the strict performance of any of the covenants of the
Lease, or to exercise any option herein contained, shall not be construed as a
waiver or relinquishment for the future of such covenant or option. A receipt by
Lessor or acceptance of payment by Lessor of rent with knowledge of the breach
of any covenant hereof shall not be deemed a waiver of such breach, and no
waiver, change, modification or discharge by Lessor or Lessee of any provision
of this Amended Lease shall be deemed to have been made or shall be effective
unless properly authorized, expressed in writing and signed by the party to be
charged.
Section 10.05. TERMINOLOGY
Unless the context of this Amended Lease clearly requires otherwise, (a)
pronouns, wherever used herein, and of whatever gender, shall include natural
persons and corporations and associations of every kind and character; (b) the
singular shall include the plural wherever
<PAGE>
and as often as may be appropriate (c) the word "includes" or "including" shall
mean "including without limitation".
The section, article and other headings in this Amended Lease are for
reference purposes and shall not control or affect the construction of this
Amended Lease or the interpretation hereof in any respect. Article, section and
subsection and exhibit references are to this Amended Lease unless otherwise
specified. All references to a specific time of day in this Amended Lease shall
be based upon Central Standard Time.
Section 10.06. SEVERABILITY
If any clause or provision of this Amended Lease is illegal, invalid or
unenforceable under present or future laws effective during the Term or any
extended Term of this Amended Lease, then and in that event, it is the intention
of the parties hereto that the remainder of this Amended Lease shall not be
affected thereby.
Section 10.07. ENTIRE AGREEMENT
This Amended Lease, together with the exhibits attached hereto, contains
the final and entire agreement between the parties hereto and contains all of
the terms and conditions agreed upon, and no other agreements, oral or
otherwise, regarding the subject matter of this Amended Lease shall be deemed to
exist or to bind the parties hereto; it being the intent of the parties that
neither shall be bound any term, condition or representation not herein written.
Section 10.08. AMENDMENT
No amendment, modification or alteration of the terms of this Amended Lease
shall be binding unless the same be in writing, dated on or subsequent to the
date hereof, and duly executed by Lessee and by Lessor. Lessor's approval of an
amendment, modification or alteration of the terms of the Lease is binding only
if voted upon in open session at a duly called and authorized meeting of the
governing body of Lessor, the Presidio County Commissioners Court, with the
agenda of such meeting being properly posted in accordance with the requirements
of the Texas Open Meetings Act.
Section 10.09. SUCCESSORS IN INTEREST
All of the covenants, agreements, terms and conditions to be observed and
performed by the parties hereto shall be applicable to and binding upon their
respective successors and assignees, including, any successor by merger,
consolidation of Lessee into another business entity, or permitted assignment
(the "Successor in Interest").
The terms of this Amended Lease become applicable to any Mortgagee,
Assignee or Successor in Interest immediately upon the date of foreclosure on
Lessee's interest in this Lease, upon the recordation of a Deed in Lieu of
Foreclosure, or upon transfer of legal ownership of Lessee's interest in this
Lease to any another business entity, including a Mortgagee or Assignee. Any
such Mortgagee, Assignee or Successor in Interest shall be responsible for
curing any prior default by the Lessee if that is reasonably, possible, paying
<PAGE>
any back taxes owed by the Lessee, and complying with all terms and conditions
of this Amended Lease until the end of the Term or Extended Term of this Amended
Lease.
Section 10.10. HAZARDOUS MATERIALS
Notwithstanding anything contained in this Amended Lease to the contrary,
if Lessee finds any Hazardous Materials (hereinafter defined) on the Premises as
a result of the environmental survey to be conducted pursuant to this Lease,
then Lessee shall have the right to terminate this Lease by delivering written
notice thereof to Lessor. If Lessee terminates this Lease as a result of finding
Hazardous Materials on the Premises, then neither party hereto shall have any
further rights, duties or obligations hereunder.
Lessee hereby agrees that no hazardous materials will be deposited on the
leased premises during the Term or Extended Term of this Amended Lease, except
for those used in Lessee's agricultural operations. Lessee agrees to handle and
dispose of these substances in accordance with all applicable state and federal
environmental laws, rules and regulations. Should hazardous materials be
deposited on the premises in violation of any applicable environmental law, rule
or regulation during the Term or Extended Term of the Amended Lease, Lessee
agrees to be financially responsible for any clean up which is necessary to
restore the premises to its pre-Lease condition.
As used in this Amended Lease, "Hazardous Materials" shall mean (I) any
"Hazardous Waste" is defined by the Resource Conservation and Recovery Act of
1976 (42 U. S.C. Section 6091 et seq.), is amended from time to time, and
regulations promulgated thereunder; (ii) any "hazardous substance" as defined by
the Comprehensive Environmental Response, Compensation and Liability Action of
1980 (42 U.S.C. Section 6091 et seq. ), as amended from time to time, and
regulations Promulgated thereunder, (iii) polychlorinated biphenyls; (iv)
underground storage tanks, whether empty, filled or partially filled with any
substance; (v) any substance the presence of which on the Premises is prohibited
by any governmental requirements; and (vi) any other substance which by any
Governmental requirements requires special handling or notification of any
federal, state or local governmental entity in its collection, storage,
treatment or disposal.
ARTICLE ELEVEN
Section 11.01. ATTORNEY'S FEES.
If either party is required to commence legal proceedings relating to this
Amended Lease, the prevailing party shall be entitled to receive reimbursement
for its reasonable attorney's fees and costs of suit.
EXECUTED by the respective parties on the dates specified on the following
page. When all preconditions to this Amended Ground Lease, as set out in Section
9. 01 herein, have been accomplished to the satisfaction of the Lessor and
Lessee, such parties shall acknowledge that fact in writing and on that date
this Amended Ground Lease shall come into full force and effect.
<PAGE>
PRESIDIO COUNTY, TEXAS AGRO POWER DEVELOPMENT, INC.
"Lessor" "Lessee"
- - ----------------------------- -----------------------------
Jake Brisbin, Jr Albert Vanzeyst
Presidio County Judge President
ATTEST:
- - ----------------------------- -----------------------------
Ramona Lara Ramona Lara
Presidio County Clerk Presidio County Clerk
STATE OF TEXAS ss.
COUNTY OF PRESIDIO ss.
Before me, the undersigned authority, on this day personally appeared Jake
Brisbin, Jr., known to me to be the person whose name is subscribed to the
foregoing Amended Ground Lease, and known to me to be the Presidio County Judge,
and acknowledged to me that he executed said instrument for the purposes and
consideration herein expressed, and in the capacity therein stated.
SUBSCRIBED AND SWORN TO before me this ____ day of _____________, 1997, to
which witness my hand and official seal.
--------------------------------------
Carolyn Renfroe
Notary Public, in and for the State of
Texas
STATE OF TEXAS ss.
COUNTY OF PRESIDIO ss.
Before me, the undersigned authority, on this day personally appeared
Albert Vanzeyst, known to me to be the person whose name is subscribed to the
foregoing Amended Ground Lease, and known to me to be the President of Agro
Power Development, Inc., a New York corporation, and acknowledged to me that he
executed said instrument for the purposes and consideration herein (-expressed,
and in the capacity therein stated.
SUBSCRIBED AND SWORN TO before me this ____day _________of, 1997, to which
witness my hand and official seal.
--------------------------------------
Carolyn Renfroe
Notary Public, in and for the State of
Texas
<PAGE>
EXHIBIT A
FIELD NOTES DESCRIBING A 155.72 ACRE TRACT OF LAND, IN SECTIONS 249, 250, 251,
AND 252, BLOCK 8, GH&SA RR COMPANY SURVEY, PRESIDIO COUNTY, TEXAS. THE 155.72
ACRE TRACT IS PART OF THE PROPERTY CONVEYED FROM DOROTHY GAGE FORKER, ET AL, TO
PRESIDIO COUNTY BY WARRANTY DEED RECORDED IN VOLUME 113, PAGE 223, AND FROM MRS.
W.A. MINNS, ET AL, BY WARRANTY DEED RECORED IN VOLUME 113, PAGE 221, DEED
RECORDS SAID 155.72 ACRE TRACT OF LAND BEING MORE PARTICULARLY DESCRIBED AS
FOLLOWS:
BEGINNING at a 5/8 inch rebar set at the intersection of the West right-of-way
line of State Highway 17, as marked on the ground, and the Southwest BRL of
runway 12-30 of Marfa Municipal Airport, for the Northeast corner of this tract,
said BRL is parallel to and 390 feet Southwest of the centerline of said runway
12-30, whence a concrete highway right-of-way marker found in said right-of-way
line bears North 17(0)15'36' East 1403.75 feet, and a 1/2 inch iron pipe with an
aluminum cap marked "PIPER SURVEYING COMPANY, 249, 250, 251, 252, BLK 8, PLS
1974", found at the common corner of Sections 249, 250, 251, and 252, Block 8,
GH&SA RR Company Survey, Presidio County, Texas, bears South 70(0)45'24" West
1341.99 feet, and from said found, 1/2 inch iron pipe a one inch iron pipe
marked "SE150, NE153, NW249, SW252", found in center of a rock mound, at the
common corner of Sections 150, 153, 249, and 252, of Sections 150, 153, 249, and
252, said Block 8, bears South 89(0)58'53" West 5303.86 feet, property for State
Highway 17 conveyed from A.S. Gage Estate to State of Texas, right-of-way
recorded in volume 113, page 180, deed records, property in Section 250 and
Section 251, said Block 8, conveyed from Dorothy Gage Forker, et al, to Presidio
County by warranty deed recorded in volume 113, page 223, deed records, and
property in Section 249 and Section 252, said Block 8, conveyed from Mrs. W.A.
Mimms, et al, to Presidio County by warranty deed recorded in volume 113, page
221, deed records;
THENCE South 17(0)15'36" West with said West right-of-way line, at 462.77 feet
the common line of Section 251 and Section 250, said Block 8, and at 695.48 feet
pass a found concrete highway right-of-way marker, continuing for a total
distance of 1047.62 feet to a six inch wood post, a fence corner at the
Southeast corner of said airport, for the Southeast corner of this tract;
THENCE South 89(0)56'24" West with the South boundary line of said airport
property and a wire fence line, at 955.19 feet the common line of said Section
250 and Section 249, continuing for a total distance of 4326.42 feet to a 5/8
inch rebar set at the intersection of said South boundary line and the Southeast
BRL of runway 3-21 of said airport, for the Southwest corner of this tract, said
BRL is parallel to and 265 feet Southeast of the projected centerline of said
runway 3-21;
THENCE North 45(0)01'32" East with said BRL, at 794.83 feet the common line of
said Section 249, and Section 252, continuing for a total distance of 1148.62
feet to a 5/8 inch rebar, set at the intersection of said BRL and the Southwest
line of the protection zone of runway 3-21, for a corner of this tract;
THENCE South 44(0)58'28" East 85.0 feet, with said protection zone Southwest
line, to a 5/8 inch rebar set at the South corner of said protection zone, for
an interior corner of this tract;
<PAGE>
THENCE North 39(0)18'53" East 854.25 feet with the Southeast line of said
protection zone, to a 5/8 inch rebar set at the intersection of said protection
zone Southeast line and said BRL, for a corner of this tract;
THENCE North 45(0)01'32' East 312.24 feet with said BRL, to a 5/8 inch rebar set
at a BRL comer, being 65.5 feet Southwest of the centerline of taxiway entering
said runway 3-21, for a corner of this tract;
THENCE South 89(0)59'14" East 424.65 feet, with said BRL, to a 5/8 inch rebar
set at a BRL comer, for a corner of this tract;
THENCE North 45(0)00'01' East 1269.14 feet, with said BRL, to a 5/8 inch rebar
set at a BRL comer, for a corner of this tract;
THENCE South 89(0)59'35" East 155.54 feet, with said BRL, to a 5/8 inch rebar
set at a BRL comer, for a corner of this tract;
THENCE South 44(0)59'1 1" East with said BRL, being parallel to and 390 feet
Southwest of the centerline of runway 12-30 of said airport, at 371.13 feet the
common line of said Section 252 and Section 251, continuing for a total distance
of 2157.03 feet to the "Point of Beginning".
CONTAINING 39.74 acres in Section 249, 13.37 acres in Section 250, 30.51 acres
in Section 251, and 72.10 acres in Section 252, for a total of 155.72 acres,
more or less.
<PAGE>
EXHIBIT B
Commitment Number:
G.F. Number A-0005-97
EXCEPTIONS FROM COVERAGE
In addition to the Exclusions and Conditions and Stipulations, your Policy will
not cover loss, costs, attorney's fees, and expenses resulting from
1. The following restrictive covenants of record itemized below (We must either
insert specific recording data or delete this exceptions):
as shown in Surrender of Leasehold dated March 10, 1947 from United States
of America to County of Presidio Texas, filed for record May 3, 1947 in
Volume 125, Page 212, Deed Records of Presidio County, Texas.
2. Any discrepancies, conflicts or shortages in area or boundary lines, or any
encroachments or protrusions, or any overlapping of improvements.
3. Homestead or community property or survivorship rights, if any, of any spouse
of any insured. (Applies to the Owner Policy only.)
4. Any titles or rights asserted by anyone, including, but not limited to,
persons, the public, corporations, governments or other entities,
a. to tidelands, or lands comprising the shores or beds of navigable or
perennial rivers and streams, lakes, bays, gulfs or oceans, or
b. to lands beyond the line of the harbor or bulkhead lines as established
or changed by any government, or
c. to filled in lands, or artificial islands, or
d. to statutory water rights, including riparian rights, or
e. to the area extending from the line of mean low tide to the line of
vegetation, or the right of access to that area or easement along and
across that area.
(Applies to the Owner Policy only.)
5. Standby fees, taxes and assessments by any taxing authority for the year 19__
and subsequent years. and subsequent taxes and assessments by any taxing
authority for prior years due to change in land usage or ownership.
6. The terms and conditions of the documents creating your interest in the land.
7. Materials furnished or labor performed in connection with planned
construction before signing and delivering the lien document described in
Schedule A, if the land is part of the homestead of the owner. (Applies to the
Mortgagee Title Policy Binder on Interim Construction Loan only, and may be
deleted if satisfactory evidence is furnished to us before a binder is issued.)
<PAGE>
8. Liens and leases that affect the title to the land, but that are subordinate
to the lien of the insured mortgage. (Applies to Mortgagee Policy only.)
9. The following matters and all terms of the documents creating or offering
evidence of the matters (We must insert matters or delete this exception.):
(a) Leasehold Estate by that certain Lease Agreement between The County of
Presidio, Texas, as Lessor and Agro Power Development, Inc., as Lessee,
dated to be effective as of the 14th day of March, 1997, filed for record
in Volume ___, Page _, Deed Records of Presidio County, Texas, assigned to
Village Farms of Marfa, L.P. by Assignment of Lease dated , filed for
record in Volume __, Page __, Deed Records of Presidio County, Texas.
(b) Easement dated October 9, 1978, from the County of Presidio, Texas to
Southwestern Bell Telephone Company, of record in Volume 218, Page 480,
Deed Records of Presidio County, Texas.
(c) Reversionary rights as set forth in Surrender of Leasehold dated March
10, 1947 from the United States of America to the County of Presidio Texas,
of record in Volume 125, Page 212, Deed Records of Presidio County, Texas.
(d) Title to all oil, gas and minerals and other elements not constituting
part of the surface estate in the property described on Schedule A,
together with all rights, privileges and immunities relating thereto.
(e) Building restriction line as shown on the survey made by Carlos
Trevino, Registered Professional Land Surveyor for the State of Texas,
dated May 7, 1997.
Exhibit 10.66
LEASE AGREEMENT
Dated as of January 29, 1998
between
RIPE TOUCH GREENHOUSES, INC.,
as Lessor,
and
VILLAGE FARMS OF COLORADO, INC.,
as Lessee
Greenhouse Facility
Located in Colorado Springs, Colorado
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS; CONSTRUCTION OF REFERENCES............................1
Section 1.01 Definitions.....................................................1
Section 1.02 Construction of References......................................10
ARTICLE II OPERATION OF FACILITY.............................................10
ARTICLE III RENT AND SERVICES...............................................10
Section 3.01 Basic Rent......................................................10
Section 3.02 Supplemental Rent...............................................11
Section 3.03 Late Payment....................................................11
Section 3.04 Net Lease, No Setoff-, Etc......................................11
Section 3.05 Hot Water Charges...............................................11
Section 3.06 Services Provided by Lessor.....................................12
ARTICLE IV DISCLAIMER OF WARRANTIES..........................................12
ARTICLE V RESTRICTION ON LIENS...............................................12
ARTICLE VI OPERATION AND MAINTENANCE; ALTERATIONS,
MODIFICATIONS AND ADDITIONS..................................................13
Section 6.01 Operation and Maintenance.......................................13
Section 6.02 Repair and Replacement
Section 6.03 Alterations Required by Law.....................................14
Section 6.04 plans and Specifications; Operating Manual......................14
Section 6.05 Operational Alterations.........................................14
Section 6.06 Lessor's Option to Pay Costs of Alterations.....................14
Section 6.07 Reports of Alterations..........................................14
Section 6.08 Title to Parts..................................................15
Section 6.09 Removal of Parts................................................16
Section 6.10 Parts Free and Clear of Liens...................................16
Section 6.11 Permitted Contests..............................................16
Section 6.12 Operating Logs..................................................16
Section 6.13 Return of Facility..............................................16
ARTICLE VII IDENTIFICATION...................................................17
ARTICLE VIII INSURANCE.......................................................17
Section 8.01 Coverage........................................................17
Section 8.02 Policy Provisions...............................................19
Section 8.03 Evidence of Insurance...........................................20
Section 8.04 No Duty of Lessor to Verify.....................................20
ARTICLE IX LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE.........................21
Section 9.01 Occurrence of Event of Loss.....................................21
i
<PAGE>
Section 9.02 Repair of Loss or Destruction...................................21
ARTICLE X INTEREST CONVEYED TO LESSEE........................................22
ARTICLE XI ASSIGNMENT AND SUBLEASE; LOCATION................................22
Section 11.01 Assignment and Sublease........................................22
Section 11.02 Location.......................................................22
Section 11.03 Mortgaging the Estate of Lessor................................22
ARTICLE XII INSPECTION AND REPORTS...........................................24
Section 12.01 Condition and Operation........................................24
Section 12.02 Annual Insurance Report........................................24
Section 12.03 Financial Reports..............................................24
Section 12.04 Budget Approval................................................25
Section 12.05 Liability......................................................25
Section 12.06 Liens..........................................................26
ARTICLE XIII EVENTS OF DEFAULT...............................................26
ARTICLE IV ENFORCEMENT.......................................................27
Section 14.01 Remedies.......................................................27
Section 14.02 Survival of Lessee's Obligations...............................28
Section 14.03 Remedies Cumulative............................................29
ARTICLE XV RIGHT TO PERFORM FOR LESSEE.......................................29
ARTICLE XVI INDEMNITIES......................................................29
Section 16. 01 General Indemnity.............................................29
Section 16.02 Fees, Taxes and Other Charges..................................31
Section 16.03 Survival.......................................................33
Section 16.04 Waiver.........................................................34
ARTICLE XVII COVENANTS AND REPRESENTATIONS OF LESSEE.........................34
Section 17.01 Operation of Facility..........................................34
Section 17.02 Affiliated Transactions........................................34
Section 17.03 Waiver of Operating or Efficiency Standards....................34
Section 17.04 Representations and Warranties of Lessee.......................35
ARTICLE XVIII MISCELLANEOUS..................................................35
Section 18.01 Further Assurances.............................................35
Section 18.02 Quiet Enjoyment................................................36
Section 18.03 Notices........................................................36
Section 18.04 Severability...................................................36
Section 18.05 Amendment......................................................36
Section 18.06 Headings.......................................................36
Section 18.07 Counterparts...................................................36
ii
<PAGE>
Section 18.08 Governing Law..................................................36
Section 18.09 Binding Effect; Successors and Assigns, Survival...............36
Section 18.10 Divisible Lease Agreement......................................36
Section 18.11 Effectiveness..................................................37
SCHEDULES
SCHEDULE 1.01(a) Description of Facility
SCHEDULE 1.01(b) Intentionally Blank
SCHEDULE 3.01 Basic Rent
SCHEDULE 3.02 Supplemental Rent
iii
<PAGE>
LEASE AGREEMENT dated as of January 29,1998 between RIPE TOUCH GREENHOUSES,
INC., a Delaware corporation (the "Lessor"), and VILLAGE FARMS OF COLORADO,
INC., a Delaware corporation (the "Lessee").
WITNESSETH:
WHEREAS, the Lessor desires to lease the Plant (as defined below) and the
Site (as defined below) to the Lessee and the Lessee desires to lease the Plant
and the Site from the Lessor and operate the Facility (as defined below), all on
the terms and conditions herein contained.
In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, the parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION OF REFERENCES
Section 1.01. Definitions. As used in this Agreement, the following terms
shall have the following meanings (such definitions to be equally applicable to
both the singular and plural forms of the terms defined):
"Address" shall mean:
(a) with respect to the Lessor, P. 0. Box 69 Castlerock, CO 80104,
Attn: Chief Executive Officer; and
(b) with respect to the Lessee, 10 Alvin Court, East Brunswick, New
Jersey 08816, ATTN: President;
or such other address as such party shall give by notice to the other party
hereto.
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlling, controlled by or under common control with, such Person.
"Alterations" shall mean, with respect to the Facility, alterations,
improvements, modifications and additions to the Facility (but excluding any
replacement of Parts incorporated in the Facility).
"APD" shall mean Agro Power Development, Inc., a New York corporation.
"Basic Rent" shall mean [information omitted and subject to request for
confidential treatment] payable on the Basic Rent Payment Date for the term of
this Agreement.
"Basic Rent Payment Date" shall mean the last day of each month during the
term of this Agreement, commencing at the end of the first full calendar month
following the substantial completion of construction.
<PAGE>
"Board of Directors", with respect to the Lessee or the Lessor, means
either the Board of Directors or any duly authorized committee of that Board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Lessee or Lessor, as the case may be, to have
been duly adopted by its Board of Directors and to be in full force and effect
on the date of such certification.
"Box Handling Fee" shall mean the fee payable to VF in accordance with the
Marketing and Sales Agreement to be entered into between the Lessee and VF, as
it may be amended, supplemented or otherwise modified with the prior written
consent of the Lessor and in effect from time to time, pursuant to which VF will
provide certain marketing and sales services to the Lessee, which Marketing
Agreement shall be approved in advance by the Lessor in writing.
"Budget" shall have the meaning specified in Section 12.04.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banks are authorized to be closed in New York, New York, Denver,
Colorado or Charlotte, North Carolina.
"Cash Flow" shall mean for any Lease Year (a) the sum of (i) gross revenues
from the sale of Product, plus (ii) all amounts received by the Lessee pursuant
to the Line of Credit Facility Agreement, plus, (iii) insurance proceeds
received by the Lessee from policies of the type described in subsection
8.01(a)(iii) or any other insurance proceeds paid with respect to the loss or
damage to Product, plus, (iv) revenues received pursuant to Article XVII plus
(v) all other revenues and income of the Facility, minus (b) a Greenhouse
Expenses paid in the ordinary course of business (but excluding any Greenhouse
Expenses that are prepaid by the Lessee).
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. ss. 9601 et seq.), as presently in effect and as
the same may hereafter be amended, together with any regulations pursuant
thereto.
"Closing Date" shall mean the date this Agreement is executed and delivered
by the parties.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
comparable successor law.
"Default" means any event or condition which, with notice or lapse of time
or both, would become an Event of Default.
"Equipment" shall mean the equipment and other property described in Part I
of Schedule 1.01(a) of this Agreement, together with any Parts which may from
time to time be incorporated in such equipment or other property and title to
which shall have vested in the Lessor.
"Effective Date" shall have the meaning specified in Section 18.11.
"Environment Regulations" means any and all laws, rules, orders,
regulations, statutes, ordinances, codes, decrees or requirements of any
Governmental Authority exercising
2
<PAGE>
jurisdiction over the Site, the Greenhouse Facility (including Lessorship,
construction or operation thereof), the Lessee, or the Borrower relating to the
environment or natural resources, or to emissions, discharges, or releases or
threatened releases of Hazardous Substances, or to protection of the environment
or natural resources, or to emissions, discharges, Releases or threatened
Releases of Hazardous Substances, including but not limited to the CERCLA, the
Hazardous Materials Transportation Act (49 U. S.C. ss. 1801 et seq.), the
Resource Conservation and Recovery Act (42 U. S. C. ss. 6901 et Ties.), the
Toxic Substances Control Act (1 5 U. S. C. ss. 2601 et seq.), the Clean Air Act
(42 U.S.C. ss. 7401 et seq.),.the Federal Water Pollution Control Act (33 U.S.C.
ss. 1251 et seq.), and the Safe Drinking Water Act (42 U.S. C. ss.300f et seq.),
all as presently in effect and as the same may hereafter be amended, any
regulation pursuant thereto, and also including, but not limited to, any
obligations, duties, or requirements arising from or related to Hazardous
Substances under common law.
"Event of Default" shall have the meaning specified in Article XIII of this
Agreement.
"Event of Loss" shall mean (a) the actual or constructive total loss of all
or substantially all the Facility, or the condemnation, confiscation or seizure
of, or requisition of title to, or requisition by any Governmental Authority of
the use of, all or substantially all the Facility, or (b) the loss, destruction
or damage of or condemnation, confiscation or seizure of, or requisition by any
Governmental Authority of the use of, such portion of the Facility as to render
the Facility unable to operate at substantially the same level of operation as
prior to the occurrence of such event, unless (x) it is feasible to restore,
rebuild or replace the affected portion of the Facility and (y) in the opinion
of the Lessor, sufficient funds are or will be available to the Lessor (i) to
restore, rebuild or replace the affected portion of the Facility so that the
Facility will be able to operate at substantially the same level of operation as
prior to the occurrence of such event within twelve (12) months after the
occurrence of such event and (ii) to pay all Rent until such restoration,
rebuilding or replacement is completed.
"Expense" shall have the meaning specified in Section 16.01 of the Lease
Agreement.
"Facility" shall mean the Lessor's rights in and to the Plant, the Site and
the Equipment.
"Fee Mortgagee" shall have the meaning set forth in Section 11.03(c)
hereof.
"Fees, Taxes and Other Charges" shall have the meaning specified in Section
16.02 of this Lease Agreement.
"GDP/IPD" shall have the meaning specified in Section 3.05 of this Lease
Agreement.
"Greenhouse Expenses" shall mean the sum (without duplication) of (a)
direct labor costs paid, (b) seed expense paid, (c) packaging supplies expense
paid, (d) fertilizer and chemical expenses paid, (e) biological control,
including bees, expense paid, (f) freight expense paid, (g) growing medium and
supplies expense paid, (h) carbon dioxide expense paid, (i) utility (including
hot water, electricity and natural gas) expense paid, (j) recurring maintenance
expense paid, including repairs and replacements paid, (k) Management,
Marketing, and Box Handling Fees paid, (l) Basic Rent paid, (m) insurance
premiums and property taxes paid, (n) principal and interest paid with respect
to the Line of Credit Facility Agreement and (o) all other cash expenses paid
relating to the operation of the Facility, to the extent contained in the
Budget; provided;
3
<PAGE>
however, that there shall be excluded from Greenhouse Expenses (a) all expenses
to be paid from the Management Fee, (b) all payments with respect to federal,
state and local income taxes, (c) payment of principal, interest and fees with
respect all indebtedness of the Lessee for non capital expenditures other than
the Line of Credit Facility Agreement, (d) payment of principal, interest, lease
payments and fees with respect to the acquisition by the Lessee of capital
equipment, except to the extent consented to in advance by the Lessor in
writing, and (e) expenses paid by the Lessee pursuant to Section 16.01.
"Greenhouse Facility" shall mean the approximately 20-acre greenhouse
located on the Site.
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government,
"Hazardous Substances" shall mean and include those elements or compounds
which are contained in the lists of hazardous substances or wastes now or
hereafter adopted by the United States Environmental Protection Agency (the
"EPA") or the lists of toxic pollutants designated now or hereafter by Congress
or the EPA or which are defined as hazardous, toxic, pollutant, contaminant,
infectious or radioactive by CERCLA, by any Environmental Requirement, or by any
so called federal, state or local "Superfund" or "Superlien" laws, or by any
other Federal, state or local statute, law, ordinance, code, rule, regulation,
order or decree regulating, relating to, or imposing liability or standards of
conduct concerning, any hazardous, toxic or dangerous waste, substance or
material, as now or at any time hereafter in effect, including, without
limitation, the Air Pollution Control Act, Va. Code Ann. ss. 10.1-1300 et seq.,
the Solid Waste Management Act, Va. Code Ann. ss. 10.1-1400 et seq., the State
Water Control Law, Va. Code Ann. ss. 2.1-44.2 et seq., or any and all rules and
regulations now or hereafter promulgated under any or all of the foregoing,
together with any other substance the use, handling, generation, treatment,
storage, disposal, treatment, presence or Release of which could result in the
imposition of liability under any of the aforementioned laws, statutes,
ordinances, codes, rules, regulations, orders or decrees.
"Incorporated" shall have the meaning specified in Section 6.02 of the
Lease Agreement.
"Indemnitee" shall mean the Lessor and the respective successors, assigns,
officers, directors, employees and agents of any thereof
"Inspecting Parties" shall have the meaning specified in Section 12.01 of
this Lease Agreement.
"Lien" shall mean any lien, mortgage, encumbrance, pledge, charge, lease,
easement, servitude, right of others or security interest of any kind, including
any thereof arising under any conditional sale or other title retention
agreement.
"Management Agreement" shall mean the Management, Operation, Maintenance,
Marketing and Sales Agreement to be entered into between the Lessee and APD, as
it may be amended, supplemented or otherwise modified with the prior written
consent of the Lessor and in effect from time to time, pursuant to which APD
will provide certain management, operation,
4
<PAGE>
maintenance, services to the Lessee, which Management Agreement shall be
approved in advance by the Lessor in writing.
"Management Fee" shall mean the management fee paid to APD pursuant to the
Management Agreement for (a) all internal accounting services of the Lessee, (b)
salary and other benefits paid to the Lessee's grower and sales representatives,
(c) all Internal management services performed by principals of the Lessee or
APD and (d) a direct out-of-pocket expenses (including travel and living
expenses) paid in connection with the performance of the services described in
clauses (a), (b) and (c).
"Marketing Agreement" shall mean the Marketing and Sales Agreement to be
entered into between the Lessee and VF, as it may be amended, supplemented or
otherwise modified with the prior written consent of the Lessor and in effect
from time to time, pursuant to which VF will provide certain marketing and sales
services to the Lessee, which Marketing Agreement shall be approved in advance
by the Lessor in writing.
"Marketing Fee" shall mean the marketing fee paid to VF pursuant to the
Marketing Agreement for (a) all sales efforts related to identifying and calling
on actual and potential customers, (b) marketing efforts related to identifying
the best methods to sell the product, (c) evaluating the credit quality of all
customers, (d) accepting the risk of non collection from all customers, (e)
working cooperatively with the Lessee to ensure the highest net return for the
greenhouse products.
"Metering Devices" shall mean all necessary meters and associated equipment
to be utilized in measuring the steam output of the Power Station and for
measuring the condensate return to the Power Station.
"Nonseverable" shall describe (i) with respect to any Alteration, an
Alteration which is a "nonseverable improvement" within the meaning of Revenue
Procedure 79-48 and (ii) with respect to any part not constituting an Alteration
or part of an Alteration, a part which cannot be readily removed from the
equipment without causing material damage to the Facility.
"Officer's Certificate." means a certificate signed by a Responsible
Officer of the party required to give such certificate.
"Operating Manual" shall mean such operating manuals as are ordinarily
maintained by the Lessee with respect to the Facility and any such manuals
provided by any manufacturer of any component of the Facility.
"Lease Year" shall mean each period commencing on January I and ending on
December 31 during the term of this Lease Agreement.
"Lease Documents" shall mean this Lease Agreement and the Line of Credit
Facility Agreement.
"Lessee" shall mean Village Farms of Colorado, Inc., a Delaware
corporation, and its permitted successors and permitted assigns.
5
<PAGE>
"Overdue Rate" shall mean an interest rate equal to the rate announced from
time to time by First Union National Bank of North Carolina as its prime or
reference rate plus two percent (2%) per annum.
"Lessor" shall mean Ripe Touch Greenhouses, Inc., a Delaware corporation,
and its successors and permitted assigns.
"Parts" shall have the meaning specified in Section 6.02.
"Permitted Liens" shall mean (a) the respective rights and interests of the
Lessor and the Lessee as provided in the Lease Documents, (b) liens for taxes
either not yet due or being contested in good faith and by appropriate
proceedings, so long as such proceedings shall not involve any danger of the
sale, forfeiture or loss of any part of the Facility, title thereto or any
interest therein and shall not interfere with the use or disposition of the
Facility or the payment of Rent, (c) materialmen's, mechanics', workers,
repairmen's, employees' or other similar Liens arising in the ordinary course of
business for amounts either not yet due or being contested in good faith and by
appropriate proceedings so long as such proceedings shall not involve any danger
of the sale, forfeiture or loss of any part of the Facility, title thereto or
any interest therein and shall not interfere with the use or disposition of the
Facility or the payment of Rent, and (d) Liens arising out of judgments or
awards with respect to which at the time an appeal or proceeding for review is
being prosecuted in good faith and either which have been bonded or for the
payment of which adequate reserves shall have been provided.
"Person" shall mean individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof
"Plans and Specifications" shall mean the plans and specifications for the
Plant and the Equipment identified as such, as the same may be revised from time
to time in accordance with the terms of this Agreement.
"Plant" shall mean those buildings and other properties specifically
described in Part 2 of Schedule 1.01(a) to the Lease Agreement, together at all
times with any and all Parts which may from time to time be incorporated in the
Plant.
"Power Station" means the electric power generation facility located in
Calhan, Colorado, which Lessor will construct and own.
"Power Station Piping" shall mean the pump and piping system necessary for
the return of water from the detention pond on the Site to the Power Station.
"Product" shall mean tomatoes or any other agricultural product approved in
writing by the Lessor.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment (including without limitation the abandonment or discarding of
barrels, containers or other closed or open receptacles containing any Hazardous
Substances or pollutant or contaminant).
6
<PAGE>
"Rent" shall mean Basic Rent and Supplemental Rent, collectively.
"Responsible Officer" shall mean the Chairman or Vice Chairman of the Board
of Directors, the Chairman or Vice Chairman of the Executive Committee of the
Board of Directors, the President, any Vice President (whether or not designated
by a number or a word or words added before or after the title "Vice President",
including any Assistant Vice President), the Secretary, any Assistant Secretary,
the Treasurer, any Assistant Treasurer or any other officer of any of them
customarily performing functions similar to those performed by any of the above
designated officers.
"Site" shall mean the land described in Part 3 of Schedule 1.01(a) of the
Lease Agreement.
"Steam Equipment" shall mean the heat exchange systems, cooling tower,
thermal storage tank, steam and condensate lines and the other equipment
required for the conversion of steam into a form usable in the heating and
cooling of the Greenhouse Facility and the lines required to deliver the hot
water from such equipment to the Greenhouse Facility.
"Steam Interconnection Facilities" shall mean the fines and other devices
necessary to interconnect the steam and condensate lines of the Power Station
with the Steam Equipment.
"Storm Water Piping" shall mean the pump and piping system and other
equipment necessary for the return of storm water runoff from the Greenhouse
Facility to the detention pond on the Site.
"Supplemental Rent" shall mean the rent payable pursuant to Section 3.02 of
this Agreement.
"Supplemental Basic Rent Payment Date" shall mean the last date of each
January, April, July and October during the term of this Agreement and the
Termination Date commencing April 30, 1999
"Term" shall mean (a) the period commencing on July 1, 1998 and ending on
December 3 1, 2008 or (b) such shorter period as may result from earlier
termination of this Lease Agreement as provided herein.
"Termination Date" shall mean the last day of the Term.
"Trust Property" has the meaning given in Section 1.1 of the Deed of Trust.
"VF" shall mean Village Farms, Inc., a Delaware corporation.
"Water Charge" shall have the meaning specified in Section 3.05 of this
Lease Agreement.
Section 1.02. Construction of References. All references in this instrument
to designated sections and other subdivisions are to designated sections and
other subdivisions of this
7
<PAGE>
instrument, and the words "herein", "hereof' and "hereunder" and other words of
similar import refer to this Lease Agreement as a whole and not to any
particular section or other subdivision.
Except as otherwise indicated, all the agreements or instruments herein
defined shall mean such agreements or instruments as the same may from time to
time be supplemented or amended or the terms thereof waived or modified to the
extent permitted by, and in accordance with, the terms thereof.
ARTICLE II
OPERATION OF FACILITY
As of the later to occur of (i) January 1, 1999 and (ii) Notice of
Substantial Completion (as defined in the General Contractor's Agreement) of the
Plant, subject to all the terms and conditions of this Agreement, the Lessor
shall provide and lease the Facility to the Lessee, and the Lessee shall operate
and lease, and hereby as of the Effective Date does operate and lease, the
Facility from the Lessor for the Term.
ARTICLE III
RENT AND SERVICES
Section 3.01. Basic Rent. Subject to adjustment as provided below, during
the Term, the Lessee shall pay Basic Rent to the Lessor in arrears on each Basic
Rent Payment Date for the Facility in an amount equal to the amount set forth on
Schedule 3.01 for such Basic Rent Payment Date (in the case of the last Basic
Rent Payment Date if such date is other than a Basic Rent Payment Date, such
Basic Rent shall be prorated based on the number of days during which the Lessee
leased the Facility). Basic Rent shall be increased in accordance with any
agreement reached in connection with the payment by the Lessor of the costs of
any Alterations in accordance with Section 6.06 hereof.
Section 3.02. Supplemental Rent. In addition to Basic Rent, the Lessee
shall pay to the Lessor Supplemental Rent in an amount equal to the percentage
of Cash Flow set forth on Schedule 3.02 during the Term. Supplemental Rent shall
be payable for each calendar quarter on the Supplemental Rent Payment Date
immediately following the end of such calendar quarter.
Section 3.03. Late Payment. If any Rent or any other amount required to be
paid hereunder shall not be paid when due, the Lessee shall pay to the Lessor
interest (to the extent permitted by law) on such overdue amount from and
including the due date thereof to but excluding the date of payment thereof
(unless such payment shall be made after 11:00 A.M., local time, in which case
such date of payment shall be included) at the Overdue Rate. If any Rent shall
be paid on the date when due, but after I 1:00 A.M., local time, at the place of
payment, interest shall be payable as aforesaid for one day.
Section 3.04. Net Lease; Setoff, Etc. This Lease Agreement is a net lease
and, notwithstanding any other provision of this Lease Agreement, it is intended
that Rent and all other amounts payable by Lessee hereunder to Lessor shall be
paid without notice, demand, defense and without abatement, suspension, or
deferment. Lessor shall be responsible for all property taxes associated with
the real property and any improvements thereon. In the event that Lessor is
unable as provided for in Section 3.05, then Lessee shall have unable to supply
any or
8
<PAGE>
all of the the right to setoff against any Base Lease or Supplemental Lease
payments all amounts disbursed to provide such Utilities to operate the
facility.
Section 3.05. Utilities. The Lessor agrees to provide to the Lessee during
the Term, all of the water, electricity, and heat requirements (collectively the
"Utilities") for the operation of the Facility at no cost to the Lessee. In the
event that Lessor is unable to supply the Utilities for the operation of the
Facility to the Lessee, then the Lessee shall have the right of setoff in
accordance with Section 3.04 herein.
Section 3.06. Services Provided by Lessor. At the request of the Lessee,
the Lessor may, at its option, provide, at the Lessee's expense, general
maintenance services. The Lessor shall charge the Lessee an amount equal to its
actual cost in providing such services and shall invoice the Lessee for such
services monthly as incurred. Such invoices shall be payable within thirty (30)
days of invoice.
ARTICLE IV
DISCLAIMER OF WARRANTIES
THE FACILITY IS BEING PROVIDED AND LEASED PURSUANT TO THIS AGREEMENT ON AN
"AS-IS, WHERE-IS" BASIS. THE LESSOR HAS NOT MADE NOR SHALL BE DEEMED TO HAVE
MADE ANY REPRESENTATION OR WARRANTY, ENFRESS OR IMPLIED, AS TO THE TITLE, VALUE,
MERCHANTABILITY, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN, OPERATION,
ABSENCE OF LATENT DEFECTS OR FITNESS FOR USE OF THE FACILITY (OR ANY PART
THEREOF), OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO THE FACILITY (OR ANY PART THEREOF). It is agreed that
except as expressly provided herein all risks incident to the matters discussed
in the preceding sentence, as between the Lessor, on the one hand, and the
Lessee, on the other, are to be borne by the Lessee. The provisions of this
Article IV have been negotiated, and, except to the extent otherwise expressly
stated in this Agreement, the foregoing provisions are intended to be a complete
exclusion and negation of any representations or warranties by the Lessor,
express or implied, with respect to the Facility, that may arise pursuant to any
law now or hereafter in effect, or otherwise.
ARTICLE V
RESTRICTION ON LIENS
The Lessee shall not directly or indirectly create, incur, assume or suffer
to exist any Lien on or with respect to the Facility, title thereto or any
interest therein, except Permitted Liens, The Lessee shall promptly, at its own
expense, take such action as may be necessary duly to discharge or eliminate or
bond in a manner satisfactory to the Lessor any such Lien if the same shall
arise at any time. The Lessee further agrees that it shall pay or cause to be
paid on or before the time or times prescribed by law (after giving effect to
any applicable grace period) any taxes, assessments, fees or charges imposed on
the Lessee (or any affiliated or related group of which the Lessee is a member)
under the laws of any jurisdiction that, if unpaid, might result in any Lien
prohibited by this Lease Agreement.
9
<PAGE>
ARTICLE VI
OPERATION AND MAINTENANCE; ALTERATIONS,
MODIFICATIONS AND ADDITIONS
Section 6.01. Operation and Maintenance, The Lessee, at its own expense,
shall at all times operate, maintain, service and repair the Facility in
accordance with (a) prudent commercial operating maintenance practices,
including all manufacturers' warranty requirements to the extent such
requirements are made known to the Lessee, (b) the then current Operating
Manual, (c) except to the extent Section 6.11 hereof shall apply, all applicable
requirements of law and of any court and of any Governmental Authority
(including without limitation all zoning, environmental protection, pollution,
sanitary and safety laws, and all Environmental Requirements) noncompliance with
which would have a material adverse effect on the Lessee's right to operate the
Facility, the Lessee's business or financial condition or the rights of the
Lessor in the Facility or would, in the opinion of the Lessor, involve a
material risk of any of the items enumerated in Section 6.11 (i) through (iv),
and (d) all requirements contained in permits and licenses relating to the
Facility in effect from time to time during the Term. In connection therewith,
the Lessee shall (i) maintain the Facility in good operating condition, ordinary
wear and tear excepted, (ii) cause the Facility to continue to have the capacity
and functional ability to produce Product on a continuing basis, in normal
commercial operation, in a commercially efficient manner, (iii) comply with the
standards imposed by any insurance policies in effect at any time with respect
to the Facility or any part thereof, and (iv) bear the expense associated with
changes in permitting requirements relating to the Facility during the Term.
Section 6.02. Repair and Replacement. Except after the occurrence of an
Event of Loss, and except as provided below, the Lessee, at its own expense,
shall keep the Facility in good operating condition (reasonable wear and tear
excepted), and shall make all repairs, replacements and renewals of all
necessary or useful appliances, parts, instruments, accessories and
miscellaneous property of whatever nature (collectively, the "Parts") necessary
to maintain the Facility in good operating condition. The Lessee shall be
responsible for making (a) all structural and nonstructural repairs and
replacements to the Facility up to fifteen thousand dollars ($15,000) in the
aggregate in each Lease Year and (b) all repairs and replacements, with the
exception of (i) the greenhouse structure, including the ventilation system;
(ii) the heating system, including pumps, boilers, expansion vessels and piping;
(iii) the curtain system; (iv) the C02 system- (v) the irrigation system; and
(vi) the cold storage facility; provided that notwithstanding anything contained
herein to the contrary, the Lessee shall be responsible for all repair and
replacements relating to normal wear and tear. The Lessor shall be responsible
for making all necessary structural and nonstructural repairs in excess of
fifteen thousand dollars ($15,000) in the aggregate in any Lease Year other than
repairs and replacements of items referred to in clause (b) above; provided,
however, that if such repairs or replacements are necessitated by the negligent
or willful acts of the Lessee, its employees, agents or invitees, then the cost
of such repairs or replacements shall be borne by the Lessee. In the ordinary
course of maintenance, service, repair or testing, the Lessee may remove any
Parts, but the Lessee shall cause such Parts to be replaced as promptly as
practicable. All replacement Parts shall be free and clear of all Liens except
Permitted Liens and shall be in at least as good operating condition as, and
shall have a value and utility at least equal to, the Parts replaced, assuming
such replaced Parts were in the condition and repair required to be maintained
by the terms hereof
10
<PAGE>
Section 6.03. Alterations Required by Law. The Lessor shall make such
Alterations to the Facility as may be required from time to time to meet the
requirements of and be in conformity with all applicable requirements of law, of
any court and of any Governmental Authority and the Lessee will maintain the
same in proper operating condition under such laws and requirements, except to
the extent Section 6.11 hereof shall apply.
Section 6.04. Plans and Specifications, Operating Manual. As soon as
practicable following the Effective Date, the Lessor shall provide to the Lessee
the Operating Manual and a set of Plans and Specifications (which shall in the
aggregate reflect the Facility as of the Effective Date). The Lessee shall
maintain throughout the Term, and keep on file at the Facility, a current
Operating Manual and a set of Plans and Specifications (which shall in the
aggregate reflect all Parts incorporated in the Facility and all Alterations
made pursuant to this Article VI) with respect to the Facility. Upon any
expiration of the Term or the exercise of remedies pursuant to Article XIII
hereof, the Lessee shall deliver to the Lessor a complete set, current as of the
date of such return or exercise of remedies, of such Plans and Specifications
and all work drawings and similar documents with respect to the operation of the
Facility. The Plans and Specifications shall not be revised, amended or modified
in any manner which would adversely affect the operating capacity, cost
efficiency, utility, reliability or value of the Facility.
Section 6.05. Operational Alterations. In addition to the foregoing, the
Lessee, at its own expense (subject to Section 6.06 hereof), may from time to
time make such Alterations to the Facility as the Lessee may deem desirable in
the proper conduct of its business, which shall be approved by the Lessor in
advance, provided that such Alterations shall not adversely affect the operating
capacity, cost efficiency, utility, reliability or value of the Facility.
Section 6.06. Lessor's Option to Pay Costs of Alterations. If requested to
do so by the Lessee, the Lessor may at its option pay for any Alteration title
to which will vest or has vested in the Lessor pursuant to Section 6.08 hereof,
subject to agreement as to adjustments in Basic Rent in accordance with Section
3.01 hereof.
Section 6.07. Reports of Alterations. On or before March 15 of each
calendar year commencing in 1999 and on the date on which the Term shall expire,
the Lessee shall furnish the Lessor with a report stating the total cost (as
determined in accordance with the Lessees normal accounting practices) of all
Alterations which are Nonseverable and which were not financed pursuant to
Section 6.06 hereof and which are not described in clause (i) or (ii) of Section
4(4).03(c) of Revenue Procedure 75-21 as modified by Revenue Procedure 79-48 and
which were made during the period from the date of this Lease Agreement to the
end of the preceding calendar year in the case of the first such report or
during the period from the end of the period covered by the last previous report
to one month prior to such report in the case of subsequent reports and briefly
describing all such Alterations. Each such report shall be accompanied by an
Officer's Certificate stating that no Alteration has been made that would
adversely affect the operating capacity, cost efficiency, utility, reliability
or value of the Facility or the ability of the Lessee to perform its obligations
hereunder.
Section 6.08. Title to Parts. Title to each Part (including any Alteration)
incorporated in the Facility pursuant to this Article VI shall without further
act vest in the Lessor and shall be
11
<PAGE>
deemed to constitute a part of the Facility and be subject to this Lease
Agreement in the following cases:
(a) such Part shall be in replacement of or in substitution for, and
not in addition to, any Part originally incorporated in the Equipment or
any Part title to which shall have vested in the Lessor pursuant to this
Section 6.08-,
(b) such Part shall be required to be incorporated in the Facility
pursuant to the terms of Sections 6.02 and 6.03 hereof,
(c) such Part shall be Nonseverable; or
(d) such Part shall be paid for by the Lessor.
If such Part or Parts are incorporated in the Facility pursuant to this
Article VI and are not within any of the categories set forth in clauses (a)
through (d) above, then title to such Part or Parts shall vest in the Lessee,
subject to the rights of the Lessor provided in Section 6.09 hereof.
All Parts (other than Parts the title to which is vested in the Lessee in
accordance with the preceding sentence) at any time removed from the Facility
shall remain the property of the Lessor, no matter where located, until such
time as such Parts shall be replaced by Parts that have been incorporated in the
Facility and that meet the requirements for replacement Parts specified in
Section 6.02 hereof. On or before March 15 of each calendar year commencing in
1999 and on the date on which the Term shall expire, the Lessee shall furnish
the Lessor with a report which provides a breakout of the total cost (as
determined in accordance with the Lessee's normal accounting practices) of all
Parts the title to which is vested in the Lessee and all parts the title which
is vested in the Lessor as provided in this Section 6.08 (other than those Parts
that were paid for by the Lessor) and which were incorporated in the Facility
during date of this Lease Agreement to the end of the preceding calendar year in
the case of the first such report or during the period from the end of the
period covered by the last previous report to one month prior to such report in
the case of subsequent reports and briefly describing all such Parts. Each such
report shall be accompanied by an Officer's Certificate stating that no Part has
been incorporated in the Facility that would adversely affect the operating
capacity, cost efficiency, utility, reliability or value of the Facility or the
ability of the Lessee to perform its obligations hereunder. Immediately upon any
replacement Part becoming incorporated in the Facility as provided in Section
6.02 hereof, without further act, (a) title to the removed Part shall thereupon
vest in such Person as shall be designated by the Lessee, free and clear of all
rights of the Lessor, (b) title to such replacement Part shall thereupon vest in
the Lessor and (c) such replacement Part shall become subject to this Lease
Agreement and be deemed part of the Facility for all purposes hereof to the same
extent as the parts originally incorporated in the Facility.
Section 6.09. Removal of Parts. All Parts incorporated in the Facility to
which the Lessee (or any other Person other than the Lessor) shall have title
pursuant to the provisions of Section 6.08 hereof may, (a) subject to any right
of the Lessor to use such Part as provided herein and (b) so long as such
removal shall be permitted by this Agreement and shall not result in any
violation of any law or governmental regulation and (c) so long as no Default or
Event of Default shall have occurred and be continuing, be removed at any time
by the Lessee (or such other
12
<PAGE>
Person) and shall be removed by the Lessee (or the Lessee shall cause such other
Person so to remove such Parts) prior to the delivery of the Facility to the
Lessor in accordance with the provisions of the Lease Agreement, other than upon
the termination of this Lease Agreement pursuant to Article XIV hereof, and
title to such Parts shall at all times remain in the Lessee (or such other
Person).
Section 6.10. Parts Free and Clear of Liens. Any Part title to which shall
vest in the Lessor pursuant to Section 6.08 hereof shall be free and clear of
all Liens except Permitted Liens.
Section 6.11. Permitted Contests. If, to the extent and for so long as (a)
a test, challenge, appeal or proceeding for review of any applicable requirement
of law or of a Governmental Authority relating to the operation or maintenance
of the Facility shall be prosecuted in good faith by the Lessee or (b)
compliance with such requirement shall have been excused or exempted by a
nonconforming use permit, waiver, extension or forbearance, the Lessee shall not
be required to comply with such requirement but only if such test, challenge,
appeal, proceeding or noncompliance shall not, in the opinion of the Lessor,
involve a material risk of (i) foreclosure, sale, forfeiture or loss of, or
imposition of any Lien other than a Permitted Lien on, any part of the Facility
or of impairment of the operation of the Facility, (H) extending the ultimate
imposition of such requirement beyond the termination of the Term (unless there
shall have been furnished indemnification satisfactory to the Lessor), (iii) any
material claim against the Lessor (unless there shall have been furnished
indemnification satisfactory to the Lessor) or (iv) the nonpayment of Rent.
Section 6.12. Operating Logs. The Lessee shall keep maintenance and repair
reports in sufficient detail to indicate the nature and date of major work done.
Such reports shall be kept on file by the Lessee at its offices or at the
Facility for as long as they would be kept by a prudent Lessor or Lessee of the
Facility (but in no event less than three (3) years following the end of the
Term), and shall be made available to the Lessor upon reasonable request.
Section 6.13. Return of Facility. Upon termination of this Agreement, the
Lessee, at its own expense, shall return the Facility to the Lessor by
surrendering the same into the possession of the Lessor free and clear of all
Liens and in the condition required by Section 6.01 hereof.
ARTICLE VII
IDENTIFICATION
The Lessee shall maintain throughout the Term in a prominent location at
each entrance to each of the buildings comprising the Facility at least one (1)
plate or other clear and durable marking stating "THE EQUIPMENT AND ALL RELATED
EQUIPMENT IN THIS FACILITY IS OWNED BY RIPE TOUCH GREENHOUSES, INC.," in letters
not less than one-half inch in height. On the Closing Date the Lessee shall
certify that it has complied with the preceding sentence. Except as provided
herein or as otherwise directed by the Lessor, the Lessee shall not allow the
name of any Person other than that of the Lessee to be placed on any Part of the
Facility as a designation that might reasonably be interpreted as a claim of
Lessorship or right to possession or use thereof.
ARTICLE VIII
13
<PAGE>
INSURANCE
Section 8.01. Coverage.
(a) Subject to subsection 8.01(b), the Lessee shall maintain:
(i) property damage insurance with respect to the Facility insuring
against loss or damage in an amount equal to the "full insurable value"
(which as used herein shall mean the full replacement value, including the
costs of debris removal, which amount shall be determined annually) from
(x) fire and normal extended coverage perils customarily included in
policies available with respect to property comparable to the Facility and
(y) flood, earthquake and other per-Hs customarily included under
Difference in Conditions policies so available;
(ii) "boiler and machinery" insurance in an amount equal to the full
insurable value with respect to damage (not insured against pursuant to
subsection 8.01(a)(i) above) to the machinery, plant, equipment, storage
facilities or similar apparatus included in the Facility from risks
normally insured against under boiler and machinery policies;
(iii) comprehensive commercial general liability and property damage
insurance (including, but not limited to, coverage for any construction on
or about the Premises) covering the legal liability of Lessee against all
claims for any bodily injury or death of persons and for damage to or
destruction of property occurring on, in or about the Premises and the
adjoining streets, sidewalks and passageways and arising out of the use or
occupation of the Premises by Lessee. Coverages provided by the foregoing
insurance policy shall include (but not be limited to) all of the coverages
commonly referred to by the insurance industry as: Premises/Operations
Liability; Products/Completed Operations Liability; Lessors and Contractors
Protective Liability; Blanket Contractual Liability; Broad Form Property
Damage Liability; Personal Injury, Stop-Gap or Employers' Contingent
Liability; Explosion, Collapse and Underground Liability; Automobile
Liability, including coverage for Owned, Non-Owned, Hired, or Borrowed
Vehicles and "Mobile Equipment". The foregoing insurance shall apply as
primary insurance, irrespective of any insurance which Lessor or Master
Landlord may carry and shall include a "Cross Liability" clause
(Severability of Interests). The foregoing insurance shall have a combined
single limit of not less than $5,000,000, with separate aggregate for
product and general liability, which policy shall be written on an
occurrence basis;
(iv) (x) workers' compensation insurance or occupational disability
benefits insurance (in at least the statutory amounts) and such other forms
of insurance which the Lessee is required by law to maintain or cause to be
maintained, covering loss resulting from injury, sickness, disability or
death of the employees of the Lessee and (y) employers' liability insurance
in an amount not less than $500,000 single limit;
14
<PAGE>
(v) comprehensive automobile liability insurance against claims of
personal injury (including bodily injury and death) and property damage
covering all owned, leased, non-owned and hired vehicles with a $ 1, 000,
000. 00 minimum limit per occurrence for combined bodily injury and
property damage liability; and
(vi) such other insurance with respect to the Facility in such amounts
and against such insurable hazards as is usually carried by Persons
operating similar properties in the same general region, but any loss of
the type customarily covered by the policies described in subsections
8.01(a)(i), (ii) and (iii), whether actually covered in whole or in part by
such policies, shall be the responsibility of the Lessee and the absence of
such coverage shall not relieve the Lessee from any of its obligations
under any of the Lease Documents;
provided, however, that the amount of insurance coverage specified in
subsections 8.01(a)(i) and (a)(ii) above with respect to the Facility shall not
in any event be less than the replacement cost of the Facility, as determined by
the Lessor, including agreed amount waiving coinsurance.
All insurance policies carried in accordance with Section 8.01 shall be
maintained with Florists Mutual Insurance Company or any other insurers with a
Best rating of A minus or better and a Best size rating of IX or better (except
for policies underwritten by Lloyds of London and approved English companies
acceptable to the Lessor) approved by the Lessor and not disqualified from
insuring risks in Colorado.
Any insurance policies carried in accordance with this Section 8.01 shall
be subject to (i) exclusions of the sort existing in the insurance policies in
effect on the Closing Date and (ii) such deductible amounts and retentions as
shall not exceed the following amounts specified with respect to such policies:
(1) Property Damage......................................$25,000;
(2) Boiler and Machinery.................................$25,000;
and
(3) Public Liability.....................................$25,000.
Notwithstanding anything to the contrary in this Article VIU, the Lessee
shall at all times ensure that. the insurance it maintains with respect to the
Facility is not less extensive or inclusive in type or amount of coverage than
that maintained by it in accordance with its standard corporate minimum practice
with respect to other similar facilities.
(b) During the Term and unless the Lessor gives the Lessee sixty (60) days
prior written notice, the Lessor shall provide the insurance coverage specified
in subsection 8.01(a)(i) and 8.01(a)(ii) at the Lessor's cost.
15
<PAGE>
Section 8.02. Policy Provisions. Any insurance policy maintained by the
Lessee pursuant to Section 8.01 hereof shall:
(a) specify Lessor, affiliates, the Lessor and Lessor's affiliates as
additional insured (the "Additional Insured"), as its respective interests
may appear;
(b) specify Fee Mortgagee as mortgagee and loss payee;
(c) provide, except in the case of public liability insurance and
workers' compensation insurance, that all loss or occurrence shall be
adjusted with the Lessee and Lessor, unless an Event of Default shall have
occurred and be continuing, in which case such loss or occurrence shall be
adjusted with the Lessor, and payable (x) in respect of payments not
exceeding $25,000, provided no Default or Event of Default shall have
occurred or be continuing, to the Lessee, and (y) in all other
circumstances, to the Lessor;
(d) include effective waivers by the insurer of all claims for
insurance premiums or commissions or (if such policies provide for the
payment thereof) additional premiums or assessments against any Additional
Insured;
(e) provide that in respect of the interests of the Additional
Insured, such policies shall not be invalidated by any action or inaction
of the Lessee or any other Person and shall insure the Additional Insured
regardless of, and any claims for the losses shall be payable
notwithstanding:
(i) the occupation or use of the Facility for purposes more hazardous
than permitted by the terms of the policy;
(ii) any foreclosure or other proceeding or notice of sale relating to
all or any portion of the Facility; or
(iii) any change in the title to or Lessorship of all or any portion
of the Facility.
(f) provide that such insurance shall be primary insurance and that
the insurers under such insurance policies shall be liable under such
policies without right of contribution from any other insurance coverage
effected by or on behalf of any Additional Insured under any other
insurance policies covering a loss that is also covered under the insurance
policies maintained by the Lessee pursuant to this Article VIII and shall
expressly provide that a provisions thereof, except the limits of liability
(which shall be applicable to all insureds as a group) and liability for
premiums (which shall be solely a liability of the Lessee), shall operate
in the same manner as if there were a separate policy covering each
insured;
(g) provide that any cancellation thereof or material adverse change
therein shall not be effective as to each of the Additional Insured until
at least sixty (60) days after receipt by such Additional Insured of
written notice thereof,
16
<PAGE>
(h) waive any right of subrogation of the insurers against the
Additional Insured, and waive any right of the insurers to any setoff or
counterclaim or any other deduction, whether by attachment or otherwise, in
respect of any liability of the Additional Insured; and
(i) subject to Section 8.01 hereof, be reasonably satisfactory to the
Lessor, and Fee Mortgagee in all other material respects.
Section 8.03. Evidence of Insurance. The Lessee shall deliver to each of
the Additional Insured at least two (2) days before the Effective Date copies of
all policies of insurance required hereby and, on the date this Lease Agreement
is executed and on each December 31 thereafter during the Term, certificates of
insurance, copies of all policies of insurance evidencing the provisions
described in Section 8.02(a) hereof executed by the insurer by its duly
authorized agent, and a certification from the Lessee's insurance agent or
broker to the effect that all premiums required to have been paid have been paid
in full.
Section 8.04. No Duty of Lessor to Verify. No provision of this Article
VIII or any provision of any other Operative Document shall impose on the Lessor
any duty or obligation to verify the existence or adequacy of the insurance
coverage maintained by the Lessor be responsible for any representation or
warranty made by or on behalf of the Lessee to any insurance company or
underwriter.
ARTICLE IX
LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE
Section 9.01. Occurrence of Event of Loss. If an Event of Loss shall occur
the Lessee shall give the Lessor prompt written notice of such occurrence and
the date thereof Unless the Lessor agrees in writing within thirty (30) days
after such occurrence to restore, rebuild or replace the Facility in accordance
with the provisions contained in the definition of "Event of Loss," then this
Agreement shall terminate effective on the thirtieth day following the
occurrence of the Event of Loss. Any payments (except for payments under
insurance policies maintained by the Lessee other than pursuant to Article VIII
hereof) received at any time by the Lessor or by the Lessee from any
Governmental Authority or other Person as a result of the occurrence of an Event
of Loss shall be retained by the Lessor or promptly paid to the Lessor by the
Lessee; provided, however, that so long as no Default or Event of Default shall
have occurred and be continuing, the Lessee may retain any proceeds of
requisition of use payments made by any Governmental Authority and attributable
to the Facility for a period equal to the then current Term.
Section 9.02. Repair of Loss or Destruction.
(a) In the event of loss or destruction of all or a portion of the
Facility which (x) does not constitute an Event of Loss or (y) constitutes
an Event of Loss but the Lessor agrees to restore, rebuild or replace the
Facility, then the Lessor shall give prompt notice thereof to the Lessee,
and the Lessor, at its own cost and expense, shall promptly repair, replace
and rebuild the Facility, at least to the extent of the value and as nearly
as practicable to the character of the Facility existing immediately prior
to such occurrence;
17
<PAGE>
provided, however, that the Lessee shall pay the difference, if any,
between the insurance proceeds received by the Lessor as a result of such
loss or destruction and the costs and expenses incurred by the Lessor in
restoring, rebuilding or replacing the Facility if the loss or destruction
thereof resulted from the negligent, willful, reckless or wanton act or
failure to act of the Lessee, its employees, agents, invitees or
independent contractors.
(b) Except as provided in Section 9.01, this Agreement shall not
terminate or be affected in any manner by reason of the destruction or
damage in whole or in part of the Facility, or by reason of the
untenantability of the Facility, and the Rent reserved in this Agreement
and all other charges payable hereunder shall be paid by the Lessee in
accordance with the terms, covenants and conditions of this Agreement,
without abatement, diminution or reduction.
ARTICLE X
INTEREST CONVEYED TO LESSEE
This Lease Agreement is an agreement of lease and does not convey to the
Lessee any right, title or interest in or to the Facility except as an Lessee.
ARTICLE XI
ASSIGNMENT AND SUBLEASE, LOCATION
Section 11.01. Assignment and Sublease. The Lessor shall be permitted to
assign this Agreement and any and all of its right, title or interest in, to or
under this Agreement, voluntarily or by operation of law, without the consent of
the Lessee. The Lessee may not sublease the Facility or any part thereof or
assign any of its rights or interest hereunder without the prior written consent
of the Lessor; provided, however, that any such sublease or assignment by the
Lessee to which the Lessor may, in its discretion, grant its consent (a) shall
not release the Lessee from any of its obligations or liabilities of any nature
whatsoever arising under this Agreement; (b) shall be expressly subject to and
subordinate to this Agreement; (c) shall be accompanied by an unconditional
guarantee of the Lessee's obligations under the Lease Agreement issued by a
party having financial strength satisfactory to the Lessor; and (d) shall not be
permitted if a Default or Event of Default has occurred and is continuing.
Section 11.02. Location. The Lessee shall not remove, or permit to be
removed, the Plant or Equipment or any part thereof from the Site without the
prior written consent of the Lessor, except that the Lessee or any other Person
may remove any Part in accordance with the provisions of Sections 6.02 and 6.09
hereof
Section 11. 03. Mortgaging the Estate of Lessor.
(a) Without limiting the generality of Section 11.01(a) hereof, Lessee
acknowledges receipt of a copy of the Deed of Trust and agrees that, to the
extent provided therein, any notice, demand or action which Lessor may give
or take hereunder may be given or taken by Lender or any other Fee
Mortgagee with the same force and effect as if given or taken by Lessor,
and that this Lease Agreement is and shall be subordinate to the Deed of
Trust and to any other such pledge, conveyance, deed of trust, assignment,
mortgage or ground lease now existing or hereafter executed (herein, a "Fee
18
<PAGE>
Mortgage"), with no further instrument of subordination being necessary,
provided Fee Mortgagee may subordinate the same to this Lease Agreement by
executing and recording a written instrument including language to that
effect.
(b) Lessee hereby agrees that within ten (10) days after request from
Lessor, or from any Fee Mortgagee, Lessee shall execute a subordination,
non-disturbance and attornment agreement in a commercially reasonable form
subordinating this Lease Agreement to the interest of Fee Mortgagee.
(c) The holder or beneficiary of any Fee Mortgage is herein referred
to as a "Fee Mortgagee". The term "Fee Mortgagee" as used in this Lease
Agreement shall also include the "Fee Mortgagee" as that term is defined in
the Master Lease.
(d) Without limiting the effect of the preceding provisions of this
Article XI, Lessee, in the event of any foreclosure or deed in lieu of
foreclosure or other final conveyance and transfer of Lessor's interest as
aforesaid, shall, upon request of the grantee thereof, recognize and attorn
to the grantee thereof as "landlord" under this Lease Agreement.
ARTICLE XII
INSPECTION AND REPORTS
Section 12.01. Condition and Operation. The Lessor and its authorized
representatives (the "Inspecting Parties") may inspect, at its own expense, the
Facility. After an Event of Default has occurred and is continuing, Inspecting
Parties may also inspect, at their expense, the books and records of the Lessee
relating to the Facility and make copies and abstracts therefrom. The Lessee
shall furnish to the Inspecting Parties statements accurate in all material
respects regarding the condition and state of repair of the Facility, all at
such times and as often as may be reasonably requested. None of the Inspecting
Parties shall have any duty to make any such inspection or inquiry. To the
extent permissible, the Lessee shall prepare and file in timely fashion, or,
where the Lessor shall be required to file, the Lessee shall prepare and deliver
to the Lessor within a reasonable time prior to the date for filing, any reports
with respect to the condition or operation of the Facility that shall be
required to be filed with any Governmental Authority.
Section 12.02. Annual Insurance Report. On or before March 15 of each year
during the Term, and within ten (10) days after any material adverse change in
the information set forth in the certificates provided pursuant to Section 8.03
hereof, the Lessee shall deliver to the Lessor a report of a Responsible Officer
of the Lessee setting forth (a) a complete fist of all insurance policies
obtained and maintained by the Lessee pursuant to Article VII, (b) stating
whether such insurance policies comply with the requirements of Article VIII and
(c) stating whether all premiums then due thereon have been paid.
Section 12.03. Financial Reports. During the Term, the Lessee shall provide
to the Lessor the following:
(a) As soon as available, and in any event within thirty (30) days
after the end of each month, unaudited financial statements for the
Facility, including a balance sheet
19
<PAGE>
as at the end of such month and statements of income and retained earnings
and of cash flow for such month and for the period from the beginning of
the Lease Year. There shall be included with such financial statements (i)
a certificate of a Responsible Officer stating in effect that, to the best
of his knowledge and belief, such financial statements are true and correct
and have been prepared in accordance with generally accepted accounting
principles, consistently applied. subject to changes resulting from
year-end adjustments and (ii) a certificate of a Responsible Officer
setting forth in detail reasonably satisfactory to the Lessor a calculation
of Cash Flow of the Facility for such month and for the Lease Year through
the end of such month.
(b) In addition, as soon as available and in any event within one
hundred twenty (120) days after the end of each Lease Year, financial
statements for the Facility, including a balance sheet as of the end of
such Lease Year, and statements of income and retained earnings and of cash
flow for such Lease Year, prepared in accordance with generally accepted
accounting principles consistently applied and accompanied by the audit
opinion of a recognized firm of independent certified public accountants
acceptable to the Lessor. There shall be included with such financial
statements a certificate of a Responsible Officer setting forth in detail
reasonably satisfactory to the Lessor a calculation of Cash Flow of the
Facility for such Lease Year. The Lessor shall have the right at any time
to audit the certificate of Cash Flow required to be provided hereunder.
Such audit shall be performed by an independent certified public accounting
firm selected by the Lessor and shall be at the Lessor's expense, unless
such audit results in the upward adjustment of Cash Flow for any Lease Year
in an amount equal to two percent (2%) or more of the Cash Flow reflected
on the certificate provided to the Lessor by the Lessee, in which case the
cost of such audit shall be paid by the Lessee and shall not be considered
Greenhouse Expenses. Any payments required to be made as a result of any
adjustment to the Cash Flow shall be made within ten (10) Business Days
following receipt of the results of the audit.
(c) The Lessor shall have the right to review the books and records of
the Lessee relating to the Facility for the purpose of verifying the
accuracy of the financial statements and calculations of Cash Flow provided
pursuant to Sections 12.03(a) and (b). and
(d) On or before January 31 of each year during the Term (commencing
on January 31, 1999), a certificate of a Responsible Officer of the Lessee
stating that such Responsible Officer has made or caused to be made a
review of all transactions relating to the Facility and the financial and
operating condition of the Lessee for the immediately preceding Lease Year
and that, based on such review, no Default or Event of Default has occurred
during such year (or, if a Default or Event of Default shall have occurred,
specifying the nature thereof and the action the Lessee has taken or
prepares to take with respect thereto).
Section 12.04. Budget Approval. No later than the thirty (30) days prior to
the commencement of any Lease Year, the Lessee shall present to the Lessor, its
budget for the Facility for the following Lease Year, prepared in satisfactory
detail.
20
<PAGE>
Section 12.05. Liability. The Lessee shall, promptly after obtaining
knowledge thereof, give prompt written notice to the Lessor of each accident
likely to result in material damages or claims for material damages against the
Lessee or any other Person with respect to the Facility in excess of $100,000
(if such claims and damages are insured) or $25,000 (if not insured), and
occurring in whole or in part (whenever asserted) during the Term and on request
shall furnish to the Lessor information as to the time, place and nature
thereof, the names and addresses of the parties involved, any Persons injured,
witnesses and Lessors of any property damaged and such other information as may
be known to it, and shall promptly upon request furnish the Lessor with copies
of all correspondence, papers, notices and documents whatsoever received by the
Lessee in connection therewith.
Section 12.06. Liens. The Lessee shall promptly, and in no event later than
five (5) Business Days after it shall have obtained knowledge of the attachment
of any Lien that it shall be obligated to discharge or eliminate pursuant to
Article V hereof, notify the Lessor of the attachment of such Lien and the full
particulars thereof unless the same shall have been removed or discharged by the
Lessee.
ARTICLE XIII
EVENTS OF DEFAULT
The following events shall constitute Events of Default (whether any such
event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any Governmental
Authority):
(a) the Lessee shall fail to make any payment of Rent within five (5)
days after the same shall have become due; or
(b) the Lessee shall fail to make any payment of any other amount
payable hereunder within ten (10) days after notice of such failure from
the Lessor; or
(c) the Lessee shall fail to perform or observe any covenant,
condition or agreement to be performed or observed by it under Article VIII
or Article XI hereof within five (5) days after notice of such failure from
the Lessor; or
(d) the Lessee shall fail to perform or observe any covenant,
condition of agreement (not included in clause (a), (b) or (c) of this
Article XIII) to be performed or observed by it hereunder or under any
other Operative Document and such failure shall continue unremedied for a
period of thirty (30) days after written notice thereof from the Lessor; or
(e) the filing by the Lessee of any petition for dissolution or
liquidation of the Lessee or the commencement by the Lessee of a voluntary
case under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or the Lessee shall have consented to the entry of
an order for relief in an involuntary case under any such law, or the
failure of the Lessee or generally to pay its debts as such debts become
due (within the meaning of the Bankruptcy Reform Act of 1978, as amended),
or the failure by the Lessee promptly to satisfy or discharge any
execution, garnishment or attachment
21
<PAGE>
of such consequence as will impair its ability to carry out its obligations
under this Agreement, or the appointment of or taking possession by a
receiver, custodian or trustee (or other similar official) for the Lessee
or any substantial part of its property, or a general assignment by the
Lessee for the benefit of its creditors, or the entry by the Lessee into an
agreement of composition with its creditors, or the Lessee shall have taken
any corporate action in furtherance of any of the foregoing; or the filing
against the Lessee of an involuntary petition in bankruptcy which results
in an order for relief being entered or, notwithstanding that an order for
relief has not been entered, the petition is not dismissed within
forty-five (45) days of the date of the filing of the petition, or the
filing under any law relating to bankruptcy, insolvency or relief of
debtors of any petition against the Lessee for reorganization, composition,
extension or arrangement with creditors which either (i) results in a
finding or adjudication of insolvency of the Lessee or (fi) is not
dismissed within forty-five (45) days of the date of the filing of such
petition; or
(f) any representation or warranty by the Lessee in any Operative
Document or in any certificate or document delivered pursuant thereto shall
have been materially false when made; or
(g) the occurrence of an Event of Default under the Line of Credit
Facility Agreement.
ARTICLE XIV
ENFORCEMENT
Section 14.01. Remedies. Upon the occurrence of any Event of Default and at
any time thereafter so long as the same shall be continuing, the Lessor may, at
its option, by notice to the Lessee, declare this Lease Agreement to be in
default, and at any time thereafter the Lessor may do one or more of the
following as the Lessor in its sole discretion shall determine:
(a) the Lessor may, by notice to the Lessee, rescind or terminate this
Lease Agreement;
(b) the Lessor may (i) demand that the Lessee, and the Lessee shall
upon the written demand of the Lessor, return the Facility promptly to the
Lessor in the manner and condition required by, and otherwise in accordance
with all of the provisions of, Article VI hereof as if the Facility were
being returned at the end of the Term, and the Lessor shall not be liable
for the reimbursement of the Lessee for any costs and expenses incurred by
the Lessee in connection therewith, (ii) enter upon the Site and take
immediate possession of (to the exclusion of the Lessee) the Facility or
remove the Plant or Equipment or both, by summary proceedings or otherwise,
all without liability to the Lessee for or by reason of such entry or
taking of possession, whether for the restoration of damage to property
caused by such taking or otherwise and (iii) offer employment to the
Lessee's employees;
(c) the Lessor may sell all or any part of the Equipment and its
rights to the Plant and the Site at public or private sale, as the Lessor
may determine, free and clear of
22
<PAGE>
any rights of the Lessee and without any duty to account to the Lessee with
respect to such action or inaction or any proceeds with respect thereto;
(d) the Lessor may lease to others all or any part of the Facility as
the Lessor in its sole discretion may determine, free and clear of any
rights of the Lessee and without any duty to account to the Lessee with
respect to such action or for any proceeds with respect to such action or
inaction, except that the Lessee's obligation to pay Rent with respect to
the Facility for periods commencing after the Lessee shall have been
deprived of use of the Facility pursuant to this paragraph (d) shall be
reduced by the net proceeds, if any, actually received by the Lessor from
leasing the Facility to any Person other than the Lessee for the same
periods or any portion thereof,
(e) the Lessor may demand that the Lessee assign to the Lessor (or to
a third party designated by the Lessor to operate the Facility) all of the
Lessee's rights under any agreement or contract entered into by the Lessee
in connection with the operation of the Facility, including, without
limitation, the Management Agreement, and the Lessee shall execute and
deliver to the Lessor (or such third party) such assignments or other
instruments as the Lessor may reasonably request in connection therewith;
and
(f) the Lessor may exercise any other right or remedy that may be
available to it under applicable law or proceed by appropriate court action
to enforce the terms hereof or to recover damages for the breach hereof
Section 14.02. Survival of Lessee's Obligations. Except as provided in
subsection 14.01(d) above, no termination of this Lease Agreement, in whole or
in part, or repossession of all or any portion of the Facility or exercise of
any remedy under Section 14.01 hereof shall, except as specifically provided
therein, relieve the Lessee of any of its liabilities and obligations hereunder.
In addition, the Lessee shall be liable, except as otherwise provided above, for
any and all unpaid Rent due hereunder before, during or after the exercise of
any of the foregoing remedies, including all reasonable legal fees and expenses
and other costs and expenses incurred by the Lessor by reason of the occurrence
of any Event of Default or the exercise of the Lessor's remedies with respect
thereto, and including all costs and expenses incurred in connection with the
return of the Facility in the manner and condition required by, and otherwise in
accordance with the provisions of, Article VI hereof as if such Facility were
being returned at the end of the Term.
Section 14.03. Remedies Cumulative. To the extent permitted by, and subject
to the mandatory requirements of, applicable law, each and every right, power
and remedy herein specifically given to the Lessor or otherwise in this Lease
Agreement shall be cumulative and shall be in addition to every other right,
power and remedy herein specifically given or now or hereafter existing at law,
in equity or by statute, and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from time to
time and as often and in such order as may be deemed expedient by the Lessor,
and the exercise or the beginning of the exercise of any power or remedy shall
not be construed to be a waiver of the right to exercise at the same time or
thereafter any right, power or remedy. No delay or omission by the Lessor in the
exercise of any right, power or remedy or in the pursuit of any remedy shall
impair any such right, power or remedy or be construed to be a waiver of any
default on the part
23
<PAGE>
of the Lessee or to be an acquiescence therein. No express or implied waiver by
the Lessor of any Event of Default shall in any way be, or be construed to be, a
waiver of any future or subsequent Event of Default.
ARTICLE XV
RIGHT TO PERFORM FOR LESSEE
If the Lessee shall fail to perform or comply with any of its agreements
contained herein, the Lessor may perform or comply with such agreement, and the
amount of such payment and the amount of the expenses of the Lessor incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at the Overdue
Rate, shall be payable by the Lessee upon demand.
ARTICLE XVI
INDEMNITIES
Section 16.01. General Indemnity.
(a) Payment of Expenses by Lessee. The Lessee shall pay, and shall
indemnify and hold harmless each Indemnitee from and against, any and all
liabilities, obligations, losses, damages, penalties, claims, actions,
suits, costs, expenses and disbursements, including legal fees and
expenses, of whatsoever kind and nature (collectively, "Expenses" and
individually, an "Expense"), imposed on, incurred by or asserted against
any Indemnitee (whether because of an action or omission by such Indemnitee
or otherwise), in any way relating to or arising out of the occupation and
operation of the Facility by the Lessee and the production and sale of the
Product.
(b) Exceptions. The indemnities contained in Section 16.01 (a) hereof
with regard to any particular Indemnitee shall not extend to any Expense
(i) resulting from the willful misconduct or gross negligence of such
Indemnitee (other than willful misconduct or gross negligence imputed to
such Indemnitee solely by reason of its interest in the Facility), (H)
resulting solely from the breach by such Indemnitee of any of its
representations, warranties or covenants in any of the Lease Documents,
(iii) unless an Event of Default shall have occurred and be continuing and
Lessor shall be exercising remedies with respect thereto, to the extent
such Expense shall relate to acts or events not attributable to the Lessee
that occur after the Term, (iv) so long as no Event of Default shall have
occurred and be continuing, to the extent attributable solely to the
disposition or attempted disposition of the Facility or any interest in any
thereof, by or on behalf of any Indemnitee, other than a transfer of the
Facility pursuant to Article XIV hereof or as required by any Lease
Documents, (v) constituting Fees, Taxes or Other Charges or (vi) which
constitutes internal, overhead expenses of the Indemnitee.
(c) Notice. If any party entitled to indemnity under this Section
16.01 or the Lessee shall have received written notice of any liability
indemnified against under this Section 16.01, it shall give prompt notice
thereof to the Lessee, or the party entitled to be indemnified, as the case
may be, but the failure to give such notice shall not affect any obligation
under this Section 16.01. In case any action, including any investigatory
24
<PAGE>
proceeding, shall be brought against, or commenced with respect to, any
Indemnitee in respect of which the Lessee is required to indemnify such
Indemnitee pursuant to the provisions of this Section 16.01, the Lessee
shall have the right to assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnitee and the
payment of all expenses. In the event the Lessee assumes the defense of any
such action, any Indemnitee shall have the right to employ separate counsel
in such action and participate therein, but the fees and expenses of such
counsel shall be at the expense of such Indemnitee, unless (i) the
employment of such counsel has been specifically authorized by the Lessee,
or (ii) the named parties to such action (including any impleaded parties)
include both such Indemnitee and the Lessee and representation of such
Indemnitee and the Lessee by the same counsel would be inappropriate under
applicable standards of professional conduct due to actual or potential
conflicting interests between them or (iii) the counsel employed by the
Lessee and satisfactory to such Indemnitee has advised such Indemnitee, in
writing, that such counsel's representation of such Indemnitee would be
likely to involve such counsel in representing differing interests which
could adversely affect either the judgment or loyalty of such counsel to
such Indemnitee, whether it be a conflicting, inconsistent, diverse or
other interest (in which case the Lessee shall not have the right to assume
the defense of such action on behalf of such Indemnitee; it being
understood, however, that the Lessee shall not, in connection with any one
such action, or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys, and of any local counsel retained by such
firm, at any one time for each such Indemnitee, which firm shall be
designated in writing by such Indemnitee). The Lessee shall not be liable
for any settlement of any such action effected without its consent, but if
settled with the consent of the Lessee or if there be a final judgment,
beyond further review or appeal, in any such action, the Lessee agrees to
indemnify and hold harmless any Indemnitee from and against any loss or
liability by reason of such settlement or judgment.
(d) Payment. The Lessee covenants and agrees to pay all amounts
required to be paid under this Section 16.01 on demand by the relevant
Indemnitee.
Section 16.02. Fees, Taxes and Other Charges.
(a) Payment by Lessee.
(i) The Lessee hereby agrees to pay and assume liability for, and on
written demand to indemnify, protect, defend, save and hold harmless each
Indemnitee from and against, any and all governmental or quasi-governmental
fees (including without limitation license and registration fees), taxes
(including without limitation gross receipts, franchise, sales, use,
property, real or personal, tangible or intangible), interest equalization
and stamp taxes, assessments, levies, imposts, duties, charges or
withholdings of any nature whatsoever, together with any and all penalties,
fines or interest thereon ("Fees, Taxes and Other Charges") imposed against
any Indemnitee, the Lessee or the Facility or any portion thereof by any
Federal, state or local governmental or taxing authority in the United
25
<PAGE>
States of America or by any foreign government or any subdivision or taxing
authority thereof, upon or with respect to the occupation and operation of
the Facility by the Lessee and the production and sale of the Product.
(ii) Notwithstanding anything to the contrary set forth above, the
provisions of this Section 16.02 shall not apply to:
(A) Fees, Taxes and Other Charges on, or measured in whole or in part
by (y) the net income or gross income of an Indemnitee or (z) the
franchise, capital, conduct of business, net worth or tax preference of an
Indemnitee;
(B) Fees, Taxes and Other Charges to the extent on, levied on, or
measured by, any fees or compensation received by an Indemnitee for
services rendered in connection with this Agreement;
(C) Fees, Taxes or Other Charges which result from any Indemnitee
engaged in activities not related to this Agreement;
(D) so long as no Event of Default has occurred and is continuing,
Fees, Taxes or other Charges imposed as a result of the voluntary sale,
transfer, assignment or other disposition of any interest in the Facility
by an Indemnitee, if such disposition shall not be pursuant to or in
connection with Article XIV hereof;
(E) Fees, Taxes or Other Charges imposed solely with respect to any
period after the end of the Term unless an Event of Default has occurred
and is continuing and the Lessor shall be exercising remedies with respect
thereto;
(F) Fees, Taxes or Other Charges imposed as the result of any transfer
or disposition of any interest in the Facility by any Indemnitee resulting
from bankruptcy or other proceedings for the relief of debtors (voluntary
or involuntary) in which the transferor is the debtor; or
(G) Fees, Taxes and Other Charges imposed solely as a result of the
willful misconduct or gross negligence of the Indemnitee.
(iii) In case any report or return is required to be made with respect
to any obligations of the Lessee under this Section 16.02 or arising out of
this Section 16.02, the Lessee shall, to the extent permitted by law,
either make such report or return in such manner (including the making
thereof in the Lessor's name) as will show the Lessorship of the Equipment
in the Lessor and send a copy of such report or return to the Lessor, or
shall notify the Lessor of such requirement and make such report or return
in such manner as shall be reasonably satisfactory to the Lessor. Each
Indemnitee agrees that it will promptly forward to the Lessee any notice,
bill or any advice received by it concerning any such Fees, Taxes and Other
Charges and will, at Lessee's expense, use its best efforts
26
<PAGE>
and take such lawful and reasonable steps as may be proposed by the Lessee
in writing to minimize any of the same for which the Lessee is responsible
under this Section 16.02.
(iv) The amount which the Lessee shall be required to pay to or for
the account of any Indemnitee with respect to any Fees, Taxes and Other
Charges which are subject to indemnification under this Section 16.02 shall
be an amount sufficient to restore the Indemnitee to the same position the
Indemnitee would have been in had such Fees, Taxes and Other Charges not
been incurred or imposed. If the payment by the Lessee under this Section
16.02 of an amount equal to such Fees, Taxes and Other Charges would be
more or less than the amount which would be required to make such
Indemnitee whole as a result of any tax effect to an Indemnitee in
connection with such payment of such Fees, Taxes or Other Charges,
including, without limitation (A) the inclusion of any payment to be made
by the Lessee under this Section 16.02 in the taxable income of any
indemnitee in one year and the deduction of the Fees, Taxes and Other
Charges with respect to which such payment is made from the taxable income
of such Indemnitee in a different year, (B) the nondeductibility of such
Fees, Taxes and Other Charges from the taxable income of such Indemnitee or
(C) the anticipated realization by such Indemnitee in a different year of
tax benefits resulting from the transaction giving rise to such Fees, Taxes
and Other Charges, the amount of the indemnity to be paid by the Lessee
shall be adjusted to an amount which (after taking into account all tax
effects on such Indemnitee, any loss of use of money resulting from
differences in timing between the inclusion of such indemnity in the
taxable income of such Indemnitee and the anticipated realization by such
Indemnitee of tax benefits resulting from the transaction to which such
indemnity is related and the present value of any anticipated future tax
benefits to be realized by such Indemnitee as a result of deducting such
Fees, Taxes and Other Charges or as a result of the transaction giving rise
thereto) will be sufficient to place the Indemnitee in the same position
such Indemnitee would have been in had such Fees, Taxes and Other Charges
not been imposed. All computations for purposes hereof shall be based on
tax rates in effect on the date payment pursuant to this Section 16.02 is
made. Computations involving the loss of use of money or calculations of
present value shall be based on the Overdue Rate as adjusted for applicable
income tax effects and compounded monthly on the Basic Rent Payment Dates.
Each Indemnitee shall in good faith use reasonable efforts in filing its
tax returns and in dealing with taxing authorities to seek and claim all
tax benefits available with respect to items referred to herein.
(b) Refunds. If any Indemnitee shall obtain a refund or credit of all
or any part of any Fees, Taxes and Other Charges, payment of or indemnity
for which shall have been made by the Lessee pursuant to this Section
16.02, such Indemnitee shall, unless a Default or an Event of Default shall
have occurred and be continuing, promptly pay to the Lessee (i) the amount
of such refund or credit (together with any interest paid to such
Indemnitee with respect to such refund or credit) plus (ii) an amount equal
to all tax benefits realized by such Indemnitee as the result of the
payment of the amounts referred to in clause (i) above and this clause
(ii).
27
<PAGE>
Section 16.03. Survival. The obligations of the Lessee under this Article
XVI shall survive the termination of this Agreement and are expressly made for
the benefit of and shall be enforceable by any Indemnitee, separately or
together, without declaring this Agreement to be in default and notwithstanding
any assignment by the Lessor of this Lease Agreement or any of its rights
hereunder. The extension of applicable statutes of limitations by an Indemnitee
or the Lessee shall not affect the survival of the Lessee's or any Indemnitee's
obligations, as the case may be, under this Article XVI. The obligations of the
Indemnitees shall survive the termination of this Lease Agreement. All payments
required to be paid pursuant to Article XVI shall be made directly to, or as
otherwise requested by, the Indemnitee entitled thereof, upon written demand by
such Indemnitee. All such written demands shall specify the amounts payable and
the facts upon which the right to indemnification is based.
Section 16.04. Waiver. The Lessee hereby waives all tort claims and causes
of action in tort it may have at any time against any Indemnitee in any way
relating to or arising from or alleged to relate to or arise from any Operative
Document, except with regard to circumstances constituting an exception to the
Lessee's obligation to indemnity pursuant to Section 16.01(b) hereof
ARTICLE XVIII
COVENANTS AND REPRESENTATIONS OF LESSEE
Section 17.01. Operation of Facility. During the Term, the Lessee shall use
its best efforts to operate the Facility (including the sowing, growing,
harvesting and packaging of the Product) at its fullest productive capacity as
would a prudent commercial greenhouse Lessee under the same or similar
circumstances and to market the Product with substantially the same effort and
on the same terms as used for product produced at other facilities operated by
the Lessee or its Affiliates. The Lessee hereby agrees to give prompt written
notice to the Lessor if at any time the Lessee becomes aware that the Facility
is not being operated at its fullest productive capacity. The Lessee further
agrees that it will not use the Facility for any purpose other than the
production of tomatoes or, with the Lessor's consent, any other agricultural
product.
Section 17.02. Affiliated Transactions.
(a) In the event the Lessee uses the Facility to pack, store, grade,
separate or distribute Product grown in greenhouses other than the Facility
owned, leased, operated or managed by the Lessee, then the Lessee agrees to
charge such greenhouses a fee per pound that is satisfactory to, and
approved in advanced by, the Lessor plus an amount equal to at least the
Lessee's cost for boxes and packing, materials. Without the prior written
consent of the Lessor, the Lessee shall not use the Facility for any
product other than the Product.
(b) In the event the Lessee purchases any equipment, supplies or other
items from any Affiliate, such purchases shall be on terms no less
favorable than those available from unaffiliated parties.
28
<PAGE>
(c) The Lessee shall provide to the Lessor on a monthly basis in
detail satisfactory to the Lessor a list of all Product handled by the
Facility for greenhouses pursuant to subsection 17.02(a) and all items
purchased from Affiliates and the purchase price thereof pursuant to
subsection 17.02(b).
Section 17.03. Waiver of Operating or Efficiency Standards. Lessee shall
use its reasonable best efforts to assist Lessor in obtaining and maintaining
all necessary permits and approvals for the operation of the greenhouse and
shall fully cooperate with Birchwood in the event Birchwood seeks a waiver of
the operating or efficiency standards for a "Qualifying Facility" under the
Federal Power Act or the Federal Energy Regulatory Commission's regulations, as
any of the foregoing may be now or hereafter amended.
Section 17.04. Representations and Warranties of Lessee. Lessee hereby
warrants and represents to Lessor, Master Landlord, and each Fee Mortgagee that:
(a) Lessee has not entered into any contract or agreement with other
Persons regarding the provision of thermal supply relating to the
Greenhouse Facility, and Lessee will not, without the consent of Lessor,
enter into any successor or additional contracts for thermal energy or
steam supply to the Greenhouse Facility.
(b) There is not pending or threatened against Lessee or any of its
Affiliates, and Lessee knows of no facts or circumstances that might give
rise to, any civil, criminal or administrative action, suit, demand, claim,
hearing, notice or demand letter, notice of violation, environmental lien,
investigation, or proceeding relating in any way to Environmental
Requirements.
(c) Neither this Lease Agreement nor any other instrument, document,
agreement, financial statement, financial projections or certificate
furnished to Lessor or Master Landlord by or on behalf of Lessee or any
affiliate of Lessee in connection herewith contains an untrue statement of
a material fact or omits to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading or omits to state any fact which may in the future
have a material adverse effect on the financial condition or business
prospects of Lessee.
ARTICLE XVIII
MISCELLANEOUS
Section 18.01. Further Assurances. The Lessee shall cause the Lease
Documents and any amendments and supplements to any of them (together with any
other instruments, financing statements, continuation statements, records or
papers necessary in connection therewith) to be recorded and/or filed and
rerecorded and/or refiled in each jurisdiction as and to the extent required by
law in order to, and shall take such other actions as may from time to time be
necessary to, establish, perfect and maintain the Lessor's right, title and
interest in and to the Facility, not subject to any Liens except Permitted
Liens. The Lessee will promptly and duly execute and deliver to the Lessor such
documents and assurances and take such further action as the Lessor may from
time to time reasonably request in order to carry out more effectively the
intent and purpose of the Lease Documents and to establish and protect the
rights and remedies
29
<PAGE>
created or intended to be created in favor of the Lessor, to establish, perfect
and maintain the Lessor's right, title and interest in and to the Facility,
including without limitation if requested by the Lessor at the expense of the
Lessee, the recording or filing of counterparts or appropriate memoranda of the
Lease Documents, or of such financing statements or other documents with respect
thereto as the Lessor may from time to time reasonably request, and the Lessor
agrees promptly to execute and deliver such of the foregoing financing
statements or other documents as may require execution by the Lessor.
Section 18.02. Quiet Enjoyment. The Lessor covenants that it will not
interfere in the Lessee's quiet enjoyment of the Facility hereunder during the
Term, so long as (a) the Lessee is in compliance with each term and condition
hereof and (b) no Event of Default has occurred or is continuing.
Section 18.03. Notices. Unless otherwise specifically provided herein, all
notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person shall be in writing and any such notice shall become effective three (3)
Business Days after being deposited in the mails, certified or registered with
appropriate postage prepaid for first-class mail or, if delivered by hand or in
the form of a telex or telegram, when received, and shall be directed to the
Address of such Person.
Section 18.04. Severability. Any provision of this Agreement that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the Lessee hereby waives any provision of law that renders
any provision hereof prohibited or unenforceable in any respect.
Section 18.05. Amendment. Neither this Agreement nor any of the terms
hereof may be terminated, amended, supplemented, waived or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or modification
shall be sought.
Section 18.06. Headings. The Table of Contents and headings of the various
Articles and Sections of this Agreement are for convenience of reference only
and shall not modify, define or limit any of the terms or provisions hereof
Section 18.07. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
Section 18.08. Governing Law. This Agreement has been delivered in, and
shall in all respects be governed by, and construed in accordance with, the laws
of the Commonwealth of Virginia applicable to agreements made and to be
performed entirely within such State, including all matters of construction,
validity and performance.
Section 18.9. Binding Effect, Successors and Assigns, Survival. The terms
and provisions of this Agreement, and the respective rights and obligations
hereunder of the Lessor
30
<PAGE>
and the Lessee, shall be binding upon their respective successors and assigns
(including, in the case of the Lessor, any Person to whom the Lessor may
transfer all or any portions of the Facility), and inure to the benefit of their
respective permitted successors and assigns. The obligations of the Lessee under
this Agreement shall survive the termination of this Agreement.
Section 18.10. Divisible Lease Agreement. It is the intention of the
parties hereto that this Agreement shall constitute the lease of both personal
property and real property and, to such extent, shall be deemed divisible. It is
the intention and understanding of the parties hereto that all the Equipment
constitutes personal property and all the Site and Plant constitute real
property for all purposes of this Lease Agreement and the other documents
referred to herein and for all purposes of bankruptcy laws of the United States;
provided, however that nothing herein shall affect the rights and obligations of
Lessor or Lessee under Section 18.01 hereof, it being understood that no filing,
refiling, recording, re-recording, registration or re-registration in any office
for the filing, recording or registration of interests in real property shall
constitute or be deemed to constitute evidence or an admission by Lessor or
Lessee that the Equipment is real property.
Section 18.1 1. Effectiveness. This Agreement shall become effective upon
the date (the "Effective Date") the last of the following events occurs:
(a) the Closing Date;
(b) the receipt of any necessary consent of the Lessor's lenders under
the Lessor's financing documents; and
(c) upon Notice of Substantial Completion (as defined in the General
Contractor's Agreement) of the Plant
IN WITNESS WHEREOF, the undersigned have each caused this Lease Agreement
to be duly executed and delivered and their corporate seals to be hereunto
affixed and attested by their respective officers thereunto duly authorized as
of the day and year first above written.
Attest: RIPE TOUCH GREENHOUSES, INC..
By:
- - -------------------------------- -----------------------------
, Secretary Name:
Title:
[Corporate Seal]
Attest: VILLAGE FARMS OF COLORADO, INC.
By:
- - -------------------------------- -----------------------------
J. Kevin Cobb, Secretary Name: Albert W. Vanzeyst
Title: President
[Corporate Seal]
31
<PAGE>
SCHEDULE 1.01(a)
TO LEASE AGREEMENT
Description of Facility
PART 1: Description of Equipment
The Equipment described on Annex A hereto.
PART 2: Description of Plant
The greenhouse plant including fixtures containing approximately 38
acres and the headhouse building located on the Site described in Part
3.
PART 3: Description of Site
The property described on Annex B hereto.
<PAGE>
SCHEDULE 3.01
TO LEASE AGREEMENT
INTENTIONALLY LEFT BLANK
<PAGE>
SCHEDULE 3.02
TO LEASE AGREEMENT
SCHEDULE OF SUPPLEMENTAL RENT
Supplemental Rent shall be payable to the Lessor on each Supplemental Basic Rent
Payment Date in an amount equal to the percentage (Supplemental Rent Percentage)
of cash flow for the calendar quarter preceding the Supplemental Basic Rent
Payment Date. The Supplemental Rent Percentage is defined as follows:
o Supplemental Rent Percentage shall equal [information omitted and subject
to request for confidential treatment].
Notwithstanding anything contrary herein or in the Lease Agreement, the
Supplemental Rent will be determined after paying all Greenhouse Expenses
including but not limited to Management and Marketing Fees and Lease
Payments to the Lessor.
EXHIBIT 10.67
VILLAGE FARMS OF TEXAS, L.P.
AGREEMENT OF LIMITED PARTNERSHIP
Dated as of February 6, 1996
THE LIMITED PARTNERSHIP INTEREST REPRESENTED HEREBY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF CERTAIN STATES AND HAVE BEEN OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM
THE REGISTRATION REQUIREMENT OF THE ACT AND SUCH LAWS. THE LIMITED PARTNERSHIP
INTEREST IS SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY BE
TRANSFERRED ONLY IN A MANNER WHICH IS IN COMPLIANCE WITH THE PROVISIONS OF THIS
AGREEMENT, AND MAY ONLY BE TRANSFERRED IN A TRANSACTION THAT IS REGISTERED UNDER
THE ACT OR EXEMPT FROM SUCH REGISTRATION.
<PAGE>
TABLE OF CONTENTS
LIST OF SCHEDULES
Schedule 1.1(a) Calculation of Internal Rate of Return
Schedule 1.1(b) Project Budget
Schedule 1.1(c) Project Documents
Schedule 1.1(d) Site
Schedule 6.3 Initial Officers of the Partnership
- i -
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
This Agreement of Limited Partnership dated as of February 6, 1996 of
VILLAGE FARMS OF TEXAS, L.P. (the "Partnership") is by and among COGENTRIX OF
FORT DAVIS I, INC., a Delaware corporation ("Cogentrix GP" and a "General
Partner"), COGENTRIX OF FORT DAVIS II, INC., a Delaware corporation ("Cogentrix
LP" and a "Limited Partner"), VILLAGE FARMS OF DELAWARE, L.L.C., a Delaware
limited liability company ("VF Delaware" and a "General Partner"), and VILLAGE
FARMS, L.L.C., a Delaware limited liability company ("VF" and a "limited
partner").
VF Delaware is a newly-formed Delaware limited liability company owned 99%
by Agro Power Development, Inc., a New York corporation ("Agro Power"), and 1%
by VF. VF is a newly-formed Delaware limited liability company owned 99% by Agro
Power and 1% by VF Delaware. Agro Power has entered into agreements and
instruments (as more fully defined hereafter, the "Project Documents") related
to the development and operation of a venlo style greenhouse located in the
vicinity of Fort Davis, Texas for the purpose of producing and selling beefsteak
tomatoes (as more fully defined hereafter, the "Project"). In order to continue
with the development of the Project and obtain financing for construction and
working capital needs, Agro Power desires that Cogentrix GP and Cogentrix LP
contribute in the aggregate $4,656,781.00 to the Project. In order to encourage
Cogentrix to contribute such funds to the Project, Agro Power has agreed (1) to
organize VF Delaware and VF and cause them to form the Partnership with
Cogentrix GP and Cogentrix LP pursuant to which all Project Documents will be
assigned to the Partnership, as VF Delaware's contribution to the Partnership,
in exchange for a 1% interest in the Partnership, and likewise as VF's
contribution to the Partnership in exchange for a 49% interest in the
Partnership, (2) that, in exchange for a contribution to the capital of the
Partnership of $980 by Cogentrix LP, Cogentrix LP will receive a 49% interest in
the Partnership, and (3) that, in exchange for a contribution to the capital of
the Partnership of $20 by Cogentrix GP, Cogentrix GP will receive a 1% interest
in the Partnership. Cogentrix GP and Cogentrix LP have agreed to make such
contributions to the capital of the Partnership on the terms and conditions set
forth herein.
Accordingly, in consideration of the covenants and agreements contained
herein and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, and intending to be legally bound, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms.
As used in this Agreement, the following terms have the following meanings
(such definitions to be equally applicable to both singular and plural forms of
the terms defined):
"Abandonment" has the meaning set forth in subsection 6.2(e).
<PAGE>
"Adjusted Capital Account Deficit" means, with respect to any Partner, the
deficit balance, if any, in such Partner's Capital Account as of the end of the
relevant fiscal year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such Partner is
obligated to restore pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate sentence of
Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) debit to such Capital Account the items described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
"Administrative Agent" means CoBank, ACB.
"Adverse Consequence" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, Taxes, liens, losses, expenses and
fees, including, but not limited to, court costs, arbitral costs, costs of
investigation, and attorneys' fees.
"Affiliate" of any designated Person, means each Person which, directly or
indirectly, controls or is controlled by or is under common control with such
designated Person and, without limiting the generality of the foregoing, shall
include (a) any Person which beneficially owns or holds ten percent (10%) or
more of any class of voting securities of such designated Person or ten percent
(10%) or more of the equity interest in such designated Person and (b) any
Person of which such designated Person beneficially owns and holds ten percent
(10%) or more of any class of voting securities or in which such designated
Person beneficially owns or holds ten percent (10%) or more of the equity
interest. For the purposes of this definition, the terms "controls", "controlled
by" and "under common control with," as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. Notwithstanding the
foregoing, neither Cogentrix GP or Cogentrix LP, on the one hand, nor VF
Delaware or VF, on the other hand, shall be deemed to be Affiliates of one
another.
"After-Tax" means after deducting Cogentrix GP's or Cogentrix LP's, as
applicable, notional project Federal and state income tax. As used in this
definition of After-Tax, the notional project Federal and state income tax of
Cogentrix GP and Cogentrix LP shall be calculated as follows:
(a) The Partnership's taxable income would be calculated from the
Schedule K most recently filed with the Internal Revenue Service (or the
appropriate successor form or schedule), which for purposes of clarity
would include operating income as
- 2 -
<PAGE>
shown on such Schedule and all separately stated items of income or loss
(except tax exempt income) as shown on such Schedule.
(b) Assuming the Partnership were taxable as a for-profit corporation,
the Partnership's Federal and state income tax would be determined based on
the taxable income calculated in (a). For these purposes, it will be
assumed that all of the Partnership's taxable income shall be taxed at a
blended Federal/state rate of 38.0% (subject to adjustment upward or
downward, as applicable, to reflect changes in the highest marginal
corporate Federal tax rate).
(c) The Partnership's notional income tax obligation as calculated in
(b) shall be allocated among the Partners in the same manner as Profits and
Losses are allocated among the Partners under Article IV hereof.
Provided that, for each quarter end and at year end until such time as the
Partnership has filed a Schedule K with the Internal Revenue Service and a
true-up of taxable income has occurred, notional project Federal and state
income tax for Cogentrix GP and Cogentrix LP shall be calculated by multiplying
Estimated Taxable Income allocated to Cogentrix GP and Cogentrix LP under
Article IV hereof, as the case may be, by 38.0% (subject to adjustment upward or
downward, as applicable, to reflect changes in the highest marginal corporate
Federal tax rate).
"Agreement" means this Agreement of Limited Partnership, as amended,
supplemented or otherwise modified and in effect from time to time.
"Agro Power" means Agro Power Development Inc., a New York corporation with
offices at 10 Alvin Court, East Brunswick, New Jersey 08816.
"Agro Power Investment" means all cash contributions to the capital of the
Partnership made by VF Delaware and VF pursuant to this Agreement.
"Appraisal Procedure" means a procedure whereby two independent appraisers,
one chosen by each General Partner, shall agree upon the determinations then the
subject of appraisal. Each General Partner shall deliver a written notice to the
other appointing its appraiser within 15 days after receipt from the other of a
written notice appointing its appraiser. Each appraiser then shall prepare a
written appraisal with respect to the determinations which then are the subject
of appraisal. If within 30 days after appointment of the two appraisers they are
unable to agree upon the amount in question, a third independent appraiser shall
be chosen within 10 days thereafter by the mutual consent of such first two
appraisers or, if such first two appraisers fail to agree upon the appointment
of a third appraiser, such appointment shall be made by the American Arbitration
Association, or any organization successor thereto, from a panel of arbitrators
having experience in the business of operating a hydroponic hot house and
marketing the product produced therein and a familiarity with equipment used or
operated in such business. The decision of the third appraiser so appointed and
chosen shall be given within 30 days after the selection of such third
appraiser. If three appraisers shall be appointed and the determination of one
appraiser is disparate from the median by more than twice the amount by which
the other determination is disparate from the median, then the determination of
such appraiser shall be excluded, the remaining two determinations shall be
averaged and such
- 3 -
<PAGE>
average shall be binding and conclusive on the General Partners; otherwise the
average of all three determinations shall be binding and conclusive on the
General Partners. (For example, if the two appraisers appointed by the General
Partners determine a value of $100 and $200, and the third appraiser determines
a value of $150, then the involved value shall be conclusively determined to be
$150 ($100 + $200 + $150 divided by 3). As a further example, consider the first
example but the third appraiser places a value of $190. In this case, the $100
valuation shall be disregarded and the value shall be conclusively determined to
be $195 ($190 + $200 divided by 2). The $100 valuation is disregarded because
the median of the three appraisers was $190 and the difference between $100 and
$190 is $90, which is more than twice the difference between $200 and $190 which
is $10, which multiplied by two is $20.) If a General Partner shall appoint an
appraiser and the other Person shall fail to appoint an appraiser in the manner
specified herein, the determination of the appraiser so appointed shall be
binding and conclusive on the General Partners. The expenses of the appraisal
procedure shall be borne solely by the Partnership.
"Budgets" has the meaning set forth in subsection 6.2(i).
"Business Day" means a day other than a Saturday, a Sunday or any other day
on which commercial banks in Texas, North Carolina or New Jersey are authorized
or required by law or executive order to be closed.
"Buy-Out Offer" has the meaning set forth in Section 11.2.
"Buy-Out Offeree" has the meaning set forth in Section 11.2.
"Buy-Out Offeror" has the meaning set forth in Section 11.2.
"Capital Account" means, with respect to any Partner, the capital account
maintained for such Partner in the Partnership Books in accordance with the
following provisions:
(a) To each Partner's Capital Account there shall be credited such
Partner's Capital Contributions, such Partner's distributive share of
Profits and any other items in the nature of income or gain which are
allocated under this Agreement.
(b) To each Partner's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any property (other than money)
(net of any liabilities assumed by such Partner or to which the property is
subject) distributed to such Partner pursuant to any provision of this
Agreement, and such Partner's distributive share of Losses and any other
items in the nature of deductions or losses which are allocated under this
Agreement.
(c) In the event all or a portion of an interest in the Partnership is
transferred in accordance with the terms of this Agreement in a transaction
that does not result in a termination of the Partnership under Code Section
708(b)(1)(B), the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred interest.
- 4 -
<PAGE>
(d) In determining the amount of any liability for purposes of clause
(a) and clause (b) hereof, there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and the Regulations.
(e) If a Partner owns more than one Partnership Interest, one Capital
Account shall be maintained for the Partnership Interests of the Partner.
(f) Each Partner's Capital Account shall in all other respects be
maintained in accordance with the provisions of Regulations Section
1.704-1(b).
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of capital accounts are intended to comply with Regulations
Section 1.704-1(b), and shall be interpreted and applied in a manner consistent
with such Regulations.
"Capital Contribution" means, with respect to any Partner, the amount of
money and the initial Gross Asset Value of any property (other than money) (net
of any liabilities assumed by the Partnership or to which the property is
subject) contributed to the Partnership with respect to any Partnership Interest
held by such Partner pursuant to the terms of this Agreement.
"Capital Lease" means any lease of property, real or personal, which in
accordance with GAAP, would be required to be capitalized on a balance sheet of
the lessee.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Cogentrix GP Designee" has the meaning set forth in Section 6.1(a).
"Cogentrix GP" means Cogentrix of Fort Davis Texas I, Inc., a Delaware
corporation.
"Cogentrix Investment" means (a) the respective Initial Capital
Contribution of Cogentrix GP and Cogentrix LP, (b) all subsequent contributions
to the capital of the Partnership made by Cogentrix GP or Cogentrix LP (as the
case may be) pursuant to this Agreement in excess of any Agro Power Investment
and (c) all payments made by Cogentrix GP, Cogentrix LP or any of their
Affiliates pursuant to any of the Project Loan Documents (it being understood
for purposes of (c) that the Partnership is not an Affiliate of Cogentrix GP or
Cogentrix LP) which shall be allocated for the purposes of this Agreement
between Cogentrix GP and Cogentrix LP pursuant to their agreement.
"Cogentrix LP" means Cogentrix of Fort Davis Texas II, Inc., a Delaware
corporation.
"Commonly Controlled Entity" means, with respect to any Person, an entity,
whether or not incorporated, which is under common control with such Person
within the meaning of Section 414(b) or (c) of the Code.
"Construction Agreement" means the Commercial Design and Construction
Contract dated February 12, 1996, by and among the Partnership, Cogentrix
Energy, Inc. and Agro Power, as it may be amended, supplemented or otherwise
modified and in effect from time to time.
- 5 -
<PAGE>
"Construction/Term Facility" means a loan facility in the amount of
$21,123,125.00 provided by the Construction/Term Lender pursuant to the Project
Loan Documents.
"Construction/Term Lender" means Farm Credit Bank of Texas or its successor
under the Construction/Term Facility.
"Cumulative Distributions to Cogentrix" means the aggregate, cumulative
distributions of Net Distributable Cash received by Cogentrix GP and Cogentrix
LP from the Partnership.
"Cumulative Distributions to VF" means the aggregate, cumulative
distributions of Net Distributable Cash received by VF Delaware and VF from the
Partnership.
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
6 Del.C. " 17-101, et seq., as it may be amended from time to time and any
successor to such Act.
"Depreciation" means, for each fiscal year or other period, an amount equal
to the deprecation, amortization, or other cost recovery deduction allocable
with respect to an asset for such period, except that if the Gross Asset Value
of an asset differs from its adjusted basis for Federal tax purposes at the
beginning of such period, Depreciation shall be an amount which bears the same
ratio to such beginning Gross Asset Value as the Federal income tax
depreciation, amortization or other cost recovery deduction for such period
bears to such beginning adjusted tax basis; provided that if the Federal income
tax depreciation, amortization, or other cost recovery deduction for such period
is zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the Management Committee.
"Dollars" and "$" means dollars in lawful currency of the United States of
America.
"Equity Funding Date" means the day on which all of the conditions to the
initial drawdown under the Construction/Term Loan Facility (other than the
contributions to the capital of the Partnership to be made by Cogentrix GP and
Cogentrix LP under Section 3.2) have been met to the satisfaction of the
Administrative Agent and the Construction/Term Lender.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means, with respect to any Person, any corporation or
trade or business which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as such Person or is under
common control (within the meaning of Section 414(c) of the Code) with such
Person.
"Estimated Taxable Income" means book income of the Partnership
computed in accordance with GAAP adjusted to reflect the estimated depreciation
and amortization timing differences between financial reporting and income tax
reporting.
- 6 -
<PAGE>
"First Priority Return" means the receipt by Cogentrix GP and Cogentrix LP
of cash distributions from Net Distributable Cash in an aggregate amount
sufficient to provide each of Cogentrix GP and Cogentrix LP, as the case may be,
with an Internal Rate of Return on its respective Cogentrix Investment hereunder
of [information omitted and subject to request for confidential treatment]%
calculated in accordance with Schedule 1.1(a) (it being understood that any
amounts which are part of Cogentrix Investment pursuant to subsection (b) or (c)
of the definition of Cogentrix Investment shall only be entitled to such return
from the date they are actually paid or made).
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States.
"General Partner" means each of Cogentrix GP and VF Delaware and any Person
admitted to the Partnership as an additional General Partner in accordance with
the provisions of this Agreement, until such time as such Person ceases to be a
general partner of the Partnership as provided herein or in the Delaware Act.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Gross Asset Value" means, with respect to any asset, the asset's adjusted
basis for Federal income tax purposes, except as follows:
The initial Gross Asset Value of any asset contributed by a Partner to
the Partnership shall be the gross fair market value of such asset, as
determined by agreement of the Partners;
The Gross Asset Value of all Partnership assets shall be adjusted to
equal their respective gross fair market values, as determined by agreement
of the Partners, and in the event the Partners fail to so agree, as
determined by the Appraisal Procedure, as of the following times: (i) The
acquisition of an additional interest in the Partnership by any new or
existing Partner in exchange for more than a de minimis Capital
Contribution; (ii) the distribution by the Partnership to a Partner of more
than a de minimis amount of property as consideration for an interest in
the Partnership if the Management Committee reasonably determines that such
adjustment is necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership; and (iii) the liquidation of
the Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g);
the Gross Asset Value of any Partnership asset distributed to any
Partner shall be the gross fair market value of such asset on the date of
distribution as determined by agreement of the Partners and, in the event
the Partners fail to so agree, as determined by the Appraisal Procedure;
the Gross Asset Values of Partnership assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided,
however, that Gross Asset Values shall not be adjusted to the extent the
Partners agree (and in the event the Partners fail to so agree, as
determined by the Appraisal Procedure) that an adjustment pursuant to
clause (ii) of this definition is necessary or appropriate in connection
with a transaction that would otherwise result in an adjustment pursuant to
clause (iv) of this definition. If the Gross Asset Value of an asset has
been determined or adjusted pursuant to clauses (i) and (ii) of this
definition or clause (iv) of this definition, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect
to such asset; and
- 7 -
<PAGE>
the Gross Asset Value of any asset owned indirectly by the Partnership
through a subsidiary partnership shall be determined pursuant to the terms
of the partnership agreement for such subsidiary partnership.
"Indebtedness" means, with respect to any Person, (a) indebtedness of such
Person for borrowed money or for the deferred purchase price of property or of
services (other than obligations under agreements for the purchase of goods and
services in the normal course of business which are not more than 30 days past
due; (b) obligations of such Person under Capital Leases; (c) obligations of
such Person pursuant to interest hedging transactions; (d) obligations of such
Person in respect of letters of credit; (e) obligations of such Person under
direct and indirect guarantees in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise assure a creditor
against loss in respect of, indebtedness or obligations of others of the kinds
referred to in clause (a), (b,), (c) or (d) above (other than endorsements of
negotiable instruments in the ordinary course of business); and (f) any
obligations of such Person or a Commonly Controlled Entity to a Multi-Employer
Plan. For purposes of clarity, "Indebtedness" includes the obligations of the
Partnership to repay amounts borrowed under, and to pay other amounts owing
under, the Project Loan Documents.
"Initial Capital Contribution" means, with respect to Cogentrix GP, the
amount of $20 and, with respect to Cogentrix LP, means the amount of $980.
"Internal Rate of Return" (whether or not capitalized) means the return to
capital calculated at each calendar quarter end in accordance with Schedule
1.1(a), attached hereto and incorporated herein by reference.
"Lien" means any mortgage, deed of trust, security interest, pledge,
hypothecation, encumbrance or lien (statutory or other) of any kind or nature
whatsoever (including, without limitation, any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any such
agreement, and the filing of any statement under the Uniform Commercial Code or
comparable law of any jurisdiction).
"Limited Partner" means each of Cogentrix LP and VF and any Person who
becomes a limited partner of the Partnership in accordance with the terms of
this Agreement and is shown as such on the books and records of the Partnership.
"Losses" has the meaning given to it in the definition of "Profits."
- 8 -
<PAGE>
"Management Agreement" means the Management Agreement dated the same date
as this Agreement by and between the Partnership and Agro Power, as it may be
amended, supplemented or otherwise modified and in effect from time to time,
pursuant to which Agro Power will provide operation and maintenance services to
the Partnership.
"Management Committee" means the Management Committee of the Partnership
referred to in Section 6.1.
"Marketing Agreement" means the Marketing Agreement dated the same date as
this Agreement by and between the Partnership and VF, as it may be amended,
supplemented or otherwise modified and in effect from time to time, pursuant to
which VF will agree to market tomatoes produced by the Partnership.
"Multi-Employer Plan" means, with respect to any Person, a Multi-Employer
Plan as defined in Section 3(37) of ERISA to which contributions have been made
by such Person or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Distributable Cash" means for any period, an amount equal to all cash
received by the Partnership during such period, including cash, but not limited
to, cash from operations, reductions in reserves, casualty proceeds, rebates and
other extraordinary items, less (a) principal, interest and other payments made
under or pursuant to the Construction Term Facility, (b) interest and fees paid
pursuant to the Revolving Facility, or other borrowings, (c) all cash
expenditures of and payments made by the Partnership, and (d) any reserves
established by the Management Committee of the Partnership, and subject to the
limitations on distributions, if any, imposed pursuant to the terms of the
Project Loan Documents.
"Nonrecourse Deductions" shall have the meaning set forth in Regulations
Sections 1.704-2(b) and (c). The amount of Nonrecourse Deductions for a
Partnership fiscal year equals the excess, if any, of the net increase, if any,
in the amount of Partnership minimum gain during the fiscal year over the
aggregate amount of any distributions during that fiscal year of proceeds of a
nonrecourse liability that are allocable to an increase in Partnership minimum
gain, determined according to the provisions of Regulations Section 1.704-2(c).
"Operating Budget" means the business plan and budget required to be
provided to the Partnership pursuant to the Management Agreement.
"Operating Management Fee" means a management fee to be paid to Agro Power
in accordance with the Management Agreement.
"Partner" means any of the General Partners or the Limited Partners.
"Partner Nonrecourse Deductions" shall have the meaning specified in
Regulations Section 1.704-2(i)(2).
- 9 -
<PAGE>
"Partnership" means Village Farms of Texas, L.P., the limited partnership
formed pursuant to this Agreement and the filing of the Certificate of Limited
Partnership with the Delaware Secretary of State.
"Partnership Books" means the books and records maintained by the
Partnership and reviewed within sixty (60) days of each fiscal year end by the
Management Committee, in which records and information relating to the ownership
of the Partnership, the constituency of the Management Committee and actions
taken by the Management Committee or the Partners is maintained, including but
not limited to, a register of the Partners, each Partner's Capital Account, each
Partner's Percentage Interest, actions taken by the Management Committee and the
Partners, and this Agreement and any amendments hereto.
"Partnership Interest" means, with respect to any Partner, the interest of
such Partner in the Partnership, whether general or limited, at any particular
time, including the rights and obligations of such Partner as provided in this
Agreement and the Delaware Act.
"Partnership Percentage" means, with respect to any Partner, at any time,
the percentage specified as such Partner's "Partnership Percentage" at the time
such Partner was admitted to the Partnership, as adjusted in accordance with the
terms of this Agreement. The initial Partnership Percentages are as follows:
Cogentrix GP 1%
Cogentrix LP 49%
VF Delaware 1%
VF 49%
"Permitted Liens" means Liens in favor of any Person other than the
Partners or any of their respective Affiliates, that (a) arise in the ordinary
course of business of the Partnership (including, without limitation, landlord's
materialmen's, mechanic's, worker's, repairmen's and employee's Liens and
similar Liens which arise in connection with any tax, assessment, governmental
charge or levy) and (b) do not secure Indebtedness.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Profits" and "Losses" mean, for any period, an amount equal to the
Partnership's taxable income or loss for such period, determined in accordance
with Code Section 703(a) (for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss), with the following adjustments:
Income of the Partnership that is exempt from federal income tax and
not otherwise taken into account in computing Profits or Losses pursuant to
this definition shall be added to such taxable income or loss;
- 10 -
<PAGE>
any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits or Losses pursuant to this definition shall be
subtracted from such taxable income or loss;
gain and loss with respect to the disposition of any Partnership asset
(both directly owned assets and assets owned indirectly through a
subsidiary partnership) shall be computed with respect to the Gross Asset
Value rather than adjusted tax basis of such asset;
in lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing taxable income or loss, there
shall be taken into account Depreciation for such fiscal year or other
period; and
in the event of an adjustment in the Gross Asset Value of any
Partnership asset pursuant to clause (b) of the definition of "Gross Asset
Value" herein, the amount of such adjustment shall be taken into account as
gain or loss from the disposition of such asset for purposes of computing
Profits and Losses.
"Project" means an approximately 41-acre venlo style greenhouse to be
located on the Site which is to be constructed in two phases of 20.5-acres each
and on which the Partnership will produce tomatoes for sale under the Marketing
Agreement.
"Project Assets" has the meaning set forth in Section 3.1(a).
"Project Budget" means the pro forma budget of total Project costs attached
hereto as Schedule 1.1(b), as amended or modified from time to time in
accordance with subsection 6.2(i).
"Project Credit Facilities" means, collectively, the Construction/Term
Facility and the Revolving Facility.
"Project Documents" means the agreements and instruments listed on Schedule
1.1(c) attached hereto and incorporated herein by reference as the same may be
amended, supplemented or otherwise modified in accordance with Section 6.2
hereof and in effect from time to time.
"Project Loan Documents" means the agreements and instruments executed by,
between or among the Partnership, Administrative Agent, Construction/Term Loan
Lender, Revolver Lender, and any other party relating to the Construction/Term
Loan Facility and/or the Revolving Facility, as the same may be amended,
supplemented or otherwise modified in accordance with Section 6.2 hereof and in
effect from time to time.
"Regulations" means the temporary, proposed and final regulations under the
Code and any successor provisions thereto.
"Requirement of Law" means, as to any Person, (a) the certificate of
incorporation and by-laws or partnership agreement or other organizational or
governing documents of such
- 11 -
<PAGE>
Person, and (b) any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its properties or to which such Person
or any of its properties is subject and the violation of which, or which
determination, could reasonably be expected to (i) have a material adverse
effect on the business, operations, properties, condition (financial or
otherwise) or prospects of such Person or (ii) materially adversely affect the
ability of such Person to perform its obligations under the Project Loan
Documents or the Project Documents to which it is a party.
"Revolver Lender" means Texas Production Credit Association or its
successor under the Revolving Facility.
"Revolving Facility" means a loan facility in the amount of $2,500,000.00
provided by the Revolver Lender pursuant to the Project Loan Documents.
"Second Priority Return" means the receipt by Cogentrix GP and Cogentrix LP
of cash distributions of Net Distributable Cash in an aggregate amount
sufficient to provide each of Cogentrix GP and Cogentrix LP, as the case may be,
with an Internal Rate of Return on its respective Cogentrix Investment of
[information omitted and subject to request for confidential treatment]%
inclusive of the First Priority Return) calculated in accordance with Schedule
1.1(a), (it being understood that any amounts which are part of Cogentrix
Investment pursuant to subsection (b) or (c) of the definition of Cogentrix
Investment shall only be entitled to such return for the date they are actually
paid or made). For purposes of Article V hereof, Internal Rate of Return shall
be calculated at each calendar quarter end.
"Site" means a parcel of approximately 202-acres located in the vicinity of
Fort Davis, Texas and more fully described on Schedule 1.1(d) attached hereto
and incorporated herein by reference.
"Subsidiary" means with respect to any Person, an Affiliate that is
controlled (directly or indirectly through one or more intermediaries) by that
Person.
"Taxes" means any and all income or gross receipt taxes, franchise taxes,
levies, imposts, duties, assessments, fees, charges and withholdings of any
nature whatsoever, whether or not presently in existence, imposed by any
Governmental Authority.
"VF" means Village Farms, L.L.C., a Delaware limited liability company, 99%
of which is owned by Agro Power and 1% of which is owned by VF Delaware.
"VF Delaware" means Village Farms of Delaware, L.L.C., a Delaware limited
liability company, 99% of which is owned by Agro Power and 1% of which is owned
by VF.
"Withdraw" or "Withdrawal", with respect to any Partner, means a Partner
ceasing to be a partner of the Partnership for any reason, whether voluntary or
involuntary, and "Withdrawn", with respect to a Partner, means a Partner who has
ceased to be a partner of the Partnership.
"Withdrawal Date" means the date of the Withdrawal from the Partnership of
a Withdrawn Partner.
- 12 -
<PAGE>
Other Definitional Provisions.
All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto, unless otherwise defined therein.
As used herein and in any certificate or other document made or
delivered pursuant hereto, accounting terms not defined in Section 1.1, and
accounting terms partly defined in Section 1.1 to the extent not defined,
shall have the respective meanings given to them under GAAP.
The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and section,
schedule and exhibit references are to this Agreement unless otherwise
specified.
Unless the context requires otherwise, any reference in this Agreement
to any of the Project Documents or the Project Loan Documents shall mean
any of such documents as amended, supplemented or modified and in effect
from time to time.
ARTICLE
GENERAL PROVISIONS
Formation of Partnership. The Partners hereby form and establish a limited
partnership under the terms and provisions of this Agreement and the provisions
of the Delaware Act, and the rights and liabilities of the Partners shall be as
provided in this Agreement and in the Delaware Act. Concurrently with the
execution of the Agreement by VF Delaware, VF, Cogentrix GP and Cogentrix LP, VF
Delaware and Cogentrix GP shall execute and file with the Office of Secretary of
State of the State of Delaware a Certificate of Limited Partnership in
accordance with Section 17-201 of the Delaware Act, in form and substance
satisfactory to both VF Delaware and Cogentrix GP.
Name of the Partnership. The name of the Partnership shall be Village Farms
of Texas, L.P., or such other name as the Partners from time to time may
designate.
Business of the Partnership. The business of the Partnership is to develop,
construct, and operate the Project. In furtherance of its business, the
Partnership shall have and may exercise all the powers now or hereafter
conferred by the laws of the State of Delaware on partnerships formed under the
laws of that state, and shall do any and all things necessary or desirable for
the accomplishment of the above purposes. The Partnership shall engage in no
other business except as permitted by the Management Committee in accordance
with Section 6.2 below.
Registered Office of the Partnership. The Partnership shall maintain a
registered office at, and the name and address of the Partnership's registered
agent in Delaware is, The
- 13 -
<PAGE>
Corporation Trust Company, 1209 Orange Street, New Castle County, Wilmington,
Delaware 19801.
Liability of the Partners Generally.
Except as otherwise provided in the Delaware Act, each General Partner
shall have the liabilities of a partner in a partnership without limited
partners to Persons other than the Partnership and the Limited Partners.
Except as otherwise provided in this Agreement or the Delaware Act, no
Limited Partner (or former Limited Partner) shall be obligated to make any
contribution of capital to the Partnership or have any liability for the
debts and obligations of the Partnership.
Office of the Partnership. The Partnership shall maintain an office and
principal place of business in Fort Davis, Texas. Pursuant to the Management
Agreement, the books of account and other records with respect to the operations
of the Partnership shall be maintained at 10 Alvin Court, East Brunswick, New
Jersey 08816. The Partnership shall not have or maintain any office or other
place of business outside of Fort Davis, Texas.
Duration of the Partnership. The Partnership shall commence on the date of
this Agreement, and shall continue until its termination in accordance with the
provisions of Article X.
ARTICLE
CAPITAL CONTRIBUTIONS
Capital Contributions.
Simultaneously with the execution of the Agreement by VF Delaware, VF,
Cogentrix GP and Cogentrix LP, VF Delaware and VF shall convey, grant,
transfer and assign (or cause to be conveyed, granted, transferred and
assigned) to the Partnership all of the Project Documents, all the rights
of Agro Power or any Affiliate of Agro Power under the Project Documents
and all the assets and business of every kind and description, wherever
located, real, personal and mixed, tangible or intangible, owned or held or
used by Agro Power and any Affiliate of Agro Power solely in connection
with the Project (collectively, the "Project Assets"). The Partnership
hereby assumes and agrees to pay when due all liabilities and obligations
of Agro Power and any Affiliate of Agro Power with respect to the Project
Assets and agrees to be bound by all of the terms of, and to undertake all
of the obligations of Agro Power and any Affiliate of Agro Power under the
Project Documents. For the purposes of the initial Capital Accounts of the
Partners, the Project Assets and Project Documents contributed to the
Partnership by VF Delaware and VF shall be deemed to have an aggregate
gross fair market value (net of liabilities) of $1,000.
- 14 -
<PAGE>
If any consent or approval is required in connection with the
assignment and contribution to the Partnership pursuant to this subsection
3.1(a) of any Project Asset or any Project Document, VF Delaware and VF
shall have obtained such consent or approval prior to such assignment and
contribution.
Cogentrix GP shall contribute to the Partnership on execution of this
Agreement by all of the Partners $20 by wire transfer of immediately
available funds to an account designated in writing by the Partnership.
Cogentrix LP shall contribute to the Partnership on execution of this
Agreement by all of the Partners $980 by wire transfer of immediately
available funds to an account designated in writing by the Partnership.
Additional Capital Contribution. Upon the satisfaction of or waiver of the
conditions set forth in Section 3.3 hereof, on the Equity Funding Date Cogentrix
GP shall contribute to the Partnership $93,116 and Cogentrix LP shall contribute
to the Partnership $4,562,665 by wire transfer of immediately available funds to
an account designated in writing by the Partnership.
Conditions. The obligation of Cogentrix GP and Cogentrix LP to make the
contributions described in Section 3.2 are subject to the satisfaction of each
of the following conditions precedent (except those conditions, if any, that may
be specifically waived in writing by Cogentrix GP or Cogentrix LP, as
appropriate):
The Project Credit Facilities and the Project Loan Documents shall
have been approved by the Management Committee and the Project Loan
Documents will be executed by all parties thereto. An original executed
copy of each Project Loan Document will be delivered to Cogentrix GP and a
copy thereof delivered to Cogentrix LP as soon as available.
All conditions to the closing of the Construction/Term Facility shall
have occurred or been satisfied (other than evidence that the capital
contributions described in Section 3.2 have been made) and all governmental
consents, approvals, permits and licenses and other deliveries in
connection with the Project which are required to be received by the
Construction/Term Lender and/or the Administrative Agent as a condition to
the funding of the Construction/Term Facility shall have been delivered or
received. A copy of all such deliveries and other evidence of the closing
shall be provided to Cogentrix GP and Cogentrix LP.
The contribution by VF Delaware contemplated by Section 3.1(a) shall
have been made to the satisfaction of Cogentrix GP and Cogentrix LP and
evidence thereof reasonably satisfactory to Cogentrix GP and Cogentrix LP
shall have been provided to them by VF Delaware.
The following representations or warranties shall be true and correct
in all respects, and are hereby made to Cogentrix GP and Cogentrix LP by VF
Delaware and VF as an inducement to their making capital contributions to
the Partnership:
- 15 -
<PAGE>
Each of VF and VF Delaware (A) is a limited liability company
duly organized, validly existing and in good standing under the laws
of the State of Delaware, the ownership of which is 99% by Agro Power
and 1% by VF (in the case of VF Delaware) or 1% by VF Delaware (in the
case of VF), (B) has full power and authority and the legal right to
incur the obligations provided for in this Agreement, and (C) has
taken all necessary action to authorize the execution, delivery and
performance of this Agreement and the Project Documents and Project
Loan Documents to which it is a party.
This Agreement and the Project Documents and Project Loan
Documents to which it is a party have been duly authorized, executed
and delivered by VF Delaware and VF and constitute the legal, valid
and binding obligations of each of VF Delaware and VF enforceable
against it in accordance with their terms, except as enforceability
may be limited by general equitable principles and by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally.
Neither the execution, delivery or performance by VF Delaware or
VF of this Agreement or any of the Project Documents or Project Loan
Documents to which it is a party, nor compliance by it with the terms
and provisions hereof or thereof, including, without limitation, the
assignment of the Project Documents and Project Assets to the
Partnership, requires the consent or authorization of any other party
(except such as have been duly obtained), or conflicts or will
conflict with or result in a breach or violation of its charter
documents or by-laws or any of the terms, conditions or provisions of
any Requirement of Law applicable to it or its assets or business.
It is not an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
The representations and warranties of VF Delaware or VF or any of
their respective Affiliates in or pursuant to any of the Project
Documents or Project Loan Documents are true and correct as of the
date hereof and are hereby deemed to be made to Cogentrix GP and
Cogentrix LP, mutatis mutandis, as if fully set forth herein.
Interest. No interest shall accrue on any contribution to the capital of
the Partnership.
Withdrawals of Capital. No Partner shall have the right to withdraw or to
be repaid or returned any capital contributed by it, except as otherwise
provided herein.
Additional Capital Contributions. Unless otherwise unanimously agreed by
the Management Committee, no Partner shall be required to make any contribution
to the capital of the Partnership other than its capital contributions set forth
in this Article III. If the Management
- 16 -
<PAGE>
Committee has agreed that an additional cash contribution to the capital of the
Partnership is to be made but a Partner does not make such contribution as and
when required, then any other Partner may (but shall not be required to), at its
election, either make all or a portion of the cash contribution to the capital
of the Partnership (which, in the case of such an investment by Cogentrix GP or
Cogentrix LP, would increase the Cogentrix Investment of such Partner or, in the
case of an investment by VF or VF Delaware, would constitute (and in the case of
subsequent investments would increase) an Agro Power Investment of such Partner)
or loan all or a portion of the amount of such non-contributing Partner's
portion of such agreed-upon cash capital contribution to the Partnership. In the
event the Partner elects to make an additional cash contribution, the Partner's
ownership percentage shall not change but, in the case of Cogentrix GP and
Cogentrix LP, the amount of the contribution will increase its respective
Cogentrix Investment and, in the case of VF and VF Delaware, would constitute
(or in the case of subsequent contributions would increase) its respective Agro
Power Investment. (As a result, for example, if Cogentrix were to make an
additional cash contribution to the Partnership under this Section 3.6, and, if
at that time, distributions of cash from Net Distributable Cash are being
allocated pursuant to Section 5.1(b), then distributions shall continue to be
made under Section 5.1(b) until Cogentrix GP and Cogentrix LP have received
distributions of cash from Net Distributable Cash that will provide Cogentrix GP
and Cogentrix LP with the Second Priority Return on the Cogentrix Investment
(which will have been increased by the amount of such cash contribution under
this Section 3.6)). In the event the Partner elects to make a loan, then such
loan shall be on customary terms and conditions, shall be evidenced by a
customary promissory note, and shall provide that (a) the loan shall be repaid
in full together with interest thereon prior to any distribution of cash by the
Partnership to the Partners, (b) it shall bear interest at the same rate of
interest as the interest rate then in effect under the Revolving Facility plus
1% per annum and (c) shall comply in all respects with Project Loan Documents.
ARTICLE
ALLOCATION OF PROFITS AND LOSSES
Profits and Losses.
After giving effect to the special allocations set forth in Sections 4.3,
4.4, 4.5, 4.6, 4.7 and 4.10 hereof, the Partners shall share Profits and Losses
as follows:
(i) Profits shall be allocated among the Partners as follows:
(A) Profits shall first be allocated to the General Partners to
offset any prior allocations of Loss made to the General Partners
under Section 4.1(a)(ii)(B) hereof which have not previously been
offset.
(B) Thereafter, Profits shall be allocated to the Partners to
offset any prior allocations of Loss made to the Partners under
Section 4.1(a)(ii)(A) which have not previously been offset.
(C) Thereafter, Profits shall be allocated 2% to Cogentrix GP and
98% to Cogentrix LP until the aggregate cumulative Profits allocated
to Cogentrix GP
- 17 -
<PAGE>
and Cogentrix LP under this subsection (B) equals the excess of (I)
Cumulative Distributions to Cogentrix over (II) the sum of Cumulative
Distributions to VF and the Cogentrix Investment.
(D) Thereafter, Profits shall be allocated among the Partners in
proportion to their Partnership Percentages.
(ii) Losses shall be allocated among the Partners as follows:
(A) Losses shall first be allocated to the Partners in accordance
with their positive Capital Accounts.
(B) Thereafter, Losses shall be allocated to the General Partners
in the proportion of their Partnership Percentages.
For Federal income tax purposes, each item of income, gain, loss,
deduction or credit entering into the computation of the Partnership's
taxable income shall be allocated in the same proportion.
The Profits and Losses of the Partnership shall be unanimously
determined by the Management Committee and shall be allocated as
described in Section 4.1(a) (i) at the end of each fiscal quarter,
(ii) upon the transfer of the Partnership Interest of any Partner
pursuant to Article VIII, (iii) upon the Withdrawal of any Partner
pursuant to Article IX, (iv) upon the admission of any Partner to the
Partnership pursuant to Article IX and (vi) at such other times that
the Management Committee may determine.
Capital Account Balances. Each Partner's Capital Account shall be
maintained in accordance with the principles of applicable Treasury Regulations
promulgated under Section 704(b) of the Code and as otherwise provided in the
definition of "Capital Accounts" and in this Article IV.
Minimum Gain Chargeback.
Notwithstanding any other provision in this Agreement, if there is a
net decrease in Partnership minimum gain (determined in accordance with the
principles of Regulations Sections 1.704-2(b)(2) and 1.704-2(d)) during any
Partnership taxable year, the Partners who would otherwise have an Adjusted
Capital Account Deficit at the end of such year shall be specially
allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount and manner sufficient to
eliminate as quickly as possible such Adjusted Capital Account Deficit. The
items to be so allocated shall be determined in accordance with Regulations
Section 1.704-2(g). This subsection 4.3(a) is intended to comply with the
minimum gain chargeback requirements in such Regulation Sections and shall
be interpreted consistently therewith.
Notwithstanding any other provision in this Agreement, if there is a
net decrease in Partnership minimum gain attributable to a partner
nonrecourse debt of the Partnership (within the meaning of Regulations
Sections 1.704-2(b)) during any
- 18 -
<PAGE>
Partnership fiscal year, each Person who has a share of the Partnership
minimum gain attributable to such nonrecourse debt of the Partnership,
determined in accordance with Regulation Section 1.704-2(i)(5), shall be
specially allocated items of Partnership income and gain for such year
(and, if necessary, subsequent years) in an amount equal to the greater of
(i) the portion of such Person's share of the net decrease in minimum gain
of the Partnership attributable to such nonrecourse debt of the
Partnership, determined in accordance with Regulations Section
1.704-2(i)(b), that is allocable to the disposition of property of the
Partnership subject to such nonrecourse debt of the Partnership, determined
in accordance with Regulations Section 1.704-2(i)(4), or (ii) if such
Person would otherwise have an Adjusted Capital Account Deficit at the end
of such year, an amount sufficient to eliminate such Adjusted Capital
Account Deficit. Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to
each Partner pursuant thereto. The items to be so allocated shall be
determined in accordance with Regulations Section 1.704-2(i)(4). This
subsection 4.3(b) is intended to comply with the minimum gain chargeback
requirement in such Regulations Section and shall be interpreted
consistently therewith. Solely for purposes of this subsection 4.3(b), each
Person's Adjusted Capital Account Deficit shall be determined prior to any
other allocations pursuant to this Article IV with respect to such fiscal
year, other than allocations pursuant to subsection 4.3(a) hereof.
Nonrecourse Deductions. Nonrecourse Deductions for any taxable year shall
be specifically allocated among the Partners in proportion to their Percentage
Interests.
Partner Nonrecourse Deductions. Nonrecourse Deductions attributable to
otherwise nonrecourse debt with respect to which a Partner or a related person
of a Partner described in Regulations Section 1.752-2(c) is the creditor or
otherwise bears the "economic risk of loss" as defined in Regulations Section
1.752-2(b) shall be allocated to such Partner.
Qualified Income Offset. Notwithstanding anything in this Agreement to the
contrary, in the event any Partner unexpectedly receives any adjustments,
allocations or distributions described in paragraphs (b)(2)(ii)(d)(4), (5) or
(6) of Regulations Section 1.704-1, there shall be specially allocated to such
Partner such items of Partnership income and gain, at such times and in such
amounts as will eliminate as quickly as possible that portion of its Adjusted
Capital Account Deficit caused or increased by such adjustments, allocations or
distributions.
Curative Allocations. The allocations set forth in Sections 4.3, 4.4, 4.5,
4.6 and 4.10 hereof are intended to comply with certain requirements of
Regulations Section, 1.704-1(b). Notwithstanding any other provisions of this
Article IV (other than Sections 4.3, 4.4, 4.5, 4.6 and 4.10), allocations that
have taken place pursuant to Sections 4.3, 4.4, 4.5, 4.6 and 4.10 shall be taken
into account in allocating other items of income, gain, loss, deduction and
credit so that, to the extent possible, the net amount of such other allocations
and the Sections 4.3, 4.4, 4.5, 4.6, and 4.10 allocations to each Partner shall
equal the net amount that would have been allocated to each Partner if the
Sections 4.3, 4.4, 4.5, 4.6, and 4.10 allocations had not occurred.
- 19 -
<PAGE>
Tax Allocations. Except as provided in Sections 4.7 and 4.9 hereof, for
income tax purposes each item of income, gain, loss and deduction shall be
allocated in the same manner as the corresponding book item is allocated for
Capital Account purposes.
Property Subject to 704(b) and 704(c). In the case of any Partnership asset
(directly or indirectly owned) the Gross Asset Value of which differs from its
adjusted tax basis, income, gain, loss and deduction with respect to such asset
shall, solely for tax purposes, be allocated in accordance with the principles
of Code Sections 704(b) and 704(c) to take account of such difference.
Limitations. Notwithstanding anything to the contrary in this Article IV,
no allocation under this Article IV shall be made to a Limited Partner that
would cause such Limited Partner to have, or that would increase, an Adjusted
Capital Account Deficit. Any amount not allocated as a result of this limitation
shall be reallocated to the General Partners pro rata in accordance with their
relative Partnership Interests.
ARTICLE
DISTRIBUTIONS
Distribution of Net Distributable Cash. Subject to Section 5.2 hereof, Net
Distributable Cash for each fiscal quarter shall be distributed to the Partners
within thirty (30) days after the end of such quarter as follows:
First, from the date hereof and until each of Cogentrix GP and
Cogentrix LP shall have received distributions of cash from Net
Distributable Cash sufficient to provide both Cogentrix GP and Cogentrix LP
with the First Priority Return, 89.1% to Cogentrix LP, 0.9% to Cogentrix
GP, 9.9% to VF Delaware and 0.1% to VF,
Thereafter until each of Cogentrix GP and Cogentrix LP shall have
received distributions of cash from Net Distributable Cash sufficient to
provide both Cogentrix GP and Cogentrix LP with the Second Priority Return,
64.386% to Cogentrix LP, 1.314% to Cogentrix GP, 33.614% to VF Delaware,
and 0.686% to VF, and
Thereafter, 49% to Cogentrix LP, 1% to Cogentrix GP, 49% to VF
Delaware and 1% to VF.
Default Allocations for Cogentrix. In the event VF Delaware, VF or Agro
Power defaults or breaches any of its obligations under this Agreement, the
Management Agreement, the Marketing Agreement or the Construction Agreement and
such default or breach has not been remedied within any applicable cure period,
or any representation or warranty made by VF Delaware, VF or any of their
respective Affiliates under this Agreement or any such other agreement or
document proves to have been untrue when made and (a) as a result thereof the
Partnership, Cogentrix GP and Cogentrix LP (or any of them) incurs or suffers an
Adverse Consequence and (b) Cogentrix GP or Cogentrix LP gives written notice of
such Adverse Consequence to the Partnership and, if the amount thereof is
unknown, its good faith estimate of the amount of such Adverse Consequence, then
the Partnership shall thereafter refrain from
- 20 -
<PAGE>
making any distributions to VF Delaware and VF (or either of them) under this
Agreement (any such distribution that would have been made but for this Section
5.2 is hereinafter referred to as a "Blocked Distribution") and shall take the
following steps:
The Partnership shall distribute to Cogentrix GP or Cogentrix LP from
such Blocked Distributions an aggregate amount equal to 100% of any such
Adverse Consequence suffered or actually incurred by Cogentrix GP and
Cogentrix LP or either of them (or, if the amount thereof is not known,
100% of Cogentrix GP's or Cogentrix LP's written good faith estimate
thereof). Any such distribution made by the Partnership under this
subsection 5.2(i) shall satisfy pro tanto the obligation of the Partnership
to make distributions to VF Delaware and VF (or either of them) with
respect to the Blocked Distributions. For the purposes of this Agreement,
any Adverse Consequence suffered or incurred by the Partnership shall be
deemed to have been suffered or incurred, on a dollar-for-dollar basis, 1%
by Cogentrix GP and 49% by Cogentrix LP.
Upon distribution to Cogentrix GP and Cogentrix LP of 100% of the
aggregate amount of any such Adverse Consequence (or their good faith
estimate thereof) from Blocked Distributions, the Partnership may
thereafter make distributions to VF Delaware and VF under Section 5.1,
unless and until it receives a subsequent notification from Cogentrix LP or
Cogentrix GP under this Section 5.2.
Default Allocations for VF. In the event Cogentrix GP, Cogentrix LP or
Cogentrix Energy, Inc. defaults or breaches any of its obligations under this
Agreement or the Construction Agreement and such default or breach has not been
remedied within any applicable cure period, or any representation or warranty
made by Cogentrix GP or Cogentrix LP under this Agreement proves to have been
untrue when made and (a) as a result thereof the Partnership, VF Delaware and VF
(or any of them) incurs or suffers an Adverse Consequence and (b) VF Delaware or
VF gives written notice of such Adverse Consequence to the Partnership and, if
the amount thereof is unknown, its good faith estimate of the amount of such
Adverse Consequence, then the Partnership shall thereafter refrain from making
any distributions to Cogentrix GP and Cogentrix LP (or either of them) under
this Agreement (any such distribution that would have been made but for this
Section 5.3 is hereinafter referred to as a "Blocked Distribution") and shall
take the following steps:
The Partnership shall distribute to VF Delaware or VF from such
Blocked Distributions an aggregate amount equal to 100% of any such Adverse
Consequence suffered or actually incurred by VF Delaware and VF or either
of them (or, if the amount thereof is not known, 100% of VF Delaware's or
VF's written good faith estimate thereof). Any such distribution made by
the Partnership under this subsection 5.3(i) shall satisfy pro tanto the
obligation of the Partnership to make distributions to Cogentrix GP or
Cogentrix LP (or either of them) with respect to the Blocked Distributions.
For the purposes of this Agreement, any Adverse Consequence suffered or
incurred by the Partnership shall be deemed to have been suffered or
incurred, on a dollar-for-dollar basis, 1% by VF and 49% by VF Delaware.
Upon distribution to VF Delaware and VF of 100% of the aggregate
amount of any such Adverse Consequence (or their good faith estimate
thereof) from
- 21 -
<PAGE>
Blocked Distributions, the Partnership may thereafter make distributions to
Cogentrix GP and Cogentrix LP under Section 5.1, unless and until it
receives a subsequent notification from VF Delaware or VF under this
Section 5.3.
ARTICLE
MANAGEMENT
Management of the Partnership.
The overall management and control of the business affairs of the
Partnership shall be vested in the Management Committee, subject to the
limitations contained in Section 6.2 or elsewhere in this Agreement. The
Management Committee shall consist of four members, two designated by
Cogentrix GP (each a "Cogentrix GP Designee") and two designated by VF
Delaware (each a "VF Delaware Designee"), and a quorum of the Management
Committee shall require at least three members of the Management Committee.
No action at any meeting may be taken by the Management Committee unless a
quorum is present (acting in person or by proxy). The Management Committee
shall meet not less frequently than quarterly. Members of the Management
Committee may participate in a meeting of the Management Committee by means
of conference telephone. No action may be taken by the Management Committee
with respect to any of the matters described in Section 6.2 hereof unless
such action is in the form of a writing signed by all members of the
Management Committee. Unless otherwise agreed, all meetings of the
Management Committee shall take place at Cogentrix's offices in Charlotte,
North Carolina, Agro Power's offices in East Brunswick, New Jersey or such
other place as the Management Committee may unanimously agree.
Except as set forth in Section 6.2, any action by the Management
Committee shall require the approval of a majority of the members of the
Management Committee.
Any General Partner may, at any time, replace any of its respective
Designees to the Management Committee with a new Designee and, upon such
change, or upon the death or resignation of any Designee, a successor shall
be designated in writing by the party that appointed the Designee being
replaced.
Any General Partner or member of the Management Committee may, at any
time, request a meeting of the Management Committee by sending written
notice specifying in reasonable detail the purpose(s) of such meeting to
all other Partners and to the members of the Management Committee at least
ten (10) days in advance of the proposed date for the meeting, which notice
may be waived by all members of the Management Committee and all Partners.
Any member of the Management Committee may propose that an action be
submitted to the Management Committee for approval, and there shall be no
requirement of notice of the issues to be addressed at any meeting of the
Management Committee.
- 22 -
<PAGE>
Fundamental Matters. The following matters shall require the prior
unanimous authorization and approval of the Management Committee:
Any transaction in which the Partnership (i) acquires, purchases or
leases any asset or right for consideration having a fair market value in
excess of $25,000, (ii) consolidates or merges with or into any other
Person, (iii) sells, assigns, leases or otherwise transfers any asset or
right having a fair market value in excess of $25,000, or (iv) assumes any
liability or obligation in connection with Section 6.2(a)(i) above in
excess of $25,000.
The approval, execution and delivery of any contract, lease or
agreement following the Effective Date; provided, that no such approval
shall be required for (i) any contracts and permit applications in
existence prior to the Effective Date and listed on Schedule 1.1(c) hereto,
or (ii) any other contract, lease or agreement which is expressly
non-recourse to the Partners so long as the amounts to be paid by the
Partnership thereunder, together with all other amounts to be paid by the
Partnership pursuant to contracts, leases or agreements that have not been
unanimously approved or ratified by the Management Committee, does not
exceed $50,000 in the aggregate excluding contracts, leases or agreements
for supplies used in the ordinary course of business and contemplated in
the Operating Budget.
The approval, execution or delivery of any amendments to, modification
or termination of, enforcement of rights under, or any consents or waivers
in connection with any contract, lease or agreement, other than contracts
entered into without prior unanimous approval of the Management Committee
pursuant to subsection 6.2(a) or clause (ii) of subsection 6.2(b) above.
The sale or issuance by the Partnership of any interest, or of any
option, warrant or similar right to acquire any interest, of any kind in
the Partnership.
Any decision to (i) terminate all or any substantial part of the
Project (an "Abandonment") or (ii) engage in any activity not contemplated
by this Agreement.
The incurrence or assumption of any Indebtedness by the Partnership,
except for (i) Indebtedness which, when the principal amount thereof is
aggregated with the principal amount of Indebtedness previously incurred
pursuant to this subsection 6.2(f) which remains outstanding, does not
exceed $25,000 and (ii) the Indebtedness represented by the Project Loan
Documents.
The granting of any Lien (other than Permitted Liens) on the assets or
rights of the Partnership.
The repayment (other than (i) repayments in accordance with scheduled
maturity and (ii) paydowns on the Revolving Credit Facility), voluntary
prepayment or redemption of, or any refinancing or other modification of
the terms of, any Indebtedness.
- 23 -
<PAGE>
The adoption and modification of the Operating Budget or the Project
Budget (collectively, the "Budgets").
The approval of any expenditure or investment not previously
authorized in any Budget; provided, however, that no such approval shall be
required for any expenditure or investment so long as the amount expended
by the Partnership, together with the amounts of all other expenditures by
the Partnership during any fiscal year that have not been approved or
ratified by the Management Committee, does not exceed $25,000 in the
aggregate.
The initiation of any legal proceedings or arbitration on behalf of
the Partnership, or the settlement of any claim by or against the
Partnership with respect to claims in excess of $25,000 or which include
requests for an injunction, specific performance or other equitable relief.
The selection, removal, or determination of authority and
responsibility of the officers of the Partnership, general or special
counsel for the Partnership, accountants and auditors for the Partnership
and the Project and the approval of any change in the accounting or tax
policy of the Partnership or the Project.
To the extent not specified in this Agreement, (i) any distribution of
income or any assets or rights of the Partnership or (ii) the redemption,
purchase or other acquisition of any interest in the Partnership.
Except as contemplated in Article X of this Agreement, liquidating or
dissolving, or proposing to liquidate or dissolve, or effecting, or
proposing to effect, a recapitalization in any form of transaction, of the
Partnership.
(i) Commencing any case, proceeding or other action (A) under any
existing or future law or any jurisdiction, domestic or foreign, relating
to bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for All or any substantial part of its assets;
(ii) making, or proposing to make, a general assignment for the benefit of
its creditors; (iii) admitting or proposing to admit in writing its
inability to pay its debts as they become due; (iv) filing or proposing to
file any plan of reorganization pursuant to 11 U.S.C. " 101 et seq.; (v)
taking, or proposing to take, any action in furtherance of, or indicating
its consent to, approval of or acquiescence in, any of the acts set forth
in clause (i) or (ii) above.
Establishing any operating or capital reserves other than those
required by the Project Loan Documents.
Establishing committees of the Management Committee and delegating
voting authority to such committees.
- 24 -
<PAGE>
The approval, execution or delivery of any amendments to, modification
or termination of, or any waivers of any rights under, or the grant of any
consents under or in connection with any Project Document, any Project Loan
Document, the Marketing Agreement or the Management Agreement.
The approval or taking of any action that would be an event of default
or that would give rise to a right of termination under any Project
Document or any Project Loan Document.
The approval or taking with any action that would give rise to an
event of default under any Project Loan Document or that would give rise to
a right of acceleration or termination under any Project Loan Document.
The reimbursement by the Partnership of any General Partner under
Section 6.4(b) hereof of any amount in excess of $5,000 during any fiscal
quarter.
Any change in or termination of any insurance policies maintained by
the Partnership.
Any agreement to undertake any action that would require the approval
of the Management Committee under this Section 6.2.
Any act in contravention of this Agreement or the Act.
Any act which would make it impossible to carry on the ordinary
business of the Partnership.
Possession of Partnership property by any Partner, or the assignment,
transfer or pledge of rights of the Partnership in specific Partnership
property for other than a Partnership purpose or other than for the benefit
of the Partnership, or any commingling the funds of the Partnership with
the funds of any other person.
Any action which would cause the Partnership to be treated as other
than a partnership for Federal income tax purposes.
Any confession of a judgment against the Partnership or any Partner.
The grant of any power of attorney or appointment of any agent or
attorney (other than customs brokers).
The grant of signature authority to any Person with respect to any of
the Partnership's bank or investment accounts.
Officers of the Partnership. The Partnership may have such officers as may
be designated by the Management Committee from time to time. Such officers shall
(a) serve at the pleasure of the Management Committee, (b) subject to Section
6.2 and to the instructions and directions of the Management Committee, have
such powers as are usually exercised by
- 25 -
<PAGE>
comparable designated officers of a Delaware corporation and (c) have the power
to bind the Partnership through the exercise of such powers to the extent
consistent with the terms hereof. The initial officers of the Partnership shall
be those persons listed on Schedule 6.3 attached hereto and incorporated herein
by reference. Following the execution hereof, officers shall be appointed or
removed only by action of the Management Committee in accordance with the
provisions of Section 6.1.
No Compensation; Reimbursement.
Except as expressly provided herein, the General Partners, members of
the Management Committee and officers shall receive no compensation for
performing their duties as General Partners, members of the Management
Committee or officers under this Agreement; provided, however, that this
provision shall not affect any Partners' right to receive its share of
distributions as set forth in Article V hereof.
Subject to the limitation, if any, imposed by the Project Loan
Documents and subject to subsection 6.2(u), each General Partner shall be
entitled to receive, out of any Partnership funds available therefor,
reimbursement of all amounts expended by such General Partner in payment of
properly incurred and documented Partnership obligations paid by such
General Partner out of its own funds so long as such expenditures are made
in accordance with the Budgets.
Insurance. The Partnership shall (a) maintain, with insurers or
underwriters of good repute, in the name of the Partnership, such insurance
relating to the operations of the Partnership as is customary for comparable
businesses to that of the Partnership to maintain, against such risks and
pursuant to such terms (including deductible limits or self-insured retentions)
as are customary for such businesses, and (b) pay all premiums and other sums
payable in order to maintain such insurance. For purposes of clarity, it is
hereby agreed that the Partnership shall maintain the insurance required by the
Project Loan Documents and all insurance policies shall name Cogentrix GP and VF
Delaware as an additional insured and provided that they may not be cancelled or
terminated except with 30 days' prior written notice to Cogentrix GP and VF
Delaware.
Cooperation on Tax Matters. The Partnership shall cooperate fully as and to
the extent reasonably requested by Cogentrix GP or VF Delaware in connection
with the preparation and filing of any Tax return, statement, report or form,
and any audit, litigation or other proceeding with respect to Taxes relating to
or arising out of the Project. Such cooperation shall include the retention and,
upon request by either Cogentrix GP or VF Delaware, the provision of records and
information that are reasonably relevant to any such audit, litigation or other
proceeding. The Partnership agrees to (a) retain all books and records with
respect to Tax matters pertinent to the Project and (b) give Cogentrix GP and VF
Delaware reasonable written notice prior to destroying or discarding any such
books and records. The Partnership shall retain any records requested by either
Cogentrix GP or VF Delaware to be retained.
ARTICLE
BOOKS, RECORDS AND BANK ACCOUNTS
- 26 -
<PAGE>
Books and Records. In addition to the Partnership Books, the Partnership
shall also keep such books of account and other records with respect to the
operations of the Partnership as will sufficiently explain the transactions and
financial position of the Partnership and enable financial statements to be
prepared in accordance with GAAP and shall cause such books and other records to
be kept in such manner as will enable them to be properly audited. The
Partnership Books and such other books and records shall be maintained at the
principal places of business of the Partnership and all Partners and their duly
authorized representatives shall at all times have access to and the right to
review and copy such books and records.
Accounting Basis and Fiscal Year. The books of the Partnership (a) shall be
kept on an accrual basis in accordance with GAAP, (b) shall reflect all
Partnership transactions, (c) shall be appropriate and adequate for the
Partnership's business and for the carrying out of all provisions of this
Agreement, and (d) shall be closed and balanced as of the end of each fiscal
year, as soon as practicable after the end of such fiscal year. The fiscal year
of the Partnership shall be January 1 through December 31 of each year or such
other fiscal year that may be selected with the unanimous approval of the
Management Committee.
Reports.
Unless otherwise required by the Management Committee, the Partnership
shall cause to be delivered to each Partner, within 120 days after the end
of each fiscal year, an annual report containing the following:
A balance sheet as of the end of the Partnership's fiscal year
and statements of income, Partners' equity and cash flows for the year
then ended, each of which shall be audited and reported on by Arthur
Andersen & Co. or such other independent certified public accountants,
which shall be a nationally recognized accounting firm, as may be
selected by the Management Committee;
a general description of the activities of the Partnership during
such year; and
a report of any material transaction between the Partnership and
any Partner or any of its Affiliates, including fees and compensation
and reimbursements paid by the Partnership and the products supplied
and services performed by such Partner or any such Affiliate for such
fees or compensation and the expenses so reimbursed; provided,
however, that no report shall be required for any products supplied
and services performed if such products and services are provided
pursuant to the terms of a Project Document, the Management Agreement,
the Marketing Agreement, an agreement approved by the Management
Committee or set out in any Budget and the compensation therefor is in
accordance with the terms of such agreement.
Within 45 days after the end of each quarter of each fiscal year, the
Partnership shall cause to be delivered to each Partner a quarterly report
containing a balance sheet as of the end of such quarter and a statement of
income for such quarter,
- 27 -
<PAGE>
each of which may be unaudited but which shall be certified by the chief
financial officer of the Partnership as fairly presenting the financial
position of the Partnership at the end of such quarter and results of
operations of the Partnership for such quarter and as having been prepared
in accordance with the accounting methods followed by the Partnership for
Federal income tax purposes and otherwise in accordance with GAAP applied
on a basis substantially consistent with that of the Partnership's audited
financial statements (subject to normal year end adjustments).
Within 120 days of the end of each fiscal year, the Partnership will
cause to be delivered to each Partner all information necessary for the
preparation of such Partner's Federal income tax returns, including a
statement showing such Partner's share of income, gains, losses, deductions
and credits for such year for Federal income tax purposes and the amount of
any distributions made to or for the account of such Partner pursuant to
this Agreement.
Bank Accounts. The Partnership shall maintain one or more accounts in one
or more banks located in Fort Davis, Texas and such other locations as may be
approved by the Management Committee, each of which shall be a member the
Federal Deposit Insurance Corporation. In addition, the Partnership shall
establish such other accounts and deposit amounts as required by the Project
Loan Documents. All such amounts shall be and remain the property of the
Partnership, and shall be received, held and disbursed by the Partnership for
the purposes specified in this Agreement. There shall not be deposited in any of
said accounts any funds other than funds belonging to the Partnership, and no
other funds shall in any way be commingled with such Partnership funds.
Tax Returns. The Management Committee shall cause income tax returns for
the Partnership to be prepared and timely filed with the appropriate
authorities.
Tax Elections. The Management Committee shall, from time to time, make such
tax elections as it deems necessary or advisable to carry out the business of
the Partnership or the purposes of this Agreement.
Tax Matters Partner. Cogentrix GP shall be the Partnership's "tax matters
partner" for purposes of the Code and with respect to all other Federal, state
and local Taxes. The approval of the tax matters partner shall be required
before the Partnership or any Partner (with respect to Partnership matters)
files any document with any Governmental Authority including, but not limited
to, returns, amendments, requests for refunds, appeals, or waivers or extensions
of statutes of limitations. The tax matters partner shall take such actions as
the Management Committee may lawfully require in connection with the
Partnership's Federal, state and local Tax matters.
Withholdings. Except and only to the extent required by applicable law and
except as permitted hereunder, the Partnership will not deduct or withhold any
amount in respect of any tax from any payment or distribution by the Partnership
to any Partner unless the Partnership has first received written authorization
from such Partner so to withhold or to deduct.
- 28 -
<PAGE>
ARTICLE
TRANSFER OF INTERESTS
Transfer of a Partner's Interest.
No Partner may sell, transfer, participate, assign or otherwise
dispose of (whether voluntarily or by operation of law) (collectively,
"transfer") all or any part of its Partnership Interest without the prior
written consent of the non-transferring General Partner(s).
The non-transferring General Partner(s) may condition its (their)
consent to any transfer on compliance by the Partner desiring to transfer
its Partnership Interest with all or any of the following:
The transferring Partner must give written notice to the General
Partners identifying in reasonable detail the proposed transferee(s)
and the terms and conditions of the proposed transfer and the
non-transferring General Partner(s) shall have a period of twenty (20)
Business Days from the date of such notice either to consent in
writing to the proposed transferee(s), or to give written notice that
it does not consent to such transferee(s);
within ten (10) Business Days after the non-transferring
General Partner(s) gives written notice that it does not consent
to a proposed transferee, it shall provide to the transferring
Partner a written explanation of the reasons therefor;
such transfer does not release the transferring Partner from
its obligations hereunder;
the transferee shall not have the right to be separately
represented on the Management Committee unless the transferring
Partner is a General Partner that previously had the right to
appoint Designee's to the Management Committee and the transfer
involves all of such General Partner's Partnership Interest;
the non-transferring General Partner(s) shall notify each
other Partner in writing of its decision to consent to the
transfer within five (5) Business Days of its grant of such
consent (which notice shall include a copy of the notice sent to
the non-transferring General Partner(s) by the transferring
Partner) and, prior to any such transfer, each Partner (which
term, for purposes of clarity, includes for purposes of this
subsection (v) the non-transferring General Partner and excludes
the transferring Partner) shall have the right for thirty (30)
Business Days following such notice to purchase the Partnership
Interest being sold by the transferring Partner pursuant to this
Article VIII on the same terms and conditions as were set forth
in such notice. In the event that none of the nontransferring
Partners exercises its right to purchase such Partnership
Interest being sold, then the transferring Partner shall have
forty-five (45) days thereafter to complete the
- 29 -
<PAGE>
sale in accordance with the terms of the notice, after which time
the transferring Partner must again comply with the procedures
set forth in this Article VIII. In the event more than one
Partner exercises its right to purchase such Partnership Interest
proposed to be transferred, then such exercising Partners shall
exercise such right on a pro-rata basis based on their respective
Partnership Percentages (without considering the Partnership
Percentage of the transferring Partner or the Partners (if any)
not electing to exercise such right); or
(vii) such transferee shall not have the right to sell,
transfer, participate, assign or otherwise dispose of all or a
portion of such party's Partnership Interest except in accordance
with the terms of this Section 8.1; and
(viii) the transferee shall execute documents satisfactory
to the Management Committee sufficient to make the transferee a
party to and be bound by the terms of this Agreement and (B) the
transferee shall expressly assume all obligations of the
transferring Partner hereunder.
ARTICLE
ADDITIONAL PARTNERS; WITHDRAWAL OF PARTNERS
Additional Partners. Persons other than the undersigned may from time to
time be admitted to the Partnership as General Partners or Limited Partners only
with the unanimous consent of the Management Committee and only on such terms
and conditions as may be prescribed by the Management Committee.
Withdrawal of Partners.
No Partner may withdraw from the Partnership except as provided in this
Section 9.2.
A Partner shall immediately cease to be a Partner and shall be deemed
to have Withdrawn from the Partnership, in the event:
Such Partner shall commence a voluntary case or other proceedings
seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, or shall consent to any
such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors,
or shall fail generally to pay its debts as they become due, or shall
take any corporate action to authorize any of the foregoing; or
an involuntary case or other proceeding shall be commenced
against such Partner seeking liquidation, reorganization or other
relief with
- 30 -
<PAGE>
respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, and such involuntary case
or other proceeding shall remain undismissed and unstayed for a period
of sixty (60) days, or an order for relief shall be entered against
such Partner under the federal bankruptcy laws as now or hereafter in
effect; or
such Partner defaults in its obligation to make a capital
contribution pursuant to Sections 3.1 and 3.2 (and such default is not
cured within two (2) days of written notice of such default from a
General Partner); or
it is required to Withdraw as a Partner pursuant to the Delaware
Act.
Such Partner's Withdrawal Date shall be the day such Withdrawal occurs.
Any Partner may Withdraw voluntarily from the Partnership on not less
than thirty (30) days' prior written notice by such Partner to the other
Partners either (i) in the event that such Withdrawal is after March 31,
1996 and conditions to the initial draw under the Construction/Term Loan
Documents have not been satisfied or (ii) with the prior unanimous consent
of the Management Committee. Such Partner's Withdrawal Date shall be the
date on which a written notice of Withdrawal is made.
Upon the Withdrawal of any Partner pursuant to subsections 9.2(b) or
(c), such Partner's Capital Account and Partnership Percentage shall be
allocated, as of the Withdrawal Date, among the other Partners in
proportion to their respective Partnership Percentages on such Withdrawal
Date (it being understood that such allocation shall not result in a
Limited Partner becoming a General Partner). After its Withdrawal Date, a
Withdrawn Partner shall not have any rights with respect to the profits,
capital or affairs of the Partnership (including, but not limited to, any
rights of representation on the Management Committee or any committee
thereof or any rights on liquidation of the Partnership pursuant to Article
X).
On the Withdrawal Date for any Partner that Withdraws pursuant to
Section 9.2(b) or Section 9.2(c)(ii), such Partner shall pay to the
Partnership in cash any negative balance in such Partner's capital account.
If the sum of such Partner's capital account has a positive balance on the
Withdrawal Date, the Partnership shall pay such amount to such Partner upon
its withdrawal.
ARTICLE
DISSOLUTION AND LIQUIDATION
Events of Dissolution.
The Partnership shall be dissolved upon:
- 31 -
<PAGE>
an Abandonment pursuant to subsection 6.2(e);
the occurrence of an event requiring dissolution under the
Delaware Act;
the unanimous consent of the General Partners; or
at the election of Cogentrix GP, if Agro Power ceases, at any
time, to control (as defined in the definition of "Affiliate") VF
Delaware or VF.
Dissolution of the Partnership shall be effective on the day on which
the event occurs giving rise to the dissolution, but the Partnership shall
not terminate until the assets and rights of the Partnership shall have
been distributed as provided herein. Notwithstanding the dissolution of the
Partnership, prior to the termination of the Partnership, as aforesaid, the
business of the Partnership and the affairs of the Partners, as such, shall
continue to be governed by this Agreement. Upon dissolution, the Management
Committee shall liquidate the assets of the Partnership and apply and
distribute the proceeds thereof as contemplated by this Agreement.
Distributions Upon Liquidation.
After payment of liabilities owing to creditors (but excluding any
liabilities payable with respect to the Management Agreement or the
Marketing Agreement other than amounts then due and owing), the Management
Committee or the liquidator, if any, shall set up such reserves as it deems
reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Partnership (other than liability and obligation owing
with respect to the Management Agreement and the Marketing Agreement). Said
reserves may be paid over by the Management Committee or the liquidator to
a bank, to be held in escrow for the purpose of paying any such contingent
or unforeseen liabilities or obligations and, at the expiration of such
period as the Management Committee or the liquidator may deem advisable,
such reserves shall be distributed to the Partners or their assigns in the
manner set forth in subsection (b) below.
If any General Partner has a negative Capital Account at the time of
dissolution of the Partnership, such General Partner shall be required to
restore to the Partnership the amount of the negative balance in its
Capital Account. If any Limited Partner has a negative Capital Account
balance at the time of dissolution of the Partnership, such Limited Partner
shall have no obligation to restore to the Partnership the amount of the
negative balance in its Capital Account.
After paying the liabilities and providing for the reserves referred
to in subsection 10.2(a) and the payment of any restoration amounts under
subsection 10.2(b), the Management Committee or the liquidator shall, by
the end of the Partnership's taxable year in which the Partnership
dissolves (or, if later, within 90 days after the date of such
termination), cause the net assets of the Partnership to be distributed in
accordance with Article V hereof, provided, however, that no distribution
shall be made pursuant to this
- 32 -
<PAGE>
sentence that creates or increases a Capital Account deficit for any
Partner which exceeds such Partner's obligation to restore such deficit
(under subsection 10.2(b) above), determined as follows:
Distributions shall be first determined provisionally without regard
to Capital Accounts, and the allocation provisions of Article IV hereof
shall also be applied provisionally. If as a result of such provisional
calculations and allocations, any Partner would thereby have a Capital
Account deficit which exceeds its obligation to restore such deficit under
subsection 10.2(b) above, the actual distributions pursuant to this
subsection (c) shall be equal to such provisional distribution less the
amount of such excess and actual allocations shall be made in accordance
with Article IV taking into account such actual distributions.
Any remaining net assets shall be allocated among the Partners in
accordance with their positive Capital Accounts.
If such distributions are insufficient to return to any Partner the full amount
of its capital contributions, it shall have no recourse against any other
Partner. Each Partner shall receive its share of the net assets in cash or in
kind, and the proportion of such share that is received in cash shall be the
same for each Partner. In the event that any part of such net assets consists of
notes or accounts receivable or other non-cash assets, the Management Committee
or the liquidator shall take whatever steps it deems appropriate to convert such
assets into cash or into any other form which would facilitate the distribution
thereof. If any assets of the Partnership are to be distributed in kind, such
assets shall be distributed on the basis of their fair market value, as
determined by the Management Committee or the liquidator, if any, acting in its
sole discretion.
ARTICLE
DISPUTE RESOLUTION
Arbitration.
In the event a dispute arises between or among any Partners relating
to the terms of this Agreement and any Partner gives written notice of such
dispute to the Management Committee, then each of the Partners involved in
such dispute shall refer the dispute to its senior management. The senior
management of each Partner involved in such dispute shall meet and confer
regarding the resolution of the dispute. In the event a resolution of such
dispute is not reached within 30 days of the written notice, then any of
the Partners involved in such dispute may submit the dispute to arbitration
in accordance with Section 11.1(b).
Arbitration of disputes pursuant to this Section 14.1(b) shall be held
in Charlotte, North Carolina under the commercial arbitration rules of the
American Arbitration Association, and shall be heard by three arbitrators
selected in accordance with such rules. Each arbitrator shall have at least
five years experience in the United States in a profession or professions
related to the subject matter involved in the dispute
- 33 -
<PAGE>
and shall not be a past or present officer, director or employee of, or
have any interest in or material relationship with, any Partner or any
Affiliate of any Partner. Any arbitral award shall be final and binding and
may be entered by any Partner in any state or Federal court having
jurisdiction thereof. Costs of arbitration (including reasonable attorney's
fees and costs) shall be paid either equally by the parties to the
arbitration or in accordance with the decision of the arbitrators.
Buy/Sell Option.
In the event that the Management Committee is unable to reach a
unanimous decision with respect to any matter set forth in Section 6.2,
either of the General Partners (such Partner herein referred to as a
"Buy-Out Offeror") shall have the right to make a written offer to buy (a
"Buy-Out Offer") all (but not less than all) of the Partnership Interests
of the other General Partner and its Affiliates. The Buy-Out Offer shall be
at a price determined in accordance with the Appraisal Procedure (the
"Aggregate Purchase Price") which shall be payment for all of the assets,
liabilities and business of the Partnership, and the amount to be paid to
any selling Partner under this Section 11.2 shall be equal to the amount
such selling Partner would receive if all the assets, liabilities and
business of the Partnership were sold at the Aggregate Purchase Price on
the date the Buy-Out Offer was made and the Partnership were then
immediately dissolved in accordance with Section 10.2. The General Partners
hereby agree to use their best efforts to cause the Appraisal Procedure to
be completed within ninety (90) days after it has been initiated. The
General Partner receiving a Buy-Out Offer (a "Buy-Out Offeree") shall,
within 30 days of the determination of the Aggregate Purchase Price in
accordance with the Appraisal Procedure, either (a) accept the Buy-Out
Offer on behalf of itself and its Affiliates who own Partnership Interests
or (b) agree to purchase all (but not less than all) of the Partnership
Interests of the Buy-Out Offeror and its Affiliates upon the foregoing
terms and using the same Aggregate Purchase Price as was determined in
accordance with the Appraisal Procedure to determine the amount owing to
each selling Partner. The failure of any Partner receiving a Buy-Out Offer
to respond to such Buy-Out Offer within such 30-day deadline of its receipt
thereof, either agreeing to accept such Buy-Out Offer on behalf of itself
and its Affiliates or by agreeing to purchase all (but not less than all)
of the Partnership Interest of the Buy-Out Offeror and its Affiliates on
the foregoing terms, shall constitute (without any further action by the
Buy-Out Offeror, the receiving General Partner or any other Partner) an
irrevocable acceptance of such Buy-Out Offer by the receiving General
Partner binding on and enforceable against such General Partner and its
Affiliates.
Any purchase of Partnership Interests required pursuant to subsection
11.2(a) shall be made through the redemption of such Partnership Interests
by the Partnership; provided, however, that if such redemption is
prohibited by the Project Loan Documents, such purchase shall be made
directly by the purchasing General Partner. The closing date for any such
purchase shall be on the date set by the purchasing General Partner which
may be at any time within 180 days of the acceptance of a Buy-Out Offer or
agreement to purchase, as the case may be. In the event the purchasing
General Partner does not close the purchase within such 180-day period,
then the purchasing General Partner's right to purchase Partnership
Interests under Section 11.2(a) shall at the
- 34 -
<PAGE>
close of business on such 180th day terminate and the other General Partner
shall thereafter have the right to purchase the Partnership Interests of
the purchasing General Partner and its Affiliates at a price determined by
using the same Aggregate Purchase Price and such other General Partner
shall have 180 days immediately following the expiration of the inital 180
day period in which to close such purchase. The price to be paid to each
selling Partner shall be paid by the purchasing General Partner in
immediately available funds at the closing.
ARTICLE
MISCELLANEOUS
Distributions and Notices. Distributions hereunder shall be sent, and
notices required or permitted hereunder shall be in writing and shall be sent,
to the address set forth for each Partner in signature pages hereof, or at such
other address as may be supplied by written notice given in conformity with the
terms of this Section 12.1. Notices to the Management Committee shall be sent
care of all Partners who have a right to designate members of the Management
Committee. Any notice required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given and/or delivered (a) when
personally delivered, (b) when sent by telefax and receipt is acknowledged via
telephone or otherwise as confirmation of such receipt but only if the sender
obtains a printed confirmation of the receipt by the recipient of the entire
document, (c) the second day following the day on which the same has been
delivered prepaid to a reputable overnight courier service providing proof of
receipt but only if sent for next business day delivery or (d) five (5) days
after the deposit in the United States mails, registered or certified, return
receipt requested and postage prepaid, in each case addressed to the party to
whom such notice is to be given at the address set forth on the signature pages
hereof), or at the most recent address(es) specified by written notice given to
the other party in the same manner provided in this section; provided, however,
that notice of an address change shall not be effective until actually received.
Distributions shall be deemed given only upon the receipt thereof by a Partner.
Disclosure Obligations. The Partnership hereby covenants and agrees for the
benefit of Cogentrix GP and VF Delaware that it shall (a) notify Cogentrix GP
and VF Delaware of any material fact necessary in order to make any of the
representations, warranties or other statements made by it in the Project
Documents, or any other written statement provided to Cogentrix GP or VF
Delaware not misleading and (b) disclose in writing to Cogentrix GP and VF
Delaware any fact which materially adversely affects, or which could reasonably
be expected in the future to materially adversely affect Cogentrix GP, VF
Delaware or the Project, in each case under clause (a) or (b) above promptly
upon receiving knowledge of any such fact.
Successors and Assigns. Subject to the restrictions on transfer set forth
herein, this Agreement, and, each and every provision hereof, shall be binding
upon and shall inure to the benefit of the Partners, their respective
successors, successors-in-title, heirs and assigns, and each and every
successor-in-interest to any Partner, whether such successor acquires such
interest by way of gift, purchase, foreclosure or by any other method, shall
hold such interest subject to all of the terms and provisions of this Agreement.
- 35 -
<PAGE>
Amendments. This Agreement may not be released, discharged, amended or
modified in any manner except by an instrument in writing signed by a duly
authorized officer of each party hereto.
Partition. The Partners hereby agree that no Partner, nor any
successor-in-interest to any Partner, shall have the right while this Agreement
remains in effect to have the property of the Partnership partitioned, or to
file a complaint or institute any proceeding at law or in equity to have the
property of the Partnership partitioned, and each Partner, on behalf of itself,
its successors, representatives, heirs and assigns, hereby waives any such
right. It is the intention of the Partners that during the term of this
Agreement, the rights of the Partners and their successors-in-interest, as among
themselves, shall be governed by the terms of this Agreement, and that the right
of any Partner or successor-in-interest to assign, transfer, sell or otherwise
dispose of its interest in the Partnership shall be subject to the limitations
and restrictions of this Agreement.
No Waiver. No waiver of any right under this Agreement shall be deemed
effective unless contained in a writing signed by the party charged with such
waiver. The failure of any Partner to insist upon strict performance of a
covenant hereunder or of any obligation hereunder, irrespective of the length of
time for which such failure continues, shall not be a waiver of such Partner's
right subsequently to demand strict compliance. No consent or waiver to or of
any branch or default in the performance of any obligation hereunder, shall
constitute a consent or waiver to or of any other breach or default in the
performance of the same or any other obligation hereunder.
Entire Agreement. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof and
supersedes any and all prior agreements, understandings, promises and
representations made by either party to the other concerning the subject matter
hereof and the terms applicable hereto.
Captions. Titles or captions of articles, sections and subsections
contained in this Agreement are inserted only as a matter of convenience and for
reference, and in no way are intended to define, limit, extend or describe the
scope of this Agreement or the intent of any provision hereof.
Counterparts. This Agreement may be executed in any number of counterparts,
all of which together shall for all purposes constitute one Agreement, binding
upon the Partners notwithstanding that all Partners may not have signed the same
counterpart.
Applicable Law. This Agreement shall be deemed to have been entered into
and shall be construed and enforced in accordance with the laws of the State of
Delaware as applied to contracts made and to be performed entirely within
Delaware.
Severability. If any provision of this Agreement is or becomes or is deemed
invalid, illegal or unenforceable in any jurisdiction, (a) such provision shall
be construed or deemed amended to conform to applicable laws so as to be valid
and enforceable, or, if it cannot be so construed or deemed amended without
materially altering the intention of the parties hereto, it shall be stricken,
(b) the validity, legality and enforceability of such provision will not
- 36 -
<PAGE>
in any way be affected or impaired thereby in any other jurisdiction and (c) the
remainder of this Agreement shall remain in full force and effect.
[This space intentionally left blank.]
- 37 -
<PAGE>
IN WITNESS WHEREOF, the Partners have executed this Agreement as of the
date first above mentioned.
COGENTRIX OF FORT DAVIS I, INC.,
as General Partner
By
-----------------------------------
Printed Name: Thomas F. Schwartz
Title: Vice President - Finance
and Treasurer
Address for Notices:
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273
Attention: General Counsel
Address for Distributions:
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273
Attention: Treasurer
VILLAGE FARMS OF DELAWARE, L.L.C.,
as General Partner
By: Agro Power Development, Inc.,
Managing Member
By
--------------------------
Printed Name: J. Kevin Cobb
Title: Vice President
Address for Notices:
10 Alvin Court
East Brunswick, New Jersey 08816
Attention: Chief Financial Officer
Address for Distributions:
10 Alvin Court
East Brunswick, New Jersey 08816
Attention: Chief Financial Officer
- 38 -
<PAGE>
COGENTRIX OF FORT DAVIS II, INC.,
as Limited Partner
By
-----------------------------------
Printed Name: Thomas F. Schwartz
Title: Vice President - Finance
and Treasurer
Address for Notices:
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273
Attention: General Counsel
Address for Distributions:
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273
Attention: Treasurer
VILLAGE FARMS, L.L.C.
By: Agro Power Development, Inc.,
Managing Member
By
--------------------------
Printed Name: J. Kevin Cobb
Title: Vice President
Address for Notices:
10 Alvin Court
East Brunswick, New Jersey 08816
Attention: Chief Financial Officer
Address for Distributions:
10 Alvin Court
East Brunswick, New Jersey 08816
Attention: Chief Financial Officer
- 39 -
<PAGE>
Schedule 1.1(a)
Calculation of Internal Rate of Return
Internal Rate of Return Calculation
The calculation of the Internal Rate of Return in connection with determining
the First Priority Return and Second Priority Return will be based upon the cash
inflows and cash outflows for Cogentrix GP and Cogentrix LP. The Internal Rate
of Return shall be computed utilizing Microsoft Excel software version 5.0. The
Internal Rate of Return shall be computed utilizing the @XIRR function in Excel.
For purposes of calculating the Internal Rate of Return, the cash inflows and
cash outflows to Cogentrix GP and Cogentrix LP shall consist solely of the
following:
Partner Contributions
All contributions made by Cogentrix GP and Cogentrix LP will be reflected
as a cash inflow as of the date such contribution was received by the
Partnership. Cogentrix GP and Cogentrix LP will be credited for a partner
contribution at any time such Partner funds cash into the Partnership. In
addition, to the extent Cogentrix Energy, Inc. or any of its Affiliates
funds cash directly into the Partnership or pays amounts to other persons
to fulfill obligations under the Partnership Agreement or any of the
Project Documents or Project Loan Documents or incurs costs or fees
associated with securing an obligation to make a contribution to the
Partnership, then such funding into the Partnership or such other payments
and/or such costs or fees will be deemed a capital contribution by
Cogentrix GP and Cogentrix LP as of the day on which such funding or
payment is made or such costs or fees are incurred.
Distributions to Partners
All cash distributions will be reflected as a cash outflow on a net
After-Tax basis (based on allocations of the Partnership's taxable income
(loss) in accordance with Section 4.1) as of the date such cash
distribution was received by the Partner. In addition, any construction
profits received by Cogentrix Energy, Inc. in excess of $400,000 shall be
considered a distribution to Cogentrix GP and Cogentrix LP (in an aggregate
amount equal to such excess) for purposes of the Internal Rate of Return
calculation.
The Internal Rate of Return calculation shall be performed by Agro Power as of
the end of each calendar quarter and is subject to the approval of Cogentrix GP
and Cogentrix LP.
All capitalized terms used in this Schedule 1.1(a) and not otherwise defined
herein shall have the meaning set forth in this Agreement.
<PAGE>
Schedule 1.1(c)
Project Documents
1. The Sales Contract dated as of February 8, 1996 by and between Agro Power
which has assigned its interest therein to the Partnership, and Southwest
Texas Municipal Gas Corporation.
2. The Letter Agreement dated January 15, 1996, as amended by the Addendum to
Letter Agreement, by and between Transok, Inc. and Agro Power which has
assigned its interest therein to the Partnerships.
<PAGE>
Schedule 6.3
Initial Officers of the Partnership
Name Title
- - ---- -----
Michael A. DeGiglio President
Thomas F. Schwartz Vice President
J. Kevin Cobb Vice President
Lawrence J. Howard Treasurer
Dennis W. Alexander Secretary
Lori T. Hladik Assistant Secretary
Exhibit 10.68
MARKETING AND SALES AGREEMENT
BETWEEN
VILLAGE FARMS, L.L.C.
AND
VILLAGE FARMS OF TEXAS, L.P.
February 13, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS.............................................................1
ARTICLE II
SCOPE OF DUTIES.........................................................3
Section 2.01 . Performance of Duties...............................3
Section 2.02 . Personnel...........................................3
Section 2.03 . On-Site Supervisor..................................3
Section 2.04 . Marketing Plan......................................3
Section 2.05 . Performance Standards...............................4
ARTICLE III
MARKETING AND SALES.....................................................4
Section 3.01 . Marketing...........................................4
Section 3.02 . Village Farms Trademark.............................4
Section 3.03 . Quality Control.....................................5
Section 3.04 . Promotion...........................................5
Section 3.05 . Sales Prices........................................5
Section 3.06 . Billing and Collections.............................5
Section 3.07 . Packaging, Shipping, and Delivery...................5
Section 3.08 . Obligations of Owner................................6
Section 3.09 . Greenhouse Products.................................6
Section 3.10 . No Obstruction......................................6
ARTICLE IV
COMPENSATION AND PAYMENT................................................6
Section 4.01 . Basic Compensation..................................6
Section 4.02 . Debt Service Coverage Ratio Test....................7
Section 4.03 . Bonuses.............................................7
Section 4.04 . Payment of Bonuses..................................7
ARTICLE V
REPRESENTATIONS AND WARRANTIES..........................................8
Section 5.01 . Representations and Warranties of the
Marketing Agent.....................................8
ARTICLE VI
COVENANTS OF THE MARKETING AGENT........................................8
Section 6.01 . Books, Records and Reports..........................8
Section 6.02 . Employment Practices.................................8
Section 6.03 . Nondisclosure.......................................8
Section 6.04 . Compliance With Governmental Rules..................8
Section 6.05 . Section 8 and Section 15 Declarations..............10
Section 6.06 . Section 9 Renewal..................................10
ARTICLE VII
GENERAL LIABILITY.......................................................9
Section 7.01 . Indemnification.....................................9
<PAGE>
ARTICLE VIII
DEFAULTS AND REMEDIES..................................................10
Section 8.01 . Defaults...........................................10
Section 8.02 . Damages for Termination Without Cause.............110
ARTICLE IX
TERM...................................................................11
Section 9.01 . Term...............................................11
ARTICLE X
MISCELLANEOUS..........................................................12
Section 10.01 . Notices...........................................12
Section 10.02 . Severability......................................13
Section 10.03 . Amendment.........................................13
Section 10.04 . Assignment........................................13
Section 10.05 . Relationship of the Parties.......................13
Section 10.06 . Headings; Etc.....................................13
Section 10.07 . Governing Law.....................................13
Section 10.08 . Parties in Interest; Limitation and
Rights of Others..................................13
Section 10.09 . Arbitration.......................................14
-ii-
<PAGE>
MARKETING AND SALES AGREEMENT
Village Farms of Texas, L.P. (the "Owner") intends to construct and
operate an approximate 41 acre greenhouse in Jeff Davis County, Texas (the
"Greenhouse") . The Greenhouse will be manufactured and constructed by Dalsem
Kasenkouw B.V. (the "Contractor"), Agro Power Development, Inc. (the "General
Contractor") and the Owner. Village Farms, L.L.C. (the "Marketing Agent") and
the Owner have entered into this Marketing and Sales Agreement dated as of
February 13, 1996 to market the produce grown at the Greenhouse.
In consideration of the mutual agreements herein contained and other
good and valuable consideration, receipt of which is hereby acknowledged, and in
reliance upon the representations and warranties of each party set forth herein,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms when used herein shall have the following meanings:
"Affiliate" of any Person shall mean each Person which, directly or
indirectly, controls or is controlled by or is under common control with such
designated Person and, without limiting the generality of the foregoing, shall
include (a) any Person which beneficially owns or holds ten percent (10%) or
more of any class of voting securities of such designated Person or ten percent
(10%) or more of the equity interest in such designated Person and (b) any
Person of which such designated Person beneficially owns and holds ten percent
(10%) or more of any class of voting securities or in which such designated
Person beneficially owns or holds ten percent (10%) or more of the equity
interest. For the purposes of this definition, the terms "controls," "controlled
by," and "under common control with," as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person whether through the
ownership of voting securities or by contract or otherwise.
"Agreement" shall mean this document and any exhibits and appendices
hereto as amended, modified or supplemented from time to time.
"Business Day" shall mean any day other than Saturday, Sunday or other
day on which banks are authorized to be closed in Texas, New York, North
Carolina, or New Jersey.
"Contract Year" initially shall be the period ending on December 31
next following the Date of Initial Services and each calendar year thereafter.
"Credit Agreement" shall mean the Credit Agreement to be entered into
between Owner and the Lender, as the same may be amended, modified or
supplemented from time to time.
"Date of Initial Services" shall mean the later of July 1, 1996 or the
date of Phase I Substantial Completion under the Commercial Greenhouse Design
and Construction Contract, dated December 7, 1995 by and between Contractor and
General Contractor, as same may be amended, modified or supplemented from time
to time.
<PAGE>
"Governmental Rule" shall mean any law, rule, regulation, ordinance,
order, code, interpretation, judgment or similar norm or decision of any
Federal, state, local or foreign government, authority, agency,, court or other
body or entity having jurisdiction over the Site.
"Lender" shall mean CoBank, ACB, as Agent for the lending
institution(s) providing financing for the Project, and their successors and
assigns.
"License Agreement" shall mean the License Agreement dated February 13,
1996 between Agro Power Development, Inc. and the Marketing Agent, a copy of
which is attached hereto as Exhibit A, as same may be amended from time to time.
"Loan Agreement" shall mean the Loan Agreement dated on or about
February 14, 1996, between Farm Credit Bank of Texas, Texas Production Credit
Association, CoBank, ACB, and the Owner, as same may be amended from time to
time.
"Manager" shall mean the person described in Section 2.01.
"Management Contract" shall mean the Management, Operation, and
Maintenance Contract of even date herewith between the Owner and the Manager, as
same may be amended, modified, or supplemented from time to time.
"Marketing Plan" shall mean the business plan and budget prepared
annually or more often by Marketing Agent setting forth the items described in
Section 2.04.
"On-Site Supervisor" shall mean the person described in Section 2.03.
"Party" shall mean Owner or the Marketing Agent, or any of them, as
appropriate, and their successors and permitted assignees.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
government or agency or political subdivision thereof.
"Product" shall mean all production derived from the Greenhouse, which
shall initially consist of tomatoes.
"Revenues" shall mean the gross proceeds derived from the sale of the
Product, plus interest income, and any and all other types of income received by
the Owner, less allowances, returns, and amounts received with respect to
freight and transportation charges, and excluding insurance proceeds.
"Site" shall mean the Greenhouse and its grounds located at Highway 17
North, Fort Davis, Jeff Davis County, Texas.
"Term" shall mean the period provided for in Section 9.01 hereof.
"Uncontrollable Force" shall mean any of the following which are beyond
the reasonable control of a Party and which materially impairs the performance
by such Party of its duties and
-2-
<PAGE>
obligations hereunder and such material impairment continues for a period of
more than thirty (30) days: (a) severe weather, flood, fire, lightning or other
natural disaster or act of God, (b) earthquake or subsidence, whatever its
cause, (c) strikes or other labor disturbances, whether or not involving
employees of a Party, (d) action or inaction by, or inability to obtain
authorization or approval from, any governmental agency or authority, which a
Party is unable, after its best efforts, to overcome, (e) compliance with any
Governmental Rule, (f) war (whether declared or not), sabotage, act of a public
enemy, insurrection, riot or civil disturbance, (g) defects in material
equipment necessary for performance of the Agreement, (h) any act by another
party (other than the Party claiming Uncontrollable Force, any Affiliate of such
Party or the respective agents, servants or employees of such Party or
Affiliates), or (i) any other similar act.
"Work" shall mean all duties and responsibilities of the Marketing
Agent under this Agreement.
ARTICLE II
SCOPE OF DUTIES
Section 2.01. Performance of Duties. As more specifically described in
Article III, the Marketing Agent shall furnish, manage and supervise certain
personnel necessary in connection with the marketing, sale, and distribution of
the Product, in accordance with the terms of this Agreement. Commencing on the
Date of Initial Services, the Marketing Agent shall participate in the planning
and start-up of the Greenhouse. The On-Site Supervisor (as defined herein in
Section 2.03) shall be available at the Site on a full time basis, commencing on
September 1, 1996. The operation of the Greenhouse and the production of the
Product shall be the primary responsibility of Village Farms of Delaware, L.L.C.
(the "Manager") as defined in the Management Contract.
Section 2.02. Personnel. The Marketing Agent shall make available for
the performance of its duties under the Agreement, sufficient personnel (each of
whom will be properly trained and qualified to undertake their respective
assigned duties) and support systems and services as are necessary or desirable
to assure the performance of Marketing Agent's responsibilities under this
Agreement.
Section 2.03. On-Site Supervisor. The Marketing Agent shall identify
one competent individual to act in the capacity of On Site Supervisor. The
On-Site Supervisor shall be responsible on a day-to-day basis for the marketing
and sales of the Product and shall be supervised by the Marketing Agent. The
selection and continued employment of the On-Site Supervisor shall be subject to
the approval of Owner, which approval shall not be unreasonably withheld. The
On-Site Supervisor shall be an employee of the Owner.
Section 2.04. Marketing Plan. Within thirty (30) days from receipt of a
copy of the preliminary business plan and budget for the first year of
operations of the Greenhouse, which is to be prepared by the Manager pursuant to
the Management, Operation and Maintenance Contract of even date herewith, and
approved by the Owner, the Marketing Agent will provide to the Owner and the
Lender a preliminary Marketing Plan for the first year of operations which shall
include the strategy for marketing efforts for the upcoming year, target
customers and geographic areas for penetration, and such other information which
is customarily included in a
-3-
<PAGE>
produce marketing plan, and which will also set forth such other information as
the owner may reasonably request. In addition, within thirty (30) days after
receipt by the Marketing Agent of each subsequent business plan and budget
prepared by the Manager (the "Business Plan"), which Business Plan is to be
submitted by the Manager forty-five (45) days prior to December 31 of each year
(except for the first Contract Year), the Marketing Agent shall submit to the
Owner, with a copy to the Lender, the Marketing Plan for the next succeeding
Contract Year corresponding to the year covered by such Business Plan. The
Marketing Plan shall always be prepared in conjunction with the Business Plan
and shall set forth in form and detail reasonably satisfactory to Owner, the
Marketing Agent's plans for such Contract Year. The Marketing Plan shall be
subject to the approval of owner, such approval not to be unreasonably withheld.
Section 2.05. Performance Standards. The Marketing Agent shall be
responsible for the sales of the Greenhouse produce in accordance with the
Marketing Plan. The Marketing Agent shall be responsible for the means, methods
and techniques used in the marketing and sale of the produce of the Greenhouse.
ARTICLE III
MARKETING AND SALES
Section 3.01. Marketing. During the period beginning on the Date of
Initial Services and ending at the expiration of the Term of this Agreement, the
Marketing Agent shall use its best efforts to market all the Product of the
Greenhouse in accordance with the Marketing Plan in order to derive the greatest
possible Revenues therefrom. The Marketing Agent warrants that, during each
Contract Year, it will sell One Hundred (100%) Percent of the Premium Quality
tomatoes produced by the Greenhouse in accordance with the terms and conditions
of this Agreement and the Marketing Plan (as it is updated from time to time).
Section 3.02. Village Farms Trademark. Village Farms is a trademark
registered with the U. S. Patent and Trademark office, owned by Agro Power
Development, Inc., a New York Corporation ("APD"), an affiliate of the Marketing
Agent. APD has authorized the use of the Village Farms trademark by the
Marketing Agent and the Owner in conjunction with this Agreement. The owner
hereby acknowledges that the Marketing Agent and/or APD has full right and
authority to the unlimited use of this trademark on behalf of themselves and
other producers located throughout the United States and abroad, and that the
trademark is not limited to use in conjunction with tomatoes, but may be used
for any other type of produce, at APD's and the Marketing Agent's discretion.
All Premium Quality tomatoes produced by the Greenhouse will be labeled and/or
otherwise identified by the Village Farms trademark, or such other name as
determined by the Marketing Agent which would provide a greater profit to the
owner. Subject to the provisions of Section 9.01 herein, the Owner shall have
the right to use the trademark, Village Farms, following the termination of this
Agreement, until the Construction Loan Maturity Date (as defined in the Loan
Agreement) provided that (i) it pays the Marketing Agent the sum of $100,000 per
year, with the first payment due within thirty (30) days prior to the effective
date of the termination, and the subsequent payments due within thirty (30) days
prior to the anniversary of the termination, (ii) the use of the trademark is
limited to fruits and vegetables, including tomatoes produced at the Greenhouse
in Texas, and (iii) the Owner agrees in writing to abide by the conditions and
restrictions of the License Agreement, as same may be amended from time to time.
In the event the Owner fails to pay any of the required payments,
-4-
<PAGE>
the right to use the trademark shall terminate upon the expiration of the period
for which payment was last received. The terms of this provision shall survive
termination of this Agreement.
Section 3.03. Quality Control. The On-Site Supervisor shall exercise
its reasonable exercise in determining which of the Product of the Greenhouse
qualifies as Premium Quality. Best efforts will also be used to market tomatoes
which are of lesser quality, except for those tomatoes, which in the sole
discretion of the Marketing Agent, have no market value due to their inferior
quality. The Marketing Agent shall have total discretion (subject to the
requirement that it act reasonably) over which, if any of the lesser quality
tomatoes shall be labeled or identified with the trademark "Village Farms." The
Marketing Agent will have sole and absolute discretion (subject to the
requirement that it act reasonably) over the use of the trademark, in order to
maintain the high quality associated with the trademark, and to preserve the
market share of the Village Farms tomatoes, which will ultimately serve to
benefit the owner in the sale of its Product.
Section 3.04. Promotion. Marketing Agent, in conjunction with APD,
engages in, and shall continue to engage in general advertising, marketing and
promotional efforts in the food industry, on behalf of the trademark Village
Farms, and shall maintain these general marketing efforts throughout the term of
this Agreement, on at least the same level as is currently being employed, at
the sole expense of the Marketing Agent. In the event Marketing Agent deems it
to be in the best interests of the Owner to engage in strictly local advertising
efforts for the sole benefit of the Owner, such advertising campaign efforts
shall be detailed in the Marketing Plan prepared by the Marketing Agent pursuant
to the terms of this Agreement. In the event said local advertising plan is
approved by the Owner, the owner shall be solely responsible for the costs of
same.
Section 3.05. Sales Prices. The Owner acknowledges that the sale of its
Product by the Marketing Agent is based on market demands and price fluctuation
can occur seasonally and otherwise. Marketing Agent shall use commercially
reasonable efforts to obtain the highest possible price for the Product.
Section 3.06. Billing and Collections. At its cost, the Marketing Agent
will provide billing and collection services to the Owner consistent with the
Marketing Plan and such direction as may be reasonably given by the owner to the
Marketing Agent from time to time. All customers of the Owner shall be billed
under the name Village Farms. The Marketing Agent will maintain accurate books
and records of all sales, billing and collections, and shall prepare a monthly
report which shall be made available to the owner for review. Monies collected
by the Marketing Agent on behalf of the owner shall be held by the Marketing
Agent as trustee in a -separate account for the benefit for the Owner, and shall
be remitted to Owner (without deduction) on a weekly basis. Although the
Marketing Agent is responsible for billing and collection, the Owner shall bear
the risk of nonpayment by any of its customers, and shall determine if any
customers should be dropped, due to poor payment experience.
Section 3.07. Packaging, Shipping, and Delivery. The Marketing Agent
shall be responsible for the instructing and training of owner's employees who
will physically be
-5-
<PAGE>
responsible for the proper packaging of the Product. Marketing Agent shall be
responsible for all shipping and delivery arrangements for the Product, at
Owner's sole expense.
Section 3.08. Obligations of Owner. Throughout the Term of this
Agreement, owner shall furnish all Product exclusively to the Marketing Agent,
and shall use its best efforts to produce Premium Quality tomatoes, in the
quantity established in the business plan and budget prepared annually by the
Manager, pursuant to the terms of the Management Contract. All personnel of the
Greenhouse operation shall at all times be employees of Owner.
Section 3.09. Greenhouse Products. It is contemplated by this Agreement
that the Product of the Greenhouse will be tomatoes. However, if in the opinion
of the Marketing Agent, the Greenhouse operation can be made profitable by the
production of produce more profitable than tomatoes, then the Marketing Agent,
with the prior written consent of the Owner, may instruct the Manager to produce
a substitute product, and Marketing Agent's duties will also cover this
substitute product.
Section 3.10. No Obstruction. Until the termination of this Agreement,
Owner shall not, either through its agents or employees, take any action that
would prevent the Marketing Agent from marketing the Product in accordance with
this Agreement nor take any action that would materially obstruct the production
of Product at the Site, unless such prevention or obstruction is caused by
Uncontrollable Force or by the Marketing Agent or any of its Affiliates or any
of their respective employees, servants or agents.
ARTICLE IV
COMPENSATION AND PAYMENT
Section 4.01. Basic Compensation. In consideration of the performance
of Marketing Agent's obligations under the Agreement, Owner shall pay to the
Marketing Agent the sum of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) per
Contract Year (the "Compensation") in twelve equal monthly installments
beginning on the 1st day of the second month following the Date of Initial
Services and on each anniversary thereafter. For the period from the Date of
Initial Services through the first day of the month following the Date of
Initial Services, the Marketing Agent shall be entitled to a fee equal to the
product of (i) the Compensation and (ii) a fraction which shall be the number of
weeks of such period divided by 52, such amount to be payable on the first day
of the month following the Date of Initial Services. Such compensation will be
adjusted each January 1 of each Contract Year by the same percentage change in
the Consumer Price Index ("CPI"), provided the adjustment shall not cause the
Compensation to be less than the current Contract Year's Compensation. If for
any reason the Marketing Agent is unable to perform its obligations hereunder,
except as a result of termination of this Agreement because of a default by the
Marketing Agent hereunder or in accordance with Section 9.01 herein, then the
Marketing Agent shall be entitled to the continuation of the Compensation as
though the Agreement had been performed by the Marketing Agent, provided
however, that in the event that the Marketing Agent or Owner is unable to
perform its obligations under this Agreement because of an Uncontrollable Force,
then the Compensation shall be discontinued at any time after the later of the
first anniversary of the event creating the Uncontrollable Force or the date on
which the Marketing Agent's continued performance was disrupted.
-6-
<PAGE>
Section 4.02. Debt Service Coverage Ratio Test. The provisions of this
Section 4.02 shall remain in effect only for so long as the Owner is party to
any loan agreement with the Lenders, or is a party to any loan agreement related
to the refinancing of the obligations owing to the Lenders. In the event Owner's
actual debt service coverage ratio as defined in the Credit Agreement ("DSCR"),
for any calendar year falls below 1.5, then, in that event, no Compensation
shall be paid for any portion of that calendar year, however, the right to
Compensation shall accrue, provided the DSCR is greater than 1.0, and shall be
paid to the Marketing Agent in one sum, immediately following Owner's
achievement of a DSCR of at least 1.5. In the event that Compensation was paid
for any portion of the calendar year during which Owner's actual DSCR fell below
1.5, those payments shall be deducted from future payments due the Marketing
Agent hereunder, until the Owner has recouped same. Immediately upon the owner
achieving a DSCR of 1. 5, any payments which were withheld or recouped by Owner
shall be paid to the Marketing Agent in one sum. The Owner's DSCR shall be
measured as of December 31 of each year during the term of this Agreement.
Section 4.03. Bonuses. The Marketing Agent shall be entitled to a bonus
for each calendar year in which the Owner's actual DSCR equals or exceeds 1.5.
The Owner's DSCR shall be measured in accordance with Section 4.02. above. In
the event the Owner's actual DSCR equals or exceeds 1.5 but is less than 2.0,
the bonus shall be ONE HUNDRED THOUSAND DOLLARS ($100,000.00); if the actual
DSCR equals or exceeds 2.0 but is less than 2.5, the bonus shall be TWO HUNDRED
THOUSAND DOLLARS ($200,000.00); if the actual DSCR equals or exceeds 2.5 but is
less than 3.0, the bonus shall be THREE HUNDRED THOUSAND DOLLARS ($300,000.00);
and, if the actual DSCR equals or exceeds 3.0, the bonus shall be THREE HUNDRED
FIFTY THOUSAND DOLLARS ($350,000.00). The foregoing bonus amounts shall be
automatically adjusted upward each January 1 of each Contract Year, if the
Consumer Price Index ("CPI") for that year shows an increase; the adjustment
shall be equal to the percentage change in the CPI for that calendar year. In
the event that the Owner has no debt service whatsoever, under the Credit
Agreement or otherwise, the Marketing Agent shall be entitled to the maximum
bonus payable hereunder. The terms of this provision shall survive termination
of this Agreement.
Section 4.04. Payment of Bonuses. Bonuses shall be paid quarterly in
arrears based upon the projected DSCR contained in the business plan and budget
to be prepared by the Manager each year, pursuant to the Management Contract.
The Manager shall periodically review its projection of that year's DSCR, and,
if necessary, revise same to reflect the more current information available to
the Manager. If the projected DSCR is revised, either upward or downward to a
different threshold, the quarterly payment of the estimated bonus shall be
adjusted accordingly. In the event it appears, based upon the revised projected
DSCR, that the Marketing Agent has received overpayments, such overpayments
shall be deducted from future quarterly bonus payments until such overpayments
have been recouped. In the event the Marketing Agent's projected bonus for that
year has increased based upon the revised projected DSCR, the shortfall which
resulted from the quarterly payments made based upon the prior projected DSCR
shall be paid to the Marketing Agent with its next regular adjusted quarterly
bonus payment. Upon the determination of the actual DSCR, in the event the
Marketing Agent had received a Bonus for the prior Contract Year, to which it
was not entitled, and Owner has not yet recouped same, such overpayment may be
offset against either the Compensation payable hereunder or against future Bonus
payments, until it is recouped. In the event any Bonus was
-7-
<PAGE>
earned which has not yet been paid, the balance of the Bonus earned shall be
payable in one sum within thirty (30) days of the determination of Owner's
actual DSCR. In the event this Agreement has been terminated, any Bonuses which
Marketing Agent received to which it was not entitled, shall be immediately due
and payable to the Owner, upon the determination of such overpayment.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01. Representations and Warranties of the Marketing Agent.
The Marketing Agent represents and warrants to Owner that it has substantial
experience in the marketing of tomatoes and that the On-Site Supervisor shall
either have substantial experience in the marketing of tomatoes, or shall have
been trained by a person with substantial experience in the marketing of
tomatoes. The Marketing Agent is a limited liability company duly organized and
validly existing under the laws of the State of Delaware. The Marketing Agent's
execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly authorized by all requisite action on the part of the
Marketing Agent and this Agreement constitutes the Marketing Agent's legal,
valid and binding obligation, enforceable against the Marketing Agent in
accordance with its terms. The Marketing Agent's execution and delivery of this
contract and the performance of its obligations hereunder will not conflict
with, violate or result in a default under the Marketing Agent's certificate of
formation or operating agreement or any mortgage, indenture, agreement,
instrument or other contract to which the Marketing Agent is a party or by which
the Marketing Agent is bound.
ARTICLE VI
COVENANTS OF THE MARKETING AGENT
Section 6.01. Books, Records and Reports. The Marketing Agent shall
maintain books and records and shall prepare for the benefit of owner, a monthly
report showing the sales and collections of the Product, and such other matters
as the Owner may, from time to time, reasonably request be included in such
reports. All such books, records and reports shall be the sole and exclusive
property of the Owner, and the Marketing Agent shall keep such books and records
in such place or places so as to provide Owner (and its authorized
representatives) with maximum access thereto and the ability to make copies
thereof.
Section 6.02. Employment Practices. The Marketing Agent shall comply
with the applicable requirements of Executive Orders Nos. 11246 (Equal
Opportunity and Certification of Nonsegregated Facilities), 11701 (Affirmative
Action for Disabled Veterans and Handicapped of the Viet Nam Era), 11758
(Affirmative Action for Handicapped Workers), 11458 and 11625 (Minority Business
Enterprise) and all other Governmental Rules relating to employment practices to
the extent applicable.
Section 6.03. Nondisclosure. All reports, records and other information
related to the Site, the Greenhouse, the operations of the Owner, and the
performance of the Marketing Agent of its duties hereunder shall not be used by
the Marketing Agent for any purposes other than those contemplated hereby or
pursuant to the written consent of the Owner and shall not be disclosed by the
Marketing Agent to any other party or any other person or entity except with the
-8-
<PAGE>
prior written consent of the Owner. Furthermore, the Marketing Agent shall not
copy of reproduce any such information without the written consent of the Owner
(other than such reasonable copies as may be necessary to perform its duties and
obligations under this Agreement). The Marketing Agent shall also take
reasonable precautions to ensure against any breach of the obligations contained
herein which shall be no less stringent than the precautions and procedures that
it uses to protect its own proprietary information and which shall, at a
minimum, be deemed to include, without limitation, taking precautions to ensure
that it will only make such information available to those of its employees who
have a need to know it. Upon the expiration or termination of this Agreement,
Marketing Agent shall immediately return to the Owner all such information and
all whole or partial copies thereof and all other materials that may include, in
whole or in part, such information. All rights, whether arising under copyright,
patent, trade secret, or other laws, to such information are hereby reserved by
the owner.
Section 6.04. Compliance With Governmental Rules. The Marketing Agent
shall at all times market the Product and perform its other duties and
obligations hereunder in accordance with all applicable Governmental Rules. The
Marketing Agent shall be liable for all fines, fees, penalties, damages or other
costs imposed by a governmental authority imposed on or incurred or suffered by
the Owner which are attributable to Marketing Agent and/or its agents, servants
and employees in connection with the marketing and sales of the Product and the
performance of its other duties and obligations hereunder.
Section 6.05. Section 8 and Section 15 Declarations. The Marketing
Agent shall either cause Agro Power Development, Inc. to file, or shall itself,
file during the period between July __, 1997 and July 28, 1998, Section 8 and
Section 15 Declarations, required under 15 U.S.C. ss. 1058 and 15 U.S.C. ss.
1065 to extend the duration of the initial registration of the Trademark and to
establish the Trademark as incontestable.
Section 6.06. Section 9 Renewal. The Marketing Agent shall either cause
Agro Power Development, Inc. to file, or shall itself, file within six months
prior to the expiration of the original registration of the Trademark, or any
renewal thereof, an application for renewal of registration under 15 U.S.C. ss.
1059.
ARTICLE VII
GENERAL LIABILITY
Section 7.01. Indemnification. The Marketing Agent shall indemnify and
save harmless Owner and Lender, and their respective directors, officers,
agents, and employees from and against (i) any and all loss, damage, injury,
liability and claims thereof for injury to or death of a person, including, but
not limited to, personnel of the Marketing Agent, Lender and owner, (ii) any and
all loss of or damage to property and (iii) any and all loss of income by the
owner, resulting from the Marketing Agent's performance of this Agreement to the
extent the same is caused by the negligence or willful misconduct of the
Marketing Agent, any of its Affiliates, or any or their respective directors,
officers, agents or employees. Owner shall indemnify and save harmless the
Marketing Agent and Lender, and their respective directors, officers, agents,
and employees from and against (i) any and all loss, damage, injury, liability
and claims thereof for injury to or death of a person, including, but not
limited to, personnel of Owner, Lender and the Marketing Agent, (ii) any and all
loss of or damage to property, and (iii) any and all loss of
-9-
<PAGE>
income by the Marketing Agent, resulting from the Owner's performance of this
Agreement to the extent the same is caused by the negligence or willful
misconduct of owner, any of its Affiliates, or any of its directors, officers,
agents or employees.
ARTICLE VIII
DEFAULTS AND REMEDIES
Section 8.01. Defaults. Upon the failure of any Party to substantially
comply with any of the obligations of such Party hereunder and continued
noncompliance for a period of thirty (30) days (except in the case where such
failure will result in injury to or damage or loss of perishable Product, in
which case the cure period shall be five (5) days) after written notification
the noncompliance is sent to such Party, the non-defaulting Party may, at its
option, by written notice to the defaulting Party, declare this Agreement to be
in default and at any time thereafter the non-defaulting Party may, at its sole
discretion, (a) exercise any right or pursue any remedy that may be available
under applicable law or proceed by appropriate court action to enforce the terms
hereof or to recover damages for the breach hereof and/or (b) terminate this
Agreement. The exercise of any rights or pursuit of any remedies pursuant to
this Agreement shall not relieve the defaulting Party of any of its obligations
and liabilities hereunder, all of which shall survive such exercise or pursuit.
To the extent permitted by law, and subject to any mandatory requirements of
applicable law, and further subject to Section 8.02, each and every right, power
and remedy herein specifically given to the non-defaulting Party or otherwise in
this Agreement shall be cumulative and shall be in addition to every other
right, power and remedy herein specifically given for now or hereafter existing
at law, equity or by statute and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised or pursued from
time to time and as often in such order as may be deemed expedient by the
nondefaulting Party, and the exercise or pursuit or the beginning of the
exercise or pursuit of any right, power or remedy shall not be construed to be a
waiver of the right to exercise or to pursue at any time or thereafter any other
right, power or remedy. No delay or admission by a Party in the exercise of any
right or power or in the pursuit of any remedy may impair any such right, power
or remedy or be construed to be a waiver of any default on the party of the
other Party or to be an acquiescence therein. No expressed or implied waiver by
a Party of any default hereunder shall in any way be, or be construed to be, a
waiver of any future or subsequent default hereunder. Neither Party shall be
considered to be in default for failure to perform, or delay in performing, any
obligation under this Agreement if performance is prevented, hindered or delayed
by an Uncontrollable Force (but only for so long as such Uncontrollable Force
continues unabated) . In such event, the Party which is unable, or anticipates
being unable, to perform shall (a) promptly notify the other Party in writing of
the nature, cause, date of commencement and expected duration of any such delay,
(b) indicate to what extent it will be prevented from performing and (c)
exercise due diligence to overcome such inability to perform with all reasonable
dispatch. In the event a Party claims excuse of performance as a result of an
Uncontrollable Force which continues unabated for more than one hundred twenty
(120) days, the Party that is not affected by such Uncontrollable Force shall
have the option to terminate this Agreement on written notice to the other
Party.
Section 8.02. Damages for Termination Without Cause. Notwithstanding
anything to the contrary in Section 8.01, the Parties agree that should owner
elect to terminate the Agreement without cause at any time, pursuant to Section
9.01 herein, then owner shall pay as liquidated
-10-
<PAGE>
damages to the Marketing Agent a sum equal to one-fourth (1/4) of the annual
amount of Compensation in effect at such early termination, which shall be
Owner's sole and exclusive liability and Marketing Agent's sole and exclusive
remedy, for such early termination without cause.
ARTICLE IX
TERM
Section 9.01. Term. Subject to Article VIII and Section 3.01, this
Agreement shall continue to be in effect for fifteen (15) years from the Date of
Initial Services; provided, however that the Term may be extended for additional
periods on terms acceptable to both Parties, such terms to be agreed upon not
later than three months prior to the expiration of the Term. Notwithstanding the
foregoing, the Owner shall be permitted to terminate this with or without cause,
upon ninety (90) days written notice to the Marketing Agent, subject to the
terms of the Credit Agreement. In the event the Owner terminates the Agreement
without cause, the right of the Owner to use the trademark, Village Farms, shall
terminate simultaneously with this Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.01. Notices. Unless otherwise specifically provided herein,
all notices, requests and demands and other communications hereunder must be in
writing and shall be deemed to have been duly given (i) when delivered
personally, (ii) when sent by telefax to the telefax number below and followed
by a confirmation transmitted by an additional mode of communication provided
for herein, (iii) the second day following the day on which the same has been
delivered prepaid to a national (only in the case of notices within the
continental United States) or an international air courier service, or (iv) when
received if sent by the mails, certified or registered, postage prepaid, in each
case addressed to the party to whom such notice is being given at the following
addresses:
OWNER: Village Farms of Texas, L.P.
c/o Agro Power Development, Inc.
10 Alvin Court
East Brunswick, NJ 08816
Attention: President
Telefax: 908-254-1710
and
Village Farms of Texas, L.P.
c/o Cogentrix of Fort Davis I, Inc.
9405 Arrowpoint Boulevard
Charlotte, NC 28273
Attention: General Counsel
Telefax: 704-529-1006
-11-
<PAGE>
MARKETING
AGENT: Village Farms, L.L.C.
10 Alvin Court
East Brunswick, NJ 08816
Attention: President
Telefax: 908-254-1710
Any party may change the addresses to which notices to it are to be sent by
giving notice of such change to the other parties in accordance with the
Section..
Section 10.02. Severability. Any provision of this Agreement that shall
be prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provisions in any other jurisdiction. To the extent
permitted by applicable law, the Marketing Agent and Owner hereby waive any
provision by law that renders any provision hereof prohibited or unenforceable
in any respect.
Section 10.03. Amendment. Neither this Agreement nor any other terms
hereof may be terminated, amended, supplemented, waived or modified orally, but
only by an instrument in writing signed by the Party against which enforcement
of the termination, amendment, supplement, waiver or modification shall be
signed.
Section 10.04. Assignment. Neither Party may assign any of their
respective rights under this Agreement without the prior written consent of the
other Party; provided, however, that owner may assign its rights hereunder to
the Lender. Any assignment not permitted by this Section 10.04 shall be void.
Section 10.05. Relationship of the Parties. It is agreed and understood
by the Parties that the Marketing Agent is an independent contractor with
respect to Owner. No action, admission or instruction shall be deemed to make
the Marketing Agent an employee, agent or partner of Owner or to create any
other relationship among the Parties.
Section 10.06. Headings; Etc. The Table of Contents and headings of the
various articles and sections of this Agreement are for the convenience of
reference only and shall not modify, define or limit any other terms and
provisions of this Agreement.
Section 10.07. Governing Law. This Agreement shall in all respects,
including all matters of construction, validity and performance, be governed by
and construed in accordance with the laws of the State of New York.
Section 10.08. Parties in Interest; Limitation and Rights of Others.
This provisions of this Agreement shall be binding upon, and inure to the
benefit of, the Parties hereto and their respective successors and permitted
assignees. Nothing in this Agreement, whether expressed or implied, shall be
construed to give any Person (other then the Parties hereto and their respective
successors and permitted assignees) any legal or equitable right, remedy or
claim under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
-12-
<PAGE>
Section 10.09. Arbitration. (a) In the event a dispute arises between
or among the Parties relating to the terms of this Agreement and any Party gives
written notice of such dispute to the other Party, then each of the Parties
involved in such dispute shall refer the dispute to its senior management. The
senior management of each Party shall meet and confer regarding the resolution
of the dispute. In the event a resolution of such dispute is not reached within
30 days of the written notice, then either of the Parties may submit the dispute
to arbitration in accordance with Section 10.09.(b).
(b) Arbitration of disputes pursuant to this Section 10.09.(b) shall be
held in New York, New York, unless otherwise agreed to by the Parties, under the
commercial arbitration rules of the American Arbitration Association, and shall
be heard by three arbitrators selected in accordance with such rules. Each
arbitrator shall have at least five years experience in the United States in a
profession or professions related to the subject matter involved in the dispute
and shall not be a past or present officer, director or employee of, or have any
interest in or material relationship with, any Partner or any Affiliate of any
Partner. Any arbitral award shall be final and binding and may be entered by any
Party in any state or Federal court having jurisdiction thereof. Costs of
arbitration (including reasonable attorney's fees and arbitration costs) shall
be paid either equally or by the Parties to the arbitration or in accordance
with the decision of the arbitrators.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed by the respective officers thereunto duly authorized as of the date and
year first above written.
VILLAGE FARMS, L.L.C.
By: Agro Power Development, Inc.,
its managing member
By: ___________________________________
Name:__________________________________
Title:_________________________________
VILLAGE FARMS OF TEXAS, L.P.
By: __________________________________
Title: ________________________________
-13-
<PAGE>
Agro Power Development Inc., the owner of the Village Farms trademark,
hereby consents to the use of the Village Farms trademark, as set forth in this
Agreement.
AGRO POWER DEVELOPMENT, INC.
By: __________________________________
Title:________________________________
<PAGE>
EXHIBIT A
LICENSE ARGUMENT FOR
THE TRADEMARK VILLAGE PARKS
This License Agreement is entered into this ____ day of February, 1996,
by and between Agro Power Development, Inc., a New York Corporation ("Licensor")
with an address of 10 Alvin Court, East Brunswick, New Jersey 08816, and Village
Farms, L.L.C., a Delaware Limited Liability Company ("Licensee"), with an
address at 10 Alvin Court, East Brunswick, New Jersey 08816.
W I T N E S S E T H:
WHEREAS, Licensor is involved directly, and indirectly through several
affiliates, with the hydroponic production of various fruits and vegetables,
including tomatoes, and, in connection therewith, is the owner of the trademark
"Village Farms" (the "Trademark") which is registered with the United States
Patent and Trademark Office (the "Trademark Registration"); and
WHEREAS, Licensee is a marketing agent of hydroponically produced
fruits and vegetables, including tomatoes, with expertise and ability in the
marketing, distribution and sale of such goods at both wholesale and retail; and
WHEREAS, Licensor is affiliated with Licensee, as Licensor is the owner
of a 99% interest in Licensee; and
WHEREAS, Licensee desires to be licensed by Licensor in the use of the
Trademark and Trademark Registration exclusively in connection with the
marketing, distribution and sale of hydroponically produced fruits and
vegetables by Licensor, Licensee, any of their Affiliates (defined below), and
other third parties; and
<PAGE>
WHEREAS, Licensor desires to license Licensee's use of the Trademark
and Trademark Registration; and
WHEREAS, as part of the obligations of the license, Licensee undertakes
to pay Licensor compensation as herein described;
NOW, THEREFORE, in consideration of the premises and covenants and
agreements herein contained, the parties to this Agreement covenant and agree as
follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement the following terms shall have the
meanings indicated:
1.1. "Affiliate" shall mean each person which, directly or indirectly,
controls or is controlled by or is under common control with such designated
Person and, without limiting the generality of the foregoing, shall include (a)
any Person which beneficially owns or holds ten percent (10%) or more of any
class or voting securities of such designated Person or ten percent (10%) or
more of the equity interest in such designated Person and (b) any Person of
which such designated Person beneficially owns and holds ten percent (10%) or
more of any class of voting securities or in which such designated Person
beneficially owns or holds ten percent (10%) or more of the equity interest. For
the purposes of this definition, the terms "controls," "controlled by," and
"under common control with" as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person whether through the
ownership of voting securities or by contract or otherwise.
1.2. Agreement shall mean this document and any exhibits and appendices
hereto, as may be amended, modified or supplemented from time to time.
-2-
<PAGE>
1.3. "Licensed Goods" shall mean fruits and vegetables, including
tomatoes, hydroponically produced by Licensor, Licensee, the Affiliates of
either Licensor or Licensee, and other third parities who are approved by
Licensor.
1.4. "Material Requiring Approval" means the Licensed Goods and any and
all packaging, advertising, promotional and displayed material upon which or in
connection with which the Trade Mark is used.
1.5. "Term and Extended Term" are the periods expressly set forth in
this Agreement.
1.6. "Territory" is the United States.
1.7. "Trademark" means "Village Farms" used in any form or format,
style or design, as applied to the Licensed Goods, as well as any goodwill and
rights, at common law or other wise, pertinent thereto, and refers to
trademarks, service marks and trade names.
ARTICLE II
LICENSE
2.1. Licensor hereby grants to Licensee the use of the Trademark upon
or in connection with Licensed Goods, which license shall be exclusive, subject
to the continued use of same by Licensor. This grant is throughout the Territory
and is nondivisible, and non-assignable, except as expressly set forth herein.
2.2. No other right or license is granted by Licensor to Licensee,
either expressed or implied for any other trademark, trade name, copyright or
intellectual property right owned, possessed, or licensed by or to Licensor.
Licensee shall not use the Trademark in any manner not specifically authorized
by this Agreement.
-3-
<PAGE>
ARTICLE III
RIGHT OF ASSIGNMENT
3.1. Licensee is hereby expressly permitted to assign or sublicense any
of its rights hereunder, to any Affiliate of Licensor or Licensee, or other
third parties subject to the prior written consent of Licensor.
3.2. Notwithstanding the foregoing, no assignment shall be effective
unless and until the assignee agrees in writing, that its use of the Trademark
shall be subject to all of the restrictions regarding its use, as are set forth
herein.
ARTICLE IV
COMPENSATION
4.1. Licensee agrees to pay compensation to Licensor of One Hundred
Thousand Dollars ($100,000) per year, payable quarterly, in arrears, in equal
payments of Twenty-five Thousand Dollars ($25,000) each, with the first
quarterly payment due October 1, 1996, and subsequent payments due on the first
day of each January, April, July, and October, thereafter, during the Term or
any Extended Terms of this Agreement,
4.2. The compensation set forth in Section 4.1 above shall be subject
to adjustment each January 1, during the Term or Extended Term of this
Agreement, by the same percentage change in the Consumer Price Index ("CPI") ,
provided the adjustment shall not cause the compensation to be less than the
compensation paid for the prior year.
ARTICLE V
TERM
5.1. The term of this Agreement shall end on December, 2007.
5.2. Licensee may extend this Agreement for two (2) extended terms of
five (5) years each, upon providing written notice to Licensor no later than
ninety (90) days before the end of
-4-
<PAGE>
each term; provided, however, that to qualify for any Extended Terms, Licensee
must be in full compliance with all terms and conditions of this Agreement.
ARTICLE VI
QUALITY CONTROL AND MAINTENANCE
6.1. Licensee shall use the Trademark in the form that Licensor shall,
at its sole discretion, approve in writing, on or in connection with the
Licensed Goods. Licensee shall not otherwise affix or use such Trademark in
connection with, or use any other trademark or trade name in connection with the
Licensed Goods without Licensor's prior written approval.
6.2. To assure the appearance, quality and distribution of the Licensed
Goods is consistent with the Trademark used to identify them, Licensor retains
the right to participate at each stage of the production of the Licensed Goods
and to approve or disapprove of the appearance and/or quality of the Licensed
Goods, and/or their distribution. Notwithstanding the foregoing, Licensor shall
be deemed to have approved the use of the Trademark in connection with any
produce which qualify as "Premium Quality," or any other equivalent standard as
established by the U.S. Department of Agricultural.
6.3. The Licensor shall file during the period between July 28, 1997
and July 28, 1998, Section 8 and Section 15 Declarations, required under 15
U.S.C. ss. 1058 and 15 U.S.C. ss. 1065 to extend the duration of the initial
registration of the Trademark and to establish the Trademark as incontestable.
6.4. The Licensor shall file, within six months prior to the expiration
of the original registration of the Trademark, or any renewal thereof, an
application for renewal of registration under 15 U.S.C. ss. 1059.
-5-
<PAGE>
ARTICLE VII
TRADEMARK REGISTRATION
7.1. At the request of Licensor, and without compensation to Licensee,
Licensee shall promptly do such acts and execute, acknowledge, and deliver all
those papers that may be necessary or desirable, in the sole discretion of
Licensor, to obtain, maintain, protect and/or vest in Licensor the entire right,
title, and interest in and to the Trademark in all countries of the World,
including rendering such assistance as Licensor may request in any litigation,
patent and trademark office proceeding, or other proceeding. All use of the
Trademark licensed by this Agreement and used on any good by Licensee shall
inure to the benefit and be the property of Licensor.
ARTICLE VIII
VALIDITY OF RIGHTS
8.1. Licensee shall not contest Licensor's ownership of the Trademark
or Licensee's obligation to assign any right under this Agreement, including any
rights Licensee may create in the Trademark. Licensee shall not contest or
impair these rights, either directly or indirectly, or in any way assist others
to contest or impair the same and hereby expressly acknowledge Licensor's
superior rights. This obligation shall survive any termination of this
Agreement.
ARTICLE IX
WARRANTIES
9.1. Licensor warrants that it has all right, title, and interest in
and to the Trademark and the right to license the Trademark and Trademark
Registration, to enter this agreement, and to agree to the terms and conditions
of this Agreement.
9.2. Licensee warrants that it has the right to enter into this
Agreement and agree to the terms and conditions of this Agreement.
-6-
<PAGE>
9.3. Licensee shall indemnify, hold harmless, and defend Licensor and
its officers, director, agents, and employees (and pay any and all related
attorneys fees) from and against:
9.3.1. Any alleged unauthorized use of any trade mark (not including
any right licensed under this Agreement by Licensee);
9.3.2. Any alleged liable or slander against, or invasion of, the right
of privacy or publicity or any other similar right of any third party (not
including any right licensed under this Agreement).
9.3.3. Any alleged defect in any Licensed Good despite Licensor's
approval of that Licensed Good, and any claim by a third party resulting from
Licensee's breach or alleged breach of any term or condition of this Agreement.
9.4. Licensee warrants that it shall promptly obtain and maintain, at
its sole cost and expense, advertiser's liability insurance naming Licensor, its
officers, directors, agents, and employees as additional insureds, in the amount
of $1,000,000.00 "Combined Single Limit."
9.5. Licensee warrants that it shall use best efforts to procure the
greatest volume of sales of the Licensed Goods consistent with high quality and
to make satisfactory arrangements for their distribution, advertising and
promotion.
ARTICLE X
LITIGATION
10.1. If the Licensee shall become aware of any infringement by third
parties of any right licensed under this Agreement or any other use of the
trademark or term confusingly similar to the trademark, it shall promptly notify
Licensor in writing of that infringement or use, and shall assist and supply
such information and such acts that are reasonably necessary or desirable in
relation to that infringement or use. Licensor shall take only those steps in
its sole
-7-
<PAGE>
discretion, as are necessary to enforce its rights, including the engagement of
legal counsel of its own choosing.
10.2. Licensor agrees to undertake to enforce any claim of infringement
of the Trade Mark subject to a cap of Fifty Thousand Dollars ($50,000).
ARTICLE XI
GENERAL
11.1. Licensee shall make no assignment, pledge or hypothecation of
this Agreement or its performance under this Agreement except as set forth above
in Article III.
11.2. Any notice or statement by any party shall be deemed to be
sufficiently given when (i) delivered personally, (ii) sent by telefax to the,
telefax number below and followed by a confirmation transmitted by an additional
mode of communication provided for herein, (iii) the second day following the
day on which the same has been delivered prepaid to a national air courier
service, or (iv) when received if sent by certified mail, postage prepaid, in
each case addressed to the party to whom such notice is being given at the
following address:
Licensor: Agro Power Development, Inc.
10 Alvin Court
East Brunswick, New Jersey 08816
Attn: President
Telefax: (908) 254-1710
Licensee: Village Farms, L.L.C.
10 Alvin Court
East Brunswick, New Jersey 08816
Attn: President
Telefax: (908) 254-1710
Any party may change the addresses to which notice are to be sent by given
notice of such change to the other party in accordance with this section.
-8-
<PAGE>
11.3. This Agreement shall in all respect, including all matters of
construction, validity and performance, be governed by and construed in
accordance with the laws of the State of New York.
11.4. No amendment or modification of this Agreement shall be valid or
binding unless the same shall be made in writing and signed on behalf of each
party by their respective proper agents, duly authorized to do so.
11.5. Arbitration. (a) In the event a dispute arises between or among
the Parties relating to the terms of this Agreement and any Party gives written
notice of such dispute to the other Party, then each of the Parties involved in
such dispute shall refer the dispute to its senior management. The senior
management of each Party shall meet and confer regarding the resolution of the
dispute. In the event a resolution of such dispute is not reached within 30 days
of the written notice, then either of the Parties may submit the dispute to
arbitration in accordance with Section 11.5.(b).
(b) Arbitration of disputes pursuant to this Section 11 - 5. (b) shall
be held in New York, New York, unless otherwise agreed to by the Parties, under
the commercial arbitration rules of the American Arbitration Association, and
shall be heard by three arbitrators selected in accordance with such rules. Each
arbitrator shall have at least five years experience in the United States in a
profession or professions related to the subject matter involved in the dispute
and shall not be a past or present officer, director or employee of, or have any
interest in or material relationship with, any Partner or any Affiliate of any
Partner. Any arbitral award shall be final and binding and may be entered by any
Party in any state or Federal court having jurisdiction thereof. Costs of
arbitration (including reasonable attorney's fees and arbitration
-9-
<PAGE>
costs) shall be paid either equally or by the Parties to the arbitration or in
accordance with the decision of the arbitrators.
11.6. Article Titles of this Agreement are for the convenience of
reference only and shall not modify, define or limit any other terms and
provisions of this Agreement.
11.7. The failure to enforce any of the terms and conditions of this
Agreement by either of the parties to this Agreement shall not be deemed a
waiver of any other right or privilege under this Agreement or the waiver of the
right to thereafter claim damages for any deficiencies resulting from any
misrepresentation, breach of warranty for nonfulfillment of any obligation of
any other party to this Agreement.
11.8. This provision of this Agreement shall be binding upon, and inure
to the benefit of, the Parties hereto and their respective successors and
permitted assignees. Nothing in this Agreement, whether expressed or implied,
shall be construed to give any Person (other then the Parties hereto and their
respective successors and permitted assignees) any legal or equitable right,
remedy or claim under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
11.9. This Agreement may be signed in two (2) or more counterparts,
each of which shall be an original.
11.10. The preamble to this Agreement is hereby incorporated and by
this reference shall become part of the Agreement as if set forth in the
Agreement word for word.
11.11. The parties to this Agreement shall at any and all times, upon
request by the party, make, execute, and deliver any and all such other further
instruments as may be necessary or desirable for the purpose of giving full
force and effect to the provisions of this Agreement, without charge.
-10-
<PAGE>
IN WITNESS WHEREOF, each of the parties to this Agreement have caused
this Agreement to me executed by a duly authorized representative.
AGRO POWER DEVELOPMENT, INC.
By:
-------------------------------------
Name: J. Kevin Cobb
Title: Vice President
Date: February 13, 1996
VILLAGE FARMS, L.L.C.
By: Agro Power Development, Inc.,
its managing member
By:
-------------------------------------
Name: J. Kevin Cobb
Title: Vice President
Date: February 13, 1996
Exhibit 10.69
MANAGEMENT, OPERATION AND
MAINTENANCE CONTRACT
BETWEEN
VILLAGE FARMS OF DELAWARE, L.L.C.
AND
VILLAGE FARMS OF TEXAS, L.P.
February 13, 1996
<PAGE>
Assumption and Assignment of Management, Operation and Maintenance Contract
Between
Village Farms of Delaware, L.L.C.
and
Village Farms of Texas, L.P.
date February 13, 1996
In connection with a certain Management, Operation and Maintenance Contract
between Village Farms, L.L.C. (VF) and Village Farms of Texas, L.P. (VFT) dated
February 13, 1996 (the "Agreement"), please be advised that VF hereby assigns
all of its right for the period from the "Date of Initial Services," (as defined
in said Agreement) to December 31, 1996, to Agro Power Development, Inc. (APD).
APD hereby acknowledges acceptance of this assignment and agrees to assume all
of VF obligations under said Agreement and to abide by the Agreement terms. The
acceptance of this assignment by APD does not relieve VF of any of its
obligations or responsibilities to VFT pursuant to the Agreement.
Dated: July 1, 1996 Village Farms of Delaware, L.L.C.
by Agro Power Development, Inc.,
it managing member
By:________________________________
Name: Laurence J. Howard
Title: Treasurer
Agro Power Development, Inc.
By:________________________________
Name: Kevin Cobb
Title: Vice-President
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS...............................................................1
ARTICLE II
SCOPE OF DUTIES...........................................................3
Section 2.01 . Performance of Start-up, Operation and Maintenance....3
Section 2.02 . Personnel.............................................4
Section 2.03 . Facility Manager......................................4
Section 2.04 . Business Plan and Budget..............................4
Section 2.05 . Performance Standards.................................4
ARTICLE III
OPERATION.................................................................4
Section 3.01 . Operation.............................................4
Section 3.02 . Compliance With Governmental Rules....................5
Section 3.03 . Obligations of Owner..................................5
Section 3.04 . Greenhouse Products...................................5
Section 3.05 . Maintenance...........................................5
Section 3.06 . No Obstruction........................................6
ARTICLE IV
COMPENSATION AND PAYMENT..................................................6
Section 4.01 . Basic Compensation....................................6
Section 4.02 . Debt Service Coverage Ratio Test......................7
ARTICLE V
REPRESENTATIONS AND WARRANTIES............................................7
Section 5.01 . Representations and Warranties of the Manager.........7
ARTICLE VI
COVENANTS OF THE MANAGER..................................................7
Section 6.01 . Operating Logs: Records and Audits....................8
Section 6.02 . Insurance of the Manager..............................8
Section 6.03 . Employment Practices..................................8
Section 6.04 . Nondisclosure.........................................8
Section 6.05 . Compliance with Governmental Rules....................9
ARTICLE VII
GENERAL LIABILITY.........................................................9
Section 7.01 . Indemnification.......................................9
ARTICLE VIII
DEFAULTS AND REMEDIES....................................................10
Section 8.01 . Defaults.............................................10
Section 8.02 . Damages for Termination Without Cause................11
ARTICLE IX
TERM.....................................................................11
Section 9.01 . Term.................................................11
<PAGE>
ARTICLE X
MISCELLANEOUS............................................................11
Section 10.01 . Notices.............................................11
Section 10.02 . Severability........................................12
Section 10.03 . Amendment...........................................12
Section 10.04 . Assignment..........................................12
Section 10.05 . Relationship of the Parties.........................12
Section 10.06 . Headings; Etc.......................................12
Section 10.07 . Governing Law.......................................13
Section 10.08 . Parties in Interest; Limitation and Rights
of Others...........................................13
Section 10.09 . Arbitration.........................................12
<PAGE>
MANAGEMENT, OPERATION AND MAINTENANCE CONTRACT
Village Farms of Texas, L.P. (the "Owner") intends to construct and operate
an approximate 41-acre greenhouse (the "Greenhouse"). The Greenhouse will be
manufactured and constructed by Dalsem Kasenbouw B.V. (the "Contractor") , Agro
Power Development, Inc. (the "General Contractor") and the Owner. Village Farms
of Delaware, L.L.C. (the "Manager") and the Owner have entered into this
Management, Operation and Maintenance Contract dated as of February 13, 1996 to
operate, maintain and manage the Greenhouse.
In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, and in
reliance upon the representations and warranties of each party set forth herein,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms when used herein shall have the following meanings:
"Affiliate" of any Person shall mean each Person which, directly or
indirectly, controls or is controlled by or is under common control with such
designated Person and, without limiting the generality of the foregoing, shall
include (a) any Person which beneficially owns or holds ten percent (10%) or
more of any class of voting securities of such designated Person or ten percent
(10%) or more of the equity interest in such designated Person and (b) any
Person of which such designated Person beneficially owns and holds ten percent
(10%) or more of any class of voting securities or in which such designated
Person beneficially owns or holds ten percent (10%) or more of the equity
interest. For the purposes of this definition, the terms controls, "controlled
by," and "under common control with," as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person whether through the
ownership of voting securities or by contract or otherwise.
"Business Day" shall mean any day other than Saturday, Sunday or other day
on which banks are authorized to be closed Texas, New York, North Carolina, or
New Jersey.
"Business Plan and Budget" shall mean the business plan and budget prepared
annually or more often by Manager setting forth the items described in Section
2.04.
"Capital Assets" shall mean all reusable equipment and components used in
the operation of the Greenhouse.
"Codes and Standards" shall mean the applicable national, state and local
engineering construction, building and safety codes and standards from time to
time in effect governing the construction and operation of the Greenhouse.
"Contract" shall mean this document and any exhibits and appendices hereto
as amended from time to time.
<PAGE>
"Contract Year" initially shall be the period ending on December 31 next
following the Date of Initial Services and each calendar year thereafter.
"Credit Agreement" shall mean the Credit Agreement to be entered into
between Owner and the Lender, as the same may be amended, modified or
supplemented from time to time.
"Date of Initial Services" shall mean that date, as agreed upon by the
Manager and the Owner, which is sixty (60) days prior to the date of Phase I
Substantial Completion under the Commercial Greenhouse Design and Construction
Contract, dated December 7, 1995 by and between Contractor and General
Contractor, as same may be amended, modified or supplemented from time to time.
"Facility Manager" shall mean the person described in Section 2.03.
"Governmental Rule" shall mean any law, rule, regulation, ordinance, order,
code, interpretation, judgment or similar norm or decision of any Federal,
state, local or foreign government, authority, agency, court or other body or
entity having jurisdiction over the Site including the Codes and Standards.
"Greenhouse Construction Agreement" shall mean the Construction Agreement
for the construction of the Greenhouse by and between the Contractor and the
General Contractor as assigned to the Owner and as supplemented, modified and
amended through the date hereof.
"Lender" shall mean CoBank, ACB, as Agent for the lending institution(s)
providing financing for the Project, and their successors and assigns.
"Marketing Agent" shall be Village Farms, LLC for the term and to such
extent as described in the Marketing and Sales Agreement between the Owner and
Village Farms, LLC, dated February 13, 1996.
"Operating Costs" shall mean the sum (without duplication) of (a) direct
labor costs paid, (b) seed expense paid, (c) packaging supplies expense paid,
(d) fertilizer and chemical expenses paid, (e) biological control, including
bees, expense paid, (f) freight expense paid, (g) growing medium and supplies
expense paid, (h) carbon dioxide expense paid, (i) utility (including hot water,
electricity and natural gas) expense paid, (j) compensation paid to the Manager
hereunder, (k) insurance premiums and property taxes paid, (1) principal and
interest paid with respect to the Credit Agreement and (m) all other cash
expenses paid relating to the operation of the Greenhouse, to the extent
contained in the Business Plan and Budget.
"Party" shall mean Owner or the Manager, or any of them, as appropriate and
their successors and permitted assignees.
"Payroll Costs" shall mean the salaries payable to employees of the Manager
performing the Work at the Site.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
government or agency or political subdivision thereof.
-2-
<PAGE>
"Product" shall mean all production derived from the Greenhouse, which
shall initially consist of tomatoes.
"Revenues" shall mean the gross proceeds derived from the sale of the
Product, plus interest income, and any and all other types of income received by
the Owner, less allowances, returns, and amounts received with respect to
freight and transportation charges, and excluding insurance proceeds.
"Site" shall mean the Greenhouse and its grounds located at Highway 17
North, Fort Davis, Jeff Davis County, Texas.
"Term" shall mean the period provided for in Section 9.01 hereof.
"Uncontrollable Force" shall mean any of the following which are beyond the
reasonable control of a Party and which materially impairs the performance by
such Party of its duties and obligations hereunder and such material impairment
continues for a period of more than thirty (30) days: (a) severe weather, flood,
fire, lightning or other natural disaster or act of God, (b) earthquake or
subsidence, whatever its cause, (c) strikes or other labor disturbances, whether
or not involving employees of a Party, (d) action or inaction by, or inability
to obtain authorization or approval from, any governmental agency or authority,
which a Party is unable, after its best efforts, to overcome, (e) compliance
with any Governmental Rule, (f) war (whether declared or not), sabotage, act of
a public enemy, insurrection, riot or civil disturbance, (g) defects in material
equipment necessary for performance of the Contract, (h) any act by another
party (other than the Party claiming Uncontrollable Force, any Affiliate of such
Party or the respective agents, servants or employees of such Party or
Affiliates) or (i) any other similar act.
"Work" shall mean all duties and responsibilities of the Manager under this
Contract.
ARTICLE II
SCOPE OF DUTIES
Section 2.01. Performance of Start-up, Operation and Maintenance. As more
specifically described in Articles III and IV, the Manager shall furnish, manage
and supervise all personnel necessary in connection with the design, start-up,
operation, maintenance, service and repair of the Greenhouse. Commencing on the
Date of Initial Services, the Facility Manager (as defined herein in Section
2.03) shall be available on the Site to provide consulting services to the
Contractor in its construction of the Greenhouse and to prepare the Greenhouse
for production. Prior to the Date of Initial Services and upon witnessing all
performance testing, the Manager shall inspect the Greenhouse, and unless the
Manager submits in writing to Owner a report setting forth any defects in the
design or construction of the Greenhouse within thirty (30) days after the Date
of Initial Services and upon witnessing all performance testing, the Manager
will be deemed to have accepted the Greenhouse. Any defects in the design or
construction of the Greenhouse or in any equipment therein reasonably
discoverable by the Manager through such inspection shall not be grounds for
claiming Uncontrollable Force after acceptance of the Greenhouse by the Manager.
The marketing and distribution of the Product shall be the primary
responsibility of Village Farms, LLC (the "Marketer") as defined in the
marketing and Sales Agreement, a copy of which is attached hereto as Exhibit B.
-3-
<PAGE>
Section 2.02. Personnel. The Manager shall dedicate to the performance of
the Contract such administrative, technical and supervisory personnel (each of
whom will be properly trained and qualified to undertake their respective
assigned duties) and support systems and services as are necessary or desirable
to (i) assure start-up and commissioning of the Greenhouse, (ii) instruct the
Owner and its employees in the proper operation of the Greenhouse, and (iii)
perform Manager's responsibilities under this Contract.
Section 2.03. Facility Manager. The Manager shall identify one competent
individual to act in the capacity of Facility Manager. The Facility Manager
shall be responsible on a day-to-day basis for the operations and performance of
the Greenhouse. The selection and continued employment of the Facility Manager
in the performance of the Greenhouse Operations shall be subject to the approval
of Owner, which approval shall not be unreasonably withheld. The Facility
Manager shall be an employee of the Owner.
Section 2.04. Business Plan and Budget. Prior to the date of Phase I
Substantial Completion under the Commercial Greenhouse Design and Construction
Contract, the Manager will provide to the Owner a preliminary Business Plan and
Budget for the first year operations setting forth such information as the Owner
shall reasonably request. In addition, within forty-five (45) days prior to the
Date of Initial Services and within forty-five (45) days prior to December 31 of
each year thereafter, the Manager shall submit to the Owner the Business Plan
and Budget for the initial Contract Year and each Contract Year thereafter. The
Business Plan and Budget shall set forth in form and detail reasonably
satisfactory to Owner, the Manager's best estimate of Revenues and Operating
Costs of the Greenhouse for such Contract Year. Each Business Plan and Budget
delivered hereunder shall be subject to the approval of Owner. In the event the
Owner does not notify the Manager of its approval or disapproval of the Business
Plan and Budget within fourteen (14) days of its receipt of same, the Owner
shall be deemed to have approved such Business Plan and Budget.
Section 2.05. Performance Standards. The Manager shall be responsible for
the operating performance of the Greenhouse in accordance with the Business Plan
and Budget and in conformity with industry, professional and safety standards
and in a prudent and businesslike manner. The Manager shall be responsible for
the means, methods and techniques used in the operation of the Greenhouse. The
Manager shall maintain good order and discipline at the Greenhouse at all times
and shall take all reasonable precautions to protect the Greenhouse and its
contents (including, but not limited to, the Product) from damage and to protect
employees of Lender, Owner and the Manager and members of the public from injury
at the Site.
ARTICLE III
OPERATION
Section 3.01. Operation. During the period beginning on the Date of Initial
Services and ending at the expiration of the Term of this Contract, the Manager
shall use its best efforts to operate the Greenhouse (including, but not limited
to, the sowing, growing, harvesting and packaging of the Product) at its fullest
productive capacity in accordance with the Business Plan and Budget and in
accordance with prudent agricultural economic practices and to assist the
Marketing Agent in its efforts to market the Product to derive the greatest
possible revenue therefrom. The Manager warrants that, during each Contract
Year, beginning with the Second
-4-
<PAGE>
Contract Year, that the operating performance of the Greenhouse will be on a
basis consistent with similar greenhouses operated by the Manager in
consideration of differences in size and location of the other greenhouses.
Section 3.02. Compliance With Governmental Rules. The Manager shall at all
times operate the Greenhouse in accordance with all applicable Governmental
Rules (including, but not limited to, all environmental protection, hazardous or
toxic substances, pollution, waste, material handling, disposal, sanitary,
health, and safety laws, rules and regulations). The Manager shall be liable for
all fines, fees, penalties, damages or other costs imposed by a governmental
authority attributable to its willful acts or negligence (and the negligence of
its agents and employees) in connection with the operation, use or maintenance
of the Greenhouse.
Section 3.03. Obligations of Owner. Throughout the Term of this Contract,
Owner shall supply to the Manager of the Greenhouse such personnel and Operating
Supplies as shall be mutually agreed upon by the Manager and owner in the
Business Plan and Budget. The Manager shall be responsible for overseeing and
recording the use of all Operating Supplies and shall give Owner reasonable
notice of its requirements for additional personnel and Operating Supplies not
set forth in the Business Plan and Budget, along with the reasons therefor. The
Manager shall be responsible for inspecting Operating Supplies furnished by
Owner, and any defects in such Operating Supplies reasonably discoverable by
Manager through such inspection, and which are capable of being corrected in a
reasonable time frame, shall not be grounds for claiming Uncontrollable Force.
All personnel of the Greenhouse operation shall at all times be employees of
owner. The Manager shall have the right to direct and instruct the employees of
Owner, and subject to Owner's approval, which will not be unreasonably withheld,
to hire and fire Owner's employees, as Manager considers necessary and desirable
for the operation of the Greenhouse.
Section 3.04. Greenhouse Products. It is contemplated by this Contract that
the Manager will use its best efforts to produce tomatoes in the Greenhouse in
accordance with the Business Plan and Budget. However, if in the opinion of the
manager the Greenhouse operation can be made more profitable by the production
of produce more profitable than tomatoes, then the Manager, with the prior
written consent of Owner and the Lender, may produce a substitute product.
Section 3.05. Maintenance. The Manager shall have the responsibility of
directing the maintenance, service and repair of the Greenhouse (a) in material
accordance with industry standards of prudence, (b) in accordance with
specifications, directions, instructions and recommendations of the
manufacturers of the components thereof, (c) in accordance with all applicable
Governmental Rules (including, but not limited to, all environmental protection,
hazardous or toxic substances, pollution, waste, material handling, disposal,
sanitary, health, and safety laws, rules and regulations) and (d) to the extent
materially necessary to (i) maintain the Greenhouse in good operating condition
and repair, ordinary wear and tear excepted, (ii) cause the Greenhouse to
continue to have the capacity and functional ability to perform, on a continuing
basis, in normal commercial operation, the function for which it was
specifically designed, (iii) comply with any standards imposed by any insurer
who has issued any insurance policy or policies in effect at any time during
this Contract with respect to the Greenhouse or any part thereof and (iv) keep
in full force and effect any warranty with respect to the Greenhouse or any part
thereof. The Manager shall operate the Greenhouse in such a manner that at all
times
-5-
<PAGE>
(a) the Greenhouse and its surrounding grounds shall be free of litter (both
organic and non-organic), (b) waste materials (both organic and non-organic)
will be confined to areas designed and maintained for their storage and
processing, (c) the exterior appearance of the buildings and the landscaping
surrounding the Greenhouse shall be neat and orderly and (d) the interior of the
Greenhouse will be neat and clean. The Manager will identify potential
maintenance problems and recommend corrective actions in the Business Plan and
Budget. All costs associated with performing the aforementioned maintenance
services will be the responsibility of the Owner. The Manager will include its
best estimate of such costs in the Business Plan and Budget.
Section 3.06. No Obstruction. Until the termination of this Contract, Owner
shall not, either through its agents or employees, take any action that would
prevent the Manager from operating the Greenhouse in accordance with the
Contract nor take any action that would materially obstruct the Site or the
Greenhouse, unless such prevention or obstruction is caused by Uncontrollable
Force or by the Manager or any of its Affiliates or any of their respective
employees, servants or agents.
ARTICLE IV
COMPENSATION AND PAYMENT
Section 4.01. Basic Compensation. In consideration of the performance of
Manager's obligations under the Contract, Owner shall pay to the Manager the sum
of TWO HUNDRED THOUSAND DOLLARS ($200,000.00) per Contract Year (the
"Compensation") in twelve equal monthly installments beginning on the 1st day of
the second month following the Date of Initial Services and on each anniversary
thereafter. For the period from the Date of Initial Services through the first
day of the month following the Date of Initial Services, the Manager shall be
entitled to a fee equal to the product of (i) the Compensation and (ii) a
fraction which shall be the number of weeks of such period divided by 52, such
amount to be payable on the first day of the month following the Date of Initial
Services. Such compensation will be adjusted each January 1 of each Contract
Year by the same percentage change in the Consumer Price Index ("CPI"), provided
the adjustment shall not cause the Compensation to be less than the current
Contract Year's Compensation. If for any reason the Manager is unable to perform
its obligations hereunder except as a result of termination of this Contract
because of a default by the Manager hereunder, then the Manager shall be
entitled to the continuation of the Compensation as though the Contract had been
performed by the Manager, provided however, that in the event that the Manager
or Owner is unable to perform its obligations under this Contract because of an
Uncontrollable Force, then the Compensation shall be discontinued at any time
after the later of, the first anniversary of the event creating the
Uncontrollable Force or the date on which the Manager's continued performance
was disrupted. In the event this Agreement has been terminated, and in the event
the Manager may have received Compensation to which it was not entitled, said
overpayment of Compensation shall be immediately due and payable to the Owner,
upon the determination of such overpayment.
Section 4.02. Debt Service Coverage Ratio Test. The provisions of this
Section 4.02 shall remain in effect only for so long as the Owner is party to
any loan agreement with the Lenders. In the event Owner's debt service coverage
ratio as defined in the Credit Agreement ("DSCR") for any calendar year falls
below 1.5, then, in that event, no Compensation shall be paid for any portion of
that calendar year, however, the right to Compensation shall accrue,
-6-
<PAGE>
provided the DSCR is greater than 1.0, and shall be paid to the Manager in one
sum, immediately following Owner's achievement of a DSCR of at least 1.5. In the
event that Compensation was paid for any portion of the calendar year during
which Owner's actual DSCR fell below 1.5, those payments shall be deducted from
future payments due the Manager hereunder, until the Owner has recouped same.
Immediately upon the Owner achieving a DSCR of 1.5, any payments which were
withheld or recouped by owner shall be paid to the manager in one sum. The
Owner's DSCR shall be measured as of December 31 of each year during the term of
this Contract.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01. Representations and Warranties of the Manager. The Manager
represents and warrants to Owner that both it and the Facility Manager have
substantial experience in the start-up, operation and management of the
maintenance, service and repair of facilities similar to the Greenhouse. The
Manager is a limited liability company organized and validly existing under the
laws of the State of Delaware. The Manager's execution and delivery of this
Contract and the performance of its obligations hereunder have been duly
authorized by all requisite action on the part of the Manager and this Contract
constitutes the Manager's legal, valid and binding obligation, enforceable
against the Manager in accordance with its terms. The Manager's execution and
delivery of this contract and the performance of its obligations hereunder will
not conflict with, violate or result in a default under the Manager's
certificate of formation or operating agreement or any mortgage, indenture,
agreement, instrument or other contract to which the Manager is a party or by
which the Manager is bound.
ARTICLE VI
COVENANTS OF THE MANAGER
Section 6.01. Operating Logs: Records and Audits. The Manager shall
maintain for the benefit of Owner daily operating logs showing the production
and sales from the Greenhouse and shall prepare maintenance and repair reports
in detail sufficient to indicate the nature of all maintenance and repairs
performed. The Manager shall also maintain such records and books of accounts as
are appropriate for the proper management of the Greenhouse and all transactions
related thereto. All such books, records and reports shall be the sole and
exclusive property of the Owner, and the Manager shall keep such books and
records in such place or places so as to provide Owner (and its authorized
representatives) with maximum access thereto and the ability to make copies
thereof.
Section 6.02. Insurance of the Manager. At all times during the operation
of the Greenhouse, the Manager maintain the following types and amounts of
insurance, with insurers acceptable to the Owner and the Lender:
(a) Workers' Compensation Insurance (including employer's liability
insurance) covering personnel of the Manager in connection with this contract,
subject to the laws of Texas;
-7-
<PAGE>
(b) Primary Comprehensive General Liability Insurance for bodily injury
and/or property damage arising from the Work, subject to a combined single limit
of $1,000,000 per occurrence;
All insurance policies procured and maintained pursuant to this Section
6.02 shall contain a clause requiring the insurer and the Manager to notify
Owner and the Lender in writing 45 days prior to any cancellation or expiration
thereof or any amendment thereto. Prior to the Date of Initial Services the
Manager shall furnish Owner and the Lender a certificate of insurance certifying
that the insurance coverage required pursuant to this Section 6.02 is in effect.
During the Term of this Contract, Owner shall keep the Facility (including
the Greenhouse and all equipment therein) and the Site insured against such
risks and in such amounts as are reasonably required by the Lender.
The cost of insurance required pursuant to this Section 6.02 shall be born
solely by the Manager. Each such policy shall name the Lender and the Owner (in
the case of (a) and (b) above) as an additional insured.
Section 6.03. Employment Practices. The Manager shall comply with the
applicable requirements of Executive Orders Nos. 11246 (Equal Opportunity and
Certification of Nonsegregated Facilities), 11701 (Affirmative Action for
Disabled Veterans and Handicapped of the Vietnam Era), 11758 (Affirmative Action
for Handicapped Workers), 11458 and 11625 (Minority Business Enterprise) and all
other Governmental Rules relating to employment practices to the extent
applicable.
Section 6.04. Nondisclosure. All reports, records and other information
related to the Site, the Greenhouse, the operations of the Owner, and the
performance of the Manager of its duties hereunder shall not be used by the
Manager for any purposes other than those contemplated hereby or pursuant to the
written consent of the Owner and shall not be disclosed by the Manager to any
other party or any other person or entity except with the prior written consent
of the Owner. Furthermore, the Manager shall not copy of reproduce any such
information without the written consent of the Owner (other than such reasonable
copies as may be necessary to perform its duties and obligations under this
Agreement). The Manager shall also take reasonable precautions to ensure against
any breach of the obligations contained herein which shall be no less stringent
than the precautions and procedures that it uses to protect its own proprietary
information and which shall, at a minimum, be deemed to include, without
limitation, taking precautions to ensure that it will only make such information
available to those of its employees who have a need to know it. Upon the
expiration or termination of this Agreement, Manager shall immediately return to
the Owner all such information and all whole or partial copies thereof and all
other materials that may include, in whole or in part, such information. All
rights, whether arising under copyright, patent, trade secret, or other laws, to
such information are hereby reserved by the Owner.
Section 6.05. Compliance with Governmental Rules. The Manager shall at all
times perform its other duties and obligations hereunder in accordance with all
applicable Governmental Rules. The Manager shall be liable for all fines, fees,
penalties, damages or other
-8-
<PAGE>
costs imposed by a governmental authority attributable to its and/or its agents,
servants and employees) in connection with the performance of its other duties
and obligations hereunder.
ARTICLE VII
GENERAL LIABILITY
Section 7.01. Liability. (Omitted)
Section 7.02. Indemnification. The Manager shall indemnify and save
harmless Owner and Lender, and their respective directors, officers, agents and
employees from and against (i) any and all loss, damage, injury, liability and
claims thereof for injury to or death of a person, including, but not limited
to, personnel of the Manager, Lender and owner, (ii) any and all loss of or
damage to property and (iii) any and all loss of income by the Owner, resulting
from the Manager's performance of this Contract to the extent the same is caused
by the negligence or willful misconduct of the Manager, any of its Affiliates,
or any or their respective directors, officers, agents or employees. Owner shall
indemnify and save harmless the Manager and Lender, and their respective
directors, officers, agents, and employees from and against (i) any and all
loss, damage, injury, liability and claims thereof for injury to or death of a
person, including personnel of Owner, Lender and the Manager, (ii) any and all
loss of or damage to property, and (iii) any and all loss of income by the
Manager, resulting from the owner's performance of this Contract to the extent
the same is caused by the negligence or willful misconduct of the Owner, any of
its Affiliates, or any of its directors, officers, agents or employees.
ARTICLE VIII
DEFAULTS AND REMEDIES
Section 8.01. Defaults. Upon the failure of any Party to substantially
comply with any of the obligations of such Party hereunder and continued
noncompliance for a period of 30 days (except in the case where such failure
will result in injury to or damage or loss of perishable Product, in which case
the cure period shall be five (5) days) after written notice of the
noncompliance is sent to such Party, the non-defaulting Party may, at its
option, by written notice to the defaulting Party, declare this Contract to be
in default and at any time thereafter the non-defaulting Party may, at its sole
discretion, (a) exercise any right or pursue any remedy that may be available
under applicable law or proceed by appropriate court action to enforce the terms
hereof or to recover damages for the breach hereof and (b) terminate this
Contract. The exercise of any rights or pursuit of any remedies pursuant to this
Contract shall not relieve the defaulting Party of any of its obligations and
liabilities hereunder, all of which shall survive such exercise or pursuit. To
the extent permitted by law, and subject to any mandatory requirements of
applicable law, and further subject to Section 8.02 herein, each and every
right, power and remedy herein specifically given to the non-defaulting Party or
otherwise in this Contract shall be cumulative and shall be in addition to every
other right, power and remedy herein specifically given for now or hereafter
existing at law, equity or by statute and I each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
or pursued from time to time and as of ten in such order as may be deemed
expedient by the non-defaulting Party, and the exercise or pursuit or the
beginning of the exercise or pursuit of any right, power or remedy shall not be
construed to be a waiver of the right to exercise or to pursue at any time
-9-
<PAGE>
or thereafter any other right, power or remedy. No delay or admission by a Party
in the exercise of any right or power or in the pursuit of any remedy may impair
any such right, power or remedy or be construed to be a waiver of any default on
the party of the other Party or to be an acquiescence therein. No expressed or
implied waiver by a Party of any default hereunder shall in any way be, or be
construed to be, a waiver of any future or subsequent default hereunder. Neither
Party shall be considered to be in default for failure to perform, or delay in
performing, any obligation under this Contract if performance is prevented,
hindered or delayed by an Uncontrollable Force (but only for so long as such
Uncontrollable Force continues unabated). In such event, the Party which is
unable, or anticipates being unable, to perform shall (a) promptly notify the
other Party in writing of the nature, cause, date of commencement and expected
duration of any such delay, (b) indicate to what extent it will be prevented
from performing and (c) exercise due diligence to overcome such inability to
perform with all reasonable dispatch. In the event a Party claims excuse of
performance as a result of an Uncontrollable Force which continues unabated for
more than one hundred twenty (120) days, the Party that is not affected by such
Uncontrollable Force shall have the option to terminate this Agreement on
written notice to the other Party.
Section 8.02. Damages for Termination Without Cause. Notwithstanding
anything to the contrary in Section 8.01, the Parties agree that should Owner
elect to terminate the Agreement without cause at any time, pursuant to Section
9.01 herein, then Owner shall pay as liquidated damages to the Manager a sum
equal to one-fourth (1/4) of the annual amount of Compensation in effect at such
early termination, which shall be Owner's sole and exclusive liability and
Manager's sole and exclusive remedy, for such early termination without cause.
ARTICLE IX
TERM
Section 9.01. Term. Subject to Article VIII and Section 3.01, this Contract
shall continue to be in effect for fifteen (15) years from the Date of Initial
Services; provided, however that the Term may be extended for additional periods
on terms acceptable to both Parties, such terms to be agreed upon not later than
three months prior to the expiration of the Term. Notwithstanding the foregoing,
the owner shall be permitted to terminate this Contract with or without cause,
upon ninety (90) days written notice to the Manager, subject to the terms of the
Credit Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.01. Notices. Unless otherwise specifically provided herein, all
notices, requests and demands and other communications hereunder must be in
writing and shall be deemed to have been duly given (i) when delivered
personally, (ii) when sent by telefax to the telefax number below and followed
by a confirmation transmitted by an additional mode of communication provided
for herein, (iii) the second day following the day on which the same has been
delivered prepaid to a national (only in the case of notices within the
continental United States) or an international air courier service, or (iv) when
received if sent by the mails, certified or registered, postage prepaid, in each
case addressed to the party to whom such notice is being given at the following
addresses:
-10-
<PAGE>
OWNER: Village Farms of Texas, L.P.
c/o Agro Power Development, Inc.
10 Alvin Court
East Brunswick, NJ 08816
Attention: President
Telefax: 908-254-1710
and
Village Farms of Texas, L.P.
c/o Cogentrix of Fort Davis I, Inc.
9405 Arrowpoint Boulevard
Charlotte, NC 28273
Attention: General Counsel
Telefax: 704-529-1006
MANAGER: Village Farms of Delaware, LLC
10 Alvin Court
East Brunswick, NJ 08816
Attention: President
Telefax: 908-254-1710
Any party may change the address(es) to which notices to it are to be sent by
giving notice of such change to the other parties in accordance with the
Section.
Section 10.02. Severability. Any provision of this Contract that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction. To the extent permitted
by applicable law, the Manager and Owner hereby waive any provision by law that
renders any provision hereof prohibited or unenforceable in any respect.
Section 10.03. Amendment. Neither this Contract nor any other terms hereof
may be terminated, amended, supplemented, waived or modified orally, but only by
an instrument in writing signed by the Party against which enforcement of the
termination, amendment, supplement, waiver or modification shall be signed.
Section 10.04. Assignment. Neither Party may assign any of their respective
rights under this Contract without the prior written consent of the other Party;
provided, however, that Owner may assign its rights hereunder to the Lender. Any
assignment not permitted by this Section 10.04 shall be void.
Section 10.05. Relationship of the Parties. It is agreed and understood by
the Parties that the Manager is an independent contractor with respect to Owner.
No action, admission or instruction shall be deemed to make the Manager an
employee, agent or partner of Owner or to create any other relationship among
the Parties.
-11-
<PAGE>
Section 10.06. Headings; Etc. The Table of Contents and headings of the
various articles and sections of this Contract are for the convenience of
reference only and shall not modify, define or limit any other terms and
provisions of this Contract.
Section 10.07. Governing Law. This Contract shall in all respects,
including all matters of construction, validity and performance, be governed by
and construed in accordance with the laws of the State of New York.
Section 10.08. Parties in Interest; Limitation and Rights of Others. This
provisions of this Contract shall be binding upon, and inure to the benefit of,
the Parties hereto and their respective successors and permitted assignees.
Nothing in this Contract, whether expressed or implied, shall be construed to
give any Person (other then the parties hereto and their respective successors
and permitted assignees) any legal or equitable right, remedy or claim under or
in respect of this Contract or any covenants, conditions or provisions contained
herein.
Section 10.09. Arbitration. (a) In the event a dispute arises between-or
among the Parties relating to the terms of this Agreement and any Party gives
written notice of such dispute to the other Party, then each of the Parties
involved in such dispute shall refer the dispute to its senior management. The
senior management of each Party shall meet and confer regarding the resolution
of the dispute. In the event a resolution of such dispute is not reached within
30 days of the written notice, then either of the Parties may submit the dispute
to arbitration in accordance with Section 10.09.(b).
(b) Arbitration of disputes pursuant to this Section 10.09.(b) shall be
held in New York, New York, unless otherwise agreed to by the Parties, under the
commercial arbitration rules of the American Arbitration Association, and shall
be heard by three arbitrators selected in accordance with such rules. Each
arbitrator shall have at least five years experience in the United States in a
profession or professions related to the subject matter involved in the dispute
and shall not be a past or present officer, director or employee of, or have any
interest in or material relationship with, any Partner or any Affiliate of any
Partner. Any arbitral award shall be final and binding and may be entered by any
Party in any state or Federal court having jurisdiction thereof. Costs of
arbitration (including reasonable attorney's fees and arbitration costs) shall
be paid either equally or by the Parties to the arbitration or in accordance
with the decision of the arbitrators.
IN WITNESS WHEREOF, the Parties have caused this Contract to be duly
executed by the respective officers thereunto duly authorized as of the date and
year first above written.
VILLAGE FARMS OF DELAWARE, L.L.C.
By: Agro Power Development, Inc.,
its Managing
BY:___________________________________
Name: Kevin Cobb
Title:
-12-
<PAGE>
VILLAGE FARMS OF TEXAS, L.P.
BY:___________________________________
Name:
Title:
-13-
EXHIBIT 10.70
POCONO VILLAGE FARMS, L.P.
AGREEMENT OF LIMITED PARTNERSHIP
Dated as of March 10, 1997
THE LIMITED PARTNERSHIP INTERESTS REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE AND HAVE BEEN OFFERED AND SOLD IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENT OF THE ACT AND SUCH LAWS. THE
LIMITED PARTNERSHIP INTERESTS ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY BE TRANSFERRED ONLY IN A MANNER WHICH IS IN COMPLIANCE WITH THE
PROVISIONS OF THIS AGREEMENT, AND MAY ONLY BE TRANSFERRED IN A TRANSACTION THAT
IS REGISTERED UNDER THE ACT OR EXEMPT FROM SUCH REGISTRATION.
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
This Agreement of Limited Partnership dated as of March 10, 1997 of
POCONO VILLAGE FARMS, L.P. (the "Partnership") is by and among COGENTRIX OF
POCONO, INC., a Delaware corporation ("Cogentrix GP" and a "General Partner"),
COGENTRIX GREENHOUSE INVESTMENTS, INC., a Delaware corporation formerly known as
Cogentrix of Fort Davis II, Inc. ("Cogentrix LP" and a "Limited Partner"),
VILLAGE FARMS OF DELAWARE, L.L.C., a Delaware limited liability company ("VF
Delaware" and a "General Partner"), and VILLAGE FARMS, L.L.C., a Delaware
limited liability company ("VF" and a "Limited Partner").
Cogentrix GP, Cogentrix LP, VF Delaware and VF desire to organize a
partnership for the purpose of acquiring and operating an existing tomato
greenhouse located in Mount Carmel, Pennsylvania, and currently owned by Mt.
Carmel Greenhouses, LLC.
Accordingly, in consideration of the covenants and agreements contained
herein and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, and intending to be legally bound, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
I.1 Certain Defined Terms. As used in this Agreement, the following terms
have the following meanings (such definitions to be equally applicable to both
singular and plural forms of the terms defined):
"Abandonment" has the meaning set forth in subsection 6.2(e).
"Adjusted Capital Account Deficit" means, with respect to any Partner, the
deficit balance, if any, in such Partner's Capital Account as of the end of the
relevant fiscal year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such Partner is
obligated to restore pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate sentence of
Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) debit to such Capital Account the items described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
"Adverse Consequence" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages,
<PAGE>
dues, penalties, fines, costs, amounts paid in settlement, liabilities,
obligations, Taxes, liens, losses, expenses and fees, including, but not limited
to, court costs, arbitral costs, costs of investigation, and attorneys' fees.
"Affiliate" of any designated Person, means each Person which, directly or
indirectly, controls or is controlled by or is under common control with such
designated Person and, without limiting the generality of the foregoing, shall
include (a) any Person which beneficially owns or holds ten percent (10%) or
more of any class of voting securities of such designated Person or ten percent
(10%) or more of the equity interest in such designated Person and (b) any
Person of which such designated Person beneficially owns and holds ten percent
(10%) or more of any class of voting securities or in which such designated
Person beneficially owns or holds ten percent (10%) or more of the equity
interest. For the purposes of this definition, the terms "controls", "controlled
by" and "under common control with," as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. Notwithstanding the
foregoing, neither Cogentrix GP or Cogentrix LP, on the one hand, nor VF
Delaware or VF, on the other hand, shall be deemed to be Affiliates of one
another.
"Agreement" means this Agreement of Limited Partnership, as amended,
supplemented or otherwise modified and in effect from time to time.
"Agro Power" means Agro Power Development Inc., a New York corporation with
offices at 10 Alvin Court, East Brunswick, New Jersey 08816.
"Appraisal Procedure" means a procedure whereby two independent appraisers,
one chosen by each General Partner, shall agree upon the determinations then the
subject of appraisal. Each General Partner shall deliver a written notice to the
other appointing its appraiser within 15 days after receipt from the other of a
written notice appointing its appraiser. Each appraiser then shall prepare a
written appraisal with respect to the determinations which then are the subject
of appraisal. If within 30 days after appointment of the two appraisers they are
unable to agree upon the amount in question, a third independent appraiser shall
be chosen within 10 days thereafter by the mutual consent of such first two
appraisers or, if such first two appraisers fail to agree upon the appointment
of a third appraiser, such appointment shall be made by the American Arbitration
Association, or any organization successor thereto, from a panel of arbitrators
having experience in the business of operating a hydroponic hot house and
marketing the product produced therein and a familiarity with equipment used or
operated in such business. The decision of the third appraiser so appointed and
chosen shall be given within 30 days after the selection of such third
appraiser. If three appraisers shall be appointed and the determination of one
appraiser is disparate from the median by more than twice the amount by which
the other determination is disparate from the median, then the determination of
such appraiser shall be excluded, the remaining two determinations shall be
averaged and such average shall be binding and conclusive on the General
Partners; otherwise the average of all three determinations shall be binding and
conclusive on the General Partners. (For example, if the two appraisers
appointed by the General Partners determine a value of $100 and $200, and the
third appraiser determines a value of $150, then the involved value shall be
conclusively determined to be $150 ($100 + $200 + $150 divided by 3). As a
further example, consider the
- 2 -
<PAGE>
first example but the third appraiser places a value of $190. In this case, the
$100 valuation shall be disregarded and the value shall be conclusively
determined to be $195 ($190 + $200 divided by 2). The $100 valuation is
disregarded because the median of the three appraisers was $190 and the
difference between $100 and $190 is $90, which is more than twice the difference
between $200 and $190 which is $10, which multiplied by two is $20.) If a
General Partner shall appoint an appraiser and the other Person shall fail to
appoint an appraiser in the manner specified herein, the determination of the
appraiser so appointed shall be binding and conclusive on the General Partners.
The expenses of the appraisal procedure shall be borne solely by the
Partnership.
"Business Day" means a day other than a Saturday, a Sunday or any other day
on which commercial banks in Pennsylvania, North Carolina or New Jersey are
authorized or required by law or executive order to be closed.
"Buy-Out Offer" has the meaning set forth in Section 11.2.
"Buy-Out Offeree" has the meaning set forth in Section 11.2.
"Buy-Out Offeror" has the meaning set forth in Section 11.2.
"Capital Account" means, with respect to any Partner, the capital account
maintained for such Partner in the Partnership Books in accordance with the
following provisions:
(a) To each Partner's Capital Account there shall be credited such
Partner's Capital Contributions, such Partner's distributive share of
Profits and any other items in the nature of income or gain which are
allocated under this Agreement.
(b) To each Partner's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any property (other than money)
(net of any liabilities assumed by such Partner or to which the property is
subject) distributed to such Partner pursuant to any provision of this
Agreement, and such Partner's distributive share of Losses and any other
items in the nature of deductions or losses which are allocated under this
Agreement.
(c) In the event all or a portion of an interest in the Partnership is
transferred in accordance with the terms of this Agreement in a transaction
that does not result in a termination of the Partnership under Code Section
708(b)(1)(B), the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred interest.
(d) In determining the amount of any liability for purposes of clause
(a) and clause (b) hereof, there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and the Regulations.
(e) If a Partner owns more than one Partnership Interest, one Capital
Account shall be maintained for the Partnership Interests of the Partner.
- 3 -
<PAGE>
(f) Each Partner's Capital Account shall in all other respects be
maintained in accordance with the provisions of Regulations Section
1.704-1(b).
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of capital accounts are intended to comply with Regulations
Section 1.704-1(b), and shall be interpreted and applied in a manner consistent
with such Regulations.
"Capital Contribution" means, with respect to any Partner, the amount of
money and the initial Gross Asset Value of any property (other than money) (net
of any liabilities assumed by the Partnership or to which the property is
subject) contributed to the Partnership with respect to any Partnership Interest
held by such Partner pursuant to the terms of this Agreement.
"Capital Lease" means any lease of property, real or personal, which in
accordance with GAAP, would be required to be capitalized on a balance sheet of
the lessee.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Cogentrix GP Designee" has the meaning set forth in Section 6.1(a).
"Cogentrix GP" means Cogentrix of Pocono, Inc., a Delaware corporation.
"Cogentrix LP" means Cogentrix Greenhouse Investments, Inc., a Delaware
corporation.
"Commonly Controlled Entity" means, with respect to any Person, an entity,
whether or not incorporated, which is under common control with such Person
within the meaning of Section 414(b) or (c) of the Code.
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
6 Del.C. " 17-101, et seq., as it may be amended from time to time and any
successor to such Act.
"Depreciation" means, for each fiscal year or other period, an amount equal
to the deprecation, amortization, or other cost recovery deduction allocable
with respect to an asset for such period, except that if the Gross Asset Value
of an asset differs from its adjusted basis for Federal tax purposes at the
beginning of such period, Depreciation shall be an amount which bears the same
ratio to such beginning Gross Asset Value as the Federal income tax
depreciation, amortization or other cost recovery deduction for such period
bears to such beginning adjusted tax basis; provided that if the Federal income
tax depreciation, amortization, or other cost recovery deduction for such period
is zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the Management Committee.
"Equity Funding Date" means the day on which all of the conditions to the
initial drawdown under the Loan Agreement (other than the contributions to the
capital of the Partnership to be made by the Partners under Section 3.2) have
been met and all of the conditions to the closing of the purchase of the Project
under the Purchase Agreement have been met.
- 4 -
<PAGE>
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means, with respect to any Person, any corporation or
trade or business which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as such Person or is under
common control (within the meaning of Section 414(c) of the Code) with such
Person.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States.
"General Partner" means each of Cogentrix GP and VF Delaware and any Person
admitted to the Partnership as an additional General Partner in accordance with
the provisions of this Agreement, until such time as such Person ceases to be a
general partner of the Partnership as provided herein or in the Delaware Act.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Gross Asset Value" means, with respect to any asset, the asset's adjusted
basis for Federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, as determined by agreement of the Partners;
(b) The Gross Asset Value of all Partnership assets shall be adjusted
to equal their respective gross fair market values, as determined by
agreement of the Partners, and in the event the Partners fail to so agree,
as determined by the Appraisal Procedure, as of the following times: (i)
The acquisition of an additional interest in the Partnership by any new or
existing Partner in exchange for more than a de minimis Capital
Contribution; (ii) the distribution by the Partnership to a Partner of more
than a de minimis amount of property as consideration for an interest in
the Partnership if the Management Committee reasonably determines that such
adjustment is necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership; and (iii) the liquidation of
the Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g);
(c) the Gross Asset Value of any Partnership asset distributed to any
Partner shall be the gross fair market value of such asset on the date of
distribution as determined by agreement of the Partners and, in the event
the Partners fail to so agree, as determined by the Appraisal Procedure;
(d) the Gross Asset Values of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are
- 5 -
<PAGE>
taken into account in determining Capital Accounts pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Values
shall be adjusted to the extent the Partners agree (and in the event the
Partners fail to so agree, as determined by the Appraisal Procedure) that
an adjustment pursuant to clause (ii) of this definition is necessary or
appropriate in connection with a transaction that would otherwise result in
an adjustment pursuant to clause (iv) of this definition. If the Gross
Asset Value of an asset has been determined or adjusted pursuant to clauses
(i) and (ii) of this definition or clause (iv) of this definition, such
Gross Asset Value shall thereafter be adjusted by the Depreciation taken
into account with respect to such asset; and
(e) the Gross Asset Value of any asset owned indirectly by the
Partnership through a subsidiary partnership shall be determined pursuant
to the terms of the partnership agreement for such subsidiary partnership.
"Indebtedness" means, with respect to any Person, (a) indebtedness of such
Person for borrowed money or for the deferred purchase price of property or of
services (other than obligations under agreements for the purchase of goods and
services in the normal course of business which are not more than 30 days past
due; (b) obligations of such Person under Capital Leases; (c) obligations of
such Person pursuant to interest hedging transactions; (d) obligations of such
Person in respect of letters of credit; (e) obligations of such Person under
direct and indirect guarantees in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise assure a creditor
against loss in respect of, indebtedness or obligations of others of the kinds
referred to in clause (a), (b,), (c) or (d) above (other than endorsements of
negotiable instruments in the ordinary course of business); and (f) any
obligations of such Person or a Commonly Controlled Entity to a Multi-Employer
Plan. For purposes of clarity, "Indebtedness" includes the obligations of the
Partnership to repay amounts borrowed under, and to pay other amounts owing
under, the Loan Agreement.
"Lien" means any mortgage, deed of trust, security interest, pledge,
hypothecation, encumbrance or lien (statutory or other) of any kind or nature
whatsoever (including, without limitation, any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any such
agreement, and the filing of any statement under the Uniform Commercial Code or
comparable law of any jurisdiction).
"Limited Partner" means each of Cogentrix LP and VF and any Person who
becomes a limited partner of the Partnership in accordance with the terms of
this Agreement and is shown as such on the books and records of the Partnership.
"Loan Agreement" refers to that certain Loan Agreement dated as of March
10, 1997 by and between the Partnership, as the borrower, and First Pioneer Farm
Credit, ACA, as lender, documenting a loan in the principal amount of $2,200,000
and the construction loan agreement, the promissory note, the security
agreement, the mortgage and all agreements, documents and instruments executed
or delivered in connection therewith and the transactions contemplated thereby.
"Losses" has the meaning given to it in the definition of "Profits."
- 6 -
<PAGE>
"Managing General Partner" shall initially mean VF Delaware and thereafter
its successors in such capacity as provided in Section 6.1(e) hereof.
"Management and Marketing Agreement" means the Management, Operation,
Maintenance, Marketing and Sales Agreement dated the same date as this Agreement
by and between the Partnership and VF, as it may be amended, supplemented or
otherwise modified and in effect from time to time, pursuant to which VF will
provide management, operation and maintenance services to the Partnership and
will market and sell tomatoes produced by the Partnership at the Project.
"Management Committee" means the Management Committee of the Partnership
referred to in Section 6.1.
"Multi-Employer Plan" means, with respect to any Person, a Multi-Employer
Plan as defined in Section 3(37) of ERISA to which contributions have been made
by such Person or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Distributable Cash" means for any period, an amount equal to all cash
received by the Partnership during such period, including, but not limited to,
cash from operations, reductions in reserves, casualty proceeds, rebates and
other extraordinary items, less (a) principal, interest and other payments made
under or pursuant to the Loan Agreement or other borrowing, (b) all cash
expenditures of and payments made by the Partnership, and (c) any reserves
established by the Management Committee of the Partnership, and subject to the
limitations on distributions, if any, imposed pursuant to the terms of the Loan
Agreement.
"Nonrecourse Deductions" shall have the meaning set forth in Regulations
Sections 1.704-2(b) and (c). The amount of Nonrecourse Deductions for a
Partnership fiscal year equals the excess, if any, of the net increase, if any,
in the amount of Partnership minimum gain during the fiscal year over the
aggregate amount of any distributions during that fiscal year of proceeds of a
nonrecourse liability that are allocable to an increase in Partnership minimum
gain, determined according to the provisions of Regulations Section 1.704-2(c).
"Operating Budget" means the business plan and budget required to be
provided to the Partnership pursuant to the Management and Marketing Agreement.
"Partner" means any of the General Partners or the Limited Partners.
"Partner Nonrecourse Deductions" shall have the meaning specified in
Regulations Section 1.704-2(i)(2).
"Partnership" means Pocono Village Farms, L.P., the limited partnership
formed pursuant to this Agreement and the filing of the Certificate of Limited
Partnership with the Delaware Secretary of State.
"Partnership Books" means the books and records maintained by the
Partnership and reviewed within sixty (60) days of each fiscal year end by the
Management Committee, in which
- 7 -
<PAGE>
records and information relating to the ownership of the Partnership, the
constituency of the Management Committee and actions taken by the Management
Committee or the Partners is maintained, including but not limited to, a
register of the Partners, each Partner's Capital Account, each Partner's
Percentage Interest, actions taken by the Management Committee and the Partners,
and this Agreement and any amendments hereto.
"Partnership Interest" means, with respect to any Partner, the interest of
such Partner in the Partnership, whether general or limited, at any particular
time, including the rights and obligations of such Partner as provided in this
Agreement and the Delaware Act.
"Partnership Percentage" means, with respect to any Partner, at any time,
the percentage specified as such Partner's "Partnership Percentage" at the time
such Partner was admitted to the Partnership, as adjusted in accordance with the
terms of this Agreement. The initial Partnership Percentages are as follows:
Cogentrix GP 1%
Cogentrix LP 49%
VF Delaware 1%
VF 49%
"Permitted Liens" means Liens in favor of any Person other than the
Partners or any of their respective Affiliates, that (a) arise in the ordinary
course of business of the Partnership (including, without limitation, landlord's
materialmen's, mechanic's, worker's, repairmen's and employee's Liens and
similar Liens which arise in connection with any tax, assessment, governmental
charge or levy) and (b) do not secure Indebtedness.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Profits" and "Losses" mean, for any period, an amount equal to the
Partnership's taxable income or loss for such period, determined in accordance
with Code Section 703(a) (for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss), with the following adjustments:
(a) Income of the Partnership that is exempt from federal income tax
and not otherwise taken into account in computing Profits or Losses
pursuant to this definition shall be added to such taxable income or loss;
(b) any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits or Losses pursuant to this definition shall be
subtracted from such taxable income or loss;
- 8 -
<PAGE>
(c) gain and loss with respect to the disposition of any Partnership
asset (both directly owned assets and assets owned indirectly through a
subsidiary partnership) shall be computed with respect to the Gross Asset
Value rather than adjusted tax basis of such asset;
(d) in lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing taxable income or loss, there
shall be taken into account Depreciation for such fiscal year or other
period; and
(e) in the event of an adjustment in the Gross Asset Value of any
Partnership asset pursuant to clause (b) of the definition of "Gross Asset
Value" herein, the amount of such adjustment shall be taken into account as
gain or loss from the disposition of such asset for purposes of computing
Profits and Losses.
"Project" means the greenhouse commonly known as Mt. Carmel Greenhouse
located on approximately 60 acres of real property in Mt. Carmel, Pennsylvania
and consisting of six greenhouses covering approximately 30 acres, to be
acquired by the Partnership under the Purchase Agreement and thereafter operated
by the Partnership.
"Purchase Agreement" means that certain Contract of Sale dated March 5,
1997 by and between Mt. Carmel Greenhouses, LLC, as seller, and the Partnership,
as the Buyer, and all agreements, documents and instruments executed or
delivered in connection therewith and the transactions contemplated thereby.
"Regulations" means the temporary, proposed and final regulations under the
Code and any successor provisions thereto.
"Requirement of Law" means, as to any Person, (a) the certificate of
incorporation and by-laws or partnership agreement or other organizational or
governing documents of such Person, and (b) any law, treaty, rule or regulation
or determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its properties or
to which such Person or any of its properties is subject and the violation of
which, or which determination, could reasonably be expected to (i) have a
material adverse effect on the business, operations, properties, condition
(financial or otherwise) or prospects of such Person or (ii) materially
adversely affect the ability of such Person to perform its obligations under the
Loan Agreement, the Purchase Agreement or the Management and Marketing Agreement
or any other material agreement to which it is a party.
"Special Disposition Cash Distribution" shall have the meaning given to
such term in Section 5.1 hereof.
"Subsidiary" means with respect to any Person, an Affiliate that is
controlled (directly or indirectly through one or more intermediaries) by that
Person.
"Taxes" means any and all income or gross receipt taxes, franchise taxes,
levies, imposts, duties, assessments, fees, charges and withholdings of any
nature whatsoever, whether or not presently in existence, imposed by any
Governmental Authority.
- 9 -
<PAGE>
"VF" means Village Farms, L.L.C., a Delaware limited liability company, 99%
of which is owned by Agro Power and 1% of which is owned by VF Delaware.
"VF Delaware" means Village Farms of Delaware, L.L.C., a Delaware limited
liability company, 99% of which is owned by Agro Power and 1% of which is owned
by VF.
"Withdraw" or "Withdrawal", with respect to any Partner, means a Partner
ceasing to be a partner of the Partnership for any reason, whether voluntary or
involuntary, and "Withdrawn", with respect to a Partner, means a Partner who has
ceased to be a partner of the Partnership.
"Withdrawal Date" means the date of the Withdrawal from the Partnership of
a Withdrawn Partner.
I.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto, unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto, accounting terms not defined in Section 1.1, and
accounting terms partly defined in Section 1.1 to the extent not defined,
shall have the respective meanings given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and section,
schedule and exhibit references are to this Agreement unless otherwise
specified.
ARTICLE II
GENERAL PROVISIONS
II.1 Formation of Partnership. The Partners hereby form and establish a
limited partnership under the terms and provisions of this Agreement and the
provisions of the Delaware Act, and the rights and liabilities of the Partners
shall be as provided in this Agreement and in the Delaware Act. Concurrently
with the execution of the Agreement by VF Delaware, VF, Cogentrix GP and
Cogentrix LP, VF Delaware and Cogentrix GP have executed and filed with the
Office of Secretary of State of the State of Delaware a Certificate of Limited
Partnership in accordance with Section 17-201 of the Delaware Act, in form and
substance satisfactory to both VF Delaware and Cogentrix GP.
II.2 Name of the Partnership. The name of the Partnership shall be Pocono
Village Farms, L.P., or such other name as the Partners from time to time may
designate.
- 10 -
<PAGE>
II.3 Business of the Partnership. The business of the Partnership is to
acquire and operate the Project. In furtherance of its business, the Partnership
shall have and may exercise all the powers now or hereafter conferred by the
laws of the State of Delaware on partnerships formed under the laws of that
state, and shall do any and all things necessary or desirable for the
accomplishment of the above purposes. The Partnership shall engage in no other
business except as permitted by the Management Committee in accordance with
Section 6.2 below. Notwithstanding anything contained in this Agreement to the
contrary, the transactions contemplated by the Loan Agreement and the Purchase
Agreement are hereby authorized and approved and each of the officers of the
Partnership is authorized to take any and all action, including the execution
and delivery of documents and agreements, necessary or appropriate in connection
therewith.
II.4 Registered Office of the Partnership. The Partnership shall maintain a
registered office at, and the name and address of the Partnership's registered
agent in Delaware is, The Corporation Trust Company, 1209 Orange Street, New
Castle County, Wilmington, Delaware 19801.
II.5 Liability of the Partners Generally.
(a) Except as otherwise provided in the Delaware Act, each General
Partner shall have the liabilities of a partner in a partnership without
limited partners to Persons other than the Partnership and the Limited
Partners.
(b) Except as otherwise provided in this Agreement or the Delaware
Act, no Limited Partner (or former Limited Partner) shall be obligated to
make any contribution of capital to the Partnership or have any liability
for the debts and obligations of the Partnership.
II.6 Office of the Partnership. The Partnership shall maintain an office
and principal place of business in Mt. Carmel, Pennsylvania. The Partnership
shall qualify to do business as a foreign limited partnership in the State of
Pennsylvania. Pursuant to the Management and Marketing Agreement, the books of
account and other records with respect to the operations of the Partnership
shall be maintained at 10 Alvin Court, East Brunswick, New Jersey 08816. The
Partnership shall not have or maintain any office or other place of business
outside of Mt. Carmel, Pennsylvania.
II.7 Duration of the Partnership. The Partnership shall commence on the
date of this Agreement, and shall continue until its termination in accordance
with the provisions of Article X.
- 11 -
<PAGE>
ARTICLE III
CAPITAL CONTRIBUTIONS
III.1 Capital Contributions.
(a) VF Delaware shall contribute to the Partnership on execution of
this Agreement by all of the Partners $20 by wire transfer of immediately
available funds to an account designated in writing by the Partnership.
(b) VF shall contribute to the Partnership on execution of this
Agreement by all of the Partners $980 by wire transfer of immediately
available funds to an account designated in writing by the Partnership.
(c) Cogentrix GP shall contribute to the Partnership on execution of
this Agreement by all of the Partners $20 by wire transfer of immediately
available funds to an account designated in writing by the Partnership.
(d) Cogentrix LP shall contribute to the Partnership on execution of
this Agreement by all of the Partners $980 by wire transfer of immediately
available funds to an account designated in writing by the Partnership.
III.2 Additional Capital Contribution. Upon the satisfaction of or waiver
of the conditions set forth in Section 3.3 hereof, on the Equity Funding Date:
(a) Cogentrix GP shall contribute to the Partnership $5,500;
(b) Cogentrix LP shall contribute to the Partnership $269,500;
(c) VF Delaware shall contributed $5,500 to the Partnership; and
(d) VF shall contribute $269,500 to the Partnership.
Each such contribution shall be made by wire transfer of immediately available
funds to an account designated in writing by the Partnership.
III.3 Conditions. The obligation of Cogentrix GP and Cogentrix LP to make
the contributions described in Section 3.2 are subject to the satisfaction of
each of the following conditions precedent (except those conditions, if any,
that may be specifically waived in writing by Cogentrix GP or Cogentrix LP, as
appropriate):
(a) The Loan Agreement, the Purchase Agreement and the Management and
Marketing Agreement shall have been executed by all parties thereto. An
original executed copy of the Loan Agreement, the Purchase Agreement and
the Management and Marketing Agreement and all documents and agreements
executed or delivered in connection therewith shall have been delivered to
Cogentrix GP and a copy thereof delivered to Cogentrix LP as soon as
available.
- 12 -
<PAGE>
(b) All conditions to the closing of the Loan Agreement and the
Purchase Agreement shall have occurred or been satisfied (other than
evidence that the capital contributions described in Section 3.2 have been
made) and all governmental consents, approvals, permits and licenses and
other agreements, instruments and other deliveries which are required to be
made by any party under the Loan Agreement or the Purchase Agreement at or
prior to the initial funding or closing of the transactions contemplated by
such agreement shall have been delivered or received. A copy of all such
deliveries required to be made by any party under the Loan Agreement or the
Purchase Agreement and other evidence of the closing of the Purchase
Agreement and the Loan Agreement shall be provided to Cogentrix GP and
Cogentrix LP.
(c) The following representations or warranties shall be true and
correct in all respects, and are hereby made to Cogentrix GP and Cogentrix
LP by VF Delaware and VF as an inducement to their making capital
contributions to the Partnership:
(i) Each of VF and VF Delaware (A) is a limited liability company
duly organized, validly existing and in good standing under the laws
of the State of Delaware, the ownership of which is 99% by Agro Power
and 1% by VF (in the case of VF Delaware) or 1% by VF Delaware (in the
case of VF), (B) has full power and authority and the legal right to
incur the obligations provided for in this Agreement, and (C) has
taken all necessary action to authorize the execution, delivery and
performance of this Agreement and the Management and Marketing
Agreement.
(ii) Neither the execution, delivery or performance by VF
Delaware or VF of this Agreement or the Management and Marketing
Agreement, nor compliance by it with the terms and provisions hereof
or thereof, requires the consent or authorization of any other party
(except such as have been duly obtained), or conflicts or will
conflict with or result in a breach or violation of its charter
documents or by-laws or any of the terms, conditions or provisions of
any Requirement of Law applicable to it or its assets or business.
(iii) It is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(iv) The representations and warranties, if any, of VF Delaware
or VF or any of their respective Affiliates in or pursuant to the
Management and Marketing Agreement are true and correct as of the date
hereof and are hereby deemed to be made to Cogentrix GP and Cogentrix
LP, mutatis mutandis, as if fully set forth herein.
(d) The following representations or warranties shall be true and
correct in all respects, and are hereby made to VF Delaware and VF by
Cogentrix GP and Cogentrix LP as an inducement to their making capital
contributions to the Partnership:
- 13 -
<PAGE>
(i) Each of Cogentrix GP and Cogentrix LP (A) is a corporation
duly organized, validly existing and in good standing under the laws
of the State of Delaware, (B) has full power and authority and the
legal right to incur the obligations provided for in this Agreement,
and (C) has taken all necessary action to authorize the execution,
delivery and performance of this Agreement.
(ii) Neither the execution, delivery or performance by Cogentrix
GP and Cogentrix LP of this Agreement, nor compliance by it with the
terms and provisions hereof, requires the consent or authorization of
any other party (except such as have been duly obtained), or conflicts
or will conflict with or result in a breach or violation of its
charter documents or by-laws or any of the terms, conditions or
provisions of any Requirement of Law applicable to it or its assets or
business.
(iii) It is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
III.4 Interest. No interest shall accrue on any contribution to the capital
of the Partnership.
III.5 Withdrawals of Capital. No Partner shall have the right to withdraw
or to be repaid or returned any capital contributed by it, except as otherwise
provided herein.
III.6 Additional Capital Contributions. Unless otherwise unanimously agreed
by the Management Committee, no Partner shall be required to make any
contribution to the capital of the Partnership other than its capital
contributions set forth in this Article III. If the Management Committee has
agreed that an additional cash contribution to the capital of the Partnership is
to be made but a Partner does not make such contribution as and when required,
then any other Partner may (but shall not be required to), at its election,
either make all or a portion of the cash contribution to the capital of the
Partnership or loan all or a portion of the amount of such non-contributing
Partner's portion of such agreed-upon cash capital contribution to the
Partnership. In the event the Partner elects to make an additional cash
contribution, the Partners' Partnership Percentages shall be adjusted so that
they shall be proportionate to the Partners' total Capital Contributions. In the
event the Partner elects to make a loan, then such loan shall be on customary
terms and conditions, shall be evidenced by a customary promissory note, and
shall provide that (a) the loan shall be repaid in full together with interest
thereon prior to any distribution of cash by the Partnership to any of the
Partners, (b) it shall bear interest at the same rate of interest as the
interest rate then in effect under the Loan Agreement plus 1% per annum and (c)
shall comply in all respects with the Loan Agreement.
- 14 -
<PAGE>
ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES
IV.1 Profits and Losses.
(a) After giving effect to the special allocations set forth in
Sections 4.3, 4.4, 4.5, 4.6, 4.7 and 4.10 hereof, the Partners shall share
Profits and Losses as follows:
(i) Profits shall be allocated among the Partners as follows:
(A) Profits shall first be allocated to the Partners to
offset any prior allocations of Loss made to the Partners under
Section 4.1(a)(ii)(B) hereof which have not previously been
offset.
(B) Thereafter, Profits shall be allocated to the Partners
to offset any prior allocations of Loss made to the Partners
under Section 4.1(a)(ii)(A) which have not previously been
offset.
(C) Thereafter, Profits shall be allocated to VF Delaware
and VF in an amount equal to the cash distributions pursuant to
Section 5.1 theretofore received by VF Delaware and VF in excess
of the cash distributions pursuant to Section 5.1 theretofore
received by Cogentrix GP and Cogentrix LP, respectively.
(D) Thereafter, Profits shall be allocated among the
Partners in proportion to their Partnership Percentages.
(ii) Losses shall be allocated among the Partners as follows:
(A) Losses shall first be allocated to the Partners in
accordance with their positive Capital Accounts.
(B) Thereafter, Losses shall be allocated to the Partners in
the proportion of their Partnership Percentages.
For Federal income tax purposes, each item of income, gain, loss, deduction
or credit entering into the computation of the Partnership's taxable income
shall be allocated in the same proportion.
(b) The Profits and Losses of the Partnership shall be unanimously
determined by the Management Committee and shall be allocated as described in
Section 4.1(a) (i) at the end of each fiscal quarter, (ii) upon the transfer of
the Partnership Interest of any Partner pursuant to Article VIII, (iii) upon the
Withdrawal of any Partner pursuant to Article IX, (iv) upon the admission of any
Partner to the Partnership pursuant to Article IX and (vi) at such other times
that the Management Committee may determine.
- 15 -
<PAGE>
IV.2 Capital Account Balances. Each Partner's Capital Account shall be
maintained in accordance with the principles of applicable Treasury Regulations
promulgated under Section 704(b) of the Code and as otherwise provided in the
definition of "Capital Accounts" and in this Article IV.
IV.3 Minimum Gain Chargeback.
(a) Notwithstanding any other provision in this Agreement,
if there is a net decrease in Partnership minimum gain
(determined in accordance with the principles of Regulations
Sections 1.704-2(b)(2) and 1.704-2(d)) during any Partnership
taxable year, the Partners who would otherwise have an Adjusted
Capital Account Deficit at the end of such year shall be
specially allocated items of Partnership income and gain for such
year (and, if necessary, subsequent years) in an amount and
manner sufficient to eliminate as quickly as possible such
Adjusted Capital Account Deficit. The items to be so allocated
shall be determined in accordance with Regulations Section
1.704-2(g). This subsection 4.3(a) is intended to comply with the
minimum gain chargeback requirements in such Regulation Sections
and shall be interpreted consistently therewith.
(b) Notwithstanding any other provision in this Agreement,
if there is a net decrease in Partnership minimum gain
attributable to a partner nonrecourse debt of the Partnership
(within the meaning of Regulations Sections 1.704-2(b)) during
any Partnership fiscal year, each Person who has a share of the
Partnership minimum gain attributable to such nonrecourse debt of
the Partnership, determined in accordance with Regulation Section
1.704-2(i)(5), shall be specially allocated items of Partnership
income and gain for such year (and, if necessary, subsequent
years) in an amount equal to the greater of (i) the portion of
such Person's share of the net decrease in minimum gain of the
Partnership attributable to such nonrecourse debt of the
Partnership, determined in accordance with Regulations Section
1.704-2(i)(b), that is allocable to the disposition of property
of the Partnership subject to such nonrecourse debt of the
Partnership, determined in accordance with Regulations Section
1.704-2(i)(4), or (ii) if such Person would otherwise have an
Adjusted Capital Account Deficit at the end of such year, an
amount sufficient to eliminate such Adjusted Capital Account
Deficit. Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so
allocated shall be determined in accordance with Regulations
Section 1.704-2(i)(4). This subsection 4.3(b) is intended to
comply with the minimum gain chargeback requirement in such
Regulations Section and shall be interpreted consistently
therewith. Solely for purposes of this subsection 4.3(b), each
Person's Adjusted Capital Account Deficit shall be determined
prior to any other allocations pursuant to this Article IV with
respect to such fiscal year, other than allocations pursuant to
subsection 4.3(a) hereof.
IV.4 Nonrecourse Deductions. Nonrecourse Deductions for any taxable year
shall be specifically allocated among the Partners in proportion to their
Percentage Interests.
IV.5 Partner Nonrecourse Deductions. Nonrecourse Deductions attributable to
otherwise nonrecourse debt with respect to which a Partner or a related person
of a Partner
- 16 -
<PAGE>
described in Regulations Section 1.752-2(c) is the creditor or otherwise bears
the "economic risk of loss" as defined in Regulations Section 1.752-2(b) shall
be allocated to such Partner.
IV.6 Qualified Income Offset. Notwithstanding anything in this Agreement to
the contrary, in the event any Partner unexpectedly receives any adjustments,
allocations or distributions described in paragraphs (b)(2)(ii)(d)(4), (5) or
(6) of Regulations Section 1.704-1, there shall be specially allocated to such
Partner such items of Partnership income and gain, at such times and in such
amounts as will eliminate as quickly as possible that portion of its Adjusted
Capital Account Deficit caused or increased by such adjustments, allocations or
distributions.
IV.7 Curative Allocations. The allocations set forth in Sections 4.3, 4.4,
4.5, 4.6 and 4.10 hereof are intended to comply with certain requirements of
Regulations Section, 1.704-1(b). Notwithstanding any other provisions of this
Article IV (other than Sections 4.3, 4.4, 4.5, 4.6 and 4.10), allocations that
have taken place pursuant to Sections 4.3, 4.4, 4.5, 4.6 and 4.10 shall be taken
into account in allocating other items of income, gain, loss, deduction and
credit so that, to the extent possible, the net amount of such other allocations
and the Sections 4.3, 4.4, 4.5, 4.6, and 4.10 allocations to each Partner shall
equal the net amount that would have been allocated to each Partner if the
Sections 4.3, 4.4, 4.5, 4.6, and 4.10 allocations had not occurred.
IV.8 Tax Allocations. Except as provided in Sections 4.7 and 4.9 hereof,
for income tax purposes each item of income, gain, loss and deduction shall be
allocated in the same manner as the corresponding book item is allocated for
Capital Account purposes.
IV.9 Property Subject to 704(b) and 704(c). In the case of any Partnership
asset (directly or indirectly owned) the Gross Asset Value of which differs from
its adjusted tax basis, income, gain, loss and deduction with respect to such
asset shall, solely for tax purposes, be allocated in accordance with the
principles of Code Sections 704(b) and 704(c) to take account of such
difference.
IV.10 Limitations. Notwithstanding anything to the contrary in this Article
IV, no allocation under this Article IV shall be made to a Limited Partner that
would cause such Limited Partner to have, or that would increase, an Adjusted
Capital Account Deficit. Any amount not allocated as a result of this limitation
shall be reallocated to the General Partners pro rata in accordance with their
relative Partnership Interests.
ARTICLE V
DISTRIBUTIONS
V.1 Distribution of Net Distributable Cash. Subject to Sections 5.2 and 5.3
hereof, Net Distributable Cash for each fiscal quarter shall be distributed to
the Partners within thirty (30) days after the end of such quarter as follows:
(a) First, from the date hereof and until December 31, 2000 except as
provided in the proviso hereto, as follows:
- 17 -
<PAGE>
Cogentrix GP 1%
Cogentrix LP 14%
VF Delaware 1%
VF 84%
provided, however, that in the event the Partnership sells or otherwise
disposes of the assets described on Schedule 5.1(a) attached hereto, any
cash proceeds from such sale or disposition, net of costs incurred by the
Partnership in connection with such sale or other disposition (including,
but not limited to, transportation, taxes, dismantling, commissions and
counsel fees) shall be allocated and distributed as follows (each cash
distribution from such net cash proceeds is referred to herein as a
"Special Disposition Cash Distribution"): The first $3,500,000 of such net
cash proceeds shall be allocated and distributed to VF and all net cash
proceeds in excess of $3,500,000 shall be allocated and distributed to the
Partners in accordance with the Partners' Partnership Percentages.
(b) Thereafter, 49% to Cogentrix LP, 1% to Cogentrix GP, 49% to VF and
1% to VF Delaware.
V.2 Default Allocations for Cogentrix. In the event VF Delaware or VF
defaults or breaches any of its obligations under this Agreement or the
Management and Marketing Agreement, and such default or breach has not been
remedied within any applicable cure period, or any representation or warranty
made by VF Delaware, VF or any of their respective Affiliates under this
Agreement or any such other agreement or document proves to have been untrue
when made and (a) as a result thereof the Partnership, Cogentrix GP and
Cogentrix LP (or any of them) incurs or suffers an Adverse Consequence and (b)
Cogentrix GP or Cogentrix LP gives written notice of such Adverse Consequence to
the Partnership and, if the amount thereof is unknown, its good faith estimate
of the amount of such Adverse Consequence, then the Partnership shall thereafter
refrain from making any distributions to VF Delaware and VF (or either of them)
under this Agreement (any such distribution that would have been made but for
this Section 5.2 is hereinafter referred to as a "Blocked Distribution") and
shall take the following steps:
(i) The Partnership shall distribute to Cogentrix GP or Cogentrix LP
from such Blocked Distributions an aggregate amount equal to 100% of any
such Adverse Consequence suffered or actually incurred by Cogentrix GP and
Cogentrix LP or either of them (or, if the amount thereof is not known,
100% of Cogentrix GP's or Cogentrix LP's written good faith estimate
thereof). Any such distribution made by the Partnership under this
subsection 5.2(i) shall satisfy pro tanto the obligation of the Partnership
to make distributions to VF Delaware and VF (or either of them) with
respect to the Blocked Distributions. For the purposes of this Agreement,
any Adverse Consequence suffered or incurred by the Partnership shall be
deemed to have been suffered or incurred, on a dollar-for-dollar basis, 1%
by Cogentrix GP and 49% by Cogentrix LP.
(ii) Upon distribution to Cogentrix GP and Cogentrix LP of 100% of the
aggregate amount of any such Adverse Consequence (or their good faith
estimate thereof) from Blocked Distributions, the Partnership may
thereafter make distributions to VF Delaware and VF under Section 5.1,
unless and until it receives a subsequent notification from Cogentrix LP or
Cogentrix GP under this Section 5.2.
- 18 -
<PAGE>
V.3 Default Allocations for VF. In the event Cogentrix GP or Cogentrix LP
defaults or breaches any of its obligations under this Agreement and such
default or breach has not been remedied within any applicable cure period, or
any representation or warranty made by Cogentrix GP or Cogentrix LP under this
Agreement proves to have been untrue when made and (a) as a result thereof the
Partnership, VF Delaware and VF (or any of them) incurs or suffers an Adverse
Consequence and (b) VF Delaware or VF gives written notice of such Adverse
Consequence to the Partnership and, if the amount thereof is unknown, its good
faith estimate of the amount of such Adverse Consequence, then the Partnership
shall thereafter refrain from making any distributions to Cogentrix GP and
Cogentrix LP (or either of them) under this Agreement (any such distribution
that would have been made but for this Section 5.3 is hereinafter referred to as
a "Blocked Distribution") and shall take the following steps:
(i) The Partnership shall distribute to VF Delaware or VF from such
Blocked Distributions an aggregate amount equal to 100% of any such Adverse
Consequence suffered or actually incurred by VF Delaware and VF or either
of them (or, if the amount thereof is not known, 100% of VF Delaware's or
VF's written good faith estimate thereof). Any such distribution made by
the Partnership under this subsection 5.3(i) shall satisfy pro tanto the
obligation of the Partnership to make distributions to Cogentrix GP or
Cogentrix LP (or either of them) with respect to the Blocked Distributions.
For the purposes of this Agreement, any Adverse Consequence suffered or
incurred by the Partnership shall be deemed to have been suffered or
incurred, on a dollar-for-dollar basis, 1% by VF Delaware and 49% by VF.
(ii) Upon distribution to VF Delaware and VF of 100% of the aggregate
amount of any such Adverse Consequence (or their good faith estimate
thereof) from Blocked Distributions, the Partnership may thereafter make
distributions to Cogentrix GP and Cogentrix LP under Section 5.1, unless
and until it receives a subsequent notification from VF Delaware or VF
under this Section 5.3.
- 19 -
<PAGE>
ARTICLE VI
MANAGEMENT
VI.1 Management of the Partnership.
(a) The overall management and control of the business affairs of the
Partnership shall be vested in the Management Committee, subject to the
limitations contained in Section 6.2 or elsewhere in this Agreement. The
Management Committee shall consist of four members, two designated by
Cogentrix GP (each a "Cogentrix GP Designee") and two designated by VF
Delaware (each a "VF Delaware Designee"), and a quorum of the Management
Committee shall require at least three members of the Management Committee.
No action at any meeting may be taken by the Management Committee unless a
quorum is present (acting in person or by proxy). The Management Committee
shall meet not less frequently than quarterly. Members of the Management
Committee may participate in a meeting of the Management Committee by means
of conference telephone. No action may be taken by the Management Committee
with respect to any of the matters described in Section 6.2 hereof unless
such action is in the form of a writing signed by all members of the
Management Committee. Unless otherwise agreed, all meetings of the
Management Committee shall take place at Cogentrix's offices in Charlotte,
North Carolina, Agro Power's offices in East Brunswick, New Jersey or such
other place as the Management Committee may unanimously agree.
(b) Except as set forth in Section 6.2, any action by the Management
Committee shall require the approval of a majority of the members of the
Management Committee.
(c) Any General Partner may, at any time, replace any of its
respective Designees to the Management Committee with a new Designee and,
upon such change, or upon the death or resignation of any Designee, a
successor shall be designated in writing by the party that appointed the
Designee being replaced.
(d) Any General Partner or member of the Management Committee may, at
any time, request a meeting of the Management Committee by sending written
notice specifying in reasonable detail the purpose(s) of such meeting to
all other Partners and to the members of the Management Committee at least
ten (10) days in advance of the proposed date for the meeting, which notice
may be waived by all members of the Management Committee and all Partners.
Any member of the Management Committee may propose that an action be
submitted to the Management Committee for approval, and there shall be no
requirement of notice of the issues to be addressed at any meeting of the
Management Committee.
(e) Subject to the provisions of this Section 6.1 and Section 6.2, the
day-to-day management of the business affairs of the Partnership shall be
conducted by the Managing General Partner. The Managing General Partner may
be replaced at any time with any other General Partner by any two members
of the Management Committee.
- 20 -
<PAGE>
VI.2 Fundamental Matters. The following matters shall require the prior
unanimous authorization and approval of the Management Committee:
(a) Any transaction in which the Partnership (i) acquires, purchases
or leases any asset or right for consideration having a fair market value
in excess of $25,000, (ii) consolidates or merges with or into any other
Person, (iii) sells, assigns, leases or otherwise transfers any asset or
right having a fair market value in excess of $25,000, or (iv) assumes any
liability or obligation in connection with Section 6.2(a)(i) above in
excess of $25,000.
(b) The approval, execution and delivery of any contract, lease or
agreement following the Effective Date; provided, that no such approval
shall be required for (i) any contracts and permit applications in
existence prior to the Effective Date, or (ii) any other contract, lease or
agreement which is expressly non-recourse to the Partners so long as the
amounts to be paid by the Partnership thereunder, together with all other
amounts to be paid by the Partnership pursuant to contracts, leases or
agreements that have not been unanimously approved or ratified by the
Management Committee, does not exceed $50,000 in the aggregate excluding
contracts, leases or agreements for supplies used in the ordinary course of
business and contemplated in the Operating Budget.
(c) The approval, execution or delivery of any amendments to,
modification or termination of, enforcement of rights under, or any
consents or waivers in connection with any contract, lease or agreement,
other than contracts entered into without prior unanimous approval of the
Management Committee pursuant to subsection 6.2(a) or clause (ii) of
subsection 6.2(b) above.
(d) The sale or issuance by the Partnership of any interest, or of any
option, warrant or similar right to acquire any interest, of any kind in
the Partnership.
(e) Any decision to (i) terminate all or any substantial part of the
Project (an "Abandonment") or (ii) engage in any activity not contemplated
by this Agreement.
(f) The incurrence or assumption of any Indebtedness by the
Partnership, except for (i) Indebtedness which, when the principal amount
thereof is aggregated with the principal amount of Indebtedness previously
incurred pursuant to this subsection 6.2(f) which remains outstanding, does
not exceed $25,000 and (ii) the Indebtedness represented by the Loan
Agreement.
(g) The granting of any Lien (other than Permitted Liens) on the
assets or rights of the Partnership.
(h) The repayment (other than (i) repayments in accordance with
scheduled maturity and (ii) paydowns on the Loan Agreement), voluntary
prepayment or redemption of, or any refinancing or other modification of
the terms of, any Indebtedness.
(i) The adoption and modification of any Operating Budget.
- 21 -
<PAGE>
(j) The approval of any expenditure or investment not previously
authorized in any Operating Budget; provided, however, that no such
approval shall be required for any expenditure or investment so long as the
amount expended by the Partnership, together with the amounts of all other
expenditures by the Partnership during any fiscal year that have not been
approved or ratified by the Management Committee, does not exceed $25,000
in the aggregate.
(k) The initiation of any legal proceedings or arbitration on behalf
of the Partnership, or the settlement of any claim by or against the
Partnership with respect to claims in excess of $25,000 or which include
requests for an injunction, specific performance or other equitable relief.
(l) The selection, removal, or determination of authority and
responsibility of the officers of the Partnership, general or special
counsel for the Partnership, accountants and auditors for the Partnership
and the Project and the approval of any change in the accounting or tax
policy of the Partnership or the Project.
(m) To the extent not specified in this Agreement, (i) any
distribution of income or any assets or rights of the Partnership or (ii)
the redemption, purchase or other acquisition of any interest in the
Partnership.
(n) Except as contemplated in Article X of this Agreement, liquidating
or dissolving, or proposing to liquidate or dissolve, or effecting, or
proposing to effect, a recapitalization in any form of transaction, of the
Partnership.
(o) (i) Commencing any case, proceeding or other action (A) under any
existing or future law or any jurisdiction, domestic or foreign, relating
to bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for All or any substantial part of its assets;
(ii) making, or proposing to make, a general assignment for the benefit of
its creditors; (iii) admitting or proposing to admit in writing its
inability to pay its debts as they become due; (iv) filing or proposing to
file any plan of reorganization pursuant to 11 U.S.C. " 101 et seq.; (v)
taking, or proposing to take, any action in furtherance of, or indicating
its consent to, approval of or acquiescence in, any of the acts set forth
in clause (i) or (ii) above.
(p) Establishing any operating or capital reserves other than those
required by the Loan Agreement.
(q) Establishing committees of the Management Committee and delegating
voting authority to such committees.
(r) The approval, execution or delivery of any amendments to,
modification or termination of, or any waivers of any rights under, or the
grant of any consents under
- 22 -
<PAGE>
or in connection with the Loan Agreement, the Purchase Agreement, or the
Management and Marketing Agreement.
(s) The approval or taking of any action that would be an event of
default or that would give rise to a right of termination under the
Purchase Agreement, the Loan Agreement or the Management and Marketing
Agreement.
(t) The approval or taking with any action that would give rise to an
event of default under the Loan Agreement or that would give rise to a
right of acceleration or termination under the Loan Agreement.
(u) The reimbursement by the Partnership of any General Partner under
Section 6.4(b) hereof of any amount in excess of $5,000 during any fiscal
quarter.
(v) Any change in or termination of any insurance policies maintained
by the Partnership.
(w) Any agreement to undertake any action that would require the
approval of the Management Committee under this Section 6.2.
(x) Any act in contravention of this Agreement or the Act.
(y) Any act which would make it impossible to carry on the ordinary
business of the Partnership.
(z) Possession of Partnership property by any Partner, or the
assignment, transfer or pledge of rights of the Partnership in specific
Partnership property for other than a Partnership purpose or other than for
the benefit of the Partnership, or any commingling the funds of the
Partnership with the funds of any other person.
(aa) Any action which would cause the Partnership to be treated as
other than a partnership for Federal income tax purposes.
(bb) Any confession of a judgment against the Partnership or any
Partner.
(cc) The grant of any power of attorney or appointment of any agent or
attorney (other than customs brokers).
(dd) The grant of signature authority to any Person with respect to
any of the Partnership's bank or investment accounts.
(ee) Any sale or other disposition of any assets or rights of the
Partnership to any Partner or to any Affiliate of any Partner which in any
calendar year together with all other such sales or dispositions that have
not been approved under this Section 6.2 exceeds $25,000 in the aggregate.
- 23 -
<PAGE>
VI.3 Officers of the Partnership. The Partnership may have such officers as
may be designated by the Management Committee from time to time. Such officers
shall (a) serve at the pleasure of the Management Committee, (b) subject to
Section 6.2 and to the instructions and directions of the Management Committee,
have such powers as are usually exercised by comparable designated officers of a
Delaware corporation and (c) have the power to bind the Partnership through the
exercise of such powers to the extent consistent with the terms hereof. The
initial officers of the Partnership shall be those persons listed on Schedule
6.3 attached hereto and incorporated herein by reference. Following the
execution hereof, officers shall be appointed or removed only by action of the
Management Committee in accordance with the provisions of Section 6.1.
VI.4 No Compensation; Reimbursement.
(a) Except as expressly provided herein, the General Partners, members
of the Management Committee and officers shall receive no compensation for
performing their duties as General Partners, members of the Management
Committee or officers under this Agreement; provided, however, that this
provision shall not affect any Partners' right to receive its share of
distributions as set forth in Article V hereof.
(b) Subject to the limitation, if any, imposed by the Loan Agreement
and subject to subsection 6.2(u), each General Partner shall be entitled to
receive, out of any Partnership funds available therefor, reimbursement of
all amounts expended by such General Partner in payment of properly
incurred and documented Partnership obligations paid by such General
Partner out of its own funds so long as such expenditures are made in
accordance with the Operating Budget.
VI.5 Insurance. The Partnership shall (a) maintain, with insurers or
underwriters of good repute, in the name of the Partnership, such insurance
relating to the operations of the Partnership as is customary for comparable
businesses to that of the Partnership to maintain, against such risks and
pursuant to such terms (including deductible limits or self-insured retentions)
as are customary for such businesses, and (b) pay all premiums and other sums
payable in order to maintain such insurance. For purposes of clarity, it is
hereby agreed that the Partnership shall maintain the insurance required by the
Loan Agreement and all insurance policies shall name Cogentrix GP and VF
Delaware as an additional insured and provided that they may not be cancelled or
terminated except with 30 days' prior written notice to Cogentrix GP and VF
Delaware.
VI.6 Cooperation on Tax Matters. The Partnership shall cooperate fully
as and to the extent reasonably requested by Cogentrix GP or VF Delaware in
connection with the preparation and filing of any Tax return, statement,
report or form, and any audit, litigation or other proceeding with respect
to Taxes relating to or arising out of the Project. Such cooperation shall
include the retention and, upon request by either Cogentrix GP or VF
Delaware, the provision of records and information that are reasonably
relevant to any such audit, litigation or other proceeding. The Partnership
agrees to (a) retain all books and records with respect to Tax matters
pertinent to the Project and (b) give Cogentrix GP and VF Delaware
reasonable written notice prior to destroying or discarding any such books
and records. The Partnership shall retain any records requested by either
Cogentrix GP or VF Delaware to be retained.
- 24 -
<PAGE>
ARTICLE VII
BOOKS, RECORDS AND BANK ACCOUNTS
VII.1 Books and Records. In addition to the Partnership Books, the
Partnership shall also keep such books of account and other records with respect
to the operations of the Partnership as will sufficiently explain the
transactions and financial position of the Partnership and enable financial
statements to be prepared in accordance with GAAP and shall cause such books and
other records to be kept in such manner as will enable them to be properly
audited. The Partnership Books and such other books and records shall be
maintained at the principal places of business of the Partnership and all
Partners and their duly authorized representatives shall at all times have
access to and the right to review and copy such books and records.
VII.2 Accounting Basis and Fiscal Year. The books of the Partnership (a)
shall be kept on an accrual basis in accordance with GAAP, (b) shall reflect all
Partnership transactions, (c) shall be appropriate and adequate for the
Partnership's business and for the carrying out of all provisions of this
Agreement, and (d) shall be closed and balanced as of the end of each fiscal
year, as soon as practicable after the end of such fiscal year. The fiscal year
of the Partnership shall be January 1 through December 31 of each year or such
other fiscal year that may be selected with the unanimous approval of the
Management Committee.
VII.3 Reports.
(a) Unless otherwise required by the Management Committee, the
Partnership shall cause to be delivered to each Partner, within 120 days
after the end of each fiscal year, an annual report containing the
following:
(i) A balance sheet as of the end of the Partnership's fiscal
year and statements of income, Partners' equity and cash flows for the
year then ended, each of which shall be audited and reported on by
Arthur Andersen & Co. or such other independent certified public
accountants, which shall be a nationally recognized accounting firm,
as may be selected by the Management Committee;
(ii) a general description of the activities of the Partnership
during such year; and
(iii) a report of any material transaction between the
Partnership and any Partner or any of its Affiliates, including fees
and compensation and reimbursements paid by the Partnership and the
products supplied and services performed by such Partner or any such
Affiliate for such fees or compensation and the expenses so
reimbursed; provided, however, that no report shall be required for
any products supplied and services performed if such products and
services are provided pursuant to the terms of a Project Document, the
Management and Marketing Agreement, an agreement approved by the
Management Committee or set out in any Operating Budget and the
compensation therefor is in accordance with the terms of such
agreement.
- 25 -
<PAGE>
(b) Within 45 days after the end of each quarter of each fiscal year,
the Partnership shall cause to be delivered to each Partner a quarterly
report containing a balance sheet as of the end of such quarter and a
statement of income for such quarter, each of which may be unaudited but
which shall be certified by the chief financial officer of the Partnership
as fairly presenting the financial position of the Partnership at the end
of such quarter and results of operations of the Partnership for such
quarter and as having been prepared in accordance with the accounting
methods followed by the Partnership for Federal income tax purposes and
otherwise in accordance with GAAP applied on a basis substantially
consistent with that of the Partnership's audited financial statements
(subject to normal year end adjustments).
(c) Within 120 days of the end of each fiscal year, the Partnership
will cause to be delivered to each Partner all information necessary for
the preparation of such Partner's Federal income tax returns, including a
statement showing such Partner's share of income, gains, losses, deductions
and credits for such year for Federal income tax purposes and the amount of
any distributions made to or for the account of such Partner pursuant to
this Agreement.
VII.4 Bank Accounts. The Partnership shall maintain one or more accounts in
one or more banks located in Fort Davis, Texas and such other locations as may
be approved by the Management Committee, each of which shall be a member the
Federal Deposit Insurance Corporation. In addition, the Partnership shall
establish such other accounts and deposit amounts as required by the Loan
Agreement. All such amounts shall be and remain the property of the Partnership,
and shall be received, held and disbursed by the Partnership for the purposes
specified in this Agreement. There shall not be deposited in any of said
accounts any funds other than funds belonging to the Partnership, and no other
funds shall in any way be commingled with such Partnership funds.
VII.5 Tax Returns. The Management Committee shall cause income tax returns
for the Partnership to be prepared and timely filed with the appropriate
authorities.
VII.6 Tax Elections. The Management Committee shall, from time to time,
make such tax elections as it deems necessary or advisable to carry out the
business of the Partnership or the purposes of this Agreement.
VII.7 Tax Matters Partner. Cogentrix GP shall be the Partnership's "tax
matters partner" for purposes of the Code and with respect to all other Federal,
state and local Taxes. The approval of the tax matters partner shall be required
before the Partnership or any Partner (with respect to Partnership matters)
files any document with any Governmental Authority including, but not limited
to, returns, amendments, requests for refunds, appeals, or waivers or extensions
of statutes of limitations. The tax matters partner shall take such actions as
the Management Committee may lawfully require in connection with the
Partnership's Federal, state and local Tax matters.
VII.8 Withholdings. Except and only to the extent required by applicable
law and except as permitted hereunder, the Partnership will not deduct or
withhold any amount in respect
- 26 -
<PAGE>
of any tax from any payment or distribution by the Partnership to any Partner
unless the Partnership has first received written authorization from such
Partner so to withhold or to deduct.
ARTICLE VIII
TRANSFER OF INTERESTS
VIII.1 Transfer of a Partner's Interest.
(a) No Partner may sell, transfer, participate, assign or otherwise
dispose of (whether voluntarily or by operation of law) (collectively,
"transfer") all or any part of its Partnership Interest without the prior
written consent of the non-transferring General Partner(s).
(b) The non-transferring General Partner(s) may condition its (their)
consent to any transfer on compliance by the Partner desiring to transfer
its Partnership Interest with all or any of the following:
(i) The transferring Partner must give written notice to the
General Partners identifying in reasonable detail the proposed
transferee(s) and the terms and conditions of the proposed transfer
and the non-transferring General Partner(s) shall have a period of
twenty (20) Business Days from the date of such notice either to
consent in writing to the proposed transferee(s), or to give written
notice that it does not consent to such transferee(s);
(ii) within ten (10) Business Days after the non-transferring
General Partner(s) gives written notice that it does not consent to a
proposed transferee, it shall provide to the transferring Partner a
written explanation of the reasons therefor;
(iii) such transfer does not release the transferring Partner
from its obligations hereunder;
(iv) the transferee shall not have the right to be separately
represented on the Management Committee unless the transferring
Partner is a General Partner that previously had the right to appoint
Designee's to the Management Committee and the transfer involves all
of such General Partner's Partnership Interest;
(v) the non-transferring General Partner(s) shall notify each
other Partner in writing of its decision to consent to the transfer
within five (5) Business Days of its grant of such consent (which
notice shall include a copy of the notice sent to the non-transferring
General Partner(s) by the transferring Partner) and, prior to any such
transfer, each Partner (which term, for purposes of clarity, includes
for purposes of this subsection (v) the non-transferring General
Partner and excludes the transferring Partner) shall have the right
for thirty (30) Business Days following such notice to purchase the
Partnership Interest being sold by the
- 27 -
<PAGE>
transferring Partner pursuant to this Article VIII on the same terms
and conditions as were set forth in such notice. In the event that
none of the nontransferring Partners exercises its right to purchase
such Partnership Interest being sold, then the transferring Partner
shall have forty-five (45) days thereafter to complete the sale in
accordance with the terms of the notice, after which time the
transferring Partner must again comply with the procedures set forth
in this Article VIII. In the event more than one Partner exercises its
right to purchase such Partnership Interest proposed to be
transferred, then such exercising Partners shall exercise such right
on a pro-rata basis based on their respective Partnership Percentages
(without considering the Partnership Percentage of the transferring
Partner or the Partners (if any) not electing to exercise such right);
or
(vi) such transferee shall not have the right to sell, transfer,
participate, assign or otherwise dispose of all or a portion of such
party's Partnership Interest except in accordance with the terms of
this Section 8.1; and
(vii) the transferee shall execute documents satisfactory to the
Management Committee sufficient to make the transferee a party to and
be bound by the terms of this Agreement and the transferee shall
expressly assume all obligations of the transferring Partner
hereunder.
ARTICLE IX
ADDITIONAL PARTNERS; WITHDRAWAL OF PARTNERS
IX.1 Additional Partners. Persons other than the undersigned may from time
to time be admitted to the Partnership as General Partners or Limited Partners
only with the unanimous consent of the Management Committee and only on such
terms and conditions as may be prescribed by the Management Committee.
IX.2 Withdrawal of Partners.
(a) No Partner may withdraw from the Partnership except as provided in
this Section 9.2.
(b) A Partner shall immediately cease to be a Partner and shall be
deemed to have Withdrawn from the Partnership, in the event:
(i) Such Partner shall commence a voluntary case or other
proceedings seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail
- 28 -
<PAGE>
generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing; or
(ii) an involuntary case or other proceeding shall be commenced
against such Partner seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of sixty (60) days, or an order for relief shall
be entered against such Partner under the federal bankruptcy laws as
now or hereafter in effect; or
(iii) such Partner defaults in its obligation to make a capital
contribution pursuant to Sections 3.1 and 3.2 (and such default is not
cured within two (2) days of written notice of such default from a
General Partner); or
(iv) it is required to Withdraw as a Partner pursuant to the
Delaware Act.
Such Partner's Withdrawal Date shall be the day such Withdrawal occurs.
(c) Any Partner may Withdraw voluntarily from the Partnership on
not less than thirty (30) days' prior written notice by such Partner
to the other Partners either (i) in the event that such Withdrawal is
after April 30, 1997 and conditions to the initial draw under the Loan
Agreement and the closing of the transactions contemplated under the
Purchase Agreement have not been satisfied or (ii) with the prior
unanimous consent of the Management Committee. Such Partner's
Withdrawal Date shall be the date on which a written notice of
Withdrawal is made.
(d) Upon the Withdrawal of any Partner pursuant to subsections
9.2(b) or (c), such Partner's Capital Account and Partnership
Percentage shall be allocated, as of the Withdrawal Date, among the
other Partners in proportion to their respective Partnership
Percentages on such Withdrawal Date (it being understood that such
allocation shall not result in a Limited Partner becoming a General
Partner). After its Withdrawal Date, a Withdrawn Partner shall not
have any rights with respect to the profits, capital or affairs of the
Partnership (including, but not limited to, any rights of
representation on the Management Committee or any committee thereof or
any rights on liquidation of the Partnership pursuant to Article X).
(e) On the Withdrawal Date for any Partner that Withdraws
pursuant to Section 9.2(b) or Section 9.2(c)(ii), such Partner shall
pay to the Partnership in cash any negative balance in such Partner's
capital account. If the sum of such Partner's capital account has a
positive balance on the Withdrawal Date, the Partnership shall pay
such amount to such Partner upon its withdrawal.
- 29 -
<PAGE>
ARTICLE X
DISSOLUTION AND LIQUIDATION
X.1 Events of Dissolution.
(a) The Partnership shall be dissolved upon:
(i) an Abandonment pursuant to subsection 6.2(e);
(ii) the unanimous consent of the General Partners; or
(iii) at the election of Cogentrix GP, if Agro Power ceases,
at any time, to control (as defined in the definition
of "Affiliate") VF Delaware or VF.
(b) Dissolution of the Partnership shall be effective on the day on
which the event occurs giving rise to the dissolution, but the Partnership
shall not terminate until the assets and rights of the Partnership shall
have been distributed as provided herein. Notwithstanding the dissolution
of the Partnership, prior to the termination of the Partnership, as
aforesaid, the business of the Partnership and the affairs of the Partners,
as such, shall continue to be governed by this Agreement. Upon dissolution,
the Management Committee shall liquidate the assets of the Partnership and
apply and distribute the proceeds thereof as contemplated by this
Agreement.
X.2 Distributions Upon Liquidation.
(a) After payment of liabilities owing to creditors (but excluding any
liabilities payable with respect to the Management and Marketing Agreement
other than amounts then due and owing), the Management Committee or the
liquidator, if any, shall set up such reserves as it deems reasonably
necessary for any contingent or unforeseen liabilities or obligations of
the Partnership (other than liability and obligation owing with respect to
the Management and Marketing Agreement). Said reserves may be paid over by
the Management Committee or the liquidator to a bank, to be held in escrow
for the purpose of paying any such contingent or unforeseen liabilities or
obligations and, at the expiration of such period as the Management
Committee or the liquidator may deem advisable, such reserves shall be
distributed to the Partners or their assigns in the manner set forth in
subsection (b) below.
(b) If any General Partner has a negative Capital Account at the time
of dissolution of the Partnership, such General Partner shall be required
to restore to the Partnership the amount of the negative balance in its
Capital Account. If any Limited Partner has a negative Capital Account
balance at the time of dissolution of the Partnership, such Limited Partner
shall have no obligation to restore to the Partnership the amount of the
negative balance in its Capital Account.
(c) After paying the liabilities and providing for the reserves
referred to in subsection 10.2(a) and the payment of any restoration
amounts under subsection 10.2(b), the Management Committee or the
liquidator shall, by the end of the Partnership's taxable
- 30 -
<PAGE>
year in which the Partnership dissolves (or, if later, within 90 days after
the date of such termination), cause the net assets of the Partnership to
be distributed in accordance with Article V hereof, provided, however, that
no distribution shall be made pursuant to this sentence that creates or
increases a Capital Account deficit for any Partner which exceeds such
Partner's obligation to restore such deficit (under subsection 10.2(b)
above), determined as follows:
Distributions shall be first determined provisionally without
regard to Capital Accounts, and the allocation provisions of Article
IV hereof shall also be applied provisionally. If as a result of such
provisional calculations and allocations, any Partner would thereby
have a Capital Account deficit which exceeds its obligation to restore
such deficit under subsection 10.2(b) above, the actual distributions
pursuant to this subsection (c) shall be equal to such provisional
distribution less the amount of such excess and actual allocations
shall be made in accordance with Article IV taking into account such
actual distributions.
Any remaining net assets shall be allocated among the Partners in
accordance with their positive Capital Accounts.
If such distributions are insufficient to return to any Partner
the full amount of its capital contributions, it shall have no
recourse against any other Partner. Each Partner shall receive its
share of the net assets in cash or in kind, and the proportion of such
share that is received in cash shall be the same for each Partner. In
the event that any part of such net assets consists of notes or
accounts receivable or other non-cash assets, the Management Committee
or the liquidator shall take whatever steps it deems appropriate to
convert such assets into cash or into any other form which would
facilitate the distribution thereof. If any assets of the Partnership
are to be distributed in kind, such assets shall be distributed on the
basis of their fair market value, as determined by the Management
Committee or the liquidator, if any, acting in its sole discretion.
ARTICLE XI
DISPUTE RESOLUTION
XI.1 Arbitration.
(a) In the event a dispute arises between or among any Partners
relating to the terms of this Agreement and any Partner gives written
notice of such dispute to the Management Committee, then each of the
Partners involved in such dispute shall refer the dispute to its senior
management. The senior management of each Partner involved in such dispute
shall meet and confer regarding the resolution of the dispute. In the event
a resolution of such dispute is not reached within 30 days of the written
notice, then any of the Partners involved in such dispute may submit the
dispute to arbitration in accordance with Section 11.1(b).
- 31 -
<PAGE>
(b) Arbitration of disputes pursuant to this Section 14.1(b) shall be
held in Charlotte, North Carolina under the commercial arbitration rules of
the American Arbitration Association, and shall be heard by three
arbitrators selected in accordance with such rules. Each arbitrator shall
have at least five years experience in the United States in a profession or
professions related to the subject matter involved in the dispute and shall
not be a past or present officer, director or employee of, or have any
interest in or material relationship with, any Partner or any Affiliate of
any Partner. Any arbitral award shall be final and binding and may be
entered by any Partner in any state or Federal court having jurisdiction
thereof. Costs of arbitration (including reasonable attorney's fees and
costs) shall be paid either equally by the parties to the arbitration or in
accordance with the decision of the arbitrators.
XI.2 Buy/Sell Option.
(a) In the event that the Management Committee is unable to reach a
unanimous decision with respect to any matter set forth in Section 6.2,
either of the General Partners (such Partner herein referred to as a
"Buy-Out Offeror") shall have the right to make a written offer to buy (a
"Buy-Out Offer") all (but not less than all) of the Partnership Interests
of the other General Partner and its Affiliates. The Buy-Out Offer shall be
at a price determined in accordance with the Appraisal Procedure (the
"Aggregate Purchase Price") which shall be payment for all of the assets,
liabilities and business of the Partnership, and the amount to be paid to
any selling Partner under this Section 11.2 shall be equal to the amount
such selling Partner would receive if all the assets, liabilities and
business of the Partnership were sold at the Aggregate Purchase Price on
the date the Buy-Out Offer was made and the Partnership were then
immediately dissolved in accordance with Section 10.2. The General Partners
hereby agree to use their best efforts to cause the Appraisal Procedure to
be completed within ninety (90) days after it has been initiated. The
General Partner receiving a Buy-Out Offer (a "Buy-Out Offeree") shall,
within 30 days of the determination of the Aggregate Purchase Price in
accordance with the Appraisal Procedure, either (a) accept the Buy-Out
Offer on behalf of itself and its Affiliates who own Partnership Interests
or (b) agree to purchase all (but not less than all) of the Partnership
Interests of the Buy-Out Offeror and its Affiliates upon the foregoing
terms and using the same Aggregate Purchase Price as was determined in
accordance with the Appraisal Procedure to determine the amount owing to
each selling Partner. The failure of any Partner receiving a Buy-Out Offer
to respond to such Buy-Out Offer within such 30-day deadline of its receipt
thereof, either agreeing to accept such Buy-Out Offer on behalf of itself
and its Affiliates or by agreeing to purchase all (but not less than all)
of the Partnership Interest of the Buy-Out Offeror and its Affiliates on
the foregoing terms, shall constitute (without any further action by the
Buy-Out Offeror, the receiving General Partner or any other Partner) an
irrevocable acceptance of such Buy-Out Offer by the receiving General
Partner binding on and enforceable against such General Partner and its
Affiliates.
(b) Any purchase of Partnership Interests required pursuant to
subsection 11.2(a) shall be made through the redemption of such Partnership
Interests by the Partnership; provided, however, that if such redemption is
prohibited by the Loan Agreement, such purchase shall be made directly by
the purchasing General Partner. The
- 32 -
<PAGE>
closing date for any such purchase shall be on the date set by the
purchasing General Partner which may be at any time within 180 days of the
acceptance of a Buy-Out Offer or agreement to purchase, as the case may be.
In the event the purchasing General Partner does not close the purchase
within such 180-day period, then the purchasing General Partner's right to
purchase Partnership Interests under Section 11.2(a) shall at the close of
business on such 180th day terminate and the other General Partner shall
thereafter have the right to purchase the Partnership Interests of the
purchasing General Partner and its Affiliates at a price determined by
using the same Aggregate Purchase Price and such other General Partner
shall have 180 days immediately following the expiration of the initial 180
day period in which to close such purchase. The price to be paid to each
selling Partner shall be paid by the purchasing General Partner in
immediately available funds at the closing.
ARTICLE XII
MISCELLANEOUS
XII.1 Distributions and Notices. Distributions hereunder shall be sent, and
notices required or permitted hereunder shall be in writing and shall be sent,
to the address set forth for each Partner in signature pages hereof, or at such
other address as may be supplied by written notice given in conformity with the
terms of this Section 12.1. Notices to the Management Committee shall be sent
care of all Partners who have a right to designate members of the Management
Committee. Any notice required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given and/or delivered (a) when
personally delivered, (b) when sent by telefax and receipt is acknowledged via
telephone or otherwise as confirmation of such receipt but only if the sender
obtains a printed confirmation of the receipt by the recipient of the entire
document, (c) the second day following the day on which the same has been
delivered prepaid to a reputable overnight courier service providing proof of
receipt but only if sent for next business day delivery or (d) five (5) days
after the deposit in the United States mails, registered or certified, return
receipt requested and postage prepaid, in each case addressed to the party to
whom such notice is to be given at the address set forth on the signature pages
hereof), or at the most recent address(es) specified by written notice given to
the other party in the same manner provided in this section; provided, however,
that notice of an address change shall not be effective until actually received.
Distributions shall be deemed given only upon the receipt thereof by a Partner.
XII.2 Disclosure Obligations. The Partnership hereby covenants and agrees
for the benefit of Cogentrix GP and VF Delaware that it shall (a) notify
Cogentrix GP and VF Delaware of any material fact necessary in order to make any
of the representations, warranties or other statements made by it in the Loan
Agreement, the Purchase Agreement or the Management and Marketing Agreement, or
any other written statement provided to Cogentrix GP or VF Delaware not
misleading and (b) disclose in writing to Cogentrix GP and VF Delaware any fact
which materially adversely affects, or which could reasonably be expected in the
future to materially adversely affect Cogentrix GP, VF Delaware or the Project,
in each case under clause (a) or (b) above promptly upon receiving knowledge of
any such fact.
- 33 -
<PAGE>
XII.3 Successors and Assigns. Subject to the restrictions on transfer set
forth herein, this Agreement, and, each and every provision hereof, shall be
binding upon and shall inure to the benefit of the Partners, their respective
successors, successors-in-title, heirs and assigns, and each and every
successor-in-interest to any Partner, whether such successor acquires such
interest by way of gift, purchase, foreclosure or by any other method, shall
hold such interest subject to all of the terms and provisions of this Agreement.
XII.4 Amendments. This Agreement may not be released, discharged, amended
or modified in any manner except by an instrument in writing signed by a duly
authorized officer of each party hereto.
XII.5 Partition. The Partners hereby agree that no Partner, nor any
successor-in-interest to any Partner, shall have the right while this Agreement
remains in effect to have the property of the Partnership partitioned, or to
file a complaint or institute any proceeding at law or in equity to have the
property of the Partnership partitioned, and each Partner, on behalf of itself,
its successors, representatives, heirs and assigns, hereby waives any such
right. It is the intention of the Partners that during the term of this
Agreement, the rights of the Partners and their successors-in-interest, as among
themselves, shall be governed by the terms of this Agreement, and that the right
of any Partner or successor-in-interest to assign, transfer, sell or otherwise
dispose of its interest in the Partnership shall be subject to the limitations
and restrictions of this Agreement.
XII.6 No Waiver. No waiver of any right under this Agreement shall be
deemed effective unless contained in a writing signed by the party charged with
such waiver. The failure of any Partner to insist upon strict performance of a
covenant hereunder or of any obligation hereunder, irrespective of the length of
time for which such failure continues, shall not be a waiver of such Partner's
right subsequently to demand strict compliance. No consent or waiver to or of
any branch or default in the performance of any obligation hereunder, shall
constitute a consent or waiver to or of any other breach or default in the
performance of the same or any other obligation hereunder.
XII.7 Entire Agreement. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof and
supersedes any and all prior and contemporaneous written or verbal agreements,
understandings, promises and representations made by either party to the other
concerning the subject matter hereof and the terms applicable hereto.
XII.8 Captions. Titles or captions of articles, sections and subsections
contained in this Agreement are inserted only as a matter of convenience and for
reference, and in no way are intended to define, limit, extend or describe the
scope of this Agreement or the intent of any provision hereof.
XII.9 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall for all purposes constitute one
Agreement, binding upon the Partners notwithstanding that all Partners may not
have signed the same counterpart.
- 34 -
<PAGE>
XII.10 Applicable Law. This Agreement shall be deemed to have been entered
into and shall be construed and enforced in accordance with the laws of the
State of Delaware as applied to contracts made and to be performed entirely
within Delaware.
XII.11 Severability. If any provision of this Agreement is or becomes or is
deemed invalid, illegal or unenforceable in any jurisdiction, (a) such provision
shall be construed or deemed amended to conform to applicable laws so as to be
valid and enforceable, or, if it cannot be so construed or deemed amended
without materially altering the intention of the parties hereto, it shall be
stricken, (b) the validity, legality and enforceability of such provision will
not in any way be affected or impaired thereby in any other jurisdiction and (c)
the remainder of this Agreement shall remain in full force and effect.
[This space intentionally left blank.]
- 35 -
<PAGE>
IN WITNESS WHEREOF, the Partners have executed this Agreement as of the
date first above mentioned.
COGENTRIX OF POCONO, INC.,
as General Partner
By
---------------------------------
Printed Name: Thomas F. Schwartz
Title: Vice President - Finance
and Treasurer
Address for Notices:
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273
Attention: General Counsel
Address for Distributions:
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273
Attention: Treasurer
VILLAGE FARMS OF DELAWARE, L.L.C.,
as General Partner
By: Agro Power Development, Inc.,
Managing Member
By
---------------------------------
Printed Name: J. Kevin Cobb
Title: Vice President
Address for Notices:
10 Alvin Court
East Brunswick, New Jersey 08816
Attention: Chief Financial Officer
Address for Distributions:
10 Alvin Court
East Brunswick, New Jersey 08816
Attention: Chief Financial Officer
- 36 -
<PAGE>
COGENTRIX GREENHOUSE INVESTMENTS,
INC., as Limited Partner
By
---------------------------------
Printed Name: Thomas F. Schwartz
Title: Vice President - Finance
and Treasurer
Address for Notices:
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273
Attention: General Counsel
Address for Distributions:
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273
Attention: Treasurer
VILLAGE FARMS, L.L.C.
By: Agro Power Development, Inc.,
Managing Member
By
---------------------------------
Printed Name: J. Kevin Cobb
Title: Vice President
Address for Notices:
10 Alvin Court
East Brunswick, New Jersey 08816
Attention: Chief Financial Officer
Address for Distributions:
10 Alvin Court
East Brunswick, New Jersey 08816
Attention: Chief Financial Officer
- 37 -
<PAGE>
Schedule 5.1(a)
Greenhouse Assets to be Sold
The buildings shown as 2, 3, 4 and 5 on the attached Annex 1
<PAGE>
Schedule 6.3
Initial Officers of the Partnership
Name Title
---- -----
Michael A. DeGiglio President
Thomas F. Schwartz Vice President
J. Kevin Cobb Vice President
Lawrence J. Howard Treasurer
Dennis W. Alexander Secretary
Lori T. Hladik Assistant Secretary
Eilene M. Beck Assistant Secretary
EXHIBIT 10.71
VILLAGE FARMS OF MARFA, L.P.
AGREEMENT OF LIMITED PARTNERSHIP
Dated as of June 4, 1997
THE LIMITED PARTNERSHIP INTEREST REPRESENTED HEREBY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF CERTAIN STATES AND HAVE BEEN OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM
THE REGISTRATION REQUIREMENT OF THE ACT AND SUCH LAWS. THE LIMITED PARTNERSHIP
INTEREST IS SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY BE
TRANSFERRED ONLY IN A MANNER WHICH IS IN COMPLIANCE WITH THE PROVISIONS OF THIS
AGREEMENT, AND MAY ONLY BE TRANSFERRED IN A TRANSACTION THAT IS REGISTERED UNDER
THE ACT OR EXEMPT FROM SUCH REGISTRATION.
<PAGE>
TABLE OF CONTENTS
1
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms......................................................1
1.2 Other Definitional Provisions.............................................12
ARTICLE II
GENERAL PROVISIONS
2.1 Formation of Partnership..................................................13
2.2 Name of the Partnership...................................................13
2.3 Business of the Partnership...............................................13
2.4 Registered Office of the Partnership......................................13
2.5 Liability of the Partners Generally.......................................13
2.6 Office of the Partnership.................................................14
2.7 Duration of the Partnership...............................................14
ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 Capital Contributions.....................................................16
3.2 Additional Capital Contributions..........................................15
3.3 Conditions 15
3.4 Interest. ...............................................................17
3.5 Withdrawals of Capital....................................................17
3.6 Additional Capital Contributions..........................................17
ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES
4.1 Profits and Losses........................................................18
4.2 Capital Account Balances..................................................19
4.3 Minimum Gain Chargeback...................................................19
4.4 Nonrecourse Deductions....................................................20
4.5 Partner Nonrecourse Deductions............................................20
-i-
<PAGE>
4.6 Qualified Income Offset...................................................20
4.7 Curative Allocations......................................................20
4.8 Tax Allocations...........................................................20
4.9 Property Subject to 704(b) and 704(c......................................20
4.10 Limitations..............................................................20
ARTICLE V
DISTRIBUTIONS
5.1 Distribution of Net Distributable Cash....................................21
5.2 Default Allocations for Cogentrix.........................................21
5.3 Default Allocations for VF................................................22
ARTICLE VI
MANAGEMENT
6.1 Management of the Partnership.............................................23
6.2 Fundamental Matters.......................................................23
6.3 Officers of the Partnership...............................................26
6.4 No Compensation; Reimbursement............................................27
6.5 Insurance ................................................................27
6.6 Cooperation on Tax Matters................................................27
ARTICLE VII
BOOKS, RECORDS AND BANK ACCOUNTS
7.1 Books and Records.........................................................27
7.2 Accounting Basis and Fiscal Year..........................................28
7.3 Reports ..................................................................28
7.4 Bank Accounts.............................................................29
7.5 Tax Returns...............................................................29
7.6 Tax Elections.............................................................29
7.7 Tax Matters Partner.......................................................29
7.8 Withholdings..............................................................29
ARTICLE VIII
TRANSFER OF INTERESTS
8.1 Transfer of a Partner's Interest..........................................30
ARTICLE IX
-ii-
<PAGE>
ADDITIONAL PARTNERS; WITHDRAWAL OF PARTNERS
9.1 Additional Partners.......................................................31
9.2 Withdrawal of Partners....................................................31
ARTICLE X
DISSOLUTION AND LIQUIDATION
10.1 Events of Dissolution....................................................33
10.2 Distributions Upon Liquidation...........................................33
ARTICLE XI
DISPUTE RESOLUTION
11.1 Arbitration..............................................................34
11.2 Buy/Sell Option..........................................................35
ARTICLE XII
MISCELLANEOUS
12.1 Distributions and Notices................................................36
12.2 Disclosure Obligations...................................................36
12.3 Successors and Assigns...................................................37
12.4 Amendments...............................................................37
12.5 Partition................................................................37
12.6 No Waiver................................................................37
12.7 Entire Agreement.........................................................37
12.8 Captions ................................................................37
12.9 Counterparts.............................................................37
12.10 Applicable Law..........................................................38
12.11 Severability............................................................38
LIST OF SCHEDULES
Schedule 1.1(a) Calculation of Internal Rate of Return
Schedule 1.1(b) Project Budget
Schedule 1.1(c) Project Documents
Schedule 1.1(d) Site
Schedule 6.3 Initial Officers of the Partnership
-iii-
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
This Agreement of Limited Partnership dated as of June 4, 1997 of VILLAGE
FARMS OF MARFA, L.P. (the "Partnership") is by and among COGENTRIX OF MARFA,
INC., a Delaware corporation ("Cogentrix GP" and a "General Partner"), COGENTRIX
GREENHOUSE INVESTMENTS, INC., a Delaware corporation ("Cogentrix LP" and a
"Limited Partner"), VILLAGE FARMS OF DELAWARE, L.L.C., a Delaware limited
liability company ("VF Delaware" and a "General Partner"), and VILLAGE FARMS,
L.L.C., a Delaware limited liability company ("VF" and a "Limited Partner").
VF Delaware is a Delaware limited liability company owned 99% by Agro Power
Development, Inc., a New York corporation ("Agro Power"), and 1% by VF. VF is a
Delaware limited liability company owned 99% by Agro Power and 1% by VF
Delaware. Agro Power has entered into agreements and instruments (as more fully
defined hereafter, the "Project Documents") related to the development and
operation of a venlo style greenhouse located in the vicinity of Marfa, Texas
for the purpose of producing and selling tomatoes (as more fully defined
hereafter, the "Project"). In order to continue with the development of the
Project and obtain financing for construction and working capital needs, Agro
Power desires that Cogentrix GP and Cogentrix LP contribute in the aggregate
$6,649,434 to the Project. In order to encourage Cogentrix to contribute such
funds to the Project, Agro Power has agreed (1) to cause VF Delaware and VF to
form the Partnership with Cogentrix GP and Cogentrix LP pursuant to which all
Project Documents will be assigned to the Partnership, as VF Delaware's
contribution to the Partnership, in exchange for a 1% interest in the
Partnership, and likewise as VF's contribution to the Partnership in exchange
for a 49% interest in the Partnership, (2) that, in exchange for a contribution
to the capital of the Partnership of $980 by Cogentrix LP, Cogentrix LP will
receive a 49% interest in the Partnership, and (3) that, in exchange for a
contribution to the capital of the Partnership of $20 by Cogentrix GP, Cogentrix
GP will receive a 1% interest in the Partnership. Cogentrix GP and Cogentrix LP
have agreed to make such contributions to the capital of the Partnership on the
terms and conditions set forth herein.
Accordingly, in consideration of the covenants and agreements contained
herein and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, and intending to be legally bound, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms.
As used in this Agreement, the following terms have the following meanings
(such definitions to be equally applicable to both singular and plural forms of
the terms defined):
"Abandonment" has the meaning set forth in subsection 6.2(e).
<PAGE>
"Adjusted Capital Account Deficit" means, with respect to any Partner, the
deficit balance, if any, in such Partner's Capital Account as of the end of the
relevant fiscal year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such Partner is
obligated to restore pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate sentence of
Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) debit to such Capital Account the items described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
"Adverse Consequence" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, Taxes, liens, losses, expenses and
fees, including, but not limited to, court costs, arbitral costs, costs of
investigation, and attorneys' fees.
"Affiliate" of any designated Person, means each Person which, directly or
indirectly, controls or is controlled by or is under common control with such
designated Person and, without limiting the generality of the foregoing, shall
include (a) any Person which beneficially owns or holds ten percent (10%) or
more of any class of voting securities of such designated Person or ten percent
(10%) or more of the equity interest in such designated Person and (b) any
Person of which such designated Person beneficially owns and holds ten percent
(10%) or more of any class of voting securities or in which such designated
Person beneficially owns or holds ten percent (10%) or more of the equity
interest. For the purposes of this definition, the terms "controls", "controlled
by" and "under common control with," as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. Notwithstanding the
foregoing, neither Cogentrix GP or Cogentrix LP, on the one hand, nor VF
Delaware or VF, on the other hand, shall be deemed to be Affiliates of one
another.
"After-Tax" means after deducting Cogentrix GP's or Cogentrix LP's, as
applicable, notional project Federal and state income tax. As used in this
definition of After-Tax, the notional project Federal and state income tax of
Cogentrix GP and Cogentrix LP shall be calculated as follows:
(a) The Partnership's taxable income would be calculated from the
Schedule K most recently filed with the Internal Revenue Service (or the
appropriate successor form or schedule), which for purposes of clarity
would include operating income as shown on such Schedule and all separately
stated items of income or loss (except tax exempt income) as shown on such
Schedule.
-2-
<PAGE>
(b) Assuming the Partnership were taxable as a for-profit corporation,
the Partnership's Federal and state income tax would be determined based on
the taxable income calculated in (a). For these purposes, it will be
assumed that all of the Partnership's taxable income shall be taxed at a
blended Federal/state rate of 38.0% (subject to adjustment upward or
downward, as applicable, to reflect changes in the highest marginal
corporate Federal tax rate).
(c) The Partnership's notional income tax obligation as calculated in
(b) shall be allocated among the Partners in the same manner as Profits and
Losses are allocated among the Partners under Article IV hereof.
Provided that, for each quarter end and at year end until such time as the
Partnership has filed a Schedule K with the Internal Revenue Service and a
true-up of taxable income has occurred, notional project Federal and state
income tax for Cogentrix GP and Cogentrix LP shall be calculated by multiplying
Estimated Taxable Income allocated to Cogentrix GP and Cogentrix LP under
Article IV hereof, as the case may be, by 38.0% (subject to adjustment upward or
downward, as applicable, to reflect changes in the highest marginal corporate
Federal tax rate).
"Agreement" means this Agreement of Limited Partnership, as amended,
supplemented or otherwise modified and in effect from time to time.
"Agro Power" means Agro Power Development Inc., a New York corporation with
offices at 10 Alvin Court, East Brunswick, New Jersey 08816.
"Agro Power Investment" means all cash contributions to the capital of the
Partnership made by VF Delaware and VF pursuant to this Agreement.
"Appraisal Procedure" means a procedure whereby two independent appraisers,
one chosen by each General Partner, shall agree upon the determinations then the
subject of appraisal. Each General Partner shall deliver a written notice to the
other appointing its appraiser within 15 days after receipt from the other of a
written notice appointing its appraiser. Each appraiser then shall prepare a
written appraisal with respect to the determinations which then are the subject
of appraisal. If within 30 days after appointment of the two appraisers they are
unable to agree upon the amount in question, a third independent appraiser shall
be chosen within 10 days thereafter by the mutual consent of such first two
appraisers or, if such first two appraisers fail to agree upon the appointment
of a third appraiser, such appointment shall be made by the American Arbitration
Association, or any organization successor thereto, from a panel of arbitrators
having experience in the business of operating a hydroponic hot house and
marketing the product produced therein and a familiarity with equipment used or
operated in such business. The decision of the third appraiser so appointed and
chosen shall be given within 30 days after the selection of such third
appraiser. If three appraisers shall be appointed and the determination of one
appraiser is disparate from the median by more than twice the amount by which
the other determination is disparate from the median, then the determination of
such appraiser shall be excluded, the remaining two determinations shall be
averaged and such average shall be binding and conclusive on the General
Partners; otherwise the average of all three determinations shall be binding and
conclusive on the General Partners. (For example, if
-3-
<PAGE>
the two appraisers appointed by the General Partners determine a value of $100
and $200, and the third appraiser determines a value of $150, then the value in
question shall be conclusively determined to be $150 ($100 + $200 + $150 divided
by 3). As a further example, consider the first example but the third appraiser
places a value of $190. In this case, the $100 valuation shall be disregarded
and the value shall be conclusively determined to be $195 ($190 + $200 divided
by 2). The $100 valuation is disregarded because the median of the three
appraisers was $190 and the difference between $100 and $190 is $90, which is
more than twice the difference between $200 and $190 which is $10, which
multiplied by two is $20.) If a General Partner shall appoint an appraiser and
the other Person shall fail to appoint an appraiser in the manner specified
herein, the determination of the appraiser so appointed shall be binding and
conclusive on the General Partners. The expenses of the appraisal procedure
shall be borne solely by the Partnership.
"Budgets" has the meaning set forth in subsection 6.2(i).
"Business Day" means a day other than a Saturday, a Sunday or any other day
on which commercial banks in Texas, North Carolina or New Jersey are authorized
or required by law or executive order to be closed.
"Buy-Out Offer" has the meaning set forth in Section 11.2.
"Buy-Out Offeree" has the meaning set forth in Section 11.2.
"Buy-Out Offeror" has the meaning set forth in Section 11.2.
"Capital Account" means, with respect to any Partner, the capital account
maintained for such Partner in the Partnership Books in accordance with the
following provisions:
(a) To each Partner's Capital Account there shall be credited such
Partner's Capital Contributions, such Partner's distributive share of
Profits and any other items in the nature of income or gain which are
allocated under this Agreement.
(b) To each Partner's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any property (other than money)
(net of any liabilities assumed by such Partner or to which the property is
subject) distributed to such Partner pursuant to any provision of this
Agreement, and such Partner's distributive share of Losses and any other
items in the nature of deductions or losses which are allocated under this
Agreement.
(c) In the event all or a portion of an interest in the Partnership is
transferred in accordance with the terms of this Agreement in a transaction
that does not result in a termination of the Partnership under Code Section
708(b)(1)(B), the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred interest.
-4-
<PAGE>
(d) In determining the amount of any liability for purposes of clause
(a) and clause (b) hereof, there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and the Regulations.
(e) If a Partner owns more than one Partnership Interest, one Capital
Account shall be maintained for the Partnership Interests of the Partner.
(f) Each Partner's Capital Account shall in all other respects be
maintained in accordance with the provisions of Regulations Section
1.704-1(b).
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of capital accounts are intended to comply with Regulations
Section 1.704-1(b), and shall be interpreted and applied in a manner consistent
with such Regulations.
"Capital Contribution" means, with respect to any Partner, the amount of
money and the initial Gross Asset Value of any property (other than money) (net
of any liabilities assumed by the Partnership or to which the property is
subject) contributed to the Partnership with respect to any Partnership Interest
held by such Partner pursuant to the terms of this Agreement.
"Capital Lease" means any lease of property, real or personal, which in
accordance with GAAP, would be required to be capitalized on a balance sheet of
the lessee.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Cogentrix GP Designee" has the meaning set forth in Section 6.1(a).
"Cogentrix GP" means Cogentrix of Marfa, Inc., a Delaware corporation.
"Cogentrix Investment" means (a) the respective Initial Capital
Contribution of Cogentrix GP and Cogentrix LP and (b) all subsequent
contributions to the capital of the Partnership made by Cogentrix GP or
Cogentrix LP (as the case may be) pursuant to this Agreement in excess of any
Agro Power Investment.
"Cogentrix LP" means Cogentrix Greenhouse Investments, Inc., a Delaware
corporation.
"Commonly Controlled Entity" means, with respect to any Person, an entity,
whether or not incorporated, which is under common control with such Person
within the meaning of Section 414(b) or (c) of the Code.
"Construction Agreement" means the Commercial Design and Construction
Contract dated May 1, 1997 by and between the Partnership and Agro Power, as it
may be amended, supplemented or otherwise modified and in effect from time to
time.
"Construction/Term Facility" means a loan facility in the amount of
$15,950,396 provided by the Construction/Term Lender pursuant to the Project
Loan Documents.
-5-
<PAGE>
"Construction/Term Lender" means Village Farms International Finance
Association or its successor under the Construction/Term Facility.
"Cumulative Distributions to Cogentrix" means the aggregate, cumulative
distributions of Net Distributable Cash received by Cogentrix GP and Cogentrix
LP from the Partnership.
"Cumulative Distributions to VF" means the aggregate, cumulative
distributions of Net Distributable Cash received by VF Delaware and VF from the
Partnership.
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
6 Del.C. ss.ss.17-101, et seq., as it may be amended from time to time and any
successor to such Act.
"Depreciation" means, for each fiscal year or other period, an amount equal
to the deprecation, amortization, or other cost recovery deduction allocable
with respect to an asset for such period, except that if the Gross Asset Value
of an asset differs from its adjusted basis for Federal tax purposes at the
beginning of such period, Depreciation shall be an amount which bears the same
ratio to such beginning Gross Asset Value as the Federal income tax
depreciation, amortization or other cost recovery deduction for such period
bears to such beginning adjusted tax basis; provided that if the Federal income
tax depreciation, amortization, or other cost recovery deduction for such period
is zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the Management Committee.
"Dollars" and "$" means dollars in lawful currency of the United States of
America.
"Equity Funding Date" means the day on which all of the conditions to the
initial drawdown under the Construction/Term Loan Facility (other than the
contributions to the capital of the Partnership to be made by Cogentrix GP and
Cogentrix LP under Section 3.2) have been met to the satisfaction of the
Construction/Term Lender.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means, with respect to any Person, any corporation or
trade or business which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as such Person or is under
common control (within the meaning of Section 414(c) of the Code) with such
Person.
"Estimated Taxable Income" means book income of the Partnership computed in
accordance with GAAP adjusted to reflect the estimated depreciation and
amortization timing differences between financial reporting and income tax
reporting.
"First Priority Return" means the receipt by Cogentrix GP and Cogentrix LP
of cash distributions from Net Distributable Cash in an aggregate amount
sufficient to provide each of Cogentrix GP and Cogentrix LP, as the case may be,
with an Internal Rate of Return on its respective Cogentrix Investment hereunder
of [information omitted and subject to request for confidential treatment]%
calculated in accordance with Schedule 1.1(a) (it being understood that
-6-
<PAGE>
any amounts which are part of Cogentrix Investment pursuant to subsection (b) of
the definition of Cogentrix Investment shall only be entitled to such return
from the date they are actually paid or made).
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States.
"General Partner" means each of Cogentrix GP and VF Delaware and any Person
admitted to the Partnership as an additional General Partner in accordance with
the provisions of this Agreement, until such time as such Person ceases to be a
general partner of the Partnership as provided herein or in the Delaware Act.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Gross Asset Value" means, with respect to any asset, the asset's adjusted
basis for Federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, as determined by agreement of the Partners;
(b) The Gross Asset Value of all Partnership assets shall be adjusted
to equal their respective gross fair market values, as determined by
agreement of the Partners, and in the event the Partners fail to so agree,
as determined by the Appraisal Procedure, as of the following times: (i)
The acquisition of an additional interest in the Partnership by any new or
existing Partner in exchange for more than a de minimis Capital
Contribution; (ii) the distribution by the Partnership to a Partner of more
than a de minimis amount of property as consideration for an interest in
the Partnership if the Management Committee reasonably determines that such
adjustment is necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership; and (iii) the liquidation of
the Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g);
(c) The Gross Asset Value of any Partnership asset distributed to any
Partner shall be the gross fair market value of such asset on the date of
distribution as determined by agreement of the Partners and, in the event
the Partners fail to so agree, as determined by the Appraisal Procedure;
(d) The Gross Asset Values of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m);
provided, however, that Gross Asset Values shall be adjusted to the extent
the Partners agree (and in the event the Partners fail to so agree, as
determined by the Appraisal Procedure) that an adjustment pursuant to
clause (ii) of this definition is necessary or appropriate in connection
with a transaction that would otherwise result in
-7-
<PAGE>
an adjustment pursuant to clause (iv) of this definition. If the Gross
Asset Value of an asset has been determined or adjusted pursuant to clauses
(i) and (ii) of this definition or clause (iv) of this definition, such
Gross Asset Value shall thereafter be adjusted by the Depreciation taken
into account with respect to such asset; and
(e) The Gross Asset Value of any asset owned indirectly by the
Partnership through a subsidiary partnership shall be determined pursuant
to the terms of the partnership agreement for such subsidiary partnership.
"Indebtedness" means, with respect to any Person, (a) indebtedness of such
Person for borrowed money or for the deferred purchase price of property or of
services (other than obligations under agreements for the purchase of goods and
services in the normal course of business which are not more than 30 days past
due; (b) obligations of such Person under Capital Leases; (c) obligations of
such Person pursuant to interest hedging transactions; (d) obligations of such
Person in respect of letters of credit; (e) obligations of such Person under
direct and indirect guarantees in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise assure a creditor
against loss in respect of, indebtedness or obligations of others of the kinds
referred to in clause (a), (b), (c) or (d) above (other than endorsements of
negotiable instruments in the ordinary course of business); and (f) any
obligations of such Person or a Commonly Controlled Entity to a Multi-Employer
Plan. For purposes of clarity, "Indebtedness" includes the obligations of the
Partnership to repay amounts borrowed under, and to pay other amounts owing
under, the Project Loan Documents.
"Initial Capital Contribution" means, with respect to Cogentrix GP, the
amount of $20 and, with respect to Cogentrix LP, means the amount of $980.
"Internal Rate of Return" (whether or not capitalized) means the return to
capital calculated at each calendar quarter end in accordance with Schedule
1.1(a), attached hereto and incorporated herein by reference.
"Lien" means any mortgage, deed of trust, security interest, pledge,
hypothecation, encumbrance or lien (statutory or other) of any kind or nature
whatsoever (including, without limitation, any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any such
agreement, and the filing of any statement under the Uniform Commercial Code or
comparable law of any jurisdiction).
"Limited Partner" means each of Cogentrix LP and VF and any Person who
becomes a limited partner of the Partnership in accordance with the terms of
this Agreement and is shown as such on the books and records of the Partnership.
"Losses" has the meaning given to it in the definition of "Profits."
"Management Agreement" means the Management Agreement dated the same date
as this Agreement by and between the Partnership and VF Delaware, as it may be
amended, supplemented or otherwise modified and in effect from time to time,
pursuant to which VF Delaware will provide operation and maintenance services to
the Partnership.
-8-
<PAGE>
"Management Committee" means the Management Committee of the Partnership
referred to in Section 6.1.
"Marketing Agreement" means the Marketing Agreement dated the same date as
this Agreement by and between the Partnership and VF, as it may be amended,
supplemented or otherwise modified and in effect from time to time, pursuant to
which VF will agree to market products produced by the Partnership.
"Multi-Employer Plan" means, with respect to any Person, a Multi-Employer
Plan as defined in Section 3(37) of ERISA to which contributions have been made
by such Person or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Distributable Cash" means for any period, an amount equal to all cash
received by the Partnership during such period, including but not limited to,
cash from operations, reductions in reserves, casualty proceeds, rebates and
other extraordinary items, less (a) principal, interest and other payments made
under or pursuant to the Construction/Term Facility, (b) interest and fees paid
pursuant to the Revolving Facility, or other borrowings, (c) all cash
expenditures of and payments made by the Partnership, and (d) any reserves
established by the Management Committee of the Partnership, and subject to the
limitations on distributions, if any, imposed pursuant to the terms of the
Project Loan Documents.
"Nonrecourse Deductions" shall have the meaning set forth in Regulations
Sections 1.704-2(b) and (c). The amount of Nonrecourse Deductions for a
Partnership fiscal year equals the excess, if any, of the net increase, if any,
in the amount of Partnership minimum gain during the fiscal year over the
aggregate amount of any distributions during that fiscal year of proceeds of a
nonrecourse liability that are allocable to an increase in Partnership minimum
gain, determined according to the provisions of Regulations Section 1.704-2(c).
"Operating Budget" means the business plan and budget required to be
provided to the Partnership pursuant to the Management Agreement.
"Operating Management Fee" means a management fee to be paid to VF Delaware
in accordance with the Management Agreement.
"Partner" means any of the General Partners or the Limited Partners.
"Partner Nonrecourse Deductions" shall have the meaning specified in
Regulations Section 1.704-2(i)(2).
"Partnership" means Village Farms of Marfa, L.P., the limited partnership
formed pursuant to this Agreement and the filing of the Certificate of Limited
Partnership with the Delaware Secretary of State.
"Partnership Books" means the books and records maintained by the
Partnership and reviewed within sixty (60) days of each fiscal year end by the
Management Committee, in which records and information relating to the ownership
of the Partnership, the constituency of the
-9-
<PAGE>
Management Committee and actions taken by the Management Committee or the
Partners is maintained, including but not limited to, a register of the
Partners, each Partner's Capital Account, each Partner's Percentage Interest,
actions taken by the Management Committee and the Partners, and this Agreement
and any amendments hereto.
"Partnership Interest" means, with respect to any Partner, the interest of
such Partner in the Partnership, whether general or limited, at any particular
time, including the rights and obligations of such Partner as provided in this
Agreement and the Delaware Act.
"Partnership Percentage" means, with respect to any Partner, at any time,
the percentage specified as such Partner's "Partnership Percentage" at the time
such Partner was admitted to the Partnership, as adjusted in accordance with the
terms of this Agreement. The initial Partnership Percentages are as follows:
Cogentrix GP 1%
Cogentrix LP 49%
VF Delaware 1%
VF 49%
"Permitted Liens" means Liens in favor of any Person other than the
Partners or any of their respective Affiliates, that (a) arise in the ordinary
course of business of the Partnership (including, without limitation, landlord's
materialmen's, mechanic's, worker's, repairmen's and employee's Liens and
similar Liens which arise in connection with any tax, assessment, governmental
charge or levy) and (b) do not secure Indebtedness.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Profits" and "Losses" mean, for any period, an amount equal to the
Partnership's taxable income or loss for such period, determined in accordance
with Code Section 703(a) (for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss), with the following adjustments:
(a) Income of the Partnership that is exempt from federal income tax
and not otherwise taken into account in computing Profits or Losses
pursuant to this definition shall be added to such taxable income or loss;
(b) any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits or Losses pursuant to this definition shall be
subtracted from such taxable income or loss;
(c) gain and loss with respect to the disposition of any Partnership
asset (both directly owned assets and assets owned indirectly through a
subsidiary partnership) shall
-10-
<PAGE>
be computed with respect to the Gross Asset Value rather than adjusted tax
basis of such asset;
(d) in lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing taxable income or loss, there
shall be taken into account Depreciation for such fiscal year or other
period; and
(e) in the event of an adjustment in the Gross Asset Value of any
Partnership asset pursuant to clause (b) of the definition of "Gross Asset
Value" herein, the amount of such adjustment shall be taken into account as
gain or loss from the disposition of such asset for purposes of computing
Profits and Losses.
"Project" means an approximately 41-acre venlo style greenhouse to be
located on the Site which is to be constructed in two phases of 20.5-acres each
and on which the Partnership will produce tomatoes for sale under the Marketing
Agreement.
"Project Assets" has the meaning set forth in Section 3.1(a).
"Project Budget" means the pro forma budget of total Project costs attached
hereto as Schedule 1.1(b), as amended or modified from time to time in
accordance with subsection 6.2(i).
"Project Credit Facilities" means, collectively, the Construction/Term
Facility and the Revolving Facility.
"Project Documents" means the agreements and instruments listed on Schedule
1.1(c) attached hereto and incorporated herein by reference as the same may be
amended, supplemented or otherwise modified in accordance with Section 6.2
hereof and in effect from time to time.
"Project Loan Documents" means the agreements and instruments executed by,
between or among the Partnership, the Construction/Term Lender, the Revolver
Lender, and any other party relating to the Construction/Term Facility and/or
the Revolving Facility, as the same may be amended, supplemented or otherwise
modified in accordance with Section 6.2 hereof and in effect from time to time.
"Regulations" means the temporary, proposed and final regulations under the
Code and any successor provisions thereto.
"Requirement of Law" means, as to any Person, (a) the certificate of
incorporation and by-laws or partnership agreement or other organizational or
governing documents of such Person, and (b) any law, treaty, rule or regulation
or determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its properties or
to which such Person or any of its properties is subject and the violation of
which, or which determination, could reasonably be expected to (i) have a
material adverse effect on the business, operations, properties, condition
(financial or otherwise) or prospects of such Person or (ii) materially
adversely affect the ability of such Person to perform its obligations under the
Project Loan Documents or the Project Documents to which it is a party.
-11-
<PAGE>
"Revolver Lender" means Village Farms International Finance Association or
its successor under the Revolving Facility.
"Revolving Facility" means a loan facility in the amount of $2,500,000.00
provided by the Revolver Lender pursuant to a certain revolving credit agreement
between the Revolver Lender and the Partnership.
"Second Priority Return" means the receipt by Cogentrix GP and Cogentrix LP
of cash distributions of Net Distributable Cash in an aggregate amount
sufficient to provide each of Cogentrix GP and Cogentrix LP, as the case may be,
with an Internal Rate of Return on its respective Cogentrix Investment of
[information omitted and subject to request for confidential treatment]%
inclusive of the First Priority Return) calculated in accordance with Schedule
1.1(a), (it being understood that any amounts which are part of Cogentrix
Investment pursuant to subsection (b) of the definition of Cogentrix Investment
shall only be entitled to such return for the date they are actually paid or
made). For purposes of Article V hereof, Internal Rate of Return shall be
calculated at each calendar quarter end.
"Site" means a parcel of approximately 153 acres located in the vicinity of
Marfa, Texas and more fully described on Schedule 1.1(d) attached hereto and
incorporated herein by reference.
"Subsidiary" means with respect to any Person, an Affiliate that is
controlled (directly or indirectly through one or more intermediaries) by that
Person.
"Taxes" means any and all income or gross receipt taxes, franchise taxes,
levies, imposts, duties, assessments, fees, charges and withholdings of any
nature whatsoever, whether or not presently in existence, imposed by any
Governmental Authority.
"VF" means Village Farms, L.L.C., a Delaware limited liability company, 99%
of which is owned by Agro Power and 1% of which is owned by VF Delaware.
"VF Delaware" means Village Farms of Delaware, L.L.C., a Delaware limited
liability company, 99% of which is owned by Agro Power and 1% of which is owned
by VF.
"Withdraw" or "Withdrawal", with respect to any Partner, means a Partner
ceasing to be a partner of the Partnership for any reason, whether voluntary or
involuntary, and "Withdrawn", with respect to a Partner, means a Partner who has
ceased to be a partner of the Partnership.
"Withdrawal Date" means the date of the Withdrawal from the Partnership of
a Withdrawn Partner.
1.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto, unless otherwise defined therein.
-12-
<PAGE>
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto, accounting terms not defined in Section 1.1, and
accounting terms partly defined in Section 1.1 to the extent not defined,
shall have the respective meanings given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and section,
schedule and exhibit references are to this Agreement unless otherwise
specified.
(d) Unless the context requires otherwise, any reference in this
Agreement to any of the Project Documents or the Project Loan Documents
shall mean any of such documents as amended, supplemented or modified and
in effect from time to time.
ARTICLE II
GENERAL PROVISIONS
2.1 Formation of Partnership. The Partners hereby form and establish a
limited partnership under the terms and provisions of this Agreement and the
provisions of the Delaware Act, and the rights and liabilities of the Partners
shall be as provided in this Agreement and in the Delaware Act. Concurrently
with the execution of the Agreement by VF Delaware, VF, Cogentrix GP and
Cogentrix LP, VF Delaware and Cogentrix GP shall execute and file with the
Office of Secretary of State of the State of Delaware a Certificate of Limited
Partnership in accordance with Section 17-201 of the Delaware Act, in form and
substance satisfactory to both VF Delaware and Cogentrix GP.
2.2 Name of the Partnership. The name of the Partnership shall be Village
Farms of Marfa, L.P., or such other name as the Partners from time to time may
designate.
2.3 Business of the Partnership. The business of the Partnership is to
develop, construct, and operate the Project. In furtherance of its business, the
Partnership shall have and may exercise all the powers now or hereafter
conferred by the laws of the State of Delaware on partnerships formed under the
laws of that state, and shall do any and all things necessary or desirable for
the accomplishment of the above purposes. The Partnership shall engage in no
other business except as permitted by the Management Committee in accordance
with Section 6.2 below.
2.4 Registered Office of the Partnership. The Partnership shall maintain a
registered office at, and the name and address of the Partnership's registered
agent in Delaware is, The Corporation Trust Company, 1209 Orange Street, New
Castle County, Wilmington, Delaware 19801.
2.5 Liability of the Partners Generally.
-13-
<PAGE>
(a) Except as otherwise provided in the Delaware Act, each General
Partner shall have the liabilities of a partner in a partnership without
limited partners to Persons other than the Partnership and the Limited
Partners.
(b) Except as otherwise provided in this Agreement or the Delaware
Act, no Limited Partner (or former Limited Partner) shall be obligated to
make any contribution of capital to the Partnership or have any liability
for the debts and obligations of the Partnership.
2.6 Office of the Partnership. The Partnership shall maintain an office and
principal place of business in Marfa, Texas. Pursuant to the Management
Agreement, the books of account and other records with respect to the operations
of the Partnership shall be maintained at 10 Alvin Court, East Brunswick, New
Jersey 08816. The Partnership shall not have or maintain any office or other
place of business outside of Marfa, Texas.
2.7 Duration of the Partnership. The Partnership shall commence on the date
of this Agreement, and shall continue until its termination in accordance with
the provisions of Article X.
ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 Capital Contributions.
(a) Simultaneously with the execution of the Agreement by VF Delaware,
VF, Cogentrix GP and Cogentrix LP, VF Delaware and VF shall convey, grant,
transfer and assign (or cause to be conveyed, granted, transferred and
assigned) to the Partnership all of the Project Documents, all the rights
of Agro Power or any Affiliate of Agro Power under the Project Documents
and all the assets and business of every kind and description, wherever
located, real, personal and mixed, tangible or intangible, owned or held or
used by Agro Power and any Affiliate of Agro Power solely in connection
with the Project (collectively, the "Project Assets"). The Partnership
hereby assumes and agrees to pay when due all liabilities and obligations
of Agro Power and any Affiliate of Agro Power with respect to the Project
Assets and agrees to be bound by all of the terms of, and to undertake all
of the obligations of Agro Power and any Affiliate of Agro Power under the
Project Documents. For the purposes of the initial Capital Accounts of the
Partners, the Project Assets and Project Documents contributed to the
Partnership by VF Delaware and VF shall be deemed to have an aggregate
gross fair market value (net of liabilities) of $1,000.
If any consent or approval is required in connection with the
assignment and contribution to the Partnership pursuant to this subsection
3.1(a) of any Project Asset or any Project Document, VF Delaware and VF
shall have obtained such consent or approval prior to such assignment and
contribution.
-14-
<PAGE>
(b) Cogentrix GP shall contribute to the Partnership on execution of
this Agreement by all of the Partners $20 by wire transfer of immediately
available funds to an account designated in writing by the Partnership.
(c) Cogentrix LP shall contribute to the Partnership on execution of
this Agreement by all of the Partners $980 by wire transfer of immediately
available funds to an account designated in writing by the Partnership.
3.2 Additional Capital Contributions. Upon the satisfaction of or waiver of
the conditions set forth in Section 3.3 hereof, on the Equity Funding Date
Cogentrix GP shall contribute to the Partnership $132,989 and Cogentrix LP shall
contribute to the Partnership $6,516,445 either (i) by wire transfer of
immediately available funds to an account designated in writing by the
Partnership or (ii) payment(s) to vendors with respect to obligations under
Project Documents.
3.3 Conditions. The obligation of Cogentrix GP and Cogentrix LP to make the
contributions described in Section 3.2 are subject to the satisfaction of each
of the following conditions precedent (except those conditions, if any, that may
be specifically waived in writing by Cogentrix GP or Cogentrix LP, as
appropriate):
(a) The Project Credit Facilities and the Project Loan Documents shall
have been approved by the Management Committee and the Project Loan
Documents will be executed by all parties thereto. An original executed
copy of each Project Loan Document will be delivered to Cogentrix GP and a
copy thereof delivered to Cogentrix LP as soon as available.
(b) All conditions to the closing of the Construction/Term Facility
shall have occurred or been satisfied (other than evidence that the capital
contributions described in Section 3.2 have been made) and all governmental
consents, approvals, permits and licenses and other deliveries in
connection with the Project which are required to be received by the
Construction/Term Lender as a condition to the funding of the
Construction/Term Facility and the Revolving Facility shall have been
delivered or received. A copy of all such deliveries and other evidence of
the closing shall be provided to Cogentrix GP and Cogentrix LP.
(c) The contribution by VF Delaware contemplated by Section 3.1(a)
shall have been made to the satisfaction of Cogentrix GP and Cogentrix LP
and evidence thereof reasonably satisfactory to Cogentrix GP and Cogentrix
LP shall have been provided to them by VF Delaware.
(d) The following representations or warranties shall be true and
correct in all respects, and are hereby made to Cogentrix GP and Cogentrix
LP by VF Delaware and VF as an inducement to their making capital
contributions to the Partnership:
(i) Each of VF and VF Delaware (A) is a limited liability company
duly organized, validly existing and in good standing under the laws
of the State of Delaware, the ownership of which is 99% by Agro Power
and 1% by VF (in
-15-
<PAGE>
the case of VF Delaware) or 1% by VF Delaware (in the case of VF), (B)
has full power and authority and the legal right to incur the
obligations provided for in this Agreement, and (C) has taken all
necessary action to authorize the execution, delivery and performance
of this Agreement and the Project Documents and Project Loan Documents
to which it is a party.
(ii) This Agreement and the Project Documents and Project Loan
Documents to which it is a party have been duly authorized, executed
and delivered by VF Delaware and VF and constitute the legal, valid
and binding obligations of each of VF Delaware and VF enforceable
against it in accordance with their terms, except as enforceability
may be limited by general equitable principles and by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally.
(iii) Neither the execution, delivery or performance by VF
Delaware or VF of this Agreement or any of the Project Documents or
Project Loan Documents to which it is a party, nor compliance by it
with the terms and provisions hereof or thereof, including, without
limitation, the assignment of the Project Documents and Project Assets
to the Partnership, requires the consent or authorization of any other
party (except such as have been duly obtained), or conflicts or will
conflict with or result in a breach or violation of its charter
documents or by-laws or any of the terms, conditions or provisions of
any Requirement of Law applicable to it or its assets or business.
(iv) It is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(v) The representations and warranties of VF Delaware or VF or
any of their respective Affiliates in or pursuant to any of the
Project Documents or Project Loan Documents are true and correct as of
the date hereof and are hereby deemed to be made to Cogentrix GP and
Cogentrix LP, mutatis mutandis, as if fully set forth herein.
(e) The following representations or warranties shall be true and
correct in all respects, and are hereby made to VF Delaware and VF by
Cogentrix GP and Cogentrix LP as an inducement to their making capital
contributions to the Partnership:
(i) Each of Cogentrix GP and Cogentrix LP (A) is a corporation
duly organized, validly existing and in good standing under the laws
of the State of Delaware, (B) has full power and authority and the
legal right to incur the obligations provided for in this Agreement,
and (C) has taken all necessary action to authorize the execution,
delivery and performance of this Agreement.
(ii) This Agreement and Project Loan Documents to which it is a
party have been duly authorized, executed and delivered by Cogentrix
GP and Cogentrix LP and constitute the legal, valid and binding
obligations of each of
-16-
<PAGE>
Cogentrix GP and Cogentrix LP enforceable against it in accordance
with their terms, except as enforceability may be limited by general
equitable principles and by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of
creditors generally.
(iii) Neither the execution, delivery or performance by Cogentrix
GP and Cogentrix LP of this Agreement, nor compliance by it with the
terms and provisions hereof, requires the consent or authorization of
any other party (except such as have been duly obtained), or conflicts
or will conflict with or result in a breach or violation of its
charter documents or bylaws or any of the terms, conditions or
provisions of any Requirement of Law applicable to it or its assets or
business.
(iv) It is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
3.4 Interest. No interest shall accrue on any contribution to the capital
of the Partnership.
3.5 Withdrawals of Capital. No Partner shall have the right to withdraw or
to be repaid or returned any capital contributed by it, except as otherwise
provided herein.
3.6 Additional Capital Contributions. Unless otherwise unanimously agreed
by the Management Committee, no Partner shall be required to make any
contribution to the capital of the Partnership other than its capital
contributions set forth in this Article III. If the Management Committee has
agreed that an additional cash contribution to the capital of the Partnership is
to be made but a Partner does not make such contribution as and when required,
then any other Partner may (but shall not be required to), at its election,
either make all or a portion of the cash contribution to the capital of the
Partnership (which, in the case of such an investment by Cogentrix GP or
Cogentrix LP, would increase the Cogentrix Investment of such Partner or, in the
case of an investment by VF or VF Delaware, would constitute (and in the case of
subsequent investments would increase) an Agro Power Investment of such Partner)
or loan all or a portion of the amount of such non-contributing Partner's
portion of such agreed-upon cash capital contribution to the Partnership. In the
event the Partner elects to make an additional cash contribution, the Partner's
ownership percentage shall not change but, in the case of Cogentrix GP and
Cogentrix LP, the amount of the contribution will increase its respective
Cogentrix Investment and, in the case of VF and VF Delaware, would constitute
(or in the case of subsequent contributions would increase) its respective Agro
Power Investment. (As a result, for example, if Cogentrix were to make an
additional cash contribution to the Partnership under this Section 3.6, and, if
at that time, distributions of cash from Net Distributable Cash are being
allocated pursuant to Section 5.1(b), then distributions shall continue to be
made under Section 5.1(b) until Cogentrix GP and Cogentrix LP have received
distributions of cash from Net Distributable Cash that will provide Cogentrix GP
and Cogentrix LP with the Second Priority Return on the Cogentrix Investment
(which will have been increased by the amount of such cash contribution under
this Section 3.6)). In the event the Partner elects to make a loan, then such
loan shall be on customary terms and conditions, shall be evidenced by a
customary promissory
-17-
<PAGE>
note, and shall provide that (a) the loan shall be repaid in full together with
interest thereon prior to any distribution of cash by the Partnership to the
Partners, (b) it shall bear interest at the same rate of interest as the
interest rate then in effect under the Revolving Facility plus 1% per annum and
(c) shall comply in all respects with Project Loan Documents.
ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES
4.1 Profits and Losses.
(a) After giving effect to the special allocations set forth in
Sections 4.3, 4.4, 4.5, 4.6, 4.7 and 4.10 hereof, the Partners shall share
Profits and Losses as follows:
(i) Profits shall be allocated among the Partners as follows:
(A) Profits shall first be allocated to the General Partners to
offset any prior allocations of Loss made to the General Partners
under Section 4.1(a)(ii)(B) hereof which have not previously been
offset.
(B) Thereafter, Profits shall be allocated to the Partners to
offset any prior allocations of Loss made to the Partners under
Section 4.1(a)(ii)(A) which have not previously been offset.
(C) Thereafter, Profits shall be allocated 2% to Cogentrix GP and
98% to Cogentrix LP until the aggregate cumulative Profits allocated
to Cogentrix GP and Cogentrix LP under this subsection (C) equals the
excess of (I) Cumulative Distributions to Cogentrix over (II) the sum
of Cumulative Distributions to VF and the Cogentrix Investment.
(D) Thereafter, Profits shall be allocated among the Partners in
proportion to their Partnership Percentages.
(ii) Losses shall be allocated among the Partners as follows:
(A) Losses shall first be allocated to the Partners in accordance
with their positive Capital Accounts.
(B) Thereafter, Losses shall be allocated to the General Partners
in the proportion of their Partnership Percentages.
For Federal income tax purposes, each item of income, gain, loss,
deduction or credit entering into the computation of the Partnership's
taxable income shall be allocated in the same proportion.
(b) The Profits and Losses of the Partnership shall be unanimously
determined by the Management Committee and shall be allocated as described
in Section 4.1(a) (i) at
-18-
<PAGE>
the end of each fiscal quarter, (ii) upon the transfer of the Partnership
Interest of any Partner pursuant to Article VIII, (iii) upon the Withdrawal
of any Partner pursuant to Article IX, (iv) upon the admission of any
Partner to the Partnership pursuant to Article IX and (vi) at such other
times that the Management Committee may determine.
4.2 Capital Account Balances. Each Partner's Capital Account shall be
maintained in accordance with the principles of applicable Treasury Regulations
promulgated under Section 704(b) of the Code and as otherwise provided in the
definition of "Capital Accounts" and in this Article IV.
4.3 Minimum Gain Chargeback.
(a) Notwithstanding any other provision in this Agreement, if there is
a net decrease in Partnership minimum gain (determined in accordance with
the principles of Regulations Sections 1.704-2(b)(2) and 1.704-2(d)) during
any Partnership taxable year, the Partners who would otherwise have an
Adjusted Capital Account Deficit at the end of such year shall be specially
allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount and manner sufficient to
eliminate as quickly as possible such Adjusted Capital Account Deficit. The
items to be so allocated shall be determined in accordance with Regulations
Section 1.704-2(g). This subsection 4.3(a) is intended to comply with the
minimum gain chargeback requirements in such Regulation Sections and shall
be interpreted consistently therewith.
(b) Notwithstanding any other provision in this Agreement, if there is
a net decrease in Partnership minimum gain attributable to a partner
nonrecourse debt of the Partnership (within the meaning of Regulations
Sections 1.704-2(b)) during any Partnership fiscal year, each Person who
has a share of the Partnership minimum gain attributable to such
nonrecourse debt of the Partnership, determined in accordance with
Regulation Section 1.704-2(i)(5), shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, subsequent
years) in an amount equal to the greater of (i) the portion of such
Person's share of the net decrease in minimum gain of the Partnership
attributable to such nonrecourse debt of the Partnership, determined in
accordance with Regulations Section 1.704-2(i)(b), that is allocable to the
disposition of property of the Partnership subject to such nonrecourse debt
of the Partnership, determined in accordance with Regulations Section
1.704-2(i)(4), or (ii) if such Person would otherwise have an Adjusted
Capital Account Deficit at the end of such year, an amount sufficient to
eliminate such Adjusted Capital Account Deficit. Allocations pursuant to
the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto. The items to be
so allocated shall be determined in accordance with Regulations Section
1.704-2(i)(4). This subsection 4.3(b) is intended to comply with the
minimum gain chargeback requirement in such Regulations Section and shall
be interpreted consistently therewith. Solely for purposes of this
subsection 4.3(b), each Person's Adjusted Capital Account Deficit shall be
determined prior to any other allocations pursuant to this Article IV with
respect to such fiscal year, other than allocations pursuant to subsection
4.3(a) hereof.
-19-
<PAGE>
4.4 Nonrecourse Deductions. Nonrecourse Deductions for any taxable year
shall be specifically allocated among the Partners in proportion to their
Percentage Interests.
4.5 Partner Nonrecourse Deductions. Nonrecourse Deductions attributable to
otherwise nonrecourse debt with respect to which a Partner or a related person
of a Partner described in Regulations Section 1.752-2(c) is the creditor or
otherwise bears the "economic risk of loss" as defined in Regulations Section
1.752-2(b) shall be allocated to such Partner.
4.6 Qualified Income Offset. Notwithstanding anything in this Agreement to
the contrary, in the event any Partner unexpectedly receives any adjustments,
allocations or distributions described in paragraphs (b)(2)(ii)(d)(4), (5) or
(6) of Regulations Section 1.704-1, there shall be specially allocated to such
Partner such items of Partnership income and gain, at such times and in such
amounts as will eliminate as quickly as possible that portion of its Adjusted
Capital Account Deficit caused or increased by such adjustments, allocations or
distributions.
4.7 Curative Allocations. The allocations set forth in Sections 4.3, 4.4,
4.5, 4.6 and 4.10 hereof are intended to comply with certain requirements of
Regulations Section, 1.704-1(b). Notwithstanding any other provisions of this
Article IV (other than Sections 4.3, 4.4, 4.5, 4.6 and 4.10), allocations that
have taken place pursuant to Sections 4.3, 4.4, 4.5, 4.6 and 4.10 shall be taken
into account in allocating other items of income, gain, loss, deduction and
credit so that, to the extent possible, the net amount of such other allocations
and the Sections 4.3, 4.4, 4.5, 4.6, and 4.10 allocations to each Partner shall
equal the net amount that would have been allocated to each Partner if the
Sections 4.3, 4.4, 4.5, 4.6, and 4.10 allocations had not occurred.
4.8 Tax Allocations. Except as provided in Sections 4.7 and 4.9 hereof, for
income tax purposes each item of income, gain, loss and deduction shall be
allocated in the same manner as the corresponding book item is allocated for
Capital Account purposes.
4.9 Property Subject to 704(b) and 704(c). In the case of any Partnership
asset (directly or indirectly owned) the Gross Asset Value of which differs from
its adjusted tax basis, income, gain, loss and deduction with respect to such
asset shall, solely for tax purposes, be allocated in accordance with the
principles of Code Sections 704(b) and 704(c) to take account of such
difference.
4.10 Limitations. Notwithstanding anything to the contrary in this Article
IV, no allocation under this Article IV shall be made to a Limited Partner that
would cause such Limited Partner to have, or that would increase, an Adjusted
Capital Account Deficit. Any amount not allocated as a result of this limitation
shall be reallocated to the General Partners pro rata in accordance with their
relative Partnership Interests.
-20-
<PAGE>
ARTICLE V
DISTRIBUTIONS
5.1 Distribution of Net Distributable Cash. Subject to Sections 5.2 and 5.3
hereof, Net Distributable Cash for each fiscal quarter shall be distributed to
the Partners within thirty (30) days after the end of such quarter as follows:
(a) First, from the date hereof and until each of Cogentrix GP and
Cogentrix LP shall have received distributions of cash from Net
Distributable Cash sufficient to provide both Cogentrix GP and Cogentrix LP
with the First Priority Return, 89.1% to Cogentrix LP, 0.9% to Cogentrix
GP, 9.9% to VF and 0.1% to VF Delaware,
(b) Thereafter until each of Cogentrix GP and Cogentrix LP shall have
received distributions of cash from Net Distributable Cash sufficient to
provide both Cogentrix GP and Cogentrix LP with the Second Priority Return,
64.386% to Cogentrix LP, 1.314% to Cogentrix GP, 33.614% to VF, and 0.686%
to VF Delaware, and
(c) Thereafter, 49% to Cogentrix LP, 1% to Cogentrix GP, 49% to VF and
1% to VF Delaware.
5.2 Default Allocations for Cogentrix. In the event VF Delaware, VF or Agro
Power defaults or breaches any of its obligations under this Agreement, the
Management Agreement, the Marketing Agreement or the Construction Agreement and
such default or breach has not been remedied within any applicable cure period,
or any representation or warranty made by VF Delaware, VF or any of their
respective Affiliates under this Agreement or any such other agreement or
document proves to have been untrue when made and (a) as a result thereof the
Partnership, Cogentrix GP and Cogentrix LP (or any of them) incurs or suffers an
Adverse Consequence and (b) Cogentrix GP or Cogentrix LP gives written notice of
such Adverse Consequence to the Partnership and, if the amount thereof is
unknown, its good faith estimate of the amount of such Adverse Consequence, then
the Partnership shall thereafter refrain from making any distributions to VF
Delaware and VF (or either of them) under this Agreement (any such distribution
that would have been made but for this Section 5.2 is hereinafter referred to as
a "Blocked Distribution") and shall take the following steps:
(i) The Partnership shall distribute to Cogentrix GP or Cogentrix LP
from such Blocked Distributions an aggregate amount equal to 100% of any
such Adverse Consequence suffered or actually incurred by Cogentrix GP and
Cogentrix LP or either of them (or, if the amount thereof is not known,
100% of Cogentrix GP's or Cogentrix LP's written good faith estimate
thereof). Any such distribution made by the Partnership under this
subsection 5.2(i) shall satisfy pro tanto the obligation of the Partnership
to make distributions to VF Delaware and VF (or either of them) with
respect to the Blocked Distributions. For the purposes of this Agreement,
any Adverse Consequence suffered or incurred by the Partnership shall be
deemed to have been suffered or incurred, on a dollar-for-dollar basis, 1%
by Cogentrix GP and 49% by Cogentrix LP.
(ii) Upon distribution to Cogentrix GP and Cogentrix LP of 100% of the
aggregate amount of any such Adverse Consequence (or their good faith
estimate thereof)
-21-
<PAGE>
from Blocked Distributions, the Partnership may thereafter make
distributions to VF Delaware and VF under Section 5.1, unless and until it
receives a subsequent notification from Cogentrix LP or Cogentrix GP under
this Section 5.2.
5.3 Default Allocations for VF. In the event Cogentrix GP or Cogentrix LP
defaults or breaches any of its obligations under this Agreement and such
default or breach has not been remedied within any applicable cure period, or
any representation or warranty made by Cogentrix GP or Cogentrix LP under this
Agreement proves to have been untrue when made and (a) as a result thereof the
Partnership, VF Delaware and VF (or any of them) incurs or suffers an Adverse
Consequence and (b) VF Delaware or VF gives written notice of such Adverse
Consequence to the Partnership and, if the amount thereof is unknown, its good
faith estimate of the amount of such Adverse Consequence, then the Partnership
shall thereafter refrain from making any distributions to Cogentrix GP and
Cogentrix LP (or either of them) under this Agreement (any such distribution
that would have been made but for this Section 5.3 is hereinafter referred to as
a "Blocked Distribution") and shall take the following steps:
(i) The Partnership shall distribute to VF Delaware or VF from such
Blocked Distributions an aggregate amount equal to 100% of any such Adverse
Consequence suffered or actually incurred by VF Delaware and VF or either
of them (or, if the amount thereof is not known, 100% of VF Delaware's or
VF's written good faith estimate thereof). Any such distribution made by
the Partnership under this subsection 5.3(i) shall satisfy pro tanto the
obligation of the Partnership to make distributions to Cogentrix GP or
Cogentrix LP (or either of them) with respect to the Blocked Distributions.
For the purposes of this Agreement, any Adverse Consequence suffered or
incurred by the Partnership shall be deemed to have been suffered or
incurred, on a dollar-for-dollar basis, 1% by VF and 49% by VF Delaware.
(ii) Upon distribution to VF Delaware and VF of 100% of the aggregate
amount of any such Adverse Consequence (or their good faith estimate
thereof) from Blocked Distributions, the Partnership may thereafter make
distributions to Cogentrix GP and Cogentrix LP under Section 5.1, unless
and until it receives a subsequent notification from VF Delaware or VF
under this Section 5.3.
-22-
<PAGE>
ARTICLE VI
MANAGEMENT
6.1 Management of the Partnership.
(a) The overall management and control of the business affairs of the
Partnership shall be vested in the Management Committee, subject to the
limitations contained in Section 6.2 or elsewhere in this Agreement. The
Management Committee shall consist of four members, two designated by
Cogentrix GP (each a "Cogentrix GP Designee") and two designated by VF
Delaware (each a "VF Delaware Designee"), and a quorum of the Management
Committee shall require at least three members of the Management Committee.
No action at any meeting may be taken by the Management Committee unless a
quorum is present (acting in person or by proxy). The Management Committee
shall meet not less frequently than quarterly. Members of the Management
Committee may participate in a meeting of the Management Committee by means
of conference telephone. No action may be taken by the Management Committee
with respect to any of the matters described in Section 6.2 hereof unless
such action is in the form of a writing signed by all members of the
Management Committee. Unless otherwise agreed, all meetings of the
Management Committee shall take place at Cogentrix's offices in Charlotte,
North Carolina, Agro Power's offices in East Brunswick, New Jersey or such
other place as the Management Committee may unanimously agree.
(b) Except as set forth in Section 6.2, any action by the Management
Committee shall require the approval of a majority of the members of the
Management Committee.
(c) Any General Partner may, at any time, replace any of its
respective Designees to the Management Committee with a new Designee and,
upon such change, or upon the death or resignation of any Designee, a
successor shall be designated in writing by the party that appointed the
Designee being replaced.
(d) Any General Partner or member of the Management Committee may, at
any time, request a meeting of the Management Committee by sending written
notice specifying in reasonable detail the purpose(s) of such meeting to
all other Partners and to the members of the Management Committee at least
ten (10) days in advance of the proposed date for the meeting, which notice
may be waived by all members of the Management Committee and all Partners.
Any member of the Management Committee may propose that an action be
submitted to the Management Committee for approval, and there shall be no
requirement of notice of the issues to be addressed at any meeting of the
Management Committee.
6.2 Fundamental Matters. The following matters shall require the prior
unanimous authorization and approval of the Management Committee:
(a) Any transaction in which the Partnership (i) acquires, purchases
or leases any asset or right for consideration having a fair market value
in excess of $25,000, (ii) consolidates or merges with or into any other
Person, (iii) sells, assigns, leases or
-23-
<PAGE>
otherwise transfers any asset or right having a fair market value in excess
of $25,000, or (iv) assumes any liability or obligation in connection with
Section 6.2(a)(i) above in excess of $25,000.
(b) The approval, execution and delivery of any contract, lease or
agreement following the Effective Date; provided, that no such approval
shall be required for (i) any contracts and permit applications in
existence prior to the Effective Date and listed on Schedule 1.1(c) hereto,
or (ii) any other contract, lease or agreement which is expressly
non-recourse to the Partners so long as the amounts to be paid by the
Partnership thereunder, together with all other amounts to be paid by the
Partnership pursuant to contracts, leases or agreements that have not been
unanimously approved or ratified by the Management Committee, does not
exceed $50,000 in the aggregate excluding contracts, leases or agreements
for supplies used in the ordinary course of business and contemplated in
the Operating Budget.
(c) The approval, execution or delivery of any amendments to,
modification or termination of, enforcement of rights under, or any
consents or waivers in connection with any contract, lease or agreement,
other than contracts entered into without prior unanimous approval of the
Management Committee pursuant to subsection 6.2(a) or clause (ii) of
subsection 6.2(b) above.
(d) The sale or issuance by the Partnership of any interest, or of any
option, warrant or similar right to acquire any interest, of any kind in
the Partnership.
(e) Any decision to (i) terminate all or any substantial part of the
Project (an "Abandonment") or (ii) engage in any activity not contemplated
by this Agreement.
(f) The incurrence or assumption of any Indebtedness by the
Partnership, except for (i) Indebtedness which, when the principal amount
thereof is aggregated with the principal amount of Indebtedness previously
incurred pursuant to this subsection 6.2(f) which remains outstanding, does
not exceed $25,000 and (ii) the Indebtedness represented by the Project
Loan Documents.
(g) The granting of any Lien (other than Permitted Liens) on the
assets or rights of the Partnership.
(h) The repayment (other than (i) repayments in accordance with
scheduled maturity and (ii) paydowns on the Revolving Credit Facility),
voluntary prepayment or redemption of, or any refinancing or other
modification of the terms of, any Indebtedness.
(i) The adoption and modification of the Operating Budget or the
Project Budget (collectively, the "Budgets").
(j) The approval of any expenditure or investment not previously
authorized in any Budget; provided, however, that no such approval shall be
required for any expenditure or investment so long as the amount expended
by the Partnership, together with the amounts of all other expenditures by
the Partnership during any fiscal year that
-24-
<PAGE>
have not been approved or ratified by the Management Committee, does not
exceed $25,000 in the aggregate.
(k) The initiation of any legal proceedings or arbitration on behalf
of the Partnership, or the settlement of any claim by or against the
Partnership with respect to claims in excess of $25,000 or which include
requests for an injunction, specific performance or other equitable relief.
(l) The selection, removal, or determination of authority and
responsibility of the officers of the Partnership, general or special
counsel for the Partnership, accountants and auditors for the Partnership
and the Project and the approval of any change in the accounting or tax
policy of the Partnership or the Project.
(m) To the extent not specified in this Agreement, (i) any
distribution of income or any assets or rights of the Partnership or (ii)
the redemption, purchase or other acquisition of any interest in the
Partnership.
(n) Except as contemplated in Article X of this Agreement, liquidating
or dissolving, or proposing to liquidate or dissolve, or effecting, or
proposing to effect, a recapitalization in any form of transaction, of the
Partnership.
(o) (i) Commencing any case, proceeding or other action (A) under any
existing or future law or any jurisdiction, domestic or foreign, relating
to bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for All or any substantial part of its assets;
(ii) making, or proposing to make, a general assignment for the benefit of
its creditors; (iii) admitting or proposing to admit in writing its
inability to pay its debts as they become due; (iv) filing or proposing to
file any plan of reorganization pursuant to 11 U.S.C. " 101 et seq.; (v)
taking, or proposing to take, any action in furtherance of, or indicating
its consent to, approval of or acquiescence in, any of the acts set forth
in clause (i) or (ii) above.
(p) Establishing any operating or capital reserves other than those
required by the Project Loan Documents.
(q) Establishing committees of the Management Committee and delegating
voting authority to such committees.
(r) The approval, execution or delivery of any amendments to,
modification or termination of, or any waivers of any rights under, or the
grant of any consents under or in connection with any Project Document, any
Project Loan Document, the Marketing Agreement or the Management Agreement.
-25-
<PAGE>
(s) The approval or taking of any action that would be an event of
default or that would give rise to a right of termination under any Project
Document or any Project Loan Document.
(t) The approval or taking with any action that would give rise to an
event of default under any Project Loan Document or that would give rise to
a right of acceleration or termination under any Project Loan Document.
(u) The reimbursement by the Partnership of any General Partner under
Section 6.4(b) hereof of any amount in excess of $5,000 during any fiscal
quarter.
(v) Any change in or termination of any insurance policies maintained
by the Partnership.
(w) Any agreement to undertake any action that would require the
approval of the Management Committee under this Section 6.2.
(x) Any act in contravention of this Agreement or the Act.
(y) Any act which would make it impossible to carry on the ordinary
business of the Partnership.
(z) Possession of Partnership property by any Partner, or the
assignment, transfer or pledge of rights of the Partnership in specific
Partnership property for other than a Partnership purpose or other than for
the benefit of the Partnership, or any commingling the funds of the
Partnership with the funds of any other person.
(aa) Any action which would cause the Partnership to be treated as
other than a partnership for Federal income tax purposes.
(ab) Any confession of a judgment against the Partnership or any
Partner.
(ac) The grant of any power of attorney or appointment of any agent or
attorney (other than customs brokers).
(ad) The grant of signature authority to any Person with respect to
any of the Partnership's bank or investment accounts.
6.3 Officers of the Partnership. The Partnership may have such officers as
may be designated by the Management Committee from time to time. Such officers
shall (a) serve at the pleasure of the Management Committee, (b) subject to
Section 6.2 and to the instructions and directions of the Management Committee,
have such powers as are usually exercised by comparable designated officers of a
Delaware corporation and (c) have the power to bind the Partnership through the
exercise of such powers to the extent consistent with the terms hereof. The
initial officers of the Partnership shall be those persons listed on Schedule
6.3 attached hereto and incorporated herein by reference. Following the
execution hereof, officers shall be
-26-
<PAGE>
appointed or removed only by action of the Management Committee in accordance
with the provisions of Section 6.1.
6.4 No Compensation; Reimbursement.
(a) Except as expressly provided herein, the General Partners, members
of the Management Committee and officers shall receive no compensation for
performing their duties as General Partners, members of the Management
Committee or officers under this Agreement; provided, however, that this
provision shall not affect any Partners' right to receive its share of
distributions as set forth in Article V hereof.
(b) Subject to the limitation, if any, imposed by the Project Loan
Documents and subject to subsection 6.2(u), each General Partner shall be
entitled to receive, out of any Partnership funds available therefor,
reimbursement of all amounts expended by such General Partner in payment of
properly incurred and documented Partnership obligations paid by such
General Partner out of its own funds so long as such expenditures are made
in accordance with the Budgets.
6.5 Insurance. The Partnership shall (a) maintain, with insurers or
underwriters of good repute, in the name of the Partnership, such insurance
relating to the operations of the Partnership as is customary for comparable
businesses to that of the Partnership to maintain, against such risks and
pursuant to such terms (including deductible limits or self-insured retentions)
as are customary for such businesses, and (b) pay all premiums and other sums
payable in order to maintain such insurance. For purposes of clarity, it is
hereby agreed that the Partnership shall maintain the insurance required by the
Project Loan Documents and all insurance policies shall name Cogentrix GP and VF
Delaware as an additional insured and provided that they may not be cancelled or
terminated except with 30 days' prior written notice to Cogentrix GP and VF
Delaware.
6.6 Cooperation on Tax Matters. The Partnership shall cooperate fully as
and to the extent reasonably requested by Cogentrix GP or VF Delaware in
connection with the preparation and filing of any Tax return, statement, report
or form, and any audit, litigation or other proceeding with respect to Taxes
relating to or arising out of the Project. Such cooperation shall include the
retention and, upon request by either Cogentrix GP or VF Delaware, the provision
of records and information that are reasonably relevant to any such audit,
litigation or other proceeding. The Partnership agrees to (a) retain all books
and records with respect to Tax matters pertinent to the Project and (b) give
Cogentrix GP and VF Delaware reasonable written notice prior to destroying or
discarding any such books and records. The Partnership shall retain any records
requested by either Cogentrix GP or VF Delaware to be retained.
ARTICLE VII
BOOKS, RECORDS AND BANK ACCOUNTS
7.1 Books and Records. In addition to the Partnership Books, the
Partnership shall also keep such books of account and other records with respect
to the operations of the Partnership as will sufficiently explain the
transactions and financial position of the Partnership
-27-
<PAGE>
and enable financial statements to be prepared in accordance with GAAP and shall
cause such books and other records to be kept in such manner as will enable them
to be properly audited. The Partnership Books and such other books and records
shall be maintained at the principal places of business of the Partnership and
all Partners and their duly authorized representatives shall at all times have
access to and the right to review and copy such books and records.
7.2 Accounting Basis and Fiscal Year. The books of the Partnership (a)
shall be kept on an accrual basis in accordance with GAAP, (b) shall reflect all
Partnership transactions, (c) shall be appropriate and adequate for the
Partnership's business and for the carrying out of all provisions of this
Agreement, and (d) shall be closed and balanced as of the end of each fiscal
year, as soon as practicable after the end of such fiscal year. The fiscal year
of the Partnership shall be January 1 through December 31 of each year or such
other fiscal year that may be selected with the unanimous approval of the
Management Committee.
7.3 Reports.
(a) Unless otherwise required by the Management Committee, the
Partnership shall cause to be delivered to each Partner, within 120 days
after the end of each fiscal year, an annual report containing the
following:
(i) A balance sheet as of the end of the Partnership's fiscal
year and statements of income, Partners' equity and cash flows for the
year then ended, each of which shall be audited and reported on by
Arthur Andersen & Co. or such other independent certified public
accountants, which shall be a nationally recognized accounting firm,
as may be selected by the Management Committee;
(ii) a general description of the activities of the Partnership
during such year; and
(iii) a report of any material transaction between the
Partnership and any Partner or any of its Affiliates, including fees
and compensation and reimbursements paid by the Partnership and the
products supplied and services performed by such Partner or any such
Affiliate for such fees or compensation and the expenses so
reimbursed; provided, however, that no report shall be required for
any products supplied and services performed if such products and
services are provided pursuant to the terms of a Project Document, the
Management Agreement, the Marketing Agreement, an agreement approved
by the Management Committee or set out in any Budget and the
compensation therefor is in accordance with the terms of such
agreement.
(b) Within 45 days after the end of each quarter of each fiscal year,
the Partnership shall cause to be delivered to each Partner a quarterly
report containing a balance sheet as of the end of such quarter and a
statement of income for such quarter, each of which may be unaudited but
which shall be certified by the chief financial officer of the Partnership
as fairly presenting the financial position of the Partnership at the end
of such quarter and results of operations of the Partnership for such
quarter and as having been prepared in accordance with the accounting
methods followed by the Partnership for
-28-
<PAGE>
Federal income tax purposes and otherwise in accordance with GAAP applied
on a basis substantially consistent with that of the Partnership's audited
financial statements (subject to normal year end adjustments).
(c) Within 120 days of the end of each fiscal year, the Partnership
will cause to be delivered to each Partner all information necessary for
the preparation of such Partner's Federal income tax returns, including a
statement showing such Partner's share of income, gains, losses, deductions
and credits for such year for Federal income tax purposes and the amount of
any distributions made to or for the account of such Partner pursuant to
this Agreement.
7.4 Bank Accounts. The Partnership shall maintain one or more accounts in
one or more banks located in Marfa, Texas and such other locations as may be
approved by the Management Committee, each of which shall be a member the
Federal Deposit Insurance Corporation. In addition, the Partnership shall
establish such other accounts and deposit amounts as required by the Project
Loan Documents. All such amounts shall be and remain the property of the
Partnership, and shall be received, held and disbursed by the Partnership for
the purposes specified in this Agreement. There shall not be deposited in any of
said accounts any funds other than funds belonging to the Partnership, and no
other funds shall in any way be commingled with such Partnership funds.
7.5 Tax Returns. The Management Committee shall cause income tax returns
for the Partnership to be prepared and timely filed with the appropriate
authorities.
7.6 Tax Elections. The Management Committee shall, from time to time, make
such tax elections as it deems necessary or advisable to carry out the business
of the Partnership or the purposes of this Agreement.
7.7 Tax Matters Partner. Cogentrix GP shall be the Partnership's "tax
matters partner" for purposes of the Code and with respect to all other Federal,
state and local Taxes. The approval of the tax matters partner shall be required
before the Partnership or any Partner (with respect to Partnership matters)
files any document with any Governmental Authority including, but not limited
to, returns, amendments, requests for refunds, appeals, or waivers or extensions
of statutes of limitations. The tax matters partner shall take such actions as
the Management Committee may lawfully require in connection with the
Partnership's Federal, state and local Tax matters.
7.8 Withholdings. Except and only to the extent required by applicable law
and except as permitted hereunder, the Partnership will not deduct or withhold
any amount in respect of any tax from any payment or distribution by the
Partnership to any Partner unless the Partnership has first received written
authorization from such Partner so to withhold or to deduct.
-29-
<PAGE>
ARTICLE VIII
TRANSFER OF INTERESTS
8.1 Transfer of a Partner's Interest.
(a) No Partner may sell, transfer, participate, assign or otherwise
dispose of (whether voluntarily or by operation of law) (collectively,
"transfer") all or any part of its Partnership Interest without the prior
written consent of the non-transferring General Partner(s).
(b) The non-transferring General Partner(s) may condition its (their)
consent to any transfer on compliance by the Partner desiring to transfer
its Partnership Interest with all or any of the following:
(i) The transferring Partner must give written notice to the
General Partners identifying in reasonable detail the proposed
transferee(s) and the terms and conditions of the proposed transfer
and the non-transferring General Partner(s) shall have a period of
twenty (20) Business Days from the date of such notice either to
consent in writing to the proposed transferee(s), or to give written
notice that it does not consent to such transferee(s);
(ii) within ten (10) Business Days after the non-transferring
General Partner(s) gives written notice that it does not consent to a
proposed transferee, it shall provide to the transferring Partner a
written explanation of the reasons therefor;
(iii) such transfer does not release the transferring Partner
from its obligations hereunder;
(iv) the transferee shall not have the right to be separately
represented on the Management Committee unless the transferring
Partner is a General Partner that previously had the right to appoint
Designee's to the Management Committee and the transfer involves all
of such General Partner's Partnership Interest;
(v) the non-transferring General Partner(s) shall notify each
other Partner in writing of its decision to consent to the transfer
within five (5) Business Days of its grant of such consent (which
notice shall include a copy of the notice sent to the non-transferring
General Partner(s) by the transferring Partner) and, prior to any such
transfer, each Partner (which term, for purposes of clarity, includes
for purposes of this subsection (v) the non-transferring General
Partner and excludes the transferring Partner) shall have the right
for thirty (30) Business Days following such notice to purchase the
Partnership Interest being sold by the transferring Partner pursuant
to this Article VIII on the same terms and conditions as were set
forth in such notice. In the event that none of the nontransferring
Partners exercises its right to purchase such Partnership Interest
being sold, then the transferring Partner shall have forty-five (45)
days thereafter to complete the
-30-
<PAGE>
sale in accordance with the terms of the notice, after which time the
transferring Partner must again comply with the procedures set forth
in this Article VIII. In the event more than one Partner exercises its
right to purchase such Partnership Interest proposed to be
transferred, then such exercising Partners shall exercise such right
on a pro-rata basis based on their respective Partnership Percentages
(without considering the Partnership Percentage of the transferring
Partner or the Partners (if any) not electing to exercise such right);
or
(vi) such transferee shall not have the right to sell, transfer,
participate, assign or otherwise dispose of all or a portion of such
party's Partnership Interest except in accordance with the terms of
this Section 8.1; and
(vii) the transferee shall execute documents satisfactory to the
Management Committee sufficient to make the transferee a party to and
be bound by the terms of this Agreement and the transferee shall
expressly assume all obligations of the transferring Partner
hereunder.
ARTICLE IX
ADDITIONAL PARTNERS; WITHDRAWAL OF PARTNERS
9.1 Additional Partners. Persons other than the undersigned may from time
to time be admitted to the Partnership as General Partners or Limited Partners
only with the unanimous consent of the Management Committee and only on such
terms and conditions as may be prescribed by the Management Committee.
9.2 Withdrawal of Partners.
(a) No Partner may withdraw from the Partnership except as provided in
this Section 9.2.
(b) A Partner shall immediately cease to be a Partner and shall be
deemed to have Withdrawn from the Partnership, in the event:
(i) Such Partner shall commence a voluntary case or other
proceedings seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts
as they become due, or shall take any corporate action to authorize
any of the foregoing; or
(ii) an involuntary case or other proceeding shall be commenced
against such Partner seeking liquidation, reorganization or other
relief with
-31-
<PAGE>
respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, and such involuntary case
or other proceeding shall remain undismissed and unstayed for a period
of sixty (60) days, or an order for relief shall be entered against
such Partner under the federal bankruptcy laws as now or hereafter in
effect; or
(iii) such Partner defaults in its obligation to make a capital
contribution pursuant to Sections 3.1 and 3.2 (and such default is not
cured within two (2) days of written notice of such default from a
General Partner); or
(iv) it is required to Withdraw as a Partner pursuant to the
Delaware Act.
Such Partner's Withdrawal Date shall be the day such Withdrawal occurs.
(c) Any Partner may Withdraw voluntarily from the Partnership on not
less than thirty (30) days' prior written notice by such Partner to the
other Partners either (i) in the event that such Withdrawal is after July
1, 1997 and the conditions to the initial draw under each of the
Construction/Term Facility Documents and the Revolving Facility have not
been satisfied or (ii) with the prior unanimous consent of the Management
Committee. Such Partner's Withdrawal Date shall be the date on which a
written notice of Withdrawal is made.
(d) Upon the Withdrawal of any Partner pursuant to subsections 9.2(b)
or (c), such Partner's Capital Account and Partnership Percentage shall be
allocated, as of the Withdrawal Date, among the other Partners in
proportion to their respective Partnership Percentages on such Withdrawal
Date (it being understood that such allocation shall not result in a
Limited Partner becoming a General Partner). After its Withdrawal Date, a
Withdrawn Partner shall not have any rights with respect to the profits,
capital or affairs of the Partnership (including, but not limited to, any
rights of representation on the Management Committee or any committee
thereof or any rights on liquidation of the Partnership pursuant to Article
X).
(e) On the Withdrawal Date for any Partner that Withdraws pursuant to
Section 9.2(b) or Section 9.2(c)(ii), such Partner shall pay to the
Partnership in cash any negative balance in such Partner's capital account.
If the sum of such Partner's capital account has a positive balance on the
Withdrawal Date, the Partnership shall pay such amount to such Partner upon
its withdrawal.
-32-
<PAGE>
ARTICLE X
DISSOLUTION AND LIQUIDATION
10.1 Events of Dissolution.
(a) The Partnership shall be dissolved upon:
(i) an Abandonment pursuant to subsection 6.2(e);
(ii) the occurrence of an event requiring dissolution under the
Delaware Act;
(iii) the unanimous consent of the General Partners; or
(iv) at the election of Cogentrix GP, if Agro Power ceases, at
any time, to control (as defined in the definition of "Affiliate") VF
Delaware or VF.
(b) Dissolution of the Partnership shall be effective on the day on
which the event occurs giving rise to the dissolution, but the Partnership
shall not terminate until the assets and rights of the Partnership shall
have been distributed as provided herein. Notwithstanding the dissolution
of the Partnership, prior to the termination of the Partnership, as
aforesaid, the business of the Partnership and the affairs of the Partners,
as such, shall continue to be governed by this Agreement. Upon dissolution,
the Management Committee shall liquidate the assets of the Partnership and
apply and distribute the proceeds thereof as contemplated by this
Agreement.
10.2 Distributions Upon Liquidation.
(a) After payment of liabilities owing to creditors (but excluding any
liabilities payable with respect to the Management Agreement or the
Marketing Agreement other than amounts then due and owing), the Management
Committee or the liquidator, if any, shall set up such reserves as it deems
reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Partnership (other than liability and obligation owing
with respect to the Management Agreement and the Marketing Agreement). Said
reserves may be paid over by the Management Committee or the liquidator to
a bank, to be held in escrow for the purpose of paying any such contingent
or unforeseen liabilities or obligations and, at the expiration of such
period as the Management Committee or the liquidator may deem advisable,
such reserves shall be distributed to the Partners or their assigns in the
manner set forth in subsection (b) below.
(b) If any General Partner has a negative Capital Account at the time
of dissolution of the Partnership, such General Partner shall be required
to restore to the Partnership the amount of the negative balance in its
Capital Account. If any Limited Partner has a negative Capital Account
balance at the time of dissolution of the Partnership, such Limited Partner
shall have no obligation to restore to the Partnership the amount of the
negative balance in its Capital Account.
-33-
<PAGE>
(c) After paying the liabilities and providing for the reserves
referred to in subsection 10.2(a) and the payment of any restoration
amounts under subsection 10.2(b), the Management Committee or the
liquidator shall, by the end of the Partnership's taxable year in which the
Partnership dissolves (or, if later, within 90 days after the date of such
termination), cause the net assets of the Partnership to be distributed in
accordance with Article V hereof, provided, however, that no distribution
shall be made pursuant to this sentence that creates or increases a Capital
Account deficit for any Partner which exceeds such Partner's obligation to
restore such deficit (under subsection 10.2(b) above), determined as
follows:
Distributions shall be first determined provisionally without
regard to Capital Accounts, and the allocation provisions of Article
IV hereof shall also be applied provisionally. If as a result of such
provisional calculations and allocations, any Partner would thereby
have a Capital Account deficit which exceeds its obligation to restore
such deficit under subsection 10.2(b) above, the actual distributions
pursuant to this subsection (c) shall be equal to such provisional
distribution less the amount of such excess and actual allocations
shall be made in accordance with Article IV taking into account such
actual distributions.
Any remaining net assets shall be allocated among the Partners in
accordance with their positive Capital Accounts.
If such distributions are insufficient to return to any Partner the full amount
of its capital contributions, it shall have no recourse against any other
Partner. Each Partner shall receive its share of the net assets in cash or in
kind, and the proportion of such share that is received in cash shall be the
same for each Partner. In the event that any part of such net assets consists of
notes or accounts receivable or other non-cash assets, the Management Committee
or the liquidator shall take whatever steps it deems appropriate to convert such
assets into cash or into any other form which would facilitate the distribution
thereof. If any assets of the Partnership are to be distributed in kind, such
assets shall be distributed on the basis of their fair market value, as
determined by the Management Committee or the liquidator, if any, acting in its
sole discretion.
ARTICLE XI
DISPUTE RESOLUTION
11.1 Arbitration.
(a) In the event a dispute arises between or among any Partners
relating to the terms of this Agreement and any Partner gives written
notice of such dispute to the Management Committee, then each of the
Partners involved in such dispute shall refer the dispute to its senior
management. The senior management of each Partner involved in such dispute
shall meet and confer regarding the resolution of the dispute. In the event
a resolution of such dispute is not reached within 30 days of the written
notice, then any of the Partners involved in such dispute may submit the
dispute to arbitration in accordance with Section 11.1(b).
-34-
<PAGE>
(b) Arbitration of disputes pursuant to this Section 14.1(b) shall be
held in Charlotte, North Carolina under the commercial arbitration rules of
the American Arbitration Association, and shall be heard by three
arbitrators selected in accordance with such rules. Each arbitrator shall
have at least five years experience in the United States in a profession or
professions related to the subject matter involved in the dispute and shall
not be a past or present officer, director or employee of, or have any
interest in or material relationship with, any Partner or any Affiliate of
any Partner. Any arbitral award shall be final and binding and may be
entered by any Partner in any state or Federal court having jurisdiction
thereof. Costs of arbitration (including reasonable attorney's fees and
costs) shall be paid either equally by the parties to the arbitration or in
accordance with the decision of the arbitrators.
11.2 Buy/Sell Option.
(a) In the event that the Management Committee is unable to reach a
unanimous decision with respect to any matter set forth in Section 6.2,
either of the General Partners (such Partner herein referred to as a
"Buy-Out Offeror") shall have the right to make a written offer to buy (a
"Buy-Out Offer") all (but not less than all) of the Partnership Interests
of the other General Partner and its Affiliates. The Buy-Out Offer shall be
at a price determined in accordance with the Appraisal Procedure (the
"Aggregate Purchase Price") which shall be payment for all of the assets,
liabilities and business of the Partnership, and the amount to be paid to
any selling Partner under this Section 11.2 shall be equal to the amount
such selling Partner would receive if all the assets, liabilities and
business of the Partnership were sold at the Aggregate Purchase Price on
the date the Buy-Out Offer was made and the Partnership were then
immediately dissolved in accordance with Section 10.2. The General Partners
hereby agree to use their best efforts to cause the Appraisal Procedure to
be completed within ninety (90) days after it has been initiated. The
General Partner receiving a Buy-Out Offer (a "Buy-Out Offeree") shall,
within 30 days of the determination of the Aggregate Purchase Price in
accordance with the Appraisal Procedure, either (a) accept the Buy-Out
Offer on behalf of itself and its Affiliates who own Partnership Interests
or (b) agree to purchase all (but not less than all) of the Partnership
Interests of the Buy-Out Offeror and its Affiliates upon the foregoing
terms and using the same Aggregate Purchase Price as was determined in
accordance with the Appraisal Procedure to determine the amount owing to
each selling Partner. The failure of any Partner receiving a Buy-Out Offer
to respond to such Buy-Out Offer within such 30-day deadline of its receipt
thereof, either agreeing to accept such Buy-Out Offer on behalf of itself
and its Affiliates or by agreeing to purchase all (but not less than all)
of the Partnership Interest of the Buy-Out Offeror and its Affiliates on
the foregoing terms, shall constitute (without any further action by the
Buy-Out Offeror, the receiving General Partner or any other Partner) an
irrevocable acceptance of such Buy-Out Offer by the receiving General
Partner binding on and enforceable against such General Partner and its
Affiliates.
(b) Any purchase of Partnership Interests required pursuant to
subsection 11.2(a) shall be made through the redemption of such Partnership
Interests by the Partnership; provided, however, that if such redemption is
prohibited by the Project Loan
-35-
<PAGE>
Documents, such purchase shall be made directly by the purchasing General
Partner. The closing date for any such purchase shall be on the date set by
the purchasing General Partner which may be at any time within 180 days of
the acceptance of a Buy-Out Offer or agreement to purchase, as the case may
be. In the event the purchasing General Partner does not close the purchase
within such 180-day period, then the purchasing General Partner's right to
purchase Partnership Interests under Section 11.2(a) shall at the close of
business on such 180th day terminate and the other General Partner shall
thereafter have the right to purchase the Partnership Interests of the
purchasing General Partner and its Affiliates at a price determined by
using the same Aggregate Purchase Price and such other General Partner
shall have 180 days immediately following the expiration of the initial 180
day period in which to close such purchase. The price to be paid to each
selling Partner shall be paid by the purchasing General Partner in
immediately available funds at the closing.
ARTICLE XII
MISCELLANEOUS
12.1 Distributions and Notices. Distributions hereunder shall be sent, and
notices required or permitted hereunder shall be in writing and shall be sent,
to the address set forth for each Partner in signature pages hereof, or at such
other address as may be supplied by written notice given in conformity with the
terms of this Section 12.1. Notices to the Management Committee shall be sent
care of all Partners who have a right to designate members of the Management
Committee. Any notice required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given and/or delivered (a) when
personally delivered, (b) when sent by telefax and receipt is acknowledged via
telephone or otherwise as confirmation of such receipt but only if the sender
obtains a printed confirmation of the receipt by the recipient of the entire
document, (c) the second day following the day on which the same has been
delivered prepaid to a reputable overnight courier service providing proof of
receipt but only if sent for next business day delivery or (d) five (5) days
after the deposit in the United States mails, registered or certified, return
receipt requested and postage prepaid, in each case addressed to the party to
whom such notice is to be given at the address set forth on the signature pages
hereof), or at the most recent address(es) specified by written notice given to
the other party in the same manner provided in this section; provided, however,
that notice of an address change shall not be effective until actually received.
Distributions shall be deemed given only upon the receipt thereof by a Partner.
12.2 Disclosure Obligations. The Partnership hereby covenants and agrees
for the benefit of Cogentrix GP and VF Delaware that it shall (a) notify
Cogentrix GP and VF Delaware of any material fact necessary in order to make any
of the representations, warranties or other statements made by it in the Project
Documents, or any other written statement provided to Cogentrix GP or VF
Delaware not misleading and (b) disclose in writing to Cogentrix GP and VF
Delaware any fact which materially adversely affects, or which could reasonably
be expected in the future to materially adversely affect Cogentrix GP, VF
Delaware or the Project, in each case under clause (a) or (b) above promptly
upon receiving knowledge of any such fact.
-36-
<PAGE>
12.3 Successors and Assigns. Subject to the restrictions on transfer set
forth herein, this Agreement, and, each and every provision hereof, shall be
binding upon and shall inure to the benefit of the Partners, their respective
successors, successors-in-title, heirs and assigns, and each and every
successor-in-interest to any Partner, whether such successor acquires such
interest by way of gift, purchase, foreclosure or by any other method, shall
hold such interest subject to all of the terms and provisions of this Agreement.
12.4 Amendments. This Agreement may not be released, discharged, amended or
modified in any manner except by an instrument in writing signed by a duly
authorized officer of each party hereto.
12.5 Partition. The Partners hereby agree that no Partner, nor any
successor-in-interest to any Partner, shall have the right while this Agreement
remains in effect to have the property of the Partnership partitioned, or to
file a complaint or institute any proceeding at law or in equity to have the
property of the Partnership partitioned, and each Partner, on behalf of itself,
its successors, representatives, heirs and assigns, hereby waives any such
right. It is the intention of the Partners that during the term of this
Agreement, the rights of the Partners and their successors-in-interest, as among
themselves, shall be governed by the terms of this Agreement, and that the right
of any Partner or successor-in-interest to assign, transfer, sell or otherwise
dispose of its interest in the Partnership shall be subject to the limitations
and restrictions of this Agreement.
12.6 No Waiver. No waiver of any right under this Agreement shall be deemed
effective unless contained in a writing signed by the party charged with such
waiver. The failure of any Partner to insist upon strict performance of a
covenant hereunder or of any obligation hereunder, irrespective of the length of
time for which such failure continues, shall not be a waiver of such Partner's
right subsequently to demand strict compliance. No consent or waiver to or of
any branch or default in the performance of any obligation hereunder, shall
constitute a consent or waiver to or of any other breach or default in the
performance of the same or any other obligation hereunder.
12.7 Entire Agreement. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof and
supersedes any and all prior agreements, understandings, promises and
representations made by either party to the other concerning the subject matter
hereof and the terms applicable hereto.
12.8 Captions. Titles or captions of articles, sections and subsections
contained in this Agreement are inserted only as a matter of convenience and for
reference, and in no way are intended to define, limit, extend or describe the
scope of this Agreement or the intent of any provision hereof.
12.9 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall for all purposes constitute one
Agreement, binding upon the Partners notwithstanding that all Partners may not
have signed the same counterpart.
-37-
<PAGE>
12.10 Applicable Law. This Agreement shall be deemed to have been entered
into and shall be construed and enforced in accordance with the laws of the
State of Delaware as applied to contracts made and to be performed entirely
within Delaware.
12.11 Severability. If any provision of this Agreement is or becomes or is
deemed invalid, illegal or unenforceable in any jurisdiction, (a) such provision
shall be construed or deemed amended to conform to applicable laws so as to be
valid and enforceable, or, if it cannot be so construed or deemed amended
without materially altering the intention of the parties hereto, it shall be
stricken, (b) the validity, legality and enforceability of such provision will
not in any way be affected or impaired thereby in any other jurisdiction and (c)
the remainder of this Agreement shall remain in full force and effect.
-38-
<PAGE>
IN WITNESS WHEREOF, the Partners have executed this Agreement as of the
date first above mentioned.
COGENTRIX OF MARFA, INC.,
as General Partner
By ___________________________________
Printed Name: Thomas F. Schwartz
Title: Vice President - Finance
and Treasurer
Address for Notices:
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273
Attention: General Counsel
Address for Distributions:
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273
Attention: Treasurer
VILLAGE FARMS OF DELAWARE, L.L.C.,
as General Partner
By: Agro Power Development, Inc.,
Managing Member
By ___________________________
Printed Name: J. Kevin Cobb
Title: Vice President
Address for Notices:
10 Alvin Court
East Brunswick, New Jersey 08816
Attention: Chief Financial Officer
Address for Distributions:
10 Alvin Court
East Brunswick, New Jersey 08816
Attention: Chief Financial Officer
-39-
<PAGE>
COGENTRIX GREENHOUSE INVESTMENTS,
INC., as Limited Partner
By ____________________________________
Printed Name: Thomas F. Schwartz
Title: Vice President - Finance
and Treasurer
Address for Notices:
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273
Attention: General Counsel
Address for Distributions:
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273
Attention: Treasurer
VILLAGE FARMS, L.L.C.
By: Agro Power Development, Inc.,
Managing Member
By ____________________________
Printed Name: J. Kevin Cobb
Title: Vice President
Address for Notices:
10 Alvin Court
East Brunswick, New Jersey 08816
Attention: Chief Financial Officer
Address for Distributions:
10 Alvin Court
East Brunswick, New Jersey 08816
Attention: Chief Financial Officer
-40-
<PAGE>
Schedule 1.1(a)
Calculation of Internal Rate of Return
Internal Rate of Return Calculation
The calculation of the Internal Rate of Return in connection with determining
the First Priority Return and Second Priority Return will be based upon the cash
inflows and cash outflows for Cogentrix GP and Cogentrix LP. The Internal Rate
of Return shall be computed utilizing Microsoft Excel software version 5.0. The
Internal Rate of Return shall be computed utilizing the @XIRR function in Excel.
For purposes of calculating the Internal Rate of Return, the cash inflows and
cash outflows to Cogentrix GP and Cogentrix LP shall consist solely of the
following:
Partner Contributions
All contributions made by Cogentrix GP and Cogentrix LP will be reflected
as a cash inflow as of the date such contribution was received by the
Partnership. Cogentrix GP and Cogentrix LP will be credited for a partner
contribution at any time such Partner funds cash into the Partnership. In
addition, to the extent Cogentrix Energy, Inc. or any of its Affiliates
funds cash directly into the Partnership or pays amounts to other persons
to fulfill obligations under the Agreement or any of the Project Documents
or Project Loan Documents or incurs costs or fees associated with securing
an obligation to make a contribution to the Partnership, then such funding
into the Partnership or such other payments and/or such costs or fees will
be deemed a capital contribution by Cogentrix GP and Cogentrix LP as of the
day on which such funding or payment is made or such costs or fees are
incurred.
Distributions to Partners
All cash distributions will be reflected as a cash outflow on a net
After-Tax basis (based on allocations of the Partnership's taxable income
(loss) in accordance with Section 4.1) as of the date such cash
distribution was received by the Partner.
The Internal Rate of Return calculation shall be performed by Agro Power as of
the end of each calendar quarter and is subject to the approval of Cogentrix GP
and Cogentrix LP.
All capitalized terms used in this Schedule 1.1(a) and not otherwise defined
herein shall have the meaning set forth in this Agreement.
<PAGE>
Schedule 1.1(c)
Project Documents
1. The West Texas Utility Company Agreement for Electric Service dated as of
March 13, 1997 and as supplemented on March 13, 1997 with the Economic
Development Rider by and between Agro Power, which is assigning its
interest therein to the Partnership, and West Texas Utilities.
2. The Standby/Supplemental Water Contract signed March 13, 1997 to be
effective September 1, 1997 by and between Agro Power, which is assigning
its interest therein to the Partnership, and the City of Marfa, Texas, a
municipal corporation under the laws of the State of Texas within Presidio
County, Texas.
3. The Lease Agreement dated March 14, 1997 by and between Agro Power, which
is assigning its interest therein to the Partnership, and the County of
Presidio, Texas acting by and through its duly authorized governing body,
the Presidio County Commissioners Court.
4. The Gas Sales Contract dated June 16, 1997 between Agro Power, which is
assigning its interest therein to the Partnership, and Southwest Texas
Municipal Gas Corporation, a Texas non-profit corporation operating as a
municipal utility.
<PAGE>
Schedule 6.3
Initial Officers of the Partnership
Name Title
- - ---- -----
Michael A. DeGiglio President
Thomas F. Schwartz Vice President
Albert Van Zeyst Vice President
J. Kevin Cobb Vice President
Michael Minerva Vice President
Lawrence J. Howard Treasurer
Dennis W. Alexander Secretary
Lori T. Hladik Assistant Secretary
Eilene M. Beck Assistant Secretary
Exhibit 10.72
Execution Draft
MANAGEMENT, OPERATION AND
MAINTENANCE CONTRACT
BETWEEN
VILLAGE FARMS OF DELAWARE, L.L.C.
AND
VILLAGE FARMS OF MARFA, L.P.
JUNE 4, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
ARTICLE I
<S> <C>
DEFINITIONS........................................................................................ 1
ARTICLE II
SCOPE OF DUTIES.................................................................................... 3
Section 2.01. Performance of Start-up, Operation and Maintenance...................... 3
Section 2.02. Personnel............................................................... 4
Section 2.03. Facility Manager........................................................ 4
Section 2.04. Business Plan and Budget................................................ 4
Section 2.05. Performance Standards................................................... 4
ARTICLE III
OPERATION.......................................................................................... 4
Section 3.01. Operation............................................................... 4
Section 3.02. Compliance With Governmental Rules...................................... 5
Section 3.03. Obligations of Owner.................................................... 5
Section 3.04. Greenhouse Products..................................................... 5
Section 3.05. Maintenance............................................................. 5
Section 3.06. No Obstruction.......................................................... 6
ARTICLE IV
COMPENSATION AND PAYMENT........................................................................... 6
Section 4.01. Basic Compensation...................................................... 6
Section 4.02 Debt Service Coverage Ratio Test........................................ 7
ARTICLE V
REPRESENTATIONS AND WARRANTIES..................................................................... 7
Section 5.01. Representations and Warranties of the Manager........................... 7
ARTICLE VI
COVENANTS OF THE MANAGER........................................................................... 7
Section 6.01. Operating Logs: Records and Audits...................................... 7
Section 6.02. Insurance of the Owner.................................................. 7
Section 6.03. Employment Practices.................................................... 8
Section 6.04. Nondisclosure........................................................... 8
Section 6.05. Compliance With Governmental Rules...................................... 9
ARTICLE VII
GENERAL LIABILITY.................................................................................. 9
Section 7.01. Indemnification......................................................... 9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE VIII
<S> <C>
DEFAULTS AND REMEDIES.............................................................................. 9
Section 8.01. Defaults................................................................ 10
Section 8.02. Damages for Termination Without Cause................................... 10
ARTICLE IX
TERM............................................................................................... 10
Section 9.01. Term.................................................................... 10
ARTICLE X
MISCELLANEOUS...................................................................................... 10
Section 10.01. Notices................................................................. 10
Section 10.02. Severability............................................................ 11
Section 10.03. Amendment............................................................... 11
Section 10.04. Assignment.............................................................. 11
Section 10.05. Relationship of the Parties............................................. 11
Section 10.06. Headings; Etc........................................................... 12
Section 10.07. Governing Law........................................................... 12
Section 10.08. Parties in Interest; Limitation and Rights of Others.................... 12
Section 10.09. Arbitration............................................................. 12
</TABLE>
<PAGE>
MANAGEMENT, OPERATION AND MAINTENANCE CONTRACT
Village Farms of Marfa, L.P. (the "Owner") intends to construct and operate
an approximate 41 acre greenhouse (the "Greenhouse"). The Greenhouse will be
manufactured and constructed by Dalsem Kasenbouw B.V. (the "Contractor"), Agro
Power Development, Inc. (the "General Contractor") and the Owner. Village Farms
of Delaware, L.L.C. (the "Manager") and the Owner have entered into this
Management, Operation and Maintenance Contract dated as of June 4, 1997 to
operate, maintain and manage the Greenhouse.
In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, and in
reliance upon the representations and warranties of each party set forth herein,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms when used herein shall have the following meanings:
"Affiliate" of any Person shall mean each Person which, directly or
indirectly, controls or is controlled by or is under common control with such
designated Person and, without limiting the generality of the foregoing, shall
include (a) any Person which beneficially owns or holds ten percent (10%) or
more of any class of voting securities of such designated Person or ten percent
(10%) or more of the equity interest in such designated Person and (b) any
Person of which such designated Person beneficially owns and holds ten percent
(10%) or more of any class of voting securities or in which such designated
Person beneficially owns or holds ten percent (10%) or more of the equity
interest. For the purposes of this definition, the terms "controls", "controlled
by", and "under common control with", as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person whether through the
ownership of voting securities or by contract or otherwise.
"Business Day" shall mean any day other than Saturday, Sunday or other day
on which banks are authorized to be closed in Texas, New York, North Carolina,
or New Jersey.
"Business Plan and Budget" shall mean the business plan and budget prepared
annually or more often by Manager setting forth the items described in Section
2.04.
"Capital Assets" shall mean all reusable equipment and components used in
the operation of the Greenhouse.
"Codes and Standards" shall mean the applicable national, state and local
engineering construction, building and safety codes and standards from time to
time in effect governing the construction and operation of the Greenhouse.
"Contract" shall mean this document and any exhibits and appendices hereto
as amended from time to time.
-1-
<PAGE>
"Contract Year" initially shall be the period ending on December 31 next
following the Date of Initial Services and each calendar year thereafter.
"Credit Agreement" shall mean the Credit Agreement to be entered into
between Owner and the Lender, as the same may be amended, modified or
supplemented from time to time.
"Date of Initial Services" shall mean that date, as agreed upon by the
Manager and the Owner, which is sixty (60) days prior to the date of Phase I
Substantial Completion under the Commercial Greenhouse Design and Construction
Contract, dated March 31, 1997, by and between Contractor and General
Contractor, as same may be amended, modified or supplemented from time to time.
"Facility Manager" shall mean the person described in Section 2.03.
"Governmental Rule" shall mean any law, rule, regulation, ordinance, order,
code, interpretation, judgment or similar norm or decision of any Federal,
state, local or foreign government, authority, agency, court or other body or
entity having jurisdiction over the Site including the Codes and Standards.
"Greenhouse Construction Agreement" shall mean the Commercial Greenhouse
Design and Construction Contract, dated March 31, 1997, for the construction of
the Greenhouse by and between the Contractor and the General Contractor as
assigned to the Owner and as supplemented, modified and amended through the date
hereof.
"Lender" shall mean Village Farms International Finance Association and its
successors and assigns.
"Marketing Agent" shall be Village Farms, L.L.C. for the term and to such
extent as described in the Marketing and Sales Agreement between the Owner and
Village Farms, L.L.C., dated of even date herewith.
"Marketing and Sales Agreement" shall mean the Marketing and Sales
Agreement between the Owner and Village Farms, L.L.C., dated of even date
herewith.
"Operating Costs" shall mean the sum (without duplication) of (a) direct
labor costs paid, (b) seed expense paid, (c) packaging supplies expense paid,
(d) fertilizer and chemical expenses paid, (e) biological control, including
bees, expense paid, (f) freight expense paid, (g) growing medium and supplies
expense paid, (h) carbon dioxide expense paid, (i) utility (including hot water,
electricity and natural gas) expense paid, (j) compensation paid to the Manager
hereunder, (k) insurance premiums and property taxes paid, (1) principal and
interest paid with respect to the Credit Agreement and (m) all other cash
expenses paid relating to the operation of the Greenhouse, to the extent
contained in the Business Plan and Budget.
"Party" shall mean Owner or the Manager, or any of them, as appropriate,
and their successors and permitted assignees.
"Payroll Costs" shall mean the salaries payable to employees of the Manager
performing the Work at the Site.
-2-
<PAGE>
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
government or agency or political subdivision thereof.
"Product" shall mean all production derived from the Greenhouse, which
shall initially consist of tomatoes.
"Revenues" shall mean the gross proceeds derived from the sale of the
Product, plus interest income, and any and all other types of income received by
the Owner, less allowances, returns, and amounts received with respect to
freight and transportation charges, and excluding insurance proceeds.
"Site" shall mean the Greenhouse and its grounds located at the Southern
Quadrant of the Marfa Municipal Airport, Marfa, Presidio County, Texas.
"Term" shall mean the period provided for in Section 9.01 hereof.
"Uncontrollable Force" shall mean any of the following which are beyond the
reasonable control of a Party and which materially impairs the performance by
such Party of its duties and obligations hereunder and such material impairment
continues for a period of more than thirty (30) days: (a) severe weather, flood,
fire, lightning or other natural disaster or act of God, (b) earthquake or
subsidence, whatever its cause, (c) strikes or other labor disturbances, whether
or not involving employees of a Party, (d) action or inaction by, or inability
to obtain authorization or approval from, any governmental agency or authority,
which a Party is unable, after its best efforts, to overcome, (e) compliance
with any Governmental Rule, (f) war (whether declared or not), sabotage, act of
a public enemy, insurrection, riot or civil disturbance, (g) defects in material
equipment necessary for performance of the Contract, (h) any act by another
party (other than the Party claiming Uncontrollable Force, any Affiliate of such
Party or the respective agents, servants or employees of such Party or
Affiliates) or (i) any other similar act.
"Work" shall mean all duties and responsibilities of the Manager under this
Contract.
ARTICLE II
SCOPE OF DUTIES
Section 2.01. Performance of Start-up, Operation and Maintenance. As more
specifically described in Articles III and IV, the Manager shall furnish, manage
and supervise all personnel necessary in connection with the design, start-up,
operation, maintenance, service and repair of the Greenhouse. Commencing on the
Date of Initial Services, the Facility Manager (as defined herein in Section
2.03) shall be available on the Site to provide consulting services to the
Contractor in its construction of the Greenhouse and to prepare the Greenhouse
for production. Prior to the Date of Initial Services and upon witnessing all
performance testing, the Manager shall inspect the Greenhouse, and unless the
manager submits in writing to Owner a report setting forth any defects in the
design or construction of the Greenhouse within thirty (30) days after the Date
of Initial Services and upon witnessing all performance testing, the Manager
will be deemed to have accepted the Greenhouse. Any defects in the design or
construction of the Greenhouse or in any equipment therein reasonably
discoverable by the Manager through such inspection shall not be grounds for
claiming Uncontrollable Force after acceptance of the
-3-
<PAGE>
Greenhouse by the Manager. The marketing and distribution of the Product shall
be the primary responsibility of Village Farms, L.L.C. as defined in the
Marketing and Sales Agreement.
Section 2.02. Personnel. The Manager shall dedicate to the performance of
the Contract such administrative, technical and supervisory personnel (each of
whom will be properly trained and qualified to undertake their respective
assigned duties) and support systems and services as are necessary or desirable
to (i) assure start-up and commissioning of the Greenhouse, (ii) instruct the
Owner and its employees in the proper operation of the Greenhouse, and (iii)
perform Manager's responsibilities under this Contract.
Section 2.03. Facility Manager. The Manager shall identify one competent
individual to act in the capacity of Facility Manager. The Facility Manager
shall be responsible on a day-to-day basis for the operations and performance of
the Greenhouse. The selection and continued employment of the Facility Manager
in the performance of the Greenhouse Operations shall be subject to the approval
of Owner, which approval shall not be unreasonably withheld. The Facility
Manager shall be an employee of the owner.
Section 2.04. Business Plan and Budget. Prior to the date of Phase I
Substantial Completion under the Greenhouse Construction Agreement, the Manager
will provide to the Owner a preliminary Business Plan and Budget for the first
year of operations setting forth such information as the Owner shall reasonably
request. In addition, within forty-five (45) days prior to the Date of Initial
Services and within forty-five (45) days prior to December 31 of each year
thereafter, the Manager shall submit to the Owner the Business Plan and Budget
for the initial Contract Year and each Contract Year thereafter. The Business
Plan and Budget shall set forth in form and detail reasonably satisfactory to
Owner, the Manager's best estimate of Revenues and Operating Costs of the
Greenhouse for such Contract Year. Each Business Plan and Budget delivered
hereunder shall be subject to the approval of Owner. In the event the Owner does
not notify the Manager of its approval or disapproval of the Business Plan and
Budget within fourteen (14) days of its receipt of same, the Owner shall be
deemed to have approved such Business Plan and Budget.
Section 2.05. Performance Standards. The Manager shall be responsible for
the operating performance of the Greenhouse in accordance with the Business Plan
and Budget and in conformity with industry, professional and safety standards
and in a prudent and businesslike manner. The Manager shall be responsible for
the means, methods and techniques used in the operation of the Greenhouse. The
Manager shall maintain good order and discipline at the Greenhouse at all times
and shall take all reasonable precautions to protect the Greenhouse and its
contents (including, but not limited to, the Product) from damage and to protect
employees of Lender, Owner and the Manager and members of the public from injury
at the Site.
ARTICLE III
OPERATION
Section 3.01. Operation. During the period beginning on the Date of Initial
Services and ending at the expiration of the Term of this Contract, the Manager
shall use its best efforts to operate the Greenhouse (including, but not limited
to, the sowing, growing, harvesting and packaging of the Product) at its fullest
productive capacity in accordance with the Business Plan
-4-
<PAGE>
and Budget and in accordance with prudent agricultural economic practices and to
assist the Marketing Agent in its efforts to market the Product to derive the
greatest possible revenue therefrom. The Manager warrants that, during each
Contract Year, beginning with the Second Contract Year, that the operating
performance of the Greenhouse will be on a basis consistent with similar
greenhouses operated by the Manager in consideration of differences in size and
location of the other greenhouses.
Section 3.02. Compliance With Governmental Rules. The Manager shall at all
times operate the Greenhouse in accordance with all applicable Governmental
Rules (including, but not limited to, all environmental protection, hazardous or
toxic substances, pollution, waste, material handling, disposal, sanitary,
health, and safety laws, rules and regulations). The Manager shall be liable for
all fines, fees, penalties, damages or other costs imposed by a governmental
authority attributable to its willful acts or negligence (and the negligence of
its agents and employees) in connection with the operation, use or maintenance
of the Greenhouse.
Section 3.03. Obligations of owner. Throughout the Term of this Contract,
Owner shall supply to the Manager of the Greenhouse such personnel and Operating
Supplies as shall be mutually agreed upon by the Manager and Owner in the
Business Plan and Budget. The Manager shall be responsible for overseeing and
recording the use of all Operating Supplies and shall give owner reasonable
notice of its requirements for additional personnel and Operating Supplies not
set forth in the Business Plan and Budget, along with the reasons therefor. The
Manager shall be responsible for inspecting Operating Supplies furnished by
Owner, and any defects in such Operating Supplies reasonably discoverable by
Manager through such inspection, and which are capable of being corrected in a
reasonable timeframe, shall not be grounds for claiming Uncontrollable Force.
All personnel of the Greenhouse operation shall at all times be employees of
Owner. The Manager shall have the right to direct and instruct the employees of
Owner, and subject to Owner's approval, which will not be unreasonably withheld,
to hire and fire Owner's employees, as Manager considers necessary and desirable
for the operation of the Greenhouse.
Section 3.04. Greenhouse Products. It is contemplated by this Contract that
the Manager will use its best efforts to produce tomatoes in the Greenhouse in
accordance with the Business Plan and Budget. However, if in the opinion of the
Manager the Greenhouse operation can be made more profitable by the production
of produce more profitable than tomatoes, then the Manager, with the prior
written consent of Owner and the Lender, may produce a substitute product.
Section 3.05. Maintenance. The Manager shall have the responsibility of
directing the maintenance, service and repair of the Greenhouse (a) in material
accordance with industry standards of prudence, (b) in accordance with
specifications, directions, instructions and recommendations of the
manufacturers of the components thereof, (c) in accordance with all applicable
Governmental Rules (including, but not limited to, all environmental protection,
hazardous or toxic substances, pollution, waste, material handling, disposal,
sanitary, health, and safety laws, rules and regulations) and (d) to the extent
materially necessary to (i) maintain the Greenhouse in good operating condition
and repair, ordinary wear and tear excepted, (ii) cause the Greenhouse to
continue to have the capacity and functional ability to perform, on a continuing
basis, in normal commercial operation, the function for which it was
specifically
-5-
<PAGE>
designed, (iii) comply with any standards imposed by any insurer who has issued
any insurance policy or policies in effect at any time during this Contract with
respect to the Greenhouse or any part thereof and (iv) keep in full force and
effect any warranty with respect to the Greenhouse or any part thereof. The
Manager shall operate the Greenhouse in such a manner that at all times (a) the
Greenhouse and its surrounding grounds shall be free of litter (both organic and
non-organic), (b) waste materials (both organic and non-organic) will be
confined to areas designed and maintained for their storage and processing, (c)
the exterior appearance of the buildings and the landscaping surrounding the
Greenhouse shall be neat and orderly and (d) the interior of the Greenhouse will
be neat and clean. The Manager will identify potential maintenance problems and
recommend corrective actions in the Business Plan and Budget. All costs
associated with performing the aforementioned maintenance services will be the
responsibility of the Owner. The Manager will include its best estimate of such
costs in the Business Plan and Budget.
Section 3.06. No Obstruction. Until the termination of this Contract, Owner
shall not, either through its agents or employees, take any action that would
prevent the Manager from operating the Greenhouse in accordance with the
Contract nor take any action that would materially obstruct the Site or the
Greenhouse, unless such prevention or obstruction is caused by Uncontrollable
Force or by the Manager or any of its Affiliates or any of their respective
employees, servants or agents.
ARTICLE IV
COMPENSATION AND PAYMENT
Section 4.01. Basic Compensation. In consideration of the performance of
Manager's obligations under the Contract, Owner shall pay to the Manager the sum
of THREE HUNDRED THOUSAND DOLLARS ($300,000.00) per Contract Year (the
"Compensation") in twelve equal monthly installments beginning on the 1st day of
the second month following the Date of Initial Services and on each anniversary
thereafter. For the period from the Date of Initial Services through the first
day of the month following the Date of Initial Services, the Manager shall be
entitled to a fee equal to the product of (i) the Compensation and (ii) a
fraction which shall be the number of weeks of such period divided by 52, such
amount to be payable on the first day of the month following the Date of Initial
Services. Such compensation will be adjusted each January 1 of each Contract
Year by the same percentage change in the Consumer Price Index ("CPI"), provided
the adjustment shall not cause the Compensation to be less than the current
Contract Year's Compensation. If for any reason the Manager is unable to perform
its obligations hereunder except as a result of termination of this Contract
because of a default by the Manager hereunder, then the Manager shall be
entitled to the continuation of the Compensation as though the Contract had been
performed by the Manager, provided however, that in the event that the Manager
or owner is unable to perform its obligations under this Contract because of an
Uncontrollable Force, then the Compensation shall be discontinued at any time
after the later of, the first anniversary of the event creating the
Uncontrollable Force or the date on which the Manager's continued performance
was disrupted. In the event this Agreement has been terminated, and in the event
the Manager may have received Compensation to which it was not entitled, said
overpayment of Compensation shall be immediately due and payable to the Owner,
upon the determination of such overpayment.
-6-
<PAGE>
Section 4.02. Debt Service Coverage Ratio Test. The provisions of this
Section 4.02 shall remain in effect only for so long as the Owner is party to
any loan agreement with the Lenders. In the event Owner's debt service coverage
ratio as defined in the Credit Agreement ("DSCR") for any calendar year falls
below 1.5, then, in that event, no Compensation shall be paid for any portion of
that calendar year, however, the right to Compensation shall accrue, provided
the DSCR is greater than 1.0, and shall be paid to the Manager in one sum,
immediately following Owner's achievement of a DSCR of at least 1.5. In the
event that Compensation was paid for any portion of the calendar year during
which Owner's actual DSCR fell below 1.5 those payments shall be deducted from
future payments due the Manager hereunder, until the Owner has recouped same.
Immediately upon the Owner achieving a DSCR of 1.5, any payments which were
withheld or recouped by Owner due to a DSCR between 1.0 and 1.5, shall be paid
to the Manager in one sum. The Owner's DSCR shall be measured as of December 31
of each year during the term of this Contract.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01. Representations and Warranties of the Manager. The Manager
represents and warrants to Owner that both it and the Facility Manager have
substantial experience in the start-up, operation and management of the
maintenance, service and repair of facilities similar to the Greenhouse. The
Manager is a limited liability company organized and validly existing under the
laws of the State of Delaware. The Manager's execution and delivery of this
Contract and the performance of its obligations hereunder have been duly
authorized by all requisite action on the part of the Manager and this Contract
constitutes the Manager's legal, valid and binding obligation, enforceable
against the Manager in accordance with its terms. The Manager's execution and
delivery of this contract and the performance of its obligations hereunder will
not conflict with, violate or result in a default under the Manager's
certificate of formation or operating agreement or any mortgage, indenture,
agreement, instrument or other contract to which the Manager is a party or by
which the Manager is bound.
ARTICLE VI
COVENANTS OF THE MANAGER
Section 6.01. Operating Logs: Records and Audits. The Manager shall
maintain for the benefit of Owner daily operating logs showing the production
and sales from the Greenhouse and shall prepare maintenance and repair reports
in detail sufficient to indicate the nature of all maintenance and repairs
performed. The Manager shall also maintain such records and books of accounts as
are appropriate for the proper management of the Greenhouse and all transactions
related thereto. All such books, records and reports shall be the sole and
exclusive property of the Owner, and the Manager shall keep such books and
records in such place or places so as to provide Owner (and its authorized
representatives) with maximum access thereto and the ability to make copies
thereof.
Section 6.02. Insurance of the Manager. At all times during the operation
of the Greenhouse, the Manager shall maintain the following types and amounts of
insurance, with insurers acceptable to the Owner and the Lender:
-7-
<PAGE>
(a) Workers' Compensation Insurance (including employer's liability
insurance) covering personnel of the Manager in connection with this contract,
subject to the laws of Texas;
(b) Primary Comprehensive General Liability Insurance for bodily injury
and/or property damage arising from the Work, subject to a combined single limit
of $1,000,000 per occurrence;
All insurance policies procured and maintained pursuant to this Section
6.02 shall contain a clause requiring the insurer and the Manager to notify
Owner and the Lender in writing 45 days prior to any cancellation or expiration
thereof or any amendment thereto. Prior to the Date of Initial Services the
Manager shall furnish Owner and the Lender a certificate of insurance certifying
that the insurance coverage required pursuant to this Section 6.02 is in effect.
During the Term of this Contract, Owner shall keep the Facility (including
the Greenhouse and all equipment therein) and the Site insured against such
risks and in such amounts as are reasonably required by the Lender.
The cost of insurance required pursuant to this Section 6.02 shall be born
solely by the manager. Each such policy shall name the Lender and the Owner (in
the case of (a) and (b) above) as an additional insured.
Section 6.03. Employment Practices. The Manager shall comply with the
applicable requirements of Executive Orders Nos. 11246 (Equal Opportunity and
Certification of Nonsegregated Facilities), 11701 (Affirmative Action for
Disabled Veterans and Handicapped of the Viet Nam Era), 11758 (Affirmative
Action for Handicapped Workers), 11458 and 11625 (Minority Business Enterprise)
and all other Governmental Rules relating to employment practices to the extent
applicable.
Section 6.04. Nondisclosure. All reports, records and other information
related to the Site, the Greenhouse, the operations of the Owner, and the
performance of the Manager of its duties hereunder shall not be used by the
Manager for any purposes other than those contemplated hereby or pursuant to the
written consent of the Owner and shall not be disclosed by the Manager to any
other party or any other person or entity except with the prior written consent
of the Owner. Furthermore, the Manager shall not copy or reproduce any such
information without the written consent of the Owner (other than such reasonable
copies as may be necessary to perform its duties and obligations under this
Agreement). The Manager shall also take reasonable precautions to ensure against
any breach of the obligations contained herein which shall be no less stringent
than the precautions and procedures that it uses to protect its own proprietary
information and which shall, at a minimum, be deemed to include, without
limitation, taking precautions to ensure that it will only make such information
available to those of its employees who have a need to know it. Upon the
expiration or termination of this Agreement, Manager shall immediately return to
the Owner all such information and all whole or partial copies thereof and all
other materials that may include, in whole or in part, such information. All
rights, whether arising under copyright, patent, trade secret, or other laws, to
such information are hereby reserved by the Owner.
-8-
<PAGE>
Section 6.05. Compliance With Governmental Rules. The Manager shall at all
times perform its other duties and obligations hereunder in accordance with all
applicable Governmental Rules. The Manager shall be liable for all fines, fees,
penalties, damages or other costs imposed by a governmental authority
attributable to its and/or its agents, servants and employees) in connection
with the performance of its other duties and obligations hereunder.
ARTICLE VII
GENERAL LIABILITY
Section 7.01. Indemnification. The Manager shall indemnify and save
harmless Owner and Lender, and their respective directors, officers, agents, and
employees from and against (i) any and all loss, damage, injury, liability and
claims thereof for injury to or death of a person, including, but not limited
to, personnel of the Manager, Lender and Owner, (ii) any and all loss of or
damage to property and (iii) any and all loss of income by the Owner, resulting
from the Manager's performance of this Contract to the extent the same is caused
by the negligence or willful misconduct of the Manager, any of its Affiliates,
or any of their respective directors, officers, agents or employees. Owner shall
indemnify and save harmless the Manager and Lender, and their respective
directors, officers, agents, and employees from and against (i) any and all
loss, damage, injury, liability and claims thereof for injury to or death of a
person, including personnel of Owner, Lender and the Manager, (ii) any and all
loss of or damage to property, and (iii) any and all loss of income by the
Manager, resulting from the Owner's performance of this Contract to the extent
the same is caused by the negligence or willful misconduct of the Owner, any of
its Affiliates, or any of its directors, officers, agents or employees.
ARTICLE VIII
DEFAULTS AND REMEDIES
Section 8.01. Defaults. Upon the failure of any Party to substantially
comply with any of the obligations of such Party hereunder and continued
noncompliance for a period of 30 days (except in the case where such failure
will result in injury to or damage or loss of perishable Product, in which case
the cure period shall be five (5) days) after written notice of the
noncompliance is sent to such Party, the non-defaulting Party may, at its
option, by written notice to the defaulting Party, declare this Contract to be
in default and at any time thereafter the non-defaulting Party may, at its sole
discretion, (a) exercise any right or pursue any remedy that may be available
under applicable law or proceed by appropriate court action to enforce the terms
hereof or to recover damages for the breach hereof and (b) terminate this
Contract. The exercise of any rights or pursuit of any remedies pursuant to this
Contract shall not relieve the defaulting Party of any of its obligations and
liabilities hereunder, all of which shall survive such exercise or pursuit. To
the extent permitted by law, and subject to any mandatory requirements of
applicable law, and further subject to Section 8.02 herein, each and every
right, power and remedy herein specifically given to the non-defaulting Party or
otherwise in this Contract shall be cumulative and shall be in addition to every
other right, power and remedy herein specifically given, or now or hereafter
existing at law, equity or by statute and each and every right, power and remedy
whether specifically herein given or otherwise existing may be exercised or
pursued from time to time and as of ten in such order as may be deemed expedient
by the non-defaulting Party, and the exercise or pursuit or the beginning of the
exercise or pursuit of any right, power
-9-
<PAGE>
or remedy shall not be construed to be a waiver of the right to exercise or to
pursue at any time or thereafter any other right, power or remedy. No delay or
admission by a Party in the exercise of any right or power or in the pursuit of
any remedy may impair any such right, power or remedy or be construed to be a
waiver of any default on the party of the other Party or to be an acquiescence
therein. No expressed or implied waiver by a Party of any default hereunder
shall in any way be, or be construed to be, a waiver of any future or subsequent
default hereunder. Neither Party shall be considered to be in default for
failure to perform, or delay in performing, any obligation under this Contract
if performance is prevented, hindered or delayed by an Uncontrollable Force (but
only for so long as such Uncontrollable Force continues unabated). In such
event, the Party which is unable, or anticipates being unable, to perform shall
(a) promptly notify the other Party in writing of the nature, cause, date of
commencement and expected duration of any such delay, (b) indicate to what
extent it will be prevented from performing and (c) exercise due diligence to
overcome such inability to perform with all reasonable dispatch. In the event a
Party claims excuse of performance as a result of an Uncontrollable Force which
continues unabated for more than one hundred twenty (120) days, the Party that
is not affected by such Uncontrollable Force shall have the option to terminate
this Agreement on written notice to the other Party.
Section 8.02. Damages for Termination Without Cause. Notwithstanding
anything to the contrary in Sections 4.01 or 8.01, the Parties agree that should
Owner elect to terminate the Agreement without cause at any time, pursuant to
Section 9.01 herein, then Owner shall pay as liquidated damages to the Manager a
sum equal to one-fourth (1/4) of the annual amount of Compensation in effect at
such early termination, which shall be Owner's sole and exclusive liability and
Manager's sole and exclusive remedy, for such early termination without cause.
ARTICLE IX
TERM
Section 9.01. Term. Subject to Article VIII and Section 3.01, this Contract
shall continue to be in effect for fifteen (15) years from the Date of Initial
Services; provided, however that the Term may be extended for additional periods
on terms acceptable to both Parties, such terms to be agreed upon not later than
three months prior to the expiration of the Term. Notwithstanding the foregoing,
the Owner shall be permitted to terminate this Contract, with or without cause,
upon ninety (90) days written notice to the Manager, subject to the terms of the
Credit Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.01. Notices. Unless otherwise specifically provided herein, all
notices, requests and demands and other communications hereunder must be in
writing and shall be deemed to have been duly given (i) when delivered
personally, (ii) when sent by telefax to the telefax number below and followed
by a confirmation transmitted by an additional mode of communication provided
for herein, (iii) the second day following the day on which the same has been
delivered prepaid to a national (only in the case of notices within the
continental United States) or an international air courier service, or (iv) when
received if sent by the mails, certified
-10-
<PAGE>
or registered, postage prepaid, in each case addressed to the party to whom such
notice is being given at the following addresses:
OWNER: Village Farms of Marfa, L.P.
c/o Agro Power Development, Inc. 10 Alvin Court
East Brunswick, NJ 08816
Attention: President
Telefax: 908-254-1710
and
Village Farms of Marfa, L.P.
c/o Cogentrix of Marfa, Inc.
9405 Arrowpoint Boulevard
Charlotte, NC 28273
Attention: General Counsel
Telefax: 704-529-1006
MANAGER: Village Farms of Delaware, L.L.C.
10 Alvin Court
East Brunswick, NJ 08816
Attention: President
Telefax: 908-254-1710
Any party may change the address(es) to which notices to it are to be sent by
giving notice of such change to the other parties in accordance with this
Section.
Section 10.02. Severability. Any provision of this Contract that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction. To the extent permitted
by applicable law, the Manager and Owner hereby waive any provision by law that
renders any provision hereof prohibited or unenforceable in any respect.
Section 10.03. Amendment. Neither this Contract nor any other terms hereof
may be terminated, amended, supplemented, waived or modified orally, but only by
an instrument in writing signed by the Party against which enforcement of the
termination, amendment, supplement, waiver or modification shall be signed.
Section 10.04. Assignment. Neither Party may assign any of their respective
rights under this Contract without the prior written consent of the other Party;
provided, however, that Owner may assign its rights hereunder to the Lender. Any
assignment not permitted by this Section 10.04 shall be void.
Section 10.05. Relationship of the Parties. It is agreed and understood by
the Parties that the Manager is an independent contractor with respect to Owner.
No action, admission or
-11-
<PAGE>
instruction shall be deemed to make the Manager an employee, agent or partner of
Owner or to create any other relationship among the Parties.
Section 10.06. Headings; Etc. The Table of Contents and headings of the
various articles and sections of this Contract are for the convenience of
reference only and shall not modify, define or limit any other terms and
provisions of this Contract.
Section 10.07. Governing Law. This Contract shall in all respects,
including all matters of construction, validity and performance, be governed by
and construed in accordance with the laws of the State of New York.
Section 10.08. Parties in Interest; Limitation and Rights of Others. The
provisions of this Contract shall be binding upon, and inure to the benefit of,
the Parties hereto and their respective successors and permitted assignees.
Nothing in this Contract, whether expressed or implied, shall be construed to
give any Person (other than the parties hereto and their respective successors
and permitted assignees) any legal or equitable right, remedy or claim under or
in respect of this Contract or any covenants, conditions or provisions contained
herein.
Section 10.09. Arbitration. (a) In the event a dispute arises between or
among the Parties relating to the terms of this Agreement and any Party gives
written notice of such dispute to the other Party, then each of the Parties
involved in such dispute shall refer the dispute to its senior management. The
senior management of each Party shall meet and confer regarding the resolution
of the dispute. In the event a resolution of such dispute is not reached within
30 days of the written notice, then either of the Parties may submit the dispute
to arbitration in accordance with Section 10.09.(b).
(b) Arbitration of disputes pursuant to this Section 10.09.(b) shall be
held in New York, New York unless otherwise agreed to by the Parties, under the
commercial arbitration rules of the American Arbitration Association, and shall
be heard by three arbitrators selected in accordance with such rules. Each
arbitrator shall have at least five years experience in the United States in a
profession or professions related to the subject matter involved in the dispute
and shall not be a past or present officer, director or employee of, or have any
interest in or material relationship with, any Partner or any Affiliate of any
Partner. Any arbitral award shall be final and binding and may be entered by any
Party in any state or Federal court having jurisdiction thereof. Costs of
arbitration (including reasonable attorney's fees and arbitration costs) shall
be paid either equally or by the Parties to the arbitration or in accordance
with the decision of the arbitrators.
-12-
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Contract to be duly
executed by the respective officers thereunto duly authorized as of the date and
year first above written.
VILLAGE FARMS OF DELAWARE, L.L.C.
By: Agro Power Development, Inc.,
its Managing Member
By:______________________________
Name: J. Kevin Cobb
Title: Senior Vice President
VILLAGE FARMS OF MARFA, L.P.
By:______________________________
Name: Thomas F. Schwartz
Title: Vice President
-13-
Exhibit 10.73
Execution Draft
MARKETING AND SALES AGREEMENT
BETWEEN
VILLAGE FARMS, L.L.C.
AND
VILLAGE FARMS OF MARFA, L.P.
JUNE 4, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS. ...................................................... 1
ARTICLE II
SCOPE OF DUTIES. .................................................. 3
Section 2.01. Performance Duties ..................... 3
Section 2.02. Personnel .............................. 3
Section 2.03. On-Site Supervisor ..................... 4
Section 2.04. Marketing Plan ......................... 4
Section 2.05. Performance Standards .................. 4
ARTICLE III
MARKETING and SALES ............................................... 4
Section 3.01. Marketing .............................. 4
Section 3.02. Village Farms Trademark ................ 5
Section 3.03. Quality Control ........................ 5
Section 3.04. Promotion .............................. 6
Section 3.05. Sales Price ............................ 6
Section 3.06. Billing and Collections ................ 6
Section 3.07. Packaging, Shipping
and Delivery ........................... 6
Section 3.08. Obligations of owner ................... 6
Section 3.09. Greenhouse Products .................... 7
Section 3.10 No Obstruction ......................... 7
ARTICLE IV
COMPENSATION AND PAYMENT .......................................... 7
Section 4.01. Basic Compensation ..................... 7
Section 4.02. Debt Service Coverage
Ratio Test ............................. 7
Section 4.03. Bonuses ................................ 8
Section 4.04. Payment of Bonuses ..................... 9
ARTICLE V
REPRESENTATIONS AND WARRANTIES .................................... 9
Section 5.01. Representations and
Warranties of the Marketing
Agent .................................. 9
ARTICLE VI
COVENANTS OF THE MARKETING AGENTS ................................. 10
Section 6.01. Books, Records and Reports. ............ 10
<PAGE>
Section 6.02. Employment Practices ................... 10
Section 6.03. Nondisclosure .......................... 10
Section 6.04. Compliance With
Governmental Rules ..................... 10
Section 6.05. Section 8 and
Section 15 Declarations ................ 11
Section 6.06. Section 9 Renewal ...................... 11
ARTICLE VII
GENERAL LIABILITY ................................................. 11
Section 7.01. Indemnification ........................ 11
ARTICLE VIII
DEFAULTS AND REMEDIES ............................................. 11
Section 8.01. Defaults ............................... 11
Section 8.02. Damages for Termination Without
Cause .......................... 12
ARTICLE IX
TERM .............................................................. 13
Section 9.01. Term ...................................... 13
ARTICLE X
MISCELLANEOUS ..................................................... 13
Section 10.01. Notices ................................ 13
Section 10.02. Severability ........................... 14
Section 10.03. Amendment .............................. 14
Section 10.04. Assignment ............................. 14
Section 10.05. Relationship of the
Parties ................................ 14
Section 10.06. Headings; Etc. ......................... 14
Section 10.07. Governing Law .......................... 14
Section 10.08. Parties in Interest;
Limitation and Rights
of Others .............................. 14
Section 10.09. Arbitration ............................ 15
<PAGE>
MARKETING AND SALES AGREEMENT
Village Farms of Marfa, L.P. (the "Owner") intends to construct and operate
an approximate 41 acre greenhouse in Presidio County, Texas (the "Greenhouse").
The Greenhouse will be manufactured and constructed by Dalsem Kasenbouw B.V.
(the "Contractor"), Agro Power Development, Inc. (the "General Contractor" or
"APD") and the Owner. Village Farms, L.L.C. (the "Marketing Agent") and the
Owner have entered into this Marketing and Sales Agreement dated as of June ___
1997 to market the produce grown at the Greenhouse.
In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, and in
reliance upon the representations and warranties of each party set forth herein,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms when used herein shall have the following meanings:
"Affiliate" of any Person shall mean each Person which, directly or
indirectly, controls or is controlled by or is under common control with such
designated Person and, without limiting the generality of the foregoing, shall
include (a) any Person which beneficially owns or holds ten percent (10%) or
more of any class of voting securities of such designated Person or ten percent
(10%) or more of the equity interest in such designated Person and (b) any
Person of which such designated Person beneficially owns and holds ten percent
(10%) or more of any class of voting securities or in which such designated
Person beneficially owns or holds ten percent (10%) or more of the equity
interest. For the purposes of this definition, the terms "controls", "controlled
by", and "under common control with", as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person whether through the
ownership of voting securities or by contract or otherwise.
"Agreement" shall mean this document and any exhibits and appendices hereto
as amended, modified or supplemented from time to time.
-1-
<PAGE>
"Business Day" shall mean any day other than Saturday, Sunday or other day
on which banks are authorized to be closed in Texas, New York, North Carolina,
or New Jersey.
"Contract Year" initially shall be the period ending on December 31 next
following the Date of Initial Services and each calendar year thereafter.
"Date of Initial Services" shall mean the later of September 1, 1997 or the
date of Phase I Substantial Completion under the Commercial Greenhouse Design
and Construction Contract, dated March 31, 1997 by and between Contractor and
General Contractor, as same may be amended, modified or supplemented from time
to time.
"Governmental Rule" shall mean any law, rule, regulation, ordinance, order,
code, interpretation, judgment or similar norm or decision of any Federal,
state, local or foreign government, authority, agency, court or other body or
entity having jurisdiction over the Site.
"Lender" shall mean Village Farms International Association and its
successors and assigns.
"License Agreement" shall mean the License Agreement dated February 13,
1996 between APD and the Marketing Agent, a copy of which is attached hereto as
Exhibit A, as same may be amended from time to time.
"Loan Agreement" shall mean the Loan Agreement to be entered into between
Owner and the Lender, as the same may be amended, modified or supplemented from
time to time.
"Manager" shall mean the person described in Section 2.01.
"Management Contract" shall mean the Management, Operation, and Maintenance
Contract of even date herewith between the Owner and the Manager, as same may be
amended, modified, or supplemented from time to time.
"Marketing Plan" shall mean the marketing plan prepared annually or more
often by Marketing Agent setting forth the items described in Section 2.04.
"On-Site Supervisor" shall mean the person described in Section 2.03.
-2-
<PAGE>
"Party" shall mean Owner or the Marketing Agent, or any of them, as
appropriate, and their successors and permitted assignees.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
government or agency or political subdivision thereof.
"Product" shall mean all production derived from the Greenhouse, which
shall initially consist of tomatoes.
"Revenues" shall mean the gross proceeds derived from the sale of the
Product, plus interest income, and any and all other types of income received by
the owner, less allowances, returns, and amounts received with respect to
freight and transportation charges, and excluding insurance proceeds.
"Site" shall mean the Greenhouse and its grounds located at the Southern
Quadrant of Marfa Municipal Airport, Marfa, Presidio County, Texas.
"Term" shall mean the period provided for in Section 9.01 hereof.
"Uncontrollable Force" shall mean any of the following which are beyond the
reasonable control of a Party and which materially impairs the performance by
such Party of its duties and obligations hereunder and such material impairment
continues for a period of more than thirty (30) days: (a) severe weather, flood,
fire, lightning or other natural disaster or act of God, (b) earthquake or
subsidence, whatever its cause, (c) strikes or other labor disturbances, whether
or not involving employees of a Party, (d) action or inaction by, or inability
to obtain authorization or approval from, any governmental agency or authority,
which a Party is unable, after its best efforts, to overcome, (e) compliance
with any Governmental Rule, (f) war (whether declared or not), sabotage, act of
a public enemy, insurrection, riot or civil disturbance, (g) defects in material
equipment necessary for performance of the Agreement, (h) any act by another
party (other than the Party claiming Uncontrollable Force, any Affiliate of such
Party or the respective agents, servants or employees of such Party or
Affiliates), or (i) any other similar act.
"Work" shall mean all duties and responsibilities of the Marketing Agent
under this Agreement.
-3-
<PAGE>
ARTICLE II
SCOPE OF DUTIES
Section 2.01. Performance of Duties. As more specifically described in
Article III, the Marketing Agent shall furnish, manage and supervise certain
personnel necessary in connection with the marketing, sale, and distribution of
the Product, in accordance with the terms of this Agreement. Commencing on the
Date of Initial Services, the Marketing Agent shall participate in the planning
and start-up of the Greenhouse. The On-Site Supervisor (as defined herein in
section 2.03) shall be available at the Site on a full time basis, commencing on
September 1, 1997. The operation of the Greenhouse and the production of the
Product shall be the primary responsibility of Village Farms of Delaware, L.L.C.
(the "Manager") as defined in the Management Contract.
Section 2.02. Personnel. The Marketing Agent shall make available for the
performance of its duties under the Agreement, sufficient personnel (each of
whom will be properly trained and qualified to undertake their respective
assigned duties) and support systems and services as are necessary or desirable
to assure the performance of Marketing Agent's responsibilities under this
Agreement.
Section 2.03. On-Site Supervisor. The Marketing Agent shall identify one
competent individual to act in the capacity of On-Site Supervisor. The On-Site
Supervisor shall be responsible on a day-to-day basis for the marketing and
sales of the Product and shall be supervised by the Marketing Agent. The
selection and continued employment of the On-Site Supervisor shall be subject to
the approval of owner, which approval shall not be unreasonably withheld. The
On-Site Supervisor shall be an employee of the Owner.
Section 2.04. Marketing Plan. Within thirty (30) days from receipt of a
copy of the preliminary business plan and budget for the first year of
operations of the Greenhouse, which is to be prepared by the Manager pursuant to
the Management, Operation and Maintenance Contract of even date herewith, and
approved by the Owner, the Marketing Agent will provide to the owner and the
Lender a preliminary Marketing Plan for the first year of operations which shall
include the strategy for marketing efforts for the upcoming year, target
customers and geographic areas for penetration, and such other information which
is customarily included in a produce marketing plan, and which will also set
forth such other information as the Owner may reasonably request. In addition,
within thirty (30) days after
-4-
<PAGE>
receipt by the Marketing Agent of each subsequent business plan and budget
prepared by the Manager (the "Business Plan"), which Business Plan is to be
submitted by the Manager forty-five (45) days prior to December 31 of each year
(except for the first Contract Year), the Marketing Agent shall submit to the
Owner, with a copy to the Lender, the Marketing Plan for the next succeeding
Contract Year corresponding to the year covered by such Business Plan. The
Marketing Plan shall always be prepared in conjunction with the Business Plan
and shall set forth in form and detail reasonably satisfactory to Owner, the
Marketing Agent's plans for such Contract Year. The Marketing Plan shall be
subject to the approval of Owner, such approval not to be unreasonably withheld.
Section 2.05. Performance Standards. The Marketing Agent shall be
responsible for the sales of the Greenhouse produce in accordance with the
Marketing Plan. The Marketing Agent shall be responsible for the means, methods
and techniques used in the marketing and sale of the produce of the Greenhouse.
ARTICLE III
MARKETING AND SALES
Section 3.01. Marketing. During the period beginning on the Date of Initial
Services and ending at the expiration of the Term of this Agreement, the
Marketing Agent shall use its best efforts to market all the Product of the
Greenhouse in accordance with the Marketing Plan in order to derive the greatest
possible Revenues therefrom. The Marketing Agent warrants that, during each
Contract Year, it will sell One Hundred (100%) Percent of the Premium Quality
tomatoes produced by the Greenhouse in accordance with the terms and conditions
of this Agreement and the Marketing Plan (as it is updated from time to time).
Section 3.02. Village Farms Trademark. Village Farms is a trademark
registered with the U. S. Patent and Trademark Office, owned by APD, a New York
Corporation, an affiliate of the Marketing Agent. APD has authorized the use of
the Village Farms trademark by the Marketing Agent and the owner in conjunction
with this Agreement. The Owner hereby acknowledges that the Marketing Agent
and/or APD has full right and authority to the unlimited use of this trademark
on behalf of themselves and other producers located throughout the United States
and abroad, and that the trademark is not limited to use in conjunction with
tomatoes, but may be used for any other type of produce, at APD's and the
Marketing Agent's discretion. All
-5-
<PAGE>
Premium Quality tomatoes produced by the Greenhouse will be labeled and/or
otherwise identified by the Village Farms trademark, or such other name as
determined by the Marketing Agent (with the consent of the owner) which would
provide a greater profit to the Owner. Subject to the provisions of Section 9.01
herein, the owner shall have the right to use the trademark, Village Farms,
following the termination of this Agreement, until the Construction Loan
Maturity Date (as defined in the Loan Agreement) provided that (i) it pays the
Marketing Agent the sum of $100,000 per year, with the first payment due within
thirty (30) days prior to the effective date of the termination, and the
subsequent payments due within thirty (30) days prior to the anniversary of the
termination, (ii) the use of the trademark is limited to fruits and vegetables,
including tomatoes produced at the Greenhouse in Texas, and (iii) the owner
agrees in writing to abide by the conditions and restrictions of the License
Agreement, as same may be amended from time to time provided that no amendment
after the date hereof that is or would be adverse to the owner shall be
effective against the Owner without the Owner's written consent. In the event
the Owner fails to pay any of the required payments, the right to use the
trademark shall terminate upon the expiration of the period for which payment
was last received. The Owner may, at its sole expense, record a memorandum of
the license granted hereby with the U.S. Patent and Trademark Office, and APD by
its consent hereto agrees to sign such further documents, including the
memorandum as may be necessary to record the license granted hereby. The terms
of this provision shall survive termination of this Agreement.
Section 3.03. Quality Control. The On-Site Supervisor shall exercise its
reasonable discretion in determining which of the Product of the Greenhouse
qualifies as Premium Quality. Best efforts will also be used to market tomatoes
which are of lesser quality, except for those tomatoes, which in the sole
discretion of the Marketing Agent, have no market value due to their inferior
quality. The Marketing Agent shall have total discretion (subject to the
requirement that it act reasonably) over which, if any of the lesser quality
tomatoes shall be labeled or identified with the trademark "Village Farms". The
Marketing Agent will have sole and absolute discretion (subject to the
requirement that it act reasonably) over the use of the trademark, in order to
maintain the high quality associated with the trademark, and to preserve the
market share of the Village Farms tomatoes, which will ultimately serve to
benefit the Owner in the sale of its Product.
-6-
<PAGE>
Section 3.04. Promotion. Marketing Agent, in conjunction with APD, engages
in, and shall continue to engage in general advertising, marketing and
promotional efforts in the food industry, on behalf of the trademark Village
Farms, and shall maintain these general marketing efforts throughout the term of
this Agreement, on at least the same level as is currently being employed, at
the sole expense of the Marketing Agent. In the event Marketing Agent deems it
to be in the best interests of the owner to engage in strictly local advertising
efforts for the sole benefit of the Owner, such advertising campaign efforts
shall be detailed in the Marketing Plan prepared by the Marketing Agent pursuant
to the terms of this Agreement. In the event said local advertising plan is
approved by the Owner, the Owner shall be solely responsible for the costs of
same.
Section 3.05. Sales Prices. The Owner acknowledges that the sale of its
Product by the Marketing Agent is based on market demands and price fluctuation
can occur seasonally and otherwise. Marketing Agent shall use commercially
reasonable efforts to obtain the highest possible price for the Product.
Section 3.06. Billing and Collections. At its cost, the Marketing Agent
will provide billing and collection services to the Owner consistent with the
Marketing Plan and such direction as may be reasonably given by the owner to the
Marketing Agent from time to time. All customers of the owner shall be billed
under the name Village Farms. The Marketing Agent will maintain accurate books
and records of all sales, billing and collections, and shall prepare a monthly
report which shall be made available to the Owner for review. Monies collected
by the Marketing Agent on behalf of the Owner, shall be held by the Marketing
Agent as trustee in a separate account for the benefit of the Owner, and shall
be remitted to Owner (without deduction) on a weekly basis. Although the
Marketing Agent is responsible for billing and collection, the owner shall bear
the risk of nonpayment by any of its customers, and shall determine if any
customers should be dropped, due to poor payment experience.
Section 3.07. Packaging, Shipping, and Delivery. The Marketing Agent shall
be responsible for the instructing and training of owner's employees who will
physically be responsible for the proper packaging of the Product. Marketing
Agent shall be responsible for all shipping and delivery arrangements for the
Product, at Owner's sole expense.
Section 3.08. Obligations of Owner. Throughout the Term of this Agreement,
Owner shall furnish all Product exclusively to the Marketing Agent, and shall
use its best efforts to produce
-7-
<PAGE>
Premium Quality tomatoes, in the quantity established in the business plan and
budget prepared annually by the Manager, pursuant to the terms of the Management
Contract. All personnel of the Greenhouse operation shall at all times be
employees of Owner.
Section 3.09. Greenhouse Products. It is contemplated by this Agreement
that the Product of the Greenhouse will be tomatoes. However, if in the opinion
of the Marketing Agent, the Greenhouse operation can be made more profitable by
the production of produce more profitable than tomatoes, then the Marketing
Agent, with the prior written consent of the owner, may instruct the Manager to
produce a substitute product, and Marketing Agent's duties will also cover this
substitute product.
Section 3.10. No Obstruction. Until the termination of this Agreement,
Owner shall not, either through its agents or employees, take any action that
would prevent the Marketing Agent from marketing the Product in accordance with
this Agreement nor take any action that would materially obstruct the production
of Product at the Site, unless such prevention or obstruction is caused by
Uncontrollable Force or by the Marketing Agent or any of its Affiliates or any
of their respective employees, servants or agents.
ARTICLE IV
COMPENSATION AND PAYMENT
Section 4.01. Basic Compensation. In consideration of the performance of
Marketing Agent's obligations under the Agreement, Owner shall pay to the
Marketing Agent the sum of TWO HUNDRED THOUSAND DOLLARS ($200,000.00) per
Contract Year (the "Compensation") in twelve equal monthly installments
beginning on the lst day of the second month following the Date of Initial
Services and on each anniversary thereafter. For the period from the Date of
Initial Services through the first day of the month following the Date of
Initial Services, the Marketing Agent shall be entitled to a fee equal to the
product of (i) the Compensation and (ii) a fraction which shall be the number of
weeks of such period divided by 52, such amount to be payable on the first day
of the month following the Date of Initial Services. Such compensation will be
adjusted each January 1 of each Contract Year by the same percentage change in
the Consumer Price Index ("CPI"), provided the adjustment shall not cause the
Compensation to be less than the current Contract Year's Compensation. If for
any reason the Marketing Agent is unable
-8-
<PAGE>
to perform its obligations hereunder, except as a result of termination of this
Agreement because of a default by the Marketing Agent hereunder or in accordance
with Section 9.01 herein, then the Marketing Agent shall be entitled to the
continuation of the Compensation as though the Agreement had been performed by
the Marketing Agent, provided however, that in the event that the Marketing
Agent or Owner is unable to perform its obligations under this Agreement because
of an Uncontrollable Force, then the Compensation shall be discontinued at any
time after the later of the first anniversary of the event creating the
Uncontrollable Force or the date on which the Marketing Agent's continued
performance was disrupted.
Section 4.02. Debt Service Coverage Ratio Test. The provisions of this
Section 4.02 shall remain in effect only for so long as the owner is party to
any loan agreement with the Lender, or is a party to any loan agreement related
to the refinancing of the obligations owing to the Lender. In the event Owner's
actual debt service coverage ratio as defined in the Loan Agreement ("DSCR"),
for any calendar year falls below 1.5, then, in that event, no Compensation
shall be paid for any portion of that calendar year, however, the right to
Compensation shall accrue, provided the DSCR is greater than 1.0, and shall be
paid to the Marketing Agent in one sum, immediately following Owner's
achievement of a DSCR of at least 1.5. In the event that Compensation was paid
for any portion of the calendar year during which Owner's actual DSCR fell below
1.5, those payments shall be deducted from future payments due the Marketing
Agent hereunder, until the Owner has recouped same. Immediately upon the Owner
achieving a DSCR of 1.5, any payments which were withheld or recouped by Owner
shall be paid to the Marketing Agent in one sum. The Owner's DSCR shall be
measured as of December 31 of each year during the term of this Agreement.
Section 4.03. Bonuses. The Marketing Agent shall be entitled to a bonus for
each calendar year in which the Owner's actual DSCR equals or exceeds 1.5. The
Owner's DSCR shall be measured in accordance with Section 4.02. above. In the
event the Owner's actual DSCR equals or exceeds 1.5 but is less than 2.0, the
bonus shall be ONE HUNDRED TWENTY FIVE THOUSAND DOLLARS ($125,000.00); if the
actual DSCR equals or exceeds 2.0 but is less than 2.5, the bonus shall be TWO
HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00); if the actual DSCR equals or
exceeds 2.5 but is less than 3. 0, the bonus shall be THREE HUNDRED SEVENTY FIVE
THOUSAND DOLLARS ($375,000.00); and, if the actual DSCR
-9-
<PAGE>
equals or exceeds 3. 0, the bonus shall be FIVE HUNDRED THOUSAND DOLLARS
($500,000.00). The foregoing bonus amounts shall be automatically adjusted
upward each January 1 of each Contract Year, if the Consumer Price Index ("CPI")
for that year shows an increase; the adjustment shall be equal to the percentage
change in the CPI for that calendar year. In the event that the Owner has no
debt service whatsoever, under the Loan Agreement or otherwise, the Marketing
Agent shall be entitled to the maximum bonus payable hereunder, but only if the
Partners of the Owner shall have received in the aggregate cash distributions of
Net Distributable Cash (as defined in the Agreement of Limited Partnership of
the Owner dated as of May 1, 1997) in a cumulative amount of $1,000,000 for each
such calendar year during which the Owner had no debt service. The terms of this
provision shall survive termination of this Agreement for the year of
termination.
Section 4.04. Payment of Bonuses. Bonuses shall be paid quarterly in
arrears based upon the projected DSCR contained in the business plan and budget
to be prepared by the Manager each year, pursuant to the Management Contract.
The Manager shall periodically review its projection of that year's DSCR, and,
if necessary, revise same to reflect the more current information available to
the Manager. If the projected DSCR is revised, either upward or downward to a
different threshold, the quarterly payment of the estimated bonus shall be
adjusted accordingly. In the event it appears, based upon the revised projected
DSCR, that the Marketing Agent has received overpayments, such overpayments
shall be deducted from future quarterly bonus payments until such overpayments
have been recouped. In the event the Marketing Agent's projected bonus for that
year has increased based upon the revised projected DSCR, the shortfall which
resulted from the quarterly payments made based upon the prior projected DSCR
shall be paid to the Marketing Agent with its next regular adjusted quarterly
bonus payment. Upon the determination of the actual DSCR, in the event the
Marketing Agent had received a Bonus for the prior Contract Year, to which it
was not entitled, and owner has not yet recouped same, such overpayment may be
offset against either the Compensation payable hereunder or against future Bonus
payments, until it is recouped. In the event any Bonus was earned which has not
yet been paid, the balance of the Bonus earned shall be payable in one sum
within thirty (30) days of the determination of Owner's actual DSCR. In the
event this Agreement has been terminated, any Bonuses which Marketing Agent
received to which it was not entitled, shall be immediately due
-10-
<PAGE>
and payable to the Owner, upon the determination of such overpayment.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01. Representations and Warranties of the Marketing Agent. The
Marketing Agent represents and warrants to owner that it has substantial
experience in the marketing of tomatoes and that the On-Site Supervisor shall
either have substantial experience in the marketing of tomatoes, or shall have
been trained by a person with substantial experience in the marketing of
tomatoes. The Marketing Agent is a limited liability company duly organized and
validly existing under the laws of the State of Delaware. The Marketing Agent's
execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly authorized by all requisite action on the part of the
Marketing Agent and this Agreement constitutes the Marketing Agent's legal,
valid and binding obligation, enforceable against the Marketing Agent in
accordance with its terms. The Marketing Agent's execution and delivery of this
contract and the performance of its obligations hereunder will not conflict
with, violate or result in a default under the Marketing Agent's certificate of
formation or operating agreement or any mortgage, indenture, agreement,
instrument or other contract to which the Marketing Agent is a party or by which
the Marketing Agent is bound.
ARTICLE VI
COVENANTS OF THE MARKETING AGENT
Section 6.01. Books, Records and Reports. The Marketing Agent shall
maintain books and records and shall prepare for the benefit of Owner, a monthly
report showing the sales and collections of the Product, and such other matters
as the owner may, from time to time, reasonably request be included in such
reports. All such books, records and reports shall be the sole and exclusive
property of the Owner, and the Marketing Agent shall keep such books and records
in such place or places so as to provide owner (and its authorized
representatives) with maximum access thereto and the ability to make copies
thereof.
Section 6.02. Employment Practices. The Marketing Agent shall comply with
the applicable requirements of Executive Orders Nos. 11246 (Equal Opportunity
and Certification of Nonsegregated Facilities) , 11701 (Affirmative Action for
Disabled Veterans and Handicapped of the Viet Nam Era) , 11758 (Affirmative
Action for Handicapped Workers), 11458 and 11625
-11-
<PAGE>
(Minority Business Enterprise) and all other Governmental Rules relating to
employment practices to the extent applicable.
Section 6.03. Nondisclosure. All reports, records and other information
related to the Site, the Greenhouse, the operations of the Owner, and the
performance of the Marketing Agent of its duties hereunder shall not be used by
the Marketing Agent for any purposes other than those contemplated hereby or
pursuant to the written consent of the Owner and shall not be disclosed by the
Marketing Agent to any other party or any other person or entity except with the
prior written consent of the Owner. Furthermore, the Marketing Agent shall not
copy or reproduce any such information without the written consent of the Owner
(other than such reasonable copies as may be necessary to perform its duties and
obligations under this Agreement). The Marketing Agent shall also take
reasonable precautions to ensure against any breach of the obligations contained
herein which shall be no less stringent than the precautions and procedures that
it uses to protect its own proprietary information and which shall, at a
minimum, be deemed to include, without limitation, taking precautions to ensure
that it will only make such information available to those of its employees who
have a need to know it. Upon the expiration or termination of this Agreement,
Marketing Agent shall immediately return to the Owner all such information and
all whole or partial copies thereof and all other materials that may include, in
whole or in part, such information. All rights, whether arising under copyright,
patent, trade secret, or other laws, to such information are hereby reserved by
the Owner.
Section 6.04. Compliance With Governmental Rules. The Marketing Agent shall
at all times market the Product and perform its other duties and obligations
hereunder in accordance with all applicable Governmental Rules. The Marketing
Agent shall be liable for all fines, fees, penalties, damages or other costs
imposed by a governmental authority imposed on or incurred or suffered by the
Owner which are attributable to Marketing Agent and/or its agents, servants and
employees, in connection with the marketing and sales of the Product and the
performance of its other duties and obligations hereunder.
Section 6.05. Section 8 and Section 15 Declarations. The Marketing Agent
shall either cause APD to file, or shall itself, file during the period between
July 28, 1997 and July 28, 1998, Section 8 and Section 15 Declarations, required
under 15 U.S.C. ss. 1058 and 15 U.S.C. ss. 1065 to extend the duration of the
initial registration of the Trademark and to establish the Trademark as
incontestable.
-12-
<PAGE>
Section 6.06. Section 9 Renewal. The Marketing Agent shall either cause APD
to file, or shall itself, file within six months prior to the expiration of the
original registration of the Trademark, or any renewal thereof, an application
for renewal of registration under 15 U.S.C. ss. 1059.
ARTICLE VII
GENERAL LIABILITY
Section 7.01. Indemnification. The Marketing Agent shall indemnify and save
harmless Owner and Lender, and their respective directors, officers, agents, and
employees from and against (i) any and all loss, damage, injury, liability and
claims thereof for injury to or death of a person, including, but not limited
to, personnel of the Marketing Agent, Lender and Owner, (ii) any and all loss of
or damage to property and (iii) any and all loss of income by the owner,
resulting from the Marketing Agent's performance of this Agreement to the extent
the same is caused by the negligence or willful misconduct of the Marketing
Agent, any of its Affiliates, or any or their respective directors, officers,
agents or employees. Owner shall indemnify and save harmless the Marketing Agent
and Lender, and their respective directors, officers, agents, and employees from
and against (i) any and all loss, damage, injury, liability and claims thereof
for injury to or death of a person, including, but not limited to, personnel of
Owner, Lender and the Marketing Agent, (ii) any and all loss of or damage to
property, and (iii) any and all loss of income by the Marketing Agent, resulting
from the Owner's performance of this Agreement to the extent the same is caused
by the negligence or willful misconduct of owner, any of its Affiliates, or any
of its directors, officers, agents or employees.
ARTICLE VIII
DEFAULTS AND REMEDIES
Section 8.01. Defaults. Upon the failure of any Party to substantially
comply with any of the obligations of such Party hereunder and continued
noncompliance for a period of thirty (30) days (except in the case where such
failure will result in injury to or damage or loss of perishable Product, in
which case the cure period shall be five (5) days) after written notice of the
noncompliance is sent to such Party, the non-defaulting Party may, at its
option, by written notice to the defaulting Party, declare this Agreement to be
in default and at any time thereafter the non-defaulting Party may, at its sole
discretion, (a) exercise any right or pursue any remedy that may be
-13-
<PAGE>
available under applicable law or proceed by appropriate court action to enforce
the terms hereof or to recover damages for the breach hereof and/or (b)
terminate this Agreement. The exercise of any rights or pursuit of any remedies
pursuant to this Agreement shall not relieve the defaulting Party of any of its
obligations and liabilities hereunder, all of which shall survive such exercise
or pursuit. To the extent permitted by law, and subject to any mandatory
requirements of applicable law, and further subject to Section 8.02, each and
every right, power and remedy herein specifically given to the non-defaulting
Party or otherwise in this Agreement shall be cumulative and shall be in
addition to every other right, power and remedy herein specifically given, or
now or hereafter existing at law, equity or by statute and each and every right,
power and remedy whether specifically herein given or otherwise existing may be
exercised or pursued from time to time and as often in such order as may be
deemed expedient by the non-defaulting Party, and the exercise or pursuit or the
beginning of the exercise or pursuit of any right, power or remedy shall not be
construed to be a waiver of the right to exercise or to pursue at any time or
thereafter any other right, power or remedy. No delay or admission by a Party in
the exercise of any right or power or in the pursuit of any remedy may impair
any such right, power or remedy or be construed to be a waiver of any default on
the party of the other Party or to be an acquiescence therein. No expressed or
implied waiver by a Party of any default hereunder shall in any way be, or be
construed to be, a waiver of any future or subsequent default hereunder. Neither
Party shall be considered to be in default for failure to perform, or delay in
performing, any obligation under this Agreement if performance is prevented,
hindered or delayed by an Uncontrollable Force (but only for so long as such
Uncontrollable Force continues unabated) . In such event, the Party which is
unable, or anticipates being unable, to perform shall (a) promptly notify the
other Party in writing of the nature, cause, date of commencement and expected
duration of any such delay, (b) indicate to what extent it will be prevented
from performing and (c) exercise due diligence to overcome such inability to
perform with all reasonable dispatch. In the event a Party claims excuse of
performance as a result of an Uncontrollable Force which continues unabated for
more than one hundred twenty (120) days, the Party that is not affected by such
Uncontrollable Force shall have the option to terminate this Agreement on
written notice to the other Party.
-14-
<PAGE>
Section 8.02. Damages for Termination Without Cause. Notwithstanding
anything to the contrary in Section 8.01, the Parties agree that should Owner
elect to terminate the Agreement without cause at any time, pursuant to Section
9.01 herein, then Owner shall pay as liquidated damages to the Marketing Agent a
sum equal to one-fourth (1/4) of the annual amount of compensation in effect at
such early termination, which shall be owner's sole and exclusive liability and
Marketing Agent's sole and exclusive remedy, for such early termination without
cause.
ARTICLE IX
TERM
Section 9. 01. Term. Subject to Article VIII and Section 3.01, this
Agreement shall continue to be in effect for fifteen (15) years from the Date of
Initial Services; provided, however that the Term may be extended for additional
periods on terms acceptable to both Parties, such terms to be agreed upon not
later than three months prior to the expiration of the Term. Notwithstanding the
foregoing, the owner shall be permitted to terminate this with or without cause,
upon ninety (90) days written notice to the Marketing Agent, subject to the
terms of the Loan Agreement. In the event the Owner terminates the Agreement
without cause, the right of the Owner to use the trademark, Village Farms, shall
terminate simultaneously with this Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.01. Notices. Unless otherwise specifically provided herein, all
notices, requests and demands and other communications hereunder must be in
writing and shall be deemed to have been duly given (i) when delivered
personally, (ii) when sent by telefax to the telefax number below and followed
by a confirmation transmitted by an additional mode of communication provided
for herein, (iii) the second day following the day on which the same has been
delivered prepaid to a national (only in the case of notices within the
continental United States) or an international air courier service, or (iv) when
received if sent by the mails, certified or registered, postage prepaid, in each
case addressed to the party to whom such notice is being given at the following
addresses:
-15-
<PAGE>
OWNER: Village Farms of Marfa, L.P.
c/o Agro Power Development, Inc.
10 Alvin Court
East Brunswick, NJ 08816
Attention: President
Telefax: 908-254-1710
and
Village Farms of Marfa, L.P.
c/o Cogentrix of Marfa, Inc.
9405 Arrowpoint Boulevard
Charlotte, NC 28273
Attention: General Counsel
Telefax: 704-529-1006
MARKETING
AGENT: Village Farms, L.L.C.
10 Alvin Court
East Brunswick, NJ 08816
Attention: President
Telefax: 908-254-1710
Any party may change the address(es) to which notices to it are to be sent by
giving notice of such change to the other parties in accordance with this
Section.
Section 10.02. Severability. Any provision of this Agreement that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction. To the extent permitted
by applicable law, the Marketing Agent and owner hereby waive any provision by
law that renders any provision hereof prohibited or unenforceable in any
respect.
Section 10.03. Amendment. Neither this Agreement nor any other terms hereof
may be terminated, amended, supplemented, waived or modified orally, but only by
an instrument in writing signed by the Party against which enforcement of the
termination, amendment, supplement, waiver or modification shall be signed.
-16-
<PAGE>
Section 10.04. Assignment. Neither Party may assign any of their respective
rights under this Agreement without the prior written consent of the other
Party; provided, however, that Owner may assign its rights hereunder to the
Lender. Any assignment not permitted by this Section 10.04 shall be void.
Section 10.05. Relationship of the Parties. It is agreed and understood by
the Parties that the Marketing Agent is an independent contractor with respect
to Owner. No action, admission or instruction shall be deemed to make the
Marketing Agent an employee, agent or partner of Owner or to create any other
relationship among the Parties.
Section 10.06. Headings; Etc. The Table of Contents and headings of the
various articles and sections of this Agreement are for the convenience of
reference only and shall not modify, define or limit any other terms and
provisions of this Agreement.
Section 10.07. Governing Law. This Agreement shall in all respects,
including all matters of construction, validity and performance, be governed by
and construed in accordance with the laws of the State of New York.
Section 10.08. Parties in Interest; Limitation and Rights of Others. The
provisions of this Agreement shall be binding upon, and inure to the benefit of,
the Parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, whether expressed or implied, shall be construed to
give any Person (other than the Parties hereto and their respective successors
and permitted assignees) any legal or equitable right, remedy or claim under or
in respect of this Agreement or any covenants, conditions or provisions
contained herein.
Section 10.09. Arbitration. (a) In the event a dispute arises between or
among the Parties relating to the terms of this Agreement and any Party gives
written notice of such dispute to the other Party, then each of the Parties
involved in such dispute shall refer the dispute to its senior management. The
senior management of each Party shall meet and confer regarding the resolution
of the dispute. In the event a resolution of such dispute is not reached within
30 days of the written notice, then either of the Parties may submit the dispute
to arbitration in accordance with Section 10.09.(b).
(b) Arbitration of disputes pursuant to this Section 10.09.(b) shall be
held in New York, New York, unless otherwise
-17-
<PAGE>
agreed to by the Parties, under the commercial arbitration rules of the American
Arbitration Association, and shall be heard by three arbitrators selected in
accordance with such rules. Each arbitrator shall have at least five years
experience in the United States in a profession or professions related to the
subject matter involved in the dispute and shall not be a past or present
officer, director or employee of, or have any interest in or material
relationship with, any Partner or any Affiliate of any Partner. Any arbitral
award shall be final and binding and may be entered by any Party in any state or
Federal court having jurisdiction thereof. Costs of arbitration (including
reasonable attorney's fees and arbitration costs) shall be paid either equally
or by the Parties to the arbitration or in accordance with the decision of the
arbitrators.
-18-
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed by the respective officers thereunto duly authorized as of the date and
year first above written.
VILLAGE FARMS, L.L.C.
By: Agro Power Development, Inc.,
its managing member
By:____________________________
Name: J. Kevin Cobb
Title: Senior Vice President
VILLAGE FARMS OF MARFA, L.P.
By:_____________________________
Name: Thomas F. Schwartz
Title: Vice President
Consent and Agreement
Agro Power Development, Inc. ("APD") hereby joins in this Marketing and
Sales Agreement (the "Agreement") (a) for the express purpose of agreeing to the
terms and provisions set forth in Section 3.02 hereof; (b) to represent and
warrant to Village Farms of Marfa, L.P. (the "Owner") that APD owns all right,
title and interest in and to the trademark "Village Farms" (the "Trademark") and
that APD has the right to enter into the agreement set forth in this consent and
agreement; and (c) certifying that a true and correct copy of the License
Agreement between APD and Village Farms, L.L.C. ("VF") licensing the Trademark
to VF is attached to the Agreement as Exhibit A.
AGRO POWER DEVELOPMENT, INC.
By:_______________________________
J. Kevin Cobb
Senior Vice President
-19-
EXHIBIT 10.74
VILLAGE FARMS OF BUFFALO, L.P.
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
Dated as of September 4, 1997
THE LIMITED PARTNERSHIP INTEREST REPRESENTED HEREBY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF CERTAIN STATES AND HAVE BEEN OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM
THE REGISTRATION REQUIREMENT OF THE ACT AND SUCH LAWS. THE LIMITED PARTNERSHIP
INTEREST IS SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY BE
TRANSFERRED ONLY IN A MANNER WHICH IS IN COMPLIANCE WITH THE PROVISIONS OF THIS
AGREEMENT, AND MAY ONLY BE TRANSFERRED IN A TRANSACTION THAT IS REGISTERED UNDER
THE ACT OR EXEMPT FROM SUCH REGISTRATION.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms.............................................1
1.2 Other Definitional Provisions....................................13
ARTICLE II
GENERAL PROVISIONS
2.1 Formation of Partnership.........................................13
2.2 Name of the Partnership..........................................13
2.3 Business of the Partnership......................................13
2.4 Registered Office of the Partnership.............................14
2.5 Liability of the Partners Generally..............................14
2.6 Office of the Partnership........................................14
2.7 Duration of the Partnership......................................14
ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 Capital Contributions............................................15
3.2 Additional Capital Contributions.................................16
3.3 Conditions ......................................................15
3.4 Interest.........................................................18
3.5 Withdrawals of Capital...........................................18
3.6 Additional Capital Contributions.................................18
ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES
4.1 Profits and Losses...............................................19
4.2 Capital Account Balances.........................................20
4.3 Minimum Gain Chargeback..........................................20
4.4 Nonrecourse Deductions...........................................20
4.5 Partner Nonrecourse Deductions...................................21
4.6 Qualified Income Offset..........................................21
4.7 Curative Allocations.............................................21
4.8 Tax Allocations..................................................21
4.9 Property Subject to 704(b) and 704(c)............................21
4.10 Limitations.....................................................21
-i-
<PAGE>
ARTICLE V
DISTRIBUTIONS
5.1 Distribution of Net Distributable Cash...........................21
5.2 Default Allocations for Cogentrix................................22
5.3 Default Allocations for VF.......................................22
ARTICLE VI
MANAGEMENT
6.1 Management of the Partnership....................................24
6.2 Fundamental Matters..............................................24
6.3 Officers of the Partnership......................................27
6.4 No Compensation; Reimbursement...................................28
6.5 Insurance........................................................28
6.6 Cooperation on Tax Matters.......................................28
ARTICLE VII
BOOKS, RECORDS AND BANK ACCOUNTS
7.1 Books and Records................................................28
7.2 Accounting Basis and Fiscal Year.................................29
7.3 Reports..........................................................29
7.4 Bank Accounts....................................................30
7.5 Tax Returns......................................................30
7.6 Tax Elections....................................................30
7.7 Tax Matters Partner..............................................30
7.8 Withholdings.....................................................30
ARTICLE VIII
TRANSFER OF INTERESTS
8.1 Transfer of a Partner's Interest.................................31
ARTICLE IX
ADDITIONAL PARTNERS; WITHDRAWAL OF PARTNERS
9.1 Additional Partners..............................................32
9.2 Withdrawal of Partners...........................................32
-ii-
<PAGE>
ARTICLE X
DISSOLUTION AND LIQUIDATION
10.1 Events of Dissolution...........................................34
10.2 Distributions Upon Liquidation..................................34
ARTICLE XI
DISPUTE RESOLUTION
11.1 Arbitration.....................................................35
11.2 Buy/Sell Option.................................................36
ARTICLE XII
MISCELLANEOUS
12.1 Distributions and Notices.......................................37
12.2 Disclosure Obligations..........................................37
12.3 Successors and Assigns..........................................38
12.4 Amendments......................................................38
12.5 Partition.......................................................38
12.6 No Waiver.......................................................38
12.7 Entire Agreement................................................38
12.8 Captions........................................................38
12.9 Counterparts....................................................38
12.10 Applicable Law.................................................39
12.11 Severability...................................................39
LIST OF SCHEDULES
Schedule 1.1(a) Calculation of Internal Rate of Return
Schedule 1.1(b) Project Budget
Schedule 1.1(c) Project Documents
Schedule 1.1(d) Site
Schedule 6.3 Initial Officers of the Partnership
-iii-
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
This Amended and Restated Agreement of Limited Partnership dated as of
September 4, 1997 of VILLAGE FARMS OF BUFFALO, L.P. (the "Partnership") is by
and among COGENTRIX OF BUFFALO, INC., a Delaware corporation ("Cogentrix GP" and
a "General Partner"), COGENTRIX GREENHOUSE INVESTMENTS, INC., a Delaware
corporation ("Cogentrix LP" and a "Limited Partner"), VILLAGE FARMS OF DELAWARE,
L.L.C., a Delaware limited liability company ("VF Delaware" and a "General
Partner"), and VILLAGE FARMS, L.L.C., a Delaware limited liability company ("VF"
and a "Limited Partner").
The Partners are parties to an Agreement of Limited Partnership dated as of
June 16, 1997 (the "Original Agreement") pursuant to which they formed the
Partnership. The Partners desire to amend and restate the Original Agreement by
entering into this Agreement.
VF Delaware is a Delaware limited liability company owned 99% by Agro Power
Development, Inc., a New York corporation ("Agro Power"), and 1% by VF. VF is a
Delaware limited liability company owned 99% by Agro Power and 1% by VF
Delaware. Agro Power has entered into agreements and instruments (as more fully
defined hereafter, the "Project Documents") related to the development and
operation of a venlo style greenhouse located in the vicinity of Buffalo, New
York for the purpose of producing and selling tomatoes (as more fully defined
hereafter, the "Project"). In order to continue with the development of the
Project and obtain financing for construction and working capital needs, Agro
Power desires that Cogentrix GP and Cogentrix LP contribute in the aggregate
$2,740,700 to the Project. In order to encourage Cogentrix to contribute such
funds to the Project, Agro Power has agreed (1) to cause VF Delaware and VF to
form the Partnership with Cogentrix GP and Cogentrix LP pursuant to which all
Project Documents will be assigned to the Partnership, as VF Delaware's
contribution to the Partnership, in exchange for a 1% interest in the
Partnership, and likewise as VF's contribution to the Partnership in exchange
for a 49% interest in the Partnership, (2) that, in exchange for a contribution
to the capital of the Partnership of $980 by Cogentrix LP, Cogentrix LP will
receive a 49% interest in the Partnership, and (3) that, in exchange for a
contribution to the capital of the Partnership of $20 by Cogentrix GP, Cogentrix
GP will receive a 1% interest in the Partnership. Cogentrix GP and Cogentrix LP
have agreed to make such contributions to the capital of the Partnership on the
terms and conditions set forth herein.
Accordingly, in consideration of the covenants and agreements contained
herein and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, and intending to be legally bound, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms.
<PAGE>
As used in this Agreement, the following terms have the following meanings
(such definitions to be equally applicable to both singular and plural forms of
the terms defined):
"Abandonment" has the meaning set forth in subsection 6.2(e).
"Adjusted Capital Account Deficit" means, with respect to any Partner, the
deficit balance, if any, in such Partner's Capital Account as of the end of the
relevant fiscal year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such Partner is
obligated to restore pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate sentence of
Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) debit to such Capital Account the items described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
"Adverse Consequence" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, Taxes, liens, losses, expenses and
fees, including, but not limited to, court costs, arbitral costs, costs of
investigation, and attorneys' fees.
"Affiliate" of any designated Person, means each Person which, directly or
indirectly, controls or is controlled by or is under common control with such
designated Person and, without limiting the generality of the foregoing, shall
include (a) any Person which beneficially owns or holds ten percent (10%) or
more of any class of voting securities of such designated Person or ten percent
(10%) or more of the equity interest in such designated Person and (b) any
Person of which such designated Person beneficially owns and holds ten percent
(10%) or more of any class of voting securities or in which such designated
Person beneficially owns or holds ten percent (10%) or more of the equity
interest. For the purposes of this definition, the terms "controls", "controlled
by" and "under common control with," as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. Notwithstanding the
foregoing, neither Cogentrix GP or Cogentrix LP, on the one hand, nor VF
Delaware or VF, on the other hand, shall be deemed to be Affiliates of one
another.
"After-Tax" means after deducting Cogentrix GP's or Cogentrix LP's, as
applicable, notional project Federal and state income tax. As used in this
definition of After-Tax, the notional project Federal and state income tax of
Cogentrix GP and Cogentrix LP shall be calculated as follows:
-2-
<PAGE>
(a) The Partnership's taxable income would be calculated from the
Schedule K most recently filed with the Internal Revenue Service (or the
appropriate successor form or schedule), which for purposes of clarity
would include operating income as shown on such Schedule and all separately
stated items of income or loss (except tax exempt income) as shown on such
Schedule.
(b) Assuming the Partnership were taxable as a for-profit corporation,
the Partnership's Federal and state income tax would be determined based on
the taxable income calculated in (a). For these purposes, it will be
assumed that all of the Partnership's taxable income shall be taxed at a
blended Federal/state rate of 38% (subject to adjustment upward or
downward, as applicable, to reflect changes in the highest marginal
corporate Federal tax rate).
(c) The Partnership's notional income tax obligation as calculated in
(b) shall be (i) reduced by tax credits available to be utilized to offset
the current year's Federal or state income tax obligation and (ii)
allocated among the Partners in the same manner as Profits and Losses are
allocated among the Partners under Article IV hereof.
Provided that, for each quarter end and at year end until such time as the
Partnership has filed a Schedule K with the Internal Revenue Service and a
true-up of taxable income has occurred, notional project Federal and state
income tax for Cogentrix GP and Cogentrix LP shall be calculated by multiplying
Estimated Taxable Income allocated to Cogentrix GP and Cogentrix LP under
Article IV hereof, as the case may be, by 38% (subject to adjustment upward or
downward, as applicable, to reflect changes in the highest marginal corporate
Federal tax rate).
"Agreement" means this Amended and Restated Agreement of Limited
Partnership, as further amended, supplemented or otherwise modified and in
effect from time to time.
"Agro Power" means Agro Power Development Inc., a New York corporation with
offices at 10 Alvin Court, East Brunswick, New Jersey 08816.
"Agro Power Investment" means all cash contributions to the capital of the
Partnership made by VF Delaware and VF pursuant to this Agreement.
"Appraisal Procedure" means a procedure whereby two independent appraisers,
one chosen by each General Partner, shall agree upon the determinations then the
subject of appraisal. Each General Partner shall deliver a written notice to the
other appointing its appraiser within 15 days after receipt from the other of a
written notice appointing its appraiser. Each appraiser then shall prepare a
written appraisal with respect to the determinations which then are the subject
of appraisal. If within 30 days after appointment of the two appraisers they are
unable to agree upon the amount in question, a third independent appraiser shall
be chosen within 10 days thereafter by the mutual consent of such first two
appraisers or, if such first two appraisers fail to agree upon the appointment
of a third appraiser, such appointment shall be made by the American Arbitration
Association, or any organization successor thereto, from a panel of arbitrators
having experience in the business of operating a hydroponic hot house and
marketing the product produced therein and a familiarity with equipment used or
operated in such business. The decision of the third appraiser so appointed and
chosen shall be given within
-3-
<PAGE>
30 days after the selection of such third appraiser. If three appraisers shall
be appointed and the determination of one appraiser is disparate from the median
by more than twice the amount by which the other determination is disparate from
the median, then the determination of such appraiser shall be excluded, the
remaining two determinations shall be averaged and such average shall be binding
and conclusive on the General Partners; otherwise the average of all three
determinations shall be binding and conclusive on the General Partners. (For
example, if the two appraisers appointed by the General Partners determine a
value of $100 and $200, and the third appraiser determines a value of $150, then
the value in question shall be conclusively determined to be $150 ($100 + $200 +
$150 divided by 3). As a further example, consider the first example but the
third appraiser places a value of $190. In this case, the $100 valuation shall
be disregarded and the value shall be conclusively determined to be $195 ($190 +
$200 divided by 2). The $100 valuation is disregarded because the median of the
three appraisers was $190 and the difference between $100 and $190 is $90, which
is more than twice the difference between $200 and $190 which is $10, which
multiplied by two is $20.) If a General Partner shall appoint an appraiser and
the other Person shall fail to appoint an appraiser in the manner specified
herein, the determination of the appraiser so appointed shall be binding and
conclusive on the General Partners. The expenses of the appraisal procedure
shall be borne solely by the Partnership.
"Budgets" has the meaning set forth in subsection 6.2(i).
"Business Day" means a day other than a Saturday, a Sunday or any other day
on which commercial banks in New York, North Carolina or New Jersey are
authorized or required by law or executive order to be closed.
"Buy-Out Offer" has the meaning set forth in Section 11.2.
"Buy-Out Offeree" has the meaning set forth in Section 11.2.
"Buy-Out Offeror" has the meaning set forth in Section 11.2.
"Capital Account" means, with respect to any Partner, the capital account
maintained for such Partner in the Partnership Books in accordance with the
following provisions:
(a) To each Partner's Capital Account there shall be credited such
Partner's Capital Contributions, such Partner's distributive share of
Profits and any other items in the nature of income or gain which are
allocated under this Agreement.
(b) To each Partner's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any property (other than money)
(net of any liabilities assumed by such Partner or to which the property is
subject) distributed to such Partner pursuant to any provision of this
Agreement, and such Partner's distributive share of Losses and any other
items in the nature of deductions or losses which are allocated under this
Agreement.
(c) In the event all or a portion of an interest in the Partnership is
transferred in accordance with the terms of this Agreement in a transaction
that does not
-4-
<PAGE>
result in a termination of the Partnership under Code Section 708(b)(1)(B),
the transferee shall succeed to the Capital Account of the transferor to
the extent it relates to the transferred interest.
(d) In determining the amount of any liability for purposes of clause
(a) and clause (b) hereof, there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and the Regulations.
(e) If a Partner owns more than one Partnership Interest, one Capital
Account shall be maintained for the Partnership Interests of the Partner.
(f) Each Partner's Capital Account shall in all other respects be
maintained in accordance with the provisions of Regulations Section
1.704-1(b).
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of capital accounts are intended to comply with Regulations
Section 1.704-1(b), and shall be interpreted and applied in a manner consistent
with such Regulations.
"Capital Contribution" means, with respect to any Partner, the amount of
money and the initial Gross Asset Value of any property (other than money) (net
of any liabilities assumed by the Partnership or to which the property is
subject) contributed to the Partnership with respect to any Partnership Interest
held by such Partner pursuant to the terms of this Agreement.
"Capital Lease" means any lease of property, real or personal, which in
accordance with GAAP, would be required to be capitalized on a balance sheet of
the lessee.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Cogentrix GP Designee" has the meaning set forth in Section 6.1(a).
"Cogentrix GP" means Cogentrix of Buffalo, Inc., a Delaware corporation.
"Cogentrix Investment" means (a) the respective Initial Capital
Contribution of Cogentrix GP and Cogentrix LP and (b) all subsequent
contributions to the capital of the Partnership made by Cogentrix GP or
Cogentrix LP (as the case may be) pursuant to this Agreement in excess of any
Agro Power Investment.
"Cogentrix LP" means Cogentrix Greenhouse Investments, Inc., a Delaware
corporation.
"Commonly Controlled Entity" means, with respect to any Person, an entity,
whether or not incorporated, which is under common control with such Person
within the meaning of Section 414(b) or (c) of the Code.
"Construction Agreement" means the Commercial Design and Construction
Contract dated as of July 30, 1997 between the Partnership and Agro Power for
the construction of the Project, as it may be amended, supplemented or otherwise
modified and in effect from time to time.
-5-
<PAGE>
"Construction/Term Facility" means a loan facility in the amount of
$10,962,800 provided by the Construction/Term Lender pursuant to the Project
Loan Documents.
"Construction/Term Lender" means Village Farms International Finance
Association or its successor under the Construction/Term Facility.
"Cumulative Distributions to Cogentrix" means the aggregate, cumulative
distributions of Net Distributable Cash received by Cogentrix GP and Cogentrix
LP from the Partnership.
"Cumulative Distributions to VF" means the aggregate, cumulative
distributions of Net Distributable Cash received by VF Delaware and VF from the
Partnership.
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
6 Del.C. ss.ss.17-101, et seq., as it may be amended from time to time and any
successor to such Act.
"Depreciation" means, for each fiscal year or other period, an amount equal
to the deprecation, amortization, or other cost recovery deduction allocable
with respect to an asset for such period, except that if the Gross Asset Value
of an asset differs from its adjusted basis for Federal tax purposes at the
beginning of such period, Depreciation shall be an amount which bears the same
ratio to such beginning Gross Asset Value as the Federal income tax
depreciation, amortization or other cost recovery deduction for such period
bears to such beginning adjusted tax basis; provided that if the Federal income
tax depreciation, amortization, or other cost recovery deduction for such period
is zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the Management Committee.
"Dollars" and "$" means dollars in lawful currency of the United States of
America.
"Equity Funding Date" means the day on which all of the conditions to the
initial drawdown under the Construction/Term Loan Facility (other than the
contributions to the capital of the Partnership to be made by Cogentrix GP and
Cogentrix LP under Section 3.2) have been met to the satisfaction of the
Construction/Term Lender.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means, with respect to any Person, any corporation or
trade or business which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as such Person or is under
common control (within the meaning of Section 414(c) of the Code) with such
Person.
"Estimated Taxable Income" means book income of the Partnership computed in
accordance with GAAP adjusted to reflect the estimated depreciation and
amortization timing differences between financial reporting and income tax
reporting.
-6-
<PAGE>
"First Priority Return" means the receipt by Cogentrix GP and Cogentrix LP
of cash distributions from Net Distributable Cash in an aggregate amount
sufficient to provide each of Cogentrix GP and Cogentrix LP, as the case may be,
with an Internal Rate of Return on its respective Cogentrix Investment hereunder
of [information omitted and subject to request for confidential treatment]%
calculated in accordance with Schedule 1.1(a) (it being understood that any
amounts which are part of Cogentrix Investment pursuant to subsection (b) of the
definition of Cogentrix Investment shall only be entitled to such return from
the date they are actually paid or made).
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States.
"General Partner" means each of Cogentrix GP and VF Delaware and any
Person admitted to the Partnership as an additional General Partner in
accordance with the provisions of this Agreement, until such time as such Person
ceases to be a general partner of the Partnership as provided herein or in the
Delaware Act.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Gross Asset Value" means, with respect to any asset, the asset's adjusted
basis for Federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, as determined by agreement of the Partners;
(b) The Gross Asset Value of all Partnership assets shall be adjusted
to equal their respective gross fair market values, as determined by
agreement of the Partners, and in the event the Partners fail to so agree,
as determined by the Appraisal Procedure, as of the following times: (i)
The acquisition of an additional interest in the Partnership by any new or
existing Partner in exchange for more than a de minimis Capital
Contribution; (ii) the distribution by the Partnership to a Partner of more
than a de minimis amount of property as consideration for an interest in
the Partnership if the Management Committee reasonably determines that such
adjustment is necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership; and (iii) the liquidation of
the Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g);
(c) The Gross Asset Value of any Partnership asset distributed to any
Partner shall be the gross fair market value of such asset on the date of
distribution as determined by agreement of the Partners and, in the event
the Partners fail to so agree, as determined by the Appraisal Procedure;
(d) The Gross Asset Values of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are
-7-
<PAGE>
taken into account in determining Capital Accounts pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Values
shall be adjusted to the extent the Partners agree (and in the event the
Partners fail to so agree, as determined by the Appraisal Procedure) that
an adjustment pursuant to clause (ii) of this definition is necessary or
appropriate in connection with a transaction that would otherwise result in
an adjustment pursuant to clause (iv) of this definition. If the Gross
Asset Value of an asset has been determined or adjusted pursuant to clauses
(i) and (ii) of this definition or clause (iv) of this definition, such
Gross Asset Value shall thereafter be adjusted by the Depreciation taken
into account with respect to such asset; and
(e) The Gross Asset Value of any asset owned indirectly by the
Partnership through a subsidiary partnership shall be determined pursuant
to the terms of the partnership agreement for such subsidiary partnership.
"Indebtedness" means, with respect to any Person, (a) indebtedness of such
Person for borrowed money or for the deferred purchase price of property or of
services (other than obligations under agreements for the purchase of goods and
services in the normal course of business which are not more than 30 days past
due; (b) obligations of such Person under Capital Leases; (c) obligations of
such Person pursuant to interest hedging transactions; (d) obligations of such
Person in respect of letters of credit; (e) obligations of such Person under
direct and indirect guarantees in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise assure a creditor
against loss in respect of, indebtedness or obligations of others of the kinds
referred to in clause (a), (b), (c) or (d) above (other than endorsements of
negotiable instruments in the ordinary course of business); and (f) any
obligations of such Person or a Commonly Controlled Entity to a Multi-Employer
Plan. For purposes of clarity, "Indebtedness" includes the obligations of the
Partnership to repay amounts borrowed under, and to pay other amounts owing
under, the Project Loan Documents.
"Initial Capital Contribution" means, with respect to Cogentrix GP, the
amount of $20 and, with respect to Cogentrix LP, means the amount of $980.
"Internal Rate of Return" (whether or not capitalized) means the return to
capital calculated at each calendar quarter end in accordance with Schedule
1.1(a), attached hereto and incorporated herein by reference.
"Lien" means any mortgage, deed of trust, security interest, pledge,
hypothecation, encumbrance or lien (statutory or other) of any kind or nature
whatsoever (including, without limitation, any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any such
agreement, and the filing of any statement under the Uniform Commercial Code or
comparable law of any jurisdiction).
"Limited Partner" means each of Cogentrix LP and VF and any Person who
becomes a limited partner of the Partnership in accordance with the terms of
this Agreement and is shown as such on the books and records of the Partnership.
"Losses" has the meaning given to it in the definition of "Profits."
-8-
<PAGE>
"Management Agreement" means the Management Agreement dated the same date
as this Agreement by and between the Partnership and VF Delaware, as it may be
amended, supplemented or otherwise modified and in effect from time to time,
pursuant to which VF Delaware will provide operation and maintenance services to
the Partnership.
"Management Committee" means the Management Committee of the Partnership
referred to in Section 6.1.
"Marketing Agreement" means the Marketing Agreement dated the same date as
this Agreement by and between the Partnership and VF, as it may be amended,
supplemented or otherwise modified and in effect from time to time, pursuant to
which VF will agree to market products produced by the Partnership.
"Multi-Employer Plan" means, with respect to any Person, a Multi-Employer
Plan as defined in Section 3(37) of ERISA to which contributions have been made
by such Person or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Distributable Cash" means for any period, an amount equal to all cash
received by the Partnership during such period, including but not limited to,
cash from operations, reductions in reserves, casualty proceeds, rebates and
other extraordinary items, less (a) principal, interest and other payments made
under or pursuant to the Construction/Term Facility, (b) interest and fees paid
pursuant to the Revolving Facility, or other borrowings, (c) all cash
expenditures of and payments made by the Partnership, and (d) any reserves
established by the Management Committee of the Partnership, and subject to the
limitations on distributions, if any, imposed pursuant to the terms of the
Project Loan Documents.
"Nonrecourse Deductions" shall have the meaning set forth in Regulations
Sections 1.704-2(b) and (c). The amount of Nonrecourse Deductions for a
Partnership fiscal year equals the excess, if any, of the net increase, if any,
in the amount of Partnership minimum gain during the fiscal year over the
aggregate amount of any distributions during that fiscal year of proceeds of a
nonrecourse liability that are allocable to an increase in Partnership minimum
gain, determined according to the provisions of Regulations Section 1.704-2(c).
"Operating Budget" means the business plan and budget required to be
provided to the Partnership pursuant to the Management Agreement.
"Operating Management Fee" means a management fee to be paid to VF Delaware
in accordance with the Management Agreement.
"Original Agreement" means the Agreement of Limited Partnership dated as of
June 16, 1997 among the Partners.
"Partner" means any of the General Partners or the Limited Partners.
"Partner Nonrecourse Deductions" shall have the meaning specified in
Regulations Section 1.704-2(i)(2).
-9-
<PAGE>
"Partnership" means Village Farms of Buffalo, L.P., the limited partnership
formed pursuant to this Agreement and the filing of the Certificate of Limited
Partnership with the Delaware Secretary of State.
"Partnership Books" means the books and records maintained by the
Partnership and reviewed within sixty (60) days of each fiscal year end by the
Management Committee, in which records and information relating to the ownership
of the Partnership, the constituency of the Management Committee and actions
taken by the Management Committee or the Partners is maintained, including but
not limited to, a register of the Partners, each Partner's Capital Account, each
Partner's Percentage Interest, actions taken by the Management Committee and the
Partners, and this Agreement and any amendments hereto.
"Partnership Interest" means, with respect to any Partner, the interest of
such Partner in the Partnership, whether general or limited, at any particular
time, including the rights and obligations of such Partner as provided in this
Agreement and the Delaware Act.
"Partnership Percentage" means, with respect to any Partner, at any time,
the percentage specified as such Partner's "Partnership Percentage" at the time
such Partner was admitted to the Partnership, as adjusted in accordance with the
terms of this Agreement. The initial Partnership Percentages are as follows:
Cogentrix GP 1%
Cogentrix LP 49%
VF Delaware 1%
VF 49%
"Permitted Liens" means Liens in favor of any Person other than the
Partners or any of their respective Affiliates, that (a) arise in the ordinary
course of business of the Partnership (including, without limitation, landlord's
materialmen's, mechanic's, worker's, repairmen's and employee's Liens and
similar Liens which arise in connection with any tax, assessment, governmental
charge or levy) and (b) do not secure Indebtedness.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Profits" and "Losses" mean, for any period, an amount equal to the
Partnership's taxable income or loss for such period, determined in accordance
with Code Section 703(a) (for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss), with the following adjustments:
(a) Income of the Partnership that is exempt from federal income tax
and not otherwise taken into account in computing Profits or Losses
pursuant to this definition shall be added to such taxable income or loss;
-10-
<PAGE>
(b) any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits or Losses pursuant to this definition shall be
subtracted from such taxable income or loss;
(c) gain and loss with respect to the disposition of any Partnership
asset (both directly owned assets and assets owned indirectly through a
subsidiary partnership) shall be computed with respect to the Gross Asset
Value rather than adjusted tax basis of such asset;
(d) in lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing taxable income or loss, there
shall be taken into account Depreciation for such fiscal year or other
period; and
(e) in the event of an adjustment in the Gross Asset Value of any
Partnership asset pursuant to clause (b) of the definition of "Gross Asset
Value" herein, the amount of such adjustment shall be taken into account as
gain or loss from the disposition of such asset for purposes of computing
Profits and Losses.
"Project" means an approximately 17.2-acre greenhouse to be located on the
Site on which the Partnership will produce tomatoes for sale under the Marketing
Agreement.
"Project Assets" has the meaning set forth in Section 3.1(a).
"Project Budget" means the pro forma budget of total Project costs attached
hereto as Schedule 1.1(b), as amended or modified from time to time in
accordance with subsection 6.2(i).
"Project Credit Facilities" means, collectively, the Construction/Term
Facility and the Revolving Facility.
"Project Documents" means the agreements and instruments listed on Schedule
1.1(c) attached hereto and incorporated herein by reference entered into in
connection with the Project as the same may be amended, supplemented or
otherwise modified in accordance with Section 6.2 hereof and in effect from time
to time.
"Project Loan Documents" means the agreements and instruments executed by,
between or among the Partnership, the Construction/Term Lender, the Revolver
Lender, and any other party relating to the Construction/Term Facility and/or
the Revolving Facility, as the same may be amended, supplemented or otherwise
modified in accordance with Section 6.2 hereof and in effect from time to time.
"Regulations" means the temporary, proposed and final regulations under the
Code and any successor provisions thereto.
"Requirement of Law" means, as to any Person, (a) the certificate of
incorporation and by-laws or partnership agreement or other organizational or
governing documents of such
-11-
<PAGE>
Person, and (b) any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its properties or to which such Person
or any of its properties is subject and the violation of which, or which
determination, could reasonably be expected to (i) have a material adverse
effect on the business, operations, properties, condition (financial or
otherwise) or prospects of such Person or (ii) materially adversely affect the
ability of such Person to perform its obligations under the Project Loan
Documents or the Project Documents to which it is a party.
"Revolver Lender" means Village Farms International Finance Association or
its successor under the Revolving Facility.
"Revolving Facility" means a loan facility in the amount of $1,200,000
provided by the Revolver Lender pursuant to a certain revolving credit agreement
between the Revolving Lender and the Partnership.
"Second Priority Return" means the receipt by Cogentrix GP and Cogentrix LP
of cash distributions of Net Distributable Cash in an aggregate amount
sufficient to provide each of Cogentrix GP and Cogentrix LP, as the case may be,
with an Internal Rate of Return on its respective Cogentrix Investment of
[information omitted and subject to request for confidential treatment]%
inclusive of the First Priority Return) calculated in accordance with Schedule
1.1(a), (it being understood that any amounts which are part of Cogentrix
Investment pursuant to subsection (b) of the definition of Cogentrix Investment
shall only be entitled to such return for the date they are actually paid or
made). For purposes of Article V hereof, Internal Rate of Return shall be
calculated at each calendar quarter end.
"Site" means a parcel of approximately 33 acres located in the vicinity of
Buffalo, New York and more fully described on Schedule 1.1(d) attached hereto
and incorporated herein by reference.
"Subsidiary" means with respect to any Person, an Affiliate that is
controlled (directly or indirectly through one or more intermediaries) by that
Person.
"Taxes" means any and all income or gross receipt taxes, franchise taxes,
levies, imposts, duties, assessments, fees, charges and withholdings of any
nature whatsoever, whether or not presently in existence, imposed by any
Governmental Authority.
"VF" means Village Farms, L.L.C., a Delaware limited liability company, 99%
of which is owned by Agro Power and 1% of which is owned by VF Delaware.
"VF Delaware" means Village Farms of Delaware, L.L.C., a Delaware limited
liability company, 99% of which is owned by Agro Power and 1% of which is owned
by VF.
"Withdraw" or "Withdrawal", with respect to any Partner, means a Partner
ceasing to be a partner of the Partnership for any reason, whether voluntary or
involuntary, and "Withdrawn", with respect to a Partner, means a Partner who has
ceased to be a partner of the Partnership.
-12-
<PAGE>
"Withdrawal Date" means the date of the Withdrawal from the Partnership of
a Withdrawn Partner.
1.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto, unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto, accounting terms not defined in Section 1.1, and
accounting terms partly defined in Section 1.1 to the extent not defined,
shall have the respective meanings given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and section,
schedule and exhibit references are to this Agreement unless otherwise
specified.
(d) Unless the context requires otherwise, any reference in this
Agreement to any of the Project Documents or the Project Loan Documents
shall mean any of such documents as amended, supplemented or modified and
in effect from time to time.
ARTICLE II
GENERAL PROVISIONS
2.1 Formation of Partnership. The Partners hereby confirm the formation and
establishment of a limited partnership under the terms and provisions of this
Agreement and the provisions of the Delaware Act, and the rights and liabilities
of the Partners shall be as provided in this Agreement and in the Delaware Act.
Concurrently with the execution of the Original Agreement by VF Delaware, VF,
Cogentrix GP and Cogentrix LP, VF Delaware and Cogentrix GP executed and filed
with the Office of Secretary of State of the State of Delaware a Certificate of
Limited Partnership in accordance with Section 17-201 of the Delaware Act, in
form and substance satisfactory to both VF Delaware and Cogentrix GP.
2.2 Name of the Partnership. The name of the Partnership shall be Village
Farms of Buffalo, L.P., or such other name as the Partners from time to time may
designate.
2.3 Business of the Partnership. The business of the Partnership is to
develop, construct, and operate the Project. In furtherance of its business, the
Partnership shall have and may exercise all the powers now or hereafter
conferred by the laws of the State of Delaware on partnerships formed under the
laws of that state, and shall do any and all things necessary or desirable for
the accomplishment of the above purposes. The Partnership shall engage in no
other business except as permitted by the Management Committee in accordance
with Section 6.2 below.
-13-
<PAGE>
2.4 Registered Office of the Partnership. The Partnership shall maintain a
registered office at, and the name and address of the Partnership's registered
agent in Delaware is, The Corporation Trust Company, 1209 Orange Street, New
Castle County, Wilmington, Delaware 19801.
2.5 Liability of the Partners Generally.
(a) Except as otherwise provided in the Delaware Act, each General
Partner shall have the liabilities of a partner in a partnership without
limited partners to Persons other than the Partnership and the Limited
Partners.
(b) Except as otherwise provided in this Agreement or the Delaware
Act, no Limited Partner (or former Limited Partner) shall be obligated to
make any contribution of capital to the Partnership or have any liability
for the debts and obligations of the Partnership.
2.6 Office of the Partnership. The Partnership shall maintain an office and
principal place of business in Buffalo, New York. Pursuant to the Management
Agreement, the books of account and other records with respect to the operations
of the Partnership shall be maintained at 10 Alvin Court, East Brunswick, New
Jersey 08816. The Partnership shall not have or maintain any office or other
place of business outside of Buffalo, New York.
2.7 Duration of the Partnership. The Partnership shall commence on June 11,
1997 and shall continue until its termination in accordance with the provisions
of Article X.
ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 Capital Contributions.
(a) VF Delaware and VF agree to convey, grant, transfer and assign (or
cause to be conveyed, granted, transferred and assigned) to the Partnership
all of the Project Documents, all the rights of Agro Power or any Affiliate
of Agro Power under the Project Documents and all the assets and business
of every kind and description, wherever located, real, personal and mixed,
tangible or intangible, owned or held or used by Agro Power and any
Affiliate of Agro Power solely in connection with the Project
(collectively, the "Project Assets"). The Partnership hereby assumes and
agrees to pay when due all liabilities and obligations of Agro Power and
any Affiliate of Agro Power with respect to the Project Assets and agrees
to be bound by all of the terms of, and to undertake all of the obligations
of Agro Power and any Affiliate of Agro Power under the Project Documents.
For the purposes of the initial Capital Accounts of the Partners, the
Project Assets and Project Documents contributed or to be contributed to
the Partnership by VF Delaware and VF shall be deemed to have an aggregate
gross fair market value (net of liabilities) of $1,000.
-14-
<PAGE>
If any consent or approval is required in connection with the assignment
and contribution to the Partnership pursuant to this subsection 3.1(a) of any
Project Asset or any Project Document, VF Delaware and VF shall have obtained
such consent or approval prior to such assignment and contribution.
(b) Cogentrix GP shall contribute to the Partnership on execution of
this Agreement by all of the Partners $20 by wire transfer of immediately
available funds to an account designated in writing by the Partnership.
(c) Cogentrix LP shall contribute to the Partnership on execution of
this Agreement by all of the Partners $980 by wire transfer of immediately
available funds to an account designated in writing by the Partnership.
3.2 Additional Capital Contributions. Upon the satisfaction of or waiver of
the conditions set forth in Section 3.3 hereof, on the Equity Funding Date
Cogentrix GP shall contribute to the Partnership $54,794 and Cogentrix LP shall
contribute to the Partnership $2,684,906 either (i) by wire transfer of
immediately available funds to an account designated in writing by the
Partnership or (ii) by payment(s) to vendors with respect to obligations under
Project Documents.
3.3 Conditions. The obligation of Cogentrix GP and Cogentrix LP to make the
contributions described in Section 3.2 are subject to the satisfaction of each
of the following conditions precedent (except those conditions, if any, that may
be specifically waived in writing by Cogentrix GP or Cogentrix LP, as
appropriate):
(a) The Project Credit Facilities and the Project Loan Documents shall
have been approved by the Management Committee and the Project Loan
Documents will be executed by all parties thereto. An original executed
copy of each Project Loan Document will be delivered to Cogentrix GP and a
copy thereof delivered to Cogentrix LP as soon as available.
(b) All conditions to the closing of the Construction/Term Facility
shall have occurred or been satisfied (other than evidence that the capital
contributions described in Section 3.2 have been made) and all governmental
consents, approvals, permits and licenses and other deliveries in
connection with the Project which are required to be received by the
Construction/Term Lender as a condition to the funding of the
Construction/Term Facility and the Revolving Facility shall have been
delivered or received. A copy of all such deliveries and other evidence of
the closing shall be provided to Cogentrix GP and Cogentrix LP.
(c) The contribution by VF Delaware contemplated by Section 3.1(a)
shall have been made to the satisfaction of Cogentrix GP and Cogentrix LP
and evidence thereof reasonably satisfactory to Cogentrix GP and Cogentrix
LP shall have been provided to them by VF Delaware.
-15-
<PAGE>
(d) The following representations or warranties shall be true and
correct in all respects, and are hereby made to Cogentrix GP and Cogentrix
LP by VF Delaware and VF as an inducement to their making capital
contributions to the Partnership:
(i) Each of VF and VF Delaware (A) is a limited liability company
duly organized, validly existing and in good standing under the laws
of the State of Delaware, the ownership of which is 99% by Agro Power
and 1% by VF (in the case of VF Delaware) or 1% by VF Delaware (in the
case of VF), (B) has full power and authority and the legal right to
incur the obligations provided for in this
-16-
<PAGE>
Agreement, and (C) has taken all necessary action to authorize the
execution, delivery and performance of this Agreement and the Project
Documents and Project Loan Documents to which it is a party.
(ii) This Agreement and the Project Documents and Project Loan
Documents to which it is a party have been duly authorized, executed
and delivered by VF Delaware and VF and constitute the legal, valid
and binding obligations of each of VF Delaware and VF enforceable
against it in accordance with their terms, except as enforceability
may be limited by general equitable principles and by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally.
(iii) Neither the execution, delivery or performance by VF
Delaware or VF of this Agreement or any of the Project Documents or
Project Loan Documents to which it is a party, nor compliance by it
with the terms and provisions hereof or thereof, including, without
limitation, the assignment of the Project Documents and Project Assets
to the Partnership, requires the consent or authorization of any other
party (except such as have been duly obtained), or conflicts or will
conflict with or result in a breach or violation of its charter
documents or by-laws or any of the terms, conditions or provisions of
any Requirement of Law applicable to it or its assets or business.
(iv) It is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(v) The representations and warranties of VF Delaware or VF or
any of their respective Affiliates in or pursuant to any of the
Project Documents or Project Loan Documents are true and correct as of
the date hereof and are hereby deemed to be made to Cogentrix GP and
Cogentrix LP, mutatis mutandis, as if fully set forth herein.
(e) The following representations or warranties shall be true and
correct in all respects, and are hereby made to VF Delaware and VF by
Cogentrix GP and Cogentrix LP as an inducement to their making capital
contributions to the Partnership:
(i) Each of Cogentrix GP and Cogentrix LP (A) is a corporation
duly organized, validly existing and in good standing under the laws
of the State of Delaware, (B) has full power and authority and the
legal right to incur the obligations provided for in this Agreement,
and (C) has taken all necessary action to authorize the execution,
delivery and performance of this Agreement.
(ii) This Agreement has been duly authorized, executed and
delivered by Cogentrix GP and Cogentrix LP and constitutes the legal,
valid and binding obligation of each of Cogentrix GP and Cogentrix LP
enforceable against it in accordance with its terms, except as
enforceability may be limited by general
-17-
<PAGE>
equitable principles and by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of
creditors generally.
(iii) Neither the execution, delivery or performance by Cogentrix
GP and Cogentrix LP of this Agreement, nor compliance by it with the
terms and provisions hereof, requires the consent or authorization of
any other party (except such as have been duly obtained), or conflicts
or will conflict with or result in a breach or violation of its
charter documents or bylaws or any of the terms, conditions or
provisions of any Requirement of Law applicable to it or its assets or
business.
(iv) It is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
3.4 Interest. No interest shall accrue on any contribution to the capital
of the Partnership.
3.5 Withdrawals of Capital. No Partner shall have the right to withdraw or
to be repaid or returned any capital contributed by it, except as otherwise
provided herein.
3.6 Additional Capital Contributions. Unless otherwise unanimously agreed
by the Management Committee, no Partner shall be required to make any
contribution to the capital of the Partnership other than its capital
contributions set forth in this Article III. If the Management Committee has
agreed that an additional cash contribution to the capital of the Partnership is
to be made but a Partner does not make such contribution as and when required,
then any other Partner may (but shall not be required to), at its election,
either make all or a portion of the cash contribution to the capital of the
Partnership (which, in the case of such an investment by Cogentrix GP or
Cogentrix LP, would increase the Cogentrix Investment of such Partner or, in the
case of an investment by VF or VF Delaware, would constitute (and in the case of
subsequent investments would increase) an Agro Power Investment of such Partner)
or loan all or a portion of the amount of such non-contributing Partner's
portion of such agreed-upon cash capital contribution to the Partnership. In the
event the Partner elects to make an additional cash contribution, the Partner's
ownership percentage shall not change but, in the case of Cogentrix GP and
Cogentrix LP, the amount of the contribution will increase its respective
Cogentrix Investment and, in the case of VF and VF Delaware, would constitute
(or in the case of subsequent contributions would increase) its respective Agro
Power Investment. (As a result, for example, if Cogentrix were to make an
additional cash contribution to the Partnership under this Section 3.6, and, if
at that time, distributions of cash from Net Distributable Cash are being
allocated pursuant to Section 5.1(b), then distributions shall continue to be
made under Section 5.1(b) until Cogentrix GP and Cogentrix LP have received
distributions of cash from Net Distributable Cash that will provide Cogentrix GP
and Cogentrix LP with the Second Priority Return on the Cogentrix Investment
(which will have been increased by the amount of such cash contribution under
this Section 3.6)). In the event the Partner elects to make a loan, then such
loan shall be on customary terms and conditions, shall be evidenced by a
customary promissory note, and shall provide that (a) the loan shall be repaid
in full together with interest thereon prior to any distribution of cash by the
Partnership to the Partners, (b) it shall bear interest at the same
-18-
<PAGE>
rate of interest as the interest rate then in effect under the Revolving
Facility plus 1% per annum and (c) shall comply in all respects with Project
Loan Documents.
ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES
4.1 Profits and Losses.
(a) After giving effect to the special allocations set forth in
Sections 4.3, 4.4, 4.5, 4.6, 4.7 and 4.10 hereof, the Partners shall share
Profits and Losses as follows:
(i) Profits shall be allocated among the Partners as follows:
(A) Profits shall first be allocated to the General Partners
to offset any prior allocations of Loss made to the General
Partners under Section 4.1(a)(ii)(B) hereof which have not
previously been offset.
(B) Thereafter, Profits shall be allocated to the Partners
to offset any prior allocations of Loss made to the Partners
under Section 4.1(a)(ii)(A) which have not previously been
offset.
(C) Thereafter, Profits shall be allocated 2% to Cogentrix
GP and 98% to Cogentrix LP until the aggregate cumulative Profits
allocated to Cogentrix GP and Cogentrix LP under this subsection
(C) equals the excess of (I) Cumulative Distributions to
Cogentrix over (II) the sum of Cumulative Distributions to VF and
the Cogentrix Investment.
(D) Thereafter, Profits shall be allocated among the
Partners in proportion to their Partnership Percentages.
(ii) Losses shall be allocated among the Partners as follows:
(A) Losses shall first be allocated to the Partners in
accordance with their positive Capital Accounts.
(B) Thereafter, Losses shall be allocated to the General
Partners in the proportion of their Partnership Percentages.
For Federal income tax purposes, each item of income, gain, loss,
deduction or credit entering into the computation of the Partnership's
taxable income shall be allocated in the same proportion.
(b) The Profits and Losses of the Partnership shall be unanimously
determined by the Management Committee and shall be allocated as described
in Section 4.1(a) (i) at the end of each fiscal quarter, (ii) upon the
transfer of the Partnership Interest of any Partner pursuant to Article
VIII, (iii) upon the Withdrawal of any Partner pursuant to
-19-
<PAGE>
Article IX, (iv) upon the admission of any Partner to the Partnership
pursuant to Article IX and (vi) at such other times that the Management
Committee may determine.
4.2 Capital Account Balances. Each Partner's Capital Account shall be
maintained in accordance with the principles of applicable Treasury Regulations
promulgated under Section 704(b) of the Code and as otherwise provided in the
definition of "Capital Accounts" and in this Article IV.
4.3 Minimum Gain Chargeback.
(a) Notwithstanding any other provision in this Agreement, if there is
a net decrease in Partnership minimum gain (determined in accordance with
the principles of Regulations Sections 1.704-2(b)(2) and 1.704-2(d)) during
any Partnership taxable year, the Partners who would otherwise have an
Adjusted Capital Account Deficit at the end of such year shall be specially
allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount and manner sufficient to
eliminate as quickly as possible such Adjusted Capital Account Deficit. The
items to be so allocated shall be determined in accordance with Regulations
Section 1.704-2(g). This subsection 4.3(a) is intended to comply with the
minimum gain chargeback requirements in such Regulation Sections and shall
be interpreted consistently therewith.
(b) Notwithstanding any other provision in this Agreement, if there is
a net decrease in Partnership minimum gain attributable to a partner
nonrecourse debt of the Partnership (within the meaning of Regulations
Sections 1.704-2(b)) during any Partnership fiscal year, each Person who
has a share of the Partnership minimum gain attributable to such
nonrecourse debt of the Partnership, determined in accordance with
Regulation Section 1.704-2(i)(5), shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, subsequent
years) in an amount equal to the greater of (i) the portion of such
Person's share of the net decrease in minimum gain of the Partnership
attributable to such nonrecourse debt of the Partnership, determined in
accordance with Regulations Section 1.704-2(i)(b), that is allocable to the
disposition of property of the Partnership subject to such nonrecourse debt
of the Partnership, determined in accordance with Regulations Section
1.704-2(i)(4), or (ii) if such Person would otherwise have an Adjusted
Capital Account Deficit at the end of such year, an amount sufficient to
eliminate such Adjusted Capital Account Deficit. Allocations pursuant to
the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto. The items to be
so allocated shall be determined in accordance with Regulations Section
1.704-2(i)(4). This subsection 4.3(b) is intended to comply with the
minimum gain chargeback requirement in such Regulations Section and shall
be interpreted consistently therewith. Solely for purposes of this
subsection 4.3(b), each Person's Adjusted Capital Account Deficit shall be
determined prior to any other allocations pursuant to this Article IV with
respect to such fiscal year, other than allocations pursuant to subsection
4.3(a) hereof.
4.4 Nonrecourse Deductions. Nonrecourse Deductions for any taxable year
shall be specifically allocated among the Partners in proportion to their
Percentage Interests.
-20-
<PAGE>
4.5 Partner Nonrecourse Deductions. Nonrecourse Deductions attributable to
otherwise nonrecourse debt with respect to which a Partner or a related person
of a Partner described in Regulations Section 1.752-2(c) is the creditor or
otherwise bears the "economic risk of loss" as defined in Regulations Section
1.752-2(b) shall be allocated to such Partner.
4.6 Qualified Income Offset. Notwithstanding anything in this Agreement to
the contrary, in the event any Partner unexpectedly receives any adjustments,
allocations or distributions described in paragraphs (b)(2)(ii)(d)(4), (5) or
(6) of Regulations Section 1.704-1, there shall be specially allocated to such
Partner such items of Partnership income and gain, at such times and in such
amounts as will eliminate as quickly as possible that portion of its Adjusted
Capital Account Deficit caused or increased by such adjustments, allocations or
distributions.
4.7 Curative Allocations. The allocations set forth in Sections 4.3, 4.4,
4.5, 4.6 and 4.10 hereof are intended to comply with certain requirements of
Regulations Section, 1.704-1(b). Notwithstanding any other provisions of this
Article IV (other than Sections 4.3, 4.4, 4.5, 4.6 and 4.10), allocations that
have taken place pursuant to Sections 4.3, 4.4, 4.5, 4.6 and 4.10 shall be taken
into account in allocating other items of income, gain, loss, deduction and
credit so that, to the extent possible, the net amount of such other allocations
and the Sections 4.3, 4.4, 4.5, 4.6, and 4.10 allocations to each Partner shall
equal the net amount that would have been allocated to each Partner if the
Sections 4.3, 4.4, 4.5, 4.6, and 4.10 allocations had not occurred.
4.8 Tax Allocations. Except as provided in Sections 4.7 and 4.9 hereof, for
income tax purposes each item of income, gain, loss and deduction shall be
allocated in the same manner as the corresponding book item is allocated for
Capital Account purposes.
4.9 Property Subject to 704(b) and 704(c). In the case of any Partnership
asset (directly or indirectly owned) the Gross Asset Value of which differs from
its adjusted tax basis, income, gain, loss and deduction with respect to such
asset shall, solely for tax purposes, be allocated in accordance with the
principles of Code Sections 704(b) and 704(c) to take account of such
difference.
4.10 Limitations. Notwithstanding anything to the contrary in this Article
IV, no allocation under this Article IV shall be made to a Limited Partner that
would cause such Limited Partner to have, or that would increase, an Adjusted
Capital Account Deficit. Any amount not allocated as a result of this limitation
shall be reallocated to the General Partners pro rata in accordance with their
relative Partnership Interests.
ARTICLE V
DISTRIBUTIONS
5.1 Distribution of Net Distributable Cash. Subject to Sections 5.2 and 5.3
hereof, Net Distributable Cash for each fiscal quarter shall be distributed to
the Partners within thirty (30) days after the end of such quarter as follows:
-21-
<PAGE>
(a) First, from the date hereof and until each of Cogentrix GP and
Cogentrix LP shall have received distributions of cash from Net
Distributable Cash sufficient to provide both Cogentrix GP and Cogentrix LP
with the First Priority Return, 89.1% to Cogentrix LP, 0.9% to Cogentrix
GP, 0.1% to VF Delaware and 9.9% to VF,
(b) Thereafter until each of Cogentrix GP and Cogentrix LP shall have
received distributions of cash from Net Distributable Cash sufficient to
provide both Cogentrix GP and Cogentrix LP with the Second Priority Return,
64.386% to Cogentrix LP, 1.314% to Cogentrix GP, 0.686% to VF Delaware, and
33.614% to VF, and
(c) Thereafter, 49% to Cogentrix LP, 1% to Cogentrix GP, 1% to VF
Delaware and 49% to VF.
5.2 Default Allocations for Cogentrix. In the event VF Delaware, VF or Agro
Power defaults or breaches any of its obligations under this Agreement, the
Management Agreement, the Marketing Agreement or the Construction Agreement and
such default or breach has not been remedied within any applicable cure period,
or any representation or warranty made by VF Delaware, VF or any of their
respective Affiliates under this Agreement or any such other agreement or
document proves to have been untrue when made and (a) as a result thereof the
Partnership, Cogentrix GP and Cogentrix LP (or any of them) incurs or suffers an
Adverse Consequence and (b) Cogentrix GP or Cogentrix LP gives written notice of
such Adverse Consequence to the Partnership and, if the amount thereof is
unknown, its good faith estimate of the amount of such Adverse Consequence, then
the Partnership shall thereafter refrain from making any distributions to VF
Delaware and VF (or either of them) under this Agreement (any such distribution
that would have been made but for this Section 5.2 is hereinafter referred to as
a "Blocked Distribution") and shall take the following steps:
(i) The Partnership shall distribute to Cogentrix GP or Cogentrix LP
from such Blocked Distributions an aggregate amount equal to 100% of any
such Adverse Consequence suffered or actually incurred by Cogentrix GP and
Cogentrix LP or either of them (or, if the amount thereof is not known,
100% of Cogentrix GP's or Cogentrix LP's written good faith estimate
thereof). Any such distribution made by the Partnership under this
subsection 5.2(i) shall satisfy pro tanto the obligation of the Partnership
to make distributions to VF Delaware and VF (or either of them) with
respect to the Blocked Distributions. For the purposes of this Agreement,
any Adverse Consequence suffered or incurred by the Partnership shall be
deemed to have been suffered or incurred, on a dollar-for-dollar basis, 1%
by Cogentrix GP and 49% by Cogentrix LP.
(ii) Upon distribution to Cogentrix GP and Cogentrix LP of 100% of the
aggregate amount of any such Adverse Consequence (or their good faith
estimate thereof) from Blocked Distributions, the Partnership may
thereafter make distributions to VF Delaware and VF under Section 5.1,
unless and until it receives a subsequent notification from Cogentrix LP or
Cogentrix GP under this Section 5.2.
5.3 Default Allocations for VF. In the event Cogentrix GP or Cogentrix LP
defaults or breaches any of its obligations under this Agreement and such
default or breach has not been remedied within any applicable cure period, or
any representation or warranty made by
-22-
<PAGE>
Cogentrix GP or Cogentrix LP under this Agreement proves to have been untrue
when made and (a) as a result thereof the Partnership, VF Delaware and VF (or
any of them) incurs or suffers an Adverse Consequence and (b) VF Delaware or VF
gives written notice of such Adverse Consequence to the Partnership and, if the
amount thereof is unknown, its good faith estimate of the amount of such Adverse
Consequence, then the Partnership shall thereafter refrain from making any
distributions to Cogentrix GP and Cogentrix LP (or either of them) under this
Agreement (any such distribution that would have been made but for this Section
5.3 is hereinafter referred to as a "Blocked Distribution") and shall take the
following steps:
(i) The Partnership shall distribute to VF Delaware or VF from such
Blocked Distributions an aggregate amount equal to 100% of any such Adverse
Consequence suffered or actually incurred by VF Delaware and VF or either
of them (or, if the amount thereof is not known, 100% of VF Delaware's or
VF's written good faith estimate thereof). Any such distribution made by
the Partnership under this subsection 5.3(i) shall satisfy pro tanto the
obligation of the Partnership to make distributions to Cogentrix GP or
Cogentrix LP (or either of them) with respect to the Blocked Distributions.
For the purposes of this Agreement, any Adverse Consequence suffered or
incurred by the Partnership shall be deemed to have been suffered or
incurred, on a dollar-for-dollar basis, 1% by VF Delaware and 49% by VF.
(ii) Upon distribution to VF Delaware and VF of 100% of the aggregate
amount of any such Adverse Consequence (or their good faith estimate
thereof) from Blocked Distributions, the Partnership may thereafter make
distributions to Cogentrix GP and Cogentrix LP under Section 5.1, unless
and until it re ceives a subsequent notification from VF Delaware or VF
under this Section 5.3.
-23-
<PAGE>
ARTICLE VI
MANAGEMENT
6.1 Management of the Partnership.
(a) The overall management and control of the business affairs of the
Partnership shall be vested in the Management Committee, subject to the
limitations contained in Section 6.2 or elsewhere in this Agreement. The
Management Committee shall consist of four members, two designated by
Cogentrix GP (each a "Cogentrix GP Designee") and two designated by VF
Delaware (each a "VF Delaware Designee"), and a quorum of the Management
Committee shall require at least three members of the Management Committee.
No action at any meeting may be taken by the Management Committee unless a
quorum is present (acting in person or by proxy). The Management Committee
shall meet not less frequently than quarterly. Members of the Management
Committee may participate in a meeting of the Management Committee by means
of conference telephone. No action may be taken by the Management Committee
with respect to any of the matters described in Section 6.2 hereof unless
such action is in the form of a writing signed by all members of the
Management Committee. Unless otherwise agreed, all meetings of the
Management Committee shall take place at Cogentrix's offices in Charlotte,
North Carolina, Agro Power's offices in East Brunswick, New Jersey or such
other place as the Management Committee may unanimously agree.
(b) Except as set forth in Section 6.2, any action by the Management
Committee shall require the approval of a majority of the members of the
Management Committee.
(c) Any General Partner may, at any time, replace any of its
respective Designees to the Management Committee with a new Designee and,
upon such change, or upon the death or resignation of any Designee, a
successor shall be designated in writing by the party that appointed the
Designee being replaced.
(d) Any General Partner or member of the Management Committee may, at
any time, request a meeting of the Management Committee by sending written
notice specifying in reasonable detail the purpose(s) of such meeting to
all other Partners and to the members of the Management Committee at least
ten (10) days in advance of the proposed date for the meeting, which notice
may be waived by all members of the Management Committee and all Partners.
Any member of the Management Committee may propose that an action be
submitted to the Management Committee for approval, and there shall be no
requirement of notice of the issues to be addressed at any meeting of the
Management Committee.
6.2 Fundamental Matters. The following matters shall require the prior
unanimous authorization and approval of the Management Committee:
(a) Any transaction in which the Partnership (i) acquires, purchases
or leases any asset or right for consideration having a fair market value
in excess of $25,000, (ii) consolidates or merges with or into any other
Person, (iii) sells, assigns, leases or
-24-
<PAGE>
otherwise transfers any asset or right having a fair market value in excess
of $25,000, or (iv) assumes any liability or obligation in connection with
Section 6.2(a)(i) above in excess of $25,000.
(b) The approval, execution and delivery of any contract, lease or
agreement following the date of this Agreement, including without
limitation, the Project Loan Documents, the Marketing Agreement, the
Management Agreement and the Project Documents; provided, that no such
approval shall be required for (i) any contracts and permit applications in
existence prior to the date of this Agreement and listed on Schedule 1.1(c)
hereto, or (ii) any other contract, lease or agreement which is expressly
non-recourse to the Partners so long as the amounts to be paid by the
Partnership thereunder, together with all other amounts to be paid by the
Partnership pursuant to contracts, leases or agreements that have not been
unanimously approved or ratified by the Management Committee, does not
exceed $50,000 in the aggregate excluding contracts, leases or agreements
for supplies used in the ordinary course of business and contemplated in
the Operating Budget.
(c) The approval, execution or delivery of any amendments to,
modification or termination of, enforcement of rights under, or any
consents or waivers in connection with any contract, lease or agreement,
other than contracts entered into without prior unanimous approval of the
Management Committee pursuant to subsection 6.2(a) or clause (ii) of
subsection 6.2(b) above.
(d) The sale or issuance by the Partnership of any interest, or of any
option, warrant or similar right to acquire any interest, of any kind in
the Partnership.
(e) Any decision to (i) terminate all or any substantial part of the
Project (an "Abandonment") or (ii) engage in any activity not contemplated
by this Agreement.
(f) The incurrence or assumption of any Indebtedness by the
Partnership, except for (i) Indebtedness which, when the principal amount
thereof is aggregated with the principal amount of Indebtedness previously
incurred pursuant to this subsection 6.2(f) which remains outstanding, does
not exceed $25,000 and (ii) the Indebtedness represented by the Project
Loan Documents.
(g) The granting of any Lien (other than Permitted Liens) on the
assets or rights of the Partnership.
(h) The repayment (other than (i) repayments in accordance with
scheduled maturity and (ii) paydowns on the Revolving Credit Facility),
voluntary prepayment or redemption of, or any refinancing or other
modification of the terms of, any Indebtedness.
(i) The adoption and modification of the Operating Budget or the
Project Budget (collectively, the "Budgets").
(j) The approval of any expenditure or investment not previously
authorized in any Budget; provided, however, that no such approval shall be
required for any
-25-
<PAGE>
expenditure or investment so long as the amount expended by the
Partnership, together with the amounts of all other expenditures by the
Partnership during any fiscal year that have not been approved or ratified
by the Management Committee, does not exceed $25,000 in the aggregate.
(k) The initiation of any legal proceedings or arbitration on behalf
of the Partnership, or the settlement of any claim by or against the
Partnership with respect to claims in excess of $25,000 or which include
requests for an injunction, specific performance or other equitable relief.
(l) The selection, removal, or determination of authority and
responsibility of the officers of the Partnership, general or special
counsel for the Partnership, accountants and auditors for the Partnership
and the Project and the approval of any change in the accounting or tax
policy of the Partnership or the Project.
(m) To the extent not specified in this Agreement, (i) any
distribution of income or any assets or rights of the Partnership or (ii)
the redemption, purchase or other acquisition of any interest in the
Partnership.
(n) Except as contemplated in Article X of this Agreement, liquidating
or dissolving, or proposing to liquidate or dissolve, or effecting, or
proposing to effect, a recapitalization in any form of transaction, of the
Partnership.
(o) (i) Commencing any case, proceeding or other action (A) under any
existing or future law or any jurisdiction, domestic or foreign, relating
to bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for All or any substantial part of its assets;
(ii) making, or proposing to make, a general assignment for the benefit of
its creditors; (iii) admitting or proposing to admit in writing its
inability to pay its debts as they become due; (iv) filing or proposing to
file any plan of reorganization pursuant to 11 U.S.C. ss. 101 et seq.; (v)
taking, or proposing to take, any action in furtherance of, or indicating
its consent to, approval of or acquiescence in, any of the acts set forth
in clause (i) or (ii) above.
(p) Establishing any operating or capital reserves other than those
required by the Project Loan Documents.
(q) Establishing committees of the Management Committee and delegating
voting authority to such committees.
(r) The approval, execution or delivery of any amendments to,
modification or termination of, or any waivers of any rights under, or the
grant of any consents under or in connection with any Project Document, any
Project Loan Document, the Marketing Agreement or the Management Agreement.
-26-
<PAGE>
(s) The approval or taking of any action that would be an event of
default or that would give rise to a right of termination under any Project
Document or any Project Loan Document.
(t) The approval or taking with any action that would give rise to an
event of default under any Project Loan Document or that would give rise to
a right of acceleration or termination under any Project Loan Document.
(u) The reimbursement by the Partnership of any General Partner under
Section 6.4(b) hereof of any amount in excess of $5,000 during any fiscal
quarter.
(v) Any change in or termination of any insurance policies maintained
by the Partnership.
(w) Any agreement to undertake any action that would require the
approval of the Management Committee under this Section 6.2.
(x) Any act in contravention of this Agreement or the Act.
(y) Any act which would make it impossible to carry on the ordinary
business of the Partnership.
(z) Possession of Partnership property by any Partner, or the
assignment, transfer or pledge of rights of the Partnership in specific
Partnership property for other than a Partnership purpose or other than for
the benefit of the Partnership, or any commingling the funds of the
Partnership with the funds of any other person.
(aa) Any action which would cause the Partnership to be treated as
other than a partnership for Federal income tax purposes.
(ab) Any confession of a judgment against the Partnership or any
Partner.
(ac) The grant of any power of attorney or appointment of any agent or
attorney (other than customs brokers).
(ad) The grant of signature authority to any Person with respect to
any of the Partnership's bank or investment accounts.
6.3 Officers of the Partnership. The Partnership may have such officers as
may be designated by the Management Committee from time to time. Such officers
shall (a) serve at the pleasure of the Management Committee, (b) subject to
Section 6.2 and to the instructions and directions of the Management Committee,
have such powers as are usually exercised by comparable designated officers of a
Delaware corporation and (c) have the power to bind the Partnership through the
exercise of such powers to the extent consistent with the terms hereof. The
initial officers of the Partnership shall be those persons listed on Schedule
6.3 attached hereto and incorporated herein by reference. Following the
execution hereof, officers shall be
-27-
<PAGE>
appointed or removed only by action of the Management Committee in accordance
with the provisions of Section 6.1.
6.4 No Compensation; Reimbursement.
(a) Except as expressly provided herein, the General Partners, members
of the Management Committee and officers shall receive no compensation for
performing their duties as General Partners, members of the Management
Committee or officers under this Agreement; provided, however, that this
provision shall not affect any Partners' right to receive its share of
distributions as set forth in Article V hereof.
(b) Subject to the limitation, if any, imposed by the Project Loan
Documents and subject to subsection 6.2(u), each General Partner shall be
entitled to receive, out of any Partnership funds available therefor,
reimbursement of all amounts expended by such General Partner in payment of
properly incurred and documented Partnership obligations paid by such
General Partner out of its own funds so long as such expenditures are made
in accordance with the Budgets.
6.5 Insurance. The Partnership shall (a) maintain, with insurers or
underwriters of good repute, in the name of the Partnership, such insurance
relating to the operations of the Partnership as is customary for comparable
businesses to that of the Partnership to maintain, against such risks and
pursuant to such terms (including deductible limits or self-insured retentions)
as are customary for such businesses, and (b) pay all premiums and other sums
payable in order to maintain such insurance. For purposes of clarity, it is
hereby agreed that the Partnership shall maintain the insurance required by the
Project Loan Documents and all insurance policies shall name Cogentrix GP and VF
Delaware as an additional insured and provided that they may not be cancelled or
terminated except with 30 days' prior written notice to Cogentrix GP and VF
Delaware.
6.6 Cooperation on Tax Matters. The Partnership shall cooperate fully as
and to the extent reasonably requested by Cogentrix GP or VF Delaware in
connection with the preparation and filing of any Tax return, statement, report
or form, and any audit, litigation or other proceeding with respect to Taxes
relating to or arising out of the Project. Such cooperation shall include the
retention and, upon request by either Cogentrix GP or VF Delaware, the provision
of records and information that are reasonably relevant to any such audit,
litigation or other proceeding. The Partnership agrees to (a) retain all books
and records with respect to Tax matters pertinent to the Project and (b) give
Cogentrix GP and VF Delaware reasonable written notice prior to destroying or
discarding any such books and records. The Partnership shall retain any records
requested by either Cogentrix GP or VF Delaware to be retained.
ARTICLE VII
BOOKS, RECORDS AND BANK ACCOUNTS
7.1 Books and Records. In addition to the Partnership Books, the
Partnership shall also keep such books of account and other records with respect
to the operations of the Partnership as will sufficiently explain the
transactions and financial position of the Partnership and
-28-
<PAGE>
enable financial statements to be prepared in accordance with GAAP and shall
cause such books and other records to be kept in such manner as will enable them
to be properly audited. The Partnership Books and such other books and records
shall be maintained at the principal places of business of the Partnership and
all Partners and their duly authorized representatives shall at all times have
access to and the right to review and copy such books and records.
7.2 Accounting Basis and Fiscal Year. The books of the Partnership (a)
shall be kept on an accrual basis in accordance with GAAP, (b) shall reflect all
Partnership transactions, (c) shall be appropriate and adequate for the
Partnership's business and for the carrying out of all provisions of this
Agreement, and (d) shall be closed and balanced as of the end of each fiscal
year, as soon as practicable after the end of such fiscal year. The fiscal year
of the Partnership shall be January 1 through December 31 of each year or such
other fiscal year that may be selected with the unanimous approval of the
Management Committee.
7.3 Reports.
(a) Unless otherwise required by the Management Committee, the
Partnership shall cause to be delivered to each Partner, within 120 days
after the end of each fiscal year, an annual report containing the
following:
(i) A balance sheet as of the end of the Partnership's fiscal
year and statements of income, Partners' equity and cash flows for the
year then ended, each of which shall be audited and reported on by
Arthur Andersen & Co. or such other independent certified public
accountants, which shall be a nationally recognized accounting firm,
as may be selected by the Management Committee;
(ii) a general description of the activities of the Partnership
during such year; and
(iii) a report of any material transaction between the
Partnership and any Partner or any of its Affiliates, including fees
and compensation and reimbursements paid by the Partnership and the
products supplied and services performed by such Partner or any such
Affiliate for such fees or compensation and the expenses so
reimbursed; provided, however, that no report shall be required for
any products supplied and services performed if such products and
services are provided pursuant to the terms of a Project Document, the
Management Agreement, the Marketing Agreement, an agreement approved
by the Management Committee or set out in any Budget and the
compensation therefor is in accordance with the terms of such
agreement.
(b) Within 45 days after the end of each quarter of each fiscal year,
the Partnership shall cause to be delivered to each Partner a quarterly
report containing a balance sheet as of the end of such quarter and a
statement of income for such quarter, each of which may be unaudited but
which shall be certified by the chief financial officer of the Partnership
as fairly presenting the financial position of the Partnership at the end
of such quarter and results of operations of the Partnership for such
quarter and as having been prepared in accordance with the accounting
methods followed by the Partnership for
-29-
<PAGE>
Federal income tax purposes and otherwise in accordance with GAAP applied
on a basis substantially consistent with that of the Partnership's audited
financial statements (subject to normal year end adjustments).
(c) Within 120 days of the end of each fiscal year, the Partnership
will cause to be delivered to each Partner all information necessary for
the preparation of such Partner's Federal income tax returns, including a
statement showing such Partner's share of income, gains, losses, deductions
and credits for such year for Federal income tax purposes and the amount of
any distributions made to or for the account of such Partner pursuant to
this Agreement.
7.4 Bank Accounts. The Partnership shall maintain one or more accounts in
one or more banks located in Buffalo, New York and such other locations as may
be approved by the Management Committee, each of which shall be a member the
Federal Deposit Insurance Corporation. In addition, the Partnership shall
establish such other accounts and deposit amounts as required by the Project
Loan Documents. All such amounts shall be and remain the property of the
Partnership, and shall be received, held and disbursed by the Partnership for
the purposes specified in this Agreement. There shall not be deposited in any of
said accounts any funds other than funds belonging to the Partnership, and no
other funds shall in any way be commingled with such Partnership funds.
7.5 Tax Returns. The Management Committee shall cause income tax returns
for the Partnership to be prepared and timely filed with the appropriate
authorities.
7.6 Tax Elections. The Management Committee shall, from time to time, make
such tax elections as it deems necessary or advisable to carry out the business
of the Partnership or the purposes of this Agreement.
7.7 Tax Matters Partner. Cogentrix GP shall be the Partnership's "tax
matters partner" for purposes of the Code and with respect to all other Federal,
state and local Taxes. The approval of the tax matters partner shall be required
before the Partnership or any Partner (with respect to Partnership matters)
files any document with any Governmental Authority including, but not limited
to, returns, amendments, requests for refunds, appeals, or waivers or extensions
of statutes of limitations. The tax matters partner shall take such actions as
the Management Committee may lawfully require in connection with the
Partnership's Federal, state and local Tax matters.
7.8 Withholdings. Except and only to the extent required by applicable law
and except as permitted hereunder, the Partnership will not deduct or withhold
any amount in respect of any tax from any payment or distribution by the
Partnership to any Partner unless the Partnership has first received written
authorization from such Partner so to withhold or to deduct.
-30-
<PAGE>
ARTICLE VIII
TRANSFER OF INTERESTS
8.1 Transfer of a Partner's Interest.
(a) No Partner may sell, transfer, participate, assign or otherwise
dispose of (whether voluntarily or by operation of law) (collectively,
"transfer") all or any part of its Partnership Interest without the prior
written consent of the non-transferring General Partner(s).
(b) The non-transferring General Partner(s) may condition its (their)
consent to any transfer on compliance by the Partner desiring to transfer
its Partnership Interest with all or any of the following:
(i) The transferring Partner must give written notice to the
General Partners identifying in reasonable detail the proposed
transferee(s) and the terms and conditions of the proposed transfer
and the non-transferring General Partner(s) shall have a period of
twenty (20) Business Days from the date of such notice either to
consent in writing to the proposed transferee(s), or to give written
notice that it does not consent to such transferee(s);
(ii) within ten (10) Business Days after the non-transferring
General Partner(s) gives written notice that it does not consent to a
proposed transferee, it shall provide to the transferring Partner a
written explanation of the reasons therefor;
(iii) such transfer does not release the transferring Partner
from its obligations hereunder;
(iv) the transferee shall not have the right to be separately
represented on the Management Committee unless the transferring
Partner is a General Partner that previously had the right to appoint
Designee's to the Management Committee and the transfer involves all
of such General Partner's Partnership Interest;
(v) the non-transferring General Partner(s) shall notify each
other Partner in writing of its decision to consent to the transfer
within five (5) Business Days of its grant of such consent (which
notice shall include a copy of the notice sent to the non-transferring
General Partner(s) by the transferring Partner) and, prior to any such
transfer, each Partner (which term, for purposes of clarity, includes
for purposes of this subsection (v) the non-transferring General
Partner and excludes the transferring Partner) shall have the right
for thirty (30) Business Days following such notice to purchase the
Partnership Interest being sold by the transferring Partner pursuant
to this Article VIII on the same terms and conditions as were set
forth in such notice. In the event that none of the nontransferring
Partners exercises its right to purchase such Partnership Interest
being sold, then the transferring Partner shall have forty-five (45)
days thereafter to complete the
-31-
<PAGE>
sale in accordance with the terms of the notice, after which time the
transferring Partner must again comply with the procedures set forth
in this Article VIII. In the event more than one Partner exercises its
right to purchase such Partnership Interest proposed to be
transferred, then such exercising Partners shall exercise such right
on a pro-rata basis based on their respective Partnership Percentages
(without considering the Partnership Percentage of the transferring
Partner or the Partners (if any) not electing to exercise such right);
or
(vi) such transferee shall not have the right to sell, transfer,
participate, assign or otherwise dispose of all or a portion of such
party's Partnership Interest except in accordance with the terms of
this Section 8.1; and
(vii) the transferee shall execute documents satisfactory to the
Management Committee sufficient to make the transferee a party to and
be bound by the terms of this Agreement and the transferee shall
expressly assume all obligations of the transferring Partner
hereunder.
ARTICLE IX
ADDITIONAL PARTNERS; WITHDRAWAL OF PARTNERS
9.1 Additional Partners. Persons other than the undersigned may from time
to time be admitted to the Partnership as General Partners or Limited Partners
only with the unanimous consent of the Management Committee and only on such
terms and conditions as may be prescribed by the Management Committee.
9.2 Withdrawal of Partners.
(a) No Partner may withdraw from the Partnership except as provided in
this Section 9.2.
(b) A Partner shall immediately cease to be a Partner and shall be
deemed to have Withdrawn from the Partnership, in the event:
(i) Such Partner shall commence a voluntary case or other
proceedings seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts
as they become due, or shall take any corporate action to authorize
any of the foregoing; or
(ii) an involuntary case or other proceeding shall be commenced
against such Partner seeking liquidation, reorganization or other
relief with
-32-
<PAGE>
respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, and such involuntary case
or other proceeding shall remain undismissed and unstayed for a period
of sixty (60) days, or an order for relief shall be entered against
such Partner under the federal bankruptcy laws as now or hereafter in
effect; or
(iii) such Partner defaults in its obligation to make a capital
contribution pursuant to Sections 3.1 and 3.2 (and such default is not
cured within two (2) days of written notice of such default from a
General Partner); or
(iv) it is required to Withdraw as a Partner pursuant to the
Delaware Act.
Such Partner's Withdrawal Date shall be the day such Withdrawal occurs.
(c) Any Partner may Withdraw voluntarily from the Partnership on not
less than thirty (30) days' prior written notice by such Partner to the
other Partners either (i) in the event that such Withdrawal is after
October 1, 1997 and the conditions to the initial draw under each of the
Construction/Term Facility Documents and the Revolving Facility have not
been satisfied or (ii) with the prior unanimous consent of the Management
Committee. Such Partner's Withdrawal Date shall be the date on which a
written notice of Withdrawal is made.
(d) Upon the Withdrawal of any Partner pursuant to subsections 9.2(b)
or (c), such Partner's Capital Account and Partnership Percentage shall be
allocated, as of the Withdrawal Date, among the other Partners in
proportion to their respective Partnership Percentages on such Withdrawal
Date (it being understood that such allocation shall not result in a
Limited Partner becoming a General Partner). After its Withdrawal Date, a
Withdrawn Partner shall not have any rights with respect to the profits,
capital or affairs of the Partnership (including, but not limited to, any
rights of representation on the Management Committee or any committee
thereof or any rights on liquidation of the Partnership pursuant to Article
X).
(e) On the Withdrawal Date for any Partner that Withdraws pursuant to
Section 9.2(b) or Section 9.2(c)(ii), such Partner shall pay to the
Partnership in cash any negative balance in such Partner's capital account.
If the sum of such Partner's capital account has a positive balance on the
Withdrawal Date, the Partnership shall pay such amount to such Partner upon
its withdrawal.
-33-
<PAGE>
ARTICLE X
DISSOLUTION AND LIQUIDATION
10.1 Events of Dissolution.
(a) The Partnership shall be dissolved upon:
(i) an Abandonment pursuant to subsection 6.2(e);
(ii) the occurrence of an event requiring dissolution under the
Delaware Act;
(iii) the unanimous consent of the General Partners; or
(iv) at the election of Cogentrix GP, if Agro Power ceases, at
any time, to control (as defined in the definition of "Affiliate") VF
Delaware or VF.
(b) Dissolution of the Partnership shall be effective on the day on which
the event occurs giving rise to the dissolution, but the Partnership shall not
terminate until the assets and rights of the Partnership shall have been
distributed as provided herein. Notwithstanding the dissolution of the
Partnership, prior to the termination of the Partnership, as aforesaid, the
business of the Partnership and the affairs of the Partners, as such, shall
continue to be governed by this Agreement. Upon dissolution, the Management
Committee shall liquidate the assets of the Partnership and apply and distribute
the proceeds thereof as contemplated by this Agreement.
10.2 Distributions Upon Liquidation.
(a) After payment of liabilities owing to creditors (but excluding any
liabilities payable with respect to the Management Agreement or the
Marketing Agreement other than amounts then due and owing), the Management
Committee or the liquidator, if any, shall set up such reserves as it deems
reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Partnership (other than liability and obligation owing
with respect to the Management Agreement and the Marketing Agreement). Said
reserves may be paid over by the Management Committee or the liquidator to
a bank, to be held in escrow for the purpose of paying any such contingent
or unforeseen liabilities or obligations and, at the expiration of such
period as the Management Committee or the liquidator may deem advisable,
such reserves shall be distributed to the Partners or their assigns in the
manner set forth in subsection (b) below.
(b) If any General Partner has a negative Capital Account at the time
of dissolution of the Partnership, such General Partner shall be required
to restore to the Partnership the amount of the negative balance in its
Capital Account. If any Limited Partner has a negative Capital Account
balance at the time of dissolution of the Partnership, such Limited Partner
shall have no obligation to restore to the Partnership the amount of the
negative balance in its Capital Account.
-34-
<PAGE>
(c) After paying the liabilities and providing for the reserves
referred to in subsection 10.2(a) and the payment of any restoration
amounts under subsection 10.2(b), the Management Committee or the
liquidator shall, by the end of the Partnership's taxable year in which the
Partnership dissolves (or, if later, within 90 days after the date of such
termination), cause the net assets of the Partnership to be distributed in
accordance with Article V hereof, provided, however, that no distribution
shall be made pursuant to this sentence that creates or increases a Capital
Account deficit for any Partner which exceeds such Partner's obligation to
restore such deficit (under subsection 10.2(b) above), determined as
follows:
Distributions shall be first determined provisionally without
regard to Capital Accounts, and the allocation provisions of Article
IV hereof shall also be applied provisionally. If as a result of such
provisional calculations and allocations, any Partner would thereby
have a Capital Account deficit which exceeds its obligation to restore
such deficit under subsection 10.2(b) above, the actual distributions
pursuant to this subsection (c) shall be equal to such provisional
distribution less the amount of such excess and actual allocations
shall be made in accordance with Article IV taking into account such
actual distributions.
Any remaining net assets shall be allocated among the Partners in
accordance with their positive Capital Accounts.
If such distributions are insufficient to return to any Partner the full amount
of its capital contributions, it shall have no recourse against any other
Partner. Each Partner shall receive its share of the net assets in cash or in
kind, and the proportion of such share that is received in cash shall be the
same for each Partner. In the event that any part of such net assets consists of
notes or accounts receivable or other non-cash assets, the Management Committee
or the liquidator shall take whatever steps it deems appropriate to convert such
assets into cash or into any other form which would facilitate the distribution
thereof. If any assets of the Partnership are to be distributed in kind, such
assets shall be distributed on the basis of their fair market value, as
determined by the Management Committee or the liquidator, if any, acting in its
sole discretion.
ARTICLE XI
DISPUTE RESOLUTION
11.1 Arbitration.
(a) In the event a dispute arises between or among any Partners
relating to the terms of this Agreement and any Partner gives written
notice of such dispute to the Management Committee, then each of the
Partners involved in such dispute shall refer the dispute to its senior
management. The senior management of each Partner involved in such dispute
shall meet and confer regarding the resolution of the dispute. In the event
a resolution of such dispute is not reached within 30 days of the written
notice, then any of the Partners involved in such dispute may submit the
dispute to arbitration in accordance with Section 11.1(b).
-35-
<PAGE>
(b) Arbitration of disputes pursuant to this Section 14.1(b) shall be
held in Charlotte, North Carolina under the commercial arbitration rules of
the American Arbitration Association, and shall be heard by three
arbitrators selected in accordance with such rules. Each arbitrator shall
have at least five years experience in the United States in a profession or
professions related to the subject matter involved in the dispute and shall
not be a past or present officer, director or employee of, or have any
interest in or material relationship with, any Partner or any Affiliate of
any Partner. Any arbitral award shall be final and binding and may be
entered by any Partner in any state or Federal court having jurisdiction
thereof. Costs of arbitration (including reasonable attorney's fees and
costs) shall be paid either equally by the parties to the arbitration or in
accordance with the decision of the arbitrators.
11.2 Buy/Sell Option.
(a) In the event that the Management Committee is unable to reach a
unanimous decision with respect to any matter set forth in Section 6.2,
either of the General Partners (such Partner herein referred to as a
"Buy-Out Offeror") shall have the right to make a written offer to buy (a
"Buy-Out Offer") all (but not less than all) of the Partnership Interests
of the other General Partner and its Affiliates. The Buy-Out Offer shall be
at a price determined in accordance with the Appraisal Procedure (the
"Aggregate Purchase Price") which shall be payment for all of the assets,
liabilities and business of the Partnership, and the amount to be paid to
any selling Partner under this Section 11.2 shall be equal to the amount
such selling Partner would receive if all the assets, liabilities and
business of the Partnership were sold at the Aggregate Purchase Price on
the date the Buy-Out Offer was made and the Partnership were then
immediately dissolved in accordance with Section 10.2. The General Partners
hereby agree to use their best efforts to cause the Appraisal Procedure to
be completed within ninety (90) days after it has been initiated. The
General Partner receiving a Buy-Out Offer (a "Buy-Out Offeree") shall,
within 30 days of the determination of the Aggregate Purchase Price in
accordance with the Appraisal Procedure, either (a) accept the Buy-Out
Offer on behalf of itself and its Affiliates who own Partnership Interests
or (b) agree to purchase all (but not less than all) of the Partnership
Interests of the Buy-Out Offeror and its Affiliates upon the foregoing
terms and using the same Aggregate Purchase Price as was determined in
accordance with the Appraisal Procedure to determine the amount owing to
each selling Partner. The failure of any Partner receiving a Buy-Out Offer
to respond to such Buy-Out Offer within such 30-day deadline of its receipt
thereof, either agreeing to accept such Buy-Out Offer on behalf of itself
and its Affiliates or by agreeing to purchase all (but not less than all)
of the Partnership Interest of the Buy-Out Offeror and its Affiliates on
the foregoing terms, shall constitute (without any further action by the
Buy-Out Offeror, the receiving General Partner or any other Partner) an
irrevocable acceptance of such Buy-Out Offer by the receiving General
Partner binding on and enforceable against such General Partner and its
Affiliates.
(b) Any purchase of Partnership Interests required pursuant to
subsection 11.2(a) shall be made through the redemption of such Partnership
Interests by the Partnership; provided, however, that if such redemption is
prohibited by the Project Loan
-36-
<PAGE>
Documents, such purchase shall be made directly by the purchasing General
Partner. The closing date for any such purchase shall be on the date set by
the purchasing General Partner which may be at any time within 180 days of
the acceptance of a Buy-Out Offer or agreement to purchase, as the case may
be. In the event the purchasing General Partner does not close the purchase
within such 180-day period, then the purchasing General Partner's right to
purchase Partnership Interests under Section 11.2(a) shall at the close of
business on such 180th day terminate and the other General Partner shall
thereafter have the right to purchase the Partnership Interests of the
purchasing General Partner and its Affiliates at a price determined by
using the same Aggregate Purchase Price and such other General Partner
shall have 180 days immediately following the expiration of the initial 180
day period in which to close such purchase. The price to be paid to each
selling Partner shall be paid by the purchasing General Partner in
immediately available funds at the closing.
ARTICLE XII
MISCELLANEOUS
12.1 Distributions and Notices. Distributions hereunder shall be sent, and
notices required or permitted hereunder shall be in writing and shall be sent,
to the address set forth for each Partner in signature pages hereof, or at such
other address as may be supplied by written notice given in conformity with the
terms of this Section 12.1. Notices to the Management Committee shall be sent
care of all Partners who have a right to designate members of the Management
Committee. Any notice required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given and/or delivered (a) when
personally delivered, (b) when sent by telefax and receipt is acknowledged via
telephone or otherwise as confirmation of such receipt but only if the sender
obtains a printed confirmation of the receipt by the recipient of the entire
document, (c) the second day following the day on which the same has been
delivered prepaid to a reputable overnight courier service providing proof of
receipt but only if sent for next business day delivery or (d) five (5) days
after the deposit in the United States mails, registered or certified, return
receipt requested and postage prepaid, in each case addressed to the party to
whom such notice is to be given at the address set forth on the signature pages
hereof), or at the most recent address(es) specified by written notice given to
the other party in the same manner provided in this section; provided, however,
that notice of an address change shall not be effective until actually received.
Distributions shall be deemed given only upon the receipt thereof by a Partner.
12.2 Disclosure Obligations. The Partnership hereby covenants and agrees
for the benefit of Cogentrix GP and VF Delaware that it shall (a) notify
Cogentrix GP and VF Delaware of any material fact necessary in order to make any
of the representations, warranties or other statements made by it in the Project
Documents, or any other written statement provided to Cogentrix GP or VF
Delaware not misleading and (b) disclose in writing to Cogentrix GP and VF
Delaware any fact which materially adversely affects, or which could reasonably
be expected in the future to materially adversely affect Cogentrix GP, VF
Delaware or the Project, in each case under clause (a) or (b) above promptly
upon receiving knowledge of any such fact.
-37-
<PAGE>
12.3 Successors and Assigns. Subject to the restrictions on transfer set
forth herein, this Agreement, and, each and every provision hereof, shall be
binding upon and shall inure to the benefit of the Partners, their respective
successors, successors-in-title, heirs and assigns, and each and every
successor-in-interest to any Partner, whether such successor acquires such
interest by way of gift, purchase, foreclosure or by any other method, shall
hold such interest subject to all of the terms and provisions of this Agreement.
12.4 Amendments. This Agreement may not be released, discharged, amended or
modified in any manner except by an instrument in writing signed by a duly
authorized officer of each party hereto.
12.5 Partition. The Partners hereby agree that no Partner, nor any
successor-in-interest to any Partner, shall have the right while this Agreement
remains in effect to have the property of the Partnership partitioned, or to
file a complaint or institute any proceeding at law or in equity to have the
property of the Partnership partitioned, and each Partner, on behalf of itself,
its successors, representatives, heirs and assigns, hereby waives any such
right. It is the intention of the Partners that during the term of this
Agreement, the rights of the Partners and their successors-in-interest, as among
themselves, shall be governed by the terms of this Agreement, and that the right
of any Partner or successor-in-interest to assign, transfer, sell or otherwise
dispose of its interest in the Partnership shall be subject to the limitations
and restrictions of this Agreement.
12.6 No Waiver. No waiver of any right under this Agreement shall be deemed
effective unless contained in a writing signed by the party charged with such
waiver. The failure of any Partner to insist upon strict performance of a
covenant hereunder or of any obligation hereunder, irrespective of the length of
time for which such failure continues, shall not be a waiver of such Partner's
right subsequently to demand strict compliance. No consent or waiver to or of
any branch or default in the performance of any obligation hereunder, shall
constitute a consent or waiver to or of any other breach or default in the
performance of the same or any other obligation hereunder.
12.7 Entire Agreement. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof and
supersedes any and all prior agreements, understandings, promises and
representations made by either party to the other concerning the subject matter
hereof and the terms applicable hereto, including, without limitation, the
Original Agreement.
12.8 Captions. Titles or captions of articles, sections and subsections
contained in this Agreement are inserted only as a matter of convenience and for
reference, and in no way are intended to define, limit, extend or describe the
scope of this Agreement or the intent of any provision hereof.
12.9 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall for all purposes constitute one
Agreement, binding upon the Partners notwithstanding that all Partners may not
have signed the same counterpart.
-38-
<PAGE>
12.10 Applicable Law. This Agreement shall be deemed to have been entered
into and shall be construed and enforced in accordance with the laws of the
State of Delaware as applied to contracts made and to be performed entirely
within Delaware.
12.11 Severability. If any provision of this Agreement is or becomes or is
deemed invalid, illegal or unenforceable in any jurisdiction, (a) such provision
shall be construed or deemed amended to conform to applicable laws so as to be
valid and enforceable, or, if it cannot be so construed or deemed amended
without materially altering the intention of the parties hereto, it shall be
stricken, (b) the validity, legality and enforceability of such provision will
not in any way be affected or impaired thereby in any other jurisdiction and (c)
the remainder of this Agreement shall remain in full force and effect.
-39-
<PAGE>
IN WITNESS WHEREOF, the Partners have executed this Agreement as of the
date first above mentioned.
COGENTRIX OF BUFFALO, INC.,
as General Partner
By ____________________________
Printed Name: Thomas F. Schwartz
Title: Vice President - Finance
and Treasurer
Address for Notices:
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273
Attention: General Counsel
Address for Distributions:
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273
Attention: Treasurer
VILLAGE FARMS OF DELAWARE, L.L.C.,
as General Partner
By: Agro Power Development, Inc.,
Managing Member
By ________________________
Printed Name: J. Kevin Cobb
Title: Vice President
Address for Notices:
10 Alvin Court
East Brunswick, New Jersey 08816
Attention: Chief Financial Officer
Address for Distributions:
10 Alvin Court
East Brunswick, New Jersey 08816
Attention: Chief Financial Officer
-40-
<PAGE>
COGENTRIX GREENHOUSE INVESTMENTS,
INC., as Limited Partner
By ______________________________
Printed Name: Thomas F. Schwartz
Title: Vice President - Finance
and Treasurer
Address for Notices:
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273
Attention: General Counsel
Address for Distributions:
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273
Attention: Treasurer
VILLAGE FARMS, L.L.C.,
as Limited Partner
By: Agro Power Development, Inc.,
Managing Member
By ________________________
Printed Name: J. Kevin Cobb
Title: Vice President
Address for Notices:
10 Alvin Court
East Brunswick, New Jersey 08816
Attention: Chief Financial Officer
Address for Distributions:
10 Alvin Court
East Brunswick, New Jersey 08816
Attention: Chief Financial Officer
-41-
<PAGE>
Schedule 1.1(a)
Calculation of Internal Rate of Return
Internal Rate of Return Calculation
The calculation of the Internal Rate of Return in connection with determining
the First Priority Return and Second Priority Return will be based upon the cash
inflows and cash outflows for Cogentrix GP and Cogentrix LP. The Internal Rate
of Return shall be computed utilizing Microsoft Excel software version 5.0. The
Internal Rate of Return shall be computed utilizing the @XIRR function in Excel.
For purposes of calculating the Internal Rate of Return, the cash inflows and
cash outflows to Cogentrix GP and Cogentrix LP shall consist solely of the
following:
Partner Contributions
All contributions made by Cogentrix GP and Cogentrix LP will be reflected
as a cash inflow as of the date such contribution was received by the
Partnership. Cogentrix GP and Cogentrix LP will be credited for a partner
contribution at any time such Partner funds cash into the Partnership. In
addition, to the extent Cogentrix Energy, Inc. or any of its Affiliates
funds cash directly into the Partnership or pays amounts to other persons
to fulfill obligations under the Agreement or any of the Project Documents
or Project Loan Documents or incurs costs or fees associated with securing
an obligation to make a contribution to the Partnership, then such funding
into the Partnership or such other payments and/or such costs or fees will
be deemed a capital contribution by Cogentrix GP and Cogentrix LP as of the
day on which such funding or payment is made or such costs or fees are
incurred.
Distributions to Partners
All cash distributions will be reflected as a cash outflow on a net
After-Tax basis (based on allocations of the Partnership's taxable income
(loss) in accordance with Section 4.1) as of the date such cash
distribution was received by the Partner.
The Internal Rate of Return calculation shall be performed by Agro Power as of
the end of each calendar quarter and is subject to the approval of Cogentrix GP
and Cogentrix LP.
All capitalized terms used in this Schedule 1.1(a) and not otherwise defined
herein shall have the meaning set forth in this Agreement.
-42-
<PAGE>
Schedule 1.1(b)
Project Budget
<PAGE>
Schedule 1.1(c)
Project Documents
Ground Lease dated September 4, 1997 between Agro Power Development, Inc. and
The Buffalo Enterprise Development Corporation
<PAGE>
Schedule 1.1(d)
Site
<PAGE>
Schedule 6.3
Initial Officers of the Partnership
Name Title
- - ---- -----
Michael A. DeGiglio President
Thomas F. Schwartz Vice President
Albert Van Zeyst Vice President
J. Kevin Cobb Vice President
Michael Minerva Vice President
Lawrence J. Howard Treasurer
Dennis W. Alexander Secretary
Lori T. Hladik Assistant Secretary
Eilene M. Beck Assistant Secretary
Exhibit 10.75
MANAGEMENT, OPERATION AND
MAINTENANCE CONTRACT
BETWEEN
VILLAGE FARMS OF DELAWARE, L.L.C.
AND
VILLAGE FARMS OF BUFFALO, L.P.
SEPTEMBER 4, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS...............................................................1
ARTICLE II
SCOPE OF DUTIES...........................................................3
Section 2.01. Performance of Start-up,
Operation and Maintenance............................3
Section 2.02. Personnel............................................4
Section 2.03. Facility Manager.....................................4
Section 2.04. Business Plan and Budget.............................4
Section 2.05. Performance Standards................................4
ARTICLE III
OPERATION.................................................................5
Section 3.01. Operation............................................5
Section 3.02. Compliance With Governmental Rules...................5
Section 3.03. Obligations of Owner.................................5
Section 3.04. Greenhouse Products..................................5
Section 3.05. Maintenance..........................................5
Section 3.06. No Obstruction.......................................6
ARTICLE IV
COMPENSATION AND PAYMENT..................................................6
Section 4.01. Basic Compensation...................................6
Section 4.02. Debt Service Coverage Ratio Test.....................7
ARTICLE V
REPRESENTATIONS AND WARRANTIES............................................7
Section 5.01. Representations and Warranties of the Manager........7
ARTICLE VI
COVENANTS OF THE MANAGER..................................................7
Section 6.01. Operating Logs: Records and Audits..................7
Section 6.02. Insurance of the Manager.............................8
Section 6.03. Employment Practices.................................8
Section 6.04. Nondisclosure........................................8
Section 6.05. Compliance With Governmental Rules...................9
ARTICLE VII
GENERAL LIABILITY.........................................................9
Section 7.01. Indemnification......................................9
ARTICLE VIII
DEFAULTS AND REMEDIES.....................................................9
Section 8.01. Defaults.............................................9
Section 8.02. Damages for Termination Without Cause...............10
ARTICLE IX
TERM.....................................................................10
Section 9.01. Term................................................10
<PAGE>
ARTICLE X
MISCELLANEOUS............................................................10
Section 10.01. Notices............................................10
Section 10.02. Severability.......................................11
Section 10.03. Amendment..........................................11
Section 10.04. Assignment.........................................11
Section 10.05. Relationship of the Parties........................12
Section 10.06. Headings; Etc......................................12
Section 10.07. Governing Law......................................12
Section 10.08. Parties in Interest; Limitation and
Rights of Others...................................12
Section 10.09. Arbitration........................................12
Section 10.10. Owners Title.......................................12
-ii-
<PAGE>
MANAGEMENT, OPERATION AND MAINTENANCE CONTRACT
Village Farms of Buffalo, L.P. (the "Owner") intends to construct and
operate an approximate 18 acre greenhouse (the "Greenhouse"). The Greenhouse
will be dismantled from its present location in Pennsylvania and reconstructed
by Mountain High Greenhouse L.L.C. on property leased by Owner in Buffalo New
York (the "Contractor"), Agro Power Development, Inc. (the "General Contractor")
and the owner. Village Farms of Delaware, L.L.C. (the "Manager") and the Owner
have entered into this Management, Operation and Maintenance Contract this 4th
Day of September, 1997 to operate, maintain and manage the Greenhouse.
In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, and in
reliance upon the representations and warranties of each party set forth herein,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms when used herein shall have the following meanings:
"Affiliate" of any Person shall mean each Person which, directly or
indirectly, controls or is controlled by or is under common control with such
designated Person and, without limiting the generality of the foregoing, shall
include (a) any Person which beneficially owns or holds ten percent (10%) or
more of any class of voting securities of such designated Person or ten percent
(10%) or more of the equity interest in such designated Person and (b) any
Person of which such designated Person beneficially owns and holds ten percent
(10%) or more of any class of voting securities or in which such designated
Person beneficially owns or holds ten percent (10%) or more of the equity
interest. For the purposes of this definition, the terms "controls," "controlled
by," and "under common control with," as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person whether through the
ownership of voting securities or by contract or otherwise.
"Business Day" shall mean any day other than Saturday, Sunday or other day
on which banks are authorized to be closed in Texas, New York, North Carolina,
or New Jersey.
"Business Plan and Budget" shall mean the business plan and budget prepared
annually or more often by Manager setting forth the items described in Section
2.04.
"Capital Assets" shall mean all reusable equipment and components used in
the operation of the Greenhouse.
"Codes and Standards" shall mean the applicable national, state and local
engineering construction, building and safety codes and standards from time to
time in effect governing the construction and operation of the Greenhouse.
<PAGE>
"Contract" shall mean this document and any exhibits and appendices hereto
as amended from time to time.
"Contract Year" initially shall be the period ending on December 31 next
following the Date of Initial Services and each calendar year thereafter.
"Credit Agreement" shall mean the Credit Agreement to be entered into
between owner and the Lender, as the same may be amended, modified or
supplemented from time to time.
"Date of Initial Services" shall mean that date, as agreed upon by the
Manager and the Owner, which is sixty (60) days prior to the date of Substantial
Completion under the Commercial Dismantling & Construction Contract, between
contractor and general contractor, as same may be amended, modified or
supplemented from time to time.
"Facility Manager" shall mean the person described in Section 2.03.
"Governmental Rule" shall mean any law, rule, regulation, ordinance, order,
code, interpretation, judgment or similar norm or decision of any Federal,
state, local or foreign government, authority, agency, court or other body or
entity having jurisdiction over the Site including the Codes and Standards.
"Greenhouse Construction Agreement" shall mean the Commercial Greenhouse
Dismantling and Construction Contract dated February 28, 1997 for the
dismantling and reconstruction of the Greenhouse by and between the Contractor
and the General Contractor as supplemented, modified and amended through the
date hereof.
"Lender" shall mean Village Farms International Finance Association and its
successors and assigns.
"Marketing Agent" shall be Village Farms, L.L.C. for the term and to such
extent as described in the Marketing and Sales Agreement between the Owner and
Village Farms, L.L.C., dated of even date herewith.
"Marketing and Sales Agreement" shall mean the Marketing and Sales
Agreement between the Owner and Village Farms, L.L.C., dated of even date
herewith.
"Operating Costs" shall mean the sum (without duplication) of (a) direct
labor costs paid, (b) seed expense paid, (c) packaging supplies expense paid,
(d) fertilizer and chemical expenses paid, (e) biological control, including
bees, expense paid, (f) freight expense paid, (g) growing medium and supplies
expense paid, (h) carbon dioxide expense paid, (i) utility (including hot water,
electricity and natural gas) expense paid, (j) compensation paid to the Manager
hereunder, (k) insurance premiums and property taxes paid, (1) principal and
interest paid with respect to the Credit Agreement and (m) all other cash
expenses paid relating to the operation of the Greenhouse, to the extent
contained in the Business Plan and Budget.
"Party" shall mean Owner or the Manager, or any of them, as appropriate,
and their successors and permitted assignees.
-2-
<PAGE>
"Payroll Costs" shall mean the salaries payable to employees of the Manager
performing the Work at the Site.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
government or agency or political subdivision thereof.
"Product" shall mean all production derived from the Greenhouse, which
shall initially consist of tomatoes.
"Revenues" shall mean the gross proceeds derived from the sale of the
Product, plus interest income, and any and all other types of income received by
the owner, less allowances, returns, and amounts received with respect to
freight and transportation charges, and excluding insurance proceeds.
"Site" shall mean the Greenhouse and its grounds located on the Southpark
Avenue in Buffalo, New York.
"Term" shall mean the period provided for in Section 9.01 hereof.
"Uncontrollable Force" shall mean any of the following which are beyond the
reasonable control of a Party and which materially impairs the performance by
such Party of its duties and obligations hereunder and such material impairment
continues for a period of more than thirty (30) days: (a) severe weather, flood,
fire, lightning or other natural disaster or act of God, (b) earthquake or
subsidence, whatever its cause, (c) strikes or other labor disturbances, whether
or not involving employees of a Party, (d) action or inaction by, or inability
to obtain authorization or approval from, any governmental agency or authority,
which a Party is unable, after its best efforts, to overcome, (e) compliance
with any Governmental Rule, (f) war (whether declared or not), sabotage, act of
a public enemy, insurrection, riot or civil disturbance, (g) defects in material
equipment necessary for performance of the Contract, (h) any act by another
party (other than the Party claiming Uncontrollable Force, any Affiliate of such
Party or the respective agents, servants or employees of such Party or
Affiliates) or (i) any other similar act.
"Work" shall mean all duties and responsibilities of the Manager under this
Contract.
ARTICLE II
SCOPE OF DUTIES
Section 2.01. Performance of Start-up, Operation and Maintenance. As more
specifically described in Articles III and IV, the Manager shall furnish, manage
and supervise all personnel necessary in connection with the design, start-up,
operation, maintenance, service and repair of the Greenhouse. Commencing on the
Date of Initial Services, the Facility Manager (as defined herein in Section
2.03) shall be available on the Site to provide consulting services to the
Contractor in its reconstruction of the Greenhouse and to prepare the Greenhouse
for production. Prior to the Date of Initial Services and upon witnessing all
performance testing, the Manager shall inspect the Greenhouse, and unless the
Manager submits in writing to Owner a report setting forth any defects in the
design or reconstruction of the Greenhouse within thirty (30) days after the
Date of Initial Services and upon witnessing all performance testing, the
Manager will
-3-
<PAGE>
be deemed to have accepted the Greenhouse. Any defects in the design or
reconstruction of the Greenhouse or in any equipment therein reasonably
discoverable by the Manager through such inspection shall not be grounds for
claiming Uncontrollable Force after acceptance of the Greenhouse by the Manager.
The marketing and distribution of the Product shall be the primary
responsibility of Village Farms, L.L.C. as defined in the Marketing and Sales
Agreement.
Section 2.02. Personnel. The Manager shall dedicate to the performance of
the Contract such administrative, technical and supervisory personnel (each of
whom will be properly trained and qualified to undertake their respective
assigned duties) and support systems and services as are necessary or desirable
to (i) assure start-up and commissioning of the Greenhouse, (ii) instruct the
Owner and its employees in the proper operation of the Greenhouse, and (iii)
perform Manager's responsibilities under this Contract.
Section 2.03. Facility Manager. The Manager shall identify one competent
individual to act in the capacity of Facility Manager. The Facility Manager
shall be responsible on a day-to-day basis for the operations and performance of
the Greenhouse. The selection and continued employment of the Facility Manager
in the performance of the Greenhouse Operations shall be subject to the approval
of Owner, which approval shall not be unreasonably withheld. The Facility
Manager shall be an employee of the owner.
Section 2.04. Business Plan and Budget. Prior to the date of substantial
completion under the Greenhouse Construction Agreement, the Manager will provide
to the Owner a preliminary Business Plan and Budget for the first year of
operations setting forth such information as the Owner shall reasonably request.
In addition, within forty-five (45) days prior to the Date of Initial Services
and within forty-five (45) days prior to December 31 of each year thereafter,
the Manager shall submit to the Owner the Business Plan and Budget for the
initial Contract Year and each Contract Year thereafter. The Business Plan and
Budget shall set forth in form and detail reasonably satisfactory to Owner, the
Manager's best estimate of Revenues and Operating Costs of the Greenhouse for
such Contract Year. Each Business Plan and Budget delivered hereunder shall be
subject to the approval of Owner. In the event the Owner does not notify the
Manager of its approval or disapproval of the Business Plan and Budget within
fourteen (14) days of its receipt of same, the owner shall be deemed to have
approved such Business Plan and Budget.
Section 2.05. Performance Standards. The Manager shall be responsible for
the operating performance of the Greenhouse in accordance with the Business Plan
and Budget and in conformity with industry, professional and safety standards
and in a prudent and businesslike manner. The Manager shall be responsible for
the means, methods and techniques used in the operation of the Greenhouse. The
Manager shall maintain good order and discipline at the Greenhouse at all times
and shall take all reasonable precautions to protect the Greenhouse and its
contents (including, but not limited to, the Product) from damage and to protect
employees of Lender, Owner and the Manager and members of the public from injury
at the Site.
-4-
<PAGE>
ARTICLE III
OPERATION
Section 3.01. Operation. During the period beginning on the Date of Initial
Services and ending at the expiration of the Term of this Contract, the Manager
shall use its best efforts to operate the Greenhouse (including, but not limited
to, the sowing, growing, harvesting and packaging of the Product) at its fullest
productive capacity in accordance with the Business Plan and Budget and in
accordance with prudent agricultural economic practices and to assist the
Marketing Agent in its efforts to market the Product to derive the greatest
possible revenue therefrom. The Manager warrants that, during each Contract
Year, beginning with the Second Contract Year, that the operating performance of
the Greenhouse will be on a basis consistent with similar greenhouses operated
by the Manager in consideration of differences in size and location of the other
greenhouses.
Section 3.02. Compliance With Governmental Rules. The Manager shall at all
times operate the Greenhouse in accordance with all applicable Governmental
Rules (including, but not limited to, all environmental protection, hazardous or
toxic substances, pollution, waste, material handling, disposal, sanitary,
health, and safety laws, rules and regulations). The Manager shall be liable for
all fines, fees, penalties, damages or other costs imposed by a governmental
authority attributable to its willful acts or negligence (and the negligence of
its agents and employees) in connection with the operation, use or maintenance
of the Greenhouse.
Section 3.03. Obligations of Owner. Throughout the Term of this Contract,
Owner shall supply to the Manager of the Greenhouse such personnel and operating
supplies as shall be mutually agreed upon by the Manager and Owner in the
Business Plan and Budget. The Manager shall be responsible for overseeing and
recording the use of all Operating Supplies and shall give Owner reasonable
notice of its requirements for additional personnel and Operating Supplies not
set forth in the Business Plan and Budget, along with the reasons therefor. The
Manager shall be responsible for inspecting Operating Supplies furnished by
owner, and any defects in such Operating Supplies reasonably discoverable by
Manager through such inspection, and which are capable of being corrected in a
reasonable time frame, shall not be grounds for claiming Uncontrollable Force.
All personnel of the Greenhouse operation shall at all times be employees of
Owner. The Manager shall have the right to direct and instruct the employees of
Owner, and subject to Owner's approval, which will not be unreasonably withheld,
to hire and fire Owner's employees, as Manager considers necessary and desirable
for the operation of the Greenhouse.
Section 3.04. Greenhouse Products. It is contemplated by this Contract that
the Manager will-use its best efforts to produce tomatoes in the Greenhouse in
accordance with the Business Plan and Budget. However, if in the opinion of the
Manager the Greenhouse operation can be made more profitable by the production
of produce more profitable than tomatoes, then the Manager, with the prior
written consent of Owner and the Lender, may produce a substitute product.
Section 3.05. Maintenance. The Manager shall have the responsibility of
directing the maintenance, service and repair of the Greenhouse (a) in material
accordance with industry standards of prudence, (b) in accordance with
specifications, directions, instructions and
-5-
<PAGE>
recommendations of the manufacturers of the components thereof, (c) in
accordance with all applicable Governmental Rules (including, but not limited
to, all environmental protection, hazardous or toxic substances, pollution,
waste, material handling, disposal, sanitary, health, and safety laws, rules and
regulations) and (d) to the extent materially necessary to (i) maintain the
Greenhouse in good operating condition and repair, ordinary wear and tear
excepted, (ii) cause the Greenhouse to continue to have the capacity and
functional ability to perform, on a continuing basis, in normal commercial
operation, the function for which it was specifically designed, (iii) comply
with any standards imposed by any insurer who has issued any insurance policy or
policies in effect at any time during this Contract with respect to the
Greenhouse or any part thereof and (iv) keep in full force and effect any
warranty with respect to the Greenhouse or any part thereof. The Manager shall
operate the Greenhouse in such a manner that at all times (a) the Greenhouse and
its surrounding grounds shall be free of litter (both organic and non-organic),
(b) waste materials (both organic and non-organic) will be confined to areas
designed and maintained for their storage and processing, (c) the exterior
appearance of the buildings and the landscaping surrounding the Greenhouse shall
be neat and orderly and (d) the interior of the Greenhouse will be neat and
clean. The Manager will identify potential maintenance problems and recommend
corrective actions in the Business Plan and Budget. All costs associated with
performing the aforementioned maintenance services will be the responsibility of
the Owner. The Manager will include its best estimate of such costs in the
Business Plan and Budget.
Section 3.06. No Obstruction. Until the termination of this Contract, Owner
shall not, either through its agents or employees, take any action that would
prevent the Manager from operating the Greenhouse in accordance with the
Contract nor take any action that would materially obstruct the Site or the
Greenhouse, unless such prevention or obstruction is caused by Uncontrollable
Force or by the Manager or any of its Affiliates or any of their respective
employees, servants or agents.
ARTICLE IV
COMPENSATION AND PAYMENT
Section 4.01. Basic Compensation. In consideration of the performance of
Manager's obligations under the Contract, Owner shall pay to the Manager the sum
of THREE HUNDRED THOUSAND DOLLARS ($300,000.00) per Contract Year (the
"Compensation") in twelve equal monthly installments beginning on the 1st day of
the second month following the Date of Initial Services and on each anniversary
thereafter. For the period from the Date of Initial Services through the first
day of the month following the Date of Initial Services, the Manager shall be
entitled to a fee equal to the product of (i) the Compensation and (ii) a
fraction which shall be the number of weeks of such period divided by 52, such
amount to be payable on the first day of the month following the Date of Initial
Services. Such compensation will be adjusted each January 1 of each Contract
Year by the same percentage change in the Consumer Price Index ("CPI"), provided
the adjustment shall not cause the Compensation to be less than the current
Contract Year's Compensation. If for any reason the Manager is unable to perform
its obligations hereunder except as a result of termination of this Contract
because of a default by the Manager hereunder, then the Manager shall be
entitled to the continuation of the Compensation as though the Contract had been
performed by the Manager, provided however, that in the event that the Manager
or Owner is unable to perform its obligations under this Contract because of an
Uncontrollable Force, then the Compensation shall be discontinued at any
-6-
<PAGE>
time after the later of, the first anniversary of the event creating the
Uncontrollable Force or the date on which the Manager's continued performance
was disrupted. In the event this Agreement has been terminated, and in the event
the Manager may have received Compensation to which it was not entitled, said
overpayment of Compensation shall be immediately due and payable to the Owner,
upon the determination of such overpayment.
Section 4.02. Debt Service Coverage Ratio Test. The provisions of this
Section 4.02 shall remain in effect only for so long as the Owner is party to
any loan agreement with the Lenders. In the event Owner's debt service coverage
ratio as defined in the Credit Agreement ("DSCR") for any calendar year falls
below 1.5, then, in that event, no Compensation shall be paid for any portion of
that calendar year, however, the right to Compensation shall accrue, provided
the DSCR is greater than 1.0, and shall be paid to the Manager in one sum,
immediately following Owner's achievement of a DSCR of at least 1.5. In the
event that Compensation was paid for any portion of the calendar year during
which Owner's actual DSCR fell below 1.5, those payments shall be deducted from
future payments due the Manager hereunder, until the Owner has recouped same.
Immediately upon the owner achieving a DSCR of 1.5, any payments which were
withheld or recouped by owner due to a DSCR between 1.0 and 1.5, shall be paid
to the Manager in one sum. The Owner's DSCR shall be measured as of December 31
of each year during the term of this Contract.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01. Representations and Warranties of the Manager. The Manager
represents and warrants to Owner that both it and the Facility Manager have
substantial experience in the start-up, operation and management of the
maintenance, service and repair of facilities similar to the Greenhouse. The
Manager is a limited liability company organized and validly existing under the
laws of the State of Delaware. The Manager's execution and delivery of this
Contract and the performance of its obligations hereunder have been duly
authorized by all requisite action on the part of the Manager and this Contract
constitutes the Manager's legal, valid and binding obligation, enforceable
against the Manager in accordance with its terms. The Manager's execution and
delivery of this contract and the performance of its obligations hereunder will
not conflict with, violate or result in a default under the Manager's
certificate of formation or operating agreement or any mortgage, indenture,
agreement, instrument or other contract to which the Manager is a party or by
which the Manager is bound.
ARTICLE VI
COVENANTS OF THE MANAGER
Section 6.01. Operating Logs: Records and Audits. The Manager shall
maintain f or the benefit of Owner daily operating logs showing the production
and sales from the Greenhouse and shall prepare maintenance and repair reports
in detail sufficient to indicate the nature of all maintenance and repairs
performed. The Manager shall also maintain such records and books of accounts as
are appropriate for the proper management of the Greenhouse and all transactions
related thereto. All such books, records and reports shall be the sole and
exclusive property of the Owner, and the Manager shall keep such books and
records in such place or places so as to
-7-
<PAGE>
provide Owner (and its authorized representatives) with maximum access thereto
and the ability. to make copies thereof.
Section 6.02. Insurance of the Manager. At all times during the operation
of the Greenhouse, the Manager shall maintain the following types and amounts of
insurance, with insurers acceptable to the Owner and the Lender:
(a) Workers' Compensation Insurance (including employer's liability
insurance) covering personnel of the Manager in connection with this contract,
subject to the laws of New York;
(b) Primary Comprehensive General Liability Insurance for bodily injury
and/or property damage arising from the Work, subject to a combined single limit
of $1,000,000 per occurrence;
All insurance policies procured and maintained pursuant to this Section
6.02 shall contain a clause requiring the insurer and the Manager to notify
owner and the Lender in writing 45 days prior to any cancellation or expiration
thereof or any amendment thereto. Prior to the Date of Initial Services the
Manager shall furnish Owner and the Lender a certificate of insurance certifying
that the insurance coverage required pursuant to this Section 6.02 is in effect.
During the Term of this Contract, Owner shall keep the Facility (including
the Greenhouse and all equipment therein) and the Site insured against such
risks and in such amounts as are reasonably required by the Lender.'
The cost of insurance required pursuant to this Section 6.02 shall be born
solely by the Manager. Each such policy shall name the Lender and the Owner (in
the case of (a) and (b) above) as an additional insured.
Section 6.03. Employment Practices. The Manager shall comply with the
applicable requirements of Executive orders Nos. 11246 (Equal Opportunity and
Certification of Nonsegregated Facilities), 11701 (Affirmative Action for
Disabled Veterans and Handicapped of the Vietnam Era), 11758 (Affirmative Action
for Handicapped Workers), 11458 and 11625 (Minority Business Enterprise) and all
other Governmental Rules relating to employment practices to the extent
applicable.
Section 6.04. Nondisclosure. All reports, records and other information
related to the Site, the Greenhouse, the operations of the Owner, and the
performance of the Manager of its duties hereunder shall not be used by the
Manager for any purposes other than those contemplated hereby or pursuant to the
written consent of the Owner and shall not be disclosed by the Manager to any
other party or any other person or entity except with the prior written consent
of the Owner. Furthermore, the Manager shall not copy or reproduce any such
information without the written consent of the Owner (other than such reasonable
copies as may be necessary to perform its duties and obligations under this
Agreement). The Manager shall also take reasonable precautions to ensure against
any breach of the obligations contained herein which shall be no less stringent
than the precautions and procedures that it uses to protect its own proprietary
information and which shall, at a minimum, be deemed to include, without
limitation, taking precautions to ensure that it will only make such information
available to those of its
-8-
<PAGE>
employees who have a need to know it. Upon the expiration or termination of this
Agreement, Manager shall immediately return to the owner all such information
and all whole or partial copies thereof and all other materials that may
include, in whole or in part, such information. All rights, whether arising
under copyright, patent, trade secret, or other laws, to such information are
hereby reserved by the Owner.
Section 6.05. Compliance With Governmental Rules. The Manager shall at all
times perform its other duties and obligations hereunder in accordance with all
applicable Governmental Rules. The Manager shall be liable for all fines, fees,
penalties, damages or other costs imposed by a governmental authority
attributable to its and/or its agents, servants and employees in connection with
the performance of its other duties and obligations hereunder.
ARTICLE VII
GENERAL LIABILITY
Section 7.01. Indemnification. The Manager shall indemnify and save
harmless Owner and Lender, and their respective directors, officers, agents, and
employees from and against (i) any and all loss, damage, injury, liability and
claims thereof for injury to or death of a person, including, but not limited
to, personnel of the Manager, Lender and Owner, (ii) any and all loss of or
damage to property and (iii) any and all loss of income by the Owner, resulting
from the Manager's performance of this Contract to the extent the same is caused
by the negligence or willful misconduct of the Manager, any of its Affiliates,
or any of their respective directors, officers, agents or employees. Owner shall
indemnify and save harmless the Manager and Lender, and their respective
directors, officers, agents, and employees from and against (i) any and all
loss, damage, injury, liability and claims thereof for injury to or death of a
person, including personnel of Owner, Lender and the Manager, (ii) any and all
loss of or damage to property, and (iii) any and all loss of income by the
Manager, resulting from the Owner's performance of this Contract to the extent
the same is caused by the negligence or willful misconduct of the Owner, any of
its Affiliates or any of its directors, officers, agents or employees.
ARTICLE VIII
DEFAULTS AND REMEDIES
Section 8.01. Defaults. Upon the failure of any Party to substantially
comply with any of the obligations of such Party hereunder and continued
noncompliance for a period of 30 days (except in the case where such failure
will result in injury to or damage or loss of perishable Product, in which case
the cure period shall be five (5) days) after written notice of the
noncompliance is sent to such Party, the non-defaulting Party may, at its
option, by written notice to the defaulting Party, declare this Contract to be
in default and at any time thereafter the non-defaulting Party may, at its sole
discretion, (a) exercise any right or pursue any remedy that may be available
under applicable law or proceed by appropriate court action to enforce the terms
hereof or to recover damages for the breach hereof and (b) terminate this
Contract. The exercise of any rights or pursuit of any remedies pursuant to this
Contract shall not relieve the defaulting Party of any of its obligations and
liabilities hereunder, all of which shall survive such exercise or pursuit. To
the extent permitted by law, and subject to any mandatory requirements of
applicable law, and further subject to Section 8.02 herein, each and every
right, power and
-9-
<PAGE>
remedy herein specifically given to the non-defaulting Party or otherwise in
this Contract shall be cumulative and shall be in addition to every other right,
power and remedy herein specifically given, or now or hereafter existing at law,
equity or by statute and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised or pursued from
time to time and as often in such order as may be deemed expedient by the
non-defaulting Party, and the exercise or pursuit or the beginning of the
exercise or pursuit of any right, power or remedy shall not be construed to be a
waiver of the right to exercise or to pursue at any time or thereafter any other
right, power or remedy. No delay or admission by a Party in the exercise of any
right or power or in the pursuit of any remedy may impair any such right, power
or remedy or be construed to be a waiver of any default on the party of the
other Party or to be an acquiescence therein. No expressed or implied waiver by
a Party of any default hereunder shall in any way be, or be construed to be, a
waiver of any future or subsequent default hereunder. Neither Party shall be
considered to be in default for failure to perform, or delay in performing, any
obligation under this Contract if performance is prevented, hindered or delayed
by an Uncontrollable Force (but only for so long as such Uncontrollable Force
continues unabated). In such event, the Party which is unable, or anticipates
being unable, to perform shall (a) promptly notify the other Party in writing of
the nature, cause, date of commencement and expected duration of any such delay,
(b) indicate to what extent it will be prevented from performing and (c)
exercise due diligence to overcome such inability to perform with all reasonable
dispatch. In the event a Party claims excuse of performance as a result of an
Uncontrollable Force which continues unabated for more than one hundred twenty
(120) days, the Party that is not affected by such Uncontrollable Force shall
have the option to terminate this Agreement on written notice to the other
Party.
Section 8.02. Damages for Termination Without Cause. Notwithstanding
anything to the contrary in Sections 4.01 or 8.01, the Parties agree that should
Owner elect to terminate the Agreement without cause at any time, pursuant to
Section 9.01 herein, then Owner shall pay as liquidated damages to the Manager a
sum equal to one-fourth (1/4) of the annual amount of Compensation in effect at
such early termination, which shall be Owner's sole and exclusive liability and
Manager's sole and exclusive remedy, for such early termination without cause.
ARTICLE IX
TERM
Section 9.01. Term. Subject to Article VIII and Section 3.01, this Contract
shall continue to be in effect for fifteen (15) years from the Date of Initial
Services; provided, however that the Term may be extended for additional periods
on terms acceptable to both Parties, such terms to be agreed upon not later than
three months prior to the expiration of the Term. Notwithstanding the foregoing,
the Owner shall be permitted to terminate this Contract, with or without cause,
upon ninety (90) days written notice to the Manager, subject to the terms of the
Credit Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.01. Notices. Unless otherwise specifically provided herein, all
notices, requests and demands and other communications hereunder must be in
writing and shall be
-10-
<PAGE>
deemed to have been duly given (i) when delivered personally, (ii) when sent by
telefax to the telefax number below and followed by a confirmation transmitted
by an additional mode of communication provided for herein, (iii) the second day
following the day on which the same has been delivered prepaid to a national
(only in the case of notices within the continental United States) or an
international air courier service, or (iv) when received if sent by the mails,
certified or registered, postage prepaid, in each case addressed to the party to
whom such notice is being given at the following addresses:
OWNER: Village Farms of Buffalo, L.P.
c/o Agro Power Development, Inc.
10 Alvin Court
East Brunswick, NJ 08816
Attention: President
Telefax: 908-254-1710
and
Village Farms of Buffalo, L.P.
c/o Cogentrix of Buffalo, Inc.
9405 Arrowpoint Boulevard
Charlotte, NC 28273
Attention: General Counsel
Telefax: 704-529-1006
MANAGER: Village Farms of Delaware, L.L.C.
10 Alvin Court
East Brunswick, NJ 08816
Attention: President
Telefax: 908-254-1710
Any party may change the address(es) to which notices to it are to be sent by
giving notice of such change to the other parties in accordance with this
Section.
Section 10.02. Severability. Any provision of this Contract that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction. To the extent permitted
by applicable law, the Manager and owner hereby waive any provision by law that
renders any provision hereof prohibited or unenforceable in any respect.
Section 10.03. Amendment. Neither this Contract nor any other terms hereof
may be terminated, amended, supplemented, waived or modified orally, but only by
an instrument in writing signed by the Party against which enforcement of the
termination, amendment, supplement, waiver or modification shall be signed.
Section 10.04. Assignment. Neither Party may assign any of their respective
rights under this Contract without the prior written consent of the other Party;
provided, however, that
-11-
<PAGE>
Owner may assign its rights hereunder to the Lender. Any assignment not
permitted by this Section 10.04 shall be void.
Section 10.05. Relationship of the Parties. It is agreed and understood by
the parties that the Manager is an independent contractor with respect to Owner.
No action, admission or instruction shall be deemed to make the Manager an
employee, agent or partner of Owner or to create any other relationship among
the Parties.
Section 10.06. Headings; Etc. The Table of Contents and headings of the
various articles and sections of this Contract are for the convenience of
reference only and shall not modify, define or limit any other terms and
provisions of this Contract.
Section 10.07. Governing Law. This Contract shall in all respects,
including all matters of construction, validity and performance, be governed by
and construed in accordance with the laws of the State of New York.
Section 10.08. Parties in Interest; Limitation and Rights of Others. The
provisions of this Contract shall be binding upon, and inure to the benefit of,
the Parties hereto and their respective successors and permitted assignees.
Nothing in this Contract, whether expressed or implied, shall be construed to
give any Person (other than the parties hereto and their respective successors
and permitted assignees) any legal or equitable right, remedy or claim under or
in respect of this Contract or any covenants, conditions or provisions contained
herein.
Section 10.09. Arbitration. (a) In the event a dispute arises between or
among the Parties relating to the terms of this Agreement and any Party gives
written notice of such dispute to the other Party, then each of the Parties
involved in such dispute shall refer the dispute to its senior management. The
senior management of each Party shall meet and confer regarding the resolution
of the dispute. In the event a resolution of such dispute is not reached within
30 days of the written notice, then either of the Parties may submit the dispute
to arbitration in accordance with Section 10.09.(b).
(b) Arbitration of disputes pursuant to this Section 10.09.(b) shall be
held in New York, New York, unless otherwise agreed to by the Parties, under the
commercial arbitration rules of the American Arbitration Association, and shall
be heard by three arbitrators selected in accordance with such rules. Each
arbitrator shall have at least five years experience in the United States in a
profession or professions related to the subject matter involved in the dispute
and shall not be a past or present officer, director or employee of, or have any
interest in or material relationship with, any Partner or any Affiliate of any
Partner. Any arbitral award shall be final and binding and may be entered by any
Party in any state or Federal court having jurisdiction thereof. Costs of
arbitration (including reasonable attorney's fees and arbitration costs) shall
be paid either equally or by the Parties to the arbitration or in accordance
with the decision of the arbitrators.
Section 10.10. Owners Title. Manager acknowledges that Owner is not the
owner of the site but is the tenant thereof pursuant to a Ground Lease between
The Buffalo Enterprise Development Corporation as landlord and owner as tenant
dated __________________
-12-
<PAGE>
("Ground Lease"). Manager acknowledges receipt of a copy of the Ground Lease and
agrees to comply with the terms thereof in connection with its operation of the
Greenhouse.
IN WITNESS WHEREOF, the Parties have caused this Contract to be duly
executed by the respective officers thereunto duly authorized as of the date and
year first above written.
VILLAGE FARMS OF DELAWARE, L.L.C.
By: Agro Power Development, Inc.,
its Managing Member
By:___________________________________
Name: J. Kevin Cobb
Title: Senior Vice President
VILLAGE FARMS OF BUFFALO, L.P.
By: Cogentrix of Buffalo, Inc., Partner
By:___________________________________
Name: Thomas F. Schwartz
Title: Vice President
-13-
Exhibit 10.76
MARKETING AND SALES AGREEMENT
BETWEEN
VILLAGE FARMS, L.L.C.
AND
VILLAGE FARMS OF BUFFALO, L.P.
SEPTEMBER 4, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS..........................................................1
ARTICLE II
SCOPE OF DUTIES......................................................3
Section 2.01. Performance Duties...........................3
Section 2.02. Personnel....................................3
Section 2.03. On-Site Supervisor...........................3
Section 2.04. Marketing Plan...............................3
Section 2.05. Performance Standards........................4
ARTICLE III
MARKETING and SALES..................................................4
Section 3.01. Marketing...................................4
Section 3.02. Village Farms Trademark.....................4
Section 3.03. Quality Control.............................5
Section 3.04. Promotion...................................5
Section 3.05. Sales Prices................................5
Section 3.06. Billing and Collections.....................5
Section 3.07. Packaging, Shipping and Delivery............6
Section 3.08. Obligations of Owner........................6
Section 3.09. Greenhouse Products.........................6
Section 3.10. No Obstruction..............................6
ARTICLE IV
COMPENSATION AND PAYMENT.............................................6
Section 4.01. Basic Compensation...........................6
Section 4.02. Debt Service Coverage Ratio Test.............7
Section 4.03. Bonuses......................................7
Section 4.04. Payment of Bonuses...........................7
ARTICLE V
REPRESENTATIONS AND WARRANTIES.......................................8
Section 5.01. Representations and Warranties of
the Marketing Agent.......................8
ARTICLE VI
COVENANTS OF THE MARKETING AGENT.....................................8
Section 6.01. Books, Records and Reports...................8
Section 6.02. Employment Practices.........................8
Section 6.03. Nondisclosure................................9
Section 6.04. Compliance With Governmental Rules...........9
Section 6.05. Section 8 and
Section 15 Declarations....................9
Section 6.06. Section 9 Renewal............................9
<PAGE>
ARTICLE VII
GENERAL LIABILITY....................................................9
Section 7.01. Indemnification..............................9
ARTICLE VIII
DEFAULTS AND REMEDIES.........................................................10
Section 8.01. Defaults.....................................10
Section 8.02. Damages for Termination Without
Cause......................................11
ARTICLE IX
TERM.................................................................11
Section 9.01. Term.........................................11
ARTICLE X
MISCELLANEOUS .......................................................11
Section 10.01. Notices.....................................11
Section 10.02. Severability................................12
Section 10.03. Amendment...................................12
Section 10.04. Assignment..................................12
Section 10.05. Relationship of the Parties.................12
Section 10.06. Headings; Etc...............................12
Section 10.07. Governing Law...............................12
Section 10.08. Parties in Interest; Limitation
and Rights of Others.....................13
Section 10.09. Arbitration.................................13
<PAGE>
MARKETING AND SALES AGREEMENT
Village Farms of Buffalo, L.P. (the "Owner") intends to construct and
operate an approximate 18 acre greenhouse in Buffalo, New York (the
"Greenhouse"). The Greenhouse will be dismantled from its present location in
Pennsylvania and reconstructed by Mountain High Greenhouse, LLC on property
leased by Owner in Buffalo, New York (the "Contractor"), Agro Power Development,
Inc. (the "General Contractor" or "APD") and the Owner. Village Farms, L.L.C.
(the "Marketing Agent") and the Owner have entered into this Marketing and Sales
Agreement dated this 4th Day of September, 1997 to market the produce grown at
the Greenhouse.
In consideration of the mutual agreements herein contained and other
good and valuable consideration, receipt of which is hereby acknowledged, and in
reliance upon the representations and warranties of each party set forth herein,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms when used herein shall have the following meanings:
"Affiliate" of any Person shall mean each Person which, directly or
indirectly, controls or is controlled by or is under common control with such
designated Person and, without limiting the generality of the foregoing, shall
include (a) any Person which beneficially owns or holds ten percent (10%) or
more of any class of voting securities of such designated Person or ten percent
(10%) or more of the equity interest in such designated Person and (b) any
Person of which such designated Person beneficially owns and holds ten percent
(10%) or more of any class of voting securities or in which such designated
Person beneficially owns or holds ten percent (10%) or more of the equity
interest. For the purposes of this definition, the terms "controls", "controlled
by", and "under common control with", as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person whether through the
Ownership of voting securities or by contract or otherwise.
"Agreement" shall mean this document and any exhibits and appendices hereto
as amended, modified or supplemented from time to time.
"Business Day" shall mean any day other than Saturday, Sunday or other day
on which banks are authorized to be closed in Texas, New York, North Carolina,
or New Jersey.
"Contract Year" initially shall be the period ending on December 31 next
following the Date of Initial Services and each calendar year thereafter.
"Date of Initial Services" shall mean the later of November 1, 1997, or the
date of Substantial Completion under the Commercial Greenhouse Dismantling and
Construction Contract, dated February 28, 1997 by and between Contractor and
General Contractor, as same may be amended, modified or supplemented from time
to time.
-1-
<PAGE>
"Governmental Rule" shall mean any law, rule, regulation, ordinance, order,
code, interpretation, judgment or similar norm or decision of any Federal,
state, local or foreign government, authority, agency, court or other body or
entity having jurisdiction over the Site.
"Lender" shall mean Village Farms International Association and its
successors and assigns.
"License Agreement" shall mean the License Agreement dated February 13,
1996 between APD and the Marketing Agent, a copy of which is attached hereto as
Exhibit A, as same may be amended from time to time.
"Loan Agreement" shall mean the Loan Agreement to be entered into between
Owner and the Lender, as the same may be amended, modified or supplemented from
time to time.
"Manager" shall mean the person described in Section 2.01.
"Management Contract" shall mean the Management, Operation, and Maintenance
Contract of even date herewith between the Owner and the Manager, as same may be
amended, modified, or supplemented from time to time.
"Marketing Plan" shall mean the marketing plan prepared annually or more
often by Marketing Agent setting forth the items described in Section 2.04.
"On-Site Supervisor" shall mean the person described in Section 2.03.
"Party" shall mean Owner or the Marketing Agent, or any of them, as
appropriate, and their successors and permitted assignees.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
government or agency or political subdivision thereof.
"Product" shall mean all production derived from the Greenhouse, which
shall initially consist of tomatoes.
"Revenues" shall mean the gross proceeds derived from the sale of the
Product, plus interest income, and any and all other types of income received by
the Owner, less allowances, returns, and amounts received with respect to
freight and transportation charges, and excluding insurance proceeds.
"Site" shall mean the Greenhouse and its grounds located on South Park
Avenue in Buffalo New York.
"Term" shall mean the period provided for in Section 9.01. hereof.
"Uncontrollable Force" shall mean any of the following which are beyond the
reasonable control of a Party and which materially impairs the performance by
such Party of its duties and obligations hereunder and such material impairment
continues for a period of more than thirty
-2-
<PAGE>
(30) days: (a) severe weather, flood, fire, lightning or other natural disaster
or act of God, (b) earthquake or subsidence, whatever its cause, (c) strikes or
other labor disturbances, whether or not involving employees of a Party, (d)
action or inaction by, or inability to obtain authorization or approval from,
any governmental agency or authority, which a Party is unable, after its best
efforts, to overcome, (e) compliance with any Governmental Rule, (f) war
(whether declared or not), sabotage, act of a public enemy, insurrection, riot
or civil disturbance, (g) defects in material equipment necessary for
performance of the Agreement, (h) any act by another party (other than the Party
claiming Uncontrollable Force, any Affiliate of such Party or the respective
agents, servants or employees of such Party or Affiliates), or (i) any other
similar act.
"Work" shall mean all duties and responsibilities of the Marketing Agent
under this Agreement.
ARTICLE II
SCOPE OF DUTIES
Section 2.01. Performance of Duties. As more specifically described in
Article III, the Marketing Agent shall furnish, manage and supervise certain
personnel necessary in connection with the marketing, sale, and distribution of
the Product, in accordance with the terms of this Agreement. Commencing on the
Date of Initial Services, the Marketing Agent shall participate in the planning
and start-up of the Greenhouse. The On-Site Supervisor (as defined herein in
Section 2.03) shall be available at the Site on a full time basis, commencing on
November 1, 1997. The operation of the Greenhouse and the production of the
Product shall be the primary responsibility of Village Farms of Delaware, L.L.C.
(the "Manager") as defined in the Management Contract.
Section 2.02. Personnel. The Marketing Agent shall make available for the
performance of its duties under the Agreement, sufficient personnel (each of
whom will be properly trained and qualified to undertake their respective
assigned duties) and support systems and services as are necessary or desirable
to assure the performance of Marketing Agent's responsibilities under this
Agreement.
Section 2.03. On-Site Supervisor. The Marketing Agent shall identify one
competent individual to act in the capacity of On-Site Supervisor. The On-Site
Supervisor shall be responsible on a day-to-day basis for the marketing and
sales of the Product and shall be supervised by the Marketing Agent. The
selection and continued employment of the On-Site Supervisor shall be subject to
the approval of Owner, which approval shall not be unreasonably withheld. The
On-Site Supervisor shall be an employee of the Owner.
Section 2.04. Marketing Plan. Within thirty (30) days from receipt of a
copy of the preliminary business plan and budget for the first year of
operations of the Greenhouse, which is to be prepared by the Manager pursuant to
the Management, Operation and Maintenance Contract of even date herewith, and
approved by the Owner, the Marketing Agent will provide to the Owner and the
Lender a preliminary Marketing Plan for the first year of operations which shall
include the strategy for marketing efforts for the upcoming year, target
customers and geographic areas for penetration, and such other information which
is customarily included in a produce marketing plan, and which will also set
forth such other information as the Owner may
-3-
<PAGE>
reasonably request. In addition, within thirty (30) days after receipt by the
Marketing Agent of each subsequent business plan and budget prepared by the
Manager (the "Business Plan"), which Business Plan is to be submitted by the
Manager forty-five (45) days prior to December 31 of each year (except for the
first Contract Year), the Marketing Agent shall submit to the Owner, with a copy
to the Lender, the Marketing Plan for the next succeeding Contract Year
corresponding to the year covered by such Business Plan. The Marketing Plan
shall always be prepared in conjunction with the Business Plan and shall set
forth in form and detail reasonably satisfactory to Owner, the Marketing Agent's
plans for such Contract Year. The Marketing Plan shall be subject to the
approval of Owner, such approval not to be unreasonably withheld.
Section 2.05. Performance Standards. The Marketing Agent shall be
responsible for the sales of the Greenhouse produce in accordance with the
Marketing Plan. The Marketing Agent shall be responsible for the means, methods
and techniques used in the marketing and sale of the produce of the Greenhouse.
ARTICLE III
MARKETING AND SALES
Section 3.01. Marketing. During the period beginning on the Date of Initial
Services and ending at the expiration of the Term of this Agreement, the
Marketing Agent shall use its best efforts to market all the Product of the
Greenhouse in accordance with the Marketing Plan in order to derive the greatest
possible Revenues therefrom. The Marketing Agent warrants that, during each
Contract Year, it will sell One Hundred (100%) Percent of the Premium Quality
tomatoes produced by the Greenhouse in accordance with the terms and conditions
of this Agreement and the Marketing Plan (as it is updated from time to time).
Section 3.02. Village Farms Trademark. Village Farms is a trademark
registered with the U. S. Patent and Trademark Office, owned by APD, a New York
Corporation, an affiliate of the Marketing Agent. APD has authorized the use of
the Village Farms trademark by the Marketing Agent and the Owner in conjunction
with this Agreement. The Owner hereby acknowledges that the Marketing Agent
and/or APD has full right and authority to the unlimited use of this trademark
on behalf of themselves and other producers located throughout the United States
and abroad, and that the trademark is not limited to use in conjunction with
tomatoes, but may be used for any other type of produce, at APD's and the
Marketing Agent's discretion. All Premium Quality tomatoes produced by the
Greenhouse will be labeled and/or otherwise identified by the Village Farms
trademark, or such other name as determined by the Marketing Agent (with the
consent of the Owner) which would provide a greater profit to the Owner. Subject
to the provisions of Section 9.01. herein, the Owner shall have the right to use
the trademark, Village Farms, following the termination of this Agreement, until
the Construction Loan Maturity Date (as defined in the Loan Agreement) provided
that (i) it pays the Marketing Agent the sum of $100,000 per year, with the
first payment due within thirty (30) days prior to the effective date of the
termination, and the subsequent payments due within thirty (30) days prior to
the anniversary of the termination, (ii) the use of the trademark is limited to
fruits and vegetables, including tomatoes produced at the Greenhouse in Buffalo
New York, and (iii) the Owner agrees in writing to abide by the conditions and
restrictions of the License Agreement, as same may be amended from time to time
provided that no amendment after the date hereof that is or would be adverse to
the Owner shall be effective against the Owner without the Owner's
-4-
<PAGE>
- - -written consent. In the event the Owner fails to pay any of the required
payments, the right to use the trademark shall terminate upon the expiration of
the period for which payment was last received. The Owner may, at its sole
expense, record a memorandum of the license granted hereby with the U.S. Patent
and Trademark Office, and APD by its consent hereto agrees to sign such further
documents, including the memorandum as may be necessary to record the license
granted hereby. The terms of this provision shall survive termination of this
Agreement.
Section 3.03. Quality Control. The On-Site Supervisor shall exercise its
reasonable discretion in determining which of the Product of the Greenhouse
qualifies as Premium Quality. Best efforts will also be used to market tomatoes
which are of lesser quality, except for those tomatoes, which in the sole
discretion of the Marketing Agent, have no market value due to their inferior
quality. The Marketing Agent shall have total discretion (subject to the
requirement that it act reasonably) over which, if any of the lesser quality
tomatoes shall be labelled or identified with the trademark "Village Farms". The
Marketing Agent will have sole and absolute discretion (subject to the
requirement that it act reasonably) over the use of the trademark, in order to
maintain the high quality associated with the trademark, and to preserve the
market share of the Village Farms tomatoes, which will ultimately serve to
benefit the Owner in the sale of its Product.
Section 3.04. Promotion. Marketing Agent, in conjunction with APD, engages
in, and shall continue to engage in general advertising, marketing and
promotional efforts in the food industry, on behalf of the trademark Village
Farms, and shall maintain these general marketing efforts throughout the term of
this Agreement, on at least the same level as is currently being employed, at
the sole expense of the Marketing Agent. In the event Marketing Agent deems it
to be in the best interests of the Owner to engage in strictly local advertising
efforts for the sole benefit of the Owner, such advertising campaign efforts
shall be detailed in the Marketing Plan prepared by the Marketing Agent pursuant
to the terms of this Agreement. In the event said local advertising plan is
approved by the Owner, the Owner shall be solely responsible for the costs of
same.
Section 3.05. Sales Prices. The Owner acknowledges that the sale of its
Product by the Marketing Agent is based on market demands and price fluctuation
can occur seasonally and otherwise. Marketing Agent shall use commercially
reasonable efforts to obtain the highest possible price for the Product.
Section 3.06. Billing and Collections. At its cost, the Marketing Agent
will provide billing and collection services to the Owner consistent with the
Marketing Plan and such direction as may be reasonably given by the Owner to the
Marketing Agent from time to time. All customers of the Owner shall be billed
under the name Village Farms. The Marketing Agent will maintain accurate books
and records of all sales, billing and collections, and shall prepare a monthly
report which shall be made available to the Owner for review. Monies collected
by the Marketing Agent on behalf of the Owner, shall be held by the Marketing
Agent as trustee in a separate account for the benefit of the Owner, and shall
be remitted to Owner (without deduction) on a weekly basis. Although the
Marketing Agent is responsible for billing and collection, the Owner shall bear
the risk of nonpayment by any of its customers, and shall determine if any
customers should be dropped, due to poor payment experience.
-5-
<PAGE>
Section 3.07. Packaging, Shipping, and Delivery. The Marketing Agent shall
be responsible for the instructing and training of Owner's employees who will
physically be responsible for the proper packaging of the Product. Marketing
Agent shall be responsible for all shipping and delivery arrangements for the
Product, at Owner's sole expense.
Section 3.08. Obligations of Owner. Throughout the Term of this Agreement,
Owner shall furnish all Product exclusively to the Marketing Agent, and shall
use its best efforts to produce Premium Quality tomatoes, in the quantity
established in the business plan and budget prepared annually by the Manager,
pursuant to the terms of the Management Contract. All personnel of the
Greenhouse operation shall at all times be employees of Owner.
Section 3.09. Greenhouse Products. It is contemplated by this Agreement
that the Product of the Greenhouse will be tomatoes. However, if in the opinion
of the Marketing Agent, the Greenhouse operation can be made more profitable by
the production of produce more profitable than tomatoes, then the Marketing
Agent, with the prior written consent of the Owner, may instruct the Manager to
produce a substitute product, and Marketing Agent's duties will also cover this
substitute product.
Section 3.10. No Obstruction. Until the termination of this Agreement,
Owner shall not, either through its agents or employees, take any action that
would prevent the Marketing Agent from marketing the Product in accordance with
this Agreement nor take any action that would materially obstruct the production
of Product at the Site, unless such prevention or obstruction is caused by
Uncontrollable Force or by the Marketing Agent or any of its Affiliates or any
of their respective employees, servants or agents.
ARTICLE IV
COMPENSATION AND PAYMENT
Section 4.01. Basic Compensation. In consideration of the performance of
Marketing Agent's obligations under the Agreement, Owner shall pay to the
Marketing Agent the sum of Two Hundred ($200,000) Thousand Dollars per Contract
Year (the "Compensation") in twelve equal monthly installments beginning on the
1st day of the second month following the Date of Initial Services and on each
anniversary thereafter. For the period from the Date of Initial Services through
the first day of the month following the Date of Initial Services, the Marketing
Agent shall be entitled to a fee equal to the product of (i) the Compensation
and (ii) a fraction which shall be the number of weeks of such period divided by
52, such amount to be payable on the first day of the month following the Date
of Initial Services. Such compensation will be adjusted each January 1 of each
Contract Year by the same percentage change in the Consumer Price Index ("CPI"),
provided the adjustment shall not cause the Compensation to be less than the
current Contract Year's Compensation. If for any reason the Marketing Agent is
unable to perform its obligations hereunder, except as a result of termination
of this Agreement because of a default by the Marketing Agent hereunder or in
accordance with Section 9.01. herein, then the Marketing Agent shall be entitled
to the continuation of the Compensation as though the Agreement had been
performed by the Marketing Agent, provided however, that in the event that the
Marketing Agent or Owner is unable to perform its obligations under this
Agreement because of an Uncontrollable Force, then the Compensation shall be
discontinued at any time after the
-6-
<PAGE>
later of the first anniversary of the event creating the Uncontrollable Force or
the date on which the Marketing Agent's continued performance was disrupted.
Section 4.02. Debt Service Coverage Ratio Test. The provisions of this
Section 4.02. shall remain in effect only for so long as the Owner is party to
any Loan Agreement with the Lender, or is a party to any Loan Agreement related
to the refinancing of the obligations owing to the Lender. In the event Owner's
actual debt service coverage ratio as defined in the Loan Agreement ("DSCR"),
for any calendar year falls below 1.5, then, in that event, no Compensation
shall be paid for any portion of that calendar year, however, the right to
Compensation shall accrue, provided the DSCR is greater than 1.0, and shall be
paid to the Marketing Agent in one sum, immediately following Owner's
achievement of a DSCR of at least 1.5. In the event that compensation was paid
for any portion of the calendar year during which Owner's actual DSCR fell below
1.5, those payments shall be deducted from future payments due the Marketing
Agent hereunder, until the Owner has recouped same. Immediately upon the Owner
achieving a DSCR of 1.5, any payments which were withheld or recouped by Owner
shall be paid to the Marketing Agent in one sum. The Owner's DSCR shall be
measured as of December 31 of each year during the term of this Agreement.
Section 4.03. Bonuses. The Marketing Agent shall be entitled to a bonus for
each calendar year in which the Owner's actual DSCR equals or exceeds 1.5. The
Owner's DSCR shall be measured in accordance with Section 4.02. above. In the
event the Owner's actual DSCR equals or exceeds 1.5 but is less than 2.0, the
bonus shall be ONE HUNDRED TWENTY FIVE THOUSAND DOLLARS ($125,000.00); if the
actual DSCR equals or exceeds 2.0 but is less than 2.5, the bonus shall be TWO
HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00); if the actual DSCR equals or
exceeds 2.5 but is less than 3.0, the bonus shall be THREE HUNDRED SEVENTY FIVE
THOUSAND DOLLARS ($375,000.00); and, if the actual DSCR equals or exceeds 3.0,
the bonus shall be FIVE HUNDRED THOUSAND DOLLARS ($500,000.00). The foregoing
bonus amounts shall be automatically adjusted upward each January 1 of each
Contract Year if the Consumer Price Index ("CPI") for that year shows an
increase; the adjustment shall be equal to the percentage change in the CPI for
that calendar year. In the event that the Owner has no debt service whatsoever,
under the Loan Agreement or otherwise, the Marketing Agent shall be entitled to
the maximum bonus payable hereunder, but only if the Partners of the Owner shall
have received in the aggregate cash distributions of Net Distributable Cash (as
defined in the Amended and Restated Agreement of Limited Partnership of the
Owner dated as of September 4, 1997 in a cumulative amount of $1,000,000 for
each such calendar year during which the Owner had no debt service. The terms of
this provision shall survive termination of this Agreement for the year of
termination.
Section 4.04. Payment of Bonuses. Bonuses shall be paid quarterly in
arrears based upon the projected DSCR contained in the business plan and budget
to be prepared by the Manager each year, pursuant to the Management Contract.
The Manager shall periodically review its projection of that year's DSCR, and,
if necessary, revise same to reflect the more current information available to
the Manager. If the projected DSCR is revised, either upward or downward to a
different threshold, the quarterly payment of the estimated bonus shall be
adjusted accordingly. In the event it appears, based upon the revised projected
DSCR, that the Marketing Agent has received overpayments, such overpayments
shall be deducted from future quarterly bonus payments until such overpayments
have been recouped. In the event the
-7-
<PAGE>
Marketing Agent's projected bonus for that year has increased based upon the
revised projected DSCR, the shortfall which resulted from the quarterly payments
made based upon the prior projected DSCR shall be paid to the Marketing Agent
with its next regular adjusted quarterly bonus payment. Upon the determination
of the actual DSCR, in the event the Marketing Agent had received a Bonus for
the prior Contract Year, to which it was not entitled, and Owner has not yet
recouped same, such overpayment may be offset against either the Compensation
payable hereunder or against future Bonus payments, until it is recouped. In the
event any Bonus was earned which has not yet been paid, the balance of the Bonus
earned shall be payable in one sum within thirty (30) days of the determination
of Owner's actual DSCR. In the event this Agreement has been terminated, any
Bonuses which Marketing Agent received to which it was not entitled, shall be
immediately due and payable to the Owner, upon the determination of such
overpayment.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01. Representations and Warranties of the Marketing Agent. The
Marketing Agent represents and warrants to Owner that it has substantial
experience in the marketing of tomatoes and that the On-Site Supervisor shall
either have substantial experience in the marketing of tomatoes, or shall have
been trained by a person with substantial experience in the marketing of
tomatoes. The Marketing Agent is a limited liability company duly organized and
validly existing under the laws of the State of Delaware. The Marketing Agent's
execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly authorized by all requisite action on the part of the
Marketing Agent and this Agreement constitutes the Marketing Agent's legal,
valid and binding obligation, enforceable against the Marketing Agent in
accordance with its terms. The Marketing Agent's execution and delivery of this
contract and the performance of its obligations hereunder will not conflict
with, violate or result in a default under the Marketing Agent's certificate of
formation or operating agreement or any mortgage, indenture, agreement,
instrument or other contract to which the Marketing Agent is a party or by which
the Marketing Agent is bound.
ARTICLE VI
COVENANTS OF THE MARKETING AGENT
Section 6.01. Books, Records and Reports. The Marketing Agent shall
maintain books and records and shall prepare for the benefit of Owner, a monthly
report showing the sales and collections of the Product, and such other matters
as the Owner may, from time to time, reasonably request be included in such
reports. All such books, records and reports shall be the sole and exclusive
property of the Owner, and the Marketing Agent shall keep such books and records
in such place or places so as to provide Owner (and its authorized
representatives) with maximum access thereto and the ability to make copies
thereof.
Section 6.02. Employment Practices. The Marketing Agent shall comply with
the applicable requirements of Executive Orders Nos. 11246 (Equal Opportunity
and Certification of Nonsegregated Facilities), 11701 (Affirmative Action for
Disabled Veterans and Handicapped of the Viet Nam Era), 11758 (Affirmative
Action for Handicapped Workers), 11458 and 11625
-8-
<PAGE>
(Minority Business Enterprise) and all other Governmental Rules relating to
employment practices to the extent applicable.
Section 6.03. Nondisclosure. All reports, records and other information
related to the Site, the Greenhouse, the operations of the Owner, and the
performance of the Marketing Agent of its duties hereunder shall not be used by
the Marketing Agent for any purposes other than those contemplated hereby or
pursuant to the written consent of the Owner and shall not be disclosed by the
Marketing Agent to any other party or any other person or entity except with the
prior written consent of the Owner. Furthermore, the Marketing Agent shall not
copy or reproduce any such information without the written consent of the Owner
(other than such reasonable copies as may be necessary to perform its duties and
obligations under this Agreement). The Marketing Agent shall also take
reasonable precautions to ensure against any breach of the obligations contained
herein which shall be no less stringent than the precautions and procedures that
it uses to protect its own proprietary information and which shall, at a
minimum, be deemed to include, without limitation, taking precautions to ensure
that it will only make such information available to those of its employees who
have a need to know it. Upon the expiration or termination of this Agreement,
Marketing Agent shall immediately return to the Owner all such information and
all whole or partial copies thereof and all other materials that may include, in
whole or in part, such information. All rights, whether arising under copyright,
patent, trade secret, or other laws, to such information are hereby reserved by
the Owner.
Section 6.04. Compliance With Governmental Rules. The Marketing Agent shall
at all times market the Product and perform its other duties and obligations
hereunder in accordance with all applicable Governmental Rules. The Marketing
Agent shall be liable for all fines, fees, penalties, damages or other costs
imposed by a governmental authority imposed on or incurred or suffered by the
Owner which are attributable to Marketing Agent and/or its agents, servants and
employees, in connection with the marketing and sales of the Product and the
performance of its other duties and obligations hereunder.
Section 6.05. Section 8 and Section 15 Declarations. The Marketing Agent
shall either cause APD to file, or shall itself, file during the period between
July 28, 1997 and July 28, 1998, Section 8 and Section 15 Declarations, required
under 15 U.S.C. ss. 1058 and 15 U.S.C. ss. 1065 to extend the duration of the
initial registration of the Trademark and to establish the Trademark as
incontestable.
Section 6.06. Section 9 Renewal. The Marketing Agent shall either cause APD
to file, or shall itself, file within six months prior to the expiration of the
original registration of the Trademark, or any renewal thereof, an application
for renewal of registration under 15 U.S.C. ss. 1059.
ARTICLE VII
GENERAL LIABILITY
Section 7.01. Indemnification. The Marketing Agent shall indemnify and save
harmless Owner and Lender, and their respective directors, officers, agents, and
employees from and against (i) any and all loss, damage, injury, liability and
claims thereof for injury to or death of a person, including, but not limited
to, personnel of the Marketing Agent, Lender and Owner, (ii)
-9-
<PAGE>
any and all loss of or damage to property and (iii) any and all loss of income
by the Owner, resulting from the Marketing Agent's performance of this Agreement
to the extent the same is caused by the negligence or willful misconduct of the
Marketing Agent, any of its Affiliates, or any or their respective directors,
officers, agents or employees. Owner shall indemnify and save harmless the
Marketing Agent and Lender, and their respective directors, officers, agents,
and employees from and against (i) any and all loss, damage, injury, liability
and claims thereof for injury to or death of a person, including, but not
limited to, personnel of Owner, Lender and the Marketing Agent, (ii) any and all
loss of or damage to property, and (iii) any and all loss of income by the
Marketing Agent, resulting from the Owner's performance of this Agreement to the
extent the same is caused by the negligence or willful misconduct of Owner, any
of its Affiliates, or any of its directors, officers, agents or employees.
ARTICLE VIII
DEFAULTS AND REMEDIES
Section 8.01. Defaults. Upon the failure of any Party to substantially
comply with any of the obligations of such Party hereunder and continued
noncompliance for a period of thirty (30) days (except in the case where such
failure will result in injury to or damage or loss of perishable Product, in
which case the cure period shall be five (5) days) after written notice of the
noncompliance is sent to such Party, the non-defaulting Party may, at its
option, by written notice to the defaulting Party, declare this Agreement to be
in default and at any time thereafter the non-defaulting Party may, at its sole
discretion, (a) exercise any right or pursue any remedy that may be available
under applicable law or proceed by appropriate court action to enforce the terms
hereof or to recover damages for the breach hereof and/or (b) terminate this
Agreement. The exercise of any rights or pursuit of any remedies pursuant to
this Agreement shall not relieve the defaulting Party of any of its obligations
and liabilities hereunder, all of which shall survive such exercise or pursuit.
To the extent permitted by law, and subject to any mandatory requirements of
applicable law, and further subject to Section 8.02. each and every right, power
and remedy herein specifically given to the non-defaulting Party or otherwise in
this Agreement shall be cumulative and shall be in addition to every other
right, power and remedy herein specifically given, or now or hereafter existing
at law, equity or by statute and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised or pursued from
time to time and as often in such order as may be deemed expedient by the
nondefaulting Party, and the exercise or pursuit or the beginning of the
exercise or pursuit of any right, power or remedy shall not be construed to be a
waiver of the right to exercise or to pursue at any time or thereafter any other
right, power or remedy. No delay or admission by a Party in the exercise of any
right or power or in the pursuit of any remedy may impair any such right, power
or remedy or be construed to be a waiver of any default on the party of the
other Party or to be an acquiescence therein. No expressed or implied waiver by
a Party of any default hereunder shall in any way be, or be construed to be, a
waiver of any future or subsequent default hereunder. Neither Party shall be
considered to be in default for failure to perform, or delay in performing, any
obligation under this Agreement if performance is prevented, hindered or delayed
by an Uncontrollable Force (but only for so long as such Uncontrollable Force
continues unabated). In such event, the Party which is unable, or anticipates
being unable, to perform shall (a) promptly notify the other Party in writing of
the nature, cause, date of commencement and expected duration of any such delay,
(b) indicate to what extent it will be prevented from performing and (c)
exercise due diligence to overcome such inability to perform with all
-10-
<PAGE>
reasonable dispatch. In the event a Party claims excuse of performance as a
result of an Uncontrollable Force which continues unabated for more than one
hundred twenty (120) days, the Party that is not affected by such Uncontrollable
Force shall have the option to terminate this Agreement on written notice to the
other Party.
Section 8.02. Damages for Termination Without Cause. Notwithstanding
anything to the contrary in section 8.01., the Parties agree that should Owner
elect to terminate the Agreement without cause at any time, pursuant to Section
9.01. herein, then Owner shall pay as liquidated damages to the Marketing Agent
a sum equal to one-fourth (1/4) of the annual amount of Compensation in effect
at such early termination, which shall be Owner's sole and exclusive liability
and Marketing Agent's sole and exclusive remedy, for such early termination
without cause.
ARTICLE IX
TERM
Section 9.01. Term. Subject to Article VIII and Section 3.01., this
Agreement shall continue to be in effect for fifteen (15) years from the Date of
Initial Services; provided, however that the Term may be extended for additional
periods on terms acceptable to both Parties, such terms to be agreed upon not
later than three months prior to the expiration of the Term. Notwithstanding the
foregoing, the Owner shall be permitted to terminate this with or without cause,
upon ninety (90) days written notice to the Marketing Agent, subject to the
terms of the Loan Agreement. In the event the Owner terminates the Agreement
without cause, the right of the Owner to use the trademark, Village Farms, shall
terminate simultaneously with this Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.01. Notices. Unless otherwise specifically provided herein, all
notices, requests and demands and other communications hereunder must be in
writing and shall be deemed to have been duly given (i) when delivered
personally, (ii) when sent by telefax to the telefax number below and followed
by a confirmation transmitted by an additional mode of communication provided
for herein, (iii) the second day following the day on which the same has been
delivered prepaid to a national (only in the case of notices within the
continental United States) or an international air courier service, or (iv) when
received if sent by the mails, certified or registered, postage prepaid, in each
case addressed to the party to whom such notice is being given at the following
addresses:
OWNER: Village Farms of Buffalo, L.P.
c/o Agro Power Development, Inc.
10 Alvin Court
East Brunswick, NJ 08816
Attention: President
Telefax: 908-254-1710
and
-11-
<PAGE>
Village Farms of Buffalo, L.P.
c/o Cogentrix of Buffalo, Inc.
9405 Arrowpoint Boulevard
Charlotte, NC 28273
Attention: General Counsel
Telefax: 704-529-1006
MARKETING
AGENT: Village Farms, L.L.C.
10 Alvin Court
East Brunswick, NJ 08816
Attention: President
Telefax: 908-254-1710
Any Party may change the address(es) to which notices to it are to be sent by
giving notice of such change to the other Parties in accordance with this
section.
Section 10.02. Severability. Any provision of this Agreement that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction. To the extent permitted
by applicable law, the Marketing Agent and Owner hereby waive any provision by
law that renders any provision hereof prohibited or unenforceable in any
respect.
Section 10.03. Amendment. Neither this Agreement nor any other terms hereof
may be terminated, amended, supplemented, waived or modified orally, but only by
an instrument in writing signed by the Party against which enforcement of the
termination, amendment, supplement, waiver or modification shall be signed.
Section 10.04. Assignment. Neither Party may assign any of their respective
rights under this Agreement without the prior written consent of the other
Party; provided, however, that Owner may assign its rights hereunder to the
Lender. Any assignment not permitted by this Section 10.04 shall be void.
Section 10.05. Relationship of the Parties. It is agreed and understood by
the Parties that the Marketing Agent is an independent contractor with respect
to Owner. No action, admission or instruction shall be deemed to make the
Marketing Agent an employee, agent or partner of Owner or to create any other
relationship among the Parties.
Section 10.06. Headings; Etc. The Table of Contents and headings of the
various articles and sections of this Agreement are for the convenience of
reference only and shall not modify, define or limit any other terms and
provisions of this Agreement.
Section 10.07. Governing Law. This Agreement shall in all respects,
including all matters of construction, validity and performance, be governed by
and construed in accordance with the laws of the State of New York.
-12-
<PAGE>
Section 10.08. Parties in Interest; Limitation and Rights of Others. The
provisions of this Agreement shall be binding upon, and inure to the benefit of,
the Parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, whether expressed or implied, shall be construed to
give any Person (other than the Parties hereto and their respective successors
and permitted assignees) any legal or equitable right, remedy or claim under or
in respect of this Agreement or any covenants, conditions or provisions
contained herein.
Section 10.09. Arbitration. (a) In the event a dispute arises between or
among the Parties relating to the terms of this Agreement and any Party gives
written notice of such dispute to the other Party, then each of the Parties
involved in such dispute shall refer the dispute to its senior management. The
senior management of each Party shall meet and confer regarding the resolution
of the dispute. In the event a resolution of such dispute is not reached within
30 days of the written notice, then either of the Parties may submit the dispute
to arbitration in accordance with Section 10.09.(b).
(b) Arbitration of disputes pursuant to this Section 10.09.(b) shall be
held in New York, New York, unless otherwise agreed to by the Parties, under the
commercial arbitration rules of the American Arbitration Association, and shall
be heard by three arbitrators selected in accordance with such rules. Each
arbitrator shall have at least five years experience in the United States in a
profession or professions related to the subject matter involved in the dispute
and shall not be a past or present officer, director or employee of, or have any
interest in or material relationship with, any Partner or any Affiliate of any
Partner. Any arbitral award shall be final and binding and may be entered by any
Party in any state or Federal court having jurisdiction thereof. Costs of
arbitration (including reasonable attorney's fees and arbitration costs) shall
be paid either equally or by the Parties to the arbitration or in accordance
with the decision of the arbitrators.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed by the respective officers thereunto duly authorized as of the date and
year first above written.
VILLAGE FARMS, L.L.C.
By: Agro Power Development, Inc., its
managing member
By:_____________________________________
Name: J. Kevin Cobb
Title: Senior Vice President
VILLAGE FARMS OF BUFFALO, L.P.
By: Cogentrix of Buffalo, Inc.,
Partner
By:_____________________________________
Name: Thomas F. Schwartz
Title: Vice President
-13-
<PAGE>
Consent and Agreement
Agro Power Development, Inc. ("APD") hereby joins in this Marketing and
Sales Agreement (the "Agreement") (a) for the express purpose of agreeing to the
terms and provisions set forth in Section 3.02. hereof; (b) to represent and
warrant to Village Farms of Buffalo, L.P. (the "Owner") that APD owns all right,
title and interest in and to the trademark "Village Farms" (the "Trademark") and
that APD has the right to enter into the agreement set forth in this consent and
agreement; and (c) certifying that a true and correct copy of the License
Agreement between APD and Village Farms, L.L.C. ("VF") licensing the Trademark
to VF is attached to the Agreement as Exhibit A.
AGRO POWER DEVELOPMENT, INC.
By:_________________________________
J. Kevin Cobb
Senior Vice President
-14-
Exhibit 10.77
MANAGEMENT, OPERATION, MAINTENANCE,
MARKETING AND SALES AGREEMENT
BETWEEN
VILLAGE FARMS, L.L.C.
AND
POCONO VILLAGE FARMS, L.P.
March ___, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS........................................................ 1
ARTICLE II
SCOPE OF DUTIES.................................................... 3
Section 2.01. Performance of Duties..................... 3
Section 2.02. Personnel................................. 3
Section 2.03. On-Site Supervisor........................ 3
Section 2.04. Marketing Plan............................ 4
Section 2.05. Business Plan and Budget.................. 4
Section 2.06. Performance Standards..................... 4
ARTICLE III
OPERATION.......................................................... 4
Section 3.01. Operation................................. 4
Section 3.02. Compliance with Governmental Rules........ 5
Section 3.03. Obligations of Owner...................... 5
Section 3.04. Greenhouse Products....................... 5
Section 3.05. Maintenance............................... 5
Section 3.06. No Obstruction of Greenhouse Operations... 6
ARTICLE IV
MARKETING AND SALES................................................ 6
Section 4.01. Marketing................................. 6
Section 4.02. Village Farms Trademark................... 6
Section 4.03. Quality Control........................... 7
Section 4.04. Promotion................................. 7
Section 4.05. Sales Prices.............................. 7
Section 4.06. Billing and Collections................... 7
Section 4.07. Packaging, Shipping and Delivery.......... 7
Section 4.08. Obligations of Owner...................... 7
Section 4.09. No Obstruction of Marketing or Production. 8
ARTICLE V
COMPENSATION AND PAYMENT........................................... 8
Section 5.01. Basic Compensation........................ 8
ARTICLE VI
REPRESENTATIONS AND WARRANTIES..................................... 8
Section 6.01. Representations and Warranties of the Agent 8
ARTICLE VII
COVENANTS OF THE AGENT............................................. 9
Section 7.01. Books, Records, Reports and Operating Logs. 9
Section 7.02. Insurance of the Agent..................... 9
Section 7.03. Employment Practices....................... 9
Section 7.04. Nondisclosure.............................. 9
Section 7.05. Compliance with Governmental Rules......... 10
Section 7.06. Section 8 and Section 15 Declarations...... 10
Section 7.07. Section 9 Renewal.......................... 10
ARTICLE VIII
GENERAL LIABILITY.................................................. 10
Section 8.01. Indemnification............................ 10
ARTICLE IX
DEFAULTS AND REMEDIES.............................................. 11
Section 9.01. Defaults................................... 11
Section 9.02. Damages for Termination Without Cause...... 11
ARTICLE X
TERM............................................................... 12
Section 10.01. Term....................................... 12
ARTICLE XI
MISCELLANEOUS...................................................... 12
Section 11.01. Notices.................................... 12
Section 11.02. Severability............................... 13
Section 11.03. Amendment.................................. 13
Section 11.04. Assignment................................. 13
Section 11.05. Relationship of the Parties................ 13
Section 11.06. Headings; Etc.............................. 13
Section 11.07. Governing Law.............................. 13
Section 11.08. Parties in Interest; Limitation and
Rights of Others........................... 13
Section 11.09. Arbitration................................ 14
<PAGE>
MANAGEMENT, OPERATION, MAINTENANCE,
MARKETING AND SALES AGREEMENT
Pocono Village Farms, L.P. (the "Owner") intends to operate a greenhouse
consisting of approximately 10 acres, in Mt. Carmel, Pennsylvania (the
"Greenhouse"). Village Farms, L.L.C. (the "Agent") and the Owner have entered
into this Management, Operation, Maintenance, Marketing and Sales Agreement
dated as of March ___, 1997 to operate, maintain and manage the Greenhouse and
to market the produce grown at the Greenhouse.
In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, and in
reliance upon the representations and warranties of each party set forth herein,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms when used herein shall have the following meanings:
"Affiliate" of any Person shall mean each Person which, directly or
indirectly, controls or is controlled by or is under common control with such
designated Person and, without limiting the generality of the foregoing, shall
include (a) any Person which beneficially owns or holds ten percent (10%) or
more of any class of voting securities of such designated Person or ten percent
(10%) or more of the equity interest in such designated Person and (b) any
Person of which such designated Person beneficially owns and holds ten percent
(10%) or more of any class of voting securities or in which such designated
Person beneficially owns or holds ten percent (10%) or more of the equity
interest. For the purposes of this definition, the terms "controls", "controlled
by", and "under common control with", as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person whether through the
ownership of voting securities or by contract or otherwise.
"Agreement" shall mean this document and any exhibits and appendices hereto
as amended, modified or supplemented from time to time.
"Agreement Year" initially shall be the period ending on December 31 next
following the Date of Initial Services and each calendar year thereafter.
"Business Day" shall mean any day other than Saturday, Sunday or other day
on which banks are authorized to be closed in New York, North Carolina, New
Jersey or Pennsylvania.
"Business Plan and Budget" shall mean the business plan and budget prepared
annually or more often by Manager setting forth the items described in Section
2.05.
"Capital Assets" shall mean all reusable equipment and components used in
the operation of the Greenhouse.
-1-
<PAGE>
"Codes and Standards" shall mean the applicable national, state and local
engineering construction, building and safety codes and standards from time to
time in effect governing the construction and operation of the Greenhouse.
"Commencement Date" shall mean March ___,1997.
"Credit Agreement" shall mean the credit/loan agreement to be entered into
between Owner and First Pioneer Farm Credit, ACA, providing financing for the
acquisition and improvement of the Greenhouse, and their successors and assigns,
as the same may be amended, modified or supplemented from time to time.
"Governmental Rule" shall mean any law, rule, regulation, ordinance, order,
code, interpretation, judgment or similar norm or decision of any Federal,
state, local or foreign government, authority, agency, court or other body or
entity having jurisdiction over the Site, including the Codes and Standards.
"License Agreement" shall mean the License Agreement dated February 13,
1996, between Agro Power Development, Inc. and the Agent, a copy of which is
attached hereto as Exhibit A, as same may be amended from time to time.
"Marketing Plan" shall mean the business plan and budget prepared annually
or more often by Agent setting forth the items described in Section 2.04.
"On-Site Supervisor" shall mean the person described in Section 2.03.
"Operating Costs" shall mean the sum (without duplication) of (a) direct
labor costs paid, (b) seed expense paid, (c) packaging supplies expense paid,
(d) fertilizer and chemical expenses paid, (e) biological control, including
bees, expense paid, (f) freight expense paid, (g) growing medium and supplies
expense paid, (h) carbon dioxide expense paid, (i) utility (including hot water,
electricity and natural gas) expense paid, (j) compensation paid to the Agent
hereunder, (k) insurance premiums and property taxes paid, (1) principal and
interest paid with respect to the Credit Agreement and (m) all other cash
expenses paid relating to the operation of the Greenhouse, to the extent
contained in the Business Plan and Budget.
"Party" shall mean Owner or the Agent, or any of them, as appropriate, and
their successors and permitted assignees.
"Payroll Costs" shall mean the salaries payable to employees of the Agent
performing the Work at the Site.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
government or agency or political subdivision thereof.
"Product" shall mean all production derived from the Greenhouse, which
shall initially consist of tomatoes.
-2-
<PAGE>
"Revenues" shall mean the gross proceeds derived from the sale of the
Product, plus interest income, and any and all other types of income received by
the Owner, less allowances, returns, and amounts received with respect to
freight and transportation charges, and excluding insurance proceeds.
"Site" shall mean the Greenhouse and its grounds located at Mt. Carmel,
Pennsylvania.
"Term" shall mean the period provided for in Section 10.01 hereof.
"Trademark" shall mean the Village Farms trademark as described in Section
4.02.
"Uncontrollable Force" shall mean any of the following which are beyond the
reasonable control of a Party and which materially impairs the performance by
such Party of its duties and obligations hereunder and such material impairment
continues for a period of more than thirty (30) days: (a) severe weather, flood,
fire, lightning or other natural disaster or act of God, (b) earthquake or
subsidence, whatever its cause, (c) strikes or other labor disturbances, whether
or not involving employees of a Party, (d) action or inaction by, or inability
to obtain authorization or approval from, any governmental agency or authority,
which a Party is unable, after its best efforts, to overcome, (e) compliance
with any Governmental Rule, (f) war (whether declared or not) , sabotage, act of
a public enemy, insurrection, riot or civil disturbance, (g) defects in material
equipment necessary for performance of the Agreement, (h) any act by another
party (other than the Party claiming Uncontrollable Force, any Affiliate of such
Party or the respective agents, servants or employees of such Party or
Affiliates), or (i) any other similar act.
"Work" shall mean all duties and responsibilities of the Agent under this
Agreement.
ARTICLE II
SCOPE OF DUTIES
Section 2.01. Performance of Duties. As more specifically described in
Articles III and IV, the Agent shall furnish, manage and supervise all personnel
necessary in connection with the start-up, operation, maintenance, service and
repair of the Greenhouse, and production, marketing, sale, and distribution of
the Product, in accordance with the terms of this Agreement. Commencing on the
Commencement Date, the Agent shall participate in the planning and start-up of
the Greenhouse and the On-Site Supervisor (as defined herein in Section 2.03)
shall be available on the Site on a full time basis.
Section 2.02. Personnel. The Agent shall make available for the performance
of its duties under the Agreement, sufficient personnel, including but not
limited to administrative, technical and supervisory personnel (each of whom
will be properly trained and qualified to undertake their respective assigned
duties) and support systems and services as are necessary or desirable to (i)
assure the performance of Agent's responsibilities under this Agreement, and
(ii) instruct the owner and its employees in the proper operation of the
Greenhouse.
Section 2.03. On-Site Supervisor. The Agent shall identify one competent
individual to act in the capacity of On-Site Supervisor. The On-Site Supervisor
shall be responsible on a day-to-day basis for the operations and performance of
the Greenhouse, and the marketing and sales of the Product and shall be
supervised by the Agent. The selection and continued employment of
-3-
<PAGE>
the On-Site Supervisor in the performance of the Greenhouse Operations shall be
subject to the approval of Owner, which approval shall not be unreasonably
withheld. The On-Site Supervisor shall be an employee of the Owner.
Section 2.04. Marketing Plan. The Agent will provide to the Owner
forty-five (45) days prior to December 31 of each year (except for the first
Agreement Year) , a Marketing Plan prepared by the Agent for the next succeeding
Agreement Year which shall include the strategy for marketing efforts for the
upcoming year, target customers and geographic areas for penetration, and such
other information which is customarily included in a produce marketing plan, and
which will also set forth such other information as the Owner may reasonably
request, in form and detail reasonably satisfactory to Owner. The Marketing Plan
shall always be prepared in conjunction with the Business Plan. The Marketing
Plan shall be subject to the approval of owner, such approval not to be
unreasonably withheld.
Section 2.05. Business Plan and Budget. The Agent will provide to the Owner
a Business Plan and Budget within forty-five (45) days prior to December 31 of
each year. The Business Plan and Budget shall set forth in form and detail
reasonably satisfactory to owner, the Agent's best estimate of Revenues and
Operating Costs of the Greenhouse for such Agreement Year, and such other
information as the owner shall reasonably request. Each Business Plan and Budget
delivered hereunder shall be subject to the approval of Owner. In the event the
owner does not notify the Agent of its approval or disapproval of the Business
Plan and Budget within fourteen (14) days of its receipt of same, the Owner
shall be deemed to have approved such Business Plan and Budget.
Section 2.06. Performance Standards. The Agent shall be responsible for the
operating performance of the Greenhouse in accordance with the Business Plan and
Budget and in conformity with industry, professional and safety standards and in
a prudent and businesslike manner and the sales of the Greenhouse produce in
accordance with the Marketing Plan. The Agent shall be responsible for the
means, methods and techniques used in the operation of the Greenhouse and
marketing and sale of the produce of the Greenhouse. The Agent shall maintain
good order and discipline at the Greenhouse at all times and shall take all
reasonable precautions to protect the Greenhouse and its contents (including,
but not limited to, the Product) from damage and to protect employees of the
owner and the Agent and members of the public from injury at the Site.
ARTICLE III
OPERATION
Section 3.01. Operation. During the period beginning on the Commencement
Date and ending at the expiration of the Term of this Agreement, the Agent shall
use its best efforts to operate the Greenhouse (including, but not limited to,
the sowing, growing, harvesting and packaging of the Product) at its fullest
productive capacity in accordance with the Business Plan and Budget and in
accordance with prudent agricultural economic practices and to assist the Agent
in its efforts to market the Product to derive the greatest possible revenue
therefrom. The Agent warrants that, during each Agreement Year, beginning with
the Second Agreement Year, that the operating performance of the Greenhouse will
be on a basis consistent with similar
-4-
<PAGE>
greenhouses operated by the Agent in consideration of differences in size and
location of the other greenhouses.
Section 3.02. Compliance With Governmental Rules. The Agent shall at all
times operate the Greenhouse in accordance with all applicable Governmental
Rules (including, but not limited to, all environmental protection, hazardous or
toxic substances, pollution, waste, material handling, disposal, sanitary,
health, and safety laws, rules and regulations). The Agent shall be liable for
all fines, fees, penalties, damages or other costs imposed by a governmental
authority attributable to its willful acts or negligence (and the negligence of
its agents and employees) in connection with the operation, use or maintenance
of the Greenhouse.
Section 3.03. Obligations of Owner. Throughout the Term of this Agreement,
Owner shall supply to the Agent of the Greenhouse such personnel and Operating
Supplies as shall be mutually agreed upon by the Agent and owner in the Business
Plan and Budget. The Agent shall be responsible for overseeing and recording the
use of all Operating Supplies and shall give Owner reasonable notice of its
requirements for additional personnel and Operating Supplies not set forth in
the Business Plan and Budget, along with the reasons therefor. The Agent shall
be responsible for inspecting operating Supplies furnished by Owner, and any
defects in such Operating Supplies reasonably discoverable by Agent through such
inspection, and which are capable of being corrected in a reasonable time frame,
shall not be grounds for claiming Uncontrollable Force. All personnel of the
Greenhouse operation shall at all times be employees of owner. The Agent shall
have the right to direct and instruct the employees of Owner, and subject to
owner's approval, which will not be unreasonably withheld, to hire and fire
owner's employees, as Agent considers necessary and desirable for the operation
of the Greenhouse.
Section 3.04. Greenhouse Products. It is contemplated by this Agreement
that the Agent will use its best efforts to produce tomatoes in the Greenhouse
in accordance with the Business Plan and Budget. However, if in the opinion of
the Agent the Greenhouse operation can be made more profitable by the production
of produce more profitable than tomatoes, then the Agent, with the prior written
consent of Owner, may produce a substitute product.
Section 3.05. Maintenance. The Agent shall have the responsibility of
directing the maintenance, service and repair of the Greenhouse (a) in material
accordance with industry standards of prudence, (b) in accordance with
specifications, directions, instructions and recommendations of the
manufacturers of the components thereof, (c) in accordance with all applicable
Governmental Rules (including, but not limited to, all environmental protection,
hazardous or toxic substances, pollution, waste, material handling, disposal,
sanitary, health, and safety laws, rules and regulations) and (d) to the extent
materially necessary to (i) maintain the Greenhouse in good operating condition
and repair, ordinary wear and tear excepted, (ii) cause the Greenhouse to
continue to have the capacity and functional ability to perform, on a continuing
basis, in normal commercial operation, the function for which it was
specifically designed, (iii) comply with any standards imposed by any insurer
who has issued any insurance policy or policies in effect at any time during
this Agreement with respect to the Greenhouse or any part thereof and (iv) keep
in full force and effect any warranty with respect to the Greenhouse or any part
thereof. The Agent shall operate the Greenhouse in such a manner that at all
times (a) the Greenhouse and its surrounding grounds shall be free of litter
(both organic and non-organic), (b) waste materials (both organic and
non-organic) will be confined to areas
-5-
<PAGE>
designed and maintained for their storage and processing, (c) the exterior
appearance of the buildings and the landscaping surrounding the Greenhouse shall
be neat and orderly and (d) the interior of the Greenhouse will be neat and
clean. The Agent will identify potential maintenance problems and recommend
corrective actions in the Business Plan and Budget. All costs associated with
performing the aforementioned maintenance services will be the responsibility of
the Owner. The Agent will include its best estimate of such costs in the
Business Plan and Budget.
Section 3. 06. No Obstruction of Greenhouse Operations. Until the
termination of this Agreement, Owner shall not, either through its agents or
employees, take any action that would prevent the Agent from operating the
Greenhouse in accordance with the Agreement nor take any action that would
materially obstruct the Site or the Greenhouse, unless such prevention or
obstruction is caused by Uncontrollable Force or by the Agent or any of its
Affiliates or any of their respective employees, servants or agents.
ARTICLE IV
MARKETING AND SALES
Section 4.01. Marketing. During the period beginning on the Commencement
Date and ending at the expiration of the Term of this Agreement, the Agent shall
use its best efforts to market all the Product of the Greenhouse in accordance
with the Marketing Plan in order to derive the greatest possible Revenues
therefrom. The Agent warrants that, during each Agreement Year, it will sell One
Hundred (100%) Percent of the Premium Quality tomatoes produced by the
Greenhouse in accordance with the terms and conditions of this Agreement and the
Marketing Plan (as it is updated from time to time).
Section 4.02. Village Farms Trademark. Village Farms is a trademark
registered with the U. S. Patent and Trademark Office, owned by Agro Power
Development, Inc., a New York Corporation ("APD"), an affiliate of the Agent.
APD has authorized the use of the Village Farms trademark by the Agent and the
owner in conjunction with this Agreement. The Owner hereby acknowledges that the
Agent and/or APD has full right and authority to the unlimited use of this
Trademark on behalf of themselves and other producers located throughout the
United States and abroad, and that the Trademark is not limited to use in
conjunction with tomatoes, but may be used for any other type of produce, at
APD's and the Agent's discretion. All Premium Quality tomatoes produced by the
Greenhouse will be labeled and/or otherwise identified by the Village Farms
Trademark, or such other name as determined by the Agent which would provide a
greater profit to the Owner. Subject to the provisions of Section 10.01 herein,
the owner shall have the right to use the Trademark, Village Farms, following
the termination of this Agreement, until the maturity date of the Owner's credit
facility with First Pioneer Farm Credit, ACA, provided that (i) it pays the
Agent the sum of $100,000 per year, with the first payment due within thirty
(30) days prior to the effective date of the termination, and the subsequent
payments due within thirty (30) days prior to the anniversary of the
termination, (ii) the use of the Trademark is limited to fruits and vegetables,
including tomatoes produced at the Greenhouse, and (iii) the Owner agrees in
writing to abide by the conditions and restrictions of the License Agreement, as
same may be amended from time to time. In the event the owner fails to pay any
of the required payments, the right to use the Trademark shall terminate upon
the expiration of the period for which payment was last received. The terms of
this provision shall survive termination of this Agreement.
-6-
<PAGE>
Section 4.03. Quality Control. The On-Site Supervisor shall exercise its
reasonable discretion in determining which of the Product of the Greenhouse
qualifies as Premium Quality. Best efforts will also be used to market tomatoes
which are of lesser quality, except for those tomatoes, which in the sole
discretion of the Agent, have no market value due to their inferior quality. The
Agent shall have total discretion (subject to the requirement that it act
reasonably) over which, if any of the lesser quality tomatoes shall be labeled
or identified with the Trademark "Village Farms". The Agent will have sole and
absolute discretion (subject to the requirement that it act reasonably) over the
use of the Trademark, in order to maintain the high quality associated with the
Trademark, and to preserve the market share of the Village Farms tomatoes, which
will ultimately serve to benefit the owner in the sale of its Product.
Section 4.04. Promotion. Agent, in conjunction with APD, engages in, and
shall continue to engage in general advertising, marketing and promotional
efforts in the food industry, on behalf of the Trademark Village Farms, and
shall maintain these general marketing efforts throughout the term of this
Agreement, on at least the same level as is currently being employed, at the
sole expense of the Agent. In the event Agent deems it to be in the best
interests of the Owner to engage in strictly local advertising efforts for the
sole benefit of the Owner, such advertising campaign efforts shall be detailed
in the Marketing Plan prepared by the Agent pursuant to the terms of this
Agreement. In the event said local advertising plan is approved by the Owner,
the Owner shall be solely responsible for the costs of same.
Section 4.05. Sales Prices. The Owner acknowledges that the sale of its
Product by the Agent is based on market demands and price fluctuation can occur
seasonally and otherwise. Agent shall use commercially reasonable efforts to
obtain the highest possible price for the Product.
Section 4.06. Billing and Collections. At its cost, the Agent will provide
billing and collection services to the Owner consistent with the Marketing Plan
and such direction as may be reasonably given by the Owner to the Agent from
time to time. All customers of the Owner shall be billed under the name Village
Farms. The Agent will maintain accurate books and records of all sales, billing
and collections, and shall prepare a monthly report which shall be made
available to the owner for review. Monies collected by the Agent on behalf of
the Owner, shall be held by the Agent as trustee in a separate account for the
benefit for the Owner, and shall be remitted to Owner (without deduction) on a
weekly basis. Although the Agent is responsible for billing and collection, the
owner shall bear the risk of nonpayment by any of its customers, and shall
determine if any customers should be dropped, due to poor payment experience.
Section 4.07. Packaging, Shipping, and Delivery. The Agent shall be
responsible for the instructing and training of owner's employees who will
physically be responsible for the proper packaging of the Product. Agent shall
be responsible for all shipping and delivery arrangements for the Product, at
Owner's sole expense.
Section 4.08. Obligations of Owner. Throughout the Term of this Agreement,
Owner shall furnish all Product exclusively to the Agent, and shall use its best
efforts to produce Premium Quality tomatoes, in the quantity established in the
Business Plan and Budget prepared annually by the Agent, pursuant to Section,
2.05 herein. All personnel of the Greenhouse operation shall at all times be
employees of Owner.
-7-
<PAGE>
Section 4.09. No Obstruction of Marketing or Production. Until the
termination of this Agreement, Owner shall not, either through its agents or
employees, take any action that would prevent the Agent from marketing the
Product in accordance with this Agreement nor take any action that would
materially obstruct the production of Product at the Site, unless such
prevention or obstruction is caused by Uncontrollable Force or by the Agent or
any of its Affiliates or any of their respective employees, servants or agents.
ARTICLE V
COMPENSATION AND PAYMENT
Section 5.01. Basic Compensation. In consideration of the performance of
Agent's obligations under the Agreement, Owner shall pay to the Agent the sum of
TWO HUNDRED AND FIFTY THOUSAND DOLLARS ($250,000.00) per Agreement Year (the
"Compensation") (including the initial Agreement Year, notwithstanding that it
is not a full calendar year) in equal monthly installments beginning on the lst
day of the month following the Commencement Date and on the first of each month
thereafter. Such compensation will be adjusted each January 1 of each Agreement
Year by a percentage equal to the percentage change in the Consumer Price Index
("CPI"), measured against the prior January 1, provided the adjustment shall not
cause the Compensation to be less than the current Agreement Year's
Compensation. If for any reason the Agent is unable to perform its obligations
hereunder, except as a result of termination of this Agreement because of a
default by the Agent hereunder or in accordance with Section 10.01 herein, then
the Agent shall be entitled to the continuation of the Compensation as though
the Agreement had been performed by the Agent, provided however, that in the
event that the Agent or Owner is unable to perform its obligations under this
Agreement because of an Uncontrollable Force, then the Compensation shall be
discontinued at any time after the later of the first anniversary of the event
creating the Uncontrollable Force or the date on which the Agent's continued
performance was disrupted. In the event this Agreement has been terminated, and
in the event Agent may have received Compensation to which it was not entitled,
said overpayment of Compensation shall be immediately due and payable to the
Owner, upon the determination of such overpayment.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.01. Representations and Warranties of the Agent. The Agent
represents and warrants to Owner that it has substantial experience in the
start-up, operation and management of the maintenance, service and repair of
facilities similar to the Greenhouse and in the marketing of tomatoes, and that
the On-Site Supervisor shall have substantial experience in the operation and
management of the maintenance, service and repair of facilities similar to the
Greenhouse. The Agent is a limited liability company duly organized and validly
existing under the laws of the State of Delaware and authorized to do business
in the State of Pennsylvania. The Agent's execution and delivery of this
Agreement and the performance of its obligations hereunder have been duly
authorized by all requisite action on the part of the Agent and this Agreement
constitutes the Agent's legal, valid and binding obligation, enforceable against
the Agent in accordance with its terms. The Agent's execution and delivery of
this contract and the performance of its obligations hereunder will not conflict
with, violate or result in a default under the Agent's certificate of formation
or operating agreement or any mortgage, indenture,
-8-
<PAGE>
agreement, instrument or other contract to which the Agent is a party or by
which the Agent is bound.
ARTICLE VII
COVENANTS OF THE AGENT
Section 7.01. Books, Records, Reports and Operating Logs. The Agent shall
maintain books and records and shall prepare for the benefit of Owner, a monthly
report showing the sales and collections of the Product, and such other matters
as the Owner may, from time to time, reasonably request be included in such
reports, as well as daily operating logs showing the production and sales from
the Greenhouse and shall prepare maintenance and repair reports in detail
sufficient to indicate the nature of all maintenance and repairs performed. The
Agent shall also maintain such other records and books of accounts as are
appropriate for the proper management of the Greenhouse and all transactions
related thereto. All such books, records and reports shall be the sole and
exclusive property of the Owner, and the Agent shall keep such books and records
in such place or places so as to provide Owner (and its authorized
representatives) with maximum access thereto and the ability to make copies
thereof.
Section 7.02. Insurance of the Agent. At all times during the operation of
the Greenhouse, the Agent shall maintain the following types and amounts of
insurance, with insurers acceptable to the owner:
(a) Workers' Compensation Insurance (including employer's liability
insurance) covering personnel of the Agent in connection with this
contract, subject to the laws of Pennsylvania;
(b) Primary Comprehensive General Liability Insurance for bodily
injury and/or property damage arising from the Work, subject to a combined
single limit of $1,000,000 per occurrence;
All insurance policies procured and maintained pursuant to this Section
7.02 shall contain a clause requiring the insurer and the Agent to notify owner
in writing 45 days prior to any cancellation or expiration thereof or any
amendment thereto. Prior to the Commencement Date the Agent shall furnish Owner
a certificate of insurance certifying that the insurance coverage required
pursuant to this Section 7.02 is in effect. The cost of insurance required
pursuant to this Section 7.02 shall be born solely by the Agent. Each such
policy shall name the Owner (in the case of (a) and (b) above) as an additional
insured.
Section 7.03. Employment Practices. The Agent shall comply with the
applicable requirements of Executive Orders Nos. 11246 (Equal Opportunity and
Certification of Nonsegregated Facilities), 11701 (Affirmative Action for
Disabled Veterans and Handicapped of the Viet Nam Era) , 11758 (Affirmative
Action for Handicapped Workers), 11458 and 11625 (Minority Business Enterprise)
and all other Governmental Rules relating to employment practices to the extent
applicable.
Section 7.04. Nondisclosure. All reports, records and other information
related to the Site, the Greenhouse, the operations of the Owner, and the
performance of the Agent of its duties hereunder shall not be used by the Agent
for any purposes other than those contemplated hereby
-9-
<PAGE>
or pursuant to the written consent of the Owner and shall not be disclosed by
the Agent to any other party or any other person or entity except with the prior
written consent of the owner. Furthermore, the Agent shall not copy or reproduce
any such information without the written consent of the Owner (other than such
reasonable copies as may be necessary to perform its duties and obligations
under this Agreement). The Agent shall also take reasonable precautions to
ensure against any breach of the obligations contained herein which shall be no
less stringent than the precautions and procedures that it uses to protect its
own proprietary information and which shall, at a minimum, be deemed to include,
without limitation, taking precautions to ensure that it will only make such
information available to those of its employees who have a need to know it. Upon
the expiration or termination of this Agreement, Agent shall immediately return
to the Owner all such information and all whole or partial copies thereof and
all other materials that may include, in whole or in part, such information. All
rights, whether arising under copyright, patent, trade secret, or other laws, to
such information are hereby reserved by the Owner.
Section 7.05. Compliance With Governmental Rules. The Agent shall at all
times market the Product and perform its other duties and obligations hereunder
in accordance with all applicable Governmental Rules. The Agent shall be liable
for all fines, fees, penalties, damages or other costs imposed by a governmental
authority imposed on or incurred or suffered by the owner which are attributable
to Agent (and/or its agents, servants and employees) in connection with the
marketing and sales of the Product and the performance of its other duties and
obligations hereunder.
Section 7.06. Section 8 and Section 15 Declarations. The Agent shall either
cause Agro Power Development, Inc. to file, or shall itself, file during the
period between July 28, 1997 and July 28, 1998, Section 8 and Section 15
Declarations, required under 15 U.S.C. S 1058 and 15 U.S.C. S 1065 to extend the
duration of the initial registration of the Trademark and to establish the
Trademark as incontestable.
Section 7.07. Section 9 Renewal. The Agent shall either cause Agro Power
Development, Inc. to file, or shall itself, file within six months prior to the
expiration of the original registration of the Trademark, or any renewal
thereof, an application for renewal of registration under 15 U.S.C. ss. 1059.
ARTICLE VIII
GENERAL LIABILITY
Section 8.01. Indemnification. The Agent shall indemnify and save harmless
owner and its directors, officers, agents, and employees from and against (i)
any and all loss, damage, injury, liability and claims thereof for injury to or
death of a person, including, but not limited to, personnel of the Agent and
Owner, (ii) any and all loss of or damage to property and (iii) any and all loss
of income by the Owner, resulting from the Agent's performance of this Agreement
to the extent the same is caused by the negligence or willful misconduct of the
Agent, any of its Affiliates, or any or their respective directors, officers,
agents or employees. Owner shall indemnify and save harmless the Agent and its
directors, officers, agents, and employees from and against (i) any and all
loss, damage, injury, liability and claims thereof for injury to or death of a
person, including, but not limited to, personnel of owner and the Agent, (ii)
any and all loss
-10-
<PAGE>
of or damage to property, and (iii) any and all loss of income by the Agent,
resulting from the Owner's performance of this Agreement to the extent the same
is caused by the negligence or willful misconduct of owner, any of its
Affiliates, or any of its directors, officers, agents or employees.
ARTICLE IX
DEFAULTS AND REMEDIES
Section 9.01. Defaults. Upon the failure of any Party to substantially
comply with any of the obligations of such Party hereunder and continued
noncompliance for a period of thirty (30) days (except in the case where such
failure will result in injury to or damage or loss of perishable Product, in
which case the cure period shall be five (5) days) after written notice of the
noncompliance is sent to such Party, the non-defaulting Party may, at its
option, by written notice to the defaulting Party, declare this Agreement to be
in default and at any time thereafter the non-defaulting Party may, at its sole
discretion, (a) exercise any right or pursue any remedy that may be available
under applicable law or proceed by appropriate court action to enforce the terms
hereof or to recover damages for the breach hereof and/or (b) terminate this
Agreement. The exercise of any rights or pursuit of any remedies pursuant to
this Agreement shall not relieve the defaulting Party of any of its obligations
and liabilities hereunder, all of which shall survive such exercise or pursuit.
To the extent permitted by law, and subject to any mandatory requirements of
applicable law, and further subject to Section 9.02 herein, each and every
right, power and remedy herein specifically given to the non-defaulting Party or
otherwise in this Agreement shall be cumulative and shall be in addition to
every other right, power and remedy herein specifically given for now or
hereafter existing at law, equity or by statute and each and every right, power
and remedy whether specifically herein given or otherwise existing may be
exercised or pursued from time to time and as often in such order as may be
deemed expedient by the non-defaulting Party, and the exercise or pursuit or the
beginning of the exercise or pursuit of any right, power or remedy shall not be
construed to be a waiver of the right to exercise or to pursue at any time or
thereafter any other right, power or remedy. No delay or admission by a Party in
the exercise of any right or power or in the pursuit of any remedy may impair
any such right, power or remedy or be construed to be a waiver of any default on
the party of the other Party or to be an acquiescence therein. No expressed or
implied waiver by a Party of any default hereunder shall in any way be, or be
construed to be, a waiver of any future or subsequent default hereunder. Neither
Party shall be considered to be in default for failure to perform, or delay in
performing, any obligation under this Agreement if performance is prevented,
hindered or delayed by an Uncontrollable Force (but only for so long as such
Uncontrollable Force continues unabated). In such event, the Party which is
unable, or anticipates being unable, to perform shall (a) promptly notify the
other Party in writing of the nature, cause, date of commencement and expected
duration of any such delay, (b) indicate to what extent it will be prevented
from performing and (c) exercise due diligence to overcome such inability to
perform with all reasonable dispatch. In the event a Party claims excuse of
performance as a result of an Uncontrollable Force which continues unabated for
more than one hundred twenty (120) days, the Party that is not affected by such
Uncontrollable Force shall have the option to terminate this Agreement on
written notice to the other Party.
Section 9.02. Damages for Termination Without Cause. Notwithstanding
anything to the contrary in Section 9.01 or 5.01, the Parties agree that should
owner elect to terminate the
-11-
<PAGE>
Agreement without cause at any time, pursuant to Section 10.01 herein, then
owner shall pay as liquidated damages to the Agent a sum equal to one-fourth
(1/4) of the annual amount of Compensation in effect at such early termination,
which shall be Owner's sole and exclusive liability and Agent's sole and
exclusive remedy, for such early termination without cause.
ARTICLE X
TERM
Section 10.01. Term. Subject to Article IX and Sections 3.01 and 4.01, this
Agreement shall continue to be in effect for fifteen (15) Agreement Years from
the Commencement Date. The Term shall automatically renew for an additional five
(5) year period every five years thereafter unless either Party notifies the
other Party at least sixty (60) days prior to the end of the Term, that it does
not intend to renew the Agreement. Notwithstanding the foregoing, the Owner
shall be permitted to terminate this Agreement with or without cause, upon sixty
(60) days written notice to the Agent, subject to the terms of the Credit
Agreement. In the event the owner terminates the Agreement without cause, or
does not renew the Agreement, the right of the Owner to use the Trademark shall
terminate simultaneously with the termination of this Agreement.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Notices. Unless otherwise specifically provided herein, all
notices, requests and demands and other communications hereunder must be in
writing and shall be deemed to have been duly given (i) when delivered
personally, (ii) when sent by telefax to the telefax number below and followed
by a confirmation transmitted by an additional mode of communication provided
for herein, (iii) the second day following the day on which the same has been
delivered prepaid to a national (only in the case of notices within the
continental United States) or an international air courier service, or (iv) when
received if sent by the mails, certified or registered, postage prepaid, in each
case addressed to the party to whom such notice is being given at the following
addresses:
OWNER: Pocono Village Farms, L.P.
c/o Agro Power Development, Inc.
10 Alvin Court
East Brunswick, NJ 08816
Attention: President
Telefax: 908-254-1710
and
Pocono Village Farms, L.P.
c/o Cogentrix of Pocono, Inc.
9405 Arrowpoint Boulevard
Charlotte, NC 28273
Attention: General Counsel
Telefax: 704-529-1006
-12-
<PAGE>
AGENT: Village Farms, L.L.C.
10 Alvin Court
East Brunswick, NJ 08816
Attention: President
Telefax: 908-254-1710
Any party may change the address(es) to which notices to it are to be sent by
giving notice of such change to the other parties in accordance with the
Section.
Section 11.02. Severability. Any provision of this Agreement that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction. To the extent permitted
by applicable law, the Agent and Owner hereby waive any provision by law that
renders any provision hereof prohibited or unenforceable in any respect.
Section 11.03. Amendment. Neither this Agreement nor any other terms hereof
may be terminated, amended, supplemented, waived or modified orally, but only by
an instrument in writing signed by the Party against which enforcement of the
termination, amendment, supplement, waiver or modification shall be signed.
Section 11.04. Assignment. Neither Party may assign any of their respective
rights under this Agreement without the prior written consent of the other
Party. Any assignment not permitted by this Section 11.04 shall be void.
Section 11.05. Relationship of the Parties. It is agreed and understood by
the Parties that the Agent is an independent contractor with respect to Owner.
No action, admission or instruction shall be deemed to make the Agent an
employee, agent or partner of Owner or to create any other relationship among
the Parties.
Section 11.06. Headings; Etc. The Table of Contents and headings of the
various articles and sections of this Agreement are for the convenience of
reference only and shall not modify, define or limit any other terms and
provisions of this Agreement.
Section 11.07. Governing Law. This Agreement shall in all respects,
including all matters of construction, validity and performance, be governed by
and construed in accordance with the laws of the State of New York, without
reference to the choice of law doctrine of such state.
Section 11. 08. Parties in Interest; Limitation and Rights of Others. The
provisions of this Agreement shall be binding upon, and inure to the benefit of,
the Parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, whether expressed or implied, shall be construed to
give any Person (other then the Parties hereto and their respective successors
and permitted assignees) any legal or equitable right, remedy or claim under or
in respect of this Agreement or any covenants, conditions or provisions
contained herein.
-13-
<PAGE>
Section 11.09. Arbitration. (a) In the event a dispute arises between or
among the Parties relating to the terms of this Agreement and any Party gives
written notice of such dispute to the other Party, then each of the Parties
involved in such dispute shall refer the dispute to its senior management. The
senior management of each Party shall meet and confer regarding the resolution
of the dispute. In the event a resolution of such dispute is not reached within
thirty (30) days of the written notice, then either of the Parties may submit
the dispute to arbitration in accordance with Section 11.09.(b).
(b) Arbitration of disputes pursuant to this Section 11.09. (b) shall be
held in New York, New York, unless otherwise agreed to by the Parties, under the
commercial arbitration rules of the American Arbitration Association, and shall
be heard by three arbitrators selected in accordance with such rules. Each
arbitrator shall have at least five years experience in the United States in a
profession or professions related to the subject matter involved in the dispute
and shall not be a past or present officer, director or employee of, or have any
interest in or material relationship with, any Partner or any Affiliate of any
Partner. Any arbitral award shall be final and binding and may be entered by any
Party in any state or Federal court having jurisdiction thereof. Costs of
arbitration (including reasonable attorney's fees and arbitration costs) shall
be paid either equally or by the Parties to the arbitration or in accordance
with the decision of the arbitrators.
-14-
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed by the respective officers thereunto duly authorized as of the date and
year first above written.
VILLAGE FARMS, L.L.C.
By: Agro Power Development, Inc., its
managing member
By: __________________________________
Name: J. Kevin Cobb,
Senior Vice President
POCONO VILLAGE FARMS, L.P.
By: __________________________________
Name: Thomas F. Schwartz
Title: __________________________________
Agro Power Development Inc., the owner of the Village Farms trademark,
hereby consents to the use of the Village Farms trademark, as set forth in this
Agreement.
AGRO POWER DEVELOPMENT, INC.
By: _________________________________
J. Kevin Cobb,
Senior Vice President
-15-
Exhibit 10.78
MARKETING AGREEMENT
This Marketing Agreement is made as of the first day of January 1995, by
and between Fosterfarms, Inc., a Delaware corporation (herein referred to as
"FF") and Agro Power Development, a New York corporation (herein referred to as
"APD") which markets produce under the trademarked name Village Farms (herein
referred to as "VF").
WHEREAS, FF leases and operates approximately 10 acres of greenhouse space
in Marion Heights, Pennsylvania (the "Facilities"), in which FF intends to
produce approximately three million pounds (3,000,000) of tomatoes ("Tomatoes")
annually, anticipating an initial harvest on or about February 20, 1995; and
WHEREAS, FF desires to contract with APD so that APD will market the
Tomatoes grown at the Facilities in accordance with this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual promises
contained, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows
1. Market and Sale of Entire Output
A. APD shall market, sell, invoice and collect the receivables for the
entire output of Tomatoes from the Facilities during the term of this
Agreement, subject to the terms for establishing the selling price and
inspection of the Tomatoes as stated herein.
B. Tomatoes shall conform in variety, consistency, quality, size, share
and grade to standards as mutually agreed upon in Appendix A. The
parties may, from time to time, revise the standards by mutual
agreement in writing.
C. FF shall provide APD either directly (on site) or by facsimile with a
daily status report by 10:00 a.m. which will contain the current daily
production detailing quantity, grade, size and color and the projected
harvest for the next day. In addition, FF will provide a projection
each Friday for the following week's (Monday-Saturday) total harvest
also broken down by date.
D. In addition to the services referred to in paragraphs A, B and C
above, APD will perform the following services:
o Marketing/sales of all FF products.
o Invoicing, collection, aging, guarantee and payment of
receivables.
o Provide shipping logistics including, rate structure and
preparation of Bills of Lading.
o Generate sales summaries by customer on a bi-weekly, monthly,
annual and rolling average basis.
o Technical support to growing, packing operations, including
on-site visits.
<PAGE>
o Full-time APD employee located at Facilities, at no expense to
FF. The APD employee shall abide by the rules and regulations
adopted by FF. Inspection service to be provided within one (1)
hour of scheduled package efforts.
2. Selling Prices
FF acknowledges that the sale of its Tomatoes by APD is based on market
demands and price fluctuation can occur frequently and/or seasonally. APD
will use all commercially reasonable efforts to attain the highest possible
price. APD's efforts will be at least equal to its efforts for marketing
all its produce and will sell the produce from the FF Facilities to the
customers which pay the highest net return (quality of customer and payment
risk considered) as this is in the interests of both parties.
3. Payment of Receivables
APD shall collect all receivables from its customers for the sale of FF's
Tomatoes and risk of such collection shall be with APD. APD shall pay FF
for all Tomatoes sold by APD in an amount equal to the actual sales price
for such Tomatoes. APD will transfer to an account designated by FF all
monies due by APD on a weekly basis for all Tomatoes accepted by APD from
FF for the second week preceding the week of payment. FF will have the
right, providing a 48-hour notice is given, to audit APD's books and
records relating to all produce invoices, freight costs, receivables, and
any other cost related to marketing FF produce. Invoices for transferred
products shall be provided to FF within five (5) working days of transfer.
Product no otherwise invoiced will be considered as sold and money owed to
FF in the amount equal to the APD sales price for the previous one (1) week
for the same class.
4. Inspection and Acceptance
Tomatoes which have been packed and are ready for shipment will be
inspected and accepted by APD prior to shipping by a designated APD
representative. The unit of inspection and acceptance will be the pallet of
ninety-five (95) (or fewer) boxes of Tomatoes. Upon the point of inspection
in Marion Heights all "accepted" produce will be considered to have been
transferred to APD for sales purposes. Upon written notice and explanation
to FF, APD may reject all or part of the shipment not substantially in
conformity with the standards as agreed upon. An inspection form will be
established for this purposes; the intent is to provide a record of
inspection, reason for rejection and dispositions of rejected produce. Upon
such rejection, a FF representative will meet with the APD representative
to agree on a plan of action on the rejected Tomatoes. In the event that a
decision is reached by both parties to ship the Tomatoes in question and
the Tomatoes are rejected by a customer on the customer's loading dock, APD
will immediately notify FF by phone or telefax and shall describe the
reasons for the customer's rejection. FF will then have twenty-four (24)
hours within which to make an inspection of the rejected goods at the
customer's dock and shall be allowed an additional forty-eight (48) hours
within which to replace or credit any nonconforming goods. APD does not
assume the liability for rejected goods, unless caused by APD's acts or
-2-
<PAGE>
omissions. FF may elect to sell rejected Tomatoes and such other Tomatoes
as is necessary to complete sales transactions, without restriction.
5. Shipment and Delivery
The manner and method of shipment shall be determined and arranged by APD
and will be the most cost effective. FF shall be responsible to reimburse
APD for all freight costs (shipping costs only) on a monthly basis. APD
will provide FF with a schedule of projected freight costs on a quarterly
and annual basis with updated projections each month. In the event that FF
determines that it can provide the shipment of Tomatoes more economically
than that currently being charged by APD, then FF may, upon written notice
to APD, take over such shipment.
6. Packaging
Unless otherwise specified in writing, FF shall pack all tomatoes in
fifteen (15) pound single layer boxes for premium Tomatoes and class 1
Tomatoes and twenty (20) pound boxes for class 2 Tomatoes. "Premium",
"class 1" and "class 2" Tomatoes shall be as defined in Appendix A.
Packaging for cello wrapped tomatoes, if requested by either party, shall
be subject to the mutual agreement of both parties.
In accordance with Appendix A, the VF trademark will be on all boxes packed
by FF and all premium individual tomatoes will be labeled with a sticker. A
FF stamp will be on bottom of box indicating origin of produce.
The VF trademark is a nationally registered trademark owned by APD and APD
shall allow FF to use such trademark for the sale of its Tomatoes during
the term of this Agreement.
7. Services Fee
The fee charged to FF by APD to perform the services referred to in Section
1 is as follows:
$* [Information omitted and subject to request for confidential treatment]
per shipped box plus * [Information omitted and subject to request for
confidential treatment] of the sales price of the Tomatoes delivered to
APD.
APD will bill FF for services twice per month with payment due within
thirty (30) days, provided that APD has made the payments required under
Section 3.
8. Agreement Commencement
A. This Agreement shall commence January 23, 1995 and continue until
December 31, 2000, unless earlier terminated as specified herein.
B. This Agreement may be terminated on thirty (30) days written notice by
either party if the other party breaches any material, term or
condition of this Agreement
-3-
<PAGE>
and fails to begin to cure the breach within thirty (30) days after
the delivery of the written notice of the breach. In addition, this
Agreement may be terminated by either party without cause on December
31 of any year, with written notice given ninety (90) days prior. FF
agrees not to sell product to VF customers for a period of one (1)
year from the termination date. There is no restriction for FF selling
produce to a broker who may distribute to a VF customer.
9. Force Majeure
Each party shall be excused for the failure to perform its obligations
(other than payment obligations) hereunder if such failure results from a
force majeure; provided, however, that a force majeure will not excuse a
party from its obligation to make a payment under this Agreement. Each
party shall seek diligently and in good faith to perform its obligations
notwithstanding a force majeure and to overcome a force majeure as soon as
practicable.
A "force majeure" means any event or condition that has, or may reasonably
be expected to have, a material adverse effect on the ability of FF or APD
to perform any of their obligations under this Agreement or for delay in
such performance or compliance, in each case if such event or condition is
beyond the reasonable control, and not the result of willful or negligent
actions, of the nonperforming party or its agents or subcontractors relying
thereon as justification for not performing any obligation or complying
with any condition required of such party hereunder.
10. Assignment
FF may assign its rights and obligations under the Agreement to a
subsidiary established for the purposes of this Agreement. APD may assign
its rights under this Agreement to any subsidiary affiliate or successor in
interest to its business. No assignment shall be effective or relieve
either party of its obligations or liabilities hereunder unless consented
to in writing by the other party, such consent shall not be unreasonably
withheld.
11. Entire Agreement
This Agreement represents the entire agreement of the parties and may only
be modified or amended in writing, signed by both parties. This Agreement
shall be deemed to have been made in the State of New Jersey and shall be
governed by and construed in accordance with the laws of the State of New
Jersey.
12. Binding Effect
This Agreement shall remain in full force and effect upon FF and APD and as
permitted herein upon their respective successors or assignees.
13. Notice
All notices required or permitted hereunder shall be in writing and shall
be deemed to be duly given and effective on delivery if hand delivered, or
three business days after
-4-
<PAGE>
mailing if mailed. Postage prepared by U.S. Certified Mail Return Receipt
Requested to the party intended at the address stated below or such other
addresses may be directed by notice duly given.
Agro Power Development
P.O. Box 250
Milltown, New Jersey 08850
Fosterfarms, Inc.
Marion Heights Road
P.O. Box 282
Marion Heights, Pennsylvania 17832
14. Miscellaneous
(a) Each party represents and warrants to the other that this Agreement
has been duly authorized and, when executed will be a valid and
binding obligation of such party and neither the execution nor
delivery of this Agreement nor the consummation of the transactions
contemplated herein shall violate or constitute a material default
under any agreement or instrument to which either party is a party or
by which it is bound.
(b) On the effective date of this Agreement and throughout the term
hereof, FF will not be a party to any oral written contract, agreement
or arrangement with any other person or company which provides or
arranges for the sale or distribution of tomatoes as set forth in this
Agreement, except for the sale of rejected Tomatoes pursuant to
Section 4.
(c) FF agrees to keep APD and VF informed of all pertinent competitive
situations that may affect the sale of the Tomatoes as contemplated by
this Agreement.
(d) In no event, whether as a result of indemnity, tort (including
negligence), statute, strict liability, contract or otherwise, shall
either party or any affiliate be liable to the other party or any
affiliate for any special, indirect, incidental or consequential
damages (for example, the loss of anticipated revenues, extra expenses
or loss of profit) sustained by any party in connection with or which
results from any wrongful act performed or omitted in connection with
this Agreement.
15. Indemnity
(a) FF shall: (i) protect and indemnify APD and its affiliates, officers,
agents and employees (collectively, the "APD Indemnified Parties")
against all actions, liabilities and claims (including, without
limitation, reasonable attorneys' fees) and (ii) defend the APD
Indemnified Parties in any suit for personal injury to, or death of,
any person or persons, or loss or damage to property, in each case, to
the extent caused (A) by breach of this Agreement by FF, or (B) by the
willful misconduct or negligent acts or omissions of FF or any of its
officers, agents or employees, in connection with or as a result of
this Agreement or the performance
-5-
<PAGE>
of its obligations hereunder, unless in each case the injury, death,
loss, damage or cost was the result of the willful misconduct or
negligent acts or omissions of one or more of the FF Indemnified
Parties.
(b) APD shall: (i) protect and indemnify FF and its affiliates, officers,
agents and employees (collectively, the "FF Indemnified Parties")
against all actions, liabilities and losses, (including, without
limitation, reasonable attorneys' fees) and (ii) defend FF Indemnified
Parties in any suit for personal injury to, or death of, any person or
persons, or loss or damage to property, in each case, to the extent
caused by (A) breach of this Agreement by APD, or (B) the willful
misconduct or negligent acts or omissions of APD or any of its
officers, agents or employees, in connection with or as a result of
this Agreement or the performance of its obligations hereunder, unless
in each case the injury, death, loss, damage or cost was the result of
the willful misconduct or negligent acts or omissions of one or more
of the FF Indemnified Parties.
16. Insurance
(a) FF and APD shall each continuously maintain the insurance described in
Appendix B to this Agreement provided such insurance is available on
commercially reasonable terms and conditions ("Required Insurance").
If at any time any of the Required Insurance shall no longer be
available, FF or APD shall procure substitute insurance that is the
most equivalent to the required coverage. The cost of all Required
Insurance shall be paid by the party carrying such Required Insurance.
(b) Each party shall deliver to the other certificates of insurance for
Required Insurance on the Effective Date and thereafter any updated
certificates evidencing policy amendments and policy renewals and,
upon the reasonable request of the other party, any additional
information relating to Required Insurance. Each policy shall require
the insurer to provide thirty (30) days prior written notice of
termination or cancellation or of any material change in coverage or
deductibles under such policy, and ten (10) days prior written notice
of termination for nonpayment of premium.
(c) All Required Insurance shall be with insurance companies which are
authorized to do business in the Commonwealth of Pennsylvania and
shall be with insurance companies rated at least "A-XII" by Best's Key
Rating or its equivalent by another national rating organization or
other comparable insurance companies reasonably acceptable to the
parties.
17. Confidential Information
The rights and obligations of the parties set forth in this Agreement with
respect to Confidential Information are subject to applicable law. Each
party shall withhold disclosure of (i) Confidential Information and (ii)
the terms and conditions of this
-6-
<PAGE>
Agreement unless (x) it would be unlawful to do so, or (y) unless such
disclosure is authorized by the other party.
"Confidential Information" means proprietary information of a party given
to the other party in connection with this Agreement that is (1) not in the
public domain, (2) in tangible form, (3) identified as confidential by the
word "confidential" conspicuously marked on the top of each page thereof,
and (4) annotated to reference the provisions of applicable law that
authorize nondisclosure of such material and information to the public.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
1st day of January 1995.
WITNESS: Fosterfarms, Inc.
______________________________ By: __________________________________
WITNESS: Agro Power Development
______________________________ By: __________________________________
-7-
<PAGE>
APPENDIX A
Conformity of Tomatoes
The tomatoes will be graded into three (3) quality grades; Premium, Class 1
and Class 2. Premium and Class 1 tomatoes will be packed in fifteen (15) pound
boxes, complete with inserts. Insert size will be 22, 28, 35, 39 and 45 count.
Sizes smaller than 45 will be packed in twenty (20) pound boxes. All
inserts are to be completed filled. The number of inserts has to correspond with
the number of tomatoes in a box.
Per grade, the size of the tomatoes must be uniform. The difference in
fruit weight per grade shall not exceed 25%.
Fifteen (15) pound boxes shall not weigh less than 15.1 pounds. Twenty (20)
pound boxes shall not weigh less than 20.1 pounds (weight loss will occur during
shipping).
All tomatoes shall be cooled to a temperature between 50 and 55 degrees.
All tomatoes shall be of a clear appearance.
Color requirements vary with seasonal marketing requirements and customer
preference, but shall be uniform per box and per pallet.
PREMIUM TOMATOES: - Perfect size and appearance.
- No more than two (2) tomatoes with dry puncture holes.
- No more than two (2) tomatoes with less than 2% surface
area that is scarred.
- Tomatoes have to fit inserts. Boat shares and too large
sized fruit are not allowed.
- No blossom endrot, russetting, oozing cuts, boat shares
or other misshapen fruit.
CLASS ONE: - Tomatoes with shoulder russetting, dry puncture holes
and any scaring.
- No blossom endrot, wet cuts or puncture holes. No dull
tomatoes.
CLASS TWO: - Dime sized blossom, endrot or smalls.
- Boat shaped or misshapen.
- No larger than dime blossom endrot. No wet cuts or
puncture holes.
Pallets shall be stacked with 95 boxes or as otherwise specified.
Boxes shall have sufficient strength for stacking nineteen (19) high and
allow for cross ventilation. Premium tomato boxes shall bear the Village Farms
logo.
-8-
<PAGE>
APPENDIX B
1. (a) Workers' Compensation (statutory limits) including (b) Employer's
Liability with limits of $1,000,000 per accident and $1,000,000 per disease
$1,000,000 policy limit.
2. Commercial General Liability with limits of $1,000,000 per
occurrence/aggregate combined single limit. Policy to be written on an
occurrence form with the following coverage features: premises/operations,
products liability/independent contractors or contractors protective and
contractual liability.
3. Commercial Automobile Liability with limits of $1,000,000 per accident for
bodily injury and property damage including coverage for owned, non-owned
and hired vehicles, contractual liability and loading/unloading hazards.
4. Excess of Umbrella Liability to follow form and apply in excess of 1(b)
(Employer's Liability), 2 and 3 above, in the amount of $2,000,000.
5. Each party will waive the subrogation rights of its insurers in favor of
the other party and provide a certificate of insurance within thirty (30)
days notice of cancellation and/or material change.
-9-
EXHIBIT 10.79
CREDIT AGREEMENT
(Line of Credit Facility)
by and between
COBANK, ACB,
as Agent and as a Syndication Party,
and
VILLAGE FARMS INTERNATIONAL FINANCE ASSOCIATION
dated as of June 24, 1997
<PAGE>
TABLE OF CONTENTS
Article 1. DEFINED TERMS .................................................. 1
1.1 Additional Costs .................................................. 1
1.2 Administrative Agent Fee .......................................... 1
1.3 Advance ........................................................... 1
1.4 Advance Amount .................................................... 1
1.5 Advance Date ...................................................... 1
1.6 Advance Payment ................................................... 1
1.7 Advance Request ................................................... 1
1.8 Aggregate Commitment .............................................. 1
1.9 APD ............................................................... 2
1.10 APD Subsidiary ................................................... 2
1.11 Authorized Officer ............................................... 2
1.12 Bank Debt ........................................................ 2
1.13 Base Rate ........................................................ 2
1.14 Base Rate Margin ................................................. 2
1.15 BDGCFR ........................................................... 2
1.16 Borrower Benefit Plan ............................................ 2
1.17 Borrower Debt .................................................... 2
1.18 Borrower Pension Plan ............................................ 2
1.19 Business Day ..................................................... 2
1.20 Closing Date ..................................................... 3
1.21 CoBank Equity Interests .......................................... 3
1.22 Code ............................................................. 3
i
<PAGE>
1.23 Collateral ....................................................... 3
1.24 Compliance Certificate ........................................... 3
1.25 Construction Facility ............................................ 3
1.26 Contributing Syndication Parties ................................. 3
1.27 Credit Agreement (Construction Loan Funding) ..................... 3
1.28 Credit Agreement (Term Loan Funding) ............................. 3
1.29 Default Interest Rate ............................................ 3
1.30 Delinquency Interest ............................................. 3
1.31 Delinquent Amount ................................................ 4
1.32 Delinquent Syndication Party ..................................... 4
1.33 Environmental Laws ............................................... 4
1.34 Environmental Regulations ........................................ 4
1.35 Equity ........................................................... 4
1.36 Equity Margin .................................................... 4
1.37 Equity Margin Report ............................................. 4
1.38 Equity Margin Report Deadline .................................... 4
1.39 Equity to NFI .................................................... 4
1.40 ERISA ............................................................ 4
1.41 Event of Default ................................................. 4
1.42 Fair Market Value ................................................ 4
1.43 GAAP ............................................................. 4
1.44 Greenhouse Facility .............................................. 4
1.45 Guarantor ........................................................ 5
1.46 Guarantor Cash Flow .............................................. 5
ii
<PAGE>
1.47 Guarantor Collateral ............................................. 5
1.48 Guarantor Security Documents ..................................... 5
1.49 Guaranty ......................................................... 5
1.50 Hazardous Substances ............................................. 5
1.51 Indemnified Agency Parties ....................................... 5
1.52 Indemnified Parties .............................................. 5
1.53 Intercreditor Agreement .......................................... 5
1.54 LC Collateral .................................................... 5
1.55 LC Commitment Amount ............................................. 5
1.56 LC Notice of Advance ............................................. 6
1.57 LC Request ....................................................... 6
1.58 Leasehold Assignment & Consent ................................... 6
1.59 Letter of Credit ................................................. 6
1.60 Letter of Credit Availability Period ............................. 6
1.61 Licensing Laws ................................................... 6
1.62 Line of Credit Availability Period ............................... 6
1.63 Loan ............................................................. 6
1.64 Loan Advance Amount .............................................. 6
1.65 Loan Documents ................................................... 6
1.66 Loan Proceeds .................................................... 6
1.67 Majority Lenders ................................................. 6
1.68 Material Adverse Effect .......................................... 6
1.69 Material Agreements .............................................. 7
1.70 Maturity Date .................................................... 7
iii
<PAGE>
1.71 Maximum Syndication Amount ....................................... 7
1.72 Net Fixed Investments ............................................ 7
1.73 Note or Notes .................................................... 7
1.74 Notice of Advance ................................................ 7
1.75 Notice of Loan Advance ........................................... 7
1.76 Organization Documents ........................................... 7
1.77 Payment Account .................................................. 7
1.78 Payment Distribution ............................................. 7
1.79 Permitted Encumbrance ............................................ 7
1.80 Person ........................................................... 8
1.81 Potential Default ................................................ 8
1.82 Quarter .......................................................... 8
1.83 Reimbursement Agreement .......................................... 8
1.84 Required License ................................................. 8
1.85 Regulatory Change ................................................ 8
1.86 Security Documents ............................................... 8
1.87 Successor Agent .................................................. 8
1.88 Super Majority ................................................... 8
1.89 Syndication Acquisition Agreement ................................ 8
1.90 Syndication Interest ............................................. 8
1.91 Syndication Parties .............................................. 8
1.92 Syndication Party Advance Date ................................... 9
1.93 Syndication Party LC Payment Date ................................ 9
1.94 Syndication Party Payment Date ................................... 9
iv
<PAGE>
Article 1. DEFINED TERMS ................................................. 1
1.95 Syndication Share ............................................... 9
1.96 Term Facility ................................................... 9
1.97 Title Commitments ............................................... 9
1.98 Title Insurers .................................................. 9
1.99 Title Policies .................................................. 9
1.100 Transfer ....................................................... 9
1.101 Underlying Borrowers ........................................... 9
1.102 Underlying Construction Loan Borrowers ......................... 9
1.103 Underlying Liens ............................................... 10
1.104 Underlying Loan ................................................ 10
1.105 Underlying Loan Documents ...................................... 10
1.106 Underlying LOC Borrowers ....................................... 10
1.107 Underlying Term Loan Borrowers ................................. 10
1.108 VF Lenders ..................................................... 10
1.109 VF Loan Agreement .............................................. 10
1.110 Village Farms Revolving Loan ................................... 10
1.111 Wire Instructions .............................................. 10
Article 2. CREDIT FACILITY ................................................ 10
2.1 Revolving Loan ................................................... 10
2.2 Letter of Credit ................................................. 10
Article 3. PURPOSES ....................................................... 11
3.1 Purpose - Line of Credit Loan .................................... 11
3.2 Purpose - Letter of Credit ....................................... 11
Article 4. AVAILABILITY ................................................... 12
v
<PAGE>
4.1 Availability - Line of Credit Loan ............................... 12
4.2 Availability - Letters of Credit ................................. 12
Article 5. INTEREST AND FEES .............................................. 12
5.1 Interest Calculation ............................................. 12
5.2 Equity Margin .................................................... 12
5.3 Default Interest Rate ............................................ 13
5.4 Fees ............................................................. 13
5.4.1 Facility Fee .................................... 13
5.4.2 LOC Commitment Fee .............................. 13
5.4.3 Letter of Credit Availability Fee ............... 14
5.4.4 Letter of Credit Issuance Fee ................... 14
Article 6. NOTES; PAYMENTS ................................................ 14
6.1 Promissory Notes ................................................. 14
6.2 Principal Payments ............................................... 14
6.3 Interest Payments ................................................ 14
6.4 Application of Regular Payments .................................. 14
6.5 Manner of Payment ................................................ 14
Article 7. PAYMENT APPLICATION/COMMITMENT REDUCTION ....................... 15
7.1 Application of Payments .......................................... 15
7.2 Reduction of Aggregate Commitment ................................ 15
Article 8. COBANK EQUITY .................................................. 15
Article 9. SECURITY ....................................................... 15
9.1 Borrower's Assets ................................................ 15
9.2 Guaranty ......................................................... 16
vi
<PAGE>
Article 10. REPRESENTATIONS AND WARRANTIES ................................ 16
10.1 Organization, Good Standing, Etc ................................ 16
10.2 Corporate Authority, Due Authorization; Consents ................ 17
10.3 Title to Property ............................................... 17
10.4 Litigation ...................................................... 17
10.5 No Violations ................................................... 17
10.6 Binding Agreement ............................................... 17
10.7 Compliance with Laws ............................................ 18
10.8 Principal Place of Business ..................................... 18
10.9 Underlying Loans; Underlying Loan Documents ..................... 18
10.10 Payment of Taxes ............................................... 18
10.11 Licenses and Approvals ......................................... 18
10.12 Employee Benefit Plans ......................................... 19
10.13 Equity Investments ............................................. 19
10.14 Real Property .................................................. 19
10.15 Personal Property .............................................. 19
10.16 Borrower Membership ............................................ 20
10.17 Environmental Compliance ....................................... 20
10.18 Fiscal Year .................................................... 20
10.19 Material Agreements ............................................ 20
10.20 Regulations G, U and X ......................................... 20
10.22 Disclosure ..................................................... 20
Article 11. CONDITIONS TO ADVANCES ........................................ 20
11.1 Conditions to Closing ........................................... 20
vii
<PAGE>
11.1.1 Loan Documents ........................................... 20
11.1.2 Searches; UCC Filings; Recordings; Title Insurance ....... 21
11.1.3 Approvals ................................................ 21
11.1.4 Organizational Documents ................................. 21
11.1.5 Evidence of Corporate Action ............................. 22
11.1.6 Legal Opinion for Borrower and Guarantor ................. 22
11.1.7 Evidence of Insurance .................................... 22
11.1.8 Phase I Environmental Studies ............................ 22
11.1.9 Survey ................................................... 22
11.1.10 Material Agreements ..................................... 22
11.1.11 Appointment of The Corporation Company .................. 22
11.1.12 No Material Change ...................................... 22
11.1.13 Fees and Expenses ....................................... 23
11.1.14 Application; CoBank Equity Interest Purchase Obligation . 23
11.1.15 Further Assurances ...................................... 23
11.2 Conditions to Initial Advance .............................. 23
11.2.1 Underlying Loan Documents; Possession of Documents ....... 23
11.2.2 Advance Request .......................................... 23
11.2.3 Default .................................................. 24
11.2.4 Representations and Warranties ........................... 24
11.3 Conditions to All Subsequent Advances ........................... 24
11.3.1 Representations and Warranties ........................... 24
11.3.2 No Event of Default ...................................... 24
11.3.3 No Material Adverse Change ............................... 24
viii
<PAGE>
11.3.4 Advance Request .......................................... 24
11.3.5 Possession of Collateral ................................. 25
11.4 Conditions to Issuance of Letters of Credit ..................... 25
11.4.1 Representations and Warranties ........................... 25
11.4.2 No Event of Default ...................................... 25
11.4.3 No Material Adverse Change ............................... 25
11.4.4 Issuance Request ......................................... 25
11.4.5 Possession of Collateral ................................. 26
11.4.6 Reimbursement Agreement .................................. 26
11.5 Conditions to Advances to Fund Purchase of
Village Farms Revolving Loan ................................. 26
11.5.1 Representations and Warranties ........................... 26
11.5.2 No Event of Default ...................................... 26
11.5.3 No Material Adverse Change ............................... 26
11.5.4 Advance Request .......................................... 26
11.5.5 Possession of Collateral ................................. 27
11.6 Letter of Credit Conditions ..................................... 27
11.6.1 Aggregate Commitment Amount; LC Commitment Amount ........ 27
11.6.2 Form, Expiry Date, and Beneficiary ....................... 27
11.7 Additional Disbursement Conditions .............................. 27
11.7.1 Aggregate Commitment Amount .............................. 27
11.7.2 Disbursement Period ...................................... 27
11.7.3 Illegality of Loan ....................................... 28
Article 12. AFFIRMATIVE COVENANTS ......................................... 28
ix
<PAGE>
12.1 Books and Records ............................................... 28
12.2 Reports and Notices ............................................. 28
12.2.1 Annual Financial Statements .............................. 28
12.2.2 Quarterly Financial Statements ........................... 28
12.2.3 Additional Information ................................... 28
12.2.4 Notice of Default ........................................ 29
12.2.5 Notice of Certain Changes ................................ 29
12.2.6 Notice of Litigation ..................................... 29
12.2.7 Notice of Material Adverse Effect ........................ 29
12.2.8 Notice of Environmental Litigation ....................... 29
12.2.9 Regulatory and Other Notices ............................. 29
12.2.10 Adverse Action Regarding Required Licenses .............. 30
12.2.11 Default of any Underlying Loan .......................... 30
12.2.12 Annual Attorney's Opinion Regarding Collateral .......... 30
12.3 Eligibility Certificate ......................................... 30
12.4 Maintenance of Existence and Qualification ...................... 30
12.5 Compliance with Legal Requirements and Agreements ............... 30
12.6 Compliance with Environmental Laws .............................. 31
12.7 Taxes ........................................................... 31
12.8 Insurance ....................................................... 31
12.9 Title to Assets and Maintenance ................................. 32
12.10 Payment of Liabilities ......................................... 32
12.11 Further Assurances; Real Property Security Interests ........... 32
12.12 Inspection ..................................................... 33
x
<PAGE>
12.13 Required Licenses; Permits; Etc ................................ 33
12.14 ERISA .......................................................... 33
12.15 Operations and Members ......................................... 34
Article 13. NEGATIVE COVENANTS ............................................ 34
13.1 Borrowing ....................................................... 34
13.2 No Other Businesses ............................................. 34
13.3 Liens ........................................................... 34
13.4 Sale of Assets .................................................. 35
13.5 Liabilities of Others ........................................... 35
13.6 Payments on Indebtedness ........................................ 36
13.7 Merger; Acquisitions; Etc ....................................... 36
13.8 Loans, Advances and Investments ................................. 36
13.9 Transactions With Related Parties ............................... 36
13.10 ERISA .......................................................... 36
13.11 Payment of Dividends ........................................... 37
13.12 Change in Fiscal Year .......................................... 37
13.13 Extension of Credit ............................................ 37
13.14 Amendment/Waiver of Provisions of Underlying Loan Documents .... 38
Article 14. INDEMNIFICATION ............................................... 38
14.1 General; Stamp Taxes; Intangibles Tax ........................... 38
14.2 Indemnification Relating to Hazardous Substances ................ 39
Article 15. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ........................ 40
15.1 Events of Default ............................................... 40
15.2 No Advances ..................................................... 41
xi
<PAGE>
15.3 Rights and Remedies ............................................. 42
15.4 Limitation on Rights and Remedies ............................... 42
Article 16. AGENCY AGREEMENT .............................................. 42
16.1 Funding of Syndication Interest ................................. 42
16.2 Syndication Parties'Obligations to Remit Funds .................. 42
16.3 Notice and Timing of Each Advance Payment ....................... 43
16.4 LC Notice of Advance ............................................ 43
16.5 Syndication Party's Failure to Remit Funds ...................... 43
16.6 Agency Appointment .............................................. 44
16.7 Power and Authority of Agent .................................... 44
16.7.1 Advice ................................................... 44
16.7.2 Documents ................................................ 44
16.7.3 Proceedings .............................................. 45
16.7.4 Retain Professionals ..................................... 45
16.7.5 Incidental Powers ........................................ 45
16.7.6 Letter of Credit Purposes ................................ 45
16.8 Duties of Agent ................................................. 45
16.8.1 Possession of Documents .................................. 45
16.8.2 Distribute Payments ...................................... 45
16.8.3 Collections .............................................. 45
16.9 Agent's Resignation or Removal .................................. 45
16.10 Consent Required for Certain Actions ........................... 46
16.10.1 Unanimous ............................................... 46
16.10.2 Super Majority .......................................... 46
xii
<PAGE>
16.11 Distribution of Principal and Interest ......................... 47
16.12 Distribution of Certain Fees and Amounts ....................... 47
16.12.1 LOC Commitment Fee ...................................... 47
16.12.2 Letter of Credit Availability Fee ....................... 47
16.12.3 Funding Losses .......................................... 47
16.13 Possession of Loan Documents ................................... 47
16.14 Collateral Application ......................................... 48
16.15 Amounts Required to be Returned ................................ 48
16.16 Reports and Information to Syndication Parties ................. 48
16.17 Standard of Care ............................................... 49
16.18 No Trust Relationship .......................................... 49
16.19 Sharing of Costs and Expenses .................................. 49
16.20 Syndication Parties'Indemnification of Agent ................... 50
16.21 Books and Records .............................................. 50
16.22 Administrative Agent Fee ....................................... 50
16.23 Representations and Warranties of All Parties .................. 50
16.24 Representations and Warranties of CoBank ....................... 51
16.25 Syndication Parties'Independent Credit Analysis ................ 51
16.26 No Joint Venture or Partnership ................................ 52
16.27 Purchase for Own Account/Restrictions on Transfer .............. 52
16.28 Certain Participants'Voting Rights ............................. 53
16.29 Method of Making Payments ...................................... 53
16.30 Events of Syndication Default/Remedies ......................... 53
16.30.1 Syndication Party Default ............................... 53
xiii
<PAGE>
16.30.2 Remedies ................................................ 53
16.31 Withholding Taxes .............................................. 54
16.32 Further Assurances ............................................. 54
Article 17. MISCELLANEOUS ................................................. 54
17.1 Costs and Expenses .............................................. 54
17.2 Service of Process and Consent to Jurisdiction .................. 55
17.3 Jury Waiver ..................................................... 55
17.4 Notices ......................................................... 55
17.4.1 Borrower ................................................. 56
17.4.2 CoBank ................................................... 56
17.5 Notice to Syndication Parties and Agent ......................... 56
17.6 Successors and Assigns .......................................... 56
17.7 Voting Rights Acknowledgment .................................... 57
17.8 Severability .................................................... 57
17.9 Entire Agreement ................................................ 57
17.10 Applicable Law ................................................. 57
17.11 Captions ....................................................... 57
17.12 Amendments ..................................................... 57
17.13 Additional Costs of Maintaining Loan ........................... 57
17.14 Capital Requirements ........................................... 58
17.15 Replacement Notes .............................................. 59
17.16 Patronage Payments ............................................. 59
17.17 Mutual Release ................................................. 59
17.18 Liberal Construction ........................................... 59
xiv
<PAGE>
EXHIBITS AND SCHEDULES
Exhibit 1.24 Compliance Certificate
Exhibit 6.1 Promissory Note Form
Exhibit 10.3 Permitted Encumbrances
Exhibit 10.4 Litigation
Exhibit 10.8 Borrower's Chief Executive Office and Place Where
Records Are Kept
Exhibit 10.11 Required Licenses and Consents
Exhibit 10.12 Borrower Benefit Plans
Exhibit 10.14 Interests in Real Property
Exhibit 10.19 Material Agreements
Exhibit 11.2.2 Advance Request Form
Exhibit 13.1 Existing Indebtedness
Exhibit 16.3 Notice of Loan Advance
Exhibit 16.4 LC Notice of Advance
Exhibit 16.27 Syndication Acquisition Agreement
Exhibit 16.29 Wire Instructions
xv
<PAGE>
CREDIT AGREEMENT
(Line of Credit Facility)
Village Farms International Finance Association
Loan No. S-2489
THIS CREDIT AGREEMENT ("Agreement") is entered into as of the 24th day of
June 1997, by and between COBANK, ACB ("CoBank"), whose mailing address is 245
North Waco Street, Wichita, Kansas 67201-2940 for its own benefit as a lender
(in that capacity sometimes referred to as "CoBank") and, as Agent Bank for the
benefit of the present and future Syndication Parties (in that capacity
"Agent"), and VILLAGE FARMS INTERNATIONAL FINANCE ASSOCIATION, a Delaware
corporation, whose address is 1811 Sardis Road North, Suite 207, Charlotte, NC
28270 ("Borrower").
Article 1. DEFINED TERMS
As used in this Agreement, the following terms shall have the meanings set
forth below (and such meaning shall be equally applicable to both the singular
and plural form of the terms defined, as the context may require):
1.1 Additional Costs: shall have the meaning set forth in Section 17.13.
1.2 Administrative Agent Fee: shall have the meaning set forth in
Subsection 5.4.2.
1.3 Advance: a disbursement of a portion of the Loan Proceeds.
1.4 Advance Amount: shall have the meaning set forth in Section 16.4.
1.5 Advance Date: a day (which shall be a Business Day) on which an advance
of Loan Proceeds is made.
1.6 Advance Payment: shall have the meaning set forth in Section 16.2.
1.7 Advance Request: shall have the meaning set forth in Subsection 11.2.2.
1.8 Aggregate Commitment: $10,000,000.00, subject to reduction as provided
in Section 7.2 hereof.
1.9 APD: Agro Power Development, Inc.
1.10 APD Subsidiary : (a) Village Farms of Delaware, LLC; (b) Village
Farms, LLC; (c) Keystone Village Farms, L.L.C; and (d) Village Farms of
Wheatfield, L.L.C.
1
<PAGE>
1.11 Authorized Officer: shall have the meaning set forth in Subsection
11.1.5.
1.12 Bank Debt: all amounts owing under the Note, fees, Borrower's
obligations to purchase CoBank Equity Interests, Funding Losses and all
interest, expenses, charges and other amounts payable by Borrower pursuant to
the Loan Documents.
1.13 Base Rate: a rate of interest per annum equal to the "prime rate" as
published from time to time in the Eastern Edition of the Wall Street Journal as
the average prime lending rate for seventy-five percent (75%) of the United
States' thirty (30) largest commercial banks, or if the Wall Street Journal
shall cease publication or cease publishing the "prime rate" on a regular basis,
such other regularly published average prime rate applicable to such commercial
banks as is acceptable to Agent in its sole discretion, with such rate modified
by adding the Base Rate Margin and subtracting the Equity Margin.
1.14 Base Rate Margin: shall be the Base Rate Margin in effect under the
Credit Agreement (Term Loan Funding) from time to time, and, upon the
termination of the Credit Agreement (Term Loan Funding), 100 basis points.
1.15 BDGCFR: shall have the meaning set forth in Subsection 5.2.
1.16 Borrower Benefit Plan: shall have the meaning set forth in Subsection
10.12.
1.17 Borrower Debt: the sum of the principal balance owed by Borrower under
the Term Facility and the Construction Facility.
1.18 Borrower Pension Plan: a Borrower Benefit Plan that is an "employee
pension benefit plan" as defined in Section 3(2) of ERISA that is intended to
satisfy the requirements of Section 401(a) of the Code.
1.19 Business Day: any day other than a Saturday or Sunday and other than a
day which is a Federal legal holiday or a legal holiday for banks in the States
of Colorado, New York, or North Carolina.
1.20 Closing Date: that date on which Agent, Borrower and Guarantor have
executed all Loan Documents and on which the conditions set forth in Section
11.1 of this Agreement have been met.
1.21 CoBank Equity Interests: shall have the meaning set forth in Article
8.
1.22 Code: shall have the meaning set forth in Section 10.12.
1.23 Collateral: shall have the meaning set forth in Section 9.1.
2
<PAGE>
1.24 Compliance Certificate: a certificate of the chief financial officer
of Borrower in the form attached hereto as Exhibit 1.24.
1.25 Construction Facility: means the credit facility made available to
Borrower pursuant to the Credit Agreement (Construction Loan Funding).
1.26 Contributing Syndication Parties: shall have the meaning set forth in
Section 16.5.
1.27 Credit Agreement (Construction Loan Funding): means that agreement so
titled dated June 24, 1997, by and between CoBank for its own benefit as a
lender and as agent bank for the benefit of the present and future syndication
parties as named or defined therein, and Borrower, wherein the lenders have
agreed to lend to Borrower a specified sum of money for the purpose of enabling
Borrower to make construction loans to eligible third parties to use for the
purposes therein specified.
1.28 Credit Agreement (Term Loan Funding): means that agreement so titled
dated June 24, 1997, by and between CoBank for its own benefit as a lender and
as agent bank for the benefit of the present and future syndication parties as
named or defined therein, and Borrower, wherein the lenders have agreed to lend
to Borrower a specified sum of money for the purpose of enabling Borrower to
make term loans to eligible third parties to use for the purposes therein
specified.
1.29 Default Interest Rate: a rate of interest equal to 400 basis points
plus the Base Rate.
1.30 Delinquency Interest: shall have the meaning set forth in Section
16.5.
1.31 Delinquent Amount: shall have the meaning set forth in Section 16.5.
1.32 Delinquent Syndication Party: shall have the meaning set forth in
Section 16.5.
1.33 Environmental Laws: the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended, 42 U.S.C. 9601-9657
("CERCLA") and the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
6901-6987 ("RCRA").
1.34 Environmental Regulations: as defined in the definition of Hazardous
Substances.
1.35 Equity: as determined in accordance with GAAP, plus Minority Interests
(as defined in accordance with GAAP).
1.36 Equity Margin: shall have the meaning set forth in Section 5.2.
3
<PAGE>
1.37 Equity Margin Report: shall have the meaning set forth in Section 5.2.
1.38 Equity Margin Report Deadline: shall have the meaning set forth in
Section 5.2.
1.39 Equity to NFI: the ratio, with respect to APD, of its Equity to its
Net Fixed Investments.
1.40 ERISA: shall have the meaning set forth in Subsection 10.12.
1.41 Event of Default: shall have the meaning set forth in Section 15.1.
1.42 Fair Market Value: a valuation as determined in a written appraisal
from an MAI certified appraiser.
1.43 GAAP: generally accepted accounting principles in the United States of
America, applied consistently, as in effect from time to time.
1.44 Greenhouse Facility: means a greenhouse used by an Underlying LOC
Borrower for the planting, growing and harvesting of vegetables and/or fruits.
1.45 Guarantor: APD.
1.46 Guarantor Cash Flow: Cash received by APD on account of its equity
interests in the Underlying Borrowers or from other investments and business
activities of such Guarantor.
1.47 Guarantor Collateral: shall have the meaning set forth in Section 9.2.
1.48 Guarantor Security Documents: the security agreement, pledge
agreement, and/or other security documents executed by Guarantor in favor of
Agent and the present and future Syndication Parties to secure Guarantor's
performance of its obligations under the Guaranty with a first lien on all of
Guarantor's assets.
1.49 Guaranty: the guaranty, in form and substance satisfactory to Agent,
to be executed by Guarantor in favor of Agent, as in effect on the date hereof
and as hereafter amended.
1.50 Hazardous Substances: dangerous, toxic or hazardous pollutants,
contaminants, chemicals, wastes, materials or substances, as defined in or
governed by the provisions of any Environmental Laws or any other federal, state
or local law, statute, code, ordinance, regulation, requirement or rule relating
thereto ("Environmental Regulations"), and also including urea formaldehyde,
polychlorinated biphenyls, asbestos, asbestos-containing materials, nuclear fuel
or waste, and petroleum products, or any other waste, material, substances,
pollutant or
4
<PAGE>
contaminant which would subject an owner of property to any damages, penalties
or liabilities under any applicable Environmental Regulations.
1.51 Indemnified Agency Parties: shall have the meaning set forth in
Section 16.20.
1.52 Indemnified Parties: shall have the meaning set forth in Section 14.1.
1.53 Intercreditor Agreement: means that agreement so titled dated June 24,
1997, by and between CoBank for its own benefit as a lender and as agent bank
for the benefit of the present and future syndication parties as named or
defined therein, Borrower, and Guarantor.
1.54 LC Collateral: shall have the meaning set forth in Section 3.2.
1.55 LC Commitment Amount: $5,000,000.00.
1.56 LC Notice of Advance: shall have the meaning set forth in Section
16.4.
1.57 LC Request: shall have the meaning set forth in Subsection 11.4.4.
1.58 Leasehold Assignment & Consent: the Leasehold Assignment and Consent,
in form and substance satisfactory to Agent.
1.59 Letter of Credit: shall have the meaning set forth in Section 2.2.
1.60 Letter of Credit Availability Period: shall have the meaning set forth
in Section 4.2.
1.61 Licensing Laws: shall have the meaning set forth in Section 10.5.
1.62 Line of Credit Availability Period: shall have the meaning set forth
in Section 4.1.
1.63 Loan: shall have the meaning set forth in Section 2.1.
1.64 Loan Advance Amount: shall have the meaning set forth in Section 16.3.
1.65 Loan Documents: this Agreement, the Notes, the Security Documents, the
Guaranty, the Guarantor Security Documents, and other documents required to
grant to Agent, for the benefit of the Syndication Parties, a perfected security
interest in the Collateral and in the Guarantor Collateral.
1.66 Loan Proceeds: shall have the meaning set forth in Section 3.1.
1.67 Majority Lenders: shall have the meaning set forth in Section 16.9.
5
<PAGE>
1.68 Material Adverse Effect: means: (a) a material adverse effect on the
financial condition, results of operation, business or property of Borrower; (b)
a material adverse effect on the ability of Borrower to perform its obligations
under this Agreement and the other Loan Documents; or (c) a material adverse
effect upon the ability of Agent to enforce its rights and remedies under the
Loan Documents.
1.69 Material Agreements: shall have the meaning set forth in Section
10.19.
1.70 Maturity Date: September 30, 1998, provided that such date shall be
automatically extended for successive twelve (12) month periods unless on or
before any July 31, either Agent provides to Borrower, or Borrower provides to
Agent, notice of termination effective as of the following September 30; and
provided further that, and notwithstanding any such notice, to the limited
extent that on any such date one or more Letters of Credit have not expired,
this Agreement and the other Loan Documents shall remain in full force and
effect for the sole purpose of providing finding for any draws under such
unexpired Letters of Credit.
1.71 Maximum Syndication Amount:
For CoBank - $ 10,000,000.00
1.72 Net Fixed Investments: Total Assets less Current Assets, as such
amounts are determined in accordance with GAAP.
1.73 Note or Notes: the promissory notes executed by Borrower pursuant to
Section 6.1 hereof, and all amendments, renewals, substitutions and extensions
thereof.
1.74 Notice of Advance: shall have the meaning set forth in Section 16.4.
1.75 Notice of Loan Advance: shall have the meaning set forth in Section
16.3.
1.76 Organization Documents: in the case of a corporation, its articles or
certificate of incorporation and bylaws; in the case of a partnership, its
partnership agreement and certificate of limited partnership, if applicable; in
the case of a limited liability company, its articles of organization and its
operating agreement.
1.77 Payment Account: shall have the meaning set forth in Section 16.11.
1.78 Payment Distribution: shall have the meaning set forth in Section
16.11.
1.79 Permitted Encumbrance: shall have the meaning set forth in Section
10.3.
6
<PAGE>
1.80 Person : any individual, corporation, limited liability company,
association, partnership, trust, organization, government, governmental agency,
or other entity.
1.81 Potential Default: any event, other than an event described in Section
15.1(a) hereof, which with the giving of notice or lapse of time, or both, would
become an Event of Default.
1.82 Quarter: the quarters of the calendar year commencing as of January 1,
April 1, July 1 and October 1.
1.83 Reimbursement Agreement: shall have the meaning set forth in Section
3.2.
1.84 Required License: shall have the meaning set forth in Section 10.11.
1.85 Regulatory Change: shall have the meaning set forth in Section 17.13.
1.86 Security Documents: the security agreements, mortgages, deeds of
trust, financing statements, pledge agreements, leasehold assignment and
consents, assignments and/or other security documents executed by Borrower in
favor of Agent, for the benefit of the Syndication Parties, to secure Borrower's
performance of its obligations under the Notes and other Loan Documents with a
first lien on all assets, real and personal, of Borrower, in form and substance
acceptable to Agent.
1.87 Successor Agent: such Person as may be appointed as successor to the
rights and duties of Agent as provided in Section 16.9 of this Agreement.
1.88 Super Majority: Syndication Parties whose Syndication Shares aggregate
at least seventy-five percent (75%).
1.89 Syndication Acquisition Agreement: shall have the meaning set forth in
Section 16.27.
1.90 Syndication Interest: shall have the meaning set forth in Section
16.1.
1.91 Syndication Parties: shall mean:
CoBank in its role as such, but not in its role as Agent hereunder. and
such Persons as shall from time to time execute a Syndication Acquisition
Agreement substantially in the form of Exhibit 16.27 hereto signifying their
election to purchase all or a portion of the Syndication Interest of any
Syndication Party, in accordance with Section 16.27 hereof, and to become a
Syndication Party hereunder.
7
<PAGE>
1.92 Syndication Party Advance Date: shall have the meaning set forth in
Section 16.3.
1.93 Syndication Party LC Payment Date: shall have the meaning set forth in
Section 16.4.
1.94 Syndication Party Payment Date: shall have the meaning set forth in
Section 16.4.
1.95 Syndication Share: shall mean:
For CoBank *100% ______________(subject to adjustment for sale of
further Syndication Interests)
subject, in each case, to adjustment as provided in Section 16.4
hereof.
1.96 Term Facility: means the credit facility made available to Borrower
pursuant to the Credit Agreement (Term Loan Funding).
1.97 Title Commitments: shall have the meaning set forth in Subsection
11.1.2.
1.98 Title Insurers: shall have the meaning set forth in Subsection 11.1.2.
1.99 Title Policies: shall have the meaning set forth in Subsection 11.1.2.
1.100 Transfer: shall have the meaning set forth in Section 16.27.
1.101 Underlying Borrowers: collectively, the Underlying Term Loan
Borrowers and the Underlying Construction Loan Borrowers.
1.102 Underlying Construction Loan Borrowers: means each Person to whom
Borrower has, at any time, made available an Underlying Construction Loan as
defined in the Credit Agreement (Construction Loan Funding), which is then
outstanding.
1.103 Underlying Liens: shall have the meaning set forth in Subsection
12.2.11.
1.104 Underlying Loan: shall have the meaning set forth in Section 3.1.
1.105 Underlying Loan Documents: all of the documents, including, without
limitation, the loan agreement, promissory note(s), and security documents,
executed in connection with any Underlying Loan.
1.106 Underlying LOC Borrowers: means: (a) each Person to whom Borrower has
at any time outstanding an Underlying Loan; and (b) Village Farms of
8
<PAGE>
Texas, L.P. at such time as an Advance is made to fund Borrower's purchase of
the Village Farms Revolving Loan.
1.107 Underlying Term Loan Borrowers: means each Person to whom Borrower
has, at any time, made available an Underlying Term Loan as defined in the
Credit Agreement (Term Loan Funding), which is then outstanding.
1.108 VF Lenders: Farm Credit Bank of Texas and Texas Production Credit
Association.
1.109 VF Loan Agreement: That Loan Agreement dated as of February 14, 1996
by and between Village Farms of Texas, L.P., as borrower, the VF Lenders, and
CoBank, as Administrative Agent.
1.110 Village Farms Revolving Loan: The LOC Loan (as defined in the VF Loan
Agreement) made to Village Farms of Texas, L.P. pursuant to the VF Loan
Agreement.
1.111 Wire Instructions: shall have the meaning set forth in Section 16.29.
Article 2. CREDIT FACILITY
2.1 Revolving Loan. On the terms and conditions set forth in this
Agreement, the Syndication Parties agree, each as to their Syndication Share and
to the extent of their Maximum Syndication Amount, to make a revolving loan to
Borrower (the "Loan") in an amount up to the Aggregate Commitment less the
undrawn face amount of any Letters of Credit then outstanding.
2.2 Letter of Credit. On the terms and conditions set forth in this
Agreement, the LC Issuing Bank agrees to issue letters of credit (each a "Letter
of Credit") any time during the Letter of Credit Availability Period up to an
aggregate undrawn face amount of all such Letters of Credit outstanding at any
one time equal to the lesser of: (a) the LC Commitment Amount; or (b) the
Aggregate Commitment less the principal amount committed under all Underlying
Loans then outstanding. Each Syndication Party is responsible for funding its
Syndication Share of all draws under the Letters of Credit, and such amounts
will be funded out of the Loan.
Article 3. PURPOSES
3.1 Purpose - Line of Credit Loan. The proceeds of the Loan ("Loan
Proceeds") may be used by Borrower only: (a) to fund Borrower's purchase of the
Village Farms Revolving Loan; (b) to fund Borrower's loan ("Underlying Loan"):
(i) to APD (upon its becoming a member of Borrower) to meet APD's working
capital needs; (ii) to Underlying Term Loan Borrowers (A) to meet their needs
during the planting phase of each year's production cycle as set forth in a
planting cycle budget to be provided by the Underlying Term Loan Borrower, and
(B) to enable such Underlying Term Loan Borrowers to meet their payment
requirements under their Underlying Term
9
<PAGE>
Loan for a maximum of 180 days in any three year period; and (iii) to Members to
meet their needs during the planting phase of each year's production cycle as
set forth in a planting cycle budget to be provided by the Member; and (c) to
fund draws under the Letters of Credit. All such Underlying Loans must be
evidenced by Underlying Loan Documents satisfactory to Agent and loans made
under (i) must be secured by all of APD's inventory and accounts and loans made
under (ii) or (iii) must be secured by all the assets of such Underlying Term
Loan Borrower or such Member, as applicable.
3.2 Purpose - Letter of Credit. Letters of Credit may be requested by
Borrower to support commitments: (a) of Borrower to third parties incurred in
connection with the conduct of its regular business; (b) of APD to facilitate
the purchase and sale by APD of fruits and/or vegetables and for other purposes
approved by Borrower and Agent; (c) of (i) Members or (ii) Underlying Term Loan
Borrowers to third parties, in the case of (i) or (ii), supplying services
and/or materials to such Member's or such Underlying Term Loan Borrowers in
connection with the operation of their respective Greenhouse Facilities; and/or
(d) of an APD Subsidiary to facilitate the purchase and sale by such APD
Subsidiary of fruits and/or vegetables. The Person for whose benefit or account
Letters of Credit are issued under (b), (c), or (d) must have executed a
reimbursement agreement ("Reimbursement Agreement") in form and substance
satisfactory to Agent obligating such Person to reimburse Borrower and the LC
Issuing Bank for the amount of any draw under such Letter of Credit and
associated costs and liabilities, and such Person's obligations under such
reimbursement agreement must be secured by a first lien on all merchandise and
documents, and including any letter of credit or proceeds thereof, which come
into the possession or control of such Person, or in which such Person may
acquire an interest, or which shall come into the possession or control of
Borrower or the LC Issuing Bank or any correspondents of Borrower or the LC
Issuing Bank as the result of or in connection with any transactions under the
Letter of Credit ("LC Collateral").
ARTICLE 4. AVAILABILITY
4.1 Availability - Line of Credit Loan. The Loan Proceeds will be made
available to Borrower as soon as the applicable conditions set forth in Article
11 hereof have been satisfied and until the Maturity Date ("Line of Credit
Availability Period"). Unless otherwise agreed, the Loan Proceeds will be made
available on any Business Day during the Availability Period: (a) to fund draws
under Letters of Credit; and (b) by wire transfer of immediately available funds
in accordance with written wire transfer instructions to be furnished by
Borrower on a form supplied by Agent. Amounts borrowed under the Loan and repaid
may be reborrowed during the Line of Credit Availability Period.
4.2 Availability - Letters of Credit. The Letters of Credit will be made
available to Borrower as soon as the applicable conditions set forth in Article
11 hereof have been satisfied, provided however such conditions must be
satisfied no later than
10
<PAGE>
December 31, 1997, and until a date sixty (60) days prior to the Maturity Date
("Letter of Credit Availability Period").
ARTICLE 5. INTEREST AND FEES
5.1 Interest Calculation. The outstanding principal balance under the Notes
shall bear interest at the Base Rate and shall be calculated on the actual
number of days each Advance is outstanding on the basis of a year consisting of
360 days. In calculating interest, the Advance Date shall be included and the
date each Advance is repaid shall be excluded.
5.2 Equity Margin. The "Equity Margin" shall be determined as of each June
30 and December 31 as provided in the table below (expressed in basis points)
based on: (a) the ratio of Equity to NFI of APD, on a consolidated basis; and
(b) the ratio of Borrower Debt to Guarantor Cash Flow ("BDGCFR"), as of such
date:
Equity to NFI
less than =>40<50 50 or more
40
BDGCFR
------
=>8.0 12.5 25.0 50.0
=>4.0< 8.0 25.0 50.0 62.5
< 4.0 50.0 62.5 75.0
provided that the Equity Margin may never exceed the Base Rate Margin.
On or before the last Business Day of each September and March ("Equity Margin
Report Deadline"), commencing September of 1997, Borrower shall provide to Agent
a statement, certified to by Borrower's chief financial officer, showing: (a)
the Equity to NFI ratio of APD as of the preceding June 30 or December 31, as
applicable, and showing the amounts of APD's Equity and APD's Net Fixed
Investments as of such date; and (b) the ratio of Borrower Debt to Guarantor
Cash Flow as of the preceding June 30 or December 31, as applicable, and showing
the amounts of Borrower Debt and amount of Guarantor Cash Flow as of such date
("Equity Margin Report"). The Equity Margin for the six month period commencing
as of the November 1 or May 1 next succeeding such Equity Margin Report Deadline
shall be based on the Equity to NFI ratio and BDGCFR shown in such Equity Margin
Report (unless, and except to the extent, that the contents of the annual or
quarterly financial statements received by Agent from Borrower pursuant to
Subsections 12.2.1 or 12.2.2 hereof or from APD pursuant to the Guaranty produce
different ratios). If the Equity Margin Report is not received by Agent by the
Equity Margin Report Deadline, the Equity Margin for the period commencing on
the following November 1 or May 1, as applicable, will be determined as though
the BDGCFR upon which such Equity Margin is based is equal to 8.0.
11
<PAGE>
5.3 Default Interest Rate. All Bank Debt shall, at the sole option of
Agent, bear interest at the Default Interest Rate from and after the occurrence
and during the continuance of an Event of Default. Upon the occurrence and
during the continuance of an Event of Default or Potential Default, at the
option of Agent, interest shall be payable upon demand by Agent, and in no event
less frequently than monthly.
5.4 Fees. Borrower shall pay or cause to be paid the following fees:
5.4.1 Facility Fee. A non-refundable (except for the proviso below)
facility fee equal to 75 basis points multiplied by the Aggregate Commitment
payable to CoBank on the Closing Date; provided that the Facility Fee payable
with respect to the amount advanced under the Line of Credit Facility to fund
Borrower's purchase of the Village Farms Revolving Loan shall be refunded to
Borrower at the time of such advance so long as it occurs within 180 days of the
Closing Date.
5.4.2 LOC Commitment Fee. A fee equal to 50 basis points per annum
multiplied by the Unused Line of Credit Commitment, calculated daily commencing
on the Closing Date and payable to Agent, for the benefit of the Syndication
Parties, in arrears on the last day of each Quarter. The "Unused Line of Credit
Commitment" shall be determined as of any day by starting with the Aggregate
Commitment and subtracting therefrom (a) the undrawn face amount of all Letters
of Credit then outstanding and (b) the outstanding principal balance owing under
the Line of Credit Facility.
5.4.3 Letter of Credit Availability Fee. A fee, payable to Agent, for the
benefit of the Syndication Parties, at the time of issuance of each Letter of
Credit and at the time of each renewal of a Letter of Credit, in an amount to be
quoted by Agent, in its sole discretion, at the time of issuance.
5.4.4 Letter of Credit Issuance Fee. A fee, payable to the LC Issuing Bank
at the time of each such issuance or renewal of each Letter of Credit, equal to
the greater of (a) 3% of the face amount of such Letter of Credit; or (b)
$1,500.00.
ARTICLE 6. NOTES; PAYMENTS
6.1 Promissory Notes. Each Syndication Party's Syndication Interest in the
Loan shall be evidenced by a promissory note, payable to the order of such
Syndication Party in the face amount equal to such Syndication Party's Maximum
Syndication Amount, in the form attached hereto as Exhibit 6.1 (each a "Note"
and collectively, such promissory notes shall be referred to as the "Notes").
6.2 Principal Payments. Principal shall be payable in full on or before the
Maturity Date.
12
<PAGE>
6.3 Interest Payments. Interest shall be payable the tenth day of each
month commencing on the tenth day of the month following the month in which the
Closing Date occurs, and on the Maturity Date.
6.4 Application of Regular Payments. Upon the occurrence and during the
continuance of an Event of Default or Potential Default, all payments and other
amounts received by Agent shall be applied, as Agent in its sole discretion
shall determine, to fees, the purchase of CoBank Equity Interests, interest or
principal indebtedness under the Notes, or to any other Bank Debt. The amount of
Loan Proceeds advanced and other Bank Debt, and all payments by or on behalf of
Borrower, of such amounts, shall be entered on the books of the Agent and/or the
Syndication Parties and such entries shall be presumptive evidence of the unpaid
amounts outstanding from time to time under the Notes and other Loan Documents.
6.5 Manner of Payment. All payments, including prepayments, that Borrower
is required or permitted to make under the terms of this Agreement shall be made
to Agent (a) in immediately available federal funds, to be received no later
than 12:00 noon Central Time of the Business Day on which such payment is due by
wire transfer through Federal Reserve Bank, Kansas City, Routing Number:
307088754, COBANK ENGWD (or to such other account as Agent may designate by
notice); and (b) without setoff or counterclaim and free and clear of and
without deduction for any taxes, levies, impost, duties, charges, fees,
deductions, withholding, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any jurisdiction or any political
subdivision thereof or taxing or other authority therein unless Borrower is
compelled by law to make such deduction or withholding.
ARTICLE 7. PAYMENT APPLICATION/COMMITMENT REDUCTION
7.1 Application of Payments. Upon the occurrence and during the continuance of
an Event of Default or Potential Default, Borrower hereby agrees that all
amounts paid to Agent shall be applied, as Agent in its sole discretion shall
determine, to fees, the purchase of CoBank Equity Interests, interest or
principal indebtedness under the Notes (in such order of maturity as Agent shall
select), or to any other Bank Debt.
7.2 Reduction of Aggregate Commitment. Borrower shall have the right, from time
to time, to reduce the Aggregate Commitment in multiples of $100,000.00 upon two
(2) Business Days prior written notice to Agent provided that the requested
reduction shall not cause the Aggregate Commitment to be less than the aggregate
amount of (a) the outstanding principal balance owing under the Loan and the
Notes, plus (b) the undrawn face amount of all outstanding Letters of Credit.
Any reduction of the Aggregate Commitment pursuant to this Section shall be
irrevocable.
13
<PAGE>
ARTICLE 8. COBANK EQUITY
Borrower agrees to purchase such equity interests in CoBank ("CoBank Equity
Interests") as CoBank may from time to time require in accordance with its
bylaws and capital plan as applicable to cooperative borrowers generally. In
connection with the foregoing, Borrower hereby acknowledges receipt, prior to
the execution of this Agreement, of CoBank's bylaws, a written description of
the terms and conditions under which the CoBank Equity Interests are issued,
CoBank's Loan-Based Capital Plan, CoBank's most recent annual report, and if
more recent than CoBank's latest annual report, its latest quarterly report.
ARTICLE 9. SECURITY
9.1 Borrower's Assets. As security for the payment and performance of all
obligations of Borrower to Agent, CoBank, and the Syndication Parties, including
but not limited to principal and interest under the Notes, purchases of CoBank
Equity Interests, fees, Funding Losses, reimbursements, and all other Bank Debt
or obligations under any of the Loan Documents, Borrower shall grant to, and
maintain for, Agent, for the benefit of all present and future Syndication
Parties, a first lien and security interest, subject only to Permitted
Encumbrances and to the provisions of the Intercreditor Agreement, in all of its
assets, both real and personal, tangible and intangible, whether now owned or
hereafter acquired, including, without limitation, the Underlying Loans and the
Underlying Loan Documents and its interest in the collateral securing the
Underlying Loans ("Collateral"), pursuant to the Security Documents. Borrower
shall execute and deliver to Agent, for the benefit of the Syndication Parties,
the Security Documents to evidence the security interest of Agent, for the
benefit of the Syndication Parties, in the Collateral, together with such
financing statements or other documents as Agent shall request. Borrower shall
deliver the originals of the Underlying Loan Documents to Agent, for the benefit
of all present and future Syndication Parties. Borrower shall also execute such
further security agreements, mortgages, deeds of trust, financing statements,
assignments or other documents as Agent shall reasonably request, in form and
substance as Agent shall specify, to establish, confirm, perfect or provide
notice of Agent's security interest (for the benefit of all Syndication Parties)
in the Collateral. If requested by Agent: (a) Borrower and Agent shall place a
legend on any chattel paper included in the Collateral showing Agent's security
interest therein; and (b) Borrower shall deliver to Agent possession of any
instruments and securities included in the Collateral (duly endorsed to Agent's
reasonable satisfaction).
9.2 Guaranty. Borrower's obligations under this Agreement and all other
Loan Documents shall be guaranteed by APD pursuant to the APD Guaranty and the
APD Guaranty shall be secured by a first lien and security interest, subject to
the provisions of the Intercreditor Agreement, in all of its assets, both real
and personal, tangible and intangible, whether now owned or hereafter acquired
("Guarantor Collateral") pursuant to the Guarantor Security Documents.
14
<PAGE>
ARTICLE 10. REPRESENTATIONS AND WARRANTIES
To induce the Syndication Parties to make the Loan, and recognizing that
the Syndication Parties are relying thereon, Borrower represents and warrants as
follows:
10.1 Organization, Good Standing, Etc. Borrower (a) is duly organized,
validly existing, and in good standing under the laws of its state of
incorporation; (b) qualifies as a cooperative association under the laws of its
state of incorporation; (c) is duly qualified to do business and is in good
standing in each jurisdiction in which the transaction of its business makes
such qualification necessary; and (d) has all requisite corporate and legal
power (i) to own and operate its assets and to carry on its business, (ii) to
enter into and perform the Loan Documents to which it is a party, and (iii) to
make the Underlying Loans.
10.2 Corporate Authority, Due Authorization; Consents. Borrower has full
power and authority to conduct its business as contemplated to be operated from
and after the Closing Date; to execute, deliver and perform under the Loan
Documents and all other documents and agreements as contemplated by this
Agreement; and to make the Underlying Loans, all of which have been duly
authorized. All consents or approvals of any Person which are necessary for, or
are required as a condition of, the execution, delivery and performance of the
Loan Documents and/or making of the Underlying Loans have been obtained.
10.3 Title to Property. Borrower holds good and marketable title to all of
its real property (other than rights of way, easements and similar interests in
real property which in the aggregate are not material), owns all of its personal
property, and holds all of its leases, free and clear of any lien, pledge,
restriction, or encumbrance, except as specifically identified in Exhibit 10.3
attached hereto or as permitted by Section 13.3 hereof ("Permitted
Encumbrances") and subject to the Intercreditor Agreement. All of Borrower's
leases which constitute Material Agreements are in full force and effect and
afford Borrower peaceful and undisturbed possession of the subject matter
thereof.
10.4 Litigation. Except as described on Exhibit 10.4 hereto, there are, no
pending legal or governmental actions, proceedings or investigations to which
Borrower is a party or to which any property of Borrower is subject which might
result in any Material Adverse Effect and, to Borrower's knowledge, no such
actions or proceedings are threatened or contemplated by any federal, state,
county, city (or similar unit) governmental agency or any other Person.
10.5 No Violations. The execution, delivery and performance of the Loan
Documents and the making of the Underlying Loans will not: (a) violate any
provision of Borrower's articles of incorporation or bylaws, or any law, rule,
regulation, judgment, order or ruling of any court or governmental agency; (b)
violate, conflict with, result in a breach of, constitute a default under, or
with the giving of notice or the expiration of time or both, constitute a
default under, any existing real estate mortgage, indenture, lease, security
agreement, contract, note, instrument or any other agreements
15
<PAGE>
or documents binding on Borrower or affecting its property; or (c) violate,
conflict with, result in a breach of, constitute a default under, or result in
the loss of, or restriction of rights under, any Required License or any order,
law, rule, or regulation under or pursuant to which any Required License was
issued or is maintained ("Licensing Laws").
10.6 Binding Agreement. Each of the Loan Documents to which Borrower is a
party is, or when executed and delivered, will be, the legal, valid and binding
obligation of Borrower, enforceable in accordance with its terms, subject only
to limitations on enforceability imposed by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting creditors' rights
generally and by general principles of equity.
10.7 Compliance with Laws. Borrower is in compliance with all federal,
state, and local laws, rules, regulations, ordinances, codes and orders,
including without limitation all Environmental Laws and all Licensing Laws, with
respect to which noncompliance would result in a Material Adverse Effect.
10.8 Principal Place of Business. Borrower's place of business, or chief
executive office if it has more than one place of business, and the place where
the records required by Section 12.1 hereof are kept, is located at the place(s)
shown on Exhibit 10.8 hereto.
10.9 Underlying Loans; Underlying Loan Documents. As of the time of any
Advance: (a) the Underlying Loan Documents will have been duly authorized,
executed, and delivered by all parties thereto and will constitute the legal,
valid, and binding obligation of all parties thereto, enforceable in accordance
with their terms, subject only to the effects of bankruptcy, insolvency, and
similar laws generally affecting the rights of creditors or the availability of
equitable remedies; (b) any Underlying Loan will be free from any right of
set-off, counterclaim or other claim, or defense and no event of default
thereunder shall have occurred and be continuing; (c) any Underlying LOC
Borrower's obligations pursuant to its Underlying Loan will, except where the
Underlying Loan Documents specifically state otherwise, be secured by a first
and prior lien in favor of Borrower in all assets of such Underlying LOC
Borrower; (d) all closing and pre-closing requirements, if any, set forth in the
Underlying Loan Documents, will have been satisfied in full; (e) the Underlying
Loan Documents will have been approved by Agent and shall not have been amended
subsequent to such approval; (f) the Underlying Loans will not be in violation
of any applicable usury statutes; and (g) to Borrower's knowledge and belief,
the Underlying Loan Documents, projections, budgets, financial statements, or
other information furnished by or on behalf of any Underlying LOC Borrower will
not contain any misstatement of a material fact, nor omit to state a material
fact.
10.10 Payment of Taxes. Borrower has filed all required federal, state and
local tax returns and has paid all taxes as shown on such returns as they have
become
16
<PAGE>
due. Borrower has paid when due all other taxes, assessments or impositions
levied or assessed against Borrower or its business or properties.
10.11 Licenses and Approvals. Borrower has ownership of, or license to use,
or has been issued, all trademarks, patents, copyrights, franchises,
certificates, approvals, permits, authorities, agreements, and licenses which
are used or necessary to permit it to own its properties and to conduct its
business as presently being conducted, and to make the Underlying Loans
("Required Licenses"). Exhibit 10.11 lists all Required Licenses presently in
existence with respect to Borrower. Each Required License is in full force and
effect, and there is no outstanding notice of cancellation or termination or, to
Borrower's knowledge, any threatened cancellation or termination in connection
therewith, nor has an event occurred with respect to any Required License which,
with the giving of notice or passage of time or both, could result in the
revocation or termination thereof or otherwise in any impairment of Borrower's
rights with respect thereto, which impairment could reasonably be expected to
have a Material Adverse Effect. No consent, permission, authorization, order, or
license of any governmental authority, is necessary in connection with the: (a)
execution, delivery, performance, or enforcement of the Loan Documents to which
Borrower is a party; and (b) the making of the Underlying Loans, except such as
have been obtained and are in full force and effect and as are described on
Exhibit 10.11.
10.12 Employee Benefit Plans. Borrower does not presently maintain or
participate in, and has not in the past maintained or participated in, and is
not obligated to contribute to, any of the following (each a "Borrower Benefit
Plan" and collectively "Borrower Benefit Plans"): (a) any funded "employee
welfare benefit plan," as that term is defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended, and the regulations
thereunder ("ERISA"); (b) any "multiemployer plans," as defined in Section 3(37)
of ERISA; (c) any "employee pension benefit plan" as defined in Section 3(2) of
ERISA; (d) any "employee benefit plan", as such term is defined in Section 3(3)
of ERISA; (e) any "multiple employer plan" within the meaning of Section 413 of
the Internal Revenue Code of 1986, as amended from time to time ("Code"); (f)
any "multiple employer welfare arrangement" within the meaning of Section 3(40)
of ERISA; (g) a "voluntary employees' beneficiary association" within the
meaning of Section 501(a)(9) of the Code; (h) a "welfare benefit fund" within
the meaning of Section 419 of the Code; or (i) any employee welfare benefit plan
within the meaning of Section 3(1) of ERISA for the benefit of retired or former
employees.
10.13 Equity Investments. Borrower does not now own any stock or other
voting or equity interest, directly or indirectly, in any Person other than the
CoBank Equity Interests.
10.14 Real Property. Borrower: (a) has all real property interests,
including without limitations fee interests, leasehold interests, easements,
licenses and rights of way which are necessary for the conduct of Borrower's
business; and (b) does not own any fee interest or leasehold interest, or any
other interest, including without limitation
17
<PAGE>
any easements, rights of way or licenses, in real property, other than as set
forth on Exhibit 10.14 hereto.
10.15 Personal Property. Borrower has all tangible personal property
necessary for the conduct of Borrower's business as it is contemplated to be
conducted; and all such property is in good operating condition and repair,
reasonable wear and tear excepted, and suitable in all material respects for the
uses for which it is being utilized.
10.16 Borrower Membership. Village Farms of Texas, L.P. is a member of
Borrower.
10.17 Environmental Compliance. Without limiting the provisions of Section
10.7 above, all property owned or leased by Borrower and all operations
conducted by it are in compliance in all material respects with all Laws
relating to environmental protection, with respect to which the failure to
comply would have a Material Adverse Effect.
10.18 Fiscal Year. Each fiscal year of Borrower begins on January 1 of each
calendar year and ends on December 31 of each calendar year.
10.19 Material Agreements. That Exhibit 10.19 attached hereto sets forth
all agreements of Borrower, the termination or breach of which, based upon
Borrower's knowledge as of the date of making any representation with respect
thereto, would have a Material Adverse Effect ("Material Agreements"). Neither
Borrower nor, to Borrower's knowledge, any other party to any Material
Agreement, is in default thereunder, and no facts exist which with the giving of
notice or the passage of time, or both, would constitute such a default.
10.20 Regulations G, U and X. No portion of any Advance will be used for
the purpose of purchasing, carrying, or making loans to finance the purchase of,
any "margin security" or "margin stock" as such terms are used in Regulations G,
U or X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts
207, 221 and 224.
10.21 Disclosure. The representations and warranties contained in this
Article 10 and in the other Loan Documents do not contain any untrue statement
of a material fact or omit to state a material fact necessary to make such
representations not misleading.
ARTICLE 11. CONDITIONS TO ADVANCES
11.1 Conditions to Closing. . The obligation (a) of the Syndication Parties
to make the Loan and to make any Advance thereunder; and (b) of the LC Issuing
Bank to issue the first Letter of Credit, are each subject to satisfaction, in
Agent's sole discretion, of each of the following conditions precedent:
18
<PAGE>
11.1.1 Loan Documents. Agent shall have received duly executed originals of
the Loan Documents.
11.1.2 Searches; UCC Filings; Recordings; Title Insurance. Agent shall have
received: (a) searches of appropriate filing offices showing that (i) no state
or federal tax liens have been filed which remain in effect against Borrower,
(ii) except with respect to Permitted Encumbrances no financing statements have
been filed by any Person except to perfect the security interests required by
this Agreement, which remain in effect against Borrower or any of its assets,
(iii) all financing statements necessary to perfect the security interests
granted to Agent (for the benefit of the Syndication Parties) under the Loan
Documents have been filed or recorded, to the extent such security interests are
capable of being perfected by such filing, and (iv) all of the Loan Documents
required to be recorded or filed to perfect the security interests and liens
granted therein shall be so recorded and filed; (b) mortgagees' title insurance
commitments ("Title Commitments") acceptable to Agent from one or more insurers
acceptable to Agent (the "Title Insurers") committing to issue one or more title
policies (ALTA Loan Policy Form) (the "Title Policies") insuring the lien in
favor of Agent (on behalf of the Syndication Parties) on each parcel of real
property owned in fee by Borrower having an estimated Fair Market Value of
$25,000.00 or more as a first priority lien on such real property, subject only
to Permitted Encumbrances, and (i) deleting the standard printed exceptions and
the gap exception, (ii) containing only such exceptions to title as are
reasonably acceptable to Agent, and (iii) containing such other endorsements as
Agent may reasonably require; and (c) either a Title Commitment or, at
Borrower's option, a written ownership and encumbrance report of current date
indicating that there are no prior liens on each parcel of such real property
having an estimated Fair Market Value of less than $25,000.00. In addition, in
the case of the parcels of real property covered by a Title Commitment, as of
the Closing Date Agent shall have received from the Title Insurers a written
confirmation acceptable to Agent confirming that the Title Insurers are
irrevocably committed to issue the Title Policies.
11.1.3 Approvals. Agent shall have received evidence satisfactory to it
that all consents and approvals of governmental authorities and third parties
which are with respect to Borrower and Guarantor, necessary for, or required as
a condition of: (a) the validity and enforceability of the Loan Documents; (b)
creation of and realization on, Agent's lien (for the benefit of the Syndication
Parties) on the Collateral; and (c) the making of the Underlying Loans, have
been obtained and are in full force and effect.
11.1.4 Organizational Documents. Agent shall have received: (a) good
standing certificates, dated no more than thirty (30) days prior to the Closing
Date, for Borrower and Guarantor for their respective states of incorporation
and for each state where their operations require qualification or authorization
to transact business; (b) a copy of the articles of incorporation of Borrower
and Guarantor certified by the Secretary of State of their state of
organization; and (c) a copy of the bylaws of Borrower and Guarantor, certified
as true and complete by the Secretary or Assistant Secretary of Borrower and
Guarantor, respectively.
19
<PAGE>
11.1.5 Evidence of Corporate Action. Agent shall have received in form and
substance satisfactory to Agent: documents evidencing all corporate action taken
by each of Borrower and Guarantor to authorize (including the specific names and
titles of the persons authorized to so act ("Authorized Officers")) the
execution, delivery and performance of the Loan Documents to which it is a
party, and with respect to Borrower, the making of the Underlying Loans,
certified to be true and correct by the Secretary or Assistant Secretary of
Borrower and Guarantor, respectively.
11.1.6 Legal Opinion for Borrower and Guarantor. Agent shall have received
opinions of counsel for Borrower and for Guarantor (who shall be acceptable to
Agent), in form and content acceptable to Agent and addressed to Agent and to
each Syndication Party (and expressly permitting reliance thereon by each future
Syndication Party).
11.1.7 Evidence of Insurance. Borrower and Guarantor shall have provided
Agent with insurance certificates and such other evidence, in form and substance
satisfactory to Agent, of all insurance required to be maintained by it under
the Loan Documents.
11.1.8 Phase I Environmental Studies. Borrower and Guarantor shall have
submitted to Agent such studies, investigations and reports with respect to
environmental matters for real property owned by Borrower or Guarantor,
respectively, from consultants acceptable to Agent as may be reasonably
requested by Agent and content and results of those studies, investigations and
reports shall be reasonably acceptable to Agent.
11.1.9 Survey. Borrower and Guarantor shall have provided Agent with ALTA
improvement surveys of all real property owned by Borrower or Guarantor,
respectively, and having a Fair Market Value of $25,000.00 or more, which
surveys, the certifications thereon, and all information contained therein,
shall be acceptable to Agent.
11.1.10 Material Agreements. Agent shall have received copies of those
Material Agreements as Agent may request in its sole discretion.
11.1.11 Appointment of The Corporation Company. Agent shall have received
evidence satisfactory to Agent that The Corporation Company, 1675 Broadway,
Denver, Colorado 80202 has accepted appointment by Borrower and Guarantor to
serve as their agent for service of process in accordance with Section 17.2 of
this Agreement and Section 11.7 of the Guaranty.
11.1.12 No Material Change. No change shall have occurred in the condition
or operations of Borrower since May 1, 1997 or Guarantor since March 31,
1997,which, in either case, could result in a Material Adverse Effect.
11.1.13 Fees and Expenses. Borrower shall have paid Agent, by wire transfer
of immediately available federal funds all fees set forth in Section 5.3 of this
20
<PAGE>
Agreement which are due on the Closing Date, and all expenses owing pursuant to
Section 17.1 hereof.
11.1.14 Application; CoBank Equity Interest Purchase Obligation. Borrower
shall have: (a) completed the loan application form provided by CoBank; and (b)
purchased such CoBank Equity Interests as CoBank may require pursuant to Article
8 hereof.
11.1.15 Further Assurances. Borrower and Guarantor shall have provided
and/or executed and delivered to Agent such further assignments, documents or
financing statements, in form and substance satisfactory to Agent, that Borrower
and Guarantor are to execute and deliver pursuant to the terms of the Loan
Documents or as Agent may reasonably request.
11.2 Conditions to Initial Advance. The Syndication Parties' obligation to
make the initial Advance to fund any particular Underlying Loan is subject to
the satisfaction, in Agent's sole discretion, of each of the following
conditions precedent:
11.2.1 Underlying Loan Documents; Possession of Documents. Agent shall have
received: (a) such information regarding the proposed Underlying LOC Borrower,
including credit information, as Agent may request; (b) evidence, in form and
substance satisfactory to Agent that the Underlying Loan Documents evidencing
the Underlying Loan are on forms, and contain terms and conditions, satisfactory
to Agent in its sole discretion, and in compliance with all applicable laws and
regulations; (c) proof satisfactory to Agent that the Underlying Loan has been
closed and that all conditions to closing thereof and to an advance of funds as
set forth in the Underlying Loan Documents have been satisfactorily met; (d)
possession of executed originals of the Underlying Loan Documents, properly
endorsed; and (e) such other instruments and documents in which Agent has been
granted a security interest (for the benefit of the Syndication Parties) and of
which Agent is to have possession under the terms of the Loan Documents.
11.2.2 Advance Request. Agent shall have received from Borrower (including
by facsimile transmission): (a) a duly completed request in the form attached
hereto as Exhibit 11.2.2 ("Advance Request") which has been signed by an
Authorized Officer; and (b) such other information or documentation as Agent may
request. The Advance Request shall be deemed to have been received on the
Business Day received if actually received by Agent before 12:00 noon, Central
Time, and as of the next Business Day if received by Agent after such time or on
other than a Business Day; provided that an Advance Request shall not be deemed
to have been received by Agent until it is satisfactory to Agent and includes
all information and documentation that Agent may request. Within one (1)
Business Day of the date an Advance Request is deemed to have been received,
Agent shall either fund the Advance or advise Borrower to the contrary; provided
that if Agent does not advise Borrower or does not fund within such
21
<PAGE>
time, the Advance Request shall be deemed to have been declined for funding. The
Advance Request shall be irrevocable.
11.2.3 Default. As of the Advance Date no Event of Default or Potential
Default shall have occurred and be continuing, and the disbursing of the amount
of the Loan Proceeds requested in the Advance Request shall not result in an
Event of Default or Potential Default.
11.2.4 Representations and Warranties. The representations and warranties
of Borrower and of Guarantor contained in each of the Loan Documents to which it
is a party, shall be true and correct in all material respects on and as of the
date on which the Advance is to be made as though made on . Borrower shall have
paid Agent, by wire transfer of immediately available federal funds all fees set
forth in Section 5.4 of this Agreement which are then due and payable and all
expenses owing pursuant to Section 17.1 hereof.
11.3 Conditions to All Subsequent Advances. The obligation of the
Syndication Parties to make Advances to fund any particular Underlying Loan
after the Initial Advance is subject to the satisfaction, in Agent's sole
discretion, of each of the following conditions precedent:
11.3.1 Representations and Warranties. The representations and warranties
of Borrower contained in this Agreement shall be true and correct in all
material respects on and as of the date of such Advance as though made on and as
of such date.
11.3.2 No Event of Default. No Event of Default and no Potential Default
shall have occurred and be continuing, and no Event of Default or Potential
Default would result from the making of the Advance.
11.3.3 No Material Adverse Change. No material adverse change shall have
occurred in the condition, operations, or prospects of Borrower.
11.3.4 Advance Request. Agent shall have received (including by facsimile
transmission) a duly completed Advance Request signed by an Authorized
Representative. The Advance Request shall be effective on the Business Day
received if actually received by Agent before 12:00 noon Central time, and as of
the next Business Day if received by Agent after such time or on other than a
Business Day; provided that an Advance Request shall not be deemed to have been
received by Agent until it is satisfactory to Agent and includes all information
and documentation that Agent may request. Within one (1) Business Day of the
date an Advance Request is deemed to have been received, Agent shall either fund
the Advance or advise Borrower to the contrary; provided that if Agent does not
advise Borrower or does not fund within such time, the Advance Request shall be
deemed to have been declined for funding.. Advance Requests submitted by
Borrower shall be irrevocable.
22
<PAGE>
11.3.5 Possession of Collateral. Agent shall have received possession of
the Collateral with respect to which perfection is accomplished by possession,
including all Collateral which constitutes Underlying Loan Documents, properly
endorsed.
11.4 Conditions to Issuance of Letters of Credit. The obligation of the LC
Issuing Bank to issue Letters of Credit, is subject to satisfaction, in Agent's
sole discretion, of each of the following conditions precedent:
11.4.1 Representations and Warranties. The representations and warranties
of Borrower contained in this Agreement shall be true and correct in all
material respects on and as of the date of such issuance as though made on and
as of such date.
11.4.2 No Event of Default. No Event of Default and no Potential Default
shall have occurred and be continuing, and no Event of Default or Potential
Default would result from the issuance of the Letter of Credit.
11.4.3 No Material Adverse Change. No material adverse change shall have
occurred in the condition, operations, or prospects of Borrower.
11.4.4 Issuance Request. Agent shall have received (including by facsimile
transmission) (a) a duly completed request for issuance of a Letter of Credit in
form and substance, and accompanied by such information and documentation, as
shall be satisfactory to Agent and the LC Issuing Bank in their sole discretion
("LC Request") signed by an Authorized Representative. The LC Request shall be
effective on the Business Day received if actually received by Agent before
12:00 noon Central time, and as of the next Business Day if received by Agent
after such time or on other than a Business Day; provided that an LC Request
shall not be deemed to have been received by Agent until it is satisfactory to
Agent and the LC Issuing Bank and includes all information and documentation
that Agent and the LC Issuing Bank may request. Within five (5) Business Days of
the date an LC Request is deemed to have been received, Agent shall either cause
the LC Issuing Bank to issue the Letter of Credit or advise Borrower to the
contrary. LC Requests submitted by Borrower shall be irrevocable.
11.4.5 Possession of Collateral. Agent shall have received possession of
the Collateral with respect to which perfection is accomplished by possession,
including all Collateral which constitutes Underlying Loan Documents and/or APD
Loan Documents, in each case properly endorsed.
11.4.6 Reimbursement Agreement. Agent shall have received, in form and
substance satisfactory to Agent, a copy of a Reimbursement Agreement and proof
of the granting and perfection of a security interest in the LC Collateral, all
as required in Section 3.2 hereof.
23
<PAGE>
11.5 Conditions to Advances to Fund Purchase of Village Farms Revolving
Loan. The obligation of the Syndication Parties to make an Advance to fund
Borrower's purchase of the Village Farms Revolving Loan from the VF Lenders is
subject to the satisfaction, in Agent's sole discretion, of each of the
following conditions precedent:
11.5.1 Representations and Warranties. The representations and warranties
of Borrower contained in this Agreement shall be true and correct in all
material respects on and as of the date of such Advance as though made on and as
of such date.
11.5.2 No Event of Default. No Event of Default and no Potential Default
shall have occurred and be continuing, and no Event of Default or Potential
Default would result from the making of the Advance.
11.5.3 No Material Adverse Change. No material adverse change shall have
occurred in the condition, operations, or prospects of Borrower.
11.5.4 Advance Request. Agent shall have received (including by facsimile
transmission) in form and substance satisfactory to Agent in its sole
discretion: (a) a duly completed Advance Request signed by an Authorized
Representative; and (b) the original of the LOC Note (as defined in the VF Loan
Agreement) properly endorsed from the VF Lenders to Borrower and from Borrower
to Agent; and (c) proof of (including copies of all necessary documentation) the
assignment from the VF Lenders to Borrower of all security for the LOC Note. The
Advance Request shall be effective on the Business Day received if actually
received by Agent before 12:00 noon Central time, and as of the next Business
Day if received by Agent after such time or on other than a Business Day;
provided that an Advance Request shall not be deemed to have been received by
Agent until it is satisfactory to Agent and includes all information and
documentation that Agent may request. Within five (5) Business Days of the date
an Advance Request is deemed to have been received, Agent shall either fund the
Advance or advise Borrower to the contrary. Advance Requests submitted by
Borrower shall be irrevocable.
11.5.5 Possession of Collateral. Agent shall have received possession of
the Collateral with respect to which perfection is accomplished by possession,
including all Collateral which constitutes Underlying Loan Documents, properly
endorsed.
11.6 Letter of Credit Conditions. At no time and in no event shall Borrower
be entitled to the issuance of a Letter of Credit except in strict compliance
with the following conditions:
11.6.1 Aggregate Commitment Amount; LC Commitment Amount. The face amount
thereof: (a) when added to (i) the outstanding principal amount owed under the
Loan and (ii) the undrawn face amount of all other outstanding Letters of
24
<PAGE>
Credit, must not exceed the Aggregate Commitment; and (b) when added to the
undrawn face amount of all other outstanding Letters of Credit, must not exceed
the LC Commitment Amount.
11.6.2 Form, Expiry Date, and Beneficiary. Each such Letter of Credit: (a)
must be in form and substance satisfactory to Agent and the LC Issuing Bank in
their sole discretion; (b) must, unless a later expiry date is agreed upon in
writing at the time of issuance (or renewal) by all of the Line of Credit
Lenders, expire by its terms no later than the earlier of (i) one (1) year from
the date of issuance, or (ii) thirty (30) Business Days prior to the Line of
Credit Maturity Date as in effect on the date of issuance; and (c) must be for
the benefit of Borrower, an Underlying Term Loan Borrower, or a Member.
11.7 Additional Disbursement Conditions. At no time and in no event shall
the Syndication Parties be obligated to make Advances under the Loan:
11.7.1 Aggregate Commitment Amount. In excess of an amount, which, when
added to: (a) all prior Advances and (b) the undrawn face amount of all
outstanding Letters of Credit, would exceed the Aggregate Commitment Amount.
11.7.2 Disbursement Period. If the Advance would be made other than during
the Availability Period.
11.7.3 Illegality of Loan. After the enactment of any law by any
governmental authority having jurisdiction over any Syndication Party which
would make it unlawful in any respect for such Syndication Party to make the
Advance.
ARTICLE 12. AFFIRMATIVE COVENANTS
From and after the date of this Agreement and until the Bank Debt is
indefeasibly paid in full and the Syndication Parties have no obligation to make
any advances hereunder, Borrower agrees that it will observe and comply with,
the following covenants for the benefit of Agent and the Syndication Parties:
12.1 Books and Records. Borrower shall at all times keep proper books of
record and account, in which correct and complete entries shall be made of all
its dealings, in accordance with GAAP.
12.2 Reports and Notices. Borrower shall provide to Agent the following
reports, information and notices:
12.2.1 Annual Financial Statements. As soon as available, but in no event
later than one hundred and twenty (120) days after the end of any fiscal year of
Borrower occurring during the term hereof annual financial statements of
Borrower, prepared in accordance with GAAP consistently applied which shall: (a)
be audited by independent certified public accountants selected by Borrower
which are reasonably acceptable to Agent; (b) be accompanied by a report of such
accountants containing an
25
<PAGE>
opinion reasonably acceptable to Agent; (c) be accompanied by a Compliance
Certificate; (d) be prepared in reasonable detail and in comparative form; and
(e) include a balance sheet, an income statement, a statement of cash flows, a
statement of stockholders' equity, and all notes and schedules relating thereto.
12.2.2 Quarterly Financial Statements. As soon as available but in no event
more than sixty (60) days after the end of each Quarter in Borrower's fiscal
year the following financial statements concerning Borrower's operations,
prepared in accordance with GAAP consistently applied: (a) a balance sheet, (b)
an income statement, (c) a statement of cash flows, (d) a statement of
stockholders' equity, for such Quarter and for the year to date, and (e) such
other quarterly statements as Agent may reasonably request, which quarterly
statements requested under this clause (e) shall include any and all notes and
schedules thereto. Such quarterly financial statements required pursuant to this
Subsection shall be accompanied by a Compliance Certificate.
12.2.3 Additional Information. With reasonable promptness: (a) copies of
all communications which Borrower receives or initiates from or to an Underlying
LOC Borrower and all reports, certificates, and other written materials,
including, without limitation, all financial statements, which Borrower receives
from or on account of an Underlying LOC Borrower; and (b) such additional
financial information or documentation as Agent may reasonably request.
12.2.4 Notice of Default. As soon as the existence of any Event of Default
or Potential Default becomes known to any officer of Borrower, Borrower shall
promptly give Agent written notice of such Event of Default or Potential
Default, the nature and status thereof, and the action being taken or proposed
to be taken with respect thereto.
12.2.5 Notice of Certain Changes. Borrower shall: (a) notify Agent at least
ten (10) Business Days prior to the occurrence of any change in the name or
business form of Borrower; and (b) take all actions necessary or reasonably
requested by Agent in order to maintain the perfected status of Agent's first
lien and security interest (subject only to Permitted Encumbrances and to the
Intercreditor Agreement) in the Collateral.
12.2.6 Notice of Litigation. Borrower shall promptly notify Agent in
writing of all litigation in which Borrower or, to Borrower's knowledge,
Guarantor is a party, and which either: (a) involves an amount of $100,000 or
more, singly or in the aggregate at any time; or (b) could reasonably be
expected to result in a Material Adverse Effect with respect to Borrower or
Guarantor.
12.2.7 Notice of Material Adverse Effect. Promptly after Borrower obtains
knowledge thereof, notice of any matter which has resulted or would result in a
Material Adverse Effect on Borrower or Guarantor.
26
<PAGE>
12.2.8 Notice of Environmental Litigation. Without limiting the provisions
of Subsection 12.2.6 of this Agreement, promptly after Borrower's receipt
thereof, notice of the receipt of all pleadings, orders, complaints,
indictments, or other communication alleging a condition that may require
Borrower to undertake or to contribute to a cleanup or other response under
Environmental Regulations, or which seeks penalties, damages, injunctive relief,
or criminal sanctions related to alleged violations of such laws, or which
claims personal injury or property damage to any person as a result of
environmental factors or conditions or which, if adversely determined, could
have a Material Adverse Effect on Borrower.
12.2.9 Regulatory and Other Notices. Promptly after Borrower's receipt
thereof, copies of any notices or other communications received from: (a) any
governmental authority with respect to any matter or proceeding the effect of
which could reasonably be expected to have a Material Adverse Effect on
Borrower; or (b) from APD.
12.2.10 Adverse Action Regarding Required Licenses. In the event Borrower
learns that any petition, action, investigation, notice of violation or apparent
liability, notice of forfeiture, order to show cause, complaint or proceeding is
pending, or, to the best of Borrower's knowledge, threatened, to seek to revoke,
cancel, suspend, modify, or limit any of the Required Licenses, Borrower shall
provide Agent with prompt written notice thereof and shall take, or cause to be
taken, all reasonable measures to contest such action in good faith.
12.2.11 Default of any Underlying Loan. As soon as the existence of any
event of default or potential default under any Underlying Loan becomes known to
Borrower, Borrower shall promptly give Agent written notice of such event of
default or potential default, the nature and status thereof, and the action
being taken or proposed to be taken with respect thereto.
12.2.12 Annual Attorney's Opinion Regarding Collateral. No later than the
last Business Day of February of each year, an opinion of legal counsel
acceptable to Agent as to the status of (a) Borrower's liens on the assets of
the Underlying LOC Borrowers to secure the Underlying Loans ("Underlying
Liens"); and (b) CoBank's liens on the assets of Borrower to secure the Loan
(and including the collateral assignment to CoBank of the Underlying Loans and
Underlying Liens).
12.3 Eligibility Certificate. Borrower shall maintain its membership base
so that not less than fifty percent (50%) of its equity interest is owned by
Persons engaged in the business of producing vegetables, fruits, or other
agricultural products. Within thirty (30) days of the beginning of each calendar
year, Borrower shall provide Agent with a written certification signed by an
officer thereof stating that Borrower is in compliance with this Section.
12.4 Maintenance of Existence and Qualification. Borrower shall maintain
its corporate existence in good standing under the laws of Delaware. Borrower
will
27
<PAGE>
qualify and remain qualified as a foreign corporation in each jurisdiction in
which such qualification is necessary or desirable in view of its business,
operations and properties.
12.5 Compliance with Legal Requirements and Agreements. Borrower shall: (a)
comply with all laws, rules, regulations and orders applicable to Borrower or
its business; and (b) all agreements, indentures, mortgages, and other
instruments to which it is a party or by which it or any of its property is
bound; provided, however, that the failure of Borrower to comply with this
sentence in any instance not directly involving Agent or a Syndication Party
shall not constitute an Event of Default unless such failure would have a
Material Adverse Effect.
12.6 Compliance with Environmental Laws. Without limiting the provisions of
Section 12.5 of this Agreement, Borrower shall comply in all material respects
with, and take all reasonable steps necessary to cause all persons occupying or
present on any properties owned or leased by Borrower to comply with, all
Environmental Regulations, the failure to comply with which would have a
Material Adverse Effect.
12.7 Taxes. Borrower shall cause to be paid when due all taxes,
assessments, and other governmental charges upon it, its income, its sales, its
properties, and federal and state taxes withheld from its employees' earnings,
unless such taxes, assessments, or other governmental charges shall be contested
in good faith by appropriate actions or legal proceedings and Borrower shall
establish adequate reserves therefor in accordance with GAAP.
12.8 Insurance. Borrower shall keep the Collateral insured at all times by
an insurance carrier or carriers approved by Agent which have an A rating by the
current BEST Key Rating Guide (provided that Florists Mutual Group will be
deemed an approved insurance carrier so long as its BEST Key Rating does not
fall below its rating as of the Closing Date), against all risks covered by a
special form policy (and including flood, earthquake and windstorm coverage) in
the amount of the full replacement cost (other than with respect to motor
vehicles) of the Collateral as well as liability, worker's compensation,
business interruption, boiler and machinery and such other insurance as Agent
may reasonably require, in amounts and with deductibles or maximum payouts
customarily carried by entities in similar lines of business. Borrower shall
also maintain fidelity coverage (including employee dishonesty) on such officers
and employees and in such amounts as Agent shall specify, or in the absence of
any such specification, as customarily carried by corporations engaged in
comparable businesses and comparably situated. Such insurance policies shall
contain such reasonable endorsements as Agent shall from time to time require
and all liability policies shall name Agent as an additional insured as its
interests may appear (and for the benefit of the Syndication Parties). All such
insurance policies shall be endorsed with a mortgagee's or loss payable clause,
as appropriate, in favor of Agent (and for the benefit of the Syndication
Parties). The policy or policies evidencing all insurance referred to in this
Section and receipts for the payment of premiums thereon or certificates of such
insurance satisfactory to Agent shall be delivered to and held by Agent. All
such insurance policies shall contain a provision requiring at least ten (10)
days' notice to Agent prior
28
<PAGE>
to any cancellation for non-payment of premiums and at least forty-five (45)
days' notice to Agent of cancellation for any other reason or of modification or
non-renewal. No later than forty (40) days prior to expiration, Borrower shall
give Agent (a) satisfactory written evidence of renewal of all such policies
with premiums paid, or (b) a written report as to the steps being taken by
Borrower to renew or replace all such policies, provided that notwithstanding
the receipt of such written report, Agent may at any time thereafter give
Borrower written notice to provide Agent with such evidence as described in
clause (a), in which case Borrower must do so within ten (10) days of such
notice. Borrower agrees to pay all premiums on such insurance as they become
due, and will not permit any condition to exist on or with respect to the
Collateral which would wholly or partially invalidate any insurance thereon.
Effective upon the occurrence of an Event of Default, all of Borrower's right,
title and interest in and to all such policies and any unearned premiums paid
thereon are hereby assigned to Agent (for the benefit of the Syndication
Parties) who shall have the right, but not the obligation, to assign the same to
any purchaser of the Collateral at any foreclosure sale. Borrower shall give
immediate written notice to the insurance carrier and Agent of any loss.
Borrower hereby authorizes and empowers Agent upon the occurrence and during the
continuation of an Event of Default, at Agent's option and in Agent's sole
discretion, to act as attorney-in-fact for Borrower to make proof of loss, to
adjust and compromise any claim under insurance policies, to collect and receive
insurance proceeds, and to deduct therefrom Agent's expenses incurred in the
collection of such proceeds, and all insurance policies of Borrower shall
provide that Agent may act as Borrower's attorney-in-fact for such purposes.
12.9 Title to Assets and Maintenance. Borrower shall defend and maintain
title to all its material properties and assets, including the Collateral.
Borrower shall keep its assets, both real and personal, including the
Collateral, in good order and condition consistent with industry practice and
shall make all necessary repairs, replacements and improvements so that its
business may be properly and advantageously conducted.
12.10 Payment of Liabilities. Borrower shall pay all liabilities
(including, without limitation: (a) any indebtedness for borrowed money or for
the deferred purchase price of property or services; (b) any obligations under
leases which have or should have been characterized as capitalized leases, as
determined in accordance with GAAP; and (c) any contingent liabilities, such as
guaranties, for the obligations of others relating to indebtedness for borrowed
money or for the deferred purchase price of property or services or relating to
obligations under leases which have or should have been characterized as
capitalized leases, as determined in accordance with GAAP) as they become due
beyond any period of grace under the instrument creating such liabilities,
unless (with the exception of the Bank Debt) they are contested in good faith by
appropriate actions or legal proceedings, Borrower establishes adequate reserves
therefor in accordance with GAAP, and such contesting will not result in a
Material Adverse Effect.
29
<PAGE>
12.11 Further Assurances; Real Property Security Interests. Borrower shall,
as may be required from time to time by Agent, provide such documents as may be
necessary or desirable in the judgment of Agent to confirm the security interest
in the Collateral granted to Agent for the benefit of the Syndication Parties.
Promptly after the purchase or other acquisition of any fee interest in real
estate having a cost or Fair Market Value of $25,000.00 or more, Borrower shall
provide Agent with written notice of such acquisition and shall grant to Agent
(for the benefit of the Syndication Parties) a first deed of trust or mortgage
on such real estate (subject to liens permitted by Section 13.3 hereof and to
the Intercreditor Agreement), such deed of trust or mortgage to be in form and
substance as reasonably specified by Agent. In connection with the delivery of
any mortgage or deed of trust, Borrower shall, where required under the
guidelines set forth in Subsection 12.1.2 of this Agreement, deliver to Agent a
mortgagee's title policy satisfactory to Agent in such amount as Agent shall
specify, but in no event greater than the value of the real estate, to be
obtained at Borrower's sole cost. In connection with entering into, as lessee,
any lease of an interest in real property which lease calls for a rental payment
equal to or in excess of $25,000.00 per annum, Borrower shall deliver to Agent a
Leasehold Assignment & Consent (naming Agent as assignee for the benefit of the
Syndication Parties), together with such consents or estoppels of lessor as
Agent shall specify.
12.12 Inspection. Permit Agent or its agents, during normal business hours
or at such other times as the parties may agree, to examine Borrower's
properties, books, and records, and to discuss Borrower's affairs, finances,
operations, and accounts with its respective officers, directors, employees, and
independent certified public accountants.
12.13 Required Licenses; Permits; Etc. Borrower shall duly and lawfully
obtain and maintain in full force and effect all Required Licenses.
12.14 ERISA. In the event Borrower adopts, maintains, or becomes obligated
to make payments under, any Borrower Benefit Plan in the future (which Borrower
may not do without the prior written consent of Agent), Borrower shall: (a)
cause Borrower's Benefit Plans to comply in all material respects with the Code
and ERISA, including but not limited to preparing and delivering each material
report, statement or other document required by ERISA and the Code within the
period specified therein and conforming in form and substance to the provisions
thereof; (b) cause any Borrower Benefit Plan that is intended to satisfy the
requirements of Section 401(a) of the Code to satisfy such requirements
including, but not limited to obtaining a favorable determination letter with
respect to each such Borrower Benefit Plan; and (c) prepare and deliver and (d)
administer each Borrower Benefit Plan in all material respects in accordance
with the terms of such plan and with ERISA, the Code, and any other applicable
law, except to the extent any failure to comply with the preceding clauses (a),
(b) or (c) would not have a Material Adverse Effect. Borrower shall take any
actions necessary to terminate its status as a participating employer in any
employee benefit plan (within the meaning of Section 3(3) of ERISA) sponsored by
an other entity. Within ten (10) Business Days after receiving such notice,
Borrower shall furnish to
30
<PAGE>
Agent any notice received by Borrower relating to an assertion of withdrawal
liability imposed by any Multiemployer Plan upon Borrower or Borrower's
controlled group prior to the Closing Date, or relating to any violation of the
provisions of the Code or ERISA asserted by the Department of Labor, the Pension
Benefit Guaranty Corporation or the Department of the Treasury with respect to
any Borrower Benefit Plan that could reasonably be expected to have a Material
Adverse Effect.
12.15 Operations and Members. Borrower shall: (a) duly and lawfully obtain
and maintain its business and operations for the mutual benefit of the members
thereof; (b) furnish services, including financing, to its members; (c) limit
its members to farmers, ranchers, or producers or harvesters of aquatic
products; (d) either (i) allow no member more than 1 vote, or (ii) refrain from
paying dividends on stock or membership capital in excess of 10% per annum or
such lesser amount as is permitted by applicable state statutes; (e) prohibit
any transfer or acquisition of an interest in Borrower if it would result in
less than 80% of the control of Borrower being held by farmers, producers or
harvesters of aquatic products; and (f) conduct its business so that
transactions with or for its members are at least equal in value to its
transactions with nonmembers (other than the United States or agencies thereof).
ARTICLE 13. NEGATIVE COVENANTS
From and after the date of this Agreement until the Bank Debt is
indefeasibly paid in full and the Syndication Parties have no obligation to
disburse Loan Proceeds, Borrower agrees that it will observe and comply with the
following covenants:
13.1 Borrowing. Borrower shall not create, incur, assume or permit to
exist: (a) any indebtedness for borrowed money or for the deferred purchase
price of property or services; (b) any contingent liabilities, such as
guarantees; or (c) any obligations under leases which have or should have been
characterized as capital leases, as determined in accordance with GAAP, except
for: (u) indebtedness owing under the Loan Documents, (v) indebtedness under the
Construction Facility and the Term Facility, (w) leases and purchase money
financing of property used in the ordinary course of Borrower's business the
aggregate amount of which does not exceed $50,000.00 at any one time; (x) the
indebtedness outstanding on the date hereof and which is described on Exhibit
13.1 hereto; ; and (y) indebtedness constituting any refinancing or refunding of
indebtedness described in subparagraphs (u), (v), (w), and (x) of this Section
13.1, provided that the principal amount thereof does not increase as a result
of any such refinancing or refunding from the balance owing on the date hereof
or on the date of such refinancing or refunding, whichever is lower.
13.2 No Other Businesses. Borrower shall not transact or engage in any
business other than the making of loans to its members.
31
<PAGE>
13.3 Liens. Borrower will not create, incur, assume or suffer to exist any
mortgage, pledge, lien, charge or other encumbrance on, or any security interest
in, any of the Collateral, except:
(a) the security interests, mortgages, pledges, liens, or other charges or
encumbrances resulting from the Loan Documents and arising out of the
Construction Facility and the Term Facility;
(b) liens for taxes or other governmental charges which are not due or
remain payable without penalty, or are being contested in good faith by
appropriate actions or proceedings; provided that such reserves or other
appropriate provisions, if any, as shall be required by GAAP, shall have been
made for such taxes or other governmental charges;
(c) deposits or pledges to secure workmen's compensation, unemployment
insurance, old age benefits or other social security obligations or in
connection with or to secure the performance of bids, tenders, trade contracts
or leases or to secure statutory obligations or surety or appeal bonds or other
pledges or deposits of like nature and all in the ordinary course of business;
(d) mechanics', carriers', workmen's, repairmen's or other like liens
arising in the ordinary course of business in respect of obligations not yet due
or which are being contested in good faith and by appropriate proceedings;
(e) easements, rights-of-way, zoning restrictions and other similar matters
incidental to the ownership of property which do not in the aggregate materially
detract from the value of such property or assets or materially impair their use
in the operation of the business of Borrower; and
(f) purchase money security interests in property; provided that: (i) such
property is used in the ordinary course of Borrower's business, provided that
such security interests shall attach only to the property so purchased, (ii) the
amount of the purchase money financing so secured does not exceed the amount
permitted under Section 13.1, and (iii) the purchase occurred subsequent to the
Closing Date.
13.4 Sale of Assets. Borrower will not sell, convey, assign, lease or
otherwise transfer or dispose of, voluntarily, by operation of law or otherwise,
any of the Collateral to any Person, except that: (a) Borrower may dispose of
equipment which is obsolete or no longer used or useful by Borrower in its
business so long as (i) no Event of Default has occurred and is continuing, and
(ii) the transfer is made in an arms length transaction; and (b) Borrower may
dispose of worn-out equipment so long as (i) if an Event of Default has occurred
and is continuing, any proceeds are paid to Agent (for the benefit of the
Syndication Parties) and (ii) such sales do not involve equipment having an
aggregate fair market value in excess of $50,000.00 for all such equipment
disposed of in any calendar year.
32
<PAGE>
13.5 Liabilities of Others. Borrower will not assume, guarantee, endorse or
otherwise become directly or contingently liable in connection with any
obligation of any other Person.
13.6 Payments on Indebtedness. Borrower shall not make any principal
payment on any indebtedness except: (a) indebtedness owing hereunder, under the
Credit Agreement (Term Loan Funding), and under the Credit Agreement
(Construction Loan Funding); and (b) so long as no Event of Default or Potential
Default shall exist, other indebtedness permitted by Section 13.1 of this
Agreement.
13.7 Merger; Acquisitions; Etc. Borrower shall not merge or consolidate
with any entity, or acquire all or substantially all of the assets of any person
or entity, or form or create any new subsidiary or affiliate, or commence
operations under any other name, organization, or entity, including any joint
venture.
13.8 Loans, Advances and Investments. Except as provided in Section 13.13
hereof and except for the purchase of CoBank Equity Interests, Borrower will not
make or permit to remain outstanding any loan or advance to, or own, purchase or
acquire any stock, obligations or securities of, or any other interest in, or
make any capital contribution to, any Person, except that Borrower may own,
purchase or acquire:
(a) commercial paper maturing not in excess of one year from the date of
acquisition and rated P1 by Moody's Investors Service, Inc. or A1 by Standard &
Poor's Corporation on the date of acquisition;
(b) certificates of deposit in North American commercial banks rated C or
better by Keefe, Bruyette & Woods, Inc. or 3 or better by Cates Consulting
Analysts, maturing not in excess of one year from the date of acquisition;
(c) obligations of the United States government or any agency thereof, the
obligations of which are guaranteed by the United States government, maturing,
in each case, not in excess of one year from the date of acquisition; and
(d) repurchase agreements of any bank or trust company incorporated under
the laws of the United States of America or any state thereof and fully secured
by a pledge of obligations issued or fully and unconditionally guaranteed by the
United States government.
13.9 Transactions With Related Parties. Borrower shall not purchase,
acquire, or sell any equipment, other personal property, real property or
services from or to any affiliate, except in the ordinary course of Borrower's
business and upon fair and reasonable terms no less favorable than would be
obtained by Borrower in a comparable arm's-length transaction with an unrelated
Person.
13.10 ERISA. Borrower shall not: (a) adopt, maintain, or become obligated
to contribute to any Borrower Benefit Plan without the prior written consent of
Agent; (b) engage in or permit any transaction which could result in a
"prohibited transaction" (as
33
<PAGE>
such term is defined in Section 406 of ERISA) or in the imposition of an excise
tax pursuant to Section 4975 of the Code; (c) engage in or permit any
transaction or other event which could result in a "reportable event" as such
term is defined in Section 4043 of ERISA for any Borrower Pension Plan; (d) fail
to make full payment when due of all amounts which, under the provisions of any
Borrower Benefit Plan, Borrower is required to pay as contributions thereto; (e)
permit to exist any "accumulated funding deficiency" (as such term is defined in
Section 302 of ERISA) in excess of $25,000.00, whether or not waived, with
respect to any Borrower Pension Plan; (f) fail to make any payments to any
"multiemployer plan" that Borrower may be required to make under any agreement
relating to such "multiemployer plan" or any law pertaining thereto; or (g)
terminate any Borrower Pension Plan in a manner which could result in the
imposition of a lien on any property of Borrower pursuant to Section 4068 of
ERISA. Borrower shall not terminate any Borrower Pension Plan so as to result in
any liability to the Pension Benefit Guaranty Corporation. As used in this
Section, all terms enclosed in quotation marks shall have the meanings set forth
in ERISA. Borrower's failure to comply with any of the foregoing provisions of
this Section shall not constitute a breach of this Agreement or an Event of
Default unless such failure has a Material Adverse Effect.
13.11 Payment of Dividends. Borrower shall not, directly or indirectly,
declare or pay any dividends on account of any shares of any class of its
capital stock now or hereafter outstanding, or set aside or otherwise deposit or
invest any sums for such purpose, or redeem, retire, defease, purchase or
otherwise acquire any shares of any class of its capital stock (or set aside or
otherwise deposit or invest any sums for such purpose) for any consideration
other than common stock or apply or set apart any sum, or make any other
distribution (by reduction or capital or otherwise) in respect of any such
shares or retire capital equities or other written notices of allocation, or
make any other distribution or allocation of its earnings, surplus or assets to
any holder of stock, allocated equities or other written notices of allocation,
or agree to do any of the foregoing; provided that Borrower may distribute
patronage-sourced earnings annually in the form of cash and qualified written
notices of allocation, so long as the cash portion is the minimum amount
required to qualify the distribution as a deductible patronage distribution for
federal income tax purposes, and such written notices constitute equity and not
debt.
13.12 Change in Fiscal Year. Borrower shall not change its fiscal year from
a year ending on December 31.
13.13 Extension of Credit. Notwithstanding the prohibitions of Section 13.8
hereof, Borrower may make extensions of credit as follows:
(a) Underlying Loans approved by Agent for funding hereunder and which are
included in the Collateral;
34
<PAGE>
(b) Loans approved by Agent for funding under the Credit Agreement (Term
Loan Funding); and
(c) Loans approved by Agent for funding under the Credit Agreement
(Construction Loan Funding).
13.14 Amendment/Waiver of Provisions of Underlying Loan Documents. Borrower
shall not, without the prior written consent of Agent, amend, or agree to amend,
or waive any material provision of, or give its consent with respect to any
material matter under, any of the Underlying Loan Documents after originals or
copies thereof have been delivered to Agent.
ARTICLE 14. INDEMNIFICATION
14.1 General; Stamp Taxes; Intangibles Tax. Borrower agrees to indemnify
and hold Agent and each Syndication Party and their directors, officers,
employees, agents, professional advisers and representatives ("Indemnified
Parties") harmless from and against any and all claims, damages, losses,
liabilities, costs or expenses whatsoever which Agent or any other Indemnified
Party may incur (or which may be claimed against any such Indemnified Party by
any Person), including attorneys' fees incurred by any Indemnified Party,
arising out of or resulting from: (a) the material inaccuracy of any
representation or warranty of Borrower or Guarantor in this Agreement or the
other Loan Documents; (b) the material failure of Borrower or Guarantor to
perform or comply with any covenant or obligation of Borrower or Guarantor under
this Agreement or the other Loan Documents; or (c) the exercise by Agent of any
right or remedy set forth in this Agreement or the other Loan Documents,
provided that Borrower shall have no obligation to indemnify any Indemnified
Party against claims, damages, losses, liabilities, costs or expenses to the
extent that a court of competent jurisdiction renders a final non-appealable
determination that the foregoing are solely the result of the willful misconduct
or gross negligence of such Indemnified Party. In addition, Borrower agrees to
indemnify and hold the Indemnified Parties harmless from and against any and all
claims, damages, losses, liabilities, costs or expenses whatsoever which Agent
or any other Indemnified Party may incur (or which may be claimed against any
such Indemnified Party by any Person), including attorneys' fees incurred by any
Indemnified Party, arising out of or resulting from the imposition or nonpayment
by Borrower of any stamp tax, intangibles tax, or similar tax imposed by any
state, including any amounts owing by virtue of the assertion that the property
valuation used to calculate any such tax was understated. Borrower shall have
the right to assume the defense of any claim as would give rise to Borrower's
indemnification obligation under this Section with counsel of Borrower's
choosing so long as such defense is being diligently and properly conducted and
Borrower shall establish to the Indemnified Party's satisfaction that the amount
of such claims are not, and will not be, material in comparison to the liquid
and unrestricted assets of Borrower available to respond to any award which may
be granted on account of such claim. So long as the conditions of the preceding
sentence are met, Indemnified Party shall have no further right to reimbursement
of attorney's fees incurred thereafter. The obligation to
35
<PAGE>
indemnify set forth in this Section shall survive the termination of this
Agreement and other covenants.
14.2 Indemnification Relating to Hazardous Substances. Borrower shall not
locate, produce, treat, transport, incorporate, discharge, emit, release,
deposit or dispose of any Hazardous Substance in, upon, under, over or from any
property owned or held by Borrower, except in accordance with all Environmental
Regulations; Borrower shall not permit any Hazardous Substance to be located,
produced, treated, transported, incorporated, discharged, emitted, released,
deposited, disposed of or to escape in, upon, under, over or from any property
owned or held by Borrower, except in accordance with Environmental Regulations;
and Borrower shall comply with all Environmental Regulations which are
applicable to such property. If Agent reasonably believes that an Environmental
Regulation has been violated by Borrower's activities upon property owned or
held by Borrower, and if Agent so requests, Borrower shall have prepared an
environmental review, audit, assessment and/or report relating to the subject
property, at Borrower's sole cost and expense, by an engineer or other
environmental expert acceptable to Agent. If, however, the environmental review,
audit, assessment and/or report reveals that no Environmental Regulation has
been violated, Agent shall reimburse Borrower for the costs and expenses of such
engineer or other environmental expert in completing such audit or report.
Borrower shall indemnify the Indemnified Parties against, and shall reimburse
the Indemnified Parties for, any and all claims, demands, judgments, penalties,
liabilities, costs, damages and expenses, including court costs and attorneys'
fees incurred by the Indemnified Parties (prior to trial, at trial and on
appeal) in any action against or involving the Indemnified Parties, resulting
from any breach of the foregoing covenants, or from the discovery of any
Hazardous Substance in, upon, under or over, or emanating from, such property,
it being the intent of Borrower and the Indemnified Parties that the Indemnified
Parties shall have no liability or responsibility for damage or injury to human
health, the environmental or natural resources caused by, for abatement and/or
clean-up of, or otherwise with respect to, Hazardous Substances by virtue of the
interest of Agent, or any Syndication Party, in the property created by any
documents securing Bank Debt (including without limitation the Loan Documents)
or as the result of Agent or any Syndication Party exercising any of its rights
or remedies with respect thereto, including but not limited to becoming the
owner thereof by foreclosure or conveyance in lieu of foreclosure. The foregoing
covenants of this Section shall be deemed continuing covenants for the benefit
of the Indemnified Parties, and any successors and assigns of the Indemnified
Parties, including but not limited to the holder of any certificate of purchase,
any transferee of the title of Agent or any Syndication Party or any subsequent
owner of the property, and shall survive the satisfaction or release of any
lien, any foreclosure of any lien and/or any acquisition of title to the
property or any part thereof by Agent or any Syndication Party, or anyone
claiming by, through or under Agent or any Syndication Party or Borrower by deed
in lieu of foreclosure or otherwise. Any amounts covered by the foregoing
indemnification shall bear interest from the date incurred at the Default
Interest Rate, shall be payable on demand, and shall be secured by the Security
36
<PAGE>
Documents. The indemnification and covenants of this Section shall survive the
termination of this Agreement and other covenants.
ARTICLE 15. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
15.1 Events of Default. The occurrence of any of the following events (each
an "Event of Default") shall, at the option of Agent, make the entire Bank Debt,
including the Notes, immediately due and payable (provided, that in the case of
an Event of Default under Subsection 15.1(f) all amounts owing under the Notes
and the other Loan Documents shall automatically and immediately become due and
payable without any action by or on behalf of Agent), and Agent may exercise all
rights and remedies for the collection of any amounts outstanding hereunder and
take whatever action it deems necessary to secure itself, all without notice of
default, presentment or demand for payment, protest or notice of nonpayment or
dishonor, or other notices or demands of any kind or character:
(a) Failure of Borrower to pay within five (5) days of the date when due,
whether by acceleration or otherwise, any of the Bank Debt in accordance with
this Agreement or the other Loan Documents.
(b) Any representation or warranty set forth in any Loan Document, any
Advance Request, or in the Guaranty or Guarantor Security Documents, or in
connection with any transaction contemplated by any such document, shall prove
in any material respect to have been false or misleading when made by Borrower
or Guarantor.
(c) Any default by Borrower or Guarantor in the performance or compliance
with the covenants, promises, conditions or provisions of Sections 12.3, 12.8,
12.12, 13.1, 13.3, 13.4, 13.5, 13.7, 13.11, 13.12, or 13.14 of this Agreement,
or Sections 9.1, 9.3, 9.4, 9.5, 9.6, 9.8, 9.9, or 9.13 of the Guaranty.
(d) Any breach of the covenants set forth in Sections 12.2, 12.9, 12.10
(except as provided in Section 15.1(e)), 12.13, 12.14, 12.15, 13.6, 13.8, 13.9,
or 13.10 of this Agreement or Sections 9.2, 9.7, 9.10, or 9.11 of the Guaranty,
and such failure continues for five (5) days after Borrower learns of such
failure to comply, whether by Borrower's own discovery or through notice from
Agent.
(e) The failure of Borrower or Guarantor to pay when due, or failure to
perform or observe any other obligation or condition with respect to any of the
following obligations to any Person, beyond any period of grace under the
instrument creating such obligation: (i) any indebtedness for borrowed money or
for the deferred purchase price of property or services, (ii) any obligations
under leases which have or should have been characterized as capitalized leases,
as determined in accordance with GAAP, or (iii) any contingent liabilities, such
as guaranties, for the obligations of others relating to indebtedness for
borrowed money or for the deferred purchase price of property or services or
relating to obligations under leases which have or should have been
characterized as capitalized leases, as determined in accordance with GAAP;
37
<PAGE>
provided that no such failure will be deemed to be an Event of Default hereunder
unless and until the aggregate amount owing under obligations with respect to
which such failures have occurred and are continuing is at least $50,000.00 with
respect to Borrower, or $50,000.00 with respect to Guarantor.
(f) Borrower or Guarantor applies for or consents to the appointment of a
trustee or receiver for any part of its properties; any bankruptcy,
reorganization, debt arrangement, dissolution or liquidation proceeding is
commenced or consented to by Borrower or Guarantor; or any application for
appointment of a receiver or a trustee, or any proceeding for bankruptcy,
reorganization, debt management or liquidation is filed for or commenced against
Borrower or Guarantor, and is not withdrawn or dismissed within sixty (60) days
thereafter.
(g) Failure of Borrower or Guarantor to comply with any other provision of
this Agreement or the other Loan Documents not constituting an Event of Default
under any of the preceding provisions of this Section 15.1, and such failure
continues for thirty (30) days after Borrower or Guarantor learns of such
failure to comply, whether by Borrower's or Guarantor's own discovery or through
notice from Agent.
(h) The Guaranty or the Guarantor Security Documents shall, at any time
after their execution, cease to be in full force and effect, or shall be revoked
or declared null and void, or the validity or enforceability thereof shall be
contested by Guarantor, or Guarantor shall deny any further liability or
obligation thereunder, or shall be in default or fail to perform its obligations
thereunder, or any covenant or agreement set forth therein shall be breached, or
Guarantor should breach or be in default under the terms of any of the Guarantor
Security Documents.
(i) The occurrence of an event of default, unless and until a written
waiver thereof has been granted by the Agent thereunder, under the following
agreements of even date herewith and executed by and between Borrower, as
borrower thereunder, CoBank as agent and (alone, or with any other Person) as a
syndication party thereunder: Credit Agreement (Term Loan Funding), and Credit
Agreement (Construction Loan Funding).
(j) The entry of one or more judgments in an aggregate amount in excess of
$50,000,000.00 against Borrower and/or in excess of $100,000.00 against
Guarantor, in either case not stayed, discharged or paid within thirty (30) days
after entry.
(k) The occurrence of an event of default under an Underlying Loan.
15.2 No Advances. The Syndication Parties shall have no obligation to
disburse Loan Proceeds if a Potential Default or an Event of Default shall occur
and be continuing.
15.3 Rights and Remedies. In addition to the remedies set forth in Section
15.1 and 15.2 of this Agreement, upon the occurrence of an Event of Default,
Agent shall, subject to the provisions of Section 15.4 hereof, be entitled to
exercise all the
38
<PAGE>
rights and remedies provided in the Security Documents and other Loan Documents
and by any applicable law, including, without limitation, the Uniform Commercial
Code as enacted in the state of Colorado or the state where the Collateral is
located at such time, whichever provides Agent with greater rights. Each and
every right or remedy granted to Agent pursuant to this Agreement and the other
Loan Documents, or allowed Agent by law or equity, shall be cumulative. Failure
or delay on the part of Agent to exercise any such right or remedy shall not
operate as a waiver thereof. Any single or partial exercise by Agent of any such
right or remedy shall not preclude any future exercise thereof or the exercise
of any other right or remedy.
15.4 Limitation on Rights and Remedies. Notwithstanding the provisions of
Section 15.3 hereof, when the sole Event of Default is an Event of Default
caused by Section 15.1(k) hereof, Agent will, for a period of time designated by
Agent in its sole discretion, refrain from accelerating the Loan if Borrower
promptly (a) proposes, and diligently pursues, a course of action (for example,
for collection, restructuring, or assignment) with respect to such Underlying
Loan to which course of action the Super Majority give Agent their written
approval in their sole discretion, (b) ceases making advances thereunder, and
(c) charges interest on such Underlying Loan at the default rate specified in
the relevant Underlying Loan Documents).
ARTICLE 16. AGENCY AGREEMENT
16.1 Funding of Syndication Interest. (a) Each Syndication Party, severally
but not jointly, hereby irrevocably agrees to fund its Syndication Share of all
Advances from time to time pursuant to the terms and conditions contained
herein; provided that no Syndication Party shall be required to fund an Advance
in an amount such that the aggregate principal balance owing to such Syndication
Party after such funding would be in excess of such Syndication Party's Maximum
Syndication Amount. Each Syndication Party's interest in the Advances
("Syndication Interest") hereunder shall be without recourse to Agent or any
other Syndication Party and shall not be construed as a loan from any
Syndication Party to Agent or any other Syndication Party. Each Syndication
Party acknowledges that the Loan is a revolving credit until the Maturity Date,
and that, as a result, the amount of its Syndication Interest will fluctuate as
Borrower repays and reborrows amounts under the Loan.
16.2 Syndication Parties' Obligations to Remit Funds. Each Syndication
Party agrees to remit the amount of each Advance requested by Borrower as set
forth in each Notice of Loan Advance ("Advance Payment") as such Notice of Loan
Advance may be sent, in the manner provided in Section 16.3 hereof, from time to
time for Advances to be made under the Loan on or prior to the Maturity Date, or
draws made or to be made on a Letter of Credit on or prior to July 31, 2000.
16.3 Notice and Timing of Each Advance Payment. On the Business Day on
which Agent approves an Advance Request for funding, Agent shall provide each
Syndication Party with a notice in substantially the form attached hereto as
Exhibit 16.3 ("Notice of Loan Advance"), indicating, among other things, the
amount ("Loan
39
<PAGE>
Advance Amount") and Advance Date of the requested Advance and the amount of the
Syndication Party's Advance Payment. Each Syndication Party shall remit its
Advance Payment directly to Agent, on the date specified in the Notice of Loan
Advance which shall not be later than the Advance Date ("Syndication Party
Advance Date").
16.4 LC Notice of Advance. Prior to, or promptly after, honoring a draw
under any Letter of Credit, Agent shall provide each Syndication Party with a
notice in substantially the form attached hereto as Exhibit 16.4 ("LC Notice of
Advance"), indicating, among other things, the amount of the draw, the Letter of
Credit number under which the draw is being made, and the amount of the
Syndication Party's Advance Payment to be made on account of such draw. (The
Notice of Loan Advance and the LC Notice of Advance shall be referred to
collectively as "Notice of Advance," and the Loan Advance Amount and the LC
Advance Amount shall be referred to collectively as the "Advance Amount".) Each
Syndication Party shall remit such payment directly to Agent, on the date
specified in the LC Notice of Advance ("Syndication Party LC Payment Date") (the
Syndication Party Loan Payment Date and the Syndication Party LC Payment Date
shall be referred to collectively as the "Syndication Party Payment Date").
16.5 Syndication Party's Failure to Remit Funds. If a Syndication Party
("Delinquent Syndication Party") fails to remit its Advance Payment in full by
11:00 a.m. Central Time on the Syndication Party Advance Date (the unpaid amount
of any such payment being hereinafter referred to as the "Delinquent Amount"),
in addition to any other remedies available hereunder, any other Syndication
Party or Syndication Parties may, but shall not be obligated to, pay the
Delinquent Amount (the Syndication Party or Syndication Parties which advance
such Delinquent Amount are referred to as the "Contributing Syndication
Parties"), in which case (a) the Delinquent Amount which any Contributing
Syndication Party pays shall not count as an Advance Payment against the Maximum
Syndication Amount of the Contributing Syndication Party, and (b) the Delinquent
Syndication Party shall be obligated to pay to Agent, for the account of the
Contributing Syndication Parties, interest on the Delinquent Amount at a rate of
interest equal to the rate of interest which Borrower is obligated to pay on the
Delinquent Amount ("Delinquency Interest") until the Delinquent Syndication
Party remits the full Delinquent Amount and remits all Delinquency Interest to
Agent, which will distribute such payments to the Contributing Syndication
Parties (pro rata based on the amount of the Delinquent Amount which each of
them (if more than one) paid) on the same Business Day as such payments are
received by Agent if received no later than 11:00 a.m. Central time or the next
Business Day if received by Agent thereafter. In addition, the Contributing
Syndication Parties shall be entitled to share, on the same pro rata basis, and
Agent shall pay over to them, for application against Delinquency Interest and
the Delinquent Amount, the Delinquent Syndication Party's Payment Distribution
and any fee distributions made under Section 16.11 hereof until the Delinquent
Amount and all Delinquency Interest have been paid in full. For voting purposes
the Agent shall readjust the Syndication Shares of such Delinquent Syndication
Party and the Contributing Syndication Parties from time to time first to
reflect the advance of the Delinquent Amount by the Contributing Syndication
Parties,
40
<PAGE>
and then to reflect the full or partial reimbursement to the Contributing
Syndication Parties of such Delinquent Amount. In the event no Syndication Party
elects to pay the Delinquent Amount with respect to any Advance Amount but
Borrower elects to receive such Advance Amount (less the Delinquent Amount), the
proportionate share of Payment Distributions to which the Delinquent Syndication
Party is entitled and its proportionate voting rights shall be adjusted to
reflect its failure to pay the Delinquent Amount. As between the Delinquent
Syndication Party and the Contributing Syndication Parties, the Delinquent
Syndication Party's interest in its Note shall be deemed to have been partially
assigned to the Contributing Syndication Parties in the amount of the Delinquent
Amount and Delinquency Interest owing to the Contributing Syndication Parties
from time to time.
16.6 Agency Appointment. Each of the Syndication Parties hereby designates
and appoints Agent to act as agent to service and collect the Loan and its
respective Note and to take such action on behalf of such Syndication Party with
respect to the Loan and such Note, and to execute such powers and to perform
such duties, as specifically delegated or required herein, as well as to
exercise such powers and to perform such duties as are reasonably incident
thereto, and to receive and benefit from such fees and indemnifications as are
provided for or set forth herein, until such time as a successor is appointed
and qualified to act as Agent.
16.7 Power and Authority of Agent. Without limiting the generality of the
power and authority vested in Agent pursuant to Section 16.6 hereof, the power
and authority vested in Agent includes, but is not limited to, the following:
16.7.1 Advice. To solicit the advice and assistance of each of the
Syndication Parties concerning the administration of the Loan and the exercise
by Agent of its various rights, remedies, powers, and discretions with respect
thereto.
16.7.2 Documents. To execute, seal, acknowledge, and deliver as Agent, all
such instruments as may be appropriate in connection with the administration of
the Loan and the exercise by Agent of its various rights with respect thereto.
16.7.3 Proceedings. To initiate, prosecute, defend, and to participate in,
actions and proceedings in its name as Agent for the ratable benefit of the
Syndication Parties.
16.7.4 Retain Professionals. To retain attorneys, accountants, and other
professionals to provide advice and professional services to Agent, with their
fees and expenses reimbursable to Agent by Syndication Parties pursuant to
Section 16.19 hereof.
16.7.5 Incidental Powers. To exercise powers reasonably incident to Agent's
discharge of its duties enumerated in Section 16.7 hereof.
41
<PAGE>
16.7.6 Letter of Credit Purposes. To determine the purposes other than
those set forth in Section 2.2 of this Agreement for which a Letter of Credit
may be issued.
16.8 Duties of Agent. The duties of Agent hereunder shall consist of the
following:
16.8.1 Possession of Documents. To safekeep one original of each of the
Loan Documents other than the Notes (which will be in the possession of the
Syndication Party named as payee therein).
16.8.2 Distribute Payments. To receive and distribute to the Syndication
Parties payments made by Borrower pursuant to the Loan Documents.
16.8.3 Collections. Subject to the provisions of Section 16.9 hereof, to,
on behalf of and for the ratable benefit of all Syndication Parties, in
accordance with customary banking practices, exercise all rights, remedies,
powers, privileges, and discretion to which Agent is entitled to collect amounts
owing under the Loan and the Notes.
16.9 Agent's Resignation or Removal. Agent may resign at any time by giving
at least sixty (60) days' prior written notice of its intention to do so to each
of the Syndication Parties. After the receipt of such notice, the Syndication
Parties holding in the aggregate at least 66 2/3% of the Syndication Shares of
the Loan ("Majority Lenders") shall appoint a successor ("Successor Agent"). If
(a) no Successor Agent shall have been so appointed which is either (i) a
Syndication Party, or (ii) if not a Syndication Party, which is a Person
approved by Borrower, or (b) if such Successor Agent has not accepted such
appointment, in either case within forty-five (45) days after the retiring
Agent's giving of such notice of resignation, then the retiring Agent may
appoint a Successor Agent which shall be a bank or a trust company organized
under the laws of the United States of America or any state thereof and having a
combined capital, surplus and undivided profit of at least $250,000,000. Any
Agent may be removed upon the written demand of the Required Lenders, which
demand shall also appoint a Successor Agent. Upon the appointment of a new Agent
hereunder, the term "Agent" shall for all purposes of this Agreement thereafter
mean such successor. After any retiring Agent's resignation hereunder as Agent,
or the removal hereunder of any Agent, the provisions of this Agreement shall
continue to inure to the benefit of such Agent as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement.
16.10 Consent Required for Certain Actions. Except as provided in Section
15.4 hereof, Agent may not take any of the following actions (nor may the
Syndication Parties take the action described in Subsection 16.10.1(c)) with
respect to, or under, the Loan Documents without the prior written consent,
given after notification by Agent of its intention to take any such action (or
notification by such Syndication Parties as are
42
<PAGE>
proposing the action described in Subsection 16.10.1(c) of their intention to do
so), of Syndication Parties holding in the aggregate, at the time of such
notification:
16.10.1 Unanimous. One hundred percent (100%) of the Syndication Shares
before:
(a) Agreeing to an increase in the Aggregate Commitment Amount, the
Construction Commitment Amount, the LC Commitment Amount or an extension of the
Maturity Date;
(b) Agreeing to a reduction in the amount, or to a delay in the due date,
of any payment by Borrower of interest, principal, or fees; provided, however,
this restriction shall not apply to a delay in payment granted by Agent in the
ordinary course of administration of the Loan and the exercise of reasonable
judgment (so long as such payment delay does not exceed five (5) days); or
(c) Reducing the voting rights percentage set forth in this Subsection
16.10.1; or
(d) Releasing the line on any of the Collateral except in connection with
the full payment of an Underlying Loan.
16.10.2 Super Majority . A sufficient interest to constitute a Super
Majority before:
(a) Consenting to any action, amendment, or granting any waiver, not
covered in Subsection 16.9.1;
(b) Agreeing to amend Article 16 of this Agreement; or
(c) Determining the purposes other than those set forth in Section 2.2 of
this Agreement for which a Letter of Credit may be issued.
If no written consent or denial is received from a Syndication Party within five
(5) Business Days after written notice of any proposed action as described in
this Section is delivered to such Syndication Party by Agent, such Syndication
Party shall be conclusively deemed to have consented thereto for the purposes of
this Section.
16.11 Distribution of Principal and Interest. Agent will receive and accept
all payments (including prepayments) of principal and interest made by Borrower
on the Loan and the Notes and will hold all such payments in trust for the
benefit of all present and future Syndication Parties, and, if requested in
writing by the Majority Lenders, in an account segregated from Agent's other
funds and accounts ("Payment Account"). After the receipt by Agent of any
payment representing interest or principal on the Loan, Agent shall remit to
each Syndication Party an amount equal to such payment, multiplied by the
Syndication Party's Syndication Share ("Payment Distribution") no later than the
same Business Day as such payment is received by Agent if received no
43
<PAGE>
later than 11:00 a.m. Central Time or the next Business Day if received by Agent
thereafter. Any Syndication Party's rights to its Payment Distribution shall be
subject to the rights of any Contributing Syndication Parties to such amounts as
set forth in Section 16.5.hereof.
16.12 Distribution of Certain Fees and Amounts. Agent shall (a) receive and
hold in trust for the benefit of all present and future Syndication Parties, in
the Payment Account and segregated from Agent's other funds and accounts and (b)
shall remit to the Syndication Parties, as indicated, the fees and other amounts
described below:
16.12.1 LOC Commitment Fee. The quarterly LOC Commitment Fee paid by
Borrower to Agent in connection with the Loan shall be distributed to
Syndication Parties in accordance with their respective Syndication Shares no
later than the same Business Day that payment of such fee is received by Agent,
if received no later than 11:00 a.m. Central Time, or the next Business Day if
received by Agent thereafter.
16.12.2 Letter of Credit Availability Fee. The Letter of Credit
Availability Fee paid by Borrower to Agent at the time of issuance and renewal
of each Letter of Credit.
16.12.3 Funding Losses. The amount of any Funding Losses paid by Borrower
to Agent in connection with a prepayment of any portion of a Fixed Loan shall be
distributed to the Syndication Parties in accordance with their respective
Syndication Shares no later than the same Business Day that payment of such
Funding Losses is received by Agent, if received no later than 11:00 Central
time, or the next Business Day if received by Agent thereafter.
16.13 Possession of Loan Documents. The Loan Documents (other than the
Notes) shall be held by Agent in its name, for the ratable benefit of itself and
the other Syndication Parties without preference or priority.
16.14 Collateral Application. The Syndication Parties shall have no
interest in any other loans made to Borrower by any other Syndication Party
other than the Loan, or in any property taken as security for any other loan or
loans made to Borrower by any other Syndication Party, or in any property now or
hereinafter in the possession or control of any other Syndication Party, which
may be or become security for the Loan solely by reason of the provisions of a
security instrument that would cause such security instrument and the property
covered thereby to secure generally all indebtedness owing to such other
Syndication Party. Notwithstanding the foregoing, to the extent such other
Syndication Party applies such funds or the proceeds of such property to
reduction of the Loan, such other Syndication Party shall share such funds or
proceeds with all Syndication Parties according to their respective Syndication
Shares. In the event that any Syndication Party shall obtain payment, whether
partial or full, from any source in respect of the Loan, including without
limitation payment by reason of the exercise of a right of offset, banker's
lien, general lien, or counterclaim, reducing
44
<PAGE>
such Syndication Party's outstanding balance in the Loan to below its
Syndication Share, such Syndication Party will promptly make such adjustments
(which may include payment in cash or the purchase of further syndications or
participations in the Loan) to the end that such excess payment shall be shared
with all other Syndication Parties in accordance with their respective
Syndication Shares.
16.15 Amounts Required to be Returned. If Agent makes any payment to a
Syndication Party in anticipation of the receipt of final funds from Borrower,
and such funds are not received from Borrower, or if excess funds are paid by
Agent to any Syndication Party as the result of a miscalculation by Agent, then
Syndication Party shall, on demand of Agent, forthwith return to Agent any such
amounts, plus interest thereon (from the day such amounts were transferred by
Agent to the Syndication Party to, but not including, the day such amounts are
returned by Syndication Party) at a rate per annum equal to the Federal Funds
Rate in effect on the date of such demand. If Agent is required at any time to
return to Borrower or a trustee, receiver, liquidator, custodian, or similar
official any portion of the payments made by Borrower to Agent, whether pursuant
to any bankruptcy or insolvency law or otherwise, then Syndication Party shall,
on demand of Agent, forthwith return to Agent any such payments transferred to
Syndication Party by Agent but without interest or penalty (unless Agent is
required to pay interest or penalty on such amounts to the person recovering
such payments).
16.16 Reports and Information to Syndication Parties. Agent shall use
reasonable efforts to provide to Syndication Parties, as soon as practicable
after actual knowledge thereof is acquired by an officer thereof primarily
responsible for Agent's duties as such with respect to the Loan or primarily
responsible for the credit relationship between Agent and Borrower: (a) notice
of the existence of any Event of Default or Potential Default under the Loan
Documents, and (b) any material factual information which has a material adverse
effect on the creditworthiness of Borrower and Borrower hereby authorizes such
disclosure by Agent to the Syndication Parties. Failure of Agent to provide the
information referred to in this Section shall not result in any liability upon,
or right to make a claim against, Agent except where a court of competent
jurisdiction renders a final non-appealable determination that such failure is a
result of the willful misconduct or gross negligence of Agent. Syndication
Parties acknowledge and agree that all information and reports received pursuant
to this Agreement will be received in confidence in connection with their
Syndication Interest, and that such information and reports constitute
confidential information and shall not be disclosed to any third party, except
pursuant to appropriate legal or regulatory process, (or used by the Syndication
Party except in connection with the Loan and its Syndication Interest) without
the prior written consent of Agent or Borrower, as applicable.
16.17 Standard of Care. Agent shall not be liable to Syndication Parties
for any error in judgment or for any action taken or not taken by Agent or its
agents, except for its gross negligence or willful misconduct. Subject to the
preceding sentence, Agent will exercise the same care in administering the Loan
and the Loan Documents as it
45
<PAGE>
exercises for similar loans which it holds for its own account and risk, and
Agent shall not have any further responsibility to the Syndication Parties.
Without limiting the foregoing, Agent may rely on the advice of counsel
concerning legal matters and on any written document it believes to be genuine
and correct and to have been signed or sent by the proper Person or Persons.
16.18 No Trust Relationship. Neither the execution of this Agreement, nor
the sharing in the Loan, nor the holding of the Loan Documents in its name by
Agent, nor the management and administration of the Loan and Loan Documents by
Agent (including the obligation to hold certain payments and proceeds in the
Payment Account in trust for the Syndication Parties), nor any other right, duty
or obligation of Agent under or pursuant to this Agreement is intended to be or
create, and none of the foregoing shall be construed to be or create, any
express, implied or constructive trust relationship between Agent and any
Syndication Party. Each Syndication Party hereby agrees and stipulates that
Agent is not acting as trustee for such Syndication Party with respect to the
Loan, this Agreement, or any aspect of either, or in any other respect.
16.19 Sharing of Costs and Expenses. To the extent not paid by Borrower,
each Syndication Party will promptly upon demand reimburse Agent, ratably
according to their respective Syndication Shares, for all reasonable costs,
disbursements, and expenses incurred by Agent on or after the date of this
Agreement for legal, accounting, consulting, and other services rendered to
Agent in its role as Agent in the administration of the Loan, interpreting the
Loan Documents, and protecting, enforcing, or otherwise exercising any rights,
both before and after default by Borrower under the Loan Documents, and
including, without limitation, all costs and expenses incurred in connection
with any bankruptcy proceedings; provided, however, that the costs and expenses
to be shared in accordance with this Section shall not include any costs or
expenses incurred by CoBank solely as a Syndication Party in connection with the
Loan, nor to Agent's internal costs and expenses.
16.20 Syndication Parties' Indemnification of Agent. Each of the
Syndication Parties agree to indemnify Agent, including any Successor Agent, and
its directors, officers, employees, agents, professional advisers and
representatives ("Indemnified Agency Parties"), (to the extent not reimbursed by
Borrower, and without in any way limiting the obligation of Borrower to do so),
ratably according to their respective Syndication Shares, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including, without limitation, at any time following the
payment of the Loan and/or the expiration or termination of the Syndication
Interests or this Agreement) be imposed on, incurred by or asserted against
Agent (or any of the Indemnified Agency Parties while acting for Agent or for
any Successor Agent) in any way relating to or arising out of this Agreement or
the Loan Documents, or the performance of the duties of Agent hereunder or
thereunder or any action taken or omitted while acting in the capacity of Agent
under or in connection with any of the foregoing; provided that the Syndication
Parties shall not be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties,
46
<PAGE>
actions, judgments, suits, costs, expenses or disbursements of an Indemnified
Agency Party to the extent that any of the forgoing result from the gross
negligence or willful misconduct of that Indemnified Agency Party as determined
by a court of competent jurisdiction. The agreements and obligations in this
Section shall survive the payment of the Loan, the Syndication Interests, and
the expiration or termination of this Agreement.
16.21 Books and Records. Agent shall maintain such books of account and
records relating to the Loan as it maintains with respect to other loans of
similar type and amount, and which shall clearly and accurately reflect the
Syndication Interest of each Syndication Party. Syndication Parties, or their
agents, may inspect such books of account and records at all reasonable times
during Agent's regular business hours.
16.22 Administrative Agent Fee. CoBank shall not be entitled to any fee or
compensation, other than the Administrative Agent Fee for acting as Agent. In
the event the Successor Agent is contractually entitled to an additional fee,
each Syndication Party will be responsible for the amount thereof multiplied by
their Syndication Share.
16.23 Representations and Warranties of All Parties. Agent and each
Syndication Party represents and warrants that (a) the making and performance of
this Agreement is within its power and has been duly authorized by all necessary
corporate and other action by it, (b) this Agreement is in compliance with all
applicable laws and regulations promulgated under such laws and does not
conflict with nor constitute a breach of its charter or by-laws nor any
agreements by which it is bound, and does not violate any judgment, decree or
governmental or administrative order, rule or regulation applicable to it, (c)
no approval, authorization or other action by, or declaration to or filing with,
any governmental or administrative authority or any other Person is required to
be obtained or made by it in connection with the execution, delivery and
performance of its duties under this Agreement, and (d) this Agreement has been
duly executed by it, and constitutes the legal, valid, and binding obligation of
such Person, enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the rights of
creditors generally and general equitable principles (regardless of whether such
enforceability is considered in a proceeding at law or in equity). Each
Syndication Party that is a state or national bank represents and warrants that
the act of entering into and performing its obligations under this Agreement has
been approved by its board of directors or its loan committee and such action
was duly noted in the written minutes of the meeting of such board or committee,
and that it will furnish Agent with a certified copy of such minutes or an
excerpt therefrom reflecting such approval.
16.24 Representations and Warranties of CoBank. CoBank, in its role as
Syndication Party and as Agent, makes no express or implied representation or
warranty and assumes no responsibilities with respect to the due authorization,
execution, or delivery of the Loan Documents; the accuracy of any information,
statements, or certificates provided by Borrower, the legality, validity, or
enforceability of the Loan
47
<PAGE>
Documents; the filing or recording of any document;
the collectibility of the Loan; the performance by any Borrower of any of its
obligations under the Loan Documents; or the financial condition or solvency of
any Borrower or any other party obligated with respect to the Loan.
16.25 Syndication Parties' Independent Credit Analysis. Each Syndication
Party acknowledges receipt of true and correct copies of all Loan Documents
(other than any Note payable to another Syndication Party) from Agent. Each
Syndication Party agrees and represents that it has relied upon its independent
review (a) of the Loan Documents, and (b) any information independently acquired
by such Syndication Party from Borrower or otherwise in making its decision to
acquire an interest in the Loan independently and without reliance on CoBank or
Agent. Each Syndication Party represents and warrants that it has obtained such
information as it deems necessary (including any information such Syndication
Party independently obtained from Borrower or others) prior to making its
decision to acquire an interest in the Loan. Each Syndication Party further
agrees and represents that it has made its own independent analysis and
appraisal of and investigation into each Borrower's authority, business,
operations, financial and other condition, creditworthiness, and ability to
perform its obligations under the Loan Documents and has relied on such review
in making its decision to acquire an interest in the Loan. Each Syndication
Party agrees that it will continue to rely solely upon its independent review of
the facts and circumstances related to Borrower, and without reliance upon
CoBank or Agent, in making future decisions with respect to all matters under or
in connection with the Loan Documents and its participation in the Loan. CoBank
and Agent assume no responsibility for the financial condition of Borrower, APD,
or any APD Loan Borrower, or for the performance of Borrower's obligations under
the Loan Documents, APD's performance of its obligations under the Underlying
Loan Documents, or the performance by any APD Loan Borrower of its obligations
under the APD Loan Documents. Except as otherwise expressly provided herein,
neither CoBank nor any other Syndication Party shall have any duty or
responsibility to furnish to any other Syndication Parties any credit or other
information concerning Borrower which may come into its possession.
16.26 No Joint Venture or Partnership. Neither the execution of this
Agreement, the sharing in the Loan, nor any agreement to share in payments or
losses arising as a result of this transaction is intended to be or to create,
and the foregoing shall not be construed to be, any partnership, joint venture
or other joint enterprise between Agent and any Syndication Party, nor between
any of the Syndication Parties.
16.27 Purchase for Own Account/Restrictions on Transfer. Each Syndication
Party represents that it has acquired and is retaining its Syndication Interest
in the Loan for its own account in the ordinary course of its banking or
financing business and not with a view toward the sale, distribution, further
participation, or transfer thereof. Each Syndication Party other than CoBank
agrees that it will not sell, assign, convey or otherwise dispose of
("Transfer"), or create or permit to exist any lien or security interest on all
or any part of its Syndication Interest in the Loan, without the prior written
consent of Agent and Borrower (which consent will not be
48
<PAGE>
unreasonably withheld); provided that (a) any such Transfer (except a Transfer
to another Syndication Party or a Transfer by CoBank) must be in a minimum
amount of the lesser of (i) $5,000,000.00 or (ii) the full amount of the
Syndication Interest, (b) the transferee must execute an agreement substantially
in the form of Exhibit 16.27 hereto ("Syndication Acquisition Agreement") and
assume all of the transferor's obligations hereunder and execute such documents
as Agent may reasonably require, and (c) the Syndication Party making such
Transfer must pay Agent an assignment fee of $2,500.00. Any Syndication Party
may participate any part of its Syndication Interest in the Loan to any Person
with the prior written consent of Agent and Borrower (which consent will not be
unreasonably withheld), and each Syndication Party understands and agrees that
in the event of any such participation, (x) its Syndication Share and Maximum
Syndication Amount will not change on account of such participation, (y) except
as provided in Section 16.28 hereof, the participant will have no rights under
this Agreement, including, without limitation, voting rights or the right to
receive payments or distributions, and (z) Agent shall continue to deal directly
with the Syndication Party with respect to the Loan and the Syndication Party's
Syndication Interest as though no participation had been granted and will not be
obligated to deal directly with any participant. Notwithstanding any provision
contained herein to the contrary, any Syndication Party may at any time pledge
or assign all or any portion of its Syndication Interest to any Federal Reserve
Bank in accordance with applicable law.
16.28 Certain Participants' Voting Rights. All Persons which purchase a
participation interest in CoBank's interest as a Syndication Party hereunder
may, in CoBank's sole discretion (or as required in any agreement under which
such purchase is made and governed), be allowed by CoBank to vote, on a dollar
basis, on any matter requiring or allowing CoBank, in its capacity as a
Syndication Party, to provide or withhold its consent, or to otherwise vote on
any proposed action.
16.29 Method of Making Payments. Payment and transfer of all amounts owing
or to be paid or remitted hereunder, including, without limitation, payment of
the Initial Payment and each Advance Payment by Syndication Parties, and
distribution of principal or interest payments or fees or other amounts by
Agent, shall be by wire transfer in accordance with the instructions contained
on Exhibit 16.29 hereto ("Wire Instructions").
16.30 Events of Syndication Default/Remedies.
16.30.1 Syndication Party Default. Any of the following occurrences,
failures or acts, with respect to any of the Syndication Parties shall
constitute an Event of Syndication Default hereunder by such party: (a) if any
representation or warranty made by such party in this Agreement shall be found
to have been untrue in any material respect, (b) if such party fails to make any
distributions or payments required under this Agreement within five (5) days of
the date required, (c) if such party breaches any other covenant, agreement, or
provision of this Agreement which breach shall have continued uncured for a
period of thirty (30) consecutive days after such breach first occurs, unless a
shorter period is required to avoid prejudicing the rights and position of the
other
49
<PAGE>
Syndication Parties, (d) if any agency having supervisory authority over such
party, or any creditors thereof, shall file a petition to reorganize or
liquidate such party pursuant to any applicable federal or state law or
regulation and such petition shall not be discharged or denied within fifteen
(15) days after the date on which it is filed, (e) if by the order of a court of
competent jurisdiction or by any appropriate supervisory agency, a receiver,
trustee or liquidator shall be appointed for such party or for all or any
material part of its property or if such party shall be declared insolvent, or
(f) if such party shall be dissolved, or shall make an assignment for the
benefit of its creditors, or shall file a petition seeking to take advantage of
any debtors' act, including the bankruptcy act, or shall admit in writing its
inability to pay its debts generally as they become due, or shall consent to the
appointment of a receiver or liquidator of all or any material part of its
property.
16.30.2 Remedies. Upon the occurrence of an Event of Syndication Default,
the non-defaulting parties, acting by, or through the direction of, a simple
majority (determined on the basis of Syndication Share) of the non-defaulting
parties, may, in addition to any other remedy specifically set forth in this
Agreement, have and exercise any and all remedies available generally at law or
equity, including the right to damages and to specific performance.
16.31 Withholding Taxes. Each Syndication Party represents that it is
entitled to receive any payments to be made to it hereunder without the
withholding of any tax and will furnish to Agent and to Borrower such forms,
certifications, statements and other documents as Agent or Borrower may request
from time to time to evidence such Syndication Party's exemption from the
withholding of any tax imposed by any jurisdiction or to enable Agent or
Borrower, as the case may be, to comply with any applicable laws or regulations
relating thereto. Without limiting the effect of the foregoing, if any
Syndication Party is not created or organized under the laws of the United
States of America or any state thereof, such Syndication Party will furnish to
Agent and Borrower IRS Form 4224 or Form 1001, or such other forms,
certifications, statements or documents, duly executed and completed by such
Syndication Party, as evidence of such Syndication Party's exemption from the
withholding of United States tax with respect thereto. Notwithstanding anything
herein to the contrary, Borrower shall not be obligated to make any payments
hereunder to such Syndication Party until such Syndication Party shall have
furnished to Agent and Borrower the requested form, certification, statement or
document.
16.32 Further Assurances. Agent and each Syndication Party agree to take
whatever steps and execute such documents may be reasonable and necessary to
implement this Article 16 and to carry out fully the intent thereof.
ARTICLE 17. MISCELLANEOUS
17.1 Costs and Expenses. To the extent permitted by law, Borrower agrees to
pay to Agent and the Syndication Parties, on demand, all out-of-pocket costs and
expenses (a) incurred by Agent (including, without limitation, the reasonable
fees and
50
<PAGE>
expenses of counsel retained by Agent, and including fees and expenses incurred
for consulting, appraisal, engineering, inspection, and environmental assessment
services) in connection with the preparation, negotiation, and execution of the
Loan Documents and the transactions contemplated thereby, and processing LC
Requests and Advance Requests; and (b) incurred by Agent or any Syndication
Party (including, without limitation, the reasonable fees and expenses of
counsel retained by Agent and the Syndication Parties) in connection with the
enforcement or protection of the Syndication Parties' rights under the Loan
Documents upon the occurrence of an Event of Default or upon the commencement of
an action by Borrower against Agent or any Syndication Party (except that if the
court makes a specific finding that Borrower has prevailed on all or
substantially all of its claims in such action brought by Borrower, Borrower
shall not be obligated to pay the out-of-pocket costs and expenses of Agent and
the Syndication Parties in connection with such action), including without
limitation collection of the Loan (regardless of whether such enforcement or
collection is by court action or otherwise). Borrower shall not be obligated to
pay the costs or expenses of any Person whose only interest in the Loan is as a
holder of a participation interest.
17.2 Service of Process and Consent to Jurisdiction. Borrower hereby agrees
that any litigation with respect to this Agreement or to enforce any judgment
obtained against Borrower for breach of this Agreement or under the Notes or
other Loan Documents may be brought in the courts of the State of Colorado and
in the United States District Court for the District of Colorado (if applicable
subject matter jurisdictional requirements are present), as Agent may elect;
and, by execution and delivery of this Agreement, Borrower irrevocably submits
to such jurisdiction. With respect to litigation concerning this Agreement or
under the Notes or other Loan Documents within the jurisdiction of the courts of
the State of Colorado or the United States District Court for the District of
Colorado, Borrower hereby irrevocably appoints, until January 15, 2011, The
Corporation Company, 1675 Broadway, Denver, Colorado 80202, as the agent of
Borrower to receive for and on behalf of Borrower, service of process, which
service may be made by mailing a copy of any summons or other legal process to
Borrower in care of such agent. Borrower agrees that Borrower shall maintain a
duly appointed agent for service of summons and other legal process as long as
Borrower remains obligated under this Agreement and shall keep Agent advised in
writing of the identity and location of such agent. The receipt by such agent
and/or by Borrower of such summons or other legal process in any such litigation
shall be deemed personal service and acceptance by Borrower for all purposes of
such litigation.
17.3 Jury Waiver. IT IS MUTUALLY AGREED BY AND BETWEEN AGENT, EACH
SYNDICATION PARTY, AND BORROWER THAT THEY EACH WAIVE TRIAL BY JURY IN ANY
ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER OF THEM AGAINST THE OTHER
PARTY ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS
AGREEMENT, THE NOTES, OR THE OTHER LOAN DOCUMENTS.
17.4 Notices. All notices, requests and demands required or permitted under
the terms of this Agreement shall be in writing and (a) shall be addressed as
set forth
51
<PAGE>
below or at such other address as either party shall designate in writing, (b)
shall be deemed to have been given or made: (i) if delivered personally,
immediately upon delivery, (ii) if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt, (iii) if by
nationally recognized overnight courier service with instructions to deliver the
next Business Day, one (1) Business Day after sending, and (iv) if by United
States Mail, certified mail, return receipt requested, five (5) days after
mailing.
17.4.1 Borrower:
Village Farms Finance Cooperative
1811 Sardis Road North, Suite 207
Charlotte, NC 28270
FAX: (704) 849-7662
Attention: Chief Financial Officer
With a copy to:
Agro Power Development, Inc.
10 Alvin Court
New Brunswick, NJ 08816
FAX: (908) 254-1710
Attention:
17.4.2 CoBank:
245 North Waco Street
Wichita, Kansas 67201-2940
FAX: (316) 290-2006
Attention: Greg E. Somerhalder
With a copy to:
FARM CREDIT BANK OF TEXAS
6210 Highway 290 East
Austin, Texas 78723
P.O. Box 15919
Austin, Texas 78761
FAX: (512) 465-0675
Attention:
17.5 Notice to Syndication Parties and Agent. No action shall be commenced
by Borrower for any claim against Agent or any Syndication Party on account of
any act or failure to act by such Person unless a notice specifically setting
forth the claim of Borrower shall have been given to such Person within sixty
(60) calendar days after
52
<PAGE>
Borrower has knowledge or should reasonably have acquired knowledge of the act
or omission which Borrower alleges gave rise to such claim, and failure to give
such notice shall constitute a waiver of any such claim.
17.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of Borrower, Agent, and Syndication Parties, and their respective
successors and assigns, except that Borrower may not assign or transfer its
rights or obligations hereunder without the prior written consent of the
Syndication Parties.
17.7 Voting Rights Acknowledgment. Borrower and each present and future
Syndication Party acknowledge and agree that any entity which purchases a
participation interest in CoBank's interest as Syndication Party may, in
CoBank's sole discretion (or as required in any agreement under which such
purchase is made and governed), be allowed by CoBank to vote, on a dollar basis,
on any matter requiring or allowing CoBank, in its capacity as a Syndication
Party hereunder (but not in its capacity as Agent hereunder), to provide or
withhold its consent, or to otherwise vote on any proposed action.
17.8 Severability. The invalidity or unenforceability of any provision of
this Agreement or the other Loan Documents shall not affect the remaining
portions of such documents or instruments; in case of such invalidity or
unenforceability, such documents or instruments shall be construed as if such
invalid or unenforceable provisions had not been included therein.
17.9 Entire Agreement. This Agreement (together with all exhibits hereto,
which are incorporated herein by this reference) and the other Loan Documents
represent the entire understanding of Agent, each Syndication Party, and
Borrower with respect to the subject matter hereof and shall replace and
supersede any previous agreements of the parties with respect to the subject
matter hereof.
17.10 Applicable Law. To the extent not governed by federal law, this
Agreement and the other Loan Documents, and the rights and obligations of the
parties hereto and thereto shall be governed by and interpreted in accordance
with the internal laws of the State of Colorado, without giving effect to any
otherwise applicable rules concerning conflicts of law.
17.11 Captions. The captions or headings in this Agreement and any table of
contents hereof are for convenience only and in no way define, limit or describe
the scope or intent of any provision of this Agreement.
17.12 Amendments. This Agreement may not be modified or amended unless such
modification or amendment is in writing and is signed by Borrower, Agent, and
all Syndication Parties (and each Syndication Party hereby agrees to execute any
such amendment approved pursuant to Section 16.10 hereof). Borrower agrees that
it shall reimburse Agent for all fees and expenses incurred by Agent in
retaining outside legal
53
<PAGE>
counsel in connection with any amendment or modification to this Agreement
requested by Borrower.
17.13 Additional Costs of Maintaining Loan. Borrower shall pay to Agent
from time to time such amounts as Agent may determine to be necessary to
compensate any Syndication Party for any costs incurred by it which Agent
determines, based on information presented to it by such Syndication Party, are
attributable to such Syndication Party's making or maintaining any Advances
hereunder or its obligation to make any such Advances, or any reduction in any
amount receivable by such Syndication Party under this Agreement or the Note
payable to it in respect to any such Advances or such obligation (such increases
in costs and reductions in amounts receivable being herein called "Additional
Costs"), resulting from any change after the date of this Agreement in United
States federal, state, municipal, or foreign laws or regulations (including
Regulation D), or the adoption or making after such date of any interpretations,
directives, or requirements applying to a class of banks including such
Syndication Party of or under any United States federal, state, municipal, or
foreign laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof ("Regulatory Change"), which: (a) changes the basis of
taxation of any amounts payable to such Syndication Party under this Agreement
or the Note payable to such Syndication Party in respect of any of such Advances
(other than taxes imposed on the overall net income of such Syndication Party);
or (b) imposes or modifies any reserve, special deposit, or similar requirements
relating to any extensions of credit or other assets of, or any deposits with or
other liabilities of, such Syndication Party; or (c) imposes any other condition
affecting this Agreement or the Note payable to such Syndication Party (or any
of such extensions of credit or liabilities). Agent will notify Borrower of any
event occurring after the date of this Agreement which will entitle such
Syndication Party to compensation pursuant to this Section as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation. Agent shall include with such notice, a certificate from such
Syndication Party setting forth in reasonable detail the calculation of the
amount of such compensation. Determinations by Agent for purposes of this
Section of the effect of any Regulatory Change on the costs of such Syndication
Party of making or maintaining Advances or on amounts receivable by such
Syndication Party in respect of Advances, and of the additional amounts required
to compensate such Syndication Party in respect of any Additional Costs, shall
be conclusive absent manifest error, provided that such determinations are made
on a reasonable basis.
17.14 Capital Requirements. In the event that the introduction of or any
change in (a) any law or regulation, or (b) the judicial, administrative, or
other governmental interpretation of any law or regulation, or (c) compliance by
any Syndication Party or any corporation controlling any such Syndication Party
with any guideline or request from any governmental authority (whether or not
having the force of law) has the effect of requiring an increase in the amount
of capital required or expected to be maintained by such Syndication Party or
any corporation controlling such Syndication Party, and such Syndication Party
certifies that such increase is based in
54
<PAGE>
any part upon such Syndication Party's obligations hereunder, and other similar
obligations, Borrower shall pay to such Syndication Party such additional amount
as shall be certified by such Syndication Party to Agent and to Borrower to be
the net present value (discounted at the Variable Rate) of (a) the amount by
which such increase in capital reduces the rate of return on capital which such
Syndication Party could have achieved over the period remaining until the
Maturity Date but for such introduction or change, (b) multiplied by such
Syndication Party's Syndication Share of the Aggregate Commitment. Agent will
notify Borrower of any event occurring after the date of this Agreement that
will entitle any such Syndication Party to compensation pursuant to this Section
as promptly as practicable after it obtains knowledge thereof and of such
Syndication Party's determination to request such compensation. Agent shall
include with such notice, a certificate from such Syndication Party setting
forth in reasonable detail the calculation of the amount of such compensation.
Determinations by any Syndication Party for purposes of this Section of the
effect of any increase in the amount of capital required to be maintained by any
such Syndication Party and of the amount of compensation owed to any such
Syndication Party under this Section shall be conclusive absent manifest error,
provided that such determinations are made on a reasonable basis.
17.15 Replacement Notes. Upon receipt by Borrower of evidence satisfactory
to it of: (a) the loss, theft, destruction or mutilation of any Note, and (in
case of loss, theft or destruction) of the agreement of the Syndication Party to
which the Note was payable to indemnify Borrower, and upon surrender and
cancellation of such Note, if mutilated; or (b) the assignment of any
Syndication Interest and Note relating thereto, or any portion thereof, pursuant
to this Agreement, then Borrower will pay any unpaid principal and interest (and
Funding Losses, if applicable) then or previously due and payable on such Note
and will deliver in lieu of such Note a new Note or, in the case of an
assignment of a portion of a Syndication Interest new Notes, for any remaining
balance.
17.16 Patronage Payments. Borrower acknowledges and agrees that any
patronage, or similar, payments to which Borrower is entitled on account its
ownership of CoBank Equity Interests will not be based on any portion of its
Syndication Share in which CoBank has at any time granted a participation
interest.
17.17 Mutual Release. Upon full indefeasible payment and satisfaction of
the Bank Debt and Notes and the other obligations contained in this Agreement,
the parties, including Borrower, Agent, and each Syndication Party shall, except
as provided in Article 14 hereof, thereupon automatically each be fully,
finally, and forever released and discharged from any further claim, liability,
or obligation in connection with the Bank Debt.
17.18 Liberal Construction. This Agreement constitutes a fully negotiated
agreement between commercially sophisticated parties, each assisted by legal
counsel, and shall not be construed and interpreted for or against any party
hereto.
55
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
BORROWER:
VILLAGE FARMS INTERNATIONAL
FINANCE ASSOCIATION, a
cooperative corporation
formed under the laws of
the State of Delaware
By:
------------------------
Name: J. Kevin Cobb
Title: Vice President
COBANK:
COBANK, ACB
By:
------------------------
Name: Greg E. Somerhalder
Title: Vice President
EXHIBIT 10.80
PROMISSORY NOTE
(Line of Credit Facility)
$10,000,000.00 Effective Date: June 24, 1997
FOR VALUE RECEIVED, VILLAGE FARMS INTERNATIONAL FINANCE ASSOCIATION, a
Delaware corporation ("Maker"), promises to pay to the order of COBANK, ACB
("Payee" and "CoBank") at its office at 245 North Waco Street, Wichita, Kansas
67202, or such other place as Agent (as defined in the Credit Agreement) shall
direct in writing, the principal sum of Ten million Dollars ($10,000,000.00) or,
if less, the amount outstanding under this Note for Advances for loans pursuant
to the Credit Agreement (Line of Credit Facility) dated as of June 24, 1997, by
and between CoBank (for its own benefit as a lender and as agent for the benefit
of the present and future Syndication Parties as named or defined therein) and
Maker (as it may be amended from time to time in the future, the "Credit
Agreement") and any Bank Debt related thereto. This Note is issued and delivered
to Payee pursuant to the Credit Agreement. All capitalized terms used in this
Note and not otherwise defined herein shall have the same meanings as set forth
in the Credit Agreement.
The unpaid balance of this Note from time to time outstanding shall bear
interest as set forth in the Credit Agreement. Principal and interest shall be
payable as provided in the Credit Agreement. This Note has been issued by Maker
to Payee pursuant to the Credit Agreement and reference is made thereto for
specific terms and conditions under which this Note is made and to which this
Note is subject.
This Note is subject to voluntary prepayments as set forth in the Credit
Agreement. Amounts repaid may be reborrowed as provided in the Credit Agreement.
Upon the occurrence of an Event of Default, Maker agrees that Agent shall have
all rights and remedies set forth in the Credit Agreement, including without
limitation the rights of acceleration set forth in the Credit Agreement. In
addition, Agent shall have the right to recover all costs of collection and
enforcement of this Note as provided in the Credit Agreement.
Maker and any endorser, guarantor, surety or assignor hereby waives
presentment for payment, demand, protest, notice of protest, and notice of
dishonor and nonpayment of this Note, and all defenses on the ground of delay,
suretyship, impairment of collateral, or of extension of time at or after
maturity for the payment of this Note.
This Note shall be governed in all respects by the law of the State of
Colorado.
<PAGE>
Maker:
VILLAGE FARMS INTERNATIONAL FINANCE
ASSOCIATION, a Delaware corporation
By: _____________________________
Name:_____________________________
Title:____________________________
2
Exhibit 10.81
EXECUTION COPY
FIRST AMENDMENT TO CREDIT AGREEMENT (Line of Credit Facility)
[Regarding EcoScience Merger]
This First Amendment to Credit Agreement (this "Amendment") is entered into
on September____, 1998 by and between:
Village Farms International Finance Association, a Delaware corporation, with an
address at 10 Alvin Court, East Brunswick, New Jersey 08816 ("Borrower"); and
CoBank, ACB, sole Agent and sole Syndication Party, as defined in the Credit
Agreement.
R E C I T A L S
A. The Borrower entered into a certain Credit Agreement (Line of Credit
Facility) dated June 24, 1997 (as amended to date the "Credit Agreement") in
connection with certain financing provided by the Syndication Parties to the
Borrower; and,
B. Agro Power Development, Inc. (the "Guarantor") entered into a certain
Guaranty of Agro Power Development, Inc. dated June 24, 1997 (as amended to date
the "Guaranty") in connection with certain financing provided by the Syndication
Parties to the Borrower; and,
C. The Guarantor desires to merge with Agro Acquisition Corp., an affiliate of
EcoScience Corporation, pursuant to a certain Agreement and Plan of Merger (the
"Merger Agreement") dated as of April 28, 1998 and amended and restated as of
July 31, 1998 (the "Merger"), with the name of the survivor being changed to
Agro Power Development, Inc.; and,
D. The parties desire to, among other things, amend and modify the Credit
Agreement as provided herein for the purpose,, among other things, of permitting
the transactions described above.
A G R E E M E N T S
NOW, THEREFORE, for value received, and intending to be legally bound
herein, Borrower covenants and agrees with the Agent and the Syndication Parties
as follows:
1. Definitions. Except as otherwise expressly provided herein, all capitalized
terms used herein and defined in the Credit Agreement shall have the meaning
ascribed to such term under the Credit Agreement.
(A) Section 1.9 APD. Upon and after the consummation of the Merger, the
definition of "APD" set forth in Section 1.9 shall be amended and restated in
its entirety as follows:
1.9 APD: Agro Power Development, Inc., a Delaware corporation.
<PAGE>
(B) Section 1.10 APD Subsidiary. The definition of "APD Subsidiary" set
forth in Section 1.10 is hereby amended and restated in its entirety as follows:
1.10 APD Subsidiary:
Village Farms, Inc.
Village Farms of Delaware, L.L.C.
Village Farms, L.L.C.
Keystone Village Farms, L.L.C.
Village Farms of Wheatfield, L.L.C.
Village Farms of Buffalo, L.P.
Village Farms of Texas, L.P.
Village Farms of Marfa, L.P.
Village Farms of Presidio, L.P.
Pocono Village Farms, L.P.
New Amsterdam Management Co.
New Amsterdam Joint Venture, L.L.C.
Village Farms of Virginia, Inc.
Village Farms Mediterranean, Inc.
Village Farms of Colorado, Inc.
2. Other Amendments.
(A) Section 10.14 Real Property. Clause (b) of Section 10.14 of the Credit
Agreement is hereby amended and restated in its entirety as follows:
(b) does not own any fee interest or leasehold interest, or any other
interest, including without limitation any easements, rights of way or
licenses, in real property, other than those evidenced by Underlying Loan
Documents and other than as set forth on Exhibit 10.14 hereto.
(B) Section 10.19 Material Agreements. The first sentence of Section 10.19
of the Credit Agreement is hereby amended and restated in its entirety as
follows:
Exhibit 10.19 attached hereto sets forth all agreements of Borrower (other
than Underlying Loan Documents), the termination or breach of which, based
upon Borrower's knowledge as of the date of making any representations with
respect thereto, would have a Material Adverse Effect ("Material
Agreements").
-2-
<PAGE>
3. Regulatory and Other Notices. Section 12.2.9 of the Credit Agreement is
hereby amended and restated as follows:
12.2.9 Regulatory and Other Notices. Promptly after Borrower's receipt
thereof, copies of (a) any notices or other communications received from any
governmental authority with respect to any matter or proceeding the effect of
which could reasonably be expected to have a Material Adverse Effect on
Borrower; or (b) any written notices given by any Underlying Borrower to
Borrower in accordance with the terms of any agreement between any Underlying
Borrower and Borrower.
4. Continuance of Credit Agreement. Except as otherwise expressly provided
herein, the Credit Agreement shall remain in full force and effect in accordance
with its terms.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as
of the date first set forth above.
Agro Power Development, Inc.
BY: _____________________________
J. Kevin Cobb, Sr. VP. & CFO
CoBank, ACB, as Agent and sole
Syndication Party
BY: _____________________________
Name:
Title:
-3-
EXHIBIT 10.82
SECOND AMENDMENT TO CREDIT AGREEMENT
(Line of Credit Facility)
Parties:
"CoBank": CoBank, ACB
245 North Waco Street
Wichita, Kansas 67201-2940
"Borrower": Village Farms International Finance Association
10 Alvin Court
East Brunswick, New Jersey 08816
"Guarantor": Agro Power Development, Inc.
10 Alvin Court
East Brunswick, New Jersey 08816
Effective Date: September 29, 1998
Recitals:
A. CoBank, acting in its capacity as Agent (in such capacity "Agent") and
as a Syndication Party, and Borrower entered into that certain Credit Agreement
(Line of Credit Facility) dated as of June 24, 1997 (as amended from time to
time, the "Credit Agreement").
B. Guarantor executed its Guaranty of Agro Power Development, Inc. dated as
of June 24, 1997 (as amended from time to time, the "Guaranty") whereby
Guarantor guaranteed payment of certain obligations of Borrower, including,
without limitation, all obligations of Borrower arising under the Credit
Agreement and other Loan Documents.
C. Borrower and Guarantor have requested Agent and the Syndication Parties
under the Credit Agreement to increase the loan amount available under the
Credit Agreement to the principal amount of $13,319,175.00, which Agent and the
Syndication Parties are willing to do under the terms and conditions as set
forth in this Second Amendment to Credit Agreement (Line of Credit Facility)
("Second Amendment"), including the amendments to the Credit Agreement and the
other Loan Documents (as defined therein) set forth or described herein, and
upon the written consent of Guarantor.
<PAGE>
Agreement:
Now, therefore, for good and valuable consideration, the receipt of which
is hereby acknowledged, including the mutual covenants contained herein, the
parties hereto hereby agree as follows:
1. Amendments to Credit Agreement. The Credit Agreement is amended as of the
Effective Date as follows:
1.1 The following definitions are added to Article 1 of the Credit
Agreement:
1.112 Significant Software: all software programs, equipment containing
embedded microchips, tradeware, telecommunications, physical plant and automated
processes, regularly used by Borrower in its business operations or financial
accounting which, individually, or together with one or more other such software
programs, would, if it failed to be Year 2000 Compliant, have a material adverse
effect on the business condition (financial or otherwise) of Borrower or the
operation of the business of Borrower, or Borrower's ability to perform its
obligations under this Credit Agreement.
1.113 Third Party Provider: means a third party vendor which provides
Significant Software.
1.114 Year 2000 Compliant: means, with respect to software, (a) that it
shall include calendar year 2000 date conversion and compatibility capabilities,
including date data century recognition, same century and multiple century
formula and date value calculations and user interface date data values that
reflect the century so that it will (i) manage and manipulate data involving
dates, including single century and multiple century dates and formulas, and
will not cause an abnormally ending scenario within the application or cause an
abort or result in the generation of incorrect values or invalid output
involving such dates, (ii) include the indication of the correct century in all
date related user interface functions, and (iii) operate in the same manner with
year dates of 2000 and beyond as it operates with year dates of 1900 to 1999;
and (b) that it shall recognize the year 2000 as a year containing February 29.
Software that is Year 2000 Compliant shall be considered to be in "Year 2000
Compliance".
1.115 Y2K Compliance Test: those procedures adopted by Borrower for testing
Borrower's Significant Software for Year 2000 Compliance.
1.2 The following definitions set forth in Article 1 of the Credit
Agreement are revised in their entirety to read as follows:
1.8 Aggregate Commitment: $13,319,175.00, subject to reduction as
provided in Section 7.2 hereof.
1.71 Maximum Syndication Amount:
2
<PAGE>
For CoBank - $13,319,175.00
1.3 A new Section 10.22 is added to Article 10 of the Credit Agreement to
read in its entirety as follows:
10.22. Year 2000 Compliance. Borrower represents and warrants that: (a)
Borrower has conducted an analysis of, and developed a compliance program with
respect to, all of its Significant Software, to ensure that it will be Year 2000
Compliant, and Borrower anticipates that such compliance program will be
completed on a timely basis; and (b) to the best of Borrower's knowledge, after
due inquiry, the impact of year 2000 on Borrower and the key customers and
suppliers of Borrower will not be such as to materially adversely affect the
business, condition (financial or otherwise) or operation of the business of
Borrower, taken as a whole, or to prevent Borrower from performing its
obligations hereunder.
1.4 A new Section 12.16 is added to Article 12 of the Credit Agreement to
read in its entirety as follows:
12.16. Year 2000 Compliance and Reports. Borrower agrees: (a) to cause all
of its Significant Software to be Year 2000 Compliant no later than July 1,
1999; (b) to require all Third Party Providers of Significant Software to
provide to Borrower, no later than July 1, 1999, proof that such software is
Year 2000 Compliant; (c) to require all third party suppliers and customers of
Borrower which are, to Borrower's knowledge, dependent upon software in the
conduct of their business such that the failure of such software to be Year 2000
Compliant could reasonably be expected to have a material adverse effect on the
business condition (financial or otherwise) of Borrower or the operation of the
business of Borrower, or Borrower's ability to perform its obligations under
this Credit Agreement, to provide to Borrower, no later than July 1, 1999, proof
that such software is Year 2000 Compliant; (d) to conduct a Y2K Compliance Test
on all of Borrower's Significant Software no later than July 1, 1999, and to
provide Agent with written reports on the results of all such Y2K Compliance
Tests promptly, but in no event more than thirty (30) days, after such tests are
conducted; and (e) to provide to Agent, no later than July 1, 1999, the written
certification of Borrower's chief financial officer, or other corporate officer
satisfactory to Agent, that all of Borrower's Significant Software is Year 2000
Compliant.
1.5 Exhibit 16.27 to the Credit Agreement is amended by changing the
reference in Recital paragraph A thereof from "$10,000,000.00" to
"$13,319,175.00".
2. Conditions to Effectiveness of this Second Amendment. The effectiveness of
this Second Amendment is subject to satisfaction, in Agent's sole discretion, of
each of the following conditions precedent:
2.1 Organizational Documents. Agent shall have received good standing
certificates, dated no more than thirty (30) days prior to the date of the
execution of this Second Amendment, for Borrower and Guarantor for their
respective states of incorporation and for each state where their operations
require qualification or authorization to transact business.
3
<PAGE>
2.2 Evidence of Corporate Action. Agent shall have received in form and
substance satisfactory to Agent documents evidencing all corporate action taken
by Borrower to authorize (including the specific names and titles of the persons
authorized to so act) the execution, delivery and performance of this Second
Amendment, certified to be true and correct by the Secretary or Assistant
Secretary of Borrower.
2.3 No Material Change. No change shall have occurred in the condition or
operations of Borrower or Guarantor since April 24, 1997 which could result in a
material adverse effect on the business, operations or financial condition of
Borrower or Guarantor.
2.4 Fees and Expenses. Borrower shall have paid Agent, by wire transfer of
immediately available federal funds (a) an amendment fee of $50,000.00 and (b)
all other fees and expenses, including attorneys' fees, incurred by Agent in
connection with the preparation, negotiation and execution of this Second
Amendment and related documents, and the filing or recording of any such
documents.
2.5 Further Assurances. Borrower and Guarantor shall have provided and/or
executed and delivered to Agent the following documents and such further
assignments, documents or financing statements as Agent may reasonably request,
all in form and substance satisfactory to Agent:
(a) Amended and Restated Promissory Note (Line of Credit Facility).
(b) Second Amendment to Credit Agreement (Term Loan Funding).
2.6 Representations and Warranties. The representations and warranties of
Borrower and of Guarantor contained in each of the Loan Documents to which it is
a party, shall be true and correct in all material respects on and as of the
Effective Date as though made on and as of such date.
2.7 No Event of Default. No Event of Default or Potential Default shall
have occurred and be continuing under the Guaranty or the Credit Agreement.
3. General Provisions.
3.1 The Credit Agreement, except as expressly modified herein, shall
continue in full force and effect and be binding upon the parties thereto.
3.2 This Second Amendment shall be binding upon and inure to the benefit of
Borrower, Agent, and the Syndication Parties, and their respective successors
and assigns, except that Borrower may not assign or transfer its rights or
obligations hereunder.
3.3 Capitalized terms used, but not defined, in this Second Amendment shall
have the meaning set forth in the Credit Agreement.
4
<PAGE>
3.4 The invalidity or unenforceability of any provision of this Second
Amendment shall not affect the remaining portions of this Second Amendment; in
case of such invalidity or unenforceability, this Second Amendment shall be
construed as if such invalid or unenforceable provisions had not been included
therein.
3.5 To the extent not governed by federal law, this Second Amendment and
the rights and obligations of the parties hereto shall be governed by and
interpreted in accordance with the internal laws of the State of Colorado,
without giving effect to any otherwise applicable rules concerning conflicts of
law.
3.6 The captions or headings in this Second Amendment are for convenience
only and in no way define, limit or describe the scope or intent of any
provision of this Second Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
be executed as of the Effective Date set forth above.
COBANK:
CoBank, ACB, as Agent
By: ___________________________
Name: Greg Somerhalder
Title: Vice President
COBANK:
CoBank, ACB, as sole Syndication Party
By: ___________________________
Name: Greg Somerhalder
Title: Vice President
BORROWER:
Village Farms International Finance Association
By: ___________________________
Name: _________________________
Title: ________________________
5
<PAGE>
AGREEMENT AND CONSENT OF GUARANTOR
Guarantor hereby consents to the contents of the foregoing Second Amendment and
reaffirms its guarantee of Borrower's obligations arising out of the Credit
Agreement as so amended.
GUARANTOR:
Agro Power Development, Inc.
By: ___________________________
Name: _________________________
Title: ________________________
6
EXHIBIT 10.83
LINE OF CREDIT SECURITY AGREEMENT
by and between
VILLAGE FARMS INTERNATIONAL FINANCE ASSOCIATION,
as Debtor
and
COBANK, ACB,
as Agent for the Line of Credit Lenders
<PAGE>
TABLE OF CONTENTS
1. Definitions ............................................................. 2
2. Collateral/Grant of Security Interest ................................... 4
2.1 Grant of First Priority Interest ................................... 4
2.2 Grant of Second Priority Security Interest ......................... 6
2.3 Grant of First Priority Security Interest .......................... 6
3. Secured Obligations ..................................................... 7
4. Representations and Warranties .......................................... 7
4.1 Organization; Power and Authority, etc ............................. 7
4.2 Due Authorization; Power ........................................... 7
4.3 Consents; Approvals ................................................ 7
4.4 Title to Collateral ................................................ 7
4.5 Underlying Line of Credit Loans .................................... 7
4.6 Principal Office; Collateral; Books and Records .................... 8
5. Covenants of Debtor ..................................................... 8
5.1 Title to Collateral ................................................ 8
5.2 Location of Debtor, Collateral and Books and Records ............... 9
5.3 Books and Records .................................................. 9
5.4 Inspection of Collateral ........................................... 9
5.5 Transfers, Dispositions and Encumbrances ........................... 9
5.6 Maintenance and Repair; Taxes; Insurance ........................... 9
5.7 Compliance with Laws ............................................... 10
5.8 Change in Structure or Name ........................................ 10
i
<PAGE>
5.9 Underlying Line of Credit Loan Documents ........................... 10
5.10 Possession of Collateral; Further Assurances ...................... 10
6. Events of Default ....................................................... 10
7. Rights Upon Default ..................................................... 10
7.1 General ............................................................ 10
7.2 Right of Secured Party to Take Possession and Dispose of Collateral 11
7.3 Notice of Disposition of Collateral ................................ 11
7.4 Right of Secured Party to Use and Operate Collateral ............... 11
7.5 Collection of Accounts ............................................. 12
7.6 Rights of Secured Party With Respect to the Securities Collateral .. 13
7.7 Collection of Underlying Line of Credit Loan Notes ................. 14
8. General Provisions ...................................................... 15
8.1 Appointment and Rights of Agent .................................... 15
8.2 Amendment, Modification, and Waiver ................................ 15
8.3 Costs and Attorneys'Fees ........................................... 15
8.4 Revival of Obligations ............................................. 16
8.5 Performance by Secured Party ....................................... 16
8.6 Power of Attorney .................................................. 16
8.7 Protection of Collateral ........................................... 17
8.8 Additional Rights of Secured Party ................................. 17
8.9 Successors and Assigns ............................................. 17
8.10 Advances .......................................................... 17
8.11 Severability ...................................................... 17
8.12 Governing Law ..................................................... 18
ii
<PAGE>
8.13 Notices ........................................................... 18
8.14 Financing Statement ............................................... 18
8.15 Conflict with Line of Credit Loan Agreement ....................... 18
iii
<PAGE>
EXHIBITS
Exhibit 4.6 Location of Principal Office and Collateral
iv
<PAGE>
LINE OF CREDIT SECURITY AGREEMENT
THIS LINE OF CREDIT SECURITY AGREEMENT ("Security Agreement") is made as of
the 24th day of June, 1997, by and between VILLAGE FARMS INTERNATIONAL FINANCE
ASSOCIATION, a Delaware corporation ("Debtor") whose address is 1811 Sardis Road
North, Suite 207, Charlotte, North Carolina 28270 and COBANK, ACB ("CoBank"), as
Agent on behalf of and for the benefit of the Line of Credit Lenders (as
hereinafter defined), whose address is 245 N. Waco Street, Wichita, Kansas 67202
(CoBank and all Successor Agents appointed pursuant to the Line of Credit
Agreement are referred to herein as "Secured Party").
R E C I T A L S
A. The Line of Credit Lenders have entered into a Credit Agreement (Line of
Credit Facility) of even date herewith with Debtor (as amended from time to
time, the "Line of Credit Agreement") pursuant to which the Line of Credit
Lenders have agreed to provide Debtor with a line of credit of $10,000,000
("Line of Credit Loan"), including a sublimit of $5,000,000 for the issuance of
letters of credit, under the terms and conditions set forth in the Line of
Credit Agreement to (i) fund Debtor's purchase of the LOC Loan (as defined
below), (ii) fund Debtor's loan to Agro Power Development, Inc. ("Guarantor") to
meet Guarantor's working capital needs, (iii) fund the extension by Debtor of
lines of credit (including provisions for the issuance of letters of credit) (1)
to Underlying Term Loan Borrowers (as defined below) to meet their needs during
the planting phase of each year's production cycle and to meet their payment
requirements under their Underlying Term Loans (as defined below) for a maximum
of 180 days in any three year period, and (2) to members of Debtor to meet their
needs during the planting phase of each year's production cycle, and (iv)
provide for the issuance of, and fund any draws made under, letters of credit
issued by the LC Issuing Bank (as defined in the Line of Credit Agreement) for
the account of Debtor to facilitate the purchase and sale by Guarantor and its
subsidiaries of vegetables and fruits.
B. The provisions of the Line of Credit Agreement require that Debtor
execute certain documents, including this Security Agreement, whereby Debtor
shall grant a lien and security interest to Secured Party in all of its
property, both tangible and intangible, whether now owned or hereafter acquired,
as security for the performance of its obligations under the Line of Credit
Agreement and the other Line of Credit Loan Documents (as defined below).
A G R E E M E N T S
In consideration of the mutual covenants and agreements herein contained
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Debtor and Secured Party agree as follows:
<PAGE>
1. Definitions. Capitalized terms used, but not defined, herein shall have
the meaning given to such terms in the Line of Credit Agreement, if defined
therein. In addition, unless otherwise defined herein, each term used herein and
defined in the Uniform Commercial Code as enacted in the State of Colorado
("UCC") shall have the meaning given to such term in the UCC. As used in this
Security Agreement, the following terms shall have the meanings set forth below:
"Collateral" means the First Priority Collateral, the Second Priority
Collateral and the Shared Collateral.
"Construction Agent" means CoBank in its role as Agent under the
Construction Loan Agreement and each Successor Agent (as defined in the
Construction Loan Agreement).
"Construction Lenders" means CoBank, in its role as a lender under the
Construction Loan Agreement, and any other entity that purchases, now or in the
future, a Syndication Interest (as defined in the Construction Loan Agreement)
in the Construction Loan.
"Construction Loan" means the credit facility made available to Debtor
pursuant to the Construction Loan Agreement.
"Construction Loan Agreement" means the Credit Agreement (Construction Loan
Funding) of even date herewith by and between CoBank for its own benefit as a
lender and as Agent for the benefit of the present and future syndication
parties as named or defined therein, and Debtor, wherein the Construction
Lenders have agreed to lend to Debtor an aggregate principal amount up to
$30,000,000 for the purpose of enabling Debtor to make construction loans to
eligible third parties to use for the purposes therein specified.
"Construction Loan Documents" means the Construction Loan Agreement and any
and all other present and future agreements, documents and/or instruments
evidencing, documenting, securing or otherwise relating to the Construction
Loan, all as the same may from time to time be amended, modified, extended,
renewed or restated.
"Hedge Agreement" means the secured interest rate hedging agreement of even
date herewith executed by and between Debtor and CoBank.
"Intercreditor Agreement" means the Intercreditor Agreement of even date
herewith by and between the Construction Lenders, the Term Lenders, the Line of
Credit Lenders, the Construction Agent, the Term Agent, the Line of Credit Agent
and Debtor.
"Line of Credit Agent" means CoBank in its role as Agent under the Line of
Credit Agreement and each Successor Agent.
2
<PAGE>
"Line of Credit Lenders" means CoBank in its role as a lender under the
Line of Credit Agreement and any other entity that purchases, now or in the
future, a Syndication Interest in the Line of Credit Loan.
"Line of Credit Loan Documents" means the Line of Credit Agreement, this
Security Agreement and any and all other present and future agreements,
documents and/or instruments evidencing, documenting, securing or otherwise
relating to any or all of the Line of Credit Loan, all as the same may from time
to time be amended, modified, extended, renewed or restated.
"LOC Loan" shall have the meaning given to such term in the Loan Agreement
dated as of February 14, 1996 by and between Village Farms of Texas, L.P., as
borrower, Farm Credit Bank of Texas and Texas Production Credit Association, as
lenders, and CoBank, as Administrative Agent.
"Term Agent" means CoBank in its role as Agent under the Term Loan
Agreement and each Successor Agent (as defined in the Term Loan Agreement).
"Term Lenders" means CoBank, in its role as a lender under the Term Loan
Agreement, and any other entity that purchases, now or in the future, a
Syndication Interest (as defined in the Term Loan Agreement) in the Term Loan.
"Term Loan" means the credit facility made available to Debtor pursuant to
the Term Loan Agreement.
"Term Loan Agreement" means the Credit Agreement (Term Loan Funding) of
even date herewith by and between CoBank for its own benefit as a lender and as
Agent for the benefit of the present and future syndication parties as named or
defined therein, and Debtor, wherein the Term Lenders have agreed to lend to
Debtor an aggregate principal amount up to $50,000,000 for the purpose of
enabling Debtor to make term loans to eligible third parties to use for the
purposes therein specified.
"Term Loan Documents" means the Term Loan Agreement, the Hedge Agreement
and any and all other present and future agreements, documents and/or
instruments evidencing, documenting, securing or otherwise relating to any or
all of the Term Loan, all as the same may from time to time be amended,
modified, extended, renewed or restated.
"Underlying Construction Loans" shall have the meaning given to such term
in the Construction Loan Agreement.
"Underlying Construction Loan Collateral" means all of Debtor's assets
relating to the Underlying Construction Loans, including without limitation, all
promissory notes, loan agreements, security agreements, deeds of trust,
mortgages, guaranties, financing statements and other documents, agreements and
instruments executed in connection with the Underlying Construction Loans and
all collateral security therefor.
3
<PAGE>
"Underlying Line of Credit Borrower" means (a) the Underlying LOC Borrowers
(as defined in the Line of Credit Agreement), and (b) all subsidiaries of with
respect to which the LC Issuing Bank issues a letter of credit for the account
of Debtor in order to facilitate the purchase and sale by such subsidiaries of
vegetables and fruits.
"Underlying Line of Credit Collateral" means all of Debtor's assets
relating to the Underlying Line of Credit Loans, including without limitation,
all promissory notes, loan agreements, security agreements, reimbursement
agreements, deeds of trust, mortgages, guaranties, financing statements and
other documents, agreements and instruments executed in connection with the
Underlying Line of Credit Loans and all collateral security therefor.
"Underlying Line of Credit Loans" shall mean "Underlying Loans" as defined
in the Line of Credit Agreement and the reimbursement obligations owed to Debtor
in connection with the issuance of Letters of Credit (as defined in the Line of
Credit Agreement) pursuant to the Line of Credit Agreement.
"Underlying Term Loan Borrowers" shall have the meaning given to such term
in the Term Loan Agreement.
"Underlying Term Loans" shall have the meaning given to such term in the
Term Loan Agreement.
"Underlying Term Loan Collateral" means all of Debtor's assets relating to
the Underlying Term Loans, including without limitation, promissory notes, loan
agreements, security agreements, deeds of trust, mortgages, guaranties,
financing statements and other documents, agreements and instruments executed in
connection with the Underlying Term Loans and all collateral security therefor.
2. Collateral/Grant of Security Interest.
2.1. Grant of First Priority Interest. Debtor, for consideration and to
secure the Secured Obligations (as defined below), hereby grants a first
priority security interest to Secured Party in the Underlying Line of Credit
Collateral, tangible and intangible, wherever located and whether now owned or
hereafter acquired, together with all additions, substitutions, products thereof
and proceeds therefrom or arising out of the rights reflected therein, and all
renewals, amendments, substitutions, and replacements of all or any part
thereof, including without limitation the following property (collectively, the
"First Priority Collateral"):
(a) all promissory notes made by Underlying Line of Credit Borrowers
payable to Debtor to evidence the obligations of such Underlying Line of
Credit Borrowers to Debtor under their respective Underlying Line of Credit
Loans (collectively, "Underlying Line of Credit Notes");
4
<PAGE>
(b) all of Debtor's rights under (i) all loan agreements executed by
and between Debtor and an Underlying Line of Credit Borrower in connection
with an Underlying Line of Credit Loan (collectively, "Underlying Line of
Credit Agreements"), (ii) all mortgages, deeds of trust, security
agreements, financing statements, leasehold assignments and consents,
assignments and any other documents and agreements executed as security for
the obligations of an Underlying Line of Credit Borrower to Debtor
(collectively, "Underlying Line of Credit Security Documents"), and (iii)
any other instruments, documents or agreements executed and delivered in
connection with, or to secure the obligations of an Underlying Line of
Credit Borrower under its Underlying Line of Credit Agreement
(collectively, with its Underlying Line of Credit Note, Underlying Line of
Credit Agreement and Underlying Line of Credit Security Documents,
"Underlying Line of Credit Documents");
(c) all assets and properties acquired by Debtor through foreclosure,
or deed in lieu of foreclosure, on collateral for an Underlying Line of
Credit Loan, including without limitation the following:
(i) all of an Underlying Line of Credit Borrower's right, title
and interest in and to all permits, licenses, franchises,
certificates, plans and specifications, studies, contract rights (but
not obligations), claims against third parties, judgments, awards,
building materials, rights for utilities and other rights and
privileges obtained in connection with its Greenhouse Facility and the
real property on which its Greenhouse Facility is built ("Property"),
and all equipment, fixtures, and other personal property of any kind
or character, now or later located on or about its Property and its
Greenhouse Facility or used in connection with the construction or
operation thereof, or stored off its Property for future incorporation
on or about its Property and its Greenhouse Facility, together with
all accessories thereto, replacements thereof and substitutions
therefor;
(ii) all seed, fertilizer and other supplies, and all crops now
or in the future planted or growing on an Underlying Line of Credit
Borrower's Property, all crops harvested now or in the future on its
Property ("Produce") and all other farm products, and the products and
cash and non-cash proceeds of such crops, including general
intangibles, instruments, and Paid In Kind certificates and any
governmental subsidies, rebates or other payments with respect to
farming or related operations of such Underlying Line of Credit
Borrower on its Property or otherwise under any governmental programs;
(iii) all of the rents, bonuses, royalties, revenues, income,
proceeds, damages, profits and other benefits and income paid or
payable to an Underlying Line of Credit Borrower from its Property and
the improvements located thereon, the Leases (as defined below), or
from the use, possession, operation, or sale of its Property and the
improvements located thereon, including without limitation any
insurance or condemnation proceeds; and
5
<PAGE>
(iv) any and all leases, subleases, assignments, licenses,
concessions or other agreements (written or oral, now or later in
effect) which grant a possessory interest in and to, or the right to
use, all or any part of an Underlying Line of Credit Borrower's
Property and the improvements located thereon ("Leases"), and any and
all security and other deposits made in connection with the Leases and
all guaranties of those leases, including also any oil, gas and
mineral leases, and any bonuses, royalties, and other income from
Leases.
2.2. Grant of Second Priority Security Interest. Debtor, for consideration
and to secure the Secured Obligations, hereby grants a second priority security
interest to Secured Party in (a) the Underlying Construction Loan Collateral,
wherever located and whether now owned or hereafter acquired, together with all
additions, substitutions, products thereof and proceeds therefrom or arising out
of the rights reflected therein, and all renewals, amendments, substitutions,
and replacements of all or any part thereof, to be shared pari passu with the
Term Agent pursuant to the terms and provisions of the Intercreditor Agreement,
and (b) the Underlying Term Loan Collateral, wherever located and whether now
owned or hereafter acquired, together with all additions, substitutions,
products thereof and proceeds therefrom or arising out of the rights reflected
therein, and all renewals, amendments, substitutions, and replacements of all or
any part thereof, to be shared pari passu with the Construction Agent pursuant
to the terms and provisions of the Intercreditor Agreement (all of the foregoing
shall be collectively referred to herein as the "Second Priority Collateral").
2.3. Grant of First Priority Security Interest. Debtor, for consideration
and to secure the Secured Obligations, hereby grants a first priority security
interest to Secured Party to be shared pari passu with the Construction Agent
and the Term Agent pursuant to the terms and provisions of the Intercreditor
Agreement in all assets and properties of Debtor other than the First Priority
Collateral and the Second Priority Collateral, tangible and intangible, wherever
located and whether now owned or hereafter acquired, together with all
additions, substitutions, products thereof and proceeds therefrom or arising out
of the rights reflected therein, and all renewals, amendments, substitutions,
and replacements of all or any part thereof, including without limitation the
following property to the extent that it is not included in the First Priority
Collateral or the Second Priority Collateral (collectively, the "Shared
Collateral"):
all fixtures; furniture; furnishings, accounts; inventory
(including without limitation, returned or repossessed
goods); chattel paper; instruments, drafts; letters of
credit; money; utility and other deposits, documents;
equipment; tools; machinery; goods; motor vehicles;
investment property; general intangibles (including without
limitation, litigation rights and resulting judgments,
goodwill, patents, tradenames, trade secrets, trademarks and
other intellectual property, tax refunds, miscellaneous
rights to payment, entitlements, uncertificated securities,
margin accounts,
6
<PAGE>
computer programs, invoices, books, records and other
information relating to or arising out of Debtor's
business).
3. Secured Obligations. The security interests granted to Secured Party
under this Security Agreement shall secure the payment and performance of the
obligations to, and covenants and agreements of Debtor made for the benefit of,
the Line of Credit Lenders under the Line of Credit Loan Documents ("Secured
Obligations").
4. Representations and Warranties. Debtor represents and warrants to
Secured Party as follows:
4.1. Organization; Power and Authority, etc. Debtor is duly organized and
validly existing under the laws of the State of Delaware. Debtor has all
necessary power and authority to own its property, to carry on its business as
now owned and operated by it, and to make the Underlying Line of Credit Loans.
Debtor is duly qualified to do business and is in good standing in all
jurisdictions in which the failure to be so qualified would have a Material
Adverse Effect.
4.2. Due Authorization; Power. The execution, delivery and performance by
Debtor of this Security Agreement and the other Line of Credit Loan Documents
are within the powers of Debtor and have been duly authorized by all necessary
action on the part of Debtor.
4.3. Consents; Approvals. Debtor has obtained all consents or approvals of
any Person which are necessary for, or are required as a condition of, the
execution, delivery and performance of, and the enforcement of Secured Party's
rights and remedies under, this Security Agreement.
4.4. Title to Collateral. Debtor is the true and lawful owner of all
existing Underlying Line of Credit Loans, has full power and authority to pledge
and grant a security interest in the Underlying Line of Credit Loans and the
Underlying Line of Credit Documents, and has not granted any right or interest
in any existing or future Underlying Line of Credit Loans or the Underlying Line
of Credit Documents to any person or entity other than Secured Party, except for
the second priority security interest granted to the Construction Agent and the
Term Agent under the Construction Loan Documents and the Term Loan Documents,
respectively. Except as otherwise permitted hereunder or under the Line of
Credit Agreement and subject to the terms of the Intercreditor Agreement, Debtor
has good title to the Collateral free of all adverse claims, interests, liens,
or encumbrances and has full power and authority to sell, transfer, pledge, and
grant to Secured Party a security interest in, the Collateral.
4.5. Underlying Line of Credit Loans. With respect to the Underlying Line
of Credit Loans:
7
<PAGE>
(a) no default or event which with notice and/or the passage of time
would become a default under any of the Underlying Line of Credit Documents
for any Underlying Line of Credit Loan has occurred and is continuing;
(b) the proceeds of each existing Underlying Line of Credit Loan have
been, and the proceeds of each future Underlying Line of Credit Loan will
be, used for the purposes permitted under Sections 3.1 and 3.2 of the Line
of Credit Agreement;
(c) with respect to all existing Underlying Line of Credit Loans, the
Underlying Line of Credit Documents have been duly executed by the all
parties thereto and constitute the legal, valid and binding obligation of
all parties thereto, enforceable in accordance with their terms, subject to
the effects of bankruptcy, insolvency, and similar laws affecting the
rights of creditors generally or the availability of equitable remedies,
and are free from any right of set-off, counterclaim or other claim or
defense;
(d) each existing Underlying Line of Credit Loan is, and all future
Underlying Line of Credit Loans will be, secured by a first lien and
security interest in favor of Debtor in all assets of the Underlying Line
of Credit Borrower, free and clear of all other liens, security interests,
restrictions, adverse claims or defenses, except where the Underlying Line
of Credit Documents approved by Secured Party specifically state otherwise;
(e) to Debtor's knowledge and belief, there is no misstatement of a
material fact, nor an omission to state a material fact, in any of the
financial statements, projections, budgets or other information furnished
by or on behalf of any existing Underlying Line of Credit Borrower, nor,
has anything occurred subsequent to the furnishing of such information
which would have a material adverse effect on the results of operation,
business, property, or prospects of any existing Underlying Line of Credit
Borrower.
4.6. Principal Office; Collateral; Books and Records. The principal place
of business and, if Debtor has more than one place of business, the chief
executive office ("Principal Office") of Debtor and the locations of all
Collateral, other than Collateral in the possession of the Construction Agent,
the Term Agent or the Line of Credit Agent, and Debtor's books and records are
listed on Exhibit 4.6 attached hereto.
5. Covenants of Debtor. Debtor covenants to Secured Party that:
5.1. Title to Collateral. Except as otherwise permitted hereunder or under
the Line of Credit Agreement, Debtor shall not create or permit the existence of
any adverse claims, interests, liens, or other encumbrances against any of the
Collateral. Debtor shall (a) provide prompt written notice to Secured Party of
any future adverse claims, interests, liens, or encumbrances against any
Collateral, (b) promptly obtain a
8
<PAGE>
release or discharge of any such claims, interests, liens, or other encumbrances
and (c) diligently defend Debtor's and Secured Party's interests in the
Collateral.
5.2. Location of Debtor, Collateral and Books and Records. Debtor will not
change any place of business, its chief executive office, the location of any
Collateral or the location of its books and records without giving at least
thirty (30) days' prior written notice to Secured Party and furnishing Secured
Party with such documents as Secured Party may reasonably request pursuant to
Section 5.10 hereof prior to taking any such action.
5.3. Books and Records. Debtor shall keep proper books of record and
account in which complete and correct entries will be made of all of Debtor's
dealings in accordance with GAAP.
5.4. Inspection of Collateral. Upon Secured Party's request, Debtor shall
allow Secured Party, the Line of Credit Lenders or persons designated by any of
them, during normal business hours or at such other times as the parties may
agree, to: (a) examine the Collateral, wherever located, (b) examine and make
extracts or copies from Debtor's books and records; and (c) discuss Debtor's
affairs, finances, operations, and accounts with its respective officers,
directors, employees, and independent certified public accountants.
5.5. Transfers, Dispositions and Encumbrances. Except as otherwise
permitted hereunder or under the Line of Credit Agreement, (a) Debtor will not
offer to sell, sell, transfer or otherwise dispose of any of the Collateral or
any interest therein, and (b) Debtor will not create, incur, or permit to exist
any mortgage, lien, charge, encumbrance, or security interest whatsoever with
respect to the Collateral.
5.6. Maintenance and Repair; Taxes; Insurance. Debtor will keep the
Collateral in good order and repair and adequately insured at all times in
accordance with the provisions of the Line of Credit Agreement. Debtor will pay
promptly all taxes and other governmental charges with respect to the Collateral
when due and payable except as otherwise permitted hereunder or under the Line
of Credit Agreement. Secured Party or the Line of Credit Lenders, at their
option, may (a) discharge (i) any taxes or other governmental charges that
Debtor is required to pay but fails to pay, unless such taxes or governmental
charges are being contested in good faith by appropriate actions or proceedings;
provided that such reserves or other appropriate provisions, if any, as shall be
required by GAAP, shall have been made for such taxes or other governmental
charges, and (ii) liens, security interests, or other encumbrances to which any
Collateral is at any time subject that are not permitted hereunder or under the
Line of Credit Agreement, and (b) upon the failure of Debtor to do so, purchase
insurance on any insurable Collateral and pay for the repair, maintenance, or
preservation thereof, and Debtor agrees to reimburse Secured Party and the Line
of Credit Lenders on demand for any payment or expenses incurred by any of them
pursuant to the foregoing authorization and any unreimbursed amounts shall
constitute
9
<PAGE>
amounts owing under the Secured Obligations for all purposes under this Security
Agreement.
5.7. Compliance with Laws. Debtor shall not use the Collateral in violation
of any applicable statutes, regulations or ordinances where such violation would
have a Material Adverse Effect.
5.8. Change in Structure or Name. Debtor shall not, without the prior
written consent of Secured Party, change its name or business structure.
5.9. Underlying Line of Credit Documents. Debtor shall take all such
actions as are necessary to maintain the Underlying Line of Credit Documents in
full force and effect. Without the consent of Secured Party, Debtor shall not
amend, supplement, grant consents, or otherwise modify or waive compliance with
any provision of any Underlying Line of Credit Document. Each Underlying Line of
Credit Loan shall be secured by a first lien on all the assets of the Underlying
Line of Credit Borrower, except where the Underlying Line of Credit Documents
for such Underlying Line of Credit Loan approved by Secured Party specifically
state otherwise.
5.10. Possession of Collateral; Further Assurances. Debtor shall (a)
deliver promptly to Secured Party, with such endorsement as Secured Party shall
require, all instruments and documents comprising part of the First Priority
Collateral or the Shared Collateral, now owned or hereafter acquired, of which
possession is required in order to perfect the security interests of Secured
Party granted herein, (b) upon demand, execute, assign and endorse all proxies,
applications, acceptances, stock powers, chattel paper, documents, instruments
and other evidences of payment or writings constituting or relating to any of
the Collateral, and (c) execute from time to time financing statements and any
other documents in form and content satisfactory to Secured Party and perform
such other acts, including without limitation the notation of Secured Party's
interest on the face of all chattel paper, as Secured Party may reasonably
request to perfect, maintain and continue a valid security interest in the
Collateral, and Debtor will pay all costs associated with the filing or
recordation of any such documents.
6. Events of Default. Debtor shall be in default under this Security
Agreement upon the occurrence of an Event of Default under the Line of Credit
Agreement ("Event of Default").
7.Rights Upon Default.
7.1. General. Upon the occurrence of an Event of Default and at any time
thereafter (unless such Event of Default has been waived in writing by Secured
Party), Secured Party may declare the Secured Obligations immediately due and
payable, and Secured Party shall, subject to the provisions of the Intercreditor
Agreement, have all the rights and remedies of a secured party under Article 9
of the UCC or other applicable law and all the rights provided herein, in the
Line of Credit
10
<PAGE>
Agreement, or in any other instruments and documents executed and delivered in
connection with, or to secure the obligations of Debtor under, the Line of
Credit Agreement, all of which rights and remedies shall, to the full extent
permitted by law, be cumulative.
7.2. Right of Secured Party to Take Possession and Dispose of Collateral.
Upon the occurrence of an Event of Default, subject to and to the extent
permitted by the provisions of the UCC or other applicable law and the
Intercreditor Agreement, unless such Event of Default has been waived in writing
by Secured Party, Secured Party shall have the right to:
(a) take possession of the Collateral and enter upon the premises on
which the Collateral or any part thereof may be situated and remove the
Collateral from those premises and thereafter to hold, store, and/or use,
operate, manage, and control the Collateral;
(b) require Debtor to deliver the Collateral to Secured Party at a
place to be designated by Secured Party which is reasonably convenient to
both parties; and
(c) sell, lease or otherwise dispose of any or all of the Collateral
in its then present condition or following any commercially reasonable
preparation or processing thereof, whether by public or private sale, for
cash, on credit or otherwise, with or without representations or
warranties, and upon such terms as may be acceptable to Secured Party, and
Secured Party may purchase the Collateral at any public sale.
7.3. Notice of Disposition of Collateral. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Secured Party will give notice to Debtor of any
sale or other disposition by Secured Party with respect to any Collateral which
is subject to Article 9 of the UCC at the address for Debtor specified above, or
such other address as may from time to time be shown on Secured Party's records,
at least five (5) Business Days prior to such action. Any such notice shall be
deemed to meet any requirement hereunder or under an applicable law (including
without limitation the UCC) that reasonable notification be given of the time
and place of such sale or other disposition. Debtor consents and agrees that, in
addition to the other rights and remedies provided to Secured Party in this
Article 7, Secured Party may, in lieu of, or prior to, selling the Collateral at
public or private sale, retain any payments received on account of any of the
Collateral and apply the same to amounts owing under the Secured Obligations
until such time as the Secured Obligations have been paid in full.
7.4. Right of Secured Party to Use and Operate Collateral. Upon taking
possession of the Collateral, Secured Party may, from time to time, make all
repairs, replacements, alterations, additions, and improvements to and of the
Collateral that Secured Party deems proper. Debtor agrees to reimburse Secured
Party on demand for any expenses incurred by Secured Party pursuant to the
foregoing authorization and
11
<PAGE>
any unreimbursed amounts shall constitute amounts owing under the Secured
Obligations for all purposes under this Security Agreement. In any such case,
subject to and to the extent permitted by the provisions of the Intercreditor
Agreement, the UCC, or other applicable law, Secured Party shall have the right
to operate, manage and control the Collateral and to carry on Debtor's business
and to exercise all rights and powers of Debtor in respect to the Collateral as
Secured Party shall deem best, including the right to enter into any agreements
with respect to the Collateral or any part thereof, that Secured Party sees fit;
and Secured Party shall be entitled to collect and receive all rents, issues,
profits, fees, revenues, and other income of the Collateral and every part
thereof. Such rents, issues, profits, fees, revenues, and other income shall be
applied to pay the expenses of holding and operating the Collateral and of
conducting the business thereof and of all maintenance, repairs, replacements,
alterations, additions, and improvements, and to make all payments which Secured
Party may be required or may elect to make, if any, for taxes, assessments,
insurance, and other charges upon the Collateral or any part thereof, and all
other payments which Secured Party may be required or authorized to make under
any provision of this Security Agreement (including reasonable attorneys' fees
and expenses). The remainder of such rents, issues, profits, fees, revenues, and
other income shall be applied to the payment of the Secured Obligations in such
order of priority as Secured Party shall determine in accordance with the
provisions of the Intercreditor Agreement and, unless otherwise provided by law
or by a court of competent jurisdiction, any surplus from the sale of the
Collateral shall be returned to Debtor. Without limiting the generality of the
foregoing, but subject to the provisions of the Intercreditor Agreement, Secured
Party shall have the right to apply for and have a receiver appointed ex-parte
by a court of competent jurisdiction in any action taken by Secured Party to
enforce its rights and remedies hereunder in order to manage, protect, and
preserve the Collateral and continue the operation of the business of Debtor and
to collect all revenues and profits thereof and apply them to the payment of all
expenses and other charges of such receivership, including the compensation of
the receiver, and to the payment of the Secured Obligations as described above
until a sale or other disposition of the Collateral shall be finally made and
consummated.
7.5. Collection of Accounts. Upon the occurrence of any Event of Default,
unless such Event of Default has been waived in writing by Secured Party,
Secured Party shall, subject to the provisions of the Intercreditor Agreement,
have the right at any time and from time to time, without notice, to (a) notify
account debtors that accounts have been assigned to Secured Party; (b) advise
account debtors of Secured Party's security interest and/or instruct account
debtors to make payments directly to Secured Party; (c) charge to any escrow or
other account of Debtor with Secured Party or any Line of Credit Lender or
controlled by any of them, any item of payment received by Secured Party which
is dishonored by the drawee or maker thereof; (d) endorse all items of payment
made payable to Debtor which may come into the possession of Secured Party; (e)
collect all accounts in Secured Party's name or Debtor's name and take control
of any cash or non-cash proceeds of accounts and of any returned or repossessed
goods; (f) compromise, extend or renew the amount owing on any account
12
<PAGE>
or deal with any account as Secured Party may deem advisable; and (g) make
exchanges, substitutions or surrenders of collateral for any account. Once any
or all account debtors have been notified, whether by Debtor or Secured Party,
to make payment directly to Secured Party, all amounts and proceeds received by
Debtor in respect of such accounts shall be received in trust for the benefit of
Secured Party, shall be segregated from other funds of Debtor, and shall be
immediately paid over to Secured Party in the same form as so received. Such
actions and the application of any such amounts to the Secured Obligations shall
not be deemed to constitute retention in satisfaction of the Secured Obligations
under Section 4-9-505 of the UCC and any comparable provision of the Uniform
Commercial Code as enacted in any other state where the Collateral is located.
7.6. Rights of Secured Party With Respect to the Securities Collateral.
Upon the occurrence of any Event of Default, unless such Event of Default has
been waived in writing by Secured Party:
(a) Secured Party, in its discretion, and without notice to Debtor,
may, subject to the provisions of the Intercreditor Agreement, take any one
or more of the following actions without liability except to account for
property actually received by it: (i) transfer to or register in its name
or the name of its nominee any stock certificates or evidence of other
equity interests included in the Collateral ("Securities Collateral"), with
or without indication of the security interest herein created, and whether
or not so transferred or registered, receive the income, dividends and
other distributions thereon and hold them as additional Collateral or apply
them to the Secured Obligations in any order of priority; (ii) exercise or
cause to be exercised all voting and corporate powers with respect to any
of the Securities Collateral so registered or transferred, including (1)
all rights to call or require shareholders meetings and to remove or elect
directors, and (2) all rights of proxy appointments, conversion, exchange,
subscription or any other rights, privileges or options pertaining to such
Securities Collateral, as if the absolute owner thereof; (iii) exchange any
of the Securities Collateral for other property upon a reorganization,
recapitalization, reclassification or other readjustment and, in connection
therewith, deposit any of the Securities Collateral with any depository
upon such terms as Secured Party may determine; and (iv) in its name or in
the name of Debtor, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for
any of the Securities Collateral, and Secured Party further shall have the
right at any time to sign and endorse the name of Debtor upon any stock
certificate, stock power, check, draft, money order, or any other documents
of title or evidences of payment with respect to the Securities Collateral,
in the name of Debtor, it being the intention of Debtor to grant to Secured
Party the right to sell any portion or all of the Securities Collateral and
the proceeds therefrom, upon the occurrence of an Event of Default
hereunder.
(b) If Secured Party in good faith believes that the Securities Act of
1933 ("Act") or any other state or federal law prohibits or restricts the
customary manner of sale or distribution of any of the Securities
Collateral, Secured Party may,
13
<PAGE>
subject to the provisions of the Intercreditor Agreement, sell such
Securities Collateral privately or in any other manner deemed advisable by
Secured Party at such price or prices as Secured Party determines in its
sole discretion. Debtor recognizes that such prohibition or restriction may
cause the Securities Collateral to have less value than it otherwise would
have and that, consequently, such sale or disposition by Secured Party may
result in a lower sales price than if the sale were otherwise held. Secured
Party may sell the Securities Collateral in one or more sales or parcels,
for cash, credit or future delivery, and with or without the use of a
stockbroker, as Secured Party may deem advisable. Secured Party may be the
purchaser of any or all of the Securities Collateral. In the event that
Secured Party elects to sell all or any part of the Securities Collateral
in a public sale, Debtor shall use its best efforts to register and qualify
the Securities Collateral, or the applicable part thereof, under the Act
and all state securities laws, and all expenses thereof shall be payable by
Debtor, including, but not limited to, all costs of registration or
qualification of any Securities Collateral under the Act and any state
securities laws, and the sale of such Securities Collateral, including, but
not limited to, brokers' or underwriters' commissions, fees or discounts,
accounting and legal fees and disbursements, and expenses of transfer and
sale.
(c) Notwithstanding any provision herein to the contrary, CoBank may
transfer, dispose or liquidate Debtor's CoBank Equity Interests in
accordance with its usual procedures and in accordance with its bylaws and
capital plan as applicable to cooperative borrowers generally.
7.7. Collection of Underlying Line of Credit Notes. Upon the occurrence of
any Event of Default, unless such Event of Default has been waived in writing by
Secured Party, Secured Party may, subject to the provisions of the Intercreditor
Agreement, (a) notify and require each Underlying Line of Credit Borrower to
make all payments owing on the Underlying Line of Credit Notes directly to
Secured Party, (b) endorse all items of payment, with respect to amounts owing
under Underlying Line of Credit Notes, made payable to Debtor which may come
into the possession of Secured Party; (c) collect amounts owing under the
Underlying Line of Credit Notes in Secured Party's name or Debtor's name; (d)
compromise, extend or renew the amount owing on any Underlying Line of Credit
Loan or deal with any Underlying Line of Credit Loan as Secured Party may deem
advisable; (e) make exchanges, substitutions or surrenders of collateral for any
Underlying Line of Credit Loan, and (f) declare the Underlying Line of Credit
Loans immediately due and payable, exercise all rights of Debtor under the
Underlying Line of Credit Documents and foreclose on all collateral for the
Underlying Line of Credit Loans in accordance with the rights of Debtor under
the Underlying Line of Credit Documents. Once any or all Underlying Line of
Credit Borrowers have been notified, whether by Debtor or Secured Party, to make
payment directly to Secured Party, all amounts and proceeds received by Debtor
in respect of such Underlying Line of Credit Loans shall be received in trust
for the benefit of Secured Party, shall be segregated from other funds of
Debtor, and shall be immediately paid over to Secured Party in the same form as
so received. Debtor agrees that by taking such action Secured Party will be
deemed to have acted in a
14
<PAGE>
commercially reasonable manner and that such action by Secured Party will not be
deemed to constitute retention of the Underlying Line of Credit Notes in
satisfaction of the Secured Obligations under Section 4-9-505 of the UCC and any
comparable provision of the Uniform Commercial Code as enacted in the state
where Debtor is located or otherwise.
8. General Provisions.
8.1. Appointment and Rights of Agent. Debtor acknowledges, agrees, and
consents (a) to the appointment by the Line of Credit Lenders of CoBank as Agent
under the Line of Credit Agreement ("Agent") for the purposes of administering
certain aspects of the Line of Credit Loan, (b) that CoBank as Agent is acting
for the benefit of the Line of Credit Lenders hereunder, and (c) that in the
event that a Successor Agent is appointed for CoBank in its capacity as Agent in
accordance with the provisions of the Line of Credit Agreement and written
notification thereof is provided to Debtor by CoBank, any Line of Credit Lender
or such Successor Agent, such Successor Agent shall be entitled to exercise all
the rights of Secured Party hereunder, and that Debtor will perform all its
obligations hereunder with respect to such rights as it may be directed by such
Successor Agent.
8.2. Amendment, Modification, and Waiver. Without the prior written consent
of Secured Party and Debtor, no amendment, modification, or waiver of, or
consent to any departure by Debtor from, any provision hereunder shall be
effective. Any such amendment, modification, waiver, or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No waiver by Secured Party of any default shall be effective unless in
writing, and any such waiver shall not operate as a waiver of any other default
or the same default on a future occasion. The taking of the security interest
created by this Security Agreement shall not be deemed to waive or impair any
other security interest Secured Party may have or hereafter acquire for the
payment of the Secured Obligations, nor shall the taking of any such additional
security interest waive or impair this Security Agreement; but Secured Party may
resort to any security it may have in the order it may deem proper, and
notwithstanding any collateral security, Secured Party shall retain its rights
of setoff against Debtor. No delay or omission on the part of Secured Party in
exercising any right hereunder shall operate as a waiver of such right or of any
other right hereunder.
8.3. Costs and Attorneys' Fees. Debtor will, upon demand, pay to Secured
Party and the Line of Credit Lenders the amount of any and all expenses,
including the reasonable attorneys' fees and expenses of counsel for Secured
Party and the Line of Credit Lenders and of any experts and agent, which Secured
Party and the Line of Credit Lenders may incur in connection with (a) the
administration of this Security Agreement upon the occurrence of an Event of
Default, unless and until such Event of Default has been waived in writing by
Secured Party; (b) the collection, retaking, storage, custody, preservation, use
or operation of, preparing for sale, selling or other disposition and delivery,
collection from, or other realization upon, any of the Collateral; (c) the
exercise or enforcement of any of the rights of Secured Party
15
<PAGE>
hereunder; or (d) the failure by Debtor to perform or observe any of the
provisions hereof.
8.4. Revival of Obligations. To the extent Debtor or any third party makes
a payment or payments to Secured Party or Secured Party enforces its security
interest or exercises any right of setoff, and such payment or payments or the
proceeds thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, and/or required to be repaid to a trustee, receiver, or
any other party under any bankruptcy, insolvency or other law or in equity,
then, to the extent of such recovery, the Secured Obligations or any part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment or payments had not been made, or such
enforcement or setoff had not occurred.
8.5. Performance by Secured Party. In the event Debtor shall at any time
fail to pay or perform punctually any of its obligations hereunder, Secured
Party may, at its option and without notice to or demand upon Debtor, without
obligation and without waiving or diminishing any of its other rights or
remedies hereunder, fully perform or discharge any of such duties. All costs and
expenses incurred by Secured Party in connection therewith, together with
interest thereon at the Default Interest Rate set forth in the Line of Credit
Agreement, shall become part of the Secured Obligations and be paid by Debtor
upon demand.
8.6. Power of Attorney. Secured Party is hereby appointed Debtor's
attorney-in-fact, with full power of substitution, at Secured Party's option and
Debtor's expense, to do all acts and things which Secured Party may reasonably
deem necessary to perfect and continue to perfect the security interest created
by this Security Agreement, to protect its interest in the Collateral, and, upon
the occurrence of an Event of Default hereunder (unless and until such Event of
Default has been waived in writing by Secured Party), to protect or enforce and
collect on the Collateral subject to the provisions of the Intercreditor
Agreement, including without limitation:
(a) to obtain and adjust the insurance required to be maintained
hereunder;
(b) to ask, demand, collect, sue for, recover, compromise, receive and
give receipts for moneys due and to become due under the Underlying Line of
Credit Documents;
(c) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with (a) above;
(d) to file any claims or take any action or institute any proceedings
which Secured Party may deem necessary or desirable for the collection of
any of the Collateral or otherwise to enforce the rights of the Secured
Party with respect to any of the Collateral; and
16
<PAGE>
(e) to collect the Underlying Line of Credit Loans and Underlying Line
of Credit Notes and to enforce all rights and remedies available to Debtor
under the Underlying Line of Credit Documents and to endorse all items of
payment on the Underlying Line of Credit Loans made payable to Debtor which
may come into the possession of Secured Party.
The power vested in Secured Party as Debtor's attorney-in-fact is, and shall be
deemed to be, coupled with an interest and cannot be revoked.
8.7. Protection of Collateral. Secured Party shall not be required to take
any steps necessary to preserve any rights in the Collateral. Secured Party
shall further be under no duty to exercise or to withhold the exercise of any of
the rights, powers, privileges and options expressly or implicitly granted to
Secured Party in this Security Agreement, and Secured Party shall not be
responsible for any failure to exercise such rights nor for its delay in so
doing. Secured Party shall be deemed to have exercised reasonable care as
custodian of the Collateral if it takes such action to protect and preserve the
Collateral as Debtor shall request, but failure to honor any such request shall
not be deemed to be a failure by Secured Party to exercise reasonable care. The
care which Secured Party gives to the safekeeping of its property of like kind
shall constitute reasonable care of the Collateral when in Secured Party's
possession.
8.8. Additional Rights of Secured Party. Secured Party, in its discretion,
and without notice to Debtor, may take any one or more of the following actions
without liability except to account for property actually received by it: (a)
after the occurrence of an Event of Default, unless such Event of Default has
been waived in writing by Secured Party, renew, extend, or otherwise change the
terms and conditions of any of the Collateral; (b) take or release any other
collateral as security for any of the Collateral or the Secured Obligations; and
(c) add or release any guarantor, endorser, surety or other party to any of the
Collateral or Secured Obligations.
8.9. Successors and Assigns. This Security Agreement shall be binding upon
and inure to the benefit of Debtor and Secured Party and their respective
successors and assigns, except that Debtor may not assign or transfer its rights
or obligations hereunder without the prior written consent of Secured Party.
8.10. Advances. Nothing herein contained shall be construed to obligate the
Line of Credit Lenders to make any loans or advances to Debtor and the sole
purpose of this Security Agreement is to provide collateral security for the
Secured Obligations.
8.11. Severability. Should any provision of this Security Agreement be
deemed unlawful or unenforceable, said provision shall be deemed several and
apart from all other provisions of this Security Agreement and all remaining
provisions of this Security Agreement shall be fully enforceable.
17
<PAGE>
8.12. Governing Law. This Security Agreement shall be governed by and
interpreted in accordance with the laws of the State of Colorado except to the
extent that the validity or perfection of the security interest hereunder, or
remedies hereunder in respect of any particular collateral, are governed by the
laws of a jurisdiction other than the State of Colorado.
8.13. Notices. Notices by any party hereto to any other party hereto shall
be given as provided in the Line of Credit Agreement.
8.14. Financing Statement. A copy, including a photocopy, of this Security
Agreement may be filed as a financing statement. Debtor authorizes Secured Party
to file financing statements without Debtor's signature where permitted by law.
8.15. Conflict with Line of Credit Agreement. In the event of a conflict
between the terms of this Security Agreement and those of the Line of Credit
Agreement, the provisions of the Line of Credit Agreement shall control.
This Security Agreement is executed as of the date first above written.
DEBTOR:
VILLAGE FARMS INTERNATIONAL
FINANCE ASSOCIATION, a cooperative
corporation formed under the laws of the
state of Delaware
By:
---------------------------------------
Name: J. Kevin Cobb
Title: Vice President
SECURED PARTY:
COBANK, ACB, as Agent on behalf of and for
the benefit of the Line of Credit Lenders
By:
---------------------------------------
Name: Greg Somerhalder
Title: Vice President
18
EXHIBIT 10.84
CREDIT AGREEMENT
(Construction Loan Funding)
by and between
COBANK, ACB,
as Agent and as a Syndication Party,
and
VILLAGE FARMS INTERNATIONAL FINANCE ASSOCIATION
dated as of June 24, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article 1 DEFINED TERMS..............................................................1
1.1 Activation Commitment........................................................1
1.2 Activation Request...........................................................1
1.3 Additional Costs.............................................................1
1.4 Administrative Agent Fee.....................................................1
1.5 Advance......................................................................1
1.6 Advance Date.................................................................1
1.7 Advance Payment..............................................................1
1.8 Advance Request..............................................................1
1.9 Aggregate Commitment.........................................................1
1.10 APD.........................................................................1
1.11 Authorized Officer..........................................................2
1.12 Availability Period.........................................................2
1.13 Bank Debt...................................................................2
1.14 Base Rate...................................................................2
1.15 Base Rate Loans.............................................................2
1.16 Base Rate Margin............................................................2
1.17 BDGCFR......................................................................2
1.18 Borrower Benefit Plan.......................................................2
1.19 Borrower Debt...............................................................2
1.20 Borrower Pension Plan.......................................................2
1.21 Business Day................................................................2
1.22 Change in Law...............................................................2
1.23 Closing Date................................................................3
1.24 CoBank Equity Interests.....................................................3
1.25 Code........................................................................3
1.26 Collateral..................................................................3
1.27 Commitment Request..........................................................3
1.28 Compliance Certificate......................................................3
1.29 Construction Letter of Credit...............................................3
1.30 Construction Loan Agent.....................................................3
1.31 Contributing Syndication Parties............................................3
1.32 Credit Agreement (Line of Credit Facility)..................................3
1.33 Credit Agreement (Term Loan Funding)........................................3
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
1.34 Default Interest Rate.......................................................3
1.35 Delinquency Interest........................................................3
1.36 Delinquent Amount...........................................................3
1.37 Delinquent Syndication Party................................................4
1.38 Environmental Laws..........................................................4
1.39 Environmental Regulations...................................................4
1.40 Equity......................................................................4
1.41 Equity Margin...............................................................4
1.40 Equity to NFI...............................................................4
1.42 Equity Margin Report........................................................4
1.43 Equity Margin Report Deadline...............................................4
1.44 Equity to NFI...............................................................4
1.45 ERISA.......................................................................4
1.46 Event of Default............................................................4
1.47 Fair Market Value...........................................................4
1.48 Fixed Rate Loan.............................................................4
1.49 Fixed Rate Period...........................................................4
1.50 Fixed Rate Request..........................................................5
1.51 Funding Losses..............................................................5
1.52 GAAP........................................................................5
1.53 Greenhouse Facility.........................................................5
1.54 Guarantor...................................................................5
1.55 Guarantor Cash Flow.........................................................5
1.56 Guarantor Collateral........................................................5
1.57 Guarantor Security Documents................................................5
1.58 Guaranty....................................................................5
1.59 Hazardous Substances........................................................5
1.60 Indemnified Agency Parties..................................................5
1.61 Indemnified Parties.........................................................5
1.62 Intercreditor Agreement.....................................................5
1.63 Leasehold Assignment & Consent..............................................6
1.64 Letter of Credit Cap........................................................6
1.65 Letter of Credit Fee........................................................6
1.66 LIBO Rate...................................................................6
1.67 LIBO/Quoted Rate Margin.....................................................6
1.68 Licensing Laws..............................................................6
1.69 Line of Credit Facility.....................................................6
1.70 Loan........................................................................6
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
1.71 Loan Advance Amount.........................................................6
1.72 Loan Documents..............................................................6
1.73 Loan Proceeds...............................................................6
1.74 Majority Lenders............................................................6
1.75 Material Adverse Effect.....................................................6
1.76 Material Agreements.........................................................6
1.77 Maturity Date...............................................................7
1.78 Maximum Syndication Amount..................................................7
1.79 Net Fixed Investments.......................................................7
1.80 Note or Notes...............................................................7
1.81 Notice of Loan Advance......................................................7
1.82 Organization Documents......................................................7
1.83 Payment Account.............................................................7
1.84 Payment Distribution........................................................7
1.85 Permitted Encumbrance.......................................................7
1.86 Person......................................................................7
1.87 Potential Default...........................................................7
1.88 Preliminary Commitment......................................................7
1.89 Proposed Underlying Construction Loan.......................................7
1.90 Quarter.....................................................................7
1.91 Quoted Rate.................................................................7
1.92 Quoted Rate Index...........................................................8
1.93 Quoted Rate Loan............................................................8
1.94 Quoted Rate Period..........................................................8
1.95 Quoted Rate Request.........................................................8
1.96 Request for Underlying Construction Loan Activation.........................8
1.97 Required License............................................................8
1.98 Regular Payments............................................................8
1.99 Regulatory Change...........................................................8
1.100 Security Documents.........................................................8
1.101 Successor Agent............................................................8
1.102 Super Majority.............................................................8
1.103 Syndication Interest.......................................................8
1.104 Syndication Parties........................................................8
1.105 Syndication Party Advance Date.............................................9
1.106 Syndication Share..........................................................9
1.107 Term Loan Facility.........................................................9
1.108 Title Commitments..........................................................9
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
1.109 Title Insurers.............................................................9
1.110 Title Policies.............................................................9
1.111 Transfer...................................................................9
1.112 Underlying Borrowers.......................................................9
1.113 Underlying Construction Loan...............................................9
1.114 Underlying Construction Loan Borrowers.....................................9
1.115 Underlying Construction Loan Conditions....................................9
1.116 Underlying Construction Loan Documents.....................................9
1.117 Underlying Liens...........................................................9
1.118 Underlying Term Loan Borrowers.............................................9
1.119 Wire Instructions..........................................................9
Article 2 CREDIT FACILITY...........................................................10
2.1 Loan........................................................................10
2.2 Letter of Credit............................................................10
Article 3 PURPOSES..................................................................10
3.1 Purpose - Loan..............................................................10
3.2 Purpose - Construction Letter of Credit.....................................10
Article 4 AVAILABILITY..............................................................10
4.1 Availability................................................................10
Article 5 INTEREST AND FEES.........................................................11
5.1 Interest Calculation........................................................11
5.1.1 Base Rate Option...................................................11
5.1.2 Fixed Rate Option..................................................11
5.1.3 Quoted Rate Option.................................................11
5.1.4 Equity Margin......................................................11
5.1.5 Default Interest Rate..............................................12
5.2 Additional Provisions for Fixed Rate Loans..................................12
5.2.1 Inapplicability or Unavailability of LIBO Rate.....................12
5.2.2 Change in Law; Fixed Rate Loan Unlawful............................13
5.2.3 Increased Costs....................................................13
5.3 Fees........................................................................14
5.3.1 Facility Fee.......................................................14
5.3.2 Administrative Agent Fee...........................................14
5.3.3 Construction Loan Agent Fee........................................14
5.3.4 Letter of Credit Fee...............................................14
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article 6 NOTES; PAYMENTS...........................................................14
6.1 Promissory Notes............................................................14
6.2 Principal Payments..........................................................15
6.3 Interest Payments...........................................................15
6.4 Application of Regular Payments.............................................15
6.5 Manner of Payment...........................................................16
Article 7 PREPAYMENTS...............................................................16
7.1 Voluntary Prepayments.......................................................16
7.1.1 Voluntary Prepayment of Base Rate Loan.............................16
7.1.2 Voluntary Prepayment of Fixed Rate Loans and Quoted Rate Loans.....16
7.1.3 Funding Losses.....................................................16
7.2 Minimum Prepayment Amount...................................................17
7.3 Application of Prepayments..................................................17
Article 8 COBANK EQUITY.............................................................17
Article 9 SECURITY..................................................................18
9.1 Borrower's Assets...........................................................18
9.2 Guaranty....................................................................18
Article 10 REPRESENTATIONS AND WARRANTIES...........................................18
10.1 Organization, Good Standing, Etc...........................................18
10.2 Corporate Authority, Due Authorization; Consents...........................19
10.3 Title to Property..........................................................19
10.4 Litigation.................................................................19
10.5 No Violations..............................................................19
10.6 Binding Agreement..........................................................19
10.7 Compliance with Laws.......................................................20
10.8 Principal Place of Business................................................20
10.9 Underlying Construction Loans; Underlying Construction Loan Documents......20
10.10 Payment of Taxes..........................................................20
10.11 Licenses and Approvals....................................................21
10.12 Employee Benefit Plans....................................................21
10.13 Equity Investments........................................................21
10.14 Real Property.............................................................21
10.15 Personal Property.........................................................22
10.16 Borrower Membership.......................................................22
10.17 Environmental Compliance..................................................22
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
10.18 Fiscal Year...............................................................22
10.19 Material Agreements.......................................................22
10.20 Regulations G, U and X....................................................22
10.22 Disclosure................................................................22
Article 11 CONDITIONS TO ADVANCES...................................................22
11.1 Conditions to Closing......................................................22
11.1.1 Loan Documents....................................................23
11.1.2 Searches; UCC Filings; Recordings; Title Insurance................23
11.1.3 Approvals.........................................................23
11.1.4 Organizational Documents..........................................23
11.1.5 Evidence of Corporate Action......................................24
11.1.6 Legal Opinion for Borrower and Guarantor..........................24
11.1.7 Evidence of Insurance.............................................24
11.1.8 Phase I Environmental Studies.....................................24
11.1.9 Survey............................................................24
11.1.10 Material Agreements..............................................24
11.1.11 Appointment of The Corporation Company...........................24
11.1.12 No Material Change...............................................24
11.1.13 Fees and Expenses................................................25
11.1.14 Application; CoBank Equity Interest Purchase Obligation..........25
11.1.15 Further Assurances...............................................25
11.2 Conditions to Issuance of Preliminary Commitment...........................25
11.2.1 Preliminary Commitment Request....................................25
11.2.2 No Material Change................................................25
11.2.3 Default...........................................................26
11.2.4 Default...........................................................26
11.2.5 Fees and Expenses.................................................26
11.3 Conditions to Activation...................................................26
11.3.1 Activation Request................................................26
11.3.2 Approval by Super Majority........................................26
11.3.3 No Material Change................................................27
11.3.4 Default...........................................................27
11.3.5 Representations and Warranties....................................27
11.3.6 Fees and Expenses.................................................27
11.4 Conditions to Initial Advance..............................................27
11.4.1 Underlying Construction Loan Documents; Possession of Documents...27
11.4.2 Advance Request...................................................28
</TABLE>
vi
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
11.4.3 Default...........................................................28
11.4.4 Representations and Warranties....................................29
11.4.5 Fees and Expenses.................................................29
11.5 Conditions to All Subsequent Advances......................................29
11.5.1 Representations and Warranties....................................29
11.5.2 No Event of Default...............................................29
11.5.3 No Material Adverse Change........................................29
11.5.4 Advance Request...................................................29
11.6 Additional Disbursement Conditions.........................................30
11.6.1 Aggregate Commitment Amount.......................................30
11.6.3 Disbursement Period...............................................30
11.6.4 Illegality of Loan................................................30
11.7 Requests for and Conditions to Issuance of Construction Letters of Credit..30
Article 12 AFFIRMATIVE COVENANTS....................................................30
12.1 Books and Records..........................................................30
12.2 Reports and Notices........................................................30
12.2.1 Annual Financial Statements.......................................30
12.2.2 Quarterly Financial Statements....................................31
12.2.3 Additional Information............................................31
12.2.4 Notice of Default.................................................31
12.2.5 Notice of Certain Changes.........................................31
12.2.6 Notice of Litigation..............................................31
12.2.7 Notice of Material Adverse Effect.................................31
12.2.8 Notice of Environmental Litigation................................32
12.2.9 Regulatory and Other Notices......................................32
12.2.10 Adverse Action Regarding Required Licenses.......................32
12.2.11 Default of Underlying Construction Loan..........................32
12.2.12 Annual Attorney's Opinion Regarding Collateral...................32
12.3 Eligibility Certificate....................................................32
12.4 Maintenance of Existence and Qualification.................................32
12.5 Compliance with Legal Requirements and Agreements..........................33
12.6 Compliance with Environmental Laws.........................................33
12.7 Taxes......................................................................33
12.8 Insurance..................................................................33
12.9 Title to Assets and Maintenance............................................34
12.10 Payment of Liabilities....................................................34
12.11 Further Assurances; Real Property Security Interests......................35
</TABLE>
vii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
12.12 Inspection................................................................35
12.13 Required Licenses; Permits; Etc...........................................35
12.14 ERISA.....................................................................35
Article 13 NEGATIVE COVENANTS.......................................................36
13.1 Borrowing..................................................................36
13.2 No Other Businesses........................................................36
13.3 Liens......................................................................36
13.4 Sale of Assets.............................................................37
13.5 Liabilities of Others......................................................37
13.6 Payments on Indebtedness...................................................37
13.7 Merger; Acquisitions; Etc..................................................37
13.8 Loans, Advances and Investments............................................38
13.9 Transactions With Related Parties..........................................38
13.10 ERISA.....................................................................38
13.11 Payment of Dividends......................................................39
13.12 Change in Fiscal Year.....................................................39
13.13 Extensions of Credit......................................................39
13.14 Amendment/Waiver of Provisions of Underlying Construction Loan Documents..39
Article 14 INDEMNIFICATION..........................................................39
14.1 General; Stamp Taxes; Intangibles Tax......................................39
14.2 Indemnification Relating to Hazardous Substances...........................40
Article 15 EVENTS OF DEFAULT; RIGHTS AND REMEDIES...................................41
15.1 Events of Default..........................................................41
15.2 No Advances................................................................43
15.3 Rights and Remedies........................................................43
15.4 Limitation on Rights and Remedies..........................................43
Article 16 AGENCY AGREEMENT.........................................................44
16.1 Funding of Syndication Interest............................................44
16.2 Syndication Parties' Obligations to Remit Funds............................44
16.3 Notice and Timing of Each Advance Payment..................................44
16.4 Syndication Party's Failure to Remit Funds.................................44
16.5 Agency Appointment.........................................................45
16.6 Power and Authority of Agent...............................................45
16.6.1 Advice............................................................45
16.6.2 Documents.........................................................46
</TABLE>
viii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
16.6.3 Proceedings.......................................................46
16.6.4 Retain Professionals..............................................46
16.6.5 Incidental Powers.................................................46
16.7 Duties of Agent............................................................46
16.7.1 Possession of Documents...........................................46
16.7.2 Distribute Payments...............................................46
16.7.3 Collections.......................................................46
16.8 Agent's Resignation or Removal.............................................46
16.9 Consent Required for Certain Actions.......................................47
16.9.1 Unanimous.........................................................47
16.9.2 Majority Lenders..................................................47
16.10 Distribution of Principal and Interest....................................47
16.11 Distribution of Certain Fees and Amounts..................................48
16.11.1 Funding Losses...................................................48
16.12 Possession of Loan Documents..............................................48
16.13 Collateral Application....................................................48
16.14 Amounts Required to be Returned...........................................49
16.15 Reports and Information to Syndication Parties............................49
16.16 Standard of Care..........................................................49
16.17 No Trust Relationship.....................................................50
16.18 Sharing of Costs and Expenses.............................................50
16.19 Syndication Parties' Indemnification of Agent.............................50
16.20 Books and Records.........................................................51
16.21 Administrative Agent Fee..................................................51
16.22 Representations and Warranties of All Parties.............................51
16.23 Representations and Warranties of CoBank..................................51
16.24 Syndication Parties' Independent Credit Analysis..........................52
16.25 No Joint Venture or Partnership...........................................52
16.26 Purchase for Own Account/Restrictions on Transfer.........................52
16.27 Certain Participants' Voting Rights.......................................53
16.28 Method of Making Payments.................................................53
16.29 Events of Syndication Default/Remedies....................................53
16.29.1 Syndication Party Default........................................53
16.29.2 Remedies.........................................................54
16.30 Withholding Taxes.........................................................54
16.31 Further Assurances........................................................54
</TABLE>
ix
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article 17 MISCELLANEOUS............................................................54
17.1 Costs and Expenses.........................................................54
17.2 Service of Process and Consent to Jurisdiction.............................55
17.3 Jury Waiver................................................................55
17.4 Notices....................................................................55
17.4.1 Borrower..........................................................56
17.4.2 CoBank............................................................56
17.5 Notice to Syndication Parties and Agent....................................56
17.6 Successors and Assigns.....................................................57
17.7 Severability...............................................................57
17.8 Entire Agreement...........................................................57
17.9 Applicable Law.............................................................57
17.10 Captions..................................................................57
17.11 Amendments................................................................57
17.12 Additional Costs of Maintaining Loan......................................57
17.13 Capital Requirements......................................................58
17.14 Replacement Notes.........................................................59
17.15 Patronage Payments........................................................59
17.16 Mutual Release............................................................59
17.17 Liberal Construction......................................................59
</TABLE>
x
<PAGE>
EXHIBITS AND SCHEDULES
Exhibit 1.28 Compliance Certificate
Exhibit 6.1 Promissory Note Form
Exhibit 10.3 Permitted Encumbrances
Exhibit 10.4 Litigation
Exhibit 10.8 Principal Place of Business
Exhibit 10.11 Required Licenses and Consents
Exhibit 10.12 Borrower Benefit Plans
Exhibit 10.14 Interests in Real Property
Exhibit 10.19 Material Agreements
Exhibit 11.2.1 Commitment Request Form
Exhibit 11.3.1 Activation Request Form
Exhibit 11.4.1 Underlying Construction Loan Conditions
Exhibit 11.4.2 Advance Request Form
Exhibit 13.1 Existing Indebtedness
Exhibit 16.3 Notice of Loan Advance
Exhibit 16.26 Syndication Acquisition Agreement
Exhibit 16.28 Wire Instructions
xi
<PAGE>
CREDIT AGREEMENT
(Construction Loan Funding)
Village Farms International Finance Association
Loan No. C-2491
THIS CREDIT AGREEMENT ("Construction Credit Agreement") is entered into as
of the 24th day of June 1997, by and between COBANK, ACB ("CoBank"), for its own
benefit as a lender (in that capacity sometimes referred to as "CoBank") and, as
Agent Bank for the benefit of the present and future Syndication Parties (in
that capacity "Agent"), and VILLAGE FARMS INTERNATIONAL FINANCE ASSOCIATION, a
Delaware corporation, whose address is 1811 Sardis Road North, Suite 207,
Charlotte, NC 28270("Borrower").
ARTICLE 1 DEFINED TERMS
As used in this Construction Credit Agreement, the following terms shall
have the meanings set forth below (and such meaning shall be equally applicable
to both the singular and plural form of the terms defined, as the context may
require):
1.1 Activation Commitment: shall have the meaning set forth in Subsection
11.3.1.
1.2 Activation Request: shall have the meaning set forth in Subsection
11.3.1.
1.3 Additional Costs: shall have the meaning set forth in Section 17.12.
1.4 Administrative Agent Fee: shall have the meaning set forth in
Subsection 5.3.2.
1.5 Advance: a disbursement of a portion of the Loan Proceeds..
1.6 Advance Date: a day (which shall be a Business Day) on which an Advance
of Loan Proceeds is made.
1.7 Advance Payment: shall have the meaning set forth in Section 16.2.
1.8 Advance Request: shall have the meaning set forth in Subsection 11.4.2.
1.9 Aggregate Commitment: $30,000,000.00.
1.10 APD: Agro Power Development, Inc.
<PAGE>
1.11 Authorized Officer: shall have the meaning set forth in Subsection
11.1.5.
1.12 Availability Period: shall have the meaning set forth in Section 4.1.
1.13 Bank Debt: all amounts owing under the Note, fees, Borrower's
obligations to purchase CoBank Equity Interests, Funding Losses and all
interest, expenses, charges and other amounts payable by Borrower pursuant to
the Loan Documents.
1.14 Base Rate: a rate of interest per annum equal to the "prime rate" as
published from time to time in the Eastern Edition of the Wall Street Journal as
the average prime lending rate for seventy-five percent (75%) of the United
States' thirty (30) largest commercial banks, or if the Wall Street Journal
shall cease publication or cease publishing the "prime rate" on a regular basis,
such other regularly published average prime rate applicable to such commercial
banks as is acceptable to Agent in its sole discretion, with such rate modified
by adding the Base Rate Margin and subtracting the Equity Margin.
1.15 Base Rate Loans: shall have the meaning set forth in Section 5.1.1.
1.16 Base Rate Margin: shall be 100 basis points.
1.17 BDGCFR: shall have the meaning set forth in Subsection 5.1.4.
1.18 Borrower Benefit Plan: shall have the meaning set forth in Section
10.12.
1.19 Borrower Debt: the sum of the principal balance owed by Borrower under
the Term Facility and this Construction Credit Agreement.
1.20 Borrower Pension Plan: a Borrower Benefit Plan that is an "employee
pension benefit plan" as defined in Section 3(2) of ERISA that is intended to
satisfy the requirements of Section 401(a) of the Code.
1.21 Business Day: any day (a) other than a Saturday or Sunday and other
than a day which is a Federal legal holiday or a legal holiday for banks in the
States of Colorado, New York, or North Carolina, and (b) if such day relates to
a borrowing of, a payment or prepayment of principal of or interest on, a
continuation of or conversion into, or a Fixed Rate Period, for, a Fixed Rate
Loan, or a notice by Borrower with respect to any such borrowing, payment,
prepayment, continuation, conversion, or Fixed Rate Period, on which dealings in
U.S. Dollar deposits are carried out in the London interbank market.
1.22 Change in Law: shall have the meaning set forth in Subsection 5.2.2.
2
<PAGE>
1.23 Closing Date: that date on which Agent, Borrower and Guarantor have
executed all Loan Documents and on which the conditions set forth in Section
11.1 of this Construction Credit Agreement have been met.
1.24 CoBank Equity Interests: shall have the meaning set forth in Article 8
hereof.
1.25 Code: shall have the meaning set forth in Section 10.12.
1.26 Collateral: shall have the meaning set forth in Section 9.1.
1.27 Commitment Request: shall have the meaning set forth in Subsection
11.2.1.
1.28 Compliance Certificate: a certificate of the chief financial officer
of Borrower in the form attached hereto as Exhibit 1.28.
1.29 Construction Letter of Credit: shall have the meaning set forth in
Section 2.2.
1.30 Construction Loan Agent: CoBank, ACB, in its role as such..
1.31 Contributing Syndication Parties: shall have the meaning set forth in
Section 16.4.
1.32 Credit Agreement (Line of Credit Facility): means that agreement so
titled dated June 24, 1997, by and between CoBank for its own benefit as a
lender and as agent bank for the benefit of the present and future syndication
parties as named or defined therein, and Borrower, wherein the lenders have
agreed to make available to Borrower a line of credit facility in a specified
sum for the purpose of enabling Borrower to make line of credit loans to
eligible third parties to use for the purposes therein specified.
1.33 Credit Agreement (Term Loan Funding): means that agreement so titled
dated June 24, 1997, by and between CoBank for its own benefit as a lender and
as agent bank for the benefit of the present and future syndication parties as
named or defined therein, and Borrower, wherein the lenders have agreed to lend
to Borrower a specified sum of money for the purpose of enabling Borrower to
make term loans to eligible third parties to use for the purposes therein
specified.
1.34 Default Interest Rate: a rate of interest equal to 400 basis points in
excess of the rate or rates of interest otherwise being charged on any Base Rate
Loan, Quoted Rate Loan, or Fixed Rate Loan.
1.35 Delinquency Interest: shall have the meaning set forth in Section
16.4.
1.36 Delinquent Amount: shall have the meaning set forth in Section 16.4.
3
<PAGE>
1.37 Delinquent Syndication Party: shall have the meaning set forth in
Section 16.4.
1.38 Environmental Laws: the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended, 42 U.S.C. 9601-9657
("CERCLA") and the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
6901-6987 ("RCRA").
1.39 Environmental Regulations: as defined in the definition of Hazardous
Substances.
1.40 Equity: as determined in accordance with GAAP, plus Minority Interests
(as defined in accordance with GAAP).
1.41 Equity Margin: shall have the meaning set forth in Subsection 5.1.4.
1.42 Equity Margin Report: shall have the meaning set forth in Subsection
5.1.4.
1.43 Equity Margin Report Deadline: shall have the meaning set forth in
Subsection 5.1.4.
1.44 Equity to NFI: the ratio, with respect to APD, of its Equity to its
Net Fixed Investments.
1.45 ERISA: shall have the meaning set forth in Section 10.12.
1.46 Event of Default: shall have the meaning set forth in Section 15.1.
1.47 Fair Market Value: a valuation as determined in a written appraisal
from an MAI certified appraiser.
1.48 Fixed Rate Loan: shall have the meaning set forth in Subsection 5.1.2.
1.49 Fixed Rate Period: the period of time, commencing on a Business Day
and continuing to the numerically corresponding day in the first, second, third,
or sixth calendar month thereafter, or, with the consent of all Syndication
Parties, twelfth month, as designated by Borrower in accordance with Subsection
5.1.2, hereof; provided, however, (a) if a Fixed Rate Period commences on the
last Business Day of a calendar month or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month, such
Fixed Rate Period shall end on the last Business Day of the appropriate calendar
month; (b) if a Fixed Rate Period would end on a day which is not a Business
Day, such Fixed Rate Period shall be extended to the next Business Day, unless
such Business Day would fall in the next calendar month, in which case such
Fixed Rate Period shall end on the immediately preceding Business Day; and (c)
no Fixed Rate Period may extend beyond the Maturity Date.
4
<PAGE>
1.50 Fixed Rate Request: shall have the meaning set forth in Subsection
5.1.2.
1.51 Funding Losses: shall have the meaning set forth in Subsection 7.1.3.
1.52 GAAP: generally accepted accounting principles in the United States of
America, applied consistently, as in effect from time to time.
1.53 Greenhouse Facility: shall have the meaning set forth in Section 3.1.
1.54 Guarantor: APD.
1.55 Guarantor Cash Flow: Cash received by APD during the most recently
completed four Quarters on account of its equity interests in the Underlying
Borrowers or from other investments and business activities of such Guarantor.
1.56 Guarantor Collateral: shall have the meaning set forth in Section 9.2.
1.57 Guarantor Security Documents: the security agreement, pledge agreement
and/or other security documents executed by Guarantor in favor of Agent and the
present and future Syndication Parties to secure Guarantor's performance of its
obligations under the Guaranty with a first lien on all of Guarantor's assets.
1.58 Guaranty: the guaranty, in form and substance satisfactory to Agent,
to be executed by Guarantor in favor of Agent, as in effect on the date hereof
and as hereafter amended.
1.59 Hazardous Substances: dangerous, toxic or hazardous pollutants,
contaminants, chemicals, wastes, materials or substances, as defined in or
governed by the provisions of any Environmental Laws or any other federal, state
or local law, statute, code, ordinance, regulation, requirement or rule relating
thereto ("Environmental Regulations"), and also including urea formaldehyde,
polychlorinated biphenyls, asbestos, asbestos-containing materials, nuclear fuel
or waste, and petroleum products, or any other waste, material, substances,
pollutant or contaminant which would subject an owner of property to any
damages, penalties or liabilities under any applicable Environmental
Regulations.
1.60 Indemnified Agency Parties: shall have the meaning set forth in
Section 16.19.
1.61 Indemnified Parties: shall have the meaning set forth in Section 14.1.
1.62 Intercreditor Agreement: that agreement so titled dated June 24, 1997,
by and between CoBank for its own benefit as a lender and as agent bank for the
benefit of the present and future syndication parties as named or defined
therein, Borrower, and Guarantor.
5
<PAGE>
1.63 Leasehold Assignment & Consent: the Leasehold Assignment and Consent,
in form and substance satisfactory to Agent.
1.64 Letter of Credit Cap: shall have the meaning set forth in Section 2.2.
1.65 Letter of Credit Fee: shall have the meaning set forth in Subsection
5.3.4.
1.66 LIBO Rate: the rate for deposits in U.S. dollars, with maturities
comparable to the selected Fixed Rate Period that appears on the display
designated as page "3750" of the Telerate Service (or such other page as may
replace the 3750 page of that service or, if the Telerate Service shall cease
displaying such rates, as published by such other service or services as may be
nominated by the British Bankers' Association for the purpose of displaying
London Interbank Offered Rates for U.S. Dollar deposits), determined as of 1:00
p.m. (Eastern Standard Time) two Business Days prior to the commencement of such
Fixed Rate Period, reserve adjusted basis for Regulation D, with such rate
modified by adding the LIBO/Quoted Rate Margin and subtracting the Equity
Margin.
1.67 LIBO/Quoted Rate Margin: shall be 350 basis points.
1.68 Licensing Laws: shall have the meaning set forth in Section 10.5.
1.69 Line of Credit Facility: means the credit facility made available to
Borrower pursuant to the Credit Agreement (Line of Credit Facility).
1.70 Loan: shall have the meaning set forth in Section 2.1.
1.71 Loan Advance Amount: shall have the meaning set forth in Section 16.3.
1.72 Loan Documents: this Construction Credit Agreement, the Notes, the
Security Documents, the Guaranty, the Guarantor Security Documents, and other
documents required to grant to Agent, for the benefit of the Syndication
Parties, a perfected security interest in the Collateral and in the Guarantor
Collateral.
1.73 Loan Proceeds: shall have the meaning set forth in Section 3.1.
1.74 Majority Lenders: shall have the meaning set forth in Section 16.8.
1.75 Material Adverse Effect: means: (a) a material adverse effect on the
financial condition, results of operation, business or property of Borrower; (b)
a material adverse effect on the ability of Borrower to perform its obligations
under this Construction Credit Agreement and the other Loan Documents; or (c) a
material adverse effect upon the ability of Agent to enforce its rights and
remedies under the Loan Documents.
1.76 Material Agreements: shall have the meaning set forth in Section
10.19.
6
<PAGE>
1.77 Maturity Date: July 31, 2000.
1.78 Maximum Syndication Amount:
For CoBank - $30,000,000.00
1.79 Net Fixed Investments: Total Assets less Current Assets, as such
amounts are determined in accordance with GAAP.
1.80 Note or Notes: the promissory notes executed by Borrower pursuant to
Section 6.1 hereof, and all amendments, renewals, substitutions and extensions
thereof.
1.81 Notice of Loan Advance: shall have the meaning set forth in Section
16.3.
1.82 Organization Documents: in the case of a corporation, its articles or
certificate of incorporation and bylaws; in the case of a partnership, its
partnership agreement and certificate of limited partnership, if applicable; in
the case of a limited liability company, its articles of organization and its
operating agreement.
1.83 Payment Account: shall have the meaning set forth in Section 16.10.
1.84 Payment Distribution: shall have the meaning set forth in Section
16.10.
1.85 Permitted Encumbrance: shall have the meaning set forth in Section
10.3.
1.86 Person: any individual, corporation, limited liability company,
association, partnership, trust, organization, government, governmental agency,
or other entity.
1.87 Potential Default: any event, other than an event described in Section
15.1(a) hereof, which with the giving of notice or lapse of time, or both, would
become an Event of Default.
1.88 Preliminary Commitment: shall have the meaning set forth in Subsection
11.2.1.
1.89 Proposed Underlying Construction Loan: shall have the meaning set
forth in Subsection 11.2.1.
1.90 Quarter: the quarters of the calendar year commencing as of January 1,
April 1, July 1 and October 1.
1.91 Quoted Rate: the rate of interest equal to the Quoted Rate Index
modified by adding the LIBO/Quoted Rate Margin and subtracting the Equity
Margin.
7
<PAGE>
1.92 Quoted Rate Index: the fixed rate of interest determined and quoted by
Agent in its sole and absolute discretion (but upon the approval of all the
Syndication Parties) from time to time at the request of Borrower, which may not
necessarily be the lowest rate at which any of the Syndication Parties loans
funds at that time.
1.93 Quoted Rate Loan: shall have the meaning set forth in Subsection
5.1.3.
1.94 Quoted Rate Period: the period of time, commencing on a Business Day
and continuing for any period of a minimum of five days to not later than the
Maturity Date, as designated by Borrower in accordance with Subsection 5.1.3,
hereof and as agreed to by Agent; provided, however, that no Quoted Rate Period
may end on a day which is not a Business Day.
1.95 Quoted Rate Request: shall have the meaning set forth in Subsection
5.1.3.
1.96 Request for Underlying Construction Loan Activation: shall have the
meaning set forth in Subsection 11.3.1.
1.97 Required License: shall have the meaning set forth in Section 10.11.
1.98 Regular Payments: shall have the meaning set forth in Section 6.2.
1.99 Regulatory Change: shall have the meaning set forth in Section 17.12.
1.100 Security Documents: the security agreements, mortgages, deeds of
trust, financing statements, pledge agreements, leasehold assignment and
consents, assignments and/or other security documents executed by Borrower in
favor of Agent, for the benefit of the Syndication Parties, to secure Borrower's
performance of its obligations under the Notes and other Loan Documents with a
first lien on all assets, real and personal, of Borrower, in form and substance
acceptable to Agent.
1.101 Successor Agent: such Person as may be appointed as successor to the
rights and duties of Agent as provided in Section 16.8 of this Construction
Credit Agreement.
1.102 Super Majority: shall have the meaning set forth in Subsection
11.3.2.
1.103 Syndication Interest: shall have the meaning set forth in Section
16.1.
1.104 Syndication Parties: shall mean:
CoBank in its role as such, but not in its role as Agent hereunder.
and such Persons as shall from time to time execute a Syndication
Acquisition Agreement substantially in the form of Exhibit 16.26 hereto
signifying their election to purchase all or a portion of the Syndication
Interest of any Syndication Party, in accordance with Section 16.26 hereof, and
to become a Syndication Party hereunder.
8
<PAGE>
1.105 Syndication Party Advance Date: shall have the meaning set forth in
Section 16.3.
1.106 Syndication Share: shall mean:
For CoBank - 100%
subject to adjustment: (a) as provided in Section 16.4 hereof; and (b) for
sales or transfers of Syndication Interests by any Syndication Party as provided
in Section 16.26 hereof.
1.107 Term Loan Facility: means the credit facility made available to
Borrower pursuant to the Credit Agreement (Term Loan Funding).
1.108 Title Commitments: shall have the meaning set forth in Subsection
11.1.2.
1.109 Title Insurers: shall have the meaning set forth in Subsection
11.1.2.
1.110 Title Policies: shall have the meaning set forth in Subsection
11.1.2.
1.111 Transfer: shall have the meaning set forth in Section 16.26.
1.112 Underlying Borrowers: collectively, the Underlying Term Loan
Borrowers and the Underlying Construction Loan Borrowers.
1.113 Underlying Construction Loan: shall have the meaning set forth in
Section 3.1.
1.114 Underlying Construction Loan Borrowers: shall have the meaning set
forth in Section 3.1.
1.115 Underlying Construction Loan Conditions: the conditions set forth in
Exhibit 11.3.1 hereto.
1.116 Underlying Construction Loan Documents: all of the documents,
including, without limitation, the loan agreement, promissory note(s), and
security documents, executed in connection with an Underlying Construction Loan.
1.117 Underlying Liens: shall have the meaning set forth in Subsection
12.2.12.
1.118 Underlying Term Loan Borrowers: each Person to whom Borrower has, at
any time, made available an Underlying Term Loan as defined in the Credit
Agreement (Term Loan Funding), which is then outstanding.
1.119 Wire Instructions: shall have the meaning set forth in Section 16.28.
9
<PAGE>
ARTICLE 2 CREDIT FACILITY
2.1 Loan. On the terms and conditions set forth in this Construction Credit
Agreement, the Syndication Parties agree, each as to their Syndication Share and
as to their Syndication Share and to the extent of their Maximum Syndication
Amount, to make a loan to Borrower (the "Loan") in an amount up to the Aggregate
Commitment less the undrawn face amount of any Construction Letters of Credit
then outstanding.
2.2 Letter of Credit . On the terms and conditions set forth in this
Construction Credit Agreement, the Agent agrees to issue its letters of credit
for the benefit of an Underlying Construction Loan Borrower ("Construction
Letter of Credit"), up to an aggregate undrawn face amount of all such
Construction Letters of Credit outstanding at any one time of the Aggregate
Commitment less the principal amount committed under all Underlying Construction
Loans then outstanding ("Letter of Credit Cap"). Each Syndication Party is
responsible for funding its Syndication Share of all amounts which Agent is
required to pay on account of any Construction Letter of Credit, and such
amounts will be funded out of the Loan.
ARTICLE 3 PURPOSES
3.1 Purpose - Loan. The proceeds of the Loan ("Loan Proceeds") may be used
by Borrower only to be loaned ("Underlying Construction Loan") to third parties
("Underlying Construction Loan Borrowers") for the purpose of providing
financing for a portion (to be determined on a case-by-case basis in Agent's
sole discretion) of the costs of the construction (including costs of
acquisition of land) by such third party of facilities for the planting, growing
and harvesting of vegetables and/or fruits ("Greenhouse Facility").
3.2 Purpose - Construction Letter of Credit. Any Construction Letter of
Credit must have been issued only for the purpose of supporting the Underlying
Construction Loan Borrower's obligation to unrelated third parties for the
purchase of materials, equipment, and/or services related to the Greenhouse
Facility being financed by the Underlying Construction Loan, which materials
and/or equipment are: (a) for the construction of, and/or for installation in,
the Greenhouse Facility; and (b) described in the plans and specifications and
in the construction budget submitted to Agent with the Request for Underlying
Construction Loan Activation.
ARTICLE 4 AVAILABILITY
4.1 Availability. The Loan Proceeds will be made available to Borrower, and
Borrower may request issuance of a Construction Letter of Credit, as soon as the
applicable conditions set forth in Article 11 hereof have been satisfied and
until the Maturity Date ("Availability Period"); provided, no Construction
Letter of Credit may be requested with an expiry date (including automatic
renewals) which is on or after the Maturity Date. Unless otherwise agreed, the
Loan Proceeds will be made available: (a) to fund amounts which the Syndication
Parties are required to pay on account of any Construction Letter of Credit; and
(b) to Borrower on any Business Day during the
10
<PAGE>
Availability Period by wire transfer of immediately available funds in
accordance with written wire transfer instructions to be furnished by Borrower
on a form supplied by Agent. Amounts borrowed under the Loan and repaid may not
be reborrowed.
ARTICLE 5 INTEREST AND FEES
5.1 Interest Calculation. Interest shall be calculated in one of the
following ways on the actual number of days each Advance is outstanding on the
basis of a year consisting of 360 days.
5.1.1 Base Rate Option. Unless Borrower requests and receives a Fixed Rate
Loan pursuant to Subsection 5.1.2 or a Quoted Rate Loan pursuant to Subsection
5.1.3, the outstanding principal balance under the Notes shall bear interest at
the Base Rate ("Base Rate Loans").
5.1.2 Fixed Rate Option. From time to time, and so long as no Event of
Default has occurred and is continuing, at the request of Borrower ("Fixed Rate
Request"), all or any part of the outstanding principal balance under the Notes
may bear interest at the LIBO Rate ("Fixed Rate Loans"). The Fixed Rate Request
must be made to Agent in writing on any Business Day and is effective as of the
third Business Day after the Fixed Rate Request is received if received by Agent
no later than 12 noon Central Time or as of the fourth Business Day if received
later than 12 noon Central Time. The Fixed Rate Request must specify the
principal amount that is to bear interest at the LIBO Rate and the Fixed Rate
Period selected by Borrower. Following the expiration of the Fixed Rate Period
for any Fixed Rate Loan, interest shall automatically accrue at the Base Rate
unless Borrower requests and receives another Fixed Rate Loan as provided in
this Subsection 5.1.2. or a Quoted Rate Loan as provided in Subsection 5.1.3.
5.1.3 Quoted Rate Option. From time to time, and so long as no Event of
Default has occurred and is continuing, at the request of Borrower ("Quoted Rate
Request"), all or any part of the outstanding principal balance under the Notes
may bear interest at the Quoted Rate ("Quoted Rate Loans"). The Quoted Rate
Request must be made to Agent in writing on any Business Day and is effective as
of the Business Day after the Quoted Rate Request is received if received by
Agent no later than 12 noon Central Time or as of the second Business Day if
received later than 12 noon Central Time. The Quoted Rate Request must specify
the principal amount that is to bear interest at the Quoted Rate and the Quoted
Rate Period selected by Borrower. Following the expiration of the Quoted Rate
Period for any Quoted Rate Loan, interest shall automatically accrue at the Base
Rate unless Borrower requests and receives another Quoted Rate Loan as provided
in this Subsection 5.1.3 or a Fixed Rate Loan as provided in Subsection 5.1.2.
5.1.4 Equity Margin. The "Equity Margin" shall be determined as of each
June 30 and December 31 as provided in the table below (expressed in basis
points) based on: (a) the ratio of Equity to NFI of APD, on a consolidated
basis; and (b) the ratio of Borrower Debt to Guarantor Cash Flow ("BDGCFR"), as
of such date:
11
<PAGE>
Equity to NFI
-------------
less than >|=40 <50 50 or
40 more
BDGCFR
------
>|= 8.0 12.5 25.0 50.0
>|= 4.0 < 8.0 25.0 50.0 62.5
<|= 4.0 50.0 62.5 75.0
On or before the last Business Day of each September and March ("Equity
Margin Report Deadline"), commencing September of 1997, Borrower shall provide
to Agent a statement, certified to by Borrower's chief financial officer,
showing: (a) the Equity to NFI ratio of APD as of the preceding June 30 or
December 31, as applicable, and showing the amounts of APD's Equity and APD's
Net Fixed Investments as of such date; and (b) the ratio of Borrower Debt to
Guarantor Cash Flow as of the preceding June 30 or December 31, as applicable,
and showing the amounts of Borrower Debt and amount of Guarantor Cash Flow as of
such date ("Equity Margin Report"). The Equity Margin for the six month period
commencing as of the November 1 or May 1 next succeeding such Equity Margin
Report Deadline shall be based on the Equity to NFI ratio and BDGCFR shown in
such Equity Margin Report (unless, and except to the extent, that the contents
of the annual or quarterly financial statements received by Agent from Borrower
pursuant to Subsections 12.2.1 or 12.2.2 hereof or from APD pursuant to the
Guaranty produce different ratios). If the Equity Margin Report is not received
by Agent by the Equity Margin Report Deadline, the Equity Margin for the period
commencing on the following November 1 or May 1, as applicable, will be
determined as though the BDGCFR upon which such Equity Margin is based is equal
to 8.0.
5.1.5 Default Interest Rate. All Bank Debt shall, at the sole option of
Agent, bear interest at the Default Interest Rate from and after the occurrence
and during the continuance of an Event of Default. Upon the occurrence and
during the continuance of an Event of Default or Potential Default, at the
option of Agent, interest shall be payable upon demand by Agent, and in no event
less frequently than monthly.
5.2 Additional Provisions for Fixed Rate Loans.
5.2.1 Inapplicability or Unavailability of LIBO Rate. If (a) Agent at any
time shall determine that for any reason adequate and reasonable means do not
exist for ascertaining the LIBO Rate, or (b) if any Syndication Party shall
advise Agent that the LIBO Rate does not adequately and fairly reflect the cost
to such Syndication Party of funding its Syndication Share of any Fixed Rate
Loan, then Agent shall promptly give notice thereof to Borrower. If such notice
is given and until such notice has been withdrawn by Agent, then (a) no new
Fixed Rate Loan may be requested by Borrower, and (b) any portion of the
outstanding principal balance hereof which bears interest determined in relation
to the LIBO Rate, shall, subsequent to the end of the Interest Period applicable
thereto, bear interest at the Base Rate unless and until Borrower requests and
receives a Quoted Rate Loan with respect to such amount.
12
<PAGE>
5.2.2 Change in Law; Fixed Rate Loan Unlawful. If any law, treaty, rule,
regulation or determination of a court or governmental authority or any change
therein or in the interpretation or application thereof (each, a "Change in
Law") shall make it unlawful for any of the Syndication Parties to (a) advance
its Syndication Share of any Fixed Rate Loan or (b) maintain its Syndication
Share of all or any portion of the Fixed Rate Loans, each such Syndication Party
shall promptly, by telephone or facsimile, notify Agent thereof, and of the
reasons therefor and Agent shall promptly notify Borrower thereof and if the
notice from such Syndication Party is in writing, Agent shall provide a copy of
such notice to Borrower. In the former event, any obligation of any such
Syndication Party to make available its Syndication Share of any future Fixed
Rate Loan shall immediately be cancelled, and in the latter event, any such
unlawful Fixed Rate Loans or portions thereof then outstanding shall be
converted, at the option of such Syndication Party, to a Base Rate Loan unless
and until Borrower requests and receives a Quoted Rate Loan with respect to such
amount; provided, however, that if any such Change in Law shall permit the LIBO
Rate to remain in effect until the expiration of the Fixed Rate Period
applicable to any such unlawful Fixed Rate Loan, then such Fixed Rate Loan shall
continue in effect until the expiration of such Fixed Rate Period. Upon the
occurrence of any of the foregoing events, Borrower shall pay to Agent
immediately upon demand such amounts as may be necessary to compensate any such
Syndication Party for any fines, fees, charges, penalties or other costs
incurred or payable by such Syndication Party as a result thereof and which are
attributable to any Fixed Rate Loan made available to Borrower hereunder, and
any reasonable allocation made by any such Syndication Party among its
operations shall be conclusive and binding upon Borrower absent manifest error.
5.2.3 Increased Costs. If any Change in Law or compliance by any
Syndication Party with any request or directive (whether or not having the force
of law) from any central bank or other governmental authority shall:
(a) subject such Syndication Party to any tax, duty or other charge
with respect to any Fixed Rate Loan, or change the basis of taxation of
payments to such Syndication Party of principal, interest, fees or any
other amount payable hereunder (except for changes in the rate of tax on
the overall net income of such Syndication Party); or
(b) impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by, deposits or
other liabilities in or for the account of, advances or loans by, or any
other acquisition of funds by any office of any Syndication Party; or
(c) impose on any Syndication Party any other condition;
and the result of any of the foregoing is to increase the cost to such
Syndication Party of making, renewing or maintaining its Syndication Share of
any Fixed Rate Loan hereunder and/or to reduce any amount receivable by such
Syndication Party in connection therewith, then in any such case, Borrower shall
pay to Agent for the account of such Syndication Party, within five Business
Days after receipt of written notice from
13
<PAGE>
Agent, such amounts as may be necessary to compensate such Syndication Party for
any additional costs incurred by such Syndication Party and/or reductions in
amounts received by such Syndication Party which are attributable to such Fixed
Rate Loans. In determining which costs incurred by such Syndication Party and/or
reductions in amounts received by such Syndication Party are attributable to the
LIBO Rate option made available to Borrower hereunder, any reasonable allocation
made by such Syndication Party among its operations shall be conclusive and
binding upon Borrower absent manifest error.
5.3 Fees. Borrower shall pay or cause to be paid the following fees:
5.3.1 Facility Fee. A non-refundable facility fee equal to 100 basis points
multiplied by the principal amount of each Underlying Construction Loan, payable
to CoBank at the time of closing each Underlying Construction Loan.
5.3.2 Administrative Agent Fee. A per annum fee ("Administrative Agent
Fee") equal to $12,500.00 plus $5,000.00 for each Underlying Construction Loan
Borrower, but not in excess of an aggregate, including the amount of the
Administrative Agent Fee payable for the same period under the Term Loan
Facility, of $100,000.00 per annum, payable to the Administrative Agent in
arrears on June 30 of each year, commencing June 30, 1997, based upon the
maximum number of Underlying Construction Loan Borrowers which had Underlying
Construction Loans outstanding at any time during the period for which such
Administrative Agent Fee is being paid.
5.3.3 Construction Loan Agent Fee. A per annum fee equal to $15,000.00 for
each Underlying Construction Loan Borrower payable to the Construction Loan
Agent in arrears on the last day of each Quarter, based upon the maximum number
of Underlying Construction Loans outstanding at any time during such Quarter;
provided that for any Quarter the fee payable with respect to an Underlying
Construction Loan as to which the initial Advance was made during such Quarter,
shall be prorated based upon the number of full or partial months from the date
of such initial Advance to the end of such Quarter..
5.3.4 Letter of Credit Fee. At the time of the issuance of each
Construction Letter of Credit a fee ("Letter of Credit Fee") equal to: (a) an
amount payable to the Agent equal to 12.5 basis points multiplied by the face
amount of the Construction Letter of Credit; and (b) an amount payable to the
Agent for the benefit of the Syndication Parties (in accordance with their
Syndication Shares) equal to 25.0 basis points multiplied by the face amount of
the Construction Letter of Credit.
ARTICLE 6 NOTES; PAYMENTS
6.1 Promissory Notes. Each Syndication Party's Syndication Interest in the
Loan shall be evidenced by a promissory note, payable to the order of such
Syndication Party in the face amount equal to such Syndication Party's Maximum
Syndication Amount, in the form attached hereto as Exhibit 6.1 (each a "Note"
and collectively, such promissory notes shall be referred to as the "Notes").
14
<PAGE>
6.2 Principal Payments. Principal shall be payable: (a) on the Business Day
after the day received by Borrower in the amount of all payments, pre-payments,
and other amounts (including, without limitation, payments by guarantors and
amounts realized from the Underlying Collateral) received by Borrower from an
Underlying Construction Loan Borrower or on account of an Underlying
Construction Loan ("Regular Payments"); and (b) in the amount of the entire
unpaid balance of principal owing under the Loan, reduced by the principal
amount of any Underlying Construction Loan which satisfies the conditions of
subpart (d) of this Section, on or before the Maturity Date. (c) In addition to,
but not in duplication of, the payments required under the provisions of
subparts (a) and (b) of this Section, unless the provisions of subpart (d) of
this Section apply, Borrower must make principal payments in the amount of all
Advances made hereunder on account of any particular Underlying Construction
Loan Borrower, such payment to be made on a date which is sixteen (16) months
from the initial Advance made with respect to such Underlying Construction Loan
Borrower (subject to extension for force majure to the extent provided in the
Underlying Construction Loan Documents with respect to such Underlying
Construction Loan). (d) Upon satisfaction of all conditions to the final draw
under the Underlying Construction Loan Documents with respect to any Underlying
Construction Loan, the payment required by subpart (c) of this Section need not
be made by Borrower until a date which is ten (10) years from the date such
conditions are satisfied provided (i) an Activation Commitment with respect to
such Underlying Construction Loan was issued under the Credit Agreement (Term
Loan Funding) and (ii) the lenders under the Credit Agreement (Term Loan
Funding) refuse to provide permanent financing thereunder; provided that
Borrower must make payments under any such Underlying Construction Loan as
provided in subpart (a) of this Section.
6.3 Interest Payments. Interest shall be payable (a) for Base Rate Loans
and Quoted Rate Loans on, the tenth day of each month commencing on the tenth
day of the month following the month in which the Closing Date occurs, and (b)
for Fixed Rate Loans on the last day of the Fixed Rate Period therefor unless
the Fixed Rate Period is longer than three (3) months, in which case interest
shall also be payable every ninety (90) days, and, in the case of (a) and (b),
on the Maturity Date.
6.4 Application of Regular Payments. Provided no Event of Default or
Potential Default has occurred and is continuing, Regular Payments shall be
applied in the manner directed by Borrower in writing, but if Borrower has not
so directed, then first to Base Rate Loans, then to Quoted Rate Loans, and then
to Fixed Rate Loans and, if to Fixed Rate Loans or Quoted Rate Loans, so long as
no Event of Default or Potential Default has occurred and is continuing,
Borrower shall have the right to designate which Fixed Rate Loan or Loans or
Quoted Rate Loan or Loans. On the date of making any Regular Payments, Borrower
shall pay the Funding Losses (determined in the same manner as provided in
Subsection 7.1.3 hereof for prepayments as though such Regular Payment was a
prepayment), if any, resulting from such payment. Upon the occurrence and during
the continuance of an Event of Default or Potential Default, all amounts paid to
Agent shall be applied, as Agent in its sole discretion shall determine, to
fees, the purchase of CoBank Equity Interests, interest or principal
indebtedness
15
<PAGE>
under the Notes, or to any other Bank Debt. The amount of Loan Proceeds advanced
and other Bank Debt, and all payments by or on behalf of Borrower, of such
amounts, shall be entered on the books of the Agent and/or the Syndication
Parties and such entries shall be presumptive evidence of the unpaid amounts
outstanding from time to time under the Notes and other Loan Documents.
6.5 Manner of Payment. All payments, including prepayments, that Borrower
is required or permitted to make under the terms of this Construction Credit
Agreement shall be made to Agent (a) in immediately available federal funds, to
be received no later than 12:00 noon Central Time of the Business Day on which
such payment is due by wire transfer through Federal Reserve Bank, Kansas City,
Routing Number: 307088754, COBANK ENGWD (or to such other account as Agent may
designate by notice); and (b) without setoff or counterclaim and free and clear
of and without deduction for any taxes, levies, impost, duties, charges, fees,
deductions, withholding, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any jurisdiction or any political
subdivision thereof or taxing or other authority therein unless Borrower is
compelled by law to make such deduction or withholding.
ARTICLE 7 PREPAYMENTS
7.1 Voluntary Prepayments. Borrower shall have the option to make the
following prepayments:
7.1.1 Voluntary Prepayment of Base Rate Loan. Borrower shall have the right
to prepay all or any part of the outstanding principal balance under the Base
Rate Loan at any time.
7.1.2 Voluntary Prepayment of Fixed Rate Loans and Quoted Rate Loans.
Borrower shall have the right to prepay all (but not in part) of the outstanding
principal balance of any Fixed Rate Loan and/or any Quoted Rate Loan, provided
that: (a) Borrower shall, at least three (3) Business Days prior to making any
such prepayment, deliver to Agent a written notice which sets forth the amount
of the prepayment, the date on which the prepayment will be made, and the Fixed
Rate Loan and/or Quoted Rate Loan being prepaid; (b) Borrower shall pay all
accrued and unpaid interest relating to the amount prepaid through the date of
prepayment; and (c) on the prepayment date, Borrower shall pay the Funding
Losses, if any, resulting from the prepayment. Any written notice by Borrower of
its election to prepay under this Subsection shall be irrevocable.
7.1.3 Funding Losses. In determining the "Funding Losses" for the purposes
of this Construction Credit Agreement, Agent shall select, in its sole
discretion, a security or securities of a type which CoBank is permitted by law
to purchase at the date of the prepayment calculation. The selected security or
securities shall have payment dates which approximate the scheduled principal
and interest payments for the Fixed Rate Loan or Quoted Rate Loan being prepaid.
Agent will then compare the net present value of the interest which could be
expected to be paid on the
16
<PAGE>
Fixed Rate Loan or Quoted Rate Loan being prepaid and of the yield which could
be expected on the selected security for a comparable period. The "Funding Loss"
is the sum of (a) and (b) where (a) is the amount of the excess of (i) the net
present value of the yield on the Fixed Rate Loan or Quoted Rate Loan being
prepaid, over (ii) the net present value of the yield on the selected security
(provided that such amount shall never be less than zero), and (b) is 50 basis
points. The amount of such Net present value shall be determined as follows: (x)
with respect to the interest on the Fixed Rate Loan or Quoted Rate Loan being
prepaid, the scheduled interest payments shall be discounted from the expiration
of the applicable Fixed Rate Period or Quoted Rate Period back to the date of
prepayment using as a discount rate the applicable LIBO Rate or Quoted Rate, and
(y) with respect to the selected security, the scheduled payments of the current
yields on such selected security shall be discounted back for a period
comparable to the period for which scheduled interest payments are discounted in
the preceding sentence, using as a discount rate the current yield on the
selected security. The calculation of "yield" on the selected security shall
include interest payments, any premium or discount associated with the purchase
of the selected security, any fees or administrative costs associated with the
purchase, holding and sale of the selected security, CoBank's tax rate and any
reserves which CoBank may be required by law to maintain with respect to the
selected security (provided that such fees, administrative costs, tax rate and
reserves shall not in the aggregate exceed one percent (1%) of the principal
amount being prepaid). In the event of acceleration of the Notes as provided in
Section 15.1, the date of acceleration shall be treated as the date of
prepayment for the purpose of determining the Funding Loss under this
Subsection. Funding Losses shall be calculated as provided above without
consideration of the amount of such losses actually incurred by any Syndication
Party.
7.2 Minimum Prepayment Amount. Voluntary prepayments must be in amounts no
less than $100,000.00. Voluntary prepayments shall be applied to discharge
principal amounts in the inverse order in which the principal would otherwise
become due.
7.3 Application of Prepayments. Provided no Event of Default or Potential
Default has occurred and is continuing, Borrower shall have the right to
designate whether a prepayment of principal is to be applied to a Base Rate
Loan, a Quoted Rate Loan, or a Fixed Rate Loan. Upon the occurrence and during
the continuance of an Event of Default or Potential Default, Borrower hereby
agrees that all amounts paid to Agent, including prepayments, shall be applied,
as Agent in its sole discretion shall determine, to fees, the purchase of CoBank
Equity Interests, interest or principal indebtedness under the Notes (in such
order of maturity as Agent shall select), or to any other Bank Debt.
ARTICLE 8 COBANK EQUITY
Borrower agrees to purchase such equity interests in CoBank ("CoBank Equity
Interests") as CoBank may from time to time require in accordance with its
bylaws and capital plan as applicable to cooperative borrowers generally. In
connection with the foregoing, Borrower hereby acknowledges receipt, prior to
the execution of this
17
<PAGE>
Construction Credit Agreement, of CoBank's bylaws, a written description of the
terms and conditions under which the CoBank Equity Interests are issued,
CoBank's Loan-Based Capital Plan, CoBank's most recent annual report, and if
more recent than CoBank's latest annual report, its latest quarterly report.
ARTICLE 9 SECURITY
9.1 Borrower's Assets. As security for the payment and performance of all
obligations of Borrower to Agent, CoBank, and the Syndication Parties, including
but not limited to principal and interest under the Notes, purchases of CoBank
Equity Interests, fees, Funding Losses, reimbursements, and all other Bank Debt
or obligations under any of the Loan Documents, Borrower shall grant to, and
maintain for, Agent, for the benefit of all present and future Syndication
Parties, a first lien and security interest, subject only to Permitted
Encumbrances and the provisions of the Intercreditor Agreement, in all of its
assets, both real and personal, tangible and intangible, whether now owned or
hereafter acquired, including, without limitation, the Underlying Construction
Loans and the Underlying Construction Loan Documents ("Collateral"), pursuant to
the Security Documents. Borrower shall execute and deliver to Agent, for the
benefit of the Syndication Parties, the Security Documents to evidence the
security interest of Agent, for the benefit of the Syndication Parties, in the
Collateral, together with such financing statements or other documents as Agent
shall request. Borrower shall deliver the originals of the Underlying
Construction Loan Documents to Agent, for the benefit of all present and future
Syndication Parties. Borrower shall also execute such further security
agreements, mortgages, deeds of trust, financing statements, assignments or
other documents as Agent shall reasonably request, in form and substance as
Agent shall specify, to establish, confirm, perfect or provide notice of Agent's
security interest (for the benefit of all Syndication Parties) in the
Collateral. If requested by Agent: (a) Borrower and Agent shall place a legend
on any chattel paper included in the Collateral showing Agent's security
interest therein; and (b) Borrower shall deliver to Agent possession of any
instruments and securities included in the Collateral (duly endorsed to Agent's
reasonable satisfaction).
9.2 Guaranty. Borrower's obligations under this Construction Credit
Agreement and all other Loan Documents shall be guaranteed by APD pursuant to
the APD Guaranty and the APD Guaranty shall be secured by a first lien and
security interest, subject to the provisions of the Intercreditor Agreement, in
all of its assets, both real and personal, tangible and intangible, whether now
owned or hereafter acquired ("Guarantor Collateral") pursuant to the Guarantor
Security Documents.
ARTICLE 10 REPRESENTATIONS AND WARRANTIES
To induce the Syndication Parties to make the Loan, and recognizing that
the Syndication Parties are relying thereon, Borrower represents and warrants as
follows:
10.1 Organization, Good Standing, Etc. Borrower (a) is duly organized,
validly existing, and in good standing under the laws of its state of
incorporation; (b) qualifies as a cooperative association under the laws of its
state of incorporation; (c)
18
<PAGE>
is duly qualified to do business and is in good standing in each jurisdiction in
which the transaction of its business makes such qualification necessary; and
(d) has all requisite corporate and legal power (i) to own and operate its
assets and to carry on its business, (ii) to enter into and perform the Loan
Documents to which it is a party, and (iii) to make the Underlying Construction
Loans.
10.2 Corporate Authority, Due Authorization; Consents. Borrower has full
power and authority to conduct its business as contemplated to be operated from
and after the Closing Date; to execute, deliver and perform under the Loan
Documents and all other documents and agreements as contemplated by this
Construction Credit Agreement; and to make the Underlying Construction Loans,
all of which have been duly authorized. All consents or approvals of any Person
which are necessary for, or are required as a condition of, the execution,
delivery and performance of the Loan Documents and/or making of the Underlying
Construction Loans have been obtained.
10.3 Title to Property. Borrower holds good and marketable title to all of
its real property (other than rights of way, easements and similar interests in
real property which in the aggregate are not material), owns all of its personal
property, and holds all of its leases, free and clear of any lien, pledge,
restriction, or encumbrance, except as specifically identified in Exhibit 10.3
attached hereto or as permitted by Section 13.3 hereof ("Permitted
Encumbrances") and subject to the Intercreditor Agreement. All of Borrower's
leases which constitute Material Agreements are in full force and effect and
afford Borrower peaceful and undisturbed possession of the subject matter
thereof.
10.4 Litigation. Except as described on Exhibit 10.4 hereto, there are, no
pending legal or governmental actions, proceedings or investigations to which
Borrower is a party or to which any property of Borrower is subject which might
result in any Material Adverse Effect and, to Borrower's knowledge, no such
actions or proceedings are threatened or contemplated by any federal, state,
county, or city (or similar unit) governmental agency or any other Person.
10.5 No Violations. The execution, delivery and performance of the Loan
Documents and the making of the Underlying Construction Loans will not: (a)
violate any provision of Borrower's articles of incorporation or bylaws, or any
law, rule, regulation, judgment, order or ruling of any court or governmental
agency; (b) violate, conflict with, result in a breach of, constitute a default
under, or with the giving of notice or the expiration of time or both,
constitute a default under, any existing real estate mortgage, indenture, lease,
security agreement, contract, note, instrument or any other agreements or
documents binding on Borrower or affecting its property; or (c) violate,
conflict with, result in a breach of, constitute a default under, or result in
the loss of, or restriction of rights under, any Required License or any order,
law, rule, or regulation under or pursuant to which any Required License was
issued or is maintained ("Licensing Laws").
10.6 Binding Agreement. Each of the Loan Documents to which Borrower is a
party is, or when executed and delivered, will be, the legal, valid and binding
obligation of Borrower, enforceable in accordance with its terms, subject only
to
19
<PAGE>
limitations on enforceability imposed by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting creditors' rights
generally and by general principles of equity.
10.7 Compliance with Laws. Borrower is in compliance with all federal,
state, and local laws, rules, regulations, ordinances, codes and orders,
including without limitation all Environmental Laws and all Licensing Laws, with
respect to which noncompliance would result in a Material Adverse Effect.
10.8 Principal Place of Business. Borrower's place of business, or chief
executive office if it has more than one place of business, and the place where
the records required by Section 12.1 hereof are kept, is located at the place(s)
shown on Exhibit 10.8 hereto.
10.9 Underlying Construction Loans; Underlying Construction Loan Documents.
As of the time of any Advance: (a) the Underlying Construction Loan Documents
with respect thereto will have been duly authorized, executed, and delivered by
all parties thereto and will constitute the legal, valid, and binding obligation
of all parties thereto, enforceable in accordance with their terms, subject to
the effects of bankruptcy, insolvency, and similar laws generally affecting the
rights of creditors or the availability of equitable remedies; (b) the
Underlying Construction Loan will be free from any right of set-off,
counterclaim or other claim, or defense, and no event of default thereunder
shall have occurred and be continuing; (c) the Underlying Construction Loan
Borrower's obligations pursuant to the Underlying Construction Loan will, except
where the Underlying Construction Loan Documents specifically state otherwise,
be secured by a first and prior lien in favor of Borrower in all assets of the
Underlying Construction Loan Borrower; (d) all closing and pre-closing
requirements set forth in the Underlying Construction Loan Documents, will have
been satisfied in full; (e) the Underlying Construction Loan Documents will have
been approved by Agent and shall not have been amended subsequent to such
approval; (f) the Underlying Construction Loan Documents will require payment of
all principal no later than sixteen (16) months after the first draw thereunder
(subject to adjustment for force majure to the extent provided in the Underlying
Construction Loan Documents), provided that upon satisfaction of all conditions
to the final draw thereunder, the Underlying Construction Loan Documents may
provide for conversion to a ten (10) year term (commencing from the date such
conditions are satisfied) if (i) an Activation Commitment with respect to such
Underlying Construction Loan was issued under the Credit Agreement (Term Loan
Funding) and (ii) the lenders under the Credit Agreement (Term Loan Funding)
refuse to provide permanent financing thereunder; (g) the Underlying
Construction Loan will not be in violation of any applicable usury statutes; and
(h) to Borrower's knowledge and belief, the Underlying Construction Loan
Documents, projections, budgets, financial statements, or other information
furnished by or on behalf of the Underlying Construction Loan Borrower, will not
contain any misstatement of a material fact, nor omit to state a material fact.
10.10 Payment of Taxes. Borrower has filed all required federal, state and
local tax returns and has paid all taxes as shown on such returns as they have
become
20
<PAGE>
due. Borrower has paid when due all other taxes, assessments or impositions
levied or assessed against Borrower or its business or properties.
10.11 Licenses and Approvals. Borrower has ownership of, or license to use,
or has been issued, all trademarks, patents, copyrights, franchises,
certificates, approvals, permits, authorities, agreements, and licenses which
are used or necessary to permit it to own its properties and to conduct the
business as presently being conducted, and to make the Underlying Construction
Loans ("Required Licenses"). Exhibit 10.11 lists all Required Licenses presently
in existence with respect to Borrower. Each Required License is in full force
and effect, and there is no outstanding notice of cancellation or termination
or, to Borrower's knowledge, any threatened cancellation or termination in
connection therewith, nor has an event occurred with respect to any Required
License which, with the giving of notice or passage of time or both, could
result in the revocation or termination thereof or otherwise in any impairment
of Borrower's rights with respect thereto, which impairment could reasonably be
expected to have a Material Adverse Effect. No consent, permission,
authorization, order, or license of any governmental authority, is necessary in
connection with the: (a) execution, delivery, performance, or enforcement of the
Loan Documents to which Borrower is a party; and (b) the making of the
Underlying Construction Loans, except such as have been obtained and are in full
force and effect and as are described on Exhibit 10.11.
10.12 Employee Benefit Plans. Borrower does not presently maintain or
participate in, and has not in the past maintained or participated in, and is
not obligated to contribute to, any of the following (each a "Borrower Benefit
Plan" and collectively "Borrower Benefit Plans"): (a) any funded "employee
welfare benefit plan," as that term is defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended, and the regulations
thereunder ("ERISA"); (b) any "multiemployer plans," as defined in Section 3(37)
of ERISA; (c) any "employee pension benefit plan" as defined in Section 3(2) of
ERISA; (d) any "employee benefit plan", as such term is defined in Section 3(3)
of ERISA; (e) any "multiple employer plan" within the meaning of Section 413 of
the Internal Revenue Code of 1986, as amended from time to time ("Code"); (f)
any "multiple employer welfare arrangement" within the meaning of Section 3(40)
of ERISA; (g) a "voluntary employees' beneficiary association" within the
meaning of Section 501(a)(9) of the Code; (h) a "welfare benefit fund" within
the meaning of Section 419 of the Code; or (i) any employee welfare benefit plan
within the meaning of Section 3(1) of ERISA for the benefit of retired or former
employees.
10.13 Equity Investments. Borrower does not now own any stock or other
voting or equity interest, directly or indirectly, in any Person other than the
CoBank Equity Interests.
10.14 Real Property. Borrower: (a) has all real property interests,
including without limitations fee interests, leasehold interests, easements,
licenses and rights of way which are necessary for the conduct of Borrower's
business; and (b) does not own any fee interest or leasehold interest, or any
other interest, including without limitation
21
<PAGE>
any easements, rights of way or licenses, in real property, other than as set
forth on Exhibit 10.14 hereto.
10.15 Personal Property. Borrower has all tangible personal property
necessary for the conduct of Borrower's business as it is contemplated to be
conducted; and all such property is in good operating condition and repair,
reasonable wear and tear excepted, and suitable in all material respects for the
uses for which it is being utilized.
10.16 Borrower Membership. Village Farms of Texas, L.P. is a member of
Borrower.
10.17 Environmental Compliance. Without limiting the provisions of Section
10.7 above, all property owned or leased by Borrower and all operations
conducted by it are in compliance in all material respects with all Laws
relating to environmental protection, with respect to which the failure to
comply would have a Material Adverse Effect.
10.18 Fiscal Year. Each fiscal year of Borrower begins on January 1 of each
calendar year and ends on December 31 of each calendar year.
10.19 Material Agreements. That Exhibit 10.19 attached hereto sets forth
all agreements of Borrower, the termination or breach of which, based upon
Borrower's knowledge as of the date of making any representation with respect
thereto, would have a Material Adverse Effect ("Material Agreements"). Neither
Borrower nor, to Borrower's knowledge, any other party to any Material
Agreement, is in default thereunder, and no facts exist which with the giving of
notice or the passage of time, or both, would constitute such a default.
10.20 Regulations G, U and X. No portion of any Advance will be used for
the purpose of purchasing, carrying, or making loans to finance the purchase of,
any "margin security" or "margin stock" as such terms are used in Regulations G,
U or X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts
207, 221, and 224.
10.21 Disclosure. The representations and warranties contained in this
Article 10 and in the other Loan Documents do not contain any untrue statement
of a material fact or omit to state a material fact necessary to make such
representations not misleading.
ARTICLE 11 CONDITIONS TO ADVANCES
11.1 Conditions to Closing. The obligation of the Syndication Parties to
make the Loan and any Advance thereunder or to issue a Preliminary Commitment or
an Activation Commitment, or issue a Construction Letter of Credit is subject to
satisfaction, in Agent's sole discretion, of each of the following conditions
precedent:
22
<PAGE>
11.1.1 Loan Documents . Agent shall have received duly executed originals
of the Loan Documents.
11.1.2 Searches; UCC Filings; Recordings; Title Insurance. Agent shall have
received: (a) searches of appropriate filing offices showing that (i) no state
or federal tax liens have been filed which remain in effect against Borrower,
(ii) except with respect to Permitted Encumbrances no financing statements have
been filed by any Person except to perfect the security interests required by
this Construction Credit Agreement, which remain in effect against Borrower or
any of its assets, (iii) all financing statements necessary to perfect the
security interests granted to Agent (for the benefit of the Syndication Parties)
under the Loan Documents have been filed or recorded, to the extent such
security interests are capable of being perfected by such filing, and (iv) all
of the Loan Documents required to be recorded or filed to perfect the security
interests and liens granted therein shall be so recorded and filed; (b)
mortgagees' title insurance commitments ("Title Commitments") acceptable to
Agent from one or more insurers acceptable to Agent (the "Title Insurers")
committing to issue one or more title policies (ALTA Loan Policy Form) (the
"Title Policies") insuring the lien in favor of Agent (on behalf of the
Syndication Parties) on each parcel of real property owned in fee by Borrower
having an estimated Fair Market Value of $25,000.00 or more as a first priority
lien on such real property, subject only to Permitted Encumbrances, and (i)
deleting the standard printed exceptions and the gap exception, (ii) containing
only such exceptions to title as are reasonably acceptable to Agent, and (iii)
containing such other endorsements as Agent may reasonably require; and (c)
either a Title Commitment or, at Borrower's option, a written ownership and
encumbrance report of current date indicating that there are no prior liens on
each parcel of such real property having an estimated Fair Market Value of less
than $25,000.00. In addition, in the case of the parcels of real property
covered by a Title Commitment, as of the Closing Date Agent shall have received
from the Title Insurers a written confirmation acceptable to Agent confirming
that the Title Insurers are irrevocably committed to issue the Title Policies.
11.1.3 Approvals. Agent shall have received evidence satisfactory to it
that all consents and approvals of governmental authorities and third parties
which are with respect to Borrower and Guarantor, necessary for, or required as
a condition of: (a) the validity and enforceability of the Loan Documents; (b)
creation of and realization on, Agent's lien (for the benefit of the Syndication
Parties) on the Collateral; and (c) the making of the Underlying Construction
Loans, have been obtained and are in full force and effect.
11.1.4 Organizational Documents. Agent shall have received: (a) good
standing certificates, dated no more than thirty (30) days prior to the Closing
Date, for Borrower and Guarantor for their respective states of incorporation
and for each state where their operations require qualification or authorization
to transact business; (b) a copy of the articles of incorporation of Borrower
and Guarantor certified by the Secretary of State of their state of
organization; and (c) a copy of the bylaws of
23
<PAGE>
Borrower and Guarantor, certified as true and complete by the Secretary or
Assistant Secretary of Borrower and Guarantor, respectively.
11.1.5 Evidence of Corporate Action. Agent shall have received in form and
substance satisfactory to Agent: documents evidencing all corporate action taken
by each of Borrower and Guarantor to authorize (including the specific names and
titles of the persons authorized to so act ("Authorized Officers")) the
execution, delivery and performance of the Loan Documents to which it is a
party, and with respect to Borrower, the making of Underlying Construction
Loans, certified to be true and correct by the Secretary or Assistant Secretary
of Borrower and Guarantor, respectively.
11.1.6 Legal Opinion for Borrower and Guarantor. Agent shall have received
opinions of counsel for Borrower and for Guarantor (who shall be acceptable to
Agent), in form and content acceptable to Agent and addressed to Agent and to
each Syndication Party (and expressly permitting reliance thereon by each future
Syndication Party).
11.1.7 Evidence of Insurance. Borrower and Guarantor shall have provided
Agent with insurance certificates and such other evidence, in form and substance
satisfactory to Agent, of all insurance required to be maintained by it under
the Loan Documents.
11.1.8 Phase I Environmental Studies. Borrower and Guarantor shall have
submitted to Agent such studies, investigations and reports with respect to
environmental matters for real property owned by Borrower or Guarantor,
respectively, from consultants acceptable to Agent as may be reasonably
requested by Agent and content and results of those studies, investigations and
reports shall be reasonably acceptable to Agent.
11.1.9 Survey. Borrower and Guarantor shall have provided Agent with ALTA
improvement surveys of all real property owned by Borrower or Guarantor,
respectively, and having a Fair Market Value of $25,000.00 or more, which
surveys, the certifications thereon, and all information contained therein,
shall be acceptable to Agent.
11.1.10 Material Agreements. Agent shall have received copies of those
Material Agreements as Agent may request in its sole discretion.
11.1.11 Appointment of The Corporation Company. Agent shall have received
evidence satisfactory to Agent that The Corporation Company, 1675 Broadway,
Denver, Colorado 80202 has accepted appointment by Borrower and Guarantor to
serve as their agent for service of process in accordance with Section 17.2 of
this Construction Credit Agreement and Section 11.7 of the Guaranty.
11.1.12 No Material Change. No change shall have occurred in the condition
or operations of Borrower since May 1, 1997 or the Guarantor since March 31,
1997, which could, in either case, result in a Material Adverse Effect.
24
<PAGE>
11.1.13 Fees and Expenses. Borrower shall have paid Agent, by wire transfer
of immediately available federal funds all fees set forth in Section 5.3 of this
Construction Credit Agreement which are due on the Closing Date, and all
expenses owing pursuant to Section 17.1 hereof.
11.1.14 Application; CoBank Equity Interest Purchase Obligation. Borrower
shall have: (a) completed the loan application form provided by CoBank; and (b)
purchased such CoBank Equity Interests as CoBank may require pursuant to Article
8 hereof.
11.1.15 Further Assurances. Borrower and Guarantor shall have provided
and/or executed and delivered to Agent such further assignments, documents or
financing statements, in form and substance satisfactory to Agent, that Borrower
and Guarantor are to execute and deliver pursuant to the terms of the Loan
Documents or as Agent may reasonably request.
11.2 Conditions to Issuance of Preliminary Commitment.
11.2.1 Preliminary Commitment Request. To obtain preliminary approval of a
particular proposed Underlying Construction Loan ("Proposed Underlying
Construction Loan") for funding under the Loan, Borrower must deliver to Agent,
a request for such approval in the form attached hereto as Exhibit 11.2.1
("Commitment Request") which has been signed by an Authorized Officer. The
Commitment Request shall be accompanied by sufficient information to enable
Agent to determine (and advise Borrower) whether the Proposed Underlying
Construction Loan may be eligible for funding under the Loan, including, without
limitation: (a) the following information on the Underlying Construction Loan
Borrower and the Greenhouse Facility to be constructed with the proceeds of the
Proposed Underlying Construction Loan: (i) project description, (ii) financing
schedule and requirements, (iii) proposed financial structure, (iv) marketing
plan, (v) actual and pro-forma financial statements and cash flow projections,
(vi) financial analysis, and other credit information; and (b) an estimated
construction budget and proposed sources and uses of funds for construction of
such Greenhouse Facility. Within a reasonable time after receipt of the
Commitment Request and such information as Agent shall, in its sole discretion,
request in connection therewith, and upon satisfaction of the requirements
contained in Subsections 11.2.2 through 11.2.5 hereof, Agent will advise
Borrower whether or not it preliminarily approves such Proposed Underlying
Construction Loan for funding under the Loan upon the condition that there are
no changes deemed by the Agent to be material in the information submitted with
the Commitment Request and the conditions of Sections 11.3 and 11.4 hereof are
met to Agent's satisfaction as provided, and at the time contemplated, in said
Sections ("Preliminary Commitment").
11.2.2 No Material Change. No change shall have occurred in the condition
or operations of Borrower or Guarantor since the Closing Date which could result
in a Material Adverse Effect.
25
<PAGE>
11.2.3 Default. As of the date of the Commitment Request no Event of
Default or Potential Default shall have occurred and be continuing.
11.2.4 Representations and Warranties. The representations and warranties
of Borrower and of Guarantor contained in each of the Loan Documents to which it
is a party, shall be true and correct in all material respects on and as of the
date of the Commitment Request as though made on and as of such date.
11.2.5 Fees and Expenses. Borrower shall have paid Agent, by wire transfer
of immediately available federal funds all fees set forth in Section 5.3 of this
Construction Credit Agreement which are then due and payable, and all expenses
owing pursuant to Section 17.1 hereof.
11.3 Conditions to Activation.
11.3.1 Activation Request. To obtain further approval of a particular
Proposed Underlying Construction Loan for funding under the Loan a Preliminary
Commitment must have been previously issued; and Borrower must deliver to Agent
a request in the form attached hereto as Exhibit 11.3.1 ("Activation Request")
which has been signed by an Authorized Officer. The Activation Request shall be
irrevocable and shall be accompanied by an application package ("Request for
Underlying Construction Loan Activation") containing such documentation and
information as may be required by Agent in its sole discretion to enable Agent
to determine (and advise Borrower) whether Agent will grant an Activation
Commitment to fund an Underlying Construction Loan, including, as applicable and
without limitation: (a) updates on information provided to Agent in connection
with Borrower's Commitment Request with respect to the same Proposed Underlying
Construction Loan with respect to the actual and pro-forma financial statements
and cash flow projections and other credit information on the Underlying
Construction Loan Borrower and the Greenhouse Facility to be constructed with
the Proposed Underlying Construction Loan; (b) plans and specifications,
engineering reports, proof of availability of utilities, proof of zoning
compatible with proposed use, and final line item construction budget with time
lines; (c) copies of proposed Underlying Construction Loan Documents; (d) lien
searches; (e)proof of acceptable mechanics' lien protection; (f) survey and
actual and as-built appraisals; (g) an acceptable title commitment; and (h) an
acceptable take out commitment from an acceptable lender. Within a reasonable
time after receipt of the Activation Request and such information as Agent
shall, in its sole discretion, request in connection therewith, and upon
satisfaction of the requirements contained in Subsections 11.3.2 through 11.3.6
hereof, Agent will advise Borrower whether or not it approves such Proposed
Underlying Construction Loan for funding under the Loan upon the condition that
there are no changes deemed by the Agent to be material in the information
submitted with the Activation Request and the conditions of Section 11.4 hereof
are met to Agent's satisfaction as provided, and at the time contemplated, in
said Section ("Activation Commitment").
11.3.2 Approval by Super Majority. Unless the Underlying Construction Loan
with respect to which the Advance is to be made has been approved
26
<PAGE>
in writing by Syndication Parties whose Syndication Shares at that time
aggregate at least seventy-five percent (75%) ("Super Majority").
11.3.3 No Material Change. No change shall have occurred in the condition
or operations of Borrower or Guarantor since the Closing Date which could result
in a Material Adverse Effect.
11.3.4 Default. As of the date of the Activation Request no Event of
Default or Potential Default shall have occurred and be continuing, and the
disbursing of the amount of the Loan Proceeds requested in the Activation
Request shall not result in an Event of Default or Potential Default.
11.3.5 Representations and Warranties. The representations and warranties
of Borrower and of Guarantor contained in each of the Loan Documents to which it
is a party, shall be true and correct in all material respects on and as of the
date of the Activation Request as though made on and as of such date.
11.3.6 Fees and Expenses. Borrower shall have paid Agent, by wire transfer
of immediately available federal funds all fees set forth in Section 5.3 of this
Construction Credit Agreement which are then due and payable, and all expenses
owing pursuant to Section 17.1 hereof.
11.4 Conditions to Initial Advance. The Syndication Parties' obligation to
make the initial Advance to fund any Underlying Construction Loan is subject to
the prior granting of a Preliminary Commitment and an Activation and to the
satisfaction, in Agent's sole discretion, of each of the following conditions
precedent with respect to such Underlying Construction Loan:
11.4.1 Underlying Construction Loan Documents; Possession of Documents.
Agent shall have received: (a) evidence, in form and substance satisfactory to
Agent that the Underlying Construction Loan Documents evidencing the Underlying
Construction Loan with respect to which the Advance is being requested are on
forms, and contain terms and conditions, satisfactory to Agent in its sole
discretion, and are in compliance with all applicable laws and regulations; (b)
proof satisfactory to Agent that the Underlying Construction Loan and the
Underlying Construction Loan Documents comply fully with the Underlying
Construction Loan Conditions set forth on Exhibit 11.4.1 hereto; (c) proof
satisfactory to Agent that the Underlying Construction Loan has been closed and
that all conditions to closing thereof and to the making of the initial advance
of funds, all as set forth in the Underlying Construction Loan Documents have
been satisfactorily met; (d) possession of executed originals of the Underlying
Construction Loan Documents, properly endorsed, consents, copies of pledged
agreements, and a satisfactory opinion of counsel for the Underlying
Construction Loan Borrower; (e) (i) good standing certificates, dated no more
than thirty (30) days prior to the date of the first Advance with respect to the
Underlying Construction Loan Borrower under such Underlying Construction Loan
for its state of incorporation and for each state where its operations require
qualification or authorization to transact business, (ii) a copy of the articles
of incorporation of such Underlying Construction Loan Borrower
27
<PAGE>
certified by the Secretary of State of its state of organization, (iii) a copy
of the bylaws of such Underlying Construction Loan Borrower, certified as true
and complete by the Secretary or Assistant Secretary thereof, (iv) documents
evidencing all corporate action taken by such Underlying Construction Loan
Borrower to authorize (including the specific names and titles of the persons
authorized to so act ) the execution, delivery and performance of the Underlying
Construction Loan Documents to which it is or will be a party, certified to be
true and correct by the Secretary or Assistant Secretary of such Underlying
Construction Loan Borrower, and (v) opinions of counsel, for such Underlying
Construction Loan Borrower (who shall be acceptable to Agent), in form and
content acceptable to Agent and addressed to Agent and to each Syndication Party
(and expressly permitting reliance thereon by each future Syndication Party, or,
in lieu thereof, accompanied by a separate letter from such counsel expressly
permitting reliance thereon by each present and future Syndication Party); and
(f) such other instruments and documents in which Agent has been granted a
security interest (for the benefit of the Syndication Parties) and of which
Agent is to have possession under the terms of the Loan Documents.
11.4.2 Advance Request. Agent and Construction Loan Agent shall have
received from Borrower (including by facsimile transmission): (a) a duly
completed request in the form attached hereto as Exhibit 11.4.2 which must have
appended thereto the draw request submitted to Borrower by the Underlying
Construction Loan Borrower and all accompanying invoices, affidavits,
certifications, lien waivers, and lien releases ("Advance Request") which has
been signed by an Authorized Officer; and (b) such other information or
documentation as Agent or Construction Loan Agent may request. The Advance
Request shall be deemed to have been received on the Business Day received if
actually received by Agent and Construction Loan Agent before 12:00 noon,
Central Time, and as of the next Business Day if received by Agent or
Construction Loan Agent after such time or on other than a Business Day;
provided that an Advance Request shall not be deemed to have been received by
Agent and Construction Loan Agent until it is satisfactory to Agent and
Construction Loan Agent and includes all information and documentation that
Agent and Construction Loan Agent may request. Construction Loan Agent shall
review the Advance Request and all information provided by Borrower pursuant to
this Subsection and report to Agent as to whether all requirements contained
herein to the funding of the requested Advance have been satisfied. Within five
(5) Business Days of the date an Advance Request is deemed to have been
received, Agent shall, upon having received Construction Loan Agent's report,
either fund the Advance or advise Borrower to the contrary; provided that if
Agent does not advise Borrower or does not fund within such time, the Advance
Request shall be deemed to have been declined for funding. The Advance Request
shall be irrevocable.
11.4.3 Default. As of the Advance Date there shall exist no Event of
Default or Potential Default, and the disbursing of the amount of the Loan
Proceeds requested in the Advance Request shall not result in an Event of
Default or Potential Default.
28
<PAGE>
11.4.4 Representations and Warranties. The representations and warranties
of Borrower and of Guarantor contained in each of the Loan Documents to which it
is a party, shall be true and correct in all material respects on and as of the
date on which the Advance is to be made as though made on and as of such date.
11.4.5 Fees and Expenses. Borrower shall have paid Agent, by wire transfer
of immediately available federal funds all fees set forth in Section 5.3 of this
Construction Credit Agreement which are then due and payable, including the
Facility Fee, and all expenses owing pursuant to Section 17.1 hereof.
11.5 Conditions to All Subsequent Advances. The Syndication Parties'
obligation to make Advances after the initial Advance is subject to
satisfaction, in Agent's sole discretion, of each of the following conditions
precedent:
11.5.1 Representations and Warranties. The representations and warranties
of Borrower contained in this Construction Credit Agreement shall be true and
correct in all material respects on and as of the date of such Advance as though
made on and as of such date.
11.5.2 No Event of Default. No Event of Default and no Potential Default
shall have occurred and be continuing, and no Event of Default or Potential
Default would result from the making of the Advance.
11.5.3 No Material Adverse Change. No material adverse change shall have
occurred in the condition, operations, or prospects of Borrower.
11.5.4 Advance Request. Agent and Construction Loan Agent shall have
received from Borrower (including by facsimile transmission): (a) a duly
completed Advance Request; and (b) such other information or documentation as
Agent or Construction Loan Agent may request. The Advance Request shall be
deemed to have been received on the Business Day received if actually received
by Agent and Construction Loan Agent before 10:00 a.m., Central Time, and as of
the next Business Day if received by Agent or Construction Loan Agent after such
time or on other than a Business Day; provided that an Advance Request shall not
be deemed to have been received by Agent and Construction Loan Agent until it is
satisfactory to Agent and Construction Loan Agent and includes all information
and documentation that Agent or Construction Loan Agent may request.
Construction Loan Agent shall review the Advance Request and all information
provided by Borrower pursuant to this Subsection and report to Agent as to
whether all requirements contained herein to the funding of the requested
Advance have been satisfied. Within five (5) Business Days of the date an
Advance Request is deemed to have been received, Agent shall, upon having
received Construction Loan Agent's report, either fund the Advance or advise
Borrower to the contrary; provided that if Agent does not advise Borrower or
does not fund within such time, the Advance Request shall be deemed to have been
declined for funding. The Advance Request shall be irrevocable.
29
<PAGE>
11.6 Additional Disbursement Conditions. At no time and in no event shall
the Syndication Parties be obligated to make Advances:
11.6.1 Aggregate Commitment Amount. In excess of an amount, which when
added to: (a) all prior Advances; and (b) the undrawn face amount of all
Construction Letters of Credit, would exceed the Aggregate Commitment.
11.6.2 Disbursement Period. If the Advance would be made other than during
the Availability Period.
11.6.3 Illegality of Loan. After the enactment of any law by any
governmental authority having jurisdiction over any Syndication Party which
would make it unlawful in any respect for such Syndication Party to make the
Advance.
11.7 Requests for and Conditions to Issuance of Construction Letters of
Credit. Borrower must provide Agent with a written request for issuance a
Construction Letter of Credit, containing such information as Agent shall
request, including amount, beneficiary, purpose, expiry date, and draw
conditions. In addition: (a) the representations and warranties of Borrower
contained in this Construction Credit Agreement shall be true and correct in all
material respects on and as of the date of such request as though made on and as
of such date; (b) when added to all other outstanding Construction Letters of
Credit, the requested Construction Letter of Credit must not exceed the Letter
of Credit Cap; (c) no Event of Default and no Potential Default shall have
occurred and be continuing, and no Event of Default or Potential Default would
result from the issuing of the Construction Letter of Credit; and (d) Agent must
approve the form of the Construction Letter of Credit.
ARTICLE 12 AFFIRMATIVE COVENANTS
From and after the date of this Construction Credit Agreement and until the
Bank Debt is indefeasibly paid in full and the Syndication Parties have no
obligation to make any advances hereunder, Borrower agrees that it will observe
and comply with, the following covenants for the benefit of Agent and the
Syndication Parties:
12.1 Books and Records. Borrower shall at all times keep proper books of
record and account, in which correct and complete entries shall be made of all
its dealings, in accordance with GAAP.
12.2 Reports and Notices. Borrower shall provide to Agent the following
reports, information and notices:
12.2.1 Annual Financial Statements. As soon as available, but in no event
later than one hundred and twenty (120) days after the end of any fiscal year of
Borrower occurring during the term hereof annual financial statements of
Borrower, prepared in accordance with GAAP consistently applied which shall: (a)
be audited by independent certified public accountants selected by Borrower
which are reasonably acceptable to Agent; (b) be accompanied by a report of such
accountants containing an
30
<PAGE>
opinion reasonably acceptable to Agent; (c) be accompanied by a Compliance
Certificate; (d) be prepared in reasonable detail and in comparative form; and
(e) include a balance sheet, an income statement, a statement of cash flows, a
statement of stockholders' equity, and all notes and schedules relating thereto.
12.2.2 Quarterly Financial Statements. As soon as available but in no event
more than sixty (60) days after the end of each Quarter the following financial
statements concerning Borrower's operations, prepared in accordance with GAAP
consistently applied: (a) a balance sheet, (b) an income statement, (c) a
statement of cash flows, (d) a statement of stockholders' equity, for such
Quarter and for the year to date, and (e) such other quarterly statements as
Agent may reasonably request, which quarterly statements requested under this
clause (e) shall include any and all notes and schedules thereto. Such quarterly
financial statements required pursuant to this Subsection shall be accompanied
by a Compliance Certificate.
12.2.3 Additional Information. With reasonable promptness: (a) copies of
all communications which Borrower receives or initiates from or to any
Underlying Construction Loan Borrower and all reports, certificates, and other
written materials, including, without limitation, all financial statements,
which Borrower receives from or on account of any Underlying Construction Loan
Borrower; and (b) such additional financial information or other documentation
as Agent may reasonably request.
12.2.4 Notice of Default. As soon as the existence of any Event of Default
or Potential Default becomes known to any officer of Borrower, Borrower shall
promptly give Agent written notice of such Event of Default or Potential
Default, the nature and status thereof, and the action being taken or proposed
to be taken with respect thereto.
12.2.5 Notice of Certain Changes. Borrower shall: (a) notify Agent at least
ten (10) Business Days prior to the occurrence of any change in the name or
business form of Borrower; and (b) take all actions necessary or reasonably
requested by Agent in order to maintain the perfected status of Agent's first
lien and security interest (subject only to Permitted Encumbrances and to the
Intercreditor Agreement) in the Collateral.
12.2.6 Notice of Litigation. Borrower shall promptly notify Agent in
writing of all litigation in which Borrower or, to Borrower's knowledge,
Guarantor, is a party, and which either: (a) involves an amount of $100,000 or
more, singly or in the aggregate at any time; or (b) could reasonably be
expected to result in a Material Adverse Effect with respect to Borrower or
Guarantor.
12.2.7 Notice of Material Adverse Effect. Promptly after Borrower obtains
knowledge thereof, notice of any matter which has resulted or would result in a
Material Adverse Effect on Borrower or Guarantor.
31
<PAGE>
12.2.8 Notice of Environmental Litigation. Without limiting the provisions
of Subsection 12.2.6 of this Construction Credit Agreement, promptly after
Borrower's receipt thereof, notice of the receipt of all pleadings, orders,
complaints, indictments, or other communication alleging a condition that may
require Borrower to undertake or to contribute to a cleanup or other response
under Environmental Regulations, or which seeks penalties, damages, injunctive
relief, or criminal sanctions related to alleged violations of such laws, or
which claims personal injury or property damage to any person as a result of
environmental factors or conditions or which, if adversely determined, could
have a Material Adverse Effect on Borrower.
12.2.9 Regulatory and Other Notices. Promptly after Borrower's receipt
thereof, copies of any notices or other communications received from: (a) any
governmental authority with respect to any matter or proceeding the effect of
which could reasonably be expected to have a Material Adverse Effect on
Borrower; or (b) an Underlying Construction Loan Borrower.
12.2.10 Adverse Action Regarding Required Licenses. In the event Borrower
learns that any petition, action, investigation, notice of violation or apparent
liability, notice of forfeiture, order to show cause, complaint or proceeding is
pending, or, to the best of Borrower's knowledge, threatened, to seek to revoke,
cancel, suspend, modify, or limit any of the Required Licenses, Borrower shall
provide Agent with prompt written notice thereof and shall take, or cause to be
taken, all reasonable measures to contest such action in good faith.
12.2.11 Default of Underlying Construction Loan. As soon as the existence
of any event of default or potential default under the Underlying Construction
Loan becomes known to Borrower, Borrower shall promptly give Agent written
notice of such event of default or potential default, the nature and status
thereof, and the action being taken or proposed to be taken with respect
thereto.
12.2.12 Annual Attorney's Opinion Regarding Collateral. No later than the
last Business Day of February of each year, an opinion of legal counsel
acceptable to Agent as to the status of (a) Borrower's liens on the assets of
the Underlying Construction Loan Borrowers to secure the Underlying Construction
Loans ("Underlying Liens"); and (b) CoBank's liens on the assets of Borrower to
secure the Loan (and including the collateral assignment to CoBank of the
Underlying Construction Loans and Underlying Liens).
12.3 Eligibility Certificate. Borrower shall maintain its membership base
so that not less than fifty percent (50%) of its equity interest is owned by
Persons engaged in the business of producing vegetables, fruits, or other
agricultural products. Within thirty (30) days of the beginning of each calendar
year, Borrower shall provide Agent with a written certification signed by an
officer thereof stating that Borrower is in compliance with this Section.
12.4 Maintenance of Existence and Qualification. Borrower shall maintain
its corporate existence in good standing under the laws of Delaware. Borrower
will
32
<PAGE>
qualify and remain qualified as a foreign corporation in each jurisdiction in
which such qualification is necessary or desirable in view of its business,
operations and properties.
12.5 Compliance with Legal Requirements and Agreements. Borrower shall: (a)
comply with all laws, rules, regulations and orders applicable to Borrower or
its business; and (b) all agreements, indentures, mortgages, and other
instruments to which it is a party or by which it or any of its property is
bound; provided, however, that the failure of Borrower to comply with this
sentence in any instance not directly involving Agent or a Syndication Party
shall not constitute an Event of Default unless such failure would have a
Material Adverse Effect.
12.6 Compliance with Environmental Laws. Without limiting the provisions of
Section 12.5 of this Construction Credit Agreement, Borrower shall comply in all
material respects with, and take all reasonable steps necessary to cause all
persons occupying or present on any properties owned or leased by Borrower to
comply with, all Environmental Regulations, the failure to comply with which
would have a Material Adverse Effect.
12.7 Taxes. Borrower shall cause to be paid when due all taxes,
assessments, and other governmental charges upon it, its income, its sales, its
properties, and federal and state taxes withheld from its employees' earnings,
unless such taxes, assessments, or other governmental charges shall be contested
in good faith by appropriate actions or legal proceedings and Borrower shall
establish adequate reserves therefor in accordance with GAAP.
12.8 Insurance. Borrower shall keep the Collateral insured at all times by
an insurance carrier or carriers approved by Agent which have an A rating by the
current BEST Key Rating Guide (provided that Florists Mutual Group will be
deemed an approved insurance carrier so long as its BEST Key Rating does not
fall below its rating as of the Closing Date), against all risks covered by a
special form policy (and including flood, earthquake and windstorm coverage) in
the amount of the full replacement cost (other than with respect to motor
vehicles) of the Collateral as well as liability, worker's compensation,
business interruption, boiler and machinery and such other insurance as Agent
may reasonably require, in amounts and with deductibles or maximum payouts
customarily carried by entities in similar lines of business. Borrower shall
also maintain fidelity coverage (including employee dishonesty) on such officers
and employees and in such amounts as Agent shall specify, or in the absence of
any such specification, as customarily carried by corporations engaged in
comparable businesses and comparably situated. Such insurance policies shall
contain such reasonable endorsements as Agent shall from time to time require
and all liability policies shall name Agent as an additional insured as its
interests may appear (and for the benefit of the Syndication Parties). All such
insurance policies shall be endorsed with a mortgagee's or loss payable clause,
as appropriate, in favor of Agent (and for the benefit of the Syndication
Parties). The policy or policies evidencing all insurance referred to in this
Section and receipts for the payment of premiums thereon or certificates of such
insurance satisfactory to Agent shall be delivered to and held by Agent. All
such insurance policies shall contain a provision requiring at least ten (10)
days' notice to Agent prior
33
<PAGE>
to any cancellation for non-payment of premiums and at least forty-five (45)
days' notice to Agent of cancellation for any other reason or of modification or
non-renewal. No later than forty (40) days prior to expiration, Borrower shall
give Agent (a) satisfactory written evidence of renewal of all such policies
with premiums paid, or (b) a written report as to the steps being taken by
Borrower to renew or replace all such policies, provided that notwithstanding
the receipt of such written report, Agent may at any time thereafter give
Borrower written notice to provide Agent with such evidence as described in
clause (a), in which case Borrower must do so within ten (10) days of such
notice. Borrower agrees to pay all premiums on such insurance as they become
due, and will not permit any condition to exist on or with respect to the
Collateral which would wholly or partially invalidate any insurance thereon.
Effective upon the occurrence of an Event of Default, all of Borrower's right,
title and interest in and to all such policies and any unearned premiums paid
thereon are hereby assigned to Agent (for the benefit of the Syndication
Parties) who shall have the right, but not the obligation, to assign the same to
any purchaser of the Collateral at any foreclosure sale. Borrower shall give
immediate written notice to the insurance carrier and Agent of any loss.
Borrower hereby authorizes and empowers Agent upon the occurrence and during the
continuation of an Event of Default, at Agent's option and in Agent's sole
discretion, to act as attorney-in-fact for Borrower to make proof of loss, to
adjust and compromise any claim under insurance policies, to collect and receive
insurance proceeds, and to deduct therefrom Agent's expenses incurred in the
collection of such proceeds, and all insurance policies of Borrower shall
provide that Agent may act as Borrower's attorney-in-fact for such purposes.
12.9 Title to Assets and Maintenance. Borrower shall defend and maintain
title to all its material properties and assets, including the Collateral.
Borrower shall keep its assets, both real and personal, including the
Collateral, in good order and condition consistent with industry practice and
shall make all necessary repairs, replacements and improvements so that its
business may be properly and advantageously conducted.
12.10 Payment of Liabilities. Borrower shall pay all liabilities
(including, without limitation: (a) any indebtedness for borrowed money or for
the deferred purchase price of property or services; (b) any obligations under
leases which have or should have been characterized as capitalized leases, as
determined in accordance with GAAP; and/or (c) any contingent liabilities, such
as guaranties, for the obligations of others relating to indebtedness for
borrowed money or for the deferred purchase price of property or services or
relating to obligations under leases which have or should have been
characterized as capitalized leases, as determined in accordance with GAAP) as
they become due beyond any period of grace under the instrument creating such
liabilities, unless (with the exception of the Bank Debt) they are contested in
good faith by appropriate actions or legal proceedings, Borrower establishes
adequate reserves therefor in accordance with GAAP, and such contesting will not
result in a Material Adverse Effect.
34
<PAGE>
12.11 Further Assurances; Real Property Security Interests. Borrower shall,
as may be required from time to time by Agent, provide such documents as may be
necessary or desirable in the judgment of Agent to confirm the security interest
in the Collateral granted to Agent for the benefit of the Syndication Parties.
Promptly after the purchase or other acquisition of any fee interest in real
estate having a cost or Fair Market Value of $25,000.00 or more, Borrower shall
provide Agent with written notice of such acquisition and shall grant to Agent
(for the benefit of the Syndication Parties) a first deed of trust or mortgage
on such real estate (subject to liens permitted by Section 13.3 hereof and to
the Intercreditor Agreement), such deed of trust or mortgage to be in form and
substance as reasonably specified by Agent. In connection with the delivery of
any mortgage or deed of trust, Borrower shall, where required under the
guidelines set forth in Subsection 11.1.2 of this Construction Credit Agreement,
deliver to Agent a mortgagee's title policy satisfactory to Agent in such amount
as Agent shall specify, but in no event greater than the value of the real
estate, to be obtained at Borrower's sole cost. In connection with entering
into, as lessee, any lease of an interest in real property which lease calls for
a rental payment equal to or in excess of $25,000.00 per annum, Borrower shall
deliver to Agent a Leasehold Assignment & Consent (naming Agent as assignee for
the benefit of the Syndication Parties), together with such consents or
estoppels of lessor as Agent shall specify.
12.12 Inspection. Permit Agent or its agents, during normal business hours
or at such other times as the parties may agree, to examine Borrower's
properties, books, and records, and to discuss Borrower's affairs, finances,
operations, and accounts with its respective officers, directors, employees, and
independent certified public accountants.
12.13 Required Licenses; Permits; Etc. Borrower shall duly and lawfully
obtain and maintain in full force and effect all Required Licenses.
12.14 ERISA. In the event Borrower adopts, maintains, or becomes obligated
to make payments under, any Borrower Benefit Plan in the future (which Borrower
may not do without the prior written consent of Agent), Borrower shall: (a)
cause Borrower's Benefit Plans to comply in all material respects with the Code
and ERISA, including but not limited to preparing and delivering each material
report, statement or other document required by ERISA and the Code within the
period specified therein and conforming in form and substance to the provisions
thereof; (b) cause any Borrower Benefit Plan that is intended to satisfy the
requirements of Section 401(a) of the Code to satisfy such requirements
including, but not limited to obtaining a favorable determination letter with
respect to each such Borrower Benefit Plan; and (c) prepare and deliver and (d)
administer each Borrower Benefit Plan in all material respects in accordance
with the terms of such plan and with ERISA, the Code, and any other applicable
law, except to the extent any failure to comply with the preceding clauses (a),
(b) or (c) would not have a Material Adverse Effect. Borrower shall take any
actions necessary to terminate its status as a participating employer in any
employee benefit plan (within the meaning of Section 3(3) of ERISA) sponsored by
an other entity. Within ten (10) Business Days after receiving such notice,
Borrower shall furnish to Agent any notice received by
35
<PAGE>
Borrower relating to an assertion of withdrawal liability imposed by any
Multiemployer Plan upon Borrower or Borrower's controlled group prior to the
Closing Date, or relating to any violation of the provisions of the Code or
ERISA asserted by the Department of Labor, the Pension Benefit Guaranty
Corporation or the Department of the Treasury with respect to any Borrower
Benefit Plan that could reasonably be expected to have a Material Adverse
Effect.
ARTICLE 13 NEGATIVE COVENANTS
From and after the date of this Construction Credit Agreement until the
Bank Debt is indefeasibly paid in full and the Syndication Parties have no
obligation to disburse Loan Proceeds, Borrower agrees that it will observe and
comply with the following covenants:
13.1 Borrowing. Borrower shall not create, incur, assume or permit to
exist: (a) any indebtedness for borrowed money or for the deferred purchase
price of property or services; (b) any contingent liabilities, such as
guarantees; or (c) any obligations under leases which have or should have been
characterized as capital leases, as determined in accordance with GAAP, except
for: (u) indebtedness owing under the Loan Documents, (v) indebtedness under the
Line of Credit Facility and the Term Facility, (w) leases and purchase money
financing of property used in the ordinary course of Borrower's business the
aggregate amount of which does not exceed $50,000.00 at any one time; (x) the
indebtedness outstanding on the date hereof and which is described on Exhibit
13.1 hereto; and (y) indebtedness constituting any refinancing or refunding of
indebtedness described in subparagraphs (u), (v), (w), and (x) of this Section
13.1, provided that the principal amount thereof does not increase as a result
of any such refinancing or refunding from the balance owing on the date hereof
or on the date of such refinancing or refunding, whichever is lower.
13.2 No Other Businesses. Borrower shall not transact or engage in any
business other than the making of loans to its members and to non-members.
13.3 Liens. Borrower will not create, incur, assume or suffer to exist any
mortgage, pledge, lien, charge or other encumbrance on, or any security interest
in, any of the Collateral, except:
(a) the security interests, mortgages, pledges, liens, or other
charges or encumbrances resulting from the Loan Documents and arising out
of the Line of Credit Facility and the Term Facility;
(b) liens for taxes or other governmental charges which are not due or
remain payable without penalty, or are being contested in good faith by
appropriate actions or proceedings; provided that such reserves or other
appropriate provisions, if any, as shall be required by GAAP, shall have
been made for such taxes or other governmental charges;
36
<PAGE>
(c) deposits or pledges to secure workmen's compensation, unemployment
insurance, old age benefits or other social security obligations or in
connection with or to secure the performance of bids, tenders, trade
contracts or leases or to secure statutory obligations or surety or appeal
bonds or other pledges or deposits of like nature and all in the ordinary
course of business;
(d) mechanics', carriers', workmen's, repairmen's or other like liens
arising in the ordinary course of business in respect of obligations not
yet due or which are being contested in good faith and by appropriate
proceedings;
(e) easements, rights-of-way, zoning restrictions and other similar
matters incidental to the ownership of property which do not in the
aggregate materially detract from the value of such property or assets or
materially impair their use in the operation of the business of Borrower;
and
(f) purchase money security interests in property; provided that: (i)
such property is used in the ordinary course of Borrower's business,
provided that such security interests shall attach only to the property so
purchased, (ii) the amount of the purchase money financing so secured does
not exceed the amount permitted under Section 13.1, and (iii) the purchase
occurred subsequent to the Closing Date.
13.4 Sale of Assets. Borrower will not sell, convey, assign, lease or
otherwise transfer or dispose of, voluntarily, by operation of law or otherwise,
any of the Collateral to any Person, except that; (a) Borrower may dispose of
equipment which is obsolete or no longer used or useful by Borrower in its
business so long as (i) no Event of Default has occurred and is continuing, and
(ii) the transfer is made in an arms length transaction; and (b) Borrower may
dispose of worn-out equipment so long as (i) if an Event of Default has occurred
and is continuing, any proceeds are paid to Agent (for the benefit of the
Syndication Parties) and (ii) such sales do not involve equipment having an
aggregate fair market value in excess of $50,000.00 for all such equipment
disposed of in any calendar year.
13.5 Liabilities of Others. Borrower will not assume, guarantee, endorse or
otherwise become directly or contingently liable in connection with any
obligation of any other Person.
13.6 Payments on Indebtedness. Borrower shall not make any principal
payment on any indebtedness except: (a) indebtedness owing hereunder, under the
Credit Agreement (Line of Credit Facility), and under the Credit Agreement (Term
Loan Funding); and (b), so long as no Event of Default or Potential Default
shall exist, other indebtedness permitted by Section 13.1 of this Construction
Credit Agreement.
13.7 Merger; Acquisitions; Etc. Borrower shall not merge or consolidate
with any entity, or acquire all or substantially all of the assets of any person
or entity, or form or create any new subsidiary or affiliate, or commence
operations under any other name, organization, or entity, including any joint
venture.
37
<PAGE>
13.8 Loans, Advances and Investments. Except as provided in Section 13.13
hereof and except for the purchase of CoBank Equity Interests, Borrower will not
make or permit to remain outstanding any loan or advance to, or own, purchase or
acquire any stock, obligations or securities of, or any other interest in, or
make any capital contribution to, any Person, except that Borrower may own,
purchase or acquire:
(a) commercial paper maturing not in excess of one year from the date
of acquisition and rated P1 by Moody's Investors Service, Inc. or A1 by
Standard & Poor's Corporation on the date of acquisition;
(b) certificates of deposit in North American commercial banks rated C
or better by Keefe, Bruyette & Woods, Inc. or 3 or better by Cates
Consulting Analysts, maturing not in excess of one year from the date of
acquisition;
(c) obligations of the United States government or any agency thereof,
the obligations of which are guaranteed by the United States government,
maturing, in each case, not in excess of one year from the date of
acquisition; and
(d) repurchase agreements of any bank or trust company incorporated
under the laws of the United States of America or any state thereof and
fully secured by a pledge of obligations issued or fully and
unconditionally guaranteed by the United States government.
13.9 Transactions With Related Parties. Borrower shall not purchase,
acquire, or sell any equipment, other personal property, real property or
services from or to any affiliate, except in the ordinary course of Borrower's
business and upon fair and reasonable terms no less favorable than would be
obtained by Borrower in a comparable arm's-length transaction with an unrelated
Person.
13.10 ERISA. Borrower shall not: (a) adopt, maintain or become obligated to
contribute to any Borrower Benefit Plan without the prior written consent of
Agent; (b) engage in or permit any transaction which could result in a
"prohibited transaction" (as such term is defined in Section 406 of ERISA) or in
the imposition of an excise tax pursuant to Section 4975 of the Code; (c) engage
in or permit any transaction or other event which could result in a "reportable
event" as such term is defined in Section 4043 of ERISA for any Borrower Pension
Plan; (d) fail to make full payment when due of all amounts which, under the
provisions of any Borrower Benefit Plan, Borrower is required to pay as
contributions thereto; (e) permit to exist any "accumulated funding deficiency"
(as such term is defined in Section 302 of ERISA) in excess of $25,000.00,
whether or not waived, with respect to any Borrower Pension Plan; (f) fail to
make any payments to any "multiemployer plan" that Borrower may be required to
make under any agreement relating to such "multiemployer plan" or any law
pertaining thereto; or (g) terminate any Borrower Pension Plan in a manner which
could result in the imposition of a lien on any property of Borrower pursuant to
Section 4068 of ERISA. Borrower shall not terminate any Borrower Pension Plan so
as to result in any liability to the Pension Benefit Guaranty Corporation. As
used in this Section, all terms enclosed in quotation marks shall have the
meanings set forth in ERISA. Borrower's
38
<PAGE>
failure to comply with any of the foregoing provisions of this Section shall not
constitute a breach of this Construction Credit Agreement or an Event of Default
unless such failure has a Material Adverse Effect.
13.11 Payment of Dividends. Borrower shall not, directly or indirectly,
declare or pay any dividends on account of any shares of any class of its
capital stock now or hereafter outstanding, or set aside or otherwise deposit or
invest any sums for such purpose, or redeem, retire, defease, purchase or
otherwise acquire any shares of any class of its capital stock (or set aside or
otherwise deposit or invest any sums for such purpose) for any consideration
other than common stock or apply or set apart any sum, or make any other
distribution (by reduction or capital or otherwise) in respect of any such
shares or retire capital equities or other written notices of allocation, or
make any other distribution or allocation of its earnings, surplus or assets to
any holder of stock, allocated equities or other written notices of allocation,
or agree to do any of the foregoing; provided that Borrower may distribute
patronage-sourced earnings annually in the form of cash and qualified written
notices of allocation, so long as the cash portion is the minimum amount
required to qualify the distribution as a deductible patronage distribution for
federal income tax purposes, and such written notices constitute equity and not
debt.
13.12 Change in Fiscal Year. Borrower shall not change its fiscal year from
a year ending on December 31.
13.13 Extensions of Credit. Notwithstanding the prohibitions of Section
13.8, Borrower may make extensions of credit as follows:
(a) Underlying Construction Loans approved by Agent for funding
hereunder and which are included in the Collateral;
(b) Underlying Term Loans approved by Agent for funding under the
Credit Agreement (Term Loan Funding); and
(c) Loans approved by Agent for funding under the Credit Agreement
(Line of Credit Loan).
13.14 Amendment/Waiver of Provisions of Underlying Construction Loan
Documents. Borrower shall not, without the prior written consent of Agent,
amend, or agree to amend, or waive any material provision of, or give its
consent with respect to any material matter under, any of the Underlying
Construction Loan Documents after originals or copies thereof have been
delivered to Agent in connection with a Request for Underlying Construction Loan
Approval.
ARTICLE 14 INDEMNIFICATION
14.1 General; Stamp Taxes; Intangibles Tax. Borrower agrees to indemnify
and hold Agent and each Syndication Party and their directors, officers,
employees, agents, professional advisers and representatives ("Indemnified
Parties") harmless
39
<PAGE>
from and against any and all claims, damages, losses, liabilities, costs or
expenses whatsoever which Agent or any other Indemnified Party may incur (or
which may be claimed against any such Indemnified Party by any Person),
including attorneys' fees incurred by any Indemnified Party, arising out of or
resulting from: (a) the material inaccuracy of any representation or warranty of
Borrower or Guarantor in this Construction Credit Agreement or the other Loan
Documents; (b) the material failure of Borrower or Guarantor to perform or
comply with any covenant or obligation of Borrower or Guarantor under this
Construction Credit Agreement or the other Loan Documents; or (c) the exercise
by Agent of any right or remedy set forth in this Construction Credit Agreement
or the other Loan Documents, provided that Borrower shall have no obligation to
indemnify any Indemnified Party against claims, damages, losses, liabilities,
costs or expenses to the extent that a court of competent jurisdiction renders a
final non-appealable determination that the foregoing are solely the result of
the willful misconduct or gross negligence of such Indemnified Party. In
addition, Borrower agrees to indemnify and hold the Indemnified Parties harmless
from and against any and all claims, damages, losses, liabilities, costs or
expenses whatsoever which Agent or any other Indemnified Party may incur (or
which may be claimed against any such Indemnified Party by any Person),
including attorneys' fees incurred by any Indemnified Party, arising out of or
resulting from the imposition or nonpayment by Borrower of any stamp tax,
intangibles tax, or similar tax imposed by any state, including any amounts
owing by virtue of the assertion that the property valuation used to calculate
any such tax was understated. Borrower shall have the right to assume the
defense of any claim as would give rise to Borrower's indemnification obligation
under this Section with counsel of Borrower's choosing so long as such defense
is being diligently and properly conducted and Borrower shall establish to the
Indemnified Party's satisfaction that the amount of such claims are not, and
will not be, material in comparison to the liquid and unrestricted assets of
Borrower available to respond to any award which may be granted on account of
such claim. So long as the conditions of the preceding sentence are met,
Indemnified Party shall have no further right to reimbursement of attorney's
fees incurred thereafter. The obligation to indemnify set forth in this Section
shall survive the termination of this Construction Credit Agreement and other
covenants.
14.2 Indemnification Relating to Hazardous Substances. Borrower shall not
locate, produce, treat, transport, incorporate, discharge, emit, release,
deposit or dispose of any Hazardous Substance in, upon, under, over or from any
property owned or held by Borrower, except in accordance with all Environmental
Regulations; Borrower shall not permit any Hazardous Substance to be located,
produced, treated, transported, incorporated, discharged, emitted, released,
deposited, disposed of or to escape in, upon, under, over or from any property
owned or held by Borrower, except in accordance with Environmental Regulations;
and Borrower shall comply with all Environmental Regulations which are
applicable to such property. If Agent reasonably believes that an Environmental
Regulation has been violated by Borrower's activities upon property owned or
held by Borrower, and if Agent so requests, Borrower shall have prepared an
environmental review, audit, assessment and/or report relating to the subject
property, at Borrower's sole cost and expense, by an engineer or other
environmental expert
40
<PAGE>
acceptable to Agent. If, however, the environmental review, audit, assessment
and/or report reveals that no Environmental Regulation has been violated, Agent
shall reimburse Borrower for the costs and expenses of such engineer or other
environmental expert in completing such audit or report. Borrower shall
indemnify the Indemnified Parties against, and shall reimburse the Indemnified
Parties for, any and all claims, demands, judgments, penalties, liabilities,
costs, damages and expenses, including court costs and attorneys' fees incurred
by the Indemnified Parties (prior to trial, at trial and on appeal) in any
action against or involving the Indemnified Parties, resulting from any breach
of the foregoing covenants, or from the discovery of any Hazardous Substance in,
upon, under or over, or emanating from, such property, it being the intent of
Borrower and the Indemnified Parties that the Indemnified Parties shall have no
liability or responsibility for damage or injury to human health, the
environmental or natural resources caused by, for abatement and/or clean-up of,
or otherwise with respect to, Hazardous Substances by virtue of the interest of
Agent, or any Syndication Party, in the property created by any documents
securing Bank Debt (including without limitation the Loan Documents) or as the
result of Agent or any Syndication Party exercising any of its rights or
remedies with respect thereto, including but not limited to becoming the owner
thereof by foreclosure or conveyance in lieu of foreclosure. The foregoing
covenants of this Section shall be deemed continuing covenants for the benefit
of the Indemnified Parties, and any successors and assigns of the Indemnified
Parties, including but not limited to the holder of any certificate of purchase,
any transferee of the title of Agent or any Syndication Party or any subsequent
owner of the property, and shall survive the satisfaction or release of any
lien, any foreclosure of any lien and/or any acquisition of title to the
property or any part thereof by Agent or any Syndication Party, or anyone
claiming by, through or under Agent or any Syndication Party or Borrower by deed
in lieu of foreclosure or otherwise. Any amounts covered by the foregoing
indemnification shall bear interest from the date incurred at the Default
Interest Rate, shall be payable on demand, and shall be secured by the Security
Documents. The indemnification and covenants of this Section shall survive the
termination of this Construction Credit Agreement and other covenants.
ARTICLE 15 EVENTS OF DEFAULT; RIGHTS AND REMEDIES
15.1 Events of Default. The occurrence of any of the following events (each
an "Event of Default") shall, at the option of Agent, make the entire Bank Debt,
including the Notes, immediately due and payable (provided, that in the case of
an Event of Default under Subsection 15.1(f) all amounts owing under the Notes
and the other Loan Documents shall automatically and immediately become due and
payable without any action by or on behalf of Agent), and Agent may exercise all
rights and remedies for the collection of any amounts outstanding hereunder and
take whatever action it deems necessary to secure itself, all without notice of
default, presentment or demand for payment, protest or notice of nonpayment or
dishonor, or other notices or demands of any kind or character:
41
<PAGE>
(a) Failure of Borrower to pay within five (5) days of the date when
due, whether by acceleration or otherwise, any of the Bank Debt in
accordance with this Construction Credit Agreement or the other Loan
Documents.
(b) Any representation or warranty set forth in any Loan Document, any
Activation Request, Advance Request, or in the Guaranty or Guarantor
Security Documents, or in connection with any transaction contemplated by
any such document, shall prove in any material respect to have been false
or misleading when made by Borrower or Guarantor.
(c) Any default by Borrower or Guarantor in the performance or
compliance with the covenants, promises, conditions or provisions of
Sections 12.3, 12.8, 12.12, 13.1, 13.3, 13.4, 13.5, 13.7, 13.11, 13.12, or
13.14 of this Construction Credit Agreement, or Sections 9.1, 9.3, 9.4,
9.5, 9.6, 9.8, 9.9, or 9.13 of the Guaranty.
(d) Any breach of the covenants set forth in Sections 12.2, 12.9,
12.10 (except as provided in Section 15.1(e)), 12.13, 12.14, 13.6, 13.8,
13.9, or 13.10 of this Construction Credit Agreement or Sections 9.2, 9.7,
9.10, or 9.11 of the Guaranty, and such failure continues for five (5) days
after Borrower learns of such failure to comply, whether by Borrower's own
discovery or through notice from Agent.
(e) The failure of Borrower or Guarantor to pay when due, or failure
to perform or observe any other obligation or condition with respect to any
of the following obligations to any Person, beyond any period of grace
under the instrument creating such obligation: (i) any indebtedness for
borrowed money or for the deferred purchase price of property or services,
(ii) any obligations under leases which have or should have been
characterized as capitalized leases, as determined in accordance with GAAP,
or (iii) any contingent liabilities, such as guaranties, for the
obligations of others relating to indebtedness for borrowed money or for
the deferred purchase price of property or services or relating to
obligations under leases which have or should have been characterized as
capitalized leases, as determined in accordance with GAAP; provided that no
such failure will be deemed to be an Event of Default hereunder unless and
until the aggregate amount owing under obligations with respect to which
such failures have occurred and are continuing is at least $50,000.00 with
respect to Borrower or at least $50,000.00 with respect to Guarantor.
(f) Borrower or Guarantor applies for or consents to the appointment
of a trustee or receiver for any part of its properties; any bankruptcy,
reorganization, debt arrangement, dissolution or liquidation proceeding is
commenced or consented to by Borrower or Guarantor; or any application for
appointment of a receiver or a trustee, or any proceeding for bankruptcy,
reorganization, debt management or liquidation is filed for or commenced
against Borrower or Guarantor, and is not withdrawn or dismissed within
sixty (60) days thereafter.
(g) Failure of Borrower or Guarantor to comply with any other
provision of this Construction Credit Agreement or the other Loan Documents
not constituting an Event of Default under any of the preceding provisions
of this Section 15.1, and such
42
<PAGE>
failure continues for thirty (30) days after Borrower or Guarantor learns
of such failure to comply, whether by Borrower's or Guarantor's own
discovery or through notice from Agent.
(h) The Guaranty or the Guarantor Security Documents shall, at any
time after their execution, cease to be in full force and effect, or shall
be revoked or declared null and void, or the validity or enforceability
thereof shall be contested by Guarantor, or Guarantor shall deny any
further liability or obligation thereunder, or shall be in default or fail
to perform its obligations thereunder, or any covenant or agreement set
forth therein shall be breached, or Guarantor should breach or be in
default under the terms of any of the Guarantor Security Documents.
(i) The occurrence of an event of default, unless and until a written
waiver thereof has been granted by the Agent thereunder, under the
following agreements of even date herewith and executed by and between
Borrower, as borrower thereunder, CoBank as agent and (alone, or with any
other Person) as a syndication party thereunder: Credit Agreement (Term
Loan Funding), and Credit Agreement (Line of Credit Facility).
(j) The entry of one or more judgments in an aggregate amount in
excess of $50,000.00 against Borrower and/or in excess of $100,000.00
against Guarantor, in either case not stayed, discharged or paid within
thirty (30) days after entry.
(k) The occurrence of an event of default under any Underlying
Construction Loan.
15.2 No Advances. The Syndication Parties shall have no obligation to
disburse Loan Proceeds if a Potential Default or an Event of Default shall occur
and be continuing.
15.3 Rights and Remedies. In addition to the remedies set forth in Section
15.1 and 15.2 of this Construction Credit Agreement, upon the occurrence of an
Event of Default, Agent shall, subject to the provisions of Section 15.4 hereof,
be entitled to exercise all the rights and remedies provided in the Security
Documents and other Loan Documents and by any applicable law, including, without
limitation, the Uniform Commercial Code as enacted in the state of Colorado or
the state where the Collateral is located at such time, whichever provides Agent
with greater rights. Each and every right or remedy granted to Agent pursuant to
this Construction Credit Agreement and the other Loan Documents, or allowed
Agent by law or equity, shall be cumulative. Failure or delay on the part of
Agent to exercise any such right or remedy shall not operate as a waiver
thereof. Any single or partial exercise by Agent of any such right or remedy
shall not preclude any future exercise thereof or the exercise of any other
right or remedy.
15.4 Limitation on Rights and Remedies. Notwithstanding the provisions of
Section 15.3 hereof, when the sole Event of Default is an Event of Default
caused by Section 15.1(k) hereof, Agent will, for a period of time designated by
Agent in its sole
43
<PAGE>
discretion, refrain from accelerating the Loan if Borrower promptly (a)
proposes, and diligently pursues, a course of action (for example, for
collection, restructuring, or assignment) with respect to such Underlying
Construction Loan to which course of action the Super Majority give Agent their
written approval in their sole discretion; (b) ceases making advances
thereunder; and (c) charges interest on such Underlying Construction Loan at the
default rate specified in the relevant Underlying Construction Loan Documents).
ARTICLE 16 AGENCY AGREEMENT
16.1 Funding of Syndication Interest. (a) Each Syndication Party, severally
but not jointly, hereby irrevocably agrees to fund its Syndication Share of all
Advances from time to time pursuant to the terms and conditions contained
herein; provided that no Syndication Party shall be required to fund an Advance
in an amount such that the aggregate principal balance owing to such Syndication
Party after such funding would be in excess of such Syndication Party's Maximum
Syndication Amount. Each Syndication Party's interest in the Advances
("Syndication Interest") hereunder shall be without recourse to Agent or any
other Syndication Party and shall not be construed as a loan from any
Syndication Party to Agent or any other Syndication Party.
16.2 Syndication Parties' Obligations to Remit Funds. Each Syndication
Party agrees to remit the amount of each Advance requested by Borrower as set
forth in each Notice of Loan Advance multiplied by its Syndication Share
("Advance Payment") as such Notice of Loan Advance may be sent, in the manner
provided in Section 16.3 hereof, from time to time for Advances to be made under
the Loan on or prior to the Maturity Date.
16.3 Notice and Timing of Each Advance Payment. On the Business Day on
which Agent approves an Advance Request for funding, Agent shall provide each
Syndication Party with a notice in substantially the form attached hereto as
Exhibit 16.3 ("Notice of Loan Advance"), indicating, among other things, the
amount ("Loan Advance Amount") and Advance Date of the requested Advance and the
amount of the Syndication Party's Advance Payment. Each Syndication Party shall
remit its Advance Payment directly to Agent on the date specified in the Notice
of Loan Advance which shall not be later than the Advance Date ("Syndication
Party Advance Date").
16.4 Syndication Party's Failure to Remit Funds. If a Syndication Party
("Delinquent Syndication Party") fails to remit its Advance Payment in full by
11:00 a.m. Central time on the Syndication Party Advance Date (the unpaid amount
of any such payment being hereinafter referred to as the "Delinquent Amount"),
in addition to any other remedies available hereunder, any other Syndication
Party or Syndication Parties may, but shall not be obligated to, pay the
Delinquent Amount (the Syndication Party or Syndication Parties which advance
such Delinquent Amount are referred to as the "Contributing Syndication
Parties"), in which case (a) the Delinquent Amount which any Contributing
Syndication Party pays shall not count as an Advance Payment against the Maximum
Syndication Amount of the Contributing Syndication Party, and (b) the Delinquent
Syndication Party shall be obligated to pay to Agent, for the account
44
<PAGE>
of the Contributing Syndication Parties, interest on the Delinquent Amount at a
rate of interest equal to the rate of interest which Borrower is obligated to
pay on the Delinquent Amount ("Delinquency Interest") until the Delinquent
Syndication Party remits the full Delinquent Amount and remits all Delinquency
Interest to Agent, which will distribute such payments to the Contributing
Syndication Parties (pro rata based on the amount of the Delinquent Amount which
each of them (if more than one) paid) on the same Business Day as such payments
are received by Agent if received no later than 11:00 a.m. Central time or the
next Business Day if received by Agent thereafter. In addition, the Contributing
Syndication Parties shall be entitled to share, on the same pro rata basis, and
Agent shall pay over to them, for application against Delinquency Interest and
the Delinquent Amount, the Delinquent Syndication Party's Payment Distribution
and any fee distributions made under Section 16.11 hereof until the Delinquent
Amount and all Delinquency Interest have been paid in full. For voting purposes
the Agent shall readjust the Syndication Shares of such Delinquent Syndication
Party and the Contributing Syndication Parties from time to time first to
reflect the advance of the Delinquent Amount by the Contributing Syndication
Parties, and then to reflect the full or partial reimbursement to the
Contributing Syndication Parties of such Delinquent Amount. In the event no
Syndication Party elects to pay the Delinquent Amount with respect to any Loan
Advance Amount but Borrower elects to receive such Loan Advance Amount (less the
Delinquent Amount), the proportionate share of Payment Distributions to which
the Delinquent Syndication Party is entitled and its proportionate voting rights
shall be adjusted to reflect its failure to pay the Delinquent Amount. As
between the Delinquent Syndication Party and the Contributing Syndication
Parties, the Delinquent Syndication Party's interest in its Note shall be deemed
to have been partially assigned to the Contributing Syndication Parties in the
amount of the Delinquent Amount and Delinquency Interest owing to the
Contributing Syndication Parties from time to time.
16.5 Agency Appointment. Each of the Syndication Parties hereby designates
and appoints Agent to act as agent to service and collect the Loan and its
respective Note and to take such action on behalf of such Syndication Party with
respect to the Loan and such Note, and to execute such powers and to perform
such duties, as specifically delegated or required herein, as well as to
exercise such powers and to perform such duties as are reasonably incident
thereto, and to receive and benefit from such fees and indemnifications as are
provided for or set forth herein, until such time as a successor is appointed
and qualified to act as Agent.
16.6 Power and Authority of Agent. Without limiting the generality of the
power and authority vested in Agent pursuant to Section 16.5 hereof, the power
and authority vested in Agent includes, but is not limited to, the following:
16.6.1 Advice. To solicit the advice and assistance of each of the
Syndication Parties concerning the administration of the Loan and the exercise
by Agent of its various rights, remedies, powers, and discretions with respect
thereto.
45
<PAGE>
16.6.2 Documents. To execute, seal, acknowledge, and deliver as Agent, all
such instruments as may be appropriate in connection with the administration of
the Loan and the exercise by Agent of its various rights with respect thereto.
16.6.3 Proceedings. To initiate, prosecute, defend, and to participate in,
actions and proceedings in its name as Agent for the ratable benefit of the
Syndication Parties.
16.6.4 Retain Professionals. To retain attorneys, accountants, and other
professionals to provide advice and professional services to Agent, with their
fees and expenses reimbursable to Agent by Syndication Parties pursuant to
Section 16.18 hereof.
16.6.5 Incidental Powers. To exercise powers reasonably incident to Agent's
discharge of its duties enumerated in Section 16.7 hereof.
16.7 Duties of Agent. The duties of Agent hereunder shall consist of the
following:
16.7.1 Possession of Documents. To safekeep one original of each of the
Loan Documents other than the Notes (which will be in the possession of the
Syndication Party named as payee therein).
16.7.2 Distribute Payments. To receive and distribute to the Syndication
Parties payments made by Borrower pursuant to the Loan Documents.
16.7.3 Collections. Subject to the provisions of Section 16.9 hereof, to,
on behalf of and for the ratable benefit of all Syndication Parties, in
accordance with customary banking practices, exercise all rights, remedies,
powers, privileges, and discretion to which Agent is entitled to collect amounts
owing under the Loan and the Notes.
16.8 Agent's Resignation or Removal. Agent may resign at any time by giving
at least sixty (60) days' prior written notice of its intention to do so to each
of the Syndication Parties. After the receipt of such notice, the Syndication
Parties holding in the aggregate at least 66 2/3% of the Syndication Shares of
the Loan ("Majority Lenders") shall appoint a successor ("Successor Agent"). If
(a) no Successor Agent shall have been so appointed which is either (i) a
Syndication Party, or (ii) if not a Syndication Party, which is a Person
approved by Borrower, or (b) if such Successor Agent has not accepted such
appointment, in either case within forty-five (45) days after the retiring
Agent's giving of such notice of resignation, then the retiring Agent may
appoint a Successor Agent which shall be a bank or a trust company organized
under the laws of the United States of America or any state thereof and having a
combined capital, surplus and undivided profit of at least $250,000,000. Any
Agent may be removed upon the written demand of the Super Majority, which demand
shall also appoint a Successor Agent. Upon the appointment of a new Agent
hereunder, the term "Agent" shall for all purposes of this Construction Credit
Agreement thereafter
46
<PAGE>
mean such successor. After any retiring Agent's resignation hereunder as Agent,
or the removal hereunder of any Agent, the provisions of this Construction
Credit Agreement shall continue to inure to the benefit of such Agent as to any
actions taken or omitted to be taken by it while it was Agent under this
Construction Credit Agreement.
16.9 Consent Required for Certain Actions. Except as provided in Section
15.4 hereof, Agent may not take any of the following actions (nor may the
Syndication Parties take the action described in Subsection 16.9.1(c)) with
respect to, or under, the Loan Documents without the prior written consent,
given after notification by Agent of its intention to take any such action (or
notification by such Syndication Parties as are proposing the action described
in Subsection 16.9.1(c) of their intention to do so), of Syndication Parties
holding in the aggregate, at the time of such notification:
16.9.1 Unanimous. One hundred percent (100%) of the Syndication Shares
before:
(a) Agreeing to an increase in the Aggregate Commitment amount or an
extension of the Maturity Date;
(b) Agreeing to a reduction in the amount, or to a delay in the due
date, of any payment by Borrower of interest, principal, or fees; provided,
however, this restriction shall not apply to a delay in payment granted by
Agent in the ordinary course of administration of the Loan and the exercise
of reasonable judgment (so long as such payment delay does not exceed five
(5) days);
(c) Reducing the voting rights percentage set forth in this Subsection
16.9.1; or
(d) Releasing the lien on any of the Collateral except in connection
with the full payment of the Underlying Construction Loan with respect to
which such Collateral relates.
16.9.2 Majority Lenders. A sufficient interest to constitute the Majority
Lenders before:
(a) Consenting to any action, amendment, or granting any waiver, not
covered in Subsection 16.9.1; or
(b) Agreeing to amend Article 16 of this Construction Credit
Agreement.
If no written consent or denial is received from a Syndication Party within five
(5) Business Days after written notice of any proposed action as described in
this Section is delivered to such Syndication Party by Agent, such Syndication
Party shall be conclusively deemed to have consented thereto for the purposes of
this Section.
16.10 Distribution of Principal and Interest. Agent will receive and accept
all payments (including prepayments) of principal and interest made by Borrower
on the Loan and the Notes and will hold all such payments in trust for the
benefit of all present
47
<PAGE>
and future Syndication Parties, and, if requested in writing by the Majority
Lenders, in an account segregated from Agent's other funds and accounts
("Payment Account"). After the receipt by Agent of any payment representing
interest or principal on the Loan, Agent shall remit to each Syndication Party
an amount equal to such payment, multiplied by the Syndication Party's
Syndication Share ("Payment Distribution") no later than the same Business Day
as such payment is received by Agent if received no later than 11:00 a.m.
Central time or the next Business Day if received by Agent thereafter. Any
Syndication Party's rights to its Payment Distribution shall be subject to the
rights of any Contributing Syndication Parties to such amounts as set forth in
Section 16.4 hereof.
16.11 Distribution of Certain Fees and Amounts. Agent shall: (a) receive
and hold in trust for the benefit of all present and future Syndication Parties,
in the Payment Account and, if requested in writing by the Majority Lenders,
segregated from Agent's other funds and accounts; and (b) shall remit to the
Syndication Parties, as indicated, the fees and other amounts described below:
16.11.1 Funding Losses. The amount of any Funding Losses paid by Borrower
to Agent in connection with a prepayment of any portion of a Fixed Loan shall be
distributed to the Syndication Parties in accordance with their respective
Syndication Shares no later than the same Business Day that payment of such
Funding Losses is received by Agent, if received no later than 11:00 Central
time, or the next Business Day if received by Agent thereafter.
16.12 Possession of Loan Documents. The Loan Documents (other than the
Notes) shall be held by Agent in its name, for the ratable benefit of itself and
the other Syndication Parties without preference or priority.
16.13 Collateral Application. The Syndication Parties shall have no
interest in any other loans made to Borrower by any other Syndication Party
other than the Loan, or in any property taken as security for any other loan or
loans made to Borrower by any other Syndication Party, or in any property now or
hereinafter in the possession or control of any other Syndication Party, which
may be or become security for the Loan solely by reason of the provisions of a
security instrument that would cause such security instrument and the property
covered thereby to secure generally all indebtedness owing to such other
Syndication Party. Notwithstanding the foregoing, to the extent such other
Syndication Party applies such funds or the proceeds of such property to
reduction of the Loan, such other Syndication Party shall share such funds or
proceeds with all Syndication Parties according to their respective Syndication
Shares. In the event that any Syndication Party shall obtain payment, whether
partial or full, from any source in respect of the Loan, including without
limitation payment by reason of the exercise of a right of offset, banker's
lien, general lien, or counterclaim, reducing such Syndication Party's
outstanding balance in the Loan to below its Syndication Share, such Syndication
Party will promptly make such adjustments (which may include payment in cash or
the purchase of further syndications or participations in the Loan) to the end
that such excess payment shall be shared with all other Syndication Parties in
accordance with their respective Syndication Shares.
48
<PAGE>
16.14 Amounts Required to be Returned. If Agent makes any payment to a
Syndication Party in anticipation of the receipt of final funds from Borrower,
and such funds are not received from Borrower, or if excess funds are paid by
Agent to any Syndication Party as the result of a miscalculation by Agent, then
Syndication Party shall, on demand of Agent, forthwith return to Agent any such
amounts, plus interest thereon (from the day such amounts were transferred by
Agent to the Syndication Party to, but not including, the day such amounts are
returned by Syndication Party) at a rate per annum equal to the Federal Funds
Rate in effect on the date of such demand. If Agent is required at any time to
return to Borrower or a trustee, receiver, liquidator, custodian, or similar
official any portion of the payments made by Borrower to Agent, whether pursuant
to any bankruptcy or insolvency law or otherwise, then Syndication Party shall,
on demand of Agent, forthwith return to Agent any such payments transferred to
Syndication Party by Agent but without interest or penalty (unless Agent is
required to pay interest or penalty on such amounts to the person recovering
such payments).
16.15 Reports and Information to Syndication Parties. Agent shall use
reasonable efforts to provide to Syndication Parties, as soon as practicable
after actual knowledge thereof is acquired by an officer thereof primarily
responsible for Agent's duties as such with respect to the Loan or primarily
responsible for the credit relationship between Agent and Borrower: (a) notice
of the existence of any Event of Default or Potential Default under the Loan
Documents, and (b) any material factual information which has a material adverse
effect on the creditworthiness of Borrower and Borrower hereby authorizes such
disclosure by Agent to the Syndication Parties. Failure of Agent to provide the
information referred to in this Section shall not result in any liability upon,
or right to make a claim against, Agent except where a court of competent
jurisdiction renders a final non-appealable determination that such failure is a
result of the willful misconduct or gross negligence of Agent. Syndication
Parties acknowledge and agree that all information and reports received pursuant
to this Construction Credit Agreement will be received in confidence in
connection with their Syndication Interest, and that such information and
reports constitute confidential information and shall not be disclosed to any
third party, except pursuant to appropriate legal or regulatory process, (or
used by the Syndication Party except in connection with the Loan and its
Syndication Interest) without the prior written consent of Agent or Borrower, as
applicable.
16.16 Standard of Care. Agent shall not be liable to Syndication Parties
for any error in judgment or for any action taken or not taken by Agent or its
agents, except for its gross negligence or willful misconduct. Subject to the
preceding sentence, Agent will exercise the same care in administering the Loan
and the Loan Documents as it exercises for similar loans which it holds for its
own account and risk, and Agent shall not have any further responsibility to the
Syndication Parties. Without limiting the foregoing, Agent may rely on the
advice of counsel concerning legal matters and on any written document it
believes to be genuine and correct and to have been signed or sent by the proper
Person or Persons.
49
<PAGE>
16.17 No Trust Relationship. Neither the execution of this Construction
Credit Agreement, nor the sharing in the Loan, nor the holding of the Loan
Documents in its name by Agent, nor the management and administration of the
Loan and Loan Documents by Agent (including the obligation to hold certain
payments and proceeds in the Payment Account in trust for the Syndication
Parties), nor any other right, duty or obligation of Agent under or pursuant to
this Construction Credit Agreement is intended to be or create, and none of the
foregoing shall be construed to be or create, any express, implied or
constructive trust relationship between Agent and any Syndication Party. Each
Syndication Party hereby agrees and stipulates that Agent is not acting as
trustee for such Syndication Party with respect to the Loan, this Construction
Credit Agreement, or any aspect of either, or in any other respect.
16.18 Sharing of Costs and Expenses. To the extent not paid by Borrower,
each Syndication Party will promptly upon demand reimburse Agent, ratably
according to their respective Syndication Shares, for all reasonable costs,
disbursements, and expenses incurred by Agent on or after the date of this
Construction Credit Agreement for legal, accounting, consulting, and other
services rendered to Agent in its role as Agent in the administration of the
Loan, interpreting the Loan Documents, and protecting, enforcing, or otherwise
exercising any rights, both before and after default by Borrower under the Loan
Documents, and including, without limitation, all costs and expenses incurred in
connection with any bankruptcy proceedings; provided, however, that the costs
and expenses to be shared in accordance with this Section shall not include any
costs or expenses incurred by CoBank solely as a Syndication Party in connection
with the Loan, nor to Agent's internal costs and expenses.
16.19 Syndication Parties' Indemnification of Agent. Each of the
Syndication Parties agree to indemnify Agent, including any Successor Agent, and
its directors, officers, employees, agents, professional advisers and
representatives ("Indemnified Agency Parties"), (to the extent not reimbursed by
Borrower, and without in any way limiting the obligation of Borrower to do so),
ratably according to their respective Syndication Shares, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including, without limitation, at any time following the
payment of the Loan and/or the expiration or termination of the Syndication
Interests or this Construction Credit Agreement) be imposed on, incurred by or
asserted against Agent (or any of the Indemnified Agency Parties while acting
for Agent or for any Successor Agent) in any way relating to or arising out of
this Construction Credit Agreement or the Loan Documents, or the performance of
the duties of Agent hereunder or thereunder or any action taken or omitted while
acting in the capacity of Agent under or in connection with any of the
foregoing; provided that the Syndication Parties shall not be liable for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of an
Indemnified Agency Party to the extent that any of the forgoing result from the
gross negligence or willful misconduct of that Indemnified Agency Party as
determined by a court of competent jurisdiction. The agreements and obligations
in
50
<PAGE>
this Section shall survive the payment of the Loan, the Syndication Interests,
and the expiration or termination of this Construction Credit Agreement.
16.20 Books and Records. Agent shall maintain such books of account and
records relating to the Loan as it maintains with respect to other loans of
similar type and amount, and which shall clearly and accurately reflect the
Syndication Interest of each Syndication Party. Syndication Parties, or their
agents, may inspect such books of account and records at all reasonable times
during Agent's regular business hours.
16.21 Administrative Agent Fee. CoBank shall not be entitled to any fee or
compensation other than the Administrative Agent Fee for acting as Agent. In the
event the Successor Agent is contractually entitled to an additional fee, each
Syndication Party will be responsible for the amount thereof multiplied by their
Syndication Share.
16.22 Representations and Warranties of All Parties. Agent and each
Syndication Party represents and warrants that (a) the making and performance of
this Construction Credit Agreement is within its power and has been duly
authorized by all necessary corporate and other action by it, (b) this
Construction Credit Agreement is in compliance with all applicable laws and
regulations promulgated under such laws and does not conflict with nor
constitute a breach of its charter or by-laws nor any agreements by which it is
bound, and does not violate any judgment, decree or governmental or
administrative order, rule or regulation applicable to it, (c) no approval,
authorization or other action by, or declaration to or filing with, any
governmental or administrative authority or any other Person is required to be
obtained or made by it in connection with the execution, delivery and
performance of its duties under this Construction Credit Agreement, and (d) this
Construction Credit Agreement has been duly executed by it, and constitutes the
legal, valid, and binding obligation of such Person, enforceable in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally and general equitable principles
(regardless of whether such enforceability is considered in a proceeding at law
or in equity). Each Syndication Party that is a state or national bank
represents and warrants that the act of entering into and performing its
obligations under this Construction Credit Agreement has been approved by its
board of directors or its loan committee and such action was duly noted in the
written minutes of the meeting of such board or committee, and that it will
furnish Agent with a certified copy of such minutes or an excerpt therefrom
reflecting such approval.
16.23 Representations and Warranties of CoBank. CoBank, in its role as
Syndication Party and as Agent, makes no express or implied representation or
warranty and assumes no responsibilities with respect to the due authorization,
execution, or delivery of the Loan Documents; the accuracy of any information,
statements, or certificates provided by Borrower, the legality, validity, or
enforceability of the Loan Documents; the filing or recording of any document;
the collectibility of the Loan; the performance by any Borrower of any of its
obligations under the Loan Documents; or the financial condition or solvency of
any Borrower or any other party obligated with respect to the Loan.
51
<PAGE>
16.24 Syndication Parties' Independent Credit Analysis. Each Syndication
Party acknowledges receipt of true and correct copies of all Loan Documents
(other than any Note payable to another Syndication Party) from Agent. Each
Syndication Party agrees and represents that it has relied upon its independent
review (a) of the Loan Documents, and (b) any information independently acquired
by such Syndication Party from Borrower or otherwise in making its decision to
acquire an interest in the Loan independently and without reliance on CoBank or
Agent. Each Syndication Party represents and warrants that it has obtained such
information as it deems necessary (including any information such Syndication
Party independently obtained from Borrower or others) prior to making its
decision to acquire an interest in the Loan. Each Syndication Party further
agrees and represents that it has made its own independent analysis and
appraisal of and investigation into each Borrower's authority, business,
operations, financial and other condition, creditworthiness, and ability to
perform its obligations under the Loan Documents and has relied on such review
in making its decision to acquire an interest in the Loan. Each Syndication
Party agrees that it will continue to rely solely upon its independent review of
the facts and circumstances related to Borrower, and without reliance upon
CoBank or Agent, in making future decisions with respect to all matters under or
in connection with the Loan Documents and its participation in the Loan. CoBank
and Agent assume no responsibility for the financial condition of Borrower or
any Underlying Construction Loan Borrower for the performance of Borrower's
obligations under the Loan Documents nor for the performance of any Underlying
Construction Loan Borrower of its obligations under the Underlying Construction
Loan Documents. Except as otherwise expressly provided herein, neither CoBank
nor any other Syndication Party shall have any duty or responsibility to furnish
to any other Syndication Parties any credit or other information concerning
Borrower which may come into its possession.
16.25 No Joint Venture or Partnership. Neither the execution of this
Construction Credit Agreement, the sharing in the Loan, nor any agreement to
share in payments or losses arising as a result of this transaction is intended
to be or to create, and the foregoing shall not be construed to be, any
partnership, joint venture or other joint enterprise between Agent and any
Syndication Party, nor between any of the Syndication Parties.
16.26 Purchase for Own Account/Restrictions on Transfer. Each Syndication
Party represents that it has acquired and is retaining its Syndication Interest
in the Loan for its own account in the ordinary course of its banking or
financing business and not with a view toward the sale, distribution, further
participation, or transfer thereof. Each Syndication Party other than CoBank
agrees that it will not sell, assign, convey or otherwise dispose of
("Transfer"), or create or permit to exist any lien or security interest on all
or any part of its Syndication Interest in the Loan, without the prior written
consent of Agent and Borrower (which consent will not be unreasonably withheld);
provided that: (a) any such Transfer (except a Transfer to another Syndication
Party or a Transfer by CoBank) must be in a minimum amount of the lesser of (i)
$5,000,000.00 or (ii) the full amount of the Syndication Interest; (b) the
transferee must execute an agreement substantially in the form of Exhibit 16.26
hereto
52
<PAGE>
("Syndication Acquisition Agreement") and assume all of the transferor's
obligations hereunder and execute such documents as Agent may reasonably
require; and (c) the Syndication Party making such Transfer must pay Agent an
assignment fee of $2,500.00. Any Syndication Party may participate any part of
its Syndication Interest in the Loan to any Person with the prior written
consent of Agent and Borrower (which consent will not be unreasonably withheld),
and each Syndication Party understands and agrees that in the event of any such
participation, (x) its Syndication Share and Maximum Syndication Amount will not
change on account of such participation, (y) except as provided in Section 16.27
hereof, the participant will have no rights under this Construction Credit
Agreement, including, without limitation, voting rights or the right to receive
payments or distributions, and (z) Agent shall continue to deal directly with
the Syndication Party with respect to the Loan and the Syndication Party's
Syndication Interest as though no participation had been granted and will not be
obligated to deal directly with any participant. Notwithstanding any provision
contained herein to the contrary, any Syndication Party may at any time pledge
or assign all or any portion of its Syndication Interest to any Federal Reserve
Bank in accordance with applicable law.
16.27 Certain Participants' Voting Rights. All Persons which purchase a
participation interest in CoBank's interest as a Syndication Party hereunder
may, in CoBank's sole discretion (or as required in any agreement under which
such purchase is made and governed), be allowed by CoBank to vote, on a dollar
basis, on any matter requiring or allowing CoBank, in its capacity as a
Syndication Party, to provide or withhold its consent, or to otherwise vote on
any proposed action.
16.28 Method of Making Payments. Payment and transfer of all amounts owing
or to be paid or remitted hereunder, including, without limitation, payment of
the Initial Payment and each Advance Payment by Syndication Parties, and
distribution of principal or interest payments or fees or other amounts by
Agent, shall be by wire transfer in accordance with the instructions contained
on Exhibit 16.28 hereto ("Wire Instructions").
16.29 Events of Syndication Default/Remedies.
16.29.1 Syndication Party Default. Any of the following occurrences,
failures or acts, with respect to any of the Syndication Parties shall
constitute an Event of Syndication Default hereunder by such party: (a) if any
representation or warranty made by such party in this Construction Credit
Agreement shall be found to have been untrue in any material respect, (b) if
such party fails to make any distributions or payments required under this
Construction Credit Agreement within five (5) days of the date required, (c) if
such party breaches any other covenant, agreement, or provision of this
Construction Credit Agreement which breach shall have continued uncured for a
period of thirty (30) consecutive days after such breach first occurs, unless a
shorter period is required to avoid prejudicing the rights and position of the
other Syndication Parties, (d) if any agency having supervisory authority over
such party, or any creditors thereof, shall file a petition to reorganize or
liquidate such party pursuant to any applicable federal or state law or
regulation and such petition shall not be discharged or denied within fifteen
(15) days after the date on which it is filed, (e) if by the order of a
53
<PAGE>
court of competent jurisdiction or by any appropriate supervisory agency, a
receiver, trustee or liquidator shall be appointed for such party or for all or
any material part of its property or if such party shall be declared insolvent,
or (f) if such party shall be dissolved, or shall make an assignment for the
benefit of its creditors, or shall file a petition seeking to take advantage of
any debtors' act, including the bankruptcy act, or shall admit in writing its
inability to pay its debts generally as they become due, or shall consent to the
appointment of a receiver or liquidator of all or any material part of its
property.
16.29.2 Remedies. Upon the occurrence of an Event of Syndication Default,
the non-defaulting parties, acting by, or through the direction of, a simple
majority (determined on the basis of Syndication Share) of the non-defaulting
parties, may, in addition to any other remedy specifically set forth in this
Construction Credit Agreement, have and exercise any and all remedies available
generally at law or equity, including the right to damages and to specific
performance.
16.30 Withholding Taxes. Each Syndication Party represents that it is
entitled to receive any payments to be made to it hereunder without the
withholding of any tax and will furnish to Agent and to Borrower such forms,
certifications, statements and other documents as Agent or Borrower may request
from time to time to evidence such Syndication Party's exemption from the
withholding of any tax imposed by any jurisdiction or to enable Agent or
Borrower, as the case may be, to comply with any applicable laws or regulations
relating thereto. Without limiting the effect of the foregoing, if any
Syndication Party is not created or organized under the laws of the United
States of America or any state thereof, such Syndication Party will furnish to
Agent and Borrower IRS Form 4224 or Form 1001, or such other forms,
certifications, statements or documents, duly executed and completed by such
Syndication Party, as evidence of such Syndication Party's exemption from the
withholding of United States tax with respect thereto. Notwithstanding anything
herein to the contrary, Borrower shall not be obligated to make any payments
hereunder to such Syndication Party until such Syndication Party shall have
furnished to Agent and Borrower the requested form, certification, statement or
document.
16.31 Further Assurances. Agent and each Syndication Party agree to take
whatever steps and execute such documents may be reasonable and necessary to
implement this Article 16 and to carry out fully the intent thereof.
ARTICLE 17 MISCELLANEOUS
17.1 Costs and Expenses. To the extent permitted by law, Borrower agrees to
pay to Agent and the Syndication Parties, on demand, all out-of-pocket costs and
expenses (a) incurred by Agent (including, without limitation, the reasonable
fees and expenses of counsel retained by Agent, and including fees and expenses
incurred for consulting, appraisal, engineering, inspection, and environmental
assessment services) in connection with the preparation, negotiation, and
execution of the Loan Documents and the transactions contemplated thereby, and
processing Commitment Requests, Activation Requests, and Advance Requests for
Underlying Construction Loan
54
<PAGE>
Approval; and (b) incurred by Agent or any Syndication Party (including, without
limitation, the reasonable fees and expenses of counsel retained by Agent and
the Syndication Parties) in connection with the enforcement or protection of the
Syndication Parties' rights under the Loan Documents upon the occurrence of an
Event of Default or upon the commencement of an action by Borrower against Agent
or any Syndication Party (except that if the court makes a specific finding that
Borrower has prevailed on all or substantially all of its claims in such action
brought by Borrower, Borrower shall not be obligated to pay the out-of-pocket
costs and expenses of Agent and the Syndication Parties in connection with such
action), including without limitation collection of the Loan (regardless of
whether such enforcement or collection is by court action or otherwise).
Borrower shall not be obligated to pay the costs or expenses of any Person whose
only interest in the Loan is as a holder of a participation interest.
17.2 Service of Process and Consent to Jurisdiction. Borrower hereby agrees
that any litigation with respect to this Construction Credit Agreement or to
enforce any judgment obtained against Borrower for breach of this Construction
Credit Agreement or under the Notes or other Loan Documents may be brought in
the courts of the State of Colorado and in the United States District Court for
the District of Colorado (if applicable subject matter jurisdictional
requirements are present), as Agent may elect; and, by execution and delivery of
this Construction Credit Agreement, Borrower irrevocably submits to such
jurisdiction. With respect to litigation concerning this Construction Credit
Agreement or under the Notes or other Loan Documents within the jurisdiction of
the courts of the State of Colorado or the United States District Court for the
District of Colorado, Borrower hereby irrevocably appoints, until January 15,
2011, The Corporation Company, 1675 Broadway, Denver, Colorado 80202, as the
agent of Borrower to receive for and on behalf of Borrower, service of process,
which service may be made by mailing a copy of any summons or other legal
process to Borrower in care of such agent. Borrower agrees that Borrower shall
maintain a duly appointed agent for service of summons and other legal process
as long as Borrower remains obligated under this Construction Credit Agreement
and shall keep Agent advised in writing of the identity and location of such
agent. The receipt by such agent and/or by Borrower of such summons or other
legal process in any such litigation shall be deemed personal service and
acceptance by Borrower for all purposes of such litigation.
17.3 Jury Waiver. IT IS MUTUALLY AGREED BY AND BETWEEN AGENT, EACH
SYNDICATION PARTY, AND BORROWER THAT THEY EACH WAIVE TRIAL BY JURY IN ANY
ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER OF THEM AGAINST THE OTHER
PARTY ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS
CONSTRUCTION CREDIT AGREEMENT, THE NOTES, OR THE OTHER LOAN DOCUMENTS.
17.4 Notices. All notices, requests and demands required or permitted under
the terms of this Construction Credit Agreement shall be in writing and (a)
shall be addressed as set forth below or at such other address as either party
shall designate in writing, (b) shall be deemed to have been given or made: (i)
if delivered personally,
55
<PAGE>
immediately upon delivery, (ii) if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt, (iii) if by
nationally recognized overnight courier service with instructions to deliver the
next Business Day, one (1) Business Day after sending, and (iv) if by United
States Mail, certified mail, return receipt requested, five (5) days after
mailing.
17.4.1 Borrower:
Village Farms International Finance Association
1811 Sardis Road North, Suite 207
Charlotte, NC 28270
FAX: (704) 849-7662
Attention: Chief Financial Officer
With a copy to:
Agro Power Development, Inc.
10 Alvin Court
New Brunswick, NJ 08816
FAX: (908) 254-1710)
17.4.2 CoBank:
245 North Waco Street
Wichita, Kansas 67202
Attention: Greg E. Somerhalder
FAX: (316) 290-2006
With a copy to:
FARM CREDIT BANK OF TEXAS
6210 Highway 290 East
Austin, Texas 78723
P.O. Box 15919
Austin, Texas 78761
FAX: (512) 465-0675
Attention: ________________________________
17.5 Notice to Syndication Parties and Agent. No action shall be commenced
by Borrower for any claim against Agent or any Syndication Party on account of
any act or failure to act by such Person unless a notice specifically setting
forth the claim of Borrower shall have been given to such Person within sixty
(60) calendar days after Borrower has knowledge or should reasonably have
acquired knowledge of the act or omission which Borrower alleges gave rise to
such claim, and failure to give such notice shall constitute a waiver of any
such claim.
56
<PAGE>
17.6 Successors and Assigns. This Construction Credit Agreement shall be
binding upon and inure to the benefit of Borrower, Agent, and Syndication
Parties, and their respective successors and assigns, except that Borrower may
not assign or transfer its rights or obligations hereunder without the prior
written consent of the Syndication Parties.
17.7 Severability. The invalidity or unenforceability of any provision of
this Construction Credit Agreement or the other Loan Documents shall not affect
the remaining portions of such documents or instruments; in case of such
invalidity or unenforceability, such documents or instruments shall be construed
as if such invalid or unenforceable provisions had not been included therein.
17.8 Entire Agreement. This Construction Credit Agreement (together with
all exhibits hereto, which are incorporated herein by this reference) and the
other Loan Documents represent the entire understanding of Agent, each
Syndication Party, and Borrower with respect to the subject matter hereof and
shall replace and supersede any previous agreements of the parties with respect
to the subject matter hereof.
17.9 Applicable Law. To the extent not governed by federal law, this
Construction Credit Agreement and the other Loan Documents, and the rights and
obligations of the parties hereto and thereto shall be governed by and
interpreted in accordance with the internal laws of the State of Colorado,
without giving effect to any otherwise applicable rules concerning conflicts of
law.
17.10 Captions. The captions or headings in this Construction Credit
Agreement and any table of contents hereof are for convenience only and in no
way define, limit or describe the scope or intent of any provision of this
Construction Credit Agreement.
17.11 Amendments. This Construction Credit Agreement may not be modified or
amended unless such modification or amendment is in writing and is signed by
Borrower, Agent, and all Syndication Parties (and each Syndication Party hereby
agrees to execute any such amendment approved pursuant to Section 16.9 hereof).
Borrower agrees that it shall reimburse Agent for all fees and expenses incurred
by Agent in retaining outside legal counsel in connection with any amendment or
modification to this Construction Credit Agreement requested by Borrower.
17.12 Additional Costs of Maintaining Loan. Borrower shall pay to Agent
from time to time such amounts as Agent may determine to be necessary to
compensate any Syndication Party for any costs incurred by it which Agent
determines, based on information presented to it by such Syndication Party, are
attributable to such Syndication Party's making or maintaining any Advances
hereunder or its obligation to make any such Advances, or any reduction in any
amount receivable by such Syndication Party under this Construction Credit
Agreement or the Note payable to it in respect to any such Advances or such
obligation (such increases in costs and reductions in amounts receivable being
herein called "Additional Costs"), resulting from any change after the date of
this Construction Credit Agreement in United States federal,
57
<PAGE>
state, municipal, or foreign laws or regulations (including Regulation D), or
the adoption or making after such date of any interpretations, directives, or
requirements applying to a class of banks including such Syndication Party of or
under any United States federal, state, municipal, or foreign laws or
regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof ("Regulatory Change"), which: (a) changes the basis of
taxation of any amounts payable to such Syndication Party under this
Construction Credit Agreement or the Note payable to such Syndication Party in
respect of any of such Advances (other than taxes imposed on the overall net
income of such Syndication Party); or (b) imposes or modifies any reserve,
special deposit, or similar requirements relating to any extensions of credit or
other assets of, or any deposits with or other liabilities of, such Syndication
Party; or (c) imposes any other condition affecting this Construction Credit
Agreement or the Note payable to such Syndication Party (or any of such
extensions of credit or liabilities). Agent will notify Borrower of any event
occurring after the date of this Construction Credit Agreement which will
entitle such Syndication Party to compensation pursuant to this Section as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation. Agent shall include with such notice, a certificate
from such Syndication Party setting forth in reasonable detail the calculation
of the amount of such compensation. Determinations by Agent for purposes of this
Section of the effect of any Regulatory Change on the costs of such Syndication
Party of making or maintaining Advances or on amounts receivable by such
Syndication Party in respect of Advances, and of the additional amounts required
to compensate such Syndication Party in respect of any Additional Costs, shall
be conclusive absent manifest error, provided that such determinations are made
on a reasonable basis.
17.13 Capital Requirements. In the event that the introduction of or any
change in (a) any law or regulation, or (b) the judicial, administrative, or
other governmental interpretation of any law or regulation, or (c) compliance by
any Syndication Party or any corporation controlling any such Syndication Party
with any guideline or request from any governmental authority (whether or not
having the force of law) has the effect of requiring an increase in the amount
of capital required or expected to be maintained by such Syndication Party or
any corporation controlling such Syndication Party, and such Syndication Party
certifies that such increase is based in any part upon such Syndication Party's
obligations hereunder, and other similar obligations, Borrower shall pay to such
Syndication Party such additional amount as shall be certified by such
Syndication Party to Agent and to Borrower to be the net present value
(discounted at the Variable Rate) of (a) the amount by which such increase in
capital reduces the rate of return on capital which such Syndication Party could
have achieved over the period remaining until the Maturity Date but for such
introduction or change, (b) multiplied by such Syndication Party's Syndication
Share of the Aggregate Commitment. Agent will notify Borrower of any event
occurring after the date of this Construction Credit Agreement that will entitle
any such Syndication Party to compensation pursuant to this Section as promptly
as practicable after it obtains knowledge thereof and of such Syndication
Party's determination to request such compensation. Agent shall include with
such notice, a certificate from such Syndication
58
<PAGE>
Party setting forth in reasonable detail the calculation of the amount of such
compensation. Determinations by any Syndication Party for purposes of this
Section of the effect of any increase in the amount of capital required to be
maintained by any such Syndication Party and of the amount of compensation owed
to any such Syndication Party under this Section shall be conclusive absent
manifest error, provided that such determinations are made on a reasonable
basis.
17.14 Replacement Notes. Upon receipt by Borrower of evidence satisfactory
to it of: (a) the loss, theft, destruction or mutilation of any Note, and (in
case of loss, theft or destruction) of the agreement of the Syndication Party to
which the Note was payable to indemnify Borrower, and upon surrender and
cancellation of such Note, if mutilated; or (b) the assignment of any
Syndication Interest and Note relating thereto, or any portion thereof, pursuant
to this Construction Credit Agreement, then Borrower will pay any unpaid
principal and interest (and Funding Losses, if applicable) then or previously
due and payable on such Note and will deliver in lieu of such Note a new Note
or, in the case of an assignment of a portion of a Syndication Interest new
Notes, for any remaining balance.
17.15 Patronage Payments. Borrower acknowledges and agrees that any
patronage, or similar, payments to which Borrower is entitled on account its
ownership of CoBank Equity Interests will not be based on any portion of its
Syndication Share in which CoBank has at any time granted a participation
interest.
17.16 Mutual Release. Upon full indefeasible payment and satisfaction of
the Bank Debt and Notes and the other obligations contained in this Construction
Credit Agreement, the parties, including Borrower, Agent, and each Syndication
Party shall, except as provided in Article 14 hereof, thereupon automatically
each be fully, finally, and forever released and discharged from any further
claim, liability, or obligation in connection with the Bank Debt.
17.17 Liberal Construction. This Construction Credit Agreement constitutes
a fully negotiated agreement between commercially sophisticated parties, each
assisted by legal counsel, and shall not be construed and interpreted for or
against any party hereto.
59
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Construction Credit
Agreement as of the date first above written.
BORROWER:
VILLAGE FARMS INTERNATIONAL FINANCE
ASSOCIATION, a cooperative corporation
formed under the laws of the state of
Delaware
By:______________________________________
Name: J. Kevin Cobb
Its: Vice President
COBANK:
COBANK, ACB
By:______________________________________
Name: Greg E. Somerhalder
Title: Vice President
60
Exhibit 10.85
EXECUTION COPY
FIRST AMENDMENT TO CREDIT AGREEMENT (Construction Loan Funding)
[Regarding EcoScience Merger]
This First Amendment to Credit Agreement (this "Amendment") is entered into
on September ___, 1998 by and between:
Village Farms International Finance Association, a Delaware corporation, with an
address at 10 Alvin Court, East Brunswick, New Jersey 08816 ("Borrower"); and
CoBank, ACB, sole Agent and sole Syndication Party, as defined in the Credit
Agreement.
R E C I T A L S
A. The Borrower entered into a certain Credit Agreement (Construction Loan
Funding) dated June 24, 1997 (as amended to date the "Credit Agreement") in
connection with certain financing provided by the Syndication Parties to the
Borrower; and,
B. Agro Power Development, Inc. (the "Guarantor") entered into a certain
Guaranty of Agro Power Development, Inc. dated June 24, 1997 (as amended to date
the "Guaranty") in connection with certain financing provided by the Syndication
Parties to the Borrower; and,
C. The Guarantor desires to merge with Agro Acquisition Corp., an affiliate
of EcoScience Corporation, pursuant to a certain Agreement and Plan of Merger
(the "Merger Agreement") dated as of April 28, 1998 and amended and restated as
of July 31, 1998 (the "Merger"), with the name of the survivor being changed to
Agro Power Development, Inc.; and,
D. The parties desire to, among other things, amend and modify the Credit
Agreement as provided herein for the purpose, among other things, of permitting
the transactions described above.
A G R E E M E N T S
NOW, THEREFORE, for value received, and intending to be legally bound
herein, Borrower covenants and agrees with the Agent and the Syndication Parties
as follows:
1. Definitions. Except as otherwise expressly provided herein, all
capitalized terms used herein and defined in the Credit Agreement shall have the
meaning ascribed to such term under the Credit Agreement.
(A) Section 1.11 APD. Upon and after the consummation of the Merger,
the definition of "APD" set forth in Section 1.11 shall be amended and
restated in its entirety as follows:
1.11 APD: Agro Power Development, Inc., a Delaware Corporation.
-1-
<PAGE>
2. Other Amendments.
(A) Section 10.14 Real Property. Clause (b) of Section 10.14 of the Credit
Agreement is hereby amended and restated in its entirety as follows:
(b) does not own any fee interest or leasehold interest, or any other
interest, including without limitation any easements, rights of way or
licenses, in real property, other than those evidenced by Underlying Loan
Documents and other than as set forth on Exhibit 10.14 hereto.
(B) Section 10.19 Material Agreements. The first sentence of Section 10.19
of the Credit Agreement is hereby amended and restated in its entirety as
follows:
Exhibit 10.19 attached hereto sets forth all agreements of Borrower
(other than Underlying Loan Documents), the termination or breach of which,
based upon Borrower's knowledge as of the date of making any
representations with respect thereto, would have a Material Adverse Effect
("Material Agreements").
3. Regulatory and Other Notices. Section 12.2.9 of the Credit Agreement is
hereby amended and restated as follows:
12.2.9 Regulatory and Other Notices. Promptly after Borrower's receipt
thereof, copies of (a) any notices or other communications received from
any governmental authority with respect to any matter or proceeding the
effect of which could reasonably be expected to have a Material Adverse
Effect on Borrower; or (b) any written notices given by any Underlying
Borrower to Borrower in accordance with the terms of any agreement between
any Underlying Borrower and Borrower.
4. Continuance of Credit Agreement. Except as otherwise expressly provided
herein, the Credit Agreement shall remain in full force and effect in accordance
with its terms.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as
of the date first set forth above.
Agro Power Development, Inc.
BY: ________________________________________
J. Kevin Cobb, Sr. VP. & CFO
CoBank, ACB, as Agent and sole
Syndication Party
BY: ________________________________________
Name:
Title:
-2-
EXHIBIT 10.86
PROMISSORY NOTE
(Construction Loan Funding)
$30,000,000.00 Effective Date: June 24, 1997
FOR VALUE RECEIVED, VILLAGE FARMS INTERNATIONAL FINANCE ASSOCIATION, a
Delaware corporation ("Maker"), promises to pay to the order of COBANK, ACB
("Payee" and "CoBank") at its office at 245 North Waco Street, Wichita, Kansas
67202, or such other place as Agent (as defined in the Credit Agreement) shall
direct in writing, the principal sum of Thirty million Dollars ($30,000,000.00)
or, if less, the amount outstanding under this Note for Advances for loans
pursuant to the Credit Agreement (Construction Loan Funding) dated as of June
24, 1997, by and between CoBank (for its own benefit as a lender and as agent
for the benefit of the present and future Syndication Parties as named or
defined therein) and Maker (as it may be amended from time to time in the
future, the "Credit Agreement") and any Bank Debt related thereto. This Note is
issued and delivered to Payee pursuant to the Credit Agreement. All capitalized
terms used in this Note and not otherwise defined herein shall have the same
meanings as set forth in the Credit Agreement.
The unpaid balance of this Note from time to time outstanding shall bear
interest as set forth in the Credit Agreement. Principal and interest shall be
payable as provided in the Credit Agreement. This Note has been issued by Maker
to Payee pursuant to the Credit Agreement and reference is made thereto for
specific terms and conditions under which this Note is made and to which this
Note is subject.
This Note is subject to voluntary prepayments as set forth in the Credit
Agreement. Amounts repaid may not be reborrowed. Upon the occurrence of an Event
of Default, Maker agrees that Agent shall have all rights and remedies set forth
in the Credit Agreement, including without limitation the rights of acceleration
set forth in the Credit Agreement. In addition, Agent shall have the right to
recover all costs of collection and enforcement of this Note as provided in the
Credit Agreement.
Maker and any endorser, guarantor, surety or assignor hereby waives
presentment for payment, demand, protest, notice of protest, and notice of
dishonor and nonpayment of this Note, and all defenses on the ground of delay,
suretyship, impairment of collateral, or of extension of time at or after
maturity for the payment of this Note.
This Note shall be governed in all respects by the law of the State of
Colorado.
<PAGE>
Maker:
VILLAGE FARMS INTERNATIONAL FINANCE
ASSOCIATION, a Delaware corporation
By: _______________________________
Name:_______________________________
Title:______________________________
2
EXHIBIT 10.87
CONSTRUCTION LOAN SECURITY AGREEMENT
by and between
VILLAGE FARMS INTERNATIONAL FINANCE ASSOCIATION,
as Debtor
and
COBANK, ACB,
as Agent for the Construction Lenders
<PAGE>
TABLE OF CONTENTS
1. Definitions ...............................................................1
2. Collateral/Grant of Security Interest .....................................4
2.1 Grant of First Priority Interest .....................................4
2.2 Grant of Second Priority Security Interest ...........................5
2.3 Grant of First Priority Security Interest ............................6
3. Secured Obligations .......................................................6
4. Representations and Warranties ............................................6
4.1 Organization; Power and Authority, etc ...............................6
4.2 Due Authorization; Power .............................................7
4.3 Consents; Approvals ..................................................7
4.4 Title to Collateral ..................................................7
4.5 Underlying Construction Loans ........................................7
4.6 Principal Office; Collateral; Books and Records ......................8
5. Covenants of Debtor .......................................................8
5.1 Title to Collateral ..................................................8
5.2 Location of Debtor, Collateral and Books and Records .................8
5.3 Books and Records ....................................................8
5.4 Inspection of Collateral .............................................8
5.5 Transfers, Dispositions and Encumbrances .............................9
5.6 Maintenance and Repair; Taxes; Insurance .............................9
5.7 Compliance with Laws .................................................9
5.8 Change in Structure or Name ..........................................9
i
<PAGE>
5.9 Underlying Construction Loan Documents ...............................9
5.10 Possession of Collateral; Further Assurances .......................10
6. Events of Default ........................................................10
7. Rights Upon Default ......................................................10
7.1 General .............................................................10
7.2 Right of Secured Party to Take Possession and Dispose
of Collateral .......................................................10
7.3 Notice of Disposition of Collateral .................................11
7.4 Right of Secured Party to Use and Operate Collateral ................11
7.5 Collection of Accounts ..............................................12
7.6 Rights of Secured Party With Respect to the Securities Collateral ...13
7.7 Collection of Underlying Construction Loan Notes ....................14
8. General Provisions .......................................................15
8.1 Appointment and Rights of Agent .....................................15
8.2 Amendment, Modification, and Waiver .................................15
8.3 Costs and Attorneys'Fees ............................................15
8.4 Revival of Obligations ..............................................16
8.5 Performance by Secured Party ........................................16
8.6 Power of Attorney ...................................................16
8.7 Protection of Collateral ............................................17
8.8 Additional Rights of Secured Party ..................................17
8.9 Successors and Assigns ..............................................17
8.10 Advances ...........................................................17
8.11 Severability .......................................................17
8.12 Governing Law ......................................................18
ii
<PAGE>
8.13 Notices ............................................................18
8.14 Financing Statement ................................................18
8.15 Conflict with Construction Loan Agreement ..........................18
iii
<PAGE>
EXHIBITS
Exhibit 4.6 Location of Principal Office and Collateral
iv
<PAGE>
CONSTRUCTION LOAN SECURITY AGREEMENT
THIS CONSTRUCTION LOAN SECURITY AGREEMENT ("Security Agreement") is made as
of the 24th day of June, 1997, by and between VILLAGE FARMS INTERNATIONAL
FINANCE ASSOCIATION, a Delaware corporation ("Debtor") whose address is 1811
Sardis Road North, Suite 207, Charlotte, North Carolina 28270 and COBANK, ACB
("CoBank"), as Agent on behalf of and for the benefit of the Construction
Lenders (as hereinafter defined), whose address is 245 N. Waco Street, Wichita,
Kansas 67202 (CoBank and all Successor Agents appointed pursuant to the
Construction Loan Agreement are referred to herein as "Secured Party").
R E C I T A L S
A. The Construction Lenders have entered into a Credit Agreement
(Construction Loan Funding) of even date herewith with Debtor (as amended from
time to time, the "Construction Loan Agreement") pursuant to which the
Construction Lenders have agreed (i) to loan funds to Debtor ("Construction
Loan"), under the terms and conditions set forth in the Construction Loan
Agreement, to be used by Debtor only to make loans to third parties ("Underlying
Construction Loan Borrowers") for the purpose of providing financing for a
portion of the costs of the construction (including costs of acquisition of
land) by the Underlying Construction Loan Borrowers of facilities for the
planting, growing and harvesting of vegetables and/or fruits ("Greenhouse
Facilities"), and (ii) to issue letters of credit for the benefit of Underlying
Construction Loan Borrowers, up to an aggregate for (i) and (ii) of $30,000,000.
B. The provisions of the Construction Loan Agreement require that Debtor
execute certain documents, including this Security Agreement, whereby Debtor
shall grant a lien and security interest to Secured Party in all of its
property, both tangible and intangible, whether now owned or hereafter acquired,
as security for the performance of its obligations under the Construction Loan
Agreement and the other Construction Loan Documents (as defined below).
A G R E E M E N T S
In consideration of the mutual covenants and agreements herein contained
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Debtor and Secured Party agree as follows:
1. Definitions. Capitalized terms used, but not defined, herein shall have
the meaning given to such terms in the Construction Loan Agreement, if defined
therein. In addition, unless otherwise defined herein, each term used herein and
defined in the Uniform Commercial Code as enacted in the State of Colorado
("UCC") shall have the meaning given to such term in the UCC. As used in this
Security Agreement, the following terms shall have the
<PAGE>
meanings set forth below:
"Collateral" means the First Priority Collateral, the Second Priority
Collateral and the Shared Collateral.
"Construction Agent" means CoBank in its role as Agent under the
Construction Loan Agreement and each Successor Agent.
"Construction Lenders" means CoBank, in its role as a lender under the
Construction Loan Agreement, and any other entity that purchases, now or in the
future, a Syndication Interest in the Construction Loan.
"Construction Loan Documents" means the Construction Loan Agreement, any
and all promissory notes now or hereafter executed by Debtor payable to the
Construction Lenders in the aggregate maximum principal sum of $30,000,000.00,
this Security Agreement and any and all other present and future agreements,
documents and/or instruments evidencing, documenting, securing or otherwise
relating to the Construction Loan, all as the same may from time to time be
amended, modified, extended, renewed or restated.
"Hedge Agreement" means the secured interest rate hedging agreement of even
date herewith executed by and between Debtor and CoBank.
"Intercreditor Agreement" means the Intercreditor Agreement of even date
herewith by and between the Construction Lenders, the Term Lenders, the Line of
Credit Lenders, the Construction Agent, the Term Agent, the Line of Credit Agent
and Debtor.
"Line of Credit Agent" means CoBank in its role as Agent under the Line of
Credit Agreement and each Successor Agent (as defined in the Line of Credit
Agreement).
"Line of Credit Agreement" means the Credit Agreement (Line of Credit
Facility) of even date herewith by and between CoBank for its own benefit as a
lender and as Agent for the benefit of the present and future syndication
parties as named or defined therein, and Debtor, wherein the Line of Credit
Lenders have agreed to make available to Debtor a line of credit facility in the
principal amount of up to $10,000,000 for the purpose of enabling Debtor to make
line of credit loans to eligible third parties to use for the purposes therein
specified and to issue letters of credit for the account of Debtor for the
purposes therein specified.
"Line of Credit Lenders" means CoBank in its role as a lender under the
Line of Credit Agreement and any other entity that purchases, now or in the
future, a Syndication Interest (as defined in the Line of Credit Agreement) in
the Line of Credit Loan.
2
<PAGE>
"Line of Credit Loan" means the line of credit facility made available to
Debtor pursuant to the Line of Credit Agreement.
"Line of Credit Loan Documents" means the Line of Credit Agreement and any
and all other present and future agreements, documents and/or instruments
evidencing, documenting, securing or otherwise relating to any or all of the
Line of Credit Loan, all as the same may from time to time be amended, modified,
extended, renewed or restated.
"Term Agent" means CoBank in its role as Agent under the Term Loan
Agreement and each Successor Agent (as defined in the Term Loan Agreement).
"Term Lenders" means CoBank, in its role as a lender under the Term Loan
Agreement, and any other entity that purchases, now or in the future, a
Syndication Interest (as defined in the Term Loan Agreement) in the Term Loan.
"Term Loan" means the credit facility made available to Debtor pursuant to
the Term Loan Agreement.
"Term Loan Agreement" means the Credit Agreement (Term Loan Funding of even
date herewith by and between CoBank for its own benefit as a lender and as Agent
for the benefit of the present and future syndication parties as named or
defined therein, and Debtor, wherein the Term Lenders have agreed to lend to
Debtor an aggregate principal amount up to $50,000,000 for the purpose of
enabling Debtor to make term loans to eligible third parties to use for the
purposes therein specified.
"Term Loan Documents" means the Term Loan Agreement, the Hedge Agreement
and any and all other present and future agreements, documents and/or
instruments evidencing, documenting, securing or otherwise relating to any or
all of the Term Loan, all as the same may from time to time be amended,
modified, extended, renewed or restated.
"Underlying Construction Loan Collateral" means all of Debtor's assets
relating to the Underlying Construction Loans, including without limitation, all
promissory notes, loan agreements, security agreements, deeds of trust,
mortgages, guaranties, financing statements and other documents, agreements and
instruments executed in connection with the Underlying Construction Loans and
all collateral security therefor.
"Underlying Line of Credit Collateral" means all of Debtor's assets
relating to the Underlying Line of Credit Loans, including without limitation,
all promissory notes, loan agreements, security agreements, reimbursement
agreements, deeds of trust, mortgages, guaranties, financing statements and
other documents, agreements and instruments executed in connection with the
Underlying Line of Credit Loans and all collateral security therefor.
3
<PAGE>
"Underlying Line of Credit Loans" shall mean "Underlying Loans" as defined
in the Line of Credit Agreement and the reimbursement obligations owed to Debtor
in connection with the issuance of Letters of Credit (as defined in the Line of
Credit Agreement) pursuant to the Line of Credit Agreement.
"Underlying Term Loans" shall have the meaning given to such term in the
Term Loan Agreement.
"Underlying Term Loan Collateral" means all of Debtor's assets relating to
the Underlying Term Loans, including without limitation, promissory notes, loan
agreements, security agreements, deeds of trust, mortgages, guaranties,
financing statements and other documents, agreements and instruments executed in
connection with the Underlying Term Loans and all collateral security therefor.
2. Collateral/Grant of Security Interest.
2.1. Grant of First Priority Interest. Debtor, for consideration and to
secure the Secured Obligations (as defined below), hereby grants a first
priority security interest to Secured Party in the Underlying Construction Loan
Collateral, tangible and intangible, wherever located and whether now owned or
hereafter acquired, together with all additions, substitutions, products thereof
and proceeds therefrom or arising out of the rights reflected therein, and all
renewals, amendments, substitutions, and replacements of all or any part
thereof, including without limitation the following property (collectively, the
"First Priority Collateral"):
(a) all promissory notes made by Underlying Construction Loan Borrowers
payable to Debtor to evidence the obligations of such Underlying Construction
Loan Borrowers to Debtor under their respective Underlying Construction Loans
(collectively, "Underlying Construction Loan Notes");
(b) all of Debtor's rights under (i) all loan agreements executed by and
between Debtor and an Underlying Construction Loan Borrower in connection with
an Underlying Construction Loan (collectively, "Underlying Construction Loan
Agreements"), (ii) all mortgages, deeds of trust, security agreements, financing
statements, leasehold assignments and consents, assignments and any other
documents and agreements executed as security for the obligations of an
Underlying Construction Loan Borrower to Debtor (collectively, "Underlying
Construction Security Documents"), and (iii) any other instruments, documents or
agreements executed and delivered in connection with, or to secure the
obligations of an Underlying Construction Loan Borrower under its Underlying
Construction Loan Agreement (collectively, with its Underlying Construction Loan
Note, Underlying Construction Loan Agreement and Underlying Construction
Security Documents, "Underlying Construction Loan Documents");
4
<PAGE>
(c) all assets and properties acquired by Debtor through foreclosure, or
deed in lieu of foreclosure, on collateral for an Underlying Construction Loan,
including without limitation the following:
(i) all of an Underlying Construction Loan Borrower's right, title and
interest in and to all permits, licenses, franchises, certificates, plans and
specifications, studies, contract rights (but not obligations), claims against
third parties, judgments, awards, building materials, rights for utilities and
other rights and privileges obtained in connection with its Greenhouse Facility
and the real property on which its Greenhouse Facility is built ("Property"),
and all equipment, fixtures, and other personal property of any kind or
character, now or later located on or about its Property and its Greenhouse
Facility or used in connection with the construction or operation thereof, or
stored off its Property for future incorporation on or about its Property and
its Greenhouse Facility, together with all accessories thereto, replacements
thereof and substitutions therefor;
(ii) all seed, fertilizer and other supplies, and all crops now or in the
future planted or growing on an Underlying Construction Loan Borrower's
Property, all crops harvested now or in the future on its Property ("Produce")
and all other farm products, and the products and cash and non-cash proceeds of
such crops, including general intangibles, instruments, and Paid In Kind
certificates and any governmental subsidies, rebates or other payments with
respect to farming or related operations of such Underlying Construction Loan
Borrower on its Property or otherwise under any governmental programs;
(iii) all of the rents, bonuses, royalties, revenues, income, proceeds,
damages, profits and other benefits and income paid or payable to an Underlying
Construction Loan Borrower from its Property and the improvements located
thereon, the Leases (as defined below), or from the use, possession, operation,
or sale of its Property and the improvements located thereon, including without
limitation any insurance or condemnation proceeds; and
(iv) any and all leases, subleases, assignments, licenses, concessions or
other agreements (written or oral, now or later in effect) which grant a
possessory interest in and to, or the right to use, all or any part of an
Underlying Construction Loan Borrower's Property and the improvements located
thereon ("Leases"), and any and all security and other deposits made in
connection with the Leases and all guaranties of those leases, including also
any oil, gas and mineral leases, and any bonuses, royalties, and other income
from Leases.
2.2. Grant of Second Priority Security Interest. Debtor, for consideration
and to secure the Secured Obligations, hereby grants a second priority security
interest to Secured Party in (a) the Underlying Term Loan Collateral, wherever
located and whether now owned or hereafter acquired, together with all
additions, substitutions, products thereof and proceeds therefrom or arising out
of the rights reflected therein, and all renewals, amendments, substitutions,
and replacements of all
5
<PAGE>
or any part thereof, to be shared pari passu with the Line of Credit Agent
pursuant to the terms and provisions of the Intercreditor Agreement, and (b) the
Underlying Line of Credit Collateral, wherever located and whether now owned or
hereafter acquired, together with all additions, substitutions, products thereof
and proceeds therefrom or arising out of the rights reflected therein, and all
renewals, amendments, substitutions, and replacements of all or any part
thereof, to be shared pari passu with the Term Agent pursuant to the terms and
provisions of the Intercreditor Agreement (all of the foregoing shall be
collectively referred to herein as the "Second Priority Collateral").
2.3. Grant of First Priority Security Interest. Debtor, for consideration
and to secure the Secured Obligations, hereby grants a first priority security
interest to Secured Party to be shared pari passu with the Term Agent and the
Line of Credit Agent pursuant to the terms and provisions of the Intercreditor
Agreement in all assets and properties of Debtor other than the First Priority
Collateral and the Second Priority Collateral, tangible and intangible, wherever
located and whether now owned or hereafter acquired, together with all
additions, substitutions, products thereof and proceeds therefrom or arising out
of the rights reflected therein, and all renewals, amendments, substitutions,
and replacements of all or any part thereof, including without limitation the
following property to the extent that it is not included in the First Priority
Collateral or the Second Priority Collateral (collectively, the "Shared
Collateral"):
all fixtures; furniture; furnishings, accounts; inventory (including
without limitation, returned or repossessed goods); chattel paper;
instruments, drafts; letters of credit; money; utility and other deposits,
documents; equipment; tools; machinery; goods; motor vehicles; investment
property; general intangibles (including without limitation, litigation
rights and resulting judgments, goodwill, patents, tradenames, trade
secrets, trademarks and other intellectual property, tax refunds,
miscellaneous rights to payment, entitlements, uncertificated securities,
margin accounts, computer programs, invoices, books, records and other
information relating to or arising out of Debtor's business).
3. Secured Obligations. The security interests granted to Secured Party
under this Security Agreement shall secure the payment and performance of the
obligations to, and covenants and agreements of Debtor made for the benefit of,
the Construction Lenders under the Construction Loan Documents ("Secured
Obligations").
4. Representations and Warranties. Debtor represents and warrants to
Secured Party as follows:
4.1. Organization; Power and Authority, etc. Debtor is duly organized and
validly existing under the laws of the State of Delaware. Debtor has all
6
<PAGE>
necessary power and authority to own its property, to carry on its business as
now owned and operated by it, and to make the Underlying Construction Loans.
Debtor is duly qualified to do business and is in good standing in all
jurisdictions in which the failure to be so qualified would have a Material
Adverse Effect.
4.2. Due Authorization; Power. The execution, delivery and performance by
Debtor of this Security Agreement and the other Construction Loan Documents are
within the powers of Debtor and have been duly authorized by all necessary
action on the part of Debtor.
4.3. Consents; Approvals. Debtor has obtained all consents or approvals of
any Person which are necessary for, or are required as a condition of, the
execution, delivery and performance of, and the enforcement of Secured Party's
rights and remedies under, this Security Agreement.
4.4. Title to Collateral. Debtor is the true and lawful owner of all
existing Underlying Construction Loans, has full power and authority to pledge
and grant a security interest in the Underlying Construction Loans and the
Underlying Construction Loan Documents, and has not granted any right or
interest in any existing or future Underlying Construction Loans or the
Underlying Construction Loan Documents to any person or entity other than
Secured Party, except for the second priority security interest granted to the
Term Agent and the Line of Credit Agent under the Term Loan Documents and the
Line of Credit Documents, respectively. Except as otherwise permitted hereunder
or under the Construction Loan Agreement and subject to the terms of the
Intercreditor Agreement, Debtor has good title to the Collateral free of all
adverse claims, interests, liens, or encumbrances and has full power and
authority to sell, transfer, pledge, and grant to Secured Party a security
interest in, the Collateral.
4.5. Underlying Construction Loans. With respect to the Underlying
Construction Loans:
(a) no default or event which with notice and/or the passage of time would
become a default under any of the Underlying Construction Loan Documents for any
Underlying Construction Loan has occurred and is continuing;
(b) the proceeds of each existing Underlying Construction Loan have been,
and the proceeds of each future Underlying Construction Loan will be, used for
the purposes permitted under Sections 3.1 and 3.2 of the Construction Loan
Agreement;
(c) with respect to all existing Underlying Construction Loans, the
Underlying Construction Loan Documents have been duly executed by the all
parties thereto and constitute the legal, valid and binding obligation of all
parties thereto, enforceable in accordance with their terms, subject to the
effects of bankruptcy, insolvency, and similar laws affecting the rights of
creditors generally or the availability
7
<PAGE>
of equitable remedies, and are free from any right of set-off, counterclaim or
other claim or defense;
(d) each existing Underlying Construction Loan is, and all future
Underlying Construction Loans will be, secured by a first lien and security
interest in favor of Debtor in all assets of the Underlying Construction Loan
Borrower, free and clear of all other liens, security interests, restrictions,
adverse claims or defenses, except where the Underlying Construction Loan
Documents approved by Secured Party specifically state otherwise;
(e) to Debtor's knowledge and belief, there is no misstatement of a
material fact, nor an omission to state a material fact, in any of the financial
statements, projections, budgets or other information furnished by or on behalf
of any existing Underlying Construction Loan Borrower, nor, has anything
occurred subsequent to the furnishing of such information which would have a
material adverse effect on the results of operation, business, property, or
prospects of any existing Underlying Construction Loan Borrower.
4.6. Principal Office; Collateral; Books and Records. The principal place
of business and, if Debtor has more than one place of business, the chief
executive office ("Principal Office") of Debtor and the locations of all
Collateral, other than Collateral in the possession of the Construction Agent,
the Term Agent or the Line of Credit Agent, and Debtor's books and records are
listed on Exhibit 4.6 attached hereto.
5. Covenants of Debtor. Debtor covenants to Secured Party that:
5.1. Title to Collateral. Except as otherwise permitted hereunder or under
the Construction Loan Agreement, Debtor shall not create or permit the existence
of any adverse claims, interests, liens, or other encumbrances against any of
the Collateral. Debtor shall (a) provide prompt written notice to Secured Party
of any future adverse claims, interests, liens, or encumbrances against any
Collateral, (b) promptly obtain a release or discharge of any such claims,
interests, liens, or other encumbrances and (c) diligently defend Debtor's and
Secured Party's interests in the Collateral.
5.2. Location of Debtor, Collateral and Books and Records. Debtor will not
change any place of business, its chief executive office, the location of any
Collateral or the location of its books and records without giving at least
thirty (30) days' prior written notice to Secured Party and furnishing Secured
Party with such documents as Secured Party may reasonably request pursuant to
Section 5.10 hereof prior to taking any such action.
5.3. Books and Records. Debtor shall keep proper books of record and
account in which complete and correct entries will be made of all of Debtor's
dealings in accordance with GAAP.
8
<PAGE>
5.4. Inspection of Collateral. Upon Secured Party's request, Debtor shall
allow Secured Party, the Construction Lenders or persons designated by any of
them, during normal business hours or at such other times as the parties may
agree, to: (a) examine the Collateral, wherever located, (b) examine and make
extracts or copies from Debtor's books and records; and (c) discuss Debtor's
affairs, finances, operations, and accounts with its respective officers,
directors, employees, and independent certified public accountants.
5.5. Transfers, Dispositions and Encumbrances. Except as otherwise
permitted hereunder or under the Construction Loan Agreement, (a) Debtor will
not offer to sell, sell, transfer or otherwise dispose of any of the Collateral
or any interest therein, and (b) Debtor will not create, incur, or permit to
exist any mortgage, lien, charge, encumbrance, or security interest whatsoever
with respect to the Collateral.
5.6. Maintenance and Repair; Taxes; Insurance. Debtor will keep the
Collateral in good order and repair and adequately insured at all times in
accordance with the provisions of the Construction Loan Agreement. Debtor will
pay promptly all taxes and other governmental charges with respect to the
Collateral when due and payable except as otherwise permitted hereunder or under
the Construction Loan Agreement. Secured Party or the Construction Lenders, at
their option, may (a) discharge (i) any taxes or other governmental charges that
Debtor is required to pay but fails to pay, unless such taxes or governmental
charges are being contested in good faith by appropriate actions or proceedings;
provided that such reserves or other appropriate provisions, if any, as shall be
required by GAAP, shall have been made for such taxes or other governmental
charges, and (ii) liens, security interests, or other encumbrances to which any
Collateral is at any time subject that are not permitted hereunder or under the
Construction Loan Agreement, and (b) upon the failure of Debtor to do so,
purchase insurance on any insurable Collateral and pay for the repair,
maintenance, or preservation thereof, and Debtor agrees to reimburse Secured
Party and the Construction Lenders on demand for any payment or expenses
incurred by any of them pursuant to the foregoing authorization and any
unreimbursed amounts shall constitute amounts owing under the Secured
Obligations for all purposes under this Security Agreement.
5.7. Compliance with Laws. Debtor shall not use the Collateral in violation
of any applicable statutes, regulations or ordinances where such violation would
have a Material Adverse Effect.
5.8. Change in Structure or Name. Debtor shall not, without the prior
written consent of Secured Party, change its name or business structure.
5.9. Underlying Construction Loan Documents. Debtor shall take all such
actions as are necessary to maintain the Underlying Construction Loan Documents
in full force and effect. Without the consent of Secured Party, Debtor shall not
amend, supplement, grant consents, or otherwise modify or waive compliance with
any provision of any Underlying Construction Loan Document.
9
<PAGE>
Each Underlying Construction Loan shall be secured by a first lien on all the
assets of the Underlying Construction Loan Borrower, except where the Underlying
Construction Loan Documents for such Underlying Construction Loan approved by
Secured Party specifically state otherwise.
5.10. Possession of Collateral; Further Assurances. Debtor shall (a)
deliver promptly to Secured Party, with such endorsement as Secured Party shall
require, all instruments and documents comprising part of the First Priority
Collateral or the Shared Collateral, now owned or hereafter acquired, of which
possession is required in order to perfect the security interests of Secured
Party granted herein, (b) upon demand, execute, assign and endorse all proxies,
applications, acceptances, stock powers, chattel paper, documents, instruments
and other evidences of payment or writings constituting or relating to any of
the Collateral, and (c) execute from time to time financing statements and any
other documents in form and content satisfactory to Secured Party and perform
such other acts, including without limitation the notation of Secured Party's
interest on the face of all chattel paper, as Secured Party may reasonably
request to perfect, maintain and continue a valid security interest in the
Collateral, and Debtor will pay all costs associated with the filing or
recordation of any such documents.
6. Events of Default. Debtor shall be in default under this Security
Agreement upon the occurrence of an Event of Default under the Construction Loan
Agreement ("Event of Default").
7. Rights Upon Default.
7.1. General. Upon the occurrence of an Event of Default and at any time
thereafter (unless such Event of Default has been waived in writing by Secured
Party), Secured Party may declare the Secured Obligations immediately due and
payable, and Secured Party shall, subject to the provisions of the Intercreditor
Agreement, have all the rights and remedies of a secured party under Article 9
of the UCC or other applicable law and all the rights provided herein, in the
Construction Loan Agreement, or in any other instruments and documents executed
and delivered in connection with, or to secure the obligations of Debtor under,
the Construction Loan Agreement, all of which rights and remedies shall, to the
full extent permitted by law, be cumulative.
7.2. Right of Secured Party to Take Possession and Dispose of Collateral.
Upon the occurrence of an Event of Default, subject to and to the extent
permitted by the provisions of the UCC or other applicable law and the
Intercreditor Agreement, unless such Event of Default has been waived in writing
by Secured Party, Secured Party shall have the right to:
(a) take possession of the Collateral and enter upon the premises on which
the Collateral or any part thereof may be situated and remove the Collateral
10
<PAGE>
from those premises and thereafter to hold, store, and/or use, operate, manage,
and control the Collateral;
(b) require Debtor to deliver the Collateral to Secured Party at a place to
be designated by Secured Party which is reasonably convenient to both parties;
and
(c) sell, lease or otherwise dispose of any or all of the Collateral in its
then present condition or following any commercially reasonable preparation or
processing thereof, whether by public or private sale, for cash, on credit or
otherwise, with or without representations or warranties, and upon such terms as
may be acceptable to Secured Party, and Secured Party may purchase the
Collateral at any public sale.
7.3. Notice of Disposition of Collateral. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Secured Party will give notice to Debtor of any
sale or other disposition by Secured Party with respect to any Collateral which
is subject to Article 9 of the UCC at the address for Debtor specified above, or
such other address as may from time to time be shown on Secured Party's records,
at least five (5) Business Days prior to such action. Any such notice shall be
deemed to meet any requirement hereunder or under an applicable law (including
without limitation the UCC) that reasonable notification be given of the time
and place of such sale or other disposition. Debtor consents and agrees that, in
addition to the other rights and remedies provided to Secured Party in this
Article 7, Secured Party may, in lieu of, or prior to, selling the Collateral at
public or private sale, retain any payments received on account of any of the
Collateral and apply the same to amounts owing under the Secured Obligations
until such time as the Secured Obligations have been paid in full.
7.4. Right of Secured Party to Use and Operate Collateral. Upon taking
possession of the Collateral, Secured Party may, from time to time, make all
repairs, replacements, alterations, additions, and improvements to and of the
Collateral that Secured Party deems proper. Debtor agrees to reimburse Secured
Party on demand for any expenses incurred by Secured Party pursuant to the
foregoing authorization and any unreimbursed amounts shall constitute amounts
owing under the Secured Obligations for all purposes under this Security
Agreement. In any such case, subject to and to the extent permitted by the
provisions of the Intercreditor Agreement, the UCC, or other applicable law,
Secured Party shall have the right to operate, manage and control the Collateral
and to carry on Debtor's business and to exercise all rights and powers of
Debtor in respect to the Collateral as Secured Party shall deem best, including
the right to enter into any agreements with respect to the Collateral or any
part thereof, that Secured Party sees fit; and Secured Party shall be entitled
to collect and receive all rents, issues, profits, fees, revenues, and other
income of the Collateral and every part thereof. Such rents, issues, profits,
fees, revenues, and other income shall be applied to pay the expenses of holding
and operating the Collateral and of conducting the business thereof and of all
maintenance, repairs, replacements, alterations, additions, and improvements,
and to make all payments which Secured Party may be required or may
11
<PAGE>
elect to make, if any, for taxes, assessments, insurance, and other charges upon
the Collateral or any part thereof, and all other payments which Secured Party
may be required or authorized to make under any provision of this Security
Agreement (including reasonable attorneys' fees and expenses). The remainder of
such rents, issues, profits, fees, revenues, and other income shall be applied
to the payment of the Secured Obligations in such order of priority as Secured
Party shall determine in accordance with the provisions of the Intercreditor
Agreement and, unless otherwise provided by law or by a court of competent
jurisdiction, any surplus from the sale of the Collateral shall be returned to
Debtor. Without limiting the generality of the foregoing, but subject to the
provisions of the Intercreditor Agreement, Secured Party shall have the right to
apply for and have a receiver appointed ex-parte by a court of competent
jurisdiction in any action taken by Secured Party to enforce its rights and
remedies hereunder in order to manage, protect, and preserve the Collateral and
continue the operation of the business of Debtor and to collect all revenues and
profits thereof and apply them to the payment of all expenses and other charges
of such receivership, including the compensation of the receiver, and to the
payment of the Secured Obligations as described above until a sale or other
disposition of the Collateral shall be finally made and consummated.
7.5. Collection of Accounts. Upon the occurrence of any Event of Default,
unless such Event of Default has been waived in writing by Secured Party,
Secured Party shall, subject to the provisions of the Intercreditor Agreement,
have the right at any time and from time to time, without notice, to (a) notify
account debtors that accounts have been assigned to Secured Party; (b) advise
account debtors of Secured Party's security interest and/or instruct account
debtors to make payments directly to Secured Party; (c) charge to any escrow or
other account of Debtor with Secured Party or any Construction Lender or
controlled by any of them, any item of payment received by Secured Party which
is dishonored by the drawee or maker thereof; (d) endorse all items of payment
made payable to Debtor which may come into the possession of Secured Party; (e)
collect all accounts in Secured Party's name or Debtor's name and take control
of any cash or non-cash proceeds of accounts and of any returned or repossessed
goods; (f) compromise, extend or renew the amount owing on any account or deal
with any account as Secured Party may deem advisable; and (g) make exchanges,
substitutions or surrenders of collateral for any account. Once any or all
account debtors have been notified, whether by Debtor or Secured Party, to make
payment directly to Secured Party, all amounts and proceeds received by Debtor
in respect of such accounts shall be received in trust for the benefit of
Secured Party, shall be segregated from other funds of Debtor, and shall be
immediately paid over to Secured Party in the same form as so received. Such
actions and the application of any such amounts to the Secured Obligations shall
not be deemed to constitute retention in satisfaction of the Secured Obligations
under Section 4-9-505 of the UCC and any comparable provision of the Uniform
Commercial Code as enacted in any other state where the Collateral is located.
12
<PAGE>
7.6. Rights of Secured Party With Respect to the Securities Collateral.
Upon the occurrence of any Event of Default, unless such Event of Default has
been waived in writing by Secured Party:
(a) Secured Party, in its discretion, and without notice to Debtor, may,
subject to the provisions of the Intercreditor Agreement, take any one or more
of the following actions without liability except to account for property
actually received by it: (i) transfer to or register in its name or the name of
its nominee any stock certificates or evidence of other equity interests
included in the Collateral ("Securities Collateral"), with or without indication
of the security interest herein created, and whether or not so transferred or
registered, receive the income, dividends and other distributions thereon and
hold them as additional Collateral or apply them to the Secured Obligations in
any order of priority; (ii) exercise or cause to be exercised all voting and
corporate powers with respect to any of the Securities Collateral so registered
or transferred, including (1) all rights to call or require shareholders
meetings and to remove or elect directors, and (2) all rights of proxy
appointments, conversion, exchange, subscription or any other rights, privileges
or options pertaining to such Securities Collateral, as if the absolute owner
thereof; (iii) exchange any of the Securities Collateral for other property upon
a reorganization, recapitalization, reclassification or other readjustment and,
in connection therewith, deposit any of the Securities Collateral with any
depository upon such terms as Secured Party may determine; and (iv) in its name
or in the name of Debtor, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for any
of the Securities Collateral, and Secured Party further shall have the right at
any time to sign and endorse the name of Debtor upon any stock certificate,
stock power, check, draft, money order, or any other documents of title or
evidences of payment with respect to the Securities Collateral, in the name of
Debtor, it being the intention of Debtor to grant to Secured Party the right to
sell any portion or all of the Securities Collateral and the proceeds therefrom,
upon the occurrence of an Event of Default hereunder.
(b) If Secured Party in good faith believes that the Securities Act of 1933
("Act") or any other state or federal law prohibits or restricts the customary
manner of sale or distribution of any of the Securities Collateral, Secured
Party may, subject to the provisions of the Intercreditor Agreement, sell such
Securities Collateral privately or in any other manner deemed advisable by
Secured Party at such price or prices as Secured Party determines in its sole
discretion. Debtor recognizes that such prohibition or restriction may cause the
Securities Collateral to have less value than it otherwise would have and that,
consequently, such sale or disposition by Secured Party may result in a lower
sales price than if the sale were otherwise held. Secured Party may sell the
Securities Collateral in one or more sales or parcels, for cash, credit or
future delivery, and with or without the use of a stockbroker, as Secured Party
may deem advisable. Secured Party may be the purchaser of any or all of the
Securities Collateral. In the event that Secured Party elects to sell all or any
part of the Securities Collateral in a public sale, Debtor shall use its best
efforts to register and qualify the Securities
13
<PAGE>
Collateral, or the applicable part thereof, under the Act and all state
securities laws, and all expenses thereof shall be payable by Debtor, including,
but not limited to, all costs of registration or qualification of any Securities
Collateral under the Act and any state securities laws, and the sale of such
Securities Collateral, including, but not limited to, brokers' or underwriters'
commissions, fees or discounts, accounting and legal fees and disbursements, and
expenses of transfer and sale.
(c) Notwithstanding any provision herein to the contrary, CoBank may
transfer, dispose or liquidate Debtor's CoBank Equity Interests in accordance
with its usual procedures and in accordance with its bylaws and capital plan as
applicable to cooperative borrowers generally.
7.7. Collection of Underlying Construction Loan Notes. Upon the occurrence
of any Event of Default, unless such Event of Default has been waived in writing
by Secured Party, Secured Party may, subject to the provisions of the
Intercreditor Agreement, (a) notify and require each Underlying Construction
Loan Borrower to make all payments owing on the Underlying Construction Loan
Notes directly to Secured Party, (b) endorse all items of payment, with respect
to amounts owing under Underlying Construction Loan Notes, made payable to
Debtor which may come into the possession of Secured Party; (c) collect amounts
owing under the Underlying Construction Loan Notes in Secured Party's name or
Debtor's name; (d) compromise, extend or renew the amount owing on any
Underlying Construction Loan or deal with any Underlying Construction Loan as
Secured Party may deem advisable; (e) make exchanges, substitutions or
surrenders of collateral for any Underlying Construction Loan, and (f) declare
the Underlying Construction Loans immediately due and payable, exercise all
rights of Debtor under the Underlying Construction Loan Documents and foreclose
on all collateral for the Underlying Construction Loans in accordance with the
rights of Debtor under the Underlying Construction Loan Documents. Once any or
all Underlying Construction Loan Borrowers have been notified, whether by Debtor
or Secured Party, to make payment directly to Secured Party, all amounts and
proceeds received by Debtor in respect of such Underlying Construction Loans
shall be received in trust for the benefit of Secured Party, shall be segregated
from other funds of Debtor, and shall be immediately paid over to Secured Party
in the same form as so received. Debtor agrees that by taking such action
Secured Party will be deemed to have acted in a commercially reasonable manner
and that such action by Secured Party will not be deemed to constitute retention
of the Underlying Construction Loan Notes in satisfaction of the Secured
Obligations under Section 4-9-505 of the UCC and any comparable provision of the
Uniform Commercial Code as enacted in the state where Debtor is located or
otherwise.
8. General Provisions.
8.1. Appointment and Rights of Agent. Debtor acknowledges, agrees, and
consents (a) to the appointment by the Construction Lenders of CoBank as Agent
under the Construction Loan Agreement ("Agent") for the purposes of
administering certain aspects of the Construction Loan, (b) that CoBank as Agent
is acting for the
14
<PAGE>
benefit of the Construction Lenders hereunder, and (c) that in the event that a
Successor Agent is appointed for CoBank in its capacity as Agent in accordance
with the provisions of the Construction Loan Agreement and written notification
thereof is provided to Debtor by CoBank, any Construction Lender or such
Successor Agent, such Successor Agent shall be entitled to exercise all the
rights of Secured Party hereunder, and that Debtor will perform all its
obligations hereunder with respect to such rights as it may be directed by such
Successor Agent.
8.2. Amendment, Modification, and Waiver. Without the prior written consent
of Secured Party and Debtor, no amendment, modification, or waiver of, or
consent to any departure by Debtor from, any provision hereunder shall be
effective. Any such amendment, modification, waiver, or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No waiver by Secured Party of any default shall be effective unless in
writing, and any such waiver shall not operate as a waiver of any other default
or the same default on a future occasion. The taking of the security interest
created by this Security Agreement shall not be deemed to waive or impair any
other security interest Secured Party may have or hereafter acquire for the
payment of the Secured Obligations, nor shall the taking of any such additional
security interest waive or impair this Security Agreement; but Secured Party may
resort to any security it may have in the order it may deem proper, and
notwithstanding any collateral security, Secured Party shall retain its rights
of setoff against Debtor. No delay or omission on the part of Secured Party in
exercising any right hereunder shall operate as a waiver of such right or of any
other right hereunder.
8.3. Costs and Attorneys' Fees. Debtor will, upon demand, pay to Secured
Party and the Construction Lenders the amount of any and all expenses, including
the reasonable attorneys' fees and expenses of counsel for Secured Party and the
Construction Lenders and of any experts and agent, which Secured Party and the
Construction Lenders may incur in connection with (a) the administration of this
Security Agreement upon the occurrence of an Event of Default, unless and until
such Event of Default has been waived in writing by Secured Party; (b) the
collection, retaking, storage, custody, preservation, use or operation of,
preparing for sale, selling or other disposition and delivery, collection from,
or other realization upon, any of the Collateral; (c) the exercise or
enforcement of any of the rights of Secured Party hereunder; or (d) the failure
by Debtor to perform or observe any of the provisions hereof.
8.4. Revival of Obligations. To the extent Debtor or any third party makes
a payment or payments to Secured Party or Secured Party enforces its security
interest or exercises any right of setoff, and such payment or payments or the
proceeds thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, and/or required to be repaid to a trustee, receiver, or
any other party under any bankruptcy, insolvency or other law or in equity,
then, to the extent of such recovery, the Secured Obligations or any part
thereof originally intended to be satisfied shall be
15
<PAGE>
revived and continued in full force and effect as if such payment or payments
had not been made, or such enforcement or setoff had not occurred.
8.5. Performance by Secured Party. In the event Debtor shall at any time
fail to pay or perform punctually any of its obligations hereunder, Secured
Party may, at its option and without notice to or demand upon Debtor, without
obligation and without waiving or diminishing any of its other rights or
remedies hereunder, fully perform or discharge any of such duties. All costs and
expenses incurred by Secured Party in connection therewith, together with
interest thereon at the Default Interest Rate set forth in the Construction Loan
Agreement, shall become part of the Secured Obligations and be paid by Debtor
upon demand.
8.6. Power of Attorney. Secured Party is hereby appointed Debtor's
attorney-in-fact, with full power of substitution, at Secured Party's option and
Debtor's expense, to do all acts and things which Secured Party may reasonably
deem necessary to perfect and continue to perfect the security interest created
by this Security Agreement, to protect its interest in the Collateral, and, upon
the occurrence of an Event of Default hereunder (unless and until such Event of
Default has been waived in writing by Secured Party), to protect or enforce and
collect on the Collateral subject to the provisions of the Intercreditor
Agreement, including without limitation:
(a) to obtain and adjust the insurance required to be maintained hereunder;
(b) to ask, demand, collect, sue for, recover, compromise, receive and give
receipts for moneys due and to become due under the Underlying Construction Loan
Documents;
(c) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with (a) above;
(d) to file any claims or take any action or institute any proceedings
which Secured Party may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce the rights of the Secured Party with
respect to any of the Collateral; and
(e) to collect the Underlying Construction Loans and Underlying
Construction Loan Notes and to enforce all rights and remedies available to
Debtor under the Underlying Construction Loan Documents and to endorse all items
of payment on the Underlying Construction Loans made payable to Debtor which may
come into the possession of Secured Party.
The power vested in Secured Party as Debtor's attorney-in-fact is, and shall be
deemed to be, coupled with an interest and cannot be revoked.
16
<PAGE>
8.7. Protection of Collateral. Secured Party shall not be required to take
any steps necessary to preserve any rights in the Collateral. Secured Party
shall further be under no duty to exercise or to withhold the exercise of any of
the rights, powers, privileges and options expressly or implicitly granted to
Secured Party in this Security Agreement, and Secured Party shall not be
responsible for any failure to exercise such rights nor for its delay in so
doing. Secured Party shall be deemed to have exercised reasonable care as
custodian of the Collateral if it takes such action to protect and preserve the
Collateral as Debtor shall request, but failure to honor any such request shall
not be deemed to be a failure by Secured Party to exercise reasonable care. The
care which Secured Party gives to the safekeeping of its property of like kind
shall constitute reasonable care of the Collateral when in Secured Party's
possession.
8.8. Additional Rights of Secured Party. Secured Party, in its discretion,
and without notice to Debtor, may take any one or more of the following actions
without liability except to account for property actually received by it: (a)
after the occurrence of an Event of Default, unless such Event of Default has
been waived in writing by Secured Party, renew, extend, or otherwise change the
terms and conditions of any of the Collateral; (b) take or release any other
collateral as security for any of the Collateral or the Secured Obligations; and
(c) add or release any guarantor, endorser, surety or other party to any of the
Collateral or Secured Obligations.
8.9. Successors and Assigns. This Security Agreement shall be binding upon
and inure to the benefit of Debtor and Secured Party and their respective
successors and assigns, except that Debtor may not assign or transfer its rights
or obligations hereunder without the prior written consent of Secured Party.
8.10. Advances. Nothing herein contained shall be construed to obligate the
Construction Lenders to make any loans or advances to Debtor and the sole
purpose of this Security Agreement is to provide collateral security for the
Secured Obligations.
8.11. Severability. Should any provision of this Security Agreement be
deemed unlawful or unenforceable, said provision shall be deemed several and
apart from all other provisions of this Security Agreement and all remaining
provisions of this Security Agreement shall be fully enforceable.
8.12. Governing Law. This Security Agreement shall be governed by and
interpreted in accordance with the laws of the State of Colorado except to the
extent that the validity or perfection of the security interest hereunder, or
remedies hereunder in respect of any particular collateral, are governed by the
laws of a jurisdiction other than the State of Colorado.
8.13. Notices. Notices by any party hereto to any other party hereto shall
be given as provided in the Construction Loan Agreement.
17
<PAGE>
8.14. Financing Statement. A copy, including a photocopy, of this Security
Agreement may be filed as a financing statement. Debtor authorizes Secured Party
to file financing statements without Debtor's signature where permitted by law.
8.15. Conflict with Construction Loan Agreement. In the event of a conflict
between the terms of this Security Agreement and those of the Construction Loan
Agreement, the provisions of the Construction Loan Agreement shall control.
This Security Agreement is executed as of the date first above written.
DEBTOR:
VILLAGE FARMS INTERNATIONAL
FINANCE ASSOCIATION, a
cooperative corporation
formed under the laws of
the state of Delaware
By:___________________________________
Name: J. Kevin Cobb
Title: Vice President
SECURED PARTY:
COBANK, ACB, as Agent on behalf of and for
the benefit of the Construction Lenders
By:________________________________
Name: Greg Somerhalder
Title: Vice President
18
EXHIBIT 10.88
CREDIT AGREEMENT
(TERM LOAN FUNDING)
BY AND BETWEEN
COBANK, ACB,
AS AGENT AND AS A SYNDICATION PARTY,
AND
VILLAGE FARMS INTERNATIONAL FINANCE ASSOCIATION
DATED AS OF JUNE 24, 1997
<PAGE>
CREDIT AGREEMENT
(TERM LOAN FUNDING)
Village Farms International Finance Association
Loan No. T-2490
THIS AGREEMENT ("Term Credit Agreement") is entered into as of the 24th day
of June 1997, by and between COBANK, ACB ("CoBank") for its own benefit as a
lender (in that capacity sometimes referred to as "CoBank") and, as Agent Bank
for the benefit of the present and future Syndication Parties (in that capacity
"Agent"), and VILLAGE FARMS INTERNATIONAL FINANCE ASSOCIATION, a Delaware
corporation, whose address is 1811 Sardis Road North, Suite 207, Charlotte, NC
28270 ("Borrower").
ARTICLE 1. DEFINED TERMS
As used in this Term Credit Agreement, the following terms shall have the
meanings set forth below (and such meaning shall be equally applicable to both
the singular and plural form of the terms defined, as the context may require):
1.1 Activation: shall have the meaning set forth in Subsection 11.2.1.
1.2 Activation Commitment: shall have the meaning set forth in Subsection
11.3.1.
1.3 Activation Request: shall have the meaning set forth in Subsection
11.3.1.
1.4 Additional Costs: shall have the meaning set forth in Section 17.12.
1.5 Administrative Agent Fee: shall have the meaning set forth in
Subsection 5.3.2.
1.6 Advance: a disbursement of a portion of the Loan Proceeds.
1.7 Advance Date: a day (which shall be a Business Day) on which an Advance
of Loan Proceeds is made.
1.8 Advance Payment: shall have the meaning set forth in Subsection 16.2.
1.9 Advance Request: shall have the meaning set forth in Subsection 11.4.2
and shall include a Village Farms Advance Request unless the context requires
otherwise.
1.10 Aggregate Commitment: $50,000,000.00.
1.11 APD: Agro Power Development, Inc.
<PAGE>
1.12 Authorized Officer: shall have the meaning set forth in Subsection
11.1.5.
1.13 Availability Period: shall have the meaning set forth in Section 4.1.
1.14 Bank Debt: all amounts owing under the Note, fees, Borrower's
obligations to purchase CoBank Equity Interests, Funding Losses and all
interest, expenses, charges and other amounts payable by Borrower pursuant to
the Loan Documents.
1.15 Base Rate: a rate of interest per annum equal to the "prime rate" as
published from time to time in the Eastern Edition of the Wall Street Journal as
the average prime lending rate for seventy-five percent (75%) of the United
States' thirty (30) largest commercial banks, or if the Wall Street Journal
shall cease publication or cease publishing the "prime rate" on a regular basis,
such other regularly published average prime rate applicable to such commercial
banks as is acceptable to Agent in its sole discretion, with such rate modified
by adding the Base Rate Margin and subtracting the Equity Margin.
1.16 Base Rate Factor: shall have the meaning set forth in Subsection
5.1.7.
1.17 Base Rate Loans: shall have the meaning set forth in Section 5.1.1.
1.18 Base Rate Margin: shall have the meaning set forth in Subsection
5.1.6.
1.19 Base Rate Numerator: shall have the meaning set forth in Subsection
5.1.6.
1.20 BDGCFR: shall have the meaning set forth in Subsection 5.1.4.
1.21 Borrower Benefit Plan: shall have the meaning set forth in Section
10.12.
1.22 Borrower Debt: the sum of the principal balance owed by Borrower under
the Construction Facility and this Term Credit Agreement.
1.23 Borrower Pension Plan: a Borrower Benefit Plan that is an "employee
pension benefit plan" as defined in Section 3(2) of ERISA that is intended to
satisfy the requirements of Section 401(a) of the Code.
1.24 Business Day: any day (a) other than a Saturday or Sunday and other
than a day which is a Federal legal holiday or a legal holiday for banks in the
States of Colorado, New York, or North Carolina and (b) if such day relates to a
borrowing of, a payment or prepayment of principal of or interest on, a
continuation of or conversion into, or a Fixed Rate Period for, a Fixed Rate
Loan, or a notice by Borrower with respect to any such borrowing, payment,
prepayment, continuation, conversion, or Fixed Rate
2
<PAGE>
Period, on which dealings in U.S. Dollar deposits are carried out in the London
interbank market.
1.25 Calculation Date: shall have the meaning set forth in Subsection
5.1.7.
1.26 Cash Flow: for any measurement period, (a) cash received by an
Underlying Term Loan Borrower (other than APD) from its operations, including
cash received from the sale of vegetable produce, any other cash received from
operations, and investment income received; (b) less the Underlying Term Loan
Borrower's (i) operating and general administrative expenses (but excluding debt
service payments on the Underlying Term Loan) and the management and marketing
fees paid to the extent they are subordinated in the Underlying Term Loan
Agreement, (ii) property, real estate, sales and excise taxes paid, (iii)
necessary capital expenditures made, and (iv) Federal and state income taxes.
1.27 Change in Law: shall have the meaning set forth in Subsection 5.2.2.
1.28 Closing Date: that date on which Agent, Borrower and Guarantor have
executed all Loan Documents and on which the conditions set forth in Section
11.1 of this Term Credit Agreement have been met.
1.29 CoBank Equity Interests: shall have the meaning set forth in Article 8
hereof.
1.30 Code: shall have the meaning set forth in Section 10.12.
1.31 Collateral: shall have the meaning set forth in Section 9.1.
1.32 Commitment Request: shall have the meaning set forth in Subsection
11.2.1.
1.33 Compliance Certificate: a certificate of the chief financial officer
of Borrower acceptable to Agent and in the form attached hereto as Exhibit 1.33.
1.34 Construction Facility: the credit facility made available to Borrower
pursuant to the Credit Agreement (Construction Loan Funding).
1.35 Construction Lenders: the Syndication Parties under the Credit
Agreement (Construction Loan Funding).
1.36 Construction Loan Payout:. shall have the meaning set forth in Section
3.1.
1.37 Construction Loan Purchase:. shall have the meaning set forth in
Section 3.1.
3
<PAGE>
1.38 Contributing Syndication Parties: shall have the meaning set forth in
Section 16.4.
1.39 Credit Agreement (Construction Loan Funding): means that agreement so
titled dated June 24, 1997, by and between CoBank for its own benefit as a
lender and as agent bank for the benefit of the present and future syndication
parties as named or defined therein, and Borrower, wherein the lenders have
agreed to lend to Borrower a specified sum of money for the purpose of enabling
Borrower to make construction loans to eligible third parties to use for the
purposes therein specified.
1.40 Credit Agreement (Line of Credit Facility): means that agreement so
titled dated June 24, 1997, by and between CoBank for its own benefit as a
lender and as agent bank for the benefit of the present and future syndication
parties as named or defined therein, and Borrower, wherein the lenders have
agreed to make available to Borrower a line of credit facility in a specified
sum for the purpose of enabling Borrower to make line of credit loans to
eligible third parties to use for the purposes therein specified.
1.41 Default Interest Rate: a rate of interest equal to 400 basis points in
excess of the rate or rates of interest otherwise being charged on any Base Rate
Loan, Quoted Rate Loan, or Fixed Rate Loan.
1.42 Delinquency Interest: shall have the meaning set forth in Section
16.4.
1.43 Delinquent Amount: shall have the meaning set forth in Section 16.4.
1.44 Delinquent Syndication Party: shall have the meaning set forth in
Section 16.4.
1.45 DSCR: The ratio for any Underlying Term Loan Borrower, calculated over
the preceding four Quarters, of: (a) Cash Flow; (b) divided by principal,
interest, and fees payable during the same period on the Underlying Term Loan
made to such Underlying Term Loan Borrower.
1.46 DSCR Report: shall have the meaning set forth in Subsection 5.1.7.
1.47 DSCR Report Deadline: shall have the meaning set forth in Subsection
5.1.7.
1.48 Environmental Laws: the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended, 42 U.S.C. 9601-9657
("CERCLA") and the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
6901-6987 ("RCRA").
1.49 Environmental Regulations: as defined in the definition of Hazardous
Substances.
4
<PAGE>
1.50 Equity: as determined in accordance with GAAP, plus Minority Interests
(as defined in accordance with GAAP).
1.51 Equity Margin: shall have the meaning set forth in Subsection 5.1.4.
1.52 Equity Margin Report: shall have the meaning set forth in Subsection
5.1.4.
1.53 Equity Margin Report Deadline: shall have the meaning set forth in
Subsection 5.1.4.
1.54 Equity to NFI: the ratio, with respect to APD, of its Equity to its
Net Fixed Investments.
1.55 ERISA: shall have the meaning set forth in Section 10.12.
1.56 Event of Default: shall have the meaning set forth in Section 15.1.
1.57 Fair Market Value: a valuation as determined in a written appraisal
from an MAI certified appraiser.
1.58 Fixed Rate Loan: shall have the meaning set forth in Subsection 5.1.2.
1.59 Fixed Rate Period: the period of time, commencing on a Business Day
and continuing to the numerically corresponding day in the first, second, third,
or sixth calendar month thereafter, or, with the consent of all Syndication
Parties, twelfth month, as designated by Borrower in accordance with Subsection
5.1.2, hereof; provided, however (a) if a Fixed Rate Period commences on the
last business Day of a calendar month or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month, such
Fixed Rate Period shall end on the last Business Day of the appropriate calendar
month; (b) if a Fixed Rate Period would end on a day which is not a Business
Day, such Fixed Rate Period shall be extended to the next Business Day, unless
such Business Day would fall in the next calendar month, in which case such
Fixed Rate Period shall end on the immediately preceding Business Day; and (c)
no Fixed Rate Period may extend beyond the Maturity Date.
1.60 Fixed Rate Request: shall have the meaning set forth in Subsection
5.1.2.
1.61 Funding Losses: shall have the meaning set forth in Subsection 7.1.3.
1.62 GAAP: generally accepted accounting principles in the United States of
America, applied consistently, as in effect from time to time.
1.63 Greenhouse Facility: a facility for the planting, growing and
harvesting of vegetables and/or fruits owned by an Underlying Construction Loan
Borrower or an Underlying Term Loan Borrower.
5
<PAGE>
1.64 Guarantor: APD.
1.65 Guarantor Cash Flow: cash received by APD during the most recently
completed four Quarters on account of its equity interests in the Underlying
Borrowers or from other investments permitted by the Loan Documents.
1.66 Guarantor Collateral: shall have the meaning set forth in Section 9.2.
1.67 Guarantor Security Documents: the security agreement, pledge agreement
and/or other security documents executed by Guarantor in favor of Agent and the
present and future Syndication Parties to secure Guarantor's performance of its
obligations under the Guaranty with a first lien on all of Guarantor's assets.
1.68 Guaranty: the guaranty, in form and substance satisfactory to Agent,
to be executed by Guarantor in favor of Agent, as in effect on the date hereof
and as hereafter amended.
1.69 Hazardous Substances: dangerous, toxic or hazardous pollutants,
contaminants, chemicals, wastes, materials or substances, as defined in or
governed by the provisions of any Environmental Laws or any other federal, state
or local law, statute, code, ordinance, regulation, requirement or rule relating
thereto ("Environmental Regulations"), and also including urea formaldehyde,
polychlorinated biphenyls, asbestos, asbestos-containing materials, nuclear fuel
or waste, and petroleum products, or any other waste, material, substances,
pollutant or contaminant which would subject an owner of property to any
damages, penalties or liabilities under any applicable Environmental
Regulations.
1.70 Indemnified Agency Parties: shall have the meaning set forth in
Section 16.19.
1.71 Indemnified Parties: shall have the meaning set forth in Section 14.1.
1.72 Intercreditor Agreement: that agreement so titled dated June 24, 1997,
by and between CoBank for its own benefit as a lender and as agent for the
benefit of the present and future syndication parties as named or defined
therein, Borrower, and Guarantor.
1.73 Leasehold Assignment & Consent: the Leasehold Assignment and Consent,
in form and substance satisfactory to Agent.
1.74 LIBO Rate: the rate for deposits in U.S. dollars, with maturities
comparable to the selected Fixed Rate Period that appears on the display
designated as Page "3750" of the Telerate Service (or such other Page as may
replace the 3750 Page of that service or, if the Telerate Service shall cease
displaying such rates, as published by such other service or services as may be
nominated by the British Bankers' Association for the purpose of displaying
London Interbank Offered Rates for U.S. Dollar deposits),
6
<PAGE>
determined as of 1:00 p.m. (Eastern Standard Time) two Business Days prior to
the commencement of such Fixed Rate Period, reserve adjusted basis for
Regulation D, with such rate modified by adding the LIBO/Quoted Rate Margin and
subtracting the Equity Margin.
1.75 LIBO/Quoted Rate Factor: shall have the meaning set forth in
Subsection 5.1.7.
1.76 LIBO/Quoted Rate Margin: shall have the meaning set forth in
Subsection 5.1.5.
1.77 LIBO Rate Numerator: shall have the meaning set forth in Subsection
5.1.5.
1.78 Licensing Laws: shall have the meaning set forth in Section 10.5.
1.79 Line of Credit Facility: means the credit facility made available to
Borrower pursuant to the Credit Agreement (Line of Credit Facility).
1.80 Loan: shall have the meaning set forth in Section 2.1.
1.81 Loan Advance Amount: shall have the meaning set forth in Section 16.3.
1.82 Loan Documents: this Term Credit Agreement, the Notes, the Security
Documents, the Guaranty, the Guarantor Security Documents, and other documents
required to grant to Agent, for the benefit of the Syndication Parties, a
perfected security interest in the Collateral and in the Guarantor Collateral.
1.83 Loan Proceeds: shall have the meaning set forth in Section 3.1.
1.84 Majority Lenders: shall have the meaning set forth in Section 16.8.
1.85 Material Adverse Effect: means: (a) a material adverse effect on the
financial condition, results of operation, business or property of Borrower; (b)
a material adverse effect on the ability of Borrower to perform its obligations
under this Term Credit Agreement and the other Loan Documents; or (c) a material
adverse effect upon the ability of Agent to enforce its rights and remedies
under the Loan Documents.
1.86 Material Agreements: shall have the meaning set forth in Section
10.10.
1.87 Maturity Date: July 31, 2010.
1.88 Maximum Syndication Amount:
For CoBank- $ 50,000,000.00
7
<PAGE>
1.89 Net Fixed Investments: Total Assets less Current Assets, as such
amounts are determined in accordance with GAAP.
1.90 Note or Notes: the promissory notes executed by Borrower pursuant to
Section 6.1 hereof, and all amendments, renewals, substitutions and extensions
thereof.
1.91 Notice of Loan Advance: shall have the meaning set froth in Section
16.3.
1.92 Organization Documents: in the case of a corporation, its articles or
certificate of incorporation and bylaws; in the case of a partnership, its
partnership agreement and certificate of limited partnership, if applicable; in
the case of a limited liability company, its articles of organization and its
operating agreement.
1.93 Payment Account: shall have the meaning set forth in Section 16.10.
1.94 Payment Distribution: shall have the meaning set forth in Section
16.10.
1.95 Permitted Encumbrance: shall have the meaning set forth in Section
10.3.
1.96 Person: any individual, corporation, limited liability company,
association, partnership, trust, organization, government, governmental agency,
or other entity.
1.97 Potential Default: any event, other than an event described in Section
15.1(a) hereof, which with the giving of notice or lapse of time, or both, would
become an Event of Default.
1.98 Preliminary Commitment: shall have the meaning set forth in Subsection
11.2.1.
1.99 Quarter: the quarters of the calendar year commencing as of January 1,
April 1, July 1 and October 1.
1.100 Quoted Rate: the rate of interest equal to the Quoted Rate Index
modified by adding the LIBO/Quoted Rate Margin and subtracting the Equity
Margin.
1.101 Quoted Rate Index: the fixed rate of interest determined and quoted
by Agent in its sole and absolute discretion (but upon the approval of all the
Syndication Parties) from time to time at the request of Borrower, which may not
necessarily be the lowest rate at which any of the Syndication Parties loans
funds at that time.
1.102 Quoted Rate Loan: shall have the meaning set forth in Subsection
5.1.3.
8
<PAGE>
1.103 Quoted Rate Period: the period of time, commencing on a Business Day
and continuing for any period of a minimum of five days to not later than the
Maturity Date, as designated by Borrower in accordance with Subsection 5.1.3,
hereof and as agreed to by Agent; provided, however, that no Quoted Rate Period
may end on a day which is not a Business Day.
1.104 Quoted Rate Request: shall have the meaning set forth in Subsection
5.1.3.
1.105 Request for Preliminary Term Loan Commitment: shall have the meaning
set forth in Subsection 11.2.1.
1.106 Request for Term Loan Activation: shall have the meaning set forth in
Subsection 11.3.1.
1.107 Request for Underlying Term Loan Activation: shall have the meaning
set forth in Subsection 11.2.1.
1.108 Required License: shall have the meaning set forth in Section 10.11.
1.109 Regular Payments: shall have the meaning set forth in Section 6.2.
1.110 Regulatory Change: shall have the meaning set forth in Section 17.12.
1.111 Security Documents: the security agreements, mortgages, deeds of
trust, financing statements, pledge agreements, leasehold assignment and
consents, assignments and/or other security documents executed by Borrower in
favor of Agent, for the benefit of the Syndication Parties, to secure Borrower's
performance of its obligations under the Notes and other Loan Documents with a
first lien on all assets, real and personal, of Borrower, in form and substance
acceptable to Agent.
1.112 Successor Agent: such Person as may be appointed as successor to the
rights and duties of Agent as provided in Section 16.8 of this Term Credit
Agreement.
1.113 Super Majority: shall have the meaning set forth in Subsection
11.3.2.
1.114 Syndication Interest: shall have the meaning set forth in Section
16.1.
1.115 Syndication Parties: shall mean:
CoBank in its role as such, but not in its role as Agent hereunder.
Syndication Party #1:________________
Syndication Party #2:________________
9
<PAGE>
and such Persons as shall from time to time execute a Syndication Acquisition
Agreement substantially in the form of Exhibit 16.26 hereto signifying their
election to purchase all or a portion of the Syndication Interest of any
Syndication Party, in accordance with Section 16.26 hereof, and to become a
Syndication Party hereunder.
1.116 Syndication Party Advance Date: shall have the meaning set forth in
Section 16.3.
1.117 Syndication Share: shall mean:
For CoBank - 100%
subject to adjustment (a) as provided in Section 16.4 hereof; and (b) for sales
or transfers of Syndication Interests by any Syndication Party as provided in
Section 16.26 hereof.
1.118 Title Commitments: shall have the meaning set forth in Subsection
11.1.2.
1.119 Title Insurers: shall have the meaning set forth in Subsection
11.1.2.
1.120 Title Policies: shall have the meaning set forth in Subsection
11.1.2.
1.121 Transfer: shall have the meaning set forth in Section 16.26.
1.122 12-Month DSCR: shall have the meaning set forth in Subsection 5.1.7.
1.123 Underlying Borrowers: collectively, Underlying Term Loan Borrowers
and Underlying Construction Loan Borrowers.
1.124 Underlying Construction Lenders: means the Syndication Parties (as
defined in the Credit Agreement (Construction Loan Funding)) who have made an
Underlying Construction Loan.
1.125 Underlying Construction Loan: means an Underlying Construction Loan
as defined in the Credit Agreement (Construction Loan Funding).
1.126 Underlying Construction Loan Borrowers: means each Person to whom
Borrower has, at any time, made available an Underlying Construction Loan, which
is then outstanding.
1.127 Underlying Construction Loan Documents: all of the documents,
including, without limitation, the loan agreement, promissory note(s), and
security documents, executed in connection with an Underlying Construction Loan.
10
<PAGE>
1.128 Underlying Construction Note: means the promissory note executed by
an Underlying Construction Loan Borrower payable to the Underlying Construction
Lenders in connection with an Underlying Construction Loan.
1.129 Underlying Liens: shall have the meaning set forth in Subsection
12.2.12.
1.130 Underlying Term Loan: (a) a loan made hereunder to fund a
Construction Loan Payout, (b) an Underlying Construction Loan upon its
acquisition by Borrower with the proceeds of an Advance hereunder, and (c) the
Village Farms Term Loan upon its acquisition by Borrower with the proceeds of an
Advance hereunder.
1.131 Underlying Term Loan Borrower: the borrower under an Underlying Term
Loan, including an Underlying Construction Loan Borrower upon acquisition of its
Underlying Construction Loan by Borrower with the proceeds of an Advance
hereunder.
1.132 Underlying Term Loan Documents: all of the documents, including,
without limitation, the loan agreement, promissory note(s), and security
documents, executed in connection with an Underlying Term Loan.
1.133 Village Farms: Village Farms of Texas, L.P..
1.134 Village Farms Advance Request: shall have the meaning set forth in
Subsection 11.5.1.
1.135 Village Farms Lenders: Farm Credit Bank of Texas and Texas Production
Credit Association.
1.136 Village Farms Term Loan: The Construction Loan (as defined therein)
made to Village Farms pursuant to that Loan Agreement dated as of February 14,
1996 by and between Village Farms, as borrower, the Village Farms Lenders, as
lenders, and CoBank, ACB, as Administrative Agent.
1.137 Village Farms Term Loan Documents: all of the documents, including,
without limitation, the loan agreement, promissory note(s), and security
documents, executed in connection with an Underlying Term Loan.
1.138 Wire Instructions: shall have the meaning set forth in Section 16.28.
ARTICLE 2. LOAN AMOUNT
2.1 Loan. On the terms and conditions set forth in this Term Credit
Agreement, the Syndication Parties agree, each as to their Syndication Share and
to the extent of their Maximum Syndication Amount, to make a loan to Borrower in
an amount up to the Aggregate Commitment (the "Loan").
11
<PAGE>
ARTICLE 3. PURPOSES
3.1 Purpose. The proceeds of the Loan ("Loan Proceeds") may be used by
Borrower only: (a) to fund a portion (to be determined on a case-by-case basis
in Agent's sole discretion) of the costs of Borrower's purchase of one or more
Underlying Construction Loans from the Underlying Construction Lenders
("Construction Loan Purchase") (upon the closing of any such purchase each such
Underlying Construction Loan being referred to herein as an Underlying Term Loan
and the borrower thereunder as an Underlying Term Loan Borrower); (b) to fund a
loan to an Underlying Construction Loan Borrower to enable such Underlying
Construction Loan Borrower to payoff a portion (to be determined on a
case-by-case basis in Agent's sole discretion) of its Underlying Construction
Loan from the Underlying Construction Lenders ("Construction Loan Payout") (upon
the funding of any such Construction Loan Payout by the making of an Underlying
Term Loan hereunder, the Underlying Construction Loan Borrower under the
Underlying Construction Loan will become an Underlying Term Loan Borrower); (c)
to fund an Underlying Term Loan Borrower's purchase of a fully constructed
Greenhouse Facility; and (d) to fund Borrower's purchase of the Village Farms
Term Loan, and Borrower agrees to use the Loan Proceeds for those purposes only.
ARTICLE 4. AVAILABILITY
4.1 Availability. The Loan Proceeds will be made available to Borrower as
soon as the applicable conditions set forth in Article 11 hereof have been
satisfied and until the Maturity Date ("Availability Period"). Unless otherwise
agreed, the Loan Proceeds will be made available on any Business Day during the
Availability Period by wire transfer of immediately available funds in
accordance with written wire transfer instructions to be furnished by Borrower
on a form supplied by Agent. Amounts borrowed under the Loan and repaid may not
be reborrowed.
ARTICLE 5. INTEREST AND FEES
5.1 Interest Calculation. Interest shall be calculated in one of the
following ways on the actual number of days each Advance is outstanding on the
basis of a year consisting of 360 days.
5.1.1 Base Rate Option. Unless Borrower requests and receives a Fixed Rate
Loan pursuant to Subsection 5.1.2 or a Quoted Rate Loan pursuant to Subsection
5.1.3, the outstanding principal balance under the Notes shall bear interest at
the Base Rate ("Base Rate Loans").
5.1.2 Fixed Rate Option. From time to time, and so long as no Event of
Default has occurred and is continuing, at the request of Borrower ("Fixed Rate
Request"), all or any part of the outstanding principal balance under the Notes
may bear interest at the LIBO Rate ("Fixed Rate Loans"). The Fixed Rate Request
must be made to Agent in writing on any Business Day and is effective as of the
third
12
<PAGE>
Business Day after the Fixed Rate Request is received if received by Agent no
later than 12 noon Central Time or as of the fourth Business Day if received
later than 12 noon Central Time. The Fixed Rate Request must specify the
principal amount that is to bear interest at the LIBO Rate and the Fixed Rate
Period selected by Borrower. Following the expiration of the Fixed Rate Period
for any Fixed Rate Loan, interest shall automatically accrue at the Base Rate
unless Borrower requests and receives another Fixed Rate Loan as provided in
this Subsection 5.1.2. or a Quoted Rate Loan as provided in Subsection 5.1.3.
5.1.3 Quoted Rate Option. From time to time, and so long as no Event of
Default has occurred and is continuing, at the request of Borrower ("Quoted Rate
Request"), all or any part of the outstanding principal balance under the Notes
may bear interest at the Quoted Rate ("Quoted Rate Loans"). The Quoted Rate
Request must made to Agent in writing on any Business Day and is effective as of
the Business Day after the Quoted Rate Request is received if received by Agent
no later than 12 noon Central Time or as of the second Business Day if received
later than 12 noon Central Time. The Quoted Rate Request must specify the
principal amount that is to bear interest at the Quoted Rate and the Quoted Rate
Period selected by Borrower. Following the expiration of the Quoted Rate Period
for any Quoted Rate Loan, interest shall automatically accrue at the Base Rate
unless Borrower requests and receives another Quoted Rate Loan as provided in
this Subsection 5.1.3 or a Fixed Rate Loan as provided in Subsection 5.1.2.
5.1.4 Equity Margin. The "Equity Margin" shall be determined as of each
June 30 and December 31 as provided in the table below (expressed in basis
points) based on: (a) the ratio of Equity to NFI of APD, on a consolidated
basis; and (b) the ratio of Borrower Debt to Guarantor Cash Flow ("BDGCFR"), as
of such date:
Equity to NFI
-------------
less than 40 >|=40<50 50 or more
BDGCFR
------
>|= 8.0 12.5 25.0 50.0
>|= 4.0 <8.0 25.0 50.0 62.5
<4.0 50.0 62.5 75.0
provided that the Equity Margin in effect for any period may never exceed the
Base Rate Margin in effect for that same period.
On or before the last Business Day of each September and March ("Equity Margin
Report Deadline"), commencing September of 1997, Borrower shall provide to Agent
a statement, certified to by Borrower's chief financial officer, showing: (a)
the Equity to NFI ratio of APD as of the preceding June 30 or December 31, as
applicable, and showing the amounts of APD's Equity and APD's Net Fixed
Investments as of such date; and (b) the ratio of Borrower Debt to Guarantor
Cash Flow as of the preceding June 30 or December 31, as applicable, and showing
the amounts of Borrower Debt and
13
<PAGE>
amount of Guarantor Cash Flow as of such date ("Equity Margin Report"). The
Equity Margin for the six month period commencing as of the November 1 or May 1
next succeeding such Equity Margin Report Deadline shall be based on the Equity
to NFI ratio and BDGCFR shown in such Equity Margin Report (unless, and except
to the extent, that the contents of the annual or quarterly financial statements
received by Agent from Borrower pursuant to Subsections 12.2.1 or 12.2.2 hereof
or from APD pursuant to the Guaranty produce different ratios). If the Equity
Margin Report is not received by Agent by the Equity Margin Report Deadline, the
Equity Margin for the period commencing on the following November 1 or May 1, as
applicable, will be determined as though the BDGCFR upon which such Equity
Margin is based is equal to 8.0.
5.1.5 LIBO/Quoted Rate Margin. The "LIBO/Quoted Rate Margin" (expressed in
terms of basis points) shall at any time be determined by: (a) adding the dollar
amount of the LIBO Rate Numerator for each Underlying Term Loan Borrower as of
any Calculation Date; and (b) dividing the sum thereof by the sum of the dollar
amount of outstanding principal balance owing by all such Underlying Term Loan
Borrowers under Underlying Term Loans as of such Calculation Date. The "LIBO
Rate Numerator" for any Underlying Term Loan Borrower shall be determined by
multiplying the LIBO/Quoted Rate Factor by the dollar amount of the entire
principal balance owed (without regard to which interest option(s) is applicable
to such balance) by such Underlying Term Loan Borrower under its Underlying Term
Loan as of the Calculation Date.
5.1.6 Base Rate Margin. The "Base Rate Margin" (expressed in terms of basis
points) shall at any time be determined by: (a) adding the dollar amount of Base
Rate Numerator for each Underlying Term Loan Borrower as of any Calculation Date
and (b) dividing the sum thereof by the sum of the dollar amount of outstanding
principal balance owing by all such Underlying Term Loan Borrowers under
Underlying Term Loans as of such Calculation Date. The "Base Rate Numerator" for
any Underlying Term Loan Borrower shall be determined by multiplying the Base
Rate Factor by the dollar amount of the entire principal balance owed (without
regard to which interest option(s) is applicable to such balance) by such
Underlying Term Loan Borrower under its Underlying Term Loan as of the
Calculation Date.
5.1.7 LIBO/Quoted Rate Factor; Base Rate Factor. The "LIBO/Quoted Rate
Factor" and the "Base Rate Factor" (each expressed in terms of basis points) are
determined with respect to any Underlying Term Loan Borrower as provided below
based upon the DSCR of such Underlying Term Loan Borrower over the preceding
12-month period ("12-Month DSCR") as of each June 30 and December 31 (each a
"Calculation Date"); provided that the 12-Month DSCR for each Underlying Term
Loan Borrower for the period prior to the availability of the first 12-Month
DSCR shall be deemed to be less than 2.0:
14
<PAGE>
LIBO/QUOTED
12-MONTH DSCR RATE FACTOR BASE RATE FACTOR
------------- ----------- ----------------
>|= 3.5 200 0
< 3.5 >|= 3.0 250 25
< 3.0 >|= 2.5 300 50
< 2.5 >|= 2.0 325 75
< 2.0 >|= 1.5 350 100
On or before the last Business Day of each August and February ("DSCR Report
Deadline"), commencing August of 1998, Borrower shall provide to Agent a
statement, certified to by Borrower's chief financial officer, showing, as of
the preceding Calculation Date: (a) the 12-Month DSCR for each Underlying Term
Loan Borrower; (b) the Cash Flow for each Underlying Term Loan Borrower during
the preceding six month period; (c) the amount of principal, interest, and fees
payable during the preceding six month period by each Underlying Term Loan
Borrower on its Underlying Term Loan; (d) the LIBO Rate Numerator for each
Underlying Term Loan Borrower; (e) the LIBO/Quoted Rate Factor for each
Underlying Term Loan Borrower; (f) the principal balance owing by each
Underlying Term Loan Borrower under its Underlying Term Loan; (g) the Base Rate
Numerator for each Underlying Term Loan Borrower; (h) the Base Rate Factor for
each Underlying Term Loan Borrower ; and (I) the total principal balance owed by
all Underlying Term Loan Borrowers on their Underlying Term Loans ("DSCR
Report"). The LIBO/Quoted Rate Margin and the Base Rate Margin for the six month
period commencing as of the October 1 or April 1 next succeeding such DSCR
Report Deadline shall be determined based on the information contained in such
DSCR Report (unless, and except to the extent, that the contents of the annual
or quarterly financial statements received by Agent from Borrower pursuant to
Subsections 12.2.3 hereof produce different factors). If the DSCR Report is not
received by Agent by the DSCR Report Deadline, the LIBO/Quoted Rate Factor and
the Base Rate Factor for the period commencing on the following October 1 or
April 1, as applicable, will be determined as though the 12-Month DSCR is equal
to 1.5. The 12-Month DSCR for the period prior to June 30, 1998, shall be
conclusively presumed to be equal to 1.5.
5.1.8 Default Interest Rate. All Bank Debt shall, at the sole option of
Agent, bear interest at the Default Interest Rate from and after the occurrence
and during the continuance of an Event of Default. Upon the occurrence and
during the continuance of an Event of Default or Potential Default, at the
option of Agent, interest shall be payable upon demand by Agent, and in no event
less frequently than monthly.
5.2 Additional Provisions for Fixed Rate Loans.
5.2.1 Inapplicability or Unavailability of LIBO Rate. If (a) Agent at any
time shall determine that for any reason adequate and reasonable means do not
exist for ascertaining the LIBO Rate, or (b) if any Syndication Party shall
advise Agent that the LIBO Rate does not adequately and fairly reflect the cost
to such Syndication
15
<PAGE>
Party of funding its Syndication Share of any Fixed Rate Loan, then Agent shall
promptly give notice thereof to Borrower. If such notice is given and until such
notice has been withdrawn by Agent, then (a) no new Fixed Rate Loan may be
requested by Borrower, and (b) any portion of the outstanding principal balance
hereof which bears interest determined in relation to the LIBO Rate, shall,
subsequent to the end of the Interest Period applicable thereto, bear interest
at the Base Rate unless and until Borrower requests and receives a Quoted Rate
Loan with respect to such amount.
5.2.2 Change in Law; Fixed Rate Loan Unlawful. If any law, treaty, rule,
regulation or determination of a court or governmental authority or any change
therein or in the interpretation or application thereof (each, a "Change in
Law") shall make it unlawful for any of the Syndication Parties to (a) advance
its Syndication Share of any Fixed Rate Loan or (b) maintain its Syndication
Share of all or any portion of the Fixed Rate Loans, each such Syndication Party
shall promptly, by telephone or facsimile, notify Agent thereof, and of the
reasons therefor and Agent shall promptly notify Borrower thereof and if the
notice from such Syndication Party is in writing, Agent shall provide a copy of
such notice to Borrower. In the former event, any obligation of any such
Syndication Party to make available its Syndication Share of any future Fixed
Rate Loan shall immediately be cancelled, and in the latter event, any such
unlawful Fixed Rate Loans or portions thereof then outstanding shall be
converted, at the option of such Syndication Party, to a Base Rate Loan unless
and until Borrower requests and receives a Quoted Rate Loan with respect to such
amount; provided, however, that if any such Change in Law shall permit the LIBO
Rate to remain in effect until the expiration of the Fixed Rate Period
applicable to any such unlawful Fixed Rate Loan, then such Fixed Rate Loan shall
continue in effect until the expiration of such Fixed Rate Period. Upon the
occurrence of any of the foregoing events, Borrower shall pay to Agent
immediately upon demand such amounts as may be necessary to compensate any such
Syndication Party for any fines, fees, charges, penalties or other costs
incurred or payable by such Syndication Party as a result thereof and which are
attributable to any Fixed Rate Loan made available to Borrower hereunder, and
any reasonable allocation made by any such Syndication Party among its
operations shall be conclusive and binding upon Borrower absent manifest error.
5.2.3 Increased Costs. If any Change in Law or compliance by any
Syndication Party with any request or directive (whether or not having the force
of law) from any central bank or other governmental authority shall:
(a) subject such Syndication Party to any tax, duty or other charge
with respect to any Fixed Rate Loan, or change the basis of taxation of
payments to such Syndication Party of principal, interest, fees or any
other amount payable hereunder (except for changes in the rate of tax on
the overall net income of such Syndication Party); or
(b) impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by, deposits or
other
16
<PAGE>
liabilities in or for the account of, advances or loans by, or any other
acquisition of funds by any office of any Syndication Party; or
(c) impose on any Syndication Party any other condition;
and the result of any of the foregoing is to increase the cost to such
Syndication Party of making, renewing or maintaining its Syndication Share of
any Fixed Rate Loan hereunder and/or to reduce any amount receivable by such
Syndication Party in connection therewith, then in any such case, Borrower shall
pay to Agent for the account of such Syndication Party, within five Business
Days after receipt of written notice from Agent, such amounts as may be
necessary to compensate such Syndication Party for any additional costs incurred
by such Syndication Party and/or reductions in amounts received by such
Syndication Party which are attributable to such Fixed Rate Loans. In
determining which costs incurred by such Syndication Party and/or reductions in
amounts received by such Syndication Party are attributable to the LIBO Rate
option made available to Borrower hereunder, any reasonable allocation made by
such Syndication Party among its operations shall be conclusive and binding upon
Borrower absent manifest error.
5.3 Fees. Borrower shall pay or cause to be paid the following fees:
5.3.1 Facility Fee. A non-refundable facility fee equal to 50 basis points
multiplied by the principal amount of each Underlying Term Loan (other than the
Village Farms Term Loan), payable to CoBank at the time of closing each
Underlying Term Loan.
5.3.2 Administrative Agent Fee. A per annum fee ("Administrative Agent
Fee") equal to (a) $12,500.00 plus (b) $5,000.00 for each Underlying Term Loan
Borrower, but not in excess of an aggregate, including the amount of the
Administrative Agent Fee payable for the same period under the Construction Loan
Facility, of $100,000.00 per annum, payable to the Administrative Agent in
arrears on June 30 of each year, commencing June 30, 1997, based upon the
maximum number of Underlying Term Loan Borrowers which had Underlying Term Loans
outstanding at any time during the period for which such Administrative Agent
Fee is being paid; provided that the amount payable under subpart (a) above
shall increase to $25,000.00 at such time as the Administrative Agent Fee is no
longer payable under the Construction Loan Facility; and provided further that
no Administrative Agent Fee shall be payable under this Subsection for any
period with respect to which an Administrative Agent Fee was paid under the
Construction Facility in accordance with the provisions of the Credit Agreement
(Construction Loan Funding).
5.4 Interest Rate Protection. Borrower will execute with CoBank a secured
interest rate hedging agreement on the Closing Date. Within ninety (90) days of
the funding of each Advance, Borrower must have entered into one or more
transactions to mitigate the interest rate risk on at least 50% of the amount
outstanding under the Loan
17
<PAGE>
for a period of not less than five years and at an interest rate that is not
greater than 200 basis points above the dollar weighted interest rate on each
Underlying Term Loan when it is closed.
ARTICLE 6. NOTES; PAYMENTS
6.1 Promissory Notes. Each Syndication Party's Syndication Interest in the
Loan shall be evidenced by a promissory note, payable to the order of such
Syndication Party in the face amount equal to such Syndication Party's Maximum
Syndication Amount, in the form attached hereto as Exhibit 6.1 (each a "Note"
and collectively, such promissory notes shall be referred to as the "Notes").
6.2 Principal Payments. Principal shall be payable (a) on the Business Day
after the day received by Borrower in the amount of all payments, pre-payments,
and other amounts (including, without limitation, payments by guarantors and
amounts realized from the Underlying Collateral) received by Borrower from an
Underlying Term Loan Borrower or on account of an Underlying Term Loan ("Regular
Payments"), and (b) in the amount of the entire unpaid balance of principal
owing under the Loan on or before the Maturity Date.
6.3 Interest Payments. Interest shall be payable (a) for Base Rate Loans
and Quoted Rate Loans, the tenth day of each month commencing on the tenth day
of the month following the month in which the Closing Date occurs, and (b) for
Fixed Rate Loans on the last day of the Fixed Rate Period therefor unless the
Fixed Rate Period is longer than three (3) months, in which case interest shall
also be payable every ninety (90) days, and, in the case of (a) and (b), on the
Maturity Date.
6.4 Application of Regular Payments. Provided no Event of Default or
Potential Default has occurred and is continuing, Regular Payments shall be
applied in the manner directed by Borrower in writing, but if Borrower has not
so directed, then first to Base Rate Loans, then to Quoted Rate Loans, and then
to Fixed Rate Loans and, if to Fixed Rate Loans or Quoted Rate Loans, so long as
no Event of Default or Potential Default has occurred and is continuing,
Borrower shall have the right to designate which Fixed Rate Loan or Loans or
Quoted Rate Loan or Loans. On the date of making any Regular Payments, Borrower
shall pay the Funding Losses (determined in the same manner as provided in
Subsection 7.1.3 hereof for prepayments as though such Regular Payment was a
prepayment), if any, resulting from such payment. Upon the occurrence and during
the continuance of an Event of Default or Potential Default, all amounts paid to
Agent shall be applied, as Agent in its sole discretion shall determine, to
fees, the purchase of CoBank Equity Interests, interest or principal
indebtedness under the Notes, or to any other Bank Debt. The amount of Loan
Proceeds advanced and other Bank Debt, and all payments by or on behalf of
Borrower, of such amounts, shall be entered on the books of the Agent and/or the
Syndication Parties and such entries shall be presumptive evidence of the unpaid
amounts outstanding from time to time under the Notes and other Loan Documents.
18
<PAGE>
6.5 Manner of Payment. All payments, including prepayments, that Borrower
is required or permitted to make under the terms of this Term Credit Agreement
shall be made to Agent (a) in immediately available federal funds, to be
received no later than 12:00 noon Central Time of the Business Day on which such
payment is due by wire transfer through Federal Reserve Bank, Kansas City,
Routing Number: 307088754, COBANK ENGWD (or to such other account as Agent may
designate by notice); and (b) without setoff or counterclaim and free and clear
of and without deduction for any taxes, levies, impost, duties, charges, fees,
deductions, withholding, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any jurisdiction or any political
subdivision thereof or taxing or other authority therein unless Borrower is
compelled by law to make such deduction or withholding.
ARTICLE 7. PREPAYMENTS
7.1 Voluntary Prepayments. Borrower shall have the option to make the
following prepayments:
7.1.1 Voluntary Prepayment of Base Rate Loan. Borrower shall have the right
to prepay all or any part of the outstanding principal balance under the Base
Rate Loan at any time.
7.1.2 Voluntary Prepayment of Fixed Rate Loans and Quoted Rate Loans.
Borrower shall have the right to prepay all (but not in part) of the outstanding
principal balance of any Fixed Rate Loan and/or any Quoted Rate Loan, provided
that: (a) Borrower shall, at least three (3) Business Days prior to making any
such prepayment, deliver to Agent a written notice which sets forth the amount
of the prepayment, the date on which the prepayment will be made, and the Fixed
Rate Loan and/or Quoted Rate Loan being prepaid; (b) Borrower shall pay all
accrued and unpaid interest relating to the amount prepaid through the date of
prepayment; and (c) on the prepayment date, Borrower shall pay the Funding
Losses, if any, resulting from the prepayment. Any written notice by Borrower of
its election to prepay under this Subsection shall be irrevocable.
7.1.3 Funding Losses. In determining the "Funding Losses" for the purposes
of this Term Credit Agreement, Agent shall select, in its sole discretion, a
security or securities of a type which CoBank is permitted by law to purchase at
the date of the prepayment calculation. The selected security or securities
shall have payment dates which approximate the scheduled principal and interest
payments for the Fixed Rate Loan or Quoted Rate Loan being prepaid. Agent will
then compare the net present value of the interest which could be expected to be
paid on the Fixed Rate Loan or Quoted Rate Loan or Quoted Rate Loan being
prepaid and of the yield which could be expected on the selected security for a
comparable period. The "Funding Loss" is the sum of (a) and (b) where (a) is the
amount of the excess of (i) the net present value of the yield on the Fixed Rate
Loan or Quoted Rate Loan being prepaid, over (ii) the net present value of the
yield on the selected security (provided that such amount shall
19
<PAGE>
never be less than zero), and (b) is 50 basis points. Net present value shall be
determined as follows: (a) with respect to the interest on the Fixed Rate Loan
or Quoted Rate Loan being prepaid, the scheduled interest payments shall be
discounted from the expiration of the applicable Fixed Rate Period or Quoted
Rate Period back to the date of prepayment using as a discount rate the
applicable LIBO Rate or Quoted Rate, and (b) with respect to the selected
security, the scheduled payments of the current yields on such selected security
shall be discounted back for a period comparable to the period for which
scheduled interest payments are discounted in the preceding sentence, using as a
discount rate the current yield on the selected security. The calculation of
"yield" on the selected security shall include interest payments, any premium or
discount associated with the purchase of the selected security, any fees or
administrative costs associated with the purchase, holding and sale of the
selected security, CoBank's tax rate and any reserves which CoBank may be
required by law to maintain with respect to the selected security (provided that
such fees, administrative costs, tax rate and reserves shall not in the
aggregate exceed one percent (1%) of the principal amount being prepaid). In the
event of acceleration of the Notes as provided in Section 15.1, the date of
acceleration shall be treated as the date of prepayment for the purpose of
determining the Funding Loss under this Subsection. Funding Losses shall be
calculated as provided above without consideration of the amount of such losses
actually incurred by any Syndication Party.
7.2 Minimum Prepayment Amount. Voluntary prepayments must be in amounts no
less than $100,000.00. Voluntary prepayments shall be applied to discharge
principal amounts in the inverse order in which the principal would otherwise
become due.
7.3 Application of Prepayments. Provided no Event of Default or Potential
Default has occurred and is continuing, Borrower shall have the right to
designate whether a prepayment of principal is to be applied to a Base Rate
Loan, a Quoted Rate Loan, or a Fixed Rate Loan. Upon the occurrence and during
the continuance of an Event of Default or Potential Default, Borrower hereby
agrees that all amounts paid to Agent, including prepayments, shall be applied,
as Agent in its sole discretion shall determine, to fees, the purchase of CoBank
Equity Interests, interest or principal indebtedness under the Notes (in such
order of maturity as Agent shall select), or to any other Bank Debt.
ARTICLE 8. COBANK EQUITY
Borrower agrees to purchase such equity interests in CoBank ("CoBank Equity
Interests") as CoBank may from time to time require in accordance with its
bylaws and capital plan as applicable to cooperative borrowers generally. In
connection with the foregoing, Borrower hereby acknowledges receipt, prior to
the execution of this Term Credit Agreement, of CoBank's bylaws, a written
description of the terms and conditions under which the CoBank Equity Interests
are issued, CoBank's Loan-Based Capital Plan, CoBank's most recent annual
report, and if more recent than CoBank's latest annual report, its latest
quarterly report.
20
<PAGE>
ARTICLE 9. SECURITY
9.1 Borrower's Assets. As security for the payment and performance of all
obligations of Borrower to Agent, CoBank (including but not limited to all
obligations of Borrower under any agreement entered into by and between Borrower
and CoBank pursuant to, or in furtherance of the purposes and requirements of,
Section 5.4 hereof), and the Syndication Parties, including but not limited to
principal and interest under the Notes, purchases of CoBank Equity Interests,
fees, Funding Losses, reimbursements, and all other Bank Debt or obligations
under any of the Loan Documents, Borrower shall grant to, and maintain for,
Agent, for the benefit of all present and future Syndication Parties, a first
lien and security interest, subject only to Permitted Encumbrances and the
provisions of the Intercreditor Agreement, in all of its assets, both real and
personal, tangible and intangible, whether now owned or hereafter acquired,
including, without limitation, the Underlying Term Loans and the Underlying Term
Loan Documents ("Collateral"), pursuant to the Security Documents. Borrower
shall execute and deliver to Agent, for the benefit of the Syndication Parties,
the Security Documents to evidence the security interest of Agent, for the
benefit of the Syndication Parties, in the Collateral, together with such
financing statements or other documents as Agent shall request. Borrower shall
deliver the originals of the Underlying Term Loan Documents to Agent, for the
benefit of all present and future Syndication Parties. Borrower shall also
execute such further security agreements, mortgages, deeds of trust, financing
statements, assignments or other documents as Agent shall reasonably request, in
form and substance as Agent shall specify, to establish, confirm, perfect or
provide notice of Agent's security interest (for the benefit of all Syndication
Parties) in the Collateral. If requested by Agent: (a) Borrower and Agent shall
place a legend on any chattel paper included in the Collateral showing Agent's
security interest therein; and (b) Borrower shall deliver to Agent possession of
any instruments and securities included in the Collateral (duly endorsed to
Agent's reasonable satisfaction).
9.2 Guaranty. Borrower's obligations under this Term Credit Agreement and
all other Loan Documents shall be guaranteed by APD pursuant to the APD Guaranty
and the APD Guaranty shall be secured by a first lien and security interest,
subject to the provisions of the Intercreditor Agreement, in all of its assets,
both real and personal, tangible and intangible, whether now owned or hereafter
acquired ("Guarantor Collateral") pursuant to the Guarantor Security Documents.
ARTICLE 10. REPRESENTATIONS AND WARRANTIES
To induce the Syndication Parties to make the Loan, and recognizing that
the Syndication Parties are relying thereon, Borrower represents and warrants as
follows:
10.1 Organization, Good Standing, Etc. Borrower (a) is duly organized,
validly existing, and in good standing under the laws of its state of
incorporation; (b) qualifies as a cooperative association under the laws of its
state of incorporation; (c) is duly qualified to do business and is in good
standing in each jurisdiction in which the
21
<PAGE>
transaction of its business makes such qualification necessary; and (d) has all
requisite corporate and legal power (i) to own and operate its assets and to
carry on its business, (ii) to enter into and perform the Loan Documents to
which it is a party, and (iii) to make the Underlying Term Loans.
10.2 Corporate Authority, Due Authorization; Consents. Borrower has full
power and authority to conduct its business as contemplated to be operated from
and after the Closing Date; to execute, deliver and perform under the Loan
Documents and all other documents and agreements as contemplated by this Term
Credit Agreement; and to make the Underlying Term Loans, all of which have been
duly authorized. All consents or approvals of any Person which are necessary
for, or are required as a condition of, the execution, delivery and performance
of the Loan Documents and/or making of the Underlying Term Loans have been
obtained.
10.3 Title to Property. Borrower holds good and marketable title to all of
its real property (other than rights of way, easements and similar interests in
real property which in the aggregate are not material), owns all of its personal
property, and holds all of its leases, free and clear of any lien, pledge,
restriction, or encumbrance, except as specifically identified in Exhibit 10.3
attached hereto or as permitted by Section 13.3 hereof ("Permitted
Encumbrances") and subject to the Intercreditor Agreement. All of Borrower's
leases which constitute Material Agreements are in full force and effect and
afford Borrower peaceful and undisturbed possession of the subject matter
thereof.
10.4 Litigation. Except as described on Exhibit 10.4 hereto, there are, no
pending legal or governmental actions, proceedings or investigations to which
Borrower is a party or to which any property of Borrower is subject which might
result in any Material Adverse Effect and, to Borrower's knowledge, no such
actions or proceedings are threatened or contemplated by any federal, state,
county, or city (or similar unit) governmental agency or any other Person.
10.5 No Violations. The execution, delivery and performance of the Loan
Documents and the making of the Underlying Term Loans will not: (a) violate any
provision of Borrower's articles of incorporation or bylaws, or any law, rule,
regulation, judgment, order or ruling of any court or governmental agency; (b)
violate, conflict with, result in a breach of, constitute a default under, or
with the giving of notice or the expiration of time or both, constitute a
default under, any existing real estate mortgage, indenture, lease, security
agreement, contract, note, instrument or any other agreements or documents
binding on Borrower or affecting its property; or (c) violate, conflict with,
result in a breach of, constitute a default under, or result in the loss of, or
restriction of rights under, any Required License or any order, law, rule, or
regulation under or pursuant to which any Required License was issued or is
maintained ("Licensing Laws").
10.6 Binding Agreement. Each of the Loan Documents to which Borrower is a
party is, or when executed and delivered, will be, the legal, valid and binding
obligation of Borrower, enforceable in accordance with its terms, subject only
to
22
<PAGE>
limitations on enforceability imposed by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting creditors' rights
generally and by general principles of equity.
10.7 Compliance with Laws. Borrower is in compliance with all federal,
state, and local laws, rules, regulations, ordinances, codes and orders,
including without limitation all Environmental Laws and all Licensing Laws, with
respect to which noncompliance would result in a Material Adverse Effect.
10.8 Principal Place of Business. Borrower's place of business, or chief
executive office if it has more than one place of business, and the place where
the records required by Section 12.1 hereof are kept, is located at the place(s)
shown on Exhibit 10.8 hereto.
10.9 Underlying Term Loans; Underlying Term Loan Documents. As of the time
of any Advance: (a) the Underlying Term Loan Documents with respect thereto will
have been duly authorized, executed, and delivered by all parties thereto and
will constitute the legal, valid, and binding obligation of all parties thereto,
enforceable in accordance with their terms, subject to the effects of
bankruptcy, insolvency, and similar laws generally affecting the rights of
creditors or the availability of equitable remedies; (b) the Underlying Term
Loan will be free from any right of set-off, counterclaim or other claim, or
defense, and no event of default thereunder shall have occurred and be
continuing; (c) the Underlying Term Loan Borrower's obligations pursuant to the
Underlying Term Loan will, except where the Underlying Term Loan Documents
specifically state otherwise, be secured by a first and prior lien in favor of
Borrower in all assets of the Underlying Term Loan Borrower; (d) all closing and
pre-closing requirements, if any, set forth in the Underlying Term Loan
Documents, will have been satisfied in full; (e) the Underlying Term Loan
Documents will have been approved by Agent and shall not have been amended
subsequent to such approval; and (f) the Underlying Term Loan will not be in
violation of any applicable usury statutes; and (g) to Borrower's knowledge and
belief, the Underlying Term Loan Documents, projections, budgets, financial
statements, or other information furnished by or on behalf of the Underlying
Term Loan Borrower will not contain any misstatement of a material fact, nor
omit to state a material fact.
10.10 Payment of Taxes. Borrower has filed all required federal, state and
local tax returns and has paid all taxes as shown on such returns as they have
become due. Borrower has paid when due all other taxes, assessments or
impositions levied or assessed against Borrower or its business or properties.
10.11 Licenses and Approvals. Borrower has ownership of, or license to use,
or has been issued, all trademarks, patents, copyrights, franchises,
certificates, approvals, permits, authorities, agreements, and licenses which
are used or necessary to permit it to own its properties and to conduct the
business as presently being conducted and to make the Underlying Term Loans
("Required Licenses"). Exhibit 10.11 lists all Required Licenses presently in
existence with respect to Borrower. Each Required
23
<PAGE>
License is in full force and effect, and there is no outstanding notice of
cancellation or termination or, to Borrower's knowledge, any threatened
cancellation or termination in connection therewith, nor has an event occurred
with respect to any Required License which, with the giving of notice or passage
of time or both, could result in the revocation or termination thereof or
otherwise in any impairment of Borrower's rights with respect thereto, which
impairment could reasonably be expected to have a Material Adverse Effect. No
consent, permission, authorization, order, or license of any governmental
authority, is necessary in connection with the: (a) execution, delivery,
performance, or enforcement of the Loan Documents to which Borrower is a party;
and (b) the making of the Underlying Term Loans, except such as have been
obtained and are in full force and effect and as are described on Exhibit 10.11.
10.12 Employee Benefit Plans. Borrower does not presently maintain or
participate in, and has not in the past maintained or participated in, and is
not obligated to contribute to, any of the following (each a "Borrower Benefit
Plan" and collectively "Borrower Benefit Plans"): (a) any funded "employee
welfare benefit plan," as that term is defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended, and the regulations
thereunder ("ERISA"); (b) any "multiemployer plans," as defined in Section 3(37)
of ERISA; (c) any "employee pension benefit plan" as defined in Section 3(2) of
ERISA; (d) any "employee benefit plan", as such term is defined in Section 3(3)
of ERISA; (e) any "multiple employer plan" within the meaning of Section 413 of
the Internal Revenue Code of 1986, as amended from time to time ("Code"); (f)
any "multiple employer welfare arrangement" within the meaning of Section 3(40)
of ERISA; (g) a "voluntary employees' beneficiary association" within the
meaning of Section 501(a)(9) of the Code; (h) a "welfare benefit fund" within
the meaning of Section 419 of the Code; or (i) any employee welfare benefit plan
within the meaning of Section 3(1) of ERISA for the benefit of retired or former
employees.
10.13 Equity Investments. Borrower does not now own any stock or other
voting or equity interest, directly or indirectly, in any Person other than the
CoBank Equity Interests.
10.14 Real Property. Borrower: (a) has all real property interests,
including without limitations fee interests, leasehold interests, easements,
licenses and rights of way which are necessary for the conduct of Borrower's
business; and (b) does not own any fee interest or leasehold interest, or any
other interest, including without limitation any easements, rights of way or
licenses, in real property, other than as set forth on Exhibit 10.14 hereto.
10.15 Personal Property. Borrower has all tangible personal property
necessary for the conduct of Borrower's business as it is contemplated to be
conducted; and all such property is in good operating condition and repair,
reasonable wear and tear excepted, and suitable in all material respects for the
uses for which it is being utilized.
10.16 Borrower Membership. Village Farms of Texas, L.P. is a member of
Borrower.
24
<PAGE>
10.17 Environmental Compliance. Without limiting the provisions of Section
10.7 above, all property owned or leased by Borrower and all operations
conducted by it are in compliance in all material respects with all Laws
relating to environmental protection, with respect to which the failure to
comply would have a Material Adverse Effect.
10.18 Fiscal Year. Each fiscal year of Borrower begins on January 1 of each
calendar year and ends on December 31 of each calendar year.
10.19 Material Agreements. That Exhibit 10.19 attached hereto sets forth
all agreements of Borrower, the termination or breach of which, based upon
Borrower's knowledge as of the date of making any representation with respect
thereto, would have a Material Adverse Effect ("Material Agreements"). Neither
Borrower nor, to Borrower's knowledge, any other party to any Material
Agreement, is in default thereunder, and no facts exist which with the giving of
notice or the passage of time, or both, would constitute such a default.
10.20 Regulations G, U and X. No portion of any Advance will be used for
the purpose of purchasing, carrying, or making loans to finance the purchase of,
any "margin security" or "margin stock" as such terms are used in Regulations G,
U or X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts
207, 221, and 224.
10.21 Disclosure. The representations and warranties contained in this
Article 10 and in the other Loan Documents do not contain any untrue statement
of a material fact or omit to state a material fact necessary to make such
representations not misleading.
ARTICLE 11. CONDITIONS TO ADVANCES
11.1 Conditions to Closing. The obligation of the Syndication Parties to
make the Loan and any Advance thereunder or to grant a Preliminary Commitment or
an Activation Commitment is subject to satisfaction, in Agent's sole discretion,
of each of the following conditions precedent:
11.1.1 Loan Documents. Agent shall have received duly executed originals of
the Loan Documents.
11.1.2 Searches; UCC Filings; Recordings; Title Insurance. Agent shall have
received: (a) searches of appropriate filing offices showing that (i) no state
or federal tax liens have been filed which remain in effect against Borrower,
(ii) except with respect to Permitted Encumbrances no financing statements have
been filed by any Person except to perfect the security interests required by
this Term Credit Agreement, which remain in effect against Borrower or any of
its assets, (iii) all financing statements necessary to perfect the security
interests granted to Agent (for the benefit of the Syndication Parties) under
the Loan Documents have been filed or recorded, to the
25
<PAGE>
extent such security interests are capable of being perfected by such filing,
and (iv) all of the Loan Documents required to be recorded or filed to perfect
the security interests and liens granted therein shall be so recorded and filed;
(b) mortgagees' title insurance commitments ("Title Commitments") acceptable to
Agent from one or more insurers acceptable to Agent (the "Title Insurers")
committing to issue one or more title policies (ALTA Loan Policy Form) (the
"Title Policies") insuring the lien in favor of Agent (on behalf of the
Syndication Parties) on each parcel of real property owned in fee by Borrower
having an estimated Fair Market Value of $25,000.00 or more as a first priority
lien on such real property, subject only to Permitted Encumbrances, and (i)
deleting the standard printed exceptions and the gap exception, (ii) containing
only such exceptions to title as are reasonably acceptable to Agent, and (iii)
containing such other endorsements as Agent may reasonably require; and (c)
either a Title Commitment or, at Borrower's option, a written ownership and
encumbrance report of current date indicating that there are no prior liens on
each parcel of such real property having an estimated Fair Market Value of less
than $25,000.00. In addition, in the case of the parcels of real property
covered by a Title Commitment, as of the Closing Date Agent shall have received
from the Title Insurers a written confirmation acceptable to Agent confirming
that the Title Insurers are irrevocably committed to issue the Title Policies.
11.1.3 Approvals. Agent shall have received evidence satisfactory to it
that all consents and approvals of governmental authorities and third parties
which are with respect to Borrower and Guarantor, necessary for, or required as
a condition of: (a) the validity and enforceability of the Loan Documents; (b)
creation of and realization on, Agent's lien (for the benefit of the Syndication
Parties) on the Collateral; and (c) the making of the Underlying Term Loans,
have been obtained and are in full force and effect.
11.1.4 Organizational Documents. Agent shall have received: (a) good
standing certificates, dated no more than thirty (30) days prior to the Closing
Date, for Borrower and Guarantor for their respective states of incorporation
and for each state where their operations require qualification or authorization
to transact business; (b) a copy of the articles of incorporation of Borrower
and Guarantor certified by the Secretary of State of their state of
organization; and (c) a copy of the bylaws of Borrower and Guarantor, certified
as true and complete by the Secretary or Assistant Secretary of Borrower and
Guarantor, respectively.
11.1.5 Evidence of Corporate Action. Agent shall have received in form and
substance satisfactory to Agent: documents evidencing all corporate action taken
by each of Borrower and Guarantor to authorize (including the specific names and
titles of the persons authorized to so act ("Authorized Officers")) the
execution, delivery and performance of the Loan Documents to which it is a
party, and with respect to Borrower, the making of Underlying Construction
Loans, certified to be true and correct by the Secretary or Assistant Secretary
of Borrower and Guarantor, respectively.
11.1.6 Legal Opinion for Borrower and Guarantor. Agent shall have received
opinions of counsel for Borrower and for Guarantor (who shall be
26
<PAGE>
acceptable to Agent), in form and content acceptable to Agent and addressed to
Agent and to each Syndication Party (and expressly permitting reliance thereon
by each future Syndication Party).
11.1.7 Evidence of Insurance. Borrower and Guarantor shall have provided
Agent with insurance certificates and such other evidence, in form and substance
satisfactory to Agent, of all insurance required to be maintained by it under
the Loan Documents.
11.1.8 Phase I Environmental Studies. Borrower and Guarantor shall have
submitted to Agent such studies, investigations and reports with respect to
environmental matters for real property owned by Borrower or Guarantor,
respectively, from consultants acceptable to Agent as may be reasonably
requested by Agent and content and results of those studies, investigations and
reports shall be reasonably acceptable to Agent.
11.1.9 Survey. Borrower and Guarantor shall have provided Agent with ALTA
improvement surveys of all real property owned by Borrower or Guarantor,
respectively, and having a Fair Market Value of $25,000.00 or more, which
surveys, the certifications thereon, and all information contained therein,
shall be acceptable to Agent.
11.1.10 Material Agreements. Agent shall have received copies of those
Material Agreements as Agent may request in its sole discretion.
11.1.11 Appointment of The Corporation Company. Agent shall have received
evidence satisfactory to Agent that The Corporation Company, 1675 Broadway,
Denver, Colorado 80202 has accepted appointment by Borrower and Guarantor to
serve as their agent for service of process in accordance with Section 17.2 of
this Term Credit Agreement and Section 11.7 of the Guaranty.
11.1.12 No Material Change. No change shall have occurred in the condition
or operations of Borrower since May 1, 1997 or Guarantor since March 31, 1997
which could result in a Material Adverse Effect.
11.1.13 Fees and Expenses. Borrower shall have paid Agent, by wire transfer
of immediately available federal funds all fees set forth in Section 5.3 of this
Term Credit Agreement which are due on the Closing Date, and all expenses owing
pursuant to Section 17.1 hereof.
11.1.14 Application; CoBank Equity Interest Purchase Obligation. Borrower
shall have: (a) completed the loan application form provided by CoBank; and (b)
purchased such CoBank Equity Interests as CoBank may require pursuant to Article
8 hereof.
27
<PAGE>
11.1.15 Further Assurances. Borrower and Guarantor shall have provided
and/or executed and delivered to Agent such further assignments, documents or
financing statements, in form and substance satisfactory to Agent, that Borrower
and Guarantor are to execute and deliver pursuant to the terms of the Loan
Documents or as Agent may reasonably request.
11.2 Conditions to Issuance of Preliminary Commitment.
11.2.1 Preliminary Commitment Request. To obtain preliminary approval for
use of a portion of the Loan Proceeds to make an Underlying Term Loan to fund a
particular Construction Loan Payout, or to fund a particular Construction Loan
Purchase, Borrower must deliver to Agent a request in the form attached hereto
as Exhibit 11.2.1 ("Commitment Request") which has been signed by an Authorized
Officer. The Commitment Request shall be accompanied by an application package
("Request for Preliminary Term Loan Commitment") containing sufficient
information as may be required by Agent in its sole discretion to enable Agent
to determine (and advise Borrower) whether Agent will grant a Preliminary
Commitment to fund the particular Construction Loan Payout or Construction Loan
Purchase, including, without limitation: (a) an actual or estimated construction
budget and proposed sources and uses of funds for construction of such
Greenhouse Facility, including estimated date of construction completion; and
(b) the following information on the Underlying Construction Loan Borrower and
the Greenhouse Facility constructed or to be constructed with the proceeds of
the Underlying Construction Loan: (i) project description, (ii) financing
schedule and requirements, (iii) proposed financial structure, (iv) marketing
plan, (v) actual and pro-forma financial statements and cash flow projections,
(vi) financial analysis, and other credit information. Within a reasonable time
after receipt of the Commitment Request and such information as Agent shall, in
its sole discretion, request in connection therewith, and upon satisfaction of
the requirements contained in Subsections 11.2.2 through 11.2.5 hereof, Agent
will advise Borrower whether or not it preliminarily approves such proposed
Construction Loan Payout or Construction Loan Purchase for funding under the
Loan upon the condition that (x) there are no changes deemed by the Agent to be
material in the information submitted with the Commitment Request and (y) the
conditions of Sections 11.3 and 11.4 hereof are met to Agent's satisfaction as
provided, and at the time contemplated, in said Sections ("Preliminary
Commitment").
11.2.2 No Material Change. No change shall have occurred in the condition
or operations of Borrower or Guarantor since the Closing Date which could result
in a Material Adverse Effect.
11.2.3 Default. As of the date of the Commitment Request no Event of
Default or Potential Default shall have occurred and be continuing.
11.2.4 Representations and Warranties. The representations and warranties
of Borrower and of Guarantor contained in each of the Loan Documents to
28
<PAGE>
which it is a party, shall be true and correct in all material respects on and
as of the date of the Commitment Request as though made on and as of such date.
11.2.5 Fees and Expenses. Borrower shall have paid Agent, by wire transfer
of immediately available federal funds all fees set forth in Section 5.3 of this
Term Credit Agreement which are then due and payable, and all expenses owing
pursuant to Section 17.1 hereof.
11.3 Conditions to Issuance of Activation Commitment.
11.3.1 Activation Request. To obtain further approval with respect to the
funding of a particular proposed Construction Loan Payout or Construction Loan
Purchase, Borrower must deliver to Agent a request in the form attached hereto
as Exhibit 11.3.1 ("Activation Request") which has been signed by an Authorized
Officer. The Activation Request shall be irrevocable and shall be accompanied by
an application package ("Request for Term Loan Activation") containing
sufficient information as may be required by Agent in its sole discretion to
enable Agent to determine (and advise Borrower) whether Agent will grant an
Activation Commitment to fund the particular proposed Construction Loan Payout
or Construction Loan Purchase. The Request for Term Loan Activation shall
contain such documentation and information as may be required by Agent in its
sole discretion, including, as applicable and without limitation: (a) updates on
information provided to Agent in connection with Borrower's Commitment Request
on the same proposed Construction Loan Payout or Construction Loan Purchase with
respect to the actual and pro-forma financial statements and cash flow
projections and other credit information on the Underlying Construction Loan
Borrower or Underlying Term Loan Borrower, as the case may be, and its
Greenhouse Facility; (b) plans and specifications, engineering reports, proof of
availability of utilities, proof of zoning compatible with proposed use, and
final line item construction budget with time lines; (c) if it is a proposed
Construction Loan Purchase, copies of the particular Underlying Construction
Loan Documents; (d) if it is a proposed Construction Loan Payout, copies of the
proposed Underlying Term Loan Documents reflecting the proposed Underlying Term
Loan to the Underlying Term Loan Borrower; (e) lien searches; (f) acceptable
mechanics' lien protection; (g) survey and actual and as-built appraisals; (h)
an acceptable title commitment. Within a reasonable time after receipt of the
Activation Request and such information as Agent shall, in its sole discretion,
request in connection therewith, and upon satisfaction of the requirements
contained in Subsections 11.3.2 through 11.3.6 hereof, Agent will advise
Borrower whether or not it approves such proposed Construction Loan Payout or
Construction Loan Purchase for funding under the Loan upon the condition that
there are no changes deemed by the Agent to be material in the information
submitted with the Activation Request and the conditions of Section 11.4 hereof
are met to Agent's satisfaction as provided, and at the time contemplated, in
said Section ("Activation Commitment").
11.3.2 Approval by Super Majority. Unless the Underlying Construction Loan
(in the case of a Construction Loan Purchase) or the Underlying Term Loan (in
the case of a Construction Loan Payout) has been approved in writing by
29
<PAGE>
Syndication Parties whose Syndication Shares aggregate at least seventy-five
percent (75%) ("Super Majority").
11.3.3 No Material Change. No change shall have occurred in the condition
or operations of Borrower or Guarantor since the Closing Date which could result
in a Material Adverse Effect.
11.3.4 Default. As of the date of the Activation Request no Event of
Default or Potential Default shall exist and be continuing, and the disbursing
of the amount of the Loan Proceeds requested in the Activation Request shall not
result in an Event of Default or Potential Default.
11.3.5 Representations and Warranties. The representations and warranties
of Borrower and of Guarantor contained in each of the Loan Documents to which it
is a party, shall be true and correct in all material respects on and as of the
date of the Activation Request as though made on and as of such date.
11.3.6 Fees and Expenses. Borrower shall have paid Agent, by wire transfer
of immediately available federal funds all fees set forth in Section 5.3 of this
Term Credit Agreement which are then due and payable, and all expenses owing
pursuant to Section 17.1 hereof.
11.4 Conditions to Advance. The Syndication Parties' obligation to fund any
Underlying Term Loan is subject to the satisfaction, in Agent's sole discretion,
of each of the following conditions precedent:
11.4.1 Advance Request. Agent shall have received from Borrower (including
by facsimile transmission): (a) a duly completed request in the form attached
hereto as Exhibit 11.4.1 ("Advance Request") which has been signed by an
Authorized Officer; and (b) such other information or documentation as Agent may
request. The Advance Request shall be deemed to have been received on the
Business Day received if actually received by Agent before 12:00 noon, Central
Time, and as of the next Business Day if received by Agent after such time or on
other than a Business Day; provided that an Advance Request shall not be deemed
to have been received by Agent until it is satisfactory to Agent and includes
all information and documentation that Agent may request. Within five (5)
Business Days of the date an Advance Request is deemed to have been received,
Agent shall either fund the Advance or advise Borrower to the contrary; provided
that if Agent does not advise Borrower does not fund within such time, the
Advance Request shall be deemed to have been declined for funding.. The Advance
Request shall be irrevocable.
11.4.2 Underlying Term Loan Documents; Possession of Documents. Agent shall
have received in form and substance satisfactory to Agent:
(a) if the transaction is the funding of a Construction Loan Purchase,
(i) evidence that the Underlying Construction Loan Documents evidencing the
Underlying
30
<PAGE>
Construction Loan with respect to which the Advance is being requested are
on forms, and contain terms and conditions, satisfactory to Agent in its
sole discretion, and in compliance with all applicable laws and
regulations, (ii) an assignment of the Underlying Construction Loan and
Underlying Construction Loan Documents from the Construction Lenders to
Borrower and from Borrower to Agent, for the benefit of the present and
future Syndication Parties, (iii) possession of executed originals of the
Underlying Construction Loan Documents, including the Underlying
Construction Note, properly endorsed, (iv) good standing certificates,
dated no more than thirty (30) days prior to the Closing Date of the
Construction Loan Purchase , for such Underlying Construction Loan Borrower
for its state of incorporation and for each state where its operations
require qualification or authorization to transact business, (v) a copy of
the articles of incorporation of such Underlying Construction Loan Borrower
certified by the Secretary of State of its state of organization, (vi) a
copy of the bylaws of such Underlying Construction Loan Borrower, certified
as true and complete by the Secretary or Assistant Secretary thereof, (vii)
documents evidencing all corporate action taken by such Underlying
Construction Loan Borrower to authorize (including the specific names and
titles of the persons authorized to so act ) the execution, delivery and
performance of the Underlying Construction Loan Documents to which it is or
will be a party, certified to be true and correct by the Secretary or
Assistant Secretary of such Underlying Construction Loan Borrower, and
(viii) opinions of counsel, for such Underlying Construction Loan Borrower
(who shall be acceptable to Agent), in form and content acceptable to Agent
and addressed to Agent and to each Syndication Party (and expressly
permitting reliance thereon by each future Syndication Party, or, in lieu
thereof, accompanied by a separate letter from such counsel expressly
permitting reliance thereon by each present and future Syndication Party);
(b) if the transaction is the funding of a Construction Loan Payout,
(i) evidence that the Underlying Term Loan Documents evidencing the
Underlying Term Loan with respect to which the Advance is being requested
are on forms, and contain terms and conditions, satisfactory to Agent in
its sole discretion, and in compliance with all applicable laws and
regulations, (ii) executed originals of the Underlying Term Loan Documents
evidencing the Underlying Term Loan with respect to which the Advance is
being requested, on forms and contain terms and conditions, satisfactory to
Agent in its sole discretion, and in compliance with all applicable laws
and regulations, (iii) good standing certificates, dated no more than
thirty (30) days prior to the Closing Date of the Construction Loan Payout,
for such Underlying Term Loan Borrower for its state of incorporation and
for each state where its operations require qualification or authorization
to transact business, (iv) a copy of the articles of incorporation of such
Underlying Term Loan Borrower certified by the Secretary of State of its
state of organization, (v) a copy of the bylaws of such Underlying Term
Loan Borrower, certified as true and complete by the Secretary or Assistant
Secretary thereof, (vi) documents evidencing all corporate action taken by
such Underlying Term Loan Borrower to authorize (including the specific
names and titles of the persons authorized to so act ) the execution,
delivery and performance of the Underlying Term Loan Documents to which it
will be a party and the payoff of the Underlying Construction
31
<PAGE>
Loan, certified to be true and correct by the Secretary or Assistant
Secretary of such Underlying Term Loan Borrower, (vii) opinions of counsel,
for such Underlying Term Loan Borrower (who shall be acceptable to Agent),
in form and content acceptable to Agent and addressed to Agent and to each
Syndication Party (and expressly permitting reliance thereon by each future
Syndication Party, or, in lieu thereof, accompanied by a separate letter
from such counsel expressly permitting reliance thereon by each present and
future Syndication Party), and (viii) proof of the full payoff of the
Underlying Construction Loan and release of all liens thereunder of the
Construction Lenders;
(c) in either case (a) or (b), proof satisfactory to Agent that the
final advance of funds under the Underlying Construction Loan and the
Underlying Construction Loan Documents for the Underlying Construction Loan
with respect to which the Construction Loan Payout or Construction Loan
Purchase is being requested were made in full compliance with such
Underlying Construction Loan Documents, including the Underlying
Construction Loan Conditions as described therein;
(d) if the transaction is the funding of any other Term Loan, (i)
executed originals of the Underlying Term Loan Documents evidencing the
Underlying Term Loan with respect to which the Advance is being requested,
on forms and contain terms and conditions, satisfactory to Agent in its
sole discretion, and in compliance with all applicable laws and
regulations, (ii) good standing certificates, dated no more than thirty
(30) days prior to the Closing Date of the Underlying Term Loan, for such
Underlying Term Loan Borrower for its state of incorporation and for each
state where its operations require qualification or authorization to
transact business, (iii) a copy of the articles of incorporation of such
Underlying Term Loan Borrower certified by the Secretary of State of its
state of organization, (iv) a copy of the bylaws of such Underlying Term
Loan Borrower, certified as true and complete by the Secretary or Assistant
Secretary thereof, (v) documents evidencing all corporate action taken by
such Underlying Term Loan Borrower to authorize (including the specific
names and titles of the persons authorized to so act ) the execution,
delivery and performance of the Underlying Term Loan Documents to which it
will be a party, certified to be true and correct by the Secretary or
Assistant Secretary of such Underlying Term Loan Borrower, (vi) opinions of
counsel, for such Underlying Term Loan Borrower (who shall be acceptable to
Agent), in form and content acceptable to Agent and addressed to Agent and
to each Syndication Party (and expressly permitting reliance thereon by
each future Syndication Party, or, in lieu thereof, accompanied by a
separate letter from such counsel expressly permitting reliance thereon by
each present and future Syndication Party), and (vii) proof of the full
payoff of the Underlying Construction Loan and release of all liens
thereunder of the Construction Lenders;
(e) and in the case of (a), (b), or (d), (i) proof of satisfactory
title insurance, including acceptable mechanics' lien protection, (ii) lien
searches, and (iii) a survey and actual and as-built appraisals;. and (f)
such other instruments and documents in which Agent has been granted a
security interest (for the benefit of the Syndication Parties) and of which
Agent is to have possession under the terms of the Loan Documents.
32
<PAGE>
11.4.3 Default. As of the Advance Date no Event of Default or Potential
Default shall have occurred and be continuing, and the disbursing of the amount
of the Loan Proceeds requested in the Advance Request shall not result in an
Event of Default or Potential Default.
11.4.4 Representations and Warranties. The representations and warranties
of Borrower and of Guarantor contained in each of the Loan Documents to which it
is a party, shall be true and correct in all material respects on and as of the
date on which the Advance is to be made as though made on . Borrower shall have
paid Agent, by wire transfer of immediately available federal funds all fees set
forth in Section 5.3 of this Term Credit Agreement which are then due and
payable, including the Facility Fee, and all expenses owing pursuant to Section
17.1 hereof.
11.5 Conditions to Funding Purchase of Village Farms Term Loan. The
Syndication Parties' obligation to make an Advance to enable Borrower to
purchase the Village Farms Term Loan is subject to the satisfaction, in Agent's
sole discretion, of each of the following conditions precedent:
11.5.1 Advance Request. Agent shall have received from Borrower (including
by facsimile transmission): (a) a duly completed request for an Advance to
enable Borrower to purchase the Village Farms Term Loan in form and substance
satisfactory to Agent which has been signed by an Authorized Officer; and (b)
such other information or documentation as Agent may request ("Village Farms
Advance Request"). The Village Farms Advance Request shall be deemed to have
been received on the Business Day received if actually received by Agent before
12:00 noon, Central Time, and as of the next Business Day if received by Agent
after such time or on other than a Business Day; provided that the Village Farms
Advance Request shall not be deemed to have been received by Agent until it is
satisfactory to Agent and includes all information and documentation that Agent
may request. Within five (5) Business Days of the date the Village Farms Advance
Request is deemed to have been received, Agent shall either fund the Advance or
advise Borrower to the contrary. The Village Farms Advance Request shall be
irrevocable.
11.5.2 Village Farms Term Loan Documents; Possession of Documents. Agent
shall have received in form and substance satisfactory to Agent: (a) evidence of
the assignment and endorsement by the Village Farms Lenders to Borrower of the
Village Farms Term Loan and the Village Farms Term Loan Documents; (b)
possession of executed originals of the Village Farms Term Loan Documents,
properly endorsed to Agent; (c) good standing certificates, dated no more than
thirty (30) days prior to the Closing Date of the Village Farms Term Loan
purchase, for Village Farms for its state of incorporation and for each state
where its operations require qualification or authorization to transact
business; (d) a copy of the articles of incorporation of Village Farms certified
by the Secretary of State of its state of organization; (e) a copy of the bylaws
of Village Farms, certified as true and complete by the Secretary or Assistant
Secretary thereof; (f) documents evidencing all corporate action taken by
Village Farms to authorize (including the specific names and titles of the
persons
33
<PAGE>
authorized to so act) the execution, delivery and performance of the Village
Farms Term Loan Documents to which it is a party, certified to be true and
correct by the Secretary or Assistant Secretary of Village Farms; (g) opinions
of counsel for Village Farms (who shall be acceptable to Agent), in form and
content acceptable to Agent and addressed to Agent and to each Syndication Party
(and expressly permitting reliance thereon by each future Syndication Party, or,
in lieu thereof, accompanied by a separate letter from such counsel expressly
permitting reliance thereon by each present and future Syndication Party); (h)
proof of satisfactory title insurance, including acceptable mechanics' lien
protection, and an endorsement thereunder naming Agent, on behalf of all present
and future Syndication Parties, as an insured thereunder; (i) lien searches; (j)
survey and actual and as-built appraisals; and (k) such other instruments and
documents in which Agent has been granted a security interest (for the benefit
of the Syndication Parties) and of which Agent is to have possession under the
terms of the Loan Documents.
11.5.3 Default. As of the Advance Date there shall exist no Event of
Default or Potential Default, and the disbursing of the amount of the Loan
Proceeds requested in the Village Farms Advance Request shall not result in an
Event of Default or Potential Default.
11.5.4 Representations and Warranties. The representations and warranties
of Borrower and of Guarantor contained in each of the Loan Documents to which it
is a party, shall be true and correct in all material respects on and as of the
date on which the Advance is to be made as though made on . Borrower shall have
paid Agent, by wire transfer of immediately available federal funds all fees set
forth in Section 5.3 of this Term Credit Agreement which are then due and
payable, including the Facility Fee, and all expenses owing pursuant to Section
17.1 hereof.
11.6 Additional Disbursement Conditions. At no time and in no event shall
the Syndication Parties be obligated to make Advances:
11.6.1 Aggregate Commitment Amount. In excess of an amount, which when
added to all prior Advances; would exceed the Aggregate Commitment.
11.6.2 Disbursement Period. If the Advance would be made other than during
the Availability Period.
11.6.3 Illegality of Loan. After the enactment of any law by any
governmental authority having jurisdiction over any Syndication Party which
would make it unlawful in any respect for such Syndication Party to make the
Advance.
ARTICLE 12. AFFIRMATIVE COVENANTS
From and after the date of this Term Credit Agreement and until the Bank
Debt is indefeasibly paid in full and the Syndication Parties have no obligation
to make any
34
<PAGE>
advances hereunder, Borrower agrees that it will observe and comply with, the
following covenants for the benefit of Agent and the Syndication Parties:
12.1 Books and Records. Borrower shall at all times keep proper books of
record and account, in which correct and complete entries shall be made of all
its dealings, in accordance with GAAP.
12.2 Reports and Notices. Borrower shall provide to Agent the following
reports, information and notices:
12.2.1 Annual Financial Statements. As soon as available, but in no event
later than one hundred and twenty (120) days after the end of any fiscal year of
Borrower occurring during the term hereof annual financial statements of
Borrower. prepared in accordance with GAAP consistently applied which shall: (a)
be audited by independent certified public accountants selected by Borrower
which are reasonably acceptable to Agent; (b) be accompanied by a report of such
accountants containing an opinion reasonably acceptable to Agent; (c) be
accompanied by a Compliance Certificate; (d) be prepared in reasonable detail
and in comparative form; and (e) include a balance sheet, an income statement, a
statement of cash flows, a statement of stockholders' equity, and all notes and
schedules relating thereto.
12.2.2 Quarterly Financial Statements. As soon as available but in no event
more than sixty (60) days after the end of each Quarter the following financial
statements concerning Borrower's operations, prepared in accordance with GAAP
consistently applied: (a) a balance sheet, (b) an income statement, (c) a
statement of cash flows, (d) a statement of stockholders' equity, for such
Quarter and for the year to date, and (e) such other quarterly statements as
Agent may reasonably request, which quarterly statements requested under this
clause (e) shall include any and all notes and schedules thereto. Such quarterly
financial statements required pursuant to this Subsection shall be accompanied
by a Compliance Certificate.
12.2.3 Notice of Default. As soon as the existence of any Event of Default
or Potential Default becomes known to any officer of Borrower, Borrower shall
promptly give Agent written notice of such Event of Default or Potential
Default, the nature and status thereof, and the action being taken or proposed
to be taken with respect thereto.
12.2.4 Notice of Certain Changes. Borrower shall: (a) notify Agent at least
ten (10) Business Days prior to the occurrence of any change in the name or
business form of Borrower; and (b) take all actions necessary or reasonably
requested by Agent in order to maintain the perfected status of Agent's first
lien and security interest (subject only to Permitted Encumbrances and to the
Intercreditor Agreement) in the Collateral.
12.2.5 Notice of Litigation. Borrower shall promptly notify Agent in
writing of all litigation in which Borrower or, to Borrower's knowledge,
Guarantor is a
35
<PAGE>
party, and which either: (a) involves an amount of $100,000 or more, singly or
in the aggregate at any time; or (b) could reasonably be expected to result in a
Material Adverse Effect with respect to Borrower or Guarantor.
12.2.6 Notice of Material Adverse Effect. Promptly after Borrower obtains
knowledge thereof, notice of any matter which has resulted or would result in a
Material Adverse Effect on Borrower or Guarantor.
12.2.7 Notice of Environmental Litigation. Without limiting the provisions
of Subsection 12.2.6 of this Term Credit Agreement, promptly after Borrower's
receipt thereof, notice of the receipt of all pleadings, orders, complaints,
indictments, or other communication alleging a condition that may require
Borrower to undertake or to contribute to a cleanup or other response under
Environmental Regulations, or which seeks penalties, damages, injunctive relief,
or criminal sanctions related to alleged violations of such laws, or which
claims personal injury or property damage to any person as a result of
environmental factors or conditions or which, if adversely determined, could
have a Material Adverse Effect on Borrower.
12.2.8 Regulatory and Other Notices. Promptly after Borrower's receipt
thereof, copies of any notices or other communications received from: (a) any
governmental authority with respect to any matter or proceeding the effect of
which could reasonably be expected to have a Material Adverse Effect on
Borrower; and (b) an Underlying Term Loan Borrower.
12.2.9 Adverse Action Regarding Required Licenses. In the event Borrower
learns that any petition, action, investigation, notice of violation or apparent
liability, notice of forfeiture, order to show cause, complaint or proceeding is
pending, or, to the best of Borrower's knowledge, threatened, to seek to revoke,
cancel, suspend, modify, or limit any of the Required Licenses, Borrower shall
provide Agent with prompt written notice thereof and shall take, or cause to be
taken, all reasonable measures to contest such action in good faith.
12.2.10 Default of Underlying Term Loan. As soon as the existence of any
event of default or potential default under the Underlying Term Loan becomes
known to Borrower, Borrower shall promptly give Agent written notice of such
event of default or potential default, the nature and status thereof, and the
action being taken or proposed to be taken with respect thereto.
12.2.11 Annual Attorney's Opinion Regarding Collateral. No later than the
last Business Day of February of each year, an opinion of legal counsel
acceptable to Agent as to the status of (a) Borrower's liens on the assets of
the Underlying Term Loan Borrowers to secure the Underlying Term Loans
("Underlying Liens"); and (b) CoBank's liens on the assets of Borrower to secure
the Loan (and including the collateral assignment to CoBank of the Underlying
Term Loans and Underlying Liens).
36
<PAGE>
12.2.12 Additional Information. With reasonable promptness: (a) copies of
all communications which Borrower receives or initiates from or to any
Underlying Term Loan Borrower and all reports, certificates, and other written
materials, including, without limitation, all financial statements, which
Borrower receives from or on account of any Underlying Term Loan Borrower; and
(b) such additional financial information or other documentation as Agent may
reasonably request.
12.3 Eligibility Certificate. Borrower shall maintain its membership base
so that not less than fifty percent (50%) of its equity interest is owned by
Persons engaged in the business of producing vegetables, fruits, or other
agricultural products. Within thirty (30) days of the beginning of each calendar
year, Borrower shall provide Agent with a written certification signed by an
officer thereof stating that Borrower is in compliance with this Section.
12.4 Maintenance of Existence and Qualification. Borrower shall maintain
its corporate existence in good standing under the laws of Delaware. Borrower
will qualify and remain qualified as a foreign corporation in each jurisdiction
in which such qualification is necessary or desirable in view of its business,
operations and properties.
12.5 Compliance with Legal Requirements and Agreements. Borrower shall: (a)
comply with all laws, rules, regulations and orders applicable to Borrower or
its business; and (b) all agreements, indentures, mortgages, and other
instruments to which it is a party or by which it or any of its property is
bound; provided, however, that the failure of Borrower to comply with this
sentence in any instance not directly involving Agent or a Syndication Party
shall not constitute an Event of Default unless such failure would have a
Material Adverse Effect.
12.6 Compliance with Environmental Laws. Without limiting the provisions of
Section 12.5 of this Term Credit Agreement, Borrower shall comply in all
material respects with, and take all reasonable steps necessary to cause all
persons occupying or present on any properties owned or leased by Borrower to
comply with, all Environmental Regulations, the failure to comply with which
would have a Material Adverse Effect.
12.7 Taxes. Borrower shall cause to be paid when due all taxes,
assessments, and other governmental charges upon it, its income, its sales, its
properties, and federal and state taxes withheld from its employees' earnings,
unless such taxes, assessments, or other governmental charges shall be contested
in good faith by appropriate actions or legal proceedings and Borrower shall
establish adequate reserves therefor in accordance with GAAP.
12.8 Insurance. Borrower shall keep the Collateral insured at all times by
an insurance carrier or carriers approved by Agent which have an A rating by the
current BEST Key Rating Guide (provided that Florists Mutual Group will be
deemed an approved insurance carrier so long as its BEST Key Rating does not
fall below its rating
37
<PAGE>
as of the Closing Date), against all risks covered by a special form policy (and
including flood, earthquake and windstorm coverage) in the amount of the full
replacement cost (other than with respect to motor vehicles) of the Collateral
as well as liability, worker's compensation, business interruption, boiler and
machinery and such other insurance as Bank may reasonably require, in amounts
and with deductibles or maximum payouts customarily carried by entities in
similar lines of business. Borrower shall also maintain fidelity coverage
(including employee dishonesty) on such officers and employees and in such
amounts as Agent shall specify, or in the absence of any such specification, as
customarily carried by corporations engaged in comparable businesses and
comparably situated. Such insurance policies shall contain such reasonable
endorsements as Agent shall from time to time require and all liability policies
shall name Agent as an additional insured as its interests may appear (and for
the benefit of the Syndication Parties). All such insurance policies shall be
endorsed with a mortgagee's or loss payable clause, as appropriate, in favor of
Agent (and for the benefit of the Syndication Parties). The policy or policies
evidencing all insurance referred to in this Section and receipts for the
payment of premiums thereon or certificates of such insurance satisfactory to
Agent shall be delivered to and held by Agent. All such insurance policies shall
contain a provision requiring at least ten (10) days' notice to Agent prior to
any cancellation for non-payment of premiums and at least forty-five (45) days'
notice to Agent of cancellation for any other reason or of modification or
non-renewal. No later than forty (40) days prior to expiration, Borrower shall
give Agent (a) satisfactory written evidence of renewal of all such policies
with premiums paid, or (b) a written report as to the steps being taken by
Borrower to renew or replace all such policies, provided that notwithstanding
the receipt of such written report, Agent may at any time thereafter give
Borrower written notice to provide Agent with such evidence as described in
clause (a), in which case Borrower must do so within ten (10) days of such
notice. Borrower agrees to pay all premiums on such insurance as they become
due, and will not permit any condition to exist on or with respect to the
Collateral which would wholly or partially invalidate any insurance thereon.
Effective upon the occurrence of an Event of Default, all of Borrower's right,
title and interest in and to all such policies and any unearned premiums paid
thereon are hereby assigned to Agent (for the benefit of the Syndication
Parties) who shall have the right, but not the obligation, to assign the same to
any purchaser of the Collateral at any foreclosure sale. Borrower shall give
immediate written notice to the insurance carrier and Agent of any loss.
Borrower hereby authorizes and empowers Agent upon the occurrence and during the
continuation of an Event of Default, at Agent's option and in Agent's sole
discretion, to act as attorney-in-fact for Borrower to make proof of loss, to
adjust and compromise any claim under insurance policies, to collect and receive
insurance proceeds, and to deduct therefrom Agent's expenses incurred in the
collection of such proceeds, and all insurance policies of Borrower shall
provide that Agent may act as Borrower's attorney-in-fact for such purposes.
12.9 Title to Assets and Maintenance. Borrower shall defend and maintain
title to all its material properties and assets, including the Collateral.
Borrower shall keep its assets, both real and personal, including the
Collateral, in good order and
38
<PAGE>
condition consistent with industry practice and shall make all necessary
repairs, replacements and improvements so that its business may be properly and
advantageously conducted.
12.10 Payment of Liabilities. Borrower shall pay all liabilities
(including, without limitation: (a) any indebtedness for borrowed money or for
the deferred purchase price of property or services; (b) any obligations under
leases which have or should have been characterized as capitalized leases, as
determined in accordance with GAAP; and (c) any contingent liabilities, such as
guaranties, for the obligations of others relating to indebtedness for borrowed
money or for the deferred purchase price of property or services or relating to
obligations under leases which have or should have been characterized as
capitalized leases, as determined in accordance with GAAP) as they become due
beyond any period of grace under the instrument creating such liabilities,
unless (with the exception of the Bank Debt) they are contested in good faith by
appropriate actions or legal proceedings, Borrower establishes adequate reserves
therefor in accordance with GAAP, and such contesting will not result in a
Material Adverse Effect.
12.11 Further Assurances; Real Property Security Interests. Borrower shall,
as may be required from time to time by Agent, provide such documents as may be
necessary or desirable in the judgment of Agent to confirm the security interest
in the Collateral granted to Agent for the benefit of the Syndication Parties.
Promptly after the purchase or other acquisition of any fee interest in real
estate having a cost or Fair Market Value of $25,000.00 or more, Borrower shall
provide Agent with written notice of such acquisition and shall grant to Agent
(for the benefit of the Syndication Parties) a first deed of trust or mortgage
on such real estate (subject to liens permitted by Section 13.3 hereof and to
the Intercreditor Agreement), such deed of trust or mortgage to be in form and
substance as reasonably specified by Agent. In connection with the delivery of
any mortgage or deed of trust, Borrower shall, where required under the
guidelines set forth in Subsection 11.1.2 of this Term Credit Agreement, deliver
to Agent a mortgagee's title policy satisfactory to Agent in such amount as
Agent shall specify, but in no event greater than the value of the real estate,
to be obtained at Borrower's sole cost. In connection with entering into, as
lessee, any lease of an interest in real property which lease calls for a rental
payment equal to or in excess of $25,000.00 per annum, Borrower shall deliver to
Agent a Leasehold Assignment & Consent (naming Agent as assignee for the benefit
of the Syndication Parties), together with such consents or estoppels of lessor
as Agent shall specify.
12.12 Inspection. Permit Agent or its agents, during normal business hours
or at such other times as the parties may agree, to examine Borrower's
properties, books, and records, and to discuss Borrower's affairs, finances,
operations, and accounts with its respective officers, directors, employees, and
independent certified public accountants.
12.13 Required Licenses; Permits; Etc. Borrower shall duly and lawfully
obtain and maintain in full force and effect all Required Licenses.
39
<PAGE>
12.14 ERISA. In the event Borrower adopts , maintains, or becomes obligated
to make payments under, any Borrower Benefit Plan in the future (which Borrower
may not do without the prior written consent of Agent), Borrower shall: (a)
cause each such Borrower Benefit Plan to comply in all material respects with
the Code and ERISA, including but not limited to preparing and delivering each
material report, statement or other document required by ERISA and the Code
within the period specified therein and conforming in form and substance to the
provisions thereof; (b) cause any Borrower Benefit Plan that is intended to
satisfy the requirements of Section 401(a) of the Code to satisfy such
requirements including, but not limited to obtaining a favorable determination
letter with respect to each such Borrower Benefit Plan; and (c) prepare and
deliver and (d) administer each Borrower Benefit Plan in all material respects
in accordance with the terms of such plan and with ERISA, the Code, and any
other applicable law, except to the extent any failure to comply with the
preceding clauses (a), (b) or (c) would not have a Material Adverse Effect.
Borrower shall take any actions necessary to terminate its status as a
participating employer in any employee benefit plan (within the meaning of
Section 3(3) of ERISA) sponsored by an other entity. Within ten (10) Business
Days after receiving such notice, Borrower shall furnish to Agent any notice
received by Borrower relating to an assertion of withdrawal liability imposed by
any Multiemployer Plan upon Borrower or Borrower's controlled group prior to the
Closing Date, or relating to any violation of the provisions of the Code or
ERISA asserted by the Department of Labor, the Pension Benefit Guaranty
Corporation or the Department of the Treasury with respect to any Borrower
Benefit Plan that could reasonably be expected to have a Material Adverse
Effect.
12.15 Operations and Members. Borrower shall: (a) duly and lawfully obtain
and maintain its business and operations for the mutual benefit of the members
thereof; (b) furnish services, including financing, to its members; (c) limit
its members to farmers, ranchers, or producers or harvesters of aquatic
products; (d) either (i) allow no member more than 1 vote, or (ii) refrain from
paying dividends on stock or membership capital in excess of 10% per annum or
such lesser amount as is permitted by applicable state statutes; (e) prohibit
any transfer or acquisition of an interest in Borrower if it would result in
less than 80% of the control of Borrower being held by farmers, producers or
harvesters of aquatic products; and (f) conduct its business so that
transactions with or for its members are at least equal in value to its
transactions with nonmembers (other than the United States or agencies thereof).
ARTICLE 13. NEGATIVE COVENANTS
From and after the date of this Term Credit Agreement until the Bank Debt
is indefeasibly paid in full and the Syndication Parties have no obligation to
disburse Loan Proceeds, Borrower agrees that it will observe and comply with the
following covenants:
13.1 Borrowing. Borrower shall not create, incur, assume or permit to
exist: (a) any indebtedness for borrowed money or for the deferred purchase
price of property or services; (b) any contingent liabilities, such as
guarantees; or (c) any obligations
40
<PAGE>
under leases which have or should have been characterized as capital leases, as
determined in accordance with GAAP, except for: (u) indebtedness owing under the
Loan Documents (including Section 5.4 hereof), (v) indebtedness under the
Construction Facility and the Line of Credit Facility, (w) leases and purchase
money financing of property used in the ordinary course of Borrower's business
the aggregate amount of which does not exceed $50,000.00 at any one time; (x)
the indebtedness outstanding on the date hereof and which is described on
Exhibit 13.1 hereto; ; and (y) indebtedness constituting any refinancing or
refunding of indebtedness described in subparagraphs (w), (v), (w), and (x) of
this Section, provided that the principal amount thereof does not increase as a
result of any such refinancing or refunding from the balance owing on the date
hereof or on the date of such refinancing or refunding, whichever is lower.
13.2 No Other Businesses. Borrower shall not transact or engage in any
business other than the making of loans to its members and to non-members.
13.3 Liens. Borrower will not create, incur, assume or suffer to exist any
mortgage, pledge, lien, charge or other encumbrance on, or any security interest
in, any of the Collateral, except:
(a) the security interests, mortgages, pledges, liens, or other
charges or encumbrances resulting from the Loan Documents and arising out
of the Line of Credit Facility and the Construction Facility;
(b) liens for taxes or other governmental charges which are not due or
remain payable without penalty, or are being contested in good faith by
appropriate actions or proceedings; provided that such reserves or other
appropriate provisions, if any, as shall be required by GAAP, shall have
been made for such taxes or other governmental charges;
(c) deposits or pledges to secure workmen's compensation, unemployment
insurance, old age benefits or other social security obligations or in
connection with or to secure the performance of bids, tenders, trade
contracts or leases or to secure statutory obligations or surety or appeal
bonds or other pledges or deposits of like nature and all in the ordinary
course of business;
(d) mechanics', carriers', workmen's, repairmen's or other like liens
arising in the ordinary course of business in respect of obligations not
yet due or which are being contested in good faith and by appropriate
proceedings;
(e) easements, rights-of-way, zoning restrictions and other similar
matters incidental to the ownership of property which do not in the
aggregate materially detract from the value of such property or assets or
materially impair their use in the operation of the business of Borrower;
and
(f) purchase money security interests in property; provided that: (i)
such property is used in the ordinary course of Borrower's business,
provided that such
41
<PAGE>
security interests shall attach only to the property so purchased, (ii) the
amount of the purchase money financing so secured does not exceed the
amount permitted under Section 13.1, and (iii) the purchase occurred
subsequent to the Closing Date.
13.4 Sale of Assets. Borrower will not sell, convey, assign, lease or
otherwise transfer or dispose of, voluntarily, by operation of law or otherwise,
any of the Collateral to any Person, except that; (a) Borrower may dispose of
equipment which is obsolete or no longer used or useful by Borrower in its
business so long as (i) no Event of Default has occurred and is continuing, and
(ii) the transfer is made in an arms length transaction; and (b) Borrower may
dispose of worn-out equipment so long as (i) if an Event of Default has occurred
and is continuing, any proceeds are paid to Agent (for the benefit of the
Syndication Parties) and (ii) such sales do not involve equipment having an
aggregate fair market value in excess of $50,000.00 for all such equipment
disposed of in any calendar year.
13.5 Liabilities of Others. Borrower will not assume, guarantee, endorse or
otherwise become directly or contingently liable in connection with any
obligation of any other Person.
13.6 Payments on Indebtedness. Borrower shall not make any principal
payment on any indebtedness except: (a) indebtedness owing hereunder, under the
Credit Agreement (Line of Credit Facility), and under the Credit Agreement
(Construction Loan Funding); and (b) so long as no Event of Default or Potential
Default shall exist, other indebtedness permitted by Section 13.1 of this Term
Credit Agreement.
13.7 Merger; Acquisitions; Etc. Borrower shall not merge or consolidate
with any entity, or acquire all or substantially all of the assets of any person
or entity, or form or create any new subsidiary or affiliate, or commence
operations under any other name, organization, or entity, including any joint
venture.
13.8 Loans, Advances and Investments. Except as provided in Section 13.13
hereof and except for the purchase of CoBank Equity Interests, Borrower will not
make or permit to remain outstanding any loan or advance to, or own, purchase or
acquire any stock, obligations or securities of, or any other interest in, or
make any capital contribution to, any Person, except that Borrower may own,
purchase or acquire:
(a) commercial paper maturing not in excess of one year from the date
of acquisition and rated P1 by Moody's Investors Service, Inc. or A1 by
Standard & Poor's Corporation on the date of acquisition;
(b) certificates of deposit in North American commercial banks rated C
or better by Keefe, Bruyette & Woods, Inc. or 3 or better by Cates
Consulting Analysts, maturing not in excess of one year from the date of
acquisition;
42
<PAGE>
(c) obligations of the United States government or any agency thereof,
the obligations of which are guaranteed by the United States government,
maturing, in each case, not in excess of one year from the date of
acquisition; and
(d) repurchase agreements of any bank or trust company incorporated
under the laws of the United States of America or any state thereof and
fully secured by a pledge of obligations issued or fully and
unconditionally guaranteed by the United States government.
13.9 Transactions With Related Parties. Borrower shall not purchase,
acquire, or sell any equipment, other personal property, real property or
services from or to any affiliate, except in the ordinary course of Borrower's
business and upon fair and reasonable terms no less favorable than would be
obtained by Borrower in a comparable arm's-length transaction with an unrelated
Person.
13.10 ERISA. Borrower shall not: (a) adopt, maintain or become obligated to
contribute to any Borrower Benefit Plan without the prior written consent of
Agent; (b) engage in or permit any transaction which could result in a
"prohibited transaction" (as such term is defined in Section 406 of ERISA) or in
the imposition of an excise tax pursuant to Section 4975 of the Code; (c) engage
in or permit any transaction or other event which could result in a "reportable
event" as such term is defined in Section 4043 of ERISA for any Borrower Pension
Plan; (d) fail to make full payment when due of all amounts which, under the
provisions of any Borrower Benefit Plan, Borrower is required to pay as
contributions thereto; (e) permit to exist any "accumulated funding deficiency"
(as such term is defined in Section 302 of ERISA) in excess of $25,000.00,
whether or not waived, with respect to any Borrower Pension Plan; (f) fail to
make any payments to any "multiemployer plan" that Borrower may be required to
make under any agreement relating to such "multiemployer plan" or any law
pertaining thereto; or (g) terminate any Borrower Pension Plan in a manner which
could result in the imposition of a lien on any property of Borrower pursuant to
Section 4068 of ERISA. Borrower shall not terminate any Borrower Pension Plan so
as to result in any liability to the Pension Benefit Guaranty Corporation. As
used in this Section, all terms enclosed in quotation marks shall have the
meanings set forth in ERISA. Borrower's failure to comply with any of the
foregoing provisions of this Section shall not constitute a breach of this Term
Credit Agreement or an Event of Default unless such failure has a Material
Adverse Effect.
13.11 Payment of Dividends. Borrower shall not, directly or indirectly,
declare or pay any dividends on account of any shares of any class of its
capital stock now or hereafter outstanding, or set aside or otherwise deposit or
invest any sums for such purpose, or redeem, retire, defease, purchase or
otherwise acquire any shares of any class of its capital stock (or set aside or
otherwise deposit or invest any sums for such purpose) for any consideration
other than common stock or apply or set apart any sum, or make any other
distribution (by reduction or capital or otherwise) in respect of any such
shares or retire capital equities or other written notices of allocation, or
make any other distribution or allocation of its earnings, surplus or assets to
any holder of
43
<PAGE>
stock, allocated equities or other written notices of allocation, or agree to do
any of the foregoing; provided that Borrower may distribute patronage-sourced
earnings annually in the form of cash and qualified written notices of
allocation, so long as the cash portion is the minimum amount required to
qualify the distribution as a deductible patronage distribution for federal
income tax purposes, and such written notices constitute equity and not debt.
13.12 Change in Fiscal Year. Borrower shall not change its fiscal year from
a year ending on December 31.
13.13 Extensions of Credit. Notwithstanding the prohibitions of Section
13.8, Borrower may make extensions of credit as follows:
(a) Underlying Term Loans approved by Agent for funding hereunder and
which are included in the Collateral;
(b) Underlying Construction Loans approved by Agent for funding under
the Credit Agreement (Construction Loan Funding); and
(c) Loans approved by Agent for funding under the Credit Agreement
(Line of Credit Loan).
13.14 Amendment/Waiver of Provisions of Underlying Term Loan Documents.
Borrower shall not, without the prior written consent of Agent, amend, or agree
to amend, or waive any material provision of, or give its consent with respect
to any material matter under, any of the Underlying Term Loan Documents after
originals or copies thereof have been delivered to Agent in connection with a
Request for Underlying Term Loan Activation.
ARTICLE 14. INDEMNIFICATION
14.1 General; Stamp Taxes; Intangibles Tax. Borrower agrees to indemnify
and hold Agent and each Syndication Party and their directors, officers,
employees, agents, professional advisers and representatives ("Indemnified
Parties") harmless from and against any and all claims, damages, losses,
liabilities, costs or expenses whatsoever which Agent or any other Indemnified
Party may incur (or which may be claimed against any such Indemnified Party by
any Person), including attorneys' fees incurred by any Indemnified Party,
arising out of or resulting from: (a) the material inaccuracy of any
representation or warranty of Borrower or Guarantor in this Term Credit
Agreement or the other Loan Documents; (b) the material failure of Borrower or
Guarantor to perform or comply with any covenant or obligation of Borrower or
Guarantor under this Term Credit Agreement or the other Loan Documents; or (c)
the exercise by Agent of any right or remedy set forth in this Term Credit
Agreement or the other Loan Documents, provided that Borrower shall have no
obligation to indemnify any Indemnified Party against claims, damages, losses,
liabilities, costs or expenses to the extent that a court of competent
jurisdiction renders a final non-appealable
44
<PAGE>
determination that the foregoing are solely the result of the willful misconduct
or gross negligence of such Indemnified Party. In addition, Borrower agrees to
indemnify and hold the Indemnified Parties harmless from and against any and all
claims, damages, losses, liabilities, costs or expenses whatsoever which Agent
or any other Indemnified Party may incur (or which may be claimed against any
such Indemnified Party by any Person), including attorneys' fees incurred by any
Indemnified Party, arising out of or resulting from the imposition or nonpayment
by Borrower of any stamp tax, intangibles tax, or similar tax imposed by any
state, including any amounts owing by virtue of the assertion that the property
valuation used to calculate any such tax was understated. Borrower shall have
the right to assume the defense of any claim as would give rise to Borrower's
indemnification obligation under this Section with counsel of Borrower's
choosing so long as such defense is being diligently and properly conducted and
Borrower shall establish to the Indemnified Party's satisfaction that the amount
of such claims are not, and will not be, material in comparison to the liquid
and unrestricted assets of Borrower available to respond to any award which may
be granted on account of such claim. So long as the conditions of the preceding
sentence are met, Indemnified Party shall have no further right to reimbursement
of attorney's fees incurred thereafter. The obligation to indemnify set forth in
this Section shall survive the termination of this Term Credit Agreement and
other covenants.
14.2 Indemnification Relating to Hazardous Substances. Borrower shall not
locate, produce, treat, transport, incorporate, discharge, emit, release,
deposit or dispose of any Hazardous Substance in, upon, under, over or from any
property owned or held by Borrower, except in accordance with all Environmental
Regulations; Borrower shall not permit any Hazardous Substance to be located,
produced, treated, transported, incorporated, discharged, emitted, released,
deposited, disposed of or to escape in, upon, under, over or from any property
owned or held by Borrower, except in accordance with Environmental Regulations;
and Borrower shall comply with all Environmental Regulations which are
applicable to such property. If Agent reasonably believes that an Environmental
Regulation has been violated by Borrower's activities upon property owned or
held by Borrower, and if Agent so requests, Borrower shall have prepared an
environmental review, audit, assessment and/or report relating to the subject
property, at Borrower's sole cost and expense, by an engineer or other
environmental expert acceptable to Agent. If, however, the environmental review,
audit, assessment and/or report reveals that no Environmental Regulation has
been violated, Agent shall reimburse Borrower for the costs and expenses of such
engineer or other environmental expert in completing such audit or report.
Borrower shall indemnify the Indemnified Parties against, and shall reimburse
the Indemnified Parties for, any and all claims, demands, judgments, penalties,
liabilities, costs, damages and expenses, including court costs and attorneys'
fees incurred by the Indemnified Parties (prior to trial, at trial and on
appeal) in any action against or involving the Indemnified Parties, resulting
from any breach of the foregoing covenants, or from the discovery of any
Hazardous Substance in, upon, under or over, or emanating from, such property,
it being the intent of Borrower and the Indemnified Parties that the Indemnified
Parties shall have no liability or responsibility for damage or injury to human
health, the environmental or natural
45
<PAGE>
resources caused by, for abatement and/or clean-up of, or otherwise with respect
to, Hazardous Substances by virtue of the interest of Agent, or any Syndication
Party, in the property created by any documents securing Bank Debt (including
without limitation the Loan Documents) or as the result of Agent or any
Syndication Party exercising any of its rights or remedies with respect thereto,
including but not limited to becoming the owner thereof by foreclosure or
conveyance in lieu of foreclosure. The foregoing covenants of this Section shall
be deemed continuing covenants for the benefit of the Indemnified Parties, and
any successors and assigns of the Indemnified Parties, including but not limited
to the holder of any certificate of purchase, any transferee of the title of
Agent or any Syndication Party or any subsequent owner of the property, and
shall survive the satisfaction or release of any lien, any foreclosure of any
lien and/or any acquisition of title to the property or any part thereof by
Agent or any Syndication Party, or anyone claiming by, through or under Agent or
any Syndication Party or Borrower by deed in lieu of foreclosure or otherwise.
Any amounts covered by the foregoing indemnification shall bear interest from
the date incurred at the Default Interest Rate, shall be payable on demand, and
shall be secured by the Security Documents. The indemnification and covenants of
this Section shall survive the termination of this Term Credit Agreement and
other covenants.
ARTICLE 15. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
15.1 Events of Default. The occurrence of any of the following events (each
an "Event of Default") shall, at the option of Agent, make the entire Bank Debt
immediately due and payable (provided, that in the case of an Event of Default
under Subsection 15.1(f) all amounts owing under the Notes and the other Loan
Documents shall automatically and immediately become due and payable without any
action by or on behalf of Agent), and Agent may exercise all rights and remedies
for the collection of any amounts outstanding hereunder and take whatever action
it deems necessary to secure itself, all without notice of default, presentment
or demand for payment, protest or notice of nonpayment or dishonor, or other
notices or demands of any kind or character:
(a) Failure of Borrower to pay within five (5) days of the date when
due, whether by acceleration or otherwise, any of the Bank Debt in
accordance with this Term Credit Agreement or the other Loan Documents.
(b) Any representation or warranty set forth in any Loan Document, any
Commitment Request, Request for Term Loan Activation, Advance Request,
Village Farms Advance Request, or in the Guaranty or Guarantor Security
Documents, or in connection with any transaction contemplated by any such
document, shall prove in any material respect to have been false or
misleading when made by Borrower or Guarantor.
(c) Any default by Borrower or Guarantor in the performance or
compliance with the covenants, promises, conditions or provisions of
Sections 12.3, 12.8, 12.12, 13.1, 13.3, 13.4, 13.5, 13.7, 13.11, 13.12, or
13.14 of this Term Credit Agreement, or Sections 9.1, 9.3, 9.4, 9.5, 9.6,
9.8, 9.9, or 9.13 of the Guaranty.
46
<PAGE>
(d) Any breach of the covenants set forth in Sections 12.2, 12.9,
12.10 (except as provided in Section 15.1(e)), 12.13, 12.14, 12.15, 13.6,
13.8, 13.9, or 13.10 of this Term Credit Agreement or Sections 9.2, 9.7,
9.10, or 9.11 of the Guaranty, and such failure continues for five (5) days
after Borrower learns of such failure to comply, whether by Borrower's own
discovery or through notice from Agent.
(e) The failure of Borrower or Guarantor to pay when due, or failure
to perform or observe any other obligation or condition with respect to any
of the following obligations to any Person, beyond any period of grace
under the instrument creating such obligation: (i) any indebtedness for
borrowed money or for the deferred purchase price of property or services,
(ii) any obligations under leases which have or should have been
characterized as capitalized leases, as determined in accordance with GAAP,
or (iii) any contingent liabilities, such as guaranties, for the
obligations of others relating to indebtedness for borrowed money or for
the deferred purchase price of property or services or relating to
obligations under leases which have or should have been characterized as
capitalized leases, as determined in accordance with GAAP; provided that no
such failure will be deemed to be an Event of Default hereunder unless and
until the aggregate amount owing under obligations with respect to which
such failures have occurred and are continuing is at least$50,000.00 as to
Borrower, and/or at least $50,000.00 as to Guarantor.
(f) Borrower or Guarantor applies for or consents to the appointment
of a trustee or receiver for any part of its properties; any bankruptcy,
reorganization, debt arrangement, dissolution or liquidation proceeding is
commenced or consented to by Borrower or Guarantor; or any application for
appointment of a receiver or a trustee, or any proceeding for bankruptcy,
reorganization, debt management or liquidation is filed for or commenced
against Borrower or Guarantor, and is not withdrawn or dismissed within
sixty (60) days thereafter.
(g) Failure of Borrower or Guarantor to comply with any other
provision of this Term Credit Agreement or the other Loan Documents not
constituting an Event of Default under any of the preceding provisions of
this Section 15.1, and such failure continues for thirty (30) days after
Borrower or Guarantor learns of such failure to comply, whether by
Borrower's or Guarantor's own discovery or through notice from Agent.
(h) The Guaranty or the Guarantor Security Documents shall, at any
time after their execution, cease to be in full force and effect, or shall
be revoked or declared null and void, or the validity or enforceability
thereof shall be contested by Guarantor, or Guarantor shall deny any
further liability or obligation thereunder, or shall be in default or fail
to perform its obligations thereunder, or any covenant or agreement set
forth therein shall be breached, or Guarantor should breach or be in
default under the terms of any of the Guarantor Security Documents.
(i) The occurrence of an event of default, unless and until a written
waiver thereof has been granted by the Agent thereunder, under the
following
47
<PAGE>
agreements of even date herewith and executed by and between Borrower, as
borrower thereunder, CoBank as agent and (alone, or with any other Person)
as a syndication party thereunder: Credit Agreement (Construction Loan
Funding), and Credit Agreement (Line of Credit Facility).
(j) The entry of one or more judgments in an aggregate amount in
excess of $50,000.00 against Borrower and/or in excess of $100,000.00
against Guarantor in either case not stayed, discharged or paid within
thirty (30) days after entry.
(k) The occurrence of an event of default under any Underlying Term
Loan.
15.2 No Advances. The Syndication Parties shall have no obligation to
disburse Loan Proceeds if a Potential Default or an Event of Default shall occur
and be continuing.
15.3 Rights and Remedies. In addition to the remedies set forth in Section
15.1 and 15.2 of this Term Credit Agreement, upon the occurrence of an Event of
Default, Agent shall, subject to the provisions of Section 15.4 hereof, be
entitled to exercise all the rights and remedies provided in the Security
Documents and other Loan Documents and by any applicable law, including, without
limitation, the Uniform Commercial Code as enacted in the state of Colorado or
the state where the Collateral is located at such time, whichever provides Agent
with greater rights. Each and every right or remedy granted to Agent pursuant to
this Term Credit Agreement and the other Loan Documents, or allowed Agent by law
or equity, shall be cumulative. Failure or delay on the part of Agent to
exercise any such right or remedy shall not operate as a waiver thereof. Any
single or partial exercise by Agent of any such right or remedy shall not
preclude any future exercise thereof or the exercise of any other right or
remedy.
15.4 Limitation on Rights and Remedies. Notwithstanding the provisions of
Section 15.3 hereof, when the sole Event of Default is an Event of Default
caused by Section 15.1(k) hereof, Agent will, for a period of time designated by
Agent in its sole discretion, refrain from accelerating the Loan if Borrower
promptly (a) proposes, and diligently pursues, a course of action (for example,
for collection, restructuring, or assignment) with respect to such Underlying
Term Loan to which course of action the Super Majority give Agent their written
approval in their sole discretion; (b) ceases making advances thereunder; and
(c) charges interest on such Underlying Term Loan at the default rate specified
in the relevant Underlying Term Loan Documents).
ARTICLE 16. AGENCY AGREEMENT
16.1 Funding of Syndication Interest. (a) Each Syndication Party, severally
but not jointly, hereby irrevocably agrees to fund its Syndication Share of all
Advances from time to time pursuant to the terms and conditions contained
herein; provided that no Syndication Party shall be required to fund an Advance
in an amount such that the
48
<PAGE>
aggregate principal balance owing to such Syndication Party after such funding
would be in excess of such Syndication Party's Maximum Syndication Amount. Each
Syndication Party's interest in the Advances ("Syndication Interest") hereunder
shall be without recourse to Agent or any other Syndication Party and shall not
be construed as a loan from any Syndication Party to Agent or any other
Syndication Party.
16.2 Syndication Parties' Obligations to Remit Funds. Each Syndication
Party agrees to remit the amount of each Advance requested by Borrower as set
forth in each Notice of Loan Advance multiplied by its Syndication Share
("Advance Payment") as such Notice of Loan Advance may be sent, in the manner
provided in Section 16.3 hereof, from time to time for Advances to be made under
the Loan on or prior to the Maturity Date.
16.3 Notice and Timing of Each Advance Payment. On the Business Day on
which Agent approves an Advance Request for funding, Agent shall provide each
Syndication Party with a notice in substantially the form attached hereto as
Exhibit 16.3 ("Notice of Loan Advance"), indicating, among other things, the
amount ("Loan Advance Amount") and Advance Date of the requested Advance and the
amount of the Syndication Party's Advance Payment. Each syndication Party shall
remit its Advance Payment directly to Agent on the date specified in the Notice
of Loan Advance which shall not be later than the Advance Date ("Syndication
Party Advance Date").
16.4 Syndication Party's Failure to Remit Funds. If a Syndication Party
("Delinquent Syndication Party") fails to remit its Advance Payment in full by
11:00 a.m. Central time on the Syndication Party Advance Date (the unpaid amount
of any such payment being hereinafter referred to as the "Delinquent Amount"),
in addition to any other remedies available hereunder, any other Syndication
Party or Syndication Parties may, but shall not be obligated to, pay the
Delinquent Amount (the Syndication Party or Syndication Parties which advance
such Delinquent Amount are referred to as the "Contributing Syndication
Parties"), in which case (a) the Delinquent Amount which any Contributing
Syndication Party pays shall not count as an Advance Payment against the Maximum
Syndication Amount of the Contributing Syndication Party, and (b) the Delinquent
Syndication Party shall be obligated to pay to Agent, for the account of the
Contributing Syndication Parties, interest on the Delinquent Amount at a rate of
interest equal to the rate of interest which Borrower is obligated to pay on the
Delinquent Amount ("Delinquency Interest") until the Delinquent Syndication
Party remits the full Delinquent Amount and remits all Delinquency Interest to
Agent, which will distribute such payments to the Contributing Syndication
Parties (pro rata based on the amount of the Delinquent Amount which each of
them (if more than one) paid) on the same Business Day as such payments are
received by Agent if received no later than 11:00 a.m. Central time or the next
Business Day if received by Agent thereafter. In addition, the Contributing
Syndication Parties shall be entitled to share, on the same pro rata basis, and
Agent shall pay over to them, for application against Delinquency Interest and
the Delinquent Amount, the Delinquent Syndication Party's Payment Distribution
and any fee distributions made under Section 16.11 hereof until the Delinquent
Amount and all Delinquency Interest have been paid in full. For voting
49
<PAGE>
purposes the Agent shall readjust the Syndication Shares of such Delinquent
Syndication Party and the Contributing Syndication Parties from time to time
first to reflect the advance of the Delinquent Amount by the Contributing
Syndication Parties, and then to reflect the full or partial reimbursement to
the Contributing Syndication Parties of such Delinquent Amount. In the event no
Syndication Party elects to pay the Delinquent Amount with respect to any Loan
Advance Amount but Borrower elects to receive such Loan Advance Amount (less the
Delinquent Amount), the proportionate share of Payment Distributions to which
the Delinquent Syndication Party is entitled and its proportionate voting rights
shall be adjusted to reflect its failure to pay the Delinquent Amount. As
between the Delinquent Syndication Party and the Contributing Syndication
Parties, the Delinquent Syndication Party's interest in its Note shall be deemed
to have been partially assigned to the Contributing Syndication Parties in the
amount of the Delinquent Amount and Delinquency Interest owing to the
Contributing Syndication Parties from time to time.
16.5 Agency Appointment. Each of the Syndication Parties hereby designates
and appoints Agent to act as agent to service and collect the Loan and its
respective Note and to take such action on behalf of such Syndication Party with
respect to the Loan and such Note, and to execute such powers and to perform
such duties, as specifically delegated or required herein, as well as to
exercise such powers and to perform such duties as are reasonably incident
thereto, and to receive and benefit from such fees and indemnifications as are
provided for or set forth herein, until such time as a successor is appointed
and qualified to act as Agent.
16.6 Power and Authority of Agent. Without limiting the generality of the
power and authority vested in Agent pursuant to Section 16.5 hereof, the power
and authority vested in Agent includes, but is not limited to, the following:
16.6.1 Advice. To solicit the advice and assistance of each of the
Syndication Parties concerning the administration of the Loan and the exercise
by Agent of its various rights, remedies, powers, and discretions with respect
thereto.
16.6.2 Documents. To execute, seal, acknowledge, and deliver as Agent, all
such instruments as may be appropriate in connection with the administration of
the Loan and the exercise by Agent of its various rights with respect thereto.
16.6.3 Proceedings. To initiate, prosecute, defend, and to participate in,
actions and proceedings in its name as Agent for the ratable benefit of the
Syndication Parties.
16.6.4 Retain Professionals. To retain attorneys, accountants, and other
professionals to provide advice and professional services to Agent, with their
fees and expenses reimbursable to Agent by Syndication Parties pursuant to
Section 16.18 hereof.
50
<PAGE>
16.6.5 Incidental Powers. To exercise powers reasonably incident to Agent's
discharge of its duties enumerated in Section 16.7 hereof.
16.7 Duties of Agent. The duties of Agent hereunder shall consist of the
following:
16.7.1 Possession of Documents. To safekeep one original of each of the
Loan Documents other than the Notes (which will be in the possession of the
Syndication Party named as payee therein).
16.7.2 Distribute Payments. To receive and distribute to the Syndication
Parties payments made by Borrower pursuant to the Loan Documents.
16.7.3 Collections. Subject to the provisions of Section 16.9 hereof, to,
on behalf of and for the ratable benefit of all Syndication Parties, in
accordance with customary banking practices, exercise all rights, remedies,
powers, privileges, and discretion to which Agent is entitled to collect amounts
owing under the Loan and the Notes.
16.8 Agent's Resignation or Removal. Agent may resign at any time by giving
at least sixty (60) days' prior written notice of its intention to do so to each
of the Syndication Parties. After the receipt of such notice, the Syndication
Parties holding in the aggregate at least 66 2/3% of the Syndication Shares of
the Loan ("Majority Lenders") shall appoint a successor ("Successor Agent"). If
(a) no Successor Agent shall have been so appointed which is either (i) a
Syndication Party, or (ii) if not a Syndication Party, which is a Person
approved by Borrower, or (b) if such Successor Agent has not accepted such
appointment, in either case within forty-five (45) days after the retiring
Agent's giving of such notice of resignation, then the retiring Agent may
appoint a Successor Agent which shall be a bank or a trust company organized
under the laws of the United States of America or any state thereof and having a
combined capital, surplus and undivided profit of at least $250,000,000. Any
Agent may be removed upon the written demand of the Super Majority, which demand
shall also appoint a Successor Agent. Upon the appointment of a new Agent
hereunder, the term "Agent" shall for all purposes of this Term Credit Agreement
thereafter mean such successor. After any retiring Agent's resignation hereunder
as Agent, or the removal hereunder of any Agent, the provisions of this Term
Credit Agreement shall continue to inure to the benefit of such Agent as to any
actions taken or omitted to be taken by it while it was Agent under this Term
Credit Agreement.
16.9 Consent Required for Certain Actions. Except as provided in Section
15.4 hereof, Agent may not take any of the following actions (nor may the
Syndication Parties take the action described in Subsection 16.9.1(c)) with
respect to, or under, the Loan Documents without the prior written consent,
given after notification by Agent of its intention to take any such action (or
notification by such Syndication Parties as are proposing the action described
in Subsection 16.9.1(c) of their intention to do so), of Syndication Parties
holding in the aggregate, at the time of such notification:
51
<PAGE>
16.9.1 Unanimous. One hundred percent (100%) of the Syndication Shares
before:
(a) Agreeing to an increase in the Aggregate Commitment amount or an
extension of the Maturity Date;
(b) Agreeing to a reduction in the amount, or to a delay in the due
date, of any payment by Borrower of interest, principal, or fees; provided,
however, this restriction shall not apply to a delay in payment granted by
Agent in the ordinary course of administration of the Loan and the exercise
of reasonable judgment (so long as such payment delay does not exceed five
(5) days);
(c) Reducing the voting rights percentage set forth in this Subsection
16.9.1; or
(d) Releasing the lien on any of the Collateral except in connection
with the full payment of the Underlying Term Loan with respect to which
such Collateral relates.
16.9.2 Majority Lenders. A sufficient interest to constitute the Majority
Lenders before:
(a) Consenting to any action, amendment, or granting any waiver, not
covered in Subsection 16.9.1; or
(b) Agreeing to amend Article 16 of this Term Credit Agreement.
If no written consent or denial is received from a Syndication Party within five
(5) Business Days after written notice of any proposed action as described in
this Section is delivered to such Syndication Party by Agent, such Syndication
Party shall be conclusively deemed to have consented thereto for the purposes of
this Section.
16.10 Distribution of Principal and Interest. Agent will receive and accept
all payments (including prepayments) of principal and interest made by Borrower
on the Loan and the Notes and will hold all such payments in trust for the
benefit of all present and future Syndication Parties, and, if requested in
writing by the Majority Lenders, in an account segregated from Agent's other
funds and accounts ("Payment Account"). After the receipt by Agent of any
payment representing interest or principal on the Loan, Agent shall remit to
each Syndication Party an amount equal to such payment, multiplied by the
Syndication Party's Syndication Share ("Payment Distribution") no later than the
same Business Day as such payment is received by Agent if received no later than
11:00 a.m. Central Time or the next Business Day if received by Agent
thereafter. Any Syndication Party's rights to its Payment Distribution shall be
subject to the rights of any Contributing Syndication Parties to such amounts as
set forth in Section 16.4 hereof.
<PAGE>
16.11 Distribution of Certain Fees and Amounts. Agent shall (a) receive and
hold in trust for the benefit of all present and future Syndication Parties, in
the Payment Account and, if requested in writing by the Majority Lenders,
segregated from Agent's other funds and accounts and (b) shall remit to the
Syndication Parties, as indicated, the fees and other amounts described below:
16.11.1 Commitment Fee. The quarterly Commitment Fee paid by Borrower to
Agent in connection with the Loan shall be distributed to Syndication Parties in
accordance with their respective Syndication Shares no later than the same
Business Day that payment of such fee is received by Agent, if received no later
than 11:00 a.m. Central Time, or the next Business Day if received by Agent
thereafter.
16.11.2 Funding Losses. The amount of any Funding Losses paid by Borrower
to Agent in connection with a prepayment of any portion of a Fixed Loan shall be
distributed to the Syndication Parties in accordance with their respective
Syndication Shares no later than the same Business Day that payment of such
Funding Losses is received by Agent, if received no later than 11:00 Central
time, or the next Business Day if received by Agent thereafter.
16.12 Possession of Loan Documents. The Loan Documents (other than the
Notes) shall be held by Agent in its name, for the ratable benefit of itself and
the other Syndication Parties without preference or priority.
16.13 Collateral Application. The Syndication Parties shall have no
interest in any other loans made to Borrower by any other Syndication Party
other than the Loan, or in any property taken as security for any other loan or
loans made to Borrower by any other Syndication Party, or in any property now or
hereinafter in the possession or control of any other Syndication Party, which
may be or become security for the Loan solely by reason of the provisions of a
security instrument that would cause such security instrument and the property
covered thereby to secure generally all indebtedness owing to such other
Syndication Party. Notwithstanding the foregoing, to the extent such other
Syndication Party applies such funds or the proceeds of such property to
reduction of the Loan, such other Syndication Party shall share such funds or
proceeds with all Syndication Parties according to their respective Syndication
Shares. In the event that any Syndication Party shall obtain payment, whether
partial or full, from any source in respect of the Loan, including without
limitation payment by reason of the exercise of a right of offset, banker's
lien, general lien, or counterclaim, reducing such Syndication Party's
outstanding balance in the Loan to below its Syndication Share, such Syndication
Party will promptly make such adjustments (which may include payment in cash or
the purchase of further syndications or participations in the Loan) to the end
that such excess payment shall be shared with all other Syndication Parties in
accordance with their respective Syndication Shares.
16.14 Amounts Required to be Returned. If Agent makes any payment to a
Syndication Party in anticipation of the receipt of final funds from Borrower,
and such funds are not received from Borrower, or if excess funds are paid by
Agent to any
52
<PAGE>
Syndication Party as the result of a miscalculation by Agent, then Syndication
Party shall, on demand of Agent, forthwith return to Agent any such amounts,
plus interest thereon (from the day such amounts were transferred by Agent to
the Syndication Party to, but not including, the day such amounts are returned
by Syndication Party) at a rate per annum equal to the Federal Funds Rate in
effect on the date of such demand. If Agent is required at any time to return to
Borrower or a trustee, receiver, liquidator, custodian, or similar official any
portion of the payments made by Borrower to Agent, whether pursuant to any
bankruptcy or insolvency law or otherwise, then Syndication Party shall, on
demand of Agent, forthwith return to Agent any such payments transferred to
Syndication Party by Agent but without interest or penalty (unless Agent is
required to pay interest or penalty on such amounts to the person recovering
such payments).
16.15 Reports and Information to Syndication Parties. Agent shall use
reasonable efforts to provide to Syndication Parties, as soon as practicable
after actual knowledge thereof is acquired by an officer thereof primarily
responsible for Agent's duties as such with respect to the Loan or primarily
responsible for the credit relationship between Agent and Borrower: (a) notice
of the existence of any Event of Default or Potential Default under the Loan
Documents, and (b) any material factual information which has a material adverse
effect on the creditworthiness of Borrower and Borrower hereby authorizes such
disclosure by Agent to the Syndication Parties. Failure of Agent to provide the
information referred to in this Section shall not result in any liability upon,
or right to make a claim against, Agent except where a court of competent
jurisdiction renders a final non-appealable determination that such failure is a
result of the willful misconduct or gross negligence of Agent. Syndication
Parties acknowledge and agree that all information and reports received pursuant
to this Term Credit Agreement will be received in confidence in connection with
their Syndication Interest, and that such information and reports constitute
confidential information and shall not be disclosed to any third party, except
pursuant to appropriate legal or regulatory process, (or used by the Syndication
Party except in connection with the Loan and its Syndication Interest) without
the prior written consent of Agent or Borrower, as applicable.
16.16 Standard of Care. Agent shall not be liable to Syndication Parties
for any error in judgment or for any action taken or not taken by Agent or its
agents, except for its gross negligence or willful misconduct. Subject to the
preceding sentence, Agent will exercise the same care in administering the Loan
and the Loan Documents as it exercises for similar loans which it holds for its
own account and risk, and Agent shall not have any further responsibility to the
Syndication Parties. Without limiting the foregoing, Agent may rely on the
advice of counsel concerning legal matters and on any written document it
believes to be genuine and correct and to have been signed or sent by the proper
Person or Persons.
16.17 No Trust Relationship. Neither the execution of this Term Credit
Agreement, nor the sharing in the Loan, nor the holding of the Loan Documents in
its name by Agent, nor the management and administration of the Loan and Loan
53
<PAGE>
Documents by Agent (including the obligation to hold certain payments and
proceeds in the Payment Account in trust for the Syndication Parties), nor any
other right, duty or obligation of Agent under or pursuant to this Term Credit
Agreement is intended to be or create, and none of the foregoing shall be
construed to be or create, any express, implied or constructive trust
relationship between Agent and any Syndication Party. Each Syndication Party
hereby agrees and stipulates that Agent is not acting as trustee for such
Syndication Party with respect to the Loan, this Term Credit Agreement, or any
aspect of either, or in any other respect.
16.18 Sharing of Costs and Expenses. To the extent not paid by Borrower,
each Syndication Party will promptly upon demand reimburse Agent, ratably
according to their respective Syndication Shares, for all reasonable costs,
disbursements, and expenses incurred by Agent on or after the date of this Term
Credit Agreement for legal, accounting, consulting, and other services rendered
to Agent in its role as Agent in the administration of the Loan, interpreting
the Loan Documents, and protecting, enforcing, or otherwise exercising any
rights, both before and after default by Borrower under the Loan Documents, and
including, without limitation, all costs and expenses incurred in connection
with any bankruptcy proceedings; provided, however, that the costs and expenses
to be shared in accordance with this Section shall not include any costs or
expenses incurred by CoBank solely as a Syndication Party in connection with the
Loan, nor to Agent's internal costs and expenses.
16.19 Syndication Parties' Indemnification of Agent. Each of the
Syndication Parties agree to indemnify Agent, including any Successor Agent, and
its directors, officers, employees, agents, professional advisers and
representatives ("Indemnified Agency Parties"), (to the extent not reimbursed by
Borrower, and without in any way limiting the obligation of Borrower to do so),
ratably according to their respective Syndication Shares, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including, without limitation, at any time following the
payment of the Loan and/or the expiration or termination of the Syndication
Interests or this Term Credit Agreement) be imposed on, incurred by or asserted
against Agent (or any of the Indemnified Agency Parties while acting for Agent
or for any Successor Agent) in any way relating to or arising out of this Term
Credit Agreement or the Loan Documents, or the performance of the duties of
Agent hereunder or thereunder or any action taken or omitted while acting in the
capacity of Agent under or in connection with any of the foregoing; provided
that the Syndication Parties shall not be liable for the payment of any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of an Indemnified Agency
Party to the extent that any of the forgoing result from the gross negligence or
willful misconduct of that Indemnified Agency Party as determined by a court of
competent jurisdiction. The agreements and obligations in this Section shall
survive the payment of the Loan, the Syndication Interests, and the expiration
or termination of this Term Credit Agreement.
54
<PAGE>
16.20 Books and Records. Agent shall maintain such books of account and
records relating to the Loan as it maintains with respect to other loans of
similar type and amount, and which shall clearly and accurately reflect the
Syndication Interest of each Syndication Party. Syndication Parties, or their
agents, may inspect such books of account and records at all reasonable times
during Agent's regular business hours.
16.21 Administrative Agent Fee. CoBank shall not be entitled to any fee or
compensation other than the Administrative Agent Fee for acting as Agent
("Administrative Agent Fee"). In the event the Successor Agent is contractually
entitled to an additional fee, each Syndication Party will be responsible for
the amount thereof multiplied by their Syndication Share.
16.22 Representations and Warranties of All Parties. Agent and each
Syndication Party represents and warrants that (a) the making and performance of
this Term Credit Agreement is within its power and has been duly authorized by
all necessary corporate and other action by it, (b) this Term Credit Agreement
is in compliance with all applicable laws and regulations promulgated under such
laws and does not conflict with nor constitute a breach of its charter or
by-laws nor any agreements by which it is bound, and does not violate any
judgment, decree or governmental or administrative order, rule or regulation
applicable to it, (c) no approval, authorization or other action by, or
declaration to or filing with, any governmental or administrative authority or
any other Person is required to be obtained or made by it in connection with the
execution, delivery and performance of its duties under this Term Credit
Agreement, and (d) this Term Credit Agreement has been duly executed by it, and
constitutes the legal, valid, and binding obligation of such Person, enforceable
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the rights of creditors generally and general equitable
principles (regardless of whether such enforceability is considered in a
proceeding at law or in equity). Each Syndication Party that is a state or
national bank represents and warrants that the act of entering into and
performing its obligations under this Term Credit Agreement has been approved by
its board of directors or its loan committee and such action was duly noted in
the written minutes of the meeting of such board or committee, and that it will
furnish Agent with a certified copy of such minutes or an excerpt therefrom
reflecting such approval.
16.23 Representations and Warranties of CoBank. CoBank, in its role as
Syndication Party and as Agent, makes no express or implied representation or
warranty and assumes no responsibilities with respect to the due authorization,
execution, or delivery of the Loan Documents; the accuracy of any information,
statements, or certificates provided by Borrower, the legality, validity, or
enforceability of the Loan Documents; the filing or recording of any document;
the collectibility of the Loan; the performance by any Borrower of any of its
obligations under the Loan Documents; or the financial condition or solvency of
any Borrower or any other party obligated with respect to the Loan.
55
<PAGE>
16.24 Syndication Parties' Independent Credit Analysis. Each Syndication
Party acknowledges receipt of true and correct copies of all Loan Documents
(other than any Note payable to another Syndication Party) from Agent. Each
Syndication Party agrees and represents that it has relied upon its independent
review (a) of the Loan Documents, and (b) any information independently acquired
by such Syndication Party from Borrower or otherwise in making its decision to
acquire an interest in the Loan independently and without reliance on CoBank or
Agent. Each Syndication Party represents and warrants that it has obtained such
information as it deems necessary (including any information such Syndication
Party independently obtained from Borrower or others) prior to making its
decision to acquire an interest in the Loan. Each Syndication Party further
agrees and represents that it has made its own independent analysis and
appraisal of and investigation into each Borrower's authority, business,
operations, financial and other condition, creditworthiness, and ability to
perform its obligations under the Loan Documents and has relied on such review
in making its decision to acquire an interest in the Loan. Each Syndication
Party agrees that it will continue to rely solely upon its independent review of
the facts and circumstances related to Borrower, and without reliance upon
CoBank or Agent, in making future decisions with respect to all matters under or
in connection with the Loan Documents and its participation in the Loan. CoBank
and Agent assume no responsibility for the financial condition of Borrower or
any Underlying Term Loan Borrower or for the performance of Borrower's
obligations under the Loan Documents nor for the performance of any Underlying
Term Borrower of its obligations under the Underlying Term Loan Documents.
Except as otherwise expressly provided herein, neither CoBank nor any other
Syndication Party shall have any duty or responsibility to furnish to any other
Syndication Parties any credit or other information concerning Borrower which
may come into its possession.
16.25 No Joint Venture or Partnership. Neither the execution of this Term
Credit Agreement, the sharing in the Loan, nor any agreement to share in
payments or losses arising as a result of this transaction is intended to be or
to create, and the foregoing shall not be construed to be, any partnership,
joint venture or other joint enterprise between Agent and any Syndication Party,
nor between any of the Syndication Parties.
16.26 Purchase for Own Account/Restrictions on Transfer. Each Syndication
Party represents that it has acquired and is retaining its Syndication Interest
in the Loan for its own account in the ordinary course of its banking or
financing business and not with a view toward the sale, distribution, further
participation, or transfer thereof. Each Syndication Party other than CoBank
agrees that it will not sell, assign, convey or otherwise dispose of
("Transfer"), or create or permit to exist any lien or security interest on all
or any part of its Syndication Interest in the Loan, without the prior written
consent of Agent and Borrower (which consent will not be unreasonably withheld);
provided that (a) any such Transfer (except a Transfer to another Syndication
Party or a Transfer by CoBank) must be in a minimum amount of the lesser of (i)
$5,000,000.00 or (ii) the full amount of the Syndication Interest, (b) the
56
<PAGE>
transferee must execute an agreement substantially in the form of Exhibit 16.26
hereto ("Syndication Acquisition Agreement") and assume all of the transferor's
obligations hereunder and execute such documents as Agent may reasonably
require, and (c) the Syndication Party making such Transfer must pay Agent an
assignment fee of $2,500.00. Any Syndication Party may participate any part of
its Syndication Interest in the Loan to any Person with the prior written
consent of Agent and Borrower (which consent will not be unreasonably withheld),
and each Syndication Party understands and agrees that in the event of any such
participation, (x) its Syndication Share and Maximum Syndication Amount will not
change on account of such participation, (y) except as provided in Section 16.27
hereof, the participant will have no rights under this Term Credit Agreement,
including, without limitation, voting rights or the right to receive payments or
distributions, and (z) Agent shall continue to deal directly with the
Syndication Party with respect to the Loan and the Syndication Party's
Syndication Interest as though no participation had been granted and will not be
obligated to deal directly with any participant. Notwithstanding any provision
contained herein to the contrary, any Syndication Party may at any time pledge
or assign all or any portion of its Syndication Interest to any Federal Reserve
Bank in accordance with applicable law.
16.27 Certain Participants' Voting Rights. All Persons which purchase a
participation interest in CoBank's interest as a Syndication Party hereunder
may, in CoBank's sole discretion (or as required in any agreement under which
such purchase is made and governed), be allowed by CoBank to vote, on a dollar
basis, on any matter requiring or allowing CoBank, in its capacity as a
Syndication Party, to provide or withhold its consent, or to otherwise vote on
any proposed action.
16.28 Method of Making Payments. Payment and transfer of all amounts owing
or to be paid or remitted hereunder, including, without limitation, payment of
the Initial Payment and each Advance Payment by Syndication Parties, and
distribution of principal or interest payments or fees or other amounts by
Agent, shall be by wire transfer in accordance with the instructions contained
on Exhibit 16.28 hereto ("Wire Instructions").
16.29 Events of Syndication Default/Remedies.
16.29.1 Syndication Party Default. Any of the following occurrences,
failures or acts, with respect to any of the Syndication Parties shall
constitute an Event of Syndication Default hereunder by such party: (a) if any
representation or warranty made by such party in this Term Credit Agreement
shall be found to have been untrue in any material respect, (b) if such party
fails to make any distributions or payments required under this Term Credit
Agreement within five (5) days of the date required, (c) if such party breaches
any other covenant, agreement, or provision of this Term Credit Agreement which
breach shall have continued uncured for a period of thirty (30) consecutive days
after such breach first occurs, unless a shorter period is required to avoid
prejudicing the rights and position of the other Syndication Parties, (d) if any
agency having supervisory authority over such party, or any creditors thereof,
shall file a petition to reorganize or liquidate such party pursuant to any
applicable federal or
57
<PAGE>
state law or regulation and such petition shall not be discharged or denied
within fifteen (15) days after the date on which it is filed, (e) if by the
order of a court of competent jurisdiction or by any appropriate supervisory
agency, a receiver, trustee or liquidator shall be appointed for such party or
for all or any material part of its property or if such party shall be declared
insolvent, or (f) if such party shall be dissolved, or shall make an assignment
for the benefit of its creditors, or shall file a petition seeking to take
advantage of any debtors' act, including the bankruptcy act, or shall admit in
writing its inability to pay its debts generally as they become due, or shall
consent to the appointment of a receiver or liquidator of all or any material
part of its property.
16.29.2 Remedies. Upon the occurrence of an Event of Syndication Default,
the non-defaulting parties, acting by, or through the direction of, a simple
majority (determined on the basis of Syndication Share) of the non-defaulting
parties, may, in addition to any other remedy specifically set forth in this
Term Credit Agreement, have and exercise any and all remedies available
generally at law or equity, including the right to damages and to specific
performance.
16.30 Withholding Taxes. Each Syndication Party represents that it is
entitled to receive any payments to be made to it hereunder without the
withholding of any tax and will furnish to Agent and to Borrower such forms,
certifications, statements and other documents as Agent or Borrower may request
from time to time to evidence such Syndication Party's exemption from the
withholding of any tax imposed by any jurisdiction or to enable Agent or
Borrower, as the case may be, to comply with any applicable laws or regulations
relating thereto. Without limiting the effect of the foregoing, if any
Syndication Party is not created or organized under the laws of the United
States of America or any state thereof, such Syndication Party will furnish to
Agent and Borrower IRS Form 4224 or Form 1001, or such other forms,
certifications, statements or documents, duly executed and completed by such
Syndication Party, as evidence of such Syndication Party's exemption from the
withholding of United States tax with respect thereto. Notwithstanding anything
herein to the contrary, Borrower shall not be obligated to make any payments
hereunder to such Syndication Party until such Syndication Party shall have
furnished to Agent and Borrower the requested form, certification, statement or
document.
16.31 Further Assurances. Agent and each Syndication Party agree to take
whatever steps and execute such documents may be reasonable and necessary to
implement this Article 16 and to carry out fully the intent thereof.
ARTICLE 17. MISCELLANEOUS
17.1 Costs and Expenses. To the extent permitted by law, Borrower agrees to
pay to Agent and the Syndication Parties, on demand, all out-of-pocket costs and
expenses (a) incurred by Agent (including, without limitation, the reasonable
fees and expenses of counsel retained by Agent, and including fees and expenses
incurred for consulting, appraisal, engineering, inspection, and environmental
assessment services) in connection with the preparation, negotiation, and
execution of the Loan Documents
58
<PAGE>
and the transactions contemplated thereby, and processing Commitment Requests,
Activation Requests, and Advance Requests; and (b) incurred by Agent or any
Syndication Party (including, without limitation, the reasonable fees and
expenses of counsel retained by Agent and the Syndication Parties) in connection
with the enforcement or protection of the Syndication Parties' rights under the
Loan Documents upon the occurrence of an Event of Default or upon the
commencement of an action by Borrower against Agent or any Syndication Party
(except that if the court makes a specific finding that Borrower has prevailed
on all or substantially all of its claims in such action brought by Borrower,
Borrower shall not be obligated to pay the out-of-pocket costs and expenses of
Agent and the Syndication Parties in connection with such action), including
without limitation collection of the Loan (regardless of whether such
enforcement or collection is by court action or otherwise). Borrower shall not
be obligated to pay the costs or expenses of any Person whose only interest in
the Loan is as a holder of a participation interest.
17.2 Service of Process and Consent to Jurisdiction. Borrower hereby agrees
that any litigation with respect to this Term Credit Agreement or to enforce any
judgment obtained against Borrower for breach of this Term Credit Agreement or
under the Notes or other Loan Documents may be brought in the courts of the
State of Colorado and in the United States District Court for the District of
Colorado (if applicable subject matter jurisdictional requirements are present),
as Agent may elect; and, by execution and delivery of this Term Credit
Agreement, Borrower irrevocably submits to such jurisdiction. With respect to
litigation concerning this Term Credit Agreement or under the Notes or other
Loan Documents within the jurisdiction of the courts of the State of Colorado or
the United States District Court for the District of Colorado, Borrower hereby
irrevocably appoints, until January 15, 2011, The Corporation Company, 1675
Broadway, Denver, Colorado 80202, as the agent of Borrower to receive for and on
behalf of Borrower, service of process, which service may be made by mailing a
copy of any summons or other legal process to Borrower in care of such agent.
Borrower agrees that Borrower shall maintain a duly appointed agent for service
of summons and other legal process as long as Borrower remains obligated under
this Term Credit Agreement and shall keep Agent advised in writing of the
identity and location of such agent. The receipt by such agent and/or by
Borrower of such summons or other legal process in any such litigation shall be
deemed personal service and acceptance by Borrower for all purposes of such
litigation.
17.3 Jury Waiver. IT IS MUTUALLY AGREED BY AND BETWEEN AGENT, EACH
SYNDICATION PARTY, AND BORROWER THAT THEY EACH WAIVE TRIAL BY JURY IN ANY
ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER OF THEM AGAINST THE OTHER
PARTY ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS
TERM CREDIT AGREEMENT, THE NOTES, OR THE OTHER LOAN DOCUMENTS.
17.4 Notices. All notices, requests and demands required or permitted under
the terms of this Term Credit Agreement shall be in writing and (a) shall be
addressed as
59
<PAGE>
set forth below or at such other address as either party shall designate in
writing, (b) shall be deemed to have been given or made: (i) if delivered
personally, immediately upon delivery, (ii) if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt, (iii)
if by nationally recognized overnight courier service with instructions to
deliver the next Business Day, one (1) Business Day after sending, and (iv) if
by United States Mail, certified mail, return receipt requested, five (5) days
after mailing.
17.4.1 Borrower:
Village Farms International Finance Association
1811 Sardis Road North, Suite 207
Charlotte, NC 28270
FAX: (704) 849-7662
Attention: Chief Financial Officer
With a copy to:
Agro Power Development, Inc.
10 Alvin Court
New Brunswick, NJ 08816
FAX: (908) 254-1710
17.4.2 CoBank:
245 North Waco Street
Wichita, Kansas 67202
FAX: (316) 290-2006
Attention: Greg E. Somerhalder
with a copy to:
FARM CREDIT BANK OF TEXAS
6210 Highway 290 East
Austin, Texas 78723
P.O. Box 15919
Austin, Texas 78761
FAX: (512) 465-0675
Attention: _________________
17.5 Notice to Syndication Parties and Agent. No action shall be commenced
by Borrower for any claim against Agent or any Syndication Party on account of
any act or failure to act by such Person unless a notice specifically setting
forth the claim of Borrower shall have been given to such Person within sixty
(60) calendar days after Borrower has knowledge or should reasonably have
acquired knowledge of the act or
60
<PAGE>
omission which Borrower alleges gave rise to such claim, and failure to give
such notice shall constitute a waiver of any such claim.
17.6 Successors and Assigns. This Term Credit Agreement shall be binding
upon and inure to the benefit of Borrower, Agent, and Syndication Parties, and
their respective successors and assigns, except that Borrower may not assign or
transfer its rights or obligations hereunder without the prior written consent
of the Syndication Parties.
17.7 Severability. The invalidity or unenforceability of any provision of
this Term Credit Agreement or the other Loan Documents shall not affect the
remaining portions of such documents or instruments; in case of such invalidity
or unenforceability, such documents or instruments shall be construed as if such
invalid or unenforceable provisions had not been included therein.
17.8 Entire Agreement. This Term Credit Agreement (together with all
exhibits hereto, which are incorporated herein by this reference) and the other
Loan Documents represent the entire understanding of Agent, each Syndication
Party, and Borrower with respect to the subject matter hereof and shall replace
and supersede any previous agreements of the parties with respect to the subject
matter hereof.
17.9 Applicable Law. To the extent not governed by federal law, this Term
Credit Agreement and the other Loan Documents, and the rights and obligations of
the parties hereto and thereto shall be governed by and interpreted in
accordance with the internal laws of the State of Colorado, without giving
effect to any otherwise applicable rules concerning conflicts of law.
17.10 Captions. The captions or headings in this Term Credit Agreement and
any table of contents hereof are for convenience only and in no way define,
limit or describe the scope or intent of any provision of this Term Credit
Agreement.
17.11 Amendments. This Term Credit Agreement may not be modified or amended
unless such modification or amendment is in writing and is signed by Borrower,
Agent, and all Syndication Parties (and each Syndication Party hereby agrees to
execute any such amendment approved pursuant to Section 16.9 hereof). Borrower
agrees that it shall reimburse Agent for all fees and expenses incurred by Agent
in retaining outside legal counsel in connection with any amendment or
modification to this Term Credit Agreement requested by Borrower.
17.12 Additional Costs of Maintaining Loan. Borrower shall pay to Agent
from time to time such amounts as Agent may determine to be necessary to
compensate any Syndication Party for any costs incurred by it which Agent
determines, based on information presented to it by such Syndication Party, are
attributable to such Syndication Party's making or maintaining any Advances
hereunder or its obligation to make any such Advances, or any reduction in any
amount receivable by such Syndication Party under this Term Credit Agreement or
the Note payable to it in respect
61
<PAGE>
to any such Advances or such obligation (such increases in costs and reductions
in amounts receivable being herein called "Additional Costs"), resulting from
any change after the date of this Term Credit Agreement in United States
federal, state, municipal, or foreign laws or regulations (including Regulation
D), or the adoption or making after such date of any interpretations,
directives, or requirements applying to a class of banks including such
Syndication Party of or under any United States federal, state, municipal, or
foreign laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof ("Regulatory Change"), which: (a) changes the basis of
taxation of any amounts payable to such Syndication Party under this Term Credit
Agreement or the Note payable to such Syndication Party in respect of any of
such Advances (other than taxes imposed on the overall net income of such
Syndication Party); or (b) imposes or modifies any reserve, special deposit, or
similar requirements relating to any extensions of credit or other assets of, or
any deposits with or other liabilities of, such Syndication Party; or (c)
imposes any other condition affecting this Term Credit Agreement or the Note
payable to such Syndication Party (or any of such extensions of credit or
liabilities). Agent will notify Borrower of any event occurring after the date
of this Term Credit Agreement which will entitle such Syndication Party to
compensation pursuant to this Section as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation. Agent
shall include with such notice, a certificate from such Syndication Party
setting forth in reasonable detail the calculation of the amount of such
compensation. Determinations by Agent for purposes of this Section of the effect
of any Regulatory Change on the costs of such Syndication Party of making or
maintaining Advances or on amounts receivable by such Syndication Party in
respect of Advances, and of the additional amounts required to compensate such
Syndication Party in respect of any Additional Costs, shall be conclusive absent
manifest error, provided that such determinations are made on a reasonable
basis.
17.13 Capital Requirements. In the event that the introduction of or any
change in (a) any law or regulation, or (b) the judicial, administrative, or
other governmental interpretation of any law or regulation, or (c) compliance by
any Syndication Party or any corporation controlling any such Syndication Party
with any guideline or request from any governmental authority (whether or not
having the force of law) has the effect of requiring an increase in the amount
of capital required or expected to be maintained by such Syndication Party or
any corporation controlling such Syndication Party, and such Syndication Party
certifies that such increase is based in any part upon such Syndication Party's
obligations hereunder, and other similar obligations, Borrower shall pay to such
Syndication Party such additional amount as shall be certified by such
Syndication Party to Agent and to Borrower to be the net present value
(discounted at the Variable Rate) of (a) the amount by which such increase in
capital reduces the rate of return on capital which such Syndication Party could
have achieved over the period remaining until the Maturity Date but for such
introduction or change, (b) multiplied by such Syndication Party's Syndication
Share of the Aggregate Commitment. Agent will notify Borrower of any event
occurring after the date of this Term Credit Agreement that will entitle any
such Syndication Party to compensation
62
<PAGE>
pursuant to this Section as promptly as practicable after it obtains knowledge
thereof and of such Syndication Party's determination to request such
compensation. Agent shall include with such notice, a certificate from such
Syndication Party setting forth in reasonable detail the calculation of the
amount of such compensation. Determinations by any Syndication Party for
purposes of this Section of the effect of any increase in the amount of capital
required to be maintained by any such Syndication Party and of the amount of
compensation owed to any such Syndication Party under this Section shall be
conclusive absent manifest error, provided that such determinations are made on
a reasonable basis.
17.14 Replacement Notes. Upon receipt by Borrower of evidence satisfactory
to it of: (a) the loss, theft, destruction or mutilation of any Note, and (in
case of loss, theft or destruction) of the agreement of the Syndication Party to
which the Note was payable to indemnify Borrower, and upon surrender and
cancellation of such Note, if mutilated; or (b) the assignment of any
Syndication Interest and Note relating thereto, or any portion thereof, pursuant
to this Term Credit Agreement, then Borrower will pay any unpaid principal and
interest (and Funding Losses, if applicable) then or previously due and payable
on such Note and will deliver in lieu of such Note a new Note or, in the case of
an assignment of a portion of a Syndication Interest new Notes, for any
remaining balance.
1715 Patronage Payments. Borrower acknowledges and agrees that any
patronage, or similar, payments to which Borrower is entitled on account its
ownership of CoBank Equity Interests will not be based on any portion of its
Syndication Share in which CoBank has at any time granted a participation
interest.
17.16 Mutual Release. Upon full indefeasible payment and satisfaction of
the Bank Debt and Notes and the other obligations contained in this Term Credit
Agreement, the parties, including Borrower, Agent, and each Syndication Party
shall, except as provided in Article 14 hereof, thereupon automatically each be
fully, finally, and forever released and discharged from any further claim,
liability, or obligation in connection with the Bank Debt.
17.17 Liberal Construction. This Term Credit Agreement constitutes a fully
negotiated agreement between commercially sophisticated parties, each assisted
by legal counsel, and shall not be construed and interpreted for or against any
party hereto.
63
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Term Credit Agreement as
of the date first above written.
BORROWER:
VILLAGE FARMS INTERNATIONAL
FINANCE ASSOCIATION, a
cooperative corporation
formed under the laws of
the State of Delaware
By:_____________________________________
Name: J. Kevin Cobb
Its: Vice President
COBANK:
COBANK, ACB
By:_____________________________________
Name: Greg E. Somerhalder
Title: Vice President
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. DEFINED TERMS......................................................1
1.1 Activation ...........................................................1
1.2 Activation Commitment ................................................1
1.3 Activation Request ...................................................1
1.4 Additional Costs .....................................................1
1.5 Administrative Agent Fee .............................................1
1.6 Advance ..............................................................1
1.7 Advance Date .........................................................1
1.8 Advance Payment ......................................................1
1.9 Advance Request ......................................................1
1.10 Aggregate Commitment ................................................1
1.11 APD .................................................................1
1.12 Authorized Officer ..................................................2
1.13 Availability Period .................................................2
1.14 Bank Debt ...........................................................2
1.15 Base Rate ...........................................................2
1.16 Base Rate Factor ....................................................2
1.17 Base Rate Loans .....................................................2
1.18 Base Rate Margin ....................................................2
1.19 Base Rate Numerator .................................................2
1.20 BDGCFR ..............................................................2
1.21 Borrower Benefit Plan ...............................................2
1.22 Borrower Debt .......................................................2
i
<PAGE>
1.23 Borrower Pension Plan ...............................................2
1.24 Business Day ........................................................2
1.25 Calculation Date ....................................................3
1.26 Cash Flow ...........................................................3
1.27 Change in Law .......................................................3
1.28 Closing Date ........................................................3
1.29 CoBank Equity Interests .............................................3
1.30 Code ................................................................3
1.31 Collateral ..........................................................3
1.32 Commitment Request ..................................................3
1.33 Compliance Certificate ..............................................3
1.34 Construction Facility ...............................................3
1.35 Construction Lenders ................................................3
1.36 Construction Loan Payout ............................................3
1.37 Construction Loan Purchase ..........................................3
1.38 Contributing Syndication Parties ....................................4
1.39 Credit Agreement (Construction Loan Funding) ........................4
1.40 Credit Agreement (Line of Credit Facility) ..........................4
1.41 Default Interest Rate ...............................................4
1.42 Delinquency Interest ................................................4
1.43 Delinquent Amount ...................................................4
1.44 Delinquent Syndication Party ........................................4
1.45 DSCR ................................................................4
1.46 DSCR Report .........................................................4
ii
<PAGE>
1.47 DSCR Report Deadline ................................................4
1.48 Environmental Laws ..................................................4
1.49 Environmental Regulations ...........................................4
1.50 Equity ..............................................................5
1.51 Equity Margin .......................................................5
1.52 Equity Margin Report ................................................5
1.53 Equity Margin Report Deadline .......................................5
1.54 Equity to NFI .......................................................5
1.55 ERISA ...............................................................5
1.56 Event of Default ....................................................5
1.57 Fair Market Value ...................................................5
1.58 Fixed Rate Loan .....................................................5
1.59 Fixed Rate Period ...................................................5
1.60 Fixed Rate Request ..................................................5
1.61 Funding Losses ......................................................5
1.62 GAAP ................................................................5
1.63 Greenhouse Facility .................................................5
1.64 Guarantor ...........................................................6
1.65 Guarantor Cash Flow .................................................6
1.66 Guarantor Collateral ................................................6
1.67 Guarantor Security Documents ........................................6
1.68 Guaranty ............................................................6
1.69 Hazardous Substances ................................................6
1.70 Indemnified Agency Parties ..........................................6
iii
<PAGE>
1.71 Indemnified Parties .................................................6
1.72 Intercreditor Agreement .............................................6
1.73 Leasehold Assignment & Consent ......................................6
1.74 LIBO Rate ...........................................................6
1.75 LIBO/Quoted Rate Factor .............................................7
1.76 LIBO/Quoted Rate Margin .............................................7
1.77 LIBO Rate Numerator .................................................7
1.78 Licensing Laws ......................................................7
1.79 Line of Credit Facility .............................................7
1.80 Loan ................................................................7
1.81 Loan Advance Amount .................................................7
1.82 Loan Documents ......................................................7
1.83 Loan Proceeds .......................................................7
1.84 Majority Lenders ....................................................7
1.85 Material Adverse Effect .............................................7
1.86 Material Agreements .................................................7
1.87 Maturity Date .......................................................7
1.88 Maximum Syndication Amount ..........................................7
1.89 Net Fixed Investments ...............................................8
1.90 Note or Notes .......................................................8
1.91 Notice of Loan Advance ..............................................8
1.92 Organization Documents ..............................................8
1.93 Payment Account .....................................................8
1.94 Payment Distribution ................................................8
iv
<PAGE>
1.95 Permitted Encumbrance ...............................................8
1.96 Person ..............................................................8
1.97 Potential Default ...................................................8
1.98 Preliminary Commitment ..............................................8
1.99 Quarter .............................................................8
1.100 Quoted Rate ........................................................8
1.101 Quoted Rate Index ..................................................8
1.102 Quoted Rate Loan ...................................................8
1.103 Quoted Rate Period .................................................9
1.104 Quoted Rate Request ................................................9
1.105 Request for Preliminary Term Loan Commitment .......................9
1.106 Request for Term Loan Activation ...................................9
1.107 Request for Underlying Term Loan Activation ........................9
1.108 Required License ...................................................9
1.109 Regular Payments ...................................................9
1.110 Regulatory Change ..................................................9
1.111 Security Documents .................................................9
1.112 Successor Agent ....................................................9
1.113 Super Majority .....................................................9
1.114 Syndication Interest ...............................................9
1.115 Syndication Parties ................................................9
1.116 Syndication Party Advance Date ....................................10
1.117 Syndication Share .................................................10
1.118 Title Commitments .................................................10
v
<PAGE>
1.119 Title Insurers ....................................................10
1.120 Title Policies ....................................................10
1.121 Transfer ..........................................................10
1.122 12-Month DSCR .....................................................10
1.123 Underlying Borrowers ..............................................10
1.124 Underlying Construction Lenders ...................................10
1.125 Underlying Construction Loan ......................................10
1.126 Underlying Construction Loan Borrowers ............................10
1.127 Underlying Construction Loan Documents ............................10
1.128 Underlying Construction Note ......................................11
1.129 Underlying Liens ..................................................11
1.130 Underlying Term Loan ..............................................11
1.131 Underlying Term Loan Borrowers ....................................11
1.132 Underlying Term Loan Documents ....................................11
1.133 Village Farms .....................................................11
1.134 Village Farms Advance Request .....................................11
1.135 Village Farms Lenders .............................................11
1.136 Village Farms Term Loan ...........................................11
1.137 Village Farms Term Loan Documents .................................11
1.138 Wire Instructions .................................................11
ARTICLE 2. LOAN AMOUNT.......................................................11
2.1 Loan ................................................................11
ARTICLE 3. PURPOSES..........................................................12
3.1 Purpose .............................................................12
vi
<PAGE>
ARTICLE 4. AVAILABILITY......................................................12
4.1 Availability ........................................................12
ARTICLE 5. INTEREST AND FEES.................................................12
5.1 Interest Calculation ................................................12
5.1.1 Base Rate Option ..............................................12
5.1.2 Fixed Rate Option .............................................12
5.1.3 Quoted Rate Option ............................................13
5.1.4 Equity Margin .................................................13
5.1.5 LIBO/Quoted Rate Margin .......................................14
5.1.6 Base Rate Margin ..............................................14
5.1.7 LIBO/Quoted Rate Factor; Base Rate Factor .....................14
5.1.8 Default Interest Rate .........................................15
5.2 Additional Provisions for Fixed Rate Loans ..........................15
5.2.1 Inapplicability or Unavailability of LIBO Rate ................15
5.2.2 Change in Law; Fixed Rate Loan Unlawful .......................16
5.2.3 Increased Costs ...............................................16
5.3 Fees ................................................................17
5.3.1 Facility Fee ..................................................17
5.3.2 Administrative Agent Fee ......................................17
5.4 Interest Rate Protection ............................................17
ARTICLE 6. NOTES; PAYMENTS...................................................18
6.1 Promissory Notes ....................................................18
6.2 Principal Payments ..................................................18
6.3 Interest Payments ...................................................18
vii
<PAGE>
6.4 Application of Regular Payments .....................................18
6.5 Manner of Payment ...................................................19
ARTICLE 7. PREPAYMENTS.......................................................19
7.1 Voluntary Prepayments ...............................................19
7.1.1 Voluntary Prepayment of Base Rate Loan ........................19
7.1.2 Voluntary Prepayment of Fixed Rate Loans and Quoted Rate Loans 19
7.1.3 Funding Losses ................................................19
7.2 Minimum Prepayment Amount ...........................................20
7.3 Application of Prepayments ..........................................20
ARTICLE 8. COBANK EQUITY.....................................................20
ARTICLE 9. SECURITY..........................................................21
9.1 Borrower's Assets ...................................................21
9.2 Guaranty ............................................................21
ARTICLE 10. REPRESENTATIONS AND WARRANTIES...................................21
10.1 Organization, Good Standing, Etc ...................................21
10.2 Corporate Authority, Due Authorization; Consents ...................22
10.3 Title to Property ..................................................22
10.4 Litigation .........................................................22
10.5 No Violations ......................................................22
10.6 Binding Agreement ..................................................22
10.7 Compliance with Laws ...............................................23
10.8 Principal Place of Business ........................................23
10.9 Underlying Term Loans; Underlying Term Loan Documents ..............23
viii
<PAGE>
10.10 Payment of Taxes ..................................................23
10.11 Licenses and Approvals ............................................23
10.12 Employee Benefit Plans ............................................24
10.13 Equity Investments ................................................24
10.14 Real Property .....................................................24
10.15 Personal Property .................................................24
10.16 Borrower Membership ...............................................24
10.17 Environmental Compliance ..........................................25
10.18 Fiscal Year .......................................................25
10.19 Material Agreements ...............................................25
10.20 Regulations G, U and X ............................................25
10.22 Disclosure ........................................................25
ARTICLE 11. CONDITIONS TO ADVANCES...........................................25
11.1 Conditions to Closing ..............................................25
11.1.1 Loan Documents ..............................................25
11.1.2 Searches; UCC Filings; Recordings; Title Insurance ..........25
11.1.3 Approvals ...................................................26
11.1.4 Organizational Documents ....................................26
11.1.5 Evidence of Corporate Action ................................26
11.1.6 Legal Opinion for Borrower and Guarantor ....................26
11.1.7 Evidence of Insurance .......................................27
11.1.8 Phase I Environmental Studies ...............................27
11.1.9 Survey ......................................................27
11.1.10 Material Agreements ........................................27
ix
<PAGE>
11.1.11 Appointment of The Corporation Company .....................27
11.1.12 No Material Change .........................................27
11.1.13 Fees and Expenses ..........................................27
11.1.14 Application; CoBank Equity Interest Purchase Obligation ....27
11.1.15 Further Assurances .........................................28
11.2 Conditions to Issuance of Preliminary Commitment ...................28
11.2.1 Preliminary Commitment Request ..............................28
11.2.2 No Material Change ..........................................28
11.2.3 Default .....................................................28
11.2.4 Representations and Warranties ..............................28
11.2.5 Fees and Expenses ...........................................29
11.2 Conditions to Issuance of Activation Commitment ....................29
11.3.1 Activation Request ..........................................29
11.6.2 Approval by Super Majority ..................................29
11.3.2 No Material Change ..........................................30
11.3.4 Default .....................................................30
11.3.5 Representations and Warranties ..............................30
11.3.6 Fees and Expenses ...........................................30
11.4 Conditions to Advance ..............................................30
11.4.1 Advance Request .............................................30
11.4.2 Underlying Term Loan Documents; Possession of Documents .....30
11.4.3 Default .....................................................33
11.4.4 Representations and Warranties ..............................33
x
<PAGE>
11.5 Conditions to Funding Purchase of Village Farms Term Loan ..........33
11.5.1 Advance Request .............................................33
11.5.2 Village Farms Term Loan Documents; Possession of Documents ..33
11.5.3 Default .....................................................34
11.5.4 Representations and Warranties ..............................34
11.6 Additional Disbursement Conditions .................................34
11.6.1 Aggregate Commitment Amount .................................34
11.6.3 Disbursement Period .........................................34
11.6.4 Illegality of Loan ..........................................34
ARTICLE 12. AFFIRMATIVE COVENANTS............................................34
12.1 Books and Records ..................................................35
12.2 Reports and Notices ................................................35
12.2.1 Annual Financial Statements .................................35
12.2.2 Quarterly Financial Statements ..............................35
12.2.3 Notice of Default ...........................................35
12.2.4 Notice of Certain Changes ...................................35
12.2.5 Notice of Litigation ........................................35
12.2.6 Notice of Material Adverse Effect ...........................36
12.2.7 Notice of Environmental Litigation ..........................36
12.2.8 Regulatory and Other Notices ................................36
12.2.9 Adverse Action Regarding Required Licenses ..................36
12.2.10 Default of Underlying Term Loan ............................36
12.2.11 Annual Attorney's Opinion Regarding Collateral .............36
xi
<PAGE>
12.2.12 Additional Information .....................................37
12.3 Eligibility Certificate ............................................37
12.4 Maintenance of Existence and Qualification .........................37
12.5 Compliance with Legal Requirements and Agreements ..................37
12.6 Compliance with Environmental Laws .................................37
12.7 Taxes ..............................................................37
12.8 Insurance ..........................................................37
12.9 Title to Assets and Maintenance ....................................38
12.10 Payment of Liabilities ............................................39
12.11 Further Assurances; Real Property Security Interests ..............39
12.12 Inspection ........................................................39
12.13 Required Licenses; Permits; Etc ...................................39
12.14 ERISA .............................................................40
12.15 Operations and Members ............................................40
ARTICLE 13. NEGATIVE COVENANTS...............................................40
13.1 Borrowing ..........................................................40
13.2 No Other Businesses ................................................41
13.3 Liens ..............................................................41
13.4 Sale of Assets .....................................................42
13.5 Liabilities of Others ..............................................42
13.6 Payments on Indebtedness ...........................................42
13.7 Merger; Acquisitions; Etc ..........................................42
13.8 Loans, Advances and Investments ....................................42
13.9 Transactions With Related Parties ..................................43
xii
<PAGE>
13.10 ERISA .............................................................43
13.11 Payment of Dividends ..............................................43
13.12 Change in Fiscal Year .............................................44
13.13 Extensions of Credit ..............................................44
13.14 Amendment/Waiver of Provisions of Underlying Term Loan Documents ..44
ARTICLE 14. INDEMNIFICATION..................................................44
14.1 General; Stamp Taxes; Intangibles Tax ..............................44
14.2 Indemnification Relating to Hazardous Substances ...................45
ARTICLE 15. EVENTS OF DEFAULT; RIGHTS AND REMEDIES...........................46
15.1 Events of Default ..................................................46
15.2 No Advances ........................................................48
15.3 Rights and Remedies ................................................48
15.4 Limitation on Rights and Remedies ..................................48
ARTICLE 16. AGENCY AGREEMENT.................................................48
16.1 Funding of Syndication Interest ....................................48
16.2 Syndication Parties' Obligations to Remit Funds ....................49
16.3 Notice and Timing of Each Advance Payment ..........................49
16.4 Syndication Party's Failure to Remit Funds .........................49
16.5 Agency Appointment .................................................50
16.6 Power and Authority of Agent .......................................50
16.6.1 Advice ......................................................50
16.6.2 Documents ...................................................50
16.6.3 Proceedings .................................................50
xiii
<PAGE>
16.6.4 Retain Professionals ........................................50
16.6.5 Incidental Powers ...........................................51
16.7 Duties of Agent ....................................................51
16.7.1 Possession of Documents .....................................51
16.7.2 Distribute Payments .........................................51
16.7.3 Collections .................................................51
16.8 Agent's Resignation or Removal .....................................51
16.9 Consent Required for Certain Actions ...............................51
16.9.1 Unanimous ...................................................52
16.9.2 Majority Lenders ............................................52
16.10 Distribution of Principal and Interest ............................52
16.11 Distribution of Certain Fees and Amounts ..........................53
16.11.1 Commitment Fee ............................................53
16.11.2 Funding Losses ............................................53
16.12 Possession of Loan Documents ......................................53
16.13 Collateral Application ............................................53
16.14 Amounts Required to be Returned ...................................53
16.15 Reports and Information to Syndication Parties ....................54
16.16 Standard of Care ..................................................54
16.17 No Trust Relationship .............................................54
16.18 Sharing of Costs and Expenses .....................................55
16.19 Syndication Parties' Indemnification of Agent .....................55
16.20 Books and Records .................................................56
16.21 Administrative Agent Fee ..........................................56
xiv
<PAGE>
16.22 Representations and Warranties of All Parties .....................56
16.23 Representations and Warranties of CoBank ..........................56
16.24 Syndication Parties' Independent Credit Analysis ..................57
16.25 No Joint Venture or Partnership ...................................57
16.26 Purchase for Own Account/Restrictions on Transfer .................57
16.27 Certain Participants' Voting Rights ...............................58
16.28 Method of Making Payments .........................................58
16.29 Events of Syndication Default/Remedies ............................58
16.29.1 Syndication Party Default .................................58
16.29.2 Remedies ..................................................59
16.30 Withholding Taxes .................................................59
16.31 Further Assurances ................................................59
ARTICLE 17. MISCELLANEOUS....................................................59
17.1 Costs and Expenses .................................................59
17.2 Service of Process and Consent to Jurisdiction .....................60
17.3 Jury Waiver ........................................................60
17.4 Notices ............................................................60
17.4.1 Borrower ....................................................61
17.4.2 CoBank ......................................................61
17.5 Notice to Syndication Parties and Agent ............................61
17.6 Successors and Assigns .............................................62
17.7 Severability .......................................................62
17.8 Entire Agreement ...................................................62
17.9 Applicable Law .....................................................62
xv
<PAGE>
17.10 Captions ..........................................................62
17.11 Amendments ........................................................62
17.12 Additional Costs of Maintaining Loan ..............................62
17.13 Capital Requirements ..............................................63
17.14 Replacement Notes .................................................64
17.15 Patronage Payments ................................................64
17.16 Mutual Release ....................................................64
17.17 Liberal Construction ..............................................64
xvi
<PAGE>
EXHIBITS AND SCHEDULES
Exhibit 1.33 Compliance Certificate
Exhibit 6.1 Promissory Note Form
Exhibit 10.3 Permitted Encumbrances
Exhibit 10.4 Litigation
Exhibit 10.8 Borrower's Business Location(s)
Exhibit 10.11 Required Licenses and Consents
Exhibit 10.12 Borrower Benefit Plans
Exhibit 10.14 Interests in Real Property
Exhibit 10.19 Material Agreements
Exhibit 11.2.1 Commitment Request Form
Exhibit 11.3.1 Activation Request Form
Exhibit 11.4.1 Advance Request Form
Exhibit 13.1 Existing Indebtedness
Exhibit 16.3 Notice of Loan Advance
Exhibit 16.26 Syndication Acquisition Agreement
Exhibit 16.28 Wire Instructions
xvii
EXHIBIT 10.89
PROMISSORY NOTE
(Term Loan Funding)
$50,000,000.00 Effective Date: June 24, 1997
FOR VALUE RECEIVED, VILLAGE FARMS INTERNATIONAL FINANCE ASSOCIATION, a
Delaware corporation ("Maker"), promises to pay to the order of COBANK, ACB
("Payee" and "CoBank") at its office at 245 North Waco Street, Wichita, Kansas
67202, or such other place as Agent (as defined in the Credit Agreement) shall
direct in writing, the principal sum of Fifty million Dollars ($50,000,000.00)
or, if less, the amount outstanding under this Note for Advances for loans
pursuant to the Credit Agreement (Term Loan Funding) dated as of June 24, 1997,
by and between CoBank (for its own benefit as a lender and as agent for the
benefit of the present and future Syndication Parties as named or defined
therein) and Maker (as it may be amended from time to time in the future, the
"Credit Agreement") and any Bank Debt related thereto. This Note is issued and
delivered to Payee pursuant to the Credit Agreement. All capitalized terms used
in this Note and not otherwise defined herein shall have the same meanings as
set forth in the Credit Agreement.
The unpaid balance of this Note from time to time outstanding shall bear
interest as set forth in the Credit Agreement. Principal and interest shall be
payable as provided in the Credit Agreement. This Note has been issued by Maker
to Payee pursuant to the Credit Agreement and reference is made thereto for
specific terms and conditions under which this Note is made and to which this
Note is subject.
This Note is subject to voluntary prepayments as set forth in the Credit
Agreement. Amounts repaid may not be reborrowed. Upon the occurrence of an Event
of Default, Maker agrees that Agent shall have all rights and remedies set forth
in the Credit Agreement, including without limitation the rights of acceleration
set forth in the Credit Agreement. In addition, Agent shall have the right to
recover all costs of collection and enforcement of this Note as provided in the
Credit Agreement.
Maker and any endorser, guarantor, surety or assignor hereby waives
presentment for payment, demand, protest, notice of protest, and notice of
dishonor and nonpayment of this Note, and all defenses on the ground of delay,
suretyship, impairment of collateral, or of extension of time at or after
maturity for the payment of this Note.
This Note shall be governed in all respects by the law of the State of
Colorado.
<PAGE>
Maker:
VILLAGE FARMS INTERNATIONAL FINANCE
ASSOCIATION, a Delaware corporation
By: _____________________________
Name:_____________________________
Title:____________________________
EXHIBIT 10.90
GUARANTY OF AGRO POWER DEVELOPMENT, INC.
to
CONSTRUCTION LENDERS,
TERM LENDERS,
and
LINE OF CREDIT LENDERS
<PAGE>
TABLE OF CONTENTS
R E C I T A L S .............................................................1
A G R E E M E N T S .........................................................2
1. Defined Terms ............................................................3
1.1 Affiliate ...........................................................3
1.2 Agent ...............................................................3
1.3 Closing Date ........................................................3
1.4 CoBank ..............................................................3
1.5 CoBank ..............................................................3
1.6 Compliance Certificate ..............................................3
1.7 Construction Agent ..................................................3
1.8 Construction Lender .................................................3
1.9 Construction Loan Document ..........................................3
1.10 Current Asset ......................................................4
1.11 Environmental Laws .................................................4
1.12 Environmental Regulations ..........................................4
1.13 Equity .............................................................4
1.14 Excess Cash Flow ...................................................4
1.15 Fair Market Value ..................................................4
1.16 Fort Davis Collateral ..............................................4
1.17 GAAP ...............................................................5
1.18 Guarantor Benefit Plan(s) ..........................................5
1.19 Guarantor Cash Flow ................................................5
1.20 Guarantor Document .................................................5
i
<PAGE>
1.21 Guarantor Security Agreement .......................................5
1.22 Guarantor Security Document ........................................5
1.23 Hazardous Substances ...............................................5
1.24 Hedge Agreement ....................................................5
1.25 Indebtedness .......................................................6
1.26 Lender Group .......................................................6
1.27 Line of Credit Agent ...............................................6
1.28 Line of Credit Documents ...........................................6
1.29 Line of Credit Lenders .............................................6
1.30 Loan Agreements ....................................................6
1.31 Loan Documents .....................................................6
1.32 Material Adverse Effect ............................................6
1.33 Net Fixed Investments ..............................................7
1.34 Net Income .........................................................7
1.35 Owner Group ........................................................7
1.36 Person .............................................................7
1.37 Projections ........................................................7
1.38 Quarter ............................................................7
1.39 Senior Long-Term Debt ..............................................7
1.40 Term Agent .........................................................7
1.41 Term Lenders .......................................................7
1.42 Term Loan Documents ................................................7
1.43 Total Assets .......................................................8
1.44 Underlying Borrowers ...............................................8
ii
<PAGE>
1.45 Underlying Construction Loan Borrower ..............................8
1.46 Underlying Line of Credit Borrower .................................8
1.47 Underlying Term Loan Borrower ......................................8
1.48 Village Farms ......................................................8
1.49 Village Farms Loan Agreement .......................................8
1.50 Village Farms Revolving Loan .......................................8
1.51 Village Farms Term Loan ............................................8
2. Guaranty .................................................................8
3. Guaranty of Payment; Waiver of Defenses, Etc .............................9
3.1 General .............................................................9
3.2 Waivers .............................................................9
3.3 Amount of Indebtedness .............................................10
3.4 Subrogation ........................................................10
3.5 Subordination of Other Debt ........................................10
3.6 Liens and Rights of Set-Off .......................................10
4. Recovery of Payment .....................................................11
5. Information Regarding Borrower ..........................................11
6. Security ................................................................11
7. Representations and Warranties ..........................................11
7.1 Organization, Good Standing, etc ...................................12
7.2 Corporate Authority, Due Authorization, Consents ...................12
7.3 Title to Collateral ................................................12
7.4 Litigation .........................................................12
7.5 Licenses and Approvals .............................................12
iii
<PAGE>
7.6 No Violations ......................................................13
7.7 Binding Agreement ..................................................13
7.8 Compliance with Laws ...............................................13
7.9 Principal Place of Business ........................................13
7.10 Material Agreements ...............................................13
7.11 Financial Statements; No Material Adverse Change ..................14
7.12 Payment of Taxes ..................................................14
7.13 Employee Benefit Plans ............................................14
7.14 Equity Investments; Capitalization of Guarantor, Borrower
and the Underlying Borrowers ......................................15
7.15 Real Property .....................................................15
7.16 No Contingent Liabilities .........................................15
7.17 Title Insurance ...................................................16
7.18 Disclosure ........................................................16
8. Affirmative Covenants of Guarantor ......................................16
8.1 Books and Records ..................................................16
8.2 Reports and Notices ................................................16
8.2.1 Annual Financial Statements ..................................16
8.2.2 Quarterly Financial Statements ...............................17
8.2.3 Additional Information .......................................17
8.2.4 Notice of Default ............................................17
8.2.5 Notice of Litigation .........................................17
8.2.6 Notice of Material Adverse Effect ............................17
8.2.7 Notice of Environmental Litigation ...........................17
iv
<PAGE>
8.2.8 Governmental and Other Notices ...............................18
8.2.9 Adverse Action Regarding Required Licenses ...................18
8.3 Maintenance of Existence and Qualification .........................18
8.4 Compliance with Legal Requirements and Agreements ..................18
8.5 Compliance with Environmental Laws .................................18
8.6 Taxes ..............................................................18
8.7 Insurance ..........................................................19
8.8 Title to Assets and Maintenance ....................................20
8.9 Payment of Liabilities .............................................20
8.10 Inspection ........................................................20
8.11 Further Assurances, Real Property Security Interests ..............20
8.12 Required Licenses .................................................21
8.13 Equity to Senior Long-Term Debt ...................................21
8.14 Excess Cash Flow ..................................................21
8.15 ERISA .............................................................21
9. Negative Covenants of Guarantor .........................................22
9.1 Borrowings .........................................................22
9.2 No Other Businesses ................................................22
9.3 Liens ..............................................................22
9.4 Sale of Assets .....................................................23
9.5 Liabilities of Others ..............................................24
9.6 Mergers; Acquisitions; Etc .........................................24
9.7 Loans, Advances and Investments ....................................24
9.8 Change in Owner Group ..............................................25
v
<PAGE>
9.9 Payment of Dividends; Distributions ................................25
9.10 Payments on Indebtedness ..........................................26
9.11 Transactions With Affiliates ......................................26
9.12 ERISA .............................................................26
9.13 Change in Fiscal Year .............................................27
10. Indemnification ........................................................27
10.1 General; Stamp Taxes; Intangibles Tax .............................27
10.2 Indemnification Relating to Hazardous Substances ..................28
11. Miscellaneous ..........................................................29
11.1 Loan Documents ....................................................29
11.2 Additional Guarantors .............................................29
11.3 No Waiver by Agents or Lender Group ...............................29
11.4 Assignment ........................................................29
11.5 Severability ......................................................29
11.6 Amendments ........................................................30
11.7 Service of Process and Consent to Jurisdiction ....................30
11.8 Jury Waiver .......................................................30
11.9 Notices ...........................................................30
11.10 Applicable Law ...................................................32
11.11 Captions .........................................................32
11.12 Mutual Release ...................................................32
vi
<PAGE>
EXHIBITS
Exhibit 1.6 Compliance Certificate
Exhibit 1.35 Owner Group
Exhibit 1.37 Projections
Exhibit 7.4 Litigation
Exhibit 7.5 Required Licenses and Consents
Exhibit 7.10 Material Agreements
Exhibit 7.14 Equity Investments and Capitalization of Guarantor,
Borrower and the Underlying Borrowers
Exhibit 7.15 Interests in Real Property
vii
<PAGE>
31
GUARANTY OF AGRO POWER DEVELOPMENT, INC.
This Guaranty ("Guaranty") is made and given as of June 24, 1997, by Agro
Power Development, Inc., a New York corporation ("Guarantor"), to the Lender
Group (as such term is defined below).
R E C I T A L S
A. The Construction Lenders (as defined below), the Construction Agent (as
defined below) and Village Farms International Finance Association ("Borrower")
have entered into a Credit Agreement (Construction Loan Funding) of even date
herewith (as amended from time to time, the "Construction Loan Agreement")
pursuant to which the Construction Lenders have agreed (i) to loan funds to
Borrower ("Construction Loan") under the terms and conditions set forth in the
Construction Loan Agreement to be used by Borrower only to make loans to third
parties ("Underlying Construction Loans") for the purpose of providing financing
for a portion of the costs of the construction (including costs of acquisition
of land) by such third parties of facilities for the planting, growing and
harvesting of vegetables and/or fruits ("Greenhouse Facilities"), and (ii) to
issue letters of credit for the benefit of Underlying Construction Loan
Borrowers (as defined below), up to an aggregate for (i) and (ii) of
$30,000,000.
B. The Term Lenders (as defined below), the Term Agent (as defined below)
and Borrower have entered into a Credit Agreement (Term Loan Funding) of even
date herewith (as amended from time to time, the "Term Loan Agreement") pursuant
to which the Term Lenders have agreed to loan Borrower up to $50,000,000 ("Term
Loan") under the terms and conditions set forth in the Term Loan Agreement to be
either (i) loaned by Borrower to third parties for the purpose of providing
permanent take-out financing for Underlying Construction Loans, or (ii) used by
Borrower to fund Borrower's purchase of existing loans made by third parties for
the construction or acquisition of Greenhouse Facilities (the foregoing loans
made or purchased by Borrower pursuant to (i) and (ii) above shall be
collectively referred to herein as the "Underlying Term Loans").
C. The Line of Credit Lenders (as defined below), the Line of Credit Agent
(as defined below) and Borrower have entered into a Credit Agreement (Line of
Credit Facility) of even date herewith (as amended from time to time, the "Line
of Credit Agreement") pursuant to which the Line of Credit Lenders have agreed
to provide Borrower with a line of credit of $10,000,000 ("Line of Credit
Loan"), including a sublimit of $5,000,000 for the issuance of letters of
credit, under the terms and conditions set forth in the Line of Credit Agreement
to (i) fund Borrower's purchase of the LOC Loan (as defined in the Village Farms
Loan Agreement) made to Village Farms (as defined below) pursuant to the Village
Farms Loan Agreement (as defined below), (ii) fund Borrower's loan to Guarantor
to meet Guarantor's working capital needs ("Guarantor Working Capital Loan"),
(iii) fund the extension by Borrower of lines of credit (including provisions
for the issuance of letters of credit) (x) to Underlying Term
<PAGE>
Loan Borrowers (as defined below) to meet their needs during the planting phase
of each year's production cycle and to meet their payment requirements under
their Underlying Term Loans for a maximum of 180 days in any three year period,
and (y) to members of Borrower to meet their needs during the planting phase of
each year's production cycle, and (iv) provide for the issuance of, and fund any
draws made under, letters of credit issued by the LC Issuing Bank (as defined in
the Line of Credit Agreement) for the account of Borrower to facilitate the
purchase and sale by Guarantor and its subsidiaries of vegetables and fruits
(the loans made or purchased by Borrower pursuant to (i), (ii), (iii) and (iv)
above shall be referred to herein as the "Underlying Line of Credit Loans").
D. Guarantor (i) is or will become a member of Borrower, (ii) has or will
have an approximately 50% equity ownership interest in each Underlying
Construction Loan Borrower and each Underlying Term Loan Borrower, and (iii) has
or will have at least an approximately 50% equity ownership interest in all
Underlying Line of Credit Borrowers (as defined below) other than Guarantor.
E. Guarantor will benefit from the extensions of credit made by the
Construction Lenders, the Term Lenders and the Line of Credit Lenders to
Borrower by virtue of (i) its membership interest in Borrower, (ii) its
approximately 50% ownership interest in the Underlying Construction Loan
Borrowers and the Underlying Term Loan Borrowers, and (iii) its ownership
interest of at least 50% in all Underlying Line of Credit Borrowers other than
Guarantor. Guarantor will further benefit from the extensions of credit made by
the Line of Credit Lenders to Borrower by virtue of the fact that a portion of
the proceeds of the Line of Credit Loan will be used to fund the Guarantor
Working Capital Loan.
F. The Construction Lenders, the Term Lenders and the Line of Credit
Lenders are willing to extend such credit to Borrower pursuant to the provisions
of the Construction Loan Agreement, Term Loan Agreement and Line of Credit
Agreement, respectively, upon the condition, among others, that Guarantor
execute this Guaranty.
A G R E E M E N T S
NOW, THEREFORE, for value received, and intending to be legally bound
herein, and to induce the Lender Group to extend credit and make advances to
Borrower pursuant to the terms of the Loan Agreements (as defined below),
Guarantor covenants and agrees with the Lender Group as follows:
2
<PAGE>
1. Defined Terms. As used in this Guaranty, the following terms shall have
the meanings set forth below (and such meaning shall be equally applicable to
both the singular and plural form of the terms defined, as the context may
require):
1.1 Affiliate: with respect to any Person, any Person that owns or controls
directly or indirectly such Person, any Person that controls or is controlled by
or is under common control with such Person.
1.2 Agents: the Construction Agent, the Term Agent and the Line of Credit
Agent.
1.3 Closing Date: that date on which (a) the Construction Lenders and
Borrower have executed the Construction Loan Documents, (b) the Term Lenders and
Borrower have executed the Term Loan Documents, (c) the Line of Credit Lenders
and Borrower have executed the Line of Credit Documents, (d) Guarantor has
executed this Guaranty and the Guarantor Security Documents, and (e) the
conditions set forth in Section 11.1 of each of the Construction Loan Agreement,
the Term Loan Agreement and the Line of Credit Agreement have been met.
1.4 CoBank: CoBank, ACB.
1.5 CoBank Equity Interests: those equity interests in CoBank as CoBank
may, under the Construction Loan Agreement, the Term Loan Agreement, or the Line
of Credit Agreement, require Borrower to purchase from time to time in
accordance with CoBank's bylaws and capital plan as applicable to cooperative
borrowers generally.
1.6 Compliance Certificate: a certificate of the chief financial officer of
Guarantor acceptable to CoBank and in the form attached as Exhibit 1.6 hereto,
setting forth in reasonable detail the data and calculations showing compliance
with the financial covenant set forth in Section 8.13 hereof.
1.7 Construction Agent: CoBank and each successor to CoBank as Agent under
the Construction Loan Agreement.
1.8 Construction Lenders: CoBank and any other entity that purchases, now
or in the future, a syndication interest in the Construction Loan.
1.9 Construction Loan Documents: (a) the Construction Loan Agreement, (b)
any and all promissory notes now or hereafter executed by Borrower payable to
any Construction Lender in the aggregate maximum principal sum of
$30,000,000.00, (c) the Construction Loan Security Agreement of even date
herewith by and between Borrower and CoBank, as Agent on behalf of and for the
benefit of the Construction Lenders, and (d) any and all mortgages, deeds of
trust, other security agreements, financing statements, and other present and
future agreements, documents
3
<PAGE>
and/or instruments evidencing, documenting, securing or otherwise relating to
the Construction Loan, as all of the foregoing may from time to time be amended,
modified, extended, renewed or restated.
1.10 Current Assets: the current assets of Guarantor determined on a
consolidated basis in accordance with GAAP.
1.11 Environmental Laws: the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended, 42 U.S.C. 9601-9657
("CERCLA") and the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
6901-6987 ("RCRA").
1.12 Environmental Regulations: as defined in the definition of Hazardous
Substances.
1.13 Equity: all equity of Guarantor, determined in accordance with GAAP,
plus Minority Interests of Guarantor (as determined in accordance with GAAP).
1.14 Excess Cash Flow: all Guarantor Cash Flow less the amount of all tax
distributions (or distributions in lieu of tax distributions) permitted to be
made by Guarantor under this Guaranty on account of the Guarantor Cash Flow.
1.15 Fair Market Value: a valuation as determined in a written appraisal
from an MAI certified appraiser.
1.16 Fort Davis Collateral: all of Guarantor's right, title and interest in
and to the following contracts and agreements, as amended or otherwise modified
from time to time: (a) Commercial Greenhouse Design and Construction Contract
dated December 7, 1995, by and between Guarantor and Dalsem Kassenbouw B.V.; (b)
Commercial Packing House Design and Construction Contract dated January 8, 1996,
by and between Guarantor and NC Sturgeon, Inc.; and (c) Grading and Road
Construction Contract dated January 5, 1996 by and between Guarantor and Reece
Albert, Inc.
1.17 GAAP: generally accepted accounting principles in the United States of
America, applied consistently, as in effect from time to time.
1.18 Guarantor Benefit Plan(s): shall have the meaning given to such term
in Section 7.13 of this Guaranty.
1.19 Guarantor Cash Flow: all cash received by Guarantor on account of its
equity interests in the Underlying Borrowers and other investments and business
activities permitted under this Guaranty.
1.20 Guarantor Documents: this Guaranty and the Guarantor Security
Documents.
4
<PAGE>
1.21 Guarantor Security Agreement: the Guarantor Security Agreement of even
date herewith by and between Guarantor and the Agents.
1.22 Guarantor Security Documents: the Guarantor Security Agreement, the
Trademark Collateral Assignment and Security Agreement of even date herewith by
and between the Agents and Guarantor, mortgages, deeds of trust, leasehold
assignments and consents, financing statements, pledge agreements, assignments,
and/or other security documents executed by Guarantor in favor of the Agents to
secure Guarantor's performance of its obligations under this Guaranty with a
lien on all assets, real and personal, of Guarantor, in form and substance
acceptable to the Agents.
1.23 Hazardous Substances: dangerous, toxic or hazardous pollutants,
contaminants, chemicals, wastes, materials or substances, as defined in or
governed by the provisions of any Environmental Laws or any other federal, state
or local law, statute, code, ordinance, regulation, requirement or rule relating
thereto ("Environmental Regulations"), and also including urea formaldehyde,
polychlorinated biphenyls, asbestos, asbestos-containing materials, nuclear fuel
or waste, and petroleum products, or any other waste, material, substances,
pollutant or contaminant which would subject an owner of property to any
damages, penalties or liabilities under any applicable Environmental
Regulations.
1.24 Hedge Agreement: the secured interest rate hedging agreement of even
date herewith executed by and between Borrower and CoBank.
1.25 Indebtedness: any and all advances, debts, obligations and liabilities
of Borrower under or pursuant to the Loan Documents, and any renewals,
amendments, extensions or replacements thereof, including without limitation all
principal, interest, loan fees, obligations to purchase CoBank Equity Interests,
and Funding Losses owed under the Loan Agreements and all expenses, charges and
other amounts payable by Borrower pursuant to the Loan Documents, whether now
existing or hereafter contracted or incurred, plus interest thereon at the rate
determined pursuant to the applicable Loan Agreement.
1.26 Lender Group: the Construction Lenders, the Term Lenders and the Line
of Credit Lenders.
1.27 Line of Credit Agent: CoBank and each successor to CoBank as Agent
under the Line of Credit Agreement.
1.28 Line of Credit Documents: (a) the Line of Credit Agreement, (b) any
and all promissory notes now or hereafter executed by Borrower payable to any
Line of Credit Lender in the aggregate maximum principal sum of $10,000,000.00,
(c) the Line of Credit Security Agreement of even date herewith by and between
Borrower and CoBank, as Agent on behalf of and for the benefit of the Line of
Credit Lenders, and (d) any and all mortgages, deeds of trust, other security
agreements, financing
5
<PAGE>
statements, and other present and future agreements, documents and/or
instruments evidencing, documenting, securing or otherwise relating to the Line
of Credit Loan, as all of the foregoing may from time to time be amended,
modified, extended, renewed or restated.
1.29 Line of Credit Lenders: CoBank and any other entity that purchases,
now or in the future, a syndication interest in the Line of Credit Loan.
1.30 Loan Agreements: the Construction Loan Agreement, the Term Loan
Agreement and the Line of Credit Agreement.
1.31 Loan Documents: the Construction Loan Documents, the Term Loan
Documents and the Line of Credit Documents.
1.32 Material Adverse Effect: with respect to a Person, (a) a material
adverse effect on the financial condition, results of operation, business or
property of such Person; (b) a material adverse effect on the ability of such
Person to perform its obligations under the Loan Documents and the Guarantor
Documents to which it is a party; or (c) a material adverse effect upon the
ability of Agents and the Lender Group to enforce their rights and remedies
against such Person under the Loan Documents or the Guarantor Documents.
1.33 Net Fixed Investments: the amount equal to Total Assets less Current
Assets.
1.34 Net Income: the net income of Guarantor determined on an
unconsolidated basis in accordance with GAAP.
1.35 Owner Group: the owners of Guarantor on the date of this Guaranty as
set forth on Exhibit 1.35 hereto. ------------
1.36 Person: any individual, corporation, limited liability company,
association, partnership, trust, organization, government, governmental agency,
or other entity.
1.37 Projections: the projections, pro-forma financial statements and other
materials attached hereto as Exhibit 1.37 with respect to projected operations
and financial results of operations of Guarantor, Borrower and the Underlying
Borrowers.
1.38 Quarter: the quarters of the calendar year commencing as of January 1,
April 1, July 1 and October 1.
1.39 Senior Long-Term Debt: Long-term debt plus the current portion of
long-term debt, determined in accordance with GAAP.
6
<PAGE>
1.40 Term Agent: CoBank and each successor to CoBank as Agent under the
Term Loan Agreement.
1.41 Term Lenders: CoBank and any other entity that purchases, now or in
the future, a syndication interest in the Term Loan.
1.42 Term Loan Documents: (a) the Term Loan Agreement, (b) the Hedge
Agreement, (c) any and all promissory notes now or hereafter executed by
Borrower payable to any Term Lender in the aggregate maximum principal sum of
$50,000,000.00, (d) the Term Loan Security Agreement of even date herewith by
and between Borrower and CoBank, as Agent on behalf of and for the benefit of
the Term Lenders, and (e) any and all mortgages, deeds of trust, other security
agreements, financing statements, and other present and future agreements,
documents and/or instruments evidencing, documenting, securing or otherwise
relating to the Term Loan, as all of the foregoing may from time to time be
amended, modified, extended, renewed or restated.
1.43 Total Assets: all assets of Guarantor determined on a consolidated
basis in accordance with GAAP.
1.44 Underlying Borrowers: (a) the Underlying Construction Loan Borrowers,
(b) the Underlying Term Loan Borrowers, and (c) the Underlying Line of Credit
Borrowers.
1.45 Underlying Construction Loan Borrower: shall have the meaning given to
such term in the Construction Loan Agreement.
1.46 Underlying Line of Credit Borrower: (a) the Underlying LOC Borrowers
(as defined in the Line of Credit Agreement), and (b) all subsidiaries of
Guarantor with respect to which the LC Issuing Bank issues a letter of credit
for the account of Borrower in order to facilitate the purchase and sale by such
subsidiaries of vegetables and fruits.
1.47 Underlying Term Loan Borrower: shall have the meaning given to such
term in the Term Loan Agreement.
1.48 Village Farms: Village Farms of Texas, L.P., a Delaware limited
partnership.
1.49 Village Farms Loan Agreement: the Loan Agreement dated as of February
14, 1996 by and between Village Farms, as borrower, Farm Credit Bank of Texas
and Texas Production Credit Association, as lenders, and CoBank, as
Administrative Agent.
7
<PAGE>
1.50 Village Farms Revolving Loan: the LOC Loan, as defined in the Village
Farms Loan Agreement.
1.51 Village Farms Term Loan: the Construction Loan, as defined in the
Village Farms Loan Agreement.
Capitalized terms used, but not defined, herein shall have the meaning
given to such terms in the Term Loan Agreement, if defined therein.
2. Guaranty. Guarantor hereby guarantees absolutely and unconditionally to
the Lender Group, and their successors and assigns, and any person or entity
acquiring an interest in the Indebtedness of Borrower, and becomes surety for:
(a) the due and punctual payment, in lawful money of the United States, of all
Indebtedness of Borrower as and when any of the foregoing shall become due and
payable in accordance with the terms thereof at stated maturity, by
acceleration, or otherwise; and (b) the full and timely performance of any and
all other obligations of Borrower to the Lender Group, whether now existing or
hereafter contracted or incurred, arising directly or indirectly out of or with
respect to the Loan Documents. Guarantor shall also pay all costs, expenses and
attorneys' fees incurred by Agents and the Lender Group in its efforts to
collect the Indebtedness, foreclose upon or exercise its rights with respect to
any security for the Indebtedness, or to enforce this Guaranty, or to protect
the rights of Agents and the Lender Group with respect thereto. The term
"Guaranteed Obligations" as used in this Guaranty shall mean such Indebtedness,
obligations and liabilities described above in this Article 2.
3. Guaranty of Payment; Waiver of Defenses, Etc.
3.1 General. This Guaranty is a guarantee of payment and not of collection,
and Guarantor waives any right to require that any action be brought against
Borrower or to require that resort be had at any time to any direct or indirect
security for the Guaranteed Obligations. Guarantor's obligations hereunder are
continuing obligations and are absolute and unconditional irrespective of the
genuineness, validity or enforceability of any instrument or instruments now or
hereafter evidencing any Guaranteed Obligation or any part thereof (including
but not limited to the Loan Documents) or of any other agreement now or
hereafter entered into by Agents or the Lender Group, or any of them, and
Borrower pursuant to which any Guaranteed Obligation or any part thereof is
issued, or of any other circumstance which might otherwise constitute a legal or
equitable discharge of a guarantor or surety. Guarantor's obligations hereunder
shall continue in full force and effect as long as any Guaranteed Obligation or
any part thereof remains outstanding and unpaid or the Lender Group, or any of
them, has any obligation to make advances to Borrower pursuant to any of the
Loan Agreements.
3.2 Waivers. With respect to its obligations under this Guaranty, Guarantor
waives any and all defenses and discharges available to a guarantor, surety,
8
<PAGE>
endorser or accommodation party, dependent upon its character as such. Guarantor
hereby waives presentment for payment, notice of nonpayment, demand and protest.
Guarantor agrees that its obligations hereunder shall not be affected or
impaired in any way by any of the following acts or things (which Agents or the
Lender Group may do from time to time without notice to Guarantor): (a) any
amendment (including, without limitation, an amendment increasing the interest
rate), modification or extension of the Loan Documents, or any waiver of
compliance by Borrower with the terms of any of the foregoing; (b) any sale,
pledge, surrender, compromise, settlement, release, renewal, extension,
indulgence, alteration, substitution, exchange, modification or other
disposition of any Guaranteed Obligation or any collateral therefor; (c) any
acceptance or release of collateral for or guarantors of any Guaranteed
Obligation; (d) any inability, failure, neglect or omission to obtain, perfect,
enforce or realize upon any collateral for any of the Guaranteed Obligations, or
to exercise any lien upon or right of appropriation of any moneys, credits or
property to the liquidation of any Guaranteed Obligation, or to pursue or obtain
any deficiency judgment against Borrower following any foreclosure of any
security interest, mortgage or deed of trust granted by Borrower to Agents; or
(e) any application of payments or credits upon the Guaranteed Obligations under
the Loan Agreements. Neither Agents nor the Lender Group shall be required,
before exercising its rights under this Guaranty, to first resort for the
payment of any Guaranteed Obligation to Borrower, or other Persons or entities
or any collateral, property, liens or other remedies or rights whatsoever. With
respect to its obligations under this Guaranty, Guarantor agrees not to exercise
any right of contribution, recourse, subrogation or reimbursement available to
Guarantor against Borrower or any other Person or entity or property unless and
until all the Guaranteed Obligations have been indefeasibly paid in full and
there is no obligation of the Lender Group, or any of them, to make advances to
Borrower under the Loan Agreements. Guarantor hereby waives any rights it may
have at equity or in law to require Agents or the Lender Group, or any of them,
to apply any rights of marshalling or other equitable doctrines in the
circumstances.
3.3 Amount of Indebtedness. Agents or the Lender Group may, at its or their
sole option and without any notice to or consent of Guarantor, allow the
Indebtedness of Borrower to exceed the principal amount of all promissory notes
executed by Borrower in connection with the Indebtedness without in any way
adversely affecting Guarantor's liability hereunder.
3.4 Subrogation. After all Guaranteed Obligations have been indefeasibly
paid in full and there is no obligation of the Lender Group, or any of them, to
make advances to Borrower under the Loan Agreements, Guarantor shall have and
may exercise rights of subrogation against Borrower.
3.5 Subordination of Other Debt. Any indebtedness or obligation of
Borrower, or any other claim against or liability of Borrower, now or hereafter
held by or owed to Guarantor ("Guarantor's Claims") is hereby subordinated by
Guarantor to
9
<PAGE>
the Indebtedness of Borrower to the Lender Group; and such Guarantor's Claims,
if any Agent so requests, shall be collected, enforced and received by Guarantor
as trustee for the Lender Group and paid over to Agents for the benefit of the
Lender Group on account of the Indebtedness of Borrower to the Lender Group.
3.6 Liens and Rights of Set-Off. In addition to all liens upon, and right
of set-off against, the property of Guarantor existing under applicable law, the
Lender Group or any member thereof may, without demand or notice of any kind,
and at any time when any amount shall be due and payable hereunder by Guarantor,
appropriate and apply toward the payment of such amount, in such order of
application as Agents or the Lender Group may elect, any property, balances,
credits, deposits, accounts (including escrow accounts) or moneys of Guarantor
in the possession or control of any member of the Lender Group for any purpose.
Guarantor hereby grants to the Lender Group a right of set-off and security
interest in such property and funds in the possession or control of the Lender
Group, or any of them. Guarantor further expressly grants to Agents and the
Lender Group the right, to be exercised at the discretion of Agents and the
Lender Group, to file one or more financing statements under the Uniform
Commercial Code naming Guarantor as debtor and the Lender Group and/or Agents as
secured party with respect to such property and funds and Guarantor hereby
agrees to sign any such statement.
4. Recovery of Payment. If any payment received by the Lender Group and
applied to the Guaranteed Obligations is subsequently set aside, recovered,
rescinded or required to be returned for any reason (including, without
limitation, the bankruptcy, insolvency or reorganization of Borrower), the
Guaranteed Obligations to which such payment was applied shall, for the purposes
of this Guaranty, be deemed to have continued in existence, notwithstanding such
applications, and this Guaranty shall be enforceable as to such Guaranteed
Obligations as fully as if such applications had never been made.
5. Information Regarding Borrower. Guarantor assumes full responsibility
for keeping fully informed of the financial condition of Borrower and all other
circumstances affecting Borrower's ability to pay and perform its Guaranteed
Obligations and agrees that neither the Lender Group nor Agents shall have any
duty to report to Guarantor any information which the Lender Group or Agents
receive about the financial condition of Borrower or any circumstances bearing
on the ability of Borrower to perform its Guaranteed Obligations, and Guarantor
hereby expressly and unconditionally waives any defense based on the failure of
the Lender Group or Agents to report such information.
6. Security. As security for the payment and performance of Guarantor's
obligations under this Guaranty, Guarantor shall grant to Agents (on behalf of
the Lender Group) and maintain for Agents (on behalf of the Lender Group), a
first lien and security interest in all of its assets and properties, both real
and personal, tangible or intangible, whether now owned or held or hereafter
acquired (the "Guarantor
10
<PAGE>
Collateral"), except such lien and security interest granted to Agents may be
junior to any Lien to the extent permitted by Section 9.3 hereof. Guarantor has
executed and delivered to Agents the Guarantor Security Documents as required
under this Guaranty to evidence the security interest of Agents in the Guarantor
Collateral, and the terms, provisions and conditions of the Guarantor Security
Documents are hereby incorporated in this Guaranty and made a part hereof.
Guarantor shall also execute such further security agreements, mortgages, deeds
of trust, financing statements, assignments or other documents as any Agent
shall request, in form and substance as such Agent shall specify, to establish,
confirm, perfect or provide notice of Agents' security interest in the Guarantor
Collateral.
7. Representations and Warranties. Guarantor represents, covenants and
warrants to Agents and the Lender Group that:
7.1 Organization, Good Standing, etc. Guarantor is duly organized, existing
and in good standing under the laws of the State of New York. Guarantor has the
power to own its properties and to carry on its business as now being conducted.
Guarantor is duly qualified to do business and is in good standing in each
jurisdiction in which the transaction of its business makes such qualification
necessary.
7.2 Corporate Authority, Due Authorization, Consents. Guarantor has full
power and authority to execute, deliver and perform its obligations under the
Guarantor Documents, and the Guarantor Documents have been duly authorized.
Guarantor has obtained all consents or approvals of any Person which are
necessary for, or are required as a condition of, the execution, delivery and
performance of this Guaranty and the other Guarantor Documents.
7.3 Title to Collateral. Guarantor has good and marketable title to all of
the Guarantor Collateral, free and clear of all liens, pledges, restrictions and
encumbrances except those permitted by Section 9.3 hereof.
7.4 Litigation. Except as set forth in Exhibit 7.4 attached hereto, there
are no pending legal or governmental actions, proceedings or investigations to
which Guarantor is a party or to which any property of Guarantor is subject
which might result in any Material Adverse Effect on Guarantor and, to the best
of Guarantor's knowledge, no such actions or proceedings are threatened or
contemplated by governmental authorities or any other Person.
7.5 Licenses and Approvals. Guarantor has ownership of, or license to use,
or has been issued, all trademarks, patents, copyrights, franchises,
certificates, approvals, permits, authorities, agreements, and licenses used or
necessary to permit it to own its properties and to conduct its business, in
substantially the manner as presently conducted and as contemplated to be
conducted (collectively, the foregoing shall be referred to as "Required
Licenses"). Exhibit 7.5 lists all Required Licenses presently in existence with
respect to Guarantor. Each Required License is in full force
11
<PAGE>
and effect, and there is no outstanding notice of cancellation or termination
or, to Guarantor's knowledge, any threatened cancellation or termination in
connection therewith, nor has an event occurred with respect to any Required
License which, with the giving of notice or passage of time or both, could
result in the revocation or termination thereof or otherwise in any impairment
of Guarantor's rights with respect thereto, which impairment could reasonably be
expected to have a Material Adverse Effect on Guarantor. No consent, permission,
authorization, order, or license of any governmental authority is necessary in
connection with the execution, delivery, performance, or enforcement of the
Guarantor Documents, except such as have been obtained and are in full force and
effect and as are described on Exhibit 7.5.
7.6 No Violations. The execution, delivery and performance by Guarantor of
the Guarantor Documents will not: (a) violate any provision of Guarantor's
articles of incorporation or bylaws, or any law, rule, regulation, judgment,
order or ruling of any court or governmental agency; (b) violate, conflict with,
result in a breach of, constitute a default under, or with the giving of notice
or the expiration of time or both, constitute a default under, any existing real
estate mortgage, indenture, lease, security agreement, contract, note,
instrument or any other agreements or documents binding on Guarantor or
affecting its property; or (c) violate, conflict with, result in a breach of,
constitute a default under, or result in the loss of, or restriction of rights
under, any Required License or any order, law, rule, or regulation under or
pursuant to which any Required License was issued or is maintained ("Licensing
Laws").
7.7 Binding Agreement. The Guarantor Documents are, or when executed and
delivered, will be, the legal, valid and binding obligation of Guarantor,
enforceable in accordance with their terms, subject only to limitations on
enforceability imposed by applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting creditors' rights generally and by general
principles of equity.
7.8 Compliance with Laws. Guarantor is in compliance in all material
respects with all federal, state, and local laws, rules, regulations,
ordinances, codes and orders, including without limitation all Environmental
Laws, all Environmental Regulations, and all Licensing Laws.
7.9 Principal Place of Business. Guarantor's place of business, or chief
executive office if it has more than one place of business, is located at 10
Alvin Court, East Brunswick, NJ 08816.
7.10 Material Agreements. All agreements, excluding the Guarantor
Documents, of Guarantor, the termination or breach of which would have a
Material Adverse Effect ("Material Agreements") are listed on Exhibit 7.10
hereto and neither Guarantor nor, to Guarantor's knowledge, any other party to
any Material Agreement, is in default thereunder, and no facts exist which with
the giving of notice or the passage of time, or both, would constitute such a
default. Guarantor will provide a true, correct
12
<PAGE>
and complete copy of each Material Agreement and all amendments thereto to any
Agent upon its request.
7.11 Financial Statements; No Material Adverse Change.
(a) The audited financial statements as of December 31, 1996 and the
company-prepared financial statements as of March 31, 1997 previously furnished
to CoBank for Agents and the Lender Group by Guarantor were prepared based upon
Guarantor's books and records and fairly present in all material respects the
financial condition, assets and liabilities of Guarantor as of the dates covered
thereby and the financial results for the periods covered thereby of Guarantor
and the results of operations for the periods then ended, in each case in
conformity with GAAP.
(b) To Guarantor's knowledge: (i) the Projections submitted to CoBank for
Agents and the Lender Group fairly presented in all material respects the
projected operations, financial condition, assets and liabilities of Guarantor,
Borrower and any Underlying Borrower covered in the Projections as of the dates
covered thereby; (ii) no undisclosed facts existed at the time of submission of
the Projections to CoBank which, if taken into account, would have resulted in
any material change in any of the Projections; and (iii) the Projections were,
at the time of submission, based upon reasonable estimates and assumptions, all
of which were fair in light of then-current conditions, prepared on the basis of
the assumptions stated therein, and reflected a reasonable estimate of the
results of operations and other information projected therein. To Guarantor's
knowledge, as of the date hereof: (A) there have been no changes in the
estimates and assumptions used in preparing the Projections which, if taken into
account, would, in the aggregate, materially adversely affect such Projections,
and such estimates and assumptions are fair in light of the current conditions;
(B) no undisclosed facts exist on the date hereof which, if taken into account,
would, in the aggregate, materially adversely affect the Projections; and (C)
the Projections reflect a reasonable estimate of the results of operations and
other information projected therein. Since March 31, 1997, there has been no
material adverse change in the financial condition, results of operations,
business or prospects of Guarantor, or, to Guarantor's knowledge, Borrower or
any Underlying Borrower.
7.12 Payment of Taxes. Guarantor has filed all required federal, state and
local tax returns and has paid all taxes as shown on such returns as they have
become due. Guarantor has paid when due all other taxes, assessments or
impositions levied or assessed against it or its businesses or properties.
7.13 Employee Benefit Plans. Guarantor does not presently maintain or
participate in, and has not in the past maintained or participated in, and is
not obligated to contribute to, any of the following (each a "Guarantor Benefit
Plan" and collectively "Guarantor Benefit Plans"): (a) any funded "employee
welfare benefit plan," as that term is defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended, and the regulations
thereunder ("ERISA"); (b) any
13
<PAGE>
"multiemployer plans," as defined in Section 3(37) of ERISA; (c) any "employee
pension benefit plan" as defined in Section 3(2) of ERISA; (d) any "employee
benefit plan", as such term is defined in Section 3(3) of ERISA; (e) any
"multiple employer plan" within the meaning of Section 413 of the Internal
Revenue Code of 1986, as amended from time to time ("Code"); (f) any "multiple
employer welfare arrangement" within the meaning of Section 3(40) of ERISA; (g)
a "voluntary employees' beneficiary association" within the meaning of Section
501(a)(9) of the Code; (h) a "welfare benefit fund" within the meaning of
Section 419 of the Code; or (i) any employee welfare benefit plan within the
meaning of Section 3(1) of ERISA for the benefit of retired or former employees.
7.14 Equity Investments; Capitalization of Guarantor, Borrower and the
Underlying Borrowers. The authorized and issued capital stock or other equity
interests of Guarantor, Borrower and all existing Underlying Borrowers is as set
forth on Exhibit 7.14 attached hereto ("Authorized Stock"). All such shares and
other equity interests have been duly and validly authorized and issued in
accordance, in all material respects, with all applicable federal and state
laws, including securities laws, and are fully paid and non-assessable. Except
as set forth on Exhibit 7.14, there are no outstanding warrants, options or
other rights to purchase or acquire any shares of the capital stock or other
equity interests of Guarantor, Borrower or any of the existing Underlying
Borrowers nor any outstanding securities convertible into such shares, warrants,
options, nor any rights to acquire any such convertible securities. To
Guarantor's knowledge, the Authorized Stock is held of record and beneficially
by the Persons, and in the amounts, identified on Exhibit 7.14. Neither
Guarantor nor Borrower nor any of the Underlying Borrowers owns any equity
interest in any entity other than as set forth on Exhibit 7.14. Except for liens
granted to Agents in connection with the Construction Loan, the Term Loan, the
Line of Credit Loan and/or this Guaranty, Guarantor, Borrower and the Underlying
Borrowers own the stock and other equity interests set forth on Exhibit 7.14 as
being so owned, in each case free and clear of any lien, encumbrance or
restriction on transfer (other than restrictions generally applicable under
securities laws).
7.15 Real Property. Except as shown on Exhibit 7.15, Guarantor does not now
own any title or any other interest in real property ("Real Estate Interests"),
including without limitation any fee interest, leasehold interest or fixture.
Guarantor has good and marketable title to all real property interests of
Guarantor listed on Exhibit 7.15 hereto. Guarantor agrees to revise Exhibit 7.15
from time to time in the event Guarantor acquires any additional Real Estate
Interests in the future so that such Exhibit remains accurate and complete.
7.16 No Contingent Liabilities. Except for the Guaranteed Obligations,
Guarantor: (a) does not have any direct or contingent liability for any
obligation of any Person; and (b) has no obligation to make a loan or advance to
any
14
<PAGE>
Person or to own, purchase or acquire any stock, obligations or securities of,
or any other interests in, or to make any capital contribution to, any Person.
7.17 Title Insurance. Guarantor has delivered to Agents: (a) mortgagees'
title insurance commitments ("Title Commitments") acceptable to Agents from one
or more insurers acceptable to Agents (the "Title Insurers") committing to issue
one or more title policies (ALTA Loan Policy Form) (the "Title Policies")
insuring the liens in favor of Agents (on behalf of the Lender Group) on each
parcel of real property of Guarantor having a Fair Market Value of $25,000.00 or
more as a first priority lien on such real property and (i) deleting the
standard printed exceptions, (ii) containing only such exceptions to title as
are acceptable to Agents, and (iii) containing such other endorsements as Agents
may require; and (b) either a Title Commitment or, at Guarantor's option, a
written ownership and encumbrance report of current date indicating that there
are no prior liens on each parcel of such real property having a Fair Market
Value of less than $25,000.00. In addition, in the case of the parcels of real
property covered by a Title Commitment which have an estimated fair market value
of $25,000.00 or more, Guarantor has caused the Title Insurers to deliver to
Agents a written confirmation acceptable to Agents confirming that the Title
Insurers are irrevocably committed to issue the Title Policies.
7.18 Disclosure. The representations and warranties of this Article 7 do
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make such representations not misleading.
8. Affirmative Covenants of Guarantor. From and after the date of this
Guaranty and until the Guaranteed Obligations are indefeasibly paid in full and
the Lender Group has no obligation to make any advances to Borrower under the
Loan Agreements, Guarantor agrees that it will observe and comply with the
following covenants:
8.1 Books and Records. Guarantor shall at all times keep proper books of
record and account, in which correct and complete entries shall be made of all
its dealings, in accordance with GAAP.
8.2 Reports and Notices. Guarantor shall provide to Agents the following
reports, information and notices:
8.2.1 Annual Financial Statements. As soon as available, but in no event
later than one hundred and twenty (120) days after the end of any fiscal year of
Guarantor occurring during the term hereof annual financial statements of
Guarantor, on a consolidated and consolidating basis, prepared in accordance
with GAAP consistently applied which shall: (a) be audited by independent
certified public accountants selected by Guarantor which are reasonably
acceptable to Agents; (b) be accompanied by a report of such accountants
containing an opinion reasonably acceptable to Agents; (c) be accompanied by a
Compliance Certificate; (d) be prepared in reasonable detail and in
15
<PAGE>
comparative form; and (e) include a balance sheet, an income statement, a
statement of cash flows, a statement of stockholders' equity, and all notes and
schedules relating thereto.
8.2.2 Quarterly Financial Statements. As soon as available but in no event
more than sixty (60) days after the end of each Quarter in Guarantor's fiscal
year the following financial statements, prepared in accordance with GAAP
consistently applied: (a) a balance sheet, (b) an income statement, (c) a
statement of cash flows, (d) a statement of stockholders' equity, for such
Quarter and for the year to date, and (e) such other quarterly statements as
Agents may reasonably request, which quarterly statements requested under this
clause (e) shall include any and all notes and schedules thereto. Such quarterly
financial statements required pursuant to this Subsection 8.2.2 shall be
accompanied by a Compliance Certificate.
8.2.3 Additional Information. With reasonable promptness, such additional
financial information or documentation as Agents may reasonably request.
8.2.4 Notice of Default. As soon as the existence of any default in the
observance or performance of any of the covenants in this Article 8 or in
Article 9 hereof becomes known to any officer of Guarantor, Guarantor shall
promptly give Agents written notice of such default, the nature and status
thereof, and the action being taken or proposed to be taken with respect
thereto.
8.2.5 Notice of Litigation. Guarantor shall promptly notify Agents in
writing of all litigation in which Guarantor or Borrower is a party, and which
either: (a) involves an amount of $100,000 or more, singly or in the aggregate
at any time, or (b) could reasonably be expected to result in a Material Adverse
Effect with respect to Borrower or Guarantor.
8.2.6 Notice of Material Adverse Effect. Promptly after Guarantor obtains
knowledge thereof, notice of any matter which has resulted or would result in a
Material Adverse Effect on Borrower or Guarantor.
8.2.7 Notice of Environmental Litigation. Without limiting the provisions
of Subsection 8.2.5 of this Guaranty, promptly after Guarantor's receipt
thereof, notice of the receipt of all pleadings, orders, complaints,
indictments, or other communication alleging a condition that may require
Guarantor to undertake or to contribute to a cleanup or other response under
Environmental Regulations, or which seeks penalties, damages, injunctive relief,
or criminal sanctions related to alleged violations of such laws, or which
claims personal injury or property damage to any person as a result of
environmental factors or conditions or which, if adversely determined, could
have a Material Adverse Effect on Guarantor.
16
<PAGE>
8.2.8 Governmental and Other Notices. Promptly after Guarantor's receipt
thereof, copies of any notices or other communications received from any
governmental authority, with respect to any matter or proceeding the effect of
which could reasonably be expected to have a Material Adverse Effect on
Guarantor.
8.2.9 Adverse Action Regarding Required Licenses. In the event Guarantor
learns that any petition, action, investigation, notice of violation or apparent
liability, notice of forfeiture, order to show cause, complaint or proceeding is
pending, or, to the best of Guarantor's knowledge, threatened, to seek to
revoke, cancel, suspend, modify, or limit any of the Required Licenses,
Guarantor shall provide CoBank with prompt written notice thereof and shall
take, or cause to be taken, all reasonable measures to contest such action in
good faith.
8.3 Maintenance of Existence and Qualification. Guarantor shall maintain
its corporate existence in good standing under the laws of New York. Guarantor
will qualify and remain qualified as a foreign corporation in each jurisdiction
in which such qualification is necessary or desirable in view of its business,
operations and properties.
8.4 Compliance with Legal Requirements and Agreements. Guarantor shall
comply: (a) in all material respects with all laws, rules, regulations and
orders applicable to Guarantor or its business; and (b) with all agreements,
indentures, mortgages, and other instruments to which it is a party or by which
it or any of its property is bound; provided, however, that the failure of
Guarantor to comply with this sentence in any instance shall not constitute a
breach of this Section unless such failure would have a Material Adverse Effect
on Guarantor.
8.5 Compliance with Environmental Laws. Without limiting the provisions of
Section 8.4 of this Guaranty, Guarantor shall comply in all material respects
with, and take all reasonable steps necessary to cause all persons occupying or
present on any properties owned or leased by Guarantor to comply with, all
Environmental Regulations, the failure to comply with which would have a
Material Adverse Effect on Guarantor.
8.6 Taxes. Guarantor shall cause to be paid when due all taxes,
assessments, and other governmental charges upon it, its income, its sales, its
properties, and federal and state taxes withheld from its employees' earnings,
unless such taxes, assessments, or other governmental charges shall be contested
in good faith by appropriate actions or legal proceedings and Guarantor shall
establish adequate reserves therefor in accordance with GAAP.
8.7 Insurance. Guarantor shall keep the Guarantor Collateral insured at all
times by an insurance carrier or carriers approved by Agents which have an A
rating by the current BEST Key Rating Guide (provided that Florists Mutual Group
will be deemed an approved insurance carrier so long as its BEST Key Rating does
not fall
17
<PAGE>
below its rating as of the Closing Date), against all risks covered by a special
form policy (and including flood, earthquake and windstorm coverage) in the
amount of the full replacement cost of the Guarantor Collateral as well as
liability, worker's compensation, business interruption, boiler and machinery
and such other insurance as Agents may reasonably require, in amounts and with
deductibles or maximum payouts customarily carried by entities in similar lines
of business. Guarantor shall also maintain fidelity coverage (including employee
dishonesty) on such officers and employees and in such amounts as Agents shall
specify, or in the absence of any such specification, as customarily carried by
corporations engaged in comparable businesses and comparably situated. Such
insurance policies shall contain such reasonable endorsements as Agents shall
from time to time require and all liability policies shall name Agents as an
additional insured as its interests may appear. All such insurance policies
shall be endorsed with a mortgagee's or loss payable clause, as appropriate, in
favor of Agents. The policy or policies evidencing all insurance referred to in
this Section and receipts for the payment of premiums thereon or certificates of
such insurance satisfactory to Agents shall be delivered to and held by Agents.
All such insurance policies shall contain a provision requiring at least ten
(10) days' notice to Agents prior to any cancellation for non-payment of
premiums and at least forty-five (45) days' notice to Agents of cancellation for
any other reason or of modification or non-renewal. Guarantor shall give Agents
satisfactory evidence of renewal of all such policies with premiums paid at
least thirty (30) days before expiration. Guarantor agrees to pay all premiums
on such insurance as they become due, and will not permit any condition to exist
on or with respect to the Guarantor Collateral which would wholly or partially
invalidate any insurance thereon. Effective upon any default hereunder, all of
Guarantor's right, title and interest in and to all such policies and any
unearned premiums paid thereon are hereby assigned to Agents who shall have the
right, but not the obligation, to assign the same to any purchaser of the
Guarantor Collateral at any foreclosure sale. Guarantor shall give prompt
written notice to the insurance carrier and Agents of any loss. Guarantor hereby
authorizes and empowers Agents, at Agents' option and in Agents' sole
discretion, to, upon the occurrence of a default hereunder, act as
attorney-in-fact for Guarantor to make proof of loss, to adjust and compromise
any claim under insurance policies, to collect and receive insurance proceeds,
and to deduct therefrom Agents' expenses incurred in the collection of such
proceeds, and all insurance policies of Guarantor shall provide that Agents may
act as Guarantor's attorney-in-fact for such purposes.
8.8 Title to Assets and Maintenance. Guarantor shall defend and maintain
title to the Guarantor Collateral. Guarantor shall keep its assets, both real
and personal, in good order and condition consistent with industry practice and
shall make all necessary repairs, replacements and improvements so that its
business may be properly and advantageously conducted.
8.9 Payment of Liabilities. Guarantor shall pay all liabilities (including,
without limitation, (a) any indebtedness for borrowed money or for the
18
<PAGE>
deferred purchase price of property or services, (b) any obligations under
leases which have or should have been characterized as capitalized leases, as
determined in accordance with GAAP, or (c) any contingent liabilities, such as
guaranties, for the obligations of others relating to indebtedness for borrowed
money or for the deferred purchase price of property or services or relating to
obligations under leases which have or should have been characterized as
capitalized leases, as determined in accordance with GAAP) as they become due
beyond any period of grace under the instrument creating such liabilities,
unless (with the exception of such obligations or liabilities owed to the Lender
Group) they are contested in good faith by appropriate actions or legal
proceedings, such contesting will not result in a Material Adverse Effect with
respect to Guarantor, and Guarantor establishes adequate reserves therefor in
accordance with GAAP.
8.10 Inspection. Guarantor shall permit Agents, the Lender Group or their
agents, during normal business hours or at such other times as the parties may
agree, to examine Guarantor's properties, books, and records, and to discuss
Guarantor's affairs, finances, operations, and accounts with its respective
officers, directors, employees, and independent certified public accountants.
8.11 Further Assurances, Real Property Security Interests. Guarantor shall,
as may be required from time to time by Agents, provide such documents as may be
necessary or desirable in the judgment of Agents to confirm Agents' security
interest in the Guarantor Collateral. Promptly after the purchase or other
acquisition of any fee interest in real estate having a cost or Fair Market
Value of $25,000.00 or more, Guarantor shall provide Agents with written notice
of such acquisition and shall grant to Agents a first deed of trust or mortgage
on such real estate (subject to liens permitted by Section 9.3 hereof and to the
Intercreditor Agreement), such deed of trust or mortgage to be in form and
substance as specified by Agents. In connection with the delivery of any
mortgage or deed of trust, Guarantor shall, where required under the guidelines
set forth in Section 7.17 of this Guaranty, deliver to Agents, at Guarantor's
sole cost, a mortgagee's title policy, in form and substance satisfactory to
Agents, and in such amount as Agents shall specify but in no event greater than
the value of the real estate. In connection with entering into, as lessee, any
lease of an interest in real property which lease calls for a rental payment
equal to or in excess of $25,000.00 per annum, Guarantor shall deliver to Agents
a collateral assignment of Guarantor's rights under such lease and a consent of
the lessor under such lease to such collateral assignment, each in form and
substance satisfactory to Agents together with such estoppels of lessor as
Agents shall specify.
8.12 Required Licenses . Guarantor shall duly and lawfully obtain and
maintain in full force and effect all Required Licenses.
19
<PAGE>
8.13 Equity to Senior Long-Term Debt. Guarantor shall maintain on a
Quarterly basis, a ratio of Equity to Senior Long-Term Debt, calculated on a
consolidated basis, of not less than 25%.
8.14 Excess Cash Flow. Upon the occurrence of an Event of Default (as such
term is defined in each of the Loan Agreements) under any Loan Agreement,
Guarantor shall pay, or shall cause the payors thereof to pay, the Excess Cash
Flow directly to each of the Construction Agent, the Term Agent and the Line of
Credit Agent pro rata on the basis of the amount of principal and interest
outstanding under the Construction Loan, the Term Loan and the Line of Credit
Loan, respectively.
8.15 ERISA. In the event Guarantor adopts , maintains, or becomes obligated
to make payments under, any Guarantor Benefit Plan in the future (which
Guarantor may not do without the prior written consent of the Agents), Guarantor
shall: (a) cause each such Guarantor Benefit Plan to comply in all material
respects with the Code and ERISA, including but not limited to preparing and
delivering each material report, statement or other document required by ERISA
and the Code within the period specified therein and conforming in form and
substance to the provisions thereof; (b) cause any Guarantor Benefit Plan that
is intended to satisfy the requirements of Section 401(a) of the Code to satisfy
such requirements including, but not limited to obtaining a favorable
determination letter with respect to each such Guarantor Benefit Plan; and (c)
prepare and deliver and administer each Guarantor Benefit Plan in all material
respects in accordance with the terms of such plan and with ERISA, the Code, and
any other applicable law, except to the extent any failure to comply with the
preceding clauses (a), (b) or (c) would not have a Material Adverse Effect on
Guarantor. Guarantor shall take any actions necessary to terminate its status as
a participating employer in any employee benefit plan (within the meaning of
Section 3(3) of ERISA) sponsored by an other entity. Within ten (10) Business
Days after receiving such notice, Guarantor shall furnish to Agents and the
Lender Group any notice received by Guarantor relating to an assertion of
withdrawal liability imposed by any Multiemployer Plan upon Guarantor or
Guarantor's controlled group prior to the Closing Date, or relating to any
violation of the provisions of the Code or ERISA asserted by the Department of
Labor, the Pension Benefit Guaranty Corporation or the Department of the
Treasury with respect to any Guarantor Benefit Plan that could reasonably be
expected to have a Material Adverse Effect on Guarantor.
9. Negative Covenants of Guarantor. From and after the date of this
Guaranty and until the Guaranteed Obligations are indefeasibly paid in full and
the Lender Group does not have any obligation to make any advances to Borrower
under the Loan Agreements, Guarantor agrees that it will observe and comply with
the following covenants for the benefit of the Lender Group:
9.1 Borrowings. Guarantor shall not create, incur, assume or permit to
exist: (a) any indebtedness for borrowed money or for the deferred purchase
price of property or services; (b) any contingent liabilities, such as
guarantees; or (c) any
20
<PAGE>
obligations under leases which have or should have been characterized as capital
leases, as determined in accordance with GAAP, except for: (i) indebtedness
owing to Borrower under the documents evidencing the Guarantor Working Capital
Loan, (ii) indebtedness which does not exceed in the aggregate the principal
amount of $500,000.00 as to which the scheduled principal and interest payments
do not exceed $100,000.000 in any twelve month period, (iii) leases of equipment
used in the ordinary course of Guarantor's business, provided that the greater
of the book or fair market value of the assets leased does not exceed $250,000
in the aggregate and the annual scheduled lease payments do not exceed $75,000
in the aggregate, (iv) contingent liabilities to the Lender Group arising out of
this Guaranty; and (v) the indebtedness owed to Cogentrix Delaware Holdings,
Inc. ("Cogentrix") pursuant to the loan, in the original principal amount of
$1,375,000, made by Cogentrix to Guarantor pursuant to the Promissory Note and
Security Agreement dated March 10, 1997 executed by Guarantor, Village Farms of
Delaware, L.L.C and Village Farms, L.L.C. for the benefit of Cogentrix ("Pocono
Loan").
9.2 No Other Businesses. Guarantor shall not transact or engage in any
business other than: (a) the acquisition, construction, development, and
marketing of Greenhouse Facilities and their vegetable and/or fruit products,
and (b) agricultural biotech business activities related to vegetable and/or
fruit production and preservation.
9.3 Liens. Guarantor will not create, incur, assume or suffer to exist any
mortgage, pledge, lien, charge or other encumbrance on, or any security interest
in, any of the Guarantor Collateral, except:
(a) the security interests, mortgages, pledges, liens, or other charges or
encumbrances resulting from the Guarantor Security Documents and the documents
granting and perfecting the security interest in favor of Borrower in
Guarantor's accounts and inventory as security for the Guarantor Working Capital
Loan;
(b) liens for taxes or other governmental charges which are not due or
remain payable without penalty, or are being contested in good faith by
appropriate actions or proceedings; provided that such reserves or other
appropriate provisions, if any, as shall be required by GAAP, shall have been
made for such taxes or other governmental charges;
(c) deposits or pledges to secure workmen's compensation, unemployment
insurance, old age benefits or other social security obligations or in
connection with or to secure the performance of bids, tenders, trade contracts
or leases or to secure statutory obligations or surety or appeal bonds or other
pledges or deposits of like nature and all in the ordinary course of business;
21
<PAGE>
(d) mechanics', carriers', workmen's, repairmen's or other like liens
arising in the ordinary course of business in respect of obligations not yet due
or which are being contested in good faith and by appropriate proceedings;
(e) easements, rights-of-way, zoning restrictions and other similar matters
incidental to the ownership of property which do not in the aggregate materially
detract from the value of such property or assets or materially impair their use
in the operation of the business of Guarantor;
(f) liens securing purchase money indebtedness; provided, that: (i) such
property acquired is used in the ordinary course of Guarantor's business, (ii)
such security interests shall attach only to the property so purchased, and
(iii) the amount of the purchase money financing so secured does not exceed the
amount permitted under Section 9.1;
(g) the liens and security interests granted to CoBank, as Administrative
Agent on behalf of and for the benefit of Farm Credit Bank of Texas and Texas
Production Credit Association in the Fort Davis Collateral as security for the
obligations of Village Farms to Farm Credit Bank of Texas and Texas Production
Credit Association under the Village Farms Loan Agreement;
(h) the liens and security interests granted to Cogentrix in all cash
distributions or other payments received, directly or indirectly, by Guarantor
from Pocono Village Farms, L.P., a Delaware limited partnership and all proceeds
thereof, as security for the Pocono Loan.
9.4 Sale of Assets. Guarantor will not sell, convey, assign, lease or
otherwise transfer or dispose of, voluntarily, by operation of law or otherwise,
any of the Guarantor Collateral, except that: (a) Guarantor may dispose of
equipment which is obsolete or no longer used or useful by Guarantor in its
business so long as (i) no Event of Default has occurred and is continuing, (ii)
the transfer is made in an arms length transaction, and (iii) such sales do not
involve equipment having an aggregate book value or fair market value, whichever
is greater, in excess of $200,000.00 for all such equipment disposed of in any
transaction and $500,000.00 for all such equipment disposed of in any calendar
year; and (b) Guarantor may dispose of worn-out equipment so long as (i) if an
Event of Default has occurred and is continuing, any proceeds are paid to the
Lender Group, on a pro rata basis, and (ii) such sales do not involve equipment
having an aggregate fair market value in excess of $100,000.00 for all such
equipment disposed of in any calendar year.
9.5 Liabilities of Others. Guarantor shall not assume, guaranty, endorse or
otherwise become directly or contingently liable in connection with any
obligation of any other Person other than pursuant to this Guaranty.
22
<PAGE>
9.6 Mergers; Acquisitions; Etc. Guarantor shall not:
(a) merge or consolidate with any entity, or acquire all or substantially
all of the assets of any person or entity, except that, where the
post-transaction pro-forma submitted by Guarantor to Agents and the Lender Group
(i) uses reasonable assumptions satisfactory to Agents, (ii) demonstrates that
gross revenues less cash expenses is no less than the amount of gross revenues
less cash expenses immediately prior to the consummation of the merger,
consolidation or acquisition, as applicable, (iii) demonstrates that the ratio
of Equity to Net Fixed Investments is no less than such ratio immediately prior
to the consummation of the merger, consolidation or acquisition, and (iv) the
consummation of the merger, consolidation or acquisition, as applicable, will
not result in the breach by Guarantor of any covenant under this Guaranty or the
other Guarantor Documents, then Guarantor may consummate such merger,
consolidation or acquisition upon the prior written consent of Agents which
consent shall not be unreasonably withheld;
(b) form or create any new subsidiary or Affiliate without the prior
written consent of Agents, which consent shall not be unreasonably withheld;
provided, however, that, prior to making the initial capital or equity
contribution by Guarantor to any such subsidiary or Affiliate, Guarantor must
obtain the written consent of the Agents, which consent shall be given in the
sole discretion of the Agents, and the ability of Guarantor to make capital or
equity contributions after the initial such contribution shall be governed by
Section 9.7 hereof; or
(c) commence operations under any other name, organization, or entity,
including any joint venture.
9.7 Loans, Advances and Investments. Guarantor will not make or permit to
remain outstanding any loan or advance to, or own, purchase or acquire any
stock, obligations or securities of, or any other interest in, or make any
capital contribution to, any Person, except that Guarantor may own, purchase,
extend or acquire (as applicable):
(a) commercial paper maturing not in excess of one year from the date of
acquisition and rated P1 by Moody's Investors Service, Inc. or A1 by Standard &
Poor's Corporation on the date of acquisition;
(b) certificates of deposit in North American commercial banks rated C or
better by Keefe, Bruyette & Woods, Inc. or 3 or better by Cates Consulting
Analysts, maturing not in excess of one year from the date of acquisition;
(c) obligations of the United States government or any agency thereof, the
obligations of which are guaranteed by the United States government, maturing,
in each case, not in excess of one year from the date of acquisition;
23
<PAGE>
(d) repurchase agreements of any bank or trust company incorporated under
the laws of the United States of America or any state thereof and fully secured
by a pledge of obligations issued or fully and unconditionally guaranteed by the
United States government;
(e) investments in Village Farms; and
(f) upon the prior written consent of Agents, investments in Underlying
Borrowers, potential Underlying Borrowers or the subsidiaries and Affiliates
formed pursuant to Section 9.6(b).
9.8 Change in Owner Group. Guarantor shall not permit or suffer to exist a
change in the Owner Group which results in the Owner Group owning less than
fifty percent (50%) of Guarantor.
9.9 Payment of Dividends; Distributions. Guarantor shall not, directly or
indirectly, declare or pay any dividends on account of any shares of any class
of its capital stock now or hereafter outstanding, or set aside or otherwise
deposit or invest any sums for such purpose, or redeem, retire, defease,
purchase or otherwise acquire any shares of any class of its capital stock (or
set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock or apply or set apart any sum, or make any
other distribution (by reduction or capital or otherwise) in respect of any such
shares or agree to do any of the foregoing; provided that, for so long as
Guarantor is not a taxable entity under the Internal Revenue Code, Guarantor may
pay cash dividends to its shareholders, after the end of each fiscal year of
Guarantor based on the ratio of Equity to Net Fixed Investments for the fiscal
year of Guarantor most recently completed, in the following amounts:
(a) with respect to any fiscal year of Guarantor in which the ratio of
Equity to Net Fixed Investments, calculated on a consolidated basis, equals or
exceeds fifty percent (50%), one hundred percent (100%) of Net Income;
(b) with respect to any fiscal year of Guarantor in which the ratio of
Equity to Net Fixed Investments, calculated on a consolidated basis, equals or
exceeds forty percent (40%) but is less than fifty percent (50%), sixty-five
percent (65%) of Net Income;
(c) with respect to any fiscal year of Guarantor in which the ratio of
Equity to Net Fixed Investments, calculated on a consolidated basis, equals or
exceeds thirty percent (30%) but is less than forty percent (40%), fifty-five
percent (55%) of Net Income; and
24
<PAGE>
(d) with respect to any fiscal year of Guarantor in which the ratio of
Equity to Net Fixed Investments, calculated on a consolidated basis, is less
than thirty percent (30%), forty-five percent (45%) of Net Income.
9.10 Payments on Indebtedness. Guarantor shall not make any principal
payment on any indebtedness except indebtedness owing to Borrower under the
Guarantor Working Capital Loan and indebtedness owing to the Lender Group under
the Guarantor Documents and, so long as no Event of Default or Potential Default
under any Loan Agreement shall exist, indebtedness permitted by Section 9.1 of
this Guaranty.
9.11 Transactions With Affiliates. Guarantor shall not purchase, acquire,
or sell any equipment, other personal property, real property or services from
or to any Affiliate, except in the ordinary course of Guarantor's business and
upon fair and reasonable terms no less favorable than would be obtained by
Guarantor in a comparable arm's-length transaction with an unrelated Person.
9.12 ERISA. Guarantor shall not: (a) adopt, maintain or become obligated to
contribute to any Guarantor Benefit Plan without the prior written consent of
the Agents; (b) engage in or permit any transaction which could result in a
"prohibited transaction" (as such term is defined in Section 406 of ERISA) or in
the imposition of an excise tax pursuant to Section 4975 of the Code; (c) engage
in or permit any transaction or other event which could result in a "reportable
event" as such term is defined in Section 4043 of ERISA for any Guarantor
Benefit Plan that is an "employee pension benefit plan" as defined in Section
3(2) of ERISA that is intended to satisfy the requirements of Section 401(a) of
the Code (each a "Guarantor Pension Plan"); (d) fail to make full payment when
due of all amounts which, under the provisions of any Guarantor Benefit Plan,
Guarantor is required to pay as contributions thereto; (e) permit to exist any
"accumulated funding deficiency" (as such term is defined in Section 302 of
ERISA) in excess of $25,000.00, whether or not waived, with respect to any
Guarantor Pension Plan; (f) fail to make any payments to any "multiemployer
plan" that Guarantor may be required to make under any agreement relating to
such "multiemployer plan" or any law pertaining thereto; or (g) terminate any
Guarantor Pension Plan in a manner which could result in the imposition of a
lien on any property of Guarantor pursuant to Section 4068 of ERISA. Guarantor
shall not terminate any Guarantor Pension Plan so as to result in any liability
to the Pension Benefit Guaranty Corporation. As used in this Section, all terms
enclosed in quotation marks shall have the meanings set forth in ERISA.
Guarantor's failure to comply with any of the foregoing provisions of this
Section shall not constitute a breach of this Guaranty unless such failure has a
Material Adverse Effect on Guarantor.
9.13 Change in Fiscal Year. Guarantor shall not change its fiscal year from
a year ending on December 31.
25
<PAGE>
10. Indemnification.
10.1 General; Stamp Taxes; Intangibles Tax. Guarantor agrees to indemnify
and hold Agents, the Lender Group and their directors, officers, employees,
agents, professional advisers and representatives ("Indemnified Parties")
harmless from and against any and all claims, damages, losses, liabilities,
costs or expenses whatsoever which they or any other Indemnified Party may incur
(or which may be claimed against any such Indemnified Party by any Person),
including attorneys' fees incurred by any Indemnified Party, arising out of or
resulting from: (a) the material inaccuracy of any representation or warranty of
Borrower or Guarantor in this Guaranty or the other Guarantor Documents or Loan
Documents; (b) the material failure of Borrower or Guarantor to perform or
comply with any covenant or obligation of Borrower or Guarantor under this
Guaranty or the other Guarantor Documents or Loan Documents; or (c) the exercise
by Agents or the Lender Group of any right or remedy set forth in this Guaranty
or the other Guarantor Documents or the Loan Documents, provided that Guarantor
shall have no obligation to indemnify any Indemnified Party against claims,
damages, losses, liabilities, costs or expenses to the extent that a court of
competent jurisdiction renders a final non-appealable determination that the
foregoing are solely the result of the willful misconduct or gross negligence of
such Indemnified Party. In addition, Guarantor agrees to indemnify and hold the
Indemnified Parties harmless from and against any and all claims, damages,
losses, liabilities, costs or expenses whatsoever which Agents or the Lender
Group or any other Indemnified Party may incur (or which may be claimed against
any such Indemnified Party by any Person), including attorneys' fees incurred by
any Indemnified Party, arising out of or resulting from the imposition or
nonpayment by Guarantor or Borrower of any stamp tax, intangibles tax, or
similar tax, including any amounts owing by virtue of the assertion that the
property valuation used to calculate any such tax was understated. Guarantor
shall have the right to assume the defense of any claim as would give rise to
Guarantor's indemnification obligation under this Section with counsel of
Guarantor's choosing so long as such defense is being diligently and properly
conducted and Guarantor shall establish to the Indemnified Party's satisfaction
that the amount of such claims are not, and will not be, material in comparison
to the liquid and unrestricted assets of Guarantor available to respond to any
award which may be granted on account of such claim. So long as the conditions
of the preceding sentence are met, the Indemnified Party shall have no further
right to reimbursement of attorneys' fees incurred thereafter. The obligation to
indemnify set forth in this Section shall survive the termination of this
Guaranty.
10.2 Indemnification Relating to Hazardous Substances. Guarantor shall not
locate, produce, treat, transport, incorporate, discharge, emit, release,
deposit or dispose of any Hazardous Substance in, upon, under, over or from any
property owned or held by Guarantor, except in accordance with all Environmental
Regulations; Guarantor shall not permit any Hazardous Substance to be located,
produced, treated, transported, incorporated, discharged, emitted, released,
deposited, disposed of or to
26
<PAGE>
escape in, upon, under, over or from any property owned or held by Guarantor,
except in accordance with all Environmental Regulations; and Guarantor shall
comply with all Environmental Regulations which are applicable to such property.
If an Agent reasonably believes that an Environmental Regulation has been
violated by Guarantor's activities upon property owned or held by Guarantor, and
if such Agent so requests, Guarantor shall have prepared an environmental
review, audit, assessment and/or report relating to the subject property, at
Guarantor's sole cost and expense, by an engineer or other environmental expert
acceptable to Agents. If, however, the environmental review, audit, assessment
and/or report reveals that no Environmental Regulation has been violated, such
Agent shall reimburse Guarantor for the costs and expenses of such engineer or
other environmental expert in completing such audit or report. Guarantor shall
indemnify the Indemnified Parties against, and shall reimburse the Indemnified
Parties for, any and all claims, demands, judgments, penalties, liabilities,
costs, damages and expenses, including court costs and attorneys' fees incurred
by the Indemnified Parties (prior to trial, at trial and on appeal) in any
action against or involving the Indemnified Parties, resulting from any breach
of the foregoing covenants, or from the discovery of any Hazardous Substance in,
upon, under or over, or emanating from, such property, it being the intent of
Guarantor and the Indemnified Parties that the Indemnified Parties shall have no
liability or responsibility for damage or injury to human health, the
environmental or natural resources caused by, for abatement and/or clean-up of,
or otherwise with respect to, Hazardous Substances by virtue of the interest of
Agents, or the Lender Group, or any of them, in the property created by any
documents securing the Guaranteed Obligations or as the result of Agents or the
Lender Group, or any of them, exercising any of their rights or remedies with
respect thereto, including but not limited to becoming the owner thereof by
foreclosure or conveyance in lieu of foreclosure. The foregoing covenants of
this Section shall be deemed continuing covenants for the benefit of the
Indemnified Parties, and any successors and assigns of the Indemnified Parties,
including but not limited to the holder of any certificate of purchase, any
transferee of the title of Agents or the Lender Group, or any of them, or any
subsequent owner of the property, and shall survive the satisfaction or release
of any lien, any foreclosure of any lien and/or any acquisition of title to the
property or any part thereof by Agents or the Lender Group, or any of them, or
anyone claiming by, through or under Agents or the Lender Group, or any of them,
or Guarantor by deed in lieu of foreclosure or otherwise. Any amounts covered by
the foregoing indemnification shall bear interest from the date incurred at the
Default Interest Rate, shall be payable on demand, and shall be secured by the
Guarantor Security Documents. The indemnification and covenants of this Section
shall survive the termination of this Guaranty and other covenants.
27
<PAGE>
11. Miscellaneous.
11.1 Loan Documents. Guarantor has received and reviewed the Loan
Agreements and the other Loan Documents and acknowledges, agrees, and consents
to the terms and conditions set forth therein.
11.2 Additional Guarantors. This Guaranty shall be binding on Guarantor
whether or not any other guarantors execute any guarantees of the Indebtedness.
11.3 No Waiver by Agents or Lender Group. No delay or failure by Agents or
the Lender Group to exercise any right or remedy against Borrower or Guarantor
will be construed as a waiver of that right or remedy. All remedies of Agents
and the Lender Group against Borrower and Guarantor are cumulative.
11.4 Assignment. Guarantor may not assign this Guaranty without the written
consent of Agents. Subject to the foregoing, the provisions of this Guaranty
shall be binding upon Guarantor, its successors and assigns. Agents and the
Lender Group may, without notice to or consent from Guarantor, assign all or any
part of the Indebtedness or any security therefor. In the event of such
assignment, each and every immediate and successive assignee, transferee or
holder of all or any part of the Indebtedness shall have the right to enforce
this Guaranty, by legal action or otherwise, for its benefit, as fully as if
such assignee, transferee or holder were named herein and specifically given
such rights and power. Notwithstanding such sale, assignment, or transfer,
Agents and the Lender Group shall have an unimpaired right to enforce this
Guaranty for their own benefit as to any portion of the Indebtedness not sold,
transferred or assigned, or which the Lender Group may have reacquired after
such sale, transfer or assignment.
11.5 Severability. The invalidity or unenforceability of any one or more
provisions of this Guaranty will not affect any other provision of this
Guaranty. In the case of such invalidity or unenforceability, this Guaranty
shall be construed as if the invalid or unenforceable provisions had not been
included herein.
11.6 Amendments. This Guaranty may not be amended without the written
consent of Agents and Guarantor. Guarantor agrees that it shall reimburse Agents
and the Lender Group for all fees and expenses incurred in retaining outside
legal counsel in connection with any amendment or modification to this Guaranty
requested by the Guarantor.
11.7 Service of Process and Consent to Jurisdiction. Guarantor hereby
agrees that any litigation with respect to this Guaranty or to enforce any
judgment obtained against Guarantor for breach of this Guaranty or the other
Guarantor Documents may be brought in the courts of the State of Colorado and in
the United States District Court for the District of Colorado (if applicable
subject matter
28
<PAGE>
jurisdictional requirements are present), as Agents may elect; and, by execution
and delivery of this Guaranty, Guarantor irrevocably submits to such
jurisdiction. With respect to litigation concerning this Guaranty or the other
Guarantor Documents within the jurisdiction of the courts of the State of
Colorado or the United States District Court for the District of Colorado,
Guarantor hereby irrevocably appoints The Corporation Company, 1675 Broadway,
Denver, Colorado 80202, as the agent of Guarantor to receive for and on behalf
of Guarantor, service of process, which service may be made by mailing a copy of
any summons or other legal process to Guarantor in care of such agent. Guarantor
agrees that Guarantor shall maintain a duly appointed agent for service of
summons and other legal process as long as Guarantor remains obligated under
this Guaranty and shall keep Agents and the Lender Group advised in writing of
the identity and location of such agent. The receipt by such agent and/or by
Guarantor of such summons or other legal process in any such litigation shall be
deemed personal service and acceptance by Guarantor for all purposes of such
litigation.
11.8 Jury Waiver. IT IS MUTUALLY AGREED BY AND BETWEEN AGENTS, THE LENDER
GROUP AND GUARANTOR THAT THEY EACH WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM BROUGHT ON ANY MATTER WHATSOEVER ARISING OUT OF OR
IN ANY WAY CONNECTED WITH THIS GUARANTY.
11.9 Notices. All notices, requests and demands required or permitted under
the terms of this Guaranty to be given by Agents or the Lender Group to
Guarantor and given by Guarantor to Agents or the Lender Group and all notices
relating to this Guaranty shall be in writing, and, if intended for one or more
members of the Lender Group, shall be given to the respective Agent or Agents,
and shall be deemed to have been given or made: (a) if delivered personally,
immediately upon delivery; (b) if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; (c) if by nationally
recognized overnight courier service with instructions to deliver the next
Business Day, one (1) Business Day after sending; and (d) if by United States
Mail, certified mail, return receipt requested, five (5) days after mailing. All
notices shall be addressed as follows unless either the Lender Group or
Guarantor has given written notice designating a different address in accordance
with the procedures set forth in this Section 11.9:
If to the Construction Agent:
CoBank, ACB
245 North Waco Street
Wichita, Kansas 67202
Attention:
FAX: (316) 290-2006
Attention: Mr. Greg Somerhalder
29
<PAGE>
If to the Term Agent:
CoBank, ACB
245 North Waco Street
Wichita, Kansas 67202
Attention:
FAX: (316) 290-2006
Attention: Mr. Greg Somerhalder
If to the Line of Credit Agent:
CoBank, ACB
245 North Waco Street
Wichita, Kansas 67202
FAX: (316) 290-2006
Attention: Mr. Greg Somerhalder
If to Guarantor:
Agro Power Development, Inc.
10 Alvin Court
East Brunswick, New Jersey 08816
FAX: (908) 254-1710
Attention: Treasurer
with a copy to:
Agro Power Development, Inc.
1811 Sardis Road, Suite 207
Charlotte, NC 28270
FAX: (908) 254-1710
Attention: Chief Financial Officer
11.10 Applicable Law. To the extent not governed by federal law, this
Guaranty shall be governed by and interpreted in accordance with the internal
laws of the State of Colorado, without giving effect to any otherwise applicable
rules concerning conflicts of law.
11.11 Captions. The captions or headings in this Guaranty and any table of
contents hereof are for convenience only and in no way define, limit or describe
the scope or intent of any provision of this Guaranty.
11.12 Mutual Release. Upon full indefeasible payment and satisfaction of
the Guaranteed Obligations and the other obligations contained in this Guaranty,
30
<PAGE>
Guarantor, Agents and the Lender Group shall, except as provided in Article 10
hereof, thereupon automatically each be fully, finally, and forever released and
discharged from any further claim, liability, or obligation in connection with
the Guaranteed Obligations.
Guarantor has executed this Guaranty as of the day and year first above
written.
GUARANTOR:
AGRO POWER DEVELOPMENT, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
31
Exhibit 10.91
EXECUTION COPY
FIRST AMENDMENT TO CREDIT AGREEMENT (Term Loan Funding)
[Regarding EcoScience Merger]
This First Amendment to Credit Agreement (this "Amendment") is entered into
on September , 1998 by and between:
Village Farms International Finance Association, a Delaware corporation, with an
address at 10 Alvin Court, East Brunswick, New Jersey 08816 ("Borrower"); and
CoBank, ACB, sole Agent and sole Syndication Party, as defined in the Credit
Agreement.
R E C I T A L S
A. The Borrower entered into a certain Credit Agreement (Term Loan Funding)
dated June 24, 1997 (as amended to date the "Credit Agreement") in connection
with certain financing provided by the Syndication Parties to the Borrower; and,
B. Agro Power Development, Inc. (the "Guarantor") entered into a certain
Guaranty of Agro Power Development, Inc. dated June 24, 1997 (as amended to date
the "Guaranty") in connection with certain financing provided by the Syndication
Parties to the Borrower; and,
C. The Guarantor desires to merge with Agro Acquisition Corp., an affiliate
of EcoScience Corporation, pursuant to a certain Agreement and Plan of Merger
(the "Merger Agreement") dated as of April 28, 1998 and amended and restated as
of July 31, 1998 (the "Merger"), with the name of the survivor being changed to
Agro Power Development, Inc.; and,
D. The parties desire to, among other things, amend and modify the Credit
Agreement as provided herein for the purpose, among other things, of permitting
the transactions described above.
A G R E E MENTS
NOW, THEREFORE, for value received, and intending to be legally bound
herein, Borrower covenants and agrees with the Agent and the Syndication Parties
as follows:
1. Definitions. Except as otherwise expressly provided herein, all
capitalized terms used herein and defined in the Credit Agreement shall have the
meaning ascribed to such term under the Credit Agreement.
(A) Section 1.11 APD. Upon and after the consummation of the Merger,
the definition of "APD" set forth in Section 1.11 shall be amended and
restated in its entirety as follows:
1.11 APD: Agro Power Development, Inc., a Delaware Corporation.
2. Other Amendments.
(A) Section 10.14 Real Property. Clause (b) of Section 10.14 of
the Credit Agreement is hereby amended and restated in its entirety as
follows:
<PAGE>
(b) does not own any fee interest or leasehold interest, or any other
interest, including without limitation any easements, rights of way or
licenses, in real property, other than those evidenced by Underlying
Loan Documents and other than as set forth on Exhibit 10.14 hereto.
(B) Section 10.19 Material Agreements. The first sentence of
Section 10.19 of the Credit Agreement is hereby amended and restated
in its entirety as follows:
Exhibit 10.19 attached hereto sets forth all agreements of Borrower
(other than Underlying Loan Documents), the termination or breach of
which, based upon Borrower's knowledge as of the date of making any
representations with respect thereto, would have a Material Adverse
Effect ("Material Agreements").
3. Regulatory and Other Notices. Section 12.2.8 of the Credit Agreement is
hereby amended and restated as follows:
12.2.8 Regulatory and Other Notices. Promptly after Borrower's receipt
thereof, copies of (a) any notices or other communications received from
any governmental authority with respect to any matter or proceeding the
effect of which could reasonably be expected to have a Material Adverse
Effect on Borrower; or (b) any written notices given by any Underlying
Borrower to Borrower in accordance with the terms of any agreement between
any Underlying Borrower and Borrower.
4. Continuance of Credit Agreement. Except as otherwise expressly provided
herein, the Credit Agreement shall remain in full force and effect in accordance
with its terms.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as
of the date first set forth above.
Agro Power Development, Inc.
BY:
---------------------------------
J. Kevin Cobb, Sr. VP. & CFO
CoBank, ACB, as Agent and sole
Syndication Party
BY:
---------------------------------
Name:
Title:
-2-
EXHIBIT 10.92
SECOND AMENDMENT TO CREDIT AGREEMENT
(Term Loan Funding)
Parties:
"CoBank": CoBank, ACB
245 North Waco Street
Wichita, Kansas 67201-2940
"Borrower": Village Farms International Finance Association
10 Alvin Court
East Brunswick, New Jersey 08816
"Guarantor": Agro Power Development, Inc.
10 Alvin Court
East Brunswick, New Jersey 08816
Effective Date: September 29, 1998
Recitals:
A. CoBank, acting in its capacity as Agent (in such capacity "Agent") and
as a Syndication Party, and Borrower entered into that certain Credit Agreement
(Line of Credit Facility) dated as of June 24, 1997 (as amended from time to
time, the "LOC Credit Agreement").
B. CoBank, acting in its capacity as Agent and as a Syndication Party, and
Borrower entered into that certain Credit Agreement (Term Loan Funding) dated as
of June 24, 1997 (as amended from time to time, the "Term Credit Agreement").
C. Guarantor executed its Guaranty of Agro Power Development, Inc. dated as
of June 24, 1997 (as amended from time to time, the "Guaranty") whereby
Guarantor guaranteed payment of certain obligations of Borrower, including,
without limitation, all obligations of Borrower arising under the LOC Credit
Agreement and the Term Credit Agreement and other Loan Documents.
D. Borrower and Guarantor have requested Agent and the Syndication Parties
under the Credit Agreement to increase the loan amount available under the LOC
Credit Agreement to the principal amount of $13,319,175.00, which Agent and the
Syndication Parties are willing to do under the terms and conditions as set
forth in the Second Amendment to Credit Agreement (Line of Credit Facility) and
in this Second Amendment to Credit Agreement (Term Loan Funding) ("Second
Amendment"), including the amendments to the Term Credit Agreement set forth or
described herein, and upon the written consent of Guarantor.
<PAGE>
Agreement:
Now, therefore, for good and valuable consideration, the receipt of which
is hereby acknowledged, including the mutual covenants contained herein, the
parties hereto hereby agree as follows:
1. Amendments to Term Credit Agreement. The Term Credit Agreement is
amended as of the Effective Date as follows:
1.1 The following definitions are added to Article 1 of the Term Credit
Agreement:
1.139 Significant Software: all software programs, equipment containing
embedded microchips, tradeware, telecommunications, physical plant and automated
processes, regularly used by Borrower in its business operations or financial
accounting which, individually, or together with one or more other such software
programs, would, if it failed to be Year 2000 Compliant, have a material adverse
effect on the business condition (financial or otherwise) of Borrower or the
operation of the business of Borrower, or Borrower's ability to perform its
obligations under this Term Credit Agreement.
1.140 Third Party Provider: means a third party vendor which provides
Significant Software.
1.141 Year 2000 Compliant: means, with respect to software, (a) that it
shall include calendar year 2000 date conversion and compatibility capabilities,
including date data century recognition, same century and multiple century
formula and date value calculations and user interface date data values that
reflect the century so that it will (i) manage and manipulate data involving
dates, including single century and multiple century dates and formulas, and
will not cause an abnormally ending scenario within the application or cause an
abort or result in the generation of incorrect values or invalid output
involving such dates, (ii) include the indication of the correct century in all
date related user interface functions, and (iii) operate in the same manner with
year dates of 2000 and beyond as it operates with year dates of 1900 to 1999;
and (b) that it shall recognize the year 2000 as a year containing February 29.
Software that is Year 2000 Compliant shall be considered to be in "Year 2000
Compliance".
1.142 Y2K Compliance Test: those procedures adopted by Borrower for testing
Borrower's Significant Software for Year 2000 Compliance.
1.2 The following definitions set forth in Article 1 of the Term Credit
Agreement are revised in their entirety to read as follows:
1.10 Aggregate Commitment: $46,680,825.00.
1.88 Maximum Syndication Amount::
For CoBank - $46,680,825.00
2
<PAGE>
1.3 A new Section 10.22 is added to Article 10 of the Term Credit Agreement
to read in its entirety as follows:
10.22. Year 2000 Compliance. Borrower represents and warrants that: (a)
Borrower has conducted an analysis of, and developed a compliance program with
respect to, all of its Significant Software, to ensure that it will be Year 2000
Compliant, and Borrower anticipates that such compliance program will be
completed on a timely basis; and (b) to the best of Borrower's knowledge, after
due inquiry, the impact of year 2000 on Borrower and the key customers and
suppliers of Borrower will not be such as to materially adversely affect the
business, condition (financial or otherwise) or operation of the business of
Borrower, taken as a whole, or to prevent Borrower from performing its
obligations hereunder.
1.4 A new Section 12.16 is added to Article 12 of the Term Credit Agreement
to read in its entirety as follows:
12.16. Year 2000 Compliance and Reports. Borrower agrees: (a) to cause all
of its Significant Software to be Year 2000 Compliant no later than July 1,
1999; (b) to require all Third Party Providers of Significant Software to
provide to Borrower, no later than July 1, 1999, proof that such software is
Year 2000 Compliant; (c) to require all third party suppliers and customers of
Borrower which are, to Borrower's knowledge, dependent upon software in the
conduct of their business such that the failure of such software to be Year 2000
Compliant could reasonably be expected to have a material adverse effect on the
business condition (financial or otherwise) of Borrower or the operation of the
business of Borrower, or Borrower's ability to perform its obligations under
this Term Credit Agreement, to provide to Borrower, no later than July 1, 1999,
proof that such software is Year 2000 Compliant; (d) to conduct a Y2K Compliance
Test on all of Borrower's Significant Software no later than July 1, 1999, and
to provide Agent with written reports on the results of all such Y2K Compliance
Tests promptly, but in no event more than thirty (30) days, after such tests are
conducted; and (e) to provide to Agent, no later than July 1, 1999, the written
certification of Borrower's chief financial officer, or other corporate officer
satisfactory to Agent, that all of Borrower's Significant Software is Year 2000
Compliant.
1.5 Exhibit 16.27 to the Term Credit Agreement is amended by changing the
reference in Recital paragraph A thereof from "$50,000,000.00" to
"$46,680,825.00".
2. Conditions to Effectiveness of this Second Amendment. The effectiveness
of this Second Amendment is subject to satisfaction, in Agent's sole discretion,
of each of the following conditions precedent:
2.1 Organizational Documents. Agent shall have received good standing
certificates, dated no more than thirty (30) days prior to the date of the
execution of this Second Amendment, for Borrower and Guarantor for their
respective states of incorporation and for each state where their operations
require qualification or authorization to transact business.
3
<PAGE>
2.2 Evidence of Corporate Action. Agent shall have received in form and
substance satisfactory to Agent documents evidencing all corporate action taken
by Borrower to authorize (including the specific names and titles of the persons
authorized to so act) the execution, delivery and performance of this Second
Amendment, certified to be true and correct by the Secretary or Assistant
Secretary of Borrower.
2.3 No Material Change. No change shall have occurred in the condition or
operations of Borrower or Guarantor since April 24, 1997 which could result in a
material adverse effect on the business, operations or financial condition of
Borrower or Guarantor.
2.4 Fees and Expenses. Borrower shall have paid Agent, by wire transfer of
immediately available federal funds all fees and expenses, including attorneys'
fees, incurred by Agent in connection with the preparation, negotiation and
execution of this Second Amendment and related documents, and the filing or
recording of any such documents.
2.5 Further Assurances. Borrower and Guarantor shall have provided and/or
executed and delivered to Agent the following documents and such further
assignments, documents or financing statements as Agent may reasonably request,
all in form and substance satisfactory to Agent:
(a) Amended and Restated Promissory Note (Line of Credit Facility).
(b) Second Amendment to Credit Agreement (Line of Credit Facility).
2.6 Representations and Warranties. The representations and warranties of
Borrower and of Guarantor contained in each of the Loan Documents to which it is
a party, shall be true and correct in all material respects on and as of the
Effective Date as though made on and as of such date.
2.7 No Event of Default. No Event of Default or Potential Default shall
have occurred and be continuing under the Guaranty or the Term Credit Agreement.
3. General Provisions.
3.1 Notwithstanding the fact that the Note is in the principal amount of
$50,000,000.00, Borrower may not request the Syndication Parties to advance, and
the Syndication Parties are not obligated to lend to Borrower, an aggregate
amount in excess of the Aggregate Commitment.
3.2 The Term Credit Agreement, except as expressly modified herein, shall
continue in full force and effect and be binding upon the parties thereto.
3.3 This Second Amendment shall be binding upon and inure to the benefit of
Borrower, Agent, and the Syndication Parties, and their respective successors
and
4
<PAGE>
assigns, except that Borrower may not assign or transfer its rights or
obligations hereunder.
3.4 Capitalized terms used, but not defined, in this Second Amendment shall
have the meaning set forth in the Term Credit Agreement.
3.5 The invalidity or unenforceability of any provision of this Second
Amendment shall not affect the remaining portions of this Second Amendment; in
case of such invalidity or unenforceability, this Second Amendment shall be
construed as if such invalid or unenforceable provisions had not been included
therein.
3.6 To the extent not governed by federal law, this Second Amendment and
the rights and obligations of the parties hereto shall be governed by and
interpreted in accordance with the internal laws of the State of Colorado,
without giving effect to any otherwise applicable rules concerning conflicts of
law.
3.7 The captions or headings in this Second Amendment are for convenience
only and in no way define, limit or describe the scope or intent of any
provision of this Second Amendment.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
be executed as of the Effective Date set forth above.
COBANK:
CoBank, ACB, as Agent
By:
-------------------------------
Name: Greg Somerhalder
Title: Vice President
COBANK:
CoBank, ACB, as sole Syndication Party
By:
-------------------------------
Name: Greg Somerhalder
Title: Vice President
BORROWER:
Village Farms International Finance Association
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
6
<PAGE>
AGREEMENT AND CONSENT OF GUARANTOR
Guarantor hereby consents to the contents of the foregoing Second
Amendment and reaffirms its guarantee of Borrower's obligations arising out of
the Credit Agreement as so amended.
GUARANTOR:
Agro Power Development, Inc.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
7
EXHIBIT 10.93
TERM LOAN SECURITY AGREEMENT
by and between
VILLAGE FARMS INTERNATIONAL FINANCE ASSOCIATION,
as Debtor
and
COBANK, ACB,
as Agent for the Term Lenders
<PAGE>
TABLE OF CONTENTS
1. Definitions ..............................................................1
2. Collateral/Grant of Security Interest ....................................4
2.1 Grant of First Priority Interest ....................................4
2.2 Grant of Second Priority Security Interest ..........................5
2.3 Grant of First Priority Security Interest ...........................6
3. Secured Obligations ......................................................6
4. Representations and Warranties ...........................................6
4.1 Organization; Power and Authority, etc ..............................6
4.2 Due Authorization; Power ............................................7
4.3 Consents; Approvals .................................................7
4.4 Title to Collateral .................................................7
4.5 Underlying Term Loans ...............................................7
4.6 Principal Office; Collateral; Books and Records .....................8
5. Covenants of Debtor ......................................................8
5.1 Title to Collateral .................................................8
5.2 Location of Debtor, Collateral and Books and Records ................8
5.3 Books and Records ...................................................8
5.4 Inspection of Collateral ............................................8
5.5 Transfers, Dispositions and Encumbrances ............................9
5.6 Maintenance and Repair; Taxes; Insurance ............................9
5.7 Compliance with Laws ................................................9
5.8 Change in Structure or Name .........................................9
i
<PAGE>
5.9 Underlying Term Loan Documents ......................................9
5.10 Possession of Collateral; Further Assurances ......................10
6. Events of Default .......................................................10
7. Rights Upon Default .....................................................10
7.1 General ............................................................10
7.2 Right of Secured Party to Take Possession and Dispose
of Collateral ......................................................10
7.3 Notice of Disposition of Collateral ................................11
7.4 Right of Secured Party to Use and Operate Collateral ...............11
7.5 Collection of Accounts .............................................12
7.6 Rights of Secured Party With Respect to the Securities
Collateral .........................................................12
7.7 Collection of Underlying Term Loan Notes ...........................14
8. General Provisions ......................................................14
8.1 Appointment and Rights of Agent ....................................14
8.2 Amendment, Modification, and Waiver ................................15
8.3 Costs and Attorneys'Fees ...........................................15
8.4 Revival of Obligations .............................................15
8.5 Performance by Secured Party .......................................15
8.6 Power of Attorney ..................................................16
8.7 Protection of Collateral ...........................................16
8.8 Additional Rights of Secured Party .................................17
8.9 Successors and Assigns .............................................17
8.10 Advances ..........................................................17
8.11 Severability ......................................................17
8.12 Governing Law .....................................................17
ii
<PAGE>
8.13 Notices ...........................................................17
8.14 Financing Statement ...............................................17
8.15 Conflict with Term Loan Agreement .................................17
iii
<PAGE>
EXHIBITS
Exhibit 4.6 Location of Principal Office and Collateral
<PAGE>
TERM LOAN SECURITY AGREEMENT
THIS TERM LOAN SECURITY AGREEMENT ("Security Agreement") is made as of the
24th day of June, 1997, by and between VILLAGE FARMS INTERNATIONAL FINANCE
ASSOCIATION, a Delaware corporation ("Debtor") whose address is 1811 Sardis Road
North, Suite 207, Charlotte, North Carolina 28270 and COBANK, ACB ("CoBank"), as
Agent on behalf of and for the benefit of the Term Lenders (as hereinafter
defined), whose address is 245 N. Waco Street, Wichita, Kansas 67202 (CoBank and
all Successor Agents appointed pursuant to the Term Loan Agreement are referred
to herein as "Secured Party").
R E C I T A L S
A. The Term Lenders have entered into a Credit Agreement (Term Loan
Funding) of even date herewith with Debtor (as amended from time to time, the
"Term Loan Agreement") pursuant to which the Term Lenders have agreed (i) to
loan up to $50,000,000 to Debtor ("Term Loan"), under the terms and conditions
set forth in the Term Loan Agreement, to be used by Debtor only to either (1)
make loans to third parties ("Underlying Term Loan Borrowers") for the purpose
of providing permanent take-out financing for Underlying Construction Loans (as
defined below), or (2) fund Debtor's purchase of existing loans made by third
parties for the construction or acquisition of facilities for the planting,
growing and harvesting of vegetables and/or fruits ("Greenhouse Facilities").
B. The provisions of the Term Loan Agreement require that Debtor execute
certain documents, including this Security Agreement, whereby Debtor shall grant
a lien and security interest to Secured Party in all of its property, both
tangible and intangible, whether now owned or hereafter acquired, as security
for the performance of its obligations under the Term Loan Agreement and the
other Term Loan Documents (as defined below).
A G R E E M E N T S
In consideration of the mutual covenants and agreements herein contained
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Debtor and Secured Party agree as follows:
1. Definitions. Capitalized terms used, but not defined, herein shall have
the meaning given to such terms in the Term Loan Agreement, if defined therein.
In addition, unless otherwise defined herein, each term used herein and defined
in the Uniform Commercial Code as enacted in the State of Colorado ("UCC") shall
have the meaning given to such term in the UCC. As used in this Security
Agreement, the following terms shall have the meanings set forth below:
<PAGE>
"Collateral" means the First Priority Collateral, the Second Priority
Collateral and the Shared Collateral.
"Construction Agent" means CoBank in its role as Agent under the
Construction Loan Agreement and each Successor Agent (as defined in the
Construction Loan Agreement).
"Construction Lenders" means CoBank, in its role as a lender under the
Construction Loan Agreement, and any other entity that purchases, now or in the
future, a Syndication Interest (as defined in the Construction Loan Agreement)
in the Construction Loan.
"Construction Loan" means the credit facility made available to Debtor
pursuant to the Construction Loan Agreement.
"Construction Loan Agreement" means the Credit Agreement (Construction Loan
Funding) of even date herewith by and between CoBank for its own benefit as a
lender and as Agent for the benefit of the present and future syndication
parties as named or defined therein, and Debtor, wherein the Construction
Lenders have agreed to lend to Debtor an aggregate principal amount up to
$30,000,000 for the purpose of enabling Debtor to make construction loans to
eligible third parties to use for the purposes therein specified.
"Construction Loan Documents" means the Construction Loan Agreement and any
and all other present and future agreements, documents and/or instruments
evidencing, documenting, securing or otherwise relating to the Construction
Loan, all as the same may from time to time be amended, modified, extended,
renewed or restated.
"Hedge Agreement" means the secured interest rate hedging agreement of even
date herewith executed by and between Debtor and CoBank.
"Intercreditor Agreement" means the Intercreditor Agreement of even date
herewith by and between the Construction Lenders, the Term Lenders, the Line of
Credit Lenders, the Construction Agent, the Term Agent, the Line of Credit Agent
and Debtor.
"Line of Credit Agent" means CoBank in its role as Agent under the Line of
Credit Agreement and each Successor Agent (as defined in the Line of Credit
Agreement).
"Line of Credit Agreement" means the Credit Agreement (Line of Credit
Facility) of even date herewith by and between CoBank for its own benefit as a
lender and as Agent for the benefit of the present and future syndication
parties as named or defined therein, and Debtor, wherein the Line of Credit
Lenders have agreed to make available to Debtor a line of credit facility in the
principal amount of up to $10,000,000 for the purpose of enabling Debtor to make
line of credit loans to eligible third parties to use
2
<PAGE>
for the purposes therein specified and to issue letters of credit for the
account of Debtor for the purposes therein specified.
"Line of Credit Lenders" means CoBank in its role as a lender under the
Line of Credit Agreement and any other entity that purchases, now or in the
future, a Syndication Interest (as defined in the Line of Credit Agreement) in
the Line of Credit Loan.
"Line of Credit Loan" means the line of credit facility made available to
Debtor pursuant to the Line of Credit Agreement.
"Line of Credit Loan Documents" means the Line of Credit Agreement and any
and all other present and future agreements, documents and/or instruments
evidencing, documenting, securing or otherwise relating to any or all of the
Line of Credit Loan, all as the same may from time to time be amended, modified,
extended, renewed or restated.
"Term Agent" means CoBank in its role as Agent under the Term Loan
Agreement and each Successor Agent.
"Term Lenders" means CoBank, in its role as a lender under the Term Loan
Agreement, and any other entity that purchases, now or in the future, a
Syndication Interest (as defined in the Term Loan Agreement) in the Term Loan.
"Term Loan Documents" means the Term Loan Agreement, the Hedge Agreement,
this Security Agreement and any and all other present and future agreements,
documents and/or instruments evidencing, documenting, securing or otherwise
relating to any or all of the Term Loan, all as the same may from time to time
be amended, modified, extended, renewed or restated.
"Underlying Construction Loans" shall have the meaning given to such term
in the Construction Loan Agreement.
"Underlying Construction Loan Collateral" means all of Debtor's assets
relating to the Underlying Construction Loans, including without limitation, all
promissory notes, loan agreements, security agreements, deeds of trust,
mortgages, guaranties, financing statements and other documents, agreements and
instruments executed in connection with the Underlying Construction Loans and
all collateral security therefor.
"Underlying Line of Credit Collateral" means all of Debtor's assets
relating to the Underlying Line of Credit Loans, including without limitation,
all promissory notes, loan agreements, security agreements, reimbursement
agreements, deeds of trust, mortgages, guaranties, financing statements and
other documents, agreements and instruments executed in connection with the
Underlying Line of Credit Loans and all collateral security therefor.
3
<PAGE>
"Underlying Line of Credit Loans" shall mean "Underlying Loans" as defined
in the Line of Credit Agreement and the reimbursement obligations owed to Debtor
in connection with the issuance of Letters of Credit (as defined in the Line of
Credit Agreement) pursuant to the Line of Credit Agreement.
"Underlying Term Loans" shall have the meaning given to such term in the
Term Loan Agreement.
"Underlying Term Loan Collateral" means all of Debtor's assets relating to
the Underlying Term Loans, including without limitation, all promissory notes,
loan agreements, security agreements, deeds of trust, mortgages, guaranties,
financing statements and other documents, agreements and instruments executed in
connection with the Underlying Term Loans and all collateral security therefor.
2. Collateral/Grant of Security Interest.
2.1. Grant of First Priority Interest. Debtor, for consideration and to
secure the Secured Obligations (as defined below), hereby grants a first
priority security interest to Secured Party in the Underlying Term Loan
Collateral, tangible and intangible, wherever located and whether now owned or
hereafter acquired, together with all additions, substitutions, products thereof
and proceeds therefrom or arising out of the rights reflected therein, and all
renewals, amendments, substitutions, and replacements of all or any part
thereof, including without limitation the following property (collectively, the
"First Priority Collateral"):
(a) all promissory notes made by Underlying Term Loan Borrowers payable to
Debtor to evidence the obligations of such Underlying Term Loan Borrowers to
Debtor under their respective Underlying Term Loans (collectively, "Underlying
Term Loan Notes");
(b) all of Debtor's rights under (i) all loan agreements executed by and
between Debtor and an Underlying Term Loan Borrower in connection with an
Underlying Term Loan (collectively, "Underlying Term Loan Agreements"), (ii) all
mortgages, deeds of trust, security agreements, financing statements, leasehold
assignments and consents, assignments and any other documents and agreements
executed as security for the obligations of an Underlying Term Loan Borrower to
Debtor (collectively, "Underlying Term Security Documents"), and (iii) any other
instruments, documents or agreements executed and delivered in connection with,
or to secure the obligations of an Underlying Term Loan Borrower under its
Underlying Term Loan Agreement (collectively, with its Underlying Term Loan
Note, Underlying Term Loan Agreement and Underlying Term Security Documents,
"Underlying Term Loan Documents");
4
<PAGE>
(c) all assets and properties acquired by Debtor through foreclosure, or
deed in lieu of foreclosure, on collateral for an Underlying Term Loan,
including without limitation the following:
(i) all of an Underlying Term Loan Borrower's right, title and interest in
and to all permits, licenses, franchises, certificates, plans and
specifications, studies, contract rights (but not obligations), claims against
third parties, judgments, awards, building materials, rights for utilities and
other rights and privileges obtained in connection with its Greenhouse Facility
and the real property on which its Greenhouse Facility is built ("Property"),
and all equipment, fixtures, and other personal property of any kind or
character, now or later located on or about its Property and its Greenhouse
Facility or used in connection with the construction or operation thereof, or
stored off its Property for future incorporation on or about its Property and
its Greenhouse Facility, together with all accessories thereto, replacements
thereof and substitutions therefor;
(ii) all seed, fertilizer and other supplies, and all crops now or in the
future planted or growing on an Underlying Term Loan Borrower's Property, all
crops harvested now or in the future on its Property ("Produce") and all other
farm products, and the products and cash and non-cash proceeds of such crops,
including general intangibles, instruments, and Paid In Kind certificates and
any governmental subsidies, rebates or other payments with respect to farming or
related operations of such Underlying Term Loan Borrower on its Property or
otherwise under any governmental programs;
(iii) all of the rents, bonuses, royalties, revenues, income, proceeds,
damages, profits and other benefits and income paid or payable to an Underlying
Term Loan Borrower from its Property and the improvements located thereon, the
Leases (as defined below), or from the use, possession, operation, or sale of
its Property and the improvements located thereon, including without limitation
any insurance or condemnation proceeds; and
(iv) any and all leases, subleases, assignments, licenses, concessions or
other agreements (written or oral, now or later in effect) which grant a
possessory interest in and to, or the right to use, all or any part of an
Underlying Term Loan Borrower's Property and the improvements located thereon
("Leases"), and any and all security and other deposits made in connection with
the Leases and all guaranties of those leases, including also any oil, gas and
mineral leases, and any bonuses, royalties, and other income from Leases.
2.2. Grant of Second Priority Security Interest. Debtor, for consideration
and to secure the Secured Obligations, hereby grants a second priority security
interest to Secured Party in (a) the Underlying Construction Loan Collateral,
wherever located and whether now owned or hereafter acquired, together with all
additions, substitutions, products thereof and proceeds therefrom or arising out
of the rights reflected therein, and all renewals, amendments, substitutions,
and replacements
5
<PAGE>
of all or any part thereof, to be shared pari passu with the Line of Credit
Agent pursuant to the terms and provisions of the Intercreditor Agreement, and
(b) the Underlying Line of Credit Collateral, wherever located and whether now
owned or hereafter acquired, together with all additions, substitutions,
products thereof and proceeds therefrom or arising out of the rights reflected
therein, and all renewals, amendments, substitutions, and replacements of all or
any part thereof, to be shared pari passu with the Construction Agent pursuant
to the terms and provisions of the Intercreditor Agreement (all of the foregoing
shall be collectively referred to herein as the "Second Priority Collateral").
2.3. Grant of First Priority Security Interest. Debtor, for consideration
and to secure the Secured Obligations, hereby grants a first priority security
interest to Secured Party to be shared pari passu with the Construction Agent
and the Line of Credit Agent pursuant to the terms and provisions of the
Intercreditor Agreement in all assets and properties of Debtor other than the
First Priority Collateral and the Second Priority Collateral, tangible and
intangible, wherever located and whether now owned or hereafter acquired,
together with all additions, substitutions, products thereof and proceeds
therefrom or arising out of the rights reflected therein, and all renewals,
amendments, substitutions, and replacements of all or any part thereof,
including without limitation the following property to the extent that it is not
included in the First Priority Collateral or the Second Priority Collateral
(collectively, the "Shared Collateral"):
all fixtures; furniture; furnishings, accounts; inventory (including
without limitation, returned or repossessed goods); chattel paper;
instruments, drafts; letters of credit; money; utility and other deposits,
documents; equipment; tools; machinery; goods; motor vehicles; investment
property; general intangibles (including without limitation, litigation
rights and resulting judgments, goodwill, patents, tradenames, trade
secrets, trademarks and other intellectual property, tax refunds,
miscellaneous rights to payment, entitlements, uncertificated securities,
margin accounts, computer programs, invoices, books, records and other
information relating to or arising out of Debtor's business).
3. Secured Obligations. The security interests granted to Secured Party
under this Security Agreement shall secure the payment and performance of the
obligations to, and covenants and agreements of Debtor made for the benefit of,
the Term Lenders under the Term Loan Documents ("Secured Obligations").
4. Representations and Warranties. Debtor represents and warrants to
Secured Party as follows:
4.1. Organization; Power and Authority, etc. Debtor is duly organized and
validly existing under the laws of the State of Delaware. Debtor has all
6
<PAGE>
necessary power and authority to own its property, to carry on its business as
now owned and operated by it, and to make the Underlying Term Loans. Debtor is
duly qualified to do business and is in good standing in all jurisdictions in
which the failure to be so qualified would have a Material Adverse Effect.
4.2. Due Authorization; Power. The execution, delivery and performance by
Debtor of this Security Agreement and the other Term Loan Documents are within
the powers of Debtor and have been duly authorized by all necessary action on
the part of Debtor.
4.3. Consents; Approvals. Debtor has obtained all consents or approvals of
any Person which are necessary for, or are required as a condition of, the
execution, delivery and performance of, and the enforcement of Secured Party's
rights and remedies under, this Security Agreement.
4.4. Title to Collateral. Debtor is the true and lawful owner of all
existing Underlying Term Loans, has full power and authority to pledge and grant
a security interest in the Underlying Term Loans and the Underlying Term Loan
Documents, and has not granted any right or interest in any existing or future
Underlying Term Loans or the Underlying Term Loan Documents to any person or
entity other than Secured Party, except for the second priority security
interest granted to the Construction Agent and the Line of Credit Agent under
the Construction Loan Documents and the Line of Credit Documents, respectively.
Except as otherwise permitted hereunder or under the Term Loan Agreement and
subject to the terms of the Intercreditor Agreement, Debtor has good title to
the Collateral free of all adverse claims, interests, liens, or encumbrances and
has full power and authority to sell, transfer, pledge, and grant to Secured
Party a security interest in, the Collateral.
4.5. Underlying Term Loans. With respect to the Underlying Term Loans:
(a) no default or event which with notice and/or the passage of time would
become a default under any of the Underlying Term Loan Documents for any
Underlying Term Loan has occurred and is continuing;
(b) the proceeds of each existing Underlying Term Loan have been, and the
proceeds of each future Underlying Term Loan will be, used for the purposes
permitted under Section 3.1 of the Term Loan Agreement;
(c) with respect to all existing Underlying Term Loans, the Underlying Term
Loan Documents have been duly executed by the all parties thereto and constitute
the legal, valid and binding obligation of all parties thereto, enforceable in
accordance with their terms, subject to the effects of bankruptcy, insolvency,
and similar laws affecting the rights of creditors generally or the availability
of equitable remedies, and are free from any right of set-off, counterclaim or
other claim or defense;
7
<PAGE>
(d) each existing Underlying Term Loan is, and all future Underlying Term
Loans will be, secured by a first lien and security interest in favor of Debtor
in all assets of the Underlying Term Loan Borrower, free and clear of all other
liens, security interests, restrictions, adverse claims or defenses, except
where the Underlying Term Loan Documents approved by Secured Party specifically
state otherwise;
(e) to Debtor's knowledge and belief, there is no misstatement of a
material fact, nor an omission to state a material fact, in any of the financial
statements, projections, budgets or other information furnished by or on behalf
of any existing Underlying Term Loan Borrower, nor, has anything occurred
subsequent to the furnishing of such information which would have a material
adverse effect on the results of operation, business, property, or prospects of
any existing Underlying Term Loan Borrower.
4.6. Principal Office; Collateral; Books and Records. The principal place
of business and, if Debtor has more than one place of business, the chief
executive office ("Principal Office") of Debtor and the locations of all
Collateral, other than Collateral in the possession of the Construction Agent,
the Term Agent or the Line of Credit Agent, and Debtor's books and records are
listed on Exhibit 4.6 attached hereto.
5. Covenants of Debtor. Debtor covenants to Secured Party that:
5.1. Title to Collateral. Except as otherwise permitted hereunder or under
the Term Loan Agreement, Debtor shall not create or permit the existence of any
adverse claims, interests, liens, or other encumbrances against any of the
Collateral. Debtor shall (a) provide prompt written notice to Secured Party of
any future adverse claims, interests, liens, or encumbrances against any
Collateral, (b) promptly obtain a release or discharge of any such claims,
interests, liens, or other encumbrances and (c) diligently defend Debtor's and
Secured Party's interests in the Collateral.
5.2. Location of Debtor, Collateral and Books and Records. Debtor will not
change any place of business, its chief executive office, the location of any
Collateral or the location of its books and records without giving at least
thirty (30) days' prior written notice to Secured Party and furnishing Secured
Party with such documents as Secured Party may reasonably request pursuant to
Section 5.10 hereof prior to taking any such action.
5.3. Books and Records. Debtor shall keep proper books of record and
account in which complete and correct entries will be made of all of Debtor's
dealings in accordance with GAAP.
5.4. Inspection of Collateral. Upon Secured Party's request, Debtor shall
allow Secured Party, the Term Lenders or persons designated by any of them,
during normal business hours or at such other times as the parties may agree,
to: (a) examine the Collateral, wherever located, (b) examine and make extracts
or copies from
8
<PAGE>
Debtor's books and records; and (c) discuss Debtor's affairs, finances,
operations, and accounts with its respective officers, directors, employees, and
independent certified public accountants.
5.5. Transfers, Dispositions and Encumbrances. Except as otherwise
permitted hereunder or under the Term Loan Agreement, (a) Debtor will not offer
to sell, sell, transfer or otherwise dispose of any of the Collateral or any
interest therein, and (b) Debtor will not create, incur, or permit to exist any
mortgage, lien, charge, encumbrance, or security interest whatsoever with
respect to the Collateral.
5.6. Maintenance and Repair; Taxes; Insurance. Debtor will keep the
Collateral in good order and repair and adequately insured at all times in
accordance with the provisions of the Term Loan Agreement. Debtor will pay
promptly all taxes and other governmental charges with respect to the Collateral
when due and payable except as otherwise permitted hereunder or under the Term
Loan Agreement. Secured Party or the Term Lenders, at their option, may (a)
discharge (i) any taxes or other governmental charges that Debtor is required to
pay but fails to pay, unless such taxes or governmental charges are being
contested in good faith by appropriate actions or proceedings; provided that
such reserves or other appropriate provisions, if any, as shall be required by
GAAP, shall have been made for such taxes or other governmental charges, and
(ii) liens, security interests, or other encumbrances to which any Collateral is
at any time subject that are not permitted hereunder or under the Term Loan
Agreement, and (b) upon the failure of Debtor to do so, purchase insurance on
any insurable Collateral and pay for the repair, maintenance, or preservation
thereof, and Debtor agrees to reimburse Secured Party and the Term Lenders on
demand for any payment or expenses incurred by any of them pursuant to the
foregoing authorization and any unreimbursed amounts shall constitute amounts
owing under the Secured Obligations for all purposes under this Security
Agreement.
5.7. Compliance with Laws. Debtor shall not use the Collateral in violation
of any applicable statutes, regulations or ordinances where such violation would
have a Material Adverse Effect.
5.8. Change in Structure or Name. Debtor shall not, without the prior
written consent of Secured Party, change its name or business structure.
5.9. Underlying Term Loan Documents. Debtor shall take all such actions as
are necessary to maintain the Underlying Term Loan Documents in full force and
effect. Without the consent of Secured Party, Debtor shall not amend,
supplement, grant consents, or otherwise modify or waive compliance with any
provision of any Underlying Term Loan Document. Each Underlying Term Loan shall
be secured by a first lien on all the assets of the Underlying Term Loan
Borrower, except where the Underlying Term Loan Documents for such Underlying
Term Loan approved by Secured Party specifically state otherwise.
9
<PAGE>
5.10. Possession of Collateral; Further Assurances. Debtor shall (a)
deliver promptly to Secured Party, with such endorsement as Secured Party shall
require, all instruments and documents comprising part of the First Priority
Collateral or the Shared Collateral, now owned or hereafter acquired, of which
possession is required in order to perfect the security interests of Secured
Party granted herein, (b) upon demand, execute, assign and endorse all proxies,
applications, acceptances, stock powers, chattel paper, documents, instruments
and other evidences of payment or writings constituting or relating to any of
the Collateral, and (c) execute from time to time financing statements and any
other documents in form and content satisfactory to Secured Party and perform
such other acts, including without limitation the notation of Secured Party's
interest on the face of all chattel paper, as Secured Party may reasonably
request to perfect, maintain and continue a valid security interest in the
Collateral, and Debtor will pay all costs associated with the filing or
recordation of any such documents.
6. Events of Default. Debtor shall be in default under this Security
Agreement upon the occurrence of an Event of Default under the Term Loan
Agreement ("Event of Default").
7. Rights Upon Default.
7.1. General. Upon the occurrence of an Event of Default and at any time
thereafter (unless such Event of Default has been waived in writing by Secured
Party), Secured Party may declare the Secured Obligations immediately due and
payable, and Secured Party shall, subject to the provisions of the Intercreditor
Agreement, have all the rights and remedies of a secured party under Article 9
of the UCC or other applicable law and all the rights provided herein, in the
Term Loan Agreement, or in any other instruments and documents executed and
delivered in connection with, or to secure the obligations of Debtor under, the
Term Loan Agreement, all of which rights and remedies shall, to the full extent
permitted by law, be cumulative.
7.2. Right of Secured Party to Take Possession and Dispose of Collateral.
Upon the occurrence of an Event of Default, subject to and to the extent
permitted by the provisions of the UCC or other applicable law and the
Intercreditor Agreement, unless such Event of Default has been waived in writing
by Secured Party, Secured Party shall have the right to:
(a) take possession of the Collateral and enter upon the premises on which
the Collateral or any part thereof may be situated and remove the Collateral
from those premises and thereafter to hold, store, and/or use, operate, manage,
and control the Collateral;
10
<PAGE>
(b) require Debtor to deliver the Collateral to Secured Party at a place to
be designated by Secured Party which is reasonably convenient to both parties;
and
(c) sell, lease or otherwise dispose of any or all of the Collateral in its
then present condition or following any commercially reasonable preparation or
processing thereof, whether by public or private sale, for cash, on credit or
otherwise, with or without representations or warranties, and upon such terms as
may be acceptable to Secured Party, and Secured Party may purchase the
Collateral at any public sale.
7.3. Notice of Disposition of Collateral. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Secured Party will give notice to Debtor of any
sale or other disposition by Secured Party with respect to any Collateral which
is subject to Article 9 of the UCC at the address for Debtor specified above, or
such other address as may from time to time be shown on Secured Party's records,
at least five (5) Business Days prior to such action. Any such notice shall be
deemed to meet any requirement hereunder or under an applicable law (including
without limitation the UCC) that reasonable notification be given of the time
and place of such sale or other disposition. Debtor consents and agrees that, in
addition to the other rights and remedies provided to Secured Party in this
Article 7, Secured Party may, in lieu of, or prior to, selling the Collateral at
public or private sale, retain any payments received on account of any of the
Collateral and apply the same to amounts owing under the Secured Obligations
until such time as the Secured Obligations have been paid in full.
7.4. Right of Secured Party to Use and Operate Collateral. Upon taking
possession of the Collateral, Secured Party may, from time to time, make all
repairs, replacements, alterations, additions, and improvements to and of the
Collateral that Secured Party deems proper. Debtor agrees to reimburse Secured
Party on demand for any expenses incurred by Secured Party pursuant to the
foregoing authorization and any unreimbursed amounts shall constitute amounts
owing under the Secured Obligations for all purposes under this Security
Agreement. In any such case, subject to and to the extent permitted by the
provisions of the Intercreditor Agreement, the UCC, or other applicable law,
Secured Party shall have the right to operate, manage and control the Collateral
and to carry on Debtor's business and to exercise all rights and powers of
Debtor in respect to the Collateral as Secured Party shall deem best, including
the right to enter into any agreements with respect to the Collateral or any
part thereof, that Secured Party sees fit; and Secured Party shall be entitled
to collect and receive all rents, issues, profits, fees, revenues, and other
income of the Collateral and every part thereof. Such rents, issues, profits,
fees, revenues, and other income shall be applied to pay the expenses of holding
and operating the Collateral and of conducting the business thereof and of all
maintenance, repairs, replacements, alterations, additions, and improvements,
and to make all payments which Secured Party may be required or may elect to
make, if any, for taxes, assessments, insurance, and other charges upon the
Collateral or any part thereof, and all other payments which Secured Party may
be required or authorized to make under any provision of this Security Agreement
11
<PAGE>
(including reasonable attorneys' fees and expenses). The remainder of such
rents, issues, profits, fees, revenues, and other income shall be applied to the
payment of the Secured Obligations in such order of priority as Secured Party
shall determine in accordance with the provisions of the Intercreditor Agreement
and, unless otherwise provided by law or by a court of competent jurisdiction,
any surplus from the sale of the Collateral shall be returned to Debtor. Without
limiting the generality of the foregoing, but subject to the provisions of the
Intercreditor Agreement, Secured Party shall have the right to apply for and
have a receiver appointed ex-parte by a court of competent jurisdiction in any
action taken by Secured Party to enforce its rights and remedies hereunder in
order to manage, protect, and preserve the Collateral and continue the operation
of the business of Debtor and to collect all revenues and profits thereof and
apply them to the payment of all expenses and other charges of such
receivership, including the compensation of the receiver, and to the payment of
the Secured Obligations as described above until a sale or other disposition of
the Collateral shall be finally made and consummated.
7.5. Collection of Accounts. Upon the occurrence of any Event of Default,
unless such Event of Default has been waived in writing by Secured Party,
Secured Party shall, subject to the provisions of the Intercreditor Agreement,
have the right at any time and from time to time, without notice, to (a) notify
account debtors that accounts have been assigned to Secured Party; (b) advise
account debtors of Secured Party's security interest and/or instruct account
debtors to make payments directly to Secured Party; (c) charge to any escrow or
other account of Debtor with Secured Party or any Term Lender or controlled by
any of them, any item of payment received by Secured Party which is dishonored
by the drawee or maker thereof; (d) endorse all items of payment made payable to
Debtor which may come into the possession of Secured Party; (e) collect all
accounts in Secured Party's name or Debtor's name and take control of any cash
or non-cash proceeds of accounts and of any returned or repossessed goods; (f)
compromise, extend or renew the amount owing on any account or deal with any
account as Secured Party may deem advisable; and (g) make exchanges,
substitutions or surrenders of collateral for any account. Once any or all
account debtors have been notified, whether by Debtor or Secured Party, to make
payment directly to Secured Party, all amounts and proceeds received by Debtor
in respect of such accounts shall be received in trust for the benefit of
Secured Party, shall be segregated from other funds of Debtor, and shall be
immediately paid over to Secured Party in the same form as so received. Such
actions and the application of any such amounts to the Secured Obligations shall
not be deemed to constitute retention in satisfaction of the Secured Obligations
under Section 4-9-505 of the UCC and any comparable provision of the Uniform
Commercial Code as enacted in any other state where the Collateral is located.
7.6. Rights of Secured Party With Respect to the Securities Collateral.
Upon the occurrence of any Event of Default, unless such Event of Default has
been waived in writing by Secured Party:
12
<PAGE>
(a) Secured Party, in its discretion, and without notice to Debtor, may,
subject to the provisions of the Intercreditor Agreement, take any one or more
of the following actions without liability except to account for property
actually received by it: (i) transfer to or register in its name or the name of
its nominee any stock certificates or evidence of other equity interests
included in the Collateral ("Securities Collateral"), with or without indication
of the security interest herein created, and whether or not so transferred or
registered, receive the income, dividends and other distributions thereon and
hold them as additional Collateral or apply them to the Secured Obligations in
any order of priority; (ii) exercise or cause to be exercised all voting and
corporate powers with respect to any of the Securities Collateral so registered
or transferred, including (1) all rights to call or require shareholders
meetings and to remove or elect directors, and (2) all rights of proxy
appointments, conversion, exchange, subscription or any other rights, privileges
or options pertaining to such Securities Collateral, as if the absolute owner
thereof; (iii) exchange any of the Securities Collateral for other property upon
a reorganization, recapitalization, reclassification or other readjustment and,
in connection therewith, deposit any of the Securities Collateral with any
depository upon such terms as Secured Party may determine; and (iv) in its name
or in the name of Debtor, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for any
of the Securities Collateral, and Secured Party further shall have the right at
any time to sign and endorse the name of Debtor upon any stock certificate,
stock power, check, draft, money order, or any other documents of title or
evidences of payment with respect to the Securities Collateral, in the name of
Debtor, it being the intention of Debtor to grant to Secured Party the right to
sell any portion or all of the Securities Collateral and the proceeds therefrom,
upon the occurrence of an Event of Default hereunder.
(b) If Secured Party in good faith believes that the Securities Act of 1933
("Act") or any other state or federal law prohibits or restricts the customary
manner of sale or distribution of any of the Securities Collateral, Secured
Party may, subject to the provisions of the Intercreditor Agreement, sell such
Securities Collateral privately or in any other manner deemed advisable by
Secured Party at such price or prices as Secured Party determines in its sole
discretion. Debtor recognizes that such prohibition or restriction may cause the
Securities Collateral to have less value than it otherwise would have and that,
consequently, such sale or disposition by Secured Party may result in a lower
sales price than if the sale were otherwise held. Secured Party may sell the
Securities Collateral in one or more sales or parcels, for cash, credit or
future delivery, and with or without the use of a stockbroker, as Secured Party
may deem advisable. Secured Party may be the purchaser of any or all of the
Securities Collateral. In the event that Secured Party elects to sell all or any
part of the Securities Collateral in a public sale, Debtor shall use its best
efforts to register and qualify the Securities Collateral, or the applicable
part thereof, under the Act and all state securities laws, and all expenses
thereof shall be payable by Debtor, including, but not limited to, all costs of
registration or qualification of any Securities Collateral under the Act and any
state securities laws, and the sale of such Securities Collateral, including,
but not limited to,
13
<PAGE>
brokers' or underwriters' commissions, fees or discounts, accounting and legal
fees and disbursements, and expenses of transfer and sale.
(c) Notwithstanding any provision herein to the contrary, CoBank may
transfer, dispose or liquidate Debtor's CoBank Equity Interests in accordance
with its usual procedures and in accordance with its bylaws and capital plan as
applicable to cooperative borrowers generally.
7.7. Collection of Underlying Term Loan Notes. Upon the occurrence of any
Event of Default, unless such Event of Default has been waived in writing by
Secured Party, Secured Party may, subject to the provisions of the Intercreditor
Agreement, (a) notify and require each Underlying Term Loan Borrower to make all
payments owing on the Underlying Term Loan Notes directly to Secured Party, (b)
endorse all items of payment, with respect to amounts owing under Underlying
Term Loan Notes, made payable to Debtor which may come into the possession of
Secured Party; (c) collect amounts owing under the Underlying Term Loan Notes in
Secured Party's name or Debtor's name; (d) compromise, extend or renew the
amount owing on any Underlying Term Loan or deal with any Underlying Term Loan
as Secured Party may deem advisable; (e) make exchanges, substitutions or
surrenders of collateral for any Underlying Term Loan, and (f) declare the
Underlying Term Loans immediately due and payable, exercise all rights of Debtor
under the Underlying Term Loan Documents and foreclose on all collateral for the
Underlying Term Loans in accordance with the rights of Debtor under the
Underlying Term Loan Documents. Once any or all Underlying Term Loan Borrowers
have been notified, whether by Debtor or Secured Party, to make payment directly
to Secured Party, all amounts and proceeds received by Debtor in respect of such
Underlying Term Loans shall be received in trust for the benefit of Secured
Party, shall be segregated from other funds of Debtor, and shall be immediately
paid over to Secured Party in the same form as so received. Debtor agrees that
by taking such action Secured Party will be deemed to have acted in a
commercially reasonable manner and that such action by Secured Party will not be
deemed to constitute retention of the Underlying Term Loan Notes in satisfaction
of the Secured Obligations under Section 4-9-505 of the UCC and any comparable
provision of the Uniform Commercial Code as enacted in the state where Debtor is
located or otherwise.
8. General Provisions.
8.1. Appointment and Rights of Agent. Debtor acknowledges, agrees, and
consents (a) to the appointment by the Term Lenders of CoBank as Agent under the
Term Loan Agreement ("Agent") for the purposes of administering certain aspects
of the Term Loan, (b) that CoBank as Agent is acting for the benefit of the Term
Lenders hereunder, and (c) that in the event that a Successor Agent is appointed
for CoBank in its capacity as Agent in accordance with the provisions of the
Term Loan Agreement and written notification thereof is provided to Debtor by
CoBank, any Term Lender or such Successor Agent, such Successor Agent shall be
entitled to exercise all the rights
14
<PAGE>
of Secured Party hereunder, and that Debtor will perform all its obligations
hereunder with respect to such rights as it may be directed by such Successor
Agent.
8.2. Amendment, Modification, and Waiver. Without the prior written consent
of Secured Party and Debtor, no amendment, modification, or waiver of, or
consent to any departure by Debtor from, any provision hereunder shall be
effective. Any such amendment, modification, waiver, or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No waiver by Secured Party of any default shall be effective unless in
writing, and any such waiver shall not operate as a waiver of any other default
or the same default on a future occasion. The taking of the security interest
created by this Security Agreement shall not be deemed to waive or impair any
other security interest Secured Party may have or hereafter acquire for the
payment of the Secured Obligations, nor shall the taking of any such additional
security interest waive or impair this Security Agreement; but Secured Party may
resort to any security it may have in the order it may deem proper, and
notwithstanding any collateral security, Secured Party shall retain its rights
of setoff against Debtor. No delay or omission on the part of Secured Party in
exercising any right hereunder shall operate as a waiver of such right or of any
other right hereunder.
8.3. Costs and Attorneys' Fees. Debtor will, upon demand, pay to Secured
Party and the Term Lenders the amount of any and all expenses, including the
reasonable attorneys' fees and expenses of counsel for Secured Party and the
Term Lenders and of any experts and agent, which Secured Party and the Term
Lenders may incur in connection with (a) the administration of this Security
Agreement upon the occurrence of an Event of Default, unless and until such
Event of Default has been waived in writing by Secured Party; (b) the
collection, retaking, storage, custody, preservation, use or operation of,
preparing for sale, selling or other disposition and delivery, collection from,
or other realization upon, any of the Collateral; (c) the exercise or
enforcement of any of the rights of Secured Party hereunder; or (d) the failure
by Debtor to perform or observe any of the provisions hereof.
8.4. Revival of Obligations. To the extent Debtor or any third party makes
a payment or payments to Secured Party or Secured Party enforces its security
interest or exercises any right of setoff, and such payment or payments or the
proceeds thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, and/or required to be repaid to a trustee, receiver, or
any other party under any bankruptcy, insolvency or other law or in equity,
then, to the extent of such recovery, the Secured Obligations or any part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment or payments had not been made, or such
enforcement or setoff had not occurred.
8.5. Performance by Secured Party. In the event Debtor shall at any time
fail to pay or perform punctually any of its obligations hereunder, Secured
Party may, at its option and without notice to or demand upon Debtor, without
obligation and without waiving or diminishing any of its other rights or
remedies hereunder, fully perform or discharge any of such duties. All costs and
expenses incurred by Secured
15
<PAGE>
Party in connection therewith, together with interest thereon at the Default
Interest Rate set forth in the Term Loan Agreement, shall become part of the
Secured Obligations and be paid by Debtor upon demand.
8.6. Power of Attorney. Secured Party is hereby appointed Debtor's
attorney-in-fact, with full power of substitution, at Secured Party's option and
Debtor's expense, to do all acts and things which Secured Party may reasonably
deem necessary to perfect and continue to perfect the security interest created
by this Security Agreement, to protect its interest in the Collateral, and, upon
the occurrence of an Event of Default hereunder (unless and until such Event of
Default has been waived in writing by Secured Party), to protect or enforce and
collect on the Collateral subject to the provisions of the Intercreditor
Agreement, including without limitation:
(a) to obtain and adjust the insurance required to be maintained hereunder;
(b) to ask, demand, collect, sue for, recover, compromise, receive and give
receipts for moneys due and to become due under the Underlying Term Loan
Documents;
(c) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with (a) above;
(d) to file any claims or take any action or institute any proceedings
which Secured Party may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce the rights of the Secured Party with
respect to any of the Collateral; and
(e) to collect the Underlying Term Loans and Underlying Term Loan Notes and
to enforce all rights and remedies available to Debtor under the Underlying Term
Loan Documents and to endorse all items of payment on the Underlying Term Loans
made payable to Debtor which may come into the possession of Secured Party.
The power vested in Secured Party as Debtor's attorney-in-fact is, and shall be
deemed to be, coupled with an interest and cannot be revoked.
8.7. Protection of Collateral. Secured Party shall not be required to take
any steps necessary to preserve any rights in the Collateral. Secured Party
shall further be under no duty to exercise or to withhold the exercise of any of
the rights, powers, privileges and options expressly or implicitly granted to
Secured Party in this Security Agreement, and Secured Party shall not be
responsible for any failure to exercise such rights nor for its delay in so
doing. Secured Party shall be deemed to have exercised reasonable care as
custodian of the Collateral if it takes such action to protect and preserve the
Collateral as Debtor shall request, but failure to honor any such request shall
not be deemed to be a failure by Secured Party to exercise reasonable care. The
16
<PAGE>
care which Secured Party gives to the safekeeping of its property of like kind
shall constitute reasonable care of the Collateral when in Secured Party's
possession.
8.8. Additional Rights of Secured Party. Secured Party, in its discretion,
and without notice to Debtor, may take any one or more of the following actions
without liability except to account for property actually received by it: (a)
after the occurrence of an Event of Default, unless such Event of Default has
been waived in writing by Secured Party, renew, extend, or otherwise change the
terms and conditions of any of the Collateral; (b) take or release any other
collateral as security for any of the Collateral or the Secured Obligations; and
(c) add or release any guarantor, endorser, surety or other party to any of the
Collateral or Secured Obligations.
8.9. Successors and Assigns. This Security Agreement shall be binding upon
and inure to the benefit of Debtor and Secured Party and their respective
successors and assigns, except that Debtor may not assign or transfer its rights
or obligations hereunder without the prior written consent of Secured Party.
8.10. Advances. Nothing herein contained shall be construed to obligate the
Term Lenders to make any loans or advances to Debtor and the sole purpose of
this Security Agreement is to provide collateral security for the Secured
Obligations.
8.11. Severability. Should any provision of this Security Agreement be
deemed unlawful or unenforceable, said provision shall be deemed several and
apart from all other provisions of this Security Agreement and all remaining
provisions of this Security Agreement shall be fully enforceable.
8.12. Governing Law. This Security Agreement shall be governed by and
interpreted in accordance with the laws of the State of Colorado except to the
extent that the validity or perfection of the security interest hereunder, or
remedies hereunder in respect of any particular collateral, are governed by the
laws of a jurisdiction other than the State of Colorado.
8.13. Notices. Notices by any party hereto to any other party hereto shall
be given as provided in the Term Loan Agreement.
8.14. Financing Statement. A copy, including a photocopy, of this Security
Agreement may be filed as a financing statement. Debtor authorizes Secured Party
to file financing statements without Debtor's signature where permitted by law.
8.15. Conflict with Term Loan Agreement. In the event of a conflict between
the terms of this Security Agreement and those of the Term Loan Agreement, the
provisions of the Term Loan Agreement shall control.
17
<PAGE>
This Security Agreement is executed as of the date first above written.
DEBTOR:
VILLAGE FARMS INTERNATIONAL
FINANCE ASSOCIATION, a
cooperative corporation
formed under the laws of
the state of Delaware
By:___________________________________
Name: J. Kevin Cobb
Title: Vice President
SECURED PARTY:
COBANK, ACB, as Agent on behalf of and for
the benefit of the Term Lenders
By:________________________________
Name: Greg Somerhalder
Title: Vice President
18
EXHIBIT 10.94
Amendment To LOAN DOCUMENTS
Parties:
"CoBank": CoBank, ACB
245 North Waco Street
Wichita, Kansas 67201-2940
"Borrower": Village Farms International Finance Association
10 Alvin Court
East Brunswick, New Jersey 08816
"Guarantor": Agro Power Development, Inc.
10 Alvin Court
East Brunswick, New Jersey 08816
Effective Date: September 29, 1998
Recitals:
A. CoBank, acting in its capacity as Agent (in such capacity "Line of
Credit Agent") and as a Syndication Party, and Borrower entered into that
certain Credit Agreement (Line of Credit Facility) dated as of June 24, 1997 (as
amended from time to time, the "LOC Credit Agreement").
B. CoBank, acting in its capacity as Agent (in such capacity "Term Agent")
and as a Syndication Party, and Borrower entered into that certain Credit
Agreement (Term Loan Funding) dated as of June 24, 1997 (as amended from time to
time, the "Term Credit Agreement").
C. Borrower's obligations under the LOC Credit Agreement are secured by
liens on certain of Borrower's assets pursuant to that certain Line of Credit
Security Agreement by and between Borrower and CoBank, as the Line of Credit
Agent for the Line of Credit Lenders (as such term is defined therein) and dated
as of June 24, 1997 ("LOC Security Agreement").
D. Borrower's obligations under the Term Credit Agreement are secured by
liens on certain of Borrower's assets pursuant to that certain Term Loan
Security Agreement by and between Borrower and CoBank, as the Term Agent for the
Term Lenders (as such term is defined therein) and dated as of June 24, 1997
("Term Security Agreement").
E. Guarantor executed its Guaranty of Agro Power Development, Inc. dated as
of June 24, 1997 (as amended from time to time, the "Guaranty") whereby
Guarantor guaranteed payment of certain obligations of Borrower, including,
without limitation, all
<PAGE>
Agreement and other Loan Documents. Guarantor's obligations under the Guaranty
are secured by liens on certain of Guarantor's assets pursuant to (a) that
certain Guarantor Security and Pledge Agreement by and between Guarantor and the
Construction Agent, the Term Agent, and the Line of Credit Agent (as such terms
are defined therein) and dated as of June 24, 1997 ("Guarantor Security
Agreement"), and (b) that certain Trademark Collateral Assignment and Security
Agreement by and between Guarantor and the Construction Agent, the Term Agent,
and the Line of Credit Agent (as such terms are defined therein) and dated as of
June 24, 1997 ("Guarantor Trademark Security Agreement")
F. The Construction Lenders, the Term Lenders, the Line of Credit Lenders,
the Construction Agent, the Term Agent, the Line of Credit Agent (as all of such
terms are defined therein) and Borrower entered into that certain Intercreditor
Agreement dated as of June 24, 1997 ("Intercreditor Agreement").
G. Borrower and Guarantor have requested Agent and the Syndication Parties
under the LOC Credit Agreement to increase the loan amount available under the
LOC Credit Agreement to the principal amount of $13,319,175.00, which Agent and
the Syndication Parties are willing to do under certain conditions, including
the terms and conditions as set forth in that certain document entitled Second
Amendment to Credit Agreement (Line of Credit Facility) ("Second Amendment").
H. The amendment as set forth in the Second Amendment affects certain
provisions of the LOC Security Agreement, the Term Security Agreement, the
Guarantor Security Agreement, and the Guarantor Trademark Security Agreement
(collectively the "Security Agreements"), as well as the Guaranty and the
Intercreditor Agreement, and the parties desire to address such provisions
herein.
Agreement:
Now, therefore, for good and valuable consideration, the receipt of which
is hereby acknowledged, including the mutual covenants contained herein, the
parties hereto hereby agree as follows:
1. Amendments to Security Agreements. The Security Agreements are amended
as of the Effective Date as follows:
1.1 The reference in Recital A of the LOC Security Agreement to
"$10,000,000.00" is hereby changed to be a reference to "$13,319,175.00".
1.2 The reference in Recital A of the Term Security Agreement to
"$50,000,000.00" is hereby changed to be a reference to "$46,680,825.00".
1.3 The reference in Recital C of the Guarantor Security Agreement to
"$10,000,000.00" is hereby changed to be a reference to "$13,319,175.00".
1.4 The reference in Recital C of the Guarantor Trademark Security
Agreement to "$10,000,000.00" is hereby changed to be a reference to
"$13,319,175.00".
2
<PAGE>
2. Amendments to Guaranty and Intercreditor Agreement. The Guaranty and the
Intercreditor Agreement are amended as of the Effective Date as follows:
2.1 The reference in Recital B of the Guaranty to "$50,000,000.00" is
hereby changed to be a reference to "$46,680,825.00".
2.2 The reference in Recital C of the Guaranty to "$10,000,000.00" is
hereby changed to be a reference to "$13,319,175.00".
2.3 The reference in Recital B of the Intercreditor Agreement to
"$50,000,000.00" is hereby changed to be a reference to "$46,680,825.00".
2.4 The reference in Recital C of the Intercreditor Agreement to
"$10,000,000.00" is hereby changed to be a reference to "$13,319,175.00".
3. Conditions to Effectiveness of this Amendment to Loan Documents. The
effectiveness of this Amendment to Loan Documents ("Amendment") is subject to
satisfaction, in Agent's sole discretion, of each of the following conditions
precedent:
3.1 Amendment Documents. Agent shall have received the following documents
and such further assignments, documents or financing statements as Agent may
reasonably request, all fully executed and in form and substance satisfactory to
Agent:
(a) Amended and Restated Promissory Note (Line of Credit Facility).
(b) Second Amendment to Credit Agreement (Term Loan Funding).
(c) Second Amendment to Credit Agreement (Line of Credit Facility).
3.2 Fees and Expenses. Borrower shall have paid Agent, by wire transfer of
immediately available federal funds all fees and expenses, including attorneys'
fees, incurred by Agent in connection with the preparation, negotiation and
execution of the documents described or referred to in Section 3.1 hereof, this
Amendment, and related documents, and the filing or recording of any such
documents.
3.3 No Event of Default. No Event of Default or Potential Default shall
have occurred and be continuing under the LOC Credit Agreement, the Term Credit
Agreement, or the Guaranty.
4. General Provisions.
4.1 The Guaranty, the Intercreditor Agreement, and the Security Agreements,
except as expressly modified herein, shall continue in full force and effect and
be binding upon the parties thereto.
3
<PAGE>
4.2 This Amendment shall be binding upon and inure to the benefit of
Borrower, Agents, and the Syndication Parties, and their respective successors
and assigns.
4.3 The invalidity or unenforceability of any provision of this Amendment
shall not affect the remaining portions of this Amendment; in case of such
invalidity or unenforceability, this Amendment shall be construed as if such
invalid or unenforceable provisions had not been included therein.
4.4 To the extent not governed by federal law, this Amendment and the
rights and obligations of the parties hereto and thereto shall be governed by
and interpreted in accordance with the internal laws of the State of Colorado,
without giving effect to any otherwise applicable rules concerning conflicts of
law.
4.5 The captions or headings in this Amendment are for convenience only and
in no way define, limit or describe the scope or intent of any provision of this
Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the Effective Date set forth above.
COBANK:
CoBank, ACB, as Line of Credit Agent, Term
Agent, and Construction Agent
By: __________________________
Name: Greg Somerhalder
Title: Vice President
COBANK:
CoBank, ACB, as sole Syndication Party
under the Term Credit Agreement
By: __________________________
Name: Greg Somerhalder
Title: Vice President
COBANK:
CoBank, ACB, as sole Syndication Party
under the LOC Credit Agreement
4
<PAGE>
By: __________________________
Name: Greg Somerhalder
Title: Vice President
BORROWER:
Village Farms International Finance
Association
By: ___________________________
Name: _________________________
Title: ________________________
AGREEMENT AND CONSENT OF GUARANTOR
Guarantor hereby consents and agrees to the foregoing Amendment.
GUARANTOR:
Agro Power Development, Inc.
By: ___________________________
Name: _________________________
Title: ________________________
5
Exhibit 10.95
EXECUTION COPY
FIRST AMENDMENT TO GUARANTOR SECURITY AND PLEDGE AGREEMENT
[Regarding EcoScience Merger]
This First Amendment to Guarantor Security and Pledge Agreement (this
"Amendment") is entered into on September ___, 1998 by and between:
Agro Power Development, Inc., a New York corporation with an address at 10 Alvin
Court, East Brunswick, New Jersey 08816 ("Guarantor"); and
CoBank, ACB, sole member of the Lender Group and Secured Party, as defined in
the Security Agreement.
R E C I T A L S
A. Guarantor entered into a certain Guarantor Security and Pledge Agreement
dated June 24, 1997 (as amended to date the "Security Agreement") in connection
with certain financing provided by the Lender Group to Village Farms
International Finance Association; and,
B. The Guarantor desires to merge with Agro Acquisition Corp., an affiliate
of EcoScience Corporation pursuant to a certain Agreement and Plan of Merger
(the "Merger Agreement") dated as of April 28, 1998 and amended and restated as
of July 31, 1998 (the "Merger"), with the name of the survivor being changed to
Agro Power Development, Inc.; and,
C. The parties desire to amend and modify the Security Agreement as
provided herein for the purpose, among other things, of permitting the
transactions described above.
AGREEMENTS
NOW, THEREFORE, for value received, and intending to be legally bound
herein, CoBank, ACB, in its capacity as Secured Party and sole Syndicated Party
consents and agrees with the Guarantor as follows:
1. Definitions. Except as otherwise expressly provided herein, all
capitalized terms used herein and defined in the Security Agreement shall have
the meaning ascribed to such term under the Security Agreement.
2. Preamble. Upon and after the consummation of the Merger, the reference,
in the preamble of the Security Agreement, to "Agro Power Development, Inc., a
New York corporation" shall be amended and restated in its entirety to read,
"Agro Power Development, Inc., a Delaware corporation."
<PAGE>
3. Section 6.1 Organization; Good Standing, etc. Upon and after
consummation of the Merger, the reference to "New York", shall be amended and
restated to read "Delaware".
4. Exhibit 6.6 Location of Guarantor and Collateral. The following
reference is hereby deleted and replaced as follows:
"1181 Sardis Road North
Suite 207
Charlotte, North Carolina 28270"
Replaced with:
"9912 Monroe Road
Suite 202
Matthews, North Carolina 28105"
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of
the date first set above.
Agro Power Development, Inc.
By: ______________________________
J. Kevin Cobb, Sr. VP & CFO
CoBank, ACB, as sole member of the
Lender Group and, in its capacity as Agent,
the Secured Party
By:_______________________________
Name:
Title:
Exhibit 10.96
EXECUTION COPY
FIRST AMENDMENT TO GUARANTY OF AGRO
POWER DEVELOPMENT, INC.
[Regarding EcoScience Merger]
This First Amendment to Guaranty of Agro Power Development, Inc. (this
"Amendment") is entered into on September ___, 1998 by and between:
Agro Power Development, Inc., a New York corporation, with an address at 10
Alvin Court, East Brunswick, New Jersey 08816 ("Guarantor"); and
The Lender Group, as defined in the Guaranty.
R E C I T A L S
A. The Guarantor entered into a certain Guaranty of Agro Power Development,
Inc. dated June 24, 1997 (as amended to date the "Guaranty") in connection with
certain financing provided by the Lender Group to Village Farms International
Finance Association (the "Borrower"); and,
B. The Guarantor desires to merge with Agro Acquisition Corp., an affiliate
of EcoScience Corporation, pursuant to a certain Agreement and Plan of Merger
(the "Merger Agreement") dated as of April 28, 1998 and amended and restated as
of July 31, 1998 (the "Merger"), with the name of the survivor being changed to
Agro Power Development, Inc.; and,
C. The parties desire to amend and modify the Guaranty as provided herein
for the purpose, among other things, of permitting the transactions described
above.
A G R E E M E N T S
NOW, THEREFORE, for value received, and intending to be legally bound
herein, Guarantor covenants and agrees with the Lender Group as follows:
1. Definitions. Except as otherwise expressly provided herein, all
capitalized terms used herein and defined in the Guaranty shall have the meaning
ascribed to such term under the Guaranty.
2. Preamble. Upon and after the consummation of the Merger, the reference,
in the preamble, to "Agro Power Development, Inc., a New York corporation" shall
be amended and restated in its entirety to read, "Agro Power Development, Inc.,
a Delaware corporation."
3. Definition Amendments.
(A) Section 1.35 Owner Group. Upon and after the consummation of the
Merger, the definition of "Owner Group" set forth in Section 1.35 shall be
amended and restated in its entirety as follows:
1.35 Owner Group: EcoScience Corporation.
<PAGE>
4. Other Amendments.
(A) Section 8.3 Maintenance of Existence and Qualification. The first
sentence of Section 8.3 of the Guaranty is hereby amended and restated in its
entirety as follows:
Upon and after the consummation of the Merger, the Guarantor shall maintain
its corporate existence in good standing under the laws of Delaware.
(B) Section 9.1 Borrowings. Section 9.1 of the Guaranty is hereby amended
by deleting the period at the end of the Section and by adding the following
text at the end of the Section:
and (vii) the indebtedness owed to Cogentrix Energy, Inc. ("CEI") pursuant
to the loan, in the original principal amount of $643,197.16, made by CEI
to Guarantor pursuant to the Promissory Note dated March 7, 1997 executed
by the Guarantor for the benefit of CEI ("CEI Loan").
5. Loans, Advances or Investments.
(A) Section 9.7(e) is hereby amended and restated in its entirety as
follows:
(e) investments in APD Subsidiaries, as defined in the Credit Agreement
(Line of Credit Facility).
6. Exhibits 1.35 Owner Group. Upon and after the consummation of the
Merger, Exhibit 1.35 shall be deleted in its entirety.
7. Effective Date. This Amendment, and the amendments to the Guaranty of
Agro Power Development, Inc. contained herein shall be effective only upon the
consummation of the Merger pursuant to the terms of the Merger Agreement by the
filing of the applicable certificate of merger with the Secretary of State of
Delaware.
8. Continuance of Guaranty. Except as otherwise expressly provided herein,
the Guaranty shall remain in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as
of the date first set forth above.
Agro Power Development, Inc.
BY: _____________________________________
J. Kevin Cobb, Sr. VP. & CFO
CoBank, ACB, as Construction Agent,
Term Agent, Line of Credit Agent and
sole member of the Lender Group
BY: _____________________________________
Name:
Title:
-2-
Exhibit 10.97
PROMISSORY NOTE
$643,197.16 March 7, 1997
FOR VALUE RECEIVED, the undersigned, promises to pay, ON DEMAND, to the
order of Cogentrix Energy, Inc. (the "Lender"), at 9405 Arrowpoint Boulevard,
Charlotte, North Carolinia 28273 the sum of SIX HUNDRED FORTY THREE THOUSAND ONE
HUNDRED NINETY SEVEN and 16/100 Dollars ($643,197.16) with interest as set forth
below.
All unpaid principal due hereunder shall bear interest from March 7, 1997
(the date of advance) at the rate of six percent (6%) per annum. All unpaid
principal and interest hereunder shall be due and payable ON DEMAND.
The undersigned and all other parties who at any time may be liable hereon
in any capacity, jointly and severally waive presentment, demand for payment,
protest and notice of protest and notice of dishonor of this note, and authorize
the holder hereof, without notice, to grant extensions in time of payment of any
monies owing under this note.
The undersigned shall pay attorney's fees as well as all costs and expenses
actually incurred by the Holder hereof in enforcing its rights under this
Promissory Note.
This note may not be changed orally, but only by an agreement in writing
signed by the party against whom any waiver, change, modification or discharge
is sought.
This note shall be deemed to be a contract made under the laws of the State
of New Jersey and shall be governed and construed in accordance with the laws of
said State.
IN WITNESS WHEREOF, this note has been executed, sealed and delivered on
_____ __, 1998 effective as of the day and year first above written.
Witness: Agro Power Development, Inc.
_____________________________ By:_________________________________
Name:
Title:
Exhibit 10.98
PROMISSORY NOTE
$1,838,420.47 January 31, 1997
FOR VALUE RECEIVED, the undersigned, promises to pay, ON DEMAND, to the
order of Village Farms of Texas, L.P. (the "Lender"), at 10 Alvin Court, East
Brunswick, New Jersey 08816 the sum of ONE MILLION EIGHT HUNDRED THIRTY EIGHT
THOUSAND FOUR HUNDRED TWENTY and 47/100 Dollars ($1,838,420.47) with interest as
set forth below.
$1,000,000 of the unpaid principal due hereunder shall bear interest
beginning on January 31, 1997 (the date on which such amount was advanced) and
$838,420.47 of the unpaid principal due hereunder shall bear interest beginning
on March 7, 1997 (the date on which such amount was advanced). All unpaid
principal due hereunder shall bear interest at the rate of six percent (6%) per
annum. All unpaid principal and interest hereunder shall be due and payable ON
DEMAND.
The undersigned and all other parties who at any time may be liable hereon
in any capacity, jointly and severally waive presentment, demand for payment,
protest and notice of protest and notice of dishonor of this note, and authorize
the holder hereof, without notice, to grant extensions in time of payment of any
monies owing under this note.
The undersigned shall pay attorney's fees as well as all costs and expenses
actually incurred by the Holder hereof in enforcing its rights under this
Promissory Note.
This note may not be changed orally, but only by an agreement in writing
signed by the party against whom any waiver, change, modification or discharge
is sought.
This note shall be deemed to be a contract made under the laws of the State
of New Jersey and shall be governed and construed in accordance with the laws of
said State.
IN WITNESS WHEREOF, this note has been executed, sealed and delivered on
_____ __, 1998 effective as of the day and year first above written.
Witness: Cogentrix Energy, Inc.
_____________________________ By:____________________________
Name:
Title:
Exhibit 10.99
VILLAGE FARMS OF PRESIDIO, L.P.
AGREEMENT OF LIMITED PARTNERSHIP
Dated as of August 31, 1998
THE LIMITED PARTNERSHIP INTEREST REPRESENTED HEREBY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF CERTAIN STATES AND HAVE BEEN OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM
THE REGISTRATION REQUIREMENT OF THE ACT AND SUCH LAWS. THE LIMITED PARTNERSHIP
INTEREST IS SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY BE
TRANSFERRED ONLY IN A MANNER WHICH IS IN COMPLIANCE WITH THE PROVISIONS OF THIS
AGREEMENT, AND MAY ONLY BE TRANSFERRED IN A TRANSACTION THAT IS REGISTERED UNDER
THE ACT OR EXEMPT FROM SUCH REGISTRATION.
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS ...................................................... 2
1.1 Certain Defined Terms................................ 2
1.2 Other Definitional Provisions........................ 12
ARTICLE II 12
GENERAL PROVISIONS .......................................................... 12
2.1 Formation of Partnership............................. 12
2.2 Name of the Partnership.............................. 12
2.3 Business of the Partnership.......................... 13
2.4 Registered Office of the Partnership................. 13
2.5 Liability of the Partners Generally.................. 13
2.6 Office of the Partnership............................ 13
2.7 Duration of the Partnership.......................... 13
ARTICLE III 14
CAPITAL CONTRIBUTIONS ....................................................... 14
3.1 Capital Contributions................................ 14
3.2 Representations...................................... 15
3.3 Interest............................................. 17
3.4 Withdrawals of Capital............................... 17
3.5 Additional Capital Contributions..................... 17
ARTICLE IV 17
ALLOCATION OF PROFITS AND LOSSES............................................. 17
4.1 Profits and Losses................................... 17
4.2 Capital Account Balances............................. 18
4.3 Minimum Gain Chargeback.............................. 18
4.4 Nonrecourse Deductions............................... 19
4.5 Partner Nonrecourse Deductions....................... 19
4.6 Qualified Income Offset.............................. 19
4.7 Curative Allocations................................. 19
4.8 Tax Allocations...................................... 19
4.9 Property Subject to 704(b) and 704(c)................ 19
4.10 Limitations.......................................... 19
ARTICLE V 20
DISTRIBUTIONS 20
5.1 Distribution of Net Distributable Cash............... 20
5.2 Default Allocations for Agrorent A. and Agrorent B... 20
5.3 Default Allocations for VF Delaware and VF........... 21
ARTICLE VI 23
- i -
<PAGE>
MANAGEMENT 22
6.1 Management of the Partnership........................ 22
6.2 Fundamental Matters.................................. 22
6.3 Officers of the Partnership.......................... 25
6.4 No Compensation; Reimbursement....................... 26
6.5 Insurance............................................ 26
6.6 Cooperation on Tax Matters........................... 26
ARTICLE VII 27
BOOKS, RECORDS AND BANK ACCOUNTS............................................. 27
7.1 Books and Records.................................... 27
7.2 Accounting Basis and Fiscal Year..................... 27
7.3 Reports.............................................. 27
7.4 Bank Accounts........................................ 28
7.5 Tax Returns.......................................... 28
7.6 Tax Elections........................................ 28
7.7 Tax Matters Partner.................................. 38
7.8 Withholdings......................................... 29
ARTICLE VIII 29
TRANSFER OF INTERESTS ....................................................... 29
8.1 Transfer of a Partner's Interest..................... 29
ARTICLE IX 31
ADDITIONAL PARTNERS; WITHDRAWAL OF PARTNERS.................................. 30
9.1 Additional Partners.................................. 30
9.2 Withdrawal of Partners............................... 31
ARTICLE X 32
DISSOLUTION AND LIQUIDATION ................................................. 32
10.1 Events of Dissolution................................ 32
10.2 Distributions Upon Liquidation....................... 33
ARTICLE XI 34
DISPUTE RESOLUTION .......................................................... 34
11.1 Arbitration.......................................... 34
11.2 Buy/Sell Option...................................... 35
ARTICLE XII 36
MISCELLANEOUS 36
12.1 Distributions and Notices............................ 36
12.2 Disclosure Obligations............................... 36
- ii -
<PAGE>
12.3 Successors and Assigns............................... 36
12.4 Amendments........................................... 36
12.5 Partition............................................ 37
12.6 No Waiver............................................ 37
12.7 Entire Agreement..................................... 37
12.8 Captions............................................. 37
12.9 Counterparts......................................... 37
12.10 Applicable Law....................................... 37
12.11 Severability......................................... 37
LIST OF SCHEDULES
Schedule 1.1(a) Calculation of Internal Rate of Return
Schedule 1.1(a) Project Budget
Schedule 1.1(b) Project Documents
Schedule 1.1(c) Site
Schedule 6.3 Initial Officers of the Partnership
- iii -
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
This Agreement of Limited Partnership dated as of August 31, 1998 of
VILLAGE FARMS OF PRESIDIO, L.P. (the "Partnership") is by and among VILLAGE
FARMS OF DELAWARE, LLC, a Delaware Limited Liability Company ("VF Delaware" and
a "General Partner"), Agrorent B, LLC, a Delaware Limited Liability Company,
("Agrorent B" and a "Limited Partner"), Agrorent A, LLC, a Delaware limited
liability company ("Agrorent A" and a "General Partner") and VILLAGE FARMS,
L.L.C., a Delaware Limited Liability Company ("VF" and a "Limited Partner").
VF Delaware is a Delaware limited liability company owned 99% by Agro Power
Development, Inc., a New York corporation ("Agro Power"), and 1% by Village
Farms, L.L.C., ("VF"). VF is a Delaware limited liability company owned 99% by
Agro Power and 1% by VF Delaware. Agro Power has entered into agreements and
instruments (as more fully defined hereafter, the "Project Documents") related
to the development and operation of a venlo style greenhouse located in the
vicinity of Marfa, Texas for the purpose of producing and selling peppers (as
more fully defined hereafter, the "Project"). In order to continue with the
development of the Project and obtain financing for construction and working
capital needs, Agro Power desires that Agrorent A and Agrorent B contribute in
the aggregate $999,999.14 to the Project. In order to encourage Agrorent A and
Agrorent B to contribute such funds to the Project, Agro Power has agreed (1) to
assign to VF the agreement for electrical services between Agro Power and West
Texas Utilities (the "Electrical Agreement" or the "Assigned Document") and VF
will contribute the assigned documents and $6,199,994.65 to the Partnership, in
exchange for a 85.25% interest in the Partnership. VF Delaware will contribute
$72,727.21 to the Partnership in exchange for a 1% interest in the Partnership.
In exchange for a contribution to the capital of the Partnership of $927,271.93
by Agrorent B, Agrorent B will receive a 12.75% interest in the Partnership, and
in exchange for a contribution to the capital of the Partnership of $72,727.21
by Agrorent A , Agrorent A will receive a 1% interest in the Partnership.
Agrorent A and Agrorent B have agreed to make such contributions to the capital
of the Partnership in accordance with the aforesaid and on the terms and
conditions set forth herein.
Accordingly, in consideration of the covenants and agreements contained
herein and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, and intending to be legally bound, the parties
hereto hereby agree as follows:
-1-
<PAGE>
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms.
As used in this Agreement, the following terms have the following meanings
(such definitions to be equally applicable to both singular and plural forms of
the terms defined):
"Abandonment" has the meaning set forth in subsection 6.2(e).
"Adjusted Capital Account Deficit" means, with respect to any Partner, the
deficit balance, if any, in such Partner's Capital Account as of the end of the
relevant fiscal year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such Partner is
obligated to restore pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate sentence of
Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) debit to such Capital Account the items described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
"Adverse Consequence" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, Taxes, liens, losses, expenses and
fees, including, but not limited to, court costs, arbitration costs, costs of
investigation, and attorneys' fees.
"Affiliate" of any designated Person, means each Person which, directly or
indirectly, controls or is controlled by or is under common control with such
designated Person and, without limiting the generality of the foregoing, shall
include (a) any Person which beneficially owns or holds ten percent (10%) or
more of any class of voting securities of such designated Person or ten percent
(10%) or more of the equity interest in such designated Person and (b) any
Person of which such designated Person beneficially owns and holds ten percent
(10%) or more of any class of voting securities or in which such designated
Person beneficially owns or holds ten percent (10%) or more of the equity
interest. For the purposes of this definition, the terms "controls", "controlled
by" and "under common control with," as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. Notwithstanding the
foregoing, neither Agrorent A
-2-
<PAGE>
or Agrorent B, on the one hand, nor VF Delaware or VF, on the other hand, shall
be deemed to be Affiliates of one another.
"Agreement" means this Agreement of Limited Partnership, as amended,
supplemented or otherwise modified and in effect from time to time.
"Agro Power" means Agro Power Development, Inc., a New York corporation
with offices at 10 Alvin Court, East Brunswick, New Jersey 08816.
"Agrorent" means Agrorent A and Agrorent B collectively.
"Agrorent Designee" has the meaning set forth in Section 6.1(a).
"Agrorent A" means Agrorent A, L.L.C., a Delaware limited liability
company.
"Agrorent B" means Agrorent B, L.L.C. a Delaware limited liability company.
"Appraisal Procedure" means a procedure whereby two independent appraisers,
one chosen by each General Partner, shall agree upon the determinations then the
subject of appraisal. Each General Partner shall deliver a written notice to the
other appointing its appraiser within 15 days after receipt from the other of a
written notice appointing its appraiser. Each appraiser then shall prepare a
written appraisal with respect to the determinations which then are the subject
of appraisal. If within 30 days after appointment of the two appraisers they are
unable to agree upon the amount in question, a third independent appraiser shall
be chosen within 10 days thereafter by the mutual consent of such first two
appraisers or, if such first two appraisers fail to agree upon the appointment
of a third appraiser, such appointment shall be made by the American Arbitration
Association, or any organization successor thereto, from a panel of arbitrators
having experience in the business of operating a hydroponic hot house and
marketing the product produced therein and a familiarity with equipment used or
operated in such business. The decision of the third appraiser so appointed and
chosen shall be given within 30 days after the selection of such third
appraiser. If three appraisers shall be appointed and the determination of one
appraiser is disparate from the median by more than twice the amount by which
the other determination is disparate from the median, then the determination of
such appraiser shall be excluded, the remaining two determinations shall be
averaged and such average shall be binding and conclusive on the General
Partners; otherwise the average of all three determinations shall be binding and
conclusive on the General Partners. (For example, if the two appraisers
appointed by the General Partners determine a value of $100 and $ 200, and the
third appraiser determines a value of $150, then the value in question shall be
conclusively determined to be $150 ($100 + $200 + $150 divided by 3). As a
further example, consider the first example but the third appraiser places a
value of $190. In this case, the $100 valuation shall be disregarded and the
value shall be conclusively determined to be $195 ($190 + $200 divided by 2).
The $100 valuation is disregarded because the median of the three appraisers was
$190 and the difference between $100 and $190 is $90, which is more than twice
the difference between $200 and $190 which is $10, which multiplied by two is
$20.) If a General Partner shall
-3-
<PAGE>
appoint an appraiser and the other Person shall fail to appoint an appraiser in
the manner specified herein, the determination of the appraiser so appointed
shall be binding and conclusive on the General Partners. The expenses of the
appraisal procedure shall be borne solely by the Partnership.
"Assigned Document" has the meaning set forth in the preamble to this
Agreement.
"Budgets" has the meaning set forth in subsection 6.2(i).
"Business Day" means a day other than a Saturday, a Sunday or any other day
on which commercial banks in New York or New Jersey are authorized or required
by law or executive order to be closed.
"Buy-Out Offer" has the meaning set forth in Section 11.2.
"Buy-Out Offeree" has the meaning set forth in Section 11.2.
"Buy-Out Offeror" has the meaning set forth in Section 11.2.
"Capital Account" means, with respect to any Partner, the capital account
maintained for such Partner in the Partnership Books in accordance with the
following provisions:
(a) To each Partner's Capital Account there shall be credited such
Partner's Capital Contributions, such Partner's distributive share of
Profits and any other items in the nature of income or gain which are
allocated under this Agreement.
(b) To each Partner's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any property (other than money)
(net of any liabilities assumed by such Partner or to which the property is
subject) distributed to such Partner pursuant to any provision of this
Agreement, and such Partner's distributive share of Losses and any other
items in the nature of deductions or losses which are allocated under this
Agreement.
(c) In the event all or a portion of an interest in the Partnership is
transferred in accordance with the terms of this Agreement in a transaction
that does not result in a termination of the Partnership under Code Section
708(b)(1)(B), the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred interest.
(d) In determining the amount of any liability for purposes of clause
(a) and clause (b) hereof, there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and the Regulations.
(e) If a Partner owns more than one Partnership Interest, one Capital
Account shall be maintained for the Partnership Interests of the Partner.
-4-
<PAGE>
(f) Each Partner's Capital Account shall in all other respects be
maintained in accordance with the provisions of Regulations Section
1.704-1(b).
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of capital accounts are intended to comply with Regulations
Section 1.704-1(b), and shall be interpreted and applied in a manner consistent
with such Regulations.
"Capital Contribution" means, with respect to any Partner, the amount of
money and the initial Gross Asset Value of any property (other than money) (net
of any liabilities assumed by the Partnership or to which the property is
subject) contributed to the Partnership with respect to any Partnership Interest
held by such Partner pursuant to the terms of this Agreement.
"Capital Lease" means any lease of property, real or personal, which in
accordance with GAAP, would be required to be capitalized on a balance sheet of
the lessee.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commonly Controlled Entity" means, with respect to any Person, an entity,
whether or not incorporated, which is under common control with such Person
within the meaning of Section 414(b) or (c) of the Code.
"Construction Agreement" means the Commercial Design and Construction
Contract dated as of the date hereof between the Partnership and Agro Power for
the construction of the Project, as it may be amended, supplemented or otherwise
modified and in effect from time to time.
"Construction/Term Facility" means a loan facility in the amount of
$6,841,029.00 provided by the Construction/Term Lender pursuant to the Project
Loan Documents.
"Construction/Term Lender" means Village Farms International Finance
Association or its successor under the Construction/Term Facility.
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
6 Del.C. ss.ss.17101, et seq., as it may be amended from time to time and any
successor to such Act.
"Depreciation" means, for each fiscal year or other period, an amount equal
to the deprecation, amortization, or other cost recovery deduction allocable
with respect to an asset for such period, except that if the Gross Asset Value
of an asset differs from its adjusted basis for Federal tax purposes at the
beginning of such period, Depreciation shall be an amount which bears the same
ratio to such beginning Gross Asset Value as the Federal income tax
depreciation, amortization or other cost recovery deduction for such period
bears to such beginning adjusted tax basis; provided that if the Federal income
tax depreciation, amortization, or other cost recovery deduction for such period
is zero, Depreciation shall be determined with reference to
-5-
<PAGE>
such beginning Gross Asset Value using any reasonable method selected by the
Management Committee.
"Dollars" and "$" means dollars in lawful currency of the United States of
America.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means, with respect to any Person, any corporation or
trade or business which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as such Person or is under
common control (within the meaning of Section 414(c) of the Code) with such
Person.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States.
"General Partner" means each of Agrorent A and Village Farms of Delaware,
LLC and any Person admitted to the Partnership as an additional General Partner
in accordance with the provisions of this Agreement, until such time as such
Person ceases to be a general partner of the Partnership as provided herein or
in the Delaware Act.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Gross Asset Value" means, with respect to any asset, the asset's adjusted
basis for Federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, as determined by agreement of the Partners;
(b) The Gross Asset Value of all Partnership assets shall be adjusted
to equal their respective gross fair market values, as determined by
agreement of the Partners, and in the event the Partners fail to so agree,
as determined by the Appraisal Procedure, as of the following times: (i)
The acquisition of an additional interest in the Partnership by any new or
existing Partner in exchange for more than a de minimis Capital
Contribution; (ii) the distribution by the Partnership to a Partner of more
than a de minimis amount of property as consideration for an interest in
the Partnership if the Management Committee reasonably determines that such
adjustment is necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership; and (iii) the liquidation of
the Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g);
(c) The Gross Asset Value of any Partnership asset distributed to any
Partner shall be the gross fair market value of such asset on the date of
distribution as determined
-6-
<PAGE>
by agreement of the Partners and, in the event the Partners fail to so
agree, as determined by the Appraisal Procedure;
(d) The Gross Asset Values of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m);
provided, however, that Gross Asset Values shall be adjusted to the extent
the Partners agree (and in the event the Partners fail to so agree, as
determined by the Appraisal Procedure) that an adjustment pursuant to
clause (b) of this definition is necessary or appropriate in connection
with a transaction that would otherwise result in an adjustment pursuant to
clause (d) of this definition. If the Gross Asset Value of an asset has
been determined or adjusted pursuant to clauses (a) and (b) of this
definition or clause (d) of this definition, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect
to such asset; and
(e) The Gross Asset Value of any asset owned indirectly by the
Partnership through a subsidiary partnership shall be determined pursuant
to the terms of the partnership agreement for such subsidiary partnership.
"Indebtedness" means, with respect to any Person, (a) indebtedness of such
Person for borrowed money or for the deferred purchase price of property or of
services (other than obligations under agreements for the purchase of goods and
services in the normal course of business which are not more than 30 days past
due; (b) obligations of such Person under Capital Leases; (c) obligations of
such Person pursuant to interest hedging transactions; (d) obligations of such
Person in respect of letters of credit; (e) obligations of such Person under
direct and indirect guarantees in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise assure a creditor
against loss in respect of, indebtedness or obligations of others of the kinds
referred to in clause (a), (b), (c) or (d) above (other than endorsements of
negotiable instruments in the ordinary course of business); and (f) any
obligations of such Person or a Commonly Controlled Entity to a Multi-Employer
Plan. For purposes of clarity, "Indebtedness" includes the obligations of the
Partnership to repay amounts borrowed under, and to pay other amounts owing
under, the Project Loan Documents.
"Initial Capital Contribution" means, (a) with respect to Agrorent A, the
amount of $72,727.21 and, with respect to Agrorent B, means the amount of
$927,271.93. Said Initial Capital Contributions to be paid directly to Dalsem
Kassenbouw, B.V. in partial satisfaction of the payment obligation of the
Partnership to Agro Power under the Construction Agreement; (b) with respect to
VF Delaware, the amount of $72,727.21 and, with respect to VF, the Assigned
Document and $6,199,994.65. Said initial capital contribution shall be made by
the satisfaction by VF Delaware and VF of $6,272,721.86 of the obligation owned
by the Partnership to Agro Power under the Construction Agreement.
"Lien" means any mortgage, deed of trust, security interest, pledge,
hypothecation, encumbrance or lien (statutory or other) of any kind or nature
whatsoever (including, without
-7-
<PAGE>
limitation, any agreement to give any of the foregoing, any conditional sale or
other title retention agreement, any financing lease having substantially the
same economic effect as any such agreement, and the filing of any statement
under the Uniform Commercial Code or comparable law of any jurisdiction).
"Limited Partner" means each of Agrorent B and VF and any Person who
becomes a limited partner of the Partnership in accordance with the terms of
this Agreement and is shown as such on the books and records of the Partnership.
"Losses" has the meaning given to it in the definition of "Profits."
"Management Agreement" means the Management Agreement dated the same date
as this Agreement by and between the Partnership and New Amsterdam Joint
Venture, L.L.C., as it may be amended, supplemented or otherwise modified and in
effect from time to time, pursuant to which New Amsterdam Joint Venture, L.L.C.
will provide operation and maintenance services to the Partnership.
"Management Committee" means the Management Committee of the Partnership
referred to in Section 6.1.
"Marketing Agreement" means the Marketing Agreement dated the same date as
this Agreement by and between the Partnership and VF, as it may be amended,
supplemented or otherwise modified and in effect from time to time, pursuant to
which VF will agree to market products produced by the Partnership.
"Multi-Employer Plan" means, with respect to any Person, a Multi-Employer
Plan as defined in Section 3(37) of ERISA to which contributions have been made
by such Person or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Distributable Cash" means for any period, an amount equal to all cash
received by the Partnership during such period, including but not limited to,
cash from operations, reductions in reserves, casualty proceeds, rebates and
other extraordinary items, less (a) principal, interest and other payments made
under or pursuant to the Construction/Term Facility, (b) all cash expenditures
of and payments made by the Partnership, and (c) any reserves established by the
Management Committee of the Partnership, and subject to the limitations on
distributions, if any, imposed pursuant to the terms of the Project Loan
Documents.
"Nonrecourse Deductions" shall have the meaning set forth in Regulations
Sections 1.704-2(b) and (c). The amount of Nonrecourse Deductions for a
Partnership fiscal year equals the excess, if any, of the net increase, if any,
in the amount of Partnership minimum gain during the fiscal year over the
aggregate amount of any distributions during that fiscal year of proceeds of a
non-recourse liability that are allocable to an increase in Partnership minimum
gain, determined according to the provisions of Regulations Section 1.704-2(c).
-8-
<PAGE>
"Operating Budget" means the business plan and budget required to be
provided to the Partnership pursuant to the Management Agreement.
"Operating Management Fee" means a management fee to be paid to New
Amsterdam Joint Venture, LLC in accordance with the Management Agreement.
"Partner" means any of the General Partners or the Limited Partners.
"Partner Nonrecourse Deductions" shall have the meaning specified in
Regulations Section 1.704-2(i)(2).
"Partnership" means Village Farms of Presidio, L.P., the limited
partnership formed pursuant to this Agreement and the filing of the Certificate
of Limited Partnership with the Delaware Secretary of State.
"Partnership Books" means the books and records maintained by the
Partnership and reviewed within sixty (60) days of each fiscal year end by the
Management Committee, in which records and information relating to the ownership
of the Partnership, the constituency of the Management Committee and actions
taken by the Management Committee or the Partners is maintained, including but
not limited to, a register of the Partners, each Partner's Capital Account, each
Partner's Percentage Interest, actions taken by the Management Committee and the
Partners, and this Agreement and any amendments hereto.
"Partnership Interest" means, with respect to any Partner, the interest of
such Partner in the Partnership, whether general or limited, at any particular
time, including the rights and obligations of such Partner as provided in this
Agreement and the Delaware Act.
"Partnership Percentage" means, with respect to any Partner, at any time,
the percentage specified as such Partner's "Partnership Percentage" at the time
such Partner was admitted to the Partnership, as adjusted in accordance with the
terms of this Agreement. The initial Partnership Percentages are as follows:
Agrorent A 1%
Agrorent B 12.75%
VF Delaware 1%
VF 85.25%
Unless Agrorent A and Agrorent B's respective contributions are made no later
than Friday, September 4, 1998, and evidenced by a written receipt of said
contribution from Dalsem Kassenbouw, B.V., Agrorent A's and Agrorent B's rights
and duties under this agreement shall be deemed to be void ab initio and
Agrorent A and Agrorent B shall not be deemed to be a party to this Agreement
and the initial Partnership Percentages shall be as follows:
VF Delaware 2%
VF 98%
-9-
<PAGE>
"Permitted Liens" means Liens in favor of any Person other than the
Partners or any of their respective Affiliates, that (a) arise in the ordinary
course of business of the Partnership (including, without limitation, landlord's
materialmen's, mechanic's, worker's, repairmen's and employee's Liens and
similar Liens which arise in connection with any tax, assessment, governmental
charge or levy) and (b) do not secure Indebtedness.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Profits" and "Losses" mean, for any period, an amount equal to the
Partnership's taxable income or loss for such period, determined in accordance
with Code Section 703(a) (for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss), with the following adjustments:
(a) Income of the Partnership that is exempt from federal income tax
and not otherwise taken into account in computing Profits or Losses
pursuant to this definition shall be added to such taxable income or loss;
(b) any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits or Losses pursuant to this definition shall be
subtracted from such taxable income or loss;
(c) gain and loss with respect to the disposition of any Partnership
asset (both directly owned assets and assets owned indirectly through a
subsidiary partnership) shall be computed with respect to the Gross Asset
Value rather than adjusted tax basis of such asset;
(d) in lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing taxable income or loss, there
shall be taken into account Depreciation for such fiscal year or other
period; and
(e) in the event of an adjustment in the Gross Asset Value of any
Partnership asset pursuant to clause (b) of the definition of "Gross Asset
Value" herein, the amount of such adjustment shall be taken into account as
gain or loss from the disposition of such asset for purposes of computing
Profits and Losses.
"Project" means an approximately 26 acre greenhouse to be located on the
Site on which the Partnership will produce peppers or other produce for sale
under the Marketing Agreement.
"Project Assets" has the meaning set forth in Section 3.1(a).
-10-
<PAGE>
"Project Budget" means the pro forma budget of total Project costs attached
hereto as Schedule 1.1(a), as amended or modified from time to time in
accordance with subsection 6.2(i).
"Project Credit Facility" means the Construction/Term Facility.
"Project Documents" means the agreements and instruments listed on Schedule
1.1(b) attached hereto and incorporated herein by reference entered into in
connection with the Project as the same may be amended, supplemented or
otherwise modified in accordance with Section 6.2 hereof and in effect from time
to time.
"Project Loan Documents" means the agreements and instruments executed by,
between or among the Partnership, the Construction/Term Lender and any other
party relating to the Construction/Term Facility as the same may be amended,
supplemented or otherwise modified in accordance with Section 6.2 hereof and in
effect from time to time.
"Regulations" means the temporary, proposed and final regulations under the
Code and any successor provisions thereto.
"Requirement of Law" means, as to any Person, (a) the certificate of
incorporation and bylaws or partnership agreement or other organizational or
governing documents of such Person, and (b) any law, treaty, rule or regulation
or determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its properties or
to which such Person or any of its properties is subject and the violation of
which, or which determination, could reasonably be expected to (i) have a
material adverse effect on the business, operations, properties, condition
(financial or otherwise) or prospects of such Person or (ii) materially
adversely affect the ability of such Person to perform its obligations under the
Project Loan Documents or the Project Documents to which it is a party.
"Site" means a parcel of approximately 55 acres located in the vicinity of
Marfa, Texas and more fully described on Schedule 1.1(c) attached hereto and
incorporated herein by reference.
"Subsidiary" means with respect to any Person, an Affiliate that is
controlled (directly or indirectly through one or more intermediaries) by that
Person.
"Taxes" means any and all income or gross receipt taxes, franchise taxes,
levies, imposts, duties, assessments, fees, charges and withholdings of any
nature whatsoever, whether or not presently in existence, imposed by any
Governmental Authority.
"VF" means Village Farms, L.L.C., a Delaware limited liability company, 99%
of which is owned by Agro Power and 1% of which is owned by VF Delaware.
"VF Delaware" means Village Farms of Delaware, L.L.C., a Delaware limited
liability company, 99% of which is owned by Agro Power and 1% of which is owned
by VF.
-11-
<PAGE>
"Withdraw" or "Withdrawal", with respect to any Partner, means a Partner
ceasing to be a partner of the Partnership for any reason, whether voluntary or
involuntary, and "Withdrawn", with respect to a Partner, means a Partner who has
ceased to be a partner of the Partnership.
"Withdrawal Date" means the date of the Withdrawal from the Partnership of
a Withdrawn Partner.
1.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto, unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto, accounting terms not defined in Section 1.1, and
accounting terms partly defined in Section 1.1 to the extent not defined,
shall have the respective meanings given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and section,
schedule and exhibit references are to this Agreement unless otherwise
specified.
(d) Unless the context requires otherwise, any reference in this
Agreement to any of the Project Documents or the Project Loan Documents
shall mean any of such documents as amended, supplemented or modified and
in effect from time to time.
ARTICLE II
GENERAL PROVISIONS
2.1 Formation of Partnership. The Partners hereby confirm the formation and
establishment of a limited partnership under the terms and provisions of this
Agreement and the provisions of the Delaware Act, and the rights and liabilities
of the Partners shall be as provided in this Agreement and in the Delaware Act.
Concurrently with or prior to the execution of this Agreement by Agrorent A ,
and VF Delaware, Agrorent A and VF Delaware shall or shall have executed and
filed with the Office of Secretary of State of the State of Delaware a
Certificate of Limited Partnership in accordance with Section 17201 of the
Delaware Act, in form and substance satisfactory to both Agrorent A and VF
Delaware.
2.2 Name of the Partnership. The name of the Partnership shall be Village
Farms of Presidio, L.P., or such other name as the Partners from time to time
may designate.
-12-
<PAGE>
2.3 Business of the Partnership. The business of the Partnership is to
develop, construct, and operate the Project. In furtherance of its business, the
Partnership shall have and may exercise all the powers now or hereafter
conferred by the laws of the State of Delaware on partnerships formed under the
laws of that state, and shall do any and all things necessary or desirable for
the accomplishment of the above purposes. The Partnership shall engage in no
other business except as permitted by the Management Committee in accordance
with Section 6.2 below.
2.4 Registered Office of the Partnership. The Partnership shall maintain a
registered office at, and the name and address of the Partnership's registered
agent in Delaware is, The Corporation Trust Company, 1209 Orange Street, New
Castle County, Wilmington, Delaware 19801.
2.5 Liability of the Partners Generally.
(a) Except as otherwise provided in the Delaware Act, each General
Partner shall have the liabilities of a partner in a partnership without
limited partners to Persons other than the Partnership and the Limited
Partners.
(b) Except as otherwise provided in this Agreement or the Delaware
Act, no Limited Partner (or former Limited Partner) shall be obligated to
make any contribution of capital to the Partnership or have any liability
for the debts and obligations of the Partnership.
2.6 Office of the Partnership. The Partnership shall maintain an office and
principal place of business in Marfa, Texas. Pursuant to the Management
Agreement, the books of account and other records with respect to the operations
of the Partnership shall be maintained at 10 Alvin Court, East Brunswick, New
Jersey 08816. The Partnership shall not have or maintain any office or other
place of business outside of Marfa, Texas.
2.7 Duration of the Partnership. The Partnership shall commence on the
effective date set forth in the Certificate of Limited Partnership referred to
in Section 2.1, above and shall continue until its termination in accordance
with the provisions of Article X.
-13-
<PAGE>
ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 Capital Contributions.
(a) Simultaneously with the execution of the Agreement by Agrorent A
and Agrorent B, VF shall convey, grant, transfer the assign (or cause to be
conveyed, granted, transferred and assigned) to the Partnership the
Assigned Document
If any consent or approval is required in connection with the
assignment and contribution to the Partnership pursuant to this subsection
3.1(a) of any Assigned Document VF shall have obtained such consent or
approval prior to such assignment and contribution.
(b) Agrorent A shall make a contribution of $72,727.21 by wire
transfer of immediately available funds to Dalsem Kassenbouw, B.V. in
partial satisfaction of the payment obligation of the Partnership to Agro
Power under the Construction Agreement no later than Friday, September 4,
1998. Unless the $72,727.21 contribution is made no later than Friday,
September 4, 1998 and evidenced by a written receipt of said contribution
from Dalsem Kassenbouw, B.V., Agrorent A's rights and duties under this
Agreement shall be deemed void ab initio and Agrorent A shall not be a
party to this Agreement and VF Delaware will be deemed to be become a 2%
general partner in the Partnership.
(c) Agrorent B shall make a contribution of $927,271.95 by wire
transfer of immediately available funds to Dalsem Kassenbouw, B.V. in
partial satisfaction of the payment obligation of the Partnership to Agro
Power under the Construction Agreement no later than Friday, September 4,
1998. Unless the $927,271.95 contribution is made no later than Friday,
September 4, 1998 and evidenced by a written receipt of said contribution
from Dalsem Kassenbouw, B.V., Agrorent B's rights and duties under this
Agreement shall be deemed void ab initio and Agrorent B shall not be a
party to this Agreement and VF will be deemed to be a 98% limited partner
in the Partnership.
(d) VF shall contribute to the Partnership on execution of this
agreement by all the Partners the Assigned Document and $6,199,994.65. The
cash portion of said capital contribution to be made by VF's satisfaction
of $6,199,994.65 of the obligation owed by the Partnership to Agro Power
under the Construction Agreement.
(e) VF Delaware shall contribute to the Partnership $72,727.21. Said
capital contribution to be made by VF Delaware's satisfaction of $72,727.21
of the obligation owed by the Partnership to Agro Power under the
Construction Agreement.
-14-
<PAGE>
3.2 Representations.
(a) The following representations or warranties shall be true and
correct in all respects, and are hereby made to Agrorent A and Agrorent B
by VF Delaware and VF as an inducement to their making capital
contributions to the Partnership:
(i) VF Delaware is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware,
the ownership of which is 99% by Agro Power and 1% by VF, and (B) has
full power and authority and the legal right to incur the obligations
provided for in this Agreement.
(ii) VF (A) is a Limited Liability Company duly organized, validly existing
and in good standing under the Laws of the State of Delaware, the
ownership of which is 99% by Agro Power and 1% by VF Delaware.
(iii) This Agreement, Project Documents, the Assigned Document and Project
Loan Documents to which any Agro Power Commonly Controlled Entity is a
party has been duly authorized, executed and delivered by such entity
and constitute the legal, valid and binding obligations of such entity
enforceable against it in accordance with their terms, except as
enforceability may be limited by general equitable principles and by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally.
(iv) Neither the execution, delivery or performance by any Agro Power
Commonly Controlled Entity of this Agreement, the Project Documents,
the Assigned Document or Project Loan Documents to which any such
entity is a party, nor compliance by it with the terms and provisions
hereof or thereof, including, without limitation, the assignment of
the Assigned Document and Project Assets to the Partnership, requires
the consent or authorization of any other party (except such as have
been duly obtained), or conflicts or will conflict with or result in a
breach or violation of its charter documents or bylaws or any of the
terms, conditions or provisions of any Requirement of Law applicable
to it or its assets or business.
-15-
<PAGE>
(v) It is not an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
(vi) The representations and warranties of any Agro Power Commonly
Controlled Entity in or pursuant to any of the Project Documents,
Assigned Document or Project Loan Documents to which such entity is a
party are true and correct as of the date hereof (unless stated to
relate solely to an earlier date) and are hereby deemed to be made to
Agrorent A and Agrorent B, mutatis mutandis, as if fully set forth
herein.
(b) The following representations or warranties shall be true and
correct in all respects, and are hereby made to VF Delaware and VF by
Agrorent A and Agrorent B as an inducement to their making capital
contributions to the Partnership:
(i) Each of Agrorent A and Agrorent B (A) is a limited liability company
duly organized, validly existing and in good standing under the laws
of the State of Delaware , (B) has full power and authority and the
legal right to incur the obligations provided for in this Agreement,
and (C) has taken all necessary action to authorize the execution,
delivery and performance of this Agreement.
(ii) This Agreement has been duly authorized, executed and delivered by
Agrorent A and Agrorent B and constitutes the legal, valid and binding
obligation of each of Agrorent A and Agrorent B enforceable against it
in accordance with its terms, except as enforceability may be limited
by general equitable principles and by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally.
(iii) Neither the execution, delivery or performance by Agrorent A and
Agrorent B of this Agreement, nor compliance by it with the terms and
provisions hereof, requires the consent or authorization of any other
party (except such as have been duly obtained), or conflicts or will
conflict with or result in a breach or violation of its charter
documents or bylaws or any of the terms, conditions or provisions of
any Requirement of Law applicable to it or its assets or business.
(iv) It is not an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
-16-
<PAGE>
3.3 Interest. No interest shall accrue on any contribution to the capital
of the Partnership.
3.4 Withdrawals of Capital. No Partner shall have the right to withdraw or
to be repaid or returned any capital contributed by it, except as otherwise
provided herein.
3.5 Additional Capital Contributions. Unless otherwise unanimously agreed
by the Management Committee, no Partner shall be required to make any
contribution to the capital of the Partnership other than its capital
contributions set forth in this Article III.
ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES
4.1 Profits and Losses.
(a) After giving effect to the special allocations set forth in
Sections 4.3, 4.4, 4.5, 4.6, 4.7 and 4.10 hereof, the Partners shall share
Profits and Losses as follows:
(i) Profits shall be allocated among the Partners as follows:
(A) Profits shall first be allocated to the General Partners to
offset any prior allocations of Loss made to the General Partners
under Section 4.1(a)(ii)(B) hereof which have not previously been
offset.
(B) Thereafter, Profits shall be allocated to the Partners to
offset any prior allocations of Loss made to the Partners under
Section 4.1(a)(ii)(A) which have not previously been offset.
(C) Thereafter, Profits shall be allocated among the Partners in
proportion to their Partnership Percentages.
(ii) Losses shall be allocated among the Partners as follows:
(A) Losses shall first be allocated to the Partners in accordance
with their positive Capital Accounts.
(B) Thereafter, Losses shall be allocated to the General Partners
in the proportion of their Partnership Percentages.
For Federal income tax purposes, each item of income, gain, loss,
deduction or credit entering into the computation of the Partnership's
taxable income shall be allocated in the same proportion.
(b) The Profits and Losses of the Partnership shall be unanimously
determined by the Management Committee and shall be allocated as described
in Section 4.1(a) (i) at
-17-
<PAGE>
the end of each fiscal quarter, (ii) upon the transfer of the Partnership
Interest of any Partner pursuant to Article VIII, (iii) upon the Withdrawal
of any Partner pursuant to Article IX, (iv) upon the admission of any
Partner to the Partnership pursuant to Article IX and (vi) at such other
times that the Management Committee may determine.
4.2 Capital Account Balances. Each Partner's Capital Account shall be
maintained in accordance with the principles of applicable Treasury Regulations
promulgated under Section 704(b) of the Code and as otherwise provided in the
definition of "Capital Accounts" and in this Article IV.
4.3 Minimum Gain Chargeback.
(a) Notwithstanding any other provision in this Agreement, if there is
a net decrease in Partnership minimum gain (determined in accordance with
the principles of Regulations Sections 1.704-2(b)(2) and 1.704-2(d)) during
any Partnership taxable year, the Partners who would otherwise have an
Adjusted Capital Account Deficit at the end of such year shall be specially
allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount and manner sufficient to
eliminate as quickly as possible such Adjusted Capital Account Deficit. The
items to be so allocated shall be determined in accordance with Regulations
Section 1.7042(g). This subsection 4.3(a) is intended to comply with the
minimum gain charge-back requirements in such Regulation Sections and shall
be interpreted consistently therewith.
(b) Notwithstanding any other provision in this Agreement, if there is
a net decrease in Partnership minimum gain attributable to a partner
non-recourse debt of the Partnership (within the meaning of Regulations
Sections 1.704-2(b)) during any Partnership fiscal year, each Person who
has a share of the Partnership minimum gain attributable to such
non-recourse debt of the Partnership, determined in accordance with
Regulation Section 1.704-02(i)(5), shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, subsequent
years) in an amount equal to the greater of (i) the portion of such
Person's share of the net decrease in minimum gain of the Partnership
attributable to such non-recourse debt of the Partnership, determined in
accordance with Regulations Section 1.704-2(i)(b), that is allocable to the
disposition of property of the Partnership subject to such non-recourse
debt of the Partnership, determined in accordance with Regulations Section
1.704-2(i)(4), or (ii) if such Person would otherwise have an Adjusted
Capital Account Deficit at the end of such year, an amount sufficient to
eliminate such Adjusted Capital Account Deficit. Allocations pursuant to
the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto. The items to be
so allocated shall be determined in accordance with Regulations Section
1.704-2(i)(4). This subsection 4.3(b) is intended to comply with the
minimum gain charge-back requirement in such Regulations Section and shall
be interpreted consistently therewith. Solely for purposes of this
subsection 4.3(b), each Person's Adjusted Capital Account Deficit shall be
determined prior to any other allocations pursuant to this Article IV with
respect to such fiscal year, other than allocations pursuant to subsection
4.3(a) hereof.
-18-
<PAGE>
4.4 Nonrecourse Deductions. Nonrecourse Deductions for any taxable year
shall be specifically allocated among the Partners in proportion to their
Percentage Interests.
4.5 Partner Nonrecourse Deductions. Nonrecourse Deductions attributable to
otherwise non-recourse debt with respect to which a Partner or a related person
of a Partner described in Regulations Section 1.752-2(c) is the creditor or
otherwise bears the "economic risk of loss" as defined in Regulations Section
1.752-2(b) shall be allocated to such Partner.
4.6 Qualified Income Offset. Notwithstanding anything in this Agreement to
the contrary, in the event any Partner unexpectedly receives any adjustments,
allocations or distributions described in paragraphs (b)(2)(ii)(d)(4), (5) or
(6) of Regulations Section 1.704-1, there shall be specially allocated to such
Partner such items of Partnership income and gain, at such times and in such
amounts as will eliminate as quickly as possible that portion of its Adjusted
Capital Account Deficit caused or increased by such adjustments, allocations or
distributions.
4.7 Curative Allocations. The allocations set forth in Sections 4.3, 4.4,
4.5, 4.6 and 4.10 hereof are intended to comply with certain requirements of
Regulations Section, 1.704-1(b). Notwithstanding any other provisions of this
Article IV (other than Sections 4.3, 4.4, 4.5, 4.6 and 4.10), allocations that
have taken place pursuant to Sections 4.3, 4.4, 4.5, 4.6 and 4.10 shall be taken
into account in allocating other items of income, gain, loss, deduction and
credit so that, to the extent possible, the net amount of such other allocations
and the Sections 4.3, 4.4, 4.5, 4.6, and 4.10 allocations to each Partner shall
equal the net amount that would have been allocated to each Partner if the
Sections 4.3, 4.4, 4.5, 4.6, and 4.10 allocations had not occurred.
4.8 Tax Allocations. Except as provided in Sections 4.7 and 4.9 hereof, for
income tax purposes each item of income, gain, loss and deduction shall be
allocated in the same manner as the corresponding book item is allocated for
Capital Account purposes.
4.9 Property Subject to 704(b) and 704(c). In the case of any Partnership
asset (directly or indirectly owned) the Gross Asset Value of which differs from
its adjusted tax basis, income, gain, loss and deduction with respect to such
asset shall, solely for tax purposes, be allocated in accordance with the
principles of Code Sections 704(b) and 704(c) to take account of such
difference.
4.10 Limitations. Notwithstanding anything to the contrary in this Article
IV, no allocation under this Article IV shall be made to a Limited Partner that
would cause such Limited Partner to have, or that would increase, an Adjusted
Capital Account Deficit. Any amount not allocated as a result of this limitation
shall be reallocated to the General Partners pro rata in accordance with their
relative Partnership Interests.
-19-
<PAGE>
ARTICLE V
DISTRIBUTIONS
5.1 Distribution of Net Distributable Cash. Subject to the restrictions
contained in the Project Loan Documents and subject to Sections 5.2 and 5.3
hereof, Net Distributable Cash for each fiscal quarter shall be distributed to
the Partners within thirty (30) days after the end of such quarter as follows:
(a) 1 % to Agrorent A, 12.75% to Agrorent B, 1 % to VF Delaware, and
85.25% to VF.
5.2 Default Allocations for Agrorent A. and Agrorent B. In the event VF
Delaware or Agro Power or any Agro Power Commonly Controlled Entity defaults or
breaches any of its obligations under this Agreement, the Management Agreement,
the Marketing Agreement or the Construction Agreement and such default or breach
has not been remedied within any applicable cure period, or any representation
or warranty made by VF Delaware, VF, or any Agro Power Commonly Controlled
Entity under this Agreement or any such other agreement or document proves to
have been untrue when made and (a) as a result thereof the Partnership, Agrorent
A and Agrorent B (or any of them) incurs or suffers an Adverse Consequence and
(b) Agrorent A or Agrorent B gives written notice of such Adverse Consequence to
the Partnership and, if the amount thereof is unknown, its good faith estimate
of the amount of such Adverse Consequence, then the Partnership shall thereafter
refrain from making any distributions to VF Delaware under this Agreement (any
such distribution that would have been made but for this Section 5.2 is
hereinafter referred to as a "Blocked Distribution") and shall take the
following steps:
(i) The Partnership shall distribute to Agrorent A or Agrorent B from such
Blocked Distributions an aggregate amount equal to 100% of any such
Adverse Consequence suffered or actually incurred by Agrorent A and
Agrorent B or either of them (or, if the amount thereof is not known,
100% of Agrorent A's or Agrorent B's written good faith estimate
thereof). Any such distribution made by the Partnership under this
subsection 5.2(i) shall satisfy pro tanto the obligation of the
Partnership to make distributions to VF --- ----- Delaware or VF with
respect to the Blocked Distributions. For the purposes of this
Agreement, any Adverse Consequence suffered or incurred by the
Partnership shall be deemed to have been suffered or incurred, on a
dollar-for-dollar basis, 7.272% by Agrorent A and 92.727% by Agrorent
B.
(ii) Upon distribution to Agrorent A and Agrorent B of 100% of the
aggregate amount of any such Adverse Consequence (or their good faith
estimate thereof) from Blocked Distributions, the Partnership may
thereafter make distributions to VF Delaware and VF under Section 5.1,
unless and until it receives a subsequent notification from Agrorent A
or Agrorent B under this Section 5.2.
-20-
<PAGE>
5.3 Default Allocations for VF Delaware and VF. In the event Agrorent A, GP
or Agrorent B as any Nic Poot Commonly Controlled Entity defaults or breaches
any of its obligations under this Agreement or the Management Agreement and such
default or breach has not been remedied within any applicable cure period, or
any representation or warranty made by Agrorent A or Agrorent B as any Nic Poot
Commonly Controlled Entity under this Agreement proves to have been untrue when
made and (a) as a result thereof the Partnership, VF Delaware or VF incurs or
suffers an Adverse Consequence and (b) VF Delaware or VF gives written notice of
such Adverse Consequence to the Partnership and, if the amount thereof is
unknown, its good faith estimate of the amount of such Adverse Consequence, then
the Partnership shall thereafter refrain from making any distributions to
Agrorent A and Agrorent B (or either of them) under this Agreement (any such
distribution that would have been made but for this Section 5.3 is hereinafter
referred to as a "Blocked Distribution") and shall take the following steps:
(i) The Partnership shall distribute to VF Delaware and VF from such
Blocked Distributions an aggregate amount equal to 100% of any such
Adverse Consequence suffered or actually incurred by VF Delaware and
VF (or, if the amount thereof is not known, 100% of VF Delaware's and
VF's written good faith estimate thereof). Any such distribution made
by the Partnership under this subsection 5.3(i) shall satisfy pro
tanto the obligation of the Partnership to make distributions to
Agrorent A or Agrorent B (or either of them) with respect to the
Blocked Distributions. For purposes of this Agreement, any adverse
consequence suffered or incurred by the partnership shall be deemed to
have been suffered or incurred, on a dollar for dollar basis, 1.159%
by VF Delaware and 98.840% by VF.
(ii) Upon distribution to VF Delaware and VF of 100% of the aggregate
amount of any such Adverse Consequence (or their good faith estimate
thereof) from Blocked Distributions, the Partnership may thereafter
make distributions to Agrorent A and Agrorent B under Section 5.1,
unless and until it receives a subsequent notification from VF
Delaware or VF under this Section 5.3.
-21-
<PAGE>
ARTICLE VI
MANAGEMENT
6.1 Management of the Partnership.
(a) The overall management and control of the business affairs of the
Partnership shall be vested in the Management Committee, subject to the
limitations contained in Section 6.2 or elsewhere in this Agreement. The
Management Committee shall consist of four members, one designated by
Agrorent A and three designated by VF Delaware (each a "VF Delaware
Designee"), and a quorum of the Management Committee shall require at least
three members of the Management Committee. No action at any meeting may be
taken by the Management Committee unless a quorum is present (acting in
person or by proxy). The Management Committee shall meet not less
frequently than quarterly. Members of the Management Committee may
participate in a meeting of the Management Committee by means of conference
telephone. No action may be taken by the Management Committee with respect
to any of the matters described in Section 6.2 hereof unless such action is
in the form of a writing signed by all members of the Management Committee.
All meetings of the Management Committee shall take place at Agro Power's
offices in East Brunswick, New Jersey or such other place as the Management
Committee may unanimously agree.
(b) Except as set forth in Section 6.2, any action by the Management
Committee shall require the approval of a majority of the members of the
Management Committee.
(c) Any General Partner may, at any time, replace any of its
respective Designees to the Management Committee with a new Designee and,
upon such change, or upon the death or resignation of any Designee, a
successor shall be designated in writing by the party that appointed the
Designee being replaced.
(d) Any General Partner or member of the Management Committee may, at
any time, request a meeting of the Management Committee by sending written
notice specifying in reasonable detail the purpose(s) of such meeting to
all other Partners and to the members of the Management Committee at least
ten (10) days in advance of the proposed date for the meeting, which notice
may be waived by all members of the Management Committee and all Partners.
Any member of the Management Committee may propose that an action be
submitted to the Management Committee for approval, and there shall be no
requirement of notice of the issues to be addressed at any meeting of the
Management Committee.
6.2 Fundamental Matters. The following matters shall require the prior
unanimous authorization and approval of the Management Committee:
(a) Any transaction, or series of transactions in the aggregate,
(other than those approved by any Budget) in which the Partnership (i)
acquires, purchases or leases
-22-
<PAGE>
any capital asset or right for consideration having a fair market value in
excess of $25,000, (ii) consolidates or merges with or into any other
Person, (iii) sells, assigns, leases or otherwise transfers any asset or
right having a fair market value in excess of $25,000, or (iv) assumes any
liability or obligation in excess of $25,000.
(b) The approval, execution and delivery of any contract, lease or
agreement following the date of this Agreement, including without
limitation, the Project Loan Documents, the Marketing Agreement, the
Management Agreement and the Project Documents; provided, that no such
approval shall be required for (i) any contracts and permit applications in
existence prior to the date of this Agreement and listed on Schedule 1.1(b)
hereto, or (ii) any other contract, lease or agreement which is expressly
non-recourse to the Partners so long as the amounts to be paid by the
Partnership thereunder, together with all other amounts to be paid by the
Partnership pursuant to contracts, leases or agreements that have not been
unanimously approved or ratified by the Management Committee, does not
exceed $50,000 in the aggregate excluding contracts, leases or agreements
for supplies used in the ordinary course of business and contemplated in
the Operating Budget.
(c) The approval, execution or delivery of any amendments to,
modification or termination of, enforcement of rights under, or any
consents or waivers in connection with any contract, lease or agreement,
other than contracts entered into without prior unanimous approval of the
Management Committee pursuant to subsection 6.2(a) or clause (ii) of
subsection 6.2(b) above.
(d) The sale or issuance by the Partnership of any interest, or of any
option, warrant or similar right to acquire any interest, of any kind in
the Partnership.
(e) Any decision to (i) terminate all or any substantial part of the
Project (an "Abandonment") or (ii) engage in any activity not contemplated
by this Agreement.
(f) The incurrence or assumption of any Indebtedness by the
Partnership, except for (i) Indebtedness which, when the principal amount
thereof is aggregated with the principal amount of Indebtedness previously
incurred pursuant to this subsection 6.2(f) which remains outstanding, does
not exceed $25,000 and (ii) the Indebtedness represented by the Project
Loan Documents.
(g) The granting of any Lien (other than Permitted Liens) on the
assets or rights of the Partnership.
(h) The repayment (other than repayments in accordance with scheduled
maturity), voluntary prepayment or redemption of, or any refinancing or
other modification of the terms of, any Indebtedness.
(i) The adoption and modification of the Operating Budget or the
Project Budget (collectively, the "Budgets").
-23-
<PAGE>
(j) The initiation of any legal proceedings or arbitration on behalf
of the Partnership, or the settlement of any claim by or against the
Partnership with respect to claims in excess of $25,000 or which include
requests for an injunction, specific performance or other equitable relief.
(k) The selection, removal, or determination of authority and
responsibility of the officers of the Partnership, general or special
counsel for the Partnership, accountants and auditors for the Partnership
and the Project and the approval of any change in the accounting or tax
policy of the Partnership or the Project.
(l) To the extent not specified in this Agreement, (i) any
distribution of income or any assets or rights of the Partnership or (ii)
the redemption, purchase or other acquisition of any interest in the
Partnership.
(m) Except as contemplated in Article X of this Agreement, liquidating
or dissolving, or proposing to liquidate or dissolve, or effecting, or
proposing to effect, a recapitalization in any form of transaction, of the
Partnership.
(n) (i) Commencing any case, proceeding or other action (A) under any
existing or future law or any jurisdiction, domestic or foreign, relating
to bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for All or any substantial part of its assets;
(ii) making, or proposing to make, a general assignment for the benefit of
its creditors; (iii) admitting or proposing to admit in writing its
inability to pay its debts as they become due; (iv) filing or proposing to
file any plan of reorganization pursuant to 11 U.S.C. ss. 101 et seq.; (v)
taking, or proposing to take, any action in furtherance of, or indicating
its consent to, approval of or acquiescence in, any of the acts set forth
in clause (i) or (ii) above.
(o) Establishing any operating or capital reserves other than those
required by the Project Loan Documents.
(p) Establishing committees of the Management Committee and delegating
voting authority to such committees.
(q) The approval, execution or delivery of any amendments to,
modification or termination of, or any waivers of any rights under, or the
grant of any consents under or in connection with any Project Document, any
Project Loan Document, the Marketing Agreement or the Management Agreement.
-24-
<PAGE>
(r) The approval or taking of any action that would be an event of
default or that would give rise to a right of termination under any Project
Document or any Project Loan Document.
(s) The approval or taking with any action that would give rise to an
event of default under any Project Loan Document or that would give rise to
a right of acceleration or termination under any Project Loan Document.
(t) The reimbursement by the Partnership of any General Partner under
Section 6.4(b) hereof of any expenses incurred thereby in an amount in
excess of $5,000 during any fiscal quarter (other than those contemplated
by any Budget).
(u) Any change in or termination of any insurance policies maintained
by the Partnership.
(v) Any agreement to undertake any action that would require the
approval of the Management Committee under this Section 6.2.
(w) Any act in contravention of this Agreement or the Act.
(x) Any act which would make it impossible to carry on the ordinary
business of the Partnership.
(y) Possession of Partnership property by any Partner, or the
assignment, transfer or pledge of rights of the Partnership in specific
Partnership property for other than a Partnership purpose or other than for
the benefit of the Partnership, or any commingling the funds of the
Partnership with the funds of any other person.
(z) Any action which would cause the Partnership to be treated as
other than a partnership for Federal income tax purposes.
(aa) Any confession of a judgment against the Partnership or any
Partner.
(ab) The grant of any power of attorney or appointment of any agent or
attorney (other than customs brokers).
(ac) The grant of signature authority to any Person with respect to
any of the Partnership's bank or investment accounts.
(ad) The change of the principal crop produced by the Partnership from
peppers to some other form of produce.
6.3 Officers of the Partnership. The Partnership may have such officers as
may be designated by the Management Committee from time to time. Such officers
shall (a) serve at the pleasure of the Management Committee, (b) subject to
Section 6.3 and to the instructions and
-25-
<PAGE>
directions of the Management Committee, have such powers as are usually
exercised by comparable designated officers of a Delaware corporation and (c)
have the power to bind the Partnership through the exercise of such powers to
the extent consistent with the terms hereof. The initial officers of the
Partnership shall be those persons listed on Schedule 6.3 attached hereto and
incorporated herein by reference. Following the execution hereof, officers shall
be appointed or removed only by action of the Management Committee in accordance
with the provisions of Section 6.1.
6.4 No Compensation; Reimbursement.
(a) Except as expressly provided herein, the General Partners, members
of the Management Committee and officers shall receive no compensation for
performing their duties as General Partners, members of the Management
Committee or officers under this Agreement; provided, however, that this
provision shall not affect any Partners' right to receive its share of
distributions as set forth in Article V hereof.
(b) Subject to the limitation, if any, imposed by the Project Loan
Documents and subject to subsection 6.2(u), each General Partner shall be
entitled to receive, out of any Partnership funds available therefor,
reimbursement of all amounts expended by such General Partner in payment of
properly incurred and documented Partnership obligations paid by such
General Partner out of its own funds so long as such expenditures are made
in accordance with the Budgets.
6.5 Insurance. The Partnership shall (a) maintain, with insurers or
underwriters of good repute, in the name of the Partnership, such insurance
relating to the operations of the Partnership as is customary for comparable
businesses to that of the Partnership to maintain, against such risks and
pursuant to such terms (including deductible limits or self-insured retentions)
as are customary for such businesses, and (b) pay all premiums and other sums
payable in order to maintain such insurance. For purposes of clarity, it is
hereby agreed that the Partnership shall maintain the insurance required by the
Project Loan Documents and all insurance policies shall name Agrorent A as an
additional insured and provided that they may not be cancelled or terminated
except with 30 days' prior written notice to Agrorent A.
6.6 Cooperation on Tax Matters. The Partnership shall cooperate fully as
and to the extent reasonably requested by Agrorent A or VF Delaware in
connection with the preparation and filing of any Tax return, statement, report
or form, and any audit, litigation or other proceeding with respect to Taxes
relating to or arising out of the Project. Such cooperation shall include the
retention and, upon request by either Agrorent A or VF Delaware, the provision
of records and information that are reasonably relevant to any such audit,
litigation or other proceeding. The Partnership agrees to (a) retain all books
and records with respect to Tax matters pertinent to the Project and (b) give
Agrorent A and VF Delaware reasonable written notice prior to destroying or
discarding any such books and records. The Partnership shall retain any records
requested by either Agrorent A or VF Delaware to be retained.
-26-
<PAGE>
ARTICLE VII
BOOKS, RECORDS AND BANK ACCOUNTS
7.1 Books and Records. In addition to the Partnership Books, the
Partnership shall also keep such books of account and other records with respect
to the operations of the Partnership as will sufficiently explain the
transactions and financial position of the Partnership and enable financial
statements to be prepared in accordance with GAAP and shall cause such books and
other records to be kept in such manner as will enable them to be properly
audited. The Partnership Books and such other books and records shall be
maintained at the principal places of business of the Partnership and all
Partners and their duly authorized representatives shall at all times have
access to and the right to review and copy such books and records.
7.2 Accounting Basis and Fiscal Year. The books of the Partnership (a)
shall be kept on an accrual basis in accordance with GAAP, (b) shall reflect all
Partnership transactions, (c) shall be appropriate and adequate for the
Partnership's business and for the carrying out of all provisions of this
Agreement, and (d) shall be closed and balanced as of the end of each fiscal
year, as soon as practicable after the end of such fiscal year. The fiscal year
of the Partnership shall be January 1 through December 31 of each year or such
other fiscal year that may be selected with the unanimous approval of the
Management Committee.
7.3 Reports.
(a) Unless otherwise required by the Management Committee, the
Partnership shall cause to be delivered to each Partner, within 120 days
after the end of each fiscal year, an annual report containing the
following:
(i) A balance sheet as of the end of the Partnership's fiscal year and
statements of income, Partners' equity and cash flows for the year
then ended, each of which shall be audited and reported on by Arthur
Andersen & Co. or such other independent certified public accountants,
which shall be a nationally recognized accounting firm, as may be
selected by the Management Committee;
(ii) a general description of the activities of the Partnership during such
year; and
(iii) a report of any material transaction between the Partnership and any
Partner or any of its Affiliates, including fees and compensation and
reimbursements paid by the Partnership and the products supplied and
services performed by such Partner or any such Affiliate for such fees
or compensation and the expenses so reimbursed; provided, however,
that no report shall be required for any products supplied and
services performed if such products and services are provided pursuant
to the terms of a Project Document, the Management Agreement, the
Marketing Agreement, an
-27-
<PAGE>
agreement unanimously approved by the Management Committee or set out
in any Budget and the compensation therefor is in accordance with the
terms of such agreement.
(b) Within 45 days after the end of each quarter of each fiscal year,
the Partnership shall cause to be delivered to each Partner a quarterly
report containing a balance sheet as of the end of such quarter and a
statement of income for such quarter, each of which may be unaudited but
which shall be certified by the chief financial officer of the Partnership
as fairly presenting the financial position of the Partnership at the end
of such quarter and results of operations of the Partnership for such
quarter and as having been prepared in accordance with the accounting
methods followed by the Partnership for Federal income tax purposes and
otherwise in accordance with GAAP applied on a basis substantially
consistent with that of the Partnership's audited financial statements
(subject to normal year end adjustments).
(c) Within 120 days of the end of each fiscal year, the Partnership
will cause to be delivered to each Partner all information necessary for
the preparation of such Partner's Federal income tax returns, including a
statement showing such Partner's share of income, gains, losses, deductions
and credits for such year for Federal income tax purposes and the amount of
any distributions made to or for the account of such Partner pursuant to
this Agreement.
7.4 Bank Accounts. The Partnership shall maintain one or more accounts in
one or more banks located in Marfa, Texas and such other locations as may be
approved by the Management Committee, each of which shall be a member the
Federal Deposit Insurance Corporation. In addition, the Partnership shall
establish such other accounts and deposit amounts as required by the Project
Loan Documents. All such amounts shall be and remain the property of the
Partnership, and shall be received, held and disbursed by the Partnership for
the purposes specified in this Agreement. There shall not be deposited in any of
said accounts any funds other than funds belonging to the Partnership, and no
other funds shall in any way be commingled with such Partnership funds.
7.5 Tax Returns. The Management Committee shall cause income tax returns
for the Partnership to be prepared and timely filed with the appropriate
authorities.
7.6 Tax Elections. The Management Committee shall, from time to time, make
such tax elections as it deems necessary or advisable to carry out the business
of the Partnership or the purposes of this Agreement.
7.7 Tax Matters Partner. VF Delaware shall be the Partnership's "tax
matters partner" for purposes of the Code and with respect to all other Federal,
state and local Taxes. The approval of the tax matters partner shall be required
before the Partnership or any Partner (with respect to Partnership matters)
files any document with any Governmental Authority including, but not limited
to, returns, amendments, requests for refunds, appeals, or waivers or extensions
of statutes of limitations. The tax matters partner shall take such actions as
the Management
-28-
<PAGE>
Committee may lawfully require in connection with the Partnership's Federal,
state and local Tax matters.
7.8 Withholdings. Except and only to the extent required by applicable law
and except as permitted hereunder, the Partnership will not deduct or withhold
any amount in respect of any tax from any payment or distribution by the
Partnership to any Partner unless the Partnership has first received written
authorization from such Partner so to withhold or to deduct.
ARTICLE VIII
TRANSFER OF INTERESTS
8.1 Transfer of a Partner's Interest.
(a) No Partner may sell, transfer, participate, assign or otherwise
dispose of (whether voluntarily or by operation of law) (collectively,
"transfer") all or any part of its Partnership Interest without the prior
written consent of the non-transferring General Partner(s).
(b) The non-transferring General Partner(s) may condition its (their)
consent to any transfer on compliance by the Partner desiring to transfer
its Partnership Interest with all or any of the following:
(i) The transferring Partner must give written notice to the General
Partners identifying in reasonable detail the proposed transferee(s)
and the terms and conditions of the proposed transfer and the
non-transferring General Partner(s) shall have a period of twenty (20)
Business Days from the date of such notice either to consent in
writing to the proposed transferee(s), or to give written notice that
it does not consent to such transferee(s);
(ii) within ten (10) Business Days after the non-transferring General
Partner(s) gives written notice that it does not consent to a proposed
transferee, it shall provide to the transferring Partner a written
explanation of the reasons therefor;
(iii) such transfer does not release the transferring Partner from its
obligations hereunder;
(iv) the transferee shall not have the right to be separately represented
on the Management Committee unless the transferring Partner is a
General Partner that previously had the right to appoint Designee's to
the Management Committee and the transfer involves all of such General
Partner's Partnership Interest;
-29-
<PAGE>
(v) the non-transferring General Partner(s) shall notify each other
Partner in writing of its decision to consent to the transfer within
five (5) Business Days of its grant of such consent (which notice
shall include a copy of the notice sent to the non-transferring
General Partner(s) by the transferring Partner) and, prior to any such
transfer, each Partner (which term, for purposes of clarity, includes
for purposes of this subsection (v) the non-transferring General
Partner and excludes the transferring Partner) shall have the right
for thirty (30) Business Days following such notice to purchase the
Partnership Interest being sold by the transferring Partner pursuant
to this Article VIII on the same terms and conditions as were set
forth in such notice. In the event that none of the non-transferring
Partners exercises its right to purchase such Partnership Interest
being sold, then the transferring Partner shall have forty-five (45)
days thereafter to complete the sale in accordance with the terms of
the notice, after which time the transferring Partner must again
comply with the procedures set forth in this Article VIII. In the
event more than one Partner exercises its right to purchase such
Partnership Interest proposed to be transferred, then such exercising
Partners shall exercise such right on a prorate basis based on their
respective Partnership Percentages (without considering the
Partnership Percentage of the transferring Partner or the Partners (if
any) not electing to exercise such right); or
(vi) such transferee shall not have the right to sell, transfer,
participate, assign or otherwise dispose of all or a portion of such
party's Partnership Interest except in accordance with the terms of
this Section 8.1; and
(vii) the transferee shall execute documents satisfactory to the Management
Committee sufficient to make the transferee a party to and be bound by
the terms of this Agreement and the transferee shall expressly assume
all obligations of the transferring Partner hereunder.
ARTICLE IX
ADDITIONAL PARTNERS; WITHDRAWAL OF PARTNERS
9.1 Additional Partners. Persons other than the undersigned may from time
to time be admitted to the Partnership as General Partners or Limited Partners
only with the unanimous consent of the Management Committee and only on such
terms and conditions as may be prescribed by the Management Committee.
-30-
<PAGE>
9.2 Withdrawal of Partners.
(a) No Partner may withdraw from the Partnership except as provided in
this Section 9.2.
(b) A Partner shall immediately cease to be a Partner and shall be
deemed to have Withdrawn from the Partnership, in the event:
(i) Such Partner shall commence a voluntary case or other proceedings
seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, or shall consent to any
such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors,
or shall fail generally to pay its debts as they become due, or shall
take any corporate action to authorize any of the foregoing; or
(ii) an involuntary case or other proceeding shall be commenced against
such Partner seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, and such involuntary case
or other proceeding shall remain undismissed and unstayed for a period
of sixty (60) days, or an order for relief shall be entered against
such Partner under the federal bankruptcy laws as now or hereafter in
effect; or
(iii) such Partner defaults in its obligation to make a capital
contribution pursuant to Sections 3.1 and 3.2 (and such default is not
cured within two (2) days of written notice of such default from a
General Partner); or
(iv) it is required to Withdraw as a Partner pursuant to the Delaware Act.
Such Partner's Withdrawal Date shall be the day such Withdrawal occurs.
(c) Any Partner may Withdraw voluntarily from the Partnership on not
less than thirty (30) days' prior written notice by such Partner to the
other Partners with the
-31-
<PAGE>
prior unanimous consent of the Management Committee. Such Partner's
Withdrawal Date shall be the date on which a written notice of Withdrawal
is made.
(d) Upon the Withdrawal of any Partner pursuant to subsections 9.2(b)
or (c), such Partner's Capital Account and Partnership Percentage shall be
allocated, as of the Withdrawal Date, among the other Partners in
proportion to their respective Partnership Percentages on such Withdrawal
Date (it being understood that such allocation shall not result in a
Limited Partner becoming a General Partner). After its Withdrawal Date, a
Withdrawn Partner shall not have any rights with respect to the profits,
capital or affairs of the Partnership (including, but not limited to, any
rights of representation on the Management Committee or any committee
thereof or any rights on liquidation of the Partnership pursuant to Article
X).
(e) On the Withdrawal Date for any Partner that Withdraws pursuant to
Section 9.2(b) or Section 9.2(c)(ii), such Partner shall pay to the
Partnership in cash any negative balance in such Partner's capital account.
If the sum of such Partner's capital account has a positive balance on the
Withdrawal Date, the Partnership shall pay such amount to such Partner upon
its withdrawal.
ARTICLE X
DISSOLUTION AND LIQUIDATION
10.1 Events of Dissolution.
(a) The Partnership shall be dissolved upon:
(i) an Abandonment pursuant to subsection 6.2(e);
(ii) the occurrence of an event requiring dissolution under the
Delaware Act;
(iii) the unanimous consent of the General Partners; and
(iv) at the election of Agrorent A , if Agro Power ceases, at any
time, to control (as defined in the definition of "Affiliate") VF
Delaware.
(b) Dissolution of the Partnership shall be effective on the day on
which the event occurs giving rise to the dissolution, but the Partnership
shall not terminate until the assets and rights of the Partnership shall
have been distributed as provided herein. Notwithstanding the dissolution
of the Partnership, prior to the termination of the Partnership, as
aforesaid, the business of the Partnership and the affairs of the Partners,
as such, shall continue to be governed by this Agreement. Upon dissolution,
the Management Committee shall liquidate the assets of the Partnership and
apply and distribute the proceeds thereof as contemplated by this
Agreement.
-32-
<PAGE>
10.2 Distributions Upon Liquidation.
(a) After payment of liabilities owing to creditors (but excluding any
liabilities payable with respect to the Management Agreement or the
Marketing Agreement other than amounts then due and owing), the Management
Committee or the liquidator, if any, shall set up such reserves as it deems
reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Partnership (other than liability and obligation owing
with respect to the Management Agreement and the Marketing Agreement). Said
reserves may be paid over by the Management Committee or the liquidator to
a bank, to be held in escrow for the purpose of paying any such contingent
or unforeseen liabilities or obligations and, at the expiration of such
period as the Management Committee or the liquidator may deem advisable,
such reserves shall be distributed to the Partners or their assigns in the
manner set forth in subsection (c) below.
(b) If any General Partner has a negative Capital Account at the time
of dissolution of the Partnership, such General Partner shall be required
to restore to the Partnership the amount of the negative balance in its
Capital Account. If any Limited Partner has a negative Capital Account
balance at the time of dissolution of the Partnership, such Limited Partner
shall have no obligation to restore to the Partnership the amount of the
negative balance in its Capital Account.
(c) After paying the liabilities and providing for the reserves
referred to in subsection 10.2(a) and the payment of any restoration
amounts under subsection 10.2(b), the Management Committee or the
liquidator shall, by the end of the Partnership's taxable year in which the
Partnership dissolves (or, if later, within 90 days after the date of such
termination), cause the net assets of the Partnership to be distributed in
accordance with Article V hereof, provided, however, that no distribution
shall be made pursuant to this sentence that creates or increases a Capital
Account deficit for any Partner which exceeds such Partner's obligation to
restore such deficit (under subsection 10.2(b) above), determined as
follows:
Distributions shall be first determined provisionally without
regard to Capital Accounts, and the allocation provisions of Article
IV hereof shall also be applied provisionally. If as a result of such
provisional calculations and allocations, any Partner would thereby
have a Capital Account deficit which exceeds its obligation to restore
such deficit under subsection 10.2(b) above, the actual distributions
pursuant to this subsection (c) shall be equal to such provisional
distribution less the amount of such excess and actual allocations
shall be made in accordance with Article IV taking into account such
actual distributions.
Any remaining net assets shall be allocated among the Partners in
accordance with their positive Capital Accounts.
-33-
<PAGE>
If such distributions are insufficient to return to any Partner the full amount
of its capital contributions, it shall have no recourse against any other
Partner. Each Partner shall receive its share of the net assets in cash or in
kind, and the proportion of such share that is received in cash shall be the
same for each Partner. In the event that any part of such net assets consists of
notes or accounts receivable or other non-cash assets, the Management Committee
or the liquidator shall take whatever steps it deems appropriate to convert such
assets into cash or into any other form which would facilitate the distribution
thereof. If any assets of the Partnership are to be distributed in kind, such
assets shall be distributed on the basis of their fair market value, as
determined by the Management Committee or the liquidator, if any, acting in its
sole discretion.
ARTICLE XI
DISPUTE RESOLUTION
11.1 Arbitration.
(a) In the event a dispute arises between or among any Partners
relating to the terms of this Agreement and any Partner gives written
notice of such dispute to the Management Committee, then each of the
Partners involved in such dispute shall refer the dispute to its senior
management. The senior management of each Partner involved in such dispute
shall meet and confer regarding the resolution of the dispute. In the event
a resolution of such dispute is not reached within 30 days of the written
notice, then any of the Partners involved in such dispute may submit the
dispute to arbitration in accordance with Section 11.1(a).
(b) Arbitration of disputes pursuant to this Section 14.1(b) shall be
held in New Jersey under the commercial arbitration rules of the American
Arbitration Association, and shall be heard by three arbitrators selected
in accordance with such rules. Each arbitrator shall have at least five
years experience in the United States in a profession or professions
related to the subject matter involved in the dispute and shall not be a
past or present officer, director or employee of, or have any interest in
or material relationship with, any Partner or any Affiliate of any Partner.
Any arbitral award shall be final and binding and may be entered by any
Partner in any state or Federal court having jurisdiction thereof. Costs of
arbitration (including reasonable attorney's fees and costs) shall be paid
in accordance with the decision of the arbitrators.
-34-
<PAGE>
11.2 Buy/Sell Option.
(a) In the event that the Management Committee is unable to reach a
unanimous decision with respect to any matter set forth in Section 6.2,
either of the General Partners (such Partner herein referred to as a
"Buy-Out Offeror") shall have the right to make a written offer to buy (a
"Buy-Out Offer") all (but not less than all) of the Partnership Interests
of the other General Partner and its Affiliates. The Buy-Out Offer shall be
at a price determined in accordance with the Appraisal Procedure (the
"Aggregate Purchase Price") which shall be payment for all of the assets,
liabilities and business of the Partnership, and the amount to be paid to
any selling Partner under this Section 11.2 shall be equal to the amount
such selling Partner would receive if all the assets, liabilities and
business of the Partnership were sold at the Aggregate Purchase Price on
the date the Buy-Out Offer was made and the Partnership were then
immediately dissolved in accordance with Section 10.2. The General Partners
hereby agree to use their best efforts to cause the Appraisal Procedure to
be completed within ninety (90) days after it has been initiated. The
General Partner receiving a Buy-Out Offer (a "Buy-Out Offeree") shall,
within 30 days of the determination of the Aggregate Purchase Price in
accordance with the Appraisal Procedure, either (a) accept the Buy-Out
Offer on behalf of itself and its Affiliates who own Partnership Interests
or (b) agree to purchase all (but not less than all) of the Partnership
Interests of the Buy-Out Offeror and its Affiliates upon the foregoing
terms and using the same Aggregate Purchase Price as was determined in
accordance with the Appraisal Procedure to determine the amount owing to
each selling Partner. The failure of any Partner receiving a Buy-Out Offer
to respond to such Buy-Out Offer within such 30 day deadline of its receipt
thereof, either agreeing to accept such Buy-Out Offer on behalf of itself
and its Affiliates or by agreeing to purchase all (but not less than all)
of the Partnership Interest of the Buy-Out Offeror and its Affiliates on
the foregoing terms, shall constitute (without any further action by the
Buy-Out Offeror, the receiving General Partner or any other Partner) an
irrevocable acceptance of such Buy-Out Offer by the receiving General
Partner binding on and enforceable against such General Partner and its
Affiliates.
(b) Any purchase of Partnership Interests required pursuant to
subsection 11.2(a) shall be made through the redemption of such Partnership
Interests by the Partnership; provided, however, that if such redemption is
prohibited by the Project Loan Documents, such purchase shall be made
directly by the purchasing General Partner. The closing date for any such
purchase shall be on the date set by the purchasing General Partner which
may be at any time within 180 days of the acceptance of a Buy-Out Offer or
agreement to purchase, as the case may be. In the event the purchasing
General Partner does not close the purchase within such 180 day period,
then the purchasing General Partner's right to purchase Partnership
Interests under Section 11.2(a) shall at the close of business on such
180th day terminate and the other General Partner shall thereafter have the
right to purchase the Partnership Interests of the purchasing General
Partner and its Affiliates at a price determined by using the same
Aggregate Purchase Price and such other General Partner shall have 180 days
immediately following the expiration of the initial 180 day period in which
to close such purchase. The price to be
-35-
<PAGE>
paid to each selling Partner shall be paid by the purchasing General
Partner in immediately available funds at the closing.
ARTICLE XII
MISCELLANEOUS
12.1 Distributions and Notices. Distributions hereunder shall be sent, and
notices required or permitted hereunder shall be in writing and shall be sent,
to the address set forth for each Partner in signature pages hereof, or at such
other address as may be supplied by written notice given in conformity with the
terms of this Section 12.1. Notices to the Management Committee shall be sent
care of all Partners who have a right to designate members of the Management
Committee. Any notice required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given and/or delivered (a) when
personally delivered, (b) when sent by telefax and receipt is acknowledged via
telephone or otherwise as confirmation of such receipt but only if the sender
obtains a printed confirmation of the receipt by the recipient of the entire
document, (c) the second day following the day on which the same has been
delivered prepaid to a reputable overnight courier service providing proof of
receipt but only if sent for next business day delivery or (d) five (5) days
after the deposit in the United States mails, registered or certified, return
receipt requested and postage prepaid, in each case addressed to the party to
whom such notice is to be given at the address set forth on the signature pages
hereof), or at the most recent address(es) specified by written notice given to
the other party in the same manner provided in this section; provided, however,
that notice of an address change shall not be effective until actually received.
Distributions shall be deemed given only upon the receipt thereof by a Partner.
12.2 Disclosure Obligations. The Partnership hereby covenants and agrees
for the benefit of Agrorent A and VF Delaware that it shall (a) notify Agrorent
A and VF Delaware of any material fact necessary in order to make any of the
representations, warranties or other statements made by it in the Project
Documents, or any other written statement provided to Agrorent A or VF Delaware
not misleading and (b) disclose in writing to Agrorent A and VF Delaware any
fact which materially adversely affects, or which could reasonably be expected
in the future to materially adversely affect Agrorent A , VF Delaware or the
Project, in each case under clause (a) or (b) above promptly upon receiving
knowledge of any such fact.
12.3 Successors and Assigns. Subject to the restrictions on transfer set
forth herein, this Agreement, and, each and every provision hereof, shall be
binding upon and shall inure to the benefit of the Partners, their respective
successors, successors in title, heirs and assigns, and each and every successor
in interest to any Partner, whether such successor acquires such interest by way
of gift, purchase, foreclosure or by any other method, shall hold such interest
subject to all of the terms and provisions of this Agreement.
12.4 Amendments. This Agreement may not be released, discharged, amended or
modified in any manner except by an instrument in writing signed by a duly
authorized officer of each party hereto.
-36-
<PAGE>
12.5 Partition. The Partners hereby agree that no Partner, nor any
successor in interest to any Partner, shall have the right while this Agreement
remains in effect to have the property of the Partnership partitioned, or to
file a complaint or institute any proceeding at law or in equity to have the
property of the Partnership partitioned, and each Partner, on behalf of itself,
its successors, representatives, heirs and assigns, hereby waives any such
right. It is the intention of the Partners that during the term of this
Agreement, the rights of the Partners and their successors in interest, as among
themselves, shall be governed by the terms of this Agreement, and that the right
of any Partner or successor in interest to assign, transfer, sell or otherwise
dispose of its interest in the Partnership shall be subject to the limitations
and restrictions of this Agreement.
12.6 No Waiver. No waiver of any right under this Agreement shall be deemed
effective unless contained in a writing signed by the party charged with such
waiver. The failure of any Partner to insist upon strict performance of a
covenant hereunder or of any obligation hereunder, irrespective of the length of
time for which such failure continues, shall not be a waiver of such Partner's
right subsequently to demand strict compliance. No consent or waiver to or of
any branch or default in the performance of any obligation hereunder, shall
constitute a consent or waiver to or of any other breach or default in the
performance of the same or any other obligation hereunder.
12.7 Entire Agreement. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof and
supersedes any and all prior agreements, understandings, promises and
representations made by either party to the other concerning the subject matter
hereof and the terms applicable hereto, including, without limitation, the
Original Agreement.
12.8 Captions. Titles or captions of articles, sections and subsections
contained in this Agreement are inserted only as a matter of convenience and for
reference, and in no way are intended to define, limit, extend or describe the
scope of this Agreement or the intent of any provision hereof.
12.9 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall for all purposes constitute one
Agreement, binding upon the Partners notwithstanding that all Partners may not
have signed the same counterpart.
12.10 Applicable Law. This Agreement shall be deemed to have been entered
into and shall be construed and enforced in accordance with the laws of the
State of Delaware as applied to contracts made and to be performed entirely
within Delaware.
12.11 Severability. If any provision of this Agreement is or becomes or is
deemed invalid, illegal or unenforceable in any jurisdiction, (a) such provision
shall be construed or deemed amended to conform to applicable laws so as to be
valid and enforceable, or, if it cannot be so construed or deemed amended
without materially altering the intention of the parties hereto, it shall be
stricken, (b) the validity, legality and enforceability of such provision will
not
-37-
<PAGE>
in any way be affected or impaired thereby in any other jurisdiction and (c) the
remainder of this Agreement shall remain in full force and effect.
-38-
<PAGE>
IN WITNESS WHEREOF, the Partners have executed this Agreement as of the
date first above mentioned.
AGRORENT A, L.L.C.,
as General Partner
By
--------------------------------------------
Printed Name: Nick Poot
Title: President
Address for Notices:
Agrorent B.V.
2623 AV Schipluiden
Woridewey 33, The Netherlands
Attention: Nick Poot
Address for Distributions:
Agrorent B.V.
2623 AV Schipluiden
Woridewey 33, The Netherlands
Attention: Nick Poot
VILLAGE FARMS OF DELAWARE, L.L.C.,
as General Partner
By: Agro Power Development, Inc., its Managing
Member
By
--------------------------------------------
Printed Name: Michael DeGiglio
Title: Chief Executive Officer
Address for Notices:
10 Alvin Court
East Brunswick, New Jersey 08816
Attn. Chief Financial Officer
Address for Distributions:
10 Alvin Court
East Brunswick, New Jersey 08816
Attn. Chief Financial Officer
-39-
<PAGE>
VILLAGE FARMS, L.L.C.,
as Limited Partner
By: Agro Power Development, Inc., its Managing
Member
By
--------------------------------------------
Printed Name: Michael DeGiglio
Title: Chief Executive Officer
Address for Notices:
10 Alvin Court
East Brunswick, NJ 08816
Attention: Chief Financial Officer
Address for Distributions:
10 Alvin Court
East Brunswick, NJ 08816
Attention: Chief Financial Officer
AGRORENT B, L.L.C.,
as Limited Partner
By
--------------------------------------------
Printed Name: Nick Poot
Title: President
Address for Notices:
Agrorent, B.V.
2623 AV Schipluiden
Woridewey 33, The Netherlands
Attention: Nick Poot
Address for Distributions:
Agrorent, B.V.
2623 AV Schipluiden
Woridewey 33, The Netherlands
Attention: Nick Poot
-40-
<PAGE>
Schedule 1.1(a)
Project Budget
Greenhouse Construction Contract 9,800,000
Headhouse Construction Contract 1,500,000
Land Gading Contract 450,000
Access Roads 100,000
Floor Prep Concrete 50,000
Packing & Grading 250,000
Cold Storage 150,000
Picking Trolleys 200,000
Fresh Water supply (Wells) 150,000
----------
Subtotal 12,650,000
Contingency, Startup & Testing 316,250
Construction Management Fees 250,000
Total Turnkey Contract 13,216,250
----------
Engineering & Design 25,000
Insurance 97,500
Administrative Fee 15,000
Legal 50,000
Bank's Local Counsel 10,000
Bank's Upfront Fee 125,000
Title Insurance 75,000
Interest During Constr 500,000
Other Transaction Costs 897,500
Total Construction & Transaction Costs 14,113,750
==========
Equity Contribution 51.53% 7,272,721
Constructino/Term Facility Loan Amount 48.47% 6,841,029
Total Sources of Funds 14,113,750
==========
-41-
<PAGE>
Schedule 1.1(b)
Project Documents
The Agreement for Electrical Services between Agro Power Development Inc. and
West Texas Utilities dated June 19, 1998.
Marketing Contract between The Greenery International and Agro Power Development
Inc.
The Loan Agreement between Village Farms International Finance Association and
Village Farms of Presidio, L.P. dated August 31, 1998.
The Security Agreement between Village Farms of Presidio, L.P. and Village Farms
International Finance Association dated August 31, 1998.
The Management, Operations and Maintenance Contract between New Amsterdam Joint
Venture, L.L.C. and Village Farms of Presidio, L.P. dated August 31, 1998
The Marketing and Sales Agreement between Village Farms, Inc. and Village Farms
of Presidio, L.P. dated August 31, 1998.
The Natural Gas Purchase and Sale Agreement between Dynegy, Inc. and Village
Farms of Presidio, L.P. dated August 31, 1998.
The Commercial Design and Contract between Village Farms of Presidio, L.P. and
Agro Power Development Inc. dated August 31, 1998.
The Commercial Greenhouse Design and Construction Contract between Dalsem
Horticultural Projects, B.V. and Agro Power Development dated May 11, 1998.
The Commercial Packing House Design and Construction Contract between N.C.
Sturgeon, Inc. and Agro Power Development Inc. dated July 10, 1998.
The Sub Ground Lease between Village Farms of Marfa, L.P. and Village Farms of
Presidio, L.P. dated August 27, 1998.
The NonDisturbance Agreement between the County of Presidio and Village Farms of
Presidio, L.P. dated August 20, 1998.
The Standby Supplemental Water Contract between the City of Marfa and Agro Power
Development Inc. dated September 1, 1997.
-42-
<PAGE>
Schedule 1.1(c)
Site
FIELD NOTES DESCRIBING A 58.07 ACRE TRACT OF LAND, IN SECTION 249 AND SECTION
252, BLOCK 8, GH&SA RR COMPANY SURVEY, PRESIDIO COUNTY, TEXAS. THE 58.07 ACRE
TRACT IS LOCATED IN THE SOUTHWEST PART OF A 155.72 ACRE TRACT AS DESCRIBED IN
VOLUME 303, PAGE 153, DEED RECORDS, SAID 58.07 ACRE TRACT IS MORE PARTICULARLY
DESCRIBED AS FOLLOWS:
BEGINNING at a 5/8 inch rebar set for the Southeast corner of this tract, in the
South boundary line of a 155.72 acre tract described in volume 303, page 153,
deed records, whence a 1/2 inch pipe with aluminum cap marked "PIPER SURVEYING
COMPANY, 249, 250, 251, 252, BLK 8, PLS 1974", found at the common corner of
Section 249, 250, 251, and 252, Block 8, GH&SA RR Company Survey. Presidio
County, Texas, bears North 89(degree)56'24" East 581.59 feet and North
00(degree)08' West 559.15 feet.
THENCE South 89(degree)56'24" West, with said South boundary line, 2602.59 feet
to a 5/8 inch rebar set for the Southwest corner of this tract in the Southeast
BRL of runway 321 of Marfa Municipal Airport:
THENCE North 45(degree)01'32" East, with said BRL, at 794.65 feet pass the
common line of said Section 249 and Section 252, continuing for a total distance
of 2105.37 feet to a 5/8 inch rebar set for the Northwest corner of this tract;
THENCE North 89(degree)56'24" East 518.29 feet to a 5/8 inch rebar set for the
most Northerly Northeast corner of this tract;
THENCE South 00(degree)03'36" East 389.24 feet to a 5/8 inch rebar set for an
interior corner of this tract;
THENCE North 89(degree)56'24" East 593.36 feet to a 5/8 inch rebar set for the
most Easterly Northeast corner of this tract;
THENCE South 00(degree)03'36" East at 537.88 feet pass said section common line,
continuing for a total distance of 1097.26 feet to the "Point of Beginning".
-43-
<PAGE>
Schedule 6.3
Initial Officers of the Partnership
Name Title
- - ---- -----
Michael DeGiglio President
Nic Poot Vice President
Albert VanZeyst Vice President
J. Kevin Cobb Vice President
Michael Minerva Vice President
Laurence Howard Secretary
Dave Suchniak Treasurer
Exhibit 10.100
VILLAGE FARMS FARMS OF PRESIDIO PROJECT
COMMERCIAL GREENHOUSE
DESIGN AND CONSTRUCTION CONTRACT
between
AGRO POWER DEVELOPMENT, INC.
and
DALSEM HORTICULTURAL PROJECTS B.V.
May 11, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
ARTICLE 1. THE PROJECT; EXTENT OF AGREEMENT
1.1 Services To Be Performed 1
1.2 Extent of Agreement. 1
1.3 Conflicting Provisions 2
1.4 Entire Agreement 2
1.5 Project Financing Agreements 2
ARTICLE 2. CONTRACTOR'S RESPONSIBILITIES
2.1 Contractor's Services in General 2
2.2 Summary of Contractor's Responsibilities 2
2.2.1 Familiarity with Conditions 2
2.2.2 Design and Engineering 3
2.2.3 Procurement 3
2.2.4 Construction 3
2.2.5 Consumables and Parts During Project Start-up 3
2.2.6 Training of Operators 3
2.2.7 Achieve Final Completion with All Due Diligence. 4
2.3 Particular Undertakings of the Contractor 4
2.3.1 Safety Precautions 4
2.3.2 Compliance with Governmental Approvals, Laws
and Private Rights-of-Way Requirements 5
2.3.3 Duties 5
2.3.4 Schedules 5
2.3.5 Protection of Property 5
2.3.6 Ingress and Egress 6
2.3.7 No Alcohol or Controlled Substances on Site 7
2.3.8 Miscellaneous Regulations 7
2.3.9 Access to Project Site 7
2.3.10 Site Logistics Plan 7
2.3.11 Functional and Design Verification Test Procedures 7
2.4 Submission of Reports 7
2.5 Obtaining Governmental Approvals and Private Rights-of-Way 8
2.6 Clean-up Responsibility 8
2.7 Patents, Copyrights and Royalties 8
2.8 Further Assurances 9
2.9 Interfaces 9
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C> <C>
ARTICLE 3. GENERAL CONTRACTOR'S RESPONSIBILITIES
3.1 Documents and Surveys 9
3.2 Rights-of-Way 9
3.3 Required Approvals 9
3.4 Operations and Maintenance Personnel 10
3.5 Hazardous Wastes 10
3.6 Notice of Defect 11
3.7 No Alcohol or Controlled Substances on Site; Miscellaneous Regulations 11
3.8 Interfaces 11
3.9 Utilities and Consumables During Project Start-Up 11
3.10 Utilities During Construction 11
3.11 Security During Construction 11
ARTICLE 4. SUBCONTRACTS
4.1 Major Specialty Consultants, Subcontractors and Equipment Suppliers 12
4.2 Purchase Orders and Subcontracts 12
4.3 Payments to Subcontractors 12
4.4 No Privity with Subcontractors 12
ARTICLE 5. CONTRACT PRICE
5.1 Contract Price 13
5.2 Limitation of General Contractor's Liability 13
ARTICLE 6. COMMENCEMENT OF THE PROJECT, PROJECT START-UP AND
COMPLETION
6.1 Commencement of Work 14
6.2 Project Start-up 14
6.3 Substantial Completion 14
6.4 Notice of Substantial Completion 15
6.5 Certificate of Substantial Completion 15
6.6 Final Completion 15
6.7 Notice of Final Completion 15
6.8 Certificate of Final Completion 15
ARTICLE 7. GENERAL CONTRACTOR'S RIGHT TO PLACE THE FACILITY IN
COMMERCIAL OPERATION; CARE, CUSTODY AND CONTROL
7.1 General Contractor's Right 16
7.2 Project Revenues 16
7.3 Care, Custody and Control 16
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C> <C>
ARTICLE 8. LIQUIDATED DAMAGES FOR FAILURE TO MEET
SCHEDULE GUARANTEES
8.1 Schedule Guarantees 17
8.1.1 Substantial Completion 17
8.2 Liquidated Damages for Failure to Achieve Substantial Completion 17
8.3 Liquidated Damages Reasonable 17
8.4 Time for Payment 17
ARTICLE 9. SECURITY AND LIMITATION OF CONTRACTOR'S LIABILITY
9.1 Security 18
9.1.1 Letter of Credit 18
9.1.2 Release of Letter of Credit 18
9.2 Limitation of Contractor's Liability 18
9.2.1 Consequential Damages 18
ARTICLE 10. WARRANTIES AND GUARANTEES
10.1 Materials and Workmanship 19
10.2 Vendor and Supplier Warranties 19
10.3 Engineering and Design 20
10.4 No Liens 20
10.5 Limitation of Warranties 20
ARTICLE 11. FORCE MAJEURE
11.1 Force Majeure Events 20
11.2 Limitation of Default 21
11.3 Excused Performance 21
11.4 Right to Terminate for Force Majeure 21
ARTICLE 12. CHANGES IN THE PROJECT AND SUSPENSION
12.1 Changes 22
12.1.1 Procedure for Changes 22
12.1.2 Change Orders 23
12.1.3 No Changes Due to Contractor Error 23
12.2 Other Changes 23
12.2.1 Changes in Laws, Approvals or Rights-of-Way 23
12.2.2 Changes Due to Delays in Interfaces or Force Majeure Events 23
12.3 Modifications 23
12.4 Contract Price Change 24
12.5 Continued Performance Pending Resolution of Disputes 24
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 13. PAYMENTS TO CONTRACTOR
<S> <C> <C> <C>
13.1 Initial Payment 24
13.2 Monthly Progress Payments 25
13.3 Waiver and Release of Liens 26
13.4 Payment Upon Completion 26
13.5 Payment or Use Not Acceptance 26
13.6 Waiver by General Contractor 27
13.7 Waiver by Contractor 27
13.8 Security for Payment 27
13.9 Release of Letter of Credit 27
ARTICLE 14. INDEMNITY, INSURANCE AND WAIVER OF SUBROGATION
14.1 Indemnity 28
14.2 Contractor's Insurance 28
14.3 Property Insurance Loss Adjustment 30
14.4 Waiver of Subrogation 30
14.5 Subcontractor Insurance 30
14.6 General Contractor's Insurance 31
14.7 No Effect on Liability 31
ARTICLE 15. TERMINATION
15.1 Termination By General Contractor for Cause 31
15.2 Termination Upon Bankruptcy 32
15.3 Termination Due to Event of Force Majeure 33
15.4 Liquidated Damages for Early Termination 33
ARTICLE 16. ASSIGNMENTS AND CHOICE OF LAW
16.1 No Assignment by Contractor 34
16.2 Assignment by General Contractor 34
16.3 Extension to Successors and Assigns 34
16.4 Choice of Law 35
ARTICLE 17. DRAWINGS, DOCUMENTS AND MATERIALS
17.1 General Contractor's Review 35
17.1.1 Submittal of Documents 35
17.1.2 Return of Plans and Drawings 35
17.2 Contractor's Duty 36
17.3 Final Documents and All Other Documents Furnished 36
17.4 Ownership of Drawings and Documents 36
17.4.1 Property of General Contractor 36
17.4.2 Reuse of Documents by General Contractor 36
17.5 Ownership of Materials 36
</TABLE>
iv
<PAGE>
<TABLE>
ARTICLE 18. MISCELLANEOUS PROVISIONS
<S> <C> <C> <C>
18.1 Confidential Information 37
18.2 Uses of Premises 37
18.3 Independent Contractor 37
18.4 Contractor's Obligations 38
18.5 New Developments 38
18.6 Representations 38
18.7 Rights Reserved by the General Contractor 39
18.8 Cumulative Remedies 39
18.9 Non-Waiver Clause 39
18.10 Severability 39
18.11 Amendments 40
18.12 Article and Section Headings 40
18.13 Notices 40
18.14 English as Official Language 40
18.15 Original and Counterparts 41
</TABLE>
v
<PAGE>
APPENDICES AND SCHEDULES
APPENDIX TITLE
-------- -----
A Definitions
B Project Site Documents
C Governmental Approvals and Private
Rights-of-Way
Attachment I Specified Permit Applications
D Form of Progress Report
E Boundaries of Interfaces
F Key Personnel of Contractor
G Major Specialty Consultants,
Subcontractors and Suppliers
H Major Milestone Schedule
I Form of Application for Payment
J Form of Waiver and Release of Lien
Rights
K Form of Consent to Assignment
L Documentation Requirements and List of
Documents to be Furnished by the
Contractor
M Initial Network Schedule
EXHIBIT 2 Detailed Technical Description
16 April 1998
vi
<PAGE>
MARFA 2 TEXAS PROJECT
COMMERCIAL GREENHOUSE
DESIGN AND CONSTRUCTION CONTRACT
This MARFA TEXAS PROJECT COMMERCIAL GREENHOUSE DESIGN AND CONSTRUCTION
CONTRACT dated as of May 11, 1998 (this "Agreement") is made by and between AGRO
POWER DEVELOPMENT, INC., a NEW YORK corporation with offices at 10 Alvin Court,
E. Brunswick New Jersey 08816 (the "General Contractor"), and Dalsem
Horticultural Projects B.V., a Netherlands corporation with offices at Woudseweg
9, 2635 CG Den Hoorn, The Netherlands (the "Contractor").
RECITALS
A. The General Contractor intends to build and operate an approximately
26.3 acre commercial Greenhouse facility in the County of Presidio ,Texas (the
"Facility"). The Facility will be fueled by natural gas and LPG.
B. The parties have negotiated and agreed upon the final terms, conditions,
specifications and prices for the design, engineering, procurement, construction
start-up and demonstration of performance of the Greenhouse.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and for other good and valuable consideration, the
parties hereto hereby agree as follows:
ARTICLE 1. THE PROJECT; EXTENT OF AGREEMENT
1.1 Services To Be Performed.
The Contractor agrees to perform or cause to be performed all work and services
in connection with the design, engineering, procurement, construction start-up,
demonstration of performance and personnel training, with respect to the
Greenhouse, all in strict accordance with, and for the Contract Price stated in
this Agreement. The Greenhouse, together with all equipment, labor, services and
materials to be furnished hereunder, is defined as the "Project.' The Project
will be constructed on a 153-acre parcel of property located in the County of
Presidio, as is more fully described in Appendix B (the "Project Site").
1.2 Extent of Agreement.
This Agreement consists of the following documents, and all schedules,
appendices and attachments thereto (collectively, the "Contract Documents"):
(a) Marfa Texas Project Commercial Greenhouse Design And Construction
Contract, including Appendices A-M (as the same may be amended by Changes and
Modifications); and
7
<PAGE>
(b) Scope of Work attached hereto as Schedule I, II and III, as well as
Exhibit II (as the same may be amended by Changes and Modifications, the "Scope
of Work").
Appendices A through M and Schedule I, II and III, as well as Exhibit II are
incorporated by reference herein and deemed to be a part of this Agreement. For
convenience of references a list of defined terms used in this Agreement is
attached as Appendix A.
1.3 Conflicting Provisions.
The Contract Documents are listed in Section 1.2 in their governing order. If
any conflict or inconsistency exists between or among Contract Documents, such
conflict or inconsistency shall be resolved in favor of the highest ranking
document. Any Changes and Modifications permitted under Article 12 shall rank
higher than the provisions they change and shall have the same priority of
classification as the original document or documents changed.
1.4 Entire Agreement.
This Agreement contains the entire agreement between the parties hereto, and
supersedes any and all prior agreements, proposals, negotiations or
representations pertaining to the Project.
If a financial closing has not occured by June 30, 1998 then the General
Contractor has the right to terminate this contract.
1.5 Project Financing Agreements.
The Project Lender, Loan Documents and Project Engineer shall be as follows:
(a) The Project Lender shall be Village Farms International Finance
Association
(b) The Loan Documents shall include the Credit Agreement between the
Project Lender and the Owner (collectively, the "Loan Parties"), the
Collateral Agency Agreement among CoBank ACB as Collateral Agent, the
General Contractor and certain other parties, and such other
agreements and documents as the Loan Parties may agree are necessary
or desirable to evidence the bond and debt financing facility for the
Project.
ARTICLE 2 CONTRACTOR'S RESPONSIBILITIES
2.1 Contractor's Services in General.
The Contractor shall perform or cause to be performed, and be ultimately
responsible for, all engineering, procurement and construction services, , all
materials and equipment, all machinery, tools, labor, transportation, as set
forth herein and, except for the services and information specifically set forth
in Article 3 to be provided by the General Contractor, all other services and
items required to complete the Project in strict accordance with this Agreement
(the "Work"). All construction services of the Contractor shall be performed in
accordance with the Scope of Work. The General Contractor shall have the right,
in accordance herewith, to review and
8
<PAGE>
approve any other engineering, procurement and construction services necessary
as a result of Changes and Modifications to complete the Project in accordance
with this Agreement. The General Contractor and its designees shall have the
right, but not the obligation, to review the Contractor's performance to
determine whether such performance complies with this Agreement. The General
Contractor's failure to review the Contractor's performance shall not diminish
any rights the General Contractor may have in respect of any deficiencies in the
Contractor's performance hereunder. Any engineering or other professional
service to be performed pursuant to this Agreement which must be performed by
licensed personnel shall be performed by licensed personnel as required by Law.
The enumeration of specific duties and obligations to be performed by the
Contractor under the Contract Documents shall not be construed to limit in any
way the general undertakings of the Contractor as set forth herein.
2.2 Summary of Contractor's Responsibilities.
2.2.1 Familiarity with Conditions. The Contractor has made a careful
examination of (i) the Project Site, as is more fully described in Appendix B,
(ii) the Scope of Work and Specifications, (iii) the location and nature of the
proposed construction, (iv) the kind and character of the soil, soil loading
conditions as based upon the soil examination report provided by General
Contractor, subsurface conditions and terrain to be encountered, (v)
transportation facilities, (vi) the conditions of the roads, (vii) the kind of
facilities required before and during construction of the Greenhouse, (viii)
labor conditions, (ix) the local weather conditions based upon previous weather
data, and (x) all other matters which a prudent contractor should have delivered
upon reasonable investigation. The Contractor based upon such examination hereby
accepts the risk of mistake or error relating to the matters referred to in
clauses (i) through (ix) above, and acknowledges and agrees that no Contract
Price increase, performance or scheduling alleviation will be granted by the
General Contractor under this Agreement as a result of any such mistake or
error.
2.2.2. Design and Engineering. The Contractor shall provide or cause to be
provided in a diligent and competent manner all design and engineering services
which shall be necessary or advisable (including geotechnical investigations)
for the expeditious, economical and sound design and completion of the Project
in accordance with the terms of this Agreement, with due consideration given to
all Governmental Approvals (including the relevant provisions in the Specified
Permit Applications), Private Rights-of-Way and Laws. The Contractor's design
and engineering services include, but are not limited to, the preparation of
complete detailed drawings and other documents, including surveys, schedules and
estimates required. for Final Completion of the Project, and coordination with
Subcontractors. All engineering work shall be performed by or under the
supervision of professional engineers licensed to perform such engineering
services in the State of Texas as required by Law.
2.2.3 Procurement. The Contractor shall procure in the Contractor's name,
and not as agent for the General Contractor, and make payment and be responsible
for, all services of Subcontractors and materials, equipment and supplies
manufactured on-site and off-site, and related services for the Project. This
provision shall not preclude the assignment of Subcontractor warranties to
General Contractor.
2.2.4 Construction. The Contractor shall construct the Greenhouse and
provide all labor, equipment, materials, supplies and tools for such
performance. The Contractor shall
9
<PAGE>
cause the Work to receive constant supervision by a competent site manager (the
"Site Manager") or a competent assistant to the Site Manager, one of whom shall
be on the Project Site at all times during performance of construction
activities and whom the General Contractor shall approve or disapprove, which
approval shall not be unreasonably withheld. The Contractor has provided the
General Contractor with the names and resumes of, and the General Contractor has
approved, the key personnel working on the Project identified in Appendix F, and
the General Contractor shall have the right to approve any replacements thereof.
The Site Manager and the key personnel referred to in the preceding sentence
shall be assigned to the Project until Completion thereof and, provided they are
performing in a manner acceptable to the Contractor and the General Contractor,
shall not be removed or reassigned prior to Completion, without the approval of
the General Contractor. The Contractor shall also employ, or cause
Subcontractors to employ, in connection with the construction , capable,
experienced and reliable foremen and such skilled workmen as may be required for
the various classes of work to be performed.
2.2.5 Consumables and Parts During Project Start-up. The Contractor shall
supply lubricants and spare parts as necessary for Project Start-up.
2.2.6 Training of Operators. Prior to Project Start-up, the Contractor
shall train the employees of the operations and maintenance contractor retained
by General Contractor with respect to the Greenhouse. Training shall include
classroom and on-the-job training which shall commence sufficiently in advance
of Project Start-up to prepare these personnel to operate the Greenhouse under
the Contractor's direction during Project Start-up. The Contractor also shall
prepare and provide to the General Contractor six (6) copies each of an
operations and maintenance manual for the Greenhouse. The Contractor shall
provide the General Contractor thirty (30) days prior written notice of the day
it will commence training of Greenhouse operations and maintenance personnel.
2.2.7 Achieve Final Completion with All Due Diligence. The Contractor shall
construct and endeavor to achieve Final Completion of the Project with all due
diligence, in all respects in strict accordance with this Agreement and in full
compliance with all Governmental Approvals (including the relevant provisions in
the Specified Permit Applications), and applicable Laws including without
limitation zoning, environmental protection, use and land use, building and
safety laws, ordinances and regulations with the assitance and guidance of the
General Contractor.
2.3 Particular Undertakings of the Contractor.
2.3.1 Safety Precautions. The Contractor shall at all times take all
reasonable precautions for the safety of employees engaged in services hereunder
and of the public, shall comply with all applicable safety Laws with the
assistance and guidance of the General Contractor, and, to the extent not
inconsistent therewith, shall comply with the safety rules and regulations
contained in the Contractor's safety manual, a copy of which shall be provided
to the General Contractor. All machinery and equipment and other physical
hazards shall be guarded in accordance with applicable Law and industry
construction standards. The Contractor shall develop and maintain a safety
program . Without limiting the generality of the foregoing:
2.3.1.1 The Contractor shall at no time and under no circumstances cause or
permit any employee of the Contractor to perform any work upon energized
electrical lines or
10
<PAGE>
equipment, or upon poles carrying energized electrical lines or equipment, or
upon pressurized piping, unless otherwise specified in the Contract Documents.
2.3.1.2 The Contractor shall at no time and under no circumstances obstruct
public roadways without the prior written permission of the appropriate
authorities.
2.3.1.3 The Contractor shall provide and maintain all such guard lights and
other protection for the public as may be required by applicable Laws,
Governmental Approvals and Private Rights-of-Way, or as may be advisable in the
exercise of reasonable prudence by the Contractor with the assitance and
guidance of the General Contractor. The General Contractor's receipt of the
Contractor's safety manual or its review or approval of any safety procedures or
programs shall not relieve the Contractor of any of its obligations hereunder.
2.3.2 Compliance with Governmental Approvals, Laws and Private
Rights-of-Way Requirements. The Contractor shall comply with the requirements of
all Governmental Approvals (including the relevant provisions in the Specified
Permit Applications), Laws, and Private Rights-of-Way requirements applicable as
of the time of the Contractor's performance with the assistance and guidance of
the General Contractor hereunder, including but not limited to all notices
required thereby.
2.3.3 Duties. The Contract Price (as defined in Section 5.1) includes
provisions for the payment of all moneys which will be payable by the Contractor
or the General Contractor in connection with the design, engineering,
procurement and construction, start-up and functional and design verification
tests of the Greenhouse because of gross receipts taxes or contributions,
costums duty, import duty and similar taxes, duties and contributions imposed by
any taxing authority upon materials, supplies and equipment to be incorporated
in the Project. The Contractor shall pay all such gross receipt taxes, duties
and contributions, and indemnifies the General Contractor from any liability
therefor. The General Contractor shall reimburse Contractor for any gross
receipt taxes, if any. Reimbursement for U.S. Costums import duties will only be
made if the import duties change due to a change in USA Costums regulations. The
parties agree that under current USA Customs practice and pursuant to
International convention the materials to be incorporated in the work shall be
coded as follows: 9817.00.50 "Complete greenhouse for agricultural and
horticultural use, which at the execution hereof has an import duty of 0.0%".
The Contractor shall furnish to the appropriate authorities all required
information and reports in connection with such gross receipt taxes, duties and
contributions, and shall promptly furnish copies of all such information and
reports to the General Contractor.
2.3.4 Schedules. The Contractor shall prepare and maintain detailed network
schedules of the work to be performed hereunder, such schedules to be generally
in accordance with Appendix M. These schedules shall be marked periodically (but
not less frequently than monthly) to show design status, equipment deliveries,
work accomplished and systems completed. The Contractor periodically shall
provide copies of its network schedules to General Contractor as set forth in
Section 2.4.1. The Contractor shall be responsible for maintaining all material
and equipment delivery schedules which affect the progress of the Project. The
Contractor shall closely supervise the work of Subcontractors and monitor
Subcontractor work and progress.
11
<PAGE>
2.3.5 Protection of Property. The Contractor shall do all things reasonably
necessary or expedient to properly protect any and all parallel, converging and
intersecting lines, railroad or utility equipment, highways and any and all
property of others from damage, and in the event that any such lines, railroad
equipment, highways or other property are damaged in the course of the
construction the Contractor shall at its own expense restore any and all of such
damaged property immediately to as good a condition as it was found before such
damage occurred; provided, however, that the Contractor shall not be liable to
restore such damaged property to the extent damage is caused by the General
Contractor or the General Contractor's agents, invitees or contractors (other
than the Contractor and any Subcontractors).
2.3.6 Ingress and Egress. Where ingress and egress by the Contractor to the
Project Site require the Contractor to traverse public or private lands, the
Contractor shall limit the movement of its crews and equipment to such rights of
way as are identified in Appendix C, or which otherwise may be obtained by the
General Contractor or the Contractor, and shall observe any and all restrictions
on such use contained in Governmental Approvals and Private Rights-of-Way
governing such rights of way. Within such rights of way, the Contractor shall be
responsible for laying out the access to be used. The Contractor shall cause as
little damage as possible to crops or property on such rights of way, shall
endeavor to avoid marring the lands and shall restore such lands as required by
any applicable Laws, Governmental Approvals or Private Rights-of-Way granting
documents. All fences which must be opened or moved during the construction of
the Project shall be replaced in as good condition as they were found.
2.3.7 No Alcohol or Controlled Substances on Site. No personnel of the
Contractor or any Subcontractor on the Project site shall be under the influence
of or in possession of any alcoholic beverage or controlled substance (except as
prescribed by a physician so long as the performance or safety of the Project is
not affected thereby). The Contractor shall advise its employees, and cause
Subcontractors to advise their employees, of this requirement before they enter
on the Project Site. When in the Contractor's reasonable judgment it is
appropriate, the Contractor shall, and shall cause Subcontractors to, cause each
of their employees who will have access to the Project Site to take controlled
substance test conducted in accordance with applicable Laws. The Contractor
shall promptly remove from the Project Site any employee in violation of this
Section 2.3.7 or who has failed the controlled substance test.
2.3.8 Miscellaneous Regulations. While on the Project Site, no personnel of
the Contractor or any Subcontractor shall carry firearms, weapons, or
explosives, have animals, or have any of the above in vehicles utilized in the
Work by the Contractor or its Subcontractors, their employees, or agents without
the written approval of the General Contractor. The use of explosives will not
be permitted unless and until the Contractor has submitted to the General
Contractor a blasting plan which is in accordance with all applicable Laws,
Governmental Approvals and Private Rights-of-Way and the General Contractor has
reviewed such plan. While engaged in the Work, personnel shall remain on
established roads and obey speed limits in connection with the performance of
this Agreement, unless such performance requires persons or vehicles to depart
from such roads and such departure is permitted by Law and under the terms of
the applicable Private Rights-of-Way. The Contractor shall be responsible for
the enforcement of the foregoing regulations.
12
<PAGE>
2.3.9 Access to Project Site. From time to time during normal business
hours and upon reasonable notice, the Contractor shall permit representatives of
the Project Lender to visit the Project Site. Such visitors shall obey all
applicable Project Site rules. The General Contractor, the General Contractor's
Representatives and the Project Engineer shall have access to the Project Site
at all times.
13
<PAGE>
2.3.10 Site Logistics Plan. The Contractor will be responsible for
organizing its activities at the Project Site so as to provide proper space for
the storage of materials and equipment and construction operations. Within
twenty (20) days after the date of execution of this Agreement and prior to
mobilization, the Contractor shall prepare and submit to the General Contractor
for its approval a site logistics plan (the "Site Logistics Plan"), which will
show, at a minimum, the proposed location of the following: (i) the Contractor's
trailers; (ii) vehicle parking; (iii) the site entry road; (iv) signs; and (vii)
the routing of truck deliveries. The General Contractor's approval of the Site
Logistics Plan will not be unreasonably withheld. Upon approval by the General
Contractor, the Contractor shall furnish three (3) copies of the Site Logistics
Plan to the General Contractor.
2.3.11 Functional and Design Verification Test Procedures. The Contractor
shall prepare and submit to the General Contractor and the Project Engineer for
approval, at least sixty (60) days prior to expected commencement of Project
Start-up, detailed protocols for the performance of functional and design
verification testing of the Project. The General Contractor's and Project
Engineer's approval of such protocols will not be unreasonably withheld or
delayed.
2.4 Submission of Reports.
2.4.1 The Contractor shall prepare and submit to the General Contractor (a)
within ten days after the end of each calendar month and as part of the
Application for Payment provided pursuant to Section 13.1.1, a written monthly
progress report in a form generally in accordance with Appendix D hereto, which
report shall include, as a minimum, (i) a description of the status of supplies,
Subcontractors' activities and engineering, procurement and construction
progress as compared with the Project schedule (and, if appropriate, an updated
schedule), (ii) an identification and evaluation of problem areas (including but
not limited to an evaluation of any factors which are anticipated to have a
material effect on the Project schedule or which may in the opinion of the
Contractor require Modifications), (iii) a report of any changes in the
representations set forth in Section 18.6 which cause a material adverse effect
on the Contractor's ability to perform its obligations under this Agreement,
(iv) a detailed description of Work accomplished and progress payments already
received as compared with planned expenditures for such Work, and (b) status
reports on material and equipment deliveries and scheduled deliveries. In
addition, the Contractor shall keep, and furnish to the General Contractor
and/or Project Lender at General Contractor's or Project Lender's request, such
books, records and accounts containing such information as may be necessary to
(i) determine that work is progressing according to schedule and (ii) provide
adequate documentary support (A) for the General Contractor's future tax
accounting purposes and (B) for the purpose of confirming that progress payments
are due hereunder. The Contractor shall notify the General Contractor of all
accidents which occur at the Project Site within twenty-four (24) hours after
they occur, and thereafter provide such written reports relating thereto as may
be reasonably requested by the General Contractor.
2.4.2 Prior to the execution and delivery of this Agreement, the Contractor
shall have provided to the General Contractor its most recent annual unaudited
financial statements.
14
<PAGE>
2.5 Obtaining Governmental Approvals and Private Rights-of-Way.
The Contractor shall, to the extent reasonably required, assist the General
Contractor to obtain those Governmental Approvals and Private Rights-of-Way
required to be obtained by the General Contractor, as are set forth in Appendix
C. The Contractor has delivered, or will deliver prior to the time necessary,
evidence satisfactory to the General Contractor that the Contractor hasobtained
all Governmental Approvals required to be obtained by the Contractor as are set
forth in Appendix C, including but not limited to permits, licenses or
certificates from Texas state industrial insurance authorities, Texas employment
security authorities and Texas contractors authorities.
2.6 Clean-up Responsibility.
The Contractor shall at all times keep the Project Site free from accumulation
of waste materials and rubbish resulting from operations and perform daily site
clean-up. Prior to the issuance of the Certificate of Final Completion, the
Contractor shall remove from the Project Site all waste materials and rubbish
and shall perform all other clean-up services to the reasonable satisfaction of
the General Contractor and consistent with all Governmental Approvals, Laws and
Private Rights-of-Way. Prior to the issuance of the Certificate of Final
Completion, the Contractor shall remove from the Project Site all tools,
construction equipment, machinery and surplus materials belonging to the
Contractor or any Subcontractor not necessary to the continued operation of the
Greenhouse.
2.7 Patents, Copyrights and Royalties.
The Contractor shall pay all royalties and license fees for materials, methods
and systems incorporated in the Project. The Contractor hereby indemnities,
fully protects and saves the General Contractor harmless from, and agrees to
defend the General Contractor against, any and all loss, cost and damage which
the General Contractor may hereafter suffer or pay out by reason of any claims
or suits against the General Contractor arising out of claims of infringement of
any domestic or foreign patent rights, trademarks or copyrights, or misuse of
confidential information, by the Contractor in performing its obligations
hereunder. The Contractor and the General Contractor each shall advise the other
promptly in writing of any notice of such claim or the commencement of any suit
or action based upon such claim. Upon receipt of such notice, the Contractor
shall undertake the defense of any such suit, action or claim, and the General
Contractor shall cooperate with the Contractor in such defense. The Contractor
shall have charge and direction of the defense of such suit, action or claim,
and the General Contractor shall have the right to be represented therein by
advisory counsel of its own selection and at its own expense. Neither the
Contractor nor the General Contractor may settle or compromise any such suit,
action or claim without the prior written consent of the other party if such
settlement or compromise would obligate such other party to make any payment or
part with any property, to assume any obligation or grant any license or other
right, or to be subject to any injunction. In case the Greenhouse, or part
thereof, is held in such suit to constitute infringement or the use thereof is
enjoined, the Contractor shall at its own expense and at its option either
procure for the General Contractor the right to continue using the Greenhouse,
or part thereof, or replace the same with a non-infringing part or modify it so
that it becomes non-infringing.
Contractor's obligations to indemnify, defend and save harmless General
Contractor hereunder shall not apply to claims of patent, trademark or copyright
infringement, or misuse of
15
<PAGE>
confidential information, relating to Changes or Modifications in the Work made
to the General Contractor's express specifications, as to which General
Contractor shall indemnify, defend and save harmless Contractor pursuant to the
procedures set forth above in this Section 2.7.
2.8 Further Assurances.
The Contractor shall promptly execute and deliver all further instruments and
documents, and take all further action, including but not limited to assisting
the General Contractor in filing a notice of completion with the local lien
recording offices, that may be necessary or that the General Contractor may
reasonably request (and which is consistent with this Agreement) in order to
effectuate the Contractor's obligations hereunder or the purposes or intent of
this Agreement.
2.9 Interfaces.
The Contractor shall use its best efforts to assist the General Contractor to
coordinate the timely installation and start-up of such connections, utilities,
crossings and the like as necessary to construct and operate the Greenhouse, to
the extent such items are not part of the Work. These interfaces shall include
but not be limited to the interconnections of the Greenhouse with the Greenhouse
and utilities, either similar or dissimilar, required to assure operability of
the Greenhouse. The boundaries of such interfaces shall be as generally
described in Appendix E.
ARTICLE 3 GENERAL CONTRACTOR'S RESPONSIBILITIES
3.1 Documents and Surveys.
The General Contractor has furnished to the Contractor the documents describing
the Project Site, which documents are attached as Appendix B, and will provide
any revisions or amendments thereto promptly upon receipt.
3.2 Rights-of-Way.
The General Contractor shall secure, by purchase, lease, permit, easement or
other license or grant, and shall preserve and maintain, all necessary Private
Rights-of-Way and public rights of way for the Greenhouse and for ingress and
egress of the Contractor necessary to construct the Greenhouse and otherwise to
perform its obligations under this Agreement.
3.3 Required Approvals.
The General Contractor shall secure and pay for, and shall maintain in full
force and effect, those Governmental Approvals and Private Rights-of-Way set
forth in Appendix C.
16
<PAGE>
<PAGE>
3.4 Operations and Maintenance Personnel.
At least four (4) weeks in advance of Project Start-Up, the General Contractor
shall cause the Greenhouse Lessee to hire personnel to be trained and to perform
operations and maintenance of the Greenhouse during Project Start-up and
Commercial Operation.
3.5 Hazardous Wastes.
The General Contractor shall remove, or cause to be removed, and dispose, or
cause to be disposed of, at General Contractor's expense and in accordance with
Law, any debris, soil or other materials consisting of or contaminated by
hazardous wastes as defined by Law, and shall provide replacement fill or other
suitable materials and services as necessary at General Contractor's expense;
provided, however, that if such waste or contamination is present due solely to,
or is caused solely by, the acts or omissions of Contractor or any
Subcontractors, in such case the Contractor shall remove and, dispose of such
debris, soil or other materials in accordance with Law and shall provide
replacement fill or other suitable material and services as necessary, at its
expense.Should the General Contractor need to remove or dispose any debris, soil
or other materials consisting or contaminated by hazardous waste outside the
responibility of the Contractor and its sub-contractors, the General Contractor
shall be liable and shall hold the Contractor harmles against all claims for
damages directly or indirectly resulting from the non, late or imcomplete
removal or disposal of such debris, soil or other materials.
17
<PAGE>
3.6 Notice of Defect.
If the General Contractor becomes aware of any fault or defect in the Greenhouse
or nonconformance with the Contract Documents, it shall give prompt written
notice thereof to the Contractor and thereafter the Contractor shall promptly
correct such fault or defect and/or cure such nonconformance; provided, however,
that the General Contractor shall have no duty to inspect the Greenhouse or to
compare the Greenhouse with the Contract Documents, and its failure to notify
the Contractor of discoverable faults, defects or nonconformance pursuant to
this Section 3.6 because of failure to inspect or compare shall not relieve the
Contractor from any duties, obligations or liabilities hereunder.
3.7 No Alcohol or Controlled Substances on Site; Miscellaneous Regulations.
While on the Project Site, all personnel of the General Contractor and its
separate contractors, including the Greenhouse Lessee, shall obey the
regulations and other requirements provided in Sections 2.3.7 and 2.3.8 and all
other safety requirements established by the Contractor. General Contractor
shall ensure that its personnel and those of its invitees, agents and separate
contractors, including the Greenhouse Lessee, do not interfere with the
performance of the Work.
3.8 Interfaces.
The General Contractor shall, to the extent reasonably required to maintain the
Project schedule, assist the Contractor in coordinating the Contractor's work
with the work to be performed by others with respect to the Project (to the
extent the same may affect Contractor), including but not limited to the
interconnection or interfaces with the Pipeline.
3.9 Utilities and Consumables During Project Start-Up.
The General Contractor shall supply the utilities and consumables (except
lubricants and spare parts) necessary for Project Start-Up.
3.10 Utilities During Construction.
During the period of construction, the General Contractor shall make available
sufficient quantities of electric power and water. The Contractor shall be
responsible for the payments of the above items pertaining to the use thereof.
3.11 Security During Construction.
During the period of construction, the General Contractor shall have night time
security on site, at it's expense. Fencing shall be installed around the
perimeter of the site.
18
<PAGE>
ARTICLE 4 SUBCONTRACTS
4.1 Major Specialty Consultants, Subcontractors and Equipment Suppliers.
Set forth in Appendix G and in the Scope of Work are lists of all subcontractors
that the Contractor is considering for subcontracts in connection with the
Project. The General Contractor has approved each such subcontractor listed in
Appendix G, and the Contractor shall request review of, and the General
Contractor shall have the right to review, any subcontractor proposed to replace
one of those listed on Appendix G. The General Contractor and the Contractor
shall mutually agree on any such replacement. The Contractor may from time to
time delete one or more equipment vendors or subcontractors from said lists, and
may with prior approval of General Contractor, which shall not be unreasonably
withheld, add one or more subcontractors or suppliers to said lists.
4.2 Purchase Orders and Subcontracts.
All material purchase orders and subcontracts issued by the Contractor under
this Agreement shall provide, in form and substance reasonably acceptable to
General Contractor, that in the event this Agreement is terminated, upon tender
by the General Contractor or its designee of the Contractor's performance to any
Subcontractor, such purchase order or subcontract shall continue in full force
and effect in favor of the General Contractor or such designee, as appropriate.
4.3 Payments to Subcontractors.
Except as provided in Section 4.2, the Contractor shall be solely responsible
for paying each Subcontractor and any other person or entity to whom any amount
is due from the Contractor for services or supplies in connection with the
Project.
4.4 No Privity with Subcontractors.
The General Contractor shall have no contractual obligation to, and shall not,
except in respect of rights assigned by the contractor pursuant to Section 10.2,
be deemed to be in privity with any Subcontractor. General Contractor's approval
or disapproval of a Subcontractor pursuant to Section 4.1 hereof shall not
relieve or release the Contractor of any its duties, obligations or liabilities
under the terms of this Agreement.
19
<PAGE>
ARTICLE 5 CONTRACT PRICE
5.1 Contract Price.
As full consideration to the Contractor for the full and complete performance of
the Project and all costs incurred in connection therewith, the General
Contractor shall pay and the Contractor shall accept, the sum of Nine Million
Five Hundred Sixteen Thousand Seventy Three ( 9,516,073) payable pursuant to
Article 13, subject to adjustment in accordance with Article 12 (the "Contract
Price").
5.2 Limitation of General Contractor's Liability.
The General Contractor shall not under any circumstances be liable for the
payment to the Contractor of any amounts in excess of the Contract Price, any
sums due and payable pursuant to the indemnification provisions of Article 14
hereof, and any interest due and payable pursuant to the terms of this
Agreement.
ARTICLE 6 COMMENCEMENT OF THE PROJECT, PROJECT START-UP AND COMPLETION
6.1 Commencement of Work.
The Contractor shall commence the services required under this Agreement
promptly upon receipt of a written notice to proceed with the Work (the "Notice
to Proceed") from General Contractor.
6.2 Project Start-up.
"Project Start-up" is that period (i) commencing on the date that the Contractor
first begins the checkout of systems and equipment for readiness, calibration,
functional and design verification testing, and other initial operations
functions, and (ii) ending upon Final Completion. The Contractor shall provide
the General Contractor with at least forty (40) days' prior written notice of
the expected commencement of Project Start-up. At least thirty (30) days prior
to the expected commencement of Project Start-up, the Contractor shall submit
for approval by the General Contractor and Project Engineer copies of the
proposed functional and design verification testing protocols; approval of such
protocols shall not be unreasonably withheld or delayed. During Project
Start-up, the General Contractor may have its own or its designee's personnel on
site to observe and verify all procedures and testing activities conducted.
20
<PAGE>
6.3 Substantial Completion.
The Contractor shall achieve Substantial Completion of the Project on or before
August 15, 1998 (the "Substantial Completion Deadline"), providing that Notice
to Proceed has been issued on or before April 15, 1998. Time is of the essence
with respect to such deadline. "Substantial Completion" shall mean (a) Phase 1
Substantial Completion has been achieved; (b) the Contractor has completed all
other Work on the Project under this Agreement except for the balance of Project
startup and clean up; (c) the items identified on the Phase 1 Punch-List have
been completed by the Contractor and approved by the General Contractor; (d) (
General Contractor has acknowledged to the Contractor that the functional and
design verification tests have been successfully completed; (e) the Contractor
has delivered to the General Contractor another punch-list relating to those
areas of the Greenhouse other than the Headhouse, and consisting of minor items
that are not essential to the safe and prudent operation of the Greenhouse
(collectively with additional items identified by General Contractor, the "Final
Punch-List"), which Final Punch-List shall not have an aggregate cost exceeding
$40,000, none of which shall include items normally required for the growing of
a tomato crop and/or interfere with the proper performance of the greenhouse
systems; and (d) the General Contractor has delivered to the Contractor a
Certificate of Substantial Completion.
6.4 Notice of Substantial Completion.
When the Contractor believes that it has achieved Substantial Completion, it
shall deliver to the General Contractor a notice thereof (the "Notice of
Substantial Completion").
6.5 Certificate of Substantial Completion.
The General Contractor shall, within five business days following the receipt of
the Notice of Substantial Completion inspect all Work, and either (a) deliver to
the Contractor a certificate certifying that clauses (a) through (e) of Section
6.6 have been satisfied (the "Certificate of Substantial Completion"), in which
case Substantial Completion will have been achieved as of the date the General
Contractor receives such Notice of Substantial Completion from the Contractor,
or (b) if the requirements for Substantial Completion have not been satisfied,
notify the Contractor in writing that Substantial Completion has not been
achieved, stating in detail the reasons therefor. In the event that Substantial
Completion has not been achieved, the Contractor shall promptly take such action
or perform such additional work as will achieve Substantial Completion and shall
issue to the General Contractor another Notice of Substantial Completion
pursuant to Section 6.7. Such procedure shall be repeated as necessary until the
earlier of (i) the issuance by the General Contractor of a Certificate of
Substantial Completion, which certificate shall not be unreasonably withheld, or
(ii) the issuance by General Contractor of a Certificate of Acceptance.
21
<PAGE>
6.6 Final Completion.
The Contractor shall achieve Final Completion of the Project on or before
September 1, 1998 (the "Contract Deadline") , providing that Notice to Proceed
has been issued on or before April 15, 1998. Time is of the essence with respect
to such deadline. "Final Completion" shall mean (a) both Phase 1 Substantial
Completion and Substantial Completion have been achieved; (b) Project Start-up
has been completed; (c) the items identified on the Final Punch-List have been
completed by the Contractor and approved by the General Contractor; (d) clean-up
has been completed; (e) the General Contractor has delivered to the Contractor a
Certificate of Final Completion.
6.7 Notice of Final Completion.
When the Contractor believes that it has achieved Final Completion, it shall
deliver to the General Contractor a notice thereof (the "Notice of Final
Completion").
6.8 Certificate of Final Completion
The General Contractor shall, within five business days following the receipt of
the Notice of Final Completion inspect all Work, and either (a) deliver to the
Contractor a certificate certifying that clauses (a) through (e) of Section 6.6
have been satisfied (the "Certificate of Final Completion"), in which case Final
Completion will have been achieved as of the date the General Contractor
receives such Notice of Final Completion from the Contractor, or (b) if the
requirements for Final Completion have not been satisfied, notify the Contractor
in writing that Final Completion has not been achieved, stating in detail the
reasons therefor. In the event that Final Completion has not been achieved, the
Contractor shall promptly take such action or perform such additional work as
will achieve Final Completion and shall issue to the General Contractor another
Notice of Final Completion pursuant to Section 6.7. Such procedure shall be
repeated as necessary until the issuance by the General Contractor of a
Certificate of Final Completion, which certificate shall not be unreasonably
withheld.
22
<PAGE>
ARTICLE 7 GENERAL CONTRACTOR'S RIGHT TO PLACE THE FACILITY IN COMMERCIAL
OPERATION; CARE, CUSTODY AND CONTROL
7.1 General Contractor's Right.
The parties currently contemplate that the Greenhouse shall be occupied and
placed in Commercial Operation upon Substantial Completion. However, at any time
after the Substantial Completion Deadline the General Contractor or the
Greenhouse Operator may occupy any portion of the Greenhouse which is complete.
Moreover, at any time forty-five (45) days after the Substantial Completion
Milestone, the General Contractor shall have the right to place the Greenhouse
in Commercial Operation, whether or not the Contractor has achieved Substantial
Completion. After the General Contractor shall have placed the Greenhouse in
Commercial Operation, the General Contractor shall so notify the Contractor, and
the Greenhouse Operator shall thereafter operate the Greenhouse. The placing of
the Greenhouse in Commercial Operation by the General Contractor shall not
excuse the Contractor from completing all remaining Work on the Project nor
constitute a waiver of any of the Contractor's obligations under this Agreement.
In the event the General Contractor places the Greenhouse in Commercial
Operation prior to Substantial Completion, the General Contractor shall afford
the Contractor reasonable access to the Greenhouse to complete all remaining
Work on the Project.
7.2 Project Revenues.
The Contractor shall not be entitled to any revenues associated with the sale of
any fruit, vegetables, flowers or other produce from the Greenhouse.
7.3 Care, Custody and Control.
Care, custody and control of the Greenhouse shall pass from the Contractor to
the General Contractor upon the issuance of the Certificate of Substantial
Completion, or upon General Contractor's election to place the Greenhouse in
Commercial Operation, as the case may be. General Contractor shall assume the
risk of physical loss or damage to the Work from and after the issuance of the
Certificate of Substantial Completion or the placing of the Greenhouse into
Commercial Operation, as the case may be. The Contractor shall be obligated to
replace, repair or reconstruct any of the Work which is damaged, destroyed or
lost prior to the passage of care, custody and control of the Greenhouse to
General Contractor.
23
<PAGE>
ARTICLE 8 LIQUIDATED DAMAGES FOR FAILURE TO MEET SCHEDULE GUARANTEES
8.1 Schedule Guarantees. The Contractor provides the following schedule
guarantees:
8.1.1 Substantial Completion. The Contractor guarantees that Substantial
Completion shall be achieved on or before the Substantial Completion Deadline,
as such date may be modified in accordance with Article 12 hereof.
8.2 Liquidated Damages for Failure to Achieve Substantial Completion.
As General Contractor's sole and exclusive remedy for Contractor's failure to
achieve Substantial Completion on or before the Substantial Completion Deadline,
the Contractor shall pay the following liquidated damages.
8.2.1 If the Contractor fails to achieve Substantial Completion on or
before the Substantial Completion Deadline, the Contractor shall pay to the
General Contractor, as liquidated damages, in addition to the sums set forth in
Section 8.2, the sum of $7,500 per day for each day that Substantial Completion
is delayed beyond the Substantial Completion Deadline for a maximum of
forty-five (45) days.
8.3 Liquidated Damages Reasonable.
The General Contractor and the Contractor hereby acknowledge and agree that the
terms, conditions and amounts fixed pursuant to this Article 8 for liquidated
damages are reasonable, considering the damages that the General Contractor
would sustain in the event of the Contractor's failure to achieve the above
schedule guarantees. These amounts are agreed upon and fixed as liquidated
damages because of the difficulty of ascertaining as of the date hereof the
exact amount of damages that would be sustained in such event. Notwithstanding
the first sentences of Section 8.2 and 8.3, such payment of liquidated damages
shall not affect the General Contractor's rights provided in Article 15.
Liquidated damages for failure to achieve the schedule guarantees set forth in
Section 8.1 shall not be reduced by any revenues received by the General
Contractor from the sale of produce from the Greenhouse.
8.4 Time for Payment.
The Contractor shall pay liquidated damages required under this Article 8 on the
first business day following the end of each month in which such liquidated
damages accrue. If the Contractor fails to make timely payment of liquidated
damages, interest on any unpaid amount shall accrue from the due date at the
lesser of (a) the then prevailing Base Rate plus two percent (2%) per annum and
(b) the maximum permitted legal interest rate at the time prevailing and
applicable hereto.
24
<PAGE>
ARTICLE 9 SECURITY AND LIMITATION OF CONTRACTOR'S LIABILITY
9.1 Security
9.1.1 Letter of Credit.The Contractor shall furnish, at the Contractor's
expense, an irrevocable standby letter of credit in the amount of Nine Hundred
Fifty One Thousand Six Hundred Seven (951,607) Dollars, securing the
Contractor's faithful performance of this Agreement and the payment of all
obligations of the Contractor arising hereunder (including but not limited to
liquidated damages pursuant to Article 8 hereof). The letter of credit shall be
from a financial institution and in form and substance satisfactory to the
General Contractor and the Project Lender. The expiration date of the letter of
credit shall be no less than sixty (60) days beyond the Final Completion date.
The letter of credit shall be delivered at or before the financial closing with
the Project Lender. The General Contractor shall have the right to draw on the
letter of credit to satisfy claims against the Contractor resulting from the
Contractor's default in the performance of its duties and obligations hereunder
and fails to remedy such breach in accordance with Article 15 or Contractor's
performance is terminated in accordance with Article 15.1 or 15.2. The letter of
credit will provide that payment thereunder will be made two (2) business days
after presentation of a draw down draft.
9.1.2 Release of Letter of Credit. General Contractor shall release the
letter of credit required under Section 9.1.1 upon the occurrence of any of the
following events: (i) issuance of the Certificate of Final Completion: (ii)
termination by the General Contractor pursuant to Section 15.3 of this
Agreement; or (iii) within ten (10) days after termination by the Contractor
pursuant to Section15.3 hereof. However, General Contractor's obligation under
this Section 9.1.2 to release the letter of credit shall not prejudice the
claims, if any, of General Contractor secured thereby which have accrued prior
to Final Completion or termination, as the case may be, and the General
Contractor shall remain entitled to draw down on the letter of credit in
accordance with this Agreement to satisfy such claims at any time prior to
release of the letter of credit to the contractor.
9.2 Limitation of Contractor's Liability.
9.2.1 Consequential Damages. Contractor shall not be liable for indirect,
consequential, incidental, special or punitive damages, including but not
limited to damages to delay in or loss of use of profits or products, lost
income, or obligations of General Contractor to third parties, except to the
extent such damages may be deemed included within the liquidated damages payable
pursuant to Sections 8.2 and 8.3 hereof.
25
<PAGE>
ARTICLE 10 WARRANTIES AND GUARANTEES
10.1 Materials and Workmanship.
The Contractor warrants to the General Contractor that A machinery, equipment,
materials and other items furnished under this Agreement will be new and of good
quality, free from improper workmanship and defective materials and shall
conform to the requirements of this Agreement. As the General Contractor's sole
remedy for any breach of this warranty, the Contractor agrees to correct within
ten (10) days after receipt of notice for General Contractor, and without
additional compensation, any Work performed hereunder that, at any time for a
period of one year after the earlier of Final Completion or the commencement of
Commercial Operation, proves to be improper or defective in material or
workmanship or not in conformance with the requirements of this Agreement. If
any machinery, equipment, materials or other items furnished under this
Agreement are replaced during the last six months of the original warranty
relating thereto, the warranty for such items shall be deemed extended until six
months after the date of replacement. In addition to correcting the improper,
nonconforming or defective Work itself, the Contractor shall bear all costs and
expenses associated with correcting such warranted Work including without
limitation necessary trouble shooting, disassembly, transportation, reassembly
and retesting, as well as reworking, repair or replacement of such Work, and
disassembly and reassembly of adjacent work when necessary to give access to the
improper, defective or nonconforming Work. The Contractor's warranty shall not
apply to damage arising from the Greenhouse Lessee's failure to comply with
prudent operating and maintenance practices in the commercial Greenhouse
industry. For the purposes of this Section to 10.1, improper workmanship and
defective materials shall be deemed to include, but shall not be limited to, the
following: (i) faulty or defective materials, and defective, careless or
unskilled execution of the Work; (ii) damage by exposure to foreseeable weather,
windborne water or surface drainage; (iii) degradation such as uncontrolled
cracking or spatting of concrete, unit masonry, cast and natural stone,
millwork, plaster, glass and applied finishes such as paint and special
coatings; (iv) "potholing" of pavement; (v) mechanical or electrical equipment
which does not operate in a satisfactory, quiet and efficient manner as
determined by the General Contractor in its reasonable discretion, or which does
not perform the functions specified in the Scope of Work or Specifications; or
(vi) unusual injury or deterioration of the Work when in normal use by the
Greenhouse Lessee.
10.2 Vendor and Supplier Warranties.
The Contractor shall, for the protection of the General Contractor, obtain from
all Subcontractors guarantees and warranties with respect to machinery,
equipment, materials and other items used and installed hereunder, which
guarantees and warranties shall not be amended, modified or otherwise discharged
without the prior written consent of the General Contractor. Such guarantees and
warranties shall be in accordance with reasonable commercial Greenhouse industry
standards, shall be assignable to the General Contractor, shall cover a period
of not less than one year from the earlier of Final Completion or the
commencement of Commercial Operation, and shall be made available to the General
Contractor to the full extent of the terms thereof after assignment. The
Contractor shall enforce such guarantees and warranties to the fullest extent
thereof on behalf of the General Contractor until such time as they are assigned
to the General Contractor. Upon the earlier to occur of (i) issuance of the
Certificate of Final Completion, or (ii) termination of this Agreement pursuant
to Article 15, the Contractor shall
26
<PAGE>
assign to the General Contractor all the Contractor's rights under Subcontractor
guarantees and warranties and shall deliver to the General Contractor copies of
all contracts providing for such guarantees and warranties.
10.3 Engineering and Design.
The Contractor warrants and guarantees that it shall perform all of its
engineering and design services in accordance with sound engineering practice,
Governmental Approvals and applicable Laws and that, when complete, the Project
will be free of all deficiencies caused by errors or omissions in engineering or
design. For a period of one year from the earlier of Final Completion or the
commencement of Commercial Operation, the Contractor shall, as the General
Contractor's sole remedy for breach of this warranty, at its own expense correct
any such efforts and omissions and resulting deficiencies in the Project as soon
as reasonably possible after receipt of notice from the General Contractor
specifying such deficiencies.
10.4 No Liens
The Contractor warrants and guarantees that title to all work, materials,
supplies and equipment provided hereunder will pass to the General Contractor
upon payment by General Contractor therefor free and clear of all liens, claims,
security interests, charges and other encumbrances or preferential arrangements,
including without limitation, the lien or retained security title of a
conditional vendor ("Liens"), and that none of the work, materials, supplies or
equipment will be acquired by the Contractor subject to any agreement under
which a Lien is retained by any person or entity except as otherwise provided by
Law.
10.5 Limitation of Warranties.
EXCEPT AS PROVIDED HEREIN, THERE ARE NO WARRANTIES OR GUARANTEES, EXPRESS OR
IMPLIED, RELATING TO THE CONTRACTOR'S PERFORMANCE HEREUNDER, AND THE CONTRACTOR
DISCLAIMS ANY IMPLIED WARRANTIES OR WARRANTIES IMPOSED BY LAW (OTHER THAN
WARRANTIES OF TITLE).
ARTICLE 11 FORCE MAJEURE
11.1 Force Majeure Events.
As used in this Agreement, a "Force Majeure Event" means any act or event that
prevents the performance of the General Contractor or the Contractor under this
Agreement or the compliance with any conditions required by the other party
under this Agreement if such act or event is beyond the reasonable control of
the party relying thereon as justification for such nonperformance or
noncompliance and such party has been unable to overcome such act or event by
the exercise of due diligence, including but not limited to (but subject to the
foregoing) flood, drought, unusually severe weather, earthquake, storm, fire,
explosion, sabotage or threat of sabotage of the Facility, pestilence, epidemic,
lightning and other natural catastrophes; war, riot, civil disturbance or
disobedience, action or inaction of legislative, judicial, or regulatory
agencies, or other proper authority, which may conflict with the terms of this
Agreement including but not limited to the refusal of visa work permit due to
changes in the government occuring after this contract date; failure, threat of
failure or sabotage of equipment supplied by
27
<PAGE>
Subcontractors for temporary services during performance of the Work which has
been maintained in accordance with good engineering and operating practices
applicable thereto; or loss or shortage of utilities. Economic hardship and
strikes, work stoppages or labor disturbances are explieitly excluded as Force
Majeure Events except when outside the responsibility of the contractor.
11.2 Limitation of Default.
Neither party shall be considered in default in the performance of any of the
agreements contained in this Agreement, except for the General Contractor's or
the Contractor's obligations to pay money when and to the extent the failure of
performance shall be caused by a Force Majeure Event.
11.3 Excused Performance.
If either party is rendered wholly or partly unable to perform its obligations
under this Agreement because of a Force Majeure Event, that party will be
excused from whatever performance is affected by the Force Majeure Event to the
extent so affected; provided that:
(a) the non-performing party, within five (5) days after the occurrence of
the Force Majeure Event, gives the other party written notice describing the
particulars of such occurrence, including an estimation of its expected duration
and probable impact on the performance of the affected party's obligations
hereunder, and continues to furnish timely regular reports with respect thereto
during the continuation of and upon the termination of the Force Majeure Event;
(b) the suspension of performance is of no greater scope and of no longer
duration than is reasonably required by the Force Majeure Event;
(c) the obligations of either party which arose before the occurrence
causing the suspension of performance and the performance of which is not
prevented by the occurrence, shall not be excused as a result of such
occurrence; and
(d) the non-performing party uses its best efforts to remedy its inability
to perform and mitigate the effect of such event and resumes its performance at
the earliest practical time after cessation of such occurrence.
11.4 Right to Terminate for Force Majeure.
If a suspension of performance by either party as a result of a Force Majeure
Event exceeds sixty (60) days, the party whose performance is unaffected by the
Force Majeure Event may terminate this Agreement pursuant and subject to the
terms of Section 12.2.2 hereof.
28
<PAGE>
ARTICLE 12 CHANGES IN THE PROJECT AND SUSPENSION
12.1 Changes.
At any time and from time to time prior to the issuance of the Certificate of
Final Completion, the General Contractor, without invalidating or amending this
Agreement, may order changes in the Project within the general scope of this
Agreement consisting of additions, deletions or other revisions (such changes,
and the changes permitted under Section 12.2, being referred to collectively
herein as "Changes"), in which event the Contract Price, the Substantial
Completion Deadline, the Contract Deadline, and the schedule of Major Milestones
set forth in Appendix H to this Agreement shall be adjusted accordingly, if
necessary, pursuant to Section 12.1.1. No Change will be effected without an
authorized Change Order (as defined in Section 12.1.2).
12.1.1 Procedure for Changes. Except as provided in Section 12.2, only the
General Contractor may initiate Changes. If the General Contractor wishes to
make a Change pursuant to this Section 12.1, it shall submit a written proposal
therefor to the Contractor. At no cost to the General Contractor, the Contractor
shall promptly review the General Contractor's proposal and provide the General
Contractor, within five (5) days thereafter, with notice in writing of the
effect, if any, such proposed Change would have on the Contract Price, the
Substantial Completion Deadline, the Contract Deadline, and the schedule of
Major Milestones. Such notice also shall include an analysis demonstrating (i)
the time impact, if any, of the proposed Change on the critical path items yet
to be completed (including the influence of such Change on the current dates
scheduled for Substantial Completion and Final Completion) and (ii) how the
Contractor proposes to incorporate the time impact on non-critical path items
into the schedule without schedule alleviation. If, in the Contractor's opinion,
Project schedule and/or performance may be maintained or adjustments thereof
minimized only by increasing the Contract Price, the Contractor shall, in such
notice, set forth possible trade-offs among or between Project cost, schedule
and performance so that the General Contractor may make an informed choice among
such alternatives in deciding whether to issue a Change Order. The Contractor
shall provide similar information to the General Contractor upon requesting a
Change pursuant to Section 12.2. The General Contractor shall promptly review
the information provided by the Contractor pursuant to this Section 12. 1.1 and
thereupon may issue a Change Order approving and authorizing such proposed
Change, in which event the cost, scheduling and performance alternative included
in the Contractor's notice described above and chosen by the General Contractor
shall be binding on the Contractor. The Contractor shall use all reasonable
efforts to minimize any effect adverse to the General Contractor of any Change
on Project cost, scheduling and performance. The Change Order issued by the
General Contractor will authorize an extension in the Substantial Completion
Deadline and/or the Contract Deadline only if the Contractor establishes, to the
General Contractor's reasonable satisfaction, that the nature of the proposed
Change would necessitate such extension. All Changes, whether initiated by the
General Contractor or the Contractor under Section 12.2, shall be authorized by
a Change Order, and shall be performed pursuant to this Agreement. Any change in
the Project necessitated by any change in Laws Governmental Approvals or Private
Rights-of-Way after the effective date hereof shall be treated as a Change
pursuant to this Article 12 unless the change necessitated comes within the
definition of Modification, in which case it shall be treated as a Modification
pursuant to this Article 12.
29
<PAGE>
12.1.2 Change Orders. A "Change Order" is a written order to the Contractor
signed by a duly authorized officer of the General Contractor authorizing a
Change in the Project. Upon execution and delivery of this Agreement, the
General Contractor shall deliver to the Contractor written notice signed by the
President of the General Contractor, stating which officers are authorized to
approve Change Orders. If and when, after execution and delivery of this
Agreement, another officer is selected by the General Contractor to approve
Change Orders, the General Contractor shall deliver to the Contractor another
notice signed by the President of the General Contractor so authorizing such new
officer to approve Change Orders. For the purpose of determining who has
authority to approve Change Orders, the Contractor shall be entitled to rely on
the latest notice delivered by the General Contractor pursuant to this Section
12.1.2 and received by the Contractor.
12.1.3 No Changes Due to Contractor Error. Notwithstanding anything in this
Article 12 to the contrary, no Changes shall be issued to correct errors or
omissions on the part of the Contractor which result in construction not in
accordance with the Contract Documents as they existed at the time of such error
or omission.
12.2 Other Changes.
12.2.1 Changes in Laws, Approvals or Rights-of-Way. In the event and to the
extent a change in Laws, Governmental Approvals or Private Rights-of-Way
necessitates a change in the Work, the Contractor may (and, if requested by the
General Contractor, shall) submit a written request for a Change to the General
Contractor, such Change to be incorporated into the Project upon approval by the
General Contractor, which approval shall not be unreasonably withheld, by
issuance of a Change Order pursuant to Section 12.1.1.
12.2.2 Changes Due to Delays in Interfaces or Force Majeure Events. In the
event and to the extent that (i) completion of interfaces or interconnections
with third parties are delayed due to causes beyond control of the Contractor,
and Contractor's performance is adversely affected thereby, or (ii) a Force
Majeure Event prevents the Contractor's performance hereunder, and all of the
requirements of Section 11.3 (a) through (d) are satisfied, the Contractor shall
be entitled to (and if requested by General Contractor, shall request) a Change
pursuant to, and to the extent authorized by, this Section 12.2.2. In such
event, the Contract Price, the Substantial Completion Deadline, the Contract
Deadline, and the Schedule of Major Milestones set forth in Appendix H to this
Agreement shall be adjusted to the extent of the actual and verifiable effects,
if any, which Contractor demonstrates to the reasonable satisfaction of the
General Contractor that such delay or Force Majeure Event has had upon
Contractor's performance of its obligations hereunder. Such Change shall be
incorporated into the Project by issuance of a Change Order pursuant to Section
12.1.1.
12.3 Modifications. Without invalidating or amending this Agreement, the
General Contractor may order and the Contractor may propose, subject to approval
by the General Contractor, modifications in the Project within the general
scope, and consistent with the intent, of the Contract Documents (such
modifications being referred to herein as "Modifications") consisting of
additions, deletions or other revisions, so long as such Modifications do not
adversely affect the Contract Price, Phase 1 Substantial Completion Deadline the
Substantial Completion Deadline, and the Contract Deadline.
30
<PAGE>
12.4 Contract Price Change. A Contract Price increase, if any, resulting
from a Change in the Project shall be determined in one or more of the following
ways and paid by the General Contractor pursuant to the schedule of Progress
Payments adjusted accordingly:
12.4.1 By the General Contractor's acceptance of a lump sum proposed by the
Contractor properly itemized and supported by sufficient substantiating data to
permit evaluation; or
12.4.2 If the method set forth in Section 12.4.1 is not agreed upon after
good faith negotiation by the parties, the Contractor shall provide the General
Contractor with such purchase orders, invoices and other documents and records
as may enable the General Contractor to verify, to its reasonable satisfaction,
the cost to the Contractor of effecting such Change. All equipment, materials
and other items required as a result of such Change shall be purchased by the
Contractor at competitive market prices. The General Contractor shall, upon
verifying the cost to the Contractor of effecting such Change, add to the
Contract Price the amount thereof plus a fee of (i) ten percent (10%) if and to
the extent the Change is performed directly by the Contractor, or (ii) five
percent (5%) if and to the extent the Change is performed by a Subcontractor.
12.5 Continued Performance Pending Resolution of Disputes.
Notwithstanding a dispute regarding the adequacy of a Contract Price increase or
schedule adjustment for a proposed Change, or whether a Modification should be a
Change because it affects the Contract Price or schedule, the Contractor shall
proceed with the performance of such Change or Modification.
ARTICLE 13 PAYMENTS TO CONTRACTOR
13.1 Initial Payment.
Promptly after issuance of the Notice to Proceed, the Contractor shall submit to
the General Contractor an invoice and supporting documentation in the amount of
Nine Hundred Fifty One Thousand Six Hundred Seven ($951,607) Dollars. The
General Contractor shall pay such invoice, less Retainage, by bank wire transfer
within two (2) days after either (a) receipt of the Contractor's letter of
credit required under Section 9.1.1. or (b) financial closing with the Project
Lender, whichever is later.
13.2 Monthly Progress Payments.
Progress payments shall be made by the General Contractor to the Contractor
according to the following procedure:
13.2.1 On or before the tenth day of each calendar month beginning with the
first month following receipt of the initial payment under Section 13.1, the
Contractor shall submit to the General Contractor an "Application for Payment,"
which shall include (i) the monthly progress report prepared pursuant to Section
2.4.1 (a), and (ii) an invoice reflecting an amount which has been determined
pursuant to the Application for Payment, the form of which is attached as
Appendix I, which amount, together with all previous amounts paid by the General
31
<PAGE>
Contractor to the Contractor, shall reflect work on the Project actually
accomplished through the preceding calendar month. The Contractor agrees that it
will not include in any Application for Payment a bill for materials or
equipment until such materials or equipment have been delivered to the Project
Site or has been shipped by vessel, in which case Contractor can include the
value of those materials, supported by an On Board Bill Of Lading and proof of
110% Marine Insurance, showing Buyer as beneficiary. Similarly, the Contractor
will not include in such Application for Payment a bill for labor until such
labor has been performed.
13.2.2 The General Contractor shall pay to the Contractor, twenty (20) days
after receipt of the Application for Payment, the amount determined pursuant to
Section 13.2.1 for Work performed during the month prior to the month in which
the Application for Payment is tendered, less Retainage (all such monthly
amounts paid by the General Contractor being herein referred to as "Progress
Payments"), subject to adjustment as provided in Section 13.2.3.
13.2.3 If the General Contractor disagrees with the Contractor's estimate
of actual Project progress (as reflected in an Application for Payment) and the
cumulative total of all amounts in dispute (reflecting the difference between
the Contractor's and the General Contractor's estimates of actual progress) does
not exceed $50,000.00, the General Contractor shall pay the Contractor such
disputed amount pursuant to Section 13.2.2 as part of the pertinent Progress
Payment, twenty (20) days after receipt of the Application for Payment. Any
disputed amounts in excess of $50,000.00 may be withheld from the Contractor by
the General Contractor, provided, however, that amounts withheld by the General
Contractor pursuant to this Section 13.2.3 shall be paid to the Contractor when
the Contractor has demonstrated, in an Application for Payment completed to the
reasonable satisfaction of the General Contractor, that actual progress
requiring such payment has been achieved.
13.2.4 "Retainage" shall be ten percent (10%) of the amount of each monthly
payment or other payment to be made by the General Contractor pursuant to
Sections 13.1 and 13.2. It is agreed that the Retainage pertaining to Phase 1
shall be released to the Contractor upon issuance of Certificate of Phase 1
Substantial Completion by the General Contractor.. All Retainage shall be
retained by the General Contractor and paid by the General Contractor to the
Contractor in accordance with Section 13.4.
13.2.5 If the General Contractor fails to make its Progress Payments
hereunder on or before the date due, or if the General Contractor withholds
payment of any amount pursuant to Section 13.2.3, and it is subsequently
determined that such withholding was not justified hereunder, interest on any
unpaid amount shall accrue from the due date at the lesser of (a) the Base Rate
plus two percent (2%) per annum or (b) the maximum permitted legal interest rate
at the time prevailing and applicable thereto.
13.2.6 The General Contractor shall have no obligation to make any payment
to the Contractor while the Contractor is in material breach of this Agreement.
In addition, the General Contractor may withhold payment to the Contractor to
the extent reasonably necessary to protect the General Contractor from loss due
to: (i) detective Work not remedied; (ii) claims for payment or liens asserted
by the Contractor or any Subcontractor; (iii) the failure of the Contractor to
promptly pay any Subcontractor; (iv) damage to the person or property of any
separate contractor, agent, invitee or the General Contractor; or (v) reasonable
doubt on the General Contractor's part that the Project can be completed for the
balance of the Contract Price
32
<PAGE>
yet unpaid. The General Contractor is obliged to inform Contractor officially of
such retentions or payments within 10 days before payment is due or being
transferred.
13.2.7 As promptly as possible after the Notice to Proceed, the Contractor
shall send the General Contractor and Project Lender a notice specifying all
Greenhouse equipment to be ordered from outside vendors, indicating the time
such equipment is to be ordered and specifying the General Contractor's cost
thereof. The Project Lender shall, upon receipt of the notice and the General
Contractor's and Project Lender's approval of the amounts and items specified
therein, set aside or otherwise designate for application to such equipment
purchases sufficient funds to pay for the Greenhouse equipment described in the
notice, and shall send the General Contractor and the Contractor written
confirmation of the same.
13.3 Waiver and Release of Liens.
The Contractor shall protect and keep free an clear from Liens the land upon
which the Facility is to be constructed, and any and all interests and estates
therein, and all improvements and materials arising out of or in connection with
performance by the Contractor, or Subcontractor, including services or
furnishing of any materials hereunder. The Contractor shall furnish to General
Contractor, and shall require each and every Subcontractor engaged to supply
services or materials in an amount greater than $50,000 in connection with the
Project to furnish to the Contractor for delivery to General Contractor, at the
time of submission of each Application for Payment and as a precondition to the
making of the Final Payment, a recordable waiver of its right to assert Liens on
the Project, such waiver to be substantially in the form of Appendix 1. 71c
effectiveness of such waivers shall be conditioned upon Contractor's receipt of
payment from General Contractor. If the Contractor fails to furnish a legally
effective waiver or fails to have any Lien released or discharged forthwith but
no later than thirty (30) days after notification , in lieu thereof the
Contractor shall furnish a bond or other collateral satisfactory to the General
Contractor to indemnify the General Contractor against any loss resulting from
such Lien. In addition, until such release, discharge or bonding, the General
Contractor may withhold from any payment due the Contractor an amount sufficient
to discharge any or all such Liens or claims.
13.4 Payment Upon Completion.
Upon delivery of the Certificate of Final Completion, the General Contractor
shall pay the unpaid Retainage due to the Contractor within thirty (30) days
(the "Final Payment").
13.5 Payment or Use Not Acceptance.
No payment made by the General Contractor shall Constitute an acceptance of any
of the Work not in accordance with this Agreement and the Scope of Work.
33
<PAGE>
13.6 Waiver by General Contractor.
The making of the Final Payment shall constitute a waiver of all claims by the
General Contractor except:
(i) those arising from unsettled liens, security interests or other
encumbrances;
(ii) those arising from any warranties, guarantees and indemnities provided
hereunder; and
(iii) those arising from Final Punch-List and clean-up items.
13.7 Waiver by Contractor.
Acceptance of the Final Payment shall constitute a waiver of all claims by the
Contractor except for unpaid Retainage and unresolved claims for Changes
previously asserted in writing by the Contractor.
13.8 Security for Payment.
The General Contractor shall furnish, at the General Contractor's expense, a
standby letter of credit with request to confirmation of --% of the contract
value (, securing the payment of all obligations of the General Contractor to
pay for all materials supplied by the contractor(excluding the initial payment
pertaining to these materials). The letter of credit shall be from a financial
institution and in form and substance satisfactory to the contractor. The letter
of credit shall be delivered at or before the making of the first monthly
payment to the Contractor pursuant to Section 13.2. or at the latest with time
drafts according to the planning. The letter of credit will provide that payment
thereunder will be made two (2) business days after presentation of a draw down
draft. The letter of credit will allow for partial draws.
13.9 Release of Letter of Credit.
The letter of credit shall provide that the Contractor may present a draw down
draft after all remedies provided under this Agreement, specifically Section
13.2.3, have been complied with and the General Contractor has refused to pay
any Application for Payment. Payment of any disputed amount pursuant to the
letter of credit shall have no effect on the parties respective position with
respect to such disputed amount and shall not limit the General Contractor's
remedies for any breach of the provisions of this Agreement.
34
<PAGE>
ARTICLE 14 INDEMNITY, INSURANCE AND WAIVER OF SUBROGATION
14.1 Indemnity.
14.1.1 Indemnity by Contractor. The Contractor hereby indemnifies and holds
harmless the General Contractor, and its shareholders, directors, officers and
employees (each being hereinafter referred to as an 'Indemnified Party') from
and against any and all loss, cost (including reasonable attorneys' fees),
damage, injury, liability, claims, demands, interest and causes of action (a)
for bodily injury or property damage that may arise from the Contractor's
operations under this Agreement, except to the extent arising from The
negligence or misconduct of such Indemnified Party, (b) because of any violation
of Law to be complied with by the Contractor hereunder, (c) in respect of any
taxes levied on the Contractor or in respect of the Contractor's net income or
(d) in respect to any demands or Liens by Subcontractors for nonpayment of
amounts due as a result of furnishing materials or work to the Contractor which
are payable by the Contractor for Work on the Project performed pursuant to this
Agreement.
14.1.2 Indemnity by General Contractor. The General Contractor hereby
indemnifies and holds harmless the Contractor and its shareholders, directors,
officers and employees (each being hereinafter referred to as an 'Indemnified
Party') from and against any and all loss, cost (including reasonable attorneys'
fees), damage, injury, liability, claims, demands, interest and causes of action
(a) for bodily injury or property damage to the extent such may arise, from the
negligence or misconduct of General Contractor in connection herewith, (b)
because of violation of Law to be complied with by General Contractor hereunder,
or (c) in respect of any taxes levied on the General Contractor or in respect of
the General Contractor's net income.
14.1.3 Procedure. When required to indemnify an Indemnified Party in
accordance with this Agreement, the indemnifying party shall assume on behalf of
such party, and conduct with due diligence and in good faith, the defense of any
such suit against such party, whether or not the indemnifying party be joined
therein; provided, however, that without relieving the indemnifying party of its
obligations hereunder, the Indemnified Party may elect to participate, at its
expense, in the defense of any such suit.
14.2 Contractor's Insurance. At its own expense, the Contractor shall
secure and maintain during the term of this Agreement the following insurance
with the coverage amounts indicated for occurrences during and arising out of
the Contractor's performance of this Agreement. Such insurance shall be placed
with responsible and reputable insurance companies qualified to do business in,
the State of Texas and shall be effective as of at least thirty (30) days prior
to the date of the Notice to Proceed and maintained until Final Completion.
Deductible amounts shall be the responsibility of the Contractor. The Contractor
shall also be responsible for fifty percent (100%) of the deductible amounts
with respect to the Builder's Risk Insurance described in Section 14.6 hereof,
up to a cap of Twenty-Five Thousand ($25,000) Dollars per occurrence for claims
pertaining to items in the Contractor's scope, except that Contractor shall not
be responsible for any portion of the deductible for delay in start-up. If the
General Contractor purchases Builder's Risk Insurance with deductibles in excess
of those specified in Section 14.6, the Contractor's responsibility for such
deductibles shall be limited to fifty percent (50%) of the deductible amounts
specified in Section 14.6.
35
<PAGE>
Type Coverage/Amount
Workers' Compensation Insurance As required by the State
including occupational of Texas
disease coverage
Employer's Liability $500,000 each accident
$500,000 each
employee-disease
$500,000 policy
limit-disease
Comprehensive General Liability, $1,000,000 per occurrence
with the following
coverages:
Premises--Operations; Independent
Contractors and Subcontractors
Protective; Products/Completed
Operations; Broad
Form Property Damage;
Contractual Liability (Broad
Form) Including Third Party
Coverage; Explosion, Collapse,
Underground Hazard,
and Personal Injury
Comprehensive Automobile
Liability, including coverage
for all owned, hired
and non-owned vehicles $1,000,000 combined single
limit, per occurrence
Excess Liability $2,500,000 per occurrence
Marine Insurance 110% value of shipment
14.2.1 Evidence of Coverage. The Contractor shall provide certificates of
insurance to the General Contractor evidencing all insurance policies required
pursuant to this Section 14.2. The certificates evidencing Comprehensive General
Liability, Comprehensive Automobile Liability and Excess Liability shall each
certify that:
(1) During the Contractor's performance under this Agreement, the General
Contractor and the Project Lender shall be named as additional insureds and loss
payees under such policies (without any representation or warranty by or
obligation upon such entities) as their interests may appear for occurrences
during and arising out of the Contractor's performance of this Agreement;
36
<PAGE>
(2) such insurance is primary insurance with respect to the interests
of the General Contractor and the Project Lender, and any other insurance
maintained by them is excess and not contributory with this insurance; and
(3) such policies provide that (a) the inclusion of more than one
corporation, person, organization, firm or entity as insured thereunder shall
not in any way affect the rights of any such corporation, person, organization,
firm or entity as respects any claim, demand, suit or judgment made, brought or
recovered, by or in favor of any other insured, or by or in favor of any
employee of such other insured, and (b) each corporation, person, organization,
firm, or entity is protected thereby in the same manner as though a separate
policy had been issued to each, but nothing therein shall operate to increase
the insurance company's liability as set forth elsewhere in the policy beyond
the amount for which the insurance company would have been liable if only one
person or interest had been named as insured.
14.2.2 Contents of Certificates. The certificates evidencing all insurance
provided under this Section 14.2 shall each certify that (a) under such policy
there will be no recourse against the General Contractor or any of the banks
comprising the Project Lender or any of their assignees for payment of a premium
and (b) such policy may not be canceled or materially altered by the insurance
company without giving sixty (60) days prior written notice of cancellation or
alteration to the General Contractor and the Project Lender.
14.3 Property Insurance Loss Adjustment.
Any insured loss shall be adjusted with the General Contractor and the
Contractor and made payable to the General Contractor and the Contractor as
their interests may appear, subject to any applicable mortgagee clause.
14.4 Waiver of Subrogation.
All insurance policies supplied by either party to this Agreement shall include
a waiver of any right of subrogation of the insurers thereunder against the
other party and any of the banks comprising the Project Lender, and of any right
of the insurers to any set-off or counterclaim or any other deduction, whether
by attachment or otherwise, in respect of any liability of any such person
insured under such policy.
14.5 Subcontractor Insurance.
The Contractor shall require all Subcontractors to obtain, maintain and keep in
force, during the time in which they are engaged in performing services to be
furnished by the Contractor hereunder, adequate coverage in accordance with the
Contractor's normal practice or the Contractor shall maintain such coverage
under its own insurance policies.
14.6 General Contractor's Insurance.
General Contractor shall procure at its own expense and maintain in full force
and effect from and after the issuance of the Notice to Proceed, with
responsible and reputable insurance
37
<PAGE>
companies qualified to do business in the State of Texas, builder's risk
insurance as described below and worker' compensation, general liability and
automobile liability insurance in amounts comparable to the coverages carried by
the Contractor hereunder, and excess liability insurance in the amount of
$2.500,000. General Contractor shall provide certificates of insurance to the
Contractor evidencing all insurance policies required under this Section 14.6.
Builder's Risk: Contract Price
Deductibles: $ 25,000
The certificate evidencing the builder's risk insurance shall certify that the
policy (a) provides for all losses to be paid directly to the General
Contractor, and (b) shall name the Contractor and each of the banks comprising
the Project Lender as insured parties thereunder (without any representation or
warranty by or obligation upon such entities) as their interests may appear. As
to the remaining coverages, with the exception of workers' compensation, and
only as to matters within the scope of the General Contractor's indemnity under
Section 14.1.2, such policies (a) shall name Contractor as an additional
insured, and (b) shall be primary and not excess to or contributing with any
insurance maintained by the Contractor.
14.7 No Effect on Liability.
The requirement that the Contractor, Subcontractors or General Contractor
furnish certain minimum insurance coverages is not to be interpreted as in any
way limiting the liability of the Contractor or General Contractor as the case
may be, nor does either party, by furnishing or requiring evidence of certain
minimum insurance, assume, or intend to assume, any liability that it would not
otherwise have in the absence of such a requirement.
ARTICLE 15 TERMINATION
15.1 Termination By General Contractor for Cause. In the event:
(a) at any time prior to issuance of the Certificate of Final Completion,
the Contractor shall abandon or otherwise cease efforts to achieve Final
Completion in a diligent manner; or
(b) (i) the Contractor fails to achieve a Major Milestone within thirty
(30) days after the corresponding milestone date indicated in Appendix H, or
(ii) at any time prior to the issuance of the Certificate of Final Completion an
unexcused act or omission of the Contractor has materially affected its ability
to complete the Project pursuant to this Agreement by the Contract Deadline and
such unexcused act or omission persists for a period of thirty (30) days, and in
the case of either (b) (i) or b (H), the Contractor fails to cure such default
within fifteen (15) days after receiving notice thereof from the General
Contractor (unless such default is of a nature that it cannot be cured within
such fifteen (15) day period, in which case the Contractor shall be in
compliance herewith if it presents a plan for such cure which is reasonably
acceptable to General Contractor, commences such cure within such fifteen (15)
day period, and diligently pursues such cure to completion within sixty (60)
days after the aforestated notice from the General Contractor or such longer
period as General Contractor may accept in its sole discretion); or
38
<PAGE>
(c) all items on the Final Punch-List and all clean-up have not been
completed by the Contract Deadline; then the General Contractor may, without
prejudice to any legal or equitable remedy it may have, terminate this
Agreement, take possession of the Project Site and complete the Project by
whatever reasonable method it may deem expedient, and the Contractor shall in
case of a situation as described under (a) or (b) be liable to the General
Contractor for any and all justifiable cost or expense in excess of the unpaid
portion of the Contract Price occasioned thereby, such amount to be payable
within thirty (30) days after the General Contractor has provided a notice
setting forth the amount thereof. Should the termination of the Project amount
less than the unpaid portion of the Contract Price (including the Retainage),
the surplus of the unpaid portion of the Contract Price shall be paid to the
Contractor immediately. In case of situation (c), the General Contractor is not
allowed to withhold a higher amount than $120,000 as referred to in article 6.3
and 6.6. The unpaid portion of the Contract Price (including the Retainage) that
exceeds $120,000 shall be immediately paid to the Contractor. The General
Contractor may take possession of and utilize, in completing the Project, any
materials, tools, supplies, equipment and appliance, belonging to the Contractor
or any of its Subcontractors that are at the Project Site. In such event, the
General Contractor may exercise any rights, claims or demands that the
Contractor may have against third persons in connection with this Agreement
(including but not limited to tender of performance to Subcontractors as
described in Section 4.2) and for such purpose, the Contractor does hereby, to
the extent possible, assign, transfer and set over unto the General Contractor
all such rights, claims and demands and agrees to execute whatever documents the
General Contractor deems appropriate to effect such assignment, transfer or
set-over. Neither such exercise by General Contractor of rights, claims or
demands against third persons, nor such assignment, transfer or set over by
Contractor, shall relieve Contractor of its liability to pay General
Contractor's costs or expenses to complete the Project in excess of the unpaid
portion of the Contract Price.
15.2 Termination Upon Bankruptcy.
If (a) the Contractor shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy law now or hereafter in effect or seeking the
appointment of a custodian of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking possession
by any such custodian in an involuntary case or other proceeding commenced
against it, or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing or (b) an involuntary case or
other proceeding shall be commenced against the Contractor seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy law now or hereafter in effect or seeking the appointment of a
custodian of it or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and unstayed for a period of
sixty (60) days, or an order for relief shall be entered against the Contractor
under any bankruptcy law as now or hereafter in effect, then, if the Contractor
is unable to diligently perform and does not continue so to perform its
obligations hereunder, this Agreement may be terminated by the General
Contractor who may then exercise any and all rights provided in Section 15.1.
Termination due to the failure in the project's financial closing.
39
<PAGE>
The General Contractor shall pay for all executed labour and delivered materials
including but not limited to the materials in transfer according the normal
progress payment schedule procedure described in this contract.
40
<PAGE>
15.3 Termination Due to Event of Force Majeure.
If either (i) a material suspension of performance by either party as a result
of a Force Majeure Event exceeds sixty (60) days, or (ii) the total number of
days in which a material suspension of performance by either party as a result
of all Force Majeure Events in the aggregate exceeds sixty (60) days, the party
whose performance is unaffected by the Force Majeure Event may terminate this
Agreement, provided it gives the other party written notice of its intent to
terminate not less than thirty (30) days prior to the end of the applicable
period and the other Party fails to resume performance before the period
expires; provided, however, that the Contractor's right to terminate under this
Section 15.3 shall be subject to the limitations set forth in Section 11.4
hereof. Upon such termination, the Contractor shall be compensated for all Work
satisfactorily performed through the date of termination, plus its reasonable
costs associated with the Force Majeure Event suspension and a fee equal to ten
percent (10%) of such suspension costs. However, such termination shall not
relieve Contractor of its obligation to pay liquidated damages which become due
and payable prior to the termination hereof pursuant to Sections 8.2 or 8.3
hereof. In the event of termination by either party pursuant to this Section
15.3, the General Contractor may elect to assume any or all of the obligations,
commitments and unsettled claims that the Contractor has previously undertaken
or incurred in good faith in connection with performance of the Contractor's
obligations hereunder. The Contractor shall, to the extent reasonably possible,
as a condition to receiving termination payments referred to in this Section,
execute and deliver such papers and take all such steps, including the legal
assignment of its contractual rights, as the General Contractor may require for
the purpose of fully vesting in the General Contractor the rights and benefits
of the Contractor under such obligations, commitments or claims.
15.4 Liquidated Damages for Early Termination.
If Contractor is terminated by eith3er Section 15.1 or 15.2 hereof, the General
Contractor may exercise the following remedies:
(a) Draw down on Contractor's letter of credit provided under Section
9.1.1 for the full amount of the letter of credit.
(b) General Contractor will be entitled to keep any amounts of the
Retainage at the time of termination.
After Final Completion of the Project, consideration of all Project Costs and
Liquidated Damages, General Contractor will refund any remaining amounts to
Contractor. Actions by the General Contractor provided for in this Section 15.4
will not relieve Contractor from it's obligations under this Construction
Contract.
41
<PAGE>
ARTICLE 16 ASSIGNMENTS AND CHOICE OF LAW
16.1 No Assignment by Contractor.
The Contractor shall not assign this Agreement or any interest in any funds that
may be due or become due hereunder or enter into any contract with any person,
firm or corporation for the performance of the Contractor's obligations
hereunder or any part thereof, except as specifically provided herein, without
the prior approval in writing of the General Contractor. If the Contractor, with
the consent of the General Contractor, shall enter into a subcontract with any
Subcontractor for the performance of any part of this Agreement, the Contractor
shall be as fully responsible to the General Contractor for the acts and
omissions of such Subcontractor and of persons employed by such subcontractor as
the Contractor would be for its own acts and omissions and those of persons
directly employed by it. Nothing in this Section 16.1 shall be read to limit the
General Contractor's rights to assign its interest in this Agreement or the
Project under Section 16.2.
16.2 Assignment by General Contractor.
The General Contractor shall be entitled to freely assign this Agreement and its
rights, titles and interests hereunder, to:
(a) any affiliate of the General Contractor (including any joint venture or
general or limited partnership in which the General Contractor or its affiliate
is a general partner) ; or
(b) any person, corporation, bank, trust, company, association or other
business or governmental entity (including but not limited to the Project
Lender) as security in connection with obtaining or arranging financing for the
Greenhouse; or
(c) any successor entity (whether by merger, by consolidation, by sale of
substantially all the assets or by the enforcement of the security interest
described in (b) above).
Upon each permitted assignment described in this Section 16.2 (other than in
clause (b) above) by the General Contractor, the assignee shall expressly assume
in writing all of the obligations of General Contractor hereunder. Upon the
request of the General Contractor, the Contractor shall acknowledge in writing
any permitted assignment described in clause (b) above and the right of any
permitted assignee to enforce this Agreement against the Contractor. Such
acknowledgment of a permitted assignment described in clause (b) shall be
substantially in the form of Appendix K hereto.
16.3 Extension to Successors and Assigns.
Each and all of the covenants and agreements herein contained shall extend to
and be binding upon the successors and permitted assigns of the parties hereto.
42
<PAGE>
16.4 Choice of Law.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Texas, excluding conflict-of-laws provisions which would direct the
application of the laws of another state. The parties agree that all actions or
proceedings arising in connection with this Agreement shall be tried and
litigated in any Texas state court or any federal court sitting in the State of
Texas.
ARTICLE 17 DRAWINGS, DOCUMENTS AND MATERIALS
17.1 General Contractor's Review.
All plans and drawings, calculations, specifications and other related design,
construction, performance test and start-up information, and results of any
supporting design, construction, performance test and start-up calculations,
prepared in connection with engineering, construction, performance test and
start-up services, shall be delivered to the General Contractor as such
documents are completed, as specified in Appendix L. The procedure for submittal
and review of such documents shall be as set forth in Sections 17. 1. 1 and
17.1.2 and Schedule I.
17.1.1 Submittal of Documents. The Contractor shall prepare and submit to
the General Contractor in accordance with Appendix L, the Greenhouse plans and
drawings, which shall include, but not be limited to, plot plans, general
arrangements drawings, architectural drawings including Headhouse layout
drawings, piping and instrumentation diagrams, and electrical one-line diagrams
of the Greenhouse (collectively, the "Plans and Drawings'), and design
calculations for the Greenhouse. The preliminary and/or approved for
construction issue of the above documents will provide the General Contractor
with Project definition, and provide the Contractor with (i) the information and
data required to prepare purchase specifications and data sheets for major
equipment and (ii) the definition required to complete construction drawings The
Contractor also shall submit to the General Contractor preliminary and final
checked calculations when prepared.
17.1.2 Return of Plans and Drawings. One copy of each of the Plans and
Drawings submitted by the Contractor pursuant to Section 17. 1.1 shall be
returned by the General Contractor to the Contractor as soon as possible in the
exercise of General Contractor's best efforts, but no later than fifteen (15)
working days after receipt, stamped either:
(a) "Returned Without Comment"; or
(b) "Returned with Comments".
Review by the General Contractor under this Section 17.1.2 of the submitted
Plans and Drawings shall be solely in the discretion of the General Contractor.
Failure of the General Contractor to return Plans and Drawings to the Contractor
within such fifteen (15) working day period shall be construed as having
returned the same without comment. Plans and Drawings which are returned marked
"Returned with Comments' shall bear comments which specify in detail the General
Contractor's concerns or questions regarding the contents of such document. The
Contractor may elect to proceed with the Work set forth in such Plans and
Drawings prior to the
43
<PAGE>
return of the same by General Contractor, but shall do so at the Contractor's
sole risk and expense. The Contractor shall respond to the General Contractor
advising its disposition of the General Contractor's comments within five (5)
days after receipt thereof.
17.2 Contractor's Duty.
Review (or lack thereof) by the General Contractor, its designees or the Project
Engineer of any Project documents provided by the Contractor, and the fact that
the General Contractor, its designees or the Project Engineer has not discovered
any errors reflected in such Project documents, shall not relieve or release the
Contractor of any of its duties, obligations or liabilities under the terms of
this Agreement.
17.3 Final Documents and All Other Documents Furnished.
Upon the issuance of the Certificate of Final Completion, the Contractor shall
furnish the General Contractor with all final (including as-built) documents
pertaining to the design, construction and operation of the Greenhouse, which
documents are listed in Appendix L. If this Agreement is terminated prior to
Final Completion, the Contractor shall furnish the General Contractor with any
and all final (including as-built) documents which have been prepared, and the
most up-to-date versions of documents which are not yet final. All other
documents, drawings and materials shall be submitted in the form and as required
in Appendix L.
17.4 Ownership of Drawings and Documents.
17.4.1 Property of General Contractor. All drawings, tracings,
specifications and other documents prepared by or for the Contractor in respect
of the Project and all drawings, tracings, specifications, calculations,
memoranda, data, notes and other materials containing information supplied by
the General Contractor which shall come into the Contractor's possession during
its performance hereunder, shall be the sole and exclusive property of the
General Contractor, and such documents and other materials shall be returned to
the General Contractor upon the earliest of the General Contractor's placing the
Greenhouse in Commercial Operation pursuant to Article 7, Final Completion or
termination of this Agreement. Subject to Section 18. 1, the Contractor shall
have the right to retain and use, solely and specifically for the Project, a
reproducible set of all drawings, tracings, specifications and other documents
prepared by or for the Contractor in respect of the Project.
17.4.2 Reuse of Documents by General Contractor. All drawings, tracings,
specifications, and other documents prepared by or for the Contractor pursuant
to this Agreement are instruments of service with respect to this Project. They
are not intended or represented to be suitable for reuse by General Contractor
or others on extensions of this Project or on any other project. Any reuse
without written verification or adaptation by the Contractor for the specific
purpose intended will be at General Contractor's sole risk and without liability
or legal exposure to the Contractor, and General Contractor shall indemnify and
hold harmless the Contractor against all claims, damages, losses, and expenses
including attorneys' fees, arising out of or resulting from such unauthorized
reuse.
17.5 Ownership of Materials.
44
<PAGE>
Title to all materials and equipment incorporated or to be incorporated in
construction shall vest in the General Contractor upon payment therefor by
General Contractor, so that the General Contractor will have full title to said
materials and equipment at such times and that upon Final Payment title to the
completed Greenhouse will have vested in the General Contractor; provided,
however, that construction equipment, small tools and other equipment owned by
the Contractor or third parties not necessary to the completion of the Project
or continued operation of the Greenhouse shall remain the sole property of their
respective owners. The Contractor shall deliver to the General Contractor all
instruments necessary to transfer title to the Greenhouse, including such
materials and equipment, upon Final Payment.
ARTICLE 18 MISCELLANEOUS PROVISIONS
18.1 Confidential Information.
The General Contractor and the Contractor agree to hold in confidence, except as
may be reasonably necessary from time to time to their performance hereunder,
obtain financing for the Project or fulfill requirements of government
authorities, any information supplied to the General Contractor or the
Contractor, as the case may be, by the other party and designated in writing as
confidential. The Contractor further agrees to require its Subcontractors and
employees to enter into appropriate non-disclosure agreements relating to such
confidential information a may be communicated to them by the Contractor. The
provisions of this Section 18.1 shall not apply to information within any one of
the following categories or any combination thereof: (a) information which was
in the public domain prior to the receiving party's receipt thereof from the
disclosing party or which subsequently becomes part of the public domain by
publication or otherwise except by the receiving party's wrongful act; (b)
information which the receiving party demonstrates was lawfully in its
possession prior to receipt thereof from the disclosing party through no breach
of any confidentiality obligation; or (c) information received by the receiving
party from a third party having no obligation of confidentiality with respect
thereto. The Contractor shall not publish information or photographs regarding
the Project and shall not permit or accompany any third party not connected with
the Project onto the Project Site without the express written permission of the
General Contractor. The Contractor shall not take, or permit to be taken any
photographs of the Project Site (except for the sole purpose of performing its
obligations hereunder) without the prior written consent of the General
Contractor.
18.2 Uses of Premises.
The Contractor shall confine its apparatus, the storage of materials and
construction equipment and the operations of its workers to limits imposed by
applicable Laws, Governmental Approvals and Private Rights-of-Way, or the
reasonable directions of the General Contractor, and shall not unreasonably
encumber the premises with its materials and construction equipment.
18.3 Independent Contractor.
The Contractor shall be an independent contractor with respect to the Project,
or any part thereof, and in respect of all work to be performed hereunder.
Neither the Contractor nor its Subcontractors, nor the employees of either,
employed on the Project shall be deemed to be agents, representatives, employees
or servants of the General Contractor by reason of their
45
<PAGE>
performance hereunder or in any manner dealt with herein. The General Contractor
and the Contractor hereby covenant and agree that in the approval of key
employees or major equipment vendors of Contractor, approving or furnishing of
plans and specifications, should any be furnished by the General Contractor, or
in the making of inspections by the General Contractor, or in the taking of any
other action or the exercise of any right pursuant to this Agreement, the
General Contractor is acting for and on its own behalf and not as agent of the
Contractor. The General Contractor and the Contractor hereby further covenant
and agree that, in the performance of work hereunder by the Contractor, it shall
not do any act or make any representation to any person or persons to the effect
that the Contractor, or any of its agents, representatives or Subcontractors, is
the agent of the General Contractor.
18.4 Contractor's Obligations.
The approval and consent by the General Contractor to the Contractor's entering
into any subcontract shall not relieve the Contractor of any of its duties,
liabilities or obligations hereunder, and the Contractor shall be liable to the
same extent as if no such subcontract had been entered into.
18.5 New Developments.
During the term of this Agreement, the Contractor's program of research and
development may result in potential improvements to the work to be performed
hereunder. Any such potential improvements shall be offered to the General
Contractor, and, if accepted by the General Contractor, shall be treated as a
Change or Modification pursuant to Article 12.
18.6 Representations.
18.6.1 Each party hereby represents to the other that:
(a) it has legal power and authority to enter into and carry out the terms
of this Agreement, which constitutes a legal, valid and binding obligation of it
enforceable against it in accordance with its terms; provided, however, that the
enforcement of the rights and remedies herein is subject to bankruptcy and other
similar laws of general application affecting the rights and remedies of
creditors and that the remedy of specific performance or of injunctive relief is
subject to the discretion of the court before which any proceedings therefor may
be brought; and
(b) the consummation of the transactions contemplated by, and compliance
with all the terms and provisions of, this Agreement will not violate any
provisions of such party's Certificate of Incorporation or Bylaws and will not
result in a breach of the terms and provisions of, or constitute a default
under, any other agreement or undertaking by such party or by which it or any of
its property is bound or any order of any court or administrative agency entered
in any proceedings in which it is or has been a party.
18.6.2 The Contractor hereby represents to the General Contractor that, as
of the effective date of this Agreement (and such representations of the
Contractor shall, with any changes reported to the General Contractor pursuant
to Section 2.4.1(a) (iii), be deemed reaffirmed in each Application for
Payment):
46
<PAGE>
(a) The Contractor is a corporation duly incorporated, validly existing and
in good standing under the laws of the Country of the Netherlands and duly
qualified to do business in and in good standing under the laws of the State of
Texas.
(b) The unaudited consolidated balance sheets of the Contractor and its
affiliates as at December 31, 1997, and the related statements of income and
retained earnings of the Contractor for the fiscal year then ended, copies of
which have been furnished to the General Contractor, fairly present the
financial condition of the Contractor and its affiliates as of such dates and
the results of operations of the Contractor and its affiliates for the periods
ended on such dates, all in accordance with generally accepted accounting
principles consistently applied; and since such dates there has been no material
adverse change in such condition or operations.
(c) The Contractor is not presently contemplating (i) the commencement of a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy law in effect,
(ii) the appointment of a custodian of it or any substantial part of its
property, (iii) a general assignment for the benefit of creditors, (iv) not
generally paying its debts as they become due, or (v) corporate action to
authorize any of the foregoing.
18.7 Rights Reserved by the General Contractor.
The General Contractor reserves the right to require the removal from the
Project Site of any employee of the Contractor or of any Subcontractor if in the
reasonable judgment of the General Contractor such removal shall be necessary in
order to protect the interests of the General Contractor.
18.8 Cumulative Remedies.
Except as expressly provided otherwise herein, every right or remedy herein
conferred upon or reserved to the General Contractor or Contractor shall be
cumulative, shall be in addition to every right and remedy now or hereafter
existing at law or in equity or by statute, and the pursuit of any right or
remedy shall not be construed as an election.
18.9 Non-Waiver Clause.
It is understood and agreed that any delay, waiver or omission by the General
Contractor or the Contractor to exercise any right or power arising from any
breach or default by the other party of any of the terms or provisions of this
Agreement shall not be construed to be a waiver by the General Contractor or the
Contractor of any subsequent breach or default of the same or other terms or
provisions on the part of the other party.
18.10 Severability.
In the event that any of the provisions, or portions or applications thereof, of
this Agreement are held to be unenforceable or invalid by any court of competent
jurisdiction, the General Contractor and the Contractor shall negotiate an
equitable adjustment in the provisions of this Agreement with a view toward
effecting the purpose of this Agreement, and the validity and
47
<PAGE>
enforceability of the remaining provisions, or portions or applications thereof,
shall not be affected thereby.
48
<PAGE>
18.11 Amendments.
No amendments or modifications of this Agreement shall be valid unless evidenced
in writing and signed by duly authorized representatives of both the General
Contractor and the Contractor.
18.12 Article and Section Headings.
The Article and Section headings have been inserted for convenience of reference
only and shall not in any manner affect the construction, meaning or effect of
anything herein contained nor govern the rights and liabilities of the parties
hereto.
18.13 Notices.
Except as otherwise provided herein, all notices and demands pertaining to or
required to be given under this Agreement shall be in writing and shall be
delivered by hand, telecopy or overnight courier, or mailed by registered or
certified mail, postage prepaid, properly addressed as follows:
If to the General Contractor: If to the Contractor:
Agro Power Development, Inc. Dalsem Horticultural Projects B.V.
10 Alvin Court Woudseweg 9
E. Brunswick NJ 08816 2635 CG Den Hoorn, Netherlands
Attn: President Attn: President
Telecopy No.: (908) 254-1710 Telecopy No.: 01131-152695888
Such notices shall be effective on the day received at the addresses specified
above. The parties hereto, by like notice in writing, may designate, from time
to time, another address or office to which notices shall be given pursuant to
this Agreement.
18.14 English as Official Language.
All notices and other communications made and documents developed pursuant to
this Agreement shall be in the English language. If this Agreement or any such
communications or documents are translated into any other language, the English
version shall control - In the event design work for any part of the Project is
performed in non-English speaking countries, English-speaking interpreter(s)
acceptable to the General Contractor shall be made available by the Contractor
at the Contractor's cost during all telephone conversations and meetings
involving the General Contractor and such non-English speaking persons providing
such work.
49
<PAGE>
18.15 Original and Counterparts.
This Agreement may be executed in two counterparts, each of which shall be
deemed an original for all purposes, but all of which shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the duly authorized officers of the parties hereto have
executed* this Marfa Texas Project Commercial Greenhouse Design and Construction
Contract, all as of the date and year first above written.
For Agro Power Development, Inc. For Dalsem Horticultural Projects,
B.V.
("General Contractor") ("Contractor")
- - ------------------------------- ----------------------------------
Albert Vanzeyst, President J.P. Dalsem, Sales Director
- - ----------
50
EXHIBIT 10.101
MARFA, TEXAS PROJECT
COMMERCIAL DESIGN
AND
CONSTRUCTION CONTRACT
among
VILLAGE FARMS OF PRESIDIO, , L.P.,
as Owner,
AGRO POWER DEVELOPMENT, INC.,
as General Contractor
AUGUST 31, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. THE PROJECT; EXTENT OF AGREEMENT................................................................5
1.1. SERVICES TO BE PERFORMED.................................................................................5
1.2. EXTENT OF AGREEMENT......................................................................................6
1.3. CONFLICTING PROVISIONS...................................................................................6
1.4. ENTIRE AGREEMENT.........................................................................................6
1.5. PROJECT FINANCING AGREEMENTS.............................................................................6
1.6. EFFECTIVENESS............................................................................................6
ARTICLE 2. GENERAL CONTRACTOR'S RESPONSIBILITIES...........................................................7
2.1. GENERAL CONTRACTOR'S SERVICES IN GENERAL.................................................................7
2.2. SUMMARY OF GENERAL CONTRACTOR'S RESPONSIBILITIES.........................................................8
2.3. PARTICULAR UNDERTAKINGS OF THE GENERAL CONTRACTOR........................................................9
2.4. SUBMISSION OF REPORTS...................................................................................12
2.5. OBTAINING GOVERNMENTAL APPROVALS AND PRIVATE RIGHTS-OF-WAY..............................................13
2.6. CLEAN-UP RESPONSIBILITY.................................................................................13
2.7. PATENTS, COPYRIGHTS AND ROYALTIES.......................................................................13
2.8. FURTHER ASSURANCES......................................................................................14
2.9. INTERFACES..............................................................................................14
2.10. UTILITIES AND CONSUMABLES DURING PROJECT START-UP.......................................................14
ARTICLE 3. OWNER'S RESPONSIBILITIES.......................................................................15
3.1. DOCUMENTS AND SURVEYS...................................................................................15
3.2. RIGHTS-OF-WAY...........................................................................................15
3.3. REQUIRED APPROVALS......................................................................................15
3.4. OPERATIONS AND MAINTENANCE PERSONNEL....................................................................15
3.5. NOTICE OF DEFECT........................................................................................15
3.6. NO ALCOHOL OR CONTROLLED SUBSTANCES ON SITE; MISCELLANEOUS REGULATIONS..................................15
3.7. INTERFACES..............................................................................................15
ARTICLE 4. SUBCONTRACTS...................................................................................16
4.1. MAJOR SPECIALTY CONSULTANTS, SUBCONTRACTORS AND EQUIPMENT SUPPLIERS.....................................16
4.2. PURCHASE ORDERS AND SUBCONTRACTS........................................................................16
4.3. PAYMENTS TO SUBCONTRACTORS..............................................................................16
4.4. NO PRIVITY WITH SUBCONTRACTORS..........................................................................16
ARTICLE 5. CONTRACT PRICE.................................................................................17
5.1. CONTRACT PRICE..........................................................................................17
5.2. LIMITATION OF OWNER'S LIABILITY.........................................................................17
ARTICLE 6. COMMENCEMENT OF THE PROJECT, PROJECT START-UP AND COMPLETION...................................17
6.1. COMMENCEMENT OF WORK....................................................................................17
6.2. PROJECT START-UP........................................................................................17
6.3. SUBSTANTIAL COMPLETION..................................................................................17
6.4. NOTICE OF SUBSTANTIAL COMPLETION........................................................................18
6.5. CERTIFICATE OF SUBSTANTIAL COMPLETION...................................................................18
6.6. ACCEPTANCE OF PROJECT UPON FAILURE TO ACHIEVE SUBSTANTIAL COMPLETION PRIOR TO THE
SUBSTANTIAL COMPLETION DEADLINE.........................................................................18
6.7. ACCEPTANCE OF PROJECT UPON FAILURE TO ACHIEVE SUBSTANTIAL COMPLETION....................................18
6.8. FINAL COMPLETION........................................................................................19
6.9. NOTICE OF FINAL COMPLETION..............................................................................19
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
6.10. CERTIFICATE OF FINAL COMPLETION.........................................................................19
ARTICLE 7. OWNER'S RIGHT TO PLACE THE FACILITY IN COMMERCIAL OPERATION; CARE, CUSTODY AND CONTROL.........19
7.1. OWNER'S RIGHT...........................................................................................19
7.2. PROJECT REVENUES........................................................................................20
7.3. CARE, CUSTODY AND CONTROL...............................................................................20
ARTICLE 8. SCHEDULE GUARANTEES............................................................................20
ARTICLE 9. LIMITATION OF LIABILITY........................................................................20
9.1. LIMITATION OF LIABILITY.................................................................................20
ARTICLE 10. WARRANTIES AND GUARANTEES......................................................................21
10.1. MATERIALS AND WORKMANSHIP............................................................................21
10.2. SUBCONTRACTOR WARRANTIES.............................................................................21
10.3. ENGINEERING AND DESIGN...............................................................................22
10.4. NO LIENS.............................................................................................22
10.5. LIMITATION OF WARRANTIES.............................................................................22
ARTICLE 11. FORCE MAJEURE..................................................................................22
11.1. FORCE MAJEURE EVENTS.................................................................................22
11.2. LIMITATION OF DEFAULT................................................................................23
11.3. EXCUSED PERFORMANCE..................................................................................23
11.4. RIGHT TO TERMINATE FOR FORCE MAJEURE.................................................................23
ARTICLE 12. CHANGES IN THE PROJECT AND SUSPENSION..........................................................24
12.1. CHANGES..............................................................................................24
12.2. OTHER CHANGES........................................................................................25
12.3. MODIFICATIONS........................................................................................25
12.4. CONTRACT PRICE CHANGE................................................................................26
12.5. CONTINUED PERFORMANCE PENDING RESOLUTION OF DISPUTES.................................................26
12.6. SUSPENSION...........................................................................................26
12.7. SUSPENSION PROCESS...................................................................................26
12.8. RESUMPTION OF WORK...................................................................................27
12.9. CONTRACT CHANGES DUE TO SUSPENSION...................................................................27
12.10. TERMINATION DUE TO SUSPENSION........................................................................27
ARTICLE 13. PAYMENTS TO GENERAL CONTRACTOR.................................................................27
13.1. INITIAL PAYMENT......................................................................................27
13.2. MONTHLY PROGRESS PAYMENTS............................................................................27
13.3. WAIVER AND RELEASE OF LIENS..........................................................................29
13.4. PAYMENT UPON COMPLETION..............................................................................29
13.5. PAYMENT OR USE NOT ACCEPTANCE........................................................................29
13.6. WAIVER BY OWNER......................................................................................29
13.7. WAIVER BY GENERAL CONTRACTOR.........................................................................30
13.8. GENERAL CONTRACTOR'S PERFORMANCE WITH RESPECT TO APPLICATIONS FOR PAYMENT............................30
ARTICLE 14. INDEMNITY, INSURANCE AND WAIVER OF SUBROGATION.................................................30
14.1. INDEMNITY............................................................................................30
14.2. GENERAL CONTRACTOR'S INSURANCE.......................................................................31
14.3. SUBCONTRACTOR INSURANCE..............................................................................32
14.4. GENERAL CONTRACTOR'S INSURANCE.......................................................................33
14.5. PROPERTY INSURANCE LOSS ADJUSTMENT...................................................................33
14.6. NO EFFECT ON LIABILITY...............................................................................33
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
14.7. OWNER'S ELECTION REGARDING ALL RISK INSURANCE........................................................33
14.8. WAIVER OF SUBROGATION................................................................................34
ARTICLE 15. TERMINATION....................................................................................34
15.1. TERMINATION BY OWNER FOR CAUSE.......................................................................34
15.2. TERMINATION UPON BANKRUPTCY..........................................................................35
15.3. TERMINATION BY OWNER WITHOUT CAUSE...................................................................35
15.4. TERMINATION DUE TO SUSPENSION........................................................................36
15.5. TERMINATION DUE TO EVENT OF FORCE MAJEURE............................................................36
ARTICLE 16. ASSIGNMENTS AND CHOICE OF LAW..................................................................37
16.1. NO ASSIGNMENT BY GENERAL CONTRACTOR..................................................................37
16.2. ASSIGNMENT BY OWNER..................................................................................37
16.3. EXTENSION TO SUCCESSORS AND ASSIGNS..................................................................38
16.4. CHOICE OF LAW........................................................................................38
ARTICLE 17. DRAWINGS, DOCUMENTS AND MATERIALS..............................................................38
17.1. OWNER'S REVIEW......................................................................................38
17.2. GENERAL CONTRACTOR'S DUTY............................................................................39
17.3. FINAL DOCUMENTS AND ALL OTHER DOCUMENTS FURNISHED....................................................39
17.4. OWNERSHIP OF DRAWINGS AND DOCUMENTS..................................................................39
17.5. OWNERSHIP OF MATERIALS...............................................................................40
ARTICLE 18. MISCELLANEOUS PROVISIONS.......................................................................40
18.1. CONFIDENTIAL INFORMATION.............................................................................40
18.2. USES OF PREMISES.....................................................................................40
18.3. INDEPENDENT CONTRACTOR...............................................................................41
18.4. GENERAL CONTRACTOR'S OBLIGATIONS.....................................................................41
18.5. NEW DEVELOPMENTS.....................................................................................41
18.6. REPRESENTATIONS......................................................................................41
18.7. RIGHTS RESERVED BY THE OWNER.........................................................................42
18.8. CUMULATIVE REMEDIES..................................................................................42
18.9. NON-WAIVER CLAUSE....................................................................................43
18.10. SEVERABILITY.........................................................................................43
18.11. AMENDMENTS...........................................................................................43
18.12. ARTICLE AND SECTION HEADINGS.........................................................................43
18.13. NOTICES..............................................................................................43
18.14. ORIGINAL AND COUNTERPARTS............................................................................44
</TABLE>
iii
<PAGE>
APPENDICES AND SCHEDULES
APPENDIX A..............................................................45
APPENDIX B..............................................................45
APPENDIX C..............................................................45
APPENDIX D..............................................................45
APPENDIX E..............................................................45
APPENDIX F..............................................................45
APPENDIX G..............................................................45
APPENDIX H..............................................................45
APPENDIX I..............................................................45
APPENDIX J..............................................................45
SCHEDULE
1 Scope of Work
2 Technical Details
iv
<PAGE>
MARFA, TEXAS PROJECT
COMMERCIAL DESIGN
AND CONSTRUCTION CONTRACT
This MARFA, TEXAS PROJECT COMMERCIAL DESIGN AND CONSTRUCTION CONTRACT dated
as of August 17, 1998 (this "Agreement") is made by and among VILLAGE FARMS OF
PRESIDIO, L.P., a Delaware limited partnership with offices at 9912 MonroeRoad,
Matthews, North Carolina 28105 (the "Owner"), and AGRO POWER DEVELOPMENT INC., a
New York corporation with offices at 10 Alvin Court, East Brunswick, New Jersey
08816 (the "General Contractor").
RECITALS
A. The Owner desires to have designed and constructed a venlo style
approximately 26 acre greenhouse facility located in the vicinity of Marfa,
Texas which will be heated by natural gas with Liquid Propane Gas ("LPG") as a
backup fuel source and as more fully described in the Scope of Work (the
"Facility").
B. The General Contractor has agreed with the Owner to design, engineer,
procure, construct, start-up and demonstrate performance of the Facility.
C. The terms, conditions, specifications, prices and agreements between the
Owner and the General Contractor with respect to the services to be performed
under this Agreement are as more fully set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and for other good and valuable consideration, the
parties hereto hereby agree as follows:
ARTICLE 1. THE PROJECT; EXTENT OF AGREEMENT
1.1. Services To Be Performed.
The General Contractor agrees to perform or cause to be performed all work and
services in connection with the design and engineering, procurement,
construction, start-up, demonstration of performance and personnel training with
respect to the Facility, all in strict accordance with, and for the Contract
Price stated in, this Agreement. The Facility, together with all equipment,
labor, services and materials to be furnished hereunder, is defined as the
"Project." The Project will be constructed on a 156-acre parcel of property
located in the County of Presidio, as is more fully described in Appendix B (the
"Project Site").
5
<PAGE>
1.2. Extent Of Agreement.
This Agreement consists of the following documents, and all schedules,
appendices and attachments thereto (collectively, the "Contract Documents"):
(a) Marfa, Texas, New York Project Commercial Design and Construction
Contract, including Appendices A through M (as the same may be amended
by Changes and Modifications); and
(b) Scope of Work attached hereto as Schedule 1 and the Technical Details
attached hereto as Schedule 2 (as the same may be amended by Changes
and Modifications, the "Scope of Work").
(c) Appendices A through M and Schedule 1 and Schedule 2 are incorporated
by reference herein and deemed to be a part of this Agreement. For
convenience of references a list of defined terms used in this
Agreement is attached as Appendix A.
1.3. Conflicting Provisions.
The Contract Documents are listed in Section 1.2 in their governing order. If
any conflict or inconsistency exists between or among Contract Documents, such
conflict or inconsistency shall be resolved in favor of the highest ranking
document. Any Changes and Modifications permitted under Article 12 shall rank
higher than the provisions they change and shall have the same priority of
classification as the original document or documents changed.
1.4. Entire Agreement.
This Agreement contains the entire agreement between the parties hereto, and
supersedes any and all prior agreements, proposals, negotiations or
representations pertaining to the Project.
1.5. Project Financing Agreements.
The Project Lender and Loan Documents shall be as follows:
(a) The Project Lender shall be Village Farms International Finance
Association , and it's respective successors and assigns.
(b) The Loan Documents shall include the Loan Agreement between the
Project Lender and the Owner (collectively, the "Loan Parties"), the
other Loan Documents (as such term is defined in the Loan Agreement),
and such other agreements and documents as the Loan Parties require in
connection with the debt financing facility for the Project.
1.6. Effectiveness.
This Agreement shall not become effective until the financing transaction
contemplated by the Loan Documents shall have closed and the initial funding by
the Project Lender thereunder shall have occurred.
6
<PAGE>
ARTICLE 2. GENERAL CONTRACTOR'S RESPONSIBILITIES
2.1. General Contractor's Services In General.
Subsequent to recording of the Leasehold Deed of Trust (as defined in the Loan
Agreement) and within ten (10) days after the beginning of the Work (as defined
in the Loan Agreement), the General Contractor and the Owner shall be required
to execute and record the Notice of Commencement of Construction in accordance
with the statutory requirements of Texas law and Section 9.2.10 of the Loan
Agreement. The General Contractor shall perform or cause to be performed, and be
ultimately responsible for, all design and engineering, procurement and
construction services, all razing, demolition and debris removal and disposal
services, all site security services (from the commencement of work at the
Project Site through Final Completion), all materials and equipment, all
machinery, tools, labor, transportation, start-up services, functional and
design verification tests, personnel training as set forth herein and, except
for the services and information specifically set forth in Article 3 to be
provided by the Owner, all other services and items required to complete the
Project in strict accordance with this Agreement (the "Work"). All design and
engineering and construction services of the General Contractor shall be
performed in accordance with the Scope of Work. The Owner shall have the right,
in accordance herewith, to review and approve any design and engineering,
procurement and construction services necessary as a result of Changes and
Modifications to complete the Project in accordance with this Agreement. The
Owner shall have the right, but not the obligation, to review the General
Contractor's performance to determine whether such performance complies with
this Agreement. The Owner's failure to review the General Contractor's
performance shall not diminish any rights the Owner may have in respect of any
deficiencies in the General Contractor's performance hereunder. Any design and
engineering or other professional service to be performed pursuant to this
Agreement which must be performed by licensed personnel shall be performed by
licensed personnel as required by Law. The enumeration of specific duties and
obligations to be performed by the General Contractor under the Contract
Documents shall not be construed to limit in any way the general undertakings of
the General Contractor as set forth herein.
7
<PAGE>
2.2. Summary Of General Contractor's Responsibilities.
2.2.1. Familiarity With Conditions. The Contractor has made a careful
examination of (i) the Project Site, as is more fully described in Appendix B,
(ii) the Scope of Work and Specifications, (iii) the location and nature of the
proposed construction, (iv) the kind and character of the soil, soil loading
conditions, subsurface conditions and terrain to be encountered, (v)
transportation facilities, (vi) the conditions of the roads, (vii) the kind of
facilities required before and during construction of the Greenhouse, (viii)
labor conditions, (ix) the local weather conditions based upon previous weather
data, and (x) all other matters which a prudent contractor should have
discovered upon reasonable investigation. The Contractor based upon such
examination hereby accepts the risk of mistake or error relating to the matters
referred to in clauses (i) through (x) above, and acknowledges and agrees that
no Contract Price increase, performance or scheduling alleviation will be
granted by the General Contractor under this Agreement as a result of any such
mistake or error.
2.2.2. Design And Engineering. The Contractor shall provide or cause to be
provided in a diligent and competent manner all design and engineering services
which shall be necessary or advisable (including geotechnical investigations)
for the expeditious, economical and sound design and completion of the Project
in accordance with the terms of this Agreement, with due consideration given to
all Governmental Approvals (including the relevant provisions in the Specified
Permit Applications), Private Rights-of-Way and Laws. The Contractor's design
and engineering services include, but are not limited to, the preparation of
complete detailed drawings and other documents, including surveys, schedules and
estimates required. for Final Completion of the Project, and coordination with
Subcontractors. All engineering work shall be performed by or under the
supervision of professional engineers licensed to perform such engineering
services in the State of New York as required by Law.
2.2.3. Procurement. The General Contractor shall procure in the General
Contractor's name, and not as agent for the Owner, and make payment and be
responsible for, all services of Subcontractors and materials, equipment and
supplies manufactured on-site and off-site, and related services for the
Project. This provision shall not preclude the assignment of Subcontractor
warranties to the Owner.
2.2.4. Construction. The General Contractor shall construct the Facility
and provide all labor, equipment, materials, supplies and tools for such
construction. The General Contractor shall handle and warehouse (according to
manufacturers' recommendations) equipment, materials and supplies for the
Project. The General Contractor shall cause the Work on the Facility to receive
constant supervision by a competent site manager (the "Site Manager") or a
competent assistant to the Site Manager, one of whom shall be on the Project
Site at all times during performance of construction activities and whom the
Owner shall approve or disapprove, which approval shall not be unreasonably
withheld. The General Contractor has provided the Owner with the names and
resumes of, and the Owner has approved, the key personnel working on the Project
identified in Appendix F, and the Owner shall have the right to approve any
replacements thereof. The Site Manager and the key personnel referred to in the
preceding sentence shall be assigned to the Project until Completion thereof
and, provided they are performing in a manner acceptable to the General
Contractor and the Owner, shall not be removed or reassigned prior to
Completion, without the
8
<PAGE>
approval of the Owner. The General Contractor shall also employ, or cause
Subcontractors to employ, in connection with the construction of the Facility,
capable, experienced and reliable foremen and such skilled workmen as may be
required for the various classes of work to be performed.
2.2.5. Consumables And Parts During Project Start-up. The General
Contractor shall supply lubricants and spare parts as necessary for Project
Start-up.
2.2.6. Training Of Operators. Prior to Project Start-up, the General
Contractor shall train the employees of the operations and maintenance
contractor retained by the Owner with respect to the Facility. Training shall
include classroom and on-the-job training which shall commence sufficiently in
advance of Project Start-up to prepare these personnel to operate the Facility
under the General Contractor's direction during Project Start-up. The General
Contractor also shall prepare and provide to the Owner two (2) copies of an
operations and maintenance manual for the Facility. The General Contractor shall
provide the Owner thirty (30) days prior written notice of the day it will
commence training of Facility operations and maintenance personnel.
2.2.7. Achieve Final Completion With All Due Diligence. The General
Contractor shall construct and endeavor to achieve Final Completion of the
Project with all due diligence, in all respects in strict accordance with this
Agreement and in full compliance with all Governmental Approvals (including the
relevant provisions in the Specified Permit Applications), Private
Rights-of-Way, and applicable Laws including without limitation zoning,
environmental protection, use and land use, building and safety laws, ordinances
and regulations.
2.3. Particular Undertakings Of The General Contractor.
2.3.1. Safety Precautions. The General Contractor shall at all times take
all reasonable precautions for the safety of employees engaged in services
hereunder and of the public, shall comply with all applicable safety Laws, and,
to the extent not inconsistent therewith, shall comply with the safety rules and
regulations contained in the General Contractor's safety manual, a copy of which
shall be provided to the Owner . The General Contractor shall have
responsibility for safety and security at the Project Site during the term of
this Agreement. All machinery and equipment and other physical hazards shall be
guarded in accordance with applicable Law and industry construction standards.
The General Contractor shall develop and maintain a safety program complete with
a fire protection program. Without limiting the generality of the foregoing:
2.3.1.1. The General Contractor shall at no time and under no circumstances
cause or permit any employee of the General Contractor to perform any work upon
energized electrical lines or equipment, or upon poles carrying energized
electrical lines or equipment, or upon pressurized piping, unless otherwise
specified in the Contract Documents.
2.3.1.2. The General Contractor shall at no time and under no circumstances
obstruct public roadways without the prior written permission of the appropriate
authorities.
9
<PAGE>
2.3.1.3. The General Contractor shall provide and maintain all such guard
lights and other protection for the public as may be required by applicable
Laws, Governmental Approvals and Private Rights-of-Way, or as may be advisable
in the exercise of reasonable prudence by the General Contractor. The Owner's
receipt of the General Contractor's safety manual or its review or approval of
any safety procedures or programs shall not relieve the General Contractor of
any of its obligations hereunder.
2.3.2. Compliance With Governmental Approvals, Laws And Private
Rights-of-Way Requirements. The General Contractor shall comply with the
requirements of all Governmental Approvals (including the relevant provisions in
the Specified Permit Applications), Laws, and Private Rights-of-Way requirements
applicable as of the time of the General Contractor's performance hereunder,
including but not limited to all notices required thereby. The Facility will be
built in conformance with applicable Laws.
2.3.3. Duties. The Contract Price (as defined in Section 5.1) includes
provisions for the payment of all monies which will be payable to the General
Contractor by the Owner in connection with the design, engineering, procurement,
construction, start-up and functional and design verification tests of the
Facility because of gross receipts taxes or contributions, customs duty, import
duty and similar taxes, duties and contributions imposed by any taxing authority
upon materials, supplies and equipment to be incorporated in the Project. The
General Contractor shall pay all such gross receipt taxes, duties and
contributions, and indemnifies the Owner from any liability therefor. The
General Contractor shall furnish to the appropriate authorities all required
information and reports in connection with such gross receipt taxes, duties and
contributions, and shall promptly furnish copies of all such information and
reports to the Owner.
2.3.4. Schedules. The General Contractor shall prepare and maintain
detailed network schedules of the work to be performed hereunder, such schedules
to be generally in accordance with Appendix M. These schedules shall be marked
periodically (but not less frequently than monthly) to show design status,
equipment deliveries, work accomplished and systems completed. The General
Contractor periodically shall provide copies of its network schedules to the
Owner as set forth in Section 2.4.1. The General Contractor shall be responsible
for maintaining all material and equipment delivery schedules which affect the
progress of the Project. The General Contractor shall closely supervise the work
of Subcontractors and monitor Subcontractor work and progress.
2.3.5. Protection Of Property. The General Contractor shall do all things
reasonably necessary or expedient to properly protect any and all parallel,
converging and intersecting lines, railroad or utility equipment, highways and
any and all property of others from damage, and in the event that any such
lines, railroad equipment, highways or other property are damaged in the course
of the construction of the Facility the General Contractor shall at its own
expense restore any and all of such damaged property immediately to as good a
condition as it was found before such damage occurred; provided, however, that
the General Contractor shall not be liable to restore such damaged property to
the extent damage is caused by the Owner or the Owner's agents, invitees or
contractors (other than the General Contractor and any Subcontractors).
2.3.6. Ingress And Egress. Where ingress and egress by the General
Contractor to the Project Site require the General Contractor to traverse public
or private lands, the General Contractor shall limit the movement of its crews
and equipment to such rights of way as are
10
<PAGE>
identified in Appendix C, or which otherwise may be obtained by the Owner or the
General Contractor, and shall observe any and all restrictions on such use
contained in Governmental Approvals and Private Rights-of-Way governing such
rights of way. Within such rights of way, the General Contractor shall be
responsible for laying out the access to be used. The General Contractor shall
cause as little damage as possible to crops or property on such rights of way,
shall endeavor to avoid marring the lands and shall restore such lands as
required by applicable Laws, Governmental Approvals or Private Rights-of-Way
granting documents. All fences which must be opened or moved during the
construction of the Project shall be replaced in as good condition as they were
found.
2.3.7. No Alcohol Or Controlled Substances On Site. No personnel of the
General Contractor or any Subcontractor on the Project Site shall be under the
influence of or in possession of any alcoholic beverage or controlled substance
(except as prescribed by a physician so long as the performance or safety of the
Project is not affected thereby). The General Contractor shall advise its
employees, and cause Subcontractors to advise their employees, of this
requirement before they enter on the Project Site. When in the General
Contractor's reasonable judgment it is appropriate, the General Contractor
shall, and shall cause Subcontractors to, cause each of their employees who will
have access to the Project Site to take controlled substance test conducted in
accordance with applicable Laws. The General Contractor shall promptly remove
from the Project Site any employee in violation of this Section 2.3.7 or who has
failed the controlled substance test.
2.3.8. Miscellaneous Regulations. While on the Project Site, no personnel
of the General Contractor or any Subcontractor shall carry firearms, weapons, or
explosives, have animals, or have any of the above in vehicles utilized in the
Work by the General Contractor or its Subcontractors, their employees, or agents
without the written approval of the Owner . The use of explosives will not be
permitted unless and until the General Contractor has submitted to the Owner a
blasting plan which is in accordance with all applicable Laws, Governmental
Approvals and Private Rights-of-Way and the Owner have reviewed such plan. While
engaged in the Work, personnel shall remain on established roads and obey speed
limits in connection with the performance of this Agreement, unless such
performance requires persons or vehicles to depart from such roads and such
departure is permitted by Law and under the terms of the applicable Private
Rights-of-Way. The General Contractor shall be responsible for the enforcement
of the foregoing regulations.
2.3.9. Access To Project Site. From time to time during normal business
hours and upon reasonable notice, the General Contractor shall permit
representatives of the Project Lender to visit the Project Site. Such visitors
shall obey all applicable Project Site rules. The Owner and their respective
designated representatives shall have unrestricted access to the Project Site at
all times.
2.3.10. Site Logistics Plan. The General Contractor will be responsible for
organizing its activities at the Project Site so as to provide proper space for
the storage of materials and equipment and construction operations. Within
twenty (20) days after the date of execution of this Agreement and prior to
mobilization, the General Contractor shall prepare and submit to the Owner for
its approval a site logistics plan (the "Site Logistics Plan"), which will show,
at a minimum, the proposed location of the following: (i) the General
Contractor's trailers; (ii) temporary utilities; (iii) vehicle parking; (iv)
staging and laydown areas; (v) the site entry road; (vi) signs; and (vii) the
11
<PAGE>
routing of truck deliveries. The Owner's 's approval of the Site Logistics Plan
will not be unreasonably withheld. Upon approval by the Owner , the General
Contractor shall furnish three (3) copies of the Site Logistics Plan to the
Owner .
2.3.11. Functional And Design Verification Test Procedures. The General
Contractor shall prepare and submit to the Owner for approval, at least sixty
(60) days prior to expected commencement of Project Start-up, detailed protocols
for the performance of functional and design verification testing of the
Project. The Owner's approval of such protocols will not be unreasonably
withheld or delayed.
2.4. Submission Of Reports.
2.4.1. Monthly Reports. The General Contractor shall prepare and submit to
the Owner :
(a) within ten days after the end of each calendar month and as part of
the Application for Payment provided pursuant to Section 13.1.2, a
written monthly progress report in a form generally in accordance with
Appendix D hereto, which report shall include, as a minimum,
(i) a description of the status of supplies, Subcontractors' activities
and engineering, procurement and construction progress as compared
with the Project schedule (and, if appropriate, an updated schedule),
(ii) an identification and evaluation of problem areas (including but not
limited to an evaluation of any factors which are anticipated to have
a material effect on the Project schedule or which may in the opinion
of the General Contractor require Modifications),
(iii)a report of any changes in the representations set forth in Section
18.6 which cause a material adverse effect on the General Contractor's
ability to perform its obligations under this Agreement,
(iv) a detailed description of Work accomplished and progress payments
already received as compared with planned expenditures for such Work,
and
(b) status reports on material and equipment deliveries and scheduled
deliveries. In addition, the General Contractor shall keep, and
furnish to the Owner, and/or Project Lender at Project Lender's
request, such books, records and accounts containing such information
as may be necessary to
12
<PAGE>
(i) determine that work is progressing according to schedule and
(ii) provide adequate documentary support
(A) for the Owner's future tax accounting purposes and for the purpose of
confirming that progress payments are due hereunder. The General
Contractor shall notify the Owner of all accidents which occur at the
Project Site within twenty-four (24) hours after they occur, and
thereafter provide such written reports relating thereto as may be
reasonably requested by the Owner.
2.4.2. Financial Statements. Prior to the execution and delivery of this
Agreement, the General Contractor shall have provided to the Owner its most
recent annual unaudited financial statements.
2.5. Obtaining Governmental Approvals And Private Rights-of-Way.
The General Contractor shall, to the extent reasonably required, assist the
Owner to obtain those Governmental Approvals and Private Rights-of-Way required
to be obtained by the Owner, as are set forth in Appendix C. The General
Contractor has delivered, or will deliver prior to the time necessary, evidence
satisfactory to the Owner that the General Contractor has obtained all
Governmental Approvals required to be obtained by the General Contractor, as are
set forth in Appendix C, including but not limited to permits, licenses or
certificates from The State of Texas industrial insurance authorities, Texas
employment security authorities and Texas contractors authorities.
2.6. Clean-Up Responsibility.
The General Contractor shall at all times keep the Project Site free from
accumulation of waste materials and rubbish resulting from operations and
perform daily site clean-up. Prior to the issuance of the Certificate of Final
Completion, the General Contractor shall remove from the Project Site all waste
materials and rubbish and shall perform all other clean-up services to the
reasonable satisfaction of the Owner and consistent with all Governmental
Approvals, Laws and Private Rights-of-Way. Prior to the issuance of the
Certificate of Final Completion, the General Contractor shall remove from the
Project Site all tools, construction equipment, machinery and surplus materials
belonging to the General Contractor or any Subcontractor not necessary to the
continued operation of the Facility.
2.7. Patents, Copyrights And Royalties.
The General Contractor shall pay all royalties and license fees for materials,
methods and systems incorporated in the Project. The General Contractor hereby
indemnifies, fully protects and saves the Owner harmless from, and agrees to
defend the Owner against, any and all loss, cost and damage which the Owner may
hereafter suffer or pay out by reason of any claims or suits against the Owner
arising out of claims of infringement of any domestic or foreign patent rights,
trademarks or copyrights, or misuse of confidential information, by the General
13
<PAGE>
Contractor in performing its obligations hereunder. The General Contractor and
the Owner each shall advise the other promptly in writing of any notice of such
claim or the commencement of any suit or action based upon such claim. Upon
receipt of such notice, the General Contractor shall undertake the defense of
any such suit, action or claim, and the Owner shall cooperate with the General
Contractor in such defense. The General Contractor shall have charge and
direction of the defense of such suit, action or claim, and the Owner shall have
the right to be represented therein by advisory counsel of its own selection and
at its own expense. Neither the General Contractor nor the Owner may settle or
compromise any such suit, action or claim without the prior written consent of
the other party if such settlement or compromise would obligate such other party
to make any payment or part with any property, to assume any obligation or grant
any license or other right, or to be subject to any injunction. In case the
Facility, or part thereof, is held in such suit to constitute infringement or
the use thereof is enjoined, the General Contractor shall at its own expense and
at its option either procure for the Owner the right to continue using the
Facility, or part thereof, or replace the same with a non-infringing part or
modify it so that it becomes non-infringing.
General Contractor's obligations to indemnify, defend and save harmless the
Owner hereunder shall not apply to claims of patent, trademark or copyright
infringement, or misuse of confidential information, relating to Changes or
Modifications in the Work made to the Owner's express specifications, as to
which the Owner shall indemnify, defend and save harmless General Contractor
pursuant to the procedures set forth above in this Section 2.7.
2.8. Further Assurances.
The General Contractor shall promptly execute and deliver all further
instruments and documents, and take all further action, including but not
limited to assisting the Owner in filing a notice of completion with the local
lien recording offices, that may be necessary or that the Owner may reasonably
request (and which is consistent with this Agreement) in order to effectuate the
General Contractor's obligations hereunder or the purposes or intent of this
Agreement.
2.9. Interfaces.
The General Contractor shall be responsible for the timely installation and
start-up of such connections, utilities, crossings and the like as necessary to
construct and operate the Facility, to the extent such items are not part of the
Work. These interfaces shall include but not be limited to the interconnections
of the Facility with the gas pipeline and utilities, either similar or
dissimilar, required to assure operability of the Facility. The boundaries of
such interfaces shall be as generally described in Appendix E.
2.10. Utilities And Consumables During Project Start-Up.
The Owner shall supply the utilities and consumables (except lubricants and
spare parts) necessary for Project Start-Up.
14
<PAGE>
ARTICLE 3. OWNER'S RESPONSIBILITIES
3.1. Documents and Surveys.
The Owner has furnished to the General Contractor the documents describing the
Project Site, which documents are attached as Appendix B, and will provide any
revisions or amendments thereto promptly upon receipt.
3.2. Rights-Of-Way.
The Owner shall secure, by purchase, lease, permit, easement or other license or
grant, and shall preserve and maintain, all necessary Private Rights-of-Way and
public rights of way for the Facility and for ingress and egress of the General
Contractor necessary to construct the Facility and otherwise to perform its
obligations under this Agreement.
3.3. Required Approvals.
The Owner shall secure and pay for, and shall maintain in full force and effect,
those Governmental Approvals and Private Rights-of-Way set forth in Appendix C.
3.4. Operations And Maintenance Personnel.
At least four (4) weeks in advance of Project Start-Up, the Owner and the
Greenhouse Operator shall hire personnel to be trained and to perform operations
and maintenance of the Facility during Project Start-up and Commercial
Operation.
3.5. Notice Of Defect.
If the Owner becomes aware of any fault or defect in the Facility or
nonconformance with the Contract Documents, it shall give prompt written notice
thereof to the General Contractor and thereafter the General Contractor shall
promptly correct such fault or defect and/or cure such nonconformance; provided,
however, that its failure to notify the General Contractor of discoverable
faults, defects or nonconformance pursuant to this Section 3.5 because of
failure to inspect or compare shall not relieve the General Contractor from any
duties, obligations or liabilities hereunder.
3.6. No Alcohol Or Controlled Substances On Site; Miscellaneous
Regulations.
While on the Project Site, all personnel of the Owner and its separate
contractors, shall obey the regulations and other requirements provided in
Sections 2.3.7 and 2.3.8 and all other safety requirements established by the
General Contractor. The Owner shall ensure that its personnel and those of its
invitees, agents and separate contractors, do not interfere with the performance
of the Work.
3.7. Interfaces.
The Owner shall, to the extent reasonably required to maintain the Project
schedule, assist the General Contractor in coordinating the General Contractor's
work with the work to be performed by others with respect to the Project (to the
extent the same may affect General Contractor).
15
<PAGE>
ARTICLE 4. SUBCONTRACTS
4.1. Major Specialty Consultants, Subcontractors And Equipment Suppliers.
Set forth in Appendix G and in the Scope of Work are lists of all major
equipment vendors and equipment subcontractors that the General Contractor is
considering for subcontracts in connection with the Project. The Owner have
approved each such vendor or subcontractor listed in Appendix G, and the General
Contractor shall request review of, and the Owner shall have the right to
review, any equipment vendor or subcontractor proposed to replace one of those
listed on Appendix G. The Owner and the General Contractor shall mutually agree
on any such replacement. The General Contractor may from time to time delete one
or more equipment vendors or subcontractors from said lists, and may with prior
approval of the Owner , which shall not be unreasonably withheld, add one or
more subcontractors or suppliers to said lists.
The General Contractor also shall provide to the Owner , before the date it
sends out requests for proposals to perform labor subcontracts, a list of
pre-qualified labor subcontractors proposed to be offered an opportunity to bid.
The Owner shall have the right to approve or disapprove any Subcontractor on
this list; provided, however, that the Owner's approval shall not be
unreasonably withheld.
4.2. Purchase Orders And Subcontracts.
All material purchase orders and subcontracts issued by the General Contractor
under this Agreement shall provide, in form and substance reasonably acceptable
to the Owner , that in the event this Agreement is terminated, upon tender by
the Owner or its designee of the General Contractor's performance to any
Subcontractor, such purchase order or subcontract shall continue in full force
and effect in favor of the Owner or such designee, as appropriate. Copies of all
such internal purchase orders and subcontracts issued by the General Contractor
shall be provided to the Owner upon their issuance.
4.3. Payments To Subcontractors.
Except as provided in Section 4.2, the General Contractor shall be solely
responsible for paying each Subcontractor and any other person or entity to whom
any amount is due from the General Contractor for services or supplies in
connection with the Project.
4.4. No Privity With Subcontractors.
The Owner shall have no contractual obligation to, and shall not, except in
respect of rights assigned by the General Contractor pursuant to Section 10.2,
be deemed to be in privity with any Subcontractor. The Owner's approval or
disapproval of a Subcontractor pursuant to Section 4.1 hereof shall not relieve
or release the General Contractor of any its duties, obligations or liabilities
under the terms of this Agreement.
16
<PAGE>
ARTICLE 5. CONTRACT PRICE
5.1. Contract Price.
As full consideration to the General Contractor for the full and complete
performance of the Project and all costs incurred in connection therewith, the
Owner shall pay and the General Contractor shall accept, the sum of THIRTEEN
MILLION TWO HUNDRED SIXTEEN THOUSAND AND TWO HUNDRED FIFTY Dollars
($13,216,250.00) payable pursuant to Article 13, subject to adjustment in
accordance with Article 12 (the "Contract Price").
5.2. Limitation Of Owner's Liability.
The Owner shall not under any circumstances be liable for the payment to the
General Contractor of any amounts in excess of the Contract Price, any sums due
and payable pursuant to the indemnification provisions of Article 14 hereof with
respect to claims by third parties, and any interest due and payable pursuant to
the terms of this Agreement.
ARTICLE 6. COMMENCEMENT OF THE PROJECT, PROJECT START-UP AND COMPLETION
6.1. Commencement Of Work.
The General Contractor shall commence the services required under this Agreement
promptly upon receipt of a written notice to proceed with the Work (the "Notice
to Proceed") from the Owner, which notice will not be given until such time as
the Leasehold Deed of Trust (as defined in the Loan Agreement) has been recorded
in the appropriate real estate records. At such time, the General Contractor and
the Owner shall execute and deliver to the Project Lender the Notice of
Commencement of Construction as required under applicable New York law and
Section 9.2.10 of the Loan Agreement. The General Contractor shall achieve the
Major Milestones in accordance with the Major Milestone Schedule. Time is of the
essence with respect to the Major Milestone Schedule.
6.2. Project Start-Up.
"Project Start-up" is that period (i) commencing on the date that the General
Contractor first begins the checkout of systems and equipment for readiness,
calibration, functional and design verification testing, and other initial
operations functions, and (ii) ending upon Final Completion. The General
Contractor shall provide the Owner with at least forty (40) days prior written
notice of the expected commencement of Project Start-up. At least thirty (30)
days prior to the expected commencement of Project Start-up, the General
Contractor shall submit for approval by the Owner copies of the proposed
functional and design verification testing protocols; approval of such protocols
shall not be unreasonably withheld or delayed. During Project Start-up, the
Owner and the Greenhouse Operator may each have its own or its designee's
personnel on site to observe and verify all procedures and testing activities
conducted.
6.3. Substantial Completion.
The General Contractor shall achieve Substantial Completion of the Project on or
before the "Substantial Completion Deadline", as described in Appendix G. Time
is of the essence with
17
<PAGE>
respect to such deadline. "Substantial Completion" shall mean (a) the General
Contractor has completed all other Work on the Project under this Agreement
except for the balance of Project Start-up and clean up; (b) the Owner has
acknowledged to the General Contractor that the functional and design
verification tests have been successfully completed; (c) the General Contractor
has delivered to the Owner another punch-list relating to those areas of the
Facility other than the Headhouse consisting of minor items that are not
essential to the safe and prudent operation of the Facility (collectively with
additional items identified by the Owner, the "Final Punch-List"), provided that
the condition in this clause (d) shall not be deemed satisfied if such Final
Punch-List has an aggregate cost to complete exceeding $100,000; and (e) the
Owner have delivered to the General Contractor a Certificate of Substantial
Completion.
6.4. Notice Of Substantial Completion.
When the General Contractor believes that it has achieved Substantial
Completion, it shall deliver to the Owner a notice thereof (the "Notice of
Substantial Completion").
6.5. Certificate Of Substantial Completion.
The Owner shall, within five business days following the receipt of the Notice
of Substantial Completion inspect all Work, and either (a) deliver to the
General Contractor a certificate certifying that clauses (a) through (e) of
Section 6.3 have been satisfied (the "Certificate of Substantial Completion"),
in which case Substantial Completion will have been achieved as of the date the
Owner receive such Notice of Substantial Completion from the General Contractor,
or (b) if the requirements for Substantial Completion have not been satisfied,
notify the General Contractor in writing that Substantial Completion has not
been achieved, stating in detail the reasons therefor. In the event that
Substantial Completion has not been achieved, the General Contractor shall
promptly take such action or perform such additional work as will achieve
Substantial Completion and shall issue to the Owner another Notice of
Substantial Completion pursuant to Section 6.4. Such procedure shall be repeated
as necessary until the earlier of (i) the issuance by the Owner of a Certificate
of Substantial Completion, which certificate shall not be unreasonably withheld,
or (ii) the issuance by the Owner of a Certificate of Acceptance.
6.6. Acceptance Of Project Upon Failure To Achieve Substantial Completion
Prior To The Substantial Completion Deadline.
If, on or before the date which is fifteen (15) days after the Substantial
Completion Deadline, the General Contractor has not achieved Substantial
Completion, the General Contractor may request in writing that the Owner accept
the Project by issuing a certificate of acceptance for the Project (the
"Certificate of Acceptance"). The Owner will, within five business days
following receipt of the General Contractor's request therefor, either issue a
Certificate of Acceptance (at which time "Acceptance" shall be deemed to occur)
or decline to do so. Acceptance by the Owner shall not relieve General
Contractor of its obligations to achieve Final Completion.
6.7. Acceptance Of Project Upon Failure to Achieve Substantial Completion.
If the General Contractor has not requested, or the Owner have declined to
issue, a Certificate of Acceptance pursuant to Section 6.6, the General
Contractor shall be obligated to take such action or perform such additional
work as will be necessary to achieve Substantial Completion. Such
18
<PAGE>
Acceptance by the Owner shall not relieve General Contractor of its obligation
to achieve Final Completion.
6.8. Final Completion.
The General Contractor shall achieve Final Completion of the Project on or
before the "Contract Deadline" which is twenty-five (25) days after the
Substantial Completion Deadline. Time is of the essence with respect to such
deadline. "Final Completion" shall mean (a) Substantial Completion (or
Acceptance) have been achieved; (b) Project Start-up has been completed; (c) the
items identified on the Final Punch-List have been completed by the General
Contractor and approved by the Owner ; (d) clean-up has been completed; (e) the
Owner has delivered to the General Contractor a Certificate of Final Completion.
6.9. Notice Of Final Completion.
When the General Contractor believes that it has achieved Final Completion, it
shall deliver to the Owner a notice thereof (the "Notice of Final Completion").
6.10. Certificate Of Final Completion.
The Owner shall, within five business days following the receipt of the Notice
of Final Completion inspect all Work, and either (a) deliver to the General
Contractor a certificate certifying that clauses (a) through (e) of Section 6.11
have been satisfied (the "Certificate of Final Completion") and the Owner, and
the General Contractor shall further execute and deliver to the Project Lender
the Affidavit of Completion in compliance with Texas law and Section 9.3.2 of
the Loan Agreement and take such further action as is required under Texas law
to identify Final Completion, in which case Final Completion will have been
achieved as of the date the Owner receive such Notice of Final Completion from
the General Contractor, or (b) if the requirements for Final Completion have not
been satisfied, notify the General Contractor in writing that Final Completion
has not been achieved, stating in detail the reasons therefor. In the event that
Final Completion has not been achieved, the General Contractor shall promptly
take such action or perform such additional work as will achieve Final
Completion and shall issue to the Owner another Notice of Final Completion
pursuant to Section 6.9. Such procedure shall be repeated as necessary until the
issuance by the Owner of a Certificate of Final Completion, which certificate
shall not be unreasonably withheld.
ARTICLE 7. OWNER'S RIGHT TO PLACE THE FACILITY IN COMMERCIAL OPERATION;
CARE, CUSTODY AND CONTROL
7.1. Owner's Right.
The parties currently contemplate that the Facility shall be occupied and placed
in Commercial Operation upon Substantial Completion. However, at any time after
the Substantial Completion Deadline, the Owner or the Greenhouse Operator may
occupy any portion of the Facility which is complete. Moreover, at any time on
or after August 31, 1998, the Owner shall have the right to place the Facility
in Commercial Operation, whether or not the General Contractor has achieved
Substantial Completion or Acceptance. After the Owner shall have placed the
Facility in Commercial Operation, the Owner shall so notify the General
Contractor, and the Greenhouse Operator shall thereafter operate the Facility.
The placing of the Facility in Commercial
19
<PAGE>
Operation by the Owner shall not excuse the General Contractor from completing
all remaining Work on the Project nor constitute a waiver of any of the General
Contractor's obligations under this Agreement. In the event the Owner places the
Facility in Commercial Operation prior to Substantial Completion or Acceptance,
the Owner shall afford the General Contractor reasonable access to the Facility
to complete all remaining Work on the Project.
7.2. Project Revenues.
The General Contractor shall not be entitled to any revenues associated with the
sale of any fruit, vegetables, flowers or other produce from the Greenhouse.
7.3. Care, Custody And Control.
Care, custody and control of the Facility shall pass from the General Contractor
to the Owner upon the issuance of the Certificate of Substantial Completion or
the Certificate of Acceptance, or upon the Owner's election to place the
Facility in Commercial Operation, as the case may be. The Owner shall assume the
risk of physical loss or damage to the Work resulting from the action of the
Owner or its employees from and after the issuance of the Certificate of
Substantial Completion or the Certificate of Acceptance or the placing of the
Facility into Commercial Operation, as the case may be. The General Contractor
shall be obligated to replace, repair or reconstruct any of the Work which is
damaged, destroyed or lost prior to the passage of care, custody and control of
the Facility to the Owner.
ARTICLE 8. SCHEDULE GUARANTEES
8.1 Subbstantial Completion.
The Contractor guarantees that Substantial Completion shall be achieved on or
before the Substantial Completion Deadline, as such date may be modified in
accordance with Article 12 hereof.
ARTICLE 9. LIMITATION OF LIABILITY
9.1. Limitation Of Liability.
9.1.1. Limitation. The total aggregate liability of the General Contractor
with respect to its obligations hereunder, including but not limited to warranty
obligations and its obligation to physically and mechanically complete the
Facility, shall be limited to an amount equal to the Contract Price. The
foregoing limitations shall not apply to any amounts payable to, or arising out
of or relating to any claim made by, any person other than the Owner; it being
the express intention of the parties to limit the liability of the General
Contractor only with respect to claims arising in connection with its
performance or non-performance of this Agreement (except its obligations under
Section 14.1.1), and not with respect to claims arising in connection with
damage or injury to third parties or the property of third parties including
those under Section 14.1.1.
9.1.2. Consequential Damages. No party shall be liable to any other party
for indirect, consequential, incidental, special or punitive damages, including
but not limited to damages due to delay in or loss of use of profits or
products, lost income, or obligations of the other
20
<PAGE>
to third parties, except, in the case of the General Contractor, to the extent
such damages may be deemed included within the liquidated damages payable
pursuant to Sections 8.2 and 8.3 hereof.
ARTICLE 10. WARRANTIES AND GUARANTEES
10.1. Materials And Workmanship.
The General Contractor warrants to the Owner that all machinery, equipment,
materials and other items furnished under this Agreement will be new and of good
quality, free from improper workmanship and defective materials and shall
conform to the requirements of this Agreement. As the Owner's sole remedy for
any breach of this warranty, the General Contractor agrees to correct within ten
(10) days after receipt of notice from the the Owner, and without additional
compensation, any Work performed hereunder that, at any time for a period of one
year after the earlier of Final Completion or the commencement of Commercial
Operation, proves to be improper or defective in material or workmanship or not
in conformance with the requirements of this Agreement. If any machinery,
equipment, materials or other items furnished under this Agreement are replaced
during the last six months of the original warranty relating thereto, the
warranty for such items shall be deemed extended until six months after the date
of replacement. In addition to correcting the improper, nonconforming or
defective Work itself, the General Contractor shall bear all costs and expenses
associated with correcting such warranted Work including without limitation
necessary trouble shooting, disassembly, transportation, reassembly and
retesting, as well as reworking, repair or replacement of such Work, and
disassembly and reassembly of adjacent work when necessary to give access to the
improper, defective or nonconforming Work. The General Contractor's warranty
shall not apply to damage arising from the Greenhouse Operator's failure to
comply with prudent operating and maintenance practices in the commercial
greenhouse industry. For the purposes of this Section 10.1, improper workmanship
and defective materials shall be deemed to include, but shall not be limited to,
the following: (i) faulty or defective materials, and defective, careless or
unskilled execution of the Work; (ii) damage by exposure to foreseeable weather,
windborne water or surface drainage; (iii) degradation such as uncontrolled
cracking or spatting of concrete, unit masonry, cast and natural stone,
millwork, plaster, glass and applied finishes such as paint and special
coatings; (iv) "pot-holing" of pavement; (v) mechanical or electrical equipment
which does not operate in a satisfactory, quiet and efficient manner as
determined by the Owner in its reasonable discretion, or which does not perform
the functions specified in the Scope of Work or Specifications; or (vi) unusual
injury or deterioration of the Work when in normal use by the Greenhouse
Operator.
10.2. Subcontractor Warranties.
The General Contractor shall, for the protection of the Owner and its successors
and assigns, obtain from all Subcontractors guarantees and warranties with
respect to machinery, equipment, materials and other items used and installed
hereunder, which guarantees and warranties shall not be amended, modified or
otherwise discharged without the prior written consent of the Owner . Such
guarantees and warranties shall be in accordance with reasonable commercial
greenhouse industry standards, shall be assignable to the Owner, shall cover a
period of not less than one year from the earlier of Final Completion or the
commencement of Commercial Operation, and shall be made available to the Owner
to the full extent of the terms thereof after assignment. The General Contractor
shall enforce such guarantees and warranties to the fullest extent thereof on
21
<PAGE>
behalf of the Owner until such time as they are assigned to the Owner. Upon the
earlier to occur of (i) issuance of the Certificate of Final Completion, or (ii)
termination of this Agreement pursuant to Article 15, the General Contractor
shall assign to the Owner all the General Contractor's rights under
Subcontractor guarantees and warranties and shall deliver to the Owner copies of
all contracts providing for such guarantees and warranties.
10.3. Engineering And Design.
The General Contractor warrants and guarantees that it shall perform all of its
engineering and design services in accordance with sound engineering practice,
Governmental Approvals and applicable Laws and that, when complete, the Project
will be free of all deficiencies caused by errors or omissions in engineering or
design (other than errors or omissions in the engineering or design of the
growing systems specified by the Owner in Schedule 1). For a period of one year
from the earlier of Final Completion or the commencement of Commercial
Operation, the General Contractor shall, as the Owner's sole remedy for breach
of this warranty, at its own expense correct any such efforts and omissions and
resulting deficiencies in the Project as soon as reasonably possible after
receipt of notice from the Owner specifying such deficiencies.
10.4. No Liens.
The General Contractor warrants and guarantees that title to all work,
materials, supplies and equipment provided hereunder will pass to the Owner upon
payment by the Owner to the General Contractor therefor free and clear of all
liens, claims, security interests, charges and any other encumbrances or
preferential arrangements, including without limitation the lien or retained
security title of a conditional vendor ("Liens"), and that none of such work,
materials, supplies or equipment will be acquired by the General Contractor
subject to any agreement under which a Lien is retained by any person or entity
except as otherwise provided by Law.
10.5. Limitation Of Warranties.
EXCEPT AS PROVIDED HEREIN, THERE ARE NO WARRANTIES OR GUARANTEES, EXPRESS OR
IMPLIED, RELATING TO THE GENERAL CONTRACTOR'S PERFORMANCE HEREUNDER, AND THE
GENERAL CONTRACTOR DISCLAIMS ANY IMPLIED WARRANTIES OR WARRANTIES IMPOSED BY LAW
(OTHER THAN WARRANTIES OF TITLE).
ARTICLE 11. FORCE MAJEURE
11.1. Force Majeure Events.
As used in this Agreement, a "Force Majeure Event" means any act or event that
prevents the performance of the Owner or the General Contractor under this
Agreement or the compliance with any conditions required by the other party
under this Agreement if such act or event is beyond the reasonable control of
the party relying thereon as justification for such nonperformance or
noncompliance and such party has been unable to overcome such act or event by
the exercise of due diligence, including but not limited to (but subject to the
foregoing) flood, drought, unusually severe weather, earthquake, storm, fire,
explosion, sabotage or threat of sabotage of the Facility, the Greenhouse or the
pipeline, pestilence, epidemic, lightning and other natural catastrophes; war,
riot, civil disturbance or disobedience, action or inaction of legislative,
22
<PAGE>
judicial, or regulatory agencies, or other proper authority, which may conflict
with the terms of this Agreement; failure, threat of failure or sabotage of
equipment supplied by Subcontractors for temporary services during performance
of the Work which has been maintained in accordance with good engineering and
operating practices applicable thereto; or loss or shortage of utilities.
Economic hardship and strikes, work stoppages or labor disturbances are
explicitly excluded as Force Majeure Events.
11.2. Limitation Of Default.
No party shall be considered in default in the performance of any of the
agreements contained in this Agreement, except for the Owner's or the General
Contractor's obligations to pay money when and to the extent the failure of
performance shall be caused by a Force Majeure Event.
11.3. Excused Performance.
If any party is rendered wholly or partly unable to perform its obligations
under this Agreement because of a Force Majeure Event, that party will be
excused from whatever performance is affected by the Force Majeure Event to the
extent so affected; provided that:
(a) the nonperforming party, within five (5) days after the occurrence of
the Force Majeure Event, gives the other parties written notice
describing the particulars of such occurrence, including an estimation
of its expected duration and probable impact on the performance of the
affected party's obligations hereunder, and continues to furnish
timely regular reports with respect thereto during the continuation of
and upon the termination of the Force Majeure Event;
(b) the suspension of performance is of no greater scope and of no longer
duration than is reasonably required by the Force Majeure Event;
(c) the obligations of any party which arose before the occurrence causing
the suspension of performance and the performance of which is not
prevented by the occurrence, shall not be excused as a result of such
occurrence; and
(d) the nonperforming party uses its best efforts to remedy its inability
to perform and mitigate the effect of such event and resumes its
performance at the earliest practical time after cessation of such
occurrence.
11.4. Right To Terminate For Force Majeure.
If a suspension of performance by any party as a result of a Force Majeure Event
exceeds sixty (60) days, the parties whose performance is unaffected by the
Force Majeure Event may terminate this Agreement pursuant and subject to the
terms of Section 15.5 hereof; provided, however that the General Contractor may
not terminate this Agreement pursuant to Section 15.5 hereof if and to the
extent that a Change relating to such Force Majeure Event shall have been
approved by the Owner and the General Contractor pursuant to Section 12.2.2
hereof.
23
<PAGE>
ARTICLE 12. CHANGES IN THE PROJECT AND SUSPENSION
12.1. Changes.
At any time and from time to time prior to the issuance of the Certificate of
Final Completion, the Owner, without invalidating or amending this Agreement,
may order changes in the Project within the general scope of this Agreement
consisting of additions, deletions or other revisions (such changes, and the
changes permitted under Section 12.2, being referred to collectively herein as
"Changes"), in which event the Contract Price, the Substantial Completion
Deadline, the Contract Deadline, and the Major Milestone Schedule set forth in
Appendix H to this Agreement shall be adjusted accordingly, if necessary,
pursuant to Section 12.1.1. No Change will be effected without an authorized
Change Order (as defined in Section 12.1.2).
12.1.1. Procedure For Changes. Except as provided in Section 12.2, only the
Owner may initiate Changes. At no cost to the Owner, the General Contractor
shall promptly review the Owner's proposal and provide the Owner , within five
(5) days thereafter, with notice in writing of the effect, if any, such proposed
Change would have on the Contract Price, the Substantial Completion Deadline,
the Contract Deadline, and the Major Milestone Schedule. Such notice also shall
include an analysis demonstrating (i) the time impact, if any, of the proposed
Change on the critical path items yet to be completed (including the influence
of such Change on the current dates scheduled for Substantial Completion and
Final Completion) and (ii) how the General Contractor proposes to incorporate
the time impact on non-critical path items into the schedule without schedule
alleviation. If, in the General Contractor's opinion, Project schedule and/or
performance may be maintained or adjustments thereof minimized only by
increasing the Contract Price, the General Contractor shall, in such notice, set
forth possible trade-offs among or between Project cost, schedule and
performance so that the Owner may make an informed choice among such
alternatives in deciding whether to issue a Change Order. The Owner shall
promptly review the information provided by the General Contractor pursuant to
this Section 12.1.1 and thereupon the Owner may issue a Change Order approving
and authorizing such proposed Change, in which event the cost, scheduling and
performance alternative included in the General Contractor's notice described
above and chosen by the Owner shall be binding on the General Contractor. The
General Contractor shall use all reasonable efforts to minimize any effect
adverse to the Owner of any Change on Project cost, scheduling and performance.
The Change Order issued by the Owner will authorize an extension in the
Substantial Completion Deadline and/or the Contract Deadline only if the General
Contractor establishes, to the Owner's 's reasonable satisfaction, that the
nature of the proposed Change would necessitate such extension. All Changes,
whether initiated by the Owner or the General Contractor under Section 12.2,
shall be authorized by a Change Order, and shall be performed pursuant to this
Agreement. Any change in the Project necessitated by any change in Laws,
Governmental Approvals or Private Rights-of-Way after the effective date hereof
shall be treated as a Change pursuant to this Article 12 unless the change
necessitated comes within the definition of Modification, in which case it shall
be treated as a Modification pursuant to this Article 12.
12.1.2. Change Orders. A "Change Order" is a written order to the General
Contractor signed by a duly authorized representative of the Owner authorizing a
Change in the Project. Upon execution and delivery of this Agreement, the Owner
shall deliver to the General Contractor written notice signed by the Owner ,
stating which officers or representatives are authorized to
24
<PAGE>
approve Change Orders. If and when, after execution and delivery of this
Agreement, another officer is selected by either the Owner to approve Change
Orders, such party shall deliver to the General Contractor another notice signed
by such party so authorizing such new officer or representative to approve
Change Orders. For the purpose of determining who has authority to approve
Change Orders, the General Contractor shall be entitled to rely on the latest
notice delivered by the Owner pursuant to this Section 12.1.2 and received by
the General Contractor.
12.1.3. No Changes Due To Contractor Error. Notwithstanding anything in
this Article 12 to the contrary, no Changes shall be issued to correct errors or
omissions on the part of the General Contractor which result in construction not
in accordance with the Contract Documents as they existed at the time of such
error or omission.
12.2. Other Changes.
12.2.1. Changes In Laws, Approvals Or Rights-Of-Way. In the event and to
the extent a change in Laws, Governmental Approvals or Private Rights-of-Way
necessitates a change in the Work, the General Contractor may (and, if requested
by the Owner shall submit a written request for a Change to the Owner, such
Change to be incorporated into the Project upon approval by the Owner , which
approval shall not be unreasonably withheld, by issuance of a Change Order
pursuant to Section 12.1.1.
12.2.2. Changes Due To Delays In Interfaces Or Force Majeure Events. In the
event and to the extent that (i) completion of interfaces or interconnections
with third parties are delayed due to causes beyond the control of the General
Contractor, and General Contractor's performance is adversely affected thereby,
or (ii) a Force Majeure Event prevents the General Contractor's performance
hereunder, and all of the requirements of Section 11.3 (a) through (d) are
satisfied, the General Contractor shall be entitled to (and if requested by the
Ownershall request) a Change pursuant to, and to the extent authorized by, this
Section 12.2.2. In such event, the Contract Price, the Substantial Completion
Deadline, the Contract Deadline, and the Major Milestone Schedule set forth in
Appendix H to this Agreement shall be adjusted to the extent of the actual and
verifiable effects, if any, which General Contractor demonstrates to the
reasonable satisfaction of the Owner that such delay or Force Majeure Event has
had upon General Contractor's performance of its obligations hereunder. Such
Change shall be incorporated into the Project by issuance of a Change Order
pursuant to Section 12.1.1.
12.3. Modifications.
Without invalidating or amending this Agreement, the Owner may order and the
General Contractor may propose, subject to approval by the Owner , modifications
in the Project within the general scope, and consistent with the intent, of the
Contract Documents (such modifications being referred to herein as
"Modifications") consisting of additions, deletions or other revisions, so long
as such Modifications do not adversely affect the Contract Price, the
Substantial Completion Deadline, and the Contract Deadline.
25
<PAGE>
12.4. Contract Price Change.
A Contract Price increase, if any, resulting from a Change in the Project shall
be determined in one or more of the following ways and paid by the Owner
pursuant to the schedule of Progress Payments adjusted accordingly:
12.4.1. By the acceptance by the Owner of a lump sum proposed by the
General Contractor properly itemized and supported by sufficient substantiating
data to permit evaluation; or
12.4.2. If the method set forth in Section 12.4.1 is not agreed upon after
good faith negotiation by the parties, the General Contractor shall provide the
Owner with such purchase orders, invoices and other documents and records as may
enable the Owner to verify, to their reasonable satisfaction, the cost to the
General Contractor of effecting such Change. All equipment, materials and other
items required as a result of such Change shall be purchased by the General
Contractor at competitive market prices.
12.5. Continued Performance Pending Resolution Of Disputes.
Notwithstanding a dispute regarding the adequacy of a Contract Price increase or
schedule adjustment for a proposed Change, or whether a Modification should be a
Change because it affects the Contract Price or schedule, the General Contractor
shall proceed with the performance of such Change or Modification.
12.6. Suspension.
The Owner may, by written notice to the General Contractor, suspend at any time
the performance of all or any portion of the Work to be performed under this
Agreement so long as (a) the Substantial Completion Deadline and the Contract
Deadline are extended an amount of time equal to the actual and verifiable
impact on the Project schedule caused by such suspension and (b) the suspension
of any material part on the Project schedule caused by such suspension and (b)
the suspension of any material part of the Work shall be for a period not to
exceed sixty (60) days. Suspension of the Work under this Agreement may be
accomplished only by the written notice described in this Section 12.6.
12.7. Suspension Process.
Upon receipt of a notice given pursuant to Section 12.6, the General Contractor
shall, unless the notice requires otherwise:
(a) immediately discontinue work on the date and to the extent specified
in such notice;
(b) place no further orders or subcontracts for equipment, material,
services, or other items with respect to suspended work other than to
the extent required in such notice and to the extent required to
protect the Work;
26
<PAGE>
(c) promptly make every reasonable effort to obtain suspension upon terms
satisfactory to the Owner of all orders, subcontracts and rental
agreements to the extent they relate to performance of suspended work;
(d) continue to protect and maintain the work performed including those
portions on which work has been suspended; and
(e) take any other reasonable steps to minimize costs associated with such
suspension.
12.8. Resumption Of Work.
Upon receipt of notice from the Owner to resume suspended work, the General
Contractor shall immediately resume performance under this Agreement to the
extent required in such notice.
12.9. Contract Changes Due To Suspension.
If the General Contractor believes that any suspension or resumption of
suspended Work justifies a Change in the Contract Price, the Substantial
Completion Deadline, the Contract Deadline or any other affected obligations of
the General Contractor hereunder, the General Contractor must, within 30 days
after receipt of the notice of suspension or resumption as the case may be,
submit to the Owner a written statement setting forth the justification for such
a Change in reasonable detail. If a Change is justified, the Owner shall issue a
Change Order under which the Contract Price, the Substantial Completion
Deadline, the Contract Deadline and any other affected obligations of the
General Contractor under this Agreement shall be equitably adjusted to
compensate for the effect of the suspension.
12.10. Termination Due To Suspension.
If a suspension by the Owner of all or a material portion of the Work exceeds
sixty (60) days the General Contractor may terminate this Agreement in the
manner set forth in Section 15.4 hereof.
ARTICLE 13. PAYMENTS TO GENERAL CONTRACTOR
13.1. Initial Payment.
Promptly after issuance of the Notice to Proceed, the General Contractor shall
submit to the Owner an initial payment request supported by an invoice
reflecting an amount of which has been determined pursuant to the Application
for Payment, the form of which is attached hereto as Appendix I.
13.2. Monthly Progress Payments.
Progress payments shall be made by the Owner to the General Contractor according
to the following procedure:
13.2.1. On or before the tenth day of each calendar month beginning with
the first month following receipt of the initial payment under Section 13.1, the
General Contractor shall submit to the Owner an "Application for Payment," which
shall include (i) the monthly progress report prepared pursuant to Section 2.4.1
(a), and (ii) an invoice reflecting an amount which has
27
<PAGE>
been determined pursuant to the Application for Payment, the form of which is
attached as Appendix I, which amount, together with all previous amounts paid by
the Owner to the General Contractor, shall reflect work on the Project actually
accomplished through the preceding calendar month. The General Contractor agrees
that it will not include in any Application for Payment a bill for materials or
equipment until such materials or equipment have been delivered to the Project
Site. Similarly, the General Contractor will not include in such Application for
Payment a bill for labor until such labor has been performed.
13.2.2. The Owner shall pay to the General Contractor, within ten (10) days
after receipt of the Application for Payment, the amount determined pursuant to
Section 13.2.1 for Work performed during the month prior to the month in which
the Application for Payment is tendered, less 10% retainage to be withheld by
the Project Lender from payments to the General Contractor, or subcontractors
(all such monthly amounts paid by the Owner being herein referred to as
"Progress Payments"), subject to adjustment as provided in Section 13.2.3.
"Retainage" shall be ten percent (10%) of the amount of each monthly payment or
other payment to be made by the General Contractor pursuant to Sections 13.1 and
13.2.
13.2.3. If the Owner disagrees with the General Contractor's estimate of
actual Project progress (as reflected in an Application for Payment) and the
cumulative total of all amounts in dispute (reflecting the difference between
the General Contractor's and the Owner's estimates of actual progress) does not
exceed $50,000.00, the Owner shall pay the General Contractor such disputed
amount pursuant to Section 13.2.2 as part of the pertinent Progress Payment
within ten (10) days after receipt of the Application for Payment and any
disputed amounts in excess of the cumulative total of $50,000 may be withheld
from the General Contractor by the Owner, provided, however, that amounts
withheld by the Owner pursuant to this Section 13.2.3 shall be paid to the
General Contractor when the General Contractor has demonstrated, in an
Application for Payment completed to the reasonable satisfaction of the Owner ,
that actual progress requiring such payment has been achieved.
13.2.4. If the Owner fails to make its Progress Payments hereunder on or
before the date due, or if the Owner withholds payment of any amount pursuant to
Section 13.2.3, and it is subsequently determined that such withholding was not
justified hereunder, interest on any unpaid amount shall accrue from the due
date at the lesser of (a) the Base Rate plus two percent (2%) per annum or (b)
the maximum permitted legal interest rate at the time prevailing and applicable
thereto.
13.2.5. The Owner shall have no obligation to make any payment to the
General Contractor while the General Contractor is in material breach of this
Agreement. In addition, the Owner may withhold payment to the General Contractor
to the extent reasonably necessary to protect the Owner from loss due to: (i)
defective Work not remedied; (ii) claims for payment or liens asserted by the
General Contractor or any Subcontractor; (iii) the failure of the General
Contractor to promptly pay any Subcontractor; (iv) damage to the person or
property of any separate contractor, agent, invitee of the Owner or (v)
reasonable doubt on the Owner's part that the Project can be completed for the
balance of the Contract Price yet unpaid.
28
<PAGE>
13.2.6. As promptly as possible after the Notice to Proceed, the General
Contractor shall send the Owner a notice specifying all Facility equipment to be
ordered from outside vendors, indicating the time such equipment is to be
ordered and specifying the General Contractor's cost thereof. The Project Lender
shall, upon the Owner's and Project Lender's approval of the amounts and items
specified, set aside or otherwise designate for application to such equipment
purchases sufficient funds to pay for the Facility equipment described in the
notice, and shall send the Owner, and the General Contractor written
confirmation of the same.
13.3. Waiver And Release Of Liens.
The General Contractor shall protect and keep free and clear from Liens the land
upon which the Facility is to be constructed, and any and all interests and
estates therein, and all improvements and materials arising out of or in
connection with performance by the General Contractor, or Subcontractor,
including services or furnishing of any materials hereunder. The General
Contractor shall furnish to the Owner, and shall require each and every
Subcontractor engaged to supply services or materials in an amount greater than
$50,000 (or any lesser amount if requested by the Owner) in connection with the
Project to furnish to the General Contractor for delivery to the Owner, upon the
making of the initial payment pursuant to Section 13.1 and at the time of
submission of each Application for Payment a recordable partial waiver of its
right to assert Liens on the Project, such waiver to be substantially in the
form of Appendix J-1 and as a precondition to the making of the Final Payment, a
recordable waiver of its right to assert Liens on the Project, such waiver to be
in substantially the form of Appendix J-2. Effectiveness of such waivers shall
be conditioned upon General Contractor's receipt of payment from the Owner of
payments then due to the General Contractor under this Agreement. If the General
Contractor fails to furnish, or cause any Subcontractor to furnish, a legally
effective waiver or fails to have any Lien released or discharged forthwith, in
lieu thereof the General Contractor shall furnish a bond or other collateral
satisfactory to the Owner to indemnify the Owner against any loss resulting from
such Lien. In addition, until such release, discharge or bonding, the Owner may
withhold from any payment due the General Contractor an amount sufficient to
discharge any or all such Liens or claims.
13.4. Payment Upon Completion.
Upon delivery of the Certificate of Final Completion, recordation of the
Affidavit of Completion and satisfaction of other statutory requirements in
accordance with 9.3.2 of the Loan Agreement, and the passing of at least 30 days
since the date of Final Completion, the Owner shall pay the unpaid portion of
the Contract Price due to the General Contractor (including the amount, if any,
of equal cost savings represented by the difference between the Contract Price
and the amount previously paid to the General Contractor).
13.5. Payment Or Use Not Acceptance.
No payment made or any partial or entire use of the Facility by the Owner shall
constitute an acceptance of any of the Work not in accordance with this
Agreement and the Scope of Work.
13.6. Waiver By Owner.
The making of the Final Payment shall constitute a waiver of all claims by the
Owner except:
29
<PAGE>
(a) those arising from unsettled liens, security interests or other
encumbrances;
(b) those arising from any warranties, guarantees and indemnities provided
hereunder; and
(c) those arising from Final Punch-List and clean-up items.
13.7. Waiver By General Contractor.
Acceptance of the Final Payment shall constitute a waiver of all claims by the
General Contractor except for unresolved claims for Changes previously asserted
in writing by the General Contractor.
13.8. General Contractor's Performance With Respect To Applications For
Payment.
The General Contractor is responsible to prepare and submit, in appropriate form
and order and in a timely manner, all the necessary forms and supporting
documentation (if any), on behalf of the General Contractor, to the Owner
required in this Article 13 or by the Project Lender under the Loan Agreement to
ensure the timely payment of all amounts owed to the General Contractor, and all
subcontractors, vendors, or suppliers related to the construction of the
Project.
ARTICLE 14. INDEMNITY, INSURANCE AND WAIVER OF SUBROGATION
14.1. Indemnity.
14.1.1. Indemnity By General Contractor. The General Contractor hereby
indemnifies and holds harmless the Owner and their respective successors and
assigns and their respective shareholders, directors, officers and employees
(each being hereinafter referred to as an "Indemnified Party") from and against
any and all loss, cost (including reasonable attorneys' fees), damage, injury,
liability, claims, demands, interest and causes of action (a) for bodily injury
or property damage that may arise from the General Contractor's operations under
this Agreement, except to the extent arising from the negligence or misconduct
of such Indemnified Party, (b) because of any violation of Law to be complied
with by the General Contractor hereunder, (c) in respect of any taxes levied on
the General Contractor or in respect of the General Contractor's net income or
(d) in respect to any demands or Liens by Subcontractors for nonpayment of
amounts due as a result of furnishing materials or work to the General
Contractor which are payable by the General Contractor for Work on the Project
performed pursuant to this Agreement.
14.1.2. Indemnity By Owner. The Owner hereby indemnifies and holds harmless
the General Contractor, and their respective shareholders, directors, officers
and employees (each being hereinafter referred to as an "Indemnified Party")
from and against any and all loss, cost (including reasonable attorneys' fees),
damage, injury, liability, claims, demands, interest and causes of action (a)
for bodily injury or property damage to the extent such may arise from the
negligence or misconduct of the Owner in connection herewith, (b) because of
violation of Law to be complied with by the Owner hereunder, or (c) or in
respect of the Owner's net income.
14.1.3. Procedure. When required to indemnify an Indemnified Party in
accordance with this Agreement, the indemnifying party shall assume on behalf of
such party, and conduct with
30
<PAGE>
due diligence and in good faith, the defense of any such suit against such
party, whether or not the indemnifying party be joined therein; provided,
however, that without relieving the indemnifying party of its obligations
hereunder, the Indemnified Party may elect to participate, at its expense, in
the defense of any such suit.
14.2. General Contractor's Insurance.
At its own expense, the General Contractor shall secure and maintain during the
term of this Agreement the following insurance with the coverage amounts
indicated for occurrences during and arising out of the General Contractor's
performance of this Agreement. Such insurance shall be placed with responsible
and reputable insurance companies authorized to do business in the State of
Texas with a Best's rating of A- or better and shall be effective as of at least
thirty (30) days prior to the date of the Notice to Proceed and maintained until
Final Completion, except Products Liability/Completed Operations coverage, which
shall be maintained for three years beyond Final Completion. Deductible amounts
shall be the responsibility of the General Contractor.
Type Coverage/Amount
---- ---------------
Workers' Compensation Insurance As required by the State
including occupational Texas
disease coverage
Employer's Liability $500,000 each accident
$500,000 each employee-disease
$500,000 policy limit-disease
Comprehensive General Liability, $1,000,000 per occurrence
with the following coverages:
Premises--Operations; Independent
Contractors and Subcontractors
Protective; Products/Completed
Operations; Broad Form Property
Damage; Contractual Liability
(Broad Form) Including Third Party
Coverage; Explosion, Collapse,
Underground Hazard, and Personal
Injury
31
<PAGE>
Type Coverage/Amount
---- ---------------
Comprehensive Automobile $1,000,000 combined single
Liability, including coverage limit, per occurrence
for all owned, hired and non-
owned vehicles
Excess Liability $5,000,000 per occurrence
14.2.1. Evidence Of Coverage. The General Contractor shall provide
certificates of insurance to the Owner and the Project Lender evidencing all
insurance policies required pursuant to this Section 14.2. Owner shall also
reserve the right to be provided a copy of the entire policy upon request. The
certificates evidencing Comprehensive General Liability, Comprehensive
Automobile Liability, Excess Liability, and All Risk Property insurance shall
each certify that:
14.2.1.1. During the General Contractor's performance under this Agreement,
the Owner and the Project Lender shall be named as additional insureds and loss
payees under such policies (without any representation or warranty by or
obligation upon such entities) as their interests may appear for occurrences
during and arising out of the General Contractor's performance of this
Agreement;
14.2.1.2. Such insurance is primary insurance with respect to the interests
of the Owner and the Project Lender, and any other insurance maintained by them
is excess and not contributory with this insurance; and
14.2.1.3. Such policies provide that (a) the inclusion of more than one
corporation, person, organization, firm or entity as insured thereunder shall
not in any way affect the rights of any such corporation, person, organization,
firm or entity as respects any claim, demand, suit or judgment made, brought or
recovered, by or in favor of any other insured, or by or in favor of any
employee of such other insured, and (b) each corporation, person, organization,
firm, or entity is protected thereby in the same manner as though a separate
policy had been issued to each, but nothing therein shall operate to increase
the insurance company's liability as set forth elsewhere in the policy beyond
the amount for which the insurance company would have been liable if only one
person or interest had been named as insured.
14.2.2. Contents Of Certificates. The certificates evidencing all insurance
provided under this Section 14.2 shall each certify that (a) under such policy
there will be no recourse against the Owner or any of the banks comprising the
Project Lender or any of their assignees for payment of a premium and (b) such
policy may not be canceled or materially altered by the insurance company
without giving 60 days' prior written notice of cancellation or alteration to
the Owner and the Project Lender.
14.3. Subcontractor Insurance.
The General Contractor shall require all Subcontractors to obtain, maintain and
keep in force, during the time in which they are engaged in performing services
to be furnished by the General Contractor hereunder, adequate coverage in
accordance with the General Contractor's normal practice or the General
Contractor shall maintain such coverage under its own insurance policies.
32
<PAGE>
14.4. General Contractor's Insurance.
General Contractor shall procure at its own expense and maintain in full force
and effect from and after the issuance of the Notice to Proceed, with
responsible and reputable insurance companies authorized to do business in the
State of Texas with a Best's rating of A- or better, builder's risk insurance as
described below and worker' compensation, general liability and automobile
liability insurance in amounts specified in Section 14.2. The General Contractor
shall provide certificates of insurance to the Owner evidencing all insurance
policies required under this Section 14.6.
Builder's Risk
Facility:
Real and Personal Property Replacement Cost
Deductibles: $ 25,000
The certificate evidencing the builder's risk insurance shall certify that the
policy (a) provides for all losses to be paid directly to the Owner, and (b)
shall name the General Contractor and each of the banks comprising the Project
Lender as additional insureds thereunder (without any representation or warranty
by or obligation upon such entities) as their interests may appear. As to the
remaining coverages, with the exception of workers' compensation, and only as to
matters within the scope of the General Contractor's indemnity under Section
14.1.1, such policies (a) shall name the Owner as an additional insured, and (b)
shall be primary and not excess to or contributing with any insurance maintained
by the Owner.
14.5. Property Insurance Loss Adjustment.
Any insured loss shall be adjusted with the Owner, and the General Contractor
and made payable to the Owner, and the General Contractor as their interests may
appear, subject to any applicable mortgagee clause.
14.6. No Effect On Liability.
The requirement that the General Contractor, Subcontractors or the Owner furnish
certain minimum insurance coverages is not to be interpreted as in any way
limiting the liability of the General Contractor or the Owner as the case may
be, nor does either party, by furnishing or requiring evidence of certain
minimum insurance, assume, or intend to assume, any liability that it would not
otherwise have in the absence of such a requirement.
14.7. Owner's Election Regarding All Risk Insurance.
The Owner may elect, at its complete and sole discretion, to provide the above
described All Risk Insurance program. If the Owner elects to provide such
insurance coverage a Change Order will be issued in accordance with Section 12.1
hereof.
33
<PAGE>
14.8. Waiver Of Subrogation.
All insurance policies supplied by either party to this Agreement shall include
a waiver of any right of subrogation of the insurers thereunder against the
other party and any of the banks comprising the Project Lender, and of any right
of the insurers to any set-off or counterclaim or any other deduction, whether
by attachment or otherwise, in respect of any liability of any such person
insured under such policy.
ARTICLE 15. TERMINATION
15.1. Termination By Owner For Cause.
In the event:
(a) at any time prior to issuance of the Certificate of Final Completion,
the General Contractor shall abandon or, except as permitted in
Sections 12.6 and 12.7, otherwise cease efforts to achieve Final
Completion in a diligent manner; or
(b) (i) the General Contractor fails to achieve a Major Milestone within
thirty (30) days after the corresponding milestone date indicated in
Appendix H, or
(ii) at any time prior to the issuance of the Certificate of Final
Completion an unexcused act or omission of the General Contractor has
materially affected its ability to complete the Project pursuant to
this Agreement by the Contract Deadline and such unexcused act or
omission persists for a period of thirty (30) days, and in the case of
either (b)(i) or b(ii), the General Contractor fails to cure such
default within fifteen (15) days after receiving notice thereof from
the Owner (unless such default is of a nature that it cannot be cured
within such fifteen (15) day period, in which case the General
Contractor shall be in compliance herewith if it presents a plan for
such cure which is reasonably acceptable to the Owner, commences such
cure within such fifteen (15) day period, and diligently pursues such
cure to completion within sixty (60) days after the aforestated notice
from the Owner or such longer period as the Owner may accept in its
sole discretion); or
(c) all items on the Final Punch-List and all clean-up have not been
completed by the Contract Deadline;
then the Owner may, without prejudice to any legal or equitable remedy it may
have, terminate this Agreement, take possession of the Project Site and complete
the Project by whatever reasonable method it may deem expedient, and the General
Contractor shall be liable to the Owner for any and all cost or expense in
excess of the unpaid portion of the Contract Price occasioned thereby, such
amount to be payable within thirty (30) days after the Owner has provided a
notice setting forth the
34
<PAGE>
amount thereof. The Owner may take possession of and utilize, in completing the
Project, any materials, tools, supplies, equipment and appliance, belonging to
the General Contractor or any of its Subcontractors that are at the Project
Site. In such event, the Owner may exercise any rights, claims or demands that
the General Contractor may have against third persons in connection with this
Agreement (including but not limited to tender of performance to Subcontractors
as described in Section 4.2) and for such purpose, the General Contractor does
hereby, to the extent possible, assign, transfer and set over unto the Owner all
such rights, claims and demands and agrees to execute whatever documents the
Owner deems appropriate to effect such assignment, transfer or set-over. Neither
such exercise by the Owner of rights, claims or demands against third persons,
nor such assignment, transfer or set over by General Contractor, shall relieve
General Contractor of its liability to pay the Owner's costs or expenses to
complete the Project in excess of the unpaid portion of the Contract Price.
15.2. Termination Upon Bankruptcy.
If (a) the General Contractor shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy law now or hereafter in effect or
seeking the appointment of a custodian of it or any substantial part of its
property, or shall consent to any such relief or to the appointment of or taking
possession by any such custodian in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due, or shall
take any corporate action to authorize any of the foregoing or (b) an
involuntary case or other proceeding shall be commenced against the General
Contractor seeking liquidation, reorganization or other relief with respect to
it or its debts under any bankruptcy law now or hereafter in effect or seeking
the appointment of a custodian of it or any substantial part of its property,
and such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of sixty (60) days, or an order for relief shall be
entered against the General Contractor under any bankruptcy law as now or
hereafter in effect, then, if the General Contractor is unable to diligently
perform and does not continue so to perform its obligations hereunder, this
Agreement may be terminated by the Owner who may then exercise any and all
rights provided in Section 15.1.
15.3. Termination By Owner Without Cause.
The Owner) may cancel this Agreement at any time for its convenience upon thirty
(30) days' prior written notice to the General Contractor. In the event of such
cancellation, the Owner shall pay the General Contractor for all the General
Contractor's actual costs incurred to the date of cancellation, including the
costs incurred for undelivered material and equipment and other similar Project
obligations and for the General Contractor's reasonable overhead on the Project
to the date of cancellation, less any amounts previously paid by the Owner;
provided, however, that in no event shall the Owner's liability for such actual
costs exceed the amount set forth below with respect to the calendar month after
issuance of the Notice to Proceed in which cancellation occurs.
1 month $1,200,000.00
2 months $1,800,000.00
35
<PAGE>
3 months $3,400,000.00
After 3 months Actual costs, not to exceed unpaid balance
of Contract Price
The General Contractor shall submit to the Owner all invoices and other
documentation as is sufficient to verify the amount to be paid under this
Section 15.3. The Owner shall pay such amount to the General Contractor within
thirty (30) days of receipt of such documentation. The General Contractor shall
mitigate to the fullest extent reasonably possible all expenses to be borne by
the Owner under this Section 15.3.
In the event of such cancellation, the Owner may further elect to assume
any or all of the obligations, commitments and unsettled claims that the General
Contractor has previously undertaken or incurred in good faith in connection
with performance of the General Contractor's obligations hereunder. The General
Contractor shall to the extent reasonably possible, as a condition to receiving
cancellation payments referred to in this Section, execute and deliver such
papers and take all such steps, including the legal assignment of its
contractual rights, as the Owner may require for the purpose of fully vesting in
the Owner the rights and benefits of the General Contractor under such
obligations, commitments or claims.
15.4. Termination Due To Suspension.
If the Owner elects to suspend performance of all or a material part of the Work
and the duration of such suspension exceeds sixty (60) days, the General
Contractor may terminate this Agreement, at any time after it gives the Owner
not less than thirty (30) days prior written notice of its intent to terminate
and the Owner fails to order a resumption of suspended Work before the later of
the expiration of the sixty (60) day suspension period or such thirty (30) day
notice period. In such event, the General Contractor shall be compensated for
all Work satisfactorily performed through the date of termination, plus its
reasonable costs associated with suspension of the Work. In the event of such
termination, the Owner may elect to assume any or all of the obligations,
commitments and unsettled claims that the General Contractor has previously
undertaken or incurred in good faith in connection with performance of the
General Contractor's obligations hereunder. The General Contractor shall to the
extent reasonably possible, as a condition to receiving the termination payments
referred to in this Section, execute and deliver such papers and take all such
steps, including the legal assignment of its contractual rights, as the Owner
may require for the purpose of fully vesting in the Owner the rights and
benefits of the General Contractor under such obligations, commitments or
claims.
15.5. Termination Due To Event Of Force Majeure.
If either (i) a material suspension of performance by the General Contractor or
the Owner as a result of a Force Majeure Event exceeds sixty (60) days, or (ii)
the total number of days in which a material suspension of performance by either
such party as a result of all Force Majeure Events in the aggregate exceeds
sixty (60) days, the party whose performance is unaffected by the Force Majeure
Event may terminate this Agreement, provided it gives the other party written
notice of its intent to terminate not less than thirty (30) days prior to the
end of the applicable period and the other Party fails to resume performance
before the period expires; provided, however, that the
36
<PAGE>
General Contractor's right to terminate under this Section 15.5 shall be subject
to the limitations set forth in Section 11.4 hereof. Upon such termination, the
General Contractor shall be compensated for all Work satisfactorily performed
through the date of termination, plus its reasonable costs associated with the
Force Majeure Event suspension. In the event of termination by either party
pursuant to this Section 15.5, the Owner may elect to assume any or all of the
obligations, commitments and unsettled claims that the General Contractor has
previously undertaken or incurred in good faith in connection with performance
of the General Contractor's obligations hereunder. The General Contractor shall,
to the extent reasonably possible, as a condition to receiving termination
payments referred to in this Section, execute and deliver such papers and take
all such steps, including the legal assignment of its contractual rights, as the
Owner may require for the purpose of fully vesting in the Owner the rights and
benefits of the General Contractor under such obligations, commitments or
claims.
ARTICLE 16. ASSIGNMENTS AND CHOICE OF LAW
16.1. No Assignment By General Contractor.
The General Contractor shall not assign this Agreement or any interest in any
funds that may be due or become due hereunder or enter into any contract with
any person, firm or corporation for the performance of the General Contractor's
obligations hereunder or any part thereof, except as specifically provided
herein, without the prior approval in writing of the Owner and the Project
Lender. If the General Contractor, with the consent of the Owner , shall enter
into a subcontract with any Subcontractor for the performance of any part of
this Agreement, the General Contractor shall be as fully responsible to the
Owner for the acts and omissions of such Subcontractor and of persons employed
by such subcontractor as the General Contractor would be for its own acts and
omissions and those of persons directly employed by it. Nothing in this Section
16.1 shall be read to limit the Owner's rights to assign its interest in this
Agreement or the Project under Section 16.2.
16.2. Assignment By Owner.
The Owner shall be entitled to freely assign this Agreement and its rights,
titles and interests hereunder, to:
(a) any affiliate of the Owner (including any joint venture or general or
limited partnership in which the Owner or its affiliate is a general partner) ;
or
(b) any person, corporation, bank, trust, company, association or other
business or governmental entity (including but not limited to the Project
Lender) as security in connection with obtaining or arranging financing for the
Facility;
(c) any successor entity (whether by merger, by consolidation, by sale of
substantially all the assets or by the enforcement of the security interest
described in (b) above).
Upon each permitted assignment described in this Section 16.2 (other than in
clause (b) above) by the Owner, the assignee shall expressly assume in writing
all of the obligations of the Owner hereunder. Upon the request of the Owner,
the General Contractor shall acknowledge in writing
37
<PAGE>
any permitted assignment described in clause (b) above and the right of any
permitted assignee to enforce this Agreement against the General Contractor.
Such acknowledgment of a permitted assignment described in clause (b) shall be
substantially in the form of Appendix K hereto.
16.3. Extension To Successors And Assigns.
Each and all of the covenants and agreements herein contained shall extend to
and be binding upon the successors and permitted assigns of the parties hereto.
16.4. Choice Of Law.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Texas, excluding conflict-of-laws provisions which would direct the
application of the laws of another state. The parties agree that all actions or
proceedings arising in connection with this Agreement shall be tried and
litigated in any Texas state court or any federal court sitting in the State of
Texas.
ARTICLE 17. DRAWINGS, DOCUMENTS AND MATERIALS
17.1. Owner's Review.
All plans and drawings, calculations, specifications and other related design,
construction, performance test and start-up information, and results of any
supporting design, construction, performance test and start-up calculations,
prepared in connection with engineering, construction, performance test and
start-up services, shall be delivered to the Owner as such documents are
completed, as specified in Appendix L. The procedure for submittal and review of
such documents shall be as set forth in Sections 17.1.1 and 17.1.2 and Schedule
1.
17.1.1. Submittal Of Documents. The General Contractor shall prepare and
submit to the Owner in accordance with Appendix L, the Greenhouse plans and
drawings, which shall include, but not be limited to, plot plans, general
arrangements drawings, architectural drawings including Headhouse layout
drawings, piping and instrumentation diagrams, and electrical one-line diagrams
of the Facility (collectively, the "Plans and Drawings"), and design
calculations for the Facility. The preliminary and/or approved for construction
issue of the above documents will provide the Owner with Project definition, and
provide the General Contractor with (i) the information and data required to
prepare purchase specifications and data sheets for major equipment and (ii) the
definition required to complete construction drawings the General Contractor
also shall submit to the Owner preliminary and final checked calculations when
prepared.
17.1.2. Return Of Plans And Drawings. One copy of each of the Plans and
Drawings submitted by the General Contractor pursuant to Section 17. 1.1 shall
be returned by the Owner to the General Contractor as soon as possible in the
exercise of the Owner's best efforts, but no later than fifteen (15) working
days after receipt, stamped either:
(a) "Returned Without Comment"; or
(b) "Returned with Comments".
38
<PAGE>
Review by the Owner under this Section 17.1.2 of the submitted Plans and
Drawings shall be solely in the discretion of the Owner . Failure of the Owner
to return Plans and Drawings to the General Contractor within such fifteen (15)
working day period shall be construed as having returned the same without
comment. Plans and Drawings which are returned marked "Returned with Comments'
shall bear comments which specify in detail the Owner's concerns or questions
regarding the contents of such document. The General Contractor may elect to
proceed with the Work set forth in such Plans and Drawings prior to the return
of the same by the Owner, but shall do so at the General Contractor's sole risk
and expense. The General Contractor shall respond to the Owner advising its
disposition of the Owner's 's comments within five (5) days after receipt
thereof.
17.2. General Contractor's Duty.
Review (or lack thereof) by the Owner or it's designees of any Project documents
provided by the General Contractor, and the fact that the Owner or their
designees has not discovered any errors reflected in such Project documents,
shall not relieve or release the General Contractor of any of its duties,
obligations or liabilities under the terms of this Agreement.
17.3. Final Documents And All Other Documents Furnished.
Upon the issuance of the Certificate of Final Completion, the General Contractor
shall furnish the Owner with all final (including as-built) documents pertaining
to the design, construction and operation of the Facility, which documents are
listed in Appendix L. If this Agreement is terminated prior to Final Completion,
the General Contractor shall furnish the Owner with any and all final (including
as-built) documents which have been prepared, and the most up-to-date versions
of documents which are not yet final. All other documents, drawings and
materials shall be submitted in the form and as required in Appendix L.
17.4. Ownership Of Drawings And Documents.
17.4.1. Property Of Owner. All drawings, tracings, specifications and other
documents prepared by or for the General Contractor in respect of the Project
and all drawings, tracings, specifications, calculations, memoranda, data, notes
and other materials containing information supplied by the Owner which shall
come into the General Contractor's possession during its performance hereunder,
shall be the sole and exclusive property of the Owner, and such documents and
other materials shall be returned to the Owner upon the earliest of the Owner's
placing the Facility in Commercial Operation pursuant to Article 7, Final
Completion or termination of this Agreement. Subject to Section 18.1, the
General Contractor shall have the right to retain and use, solely and
specifically for the Project, a reproducible set of all drawings, tracings,
specifications and other documents prepared by or for the General Contractor in
respect of the Project.
17.4.2. Reuse Of Documents By Owner. All drawings, tracings,
specifications, and other documents prepared by or for the General Contractor
pursuant to this Agreement are instruments of service with respect to this
Project. They are not intended or represented to be suitable for reuse by the
Owner or others on extensions of this Project or on any other project. Any reuse
without written verification or adaptation by the General Contractor for the
specific purpose intended will be at the Owner's sole risk and without liability
or legal exposure to the General
39
<PAGE>
Contractor, and the Owner shall indemnify and hold harmless the General
Contractor against all claims, damages, losses, and expenses including
attorneys' fees, arising out of or resulting from such unauthorized reuse.
17.5. Ownership Of Materials.
Title to all materials and equipment incorporated or to be incorporated in
construction shall vest in the Owner upon payment therefor by the Owner, so that
the Owner will have full title to said materials and equipment at such times and
that upon Final Payment title to the completed Facility will have vested in the
Owner; provided, however, that construction equipment, small tools and other
equipment owned by the General Contractor or third parties not necessary to the
completion of the Project or continued operation of the Facility shall remain
the sole property of their respective owners. The General Contractor shall
deliver to the Owner all instruments necessary to transfer title to the Facility
to the Owner, including such materials and equipment, upon Final Payment.
ARTICLE 18. MISCELLANEOUS PROVISIONS
18.1. Confidential Information.
The Owner and the General Contractor agree to hold in confidence, except as may
be reasonably necessary from time to time to their performance hereunder, obtain
financing for the Project or fulfill requirements of government authorities, any
information supplied to the Owner or the General Contractor, as the case may be,
by the other party and designated in writing as confidential. The General
Contractor further agrees to require its Subcontractors and employee to enter
into appropriate non-disclosure agreements relating to such confidential
information a may be communicated to them by the General Contractor. The
provisions of this Section 18.1 shall not apply to information within any one of
the following categories or any combination thereof: (a) information which was
in the public domain prior to the receiving party's receipt thereof from the
disclosing party or which subsequently becomes part of the public domain by
publication or otherwise except by the receiving party's wrongful act; (b)
information which the receiving party demonstrates was lawfully in its
possession prior to receipt thereof from the disclosing party through no breach
of any confidentiality obligation; or (c) information received by the receiving
party from a third party having no obligation of confidentiality with respect
thereto. The General Contractor shall not publish information or photographs
regarding the Project and shall not permit or accompany any third party not
connected with the Project onto the Project Site without the express written
permission of the Owner. The General Contractor shall not take, or permit to be
taken any photographs of the Project Site (except for the sole purpose of
performing its obligations hereunder) without the prior written consent of the
Owner.
18.2. Uses Of Premises.
The General Contractor shall confine its apparatus, the storage of materials and
construction equipment and the operations of its workers to limits imposed by
applicable Laws, Governmental Approvals and Private Rights-of-Way, or the
reasonable directions of the Owner and shall not unreasonably encumber the
premises with its materials and construction equipment.
40
<PAGE>
18.3. Independent Contractor.
The General Contractor and the Owner shall be independent contractors with
respect to the Project, or any part thereof, and in respect of all Work to be
performed hereunder. Neither the General Contractor nor its Subcontractors, nor
the employees of either (acting in such capacities), employed on the Project
shall be deemed to be agents, representatives, employees or servants of the
Owner by reason of their performance hereunder or in any manner dealt with
herein. The Owner and the General Contractor hereby covenant and agree that in
the approval of key employees or major equipment vendors of General Contractor,
approving or furnishing of plans and specifications, should any be furnished by
the Owner, or in the making of inspections by the Owner, or in the taking of any
other action or the exercise of any right pursuant to this Agreement, the Owner
are acting for and on the Owner's behalf and not as agent of the General
Contractor. The Owner and the General Contractor each hereby further covenant
and agree that, in the performance of work hereunder by the General Contractor,
it shall not do any act or make any representation to any person or persons to
the effect that the General Contractor, or any of its agents, representatives or
Subcontractors, is the agent of the Owner.
18.4. General Contractor's Obligations.
The approval and consent by the Owner to the General Contractor's entering into
any subcontract shall not relieve the General Contractor of any of its duties,
liabilities or obligations hereunder, and the General Contractor shall be liable
to the same extent as if no such subcontract had been entered into.
18.5. New Developments.
During the term of this Agreement, the General Contractor's program of research
and development may result in potential improvements to the Work to be performed
hereunder. Any such potential improvements shall be offered to the Owner, and,
if accepted by the Owner shall be treated as a Change or Modification pursuant
to Article 12.
18.6. Representations.
18.6.1. Each party hereby represents to the other that:
(a) it has legal power and authority to enter into and carry out the terms
of this Agreement, which constitutes a legal, valid and binding
obligation of it enforceable against it in accordance with its terms;
provided, however, that the enforcement of the rights and remedies
herein is subject to bankruptcy and other similar laws of general
application affecting the rights and remedies of creditors and that
the remedy of specific performance or of injunctive relief is subject
to the discretion of the court before which any proceedings therefor
may be brought; and
(b) the consummation of the transactions contemplated by, and compliance
with all the terms and provisions of, this Agreement will not violate
any provisions of such party's certificate of incorporation,
41
<PAGE>
bylaws or operating agreement and will not result in a breach of the
terms and provisions of, or constitute a default under, any other
agreement or undertaking by such party or by which it or any of its
property is bound or any order of any court or administrative agency
entered in any proceedings in which it is or has been a party.
18.6.2. The General Contractor hereby represents to the Owner that, as of
the effective date of this Agreement (and such representations of the General
Contractor shall, with any changes reported to the Owner pursuant to Section
2.4.1(a)(iii), be deemed reaffirmed in each Application for Payment):
(a) The General Contractor is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of New York
and duly qualified to do business in and in good standing under the
laws of the State of New York.
(b) The unaudited consolidated balance sheets of the General Contractor
and its affiliates as of December 29, 1996, and the related statements
of income and retained earnings of the General Contractor for the
fiscal year then ended, copies of which have been furnished to the
Owner, fairly present the financial condition of the General
Contractor and its affiliates as of such dates and the results of
operations of the General Contractor and its affiliates for the
periods ended on such dates, all in accordance with generally accepted
accounting principles consistently applied; and since such dates there
has been no material adverse change in such condition or operations.
(c) The General Contractor is not presently contemplating (i) the
commencement of a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy law in effect, (ii) the appointment of
a custodian of it or any substantial part of its property, (iii) a
general assignment for the benefit of creditors, (iv) not generally
paying its debts as they become due, or (v) corporate action to
authorize any of the foregoing.
18.7. Rights Reserved By The Owner.
The Owner reserves the right to require the removal from the Project Site of any
employee of the General Contractor or of any Subcontractor if in the reasonable
judgment of the Owner such removal shall be necessary in order to protect the
interests of the Owner.
18.8. Cumulative Remedies.
Except as expressly provided otherwise herein, every right or remedy herein
conferred upon or reserved to the Owner or the General Contractor shall be
cumulative, shall be in addition to every right and remedy now or hereafter
existing at law or in equity or by statute, and the pursuit of any right or
remedy shall not be construed as an election.
42
<PAGE>
18.9. Non-Waiver Clause.
It is understood and agreed that any delay, waiver or omission by the Owner, or
the General Contractor to exercise any right or power arising from any breach or
default by the other party of any of the terms or provisions of this Agreement
shall not be construed to be a waiver by the Owner or the General Contractor of
any subsequent breach or default of the same or other terms or provisions on the
part of the other party.
18.10. Severability.
In the event that any of the provisions, or portions or applications thereof, of
this Agreement are held to be unenforceable or invalid by any court of competent
jurisdiction, the Owner and the General Contractor shall negotiate an equitable
adjustment in the provisions of this Agreement with a view toward effecting the
purpose of this Agreement, and the validity and enforceability of the remaining
provisions, or portions or applications thereof, shall not be affected thereby.
18.11. Amendments.
No amendments or modifications of this Agreement shall be valid unless evidenced
in writing and signed by duly authorized representatives of the Owner and the
General Contractor.
18.12. Article And Section Headings.
The Article and Section headings have been inserted for convenience of reference
only and shall not in any manner affect the construction, meaning or effect of
anything herein contained nor govern the rights and liabilities of the parties
hereto.
18.13. Notices.
Except as otherwise provided herein, all notices and demands pertaining to or
required to be given under this Agreement shall be in writing and shall be
delivered by hand, telecopy or overnight courier, or mailed by registered or
certified mail, postage prepaid, properly addressed as follows:
If to the Owner: If to the General Contractor:
Village Farms of Presidio, L.P. Agro Power Development, Inc.
c/o Agro Power Development, Inc. 10 Alvin Court
9912 Monroe Rd.. Suite 202 East Brunswick, New Jersey 08816
Matthews, North Carolina 28105 Attn: President
Attn: Michael Minerva Telecopy No.: (908) 254-1710
Telecopy No.: (704) 849-7662
Such notices shall be effective on the day received at the addresses specified
above. The parties hereto, by like notice in writing, may designate, from time
to time, another address or office to which notices shall be given pursuant to
this Agreement.
43
<PAGE>
18.14. Original And Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original for all purposes, but all of which shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the duly authorized officers of the parties hereto have
executed this Marfa, Texas Project Commercial Design and Construction Contract,
all as of the date and year first above written.
VILLAGE FARMS OF PRESIDIO, L.P.
("Owner")
By:
--------------------------------
Name: Michael Minerva
Title: Vice President
AGRO POWER DEVELOPMENT INC.
("General Contractor")
By:
--------------------------------
Name: Michael A. DeGiglio
Title: Chief Executive Officer
44
<PAGE>
APPENDIX A
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings as necessary to be equally applicable to both the
singular and plural forms of the terms defined):
"Acceptance" shall have the meaning set forth in Sections 6.9 and 6.10 hereof.
"Agreement" shall mean this MARFA, TEXAS Facility Commercial Design and
Construction Contract dated as of August 17, 1998 among Village Farms of
Presidio, L.P., and Agro Power Development, Inc.
"Application for Payment" shall refer to the document mentioned in Section
13.2.1 of this Agreement and having the form attached as Appendix I.
"Base Rate" means, for any period, the fluctuating rate of interest announced
publicly by NationsBank Carolinas, N.A. of Charlotte, North Carolina from time
to time as its base rate.
"Certificate of Acceptance" shall have the meaning set forth in Section 6.9 of
this Agreement.
"Certificate of Final Completion" shall have the meaning set forth in Section
6.13 of this Agreement.
"Certificate of Substantial Completion" shall have the meaning set forth in
Section 6.8 of this Agreement.
"Change Order" shall have the meaning set forth in Section 12.1.2 of this
Agreement.
"Changes" shall have the meaning set forth in Section 12.1 of this Agreement.
"Commercial Operation" shall mean the point in time at which the Owner notifies
the General Contractor that the Owner and the Greenhouse Operator have commenced
the occupation and use of the Facility for commercial purposes.
"Contract Deadline" shall have the meaning set forth in Section 6.11 of this
Agreement.
"Contract Documents" shall have the meaning set forth in Section 1.2 of this
Agreement.
"Contract Price" shall have the meaning set forth in Section 5.1 of this
Agreement.
"Day(s)" or "day(s)" shall mean a calendar day or days.
45
<PAGE>
"Facility" shall have the meaning set forth in the Recitals to this Agreement.
"Final Completion" shall have the meaning set forth in Section 6.11 of this
Agreement.
"Final Payment" shall have the meaning set forth in Section 13.4 of this
Agreement.
"Final Punch-List" shall have the meaning set forth in Section 6.6 of this
Agreement.
"Force Majeure Event" shall have the meaning set forth in Section 11.1 of this
Agreement.
"Gas Utility" shall mean West Texas Gas, Distribution Company.
"General Contractor" shall mean Agro Power Development, Inc.
"Governmental Approval" means an authorization, consent, approval, license,
permit, certificate, exemption of or filing or registration with any
governmental authority or other legal or regulatory body, required in connection
with the development, construction, Final Completion or the short- or long-term
operation of the Facility, as set forth in Appendix C.
"Greenhouse" shall mean the commercial greenhouse of approximately 26.3 enclosed
acres of growing area to be designed and constructed by General Contractor for
the Owner, as is described more fully in the Scope of Work.
"Greenhouse Operator" shall mean Agro Power Development, Inc., a New York
Corporation, which will operate the Greenhouse under a contract with the Owner.
"Headhouse" shall mean the separate structure housing the office and the
heating, packaging and control systems for the Greenhouse, as is more fully
described in the Scope of Work.
"Heating System" shall mean the boilers complete with stacks, and the complete
heating distribution system as described in Schedules 1 and 2.
"Indemnified Party" shall have the respective meanings set forth in Sections
14.1.1, 14.1.2 and 14.1.3 of this Agreement.
"Law" or "Laws" shall mean one or more of the Federal, state and municipal laws,
ordinances, rules and regulations, and any other applicable governmental or
industry codes and standards, which would affect work on, or the intended
operation of, the Facility.
"Liens" shall have the meaning set forth in Section 10.4 of this Agreement.
"Loan Agreement" shall mean that certain loan agreement dated August 17, 1998 by
and between Village Farms International Finance Association and Village Farms of
Presidio, L.P.
46
<PAGE>
"Loan Documents" and "Loan Parties" shall have the meanings set forth in Section
1.5 of this Agreement.
"Major Milestone(s)" shall mean one or more major milestones as set forth in
Appendix H hereto.
"Major Milestone Schedule" shall mean the date on which a Major Milestone is to
be achieved as set forth on Appendix H hereto.
"Manual" shall have the meanings set forth in Appendix L of this Agreement.
"Modifications" shall have the meaning set forth in Section 12.3 of this
Agreement.
"Notice of Final Completion" shall have the meaning set forth in Section 6.12 of
this Agreement.
"Notice of Substantial Completion" shall have the meaning set forth in Section
6.4 of this Agreement.
"Notice to Proceed" shall have the meaning set forth in Section 6.1 of this
Agreement.
"Owner" shall mean the owner of Village Farms of Presidio, L.P., a Delaware
limited partnership.
"Plans and Drawings" shall have the meaning set forth in Section 17.1.1 of this
Agreement.
"Private Rights-of-Way" shall mean all permits, easements, licenses, private
rights of way, and utility and railroad crossing rights required in connection
with the Project.
"Progress Payment" shall have the meaning set forth in Section 13.2.2 of this
Agreement.
"Project" shall have the meaning set forth in Section 1.1 of this Agreement.
"Project Lender" shall have the meaning set forth in Section 1.5 of this
Agreement.
"Project Site" shall have the meaning set forth in Section 1.1 of this
Agreement.
"Project Start-up" shall have the meaning set forth in Section 6.2 of this
Agreement.
"Scope of Work" shall have the meaning set forth in Section 1.2(b) of this
Agreement.
"Site Logistics Plan" shall have the meaning set forth in Section 2.3.10 of this
Agreement.
"Site Manager" shall have the meaning set forth in Section 2.2.4 of this
Agreement.
"Specified Permit Applications" shall mean those applications for Governmental
Approvals and related materials set forth in Attachment I to Appendix C.
"Subcontractors" shall mean all third-party engineers, vendors, suppliers,
materialmen, consultants and subcontractors providing materials and services in
connection with the Project.
47
<PAGE>
"Substantial Completion" shall have the meaning set forth in Section 6.3 of this
Agreement.
"Substantial Completion Deadline" shall have the meaning set forth in Section
6.3 of this Agreement.
"Work" shall have the meaning set forth in Section 2.1 of this Agreement.
EXHIBIT 10.102
VILLAGE FARMS OF PRESIDIO, L.P. GREENHOUSE PROJECT
MARFA, TEXAS
COMMERCIAL PACKING HOUSE
DESIGN AND CONSTRUCTION CONTRACT
between
AGRO POWER DEVELOPMENT, INC.
and
NC STURGEON, INC.
JULY 10 ,1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1. THE PROJECT; EXTENT OF AGREEMENT
1.1 Services To Be Performed 1
1.2 Extent of Agreement. 1
1.3 Conflicting Provisions 2
1.4 Entire Agreement 2
1.5 Project Financing Agreements 2
ARTICLE 2. CONTRACTOR'S RESPONSIBILITIES
2.1 Contractor's Services in General 2
2.2 Summary of Contractor's Responsibilities 3
2.2.1 Familiarity with Conditions 3
2.2.2 Design and Engineering 3
2.2.3 Procurement 3
2.2.4 Construction 3
2.2.5 Consumables and Parts During Project Start-up 4
2.2.6 Training of Operators 4
2.2.7 Achieve Final Completion with All Due Diligence. 4
2.3 Particular Undertakings of the Contractor 4
2.3.1 Safety Precautions 4
2.3.2 Compliance with Governmental Approvals, Laws and Private Rights-of-Way
Requirements 5
2.3.3 Duties 5
2.3.4 Schedules 5
2.3.5 Protection of Property 5
2.3.6 Ingress and Egress 5
2.3.7 No Alcohol or Controlled Substances on Site 6
2.3.8 Miscellaneous Regulations 6
2.3.9 Access to Project Site 6
2.3.10 Site Logistics Plan 6
2.3.11 Functional and Design Verification Test Procedures 6
2.4 Submission of Reports 7
2.5 Obtaining Governmental Approvals and Private Rights-of-Way 7
2.6 Clean-up Responsibility 7
2.7 Patents, Copyrights and Royalties 8
2.8 Further Assurances 8
2.9 Interfaces 8
ARTICLE 3. GENERAL CONTRACTOR'S RESPONSIBILITIES
3.1 Documents and Surveys 9
3.2 Rights-of-Way 9
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
3.3 Required Approvals 9
3.4 Operations and Maintenance Personnel 9
3.5 Hazardous Wastes 9
3.6 Notice of Defect 9
3.7 No Alcohol or Controlled Substances on Site; Miscellaneous Regulations 10
3.8 Interfaces 10
3.9 Utilities and Consumables During Project Start-Up 10
3.10 Utilities During Construction 10
ARTICLE 4. SUBCONTRACTS
4.1 Major Specialty Consultants, Subcontractors and Equipment Suppliers 10
4.2 Purchase Orders and Subcontracts 11
4.3 Payments to Subcontractors 11
4.4 No Privity with Subcontractors 11
ARTICLE 5. CONTRACT PRICE
5.1 Contract Price 11
5.2 Limitation of General Contractor's Liability 11
ARTICLE 6. COMMENCEMENT OF THE PROJECT, PROJECT START-UP AND
COMPLETION
6.1 Commencement of Work 12
6.2 Project Start-up 12
6.3 Substantial Completion 12
6.4 Notice of Substantial Completion 12
6.5 Certificate of Substantial Completion 12
6.6 Acceptance of Project Upon Failure to Achieve Substantial Completion
Prior to Substantial Completion Deadline. 13
6.7 Acceptance of Project Upon Failure to Achieve Substantial Completion
Prior to the Contract Deadline. 13
6.8 Final Completion 13
6.9 Notice of Final Completion 13
6.10 Certificate of Final Completion 14
ARTICLE 7. GENERAL CONTRACTOR'S RIGHT TO PLACE THE FACILITY IN
COMMERCIAL OPERATION; CARE, CUSTODY AND CONTROL
7.1 General Contractor's Right 14
7.2 Project Revenues 14
7.3 Care, Custody and Control 14
ARTICLE 8. LIQUIDATED DAMAGES FOR FAILURE TO MEET
SCHEDULE GUARANTEES
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
8.1 Schedule Guarantees 15
8.1.1 Substantial Completion 15
8.2 Liquidated Damages for Failure to Achieve Substantial Completion 15
8.3 Liquidated Damages Reasonable 15
8.4 Time for Payment 15
ARTICLE 9. LIMITATION OF CONTRACTOR'S LIABILITY
9.1 Limitation 16
9.2 Consequential Damages 16
ARTICLE 10. WARRANTIES AND GUARANTEES
10.1 Materials and Workmanship 16
10.2 Subcontractor Warranties 17
10.3 Engineering and Design 17
10.4 No Liens 17
10.5 Limitation of Warranties 17
ARTICLE 11. FORCE MAJEURE
11.1 Force Majeure Events 18
11.2 Limitation of Default 18
11.3 Excused Performance 18
11.4 Right to Terminate for Force Majeure 19
ARTICLE 12. CHANGES IN THE PROJECT AND SUSPENSION
12.1 Changes 19
12.1.1 Procedure for Changes 19
12.1.2 Change Orders 20
12.1.3 No Changes Due to Contractor Error 20
12.2 Other Changes 20
12.2.1 Changes in Laws, Approvals or Rights-of-Way 20
12.2.2 Changes Due to Delays in Interfaces or Force Majeure Events 20
12.3 Modifications 21
12.4 Contract Price Change 21
12.5 Continued Performance Pending Resolution of Disputes 21
12.6 Suspension 21
12.7 Suspension Process 22
12.8 Resumption of Work 22
12.9 Contract Changes Due to Suspension 22
12.10 Termination Due to Suspension 22
ARTICLE 13. PAYMENTS TO CONTRACTOR
13.1 Monthly Progress Payments 23
13.2 Waiver and Release of Liens 24
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
13.3 Payment Upon Completion 24
13.4 Payment or Use Not Acceptance 24
13.5 Waiver by General Contractor 24
13.6 Waiver by Contractor 25
ARTICLE 14. INDEMNITY, INSURANCE AND WAIVER OF SUBROGATION
14.1 Indemnity 25
14.2 Contractor's Insurance 26
14.3 Property Insurance Loss Adjustment 27
14.4 Waiver of Subrogation 27
14.5 Subcontractor Insurance 27
14.6 General Contractor's Insurance 28
14.7 No Effect on Liability 28
ARTICLE 15. TERMINATION
15.1 Termination By General Contractor for Cause 28
15.2 Termination Upon Bankruptcy 29
15.3 Termination By General Contractor Without Cause 30
15.4 Termination Due to Suspension 30
15.5 Termination Due to Event of Force Majeure 31
ARTICLE 16. ASSIGNMENTS AND CHOICE OF LAW
16.1 No Assignment by Contractor 31
16.2 Assignment by General Contractor 31
16.3 Extension to Successors and Assigns 32
16.4 Choice of Law 32
ARTICLE 17. DRAWINGS, DOCUMENTS AND MATERIALS
17.1 General Contractor's Review 32
17.1.1 Submittal of Documents 32
17.1.2 Return of Plans and Drawings 33
17.2 Contractor's Duty 33
17.3 Final Documents and All Other Documents Furnished 33
17.4 Ownership of Drawings and Documents 33
17.4.1 Property of General Contractor 33
17.4.2 Reuse of Documents by General Contractor 34
17.5 Ownership of Materials 34
ARTICLE 18. MISCELLANEOUS PROVISIONS
18.1 Confidential Information 34
18.2 Uses of Premises 35
18.3 Independent Contractor 35
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C> <C>
18.4 Contractor's Obligations 35
18.5 New Developments 35
18.6 Representations 35
18.7 Rights Reserved by the General Contractor 35
18.8 Cumulative Remedies 36
18.9 Non-Waiver Clause 36
18.10 Severability 37
18.11 Amendments 37
18.12 Article and Section Headings 37
18.13 Notices 37
18.14 English as Official Language 38
18.15 Original and Counterparts 38
</TABLE>
v
<PAGE>
APPENDICES AND SCHEDULES
APPENDIX TITLE
-------- -----
A Definitions
B Project Site Documents
C Governmental Approvals and Private
Rights-of-Way
Attachment I Specified Permit Applications
D Form of Progress Report
E Boundaries of Interfaces
F Key Personnel of Contractor
G Major Specialty Consultants,
Subcontractors and Suppliers
H Major Milestone Schedule
I Form of Application for Payment
J Form of Waiver and Release of Lien
Rights
K Form of Consent to Assignment
L Documentation Requirements and List
of Documents to be Furnished by the
Contractor
M Initial Network Schedule
SCHEDULE I Project Description
SCHEDULE II Scope of Work
SCHEDULE III Technical Requirements
vi
<PAGE>
VILLAGE FARMS OF PRESIDIO, L.P. GREENHOUSE PROJECT
COMMERCIAL PACKING HOUSE
DESIGN AND CONSTRUCTION CONTRACT
This VILLAGE FARMS OF PRESIDIO, L.P. PROJECT COMMERCIAL PACKING HOUSE
DESIGN AND CONSTRUCTION CONTRACT dated as of July 10, 1998 (this "Agreement") is
made by and between AGRO POWER DEVELOPMENT, INC., a NEW YORK corporation with
offices at 10 Alvin Court, E. Brunswick New Jersey 08816 (the "General
Contractor"), and NC Sturgeon Inc., a Texas corporation with offices at 2800
Windecker, Midland, Texas 79711 (the "Contractor").
RECITALS
A. The General Contractor intends to build and operate a commercial
Greenhouse facility in the County of Presidio ,Texas (the "Facility"). The
Facility will be fueled by natural gas and LPG.
B. The parties have negotiated and agreed upon the final terms, conditions,
specifications and prices for the engineering, procurement and construction of
the Packing House
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and for other good and valuable consideration, the
parties hereto hereby agree as follows:
ARTICLE 1. THE PROJECT; EXTENT OF AGREEMENT
1.1 Services To Be Performed.
The Contractor agrees to perform or cause to be performed all work and services
in connection with the engineering and construction, with respect to the Packing
House, all in strict accordance with, and for the Contract Price stated in this
Agreement. The Packing House, together with all equipment, labor, services and
materials to be furnished hereunder, is defined as the "Project.' The Project
will be constructed on a 153-acre parcel of property located in the County of
Presidio, as is more fully described in Appendix B (the "Project Site").
1.2 Extent of Agreement.
This Agreement consists of the following documents, and all schedules,
appendices and attachments thereto (collectively, the "Contract Documents"):
(a) Marfa Texas Project Commercial Packing House Design And Construction
Contract, including Appendices A-N (as the same may be amended by Changes and
Modifications); and
(b) Scope of Work attached hereto as Schedule I and II (as the same may be
amended by
1
<PAGE>
Changes and Modifications, the "Scope of Work").
(c) Drawing A-2, d.d. 3/17/98, by Contractor
Appendices A through M and Schedule I, II and III are incorporated by reference
herein and deemed to be a part of this Agreement. For convenience of references
a list of defined terms used in this Agreement is attached as Appendix A.
1.3 Conflicting Provisions.
The Contract Documents are listed in Section 1.2 in their governing order. If
any conflict or inconsistency exists between or among Contract Documents, such
conflict or inconsistency shall be resolved in favor of the highest ranking
document. Any Changes and Modifications permitted under Article 12 shall rank
higher than the provisions they change and shall have the same priority of
classification as the original document or documents changed.
1.4 Entire Agreement.
This Agreement contains the entire agreement between the parties hereto, and
supersedes any and all prior agreements, proposals, negotiations or
representations pertaining to the Project.
1.5 Project Financing Agreements.
The Project Lender, Loan Documents and Project Engineer shall be as follows:
(a) The Project Lender shall be Village Farms International Finance
Association
(b) The Loan Documents shall include the Credit Agreement between the
Project Lender and the Owner (collectively, the "Loan Parties"), the
Collateral Agency Agreement among CoBank ACB as Collateral Agent, the
General Contractor and certain other parties, and such other
agreements and documents as the Loan Parties may agree are necessary
or desirable to evidence the bond and debt financing facility for the
Project.
ARTICLE 2 CONTRACTOR'S RESPONSIBILITIES
2.1 Contractor's Services in General.
The Contractor shall perform or cause to be performed, and be ultimately
responsible for, all engineering, procurement and construction services, , all
materials and equipment, all machinery, tools, labor, transportation, as set
forth herein and, except for the services and information specifically set forth
in Article 3 to be provided by the General Contractor, all other services and
items required to complete the Project in strict accordance with this Agreement
(the "Work"). All construction services of the Contractor shall be performed in
accordance with the Scope of
2
<PAGE>
Work. The General Contractor shall have the right, in accordance herewith, to
review and approve any other engineering, procurement and construction services
necessary as a result of Changes and Modifications to complete the Project in
accordance with this Agreement. The General Contractor and its designees shall
have the right, but not the obligation, to review the Contractor's performance
to determine whether such performance complies with this Agreement. The General
Contractor's failure to review the Contractor's performance shall not diminish
any rights the General Contractor may have in respect of any deficiencies in the
Contractor's performance hereunder. Any engineering or other professional
service to be performed pursuant to this Agreement which must be performed by
licensed personnel shall be performed by licensed personnel as required by Law.
The enumeration of specific duties and obligations to be performed by the
Contractor under the Contract Documents shall not be construed to limit in any
way the general undertakings of the Contractor as set forth herein.
2.2 Summary of Contractor's Responsibilities.
2.2.1 Familiarity with Conditions. The Contractor has made a careful
examination of (i) the Project Site, as is more fully described in Appendix B,
(ii) the Scope of Work and Specifications, (iii) the location and nature of the
proposed construction, (iv) the kind and character of the soil, soil loading
conditions, subsurface conditions and terrain to be encountered, (v)
transportation facilities, (vi) the conditions of the roads, (vii) the kind of
facilities required before and during construction of the Packing House, (viii)
labor conditions, (ix) the local weather conditions based upon previous weather
data, and (x) all other matters which a prudent contractor should have
discovered upon reasonable investigation. The Contractor based upon such
examination hereby accepts the risk of mistake or error relating to the matters
referred to in clauses (i) through (x) above, and acknowledges and agrees that
no Contract Price increase, performance or scheduling alleviation will be
granted by the General Contractor under this Agreement as a result of any such
mistake or error.
2.2.2. Design and Engineering. The Contractor shall provide or cause to be
provided in a diligent and competent manner all design and engineering services
which shall be necessary or advisable (including geotechnical investigations)
for the expeditious, economical and sound design and completion of the Project
in accordance with the terms of this Agreement, with due consideration given to
all Governmental Approvals (including the relevant provisions in the Specified
Permit Applications), Private Rights-of-Way and Laws. The Contractor's design
and engineering services include, but are not limited to, the preparation of
complete detailed drawings and other documents, including surveys, schedules and
estimates required. for Final Completion of the Project, and coordination with
Subcontractors. All engineering work shall be performed by or under the
supervision of professional engineers licensed to perform such engineering
services in the State of Texas as required by Law.
2.2.3 Procurement. The Contractor shall procure in the Contractor's name,
and not as agent for the General Contractor, and make payment and be responsible
for, all services of Subcontractors and materials, equipment and supplies
manufactured on-site and off-site, and related services for the Project. This
provision shall not preclude the assignment of Subcontractor warranties to
General Contractor.
2.2.4 Construction. The Contractor shall construct the Packing House and
3
<PAGE>
provide all labor, equipment, materials, supplies and tools for such
performance. The Contractor shall cause the Work to receive constant supervision
by a competent site manager (the "Site Manager") or a competent assistant to the
Site Manager, one of whom shall be on the Project Site at all times during
performance of construction activities and whom the General Contractor shall
approve or disapprove, which approval shall not be unreasonably withheld. The
Contractor has provided the General Contractor with the names and resumes of,
and the General Contractor has approved, the key personnel working on the
Project identified in Appendix F, and the General Contractor shall have the
right to approve any replacements thereof. The Site Manager and the key
personnel referred to in the preceding sentence shall be assigned to the Project
until Completion thereof and, provided they are performing in a manner
acceptable to the Contractor and the General Contractor, shall not be removed or
reassigned prior to Completion, without the approval of the General Contractor.
The Contractor shall also employ, or cause Subcontractors to employ, in
connection with the construction , capable, experienced and reliable foremen and
such skilled workmen as may be required for the various classes of work to be
performed.
2.2.5 Consumables and Parts During Project Start-up. The Contractor shall
supply lubricants and spare parts as necessary for Project Start-up.
2.2.6 Training of Operators. Prior to Project Start-up, the Contractor
shall train the employees of the operations and maintenance contractor retained
by General Contractor with respect to the Packing house. Training shall include
classroom and on-the-job training which shall commence sufficiently in advance
of Project Start-up to prepare these personnel to operate the Packing house
under the Contractor's direction during Project Start-up. The Contractor also
shall prepare and provide to the General Contractor six (6) copies each of an
operations and maintenance manual for the Packing house. The Contractor shall
provide the General Contractor sixty (60) days prior written notice of the day
it will commence training of Packing house operations and maintenance personnel.
2.2.7 Achieve Final Completion with All Due Diligence. The Contractor shall
construct and endeavor to achieve Final Completion of the Project with all due
diligence, in all respects in strict accordance with this Agreement and in full
compliance with all Governmental Approvals (including the relevant provisions in
the Specified Permit Applications), Private Rights-of-Way, and applicable Laws
including without limitation zoning, environmental protection, use and land use,
building and safety laws, ordinances and regulations.
2.3 Particular Undertakings of the Contractor.
2.3.1 Safety Precautions. The Contractor shall at all times take all
reasonable precautions for the safety of employees engaged in services hereunder
and of the public, shall comply with all applicable safety Laws, and, to the
extent not inconsistent therewith, shall comply with the safety rules and
regulations contained in the Contractor's safety manual, a copy of which shall
be provided to the General Contractor. All machinery and equipment and other
physical hazards shall be guarded in accordance with applicable Law and industry
construction standards. The Contractor shall develop and maintain a safety
program . Without limiting the generality of the foregoing:
4
<PAGE>
2.3.1.1 The Contractor shall at no time and under no circumstances cause or
permit any employee of the Contractor to perform any work upon energized
electrical lines or equipment, or upon poles carrying energized electrical lines
or equipment, or upon pressurized piping, unless otherwise specified in the
Contract Documents.
2.3.1.2 The Contractor shall at no time and under no circumstances obstruct
public roadways without the prior written permission of the appropriate
authorities.
2.3.1.3 The Contractor shall provide and maintain all such guard lights and
other protection for the public as may be required by applicable Laws,
Governmental Approvals and Private Rights-of-Way, or as may be advisable in the
exercise of reasonable prudence by the Contractor. The General Contractor's
receipt of the Contractor's safety manual or its review or approval of any
safety procedures or programs shall not relieve the Contractor of any of its
obligations hereunder.
2.3.2 Compliance with Governmental Approvals, Laws and Private
Rights-of-Way Requirements. The Contractor shall comply with the requirements of
all Governmental Approvals (including the relevant provisions in the Specified
Permit Applications), Laws, and Private Rights-of-Way requirements applicable as
of the time of the Contractor's performance hereunder, including but not limited
to all notices required thereby.
2.3.3 Duties. The Contract Price (as defined in Section 5.1) includes
provisions for the payment of all moneys which will be payable by the Contractor
or the General Contractor in connection with the engineering, procurement and
construction of the Work because of gross receipts taxes or contributions,
duties and contributions imposed by any taxing authority upon materials,
supplies and equipment to be incorporated in the Project. The Contractor shall
pay all such gross receipt taxes, duties and contributions, and indemnifies the
General Contractor from any liability therefor. The Contractor shall furnish to
the appropriate authorities all required information and reports in connection
with such gross receipt taxes, duties and contributions, and shall promptly
furnish copies of all such information and reports to the General Contractor.
2.3.4 Schedules. The Contractor shall prepare and maintain detailed network
schedules of the work to be performed hereunder, such schedules to be generally
in accordance with Appendix M. These schedules shall be marked periodically (but
not less frequently than monthly) to show design status, equipment deliveries,
work accomplished and systems completed. The Contractor periodically shall
provide copies of its network schedules to General Contractor as set forth in
Section 2.4.1. The Contractor shall be responsible for maintaining all material
and equipment delivery schedules which affect the progress of the Project. The
Contractor shall closely supervise the work of Subcontractors and monitor
Subcontractor work and progress.
2.3.5 Protection of Property. The Contractor shall do all things reasonably
necessary or expedient to properly protect any and all parallel, converging and
intersecting lines, railroad or utility equipment, highways and any and all
property of others from damage, and in the event that any such lines, railroad
equipment, highways or other property are damaged in the course of the
construction the Contractor shall at its own expense restore any and all of such
damaged property immediately to as good a condition as it was found before such
damage
5
<PAGE>
occurred; provided, however, that the Contractor shall not be liable to restore
such damaged property to the extent damage is caused by the General Contractor
or the General Contractor's agents, invitees or contractors (other than the
Contractor and any Subcontractors).
2.3.6 Ingress and Egress. Where ingress and egress by the Contractor to the
Project Site require the Contractor to traverse public or private lands, the
Contractor shall limit the movement of its crews and equipment to such rights of
way as are identified in Appendix C, or which otherwise may be obtained by the
General Contractor or the Contractor, and shall observe any and all restrictions
on such use contained in Governmental Approvals and Private Rights-of-Way
governing such rights of way. Within such rights of way, the Contractor shall be
responsible for laying out the access to be used. The Contractor shall cause as
little damage as possible to crops or property on such rights of way, shall
endeavor to avoid marring the lands and shall restore such lands as required by
any applicable Laws, Governmental Approvals or Private Rights-of-Way granting
documents. All fences which must be opened or moved during the construction of
the Project shall be replaced in as good condition as they were found.
2.3.7 No Alcohol or Controlled Substances on Site. No personnel of the
Contractor or any Subcontractor on the Project site shall be under the influence
of or in possession of any alcoholic beverage or controlled substance (except as
prescribed by a physician so long as the performance or safety of the Project is
not affected thereby). The Contractor shall advise its employees, and cause
Subcontractors to advise their employees, of this requirement before they enter
on the Project Site. When in the Contractor's reasonable judgment it is
appropriate, the Contractor shall, and shall cause Subcontractors to, cause each
of their employees who will have access to the Project Site to take controlled
substance test conducted in accordance with applicable Laws. The Contractor
shall promptly remove from the Project Site any employee in violation of this
Section 2.3.7 or who has failed the controlled substance test.
2.3.8 Miscellaneous Regulations. While on the Project Site, no personnel of
the Contractor or any Subcontractor shall carry firearms, weapons, or
explosives, have animals, or have any of the above in vehicles utilized in the
Work by the Contractor or its Subcontractors, their employees, or agents without
the written approval of the General Contractor. The use of explosives will not
be permitted unless and until the Contractor has submitted to the General
Contractor a blasting plan which is in accordance with all applicable Laws,
Governmental Approvals and Private Rights-of-Way and the General Contractor has
reviewed such plan. While engaged in the Work, personnel shall remain on
established roads and obey speed limits in connection with the performance of
this Agreement, unless such performance requires persons or vehicles to depart
from such roads and such departure is permitted by Law and under the terms of
the applicable Private Rights-of-Way. The Contractor shall be responsible for
the enforcement of the foregoing regulations.
2.3.9 Access to Project Site. From time to time during normal business
hours and upon reasonable notice, the Contractor shall permit representatives of
the Project Lender to visit the Project Site. Such visitors shall obey all
applicable Project Site rules. The General Contractor, the General Contractor's
Representatives and the Project Engineer shall have access to the Project Site
at all times.
6
<PAGE>
2.3.10 Site Logistics Plan. The Contractor will be responsible for
organizing its activities at the Project Site so as to provide proper space for
the storage of materials and equipment and construction operations. Within
twenty (20) days after the date of execution of this Agreement and prior to
mobilization, the Contractor shall prepare and submit to the General Contractor
for its approval a site logistics plan (the "Site Logistics Plan"), which will
show, at a minimum, the proposed location of the following: (i) the Contractor's
trailers; (ii) vehicle parking; (iii) the site entry road; (iv) signs; and (vii)
the routing of truck deliveries. The General Contractor's approval of the Site
Logistics Plan will not be unreasonably withheld. Upon approval by the General
Contractor, the Contractor shall furnish three (3) copies of the Site Logistics
Plan to the General Contractor.
2.3.11 Functional and Design Verification Test Procedures. The Contractor
shall prepare and submit to the General Contractor and the Project Engineer for
approval, at least sixty (60) days prior to expected commencement of Project
Start-up, detailed protocols for the performance of functional and design
verification testing of the Project. The General Contractor's and Project
Engineer's approval of such protocols will not be unreasonably withheld or
delayed.
2.4 Submission of Reports.
2.4.1 The Contractor shall prepare and submit to the General Contractor (a)
within ten days after the end of each calendar month and as part of the
Application for Payment provided pursuant to Section 13.1.1, a written monthly
progress report in a form generally in accordance with Appendix D hereto, which
report shall include, as a minimum, (i) a description of the status of supplies,
Subcontractors' activities and engineering, procurement and construction
progress as compared with the Project schedule (and, if appropriate, an updated
schedule), (ii) an identification and evaluation of problem areas (including but
not limited to an evaluation of any factors which are anticipated to have a
material effect on the Project schedule or which may in the opinion of the
Contractor require Modifications), (iii) a report of any changes in the
representations set forth in Section 18.6 which cause a material adverse effect
on the Contractor's ability to perform its obligations under this Agreement,
(iv) a detailed description of Work accomplished and progress payments already
received as compared with planned expenditures for such Work, and (b) status
reports on material and equipment deliveries and scheduled deliveries. In
addition, the Contractor shall keep, and furnish to the General Contractor
and/or Project Lender at General Contractor's or Project Lender's request, such
books, records and accounts containing such information as may be necessary to
(i) determine that work is progressing according to schedule and (ii) provide
adequate documentary support (A) for the General Contractor's future tax
accounting purposes and (B) for the purpose of confirming that progress payments
are due hereunder. The Contractor shall notify the General Contractor of all
accidents which occur at the Project Site within twenty-four (24) hours after
they occur, and thereafter provide such written reports relating thereto as may
be reasonably requested by the General Contractor.
2.4.2 Prior to the execution and delivery of this Agreement, the Contractor
shall have provided to the General Contractor its most recent annual unaudited
financial statements.
2.5 Obtaining Governmental Approvals and Private Rights-of-Way.
7
<PAGE>
The Contractor shall, to the extent reasonably required, assist the General
Contractor to obtain those Governmental Approvals and Private Rights-of-Way
required to be obtained by the General Contractor, as are set forth in Appendix
C. The Contractor has delivered, or will deliver prior to the time necessary,
evidence satisfactory to the General Contractor that the Contractor has obtained
all Governmental Approvals required to be obtained by the Contractor, as are set
forth in Appendix C, including but not limited to permits, licenses or
certificates from Texas state industrial insurance authorities, Texas employment
security authorities and Texas contractors authorities.
2.6 Clean-up Responsibility.
The Contractor shall at all times keep the Project Site free from accumulation
of waste materials and rubbish resulting from operations and perform daily site
clean-up. Prior to the issuance of the Certificate of Final Completion, the
Contractor shall remove from the Project Site all waste materials and rubbish
and shall perform all other clean-up services to the reasonable satisfaction of
the General Contractor and consistent with all Governmental Approvals, Laws and
Private Rights-of-Way. Prior to the issuance of the Certificate of Final
Completion, the Contractor shall remove from the Project Site all tools,
construction equipment, machinery and surplus materials belonging to the
Contractor or any Subcontractor not necessary to the continued operation of the
Facility.
2.7 Patents, Copyrights and Royalties.
The Contractor shall pay all royalties and license fees for materials, methods
and systems incorporated in the Project. The Contractor hereby indemnities,
fully protects and saves the General Contractor harmless from, and agrees to
defend the General Contractor against, any and all loss, cost and damage which
the General Contractor may hereafter suffer or pay out by reason of any claims
or suits against the General Contractor arising out of claims of infringement of
any domestic or foreign patent rights, trademarks or copyrights, or misuse of
confidential information, by the Contractor in performing its obligations
hereunder. The Contractor and the General Contractor each shall advise the other
promptly in writing of any notice of such claim or the commencement of any suit
or action based upon such claim. Upon receipt of such notice, the Contractor
shall undertake the defense of any such suit, action or claim, and the General
Contractor shall cooperate with the Contractor in such defense. The Contractor
shall have charge and direction of the defense of such suit, action or claim,
and the General Contractor shall have the right to be represented therein by
advisory counsel of its own selection and at its own expense. Neither the
Contractor nor the General Contractor may settle or compromise any such suit,
action or claim without the prior written consent of the other party if such
settlement or compromise would obligate such other party to make any payment or
part with any property, to assume any obligation or grant any license or other
right, or to be subject to any injunction. In case the Packing house, or part
thereof, is held in such suit to constitute infringement or the use thereof is
enjoined, the Contractor shall at its own expense and at its option either
procure for the General Contractor the right to continue using the Packing
house, or part thereof, or replace the same with a non-infringing part or modify
it so that it becomes non-infringing. Contractor's obligations to indemnify,
defend and save harmless General Contractor hereunder shall not apply to claims
of patent, trademark or copyright infringement, or misuse of
8
<PAGE>
confidential information, relating to Changes or Modifications in the Work made
to the General Contractor's express specifications, as to which General
Contractor shall indemnify, defend and save harmless Contractor pursuant to the
procedures set forth above in this Section 2.7.
2.8 Further Assurances.
The Contractor shall promptly execute and deliver all further instruments and
documents, and take all further action, including but not limited to assisting
the General Contractor in filing a notice of completion with the local lien
recording offices, that may be necessary or that the General Contractor may
reasonably request (and which is consistent with this Agreement) in order to
effectuate the Contractor's obligations hereunder or the purposes or intent of
this Agreement.
2.9 Interfaces.
The Contractor shall use its best efforts to assist the General Contractor to
coordinate the timely installation and start-up of such connections, utilities,
crossings and the like as necessary to construct and operate the Packing house,
to the extent such items are not part of the Work. These interfaces shall
include but not be limited to the interconnections of the Packing house with the
Greenhouse and utilities, either similar or dissimilar, required to assure
operability of the Packing house. The boundaries of such interfaces shall be as
generally described in Appendix E.
ARTICLE 3 GENERAL CONTRACTOR'S RESPONSIBILITIES
3.1 Documents and Surveys.
The General Contractor has furnished to the Contractor the documents describing
the Project Site, which documents are attached as Appendix B, and will provide
any revisions or amendments thereto promptly upon receipt.
3.2 Rights-of-Way.
The General Contractor shall secure, by purchase, lease, permit, easement or
other license or grant, and shall preserve and maintain, all necessary Private
Rights-of-Way and public rights of way for the Packing House and for ingress and
egress of the Contractor necessary to construct the Packing House and otherwise
to perform its obligations under this Agreement.
3.3 Required Approvals.
The General Contractor shall secure and pay for, and shall maintain in full
force and effect, those Governmental Approvals and Private Rights-of-Way set
forth in Appendix C.
3.4 Operations and Maintenance Personnel.
At least four (4) weeks in advance of Project Start-Up, the General Contractor
shall cause the
9
<PAGE>
Packing House Lessee to hire personnel to be trained and to perform operations
and maintenance of the Packing House during Project Start-up and Commercial
Operation.
3.5 Hazardous Wastes.
The General Contractor shall remove, or cause to be removed, and dispose, or
cause to be disposed of, at General Contractor's expense and in accordance with
Law, any debris, soil or other materials consisting of or contaminated by
hazardous wastes as defined by Law, and shall provide replacement fill or other
suitable materials and services as necessary at General Contractor's expense;
provided, however, that if such waste or contamination is present due solely to,
or is caused solely by, the acts or omissions of Contractor or any
Subcontractors, in such case the Contractor shall remove and, dispose of such
debris, soil or other materials in accordance with Law and shall provide
replacement fill or other suitable material and services as necessary, at its
expense.
3.6 Notice of Defect.
If the General Contractor becomes aware of any fault or defect in the Packing
House or nonconformance with the Contract Documents, it shall give prompt
written notice thereof to the Contractor and thereafter the Contractor shall
promptly correct such fault or defect and/or cure such nonconformance; provided,
however, that the General Contractor shall have no duty to inspect the Packing
House or to compare the Packing House with the Contract Documents, and its
failure to notify the Contractor of discoverable faults, defects or
nonconformance pursuant to this Section 3.6 because of failure to inspect or
compare shall not relieve the Contractor from any duties, obligations or
liabilities hereunder.
3.7 No Alcohol or Controlled Substances on Site;
Miscellaneous Regulations.
While on the Project Site, all personnel of the General Contractor and its
separate contractors, including the Packing House Lessee, shall obey the
regulations and other requirements provided in Sections 2.3.7 and 2.3.8 and all
other safety requirements established by the Contractor. General Contractor
shall ensure that its personnel and those of its invitees, agents and separate
contractors, including the Packing House Lessee, do not interfere with the
performance of the Work.
3.8 Interfaces.
The General Contractor shall, to the extent reasonably required to maintain the
Project schedule, assist the Contractor in coordinating the Contractor's work
with the work to be performed by others with respect to the Project (to the
extent the same may affect Contractor), including but not limited to the
interconnection or interfaces with the Pipeline.
3.9 Utilities and Consumables During Project Start-Up.
10
<PAGE>
The General Contractor shall supply the utilities and consumables (except
lubricants and spare parts) necessary for Project Start-Up.
3.10 Utilities During Construction.
During the period of construction, the General Contractor shall make available
sufficient quantities of electric power and water. The Contractor shall be
responsible for the payments of the above items pertaining to the use thereof.
ARTICLE 4 SUBCONTRACTS
4.1 Major Specialty Consultants, Subcontractors and Equipment Suppliers.
Set forth in Appendix G and in the Scope of Work are lists of all subcontractors
that the Contractor is considering for subcontracts in connection with the
Project. The General Contractor has approved each such subcontractor listed in
Appendix G, and the Contractor shall request review of, and the General
Contractor shall have the right to review, any subcontractor proposed to replace
one of those listed on Appendix G. The General Contractor and the Contractor
shall mutually agree on any such replacement. The Contractor may from time to
time delete one or more equipment vendors or subcontractors from said lists, and
may with prior approval of General Contractor, which shall not be unreasonably
withheld, add one or more subcontractors or suppliers to said lists.
4.2 Purchase Orders and Subcontracts.
All material purchase orders and subcontracts issued by the Contractor under
this Agreement shall provide, in form and substance reasonably acceptable to
General Contractor, that in the event this Agreement is terminated, upon tender
by the General Contractor or its designee of the Contractor's performance to any
Subcontractor, such purchase order or subcontract shall continue in full force
and effect in favor of the General Contractor or such designee, as appropriate.
4.3 Payments to Subcontractors.
Except as provided in Section 4.2, the Contractor shall be solely responsible
for paying each Subcontractor and any other person or entity to whom any amount
is due from the Contractor for services or supplies in connection with the
Project.
4.4 No Privity with Subcontractors.
The General Contractor shall have no contractual obligation to, and shall not,
except in respect of
11
<PAGE>
rights assigned by the contractor pursuant to Section 10.2, be deemed to be in
privity with any Subcontractor. General Contractor's approval or disapproval of
a Subcontractor pursuant to Section 4.1 hereof shall not relieve or release the
Contractor of any its duties, obligations or liabilities under the terms of this
Agreement.
ARTICLE 5 CONTRACT PRICE
5.1 Contract Price.
As full consideration to the Contractor for the full and complete performance of
the Project and all costs incurred in connection therewith, the General
Contractor shall pay and the Contractor shall accept, the sum of One Million
Four Hundred and Seventy-Five Thousand Dollars ($1,475,000) payable pursuant to
Article 13, subject to adjustment in accordance with Article 12 (the "Contract
Price").
5.2 Limitation of General Contractor's Liability.
The General Contractor shall not under any circumstances be liable for the
payment to the Contractor of any amounts in excess of the Contract Price, any
sums due and payable pursuant to the indemnification provisions of Article 14
hereof, and any interest due and payable pursuant to the terms of this
Agreement.
ARTICLE 6 COMMENCEMENT OF THE PROJECT, PROJECT START-UP AND COMPLETION
6.1 Commencement of Work.
The Contractor shall commence the services required under this Agreement
promptly upon receipt of a written notice to proceed with the Work (the "Notice
to Proceed") from General Contractor.
6.2 Project Start-up.
"Project Start-up" is that period (i) commencing on the date that the Contractor
first begins the checkout of systems and equipment for readiness, calibration,
functional and design verification testing, and other initial operations
functions, and (ii) ending upon Final Completion. The Contractor shall provide
the General Contractor with at least sixty (60) days' prior written notice of
the expected commencement of Project Start-up. At least thirty (30) days prior
to the expected commencement of Project Start-up, the Contractor shall submit
for approval by the General Contractor and Project Engineer copies of the
proposed functional and design verification testing protocols; approval of such
protocols shall not be unreasonably withheld or delayed. During Project
Start-up, the General Contractor may have its own or its designee's personnel on
site to observe and verify all procedures and testing activities conducted.
12
<PAGE>
6.3 Substantial Completion.
The Contractor shall achieve Substantial Completion of the Project on or before
the "Substantial Completion Deadline". Time is of the essence with respect to
such deadline. "Substantial Completion" shall mean (a) ( the Contractor has
completed all other Work on the Project under this Agreement except for the
balance of Project startup and clean up; (b) ( General Contractor has
acknowledged to the Contractor that the functional and design verification tests
have been successfully completed; (c) the Contractor has delivered to the
General Contractor a punch-list relating to those areas of the Packing House
other than the Greenhouse and Nursery, and consisting of minor items that are
not essential to the safe and prudent operation of the Packing house
(collectively with additional items identified by General Contractor, the "Final
Punch-List"), which Final Punch-List shall not have an aggregate cost exceeding
$50,000; and (d) the General Contractor has delivered to the Contractor a
Certificate of Substantial Completion.
6.4 Notice of Substantial Completion.
When the Contractor believes that it has achieved Substantial Completion, it
shall deliver to the General Contractor a notice thereof (the "Notice of
Substantial Completion").
6.5 Certificate of Substantial Completion.
The General Contractor shall, within five business days following the receipt of
the Notice of Substantial Completion inspect all Work, and either (a) deliver to
the Contractor a certificate certifying that clauses (a) and (b) of Section 6.3
have been satisfied (the "Certificate of Substantial Completion"), in which case
Substantial Completion will have been achieved as of the date the General
Contractor receives such Notice of Substantial Completion from the Contractor,
or (b) if the requirements for Substantial Completion have not been satisfied,
notify the Contractor in writing that Substantial Completion has not been
achieved, stating in detail the reasons therefor. In the event that Substantial
Completion has not been achieved, the Contractor shall promptly take such action
or perform such additional work as will achieve Substantial Completion and shall
issue to the General Contractor another Notice of Substantial Completion
pursuant to Section 6.7. Such procedure shall be repeated as necessary until the
earlier of (i) the issuance by the General Contractor of a Certificate of
Substantial Completion, which certificate shall not be unreasonably withheld, or
(ii) the issuance by General Contractor of a Certificate of Acceptance.
6.6 Acceptance of Project Upon Failure to Achieve Substantial Completion
Prior to the Substantial Completion Deadline.
If, on or before the date which is fifteen (15) days after the Substantial
Completion Deadline, the Contractor has not achieved Substantial Completion, the
Contractor may request in writing that the General Contractor accept the Project
by issuing a certificate of acceptance for the Project (the "Certificate of
Acceptance"). The General Contractor will, within five business days following
receipt of the Contractor's request therefor, either issue a Certificate of
Acceptance (at which time "Acceptance" shall be deemed to occur) or decline to
do so. Contractor's request for the issuance of a Certificate of Acceptance
shall not be unreasonably denied by General
13
<PAGE>
Contractor. Acceptance by General Contractor shall not relieve Contractor of its
obligations to achieve Final Completion or to pay liquidated damages pursuant to
Section 8.2 and 8.3 hereof.
6.7 Acceptance of Project Upon Failure to Achieve Substantial Completion
Prior to the Contract Deadline.
If the Contractor has not requested, or the General Contractor has declined to
issue, a Certificate of Acceptance pursuant to Section 6.9, the Contractor shall
be obligated to take such action or perform such additional work as will be
necessary to achieve Substantial Completion. Provided the General Contractor has
not terminated this Agreement pursuant to Article 16, if by the date which is
thirty (30) days after the Substantial Completion Deadline, the Contractor after
exercising due diligence has not achieved Substantial Completion, on such date
the General Contractor shall accept the Project ("Acceptance") by issuing a
Certificate of Acceptance. Such Acceptance by General Contractor shall not
relieve General Contractor of its obligation to achieve Final Completion or to
pay liquidated damages pursuant to Section 8.2 and 8.3 hereof.
6.8 Final Completion.
The Contractor shall achieve Final Completion of the Project on or before the
Contract Deadline. Time is of the essence with respect to such deadline. "Final
Completion" shall mean (a) Substantial Completion (or Acceptance) have been
achieved; (b) clean-up has been completed; (c) the General Contractor has
delivered to the Contractor a Certificate of Final Completion.
6.9 Notice of Final Completion.
When the Contractor believes that it has achieved Final Completion, it shall
deliver to the General Contractor a notice thereof (the "Notice of Final
Completion").
6.10 Certificate of Final Completion
The General Contractor shall, within five business days following the receipt of
the Notice of Final Completion inspect all Work, and either (a) deliver to the
Contractor a certificate certifying that clauses (a) through (c) of Section 6.8
have been satisfied (the "Certificate of Final Completion"), in which case Final
Completion will have been achieved as of the date the General Contractor
receives such Notice of Final Completion from the Contractor, or (b) if the
requirements for Final Completion have not been satisfied, notify the Contractor
in writing that Final Completion has not been achieved, stating in detail the
reasons therefor. In the event that Final Completion has not been achieved, the
Contractor shall promptly take such action or perform such additional work as
will achieve Final Completion and shall issue to the General Contractor another
Notice of Final Completion pursuant to Section 6.9. Such procedure shall be
repeated as necessary until the issuance by the General Contractor of a
Certificate of Final Completion, which certificate shall not be unreasonably
withheld.
ARTICLE 7 GENERAL CONTRACTOR'S RIGHT TO PLACE THE FACILITY IN COMMERCIAL
OPERATION; CARE, CUSTODY AND CONTROL
14
<PAGE>
7.1 General Contractor's Right.
The parties currently contemplate that the Packing House shall be occupied and
placed in Commercial Operation upon Substantial Completion. However, at any time
after the Substantial Completion Deadline the General Contractor or the Packing
House Operator may occupy any portion of the Packing House which is complete.
Moreover, at any time on or after ......., 19.., the General Contractor shall
have the right to place the Packing House in Commercial Operation, whether or
not the Contractor has achieved Substantial Completion or Acceptance. After the
General Contractor shall have placed the Packing House in Commercial Operation,
the General Contractor shall so notify the Contractor, and the Packing House
Operator shall thereafter operate the Packing House. The placing of the Packing
House in Commercial Operation by the General Contractor shall not excuse the
Contractor from completing all remaining Work on the Project nor constitute a
waiver of any of the Contractor's obligations under this Agreement. In the event
the General Contractor places the Packing House in Commercial Operation prior to
Substantial Completion or Acceptance, the General Contractor shall afford the
Contractor reasonable access to the Packing House to complete all remaining Work
on the Project.
7.2 Project Revenues.
The Contractor shall not be entitled to any revenues associated with the sale of
any fruit, vegetables, flowers or other produce from the Packing House.
7.3 Care, Custody and Control.
Care, custody and control of the Packing House shall pass from the Contractor to
the General Contractor upon the issuance of the Certificate of Substantial
Completion or the Certificate of Acceptance, or upon General Contractor's
election to place the Packing House in Commercial Operation, as the case may be.
General Contractor shall assume the risk of physical loss or damage to the Work
from and after the issuance of the Certificate of Substantial Completion or the
Certificate of Acceptance or the placing of the Packing House into Commercial
Operation, as the case may be. The Contractor shall be obligated to replace,
repair or reconstruct any of the Work which is damaged, destroyed or lost prior
to the passage of care, custody and control of the Packing House to General
Contractor.
ARTICLE 8 LIQUIDATED DAMAGES FOR FAILURE TO MEET SCHEDULE GUARANTEES
8.1 Schedule Guarantees. The Contractor provides the following schedule
guarantees:
8.1.1 Substantial Completion. The Contractor guarantees that Substantial
Completion shall be achieved on or before the Substantial Completion Deadline,
as such date may be modified in accordance with Article 12 hereof.
8.2 Liquidated Damages for Failure to Achieve Substantial Completion.
15
<PAGE>
As General Contractor's sole and exclusive remedy for Contractor's failure to
achieve Substantial Completion on or before the Substantial Completion Deadline,
the Contractor shall pay the following liquidated damages.
8.2.1 If the Contractor fails to achieve Substantial Completion on or
before the Substantial Completion Deadline, the Contractor shall pay to the
General Contractor, as liquidated damages, in addition to the sums set forth in
Section 8.2, the sum of $2,500 per day for each day that Substantial Completion
is delayed beyond the Substantial Completion Deadline.
8.3 Liquidated Damages Reasonable.
The General Contractor and the Contractor hereby acknowledge and agree that the
terms, conditions and amounts fixed pursuant to this Article 8 for liquidated
damages are reasonable, considering the damages that the General Contractor
would sustain in the event of the Contractor's failure to achieve the above
schedule guarantees. These amounts are agreed upon and fixed as liquidated
damages because of the difficulty of ascertaining as of the date hereof the
exact amount of damages that would be sustained in such event. Notwithstanding
the first sentences of Section 8.2 and 8.3, such payment of liquidated damages
shall not affect the General Contractor's rights provided in Article 15.
Liquidated damages for failure to achieve the schedule guarantees set forth in
Section 8.1 shall not be reduced by any revenues received by the General
Contractor from the sale of produce from the Packing House.
8.4 Time for Payment.
The Contractor shall pay liquidated damages required under this Article 8 on the
first business day following the end of each month in which such liquidated
damages accrue. If the Contractor fails to make timely payment of liquidated
damages, interest on any unpaid amount shall accrue from the due date at the
lesser of (a) the then prevailing Base Rate plus two percent (2%) per annum and
(b) the maximum permitted legal interest rate at the time prevailing and
applicable hereto.
ARTICLE 9 LIMITATION OF CONTRACTOR'S LIABILITY
9.1 Limitation.
The total aggregate liability of the Contractor with respect to its obligations
hereunder, including but not limited to warranty obligations, liquidated
damages, and its obligation to complete the Work, shall be limited to the
Contract Price.
9.2 Consequential Damages.
16
<PAGE>
Contractor shall not be liable for indirect, consequential, incidental, special
or punitive damages, including but not limited to damages to delay in or loss of
use of profits or products, lost income, or obligations of General Contractor to
third parties.
ARTICLE 10 WARRANTIES AND GUARANTEES
10.1 Materials and Workmanship.
The Contractor warrants to the General Contractor that A machinery, equipment,
materials and other items furnished under this Agreement will be new and of good
quality, free from improper workmanship and defective materials and shall
conform to the requirements of this Agreement. As the General Contractor's sole
remedy for any breach of this warranty, the Contractor agrees to correct within
ten (10) days after receipt of notice for General Contractor, and without
additional compensation, any Work performed hereunder that, at any time for a
period of one year after the earlier of Final Completion or the commencement of
Commercial Operation, proves to be improper or defective in material or
workmanship or not in conformance with the requirements of this Agreement. If
any machinery, equipment, materials or other items furnished under this
Agreement are replaced during the last six months of the original warranty
relating thereto, the warranty for such items shall be deemed extended until six
months after the date of replacement. In addition to correcting the improper,
nonconforming or defective Work itself, the Contractor shall bear all costs and
expenses associated with correcting such warranted Work including without
limitation necessary trouble shooting, disassembly, transportation, reassembly
and retesting, as well as reworking, repair or replacement of such Work, and
disassembly and reassembly of adjacent work when necessary to give access to the
improper, defective or nonconforming Work. The Contractor's warranty shall not
apply to damage arising from the Packing House Lessee's failure to comply with
prudent operating and maintenance practices in the commercial packing house
industry. For the purposes of this Section to 10.1, improper workmanship and
defective materials shall be deemed to include, but shall not be limited to, the
following: (i) faulty or defective materials, and defective, careless or
unskilled execution of the Work; (ii) damage by exposure to foreseeable weather,
windborne water or surface drainage; (iii) degradation such as uncontrolled
cracking or spatting of concrete, unit masonry, cast and natural stone,
millwork, plaster, glass and applied finishes such as paint and special
coatings; (iv) "potholing" of pavement; (v) mechanical or electrical equipment
which does not operate in a satisfactory, quiet and efficient manner as
determined by the General Contractor in its reasonable discretion, or which does
not perform the functions specified in the Scope of Work or Specifications; or
(vi) unusual injury or deterioration of the Work when in normal use by the
Packing House Lessee.
10.2 Vendor and Supplier Warranties.
The Contractor shall, for the protection of the General Contractor, obtain from
all Subcontractors guarantees and warranties with respect to machinery,
equipment, materials and other items used and installed hereunder, which
guarantees and warranties shall not be amended, modified or otherwise discharged
without the prior written consent of the General Contractor. Such guarantees and
warranties shall be in accordance with reasonable commercial packing house
17
<PAGE>
industry standards, shall be assignable to the General Contractor, shall cover a
period of not less than one year from the earlier of Final Completion or the
commencement of Commercial Operation, and shall be made available to the General
Contractor to the full extent of the terms thereof after assignment. The
Contractor shall enforce such guarantees and warranties to the fullest extent
thereof on behalf of the General Contractor until such time as they are assigned
to the General Contractor. Upon the earlier to occur of (i) issuance of the
Certificate of Final Completion, or (ii) termination of this Agreement pursuant
to Article 15, the Contractor shall assign to the General Contractor all the
Contractor's rights under Subcontractor guarantees and warranties and shall
deliver to the General Contractor copies of all contracts providing for such
guarantees and warranties.
10.3 Engineering and Design.
The Contractor warrants and guarantees that it shall perform all of its
engineering and design services in accordance with sound engineering practice,
Governmental Approvals and applicable Laws and that, when complete, the Project
will be free of all deficiencies caused by errors or omissions in engineering or
design. For a period of one year from the earlier of Final Completion or the
commencement of Commercial Operation, the Contractor shall, as the General
Contractor's sole remedy for breach of this warranty, at its own expense correct
any such efforts and omissions and resulting deficiencies in the Project as soon
as reasonably possible after receipt of notice from the General Contractor
specifying such deficiencies.
10.4 No Liens.
The Contractor warrants and guarantees that title to all work, materials,
supplies and equipment provided hereunder will pass to the General Contractor
upon payment by General Contractor therefor free and clear of all liens, claims,
security interests, charges and any other encumbrances or preferential
arrangements, including without limitation the lien or retained security title
of a conditional vendor ("Liens"), and that none of such work, materials,
supplies or equipment will be acquired by the Contractor subject to any
agreement under which a Lien is retained by any person or entity except as
otherwise provided by Law.
10.5 Limitation of Warranties.
EXCEPT AS PROVIDED HEREIN, THERE ARE NO WARRANTIES OR GUARANTEES, EXPRESS OR
IMPLIED, RELATING TO THE CONTRACTOR'S PERFORMANCE HEREUNDER, AND THE CONTRACTOR
DISCLAIMS ANY IMPLIED WARRANTIES OR WARRANTIES IMPOSED BY LAW (OTHER THAN
WARRANTIES OF TITLE).
ARTICLE 11 FORCE MAJEURE
11.1 Force Majeure Events.
As used in this Agreement, a "Force Majeure Event" means any act or event that
prevents the performance of the General Contractor or the Contractor under this
Agreement or the compliance with any conditions required by the other party
under this Agreement if such act or event is beyond the reasonable control of
the party relying thereon as justification for such
18
<PAGE>
nonperformance or noncompliance and such party has been unable to overcome such
act or event by the exercise of due diligence, including but not limited to (but
subject to the foregoing) flood, drought, unusually severe weather, earthquake,
storm, fire, explosion, sabotage or threat of sabotage of the Facility,
pestilence, epidemic, lightning and other natural catastrophes; war, riot, civil
disturbance or disobedience, action or inaction of legislative, judicial, or
regulatory agencies, or other proper authority, which may conflict with the
terms of this Agreement; failure, threat of failure or sabotage of equipment
supplied by Subcontractors for temporary services during performance of the Work
which has been maintained in accordance with good engineering and operating
practices applicable thereto; or loss or shortage of utilities. Economic
hardship and strikes, work stoppages or labor disturbances are explicitly
excluded as Force Majeure Events.
11.2 Limitation of Default.
Neither party shall be considered in default in the performance of any of the
agreements contained in this Agreement, except for the General Contractor's or
the Contractor's obligations to pay money when and to the extent the failure of
performance shall be caused by a Force Majeure Event.
11.3 Excused Performance.
If either party is rendered wholly or partly unable to perform its obligations
under this Agreement because of a Force Majeure Event, that party will be
excused from whatever performance is affected by the Force Majeure Event to the
extent so affected; provided that:
(a) the non-performing party, within five (5) days after the occurrence of
the Force Majeure Event, gives the other party written notice describing the
particulars of such occurrence, including an estimation of its expected duration
and probable impact on the performance of the affected party's obligations
hereunder, and continues to furnish timely regular reports with respect thereto
during the continuation of and upon the termination of the Force Majeure Event;
(b) the suspension of performance is of no greater scope and of no longer
duration than is reasonably required by the Force Majeure Event;
(c) the obligations of either party which arose before the occurrence
causing the suspension of performance and the performance of which is not
prevented by the occurrence, shall not be excused as a result of such
occurrence; and
(d) the non-performing party uses its best efforts to remedy its inability
to perform and mitigate the effect of such event and resumes its performance at
the earliest practical time after cessation of such occurrence.
11.4 Right to Terminate for Force Majeure.
If a suspension of performance by either party as a result of a Force Majeure
Event exceeds sixty (60) days, the party whose performance is unaffected by the
Force Majeure Event may terminate this Agreement pursuant and subject to the
terms of Section 15.4 hereof; provided, however that
19
<PAGE>
the Contractor may not terminate this Agreement pursuant to Section 15.4 hereof
if and to the extent that a Change relating to such Force Majeure Event shall
have been approved by the General Contractor and the Contractor pursuant to
Section 12.2.2 hereof.
ARTICLE 12 CHANGES IN THE PROJECT AND SUSPENSION
12.1 Changes.
At any time and from time to time prior to the issuance of the Certificate of
Final Completion, the General Contractor, without invalidating or amending this
Agreement, may order changes in the Project within the general scope of this
Agreement consisting of additions, deletions or other revisions (such changes,
and the changes permitted under Section 12.2, being referred to collectively
herein as "Changes"), in which event the Contract Price, the Substantial
Completion Deadline, the Contract Deadline, and the schedule of Major Milestones
set forth in Appendix H to this Agreement shall be adjusted accordingly, if
necessary, pursuant to Section 12.1.1. No Change will be effected without an
authorized Change Order (as defined in Section 12.1.2).
12.1.1 Procedure for Changes. Except as provided in Section 12.2, only the
General Contractor may initiate Changes. If the General Contractor wishes to
make a Change pursuant to this Section 12.1, it shall submit a written proposal
therefor to the Contractor. At no cost to the General Contractor, the Contractor
shall promptly review the General Contractor's proposal and provide the General
Contractor, within five (5) days thereafter, with notice in writing of the
effect, if any, such proposed Change would have on the Contract Price, the
Substantial Completion Deadline, the Contract Deadline, and the schedule of
Major Milestones. Such notice also shall include an analysis demonstrating (i)
the time impact, if any, of the proposed Change on the critical path items yet
to be completed (including the influence of such Change on the current dates
scheduled for Substantial Completion and Final Completion) and (ii) how the
Contractor proposes to incorporate the time impact on non-critical path items
into the schedule without schedule alleviation. If, in the Contractor's opinion,
Project schedule and/or performance may be maintained or adjustments thereof
minimized only by increasing the Contract Price, the Contractor shall, in such
notice, set forth possible trade-offs among or between Project cost, schedule
and performance so that the General Contractor may make an informed choice among
such alternatives in deciding whether to issue a Change Order. The Contractor
shall provide similar information to the General Contractor upon requesting a
Change pursuant to Section 12.2. The General Contractor shall promptly review
the information provided by the Contractor pursuant to this Section 12. 1.1 and
thereupon may issue a Change Order approving and authorizing such proposed
Change, in which event the cost, scheduling and performance alternative included
in the Contractor's notice described above and chosen by the General Contractor
shall be binding on the Contractor. The Contractor shall use all reasonable
efforts to minimize any effect adverse to the General Contractor of any Change
on Project cost, scheduling and performance. The Change Order issued by the
General Contractor will authorize an extension in the Substantial Completion
Deadline and/or the Contract Deadline only if the Contractor establishes, to the
General Contractor's reasonable satisfaction, that the nature of the
20
<PAGE>
proposed Change would necessitate such extension. All Changes, whether initiated
by the General Contractor or the Contractor under Section 12.2, shall be
authorized by a Change Order, and shall be performed pursuant to this Agreement.
Any change in the Project necessitated by any change in Laws Governmental
Approvals or Private Rights-of-Way after the effective date hereof shall be
treated as a Change pursuant to this Article 12 unless the change necessitated
comes within the definition of Modification, in which case it shall be treated
as a Modification pursuant to this Article 12.
12.1.2 Change Orders. A "Change Order" is a written order to the Contractor
signed by a duly authorized officer of the General Contractor authorizing a
Change in the Project. Upon execution and delivery of this Agreement, the
General Contractor shall deliver to the Contractor written notice signed by the
President of the General Contractor, stating which officers are authorized to
approve Change Orders. If and when, after execution and delivery of this
Agreement, another officer is selected by the General Contractor to approve
Change Orders, the General Contractor shall deliver to the Contractor another
notice signed by the President of the General Contractor so authorizing such new
officer to approve Change Orders. For the purpose of determining who has
authority to approve Change Orders, the Contractor shall be entitled to rely on
the latest notice delivered by the General Contractor pursuant to this Section
12.1.2 and received by the Contractor.
12.1.3 No Changes Due to Contractor Error. Notwithstanding anything in this
Article 12 to the contrary, no Changes shall be issued to correct errors or
omissions on the part of the Contractor which result in construction not in
accordance with the Contract Documents as they existed at the time of such error
or omission.
12.2 Other Changes.
12.2.1 Changes in Laws, Approvals or Rights-of-Way. In the event and to the
extent a change in Laws, Governmental Approvals or Private Rights-of-Way
necessitates a change in the Work, the Contractor may (and, if requested by the
General Contractor, shall) submit a written request for a Change to the General
Contractor, such Change to be incorporated into the Project upon approval by the
General Contractor, which approval shall not be unreasonably withheld, by
issuance of a Change Order pursuant to Section 12.1.1.
12.2.2 Changes Due to Delays in Force Majeure Events. In the event and to
the extent that (i) a Force Majeure Event prevents the Contractor's performance
hereunder, and all of the requirements of Section 11.3 (a) through (d) are
satisfied, the Contractor shall be entitled to (and if requested by General
Contractor, shall request) a Change pursuant to, and to the extent authorized
by, this Section 12.2.2. In such event, the Contract Price, the Substantial
Completion Deadline, the Contract Deadline, and the Schedule of Major Milestones
set forth in Appendix H to this Agreement shall be adjusted to the extent of the
actual and verifiable effects, if any, which Contractor demonstrates to the
reasonable satisfaction of the General Contractor that such delay or Force
Majeure Event has had upon Contractor's performance of its obligations
hereunder. Such Change shall be incorporated into the Project by issuance of a
Change Order pursuant to Section 12.1.1.
12.3 Modifications. Without invalidating or amending this Agreement, the
General
21
<PAGE>
Contractor may order and the Contractor may propose, subject to approval by the
General Contractor, modifications in the Project within the general scope, and
consistent with the intent, of the Contract Documents (such modifications being
referred to herein as "Modifications") consisting of additions, deletions or
other revisions, so long as such Modifications do not adversely affect the
Contract Price, Nursery Substantial Completion Deadline the Substantial
Completion Deadline, and the Contract Deadline.
12.4 Contract Price Change. A Contract Price increase, if any, resulting
from a Change in the Project shall be determined in one or more of the following
ways and paid by the General Contractor pursuant to the schedule of Progress
Payments adjusted accordingly:
12.4.1 By the General Contractor's acceptance of a lump sum proposed by the
Contractor properly itemized and supported by sufficient substantiating data to
permit evaluation; or
12.4.2 If the method set forth in Section 12.4.1 is not agreed upon after
good faith negotiation by the parties, the Contractor shall provide the General
Contractor with such purchase orders, invoices and other documents and records
as may enable the General Contractor to verify, to its reasonable satisfaction,
the cost to the Contractor of effecting such Change. All equipment, materials
and other items required as a result of such Change shall be purchased by the
Contractor at competitive market prices. The General Contractor shall, upon
verifying the cost to the Contractor of effecting such Change, add to the
Contract Price the amount thereof plus a fee of (i) ten percent (10%) if and to
the extent the Change is performed directly by the Contractor, or (ii) five
percent (5%) if and to the extent the Change is performed by a Subcontractor.
12.5 Continued Performance Pending Resolution of Disputes.
Notwithstanding a dispute regarding the adequacy of a Contract Price increase or
schedule adjustment for a proposed Change, or whether a Modification should be a
Change because it affects the Contract Price or schedule, the Contractor shall
proceed with the performance of such Change or Modification.
12.6 Suspension.
The General Contractor may, by written notice to the Contractor, suspend at any
time the performance of all or any portion of the Work to be performed under
this Agreement so long as (a) the Substantial Completion Deadline and the
Contract Deadline are extended an amount of time equal to the actual and
verifiable impact on the Project schedule caused by such suspension and (b) the
suspension of any material part on the Project schedule caused by such
suspension and (b) the suspension of any material part of the Work shall be for
a period not to exceed sixty (60) days. Suspension of the Work under this
Agreement may be accomplished only by the written notice described in this
Section 12.6.
12.7 Suspension Process.
22
<PAGE>
Upon receipt of a notice given pursuant to Section 12.6, the Contractor shall,
unless the notice requires otherwise:
(a) immediately discontinue work on the date and to the extent specified
in such notice;
(b) place no further orders or subcontracts for equipment, material,
services, or other items with respect to suspended work other than to
the extent required in such notice and to the extent required to
protect the Work;
(c) promptly make every reasonable effort to obtain suspension upon terms
satisfactory to the General Contractor of all orders, subcontracts and
rental agreements to the extent they relate to performance of
suspended;
(d) continue to protect and maintain the work performed including those
portions on which work has been suspended; and
(e) take any other reasonable steps to minimize costs, associated with
such suspension
12.8 Resumption of Work.
Upon receipt of notice from the General Contractor to resume suspended work, the
Contractor shall immediately resume performance under this Agreement to the
extent required in such notice.
12.9 Contract Changes Due to Suspension.
If the Contractor believes that any suspension or resumption of suspended Work
justifies a Change in the Contract Price, Substantial Completion Deadline, the
Contract Deadline or any other affected obligations of the Contractor hereunder,
the Contractor must, within 30 days after receipt of the notice of suspension or
resumption as the case may be, submit to the General Contractor a written
statement setting forth the justification for such a Change in reasonable
detail. If a Change is justified, the General Contractor shall issue a Change
Order under which the Contract Price, Substantial Completion Deadline, the
Contract Deadline and any other affected obligations of the Contractor under
this Agreement shall be equitably adjusted to compensate for the effect of the
suspension.
12.10 Termination Due to Suspension.
If a suspension by the General Contractor of all or a material portion of the
Work exceeds sixty (60) days the Contractor may terminate this Agreement in the
manner set forth in Section 13.3 hereof.
ARTICLE 13 PAYMENTS TO CONTRACTOR
23
<PAGE>
13.1 Monthly Progress Payments.
Progress payments shall be made by the General Contractor to the Contractor
according to the following procedure:
13.1.1 On or before the tenth day of each calendar month beginning with the
first month following receipt of the initial payment under Section 13.1, the
Contractor shall submit to the General Contractor an "Application for Payment,"
which shall include (i) the monthly progress report prepared pursuant to Section
2.4.1 (a), and (ii) an invoice reflecting an amount which has been determined
pursuant to the Application for Payment, the form of which is attached as
Appendix I, which amount, together with all previous amounts paid by the General
Contractor to the Contractor, shall reflect work on the Project actually
accomplished through the preceding calendar month. The Contractor agrees that it
will not include in any Application for Payment a bill for materials or
equipment until such materials or equipment have been delivered to the Project
Site. Similarly, the Contractor will not include in such Application for Payment
a bill for labor until such labor has been performed.
13.1.2 The General Contractor shall pay to the Contractor, twenty (20) days
after receipt of the Application for Payment, the amount determined pursuant to
Section 13.1.1 for Work performed during the month prior to the month in which
the Application for Payment is tendered, less Retainage (all such monthly
amounts paid by the General Contractor being herein referred to as "Progress
Payments"), subject to adjustment as provided in Section 13.1.3.
13.1.3 If the General Contractor disagrees with the Contractor's estimate
of actual Project progress (as reflected in an Application for Payment) and the
cumulative total of all amounts in dispute (reflecting the difference between
the Contractor's and the General Contractor's estimates of actual progress) does
not exceed $50,000.00, the General Contractor shall pay the Contractor such
disputed amount pursuant to Section 13.1.2 as part of the pertinent Progress
Payment, twenty (20) days after receipt of the Application for Payment. Any
disputed amounts in excess of $50,000.00 may be withheld from the Contractor by
the General Contractor, provided, however, that amounts withheld by the General
Contractor pursuant to this Section 13.1.3 shall be paid to the Contractor when
the Contractor has demonstrated, in an Application for Payment completed to the
reasonable satisfaction of the General Contractor, that actual progress
requiring such payment has been achieved.
13.1.4 "Retainage" shall be ten percent (10%) of the amount of each monthly
payment or other payment to be made by the General Contractor pursuant to
Sections 13.1. All Retainage shall be retained by the General Contractor and
paid by the General Contractor to the Contractor in accordance with Section
13.4.
13.1.5 If the General Contractor fails to make its Progress Payments
hereunder on or before the date due, or if the General Contractor withholds
payment of any amount pursuant to Section 13.1.3, and it is subsequently
determined that such withholding was not justified hereunder, interest on any
unpaid amount shall accrue from the due date at the lesser of (a) the Base Rate
plus two percent (2%) per annum or (b) the maximum permitted legal interest rate
at the time prevailing and applicable thereto.
24
<PAGE>
13.1.6 The General Contractor shall have no obligation to make any payment
to the Contractor while the Contractor is in material breach of this Agreement.
In addition, the General Contractor may withhold payment to the Contractor to
the extent reasonably necessary to protect the General Contractor from loss due
to: (i) detective Work not remedied; (ii) claims for payment or liens asserted
by the Contractor or any Subcontractor; (iii) the failure of the Contractor to
promptly pay any Subcontractor; (iv) damage to the person or property of any
separate contractor, agent, invitee or the General Contractor; or (v) reasonable
doubt on the General Contractor's part that the Project can be completed for the
balance of the Contract Price yet unpaid.
13.1.7 As promptly as possible after the Notice to Proceed, the Contractor
shall send the General Contractor and Project Lender a notice specifying all
Packing house equipment to be ordered from outside vendors, indicating the time
such equipment is to be ordered and specifying the General Contractor's cost
thereof. The Project Lender shall, upon receipt of the notice and the General
Contractor's and Project Lender's approval of the amounts and items specified
therein, set aside or otherwise designate for application to such equipment
purchases sufficient funds to pay for the Packing house equipment described in
the notice, and shall send the General Contractor and the Contractor written
confirmation of the same.
13.2 Waiver and Release of Liens.
The Contractor shall furnish to General Contractor, and shall require each
and every Subcontractor engaged to supply services or materials in an amount
greater than $50,000 in connection with the Project to furnish to the Contractor
for delivery to General Contractor, at the time of submission of each
Application for Payment and as a precondition to the making of the Final
Payment, a recordable waiver of its right to assert Liens on the Project, such
waiver to be substantially in the form of Appendix 1. 71c effectiveness of such
waivers shall be conditioned upon Contractor's receipt of payment from General
Contractor. If the Contractor fails to furnish a legally effective waiver or
fails to have any Lien released or discharged forthwith, in lieu thereof the
Contractor shall furnish a bond or other collateral satisfactory to the General
Contractor to indemnify the General Contractor against any loss resulting from
such Lien. In addition, until such release, discharge or bonding, the General
Contractor may withhold from any payment due the Contractor an amount sufficient
to discharge any or all such Liens or claims.
13.3 Payment Upon Completion.
Upon delivery of the Certificate of Final Completion, the General Contractor
shall pay the unpaid Retainage due to the Contractor (the "Final Payment").
13.4 Payment or Use Not Acceptance.
No payment made by the General Contractor shall Constitute an acceptance of any
of the Work not in accordance with this Agreement and the Scope of Work.
13.5 Waiver by General Contractor.
25
<PAGE>
The making of the Final Payment shall constitute a waiver of all claims by the
General Contractor except:
(i) those arising from unsettled liens, security interests or other
encumbrances;
(ii) those arising from any warranties, guarantees and indemnities
provided hereunder; and
(iii) those arising from Final Punch-List and clean-up items.
13.6 Waiver by Contractor.
Acceptance of the Final Payment shall constitute a waiver of all claims by the
Contractor except for unpaid Retainage and unresolved claims for Changes
previously asserted in writing by the Contractor.
ARTICLE 14 INDEMNITY, INSURANCE AND WAIVER OF SUBROGATION
14.1 Indemnity.
14.1.1 Indemnity by Contractor. The Contractor hereby indemnifies and holds
harmless the General Contractor, and its shareholders, directors, officers and
employees (each being hereinafter referred to as an 'Indemnified Party') from
and against any and all loss, cost (including reasonable attorneys' fees),
damage, injury, liability, claims, demands, interest and causes of action (a)
for bodily injury or property damage that may arise from the Contractor's
operations under this Agreement, except to the extent arising from The
negligence or misconduct of such Indemnified Party, (b) because of any violation
of Law to be complied with by the Contractor hereunder, (c) in respect of any
taxes levied on the Contractor or in respect of the Contractor's net income or
(d) in respect to any demands or Liens by Subcontractors for nonpayment of
amounts due as a result of furnishing materials or work to the Contractor which
are payable by the Contractor for Work on the Project performed pursuant to this
Agreement.
14.1.2 Indemnity by General Contractor. The General Contractor hereby
indemnifies and holds harmless the Contractor and its shareholders, directors,
officers and employees (each being hereinafter referred to as an 'Indemnified
Party') from and against any and all loss, cost (including reasonable attorneys'
fees), damage, injury, liability, claims, demands, interest and causes of action
(a) for bodily injury or property damage to the extent such may arise, from the
negligence or misconduct of General Contractor in connection herewith, (b)
because of violation of Law to be complied with by General Contractor hereunder,
or (c) in respect of any taxes levied on the General Contractor or in respect of
the General Contractor's net income.
14.1.3 Procedure. When required to indemnify an Indemnified Party in
accordance with this Agreement, the indemnifying party shall assume on behalf of
such party, and conduct with due diligence and in good faith, the defense of any
such suit against such party,
26
<PAGE>
whether or not the indemnifying party be joined therein; provided, however, that
without relieving the indemnifying party of its obligations hereunder, the
Indemnified Party may elect to participate, at its expense, in the defense of
any such suit.
14.2 Contractor's Insurance. At its own expense, the Contractor shall
secure and maintain during the term of this Agreement the following insurance
with the coverage amounts indicated for occurrences during and arising out of
the Contractor's performance of this Agreement. Such insurance shall be placed
with responsible and reputable insurance companies qualified to do business in,
the State of Texas and shall be effective as of at least thirty (30) days prior
to the date of the Notice to Proceed and maintained until Final Completion.
Deductible amounts shall be the responsibility of the Contractor. The Contractor
shall also be responsible for fifty percent (50%) of the deductible amounts with
respect to the Builder's Risk Insurance described in Section 14.6 hereof. If the
General Contractor purchases Builder's Risk Insurance with deductibles in excess
of those specified in Section 14.6, the Contractor's responsibility for such
deductibles shall be limited to fifty percent (50%) of the deductible amounts
specified in Section 14.6.
Type Coverage/Amount
Workers' Compensation Insurance As required by the State
including occupational of Texas
disease coverage
Employer's Liability $500,000 each accident
$500,000 each
employee-disease
$500,000 policy
limit-disease
Comprehensive General Liability, $1,000,000 per occurrence
with the following
coverages:
Premises--Operations; Independent
Contractors and Subcontractors
Protective; Products/Completed
Operations; Broad
Form Property Damage;
Contractual Liability (Broad
Form) Including Third Party
Coverage; Explosion, Collapse,
Underground Hazard,
and Personal Injury
Comprehensive Automobile
Liability, including coverage
for all owned, hired
and non-owned vehicles $1,000,000 combined single
27
<PAGE>
limit, per occurrence
Excess Liability $5,000,000 per occurrence
14.2.1 Evidence of Coverage. The Contractor shall provide certificates of
insurance to the General Contractor evidencing all insurance policies required
pursuant to this Section 14.2. The certificates evidencing Comprehensive General
Liability, Comprehensive Automobile Liability and Excess Liability shall each
certify that:
(1) During the Contractor's performance under this Agreement, the General
Contractor and the Project Lender shall be named as additional insureds and loss
payees under such policies (without any representation or warranty by or
obligation upon such entities) as their interests may appear for occurrences
during and arising out of the Contractor's performance of this Agreement;
(2) such insurance is primary insurance with respect to the interests of
the General Contractor and the Project Lender, and any other insurance
maintained by them is excess and not contributory with this insurance; and
(3) such policies provide that (a) the inclusion of more than one
corporation, person, organization, firm or entity as insured thereunder shall
not in any way affect the rights of any such corporation, person, organization,
firm or entity as respects any claim, demand, suit or judgment made, brought or
recovered, by or in favor of any other insured, or by or in favor of any
employee of such other insured, and (b) each corporation, person, organization,
firm, or entity is protected thereby in the same manner as though a separate
policy had been issued to each, but nothing therein shall operate to increase
the insurance company's liability as set forth elsewhere in the policy beyond
the amount for which the insurance company would have been liable if only one
person or interest had been named as insured.
14.2.2 Contents of Certificates. The certificates evidencing all insurance
provided under this Section 14.2 shall each certify that (a) under such policy
there will be no recourse against the General Contractor or any of the banks
comprising the Project Lender or any of their assignees for payment of a premium
and (b) such policy may not be canceled or materially altered by the insurance
company without giving 60 days' prior written notice of cancellation or
alteration to the General Contractor and the Project Lender.
14.3 Property Insurance Loss Adjustment.
Any insured loss shall be adjusted with the General Contractor and the
Contractor and made payable to the General Contractor and the Contractor as
their interests may appear, subject to any applicable mortgagee clause.
14.4 Waiver of Subrogation.
All insurance policies supplied by either party to this Agreement shall include
a waiver of any right of subrogation of the insurers thereunder against the
other party and any of the banks
28
<PAGE>
comprising the Project Lender, and of any right of the insurers to any set-off
or counterclaim or any other deduction, whether by attachment or otherwise, in
respect of any liability of any such person insured under such policy.
14.5 Subcontractor Insurance.
The Contractor shall require all Subcontractors to obtain, maintain and keep in
force, during the time in which they are engaged in performing services to be
furnished by the Contractor hereunder, adequate coverage in accordance with the
Contractor's normal practice or the Contractor shall maintain such coverage
under its own insurance policies.
14.6 General Contractor's Insurance.
General Contractor shall procure at its own expense and maintain in full force
and effect from and after the issuance of the Notice to Proceed, with
responsible and reputable insurance companies qualified to do business in the
State of Texas, builder's risk insurance as described below and worker'
compensation, general liability and automobile liability insurance in amounts
comparable to the coverages carried by the Contractor hereunder, and excess
liability insurance in the amount of $5,000,000. General Contractor shall
provide certificates of insurance to the Contractor evidencing all insurance
policies required under this Section 14.6.
Builder's Risk Contract Price
Deductibles: $ 25,000
The certificate evidencing the builder's risk insurance shall certify that the
policy (a) provides for all losses to be paid directly to the General
Contractor, and (b) shall name the Contractor and each of the banks comprising
the Project Lender as insured parties thereunder (without any representation or
warranty by or obligation upon such entities) as their interests may appear. As
to the remaining coverages, with the exception of workers' compensation, and
only as to matters within the scope of the General Contractor's indemnity under
Section 14.1.2, such policies (a) shall name Contractor as an additional
insured, and (b) shall be primary and not excess to or contributing with any
insurance maintained by the Contractor.
14.7 No Effect on Liability.
The requirement that the Contractor, Subcontractors or General Contractor
furnish certain minimum insurance coverages is not to be interpreted as in any
way limiting the liability of the Contractor or General Contractor as the case
may be, nor does either party, by furnishing or requiring evidence of certain
minimum insurance, assume, or intend to assume, any liability that it would not
otherwise have in the absence of such a requirement.
ARTICLE 15 TERMINATION
15.1 Termination By General Contractor for Cause. In the event:
29
<PAGE>
(a) at any time prior to issuance of the Certificate of Final Completion,
the Contractor shall abandon or, except as permitted in Sections 12.6 and 12.7,
otherwise cease efforts to achieve Final Completion in a diligent manner; or
(b) (i) the Contractor fails to achieve a Major Milestone within thirty
(30) days after the corresponding milestone date indicated in Appendix H, or (H)
at any time prior to the issuance of the Certificate of Final Completion an
unexcused act or omission of the Contractor has materially affected its ability
to complete the Project pursuant to this Agreement by the Contract Deadline and
such unexcused act or omission persists for a period of thirty (30) days, and in
the case of either (b) (i) or b (H), the Contractor fails to cure such default
within fifteen (15) days after receiving notice thereof from the General
Contractor (unless such default is of a nature that it cannot be cured within
such fifteen (15) day period, in which case the Contractor shall be in
compliance herewith if it presents a plan for such cure which is reasonably
acceptable to General Contractor, commences such cure within such fifteen (15)
day period, and diligently pursues such cure to completion within sixty (60)
days after the aforestated notice from the General Contractor or such longer
period as General Contractor may accept in its sole discretion); or
(c) all items on the Final Punch-List and all clean-up have not been
completed by the Contract Deadline; then the General Contractor may, without
prejudice to any legal or equitable remedy it may have, terminate this
Agreement, take possession of the Project Site and complete the Project by
whatever reasonable method it may deem expedient, and the Contractor shall be
liable to the General Contractor for any and all cost or expense in excess of
the unpaid portion of the Contract Price occasioned thereby, such amount to be
payable within thirty (30) days after the General Contractor has provided a
notice setting forth the amount thereof. The General Contractor may take
possession of and utilize, in completing the Project, any materials, tools,
supplies, equipment and appliance, belonging to the Contractor or any of its
Subcontractors that are at the Project Site. In such event, the General
Contractor may exercise any rights, claims or demands that the Contractor may
have against third persons in connection with this Agreement (including but not
limited to tender of performance to Subcontractors as described in Section 4.2)
and for such purpose, the Contractor does hereby, to the extent possible,
assign, transfer and set over unto the General Contractor all such rights,
claims and demands and agrees to execute whatever documents the General
Contractor deems appropriate to effect such assignment, transfer or set-over.
Neither such exercise by General Contractor of rights, claims or demands against
third persons, nor such assignment, transfer or set over by Contractor, shall
relieve Contractor of its liability to pay General Contractor's costs or
expenses to complete the Project in excess of the unpaid portion of the Contract
Price.
15.2 Termination Upon Bankruptcy.
If (a) the Contractor shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy law now or hereafter in effect or seeking the
appointment of a custodian of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking possession
by any
30
<PAGE>
such custodian in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing or (b) an involuntary case or other
proceeding shall be commenced against the Contractor seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy law now or hereafter in effect or seeking the appointment of a
custodian of it or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and unstayed for a period of
sixty (60) days, or an order for relief shall be entered against the Contractor
under any bankruptcy law as now or hereafter in effect, then, if the Contractor
is unable to diligently perform and does not continue so to perform its
obligations hereunder, this Agreement may be terminated by the General
Contractor who may then exercise any and all rights provided in Section 15.1.
15.3 Termination By General Contractor Without Cause.
The General Contractor may cancel this Agreement at any time for its convenience
upon thirty (30) days' prior written notice to the Contractor. In the event of
such cancellation, the General Contractor shall pay the Contractor for all the
Contractor's actual costs incurred to the date of cancellation, including the
costs incurred for undelivered material and equipment and other similar Project
obligations and for the Contractor's reasonable overhead and lost profits on the
Project, less any amounts previously paid by the General Contractor; provided,
however, that in no event shall the General Contractor's liability for such
actual costs exceed the amount set forth below with respect to the calendar
month after issuance of the Notice to Proceed in which cancellation occurs.
1 month $ 200,000
2 months $ 300,000
3 months $ 400,000
After 3 months Actual costs, not to exceed unpaid balance of
Contract Price
The Contractor shall submit to the General Contractor all invoices and other
documentation as is sufficient to verify the amount to be paid under this
Section 15.3. The General Contractor shall pay such amount to the Contractor,
and shall release the letter of credit provided pursuant to Section 9.1 hereof,
within thirty (30) days of receipt of such documentation. The Contractor shall
mitigate to the fullest extent reasonably possible all expenses to be borne by
the General Contractor under this Section 15.3.
In the event of such cancellation, the General Contractor may further elect to
assume any or all of the obligations, commitments and unsettled claims that the
Contractor has previously undertaken or incurred in good faith in connection
with performance of the Contractor's obligations hereunder. The Contractor shall
to the extent reasonably possible, as a condition to receiving cancellation
payments referred to in this Section, execute and deliver such papers and take
all such steps, including the legal assignment of its contractual rights, as the
General Contractor may require for the purpose of fully vesting in the General
Contractor the rights and benefits of the Contractor under such obligations,
commitments or claims.
15.4 Termination Due to Suspension.
31
<PAGE>
If the General Contractor elects to suspend performance of all or a material
part of the Work and the duration of such suspension exceeds sixty (60) days,
the Contractor may terminate this Agreement, provided it gives the General
Contractor written notice of its intent to terminate not less than thirty (30)
days prior to the end of such sixty (60) day period and General Contractor fails
to order a resumption of suspended Work before the sixty (60) day period
expires. In such event, the Contractor shall be compensated for all Work
satisfactorily performed through the date of termination, plus its reasonable
costs associated with suspension of the Work and a fee equal to ten percent
(10%) of such suspension costs. In the event of such termination, the General
Contractor may elect to assume any or all of the obligations, commitments and
unsettled claims that the Contractor has previously undertaken or incurred in
good faith in connection with performance of the Contractor's obligations
hereunder. The Contractor shall to the extent reasonably possible, as a
condition to receiving the termination payments referred to in this Section,
execute and deliver such papers and take all such steps, including the legal
assignment of its contractual rights, as the General Contractor may require for
the purpose of fully vesting in the General Contractor the rights and benefits
of the Contractor under such obligations, commitments or claims.
15.5 Termination Due to Event of Force Majeure.
If either (i) a material suspension of performance by either party as a result
of a Force Majeure Event exceeds sixty (60) days, or (H) the total number of
days in which a material suspension of performance by either party as a result
of all Force Majeure Events in the aggregate exceeds sixty (60) days, the party
whose performance is unaffected by the Force Majeure Event may terminate this
Agreement, provided it gives the other party written notice of its intent to
terminate not less than thirty (30) days prior to the end of the applicable
period and the other Party fails to resume performance before the period
expires; provided, however, that the Contractor's right to terminate under this
Section 15.5 shall be subject to the limitations set forth in Section 11.4
hereof. Upon such termination, the Contractor shall be compensated for all Work
satisfactorily performed through the date of termination, plus its reasonable
costs associated with the Force Majeure Event suspension and a fee equal to ten
percent (10%) of such suspension costs. However, such termination shall not
relieve Contractor of its obligation to pay liquidated damages which become due
and payable prior to the termination hereof pursuant to Sections 8.2 or 8.3
hereof. In the event of termination by either party pursuant to this Section
15.5, the General Contractor may elect to assume any or all of the obligations,
commitments and unsettled claims that the Contractor has previously undertaken
or incurred in good faith in connection with performance of the Contractor's
obligations hereunder. The Contractor shall, to the extent reasonably possible,
as a condition to receiving termination payments referred to in this Section,
execute and deliver such papers and take all such steps, including the legal
assignment of its contractual rights, as the General Contractor may require for
the purpose of fully vesting in the General Contractor the rights and benefits
of the Contractor under such obligations, commitments or claims.
ARTICLE 16 ASSIGNMENTS AND CHOICE OF LAW
16.1 No Assignment by Contractor.
32
<PAGE>
The Contractor shall not assign this Agreement or any interest in any funds that
may be due or become due hereunder or enter into any contract with any person,
firm or corporation for the performance of the Contractor's obligations
hereunder or any part thereof, except as specifically provided herein, without
the prior approval in writing of the General Contractor. If the Contractor, with
the consent of the General Contractor, shall enter into a subcontract with any
Subcontractor for the performance of any part of this Agreement, the Contractor
shall be as fully responsible to the General Contractor for the acts and
omissions of such Subcontractor and of persons employed by such subcontractor as
the Contractor would be for its own acts and omissions and those of persons
directly employed by it. Nothing in this Section 16.1 shall be read to limit the
General Contractor's rights to assign its interest in this Agreement or the
Project under Section 16.2.
16.2 Assignment by General Contractor.
The General Contractor shall be entitled to freely assign this Agreement and its
rights, titles and interests hereunder, to:
(a) any affiliate of the General Contractor (including any joint venture or
general or limited partnership in which the General Contractor or its affiliate
is a general partner) ; or
(b) any person, corporation, bank, trust, company, association or other
business or governmental entity (including but not limited to the Project
Lender) as security in connection with obtaining or arranging financing for the
Packing House; or
(c) any successor entity (whether by merger, by consolidation, by sale of
substantially all the assets or by the enforcement of the security interest
described in (b) above). Upon each permitted assignment described in this
Section 16.2 (other than in clause (b) above) by the General Contractor, the
assignee shall expressly assume in writing all of the obligations of General
Contractor hereunder. Upon the request of the General Contractor, the Contractor
shall acknowledge in writing any permitted assignment described in clause (b)
above and the right of any permitted assignee to enforce this Agreement against
the Contractor. Such acknowledgment of a permitted assignment described in
clause (b) shall be substantially in the form of Appendix K hereto.
16.3 Extension to Successors and Assigns.
Each and all of the covenants and agreements herein contained shall extend to
and be binding upon the successors and permitted assigns of the parties hereto.
16.4 Choice of Law.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Texas, excluding conflict-of-laws provisions which would direct the
application of the laws of another state. The parties agree that all actions or
proceedings arising in connection with this Agreement shall be tried and
litigated in any Texas state court or any federal court sitting in the State of
Texas.
33
<PAGE>
ARTICLE 17 DRAWINGS, DOCUMENTS AND MATERIALS
17.1 General Contractor's Review.
All plans and drawings, calculations, specifications and other related design,
construction, performance test and start-up information, and results of any
supporting design, construction, performance test and start-up calculations,
prepared in connection with engineering, construction, performance test and
start-up services, shall be delivered to the General Contractor as such
documents are completed, as specified in Appendix L. The procedure for submittal
and review of such documents shall be as set forth in Sections 17. 1. 1 and
17.1.2 and Schedule I.
17.1.1 Submittal of Documents. The Contractor shall prepare and submit to
the General Contractor in accordance with Appendix L, the Packing house plans
and drawings, which shall include, but not be limited to, plot plans, general
arrangements drawings, architectural drawings including Headhouse layout
drawings, piping and instrumentation diagrams, and electrical one-line diagrams
of the Packing house (collectively, the "Plans and Drawings'), and design
calculations for the Packing house. The preliminary and/or approved for
construction issue of the above documents will provide the General Contractor
with Project definition, and provide the Contractor with (i) the information and
data required to prepare purchase specifications and data sheets for major
equipment and (ii) the definition required to complete construction drawings The
Contractor also shall submit to the General Contractor preliminary and final
checked calculations when prepared.
17.1.2 Return of Plans and Drawings. One copy of each of the Plans and
Drawings submitted by the Contractor pursuant to Section 17. 1.1 shall be
returned by the General Contractor to the Contractor as soon as possible in the
exercise of General Contractor's best efforts, but no later than fifteen (15)
working days after receipt, stamped either:
(a) "Returned Without Comment"; or
(b) "Returned with Comments".
Review by the General Contractor under this Section 17.1.2 of the submitted
Plans and Drawings shall be solely in the discretion of the General Contractor.
Failure of the General Contractor to return Plans and Drawings to the Contractor
within such fifteen (15) working day period shall be construed as having
returned the same without comment. Plans and Drawings which are returned marked
"Returned with Comments' shall bear comments which specify in detail the General
Contractor's concerns or questions regarding the contents of such document. The
Contractor may elect to proceed with the Work set forth in such Plans and
Drawings prior to the return of the same by General Contractor, but shall do so
at the Contractor's sole risk and expense. The Contractor shall respond to the
General Contractor advising its disposition of the General Contractor's comments
within five (5) days after receipt thereof.
17.2 Contractor's Duty.
Review (or lack thereof) by the General Contractor, its designees or the Project
Engineer of any Project documents provided by the Contractor, and the fact that
the General Contractor, its
34
<PAGE>
designees or the Project Engineer has not discovered any errors reflected in
such Project documents, shall not relieve or release the Contractor of any of
its duties, obligations or liabilities under the terms of this Agreement.
17.3 Final Documents and All Other Documents Furnished.
Upon the issuance of the Certificate of Final Completion, the Contractor shall
furnish the General Contractor with all final (including as-built) documents
pertaining to the design, construction and operation of the Packing house, which
documents are listed in Appendix L. If this Agreement is terminated prior to
Final Completion, the Contractor shall furnish the General Contractor with any
and all final (including as-built) documents which have been prepared, and the
most up-to-date versions of documents which are not yet final. All other
documents, drawings and materials shall be submitted in the form and as required
in Appendix L.
17.4 Ownership of Drawings and Documents.
17.4.1 Property of General Contractor. All drawings, tracings,
specifications and other documents prepared by or for the Contractor in respect
of the Project and all drawings, tracings, specifications, calculations,
memoranda, data, notes and other materials containing information supplied by
the General Contractor which shall come into the Contractor's possession during
its performance hereunder, shall be the sole and exclusive property of the
General Contractor, and such documents and other materials shall be returned to
the General Contractor upon the earliest of the General Contractor's placing the
Packing house in Commercial Operation pursuant to Article 7, Final Completion or
termination of this Agreement. Subject to Section 18. 1, the Contractor shall
have the right to retain and use, solely and specifically for the Project, a
reproducible set of all drawings, tracings, specifications and other documents
prepared by or for the Contractor in respect of the Project.
17.4.2 Reuse of Documents by General Contractor. All drawings, tracings,
specifications, and other documents prepared by or for the Contractor pursuant
to this Agreement are instruments of service with respect to this Project. They
are not intended or represented to be suitable for reuse by General Contractor
or others on extensions of this Project or on any other project. Any reuse
without written verification or adaptation by the Contractor for the specific
purpose intended will be at General Contractor's sole risk and without liability
or legal exposure to the Contractor, and General Contractor shall indemnify and
hold harmless the Contractor against all claims, damages, losses, and expenses
including attorneys' fees, arising out of or resulting from such unauthorized
reuse.
17.5 Ownership of Materials.
Title to all materials and equipment incorporated or to be incorporated in
construction shall vest in the General Contractor upon payment therefor by
General Contractor, so that the General Contractor will have full title to said
materials and equipment at such times and that upon Final Payment title to the
completed Facility will have vested in the General Contractor; provided,
however, that construction equipment, small tools and other equipment owned by
the Contractor or third parties not necessary to the completion of the Project
or continued operation of the Facility shall remain the sole property of their
respective owners.
35
<PAGE>
ARTICLE 18 MISCELLANEOUS PROVISIONS
18.1 Confidential Information.
The General Contractor and the Contractor agree to hold in confidence, except as
may be reasonably necessary from time to time to their performance hereunder,
obtain financing for the Project or fulfill requirements of government
authorities, any information supplied to the General Contractor or the
Contractor, as the case may be, by the other party and designated in writing as
confidential. The Contractor further agrees to require its Subcontractors and
employees to enter into appropriate non-disclosure agreements relating to such
confidential information a may be communicated to them by the Contractor. The
provisions of this Section 18.1 shall not apply to information within any one of
the following categories or any combination thereof: (a) information which was
in the public domain prior to the receiving party's receipt thereof from the
disclosing party or which subsequently becomes part of the public domain by
publication or otherwise except by the receiving party's wrongful act; (b)
information which the receiving party demonstrates was lawfully in its
possession prior to receipt thereof from the disclosing party through no breach
of any confidentiality obligation; or (c) information received by the receiving
party from a third party having no obligation of confidentiality with respect
thereto. The Contractor shall not publish information or photographs regarding
the Project and shall not permit or accompany any third party not connected with
the Project onto the Project Site without the express written permission of the
General Contractor. The Contractor shall not take, or permit to be taken any
photographs of the Project Site (except for the sole purpose of performing its
obligations hereunder) without the prior written consent of the General
Contractor.
18.2 Uses of Premises.
The Contractor shall confine its apparatus, the storage of materials and
construction equipment and the operations of its workers to limits imposed by
applicable Laws, Governmental Approvals and Private Rights-of-Way, or the
reasonable directions of the General Contractor, and shall not unreasonably
encumber the premises with its materials and construction equipment.
18.3 Independent Contractor.
The Contractor shall be an independent contractor with respect to the Project,
or any part thereof, and in respect of all work to be performed hereunder.
Neither the Contractor nor its Subcontractors, nor the employees of either,
employed on the Project shall be deemed to be agents, representatives, employees
or servants of the General Contractor by reason of their performance hereunder
or in any manner dealt with herein. The General Contractor and the Contractor
hereby covenant and agree that in the approval of key employees or major
equipment vendors of Contractor, approving or furnishing of plans and
specifications, should any be furnished by the General Contractor, or in the
making of inspections by the General Contractor, or in the taking of any other
action or the exercise of any right pursuant to this Agreement, the General
Contractor is acting for and on its own behalf and not as agent of the
Contractor. The General Contractor and the Contractor hereby further covenant
and agree that, in the performance of work hereunder by the Contractor, it shall
not do any act or make any
36
<PAGE>
representation to any person or persons to the effect that the Contractor, or
any of its agents, representatives or Subcontractors, is the agent of the
General Contractor.
18.4 Contractor's Obligations.
The approval and consent by the General Contractor to the Contractor's entering
into any subcontract shall not relieve the Contractor of any of its duties,
liabilities or obligations hereunder, and the Contractor shall be liable to the
same extent as if no such subcontract had been entered into.
18.5 New Developments.
During the term of this Agreement, the Contractor's program of research and
development may result in potential improvements to the work to be performed
hereunder. Any such potential improvements shall be offered to the General
Contractor, and, if accepted by the General Contractor, shall be treated as a
Change or Modification pursuant to Article 12.
18.6 Representations.
18.6.1 Each party hereby represents to the other that:
(a) it has legal power and authority to enter into and carry out the terms
of this Agreement, which constitutes a legal, valid and binding obligation of it
enforceable against it in accordance with its terms; provided, however, that the
enforcement of the rights and remedies herein is subject to bankruptcy and other
similar laws of general application affecting the rights and remedies of
creditors and that the remedy of specific performance or of injunctive relief is
subject to the discretion of the court before which any proceedings therefor may
be brought; and
(b) the consummation of the transactions contemplated by, and compliance
with all the terms and provisions of, this Agreement will not violate any
provisions of such party's Certificate of Incorporation or Bylaws and will not
result in a breach of the terms and provisions of, or constitute a default
under, any other agreement or undertaking by such party or by which it or any of
its property is bound or any order of any court or administrative agency entered
in any proceedings in which it is or has been a party.
18.6.2 The Contractor hereby represents to the General Contractor that, as
of the effective date of this Agreement (and such representations of the
Contractor shall, with any changes reported to the General Contractor pursuant
to Section 2.4.1(a) (iii), be deemed reaffirmed in each Application for
Payment):
(a) The Contractor is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Texas and duly qualified to do
business in and in good standing under the laws of the State of Texas.
(b) The unaudited consolidated balance sheets of the Contractor and its
affiliates as at December 31, 1996, and the related statements of income and
retained earnings of the Contractor for the fiscal year then ended, copies of
which have been furnished to the General Contractor,
37
<PAGE>
fairly present the financial condition of the Contractor and its affiliates as
of such dates and the results of operations of the Contractor and its affiliates
for the periods ended on such dates, all in accordance with generally accepted
accounting principles consistently applied; and since such dates there has been
no material adverse change in such condition or operations.
(c) The Contractor is not presently contemplating (i) the commencement of a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy law in effect,
(ii) the appointment of a custodian of it or any substantial part of its
property, (iii) a general assignment for the benefit of creditors, (iv) not
generally paying its debts as they become due, or (v) corporate action to
authorize any of the foregoing.
18.7 Rights Reserved by the General Contractor.
The General Contractor reserves the right to require the removal from the
Project Site of any employee of the Contractor or of any Subcontractor if in the
reasonable judgment of the General Contractor such removal shall be necessary in
order to protect the interests of the General Contractor.
18.8 Cumulative Remedies.
Except as expressly provided otherwise herein, every right or remedy herein
conferred upon or reserved to the General Contractor or Contractor shall be
cumulative, shall be in addition to every right and remedy now or hereafter
existing at law or in equity or by statute, and the pursuit of any right or
remedy shall not be construed as an election.
18.9 Non-Waiver Clause.
It is understood and agreed that any delay, waiver or omission by the General
Contractor or the Contractor to exercise any right or power arising from any
breach or default by the other party of any of the terms or provisions of this
Agreement shall not be construed to be a waiver by the General Contractor or the
Contractor of any subsequent breach or default of the same or other terms or
provisions on the part of the other party.
18.10 Severability.
In the event that any of the provisions, or portions or applications thereof, of
this Agreement are held to be unenforceable or invalid by any court of competent
jurisdiction, the General Contractor and the Contractor shall negotiate an
equitable adjustment in the provisions of this Agreement with a view toward
effecting the purpose of this Agreement, and the validity and enforceability of
the remaining provisions, or portions or applications thereof, shall not be
affected thereby.
18.11 Amendments.
No amendments or modifications of this Agreement shall be valid unless evidenced
in writing and signed by duly authorized representatives of both the General
Contractor and the Contractor.
38
<PAGE>
18.12 Article and Section Headings.
The Article and Section headings have been inserted for convenience of reference
only and shall not in any manner affect the construction, meaning or effect of
anything herein contained nor govern the rights and liabilities of the parties
hereto.
18.13 Notices.
Except as otherwise provided herein, all notices and demands pertaining to or
required to be given under this Agreement shall be in writing and shall be
delivered by hand, telecopy or overnight courier, or mailed by registered or
certified mail, postage prepaid, properly addressed as follows:
If to the General Contractor: If to the Contractor:
Agro Power Development, Inc. NC Sturgeon, Inc.
10 Alvin Court 2800 Windecker
E. Brunswick NJ 08816 Midland, TX 79711
Attn: President Attn: President
Telecopy No.: (908) 254-1710 Telecopy No.: (915) 561-5210
Such notices shall be effective on the day received at the addresses specified
above. The parties hereto, by like notice in writing, may designate, from time
to time, another address or office to which notices shall be given pursuant to
this Agreement.
18.14 English as Official Language.
All notices and other communications made and documents developed pursuant to
this Agreement shall be in the English language. If this Agreement or any such
communications or documents are translated into any other language, the English
version shall control - In the event design work for any part of the Project is
performed in non-English speaking countries, English-speaking interpreter(s)
acceptable to the General Contractor shall be made available by the Contractor
at the Contractor's cost during all telephone conversations and meetings
involving the General Contractor and such non-English speaking persons providing
such work.
18.15 Original and Counterparts.
This Agreement may be executed in two counterparts, each of which shall be
deemed an original for all purposes, but all of which shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the duly authorized officers of the parties hereto have
39
<PAGE>
executed* this Marfa Texas Project Commercial Packing House Design and
Construction Contract, all as of the date and year first above written.
For Agro Power Development, Inc. For NC Sturgeon, Inc.
("General Contractor") ("Contractor")
- - ------------------------------ ----------------------
Albert Van Zeyst, President
- - ----------
*The duties and obligations of the General Contractor and Contractor contained
herein are expressly conditioned on the Owner successfully closing the Loan
Transaction with the Project Lender discussed in Section 1.5, and review without
objections by Cogentrix Energy, Inc..
40
<PAGE>
APPENDIX A
DEFINITIONS
As used in this Agreement, the following terms shall have the following meanings
(such meanings as necessary to be equally applicable to both the singular and
plural forms of the terms defined):
"Acceptance" shall have the meaning set forth in Sections 6.6 and 6.7 hereof.
"Agreement" shall mean this Village Farms of Presidio, L.P. Greenhouse Project
Commercial Design and Construction Contract dated as of July 10 , 1998 between
APD Inc., and NC Sturgeon, Inc.
"Application for Payment" shall refer to the document mentioned in Section
13.1.1 of this Agreement and having the form attached as Appendix I.
"Base Rate" means, for any period, the fluctuating rate of interest announced
publicly by NatWest, N.A. in New Jersey from time to time as its base rate.
"Certificate of Acceptance" shall have the meaning set forth in Section 6.6 of
this Agreement.
"Certificate of Final Completion" shall have the meaning set forth in Section
6.10 of this Agreement.
"Certificate of Substantial Completion" shall have the meaning set forth in
Section 6.5 of this Agreement.
"Change Order" shall have the meaning set forth in Section 12.1.2 of this
Agreement.
"Changes" shall have the meaning set forth in Section 12.1 of this Agreement.
"Commercial Operation" shall mean the point in time at which the General
Contractor notifies the Contractor that the Greenhouse Operator has commenced
the occupation and use of the Packing House for commercial purposes.
"Contract Deadline" shall have the meaning set forth in Section 6.7 of this
Agreement.
"Contract Documents" shall have the meaning set forth in Section 1.2 of this
Agreement.
"Contract Price" shall have the meaning set forth in Section 5.1 of this
Agreement.
"Day(s)" or "day(s)" shall mean a calendar day or days.
"Facility" shall have the meaning set forth in the Recitals to this Agreement.
"Final Completion" shall have the meaning set forth in Section 6.8 of this
Agreement.
41
<PAGE>
"Final Payment" shall have the meaning set forth in Section 131.3 of this
Agreement.
"Force Majeure Event" shall have the meaning set forth in Section 11.1 of this
Agreement.
"Contractor" shall mean NC Sturgeon, Inc.
"General Contractor "shall mean Agro Power Development
"Good Commercial Industry Practices" means the practices, methods and acts
(including but not limited to the practices, methods and acts engaged in or
approved by a significant portion of the commercial industry for similarly
situated sites in the United States with characteristics similar to those of the
Packing House Construction) that at a particular time, in the exercise of
reasonable judgment, would have been expected to accomplish the desired result
in a manner consistent with Laws, reliability, safety, environmental protection,
economy and expediency.
"Governmental Approval" means an authorization, consent, approval, license,
permit, certificate, exemption of or filing or registration with any
governmental authority or other legal or regulatory body, required in connection
with the development, construction, Final Completion or the short- or long-term
operation of the Project, as set forth in Appendix C.
"Greenhouse" shall mean the commercial greenhouse of approximately 41 enclosed
acres of growing area to be designed and constructed by Others .
"Packing House" shall mean the separate structure housing the office and the
heating, packaging and control systems for the Greenhouse, as is more fully
described in the Scope of Work.
"Indemnified Party" shall have the meaning set forth in Sections 14. 1.1 and
14.1.2 of this Agreement.
"Law" or "Laws" shall mean one or more of the Federal, state and municipal laws,
ordinances, rules and regulations, and any other applicable governmental or
industry codes and standards, which would affect work on, or the intended
operation of, the Project.
"Liens" shall have the meaning set forth in Section 10.4 of this Agreement.
"Loan Documents" and "Loan Parties" shall have the meanings set forth in Section
1.5 of this Agreement.
"Major Milestone(s)" shall mean one or more major milestones as set forth in
Appendix H hereto.
"Manual" shall have the meaning set forth in Appendix L of this Agreement.
"Modifications" shall have the meaning set forth in Section 12.3 of this
Agreement.
42
<PAGE>
"Notice of Final Completion" shall have the meaning set forth in Section 6.9 of
this Agreement.
"Notice of Substantial Completion" shall have the meaning set forth in Section
6.4 of this Agreement.
"Notice to Proceed" shall have the meaning set forth in Section 6.1 of this
Agreement.
"Owner" shall mean Village Farms of Presidio, L.P and its successors and
permitted assigns.
"Plans and Drawings" shall have the meaning set forth in Section 17.1.1 of this
Agreement.
"Private Rights-of-Way" shall mean all permits, easements, licenses, private
rights of way, and utility and railroad crossing rights required in connection
with the Project.
"Progress Payment" to shall have the meaning set forth in Section 13.1.2 of this
Agreement.
"Project" shall have the meaning set forth in Section 1.1 of this Agreement.
"Project Lender" shall have the meaning set forth in Section 1.5 of this
Agreement.
"Project Site" shall have the meaning set forth in Section 1.1 of this
Agreement.
"Project Start-up" shall have the meaning set forth in Section 6.2 of this
Agreement.
"Retainage" shall have the meaning set forth in Section 13.2.4 of this
Agreement.
"Scope of Work" shall have the meaning set forth in Section 1.2(b) of this
Agreement.
"Site Logistics Plan" shall have the meaning set forth in Section 2.3.10 of this
Agreement.
"Site Manager" shall have the meaning set forth in Section 2.2.4 of this
Agreement.
"Specified Permit Applications" shall mean those applications for Governmental
Approvals and related materials set forth in Attachment I to Appendix C.
"Subcontractors" shall mean all third-party engineers, vendors, suppliers,
material men, consultants and subcontractors providing materials and services in
connection with the Project.
"Substantial Completion" shall have the meaning set forth in Section 6.3 of this
Agreement.
"Substantial Completion Deadline" shall have the meaning set forth in Section
6.3 of this Agreement.
"Work" shall have the meaning set forth in Section 2.1 of this Agreement.
43
Exhibit 10.103
MARKETING AND SALES AGREEMENT
BETWEEN
VILLAGE FARMS, INC.
AND
VILLAGE FARMS OF PRESIDIO, L.P.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS....................................................... 1
ARTICLE II
SCOPE OF DUTIES................................................... 3
Section 2.01. Performance Duties..................... 3
Section 2.02. Personnel.............................. 3
Section 2.03. On-Site Supervisor..................... 3
Section 2.04. Marketing Plan......................... 3
Section 2.05. Performance Standards.................. 4
ARTICLE III
MARKETING AND SALES............................................... 4
Section 3.01. Marketing.............................. 4
Section 3.02. Village Farms Trademark................ 4
Section 3.03. Quality Control........................ 5
Section 3.04. Promotion.............................. 5
Section 3.05. Sales Prices........................... 5
Section 3.06. Billing and Collections................ 5
Section 3.07. Packaging, Shipping and Delivery....... 5
Section 3.08. Obligations of Owner................... 6
Section 3.09. Greenhouse Products.................... 6
Section 3.10. No Obstruction......................... 6
ARTICLE IV
COMPENSATION AND PAYMENT.......................................... 6
Section 4.01. Basic Compensation..................... 6
ARTICLE V
REPRESENTATIONS AND WARRANTIES.................................... 6
Section 5.01. Representations and Warranties of
the Marketing Agent.................... 7
ARTICLE VI
COVENANTS OF THE MARKETING AGENT.................................. 7
Section 6.01. Books, Records and Reports............. 7
Section 6.02. Employment Practices................... 7
Section 6.03. Nondisclosure.......................... 7
Section 6.04. Compliance With Governmental Rules..... 8
Section 6.05. Section 8 and Section 15 Declarations.. 8
Section 6.06. Section 9 Renewal...................... 8
ARTICLE VII
GENERAL LIABILITY................................................. 8
Section 7.01. Indemnification........................ 8
ARTICLE VIII
<PAGE>
DEFAULTS AND REMEDIES............................................. 8
Section 8.01. Defaults............................... 8
Section 8.02. Damages for Termination Without
Cause.................................. 9
ARTICLE IX
TERM ......................................................... 9
Section 9.01. Term................................... 9
ARTICLE X
MISCELLANEOUS..................................................... 10
Section 10.01. Notices................................ 10
Section 10.02. Severability........................... 11
Section 10.03. Amendment.............................. 11
Section 10.04. Assignment............................. 11
Section 10.05. Relationship of the Parties............ 11
Section 10.06. Headings; Etc.......................... 11
Section 10.07. Governing Law.......................... 11
Section 10.08. Parties in Interest; Limitation
and Rights of Others................... 11
Section 10.09. Arbitration............................ 11
<PAGE>
MARKETING AND SALES AGREEMENT
Village Farms of Presidio, L.P. (the "Owner") intends to construct and
operate an approximate 26 acre greenhouse in Presidio County, Texas (the
"Greenhouse"). The Greenhouse will be manufactured and constructed by Dalsem
Horticultural Projects, B.V. (the "Contractor"), Agro Power Development, Inc.
(the "General Contractor" or "APD") and the Owner. Village Farms, Inc. (the
"Marketing Agent") and the Owner have entered into this Marketing and Sales
Agreement dated as of August 31, 1998 to market the produce grown at the
Greenhouse.
In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, and in
reliance upon the representations and warranties of each party set forth herein,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms when used herein shall have the following meanings:
"Affiliate" of any Person shall mean each Person which, directly or
indirectly, controls or is controlled by or is under common control with such
designated Person and, without limiting the generality of the foregoing, shall
include (a) any Person which beneficially owns or holds ten percent (10%) or
more of any class of voting securities of such designated Person or ten percent
(10%) or more of the equity interest in such designated Person and (b) any
Person of which such designated Person beneficially owns and holds ten percent
(10%) or more of any class of voting securities or in which such designated
Person beneficially owns or holds ten percent (10%) or more of the equity
interest. For the purposes of this definition, the terms "controls", "controlled
by", and "under common control with", as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person whether through the
ownership of voting securities or by contract or otherwise.
"Agreement" shall mean this document and any exhibits and appendices hereto
as amended, modified or supplemented from time to time.
"Business Day" shall mean any day other than Saturday, Sunday or other day
on which banks are authorized to be closed in Texas, New York, North Carolina,
or New Jersey.
"Contract Year" initially shall be the period ending on December 31 next
following the Date of Initial Services and each calendar year thereafter.
"Date of Initial Services" shall mean the date of Substantial Completion
under the Commercial Greenhouse Design and Construction Contract, dated May 11,
1998 by and between Contractor and General Contractor, as same may be amended,
modified or supplemented from time to time.
"Governmental Rule" shall mean any law, rule, regulation, ordinance, order,
code, interpretation, judgment or similar norm or decision of any Federal,
state, local or foreign government, authority, agency, court or other body or
entity having jurisdiction over the Site.
"Greenery" shall mean The Greenery International, with whom Agro Power
Development, Inc. has entered into an exclusive marketing agreement to market
all of the Dutch quality produce from the Greenhouse under The Greenery
International brand name.
-1-
<PAGE>
"Lender" shall mean Village Farms International Association and its
successors and assigns.
"License Agreement" shall mean the License Agreement dated February 13,
1996 , between APD and the Marketing Agent, a copy of which is attached hereto
as Exhibit A, as same may be amended from time to time.
"Loan Agreement" shall mean the Loan Agreement to be entered into between
Owner and the Lender, as the same may be amended, modified or supplemented from
time to time.
"Manager" shall mean the person described in Section 2.01.
"Management Contract" shall mean the Management, Operation, and Maintenance
Contract of even date herewith between the Owner and the Manager, as same may be
amended, modified, or supplemented from time to time.
"Marketing Plan" shall mean the marketing plan prepared annually or more
often by Marketing Agent setting forth the items described in Section 2.04.
"On-Site Supervisor" shall mean the person described in Section 2.03.
"Party" shall mean Owner or the Marketing Agent, or any of them, as
appropriate, and their successors and permitted assignees.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
government or agency or political subdivision thereof.
"Product" shall mean all production derived from the Greenhouse, which
shall initially consist of colored bell peppers.
"Revenues" shall mean the gross proceeds derived from the sale of the
Product, plus interest income, and any and all other types of income received by
the Owner, less allowances, returns, and amounts received with respect to
freight and transportation charges, and excluding insurance proceeds.
"Site" shall mean the Greenhouse and its grounds located at the Southern
Quadrant of Presidio Municipal Airport, Presidio, Presidio County, Texas.
"Term" shall mean the period provided for in Section 9.01 hereof.
"Uncontrollable Force" shall mean any of the following which are beyond the
reasonable control of a Party and which materially impairs the performance by
such Party of its duties and obligations hereunder and such material impairment
continues for a period of more than thirty (30) days: (a) severe weather, flood,
fire, lightning or other natural disaster or act of God, (b) earthquake or
subsidence, whatever its cause, (c) strikes or other labor disturbances, whether
or not involving employees of a Party, (d) action or inaction by, or inability
to obtain authorization or approval from, any governmental agency or authority,
which a Party is unable, after its best efforts, to overcome, (e) compliance
with any Governmental Rule, (f) war (whether declared or not), sabotage, act of
a public enemy, insurrection, riot or civil disturbance, (g) defects in material
equipment necessary for performance of the Agreement, (h) any act by another
party (other than the Party claiming Uncontrollable Force, any Affiliate of such
Party or the respective agents, servants or employees of such Party or
Affiliates), or (i) any other similar act.
-2-
<PAGE>
"Work" shall mean all duties and responsibilities of the Marketing Agent
under this Agreement.
ARTICLE II
SCOPE OF DUTIES
Section 2.01. Performance of Duties. As more specifically described in
Article III, the Marketing Agent shall furnish, manage and supervise certain
personnel necessary in connection with the marketing, sale, and distribution of
the Product, in accordance with the terms of this Agreement. Commencing on the
Date of Initial Services, the Marketing Agent shall participate in the planning
and start-up of the Greenhouse. The On-Site Supervisor (as defined herein in
Section 2.03) shall be available at the Site on a full time basis, commencing on
October 1, 1998. The operation of the Greenhouse and the production of the
Product shall be the primary responsibility of Agro Power Development, Inc. (the
"Manager") as defined in the Management Contract.
Section 2.02. Personnel. The Marketing Agent shall make available for the
performance of its duties under the Agreement, sufficient personnel (each of
whom will be properly trained and qualified to undertake their respective
assigned duties) and support systems and services as are necessary or desirable
to assure the performance of Marketing Agent's responsibilities under this
Agreement.
Section 2.03. On-Site Supervisor. The Marketing Agent shall identify one
competent individual to act in the capacity of on Site Supervisor. The On-Site
Supervisor shall be responsible on a day-to-day basis for the marketing and
sales of the Product and shall be supervised by the Marketing Agent. The
selection and continued employment of the On-Site Supervisor shall be subject to
the approval of owner, which approval shall not be unreasonably withheld. The
On-Site Supervisor shall be an employee of the Owner.
Section 2.04. Marketing Plan. Within thirty (30) days from receipt of a
copy of the preliminary business plan and budget for the first year of
operations of the Greenhouse, which is to be prepared by the Manager pursuant to
the Management, Operation and Maintenance Contract of even date herewith, and
approved by the Owner, the Marketing Agent will provide to the Owner and the
Lender a preliminary Marketing Plan for the first year of operations which shall
include the strategy for marketing efforts for the upcoming year, target
customers and geographic areas for penetration, and such other information which
is customarily included in a produce marketing plan, and which will also set
forth such other information as the Owner may reasonably request. In addition,
within thirty (30) days after receipt by the Marketing Agent of each subsequent
business plan and budget prepared by the Manager (the "Business Plan"), which
Business Plan is to be submitted by the Manager forty-five (45) days prior to
December 31 of each year (except for the first Contract Year), the Marketing
Agent shall submit to the Owner, with a copy to the Lender, the Marketing Plan
for the next succeeding Contract Year corresponding to the year covered by such
Business Plan. The Marketing Plan shall always be prepared in conjunction with
the Business Plan and shall set forth in form and detail reasonably satisfactory
to Owner, the Marketing Agent's plans for such Contract Year. The Marketing Plan
shall be subject to the approval of Owner, such approval not to be unreasonably
withheld.
Section 2.05. Performance Standards. The Marketing Agent shall be
responsible for the sales of the Greenhouse produce in accordance with the
Marketing Plan. The Marketing
-3-
<PAGE>
Agent shall be responsible for the means, methods and techniques used in the
marketing and sale of the produce of the Greenhouse.
ARTICLE III
MARKETING AND SALES
Section 3.01. Marketing. During the period beginning on the Date of Initial
Services and ending at the expiration of the Term of this Agreement, the
Marketing Agent shall use its best efforts to market all the Product of the
Greenhouse in accordance with the Marketing Plan in order to derive the greatest
possible Revenues therefrom. The Marketing Agent warrants that, during each
Contract Year, it will sell One Hundred (100%) Percent of the Premium Quality
Product produced by the Greenhouse in accordance with the terms and conditions
of this Agreement and the Marketing Plan (as it is updated from time to time).
Section 3.02. Village Farms Trademark. Village Farms is a trademark
registered with the U. S. Patent and Trademark Office, owned by APD, a New York
Corporation, an affiliate of the Marketing Agent. APD has authorized the use of
the Village Farms trademark by the Marketing Agent and the Owner in conjunction
with this Agreement. The Owner hereby acknowledges that the Marketing Agent
and/or APD has full right and authority to the unlimited use of this trademark
on behalf of themselves and other producers located throughout the United States
and abroad, and that the trademark is not limited to use in conjunction with
peppers, but may be used for any other type of produce, at APD's and the
Marketing Agent's discretion. All Premium Quality tomatoes produced by the
Greenhouse will be labeled and/or otherwise identified by the Village Farms
trademark, or such other name as determined by the Marketing Agent (with the
consent of the Owner) which would provide a greater profit to the Owner. Subject
to the provisions of section 9.01 herein, the Owner shall have the right to use
the trademark, Village Farms, following the termination of this Agreement, until
the Construction Loan Maturity Date (as defined in the Loan Agreement) provided
that (i) it pays the Marketing Agent the sum of $100,000 per year, with the
first payment due within thirty (30) days prior to the effective date of the
termination, and the subsequent payments due within thirty (30) days prior to
the anniversary of the termination, (ii) the use of the trademark is limited to
fruits and vegetables, including peppers produced at the Greenhouse in Texas,
and (iii) the Owner agrees in writing to abide by the conditions and
restrictions of the License Agreement, as same may be amended from time to time
provided that no amendment after the date hereof that is or would be adverse to
the Owner shall be effective against the Owner without the Owner's written
consent. In the event the Owner fails to pay any of the required payments, the
right to use the trademark shall terminate upon the expiration of the period for
which payment was last received. The Owner may, at its sole expense, record a
memorandum of the license granted hereby with the U.S. Patent and Trademark
Office, and APD by its consent hereto agrees to sign such further documents,
including the memorandum as may be necessary to record the license granted
hereby. The terms of this provision shall survive termination of this Agreement.
Section 3.03. Quality Control. The On-Site Supervisor shall exercise its
reasonable discretion in determining which of the Product of the Greenhouse
qualifies as Premium Quality. Best efforts will also be used to market Product
which are of lesser quality, except for that Product, which in the sole
discretion of the Marketing Agent, have no market value due to their
-4-
<PAGE>
inferior quality. The Marketing Agent shall have total discretion (subject to
the requirement that it act reasonably) over which, if any of the lesser quality
Product shall be labeled or identified with the trademark "Village Farms". The
Marketing Agent will have sole and absolute discretion (subject to the
requirement that it act reasonably) over the use of the trademark, in order to
maintain the high quality associated with the trademark, and to preserve the
market share of the Village Farms peppers, which will ultimately serve to
benefit the Owner in the sale of its Product.
Section 3.04. Promotion. Marketing Agent, in conjunction with APD, engages
in, and shall continue to engage in general advertising, marketing and
promotional efforts in the food industry, on behalf of the trademark Village
Farms, and shall maintain these general marketing efforts throughout the term of
this Agreement, on at least the same level as is currently being employed, at
the sole expense of the Marketing Agent. In the event Marketing Agent deems it
to be in the best interests of the Owner to engage in strictly local advertising
efforts for the sole benefit of the Owner, such advertising campaign efforts
shall be detailed in the Marketing Plan prepared by the Marketing Agent pursuant
to the terms of this Agreement. In the event said local advertising plan is
approved by the Owner, the Owner shall be solely responsible for the costs of
same.
Section 3.05. Sales Prices. The Owner acknowledges that the sale of its
Product by the Marketing Agent is based on market demands and price fluctuation
can occur seasonally and otherwise. Marketing Agent shall use commercially
reasonable efforts to obtain the highest possible price for the Product.
Section 3.06. Billing and Collections. At its cost, the Marketing Agent
will provide billing and collection services to the Owner consistent with the
Marketing Plan and such direction as may be reasonably given by the Owner to the
Marketing Agent from time to time. All customers of the Owner shall be billed
under the name Village Farms. The Marketing Agent will maintain accurate books
and records of all sales, billing and collections, and shall prepare a monthly
report which shall be made available to the Owner for review. Monies collected
by the Marketing Agent on behalf of the owner, shall be held by the Marketing
Agent as trustee in a separate account for the benefit of the Owner, and shall
be remitted to Owner (without deduction) on a weekly basis. Although the
Marketing Agent is responsible for billing and collection, the Owner shall bear
the risk of nonpayment by any of its customers, and shall determine if any
customers should be dropped, due to poor payment experience.
Section 3.07. Packaging, Shipping, and Delivery. The Marketing Agent shall
be responsible for the instructing and training of Owner's employees who will
physically be responsible for the proper packaging of the Product. Marketing
Agent shall be responsible for all shipping and delivery arrangements for the
Product, at owner's sole expense.
Section 3.08. Obligations of owner. Throughout the Term of this Agreement,
Owner shall furnish all Product exclusively to the Marketing Agent, and shall
use its best efforts to produce Premium Quality colored bell peppers, in the
quantity established in the business plan and budget prepared annually by the
Manager, pursuant to the terms of the Management Contract. All personnel of the
Greenhouse operation shall at all times be employees of Owner.
Section 3.09. Greenhouse Products. It is contemplated by this Agreement
that the Product of the Greenhouse will be colored bell peppers. However, if in
the opinion of the Marketing Agent, the Greenhouse operation can be made more
profitable by the production of
-5-
<PAGE>
produce more profitable than tomatoes, then the Marketing Agent, with the prior
written consent of the owner, may instruct the Manager to produce a substitute
product, and Marketing Agent's duties will also cover this substitute product.
Section 3.10. No Obstruction. Until the termination of this Agreement,
Owner shall not, either through its agents or employees, take any action that
would prevent the Marketing Agent from marketing the Product in accordance with
this Agreement nor take any action that would materially obstruct the production
of Product at the Site, unless such prevention or obstruction is caused by
Uncontrollable Force or by the Marketing Agent or any of its Affiliates or any
of their respective employees, servants or agents.
ARTICLE IV
COMPENSATION AND PAYMENT
Section 4.01. Basic Compensation. In consideration of the performance of
Marketing Agent's obligations under the Agreement, Owner shall pay to the
Marketing Agent the sum of FOUR HUNDRED THOUSAND DOLLARS ($400,000.00) per
Contract Year (the "Compensation") in twelve equal monthly installments
beginning on the 1st day of the second month following the Date of Initial
Services and on each anniversary thereafter. For the period from the Date of
Initial Services through the first day of the month following the Date of
Initial Services, the Marketing Agent shall be entitled to a fee equal to the
product of (i) the Compensation and (ii) a fraction which shall be the number of
weeks of such period divided by 52, such amount to be payable on the first day
of the month following the Date of Initial Services. Additionally, Owner shall
pay the Greenery ten cents (.10) per kilo of premium quality bell peppers sold
under The Greenery brand name. Such compensation will be adjusted each January 1
of each Contract Year by the same percentage change in the Consumer Price Index
("CPI"), provided the adjustment shall not cause the Compensation to be less
than the current Contract Year's Compensation. If for any reason the Marketing
Agent is unable to perform its obligations hereunder, except as a result of
termination of this Agreement because of a default by the Marketing Agent
hereunder or in accordance with Section 9.01 herein, then the Marketing Agent
shall be entitled to the continuation of the Compensation as though the
Agreement had been performed by the Marketing Agent, provided however, that in
the event that the Marketing Agent or Owner is unable to perform its obligations
under this Agreement because of an Uncontrollable Force, then the Compensation
shall be discontinued at any time after the later of the first anniversary of
the event creating the Uncontrollable Force or the date on which the Marketing
Agent's continued performance was disrupted.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01. Representations and Warranties of the Marketing Agent. The
Marketing Agent represents and warrants to Owner that it has substantial
experience in the marketing of tomatoes and that the On-Site Supervisor shall
either have substantial experience in the marketing of peppers, or shall have
been trained by a person with substantial experience in the marketing of
peppers. The Marketing Agent is a corporation duly organized and validly
existing under the laws of the State of Delaware. The Marketing Agent's
execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly authorized by all requisite action on the part of the
Marketing Agent and this Agreement constitutes the Marketing Agent's legal,
valid and binding obligation, enforceable against the
-6-
<PAGE>
Marketing Agent in accordance with its terms. The Marketing Agent's execution
and delivery of this contract and the performance of its obligations hereunder
will not conflict with, violate or result in a default under the Marketing
Agent's certificate of incorporation or any mortgage, indenture, agreement,
instrument or other contract to which the Marketing Agent is a party or by which
the Marketing Agent is bound.
ARTICLE VI
COVENANTS OF THE MARKETING AGENT
Section 6.01. Books, Records and Reports. The Marketing Agent shall
maintain books and records and shall prepare for the benefit of Owner, a monthly
report showing the sales and collections of the Product, and such other matters
as the Owner may, from time to time, reasonably request be included in such
reports. All such books, records and reports shall be the sole and exclusive
property of the Owner, and the Marketing Agent shall keep such books and records
in such place or places so as to provide Owner (and its authorized
representatives) with maximum access thereto and the ability to make copies
thereof.
Section 6.02. Employment Practices. The Marketing Agent shall comply with
the applicable requirements of Executive Orders Nos. 11246 (Equal Opportunity
and Certification of Nonsegregated Facilities), 11701 (Affirmative Action for
Disabled Veterans and Handicapped of the Vietnam Era), 11758 (Affirmative Action
for Handicapped Workers), 11458 and 11625 (Minority Business Enterprise) and all
other Governmental Rules relating to employment practices to the extent
applicable.
Section 6.03. Nondisclosure. All reports, records and other information
related to the Site, the Greenhouse, the operations of the Owner, and the
performance of the Marketing Agent of its duties hereunder shall not be used by
the Marketing Agent for any purposes other than those contemplated hereby or
pursuant to the written consent of the Owner and shall not be disclosed by the
Marketing Agent to any other party or any other person or entity except with the
prior written consent of the Owner. Furthermore, the Marketing Agent shall not
copy or reproduce any such information without the written consent of the Owner
(other than such reasonable copies as may be necessary to perform its duties and
obligations under this Agreement). The Marketing Agent shall also take
reasonable precautions to ensure against any breach of the obligations contained
herein which shall be no less stringent than the precautions and procedures that
it uses to protect its own proprietary information and which shall, at a
minimum, be deemed to include, without limitation, taking precautions to ensure
that it will only make such information available to those of its employees who
have a need to know it. Upon the expiration or termination of this Agreement,
Marketing Agent shall immediately return to the Owner all such information and
all whole or partial copies thereof and all other materials that may include, in
whole or in part, such information. All rights, whether arising under copyright,
patent, trade secret, or other laws, to such information are hereby reserved by
the owner.
Section 6.04. Compliance With Governmental Rules. The Marketing Agent shall
at all times market the Product and perform its other duties and obligations
hereunder in accordance with all applicable Governmental Rules. The governmental
authority imposed on or incurred or suffered by the Owner which are attributable
to Marketing Agent and/or its agents, servants and employees, in connection with
the marketing and sales of the Product and the performance of its other duties
and obligations hereunder.
-7-
<PAGE>
Section 6.05. Section 8 and Section 15 Declarations. The Marketing Agent
shall either cause APD to file, or shall itself, file during the period between
July 28, 1997 and July 28, 1998, Section 8 and Section 15 Declarations, required
under 15 U.S.C. ss. 1058 and 15 U.S.C. ss. 1065 to extend the duration of the
initial registration of the Trademark and to establish the Trademark as
incontestable.
Section 6.06. Section 9 Renewal. The Marketing Agent shall either cause APD
to file, or shall itself, file within six months prior to the expiration of the
original registration of the Trademark, or any renewal thereof, an application
for renewal of registration under 15 U.S.C. ss. 1059.
ARTICLE VII
GENERAL LIABILITY
Section 7.01. Indemnification. The Marketing Agent shall indemnify and save
harmless Owner and Lender, and their respective directors, officers, agents, and
employees from and against (i) any and all loss, damage, injury, liability and
claims thereof for injury to or death of a person, including, but not limited
to, personnel of the Marketing Agent, Lender and Owner, (ii) any and all loss of
or damage to property and (iii) any and all loss of income by the owner,
resulting from the Marketing Agent's performance of this Agreement to the extent
the same is caused by the negligence or willful misconduct of the Marketing
Agent, any of its Affiliates, or any or their respective directors, officers,
agents or employees. Owner shall indemnify and save harmless the Marketing Agent
and Lender, and their respective directors, officers, agents, and employees from
and against (i) any and all loss, damage, injury, liability and claims thereof
for injury to or death of a person, including, but not limited to, personnel of
Owner, Lender and the Marketing Agent, (ii) any and all loss of or damage to
property, and (iii) any and all loss of income by the Marketing Agent, resulting
from the Owner's performance of this Agreement to the extent the same is caused
by the negligence or willful misconduct of owner, any of its Affiliates, or any
of its directors, officers, agents or employees.
ARTICLE VIII
DEFAULTS AND REMEDIES
Section 8.01. Defaults. Upon the failure of any Party to substantially
comply with any of the obligations of such Party hereunder and continued
noncompliance for a period of thirty (30) days (except in the case where such
failure will result in injury to or damage or loss of perishable Product, in
which case the cure period shall be five (5) days) after written notice of the
noncompliance is sent to such Party, the non-defaulting Party may, at its
option, by written notice to the defaulting Party, declare this Agreement to be
in default and at any time thereafter the non-defaulting Party may, at its sole
discretion, (a) exercise any right or pursue any remedy that may be available
under applicable law or proceed by appropriate court action to enforce the terms
hereof or to recover damages for the breach hereof and/or (b) terminate this
Agreement. The exercise of any rights or pursuit of any remedies pursuant to
this Agreement shall not relieve the defaulting Party of any of its obligations
and liabilities hereunder, all of which shall survive such exercise or pursuit.
To the extent permitted by law, and subject to any mandatory requirements of
applicable law, and further subject to Section 8.02, each and every right, power
and remedy herein specifically given to the non-defaulting Party or otherwise in
this Agreement shall be cumulative and shall be in addition to every other
right, power and remedy herein specifically given, or now or hereafter existing
at law, equity or by statute and each and every
-8-
<PAGE>
right, power and remedy whether specifically herein given or otherwise existing
may be exercised or pursued from time to time and as often in such order as may
be deemed expedient by the non-defaulting Party, and the exercise or pursuit or
the beginning of the exercise or pursuit of any right, power or remedy shall not
be construed to be a waiver of the right to exercise or to pursue at any time or
thereafter any other right, power or remedy. No delay or admission by a Party in
the exercise of any right or power or in the pursuit of any remedy may impair
any such right, power or remedy or be construed to be a waiver of any default on
the party of the other Party or to be an acquiescence therein. No expressed or
implied waiver by a Party of any default hereunder shall in any way be, or be
construed to be, a waiver of any future or subsequent default hereunder. Neither
Party shall be considered to be in default for failure to perform, or delay in
performing, any obligation under this Agreement if performance is prevented,
hindered or delayed by an Uncontrollable Force (but only for so long as such
Uncontrollable Force continues unabated) . In such event, the Party which is
unable, or anticipates being unable, to perform shall (a) promptly notify the
other Party in writing of the nature, cause, date of commencement and expected
duration of any such delay, (b) indicate to what extent it will be prevented
from performing and (c) exercise due diligence to overcome such inability to
perform with all reasonable dispatch. In the event a Party claims excuse of
performance as a result of an Uncontrollable Force which continues unabated for
more than one hundred twenty (120) days, the Party that is not affected by such
Uncontrollable Force shall have the option to terminate this Agreement on
written notice to the other Party.
Section 8.02. Damages for Termination Without Cause. Notwithstanding
anything to the contrary in Section 8.01, the Parties agree that should Owner
elect to terminate the Agreement without cause at any time, pursuant to Section
9.01 herein, then Owner shall pay as liquidated damages to the Marketing Agent a
sum equal to one-fourth (1/4) of the annual amount of Compensation in effect at
such early termination, which shall be owner's sole and exclusive liability and
Marketing Agent's sole and exclusive remedy, for such early termination without
cause.
ARTICLE IX
TERM
Section 9.01. Term. Subject to Article VIII and Section 3.01, this
Agreement shall continue to be in effect for fifteen (15) years from the Date of
Initial Services; provided, however that the Term may be extended f or
additional periods on terms acceptable to both Parties, such terms to be agreed
upon not later than three months prior to the expiration of the Term.
Notwithstanding the foregoing, the Owner shall be permitted to terminate this
with or without cause, upon ninety (90) days written notice to the Marketing
Agent, subject to the terms of the Loan Agreement. In the event the Owner
terminates the Agreement without cause, the right of the Owner to use the
trademark, Village Farms, shall terminate simultaneously with this Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.01. Notices. Unless otherwise specifically provided herein, all
notices, requests and demands and other communications hereunder must be in
writing and shall be deemed to have been duly given (i) when delivered
personally, (ii) when sent by telefax to the
-9-
<PAGE>
telefax number below and followed by a confirmation transmitted by an additional
mode of communication provided for herein, (iii) the second day following the
day on which the same has been delivered prepaid to a national (only in the case
of notices within the continental United States) or an international air courier
service, or (iv) when received if sent by the mails, certified or registered,
postage prepaid, in each case addressed to the party to whom such notice is
being given at the following addresses:
OWNER: Village Farms of Presidio, L.P.
c/o Agro Power Development, Inc.
10 Alvin Court
East Brunswick, NJ 08816
Attention: President
Telefax: 908-254-1710
and
Village Farms of Presidio, L.P.
Hwy 17 North
Marfa Municipal Airport
Marfa, Texas 79843
Attention: General Counsel
Telefax:
MARKETING
AGENT: Village Farms, Inc.
10 Alvin Court
East Brunswick, NJ 08816
Attention: President
Telefax: 908-254-1710
Any party may change the address(es) to which notices to it are to be sent by
giving notice of such change to the other parties in accordance with this
Section.
Section 10.02. Severability. Any provision of this Agreement that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction. To the extent permitted
by applicable law, the Marketing Agent And Owner hereby waive any provision by
law that renders any provision hereof prohibited or unenforceable in any
respect.
Section 10.03. Amendment. Neither this Agreement nor any other terms hereof
may be terminated, amended, supplemented, waived or modified orally, but only by
an instrument in writing signed by the Party against which enforcement of the
termination, amendment, supplement, waiver or modification shall be signed.
Section 10.04. Assignment. Neither Party may assign any of their respective
rights under this Agreement without the prior written consent of the other
Party; provided, however,
-10-
<PAGE>
that Owner may assign its rights hereunder to the Lender. Any assignment not
permitted by this Section 10.04 shall be void.
Section 10.05. Relationship of the Parties. It is agreed and understood by
the Parties that the Marketing Agent is an independent contractor with respect
to Owner. No action, admission or instruction shall be deemed to make the
Marketing Agent an employee, agent or partner of Owner or to create any other
relationship among the Parties.
Section 10.06. Headings; Etc. The Table of Contents and headings of the
various articles and sections of this Agreement are for the convenience of
reference only and shall not modify, define or limit any other terms and
provisions of this Agreement.
Section 10.07. Governing Law. This Agreement shall in all respects,
including all matters of construction, validity and performance, be governed by
and construed in accordance with the laws of the State of New York.
Section 10.08. Parties in Interest; Limitation and Rights of others. The
provisions of this Agreement shall be binding upon, and inure to the benefit of,
the Parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, whether expressed or implied, shall be construed to
give any Person (other than the Parties hereto and their respective successors
and permitted assignees) any legal or equitable right, remedy or claim under or
in respect of this Agreement or any covenants, conditions or provisions
contained herein.
Section 10.09. Arbitration. (a) In the event a dispute arises between or
among the Parties relating to the terms of this Agreement and any Party gives
written notice of such dispute to the other Party, then each of the Parties
involved in such dispute shall refer the dispute to its senior management. The
senior management of each Party shall meet and confer regarding the resolution
of the dispute. In the event a resolution of such dispute is not reached within
30 days of the written notice, then either of the Parties may submit the dispute
to arbitration in accordance with Section 10.09.(b).
(b) Arbitration of disputes pursuant to this Section 10.09. (b) shall be
held in New York, New York, unless otherwise agreed to by the Parties, under the
commercial arbitration rules of the American Arbitration Association, and shall
be heard by three arbitrators selected in accordance with such rules. Each
arbitrator shall have at least five years experience in the United States in a
profession or professions related to the subject matter involved in the dispute
and shall not be a past or present officer, director or employee of, or have any
interest in or material relationship with, any Partner or any Affiliate of any
Partner. Any arbitral award shall be final and binding and may be entered by any
Party in any state or Federal court having jurisdiction thereof. Costs of
arbitration (including reasonable attorney's fees and arbitration costs) shall
be paid either equally or by the Parties to the arbitration or in accordance
with the decision of the arbitrators.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed by the respective officers thereunto duly authorized as of the date and
year first above written.
VILLAGE FARMS, INC.
-11-
<PAGE>
By: ______________________________
Name: Michael DeGiglio
Title: Chief Executive Officer
VILLAGE FARMS OF PRESIDIO, L.P.
By: ______________________________
Name: Michael Minerva
Title: Vice President
Consent and Agreement
Agro Power Development, Inc. ("APD,") hereby joins in this Marketing and
Sales Agreement (the "Agreement") (a) for the express purpose of agreeing to the
terms and provisions set forth in Section 3.02 hereof; (b) to represent and
warrant to Village Farms of Presidio, L.P. (the "Owner") that APD owns all
right, title and interest in and to the trademark "Village Farms" (the
"Trademark") and that APD has the right to enter into the agreement set forth in
this consent and agreement; and (c) certifying that a true and correct copy of
the License Agreement between APD and Village Farms, Inc. ("VF") licensing the
Trademark to VF is attached to the Agreement as Exhibit A.
AGRO POWER DEVELOPMENT, INC.
By: ______________________________
Michael DeGiglio
Chief Executive Officer
Exhibit 10.104
MANAGEMENT, OPERATION AND
MAINTENANCE CONTRACT
BETWEEN
NEW AMSTERDAM JOINT VENTURE, L.L.C.
AND
VILLAGE FARMS OF PRESIDIO, L.P.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS......................................................... 1
ARTICLE II
SCOPE OF DUTIES..................................................... 3
Section 2.01. Performance of Start-up, Operation
and Maintenance.............................. 3
Section 2.02. Personnel.................................... 4
Section 2.03. Facility Manager............................. 4
Section 2.04. Business Plan and Budget..................... 4
Section 2.05. Performance Standards........................ 4
ARTICLE III
OPERATION........................................................... 5
Section 3.01. Operation.................................... 5
Section 3.02. Compliance With Governmental Rules........... 5
Section 3.03. Obligations of Owner......................... 5
Section 3.04. Greenhouse Products.......................... 5
Section 3.05. Maintenance.................................. 6
Section 3.06. No Obstruction............................... 6
ARTICLE IV
COMPENSATION AND PAYMENT............................................ 6
Section 4.01. Basic Compensation........................... 6
ARTICLE V
REPRESENTATIONS AND WARRANTIES...................................... 7
Section 5.01. Representations and Warranties of
the Manager.................................. 7
ARTICLE VI
COVENANTS OF THE MANAGER............................................ 7
Section 6.01. Operating Logs: Records and Audits........... 7
Section 6.02. Insurance of the Owner....................... 8
Section 6.03. Employment Practices......................... 8
Section 6.04. Nondisclosure................................ 8
Section 6.05. Compliance With Governmental Rules........... 9
ARTICLE VII
GENERAL LIABILITY................................................... 9
Section 7.01. Indemnification.............................. 9
ARTICLE VIII
DEFAULTS AND REMEDIES............................................... 9
Section 8.01. Defaults..................................... 9
Section 8.02. Damages for Termination Without Cause........ 10
<PAGE>
ARTICLE IX
TERM ............................................................... 10
Section 9.01. Term......................................... 10
ARTICLE X
MISCELLANEOUS....................................................... 11
Section 10.01. Notices...................................... 11
Section 10.02. Severability................................. 11
Section 10.03. Amendment.................................... 12
Section 10.04. Assignment................................... 12
Section 10.05. Relationship of the Parties.................. 12
Section 10.06. Headings; Etc................................ 12
Section 10.07. Governing Law................................ 12
Section 10.08. Parties in Interest; Limitation
and Rights of Others......................... 12
Section 10.09. Arbitration.................................. 12
<PAGE>
MANAGEMENT, OPERATION AND MAINTENANCE CONTRACT
Village Farms of Presidio, L.P. (the "Owner") intends to construct and
operate an approximate 26 acre greenhouse (the "Greenhouse"). The Greenhouse
will be manufactured and constructed by Dalsem Horticultural Projects, B.V. (the
"Contractor"), Agro Power Development, Inc. (the "General Contractor") and the
Owner. New Amsterdam Joint Venture L.L.C. (the "Manager") and the Owner have
entered into this Management, Operation and Maintenance Contract dated as of
August 31, 1998 to operate, maintain and manage the Greenhouse.
In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, and in
reliance upon the representations and warranties of each party set forth herein,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms when used herein shall have the following meanings:
"Affiliate" of any Person shall mean each Person which, directly or
indirectly, controls or is controlled by or is under common control with such
designated Person and, without limiting the generality of the foregoing, shall
include (a) any Person which beneficially owns or holds ten percent (10%) or
more of any class of voting securities of such designated Person or ten percent
(10%) or more of the equity interest in such designated Person and (b) any
Person of which such designated Person beneficially owns and holds ten percent
(10%) or more of any class of voting securities or in which such designated
Person beneficially owns or holds ten percent (10%) or more of the equity
interest. For the purposes of this definition, the terms "controls", "controlled
by", and "under common control with", as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person whether through the
Ownership of voting securities or by contract or otherwise.
"Business Day" shall mean any day other than Saturday, Sunday or other day
on which banks are authorized to be closed in Texas, New York, North Carolina,
or New Jersey.
"Business Plan and Budget" shall mean the business plan and budget prepared
annually or more often by Manager setting forth the items described in Section
2.04.
"Capital Assets" shall mean all reusable equipment and components used in
the operation of the Greenhouse.
"Codes and Standards" shall mean the applicable national, state and local
engineering construction, building and safety codes and standards from time to
time in effect governing the construction and operation of the Greenhouse.
"Contract" shall mean this document and any exhibits and appendices hereto
as amended from time to time.
- 1 -
<PAGE>
"Contract Year" initially shall be the period ending on December 31 next
following the Date of Initial Services and each calendar year thereafter.
"Credit Agreement" shall mean the Credit Agreement to be entered into
between Owner and the Lender, as the same may be amended, modified or
supplemented from time to time.
"Date of Initial Services" shall mean that date, as agreed upon by the
Manager and the Owner, which is sixty (60) days prior to the date of Substantial
Completion under the Commercial Greenhouse Design and Construction Contract,
dated May 11, 1998, by and between Contractor and General Contractor, as same
may be amended, modified or supplemented from time to time.
"Facility Manager" shall mean the person described in Section 2.03.
"Governmental Rule" shall mean any law, rule, regulation, ordinance, order,
code, interpretation, judgment or similar norm or decision of any Federal,
state, local or foreign government, authority, agency, court or other body or
entity having jurisdiction over the Site including the Codes and Standards.
"Greenhouse Construction Agreement" shall mean the Commercial Greenhouse
Design and Construction Contract, dated May 11, 1998, for the construction of
the Greenhouse by and between the Contractor and the General Contractor as
assigned to the Owner and as supplemented, modified and amended through the date
hereof.
"Lender" shall mean Village Farms International Finance Association and its
successors and assigns.
"Marketing Agent" shall be Village Farms, Inc. for the term and to such
extent as described in the Marketing and Sales Agreement between the Owner and
Village Farms, Inc., dated of even date herewith.
"Marketing and Sales Agreement" shall mean the Marketing and Sales
Agreement between the Owner and Village Farms, Inc., dated of even date
herewith.
"Operating Costs" shall mean the sum (without duplication) of (a) direct
labor costs paid, (b) seed expense paid, (c) packaging supplies expense paid,
(d) fertilizer and chemical expenses paid, (e) biological control, including
bees, expense paid, (f) freight expense paid, (g) growing medium and supplies
expense paid, (h) carbon dioxide expense paid, (i) utility (including hot water,
electricity and natural gas) expense paid, (j) compensation paid to the Manager
hereunder, (k) insurance premiums and property taxes paid, (1) principal and
interest paid with respect to the Credit Agreement and (m) all other cash
expenses paid relating to the operation of the Greenhouse, to the extent
contained in the Business Plan and Budget.
"Party" shall mean Owner or the Manager, or any of them, as appropriate,
and their successors and permitted assignees.
"Payroll Costs" shall mean the salaries payable to employees of the Manager
performing the Work at the Site.
- 2 -
<PAGE>
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
government or agency or political subdivision thereof.
"Product" shall mean all production derived from the Greenhouse, which
shall initially consist of colored bell peppers.
"Revenues" shall mean the gross proceeds derived from the sale of the
Product, plus interest income, and any and all other types of income received by
the Owner, less allowances, returns, and amounts received with respect to
freight and transportation charges, and excluding insurance proceeds.
"Site" shall mean the Greenhouse and its grounds located at the Southern
Quadrant of the Presidio Municipal Airport, Presidio, Presidio County, Texas.
"Term" shall mean the period provided for in Section 9.01 hereof.
"Uncontrollable Force" shall mean any of the following which are beyond the
reasonable control of a Party and which materially impairs the performance by
such Party of its duties and obligations hereunder and such material impairment
continues for a period of more than thirty (30) days: (a) severe weather, flood,
fire, lightning or other natural disaster or act of God, (b) earthquake or
subsidence, whatever its cause, (c) strikes or other labor disturbances, whether
or not involving employees of a Party, (d) action or inaction by, or inability
to obtain authorization or approval from, any governmental agency or authority,
which a Party is unable, after its best efforts, to overcome, (e) compliance
with any Governmental Rule, (f) war (whether declared or not), sabotage, act of
a public enemy, insurrection, riot or civil disturbance, (g) defects in material
equipment necessary for performance of the Contract, (h) any act by another
party (other than the Party claiming Uncontrollable Force, any Affiliate of such
Party or the respective agents, servants or employees of such Party or
Affiliates) or (i) any other similar act.
"Work" shall mean all duties and responsibilities of the Manager under this
Contract.
ARTICLE II
SCOPE OF DUTIES
Section 2.01. Performance of Start-up, Operation and Maintenance. As more
specifically described in Articles III and IV, the Manager shall furnish, manage
and supervise all personnel necessary in connection with the design, start-up,
operation, maintenance, service and repair of the Greenhouse. Commencing on the
Date of Initial Services, the Facility Manager (as defined herein in Section
2.03) shall be available on the Site to provide consulting services to the
Contractor in its construction of the Greenhouse and to prepare the Greenhouse
for production. Prior to the Date of Initial Services and upon witnessing all
performance testing, the Manager shall inspect the Greenhouse, and unless the
Manager submits in writing to Owner a report setting forth any defects in the
design or construction of the Greenhouse within thirty (30) days after the Date
of Initial Services and upon witnessing all performance testing, the Manager
will be deemed to have accepted the Greenhouse. Any defects in the design or
construction of the Greenhouse or in any equipment therein reasonably
discoverable by the
- 3 -
<PAGE>
Manager through such inspection shall not be grounds for claiming Uncontrollable
Force after acceptance of the Greenhouse by the Manager. The marketing and
distribution of the Product shall be the primary responsibility of Village
Farms, Inc. as defined in the Marketing and Sales Agreement.
Section 2.02. Personnel. The Manager shall dedicate to the performance of
the Contract such administrative, technical and supervisory personnel (each of
whom will be properly trained and qualified to undertake their respective
assigned duties) and support systems and services as are necessary or desirable
to (i) assure start-up and commissioning of the Greenhouse, (ii) instruct the
Owner and its employees in the proper operation of the Greenhouse, and (iii)
perform Manager's responsibilities under this Contract.
Section 2.03. Facility Manager. The Manager shall identify one competent
individual to act in the capacity of Facility Manager. The Facility Manager
shall be responsible on a day-to-day basis for the operations and performance of
the Greenhouse. The selection and continued employment of the Facility Manager
in the performance of the Greenhouse Operations shall be subject to the approval
of Owner, which approval shall not be unreasonably withheld. The Facility
Manager shall be an employee of the Owner.
Section 2.04. Business Plan and Budget. Prior to the date of Substantial
Completion under the Greenhouse Construction Agreement, the Manager will provide
to the Owner a preliminary Business Plan and Budget for the first year of
operations setting forth such information as the Owner shall reasonably request.
In addition, within forty-five (45) days prior to the Date of Initial Services
and within forty-five (45) days prior to December 31 of each year thereafter,
the Manager shall submit to the Owner the Business Plan and Budget for the
initial Contract Year and each Contract Year thereafter. The Business Plan and
Budget shall set forth in form and detail reasonably satisfactory to Owner, the
Manager's best estimate of Revenues and Operating Costs of the Greenhouse for
such Contract Year. Each Business Plan and Budget delivered hereunder shall be
subject to the approval of Owner. In the event the Owner does not notify the
Manager of its approval or disapproval of the Business Plan and Budget within
fourteen (14) days of its receipt of same, the Owner shall be deemed to have
approved such Business Plan and Budget.
Section 2.05. Performance Standards. The Manager shall be responsible for
the operating performance of the Greenhouse in accordance with the Business Plan
and Budget and in conformity with industry, professional and safety standards
and in a prudent and businesslike manner. The Manager shall be responsible for
the means, methods and techniques used in the operation of the Greenhouse. The
Manager shall maintain good order and discipline at the Greenhouse at all times
and shall take all reasonable precautions to protect the Greenhouse and its
contents (including, but not limited to, the Product) from damage and to protect
employees of Lender, Owner and the Manager and members of the public from injury
at the Site.
ARTICLE III
OPERATION
Section 3.01. Operation. During the period beginning on the Date of Initial
Services and ending at the expiration of the Term of this Contract, the Manager
shall use its best efforts
- 4 -
<PAGE>
to operate the Greenhouse (including, but not limited to, the sowing, growing,
harvesting and packaging of the Product) at its fullest productive capacity in
accordance with the Business Plan and Budget and in accordance with prudent
agricultural economic practices and to assist the Marketing Agent in its efforts
to market the Product to derive the greatest possible revenue therefrom. The
Manager warrants that, during each Contract Year, beginning with the Second
Contract Year, that the operating performance of the Greenhouse will be on a
basis consistent with similar greenhouses operated by the manager in
consideration of differences in size and location of the other greenhouses.
Section 3.02. Compliance With Governmental Rules. The Manager shall at all
times operate the Greenhouse in accordance with all applicable Governmental
Rules (including, but not limited to, all environmental protection, hazardous or
toxic substances, pollution, waste, material handling, disposal, sanitary,
health, and safety laws, rules and regulations). The Manager shall be liable for
all fines, fees, penalties, damages or other costs imposed by a governmental
authority attributable to its willful acts or negligence (and the negligence of
its agents and employees) in connection with the operation, use or maintenance
of the Greenhouse.
Section 3.03. Obligations of Owner. Throughout the Term of this Contract,
Owner shall supply to the Manager of the Greenhouse such personnel and Operating
Supplies as shall be mutually agreed upon by the Manager and Owner in the
Business Plan and Budget. The Manager shall be responsible for overseeing and
recording the use of all Operating Supplies and shall give Owner reasonable
notice of its requirements for additional personnel and Operating Supplies not
set forth in the Business Plan and Budget, along with the reasons therefor. The
Manager shall be responsible for inspecting Operating Supplies furnished by
Owner, and any defects in such Operating Supplies reasonably discoverable by
Manager through such inspection, and which are capable of being corrected in a
reasonable time frame, shall not be grounds for claiming Uncontrollable Force.
All personnel of the Greenhouse operation shall at all times be employees of
Owner. The Manager shall have the right to direct and instruct the employees of
Owner, and subject to Owner's approval, which will not be unreasonably withheld,
to hire and fire Owner's employees, as Manager considers necessary and desirable
for the operation of the Greenhouse.
Section 3.04. Greenhouse Products. It is contemplated by this Contract that
the Manager will use its best efforts to produce colored bell peppers in the
Greenhouse in accordance with the Business Plan and Budget. However, if in the
opinion of the Manager the Greenhouse operation can be made more profitable by
the production of produce more profitable than colored bell peppers, then the
Manager, with the prior written consent of Owner and the Lender, may produce a
substitute product.
Section 3.05. Maintenance. The Manager shall have the responsibility of
directing the maintenance, service and repair of the Greenhouse (a) in material
accordance with industry standards of prudence, (b) in accordance with
specifications, directions, instructions and recommendations of the
manufacturers of the components thereof, (c) in accordance with all applicable
Governmental Rules (including, but not limited to, all environmental protection,
hazardous or toxic substances, pollution, waste, material handling, disposal,
sanitary, health, and safety laws, rules and regulations) and (d) to the extent
materially necessary to (i) maintain the Greenhouse in good operating condition
and repair, ordinary wear and tear excepted, (ii)
- 5 -
<PAGE>
cause the Greenhouse to continue to have the capacity and functional ability to
perform, on a continuing basis, in normal commercial operation, the function for
which it was specifically designed, (iii) comply with any standards imposed by
any insurer who has issued any insurance policy or policies in effect at any
time during this Contract with respect to the Greenhouse or any part thereof and
(iv) keep in full force and effect any warranty with respect to the Greenhouse
or any part thereof. The Manager shall operate the Greenhouse in such a manner
that at all times (a) the Greenhouse and its surrounding grounds shall be free
of litter (both organic and non-organic), (b) waste materials (both organic and
non-organic) will be confined to areas designed and maintained for their storage
and processing, (c) the exterior appearance of the buildings and the landscaping
surrounding the Greenhouse shall be neat and orderly and (d) the interior of the
Greenhouse will be neat and clean. The Manager will identify potential
maintenance problems and recommend corrective actions in the Business Plan and
Budget. All costs associated with performing the aforementioned maintenance
services will be the responsibility of the Owner. The Manager will include its
best estimate of such costs in the Business Plan and Budget.
Section 3.06. No Obstruction. Until the termination of this Contract, Owner
shall not, either through its agents or employees, take any action that would
prevent the Manager from operating the Greenhouse in accordance with the
Contract nor take any action that would materially obstruct the Site or the
Greenhouse, unless such prevention or obstruction is caused by Uncontrollable
Force or by the Manager or any of its Affiliates or any of their respective
employees, servants or agents.
ARTICLE IV
COMPENSATION AND PAYMENT
Section 4.01. Basic Compensation. In consideration of the performance of
Manager's obligations under the Contract, Owner shall pay to the Manager the sum
of FOUR HUNDRED THOUSAND DOLLARS ($400,000.00) per Contract Year (the
"Compensation") in twelve equal monthly installments beginning on the 1st day of
the second month following the Date of Initial Services and on each anniversary
thereafter. For the period from the Date of Initial Services through the first
day of the month following the Date of Initial Services, the Manager shall be
entitled to a fee equal to the product of (i) the Compensation and (ii) a
fraction which shall be the number of weeks of such period divided by 52, such
amount to be payable on the first day of the month following the Date of Initial
Services. Such compensation will be adjusted each January 1 of each Contract
Year by the same percentage change in the Consumer Price Index ("CPI"), provided
the adjustment shall not cause the Compensation to be less than the current
Contract Year's Compensation. If for any reason the Manager is unable to perform
its obligations hereunder except as a result of termination of this Contract
because of a default by the Manager hereunder, then the Manager shall be
entitled to the continuation of the Compensation as though the Contract had been
performed by the Manager, provided however, that in the event that the Manager
or Owner is unable to perform its obligations under this Contract because of an
Uncontrollable Force, then the Compensation shall be discontinued at any time
after the later of, the first anniversary of the event creating the
Uncontrollable Force or the date on which the Manager's continued performance
was disrupted. In the event this Agreement has been terminated, and in the event
the Manager may have received
- 6 -
<PAGE>
Compensation to which it was not entitled, said overpayment of Compensation
shall be immediately due and payable to the Owner, upon the determination of
such overpayment.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01. Representations and Warranties of the Manager. The Manager
represents and warrants to Owner that both it and the Facility Manager have
substantial experience in the start-up, operation and management of the
maintenance, service and repair of facilities similar to the Greenhouse. The
Manager is a corporation organized and validly existing under the laws of the
State of New York. The Manager's execution and delivery of this Contract and the
performance of its obligations hereunder have been duly authorized by all
requisite action on the part of the Manager and this Contract constitutes the
Manager's legal, valid and binding obligation, enforceable against the Manager
in accordance with its terms. The Manager's execution and delivery of this
contract and the performance of its obligations hereunder will not conflict
with, violate or result in a default under the Manager's certificate of
incorporation or any mortgage, indenture, agreement, instrument or other
contract to which the Manager is a party or by which the Manager is bound.
ARTICLE VI
COVENANTS OF THE MANAGER
Section 6.01. Operating Logs: Records and Audits. The Manager shall
maintain for the benefit of Owner daily operating logs showing the production
and sales from the Greenhouse and shall prepare maintenance and repair reports
in detail sufficient to indicate the nature of all maintenance and repairs
performed. The Manager shall also maintain such records and books of accounts as
are appropriate for the proper management of the Greenhouse and all transactions
related thereto. All such books, records and reports shall be the sole and
exclusive property of the Owner, and the Manager shall keep such books and
records in such place or places so as to provide Owner (and its authorized
representatives) with maximum access thereto and the ability to make copies
thereof.
Section 6.02. Insurance of the Manager. At all times during the operation
of the Greenhouse, the Manager shall maintain the following types and amounts of
insurance, with insurers acceptable to the Owner and the Lender:
(a) Workers' Compensation Insurance (including employer's liability
insurance) covering personnel of the Manager in connection with this contract,
subject to the laws of Texas;
(b) Primary Comprehensive General Liability Insurance for bodily injury
and/or property damage arising from the Work, subject to a combined single limit
of $1,000,000 per occurrence;
All insurance policies procured and maintained pursuant to this Section
6.02 shall contain a clause requiring the insurer and the Manager to notify
Owner and the Lender in writing 45 days prior to any cancellation or expiration
thereof or any amendment thereto. Prior to the Date of Initial Services the
Manager shall furnish Owner and the Lender a certificate of
- 7 -
<PAGE>
insurance certifying that the insurance coverage required pursuant to this
Section 6.02 is in effect.
During the Term of this Contract, Owner shall keep the Facility (including
the Greenhouse and all equipment therein) and the Site insured against such
risks and in such amounts as are reasonably required by the Lender.
The cost of insurance required pursuant to this Section 6.02 shall be born
solely by the Manager. Each such policy shall name the Lender and the Owner (in
the case of (a) and (b) above) as an additional insured.
Section 6.03. Employment Practices. The Manager shall comply with the
applicable requirements of Executive Orders Nos. 11246 (Equal Opportunity and
Certification of Nonsegregated Facilities), 11701 (Affirmative Action for
Disabled Veterans and Handicapped of the Vietnam Era), 11758 (Affirmative Action
for Handicapped Workers), 11458 and 11625 (Minority Business Enterprise) and all
other Governmental Rules relating to employment practices to the extent
applicable.
Section 6.04. Nondisclosure. All reports, records and other information
related to the Site, the Greenhouse, the operations of the Owner, and the
performance of the Manager of its duties hereunder shall not be used by the
Manager for any purposes other than those contemplated hereby or pursuant to the
written consent of the Owner and shall not be disclosed by the Manager to any
other party or any other person or entity except with the prior written consent
of the Owner. Furthermore, the Manager shall not copy or reproduce any such
information without the written consent of the Owner (other than such reasonable
copies as may be necessary to perform its duties and obligations under this
Agreement). The Manager shall also take reasonable precautions to ensure against
any breach of the obligations contained herein which shall be no less stringent
than the precautions and procedures that it uses to protect its own proprietary
information and which shall, at a minimum, be deemed to include, without
limitation, taking precautions to ensure that it will only make such information
available to those of its employees who have a need to know it. Upon the
expiration or termination of this Agreement, Manager shall immediately return to
the Owner all such information and all whole or partial copies thereof and all
other materials that may include, in whole or in part, such information. All
rights, whether arising under copyright, patent, trade secret, or other laws, to
such information are hereby reserved by the Owner.
Section 6.05. Compliance With Governmental Rules. The Manager shall at all
times perform its other duties and obligations hereunder in accordance with all
applicable Governmental Rules. The Manager shall be liable for all fines, fees,
penalties, damages or other costs imposed by a governmental authority
attributable to its and/or its agents, servants and employees) in connection
with the performance of its other duties and obligations hereunder.
ARTICLE VII
GENERAL LIABILITY
- 8 -
<PAGE>
Section 7.01. Indemnification. The Manager shall indemnify and save
harmless Owner and Lender, and their respective directors, officers, agents, and
employees from and against (i) any and all loss, damage, injury, liability and
claims thereof for injury to or death of a person, including, but not limited
to, personnel of the Manager, Lender and Owner, (ii) any and all loss of or
damage to property and (iii) any and all loss of income by the Owner, resulting
from the Manager's performance of this Contract to the extent the same is caused
by the negligence or willful misconduct of the Manager, any of its Affiliates,
or any of their respective directors, officers, agents or employees. Owner shall
indemnify and save harmless the Manager and Lender, and their respective
directors, officers, agents, and employees from and against (i) any and all
loss, damage, injury, liability and claims thereof for injury to or death of a
person, including personnel of Owner, Lender and the Manager, (ii) any and all
loss of or damage to property, and (iii) any and all loss of income by the
Manager, resulting from the Owner's performance of this Contract to the extent
the same is caused by the negligence or willful misconduct of the Owner, any of
its Affiliates, or any of its directors, officers, agents or employees.
ARTICLE VIII
DEFAULTS AND REMEDIES
Section 8.01. Defaults. Upon the failure of any Party to substantially
comply with any of the obligations of such Party hereunder and continued
noncompliance for a period of 30 days (except in the case where such failure
will result in injury to or damage or loss of perishable Product, in which case
the cure period shall be five (5) days) after written notice of the
noncompliance is sent to such Party, the non-defaulting Party may, at its
option, by written notice to the defaulting Party, declare this Contract to be
in default and at any time thereafter the non-defaulting Party may, at its sole
discretion, (a) exercise any right or pursue any remedy that may be available
under applicable law or proceed by appropriate court action to enforce the terms
hereof or to recover damages for the breach hereof and (b) terminate this
Contract. The exercise of any rights or pursuit of any remedies pursuant to this
Contract shall not relieve the defaulting Party of any of its obligations and
liabilities hereunder, all of which shall survive such exercise or pursuit. To
the extent permitted by law, and subject to any mandatory requirements of
applicable law, and further subject to Section 8.02 herein, each and every
right, power and remedy herein specifically given to the non-defaulting Party or
otherwise in this Contract shall be cumulative and shall be in addition to every
other right, power and remedy herein specifically given, or now or hereafter
existing at law, equity or by statute and each and every right, power and remedy
whether specifically herein given or otherwise existing may be exercised or
pursued from time to time and as often in such order as may be deemed expedient
by the non-defaulting Party, and the exercise or pursuit or the beginning of the
exercise or pursuit of any right, power or remedy shall not be construed to be a
waiver of the right to exercise or to pursue at any time or thereafter any other
right, power or remedy. No delay or admission by a Party in the exercise of any
right or power or in the pursuit of any remedy may impair any such right, power
or remedy or be construed to be a waiver of any default on the party of the
other Party or to be an acquiescence therein. No expressed or implied waiver by
a Party of any default hereunder shall in any way be, or be construed to be, a
waiver of any future or subsequent default hereunder. Neither Party shall be
considered to be in default for failure to perform, or delay in performing, any
obligation under this Contract if performance is prevented, hindered or delayed
by an Uncontrollable Force (but only for so long as such Uncontrollable
- 9 -
<PAGE>
Force continues unabated). In such event, the Party which is unable, or
anticipates being unable, to perform shall (a) promptly notify the other Party
in writing of the nature, cause, date of commencement and expected duration of
any such delay, (b) indicate to what extent it will be prevented from performing
and (c) exercise due diligence to overcome such inability to perform with all
reasonable dispatch. In the event a Party claims excuse of performance as a
result of an Uncontrollable Force which continues unabated for more than one
hundred twenty (120) days, the Party that is not affected by such Uncontrollable
Force shall have the option to terminate this Agreement on written notice to the
other Party.
Section 8.02. Damages for Termination Without Cause. Notwithstanding
anything to the contrary in Sections 4.01 or 8.01, the Parties agree that should
Owner elect to terminate the Agreement without cause at any time, pursuant to
Section 9.01 herein, then Owner shall pay as liquidated damages to the Manager a
sum equal to one-fourth (1/4) of the annual amount of Compensation in effect at
such early termination, which shall be Owner's sole and exclusive liability and
Manager's sole and exclusive remedy, for such early termination without cause.
ARTICLE IX
TERM
Section 9.01. Term. Subject to Article VIII and Section 3.01, this Contract
shall continue to be in effect for fifteen (15) years from the Date of Initial
Services; provided, however that the Term may be extended for additional periods
on terms acceptable to both Parties, such terms to be agreed upon not later than
three months prior to the expiration of the Term. Notwithstanding the foregoing,
the Owner shall be permitted to terminate this Contract, with or without cause,
upon ninety (90) days written notice to the Manager, subject to the terms of the
Credit Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.01. Notices. Unless otherwise specifically provided herein, all
notices, requests and demands and other communications hereunder must be in
writing and shall be deemed to have been duly given (i) when delivered
personally, (ii) when sent by telefax to the telefax number below and followed
by a confirmation transmitted by an additional mode of communication provided
for herein, (iii) the second day following the day on which the same has been
delivered prepaid to a national (only in the case of notices within the
continental United States) or an international air courier service, or (iv) when
received if sent by the mails, certified or registered, postage prepaid, in each
case addressed to the party to whom such notice is being given at the following
addresses:
OWNER: Village Farms of Presidio, L.P.
c/o Agro Power Development, Inc.
10 Alvin Court
East Brunswick, NJ 08816
Attention: President
Telefax: 908-254-1710
- 10 -
<PAGE>
and
Village Farms of Presidio, L.P.
Hwy 17 North
Marfa Municipal Airport
Marfa, Texas 79843
Attention: General Counsel
Telefax: _______________
MANAGER: New Amsterdam Joint Venture, L.L.C.
10 Alvin Court
East Brunswick, NJ 08816
Attention: President
Telefax: 908-254-1710
Any party may change the address(es) to which notices to it are to be sent by
giving notice of such change to the other parties in accordance with this
Section.
Section 10.02. Severability. Any provision of this Contract that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction. To the extent permitted
by applicable law, the Manager and Owner hereby waive any provision by law that
renders any provision hereof prohibited or unenforceable in any respect.
Section 10.03. Amendment. Neither this Contract nor any other terms hereof
may be terminated, amended, supplemented, waived or modified orally, but only by
an instrument in writing signed by the Party against which enforcement of the
termination, amendment, supplement, waiver or modification shall be signed.
Section 10.04. Assignment. Neither Party may assign any of their respective
rights under this Contract without the prior written consent of the other Party;
provided, however, that Owner may assign its rights hereunder to the Lender. Any
assignment not permitted by this Section 10.04 shall be void.
Section 10.05. Relationship of the Parties. It is agreed and understood by
the parties that the Manager is an independent contractor with respect to Owner.
No action, admission or instruction shall be deemed to make the Manager an
employee, agent or partner of Owner or to create any other relationship among
the Parties.
Section 10.06. Headings; Etc. The Table of Contents and headings of the
various articles and sections of this Contract are for the convenience of
reference only and shall not modify, define or limit any other terms and
provisions of this Contract.
Section 10.07. Governing Law. This Contract shall in all respects,
including all matters of construction, validity and performance, be governed by
and construed in accordance with the laws of the State of New York.
- 11 -
<PAGE>
Section 10.08. Parties in Interest; Limitation and Rights of Others. The
provisions of this Contract shall be binding upon, and inure to the benefit of,
the Parties hereto and their respective successors and permitted assignees.
Nothing in this Contract, whether expressed or implied, shall be construed to
give any Person (other than the parties hereto and their respective successors
and permitted assignees) any legal or equitable right, remedy or claim under or
in respect of this Contract or any covenants, conditions or provisions contained
herein.
Section 10.09. Arbitration. (a) In the event a dispute arises between or
among the Parties relating to the terms of this Agreement and any Party gives
written notice of such dispute to the other Party, then each of the Parties
involved in such dispute shall refer the dispute to its senior management. The
senior management of each Party shall meet and confer regarding the resolution
of the dispute. In the event a resolution of such dispute is not reached within
30 days of the written notice, then either of the Parties may submit the dispute
to arbitration in accordance with Section 10.09.(b).
(b) Arbitration of disputes pursuant to this Section 10.09.(b) shall be
held in New York, New York, unless otherwise agreed to by the Parties, under the
commercial arbitration rules of the American Arbitration Association, and shall
be heard by three arbitrators selected in accordance with such rules. Each
arbitrator shall have at least five years experience in the United States in a
profession or professions related to the subject matter involved in the dispute
and shall not be a past or present officer, director or employee of, or have any
interest in or material relationship with, any Partner or any Affiliate of any
Partner. Any arbitral award shall be final and binding and may be entered by any
Party in any state or Federal court having jurisdiction thereof. Costs of
arbitration (including reasonable attorney's fees and arbitration costs) shall
be paid either equally or by the Parties to the arbitration or in accordance
with the decision of the arbitrators.
IN WITNESS WHEREOF, the Parties have caused this Contract to be duly
executed by the respective officers thereunto duly authorized as of the date and
year first above written.
NEW AMSTERDAM JOINT VENTURE, L.L.C.
By: AGRORENT, B.V.
By:
------------------------------------
Name: Nic Poot
Title: President
NEW AMSTERDAM JOINT VENTURE, L.L.C.
By: NEW AMSTERDAM MANAGEMENT CO.
- 12 -
<PAGE>
By:
------------------------------------
Name: Michael DeGiglio
Title: Chief Executive Officer
VILLAGE FARMS OF PRESIDIO, L.P.
By:
---------------------------------
Name: Michael Minerva
Title: Vice President
- 13 -
Exhibit 10.105
PROMISSORY NOTE AND SECURITY AGREEMENT
$1,375,000.00 March 10, 1997
Wilmington, Delaware
AGRO POWER DEVELOPMENT, INC., a New York corporation ("Agro"), VILLAGE
FARMS OF DELAWARE, L.L.C., a Delaware limited liability company ("VFD"), and
VILLAGE FARMS, L.L.C., a Delaware limited liability company ("VF"; Agro, VFD and
VF are each referred to herein as a "Co-Obligor", and collectively as the
"Co-Obligors"), for value received and as evidence of indebtedness for borrowed
money, hereby promises to pay to COGENTRIX DELAWARE HOLDINGS, INC., a Delaware
corporation, its successors and assigns (the "Holder"), the principal sum of ONE
MILLION THREE HUNDRED SEVENTY-FIVE THOUSAND DOLLARS ($1,375,000.00), together
with interest, in accordance with the terms and conditions set forth herein.
1. Payment of Principal and Interest. The Co-Obligors shall (a) repay the
principal balance outstanding under this Promissory Note in twenty (20) equal
quarterly installments, and (b) pay, at such times as payments of principal are
required to be paid hereunder, accrued interest on the unpaid principal balance
hereof at the rate of six percent (6%) per annum from the date this Promissory
Note is issued until the repayment in full of all outstanding principal and
accrued interest. The first quarterly payment of principal and accrued interest
shall be due and payable on September 30, 1997, and subsequent quarterly
payments shall be due and payable on each December 31, March 31, June 30 and
September 30 thereafter until and including June 30, 2002. A final payment of
all principal and accrued interest then outstanding shall be made by the
Co-Obligors on June 30, 2002. Notwithstanding the foregoing, in the event a
payment of principal and accrued interest under this Promissory Note is stated
to be due on a day that is not a Business Day (defined below), such payment
shall be due on the immediately preceding Business Day. As used herein, a
"Business Day" shall mean any day other than a Saturday, Sunday or any other day
on which commercial banks in Wilmington, Delaware are authorized or required by
law or executive order to be closed.
2. Default Interest. Notwithstanding the foregoing, the Co-Obligors hereby
promise to pay to the Holder interest at a rate per annum equal to the lesser of
ten percent (10%) or the maximum rate allowed by applicable law (the
"Post-Default Rate") on any amounts payable by the Co-Obligors under this
Promissory Note which shall not have been paid in full when due (whether at
stated maturity, by acceleration or otherwise), for the period from and
including the due date thereof to but excluding the date the same is paid in
full. Interest at the Post-Default Rate shall be payable from time to time on
demand.
3. Method of Payment. All payments of principal and interest hereunder
shall be made in lawful money of the United States of America and delivered to
the Holder at its offices located at 1105 N. Market Street, Suite 1108,
Wilmington, Delaware 19801, Attention: Treasurer, or at such other place or to
such other person as the Holder may designate in writing to the Co-Obligors from
time to time.
<PAGE>
4. Prepayment. The Co-Obligors may not prepay this Promissory Note, in
whole or in part, without the prior written consent of the Holder.
5. Events of Default. If one or more of the following events (herein called
"Events of Default") shall occur and be continuing:
(a) The Co-Obligors shall default in the payment when due of any principal
of or accrued interest on this Promissory Note or any other amount
payable by them hereunder; or
(b) Any Co-Obligor shall be in default of any note, agreement, indenture
or other document evidencing or relating to any obligation for
borrowed money in an original principal amount of $5,000,000.00 or
more; or
(c) The occurrence of any of the following with respect to any Co-Obligor
pursuant to or within the meaning of any Bankruptcy Law (as defined
below):
(i) commencement of a voluntary case or proceeding,
(ii) consent to the entry of an order for relief against it in an
involuntary case or proceeding,
(iii) consent to the appointment of a custodian, trustee or receiver
of it or for all or substantially all of its property,
(iv) making a general assignment for the benefit of its creditors,
(v) admitting in writing that it generally is unable to pay its
debts as the same become due, or
(vi) the entry by a court of competent jurisdiction of an order or
decree under any Bankruptcy Law that:
A is for relief against any Co-Obligor in an involuntary case
or proceeding,
B appoints a custodian, trustee or receiver of any Co-Obligor
or for all or substantially all of its property, or
C orders the liquidation of any Co-Obligor;
then, (1) in the case of an Event of Default other than one referred to in
clause (c) of this Section 5, the Holder may, by notice to the Co-Obligors,
declare the entire outstanding principal amount, and any and all accrued but
unpaid interest thereon, under this Promissory Note and all other amounts
payable by the Co-Obligors (or any of them) hereunder to be forthwith due and
payable, whereupon such amounts shall be immediately due and payable without
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by each of the Co-Obligors; and (2) in the case of the
occurrence of an Event of Default referred to in clause (c)
-2-
<PAGE>
of this Section 5, the entire outstanding principal amount, and any and all
accrued but unpaid interest thereon, under this Promissory Note and all other
amounts payable by the Co-Obligors (or any of them) hereunder shall
automatically become immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are expressly waived by
each of the Co-Obligors.
As used herein, "Bankruptcy Law" means Title 11 of the United States Code
or any successor thereto and any state law providing for the appointment of a
receiver with respect to any Co-Obligor.
6. Security. As security for the repayment of the principal, interest and
other amounts due hereunder, and for so long as any amounts remain outstanding
hereunder, each of the Co-Obligors hereby grants to the Holder a first priority
lien on and security interest in all cash distributions or other payments which
it may receive, directly or indirectly, or which it may be entitled to receive,
directly or indirectly, nor or in the future, from Pocono Village Farms, L.P., a
Delaware limited partnership (the "Partnership"), and all proceeds thereof. With
respect to cash distributions and other payments made following the occurrence
and during the continuance of an Event of Default hereunder, (a) each of the
Co-Obligors shall direct the Partnership to make any such cash distributions or
other payments to which it may be entitled directly to the Holder, and (b) each
of the Co-Obligors agrees that any such cash distributions or other payments
actually received from the Partnership by it shall be deemed to be held in trust
by such Co-Obligor for the benefit of the Holder and shall immediately be paid
over to the Holder by such Co-Obligors. Each Co-Obligor hereby covenants that,
for so long as any amounts remain outstanding under this Promissory Note, it
will not, without the prior written consent of the Holder, grant a lien on or
security interest in (y) any such cash distribution or other payment which it
may receive or which it may be entitled to receive now or in the future from the
Partnership, or (z) its interest in the Partnership or any right to receive
distributions or payments from any partner of the Partnership. Each Co-Obligor
hereby represents that its chief executive office and principal place of
business is located at 10 Alvin Court, East Brunswick, New Jersey 08816.
7. Co-Obligors. Notwithstanding anything contained herein to the contrary,
each Co-Obligor shall be jointly and severally liable for all amounts due and
payable under this Promissory Note as though each were the sole obligor
hereunder.
8. Miscellaneous. This Promissory Note shall be governed by and construed
in accordance with the laws of the State of Delaware without application of the
principles of conflict of laws thereunder; provided, however, that the
provisions of this Promissory Note relating to the perfection and enforcement of
the lien and security interest in the Collateral, with respect to each
Co-Obligor, shall be governed by and construed in accordance with the laws of
the state where the chief executive office of each Co-Obligor is located. Each
Co-Obligor agrees to pay, in addition to any principal and interest due
hereunder, all costs incurred by the Holder to enforce this Promissory Note or
to collect amounts due hereunder, including, without limitation, reasonable
attorneys' fees and expenses. No delay or omission on the part of the Holder in
exercising any of its rights or remedies, nor shall any delay, omission or
waiver on any one occasion be deemed a waiver of, or a bar to the exercise of,
the same or any other right or remedy on any future occasion.
-3-
<PAGE>
IN WITNESS WHEREOF, each Co-Obligor has caused this Promissory Note to be
duly executed as of the date first above written.
AGRO POWER DEVELOPMENT, INC.
By:__________________________________________
Printed Name: J. Kevin Cobb
Title: Vice President
VILLAGE FARMS OF DELAWARE, L.L.C.
By: Agro Power Development, Inc.,
Managing Member
By:__________________________________________
Printed Name: J. Kevin Cobb
Title: Vice President
VILLAGE FARMS, L.L.C.
By: Agro Power Development, Inc.,
Managing Member
By:__________________________________________
Printed Name: J. Kevin Cobb
Title: Vice President
-4-
Exhibit 10.106
Association: First Pioneer Farm Credit, ACA Issue Date: 03/05/1997
Customer #: 0152302728 Closing Date: 03/10/1997
Loan #: 4270258
LOAN AGREEMENT
THIS AGREEMENT is made on the above written date between Pocono Village Farms,
L.P. ("Borrower") c/o Agro Power Development, Inc. 10 Alvin Court, East
Brunswick, NJ 08816 and First Pioneer Farm Credit, ACA a corporation organized
and existing under the laws of the United States Under the Farm Credit Act of
1971, as amended, having its office and place of business at 9 County Road 618,
Lebanon, NJ 08833 ("Lender").
WHEREAS, Lender is willing to establish or renew a credit facility for the
benefit of Borrower, and to make advances from time to time to Borrower under
the terms hereof and the applicable Loan Documents.
NOW THEREFORE, it is mutually agreed as follows:
1. LOAN TERMS AND REPAYMENTS. For the Parties' mutual convenience and
Borrower's ease of repayment, the Indebtedness subject to this Agreement
may be represented by one or more Note(s) with different repayment terms
and security. The Parties shall be free to agree on such repayment terms
and conditions as they may find mutually acceptable. A list of the Note(s)
subject hereto and a summary of their terms is shown on Exhibit "A".
In addition to the terms hereof, the specific repayment terms of the
Indebtedness and all other terms and conditions shall be as described in
the Note(s) listed, and such other note(s), other evidence of indebtedness
or obligation, mortgage(s), loan agreement9s), security agreement(s),
guaranty(ies), writings related to or governed hereby, as may be executed
from time to time by Borrower, and all amendments, renewals, refinancings
and replacements thereof (collectively: the "Loan documents"). The terms of
all Loan Documents are incorporated by reference herein and made a part
hereof.
2. AVAILABILITY OF FUNDS. Unless otherwise stated herein, or elsewhere in the
Loan Documents, Borrower's privilege to request and draw advances shall
expire on the date shown on Exhibit A hereto for each respective Loan/Line.
Lender shall consider renewing or extending Borrower's privileges to draw
funds when requested by Borrower, and upon Borrower's satisfactory
completion of all Lender's requirements; however, Lender is not obligated
to extend or renew Borrower's drawing privileges, and such action is in
Lender's sole discretion.
3. TERM OF THIS AGREEMENT. This Agreement shall remain in effect until all
sums owing hereunder are paid in full and this Agreement is terminated,
subject to all
- - --------------------------------------------------------------------------------
POCONO VILLAGE FARMS, L.P. Page 1
LOAN AGREEMENT
<PAGE>
written extensions, modifications or renewals executed by the Parties
hereto from time to time.
4. ADVANCES. Lender is not obligated to make any future advances. All future
advances shall be added to the unpaid principal balance of the Indebtedness
as evidenced by the applicable note(s) and shall bear interest thereunder
from the date of the advance. No advance needs to be made completed after
the occurrence of one or more of the following circumstances:
a.) Borrower is in default on this Agreement, or on any Loan Document
subject hereto, or on any other obligation of Borrower or any guarantor to
Lender to this loan or related loaner in which lender has an interest; or
b.) There has been a material adverse change in the financial condition of
Borrower or the value or condition of the loan collateral; or
c.) The enforceability of any lien on any unreleased security becomes
doubtful, or the priority of any such lien shall have changed.
5. SECURITY The security given by Borrower to Lender includes, without
limitation, the following as all or any of these may be renewed or amended
from time and time:
5.1 A real estate mortgage to be recorded in the Town of Mount Carmel, PA
Registry of Deed/Mortgages.
5.2 A Security Agreement, which provides a first lien on all assets,
tangible or intangible, of the Borrower, including all Greenhouse and
related equipment, excluding Inventory and Accounts Receivable.
All security now existing and hereafter given for the payment of the
Indebtedness shall continue in full force and effect until the Indebtedness
is paid in full, despite any interim period during which no Indebtedness is
outstanding, and until all Note(s), Loan Documents and any accompanying
security documents are terminated.
Borrower agrees to deliver such additional security as Lender may at any
time deem necessary. Borrower further agrees to execute, deliver, file
and/or record such documents or instruments, or take such other actions, as
may be reasonably required by Lender to effectuate the intention of this
Agreement, or to assure the enforceability and collectability of the
Indebtedness, the Loan documents or any lien, or to otherwise protect or
enforce the rights of Lender hereunder. Borrower agrees to purchase flood
insurance, or additional flood insurance, in such amounts as may be
required by Lender if at any time during the life of this loan Lender
determines that any loan collateral is or will be located in a special
flood hazard area.
6. USE OF LOAN PROCEEDS. As set forth in the Loan Application.
- - --------------------------------------------------------------------------------
POCONO VILLAGE FARMS, L.P. Page 2
LOAN AGREEMENT
<PAGE>
7. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower makes the following
representations and warranties to Lender. WHICH REMAIN IN EFFECT UNTIL ALL
SUMS SUBJECT TO THIS AGREEMENT ARE REPAID IN FULL.
7.1 FINANCIAL STATEMENTS. All financial statements and other information
previously furnished by Borrower to Lender are accurate in every
material respect; there has not been any material adverse change in
the financial condition of Borrower since the date of the last
financial statement provided; Borrower has no material liabilities,
fixed or contingent, which are not fully shown or provided for in the
said financial statements as of the date thereof.
7.2 SOLVENCY. Borrower has sufficient capital to carry on the business and
is solvent and able to pay debts as they mature, and Borrower is
generally paying such debts. Borrower owns property the fair market
value of which exceeds the dollar amount required to pay Borrower's
debts.
7.3 COMPLIANCE WITH LOAN TERMS. Borrower is performing on, or is in
compliance with, all terms of all Borrower's other loans and
obligations to all other creditors, if any, and all loans and
obligations to Lender, whether or not subject to this Agreement.
7.4 LEGAL ENTITY WARRANTY. If Borrower is a legal entity, Borrower
represents and warrants that it is duly constituted under applicable
laws and is in good standing; that appropriate authorization has been
obtained to enter into this Agreement and all Loan Documents; and that
when executed this Agreement and all Loan Documents shall be valid and
legally binding on Borrower.
8. LOAN APPROVAL CONDITIONS. Borrower covenants with Lender as follows:
8.1 FINANCIAL PERFORMANCE.
8.1.1 Net worth must be maintained at a percentage of at least 20%
(Book), improve by a least two percent annually and achieve a 40%
net worth within five years. (Measured according to GAAP,
consistently applied).
8.2 INSURANCE. In addition to the insurance requirements of all Loan
Documents, Borrower shall maintain the following indicated insurance
coverage in full force, and naming Lender as beneficiary unless stated
otherwise:
8.2.1. Fire insurance, with extended coverage, on all Real Estate in
the amount of $2,200,000.00.
8.2.2. Public liability insurance in the amount of $2,200,000.00.
8.2.3. Mortgage title insurance on all real estate collateral in the
amount of $2,200,000.00.
8.3 FINANCIAL INFORMATION. At Lender's request, Borrower shall provide, in
a form acceptable to Lender, a current balance sheet and income
statement as
- - --------------------------------------------------------------------------------
POCONO VILLAGE FARMS, L.P. Page 3
LOAN AGREEMENT
<PAGE>
described and at such other additional times as Lender may request in
connection with this loan:
8.3.1. Annual audited financial statements within 120 days of the end
of each fiscal year and unaudited financial statements within
30 days of the end of the first three quarters of each fiscal
year.
8.3.2. Budgets and operating reports for the Greenhouse as may
reasonably be requested for informational purposes.
8.4 NOTICE. Borrower shall provide prompt written notice to Lender of the
following events:
8.4.1. Change in management or ownership of the business.
8.4.2. Default on loans or credit arrangements with any other
creditors.
8.4.3. Occurrence of any event having a material adverse affect on
Borrower's business.
8.4.4. Location change or new location of office or site of operation.
8.4.5. Change to out of state or county for any collateral, except in
the ordinary course of business.
8.4.6 Restriction, suspension, revocation or other changes in all
permit(s), license(s), or authority(ies) required to conduct
Borrower's business.
8.4.7. Any order, consent order, agreement, notice or requirement
affecting Borrower from any federal or state agency with
jurisdiction or powers over environmental matters.
8.5 NEGATIVE COVENENTS. During the term of this Agreement, Borrower will
not take any of the following actions without the prior written
approval of Lender:
8.5.1. Sell Borrower's business, abandon or cease business operations,
or merge or consolidate with any third party or entity.
8.5.2. Dispose of all or a substantial portion of Borrower's business
assets, by sale, transfer, lease, gift, abandonment or
otherwise, except for sales of inventory in the ordinary course
of business.
8.5.3. Mortgage, pledge, lease for a period exceeding one year or
otherwise make or allow the filing of any collateral for this
Line of Credit.
8.5.4. Make distributions unless: a) The calculation of Projected 12
Month Debt Service Coverage Ratio ("12 month DSCR") is 1.10X or
greater, b) No Default or Event of Default shall have occurred
and be continuing except that, cash distributions will be
allowed to the partners of the Borrower for the payment of
liabilities for State and Federal Income Taxes arising from the
allocations of the Borrower's income to the partners ("Tax
Distributions"), provided all loan approval conditions are met
before and after the distributions. The amount of such tax
distributions will be limited to the lessor of Net Projected
Cash Flow or the amount of the Federal or State Tax obligations
resulting from the allocation of income to the partners of the
Borrower for the period.
- - --------------------------------------------------------------------------------
POCONO VILLAGE FARMS, L.P. Page 4
LOAN AGREEMENT
<PAGE>
Projected 12 Month DSCR shall be calculated as follows: Project
Cash Flow the twelve month period updated for actual Projected
Cash Flow and projected for the remainder of the year, plus
undistributed Retained Earnings divided by principal, interest
and fees payable on the Senior Debt during the same period,
(Measured according to GAAP, consistently applied).
Projected Cash Flow: Project cash flow for any period will
consist of (x) revenues from the sale of vegetables produce and
any other operations revenue and investment income for such
period less (y) fuel costs, utility expenses, insurance costs,
and other operation and maintenance costs, property, real
estate, sales and excise taxes, general and administrative
expenses, regional support costs, professional fees, Management
Costs and capital expenditures necessary to maintain the
Greenhouse, but excluding Federal and State partnership income
taxes, and Debt Service for such period.
8.5.5. Net Project Cash Flow: Project Cash Flow less Debt Service for
such period. Will not enter into an agreement with another
creditor which offers terms/conditions more favorable than
those offered to First Pioneer Farm Credit, including without
limitations a guarantee from any affiliated entity.
9. DEFAULT. If a default hereunder should occur, Lender shall have such rights
and remedies as are provided in the Promissory Note(s) and Loan Documents,
including without limitation and at Lender's sole option, the right to make
demand or to accelerate the whole Indebtedness subject hereto.
9.1 BREACH OF THIS AGREEMENT. A breach of any warranty contained herein;
or any material misrepresentation relating hereto; or Borrower's
failure to observe, perform timely or comply with any provision of
this Agreement shall be a default under this Agreement.
9.2 DEFAULT UNDER LOAN DOCUMENTS. A default under any Loan Document or
other writing related to or subject hereto shall also be a default on
this Agreement.
GENERAL PROVISIONS.
10. NON WAIVER. Waiver, by Lender of the breach of any term or covenant, or the
failure of Lender to exercise any option given to it, or the granting by
Lender of any forbearance, restructuring or "borrower rights" (as may be
required or allowed under the Farm Credit Act or other applicable law or
regulations) shall not be deemed to be a waiver of any subsequent breach of
such covenant or other breach of any other covenant, or of Lender's rights
thereafter to exercise any such option. Any provision of this Agreement or
the Loan Documents subject hereto can be waived only by a writing , signed
by an authorized representative of Lender.
- - --------------------------------------------------------------------------------
POCONO VILLAGE FARMS, L.P. Page 5
LOAN AGREEMENT
<PAGE>
11. SEVERABILITY. If any provision of this Agreement, the Note(s) and
Mortgage(s), any Loan Document or other obligation affecting this Agreement
or any other document given to secure the said Indebtedness shall be
determined to be invalid, inapplicable to any party or unenforceable, such
determination shall not affect the validity, applicability or
enforceability of any other provision of that instrument, or this
Agreement.
12. NO ORAL MODIFICATION. This Agreement and all Loan Documents subject hereto
cannot be changed or modified orally, but only by a writing signed by the
party against whom enforcement is sought.
13. NOT A CONSUMER TRANSACTION. Borrower agrees and acknowledges that this is
not a consumer transaction.
14. GOVERNING LAW. This Agreement is subject to the provisions of the Farm
Credit Act of 1971 and all acts amendatory thereof or supplementary
thereto; and shall be interpreted according to the law of the State of New
Jersey.
Signatures:
Pocono Village Farms, L.P. Pocono Village Farms, L.P.
By:_________________________________ By:_____________________________
J. Kevin Cobb, Vice President Thomas F. Schwartz, Vice President
First Pioneer Farm Credit, ACA
By:_____________________________
David W .Boone, Vice-President
- - ------------------------------------
________________________
Witness to All
- - ------------------------------------
- - --------------------------------------------------------------------------------
POCONO VILLAGE FARMS, L.P. Page 6
LOAN AGREEMENT
<PAGE>
EXHIBIT "A" TO LOAN AGREEMENT
The following Promissory Notes are subject to this Loan Agreement:
Loan #: 4270258 $2,220,000.00 Long loan application. All funds to be
disbursed at closing with the exception
of improvements to be completed.
Line #: 1 TERMS: A $2,220,000.00 Capital
Non-Revolving Line of Credit. Funds are
available until the earlier of 12 months
or until fully disbursed. Current
principal balance is $0.00.
INTEREST RATE: Variable rate loan, with
an initial rate of 8.75%, rate tier: LT
Rate 4.
NOTE TO BE SIGNED OR GUARNATEED BY:
Pocono Village Farms, L.P.
REPAYMENT TERMS: $36,670.00 plus
interest, quarterly starting 7/1/97
DRAWING PRIVILEGES EXPIRE: No later than
12 months after closing.
REQUIRED USE OF LOAN PROCEEDS: Purchase
greenhouse property, Mount Carmel, PA and
make planned improvements.
- - --------------------------------------------------------------------------------
POCONO VILLAGE FARMS, L.P. Page 7
LOAN AGREEMENT
Exhibit 10.107
Installment Note - 11327 Page 1
INSTALLMENT PROMISSORY NOTE
Filing Ref.: Pocono Village Farms, L.P. Printed: 35495.3539351852
Date: 03/10/1997
Association: First Pioneer Farm Credit, ACA
Branch: Flemington 028-012)
Account#: 4270258
Customer #: 0152302728
1. INDEBTEDNESS. For value received, the undersigned (collectively: the
"Borrower") jointly and severally promise to pay to the order of First Pioneer
Farm Credit, ACA, or the Holder of this Note (collectively: the "Lender") the
principal sum of Two Million, Two Hundred Thousand Dollars and Zero Cents
($2,200,000.00) together with interest as set forth below, all future advances
and all other sums owing hereunder (the "Indebtedness").
INSTALLMENTS. Installments shall be made as follows:
Sixty (60) Quarterly installments of interest in the amount billed and principal
in the amount of $36,670.00, beginning on 07/01/1997, plus a final installment
of any amount necessary to pay the Indebtedness in full. The amount of each
installment due after any change in the interest rate or optional future advance
shall be increased or decreased to reflect such change or advance.
2. FUTURE ADVANCES. This Note is also given for optional future advances up to
an unlimited amount of Indebtedness, which may be made or arise from time to;
but Lender is not obligated to make future advances. No future advance needs to
be made or completed if an Event of Default has occurred, or if Borrower is in
default on any Loan Document or on any other loan, obligation or Agreement with
Lender or in which Lender has an interest. All future advances made hereunder
shall be added to the unpaid principal balance hereof, and shall bear interest,
as provided herein, at the rate applicable thereto from the date of such
advance. Any advance made by Lender for taxes, liens, judgments, assessments,
insurance premiums, environmental compliance or to protect collateral pursuant
to any Loan Document, at Lender's sole option, shall be payable on demand, or
such amount may be added to the unpaid principal balance hereof.
3. INTEREST RATE. The unpaid principal balance of the Indebtedness evidenced
hereby, including any amount which is not paid when due and all future advances,
shall bear interest from the date incurred or advanced at a VARIABLE INTEREST
RATE, corresponding to the applicable Interest Rate Tier, both of which shall be
determined by Lender. The Interest Rate Tier assigned to Borrower may be changed
at any time, pursuant to Lender's credit criteria for that Tier, which change in
Tier may result in a change of the Variable Interest Rate applicable hereto. The
Variable Interest Rate applicable to any Tier also may be increased or decreased
at any time pursuant to the Lender's Interest Rate Policy applicable to this
Note and pursuant to the Farm Credit Act of 1971, as such policy or law may
hereafter be amended. Such Rate is determined from time to time as a means of
pricing loans to Lender's customers, including Borrower, and is neither tied to
any external rate or index, nor does it necessarily reflect the lowest rate
actually charged to any particular category of customers. The Variable Interest
Rate
<PAGE>
Installment Note - 11327 Page 2
INSTALLMENT PROMISSORY NOTE
Filing Ref.: Pocono Village Farms, L.P. Printed: 35495.3539351852
Date: 03/10/1997
of this Note shall not be limited by any State's usury or other legal interest
rate limits. The Rate applicable on the date hereof is 8.750% per year. Interest
shall accrue to the date of receipt of payment. If the Indebtedness shall become
due, because of acceleration due to Borrower's default, or because of maturity
under terms of this Note, or for any other reason, then interest shall continue
as provided for herein until the Indebtedness is paid in full.
4. SECURITY. This Note is subject to a Loan Agreement, and the security includes
but is not limited to: Security Agreement(s) covering tangible and intangible
assets, and a Real Estate Mortgage dated 03/10/1997, and the security or
additional security described in the Loan Agreement, as all or any of these may
be renewed or amended from time to time. All liens shall continue in effect
until the indebtedness is paid in full, despite any interim period of no
indebtedness outstanding, and until this Note and the security documents are
terminated.
5. PREPAYMENT. Except where limited by any attached Interest Rate Rider, this
Note may be prepaid without penalty in whole or in part at any time. Unless
otherwise agreed in writing by Lender, partial prepayments shall not operate to
defer or reduce the installments due hereunder.
6. EVIDENCE OF INDEBTEDNESS. Advances, interest and other charges, and
repayments shall be posted to Lender's accounting record, which record shall be
evidence of the Indebtedness owing hereunder from time to time, and which record
shall be admitted into evidence in any dispute involving this Note as prima
facie evidence of the amount of the Indebtedness. Each statement of account sent
to Borrower shall constitute an account stated, and shall be deemed accepted by
and binding upon Borrower unless specific written objection thereto is received
by Lender within 30 days after the date thereof. All payments and credits shall
be applied to the Indebtedness in such reasonable manner as Lender in its sole
discretion shall elect.
7. DEFAULT. It is expressly agreed that the whole of the Indebtedness shall
become immediately due and payable, at Lender's sole option, together with
collection costs if any of the following "Events of Default" should occur: a.)
Any installment or other amount due hereunder or under any Loan Document remains
unpaid for 30 days after the due date thereof, including all extensions,
renewals and reamortizations; or b.) Borrower's or any Guarantor's failure to
perform timely or observe any term or provision of this Note or any other Loan
Document securing or otherwise related hereto; or c.) The breach of any
warranty, representation, covenant or agreement in any Loan Document, or any
material misrepresentation made to Lender under any Loan Document, financial
statement or loan application related hereto; or d.) Lender declares Borrower or
any Guarantor in Default on any Loan Document securing or otherwise related
hereto; or e.) Lender declares a default on any other obligation of Borrower or
any guarantor to Lender or in which Lender has an interest.
8. COLLECTION COSTS AND FEES. Borrower jointly and severally agrees to pay all
costs, charges and expenses, including reasonable attorneys fees, which are
incurred by Lender in connection with preserving or protecting Lender's rights
and interests under this Note, any Mortgage, Security Agreement, Loan Agreement,
Guaranty or other legal document related to or
<PAGE>
Installment Note - 11327 Page 3
INSTALLMENT PROMISSORY NOTE
Filing Ref.: Pocono Village Farms, L.P. Printed: 35495.3539351852
Date: 03/10/1997
affecting this Note or the Indebtedness (all collectively called "Loan
Documents") whether or not a legal action is filed; or incurred by Lender in the
event of suit on the Loan Documents; or incurred in other legal proceedings for
the collection of the Indebtedness secured hereby; or incurred in any
foreclosure brought by Lender; or incurred in any other legal proceeding to
protect or sustain any mortgage or lien granted as security for the
Indebtedness; or incurred in any litigation or controversy, including any action
in Bankruptcy Court, affecting, arising from or connected with the Loan
Documents or Indebtedness. Such amounts together with interests as provided
herein shall be added to the unpaid principal balance hereof, notwithstanding
the maximum amount of Indebtedness described in any Loan Document; shall be
evidenced by this Note and secured by all loan collateral documents; and shall
be a lien of the same priority on all loan collateral.
9. ADDITIONAL TERMS. Borrower hereby jointly and severally: a) agrees to pay the
Indebtedness evidenced hereby without set-off, deduction, defense or
counterclaim; and b) waives presentment, demand, protest, notice of protest and
dishonor; and c) guaranties payment of this Note when due and consents without
notice to the release of security and/or of other obligors and to any change in
terms or extensions of time for payment for any period regardless of the
original terms of this Note; and d) agrees not to assert against any holder of
this Note any defenses or rights of set-off which any of the borrowers or any
endorser may have against the payee hereof; and e) agrees to provide, in a form
acceptable to Lender, a current balance sheet and income statement annually and
at such other additional times as Lender may request in connection with loans;
and f) agrees to deliver such additional security as Lender may at any time deem
necessary; and g) agrees that the terms of the Loan Documents shall bind and
inure to the benefit of the heirs, executors, administrators, successors and
assigns of the parties hereto.
10. NON-WAIVER. Lender's waiver of Borrower's breach, or Lender's failure to
exercise any right, or Lender's granting of forbearance, restructuring or
"borrower rights" (under the Farm Credit Act or other applicable law or
regulations) shall not be deemed a waiver of any subsequent breach of the same
covenant or the breach of any other covenant, or of Lender's rights thereafter
to exercise any right. Any provision of the Loan Documents may be waived only by
a writing, signed by an authorized representative of Lender. This note may be
assumed only with prior written permission of the Lender.
11. RELEASES. Lender may, at its sole option and without notice, release any
part of the security described in the Loan Documents, or release any person or
entity liable for or guaranteeing the Indebtedness, or agree to extend time for
payment of the Indebtedness, or provide "borrower rights" under the Farm Credit
Act without in any way affecting the lien thereof (except to the extent
released) or without releasing any unreleased person or entity obligated to pay
or guaranty the Indebtedness.
12. AGENCY. Each of the undersigned hereby appoints each of the other
undersigned as his, her or its agent for purposes of the within obligations
until written notice of termination of such agency is actually received by
Lender.
<PAGE>
Installment Note - 11327 Page 4
INSTALLMENT PROMISSORY NOTE
Filing Ref.: Pocono Village Farms, L.P. Printed: 35495.3539351852
Date: 03/10/1997
13. EXECUTION OF DOCUMENTS. Borrower agrees to execute, deliver, file and/or
record such documents or instruments, or take such other actions, as may be
reasonably required by Lender to effectuate the intention of this transaction,
or to assure the enforceability and collectability of the Indebtedness or any
Loan Document or lien, or to otherwise protect or enforce the rights of Lender
thereunder.
14. NOT A CONSUMER TRANSACTION. Borrower acknowledges and agrees that this is
not a consumer transaction.
THIS NOTE IS SUBJECT TO THE TERMS ON THE PREVIOUS PAGE(S) AND, WHEN APPLICABLE,
THE TERMS ON ANY ATTACHMENTS OR RIDERS, ALL OF WHICH THE UNDERSIGNED HAVE READ
PRIOR TO SIGNING.
Signed and sealed in the Presence of:
Pocono Village Farms, L.P. Pocono Village Farms, L.P.
By:_________________________________ By:_________________________________
J. Kevin Cobb, Vice President Thomas F. Schwartz, Vice President
____________________________________
Witness to All
COGENTREX OF POCONO, INC.,
General Partner
By:______________________________________
Thomas F. Schwartz, Vice President-
Finance of Cogentrix of Pocono, Inc.
VILLAGE FARMS OF DELAWARE, L.L.C.,
General Partner, by Agro Power
Development, Inc.,
Managing Member of Village Farms of
Delaware, L.L.C.
By:______________________________________
J. Kevin Cobb, Senior Vice President
of Agro Power Development, Inc.
Exhibit 10.108
Construction Loan Agreement ME, NH, MA, RI, CT, NJ
11390 1/92
CONSTRUCTION LOAN AGREEMENT
THIS AGREEMENT, made is on March 10, 1997, by and between Pocono Village Farms,
L.P., a Delaware Limited Partnership at 10 Alvin Court, East Brunswick, NJ 08816
(called collectively "Borrower,") and First Pioneer Farm Credit, ACA, a
corporation organized under and pursuant to the laws of the United States of
America with its office at 9 County Road 618, Lebanon, NJ 08833 (called
"Lender.")
1. CONSTRUCTION LOAN. Lender has agreed to lend, and Borrower has agreed to
borrow, the sum of $297,500.00 (called the "construction loan") to be used in
the erection, construction and completion of the improvements, described below,
on a certain parcel of land in the Township of Mount Carmel, County of
Northumberland, State of Pennsylvania, described in a deed from
________________________ to ________________________ dated _____, and recorded
in the ________________________ Registry of Deeds at _______________________ ,
in Book at Page ___________ [Attachment "A"] (called the "Premises.") This loan
is subject to the terms of this Construction Loan Agreement as well as a
promissory note (the "Note") and secured by a mortgage on the Premises (the
"Mortgage") in the amount of $2,200,000.00, both bearing even date herewith, and
any other legal Loan Documents governing the consruction loan.
2. DISBURSEMENTS SCHEDULE. The construction loan purpose is to pay the
construction costs in connection with erecting and completing on the Premises
the following (called the "improvements"):
The amount of the construction loan may be advanced in installments, made at
Lender's sole discretion, according to the satisfactory completion of work as
follows:
o Purchase and install boilers and CO2 systems ........... $
o Upon arrival of materials .............................. $ 210,000.00
o Upon completion of boiler room #1 ...................... $ 50,000.00
o ......................................................... $ 37,500.00
o ......................................................... $
o ......................................................... $
=============
TOTAL ..................................................... $ 297,500.00
3. COMPLETION DATE. Construction work shall begin [immediately] [by
______________]. The improvements must be fully completed by 12/1/97. At its
sole option, Lender may extend the time for completing construction work, but
Lender shall have no obligation to do so.
4. QUALITY. All construction work shall be done according to the building plans
and specifications submitted to Lender. All work shall be performed in a good,
first-class, workman-like manner to the satisfaction of Lender, and in
compliance with all applicable building codes, zoning and other legal and trade
standards and requirements. Materials and fixtures shall be of a quality
satisfactory to Lender, or as specified in building plans or specifications.
5. ADVANCES. All advances are at Lender's sole discretion and may be made only
upon the certified completion of work required for each particular installment
or the favorable report of Lender's representative.
Lender's sole discretion shall determine whether the quality and progress of
construction work is sufficient to entitle Borrower to request the next advance.
Lender shall have the right to require, at Borrower's expense, the approval of
any or all phases of the construction work by an engineer, architect or other
qualified professional acceptable to Lender. Lender's advance of funds does not
constitute acceptance or approval of any work performed or materials used, and
advances in the future may be denied for unsatisfactory work existing when a
previous advance was made.
Borrower shall request advances hereunder using such forms, procedures and
certifications, and taking such other action as Lender shall require in its sole
discretion from time to time. Lender is entitled to at least three days prior
notice of any request for an
Page 1 of 4
<PAGE>
advance. In its sole discretion, Lender may advance the whole or any part of any
advance before it becomes due. Lender may advance the whole or any part of any
advance before it becomes due. Lender may advance to Borrower or directly to the
contractor, with notice to Borrower, at Lender's discretion. Lender shall have
no liability for any delay in advancing funds or determining the acceptability
of work performed.
6. ADVANCE MAY BE WITHHELD. Lender, in its discretion, may refuse to make an
advance if:
A. All work done at the construction site when the advance is requested
is not satisfactory to Lender; or if all materials and fixtures
usually finished and installed by that time are not actually finished
and installed; or if Lender has not had reasonable opportunity to
inspect the work completed or obtain other evidence required to
determine satisfactory completion.
B. There is any lien or encumbrance upon the Premises, other than the
Mortgage, or Lender has received notice of any other mortgage, lien or
encumbrance, unless such lien is authorized herein.
Before any advance is made, Lender may conduct a title rundown, at
Borrower's expense, to confirm that there are no changes from the date
the Mortgage was recorded; and/or require Borrower to procure and
deliver to Lender lien waivers from any or all contractors,
subcontractors, suppliers or others; or require such other proof that
the Premises have not become encumbered by any lien, judgment, notice
of contract or assignment of contract subsequent to the recording of
Lender's mortgage. The following liens on the Premises are authorized
by Lender: None.
C. Borrower is in default under the Note or Mortgage; or demand under the
Note has been made (if applicable); or Borrower is in violation of or
in default under any provision of this Agreement, the Note, Mortgage,
or any other legal Loan Document governing the construction loan,
unless such violation has been specifically waived in writing by
Lender.
7. LENDER'S REMEDIES. If construction of the improvements is discontinued at any
time, or if the work does not proceed according to schedule, or if none, at
reasonable speed, Lender (or its successors or assigns) may purchase materials
and employ workmen to complete and protect the work. If any mechanic's lien or
liens, judgement or assignment of contract is filed against the Premises or any
part thereof, Lender may pay and satisfy them. If any taxes, assessments, sewer
rents or water rates assessed against the Premises are unpaid when due, Lender
(or its successors or assigns) may pay the same. Payments made by Lender under
this paragraph shall be in Lender's sole discretion; and all such payments shall
be deemed to be evidenced by the Note and secured by the Mortgage as if they
were advances made to the Borrower.
8. BORROWER'S COVENANTS AND WARRANTIES. Borrower accepts the construction loan
upon the terms and conditions herein specified, and covenants to erect and
finish the improvements according to the plans and specifications previously
submitted to and approved by Lender, and in accord with all applicable local,
state and federal laws. Borrower covenants to prosecute the work with all
reasonable speed and diligence. Borrower further covenants and warrants to
Lender as follows: (A.) Borrower shall promptly begin construction, and shall
complete construction using due diligence and in full compliance with all
applicable specifications and requirements by the date specified herein. (B.)
All amounts advanced hereunder will be used for the purposes, as specified
herein. (C.) All improvements shall be constructed within the boundaries of the
Premises and shall meet all zoning and setback requirements. (D.) Borrower shall
maintain such insurance as may be required by Lender, including "All
Risk/Builder's Risk" insurance. All policies shall name Lender as mortgagee and
shall provide for at least 30 days prior written notice to Lender of any change
in coverage or of cancellation. (E.) Lender, its agents representatives,
successors and assigns, shall have free access to the Premises at all times and
the right to inspect the improvements and all of Borrower's records relating to
the improvements. (F.) Borrower shall immediately notify Lender in writing if
any: litigation; liens; citations for violations, complaints or orders by
governmental authorities are commenced or filed against the Premises or the
improvements; or if the improvements are damaged or destroyed by fire or any
other cause. (G.) Borrower shall not create or allow to exist any lien on the
Premises or the materials used in the improvements, whether superior or
subordinate to Lender's interest, without Lender's prior written approval. (H.)
Upon Lender's demand, Borrower shall promptly take such action or execute such
documents as may be required by Lender. (I.) Borrower will timely and completely
comply with and fulfill all of the terms and provisions to be complied with or
fulfilled by the borrower under this Agreement, the Note, Mortgage and all other
legal Loan Documents. (J.) Borrower further acknowledges and agrees that Lender
does not warrant, guaranty, certify or make any representations as to the
quality of the improvements, the workmanship, or the improvements conforming to
any design, specification(s), building code(s) or use(s). (K.) Each request by
Borrower for an advance hereunder shall constitute an affirmation that the
representations and warranties made in this Agreement and in the Note, Mortgage
and other legal Loan Documents remain true and correct as of the date of such
request and, unless Lender is notified to the contrary prior to disbursement of
the requested advance, will continue to be so on the date of such advance.
9. DEFAULT. The following shall be defaults under this Agreement: (A.) Sale,
assignment, mortgage or any other transfer of Borrower's interest in the
Premises, or in this Agreement, without the prior written consent of Lender,
including a contract of sale in which title does not pass; (B.) A petition is
filed by or against Borrower under any Chapter of the U.S. Bankruptcy Code or
any state insolvency or reorganization law; (C.) Default on any other mortgage
or lien upon the Premises; (D.) Material injury or destruction of the
improvements by fire or other casualty; (E.) The death, dissolution, merger,
insolvency or change in control of
Page 2 of 4
<PAGE>
Borrower before receipt of the last advance; (F.) Failure to timely obtain any
permits or governmental approval necessary to the construction of the
improvements; (G.) Borrower's failure to keep any covenant, warranty or other
obligation of this Agreement, or in the Note, Mortgage or any other legal Loan
Document connected with the construction loan. (H.) The occurrence of any event
of default under the Note, Mortgage or any other legal Loan Document, or in any
obligation of Borrower to Lender. (I.) If in the opinion of the Lender, the
estimated cost of completing the improvements is in excess of the amount of
funds available to Borrower hereunder to complete such improvements.
10. LENDER'S RIGHTS UPON DEFAULT. In the event of any default: (A.) Lender may
refuse to make any further advances; (B.) At Lender's option, Lender may declare
the construction loan, as evidenced by the Note and Mortgage, immediately due
and payable and exercise all rights and remedies under the Note, Mortgage or
other legal Loan Documents or as otherwise available to Lender at law or in
equity; (C.) Lender, at its option, may continue to make advances without
becoming liable to make any other advances and without waiving any of the
Lender's right to demand payment of the indebtedness and without giving up any
of Lender's other rights or waiving them.
11. FINAL ADVANCE. Lender shall not be obligated to make a final advance
hereunder until it has received from the Borrower the following: (A.) If
requested, lien waivers in form and substance satisfactory to Lender; (B.)
Evidence that the improvements have been completed and are ready for use,
including a copy of the Certificate of Occupancy issued by the municipality
where the Premises is located; (C.) If requested, a survey of the Premises
showing that the improvements are within the boundary lines of the Premises and
that no encroachments exist.
12. LENDER HELD HARMLESS. Borrower hereby agrees to save, hold harmless and
indemnify Lender from and against any and all claims or liens for the price and
value of work, labor, service and materials now or hereafter done or furnished,
in and about the erection and completion of the improvements, or any cost or
expense growing out of the same. Borrower shall defend any action or proceeding
brought against Lender arising out of such liens or claims with an attorney of
Lender's choice.
IN WITNESS WHEREOF, the parties hereto have executed this Construction Loan
Agreement the day and year first above written.
Pocono Village Farms, L.P. Pocono Village Farms, L.P.
- - ----------------------- ----------------------
Borrower by: J. Kevin Cobb, Borrower by: Thomas F. Schwartz,
Vice President Vice President
First Pioneer Farm Credit, ACA
---------------------------------
Title and Name: David W. Boone,
Vice President
STATE OF New Jersey )
) SS:
COUNTY OF Monmouth )
On this 10th day of March, 1997, before me the subscriber, personally
appeared J. Kevin Cobb and Thomas F. Schwartz*, to me personally known and known
to me to be the same person(s) described in and who executed the within
Instrument and they severally acknowledged to me that they executed the same.
*Vice Presidents of Pocono Village Farms, L.P.
_________________________________
Notary Public Lisa M. Miceli
My Commission Expires: July 6, 2000
Page 3 of 4
<PAGE>
STATE OF New Jersey )
) SS:
COUNTY OF Monmouth )
On this 10th day of March, 1997, before me the subscriber, personally
appeared David W. Boone, to me personally known who, being by me duly sworn, did
depose and say that s/he resides at Phillipsburg, NJ, and that s/he is an
officer of First Pioneer Farm Credit, ACA, the corporation described in and
which executed the within instrument, that s/he knows the seal of said
corporation, that the seal affixed to said Instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation,
and that s/he signed his name thereto by like order.
____________________________________________
Notary Public: Lisa M. Miceli
My Commission Expires: July 6, 2000
COGENTREX OF POCONO, INC.,
General Partner
By:_________________________________________
Thomas F. Schwartz, Vice President-
Finance of Cogentrix of Pocono, Inc.
VILLAGE FARMS OF DELAWARE, L.L.C.,
General Partner, by Agro Power Development, Inc.,
Managing Member of Village Farms of
Delaware, L.L.C.
By:_________________________________________
J. Kevin Cobb, Senior Vice President of
Agro Power Development, Inc.
Page 4 of 4
Exhibit 10.109
Security Agreement 11079 ST (Revised 6/93) Page: 1
Security Agreement
Filing Ref.: Pocono Village Farms, L.P., J. Kevin Cobb and Thomas F
Creditor: First Pioneer Farm Credit, ACA
Printed: 03/06/1997 09:23:57 AM
Office At: Lebanon, NJ
1. Security Interest
Pocono Village Farms, L.P. residing in the town of East Brunswick, county of
Middlesex, State of New Jersey, whose mailing address is c/o Agro Power
Development, Inc., 10 Alvin Court, East Brunswick, NJ ("Debtor", whether one or
more), for value received, hereby grants to First Pioneer Farm Credit, ACA a
Federally chartered instrumentality of the United States under the Farm Credit
Act of 1971 as amended, having its place of business and mailing address at 9
County Road 618, Lebanon, NJ, 08833 "Secured Party", a continuing security
interest in all Debtor's or any of their property of the following description
wherever located, including such property located at:
1) The farm of about 59 acres occupied and operated by Debtor on (Street
& No.) in the Town of Mount Carmel, County of Northumberland, State of
Pennsylvania the record title to which is in the name of : Pocono
Village Farms, L.P.
1. All equipment of the Debtor, whether now owned or hereafter acquired,
including, without limitation, glass and plastic greenhouses, planting machines,
freezers, irrigation equipment, racks, trays and supplies, heaters, tillage and
harvesting tools, furniture and office equipment, computers, printers,
communications equipment, materials and supplies, machinery, trade and
production equipment, fixtures, and all other goods used by the Debtor which do
not constitute inventory and farm products.
2. As to all of the foregoing, cash proceeds, non-cash proceeds and products
thereof, additions and accessions thereto, replacements and substitutions
therefor, and all related books, records, journals, computer print-outs and
data, of the Debtor.
Also, all such property which is hereafter acquired by Debtor or any of them,
including but not limited to, all natural increase, substitutions, replacements,
accessions and additions. No security interest shall attach to after-acquired
consumer goods other than accessions unless the Debtor acquires rights in them
within ten (10) days after Secured Party makes advances to Debtor or any of them
or otherwise gives value. Also, all proceeds and products thereof, including
insurance proceeds (the "Collateral"). It is understood that the use of the
terms "proceeds," "substitutions," "replacements," "accessions," and "additions"
does not give the Debtor or any of them authority, express or implied, to sell
or otherwise dispose of the Collateral, unless Debtor is hereafter specifically
authorized to do so. The within grant of a security interest is in addition to
and supplemental of any security interest previously or herewith granted by the
Debtor or any of them to the Secured Party.
2. Obligations Secured
The security interest granted herein shall secure payment and performance of all
now existing and future obligations and indebtedness of Debtor or any of them to
Secured Party of every kind
<PAGE>
Security Agreement 11079 ST (Revised 6/93) Page: 2
Security Agreement
Filing Ref.: Pocono Village Farms, L.P., J. Kevin Cobb and Thomas F
Creditor: First Pioneer Farm Credit, ACA
Printed: 03/06/1997 09:23:57 AM
Office At: Lebanon, NJ
and description, direct or indirect, absolute or contingent, matured or
unmatured, whether arising hereunder or under any other agreement, guaranty,
document or instrument or by operation of law, or acquired by Secured Party from
others (including without limitation all principal, interest, fees, charges,
expenses and attorneys' fees) (all hereinafter called "Obligations").
3. Warranties and Covenants
Debtor warrants and agrees that:
A) Debtor will pay and perform all of the Obligations according to their
terms.
B) Debtor will use the proceeds of loan(s) secured hereby solely for the
purposes stated in the application(s) therefor.
C) To the extent that any of the Collateral is purchased with the proceeds of
any loan or advance secured hereby, Debtor hereby authorizes Secured Party
at its option to disburse such proceeds to the seller of such Collateral.
D) All of the Collateral is owned by Debtor or any of them free and clear of
all liens, security interests and encumbrances and Debtor or any of them
has the right to give a security interest in the Collateral and will
forever defend the title thereto against all persons whomsoever.
E) Debtor or any of them will insure all of the Collateral to the extent
required by Secured Party, and such policies shall be payable to Secured
Party as its interest may appear, under endorsements providing for at least
ten (10) days prior written notice of cancellation to Secured Party and
that Secured Party's coverage shall not be affected by any act or neglect
of the Debtor or any of them. Debtor will deposit such policies with
Secured Party. Secured Party may act for Debtor or any of them in
negotiating and settling insurance claims and in endorsing any drafts.
F) Debtor or any of them will not use the Collateral or permit it to be used
in violation of any applicable law, regulation or policy of insurance.
G) Debtor or any of them will insure, repair, maintain, preserve, cultivate,
harvest, store, feed and husband the Collateral and will satisfy any liens,
security interests and encumbrances on any of the Collateral and if Debtor
fails to do any of the foregoing, Secured Party may do so at its option,
either on or off the premises, but at Debtor's expense and without waiving
Debtor's default. All expenses incurred by Secured Party shall be payable
on demand, shall bear interest at the highest rate on any Obligations
secured hereby and shall be secured by the security interest herein.
H) Without the prior written consent of Secured Party, (1) Debtor will not
sell, lease, transfer, assign or otherwise dispose of any of the
Collateral, nor permit any liens, security interests or encumbrances to
attach to any of the Collateral, except in favor of Secured Party; and (2)
Neither Debtor or any of them will remove any of the Collateral or books
and records pertaining thereto from the location(s) specified in Section
(1) above.
I) Secured Party or its agents may examine and inspect the Collateral at all
reasonable times and may examine and make copies of books and records
pertaining thereto.
J) If the Collateral includes Accounts, Debtor agrees that at any time Secured
Party may verify the Accounts and/or notify account debtors to make
payments directly to Secured
<PAGE>
Security Agreement 11079 ST (Revised 6/93) Page: 3
Security Agreement
Filing Ref.: Pocono Village Farms, L.P., J. Kevin Cobb and Thomas F
Creditor: First Pioneer Farm Credit, ACA
Printed: 03/06/1997 09:23:57 AM
Office At: Lebanon, NJ
Part. Debtor will assist in such verifications and will give such notices
to account debtors if Secured Party requests. Secured Party may litigate,
compromise, extend, renew or otherwise deal with the Accounts and may
endorse Debtor's name on account payments received by Secured Party.
K) Debtor will immediately advise Secured Party in writing of any change in
Debtor's names or addresses, discontinuance or opening of any place of
business, change in chief executive office, or change in partnership or
corporate status or identity.
L) Debtor or any of them will take such action and will execute Uniform
Commercial Code financing statements, motor vehicle lien certificates, and
any other documents required by Secured Party to perfect the security
interest granted herein or to effectuate the purposes of this Agreement.
Debtor authorizes Secured Party to act for Debtor or any of them (1) in
executing Uniform Commercial Code amendments except when additional
Collateral is taken and (2) in signing any document of title covering
Collateral.
M) At Secured Party's request, Debtor agrees to provide an attested current
balance sheet and income statement annually and at such other additional
times as Secured Party may request in connection with the loan.
N) At the Secured Party's request, Debtor or any of them agrees to furnish a
list (organized by commodity or species of livestock) of the buyers,
commission merchants, or selling agents to or through whom Debtor may sell
any of the farm products described herein. When requested to provide such
list, Debtor or any of them shall notify the Secured Party in writing of
any new buyers, commission merchants or selling agents purchasing or
marketing Debtor's farm products at least seven (7) days before any such
sale.
O) Debtor grants to Secured Party permission to disclose the existence of its
security interest to any buyer, commission merchant or selling agent of
farm products that Secured Party deems appropriate. Debtor authorizes
Secured Party to take such actions and execute on Debtor's or any of them
behalf such documents, including but not limited to effective financing
statements, as may be necessary to preserve Secured Party's lien on
proceeds from the sale of all farm products described herein.
4. Events of Default
All Obligations shall become immediately due and payable, at Secured Party's
option, upon the occurrence of any of the following events of default:
A) Debtor or any of them fails to pay when due any indebtedness to Secured
Party or to pay or perform any other Obligation when due.
B) Breach by Debtor or any of them of any warranty or covenant herein or in
any other agreement, document or instrument between Debtor and Secured
Party.
C) Any warranty or representation made or to be made by any Debtor is
materially false.
D) Default by Debtor or any of them in payment when due of any indebtedness
now or hereafter owed for moneys borrowed from anyone other than Secured
Party.
E) Occurrence of any of the following with respect to any Debtor or any
co-maker or guarantor of any of the Obligations; death, insolvency,
business cessation, dissolution, calling of a meeting of creditors,
appointment of a receiver for any property, assignment for the benefit of
creditors, voluntary or involuntary commencement of any proceeding
<PAGE>
Security Agreement 11079 ST (Revised 6/93) Page: 4
Security Agreement
Filing Ref.: Pocono Village Farms, L.P., J. Kevin Cobb and Thomas F
Creditor: First Pioneer Farm Credit, ACA
Printed: 03/06/1997 09:23:57 AM
Office At: Lebanon, NJ
under any bankruptcy or insolvency law, entry of a court order which
enjoins or restrains the conduct of business in the ordinary course,
failure to pay any federal, state or local tax unless same is being
contested in good faith.
F) Secured Party at any time deems itself reasonable insecure or any of the
Collateral unsafe.
5. Remedies
Upon the occurrence of any such event of default and at any time thereafter,
Secured Party shall have all rights and remedies provide by law, including those
of a Secured Party under the Uniform Commercial Code, in addition to the rights
and remedies provided herein or in any other agreement between Debtor and
Secured Party. Secured Party may peaceably by its own means or with judicial
assistance enter Debtor's or any of their premises and take possession of and
remove the Collateral therefrom, and Debtor or any of them shall not resist or
interfere with such action. Secured Party may require Debtor or any of them to
assemble the Collateral and make it available to Secured Party at a place to be
designated by Secured Party which is reasonably convenient to both parties. If
notice to Debtor of intended disposition of any Collateral is required by law,
five (5) days notice shall constitute reasonable notification. All Secured
Party's rights and remedies shall be cumulative and none are exclusive. Debtor
or any of them agrees to pay all costs and expenses, including reasonable
attorneys' fees, incurred by Secured Party in a suit or other legal proceeding
for collection or enforcement of this Security Agreement or the Obligations
secured hereby, and/or in any legal proceeding to protect or sustain the
security interest created hereby, and/or in any other controversy, including
bankruptcy, arising from or connected with the Obligations or this Agreement,
and/or incurred in repossessing, holding, preparing for sale or other
disposition and in selling or otherwise disposing of any Collateral, which costs
and expenses shall be payable on demand, shall bear interest at the highest rate
on any Obligation secured hereby and shall be secured by the security interest
herein.
6. Miscellaneous
A) Any failure or delay by Secured Party to require strict performance by
Debtor or any of them of any of the provisions herein or in any other
document, shall not affect Secured Party's right to demand strict
performance therewith, and any waiver of any default shall not constitute
waiver of any other default or of the same default on a future occasion.
Any provision herein or in any other document may be waived only by an
instrument in writing, signed by an officer of Secured Party and directed
to any Debtor specifying such waiver, and not by any course of dealing,
trade custom or knowledge of Secured Party.
B) The security interest hereunder shall remain in effect despite any interim
period during which no Obligations are outstanding until termination
statements and satisfactions with respect thereto are filed under the
Uniform Commercial Code and any other lien statutes.
C) Nothing in this Agreement shall affect Secured Party's right to demand
payment at any time of any demand note or other indebtedness payable on
demand made or owing by Debtor to Secured Party.
<PAGE>
Security Agreement 11079 ST (Revised 6/93) Page: 5
Security Agreement
Filing Ref.: Pocono Village Farms, L.P., J. Kevin Cobb and Thomas F
Creditor: First Pioneer Farm Credit, ACA
Printed: 03/06/1997 09:23:57 AM
Office At: Lebanon, NJ
D) Any notice under this Agreement shall be addressed to the parties at their
respective addresses set forth in Section 1 above.
E) Each of the undersigned, including guarantors, sureties, endorsers or
co-makers, consents and agrees without further notice to any of them and
without affecting the liability of any of them, that: (1) performance of
any Obligations by any party may be waived, extended or accelerated by
Secured Party; (2) any of the Obligations may be settled, compromised or
released; (3) any credit arrangement may be renewed, extended or
reamortized in whole or in part; (4) future loans may be made; (5) any
Collateral may be exchanged, surrendered, released or otherwise dealt with
as Secured Party may determine; (6) any party may be totally or partially
released of liability; and (7) any defenses that may be available if
Secured Party fails to perfect any security interest in Collateral are
waived.
F) In the event that any provision hereof shall be deemed to be invalid by any
court, such invalidity shall not affect the remainder of this Agreement.
G) Any security interest heretofore granted by Debtor or any of them to
Secured Party in any Collateral described herein shall remain in full force
and effect.
H) The Obligations of all Debtors or any of them hereunder, if more than one,
are joint and several and this Security Agreement shall be binding upon and
for the benefit of the parties hereto and their respective heirs,
administrators, successors and assigns.
IN WITNESS WHEREOF, the Debtor has executed and delivered this Agreement on
March 10, 1997.
Signature(s)
Pocono Village Farms, L.P.
By:___________________________________________
J. Kevin Cobb, Vice President
Pocono Village Farms, L.P.
By:___________________________________________
Thomas F. Schwartz, Vice President
Pocono Village Farms, L.P., a
Delaware Limited Partnership
by:
COGENTREX OF POCONO, INC.,
General Partner
By:___________________________________________
Thomas F. Schwartz, Vice President-
Finance of Cogentrix of Pocono, Inc.
<PAGE>
Security Agreement 11079 ST (Revised 6/93) Page: 6
Security Agreement
Filing Ref.: Pocono Village Farms, L.P., J. Kevin Cobb and Thomas F
Creditor: First Pioneer Farm Credit, ACA
Printed: 03/06/1997 09:23:57 AM
Office At: Lebanon, NJ
VILLAGE FARMS OF DELAWARE, L.L.C.,
General Partner, by Agro Power Development, Inc.,
Managing Member of Village Farms of
Delaware, L.L.C.
By:___________________________________________
J. Kevin Cobb, Senior Vice President of
Agro Power Development, Inc.
Exhibit 10.110
the greenery
INTERNATIONAL
CONTRACT
Parties : A. Vanzeyst and N. Poot
on behalf of APD Inc.
D. Schuwer
on behalf of The Greenery International
C.A.M. de Wit
on behalf of Van Dijk Beheer BV
Date : 1 July 1998
The above three parties, in the consideration that:
1. It is the intention of above parties to stimulate the year-round supply and
marketing of fresh bell peppers in North America under The Greenery label;
2. APD Inc. is considering an investment in a 16 ha greenhouse project in the
U.S.A. for the production of bell peppers;
3. This contract is valid for the above mentioned 16 ha greenhouse project
only;
Have agreed as follows:
a. The bell peppers produced in the above project which meet the Dutch quality
requirements for bell peppers destined for export to the U.S.A. will be
marketed by APD Inc. in North America under the brand name of The Greenery.
The requirements will be specified in writing by The Greenery.
b. APD will not enter into similar arrangements, meaning the production of
fresh produce in North America under the product name of European growers
and/or European produce, or in co-operation with other European marketing
and/or supplier organisations, with the exception of the existing
arrangements with the Spanish producer.
c. APD is not allowed to market under The Greenery brand name that part of its
production which does not meet the above mentioned requirements.
d. The bell peppers of APD's production which are marketed under the brand
name of The Greenery will be marketed in conformity with market prices.
<PAGE>
e. Apart from the marketing of the above bell peppers which are produced by
APD itself, APD will give their best efforts to stimulate the marketing of
Greenery bell peppers through North America.
f. APD will purchase the products under The Greenery label which it markets in
North America and which are from European origin through the Van Dijk
Beheer organisation.
g. For the use of The Greenery brand for its own production, APD will pay a
fee of US$ [information omitted and subject to request for confidential
treatment] per kg produce.
h. In return for payment of this fee, The Greenery International will assist
APD in its marketing efforts of Greenery produce in North America. These
marketing efforts will be focused on final key account level. The level of
assistance will be agreed upon by both parties no later than 1 July 1998.
i. Each year in the months of January/February, APD, The Greenery and the Van
Dijk organisation will jointly make a key account planning.
j. All packing materials, advertising material etc. carrying the brand name of
The Greenery should be submitted to The Greenery International for approval
(in writing) before being used by APD.
k. The Greenery International will have the unlimited right to control the
qualities and quantities needed of basic materials carrying The Greenery
brand name without prior consent of APD, e.g. at the manufacturer of
packing materials or at other stages of production, storage, etc. If the
contract should be terminated by either party earlier than described in
clause n., all packaging material mentioned in this paragraph will be
returned to The Greenery International at cost.
l. For the duration of this agreement, The Greenery International will not
enter into similar agreements subject to the stipulation hereunder in
clause m.
m. In case the market situation requires an extension of the production of
bell peppers in North America which can be marketed under The Greenery
brand, APD during a period of three months will have a first option to
confirm that they will comply to a request for extension within a
reasonable period of time. In case APD informs The Greenery International
that it can not or will not extend its production, The Greenery
International will have the right to enter into negotiations and reach a
similar agreement with other parties in North America.
the greenery
INTERNATIONAL
<PAGE>
n. This agreement is made for a duration of five years, with a trial period of
1 year. After 9 months the agreement will be re-evaluated and in case of a
successful first year the agreement will be continued for five years. After
five years the agreement can be terminated by each party upon one year
prior written notice. The exit clause during the trial period means that
both parties can cancel this agreement due to non-performance of the other
party.
o. Each of the parties will have the right to terminate this agreement per
direct in the case of violation of the terms of this agreement by (one of)
the other part(ies). Before a direct termination of the agreement, a cure
period of three months should be observed.
p. APD will provide The Greenery International with the following information:
quarterly turnover figures, a customer list and volume indications for the
Dutch imports.
q. Settlement of the royalty mentioned under clause g. will take place every
three months.
r. An arbitration clause will be added later after further consultation
between the legal representatives of the parties involved.
Den Hoorn, 1 July 1998
A. Vanzeyst N. Poot
D. Schuwer C.A.M. de Wit
the greenery
INTERNATIONAL
Exhibit 10.111
Corporate Headquarters
10 Alvin Court, East Brunswick, NJ 08816
(732) 254-0606 o Fax (732) 254-1710
1811 Sardis Road North, Suite 207, Charlotte, NC 28270
(74) 849--7660 o Fax (704) 849-7662
2799 Marsh Wren Circle, Longwood, FL 32799
(407) 333-9501 o Fax (407) 333-9522
- - --------------------------------------------------------------------------------
June 8, 1998
Mr. David M. Sucniak
1145 Hambiltonian Way
York, PA 17404
Dear Mr. Suchniak:
This letter contains the terms and conditions of your Offer of Employment with
our Company. A more detailed Employment Agreement (Contract) will follow
shortly. However, we felt it important to document the information contained
herein as quickly as possible.
Your initial employment, beginning July 1, 1998, will be as Chief Financial
Officer/Senior Vice President of Agro Power Development, Inc. You will report
directly to the Chief Executive Officer of APD, Inc. As soon as the proposed
merger between APD, Inc. and EcoScience Corporation is complete, expected in the
third quarter of this year, you will be come CFO/VP of the new public company
and report directly to the CEO of that company.
Your duties and responsibilities in these positions will be consistent with the
duties and responsibilities normally assigned to a CFO of a publicly held
company. These will include, but may not be limited to oversight and management
of the Accounting Department(s), management of all corporate finance matters,
oversight and management of the Treasury function, oversight and management of
the Management Information Systems functions and management of all required SEC
filings and reports. In sum, you will have accountability for all company fiscal
matters. Specific goals and targets for achievement will be mutually determined
by you and the CEO within ninety (90) days of your initial employment with us.
You agree that you will not engage in consulting work or any other type of
business for your own benefit with other companies nor will you agree to serve
on any company's Board of Directors without the explicit approval of the CEO.
Your starting salary will be $160,000.00/year. This will be increased to
$170,000.00/year on January 1, 1999 or after six (6) months of continuous
service with our company, whichever occurs first. In addition, we will provide
you a monthly Vehicle Allowance in the amount of $500.00; this will be increased
to $600.00/month on January 1, 1999 or after six (6) months of continuous
service, whichever comes first. Finally, we will pay you a Signing Bonus of
$10,000.00 within fifteen (15) days of your employment commencement date.
<PAGE>
Page 2
You will be eligible to receive an Incentive Bonus beginning in fiscal
(calendar) year 1999. The amount of this annual bonus will be based on
quantitative and qualitative objectives to be established by you and the CEO.
The target threshold for this bonus plan will be 25% of your base salary.
Additionally, we will create an Incentive Stock Option Plan for Executives which
we expect to be in place by January 1, 1999. The actual amount of options
granted, and their price, will be determined by the CEO and the Board of
Directors and will be commensurate with your position in the company.
Effective January 1, 1999 you will be eligible for fifteen (15) days of paid
vacation per year. You will be eligible for eight (8) days of paid vacation for
the remainder of 1998.
You will be eligible to participate in our various Benefit Plans immediately
upon your commencement of employment. The company pays the major portion of the
premiums for you and your dependents for both our Medical and Dental Plans. Your
approximately costs would be $311.00/month for medical coverage and $30.00/month
for dental coverage. The plans are voluntary. Should you choose to participate
the payments are made through pre-tax payroll deductions. Additional details
regarding this coverage, including enrollment forms, will be sent to you under
separate cover.
Also, the company will provide, at no cost to you, Life Insurance. The benefit
of this insurance is equal to one times (1X) your annual salary. In addition you
will be covered, again at no coast to you, under our Accidental Death and
Dismemberment Policy.
The Company sponsors a 401(k) plan which is managed by Franklin-Templeton Funds.
Currently the company does not contribute to this plan; however, we encourage
all eligible employees to participate. Enrollment in the 401(k) plan is open the
first day of each calendar quarter, i.e. July 1, Oct. 1, etc.
In your position you will be expected to develop an Expense Budget primarily
covering travel and entertainment expenses. These expenses are reimbursed
through our normal Expense Reporting Process and generally require the
submission of relevant receipts.
It is recognized that you will have to relocate your residence in order to
accept this position. In consideration of this the company will reimburse you
the following expenses regarding your relocation:
- All fees associated with selling your current home, including any real
estate fee you must pay (to a maximum of 6% of the selling price of
your home)
- Costs associated with the purchase of a new home including attorney or
bank fees, inspections, etc...(Not to include the cost of "mortgage
points.")
- Any costs associated with moving your household goods from your old
residence to your new home.
- The cost of a "house hunting" trip for you and your family in order
for you to find a new home. This trip should not exceed one week and
we will reimburse expenses such as lodging, meals, etc.
- The company will reimburse you any expenses you incur as a result of
tax liabilities related to relocation payments. This reimbursement may
take the form of "grossup"
<PAGE>
Page 3
payments to cover your tax costs or may be covered through the
utilization of a third-party relocation company.
Should you require a temporary living arrangement prior to actually moving into
your new residence we will pay you at the rate of $125.00/day to cover the costs
of this temporary arrangement. This is intended to cover the costs of lodging,
food, rental automobile and any other miscellaneous expenses you might have.
This Interim Living provision is in effect until October 1, 1998 or sooner,
should you finalize your relocation prior to that date.
As noted above we will have a Stock Option Plan in place shortly. Should you be
terminated by the company prior to the implementation of that plan, and your
vesting within the plan, and without cause, the company agrees to pay you a
separation allowance equal to twelve (12) month's base pay. This provision
becomes null and void after the Stock Option Plan has been put in place.
A more detailed Employment Agreement will be provided shortly. If, based on the
information in this letter, you wish to accept this position please indicate by
signing below, as noted, and returning a copy of this letter as soon as
possible.
We are eager to have you on the team! If you have any questions please call.
Best regards,
Michael A. DeGiglio Gerald M. Lewis
CEO Human Resources VP
I accept the position of CFO/VP based on the contents of this letter.
- - ------------------------------------ ------------------
David M. Suchniak Date
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Company's
Consolidated Balance Sheet as of September 30, 1998 and Consolidated Statement
of Operations for the Three Months Ended September 30, 1998 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,252
<SECURITIES> 385
<RECEIVABLES> 2,546
<ALLOWANCES> 379
<INVENTORY> 8,298
<CURRENT-ASSETS> 17,029
<PP&E> 61,731
<DEPRECIATION> 4,707
<TOTAL-ASSETS> 78,456
<CURRENT-LIABILITIES> 27,209
<BONDS> 45,923
0
0
<COMMON> 116
<OTHER-SE> (4,409)
<TOTAL-LIABILITY-AND-EQUITY> 78,456
<SALES> 8,711
<TOTAL-REVENUES> 8,711
<CGS> 10,423
<TOTAL-COSTS> 10,423
<OTHER-EXPENSES> 4,012
<LOSS-PROVISION> 128
<INTEREST-EXPENSE> 1,240
<INCOME-PRETAX> (4,210)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,210)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,693)
<EPS-PRIMARY> (0.36)
<EPS-DILUTED> (0.36)
</TABLE>
