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MANAGEMENT SERVICES AGREEMENT
This MANAGEMENT SERVICES AGREEMENT (the "Agreement") is entered into on
_____, 2000 (the "Effective Date"), by and between GREENHOST, INC, a Delaware
corporation ("Owner"), and VILLAGE FARMS, L.P., a Delaware limited partnership
("Contractor"). Owner and Contractor sometimes are referred to herein
individually as a "Party" and collectively as the "Parties".
RECITALS
WHEREAS, Owner and Village Farms of Virginia, Inc., a
predecessor-in-interest to Contractor, entered into that certain Operating
Agreement dated as of November 14, 1997, as amended, (the "Operating
Agreement"), pursuant to which Owner leased to Contractor and Village Farms of
Virginia, Inc. leased and operated a greenhouse facility located at 259 Kings
Highway, King George, Virginia 22485;
WHEREAS, Owner terminated the Operating Agreement pursuant to a letter
dated June 23, 2000; and
WHEREAS, Owner will operate a greenhouse facility (as more particularly
described in Exhibit A which is attached hereto, the "Facility") and will farm
certain crops at the Facility; and
WHEREAS, Owner desires to obtain services (which are more particularly
described below) from Contractor in connection with Owner's greenhouse farming
of certain crops at the Facility and Contractor is able and willing to render
the Services to Owner in accordance with, and subject to, the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein, the Parties hereby agree as follows:
ARTICLE 1
PROVISION OF SERVICES
1.1 Contractor agrees to provide to Owner the following services in
connection with Owner's greenhouse farming of Owner's crops at the Facility
(collectively the "Services"):
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(i) General management and advice in connection with Owner's business
of greenhouse farming of crops at the Facility and all services necessary or
incidental thereto;
(ii) Removal of all plants and rubbish from last season's crop to be
completed on or before the Effective Date;
(iii) Completion of the sowing of Owner's 2000 to 2001 crop (the
"Current Season's Crop") in accordance with the Operating Plan;
(iv) Sowing, growing (including, without limitation, all nourishment,
fertilizer and pesticide application and care for the Current Season's Crop),
harvesting, packaging and marketing of the Current Season's Crop;
(v) Procurement for the account of Owner of all necessary services,
supplies, materials, chemicals and equipment necessary to sow, grow, harvest,
package and market the Current Season's Crop or to maintain or repair the
Facility to the extent contemplated by this Agreement. In procuring such
services, supplies, materials, chemicals and equipment, Contractor shall obtain
from all vendors the best warranties, indemnities, and guarantees that are
commercially available on reasonable terms; except, however, if the procurement
of any such warranty, indemnity or guarantee requires an additional payment,
Contractor shall first obtain prior written approval therefor from Owner;
(vi) Maintenance and repair of the Facility (as more particularly
described in Article 2 below);
(vii) Removal from the Facility and proper disposal of all plants and
rubbish resulting from the sowing, growing, harvesting, packaging and marketing
of the Current Season's Crop;
(viii) Provision of all required tools, equipment and labor (including,
without limitation, the tools and equipment listed on Exhibit B attached hereto)
necessary to perform properly the Services;
(ix) Assisting Owner with the preparation of the Budget, the Operating
Plan and the Marketing Plan with regard to the sowing, growing, harvesting,
packaging and marketing of the Current Season's Crop including, without
limitation, advice with regard to the preparation and analyses of financial
plans and statements, operating reports and the accounting systems and
procedures; and
(x) Provision of all other activities necessary or incidental to the
performance of the Services.
1.2 Throughout the term of this Agreement, Contractor agrees to use the
Contractor's employees listed on the attached Exhibit C (the "Key Employees"),
among others, to perform the Services described in this Article 1 to the extent
that such Key Employees remain employed by Contractor. In the event any such Key
Employee ceases to be employed by the Contractor, Contractor shall replace such
Key Employee with a person whom shall be reasonably satisfactory to Owner.
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1.3 As soon as practical after the Effective Date, Owner shall provide
to Contractor a budget (the "Budget"), an operating plan (the "Operating Plan")
and, when appropriate, a marketing plan (the "Marketing Plan") for the sowing,
growing, harvesting, packaging and marketing of the Current Season's Crop. The
Operating Plan and Budget will include the estimated production and harvesting
schedule for the crop and all estimated costs and expenses to be incurred for
the sowing, growing, harvesting, packaging and marketing of the Current Season's
Crop including, without limitation, estimated maintenance costs for the
Facility. The Budget, Operating Plan and Marketing Plan will be based on the
entire crop cycle, but will be broken out to cover monthly periods. The Owner
reserves the right, at any time and from time to time, to revise, in any way as
Owner deems necessary or appropriate, the Budget, Operating Plan or Marketing
Plan. Unless otherwise specifically requested by Owner, Contractor shall perform
the Services in accordance with the Budget, the Operating Plan and the Marketing
Plan. In the event (i) the Owner revises in a material way the Budget, Operating
Plan, or Marketing Plan (the "Material Revision"); and (ii) the Material
Revision results in a material increase in the cost to Contractor of performing
Contractor's obligations pursuant hereto (the "Material Increase"); and (iii)
the Material Increase is not already reimbursable by the Owner to the Contractor
pursuant to the terms of this Agreement, Contractor shall notify the Owner in
writing of such and the Owner shall then, within a reasonable time in its sole
discretion, decide whether to (x) continue with the Material Revision and
reimburse Contractor for the amount of the Material Increase as agreed at that
time by the Parties in writing or (y) rescind or revise the Material Revision so
the Material Revision does not result in a Material Increase. The Owner shall
communicate such decision to the Contractor in writing. In the event the Owner
revises the Material Revision so that it does not result in a Material Increase,
the Contractor shall perform the Services in accordance with the Material
Revision without reimbursement therefor.
1.4 Notwithstanding any other provision of this Agreement, title to the
seeds, plants, crops and produce related to the Current Season's Crop and
profits resulting therefrom shall at all times remain with Owner and not with
the Contractor.
1.5 Contractor shall obtain and maintain all applicable governmental
approvals and permits necessary to perform the Services and shall perform the
Services at all times in compliance with such approvals and permits as well as
in compliance with all applicable laws, rules and regulations.
1.6 Contractor shall remove promptly all supplies and packaging
materials located at the Facility on the Effective Date except for those
supplies and packaging materials to be used by Contractor in connection with
performing the Services pursuant hereto. In the event Contractor uses any such
supplies or packaging materials in connection with Owner's greenhouse farming
business, the cost of such supplies and packaging materials so used shall
constitute an expense that Owner will pay to Contractor in accordance with the
terms and conditions of this Agreement.
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1.7 Contractor shall assist Owner to accept and to use thermal energy
produced by the Birchwood power station for heating purposes that are consistent
with Good Business Practices (as defined in Section 7.1 below). Without limiting
the generality of the foregoing, Contractor shall assist Owner to accept
delivery of, and to use, sufficient steam based on a per hour basis for heating
purposes to allow the Birchwood power station to maintain the status of a
"Qualifying Facility" within the meaning of the Public Utility Regulatory
Policies Act of 1978, as may be amended from time to time, on an annual basis as
described in the 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. In the event
that Contractor believes that such use of such thermal energy is not consistent
with Good Business Practices, Contractor shall notify Owner immediately in
writing of such belief including an explanation of the reasons for such belief.
If Owner agrees that such use of such thermal energy is not consistent with Good
Business Practices and nonetheless continues with such use of such thermal
energy, Contractor shall not be liable for any loss or damage to the Current
Season's Crop that is solely and directly due to such continued use of such
thermal energy.
1.8 Contractor acknowledges that Owner owns and operates the Facility
and Contractor shall not directly or indirectly create, incur, assume or permit
to exist any lien or encumbrance (other than any lien or encumbrance created by
or as a result of an act or omission of Owner) whatsoever on or with respect to
the Facility or to the crops, title thereto or any interest therein. Contractor
shall promptly, at its own expense, take such action as may be necessary to duly
discharge (or bond in a manner satisfactory to Owner) any lien or encumbrance
that may arise at any time as a result of Contractor's acts or omissions.
Contractor 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 Contractor (or any
affiliated or related group of which Contractor is a member) under the laws of
any jurisdiction that, if unpaid, might result in any lien or encumbrance
prohibited by this Agreement; provided, however, that no such tax, assessment,
fee or charge need be paid if being contested in good faith by appropriate
proceedings.
1.9 Contractor shall be responsible for initiating, maintaining,
directing and supervising all safety precautions and programs in connection with
its performance of the Services. Notwithstanding and without limiting the
generality of the foregoing, Contractor and its employees shall comply at all
times with Owner's safety policies and practices communicated to Contractor from
time to time. In performing the Services pursuant hereto, Contractor shall take
all reasonable precautions to prevent (i) damage to the Facility; (ii) injury to
persons (whether such persons are employees of the Contractor, employees of
Owner, employees of vendors or employees of purchasers of the crops); and (iii)
damage to all equipment and property of Owner and all other property located at
the Facility.
1.10 During the term hereof, Contractor shall have the limited,
non-exclusive right to use the cooling facilities located on the Facility for
the temporary storage of products owned by Contractor if, and for so long as,
(i) such use does not in any way interfere with Owner's farming business at the
Facility or with Contractor fully and properly performing the Services in
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accordance herewith; and (ii) Contractor segregates at all times such products
from products owned by Owner; and (iii) Contractor clearly identifies such
segregated products as products owned by Contractor; and (iv) Contractor pays
the Owner the amounts specified in Section 1.11 below.
1.11 In the event Contractor desires to use such cooling facilities as
provided for in Section 1.10 above, (i) Contractor shall pay to Owner a handling
fee equal to Twenty Four Cents ($0.24) for each box placed into temporary
storage PLUS Ten Cents ($0.10) for each box for each day thereafter while in
temporary storage PLUS, a sum equal to Owner's costs for the time and materials
required to repack the products if any pallet must be broken down in any way and
any of Contractor's products must be repackaged; (ii) Owner shall prepare and
send to Contractor an invoice setting forth the charges for such temporary
storage; and (iii) Contractor shall pay the amount of such invoice to Owner
within thirty (30) days of receipt thereof.
1.12 Except for the temporary use of Owner's cooling facilities as
provided for in Section 1.10 above, Contractor shall not use the Facility, or
any part thereof, in any way for any purpose other than to perform the Services.
1.13 Owner shall arrange for and make available at the Facility in
accordance with the Budget and Operating Plan thermal energy, electricity,
water, telephone and sewer services necessary for Contractor to perform the
Services in accordance with this Agreement.
ARTICLE 2
MAINTENANCE AND REPAIR OF THE PLANT
2.1 As part of the provision of the Services described in Article 1,
Contractor shall at all times maintain, service and repair the Facility and
store all fertilizers and pesticides used in connection with the performance of
the Services in accordance with (i) prudent commercial maintenance practices,
including all manufacturers' warranty requirements to the extent such
requirements are made known to the Contractor; (ii) Owner's operating policies
and practices for the Facility that are made known to the Contractor; (iii) all
applicable requirements of law and of any court and of any governmental
authority (including without limitation all zoning, environmental protection,
pollution, sanitary, occupation, health and safety laws, and all environmental
requirements); and (iv) all requirements contained in permits and licenses
relating to the Facility in effect from time to time during the term of this
Agreement.
2.2 In connection with and in addition to Contractor's general
obligation to maintain, service and repair the Facility as provided for in
Section 1.1 and in Section 2.1, Contractor 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
crops on a continuing basis in normal commercial operation and in a commercially
efficient manner; and (iii) comply with the standards imposed by any insurance
policies in effect at any time with respect to the Facility or any part thereof.
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2.3 Owner shall bear the cost of any repair or replacement to the
Facility that may be necessary or appropriate to keep the Facility in good
operating condition as Owner may determine in its sole discretion unless,
however, the reason for such repair is due to an act or omission of Contractor
or any of Contractor's employees in which case Contractor shall bear the cost of
any such repair or replacement.
2.4 Contractor shall not make at any time any alteration to the
Facility unless specifically approved by Owner in writing in advance.
ARTICLE 3
TRADEMARK LICENSE
3.1 In consideration of a portion of the Fee payable by Owner to
Contractor pursuant hereto, Contractor hereby irrevocably grants to Owner a
non-exclusive, non-transferable license to use all of Contractor's trademarks
listed on Exhibit D (the "Licensed Marks") in the United States for the sowing,
growing, harvesting, packaging and marketing of Owner's Current Season's Crop,
or any portion thereof, during the term of this Agreement (and for so long as
any portion of the Current Season's Crop remains to be sold).
3.2 In addition to, and without limiting or affecting in any way, the
provisions of Article 9 below, Contractor hereby agrees to indemnify and hold
Owner harmless from and against any and all third party claims or demands for
trademark infringement attributable to Owner's use of the Licensed Marks. In the
event Owner becomes aware of any such claim, (i) Owner shall promptly notify
Contractor of any such claim or demand; and (ii) Owner may provide Contractor
with such assistance as may be reasonably required to conduct the defense to or
otherwise respond to such claim; and (iii) the procedures set forth in Section
9.2 below shall apply.
ARTICLE 4
OPERATING EXPENSES
4.1 Owner shall be responsible for the payment of all operating
expenses in connection with the greenhouse farming of the Current Season's Crop
provided that such operating expenses are incurred in accordance with the
approved Budget, Operating Plan and Marketing Plan and in accordance with this
Article 4. For each item of expense to be incurred pursuant to the Budget,
Operating Plan and Marketing Plan, whether such expense is for the procurement
of materials or supplies or otherwise, Contractor shall provide, or cause the
relevant vendor to provide, an invoice that sets forth in reasonable detail, and
with reasonable documentation in support thereof, each such item of expense.
Contractor shall seek to obtain the best payment terms commercially available
for such item of expense. Owner will pay the amount of each invoice that is not
in dispute directly to each such vendor according to its terms.
4.2 Owner shall have the right to request Contractor to make payments
on behalf of Owner to any vendor for materials, supplies or other expenses to be
incurred to implement the Operating Plan or the Marketing Plan. In the event
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Owner wishes Contractor to make any such payment on behalf of Owner (i) Owner
shall make such request in writing; (ii) Contractor shall make such payment to
such vendor on Owner's behalf after receiving, and in accordance with, Owner's
request; and (iii) Owner shall reimburse Contractor for such expense in
accordance with Section 5.2 below if Contractor provides Owner with an invoice
marked "paid" and other reasonable documentation as may be requested by Owner
for any expense. Contractor shall not make any payment on behalf of Owner to any
person or entity unless first requested to do so by Owner in writing pursuant to
this Section 4.2.
4.3 Contractor shall secure Owner's prior written approval before
incurring any expense that may result in the aggregate expenditures under any
one budget category or line item in the Budget and Operating Plan to exceed the
amount budgeted therefor.
4.4 Owner shall establish and maintain an account with a bank selected
by Owner in its sole discretion from which Contractor's payroll payment agent
will be authorized to withdraw funds only for the payment of expenses contained
in the Budget for salaries, wages, payroll taxes and employee benefits for
employees of Contractor engaged in providing the Services pursuant to this
Agreement. Contractor may withdraw such funds only to the extent necessary to
compensate its employees for their work for Contractor in connection with
providing the Services pursuant hereto and not for other work or tasks that such
employees may perform for Contractor. (By way of example only, if one-half of a
Contractor's employee's job is in connection with performing the Services,
Contractor may withdraw one-half of the cost of such employee's salary, wages,
payroll taxes and employee benefits from such account and not the full amount of
the cost of such employee's salary, wages, payroll taxes and employee benefits.)
Owner will deposit funds into the account on a bi-monthly basis based on the
amounts in the Budget and Operating Plan for such salaries, wages, payroll taxes
and employee benefits of Contractor's employees for the subsequent two week
period. Contractor shall submit to Owner invoices and other documentation, time
cards, or other payroll records to support the amount of all withdrawals from
the account. Contractor represents and warrants that any money Contractor
withdraws from the account will be used by Contractor solely for the payment of
salaries, wages, payroll taxes and employee benefits for employees of Contractor
engaged in providing the Services pursuant to this Agreement. In the event (i)
the Owner fails to deposit funds into such account to enable Contractor to
withdraw funds sufficient to pay the amounts in the Budget and Operating Plan
for payroll taxes for Contractor's employees engaged in providing the Services
pursuant to this Agreement and (ii) any officer of the Contractor becomes
personally liable as a result thereof, the Owner shall indemnify such officer or
officers for any personal liability resulting therefrom for his or their failure
to pay payroll taxes for employees of Contractor engaged in providing the
Services pursuant to this Agreement.
ARTICLE 5
INVOICING AND COMPENSATION
5.1 As full and complete compensation for the Services rendered
pursuant to this Agreement and for the trademark license set forth in Article 3
above, subject to Section 12.3 below, Owner shall pay to Contractor, and
Contractor shall accept, a total fee (the "Fee") equal to Five Hundred Thousand
Dollars ($500,000.00). Owner shall pay the Fee to Contractor in twelve (12)
equal consecutive monthly installments in arrears on the last business day of
each month during the term of this Agreement.
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5.2 Unless otherwise agreed by the Parties, for the first twelve (12)
months of the term of this Agreement, Contractor shall submit an invoice to
Owner setting forth one-twelfth of the total Fee and any claim for reimbursable
expenses associated with a particular month on or before the 5th day of the
succeeding month. Thereafter, Contractor shall submit an invoice to Owner
setting forth any claim for reimbursable expenses associated with a particular
month on or before the 5th day of the succeeding month. Owner shall pay all
amounts not in dispute contained on each such invoice on the last business day
of that month. Each invoice shall set forth in reasonable detail a description
of the nature of the Services and of the reimbursable expenses.
5.3 For each sale of produce from the crops, Contractor shall prepare
an invoice in the name of Owner, as seller, and deliver such invoice to Owner.
After preparation and delivery of each such invoice, Contractor shall have no
further responsibility for handling, processing or collecting of the accounts
receivables, proceeds from the sales of crops or any other funds. All such
proceeds and funds shall be for Owner's account and will be deposited directly
by Owner into its account. Contractor shall at no time have access or be
authorized to access or transact in such account of Owner. Owner agrees to give
notice to Contractor prior to proceeding with collecting debts that are past due
from customers of Owner that have made purchases of the Current Season's Crop.
5.4 For any reason whatsoever, in the event either Party hereto comes
into the possession of any instrument, negotiable instrument, check, draft,
letter of credit, bank advice, cash or other property due to, owned by or for
the benefit of the other Party, such Party shall (i) notify the other Party of
such fact immediately; (ii) hold such instrument, negotiable instrument, check,
draft, letter of credit, bank advice, cash or other property in trust for the
other Party as a fiduciary of the other Party; and (iii) promptly, but in no
event later than five (5) business days, deliver safely any such instrument,
negotiable instrument, check, draft, letter of credit, bank advice, cash or
other property to the other Party.
5.5 For avoidance of doubt, Contractor shall not receive, and shall not
be entitled to receive, any payment whatsoever from Owner in connection with or
arising out of this Agreement other than, and subject to the other provisions of
this Agreement, the Fee, the reimbursement of expenses pursuant to and in
accordance with Section 4.2 above and the deposit of the amounts specified in
Section 4.4 above and any amount required to be delivered pursuant to Section
5.4 above.
ARTICLE 6
COOPERATION AND ACCESS TO THE FACILITY
6.1 Owner shall appoint in writing a representative or representatives
to liaise with Contractor in relation to Contractor's performance of the
Services. Contractor shall consult and cooperate with such representative or
representatives in the performance of the Services. The instructions, requests
and decisions of such representative or representatives will be binding on Owner
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and Contractor shall follow such instructions, requests and decisions. In
addition, Owner may designate one or more of its employees to assist with the
repairs and maintenance of the Facility and with the bookkeeping or auditing of
Contractor's performance of the Services or of Owner's greenhouse farming
business or for other reasons designated by Owner. Contractor shall cooperate
fully with Owner's representatives and designees at all times during the term
hereof in connection with Contractor 's performance of the Services.
6.2 Owner shall provide Contractor with such reasonable cooperation as
is necessary or appropriate to enable Contractor and Contractor's employees to
perform the Services. Without limiting the foregoing, Contractor and its
employees who are to perform the Services shall have reasonable access to the
Facility during normal operating hours as Owner determines necessary, advisable
or appropriate for or in connection with the provision of any or all of the
Services.
ARTICLE 7
STANDARD OF CONDUCT; CONTRACTOR REPRESENTATIONS
7.1 Contractor shall perform the Services (i) in a workmanlike manner;
(ii) in strict accordance with all applicable laws, rules and regulations as
provided for in Section 1.5 above; and (ii) in accordance with Good Business
Practices. "Good Business Practices" means the latest prudent practices, methods
and acts that are commonly used in the greenhouse farming industry to perform
(or fulfill the activities comprising) the Services and any practices, methods
or acts which, in the exercise of reasonable judgment in light of the facts
known at the time (or those which, with the exercise of due diligence, should
have been known), could have been expected to accomplish the desired result
consistent with good operating practices, reliability, safety and expedition.
Whether any particular practice, method or act constitutes "Good Business
Practices" shall be judged in light of the facts known (or those which, with the
exercise of due diligence, should have been known) at the time such particular
practice, method or act was performed or taken.
7.2 In performing the Services, Contractor shall (i) use its best
efforts to maximize the value of Owner's crop; (ii) ensure that the Facility is
used to its fullest productive capacity; (iii) obtain the highest price
available in the market for Owner's crop and for Owner's propagated plants; and
(iv) market Owner's crop and propagated plants using the same degree of effort
and diligence as Contractor uses for its own crops, plants and products.
7.3 In addition to representations and warranties made and given by
Contractor in other provisions of this Agreement, Contractor represents and
warrants that (i) it is duly organized, validly existing and in good standing
under the laws of the State of Delaware (ii) it has the power and authority and
the legal right to own its property and to conduct the business in which it is
currently engaged; (iii) to its knowledge, it is in compliance in all material
respects with all statutes, ordinances, laws, rules, regulations, judgments,
orders and decrees of any court or other governmental or regulatory authority by
which it is bound and to the extent that it is not in compliance such
non-compliance does and will not affect in any way Contractor's ability to
perform the Services in accordance with this Agreement; (iv) it has the power
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and authority to make, execute and deliver this Agreement; (v) it has taken all
action necessary to authorize the execution, delivery and performance of this
Agreement and has duly executed and delivered this Agreement; (vi) no consent or
authorization of, approval by, filing with, notice to or other act by or in
respect of any governmental authority or other person or entity is required in
connection with the execution, delivery, performance, validity or enfoceability
of this Agreement which has not already been obtained; (vii) this Agreement is a
legal, valid and binding obligation of Contractor, enforceable against
Contractor in accordance with its terms, subject to the effect of bankruptcy or
other similar laws relating to creditors' rights generally and to the effect of
general equitable principles; (viii) the execution, delivery and performance of
this Agreement will not violate the limited partnership agreement of Contractor
or any law or regulation or determination of any court or arbitrator applicable
to Contractor; (ix) Contractor is not subject to any pending, or to its
knowledge threatened, litigation or arbitration proceeding that, if determined
adversely, would have a material adverse effect on its ability to perform its
obligations pursuant to this Agreement; and (x) the execution, delivery and
performance by Contractor of this Agreement will not constitute a default under
any material contract or agreement to which Contractor is a party.
ARTICLE 8
INSURANCE
8.1 The Contractor shall maintain the following:
(i) 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
Contractor 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 Facility and the adjoining streets, sidewalks and passageways and
arising out of the use of the Facility by Contractor. Coverage provided
by the foregoing insurance policy shall include, without limitation,
all of the insurance commonly referred to by the insurance industry as:
Premises/Operations Liability; 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 any other party 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
Five Million Dollars ($5,000,000.00), with separate aggregate limits
for product and general liability, which policy shall be written on an
occurrence basis;
(ii) (a) workers' compensation insurance or occupational
disability benefits insurance (in at least the statutory amounts) and
such other forms of insurance which Contractor is required by law to
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maintain or cause to be maintained, covering loss resulting from
injury, sickness, disability or death of the employees of Contractor
and (b) employers' liability insurance in an amount not less than Five
Hundred Thousand Dollar ($500,000.00) single limit; and
(iii) 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 One Million Dollar ($1,000,000.00) minimum limit per
occurrence for combined bodily injury and property damage liability.
8.2 All insurance policies procured in accordance with Section 8.1
shall be (i) 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 Owner) approved by Owner and not disqualified
from insuring risks in Virginia; and (ii) shall be subject to (a) exclusions of
the sort existing in the insurance policies in effect on the Effective Date and
(b) such deductible amounts and retentions as shall not exceed Twenty-five
Thousand Dollars ($25,000.00) specified with respect to such policies.
8.3 Insurance policies maintained by Contractor pursuant to Section 8.1
hereof shall:
(i) except for workers' compensation insurance, specify
Birchwood Power Partners, L.P., Owner, and Owner's affiliates (and such
others as Owner shall from time to time designate) as additional
insured (the "Additional Insured"), as their respective interests may
appear;
(ii) except in the case of public liability insurance and
workers' compensation insurance, provide that all losses or occurrences
shall be adjusted with Contractor and Owner, unless an event of default
shall have occurred and be continuing, in which case such loss or
occurrence shall be adjusted with Owner, and payable (a) in respect of
payments not exceeding Twenty-five Thousand Dollars ($25,000.00),
provided no default or event of default shall have occurred or be
continuing, to the Contractor, and (b) in all other circumstances, to
Owner;
(iii) 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;
(iv) provide that in respect of the interests of the
Additional Insured, such policies shall not be invalidated by any
action or inaction of Contractor or any other person and shall insure
the Additional Insured regardless of, and any claims for the losses
shall be payable notwithstanding:
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(a) the occupation or use of the Facility for
purposes more hazardous than permitted by the terms of the
policy;
(b) any foreclosure or other proceeding or notice of
sale relating to all or any portion of the Facility; or
(c) any change in the title to or ownership of all or
any portion of the Facility;
(v) 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 Contractor pursuant to this Article 8
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, shall operate in the same manner as
if there were a separate policy covering each insured;
(vi) 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;
(vii) 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
(viii) be reasonably satisfactory to Owner in all other
material respects.
8.4 Upon execution hereof, Contractor shall deliver to each of the
Additional Insured copies of all policies of insurance required hereby and
certificates of insurance evidencing the provisions described in Section 8.3 (i)
hereof executed by the insurer or by its duly authorized agent, and a
certification from the Contractor's insurance agent or broker to the effect that
all premiums required to have been paid have been paid in full.
8.5 No provision of this Agreement shall impose on Owner any duty or
obligation to verify the existence or adequacy of the insurance coverage
maintained by Contractor nor shall Owner be responsible for any representation
or warranty made by or on behalf of Contractor to any insurance company or
underwriter.
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ARTICLE 9
INDEMNIFICATION
9.1 Contractor agrees to indemnify, hold harmless and defend Owner, its
stockholders, its affiliates and their respective officers, directors, employees
and agents (the "Indemnified Parties") from and against any and all liabilities,
actions, claims, demands, damages (including, without limitation, damage to
property and injuries to or death of persons) losses and expenses (including,
without limitation, attorney fees and other legal expenses) of whatsoever kind
and nature resulting from or in any way attributable to or in connection with
(i) claims of third parties arising out of the performance or nonperformance of
the Services or (ii) any breach by Contractor of any provision hereof; except
that liabilities, actions, claims, demands, damages, losses or expenses
attributable to the gross negligence or willful misconduct of any of the
Indemnified Parties shall be excluded from Contractor's obligations under this
Section 9.1.
9.2 Owner shall promptly notify Contractor of any liability, action,
claim, demand, damage, loss, or expense of which Owner has actual knowledge and
against which Owner expects an Indemnified Party to be indemnified pursuant to
Section 9.1. Thereafter, Contractor may at its own expense, upon notice to
Owner, employing counsel reasonably acceptable to Owner, defend or participate
in the defense of such action or claim or any negotiation for settlement of such
action or claim, provided that unless Contractor proceeds promptly and in good
faith to pay or defend such action or claim, Owner shall have the right (but not
the obligation), in good faith, upon notice to Contractor, to pay, settle,
compromise or proceed to defend any such action or claim without the further
participation by Contractor. In the event Contractor assumes the defense of any
such action, the Indemnified Party 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 Indemnified Party, unless (i) the
employment of such counsel has been specifically authorized by the Contractor;
or (ii) the named parties to such action (including any impleaded parties)
include both such Indemnified Party and Contractor and the representation of
such Indemnified Party and Contractor 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 Contractor
has advised such Indemnified Party, in writing, that such counsel's
representation of such Indemnified Party 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 Indemnified Party whether it be a
conflicting, inconsistent, diverse or other interest (in which case Contractor
shall not have the right to assume the defense of such action on behalf of such
Indemnified Party. Contractor will immediately pay (or reimburse Owner, as the
case may be) any payments, settlements, compromises, judgments, costs or
expenses made or incurred by Owner in or resulting from the pursuit by Owner of
such right. If any judgment is rendered against Owner in any action defended by
Contractor or from which Owner is otherwise entitled to indemnification under
the terms of this Agreement, or any lien attaches to the assets of Owner in
connection therewith, Contractor immediately upon such entry or attachment shall
pay the judgment in full or discharge any such lien unless, at its expense and
direction, appeal shall be taken under which the execution of the judgment or
satisfaction of the lien is stayed. If and when a final and unappealable
judgment is rendered against Owner in any such action, Contractor shall
forthwith pay such judgment or discharge such lien prior to the time that Owner
would be legally held to do so.
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9.3 Promptly after obtaining knowledge thereof, Contractor shall give
prompt written notice to Owner of each incident likely to result in (i) damages
or claims for damages to person or property against Contractor or any other
person with respect to Contractor's performance of the Services; or (ii) a
violation of any law or regulation. Such notice shall include information as to
the time, place and nature of such incident, the names and addresses of the
persons and parties involved, any persons injured, witnesses and owners of any
property damaged and such other information as may be known to Contractor. In
addition, upon request from Owner, Contractor shall furnish Owner promptly with
copies of all correspondence, papers, notices and documents whatsoever received
by, or in the possession of Contractor, in connection with such incident.
ARTICLE 10
LIMITATIONS OF LIABILITY
10.1 Notwithstanding any other provision of this Agreement, Owner's
total liability to Contractor for all acts and omissions of Owner, its
employees, subcontractors, agents, representatives and designees including,
without limitation, liability arising out of contract, tort (including, without
limitation, negligence, gross negligence and intentional misconduct), strict
liability or any other cause or form of action whatsoever, shall not exceed the
Fee paid to Contractor under this Agreement.
10.2 Under no circumstances shall an affiliate of Owner be liable or
responsible to Contractor for obligations or liabilities arising from this
Agreement or otherwise, and Contractor hereby expressly waives any and all
claims against such affiliates of Owner now and in the future based on such
obligations or liabilities.
10.3 Nothing in this Agreement, express or implied, shall be construed
to create any interest, beneficial or otherwise, for any third party.
ARTICLE 11
INDEPENDENT CONTRACTOR RELATIONSHIP
11.1 The Parties acknowledge and agree that Contractor's relationship
with Owner hereunder shall be that of an independent contractor, and under no
circumstances shall either Party or any of its employees or agents be deemed to
be employees, partners, agents, or joint venturers of the other Party. At all
times during the term hereof, the employees of Contractor and the method of
achieving the performance of the Services shall be under the exclusive
direction, charge and control of Contractor and shall not be subject to the
direction, control or supervision of Owner. With respect to all employees of
Contractor engaged in performing the Services, Contractor shall, and Contractor
represents and warrants to Owner that it will, (i) make all payments of any kind
or character required by law to be made by an employer; (ii) make all
withholdings and deductions required by law to be made by an employer; (iii) and
does make all employment decisions including, without limitation, decisions
concerning hiring, termination, promotion, raises and employee benefits; and
(iv) comply with all applicable laws, rules and regulations in regard of such
employees of Contractor.
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11.2 Neither Party shall maintain, hold out, represent, state or imply
to any other individual or entity that any relationship other than an
independent contractor relationship exists between the Parties. Except as
expressly provided for herein to the contrary and other than for purposes of
Section 1.1 (v) above, neither Party nor any of its employees or agents shall
have any power or authority to bind, or enter into agreements on behalf of, or
otherwise create any debts or liabilities for or on behalf of the other Party.
ARTICLE 12
TERM AND TERMINATION
12.1 Unless sooner terminated in accordance with the provisions of this
Agreement, the term of this Agreement shall commence as of the Effective Date
and shall continue until the end of the crop cycle for the Current Season's
Crop, but in no event later than July 31, 2001.
12.2 Both Owner and Contractor shall have the right to terminate this
Agreement unilaterally upon thirty (30) days prior written notice to the other
Party in the event the other Party refuses to perform or fails to fully perform
or breaches in any way any of its obligations or representations under this
Agreement.
12.3 In the event this Agreement is terminated in any way whatsoever
prior to its expiration, Owner shall be liable to Contractor only for that
portion of the Fee attributable to the period from the Effective Date until (and
including) the date of such termination. In the event such termination is
effective on a date other than the first day of a month, the amount of the Fee
attributable for such month shall be prorated by dividing one-twelfth of the
total Fee by the number of days in the relevant month and multiplying the
remainder by the total number of days in the relevant month prior to the date of
such termination.
12.4 Upon the expiration or earlier termination of this Agreement,
Contractor shall remove promptly all of its property from the Facility.
12.5 In the event Owner elects to continue farming tomatoes at the
Facility beyond the term of this Agreement, Contractor and Owner agree to meet
during the month of January, 2001, at mutually convenient times to discuss in
good faith whether, upon the expiration of this Agreement, to enter into an
arrangement (which would be on mutually agreeable terms and conditions) similar
to that contained in the Operating Agreement; provided, however, that Owner
shall not be precluded in any way from talking to other parties with regard to
the future use of the Facility. Notwithstanding the foregoing sentence, neither
Party shall have any obligation to enter into any such arrangement or agreement
and neither Party shall have any liability to the other as a result of
determining in its sole discretion not to enter into such arrangement or
agreement.
ARTICLE 13
MISCELLANEOUS
13.1 Governing Law and Submission to Jurisdiction. This Agreement and
the rights of the Parties hereunder shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Virginia (without giving effect
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to principles of conflicts of laws which would lead to the application of the
laws of another jurisdiction). Contractor hereby (i) irrevocably submits to the
non-exclusive jurisdiction of the courts of the Commonwealth of Virginia
(including the federal courts having jurisdiction therefor); and (ii) waives any
objection which it may have at any time to the laying of venue of any
proceedings brought in any such court, waives any claim that any such proceeding
has been brought in an inconvenient forum and further waives the right to
object, with respect to any such proceeding, that such court does not have
jurisdiction over such Party. Nothing in this Agreement precludes either Party
from bringing proceedings in any other jurisdiction in order to enforce any
judgment obtained in any proceeding referred to in the preceding sentence nor
will the bringing of such enforcement proceedings in any one or more
jurisdictions preclude the bringing of enforcement proceedings in any other
jurisdiction.
13.2 Successors and Assignability. Contractor shall not assign, whether
by operation of law or otherwise, any of its rights or delegate any of its
duties under this Agreement, in whole or in part, without the prior written
consent of Owner. Owner shall have the right to assign any of its rights or to
delegate any of its duties under this Agreement without the consent of
Contractor. This Agreement shall be binding upon each of the Parties and their
respective successors and permitted assigns.
13.3 Severability. If any provision of this Agreement shall be
determined by any court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Agreement, other than that portion
determined to be invalid or unenforceable, shall not be affected thereby, and
each valid provision hereof shall be enforced to the fullest extent permitted by
law.
13.4 Modifications. No change, amendment or modification of this
Agreement shall be valid or binding upon the Parties unless such change,
amendment or modification is in writing and duly executed by both Parties.
13.5 Waivers. No provision of this Agreement shall be deemed waived and
no breach shall be deemed excused or consented to unless such waiver or consent
is in writing and signed by the Party claimed to have waived or consented. No
consent by either Party to, or waiver of, a breach by the other, whether express
or implied, shall constitute a consent to, waiver of, or excuse for any
different or subsequent breach.
13.6 Notice to Lenders. The Contractor shall notify CoBank, ACB,
Village Farms International Finance Association and its other lenders, if any,
(and provide Owner with evidence thereof) that (i) Owner has terminated the
Operating Agreement; (ii) Owner and Contractor have entered into this Agreement
pursuant to which Contractor is providing the Services to Owner; and (iii) title
to the Current Season's Crop, the seeds, plants, crops, produce and profits
resulting therefrom shall at all times remain with Owner.
13.7 Owner Incentives. Owner may provide in its sole discretion
additional incentives to Contractor for Key Employees aimed at retaining the Key
Employees at the Facility for the term of this Agreement.
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13.8 Reserved.
13.9 Set off; Cumulative Remedies. Without affecting or limiting in any
way any rights Owner may have at common law or in equity, Owner shall have the
right at any time and from time to time to set off any amount it may owe to
Contractor against any amount that Contractor may owe to Owner other than any
amount owed to Owner as Basic Rent or as Supplemental Rent (as those terms were
defined in the Operating Agreement) under the Operating Agreement. Contractor
shall not set off at any time any amount that it may owe to Owner. 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 Owner 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, 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 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 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 Contractor or to be an acquiescence
therein. No express or implied waiver by 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.
13.10 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original hereof but all of which
together shall constitute one and the same instrument. Any signature page of any
such counterpart, or any facsimile transmission thereof, may be attached or
appended to any other counterpart to complete a fully executed and delivered
counterpart of this Agreement. Any facsimile transmission of any signature of a
Party shall be deemed an original and shall bind such Party.
13.11 Headings. The 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.
13.12 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
Party 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 facsimile, when received, and shall be directed to the address of
such Party specified above.
13.13 Release of Certain Claims under the Operating Agreement. If, and
only if, (i) Contractor fully, promptly, diligently and satisfactorily performs
the Services in accordance with the terms and conditions of this Agreement; and
(ii) Contractor does not breach in any way any of the provisions of this
Agreement, Owner will release (in a form to be drafted by, and satisfactory to,
Owner) Contractor (as successor-in-interest to Village Farms of Virginia, Inc.)
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only from liability resulting from breaches by Contractor or Village Farms of
Virginia, Inc. of its obligations under the Operating Agreement, except that
such release shall not apply to and Contractor shall not be released from any
liability that may or could result from (x) any claim that may or could be made
by any third party based on any legal or equitable theory of recovery whatsoever
and whether such claim is based on an act or omission of, or breach of any
obligation by, Contractor, Village Farms of Virginia, Inc. or not; or (y) any
claim or demand for indemnity or for contribution that may or could be made by
Owner, Birchwood Power Partners, L.P., their stockholders, or their respective
successors, assigns, officers, directors, employees, agents or affiliates
pursuant to the provisions of the Operating Agreement or pursuant to law or in
equity.
13.14 Taxes. Notwithstanding anything to the contrary Contractor shall
pay and Owner shall not be liable or otherwise responsible for the payment of
any taxes or statutory charges levied or assessed against, or collected from,
Contractor including, without limitation, ad valorem, sales, property,
employment, occupation, income and other taxes levied, assessed or collected on
or with respect to Contractor's property or operations; provided, however, that
Contractor shall not be liable for (i) any real estate taxes assessed against
and upon the Facility or the real property upon which the Facility is located;
or (ii) any taxes imposed on the Owner's personal property located at the
Facility; or (iii) any sales taxes arising from the sale of the Current Season's
Crop by Owner (unless Contractor purchases any of the Current Season's Crop) or
(iv) any income taxes of Owner.
13.15 Transitional Operating Expenses. Owner and Contractor acknowledge
that Contractor has incurred certain expenses prior to the execution of this
Agreement on behalf of Owner in preparation for and in connection with
performing the Services. Owner agrees to promptly reimburse Contractor for such
expenses that Owner determines in its sole discretion were incurred by
Contractor in preparation for or in connection with Contractor's performance of
the Services if Contractor provides Owner with an invoice marked "paid" and
other reasonable documentation as may be requested by Owner for any such
expense. Contractor acknowledges that Owner shall have title to any goods,
materials, equipment or supplies procured by Contractor prior to the execution
of this Agreement in preparation for or in connection with Contractor's
performance of the Services that Owner reimburses Contractor for and, for
avoidance of doubt, Contractor hereby conveys to Owner all rights, title and
interest in and to any such goods, materials, equipment or supplies so procured.
13.16 Entire Agreement. This Agreement constitutes the Parties' entire
agreement as to the subject matter hereof and supersedes any and all other prior
understandings, correspondence and agreements, oral or written, between them.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
day and year first above written.
GREENHOST, INC. VILLAGE FARMS, L.P.
By: ___________________________ By: VILLAGE FARMS OF DELAWARE, LLC
its General Partner
Title: __________________________
By: ______________________________
Title: _____________________________
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EXHIBIT A
DESCRIPTION OF THE FACILITY
The "Facility" consists of the following:
1. The greenhouse plant (including, without limitation, all fixtures
thereof), the headhouse building and other buildings used in Owner's
farming business located on approximately forty-two (42) acres at 2259
Kings Highway, King George, Virginia 22485; and
2. The following equipment:
(i) All existing office equipment, furniture, fixtures and computers
(including, without limitation, radio and phone systems) owned by Owner;
(ii) Three (3) Caterpillar GP 18 Forklifts;
(iii) Nine (9) electric golf carts;
(iv) One (1) EZ Go PC 956 Personnel Carrier;
(v) Security system and hardware therefor;
(vi) One (1) John Deere 5300 4WD 50HP tractor with blade
attachment;
(vii) One (1) mower;
(viii) One (1) tiller;
(ix) Seven (7) trash dumpsters;
(x) All existing greenhouse safety equipment, maintenance equipment
(excluding scissor lifts), tools and spare parts;
(xi) Two (2) air compressors;
(xii) One (1) 1000 kw generator;
(xiii) One (1) sweeper; and
(xiv) One (1) 12,000 sq. ft. Cooler.
<PAGE>
EXHIBIT B
LIST OF CONTRACTOR'S TOOLS AND EQUIPMENT
1. Mobile Home
2. Triple K Fence - chain link mesh fence for pool
3. Kehr Buffalo Wire Frame - Stem supports
4. Agro Dynamics Battery Charger (14)
5. AWETA grader machine
6. Priva Computer - Sensor and Inte gro Extension
7. (2) Space maker Group Pallet Trucks
8. Agro Dynamics Hole Cutters (5 - handheld)
9. Agro Dynamics Fert Plus Irrigation
10. Agro Dynamics Sprinkler System
11. Agro Dynamics Irrigation System
12. Agro Dynamics - HP Cart 1000 liter sprayer
13. Bouldin & Lawson Needle Seeder
14. (__) AGRODY aluminum carts
15. Pulse Fog K3 Bio Insect Control Equipment
16. Prins maaskijk bailing machine
17. One (1) Mitsubishi Forklift
18. ADI - P/R Time Card Upgrade
19. Chevy Truck
20. (50) electric work carts
21. (50) picking carts
22. Two (2) Sinclair Sticker Applicators
23. One (1) Box Folding Machine
24. Four (4) office computers
<PAGE>
EXHIBIT C
KEY EMPLOYEES
The Key Employees are:
1. Bob Hoffman - General Manager and Head Grower;
2. Brett Wiley - National Sales Manager
<PAGE>
EXHIBIT D
LICENSED MARKS
The "Licensed Marks" are:
<TABLE>
<CAPTION>
Application Application
Registration Registration
Trademark Number Date Remarks Status
--------- ----------- ------------ --------- ------
<S> <C> <C> <C> <C>
BABY BEEFS (75/528,439) (7/29/98) Pending (TM)
HOME CHOICE (75/528,441) (7/29/98) Pending (TM)
VILLAGE FARMS 1,740,348 7/28/1992 Registered (R)
</TABLE>
