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OPERATING AGREEMENT
DATED AS OF NOVEMBER 14, 1997
BETWEEN
GREENHOST, INC.,
AS OWNER,
AND
VILLAGE FARMS OF VIRGINIA, INC.
AS OPERATOR
GREENHOUSE FACILITY
LOCATED IN BIRCHWOOD, VIRGINIA
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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 Owner.....................................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.........................................13
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 Owner'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
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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 Owner to Verify.....................................20
ARTICLE IX LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE......................21
Section 9.01 Occurrence of Event of Loss....................................21
Section 9.02 Repair of Loss or Destruction..................................21
ARTICLE X INTEREST CONVEYED TO OPERATOR .................................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 XIV ENFORCEMENT....................................................27
Section 14.01 Remedies.......................................................27
Section 14.02 Survival of Operator's Obligations.............................28
Section 14.03 Remedies Cumulative............................................29
ARTICLE XV RIGHT TO PERFORM FOR OPERATOR..................................29
ARTICLE XVI INDEMNITIES....................................................29
Section 16.01 General Indemnity..............................................29
Section 16.02 Fees, Taxes and Other Charges..................................31
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Section 16.03 Survival......................................................33
Section 16.04 Waiver........................................................34
ARTICLE XVII COVENANTS AND REPRESENTATIONS OF OPERATOR.....................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 Operator....................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
Section 18.08 Governing Law.................................................36
Section 18.09 Binding Effect; Successors and Assigns, Survival..............36
Section 18.10 Divisible Operating Agreement.................................36
Section 18.11 Effectiveness.................................................37
ARTICLE XIX STEAM SALES AGREEMENT, FEE MORTGAGE AND
MASTER LEASE..................................................37
Section 19.01 Subject to Fee Mortgage and Master Lease......................37
Section 19.02 Cooperation with Lenders......................................38
Section 19.03 Steam Sales Agreement.........................................38
Section 19.04 Storm Water Piping, Power Station Piping, Steam Equipment,
Steam Interconnection Facilities and Metering Devices.........40
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
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OPERATING AGREEMENT dated as of November 14, 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. O. Box 67, Sealston,
Virginia 22547, Attn: Chief Executive Officer; and
(b) with respect to the Operator, 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).
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"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.
"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.
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"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 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 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 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.
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"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 (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
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
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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, 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 in" shall have the meaning specified in Section 6.02 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,
including any thereof arising under any conditional sale or other title
retention agreement.
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"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, 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.
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"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.
"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 31 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
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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.
"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).
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"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 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 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.
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"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.
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.
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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 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 31 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 actually 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.
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The Owner shall invoice the Operator for hot water on a monthly basis,
and such invoices shall be payable 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 be borne 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 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 LIENS
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 satisfactory 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.
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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 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 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
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,
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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 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 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 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
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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 Owner 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 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
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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
right 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 Logs. 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 prudent owner or operator
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 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.
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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 complied 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; Products/Completed
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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.
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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 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) specify 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) 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 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
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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.
(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
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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 hereof) received at any time by the Owner or by the Operator from
any Governmental Authority or other Person as a result of the occurrence 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.
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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
Operator to which 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
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 language 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 form subordinating this Operating Agreement to
the interest of Fee Mortgagee.
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(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 that
term 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 any 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 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
of such Fee Mortgagee, then Operator shall give to such Fee Mortgagee
at the 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 Mortgagee) 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.
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ARTICLE XII
INSPECTION AND REPORTS
Section 12.01. Condition and Operation. The Owner 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, 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:
(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
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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 Operator 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).
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
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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 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
(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 by 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
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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:
(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
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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 contract 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 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 of, Article VI hereof as if
such Facility were being returned at the end of the Term.
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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 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
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 willful misconduct or gross negligence
of such Indemnitee (other than willful misconduct or gross negligence
imputed to such Indemnitee
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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 any
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 be a final judgment, beyond
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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.
(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 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 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 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
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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 Owner 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 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 or 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
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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 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 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
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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 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 from 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
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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 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.
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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 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 Operator 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 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
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that all 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
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
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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 reasonably
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.
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 from 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
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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.
(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 partly unable
to perform its obligations under this Section 19.03 because of Force
Majeure, that party shall be excused 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
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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 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.
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IN WITNESS WHEREOF, the undersigned have each 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.
/s/ R J Pushing
- ------------------------------ By: /s/ Steve Gillis
------------------------------------
Secretary Name: Steve Gillis
- -------------------- Title: CFO
[Corporate Seal]
Attest: VILLAGE FARMS OF VIRGINIA, INC.
/s/ Michael Minerva
- ------------------------------ By: /s/ J. Kevin Cobb
------------------------------------
Assistant 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 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: /s/ Michael A. Degiglio
--------------------------------
Name: Michael A. Degiglio
Title: President
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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.
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ANNEX A to
Schedule 1.01(a)
Description of Equipment
- All existing Greenhost office equipment, furniture, fixtures and computers
(including radios and phone systems).
- 3 Caterpillar GP 18 forklifts
- 13 Electric Golf Carts
- EZ Go PC956 Personnel Carrier
- Security System and hardware
- John Deere 5300 4WD 50 HP Tractor with blade, mower and tiller
- 7 Trash Dumpsters
- Motorized sweeper
- All existing Greenhouse safety and maintenance equipment (excluding
scissor lifts), tools and spare parts.
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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.
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SCHEDULE 3.01
TO OPERATING AGREEMENT
SCHEDULE OF BASIC RENT
March 31, 1998 $500,000.00 March 31, 2003 $500,000.00
June 30, 1998 $500,000.00 June 30, 2003 $500,000.00
September 30, 1998 $500,000.00 September 30, 2003 $500,000.00
December 31, 1998 $500,000.00 December 31, 2003 $500,000.00
March 31, 1999 $500,000.00 March 31, 2004 $500,000.00
June 30, 1999 $500,000.00 June 30, 2004 $500,000.00
September 30, 1999 $500,000.00 September 30, 2004 $500,000.00
December 31, 1999 $500,000.00 December 31, 2004 $500,000.00
March 31, 2000 $500,000.00 March 31, 2005 $500,000.00
June 30, 2000 $500,000.00 June 30, 2005 $500,000.00
September 30, 2000 $500,000.00 September 30, 2005 $500,000.00
December 31, 2000 $500,000.00 December 31, 2005 $500,000.00
March 31, 2001 $500,000.00 March 31, 2006 $500,000.00
June 30, 2001 $500,000.00 June 30, 2006 $500,000.00
September 30, 2001 $500,000.00 September 30, 2006 $500,000.00
December 31, 2001 $500,000.00 December 31, 2006 $500,000.00
March 31, 2002 $500,000.00 March 31, 2007 $500,000.00
June 30, 2002 $500,000.00 June 30, 2007 $500,000.00
September 30, 2002 $500,000.00 September 30, 2007 $500,000.00
December 31, 2002 $500,000.00 December 31, 2007 $500,000.00
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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:
- -- Supplemental Rent Percentage shall equal [xxx]% as long as the Owner's
Internal Rate of Return shall be less than or equal to [xxx]%.
- -- Subsequent to the date that the Owner's Internal Rate of Return exceeds
[xxx]%, the Supplemental Rent Percentage shall equal [xxx]% through
the end of the Term of the Operating Agreement.
[xxx] These portions of this exhibit have been omitted and filed separately
with the Commission pursuant to a request for confidential treatment
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