Exhibit 10.63
OPERATING AGREEMENT
Dated as of Nov. 14, 1997
between
GREENHOST, INC.,
as Owner,
and
VILLAGE FARMS OF VIRGINIA, INC.
as Operator
Greenhouse Facility
Located in Birchwood, Virginia
TABLE OF CONTENTS
ARTICLE I DEFINITIONS; CONSTRUCTION OF REFERENCES................... 1
Section 1.01 Definitions............................................... 1
Section 1.02 Construction of References................................ 9
ARTICLE II OPERATION OF FACILITY..................................... 10
ARTICLE III RENT AND SERVICES......................................... 10
Section 3.01 Basic Rent................................................ 10
Section 3.02 Supplemental Rent......................................... 10
Section 3.03 Late Payment.............................................. 10
Section 3.04 Net Lease; No Setoff; Etc................................. 10
Section 3.05 Hot Water Charges......................................... 10
Section 3.06 Services Provided by, Owner............................... 11
ARTICLE IV DISCLAIMER OF WARRANTIES.................................. 11
ARTICLE V RESTRICTION ON LIENS...................................... 12
ARTICLE VI OPERATION AND MAINTENANCE, ALTERATIONS
MODIFICATIONS AND ADDITIONS............................... 12
Section 6.01 Operation and Maintenance................................. 12
Section 6.02 Repair and Replacement.................................... 12
Section 6.03 Alterations Required by Law............................... 13
Section 6.04 Plans and Specifications; Operating Manual................ 13
Section 6.05 Operational Alterations................................... 13
Section 6.06 Owner's Option to Pay costs of Alterations................ 13
Section 6.07 Reports of Alterations.................................... 14
Section 6.08 Title to Parts............................................ 14
Section 6.09 Removal of Parts.......................................... 15
Section 6.10 Parts Free and Clear of Liens............................. 15
Section 6.11 Permitted Contests........................................ 15
Section 6.12 Operating Logs............................................ 15
Section 6.13 Return of Facility........................................ 16
ARTICLE VII IDENTIFICATION............................................ 16
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ARTICLE VIII INSURANCE................................................. 17
Section 8.01 Coverage.................................................. 17
Section 8.02 Policy Provisions......................................... 18
Section 8.03 Evidence of Insurance..................................... 19
Section 8.04 No Duty of Owner to Verify................................ 19
ARTICLE IX LOSS, DESTRUCTION. CONDEMNATION OR DAMAGE................. 19
Section 9.01 Occurrence of Event of Loss............................... 19
Section 9.02 Repair of Loss or Destruction............................. 20
ARTICLE X INTEREST CONVEYED TO OPERATOR............................. 20
ARTICLE XI ASSIGNMENT AND SUBLEASE. LOCATION......................... 20
Section 11.01 Assignment and Sublease................................... 21
Section 11.02 Location.................................................. 21
Section 11.03 Mortgaging the Estate of Lessor........................... 22
ARTICLE XII INSPECTION AND REPORTS.................................... 22
Section 12.01 Condition and Operation................................... 22
Section 12.02 Annual Insurance Report................................... 22
Section 12.03 Financial Reports......................................... 23
Section 12.04 Budget Approval........................................... 24
Section 12.05 Liability................................................. 24
Section 12.06 Liens..................................................... 24
ARTICLE XIII EVENTS OF DEFAULT......................................... 25
ARTICLE XIV ENFORCEMENT............................................... 26
Section 14.01 Remedies.................................................. 26
Section 14.02 Survival of Operator's Obligations........................ 27
Section 14.03 Remedies Cumulative....................................... 27
ARTICLE XV RIGHT TO PERFORM FOR OPERATOR............................. 28
ARTICLE XVI INDEMNITIES............................................... 28
Section 16.01 General Indemnity......................................... 28
Section 16.02 Fees, Taxes and Other Charges............................. 29
Section 16.03 Survival.................................................. 31
Section 16.04 Waiver.................................................... 32
ARTICLE XVII COVENANTS AND REPRESENTATIONS OF OPERATOR................. 32
Section 17.01 Operation of Facility..................................... 32
Section 17.02 Affiliated Transactions................................... 32
Section 17.03 Waiver of Operating or Efficiency Standards............... 33
Section 17.04 Representations and Warranties of Operator................ 33
ARTICLE XVIII MISCELLANEOUS............................................. 33
Section 18.01 Further Assurances........................................ 33
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Section 18.02 Quiet Enjoyment........................................... 34
Section 18.03 Notices................................................... 34
Section 18.04 Severability.............................................. 34
Section 18.05 Amendment................................................. 34
Section 18.06 Headings.................................................. 34
Section 18.07 Counterparts.............................................. 34
Section 18.08 Governing Law............................................. 34
Section 18.09 Binding, Effect; Successors and Assigns Survival.......... 34
Section 18.10 Divisible Operating Agreement............................. 35
Section 18.11 Effectiveness............................................. 35
ARTICLE XIX STEAM SALES AGREEMENT, FEE MORTGAGE AND
MASTER LEASE.............................................. 35
Section 19.01 Subject to Fee Mortgage and Master Lease.................. 35
Section 19.02 Cooperation with Lenders.................................. 36
Section 19.03 Steam Sales Agreement..................................... 36
Section 19.04 Storm Water Piping, Power Station Piping, Steam Equipment,
Steam Interconnection Facilities and Metering Devices..... 38
SCHEDULES
SCHEDULE 1.01(a) Description of Facility
SCHEDULE 1.01(b) Internal Rate of Return
SCHEDULE 3.01 Basic Rent
SCHEDULE 3.02 Supplemental Rent
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OPERATING AGREEMENT dated as of __________, 1997 between GREENHOST, INC., a
Delaware corporation (the "Owner"), and VILLAGE FARMS OF VIRGINIA, INC., a
Delaware corporation (the "Operator").
W I T N E S S E T H :
WHEREAS, the Owner owns a greenhouse plant in Birchwood, Virginia and
leases the Site as defined below) from the Master Landlord (as defined below)
under the Master Lease (as defined below) and
WHEREAS, the Owner desires to lease the Plant (as defined below) and
sublease the Site (as defined below) to the Operator and the Operator desires to
lease the Plant and sublease the Site from the Owner and operate the Facility
(as defined below), all on the terms and conditions herein contained.
In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, the parties
hereto, intending to be legally bound hereby. agree as follows:
ARTICLE I
DEFINITIONS, CONSTRUCTION OF REFERENCES
Section 1.01. Definitions. As used in this Agreement. the following terms
shall have the following meanings (such definitions to be equally applicable to
both the singular and plural forms of the terms defined):
"Address" shall mean:
(a) with respect to the Owner, P. 0. ▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attn: Chief Executive Officer: and
(b) with respect to the Operator, ▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇. ATTN: President;
or such other address as such party shall give by notice to the other party
hereto.
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlling, controlled by or under common control with, such Person.
"Alterations" shall mean, with respect to the Facility, alterations.
improvements, modifications and additions to the Facility (but excluding any
replacement of Parts incorporated in the Facility).
"APD" shall mean Agro Power Development, Inc. a New York corporation.
"Basic Rent" shall mean the rent payable pursuant to Section 3.01 of this
Agreement.
"Basic Rent Payment Date" shall mean the last day of each March, June,
September and December during the term of this Agreement and the Termination
Date, commencing March 31, 1998.
"Birchwood" means, as the context may permit or require, Birchwood Power
Partners, L.P. its successors and assigns, individually, and in its capacity as
all or any one or more of Master Landlord, or Lender.
"Board of Directors" with respect to the Operator or the Owner, means
either the Board of Directors or any duly authorized committee of that Board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Operator or Owner, as the case may be. to have
been duly adopted by its Board of Directors and to be in full force and effect
on the date of such certification.
"Borrower" means Greenhost, Inc., a Delaware corporation, in its capacity
as Borrower under the Loan Agreement.
"Budget" shall have the meaning specified in Section 12.04.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banks are authorized to be closed in New York, New York or
Charlotte, North Carolina.
"Capital Improvements Costs" shall mean the costs incurred by, the Owner
pursuant to the General Contractors Agreement.
"Cash Flow" shall mean for any Operating Year (a) the sum of (i) gross
revenues from the sale of Product, plus (ii) all amounts received by the
Operator pursuant to the Line of Credit Facility Agreement, plus, (iii)
insurance proceeds received by the Operator from policies of the type described
in subsection 8.01 (a)(iii) or any other insurance proceeds paid with respect to
the loss or damage to Product, plus, (iv) revenues received pursuant to Article
XVII plus (v) all other revenues and income of the Facility, minus (b) all
Greenhouse Expenses paid in the ordinary course of business (but excluding any
Greenhouse Expenses that are prepaid by the Operator).
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. ss. 9601 et seq.) as presently in effect and as the
same may hereafter be amended, together with any regulations pursuant thereto.
"Closing Date" shall mean the date this Agreement is executed and delivered
by the parties.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
comparable successor law.
"Collateral Pledge" means the Collateral Assignment of Note, Loan
Agreement, and the Deed of Trust, dated as of May 18, 1994, from Birchwood to
the Security Agent, as amended by that certain Amended and Restated Collateral
Assignment of Greenhouse Note, Loan Agreement
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and Mortgage, dated November 19, 1996 and as the same may be further amended,
modified or supplemented from time to time.
"Deed of Trust" means the Deed of Trust, Security Agreement and Assignment
of Leases and Rents, dated as of May 18, 1994, by and between Borrower, as
Grantor thereunder, Lawyers Title Insurance Corporation, as Trustee thereunder,
and Lender, as Beneficiary thereunder, pursuant to which Borrower has granted a
security interest in the Trust Property to secure the repayment of the
Indebtedness and performance of the Obligations, as amended by the Amendment to
Deed of Trust, Security Agreement and Assignment of Leases and Rents. dated
March 27, 1997, and as the same may be further amended. modified or supplemented
from time to time. and. unless the context otherwise requires, shall include the
Collateral Pledge.
"Default" means any event or condition which, with notice or lapse of time
or both, would become an Event of Default.
"Equipment" shall mean the equipment and other property described in Part I
of Schedule 1.01(a) of this Agreement together with any Parts which may from
time to time be incorporated in such equipment or other property and title to
which shall have vested in the Owner.
"Effective Date" shall have the meaning specified in Section 18.11.
"Environmental Regulations" means any and all laws, rules, orders,
regulations, statutes, ordinances, codes, decrees or requirements of any
Governmental Authority exercising jurisdiction over the Site, the Greenhouse
Facility (including ownership, construction or operation thereof), the Operator,
or the Borrower relating to the environment or natural resources, or to
emissions, discharges, or releases or threatened releases of Hazardous
Substances, or to protection of the environment or natural resources, or to
emissions, discharges, Releases or threatened Releases of Hazardous Substances,
including but not limited to the CERCLA, the Hazardous Materials Transportation
Act (49 U.S.C. ss. 1801 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. ss.6901 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 et
seq.), the Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. ss. 1251 et seq.), and the Safe Drinking Water
Act (42 U.S.C. ss. 300f et seq.), all as presently in effect and as the same may
hereafter be amended, any regulation pursuant thereto, and also including, but
not limited to, any obligations, duties, or requirements arising from or related
to Hazardous Substances under common law.
"Event of Default" shall have the meaning specified in Article XIII of this
Agreement.
"Event of Loss" shall mean (a) the actual or constructive total loss of all
or substantially all the Facility, or the condemnation, confiscation or seizure
of, or requisition of title to, or requisition by any Governmental Authority of
the use of all or substantially all the Facility, or (b) the loss, destruction
or damage of or condemnation confiscation or seizure of. or requisition by any
Governmental Authority of the use of such portion of the Facility as to render
the Facility unable to operate at substantially the same level of operation as
prior to the occurrence of such event, unless (x) it is feasible to restore
rebuild or replace the affected portion of the Facility and (y) in the opinion
of the Owner sufficient funds are or will be available to the Owner (1) to
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restore, rebuild or replace the affected portion of the Facility so that the
Facility will be able to operate at substantially the same level of operation as
prior to the occurrence of such event within twelve (12) months after the
occurrence of such event and (ii) to pay all Rent until such restoration
rebuilding or replacement is completed.
"Expense" shall have the meaning, specified in Section 16.01 of the
Operating Agreement.
"Facility" shall mean the Owner's rights in and to the Plant, the Site and
the Equipment.
"Fee Mortgagee" shall have the meaning set forth in Section 11.03(c)
hereof.
"Fees, Taxes and Other Charges" shall have the meaning specified in Section
16.02 of this Operating Agreement.
"Financing Parties Representative" means Credit Suisse, in its capacity as
administrative agent under the Power Station Loan Agreement (and its successors
thereto).
"GDP/IPD" shall have the meaning specified in Section 3.05 of this
Operating Agreement.
"General Contractors' Agreement" shall mean the agreement between APD, as
General contractor, and the Owner dated as of ____________, as the same may be
amended, modified or supplemented from time to time in accordance with the
provisions thereof, to provide certain capital improvements to the Facility.
"Greenhouse Expenses" shall mean the sum (without duplication) of (a)
direct labor costs paid, (b) seed expense paid, (c) packaging supplies expense
paid, (d) fertilizer and chemical expenses paid, (e) biological control,
including bees, expense paid, (f) freight expense paid, (g) growing, medium and
supplies expense paid, (h) carbon dioxide expense paid, (i) utility (including
hot water, electricity and natural gas) expense paid, (j) Management Fee paid,
(k) Basic Rent paid, (l) insurance premiums and property taxes paid, (m)
principal and interest paid with respect to the Line of Credit Facility
Agreement and (n) all other cash expenses paid relating, to the operation of the
Facility, to the extent contained in the Budget; provided, however, that there
shall be excluded from Greenhouse Expenses (a) all expenses to be paid from the
Management Fee, (b) all payments with respect to federal, state and local income
taxes, (c) payment of principal, interest and fees with respect all indebtedness
of the Operator for non capital expenditures other than the Line of Credit
Facility Agreement, (d) payment of principal, interest, lease payments and fees
with respect to the acquisition by the Operator of capital equipment, except to
the extent consented to in advance by the Owner in writing, and (e) expenses
paid by the Operator pursuant to Section 16.01.
"Greenhouse Facility" shall mean the approximately 38-acre greenhouse
located on the Site.
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulation or administrative functions of or pertaining
to government.
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"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 ▇▇▇. ss. 10.1-1300 et seq.,
the Solid Waste Management Act, Va. Code ▇▇▇. ss.10.1-1400 et seq., the State
Water Control Law, Va. Code ▇▇▇. ss.2.1-44.2 et seq., or any and all rules and
regulations now or hereafter promulgated under any or all of the foregoing,
together with any other substance the use, handling, generation, treatment,
storage, disposal, treatment, presence or Release of which could result in the
imposition of liability, under any of the aforementioned laws, statutes,
ordinances, codes, rules, regulations, orders or decrees.
"Incorporated in" shall have the meaning specified in Section 6.01 of the
Operating Agreement.
"Indemnitee" shall mean the Owner and the respective successors, assigns,
officers, directors, employees and agents of any thereof.
"Inspecting Parties" shall have the meaning specified in Section 12.01 of
this Operating Agreement.
"Internal Rate of Return" shall mean the return to capital calculated at
the end of each calendar quarter end in accordance with Schedule 1.01(b) hereto.
"Lender" means Birchwood, in its capacity as Lender under the Loan
Agreement.
"Lien" shall mean any lien, mortgage, encumbrance, pledge, charge, lease,
easement, servitude, right of others or security interest of any kind, include
any thereof arising under any conditional sale or other retention agreement.
"Line of Credit Facility Agreement" shall mean the Line of Credit Facility
Agreement between Village Farms International Finance Association and the
Operator, as the same may be amended, modified or supplemented from time to time
in accordance with the provisions thereof.
"Loan Agreement" means the Loan and Contribution Agreement, dated as of May
18, 1994, between the Owner, as Borrower, and Birchwood, as Lender, as amended
by the Greenhouse Restructure Amendment, dated March 27, 1997 and Lender, and as
the same may be further amended, modified or supplemented from time to time.
"Management Agreement" shall mean the Management, Operation, Maintenance.
Marketing and Sales Agreement to be entered into between the Operator and VF, as
it may be amended, supplemented or otherwise modified with the prior written
consent of the Owner and in effect from time to time, pursuant to which VF will
provide certain management, operation,
5
maintenance, marketing and sales services to the Operator, which Management
Agreement shall be approved in advance by the Owner in writing.
"Management Fee" shall mean the management fee paid to VF pursuant to the
Management Agreement for (a) all internal accounting services of the Operator,
(b) salary and other benefits paid to the Operator's grower and sales
representatives, (c) all internal management services performed by principals of
the Operator or VF and (d) all direct out-of-pocket expenses (including travel
and living expenses) paid in connection with the performance of the services
described in clauses (a), (b) and (c).
"Master Landlord" means Birchwood (or its successors and assigns), in its
capacity as Master Landlord under the Master Lease.
"Master Landlord's Facilities" shall mean, collectively, the Steam
Interconnection Facilities, the Metering Devices and the Power Station Piping.
"Master Lease" means that certain Deed of Master Lease, dated as of May 18,
1994, between the Master Landlord, and the Master Tenant, as amended by the
Amendment to Master Lease dated March 27, 1997 and as the same may be further
amended, modified or supplemented from time to time.
"Master Tenant" means the Owner (or its successors and permitted assigns),
in its capacity as Master Tenant under the Master Lease.
"Metering Devices" shall mean all necessary meters and associated equipment
to be utilized in measuring the steam output of the Power Station and for
measuring the condensate return to the Power Station.
"Nonseverable" shall describe (i) with respect to any Alteration, an
Alteration which is a "nonseverable improvement" within the meaning of Revenue
Procedure 79-48 and (ii) with respect to any part not constituting an Alteration
or part of an Alteration, a part which cannot be readily removed from the
equipment without causing material damage to the Facility.
"Notes" means (i) the promissory note executed by Owner in the form of
Exhibit A to the Loan Agreement, payable to the order of Birchwood, in the
amount of twenty million seventy nine thousand dollars ($20,079,000), (ii) the
term note executed by Owner in the form of Exhibit A to the Term Loan and
Working, Capital Agreement payable to the order of Birchwood. in the amount of
Two Million Five Hundred Thousand Dollars ($2,500,000) and (iii) the working
capital note executed by Owner in the form of Exhibit B to the Term Loan and
Working Capital Agreement, payable to the order of Birchwood, in the amount of
Three Million Dollars ($3,000,000), and any and all renewals, reinstatements,
rearrangements, enlargements or extensions of such notes or of any promissory
note or notes given therefor.
"Officer's Certificate" means a certificate signed by a Responsible Officer
of the party required to give such certificate.
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"Operating Manual" shall mean such operating manuals as are ordinarily
maintained by the Operator with respect to the Facility and any such manuals
provided by any manufacturer of any component of the Facility.
"Operating Year" shall mean each period commencing on January 1 and ending
on December 1 during the term of this Operating Agreement.
"Operative Documents" shall mean this Operating Agreement and the Line of
Credit Facility Agreement.
"Operator" shall mean Village Farms of Virginia, Inc., a Delaware
corporation, and its permitted successors and permitted assigns.
"Overdue Rate" shall mean an interest rate equal to the rate announced from
time to time by First Union National Bank of North Carolina as its prime or
reference rate plus two percent (2%) per annum.
"Owner" shall mean Greenhost, Inc. a Delaware corporation, and its
successors and permitted assigns.
"Parts" shall have the meaning specified in Section 6.02.
"Permitted Liens" shall mean (a) the respective rights and interests of the
Owner and the Operator as provided in the Operative Documents, (b) liens for
taxes either not yet due or being contested in good faith and by appropriate
proceedings, so long as such proceedings shall not involve any danger of the
sale, forfeiture or loss of any part of the Facility, title thereto or any
interest therein and shall not interfere with the use or disposition of the
Facility or the payment of Rent, (c) materialmen's, mechanics', workers,
repairmen's, employees' or other similar Liens arising in the ordinary course of
business for amounts either not yet due or being contested in good faith and by
appropriate proceedings so long as such proceedings shall not involve any danger
of the sale, forfeiture or loss of any part of the Facility, title thereto or
any interest therein and shall not interfere with the use or disposition of the
Facility or the payment of Rent, and (d) Liens arising, out of judgments or
awards with respect to which at the time an appeal or proceeding for review is
being prosecuted in good faith and either which have been bonded or for the
payment of which adequate reserves shall have been provided.
"Person" shall mean individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Plans and Specifications" shall mean the plans and specifications for the
Plant and the Equipment identified as such. as the same may be revised from time
to time in accordance with the terms of this Agreement.
"Plant" shall mean those buildings and other properties specifically
described in Part 2 of Schedule 1.01(a) to the Operating Agreement, together at
all times with any and all Parts which may from time to time be incorporated in
the Plant.
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"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
▇▇▇▇, ▇▇▇▇▇▇ County, Virginia, which Birchwood constructed and currently owns,
operates and maintains.
"Power Station Loan Agreement" means the Loan and Reimbursement Agreement
dated as of May 18, 1994, among, Lender, as the borrower thereunder, the "Banks"
and "Institutions" from time to time party thereto, and Credit Suisse, as
administrative agent for the Banks, providing for loans and other extensions of
credit to finance the construction and other costs of the Power Station, as
amended by that certain Greenhouse Restructure Amendment, dated March 27, 1997,
and as the same may be further amended. supplemented or otherwise modified from
time to time.
"Power Station Piping" shall mean the pump and piping system necessary for
the return of water from the detention pond on the Site to the Power Station.
"Product" shall mean tomatoes or any other agricultural product approved in
writing by the Owner.
"QF Application" means that certain Application of Birchwood Power
Partners, L.P. Certification of Qualifying Status as a Cogeneration Facility
filed with the Federal Energy Regulatory Commission on June 29, 1993, and all
amendments thereto.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment including without limitation the abandonment or discarding of
barrels, containers or other closed or open receptacles containing any Hazardous
Substances or pollutant or contaminant).
"Rent" shall mean Basic Rent and Supplemental Rent, collectively.
"Responsible Officer" shall mean the Chairman or Vice Chairman of the Board
of Directors, the Chairman or Vice Chairman of the Executive Committee of the
Board of Directors, the President, and Vice President (whether or not designated
by a number or a word or words added before or after the title "Vice President",
including an Assistant Vice President), the Secretary, an Assistant Secretary,
the Treasurer, an Assistant Treasurer or any other officer of any of them
customarily performing functions similar to those performed by any of the above
designated officers.
"Site" shall mean the land described in Part 3 of Schedule 1.01 (a) of the
Operating Agreement.
"Steam Equipment" shall mean the absorption chiller and heat exchange
systems, cooling tower, thermal storage tank, steam and condensate lines and the
other equipment required for the conversion of steam into a form usable in the
heating and cooling, of the Greenhouse Facility
8
and the lines required to deliver the hot and chilled water from such equipment
to the Greenhouse Facility.
"Steam Interconnection Facilities" shall mean the lines and other devices
necessary to interconnect the steam and condensate lines of the Power Station
with the Steam Equipment.
"Steam Sales Agreement" means the agreement, dated as of May 18, 1994,
between Birchwood, as seller, and the Owner, as purchaser, as amended by that
certain Greenhouse Restructure Amendment. dated March 27, 1997. and as the same
may be further amended, modified or supplemented from time to time.
"Storm Water Piping" shall mean the pump and piping system and other
equipment necessary for the return of storm water runoff from the Greenhouse
Facility to the detention pond on the Site.
"Supplemental Rent" shall mean the rent payable pursuant to Section 3.02 of
this Agreement.
"Supplemental Basic Rent Payment Date" shall mean the last date of each
January, April, July and October during the term of this Agreement and the
Termination Date commencing April 30, 1998.
"Term" shall mean (a) the period commencing on January 1, 1998 and ending
on December 31, 2007 or (b) such shorter period as may result from earlier
termination of this Operating Agreement as provided herein.
"Term Loan and Working Capital Agreement" shall mean the Term Loan and
Working Capital Agreement dated as of November 19, 1996 between Birchwood, as
Lender, and Owner, as Borrower.
"Termination Date" shall mean the last day of the Term.
"Trust Property" has the meaning, given in Section 1.1 of the Deed of
Trust.
"VF" shall mean Village Farms, L.L.C. a Delaware limited liability company.
"Virginia Power" means Virginia Electric and Power Company, a Virginia
corporation, as purchaser of energy and capacity (or its successor and permitted
assigns) under the Power Purchase Agreement.
"Water Charge" shall have the meaning, specified in Section 3.05 of this
Operating Agreement.
Section ▇.▇▇.▇▇▇▇▇▇▇▇▇▇▇▇ of References. All references in this instrument
to designated sections and other subdivisions are to designated sections and
other subdivisions of this instrument, and the words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Operating, Agreement
as a whole and not to any particular section or other subdivision.
9
Except as otherwise indicated, all the agreements or instruments herein
defined shall mean such agreements or instruments as the same may from time to
time be supplemented or amended or the terms thereof waived or modified to the
extent permitted by, and in accordance with, the terms thereof.
ARTICLE II
OPERATION OF FACILITY
As of the later to occur of (i) January 1, 1998 and (ii) Notice of
Substantial Completion (as defined in the General Contractor's Agreement) of the
Plant, subject to all the terms and conditions of this Agreement, the Owner
shall provide and lease the Facility, to the Operator, and the Operator shall
operate and lease, and hereby, as of the Effective Date does operate and lease,
the Facility from the Owner for the Term.
ARTICLE III
RENT AND SERVICES
Section 3.01. Basic Rent. Subject to adjustment as provided below, during
the Term, the Operator shall pay Basic Rent to the Owner in arrears on each
Basic Rent Payment Date for the Facility in an amount equal to the amount set
forth on Schedule 3.01 for such Basic Rent Payment Date (in the case of the last
Basic Rent Payment Date if such date is other than a Basic Rent Payment Date,
such Basic Rent shall be prorated based on the number of days during which the
Operator leased the Facility). Basic Rent shall be increased in accordance with
any agreement reached in connection with the payment by the Owner of the costs
of any Alterations in accordance with Section 6.06 hereof
Section 3.02. Supplemental Rent. In addition to Basic Rent, the Operator
shall pay to the Owner Supplemental Rent in an amount equal to the percentage of
Cash Flow set forth on Schedule 3.02 during the Term. Supplemental Rent shall be
payable for each calendar quarter on the Supplemental Rent Payment Date
immediately following the end of such calendar quarter.
Section 3.03. Late Payment. If any Rent or any other amount required to be
paid hereunder shall not be paid when due, the Operator shall pay to the Owner
interest (to the extent permitted by law) on such overdue amount from and
including the due date thereof to but excluding the date of payment thereof
(unless such payment shall be made after 11:00 A.M. local time, in which case
such date of payment shall be included) at the Overdue Rate. If any Rent shall
be paid on the date when due, but after 11:00 A.M., local time, at the place of
payment, interest shall be payable as aforesaid for one day.
Section 3.04. Net Lease: No Setoff, Etc. This Operating Agreement is a net
lease and, notwithstanding any other provision of this Operating Agreement, it
is intended that Rent and all other amounts payable by Operator hereunder to
Owner shall be paid without notice, demand, counterclaim, setoff, deduction or
defense and without abatement, suspension, deferment, diminution or reduction.
Section 3.05. Hot Water Charges. The Owner agrees to provide to the
Operator during the Term hot water for the operation of the Facility at a cost
to the Operator of $200,000.00 per annum, subject to increase as set forth
below, (the "Water Charge"). The Water Charge shall be
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due and payable in equal monthly installments in arrears on the last day of each
month during the Term (prorated for any partial ,years or months). Commencing
January 1, 1999, and annually on each January 1 thereafter during the Term, the
Water Charge shall be increased in accordance with increases, if any, in the
Gross Domestic Product/Implicit Price Deflator ("GDP/IPD"), as published by the
U.S. Department of Labor, Bureau of Labor Statistics. The new Water Charge for
each such period shall be calculated by the Owner by multiplying the Water
Charge in effect on the immediately preceding December 1 by a fraction, the
numerator of which shall be the GDP/IPD as first published for the preceding
year and the denominator of which shall be the GDP/IPD as first published for
the second preceding year (i.e., the new Water Charge for January 1, 1999 shall
equal the Water Charge in effect on December 31, 1998 multiplied by a fraction,
the numerator of which shall be the GDP/IPD for 1998 (first published in March
of 1999) and the denominator of which shall be the GDP/IPD for 1997 (first
published in March of 1998)). Due to the timing of the publication of the
GDP/IPD, the new Water Charge for each such period shall be calculated in April
of each such period and applied retroactively to be effective as of the prior
January 1. Upon calculation of the new Water Charge, the Operator agrees to
promptly pay the Owner the difference between the amounts due for Water Charges
for the months of January, February, and March of each such period based on the
adjusted Water Charge, and the amounts actuation, paid for water based on the
pre-adjusted Water Charge.
The Owner shall be responsible for contracting for any fuel necessary for
providing hot water.
The Owner shall invoice the Operator for hot water on a monthly basis. and
such invoices shall be savable within thirty (30) days of invoice.
Section 3.06. Services Provided by Owner. At the request of the Operator.
the Owner may at its option, provide, at the Operator's expense, general
maintenance services. The Owner shall charge the Operator an amount equal to its
actual cost in providing such services and shall invoice the Operator for such
services monthly as incurred. Such invoices shall be payable within thirty (30)
days of invoice.
ARTICLE IV
DISCLAIMER OF WARRANTIES
THE FACILITY IS BEING PROVIDED AND LEASED PURSUANT TO THIS AGREEMENT ON AN
"AS-IS, WHERE-IS" BASIS. THE OWNER HAS NOT MADE NOR SHALL BE DEEMED TO HAVE MADE
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED AS TO THE TITLE, VALUE,
MERCHANTABILITY, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN, OPERATION,
ABSENCE OF LATENT DEFECTS OR FITNESS FOR USE OF THE FACILITY (OR ANY PART
THEREOF), OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO THE FACILITY (OR ANY PART THEREOF). It is agreed that
except as expressly provided herein all risks incident to the matters discussed
in the preceding sentence, as between the Owner, on the one hand, and the
Operator, on the other, are to become by the Operator. The provisions of this
Article IV have been negotiated, and, except to the extent otherwise expressly
stated in this Agreement, the foregoing provisions are intended to be a complete
exclusion and negation of any representations or warranties by the
11
Owner, express or implied, with respect to the Facility that may arise pursuant
to any law now or hereafter in effect, or otherwise.
ARTICLE V
RESTRICTION ON LIEN'S
The Operator shall not directly or indirectly create, incur, assume or
suffer to exist any Lien on or with respect to the Facility, title thereto or
any interest therein, except Permitted Liens. The Operator shall promptly, at
its own expense, take such action as may be necessary duly to discharge or
eliminate or bond in a manner satisfaction to the Owner any such Lien if the
same shall arise at any time. The Operator further agrees that it shall pay or
cause to be paid on or before the time or times prescribed by law (after giving
effect to any applicable grace period) any taxes, assessments, fees or charges
imposed on the Operator (or any affiliated or related group of which the
Operator is a member) under the laws of any jurisdiction that. if unpaid, might
result in any Lien prohibited by this Operating Agreement.
ARTICLE VI
OPERATION AND MAINTENANCE; ALTERATIONS,
MODIFICATIONS AND ADDITIONS
Section 6.01. Operation and Maintenance. The Operator. at its own expense,
shall at all times operate. maintain, service and repair the Facility in
accordance with (a) prudent commercial operating maintenance practices,
including all manufacturers' warranty requirements to the extent such
requirements are made known to the Operator, (b) the then current Operating
Manual, (c) except to the extent Section 6.11 hereof shall apply all applicable
requirements of law and of any court and of any Governmental Authority
(including without limitation all zoning, environmental protection, pollution,
sanitary and safety laws, and all Environmental Requirements) noncompliance with
which would have a material adverse effect on the Operator's right to operate
the Facility, the Operator's business or financial condition or the rights of
the Owner in the Facility or would, in the opinion of the Owner, involve a
material risk of any of the items enumerated in Section 6.11 (i) through (iv),
and (d) all requirements contained in permits and licenses relating to the
Facility in effect from time to time during the Term. In connection therewith,
the Operator shall (i) maintain the Facility in stood operating condition.
ordinary wear and tear excepted, (ii) cause the Facility to continue to have the
capacity and functional ability, to produce Product on a continuing basis. in
normal commercial operation, in a commercially efficient manner, (iii) comply
with the standards imposed by any insurance policies in effect at any time with
respect to the Facility or any part thereof, and (iv) bear the expense
associated with changes in permitting requirements relating to the Facility
during the Term.
Section 6.02. Repair and Replacement. Except after the occurrence of an
Event of Loss, and except as provided below, the Operator, at its own expense,
shall keep the Facility in good operating condition (reasonable wear and tear
excepted), and shall make all repairs, replacements and renewals of all
necessary, or useful appliances, parts, instruments, accessories and
miscellaneous property of whatever nature (collectively, the "Parts") necessary
to maintain the Facility in good operating condition. The Operator shall be
responsible for making (a) all structural and nonstructural repairs and
replacements to the Facility up to thirty thousand dollars ($30,000) in the
aggregate in each Operating Year and (b) all repairs and replacements, with the
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exception of (i) the Greenhouse structure, including the ventilation system;
(ii) the heating system, including pumps, boilers, expansion vessels and piping;
(iii) the curtain system; (iv) the CO2 system; (v) the irrigation system; and
(vi) the cold storage facility: provided that notwithstanding anything contained
herein to the contrary, the Operator shall be responsible for all repair and
replacements relating to normal wear and tear. The Owner shall be responsible
for making all necessary structural and nonstructural repairs in excess of
thirty thousand dollars ($30,000) in the aggregate in any Operating Year other
than repairs and replacements of items referred to in clause (b) above;
provided, however, that if such repairs or replacements are necessitated by the
negligent or willful acts of the Operator, its employees, agents or invitees,
then the cost of such repairs or replacements shall be borne by the Operator. In
the ordinary course of maintenance, service, repair or testing, the Operator may
remove any Parts, but the Operator shall cause such Parts to be replaced as
promptly as practicable. All replacement Parts shall be free and clear of all
Liens except Permitted Liens and shall be in at least as good operating
condition as. and shall have a value and utility at least equal to, the Parts
replaced, assuming such replaced Parts were in the condition and repair required
to be maintained by the terms hereof.
Section 6.03. Alterations Required by Law. The Owner shall make such
Alterations to the Facility as may be required from time to time to meet the
requirements of and be in conformity with all applicable requirements of law, of
any court and of any Governmental Authority and the Operator will maintain the
same in proper operating condition under such laws and requirements. except to
the extent Section 6.11 hereof shall apply. Upon completion of such Alterations,
the Basic Rent shall be automatically increased on an annual basis by an amount
sufficient to enable the Owner to recover (over ten (10) years) the cost paid in
connection with the Alterations.
Section 6.04. Plans and Specifications: Operating Manual. As soon as
practicable following the Effective Date, the Owner shall provide to the
Operator the Operating Manual and a set of Plans and Specifications (which shall
in the aggregate reflect the Facility as of the Effective Date). The Operator
shall maintain throughout the Term, and keep on file at the Facility, a current
Operating Manual and a set of Plans and Specifications (which shall in the
aggregate reflect all Parts incorporated in the Facility and all Alterations
made pursuant to this Article VI) with respect to the Facility. Upon any
expiration of the Term or the exercise of remedies pursuant to Article XIII
hereof, the Operator shall deliver to the Owner a complete set. current as of
the date of such return or exercise of remedies, of such Plans and
Specifications and all work drawings and similar documents with respect to the
operation of the Facility. The Plans and Specifications shall not be revised,
amended or modified in any manner which would adversely affect the operating
capacity, cost efficiency, utility, reliability or value of the Facility.
Section 6.05. Operational Alterations. In addition to the foregoing, the
Operator, at its own expense (subject to Section 6.06 hereof) may, from time to
time make such Alterations to the Facility as the Operator may deem desirable in
the proper conduct of its business, which shall be approved by the Owner in
advance, provided that such Alterations shall not adversely affect the operating
capacity, cost efficiency, utility, reliability or value of the Facility.
Section 6.06. Owner's Option to Pay Costs of Alterations. If requested to
do so by the Operator, the Owner may at its option pay for any Alteration title
to which will vest or has vested
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in the Owner pursuant to Section 6.08 hereof, subject to agreement as to
adjustments in Basic Rent in accordance with Section 3.01 hereof.
Section 6.07. Reports of Alterations. On or before March 15 of each
calendar year commencing in 1999 and on the date on which the Term shall expire.
the Operator shall furnish the Owner with a report stating the total cost (as
determined in accordance with the Operator's normal accounting practices) of all
Alterations which are Nonservable and which were not financed pursuant to
Section 6.06 hereof and which are not described in clause (i) or (ii) of Section
4(4).03(c) of Revenue Procedure 75-21 as modified by Revenue Procedure 79-48 and
which were made during, the period from the date of this Operating Agreement to
the end of the preceding calendar year in the case of the first such report or
during the period from the end of the period covered by the last previous report
to one month prior to such report in the case of subsequent reports and briefly
describing all such Alterations. Each such report shall be accompanied by an
Officer's Certificate stating that no Alteration has been made that would
adversely affect the operating capacity, cost efficiency, utility, reliability
or value of the Facility, or the ability of the Operator to perform its
obligations hereunder.
Section 6.08. Title to Parts. Title to each Part (including any Alteration)
incorporated in the Facility pursuant to this Article VI shall without further
act vest in the Owner and shall be deemed to constitute a part of the Facility
and be subject to this Operating Agreement in the following cases:
(a) such Part shall be in replacement of or in substitution for. and
not in addition to, any Part originally incorporated in the Equipment or
any Part title to which shall have vested in the Owner pursuant to this
Section 6.08;
(b) such Part shall be required to be incorporated in the Facility
pursuant to the terms of Sections 6.02 and 6.03 hereof,
(c) such Part shall be Nonseverable; or
(d) such Part shall be paid for by the Owner.
If such Part or Parts are incorporated in the Facility, pursuant to this
Article VI and are not within any of the categories set forth in clauses (a)
through (d) above, then title to such Part or Parts shall vest in the Operator,
subject to the rights of the Owner provided in Section 6.09 hereof.
All Parts (other than Parts the title to which is vested in the Operator in
accordance with the preceding sentence) at any time removed from the Facility
shall remain the property of the Owner no matter where located, until such time
as such Parts shall be replaced by Parts that have been incorporated in the
Facility and that meet the requirements for replacement Parts specified in
Section 6.02 hereof. On or before March 15 of each calendar year commencing in
1999 and on the date on which the Term shall expire, the Operator shall furnish
the Owner with a report which provides a breakout of the total cost (as
determined in accordance with the Operator's normal accounting practices) of all
Parts the title to which is vested in the Operator and all parts the title which
is vested in the Owners as provided in this Section 6.08 (other than those Parts
that were paid for by the Owner) and which were incorporated in the Facility
during the period
14
from the date of this Operating Agreement to the end of the preceding calendar
year in the case of the first such report or during the period from the end of
the period covered by the last previous report to one month prior to such report
in the case of subsequent reports and briefly describing all such Parts. Each
such report shall be accompanied by an Officer's Certificate stating that no
Part has been incorporated in the Facility that would adversely affect the
operating capacity, cost efficiency, utility, reliability or value of the
Facility or the ability of the Operator to perform its obligations hereunder.
Immediately upon any replacement Part becoming incorporated in the Facility as
provided in Section 6.02 hereof, without further act, (a) title to the removed
Part shall thereupon vest in such Person as shall be designated by the Operator,
free and clear of all rights of the Owner, (b) title to such replacement Part
shall thereupon vest in the Owner and (c) such replacement Part shall become
subject to this Operating Agreement and be deemed part of the Facility for all
purposes hereof to the same extent as the parts originally incorporated in the
Facility.
Section 6.09. Removal of Parts. All Parts incorporated in the Facility to
which the Operator (or any other Person other than the Owner) shall have title
pursuant to the provisions of Section 6.08 hereof may, (a) subject to any night
of the Owner to use such Part as provided herein and (b) so long as such removal
shall be permitted by this Agreement and shall not result in any violation of
any law or governmental regulation and (c) so long as no Default or Event of
Default shall have occurred and be continuing, be removed at any time by the
Operator (or such other Person) and shall be removed by the Operator (or the
Operator shall cause such other Person so to remove such Parts) prior to the
delivery of the Facility to the Owner in accordance with the provisions of the
Operating Agreement, other than upon the termination of this Operating Agreement
pursuant to Article XIV hereof, and title to such Parts shall at all times
remain in the Operator (or such other Person).
Section 6.10. Parts Free and Clear of Liens. Any Part title to which shall
vest in the Owner pursuant to Section 6.08 hereof shall be free and clear of all
Liens except Permitted Liens.
Section 6.11. Permitted Contests. If, to the extent and for so long as (a)
a test, challenge, appeal or proceeding for review of any applicable requirement
of law or of a Governmental Authority relating to the operation or maintenance
of the Facility shall be prosecuted in good faith by the Operator or (b)
compliance with such requirement shall have been excused or exempted by a
nonconforming use permit, waiver extension or forbearance, the Operator shall
not be required to comply with such requirement but only if such test challenge,
appeal, proceeding or noncompliance shall not, in the opinion of the Owner,
involve a material risk of (i) foreclosure, sale, forfeiture or loss of, or
imposition of any Lien other than a Permitted Lien on, any part of the Facility
or of impairment of the operation of the Facility (ii) extending the ultimate
imposition of such requirement beyond the termination of the Term (unless there
shall have been furnished indemnification satisfactory to the Owner), (iii) any
material claim against the Owner (unless there shall have been furnished
indemnification satisfactory to the Owner) or (iv) the nonpayment of Rent.
Section 6.12. Operating, Loss. The Operator shall keep maintenance and
repair reports in sufficient detail to indicate the nature and date of major
work done. Such reports shall be kept on file by the Operator at its offices or
at the Facility for as long, as they would be kept by a
15
prudent owner or operator of the Facility (but in no event less than three years
following the end of the Term), and shall be made available to the Owner upon
reasonable request.
Section 6.13. Return of Facility. Upon termination of this Agreement, the
Operator, at its own expense, shall return the Facility to the Owner by
surrendering the same into the possession of the Owner free and clear of all
Liens and in the condition required by Section 6.01 hereof.
ARTICLE VII
IDENTIFICATION
The Operator shall maintain throughout the Term in a prominent location at
each entrance to each of the buildings comprising the Facility at least one (1)
plate or other clear and durable marking stating "THE EQUIPMENT AND ALL RELATED
EQUIPMENT IN THIS FACILITY IS OWNED BY GREENHOST, INC." in letters not less than
one-half inch in height. On the Closing Date the Operator shall certify that it
has compiled with the preceding sentence. Except as provided herein or as
otherwise directed by the Owner, the Operator shall not allow the name of any
Person other than that of the Operator to be placed on any Part of the Facility
as a designation that might reasonably be interpreted as a claim of ownership or
right to possession or use thereof
ARTICLE VIII
INSURANCE
Section 8.01. Coverage.
(a) Subject to subsection 8.01(b), the Operator shall maintain:
(i) property damage insurance with respect to the Facility insuring
against loss or damage in an amount equal to the "full insurable value"
(which as used herein shall mean the full replacement value, including the
costs of debris removal, which amount shall be determined annually) from
(x) fire and normal extended coverage perils customarily included in
policies available with respect to property comparable to the Facility and
(y) flood, earthquake and other perils customarily included under
Difference in Conditions policies so available;
(ii) "boiler and machinery" insurance in an amount equal to the full
insurable value with respect to damage (not insured against pursuant to
subsection 8.01(a)(i) above) to the machinery, plant, equipment, storage
facilities or similar apparatus included in the Facility from risks
normally insured against under boiler and machinery policies.
(iii) comprehensive commercial general liability and property damage
insurance (including, but not limited to, coverage for any construction on
or about the Premises) covering the legal liability of Operator against all
claims for any bodily injury or death of persons and for damage to or
destruction of property occurring on, in or about the Premises and the
adjoining streets, sidewalks and passageways and arising, out of the use or
occupation of the Premises by Operator. Coverages provided by the foregoing
insurance policy shall include (but not be limited to) all of the coverages
commonly, referred to by the insurance industry as: Premises/Operations
Liability;
16
Products/Completed Operations Liability, Owners and Contractors Protective
Liability; Blanket Contractual Liability; Broad Form Property Damage
Liability, Personal Injury, Stop-Gap or Employers' Contingent Liability
Explosion, Collapse and Underground Liability, Automobile Liability,
including coverage for Owned, Non-Owned, Hired, or Borrowed Vehicles and
"Mobile Equipment". The foregoing insurance shall apply as primary
insurance, irrespective of any insurance which Owner or Master Landlord may
carry and shall include a "Cross Liability" clause (Severability of
Interests). The foregoing insurance shall have a combined single limit of
not less than $5,000,000, with separate aggregate for product and general
liability, which policy shall be written on an occurrence basis;
(iv) (x) workers' compensation insurance or occupational disability
benefits insurance (in at least the statutory amounts) and such other forms
of insurance which the Operator is required by law to maintain or cause to
be maintained, covering, loss resulting from injury, sickness, disability
or death of the employees of the Operator and (y) employers' liability
insurance in an amount not less than $500,000 single limit.
(v) comprehensive automobile liability insurance against claims of
personal injury (including bodily injury and death) and property damage
covering all owned, leased, non-owned and hired vehicles with a
$1,000,000.00 minimum limit per occurrence for combined bodily injury and
property damage liability; and
(vi) such other insurance with respect to the Facility in such amounts
and against such insurable hazards as is usually carried by Persons
operating similar properties in the same general region, but any loss of
the type customarily covered by the policies described in subsections
8.01(a)(i), (ii) and (iii), whether actually covered in whole or in part by
such policies, shall be the responsibility of the Operator and the absence
of such coverage shall not relieve the Operator from any of its obligations
under any of the Operative Documents:
provided, however, that the amount of insurance coverage specified in
subsections 8.01 (a)(i) and (a)(ii) above with respect to the Facility
shall not in any event be less than the replacement cost of the Facility,
as determined by the Owner, including agreed amount waiving coinsurance.
All insurance policies carried in accordance with Section 8.01 shall be
maintained with Florists Mutual Insurance Company or any other insurers with a
Best rating of A minus or better and a Best size rating of IX or better (except
for policies underwritten by Lloyds of London and approved English companies
acceptable to the Owner) approved by the Owner and not disqualified from
insuring risks in Virginia.
Any insurance policies carried in accordance with this Section 8.01 shall
be subject to (i) exclusions of the sort existing in the insurance policies in
effect on the Closing Date and (ii) such deductible amounts and retentions as
shall not exceed the following amounts specified with respect to such policies:
(1) Property Damage $25,000;
17
(2) Boiler and Machinery $25,000; and
(3) Public Liability $25,000.
Notwithstanding anything to the contrary in this Article VIII, the Operator
shall at all times ensure that the insurance it maintains with respect to the
Facility is not less extensive or inclusive in type or amount of coverage than
that maintained by it in accordance with its standard corporate minimum practice
with respect to other similar facilities.
(b) During the Term and unless the Owner gives the Operator sixty (60)
days prior written notice, the Owner shall provide the insurance coverage
specified in subsection 8.01 (a)(i) and 8.01 (a)(ii) at the Owner's cost.
Section 8.02. Policy Provisions. Any insurance policy maintained by the
Operator pursuant to Section 8.01 hereof shall:
(a) specific Birchwood, Master Landlord, Owner, Lender, Fee Mortgagee,
Master Landlord's affiliates, the Owner and Owner's affiliates (and such
others as Master Landlord or Owner shall from time to time designate) as
additional insured (the "Additional Insured"), as their respective
interests may appear:
(b) specific Fee Mortgagee as mortgagee and loss payee;
(c) provide. except in the case of public liability insurance and
workers' compensation insurance, that all loss or occurrence shall be
adjusted with the Operator and Owner, unless an Event of Default shall have
occurred and be continuing, in which case such loss or occurrence shall be
adjusted with the Owner, and payable (x) in respect of payments not
exceeding $25,000, provided no Default or Event of Default shall have
occurred or be continuing, to the Operator, and (y) in all other
circumstances, to the Owner:
(d) include effective waivers by the insurer of all claims for
insurance premiums or commissions or (if such policies provide for the
payment thereof) additional premiums or assessments against any Additional
Insured;
(e) provide that in respect of the interests of the Additional
Insured, such policies shall not be invalidated by any action or inaction
of the Operator or any other Person and shall insure the Additional Insured
regardless of. and any claims for the losses shall be payable
notwithstanding:
(i) the occupation or use of the Facility for purposes more
hazardous than permitted by the terms of the policy;
(ii) any foreclosure or other proceeding or notice of sale
relating to all or any portion of the Facility; or
(iii) any change in the title to or ownership of all or any
portion of the Facility.
18
(f) provide that such insurance shall be primary insurance and that
the insurers under such insurance policies shall be liable under such
policies without right of contribution from any other insurance coverage
effected by or on behalf of any Additional Insured under any other
insurance policies covering a loss that is also covered under the insurance
policies maintained by the Operator pursuant to this Article VIII and shall
expressly provide that all provisions thereof, except the limits of
liability (which shall be applicable to all insureds as a group) and
liability for premiums (which shall be solely a liability of the Operator),
shall operate in the same manner as if there were a separate policy
covering each insured.
(g) provide that any cancellation thereof or material adverse change
therein shall not be effective as to each of the Additional insured until
at least sixty (60) days after receipt by such Additional Insured of
written notice thereof,
(h) waive any right of subrogation of the insurers against the
Additional Insured, and waive any right of the insurers to any setoff or
counterclaim or any other deduction, whether by attachment or otherwise, in
respect of any liability of the Additional Insured: and
(i) subject to Section 8.01 hereof. be reasonably satisfactory to the
Owner, Master Landlord and Fee Mortgagee in all other material respects.
Section 8.03. Evidence of Insurance. The Operator shall deliver to each of
the Additional Insured at least two (2) days before the Effective Date copies of
all policies of insurance required hereby and, on the date this Operating
Agreement is executed and on each December 31 thereafter during the Term,
certificates of insurance, copies of all policies of insurance evidencing the
provisions described in Section 8.02(a) hereof executed by the insurer by its
duly authorized agent, and a certification from the Operator's insurance agent
or broker to the effect that all premiums required to have been paid have been
paid in full.
Section 8.04. No Duty of Owner to Verify. No provision of this Article VIII
or any provision of any other Operative Document shall impose on the Owner any
duty or obligation to verify the existence or adequacy of the insurance coverage
maintained by the Operator nor shall the Owner be responsible for any
representation or warranty made by or on behalf of the Operator to any insurance
company or underwriter.
ARTICLE IX
LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE
Section 9.01. Occurrence of Event of Loss. If an Event of Loss shall occur,
the Operator shall give the Owner prompt written notice of such occurrence and
the date thereof unless the Owner agrees in writing within thirty (30) days
after such occurrence to restore, rebuild or replace the Facility in accordance
with the provisions contained in the definition of "Event of Loss," then this
Agreement shall terminate effective on the thirtieth day following the
occurrence of the Event of Loss. Any payments (except for payments under
insurance policies maintained by the Operator other than pursuant to Article
VIII hereto received at any time by the Owner or by the Operator from any
Governmental Authority or other Person as a result of the occurrence
19
of an Event of Loss shall be retained by the Owner or promptly paid to the Owner
by the Operator; provided, however, that so long as no Default or Event of
Default shall have occurred and be continuing, the Operator may retain any
proceeds of requisition of use payments made by any Governmental Authority and
attributable to the Facility for a period equal to the then current Term.
Section 9.02. Repair of Loss or Destruction.
(a) In the event of loss or destruction of all or a portion of the
Facility which (x) does not constitute an Event of Loss or (y) constitutes
an Event of Loss but the Owner agrees to restore, rebuild or replace the
Facility, then the Owner shall give prompt notice thereof to the Operator,
and the Owner, at its own cost and expense, shall promptly repair, replace
and rebuild the Facility, at least to the extent of the value and as nearly
as practicable to the character of the Facility existing immediately prior
to such occurrence; provided, however, that the Operator shall pay the
difference, if any, between the insurance proceeds received by the Owner as
a result of such loss or destruction and the costs and expenses incurred by
the Owner in restoring, rebuilding or replacing the Facility if the loss or
destruction thereof resulted from the negligent, willful, reckless or
wanton act or failure to act of the Operator, its employees, agents,
invitees or independent contractors.
(b) Except as provided in Section 9.01, this Agreement shall not
terminate or be affected in any manner by reason of the destruction or
damage in whole or in part of the Facility, or by reason of the
untenantability of the Facility, and the Rent reserved in this Agreement
and all other charges payable hereunder shall be paid by the Operator in
accordance with the terms, covenants and conditions of this Agreement,
without abatement, diminution or reduction.
ARTICLE X
INTEREST CONVEYED TO OPERATOR
This Operating Agreement is an agreement of lease and does not convey to
the Operator any right, title or interest in or to the Facility except as an
Operator.
ARTICLE XI
ASSIGNMENT AND SUBLEASE; LOCATION
Section 11.01. Assignment and Sublease. The Owner shall be permitted to
assign this Agreement and any and all of its right, title or interest in, to or
under this Agreement, voluntarily or by operation of law, without the consent of
the Operator. The Operator may not sublease the Facility or any part thereof or
assign any of its rights or interest hereunder without the prior written consent
of the Owner; provided, however, that any such sublease or assignment by the
written consent of the Owner may, in its discretion, grant its consent (a) shall
not release the Operator from any of its obligations or liabilities of any
nature whatsoever arising under this Agreement; (b) shall be expressly subject
to and subordinate to this Agreement; (c) shall be accompanied by an
unconditional guarantee of the Operator's obligations under the Operating
20
Agreement issued by a party having financial strength satisfactory to the Owner;
and (d) shall not be permitted if a Default or Event of Default has occurred and
is continuing.
Section 11.02. Location. The Operator shall not remove. or permit to be
removed, the Plant or Equipment or any part thereof from the Site without the
prior written consent of the Owner, except that the Operator or any other Person
may remove any Part in accordance with the provisions of Sections 6.02 and 6.09
hereof.
Section 11.03. Mortgaging the Estate of Lessor.
(a) Without limiting, the generality of Section 11.01(a) hereof,
Operator acknowledges receipt of a copy of the Deed of Trust and agrees
that, to the extent provided therein, any notice, demand or action which
Owner may give or take hereunder may, be given or taken by, Lender or any
other Fee Mortgagee with the same force and effect as if given or taken by
Owner, and that this Operating Agreement is and shall be subordinate to the
Deed of Trust and to any other such pledge, conveyance, deed of trust,
assignment, mortgage or ground lease now existing or hereafter executed
(herein, a "Fee Mortgage"), with no further instrument of subordination
being necessary, provided Fee Mortgagee may subordinate the same to this
Operating Agreement by executing and recording a written instrument
including to that effect.
(b) Operator hereby agrees that within ten (10) days after request
from Owner, or from any Fee Mortgagee, Operator shall execute a
subordination, non-disturbance and attornment agreement in a commercially
reasonable from subordinating this Operating Agreement to the interest of
Fee Mortgagee.
(c) The holder or beneficiary of any Fee Mortgage is herein referred
to as a "Fee Mortgagee". The term "Fee Mortgagee" as used in this Operating
Agreement shall also include the "Fee Mortgagee" as the term that is
defined in the Master Lease.
(d) Without limiting the effect of the preceding provisions of this
Article XI. Operator, in the event of any foreclosure or deed in lieu of
foreclosure or other final conveyance and transfer of Owner's interest as
aforesaid, shall, upon request of the grantee thereof, recognize and attorn
to the grantee thereof as "landlord" under this Operating Agreement.
(e) Operator acknowledges and agrees that no consent or approval of
Owner shall be effective unless and until each and every Fee Mortgagee has
likewise consented or approved the matter which was the subject of such
request for consent or approval. No consent by Master landlord or fee
Mortgagee to assignment of this Operating Agreement or of Operator's
interest under this Operating Agreement or in the Facility, or any part
thereof, or to any sublease shall be effective unless and until there have
been delivered to Master Landlord and Fee Mortgagee an agreement in
recordable form, executed by Operator and the proposed assignee or
subtenant, as the case may be, wherein and whereby any assignee assumes due
performance of this Operating Agreement to be done and performed for the
balance then remaining in the Term, and any subtenant acknowledges the
right of Master Landlord and Fee Mortgagee to continue or terminate
21
any sublease, in Master Landlord's sole discretion, upon termination of the
Master Lease or this Operating Agreement, and such subtenant agrees to
recognize and attorn to Master Landlord in the event that Master Landlord
elects to continue such sublease. Until such time as Fee Mortgagee shall
notify Operator in writing to the contrary, Financing Parties
Representative shall have the right to exercise all rights and give all
consents and approvals of Fee Mortgagee under this Operating Agreement, and
Operator shall be entitled to rely on any action taken by Financing Parties
Representative. If Operator shall have received from Master Landlord, Owner
or a Fee Mortgagee written notice specifying the name and address last
furnished to Operator a copy of each request for Owner's consent or
approval as well as a copy of each notice of Owner's default at the same
time as and whenever any such request for Owner's consent or approval or
notice of Owner's default shall thereafter be given by Operator to Owner.
Operator shall give to Financing Parties Representative (on behalf of Fee
Mortgage) and to Lender a copy of each request for Owner's consent or
approval as well as a copy of each notice of owner's default at the same
time as and whenever any such request for Owner's consent or approval or
notice of Owner's default shall thereafter be given by Operator to Owner.
Operator shall accept performance by any Fee Mortgagee of any covenant,
condition or agreement on Owner's part to be performed hereunder with the
same force and effect as though performed by Owner.
ARTICLE XII
INSPECTION AND REPORTS
Section 12.01. Condition and Operation. The Owner and its authorized
representatives (the "Inspecting Parties") may inspect, as its own expense, the
Facility. After an Event of Default has occurred and is continuing, the
Inspecting Parties may also inspect, at their expense, the books and records of
the Operator relating to the Facility and make copies and abstracts therefrom.
The Operator shall furnish to the Inspecting Parties statements accurate in all
material respects regarding the condition and state of repair of the Facility,
all at such times and as often as may be reasonably requested. None of the
Inspecting Parties shall have any duty to make any such inspection or inquiry.
To the extent permissible, the Operator shall prepare and file in timely
fashion, or where the Owner shall be required to file, the Operator shall
prepare and deliver to the Owner within a reasonable time prior to the date for
filing, any reports with respect to the condition or operation of the Facility
that shall be required to be filed with any Governmental Authority.
Section 12.02. Annual Insurance Report. On or before March 15 of each year
during the Term, and within ten (10) days after any material adverse change in
the information set forth in the certificates provided pursuant to Section 8.03
hereof, the Operator shall deliver to the Owner a report of a Responsible
Officer of the Operator setting forth (a) a complete list of all insurance
policies obtained and maintained by the Operator pursuant to Article VIII, (b)
stating whether such insurance policies comply with the requirements of Article
VIII and (c) stating whether all premiums then due thereon have been paid.
Section 12.03. Financial Reports. During the Term, the Operator shall
provide to the Owner the following:
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(a) As soon as available, and in any event within thirty (30) days
after the end of each month, unaudited financial statements for the
Facility, including a balance sheet as at the end of such month and
statements of income and retained earnings and of cash flow for such month
and for the period from the beginning of the Operating Year. There shall be
included with such financial statements (i) a certificate of a Responsible
Officer stating in effect that, to the best of his knowledge and belief,
such financial statements are true and correct and have been prepared in
accordance with generally accepted accounting principles, consistently
applied, subject to changes resulting from year-end adjustments and (ii) a
certificate of a Responsible Officer setting forth in detail reasonably
satisfactory to the Owner a calculation of Cash Flow of the Facility for
such month and for the Operating Year through the end of such month.
(b) In addition, as soon as available and in any event within one
hundred twenty (120) days after the end of each Operating Year, financial
statements for the Facility, including a balance sheet as of the end of
such Operating Year, and statements of income and retained earnings and of
cash flow for such Operating Year, prepared in accordance with generally
accepted accounting principles consistently applied and accompanied by the
audit opinion of a recognized firm of independent certified public
accountants acceptable to the Owner. There shall be included with such
financial statements a certificate of a Responsible Officer setting forth
in detail reasonably satisfactory to the Owner a calculation of Cash Flow
of the Facility for such Operating Year. The Owner shall have the right at
any time to audit the certificate of Cash Flow required to be provided
hereunder. Such audit shall be performed by an independent certified public
accounting firm selected by the Owner and shall be at the Owner's expense,
unless such audit results in the upward adjustment of Cash Flow for any
Operating Year in an amount equal to two percent (2%) or more of the Cash
Flow reflected on the certificate provided to the Owner by the Operator, in
which case the cost of such audit shall be paid by the Operator and shall
not be considered Greenhouse Expenses. Any payments required to be made as
a result of any adjustment to the Cash Flow shall be made within ten (10)
Business Days following receipt of the results of the audit.
(c) The Owner shall have the right to review the books and records of
the Operating relating to the Facility for the purpose of verifying the
accuracy of the financial statements and calculations of Cash Flow provided
pursuant to Sections 12.03(a) and (b), and
(d) On or before January 31 of each year during the Term (commencing
on January 31, 1999), a certificate of a Responsible Officer of the
Operator stating that such Responsible Officer has made or caused to be
made a review of all transactions relating to the Facility and the
financial and operating condition of the Operator for the immediately
preceding Operating Year and that, based on such review, no Default or
Event of Default has occurred during such year (or, if a Default or Event
of Default shall have occurred, specifying the nature thereof and the
action the Operator has taken or prepares to take with respect thereto).
23
Section 12.04. Budget Approval. No later than the forty-five (45) days
prior to the commencement of any Operating Year, the Operator shall present to
the Owner for its approval, which shall not be unreasonably withheld, its budget
for the Facility for the following Operating Year, prepared in detail
satisfactory to the Owner (the budget prepared pursuant to this Section 12.04
shall be referred to herein as the "Budget"). In the event the Owner withholds
its approval of any Budget, it shall provide to the Operator a written statement
of specific objections to the Budget. The Budget presented shall be deemed to be
approved with respect to all items except those to which the Owner has objected.
In the event the Operator disputes the Owner's objections, the Owner and the
Operator shall appoint a mutually agreeable independent advisor with experience
in the operation of greenhouse facilities, which advisor shall review the
disputed amounts and decide the appropriate level of expenditures for such
items. The decision of such advisor shall be binding upon the Owner and the
Operator and shall become part of the Budget for such Operating Year.
Section 12.05. Liability. The Operator shall, promptly after obtaining
knowledge thereof, give prompt written notice to the Owner of each accident
likely to result in material damages or claims for material damages against the
Operator or any other Person with respect to the Facility of $100,000 (if such
claims and damages are insured) or $25,000 (if not insured), and occurring in
whole or in part (whenever asserted) during the Term, and on request shall
furnish to the Owner information as to the time, place and nature thereof, the
names and addresses of the parties involved, any Persons injured, witnesses and
owners of any property damaged and such other information as may be known to it,
and shall promptly upon request furnish the Owner with copies of all
correspondence, papers, notices and documents whatsoever received by the
Operator in connection therewith.
Section 12.06. Liens. The Operator shall promptly, and in no event later
than five (5) Business Days after it shall have obtained knowledge of the
attachment of any Lien that it shall be obligated to discharge or eliminate
pursuant to Article V hereof, notify the Owner of the attachment of such Lien
and the full particulars thereof unless the same shall have been removed or
discharged by the Operator.
ARTICLE XIII
EVENTS OF DEFAULT
The following events shall constitute Events of Default (whether any such
event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any Governmental
Authority):
(a) the Operator shall fail to make any payment of Rent within five
(5) days after the same shall have become due; or
(b) the Operator shall fail to make any payment of any other amount
payable hereunder within ten (10) days after notice of such failure from
the Owner; or
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(c) the Operator shall fail to perform or observe any covenant,
condition or agreement to be performed or observed by it under Article VIII
or Article XI hereof within five (5) days after notice of such failure from
the Owner; or
(d) the Operator shall fail to perform or observe any covenant,
condition of agreement (not included in clause (a), (b) or (c) of this
Article XIII) to be performed or observed by it hereunder or under any
other Operative Document and such failure shall continue unremedied for a
period of thirty (30) days after written notice thereof from the Owner; or
(e) the filing of the Operator or APD of any petition for dissolution
or liquidation of the Operator or APD or the commencement by the Operator
or APD of a voluntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or the Operator or APD shall
have consented to the entry of an order for relief in an involuntary case
under any such law, or the failure of the Operator or APD generally to pay
its debts as such debts become due (within the meaning of the Bankruptcy
Reform Act of 1978, as amended), or the failure by the Operator or APD
promptly to satisfy or discharge any execution, garnishment or attachment
of such consequence as will impair its ability to carry out its obligations
under this Agreement, or the appointment of or taking possession by a
receiver, custodian or trustee (or other similar official) for the Operator
or APD or any substantial part of its property, or a general assignment by
the Operator or APD for the benefit of its creditors, or the entry by the
Operator or APD into an agreement of composition with its creditors, or the
Operator or APD shall have taken any corporate action in furtherance of any
of the foregoing; or the filing against the Operator or APD of an
involuntary petition in bankruptcy which results in an order for relief
being entered or, notwithstanding that an order for relief has not been
entered, the petition is not dismissed within forty-five (45) days of the
date of the filing of the petition, or the filing under any law relating to
bankruptcy, insolvency or relief of debtors of any petition against the
Operator or APD for reorganization, composition, extension or arrangement
with creditors which either (i) results in a finding or adjudication of
insolvency of the Operator or APD or (ii) is not dismissed within
forty-five (45) days of the date of the filing of such petition; or
(f) any representation or warranty by the Operator in any Operative
Document or in any certificate or document delivered pursuant thereto shall
have been materially false when made; or
(g) the occurrence of an Event of Default under the Line of Credit
Facility Agreement.
ARTICLE XIV
ENFORCEMENT
Section 14.01. Remedies. Upon the occurrence of any Event of Default and at
any time thereafter so long as the same shall be continuing, the Owner may, at
its option, by notice to the Operator, declare this Operating Agreement to be in
default, and at any time thereafter the Owner may do one or more of the
following as the Owner in its sole discretion shall determine:
25
(a) the Owner may, by notice to the Operator, rescind or terminate
this Operating Agreement;
(b) the Owner may (i) demand that the Operator, and the Operator shall
upon the written demand of the Owner, return the Facility promptly to the
Owner in the manner and condition required by, and otherwise in accordance
with all of the provisions of, Article VI hereof as if the Facility were
being returned at the end of the Term, and the Owner shall not be liable
for the reimbursement of the Operator for any costs and expenses incurred
by the Operator in connection therewith, (ii) enter upon the Site and take
immediate possession of (to the exclusion of the Operator) the Facility or
remove the Plant or Equipment or both, by summary proceedings or otherwise,
all without liability to the Operator for or by reason of such entry or
taking of possession, whether for the restoration of damage to property
caused by such taking or otherwise and (iii) offer employment to the
Operator's employees;
(c) the Owner may sell all or any part of the Equipment and its rights
to the Plant and the Site at public or private sale, as the Owner may
determine, free and clear of any rights of the Operator and without any
duty to account to the Operator with respect to such action or inaction or
any proceeds with respect thereto;
(d) the Owner may lease to others all or any part of the Facility as
the Owner in its sole discretion may determine, free and clear of any
rights of the Operator and without any duty to account to the Operator with
respect to such action or for any proceeds with respect to such action or
inaction, except that the Operator's obligation to pay Rent with respect to
the Facility for periods commencing after the Operator shall have been
deprived of use of the Facility pursuant to this paragraph (d) shall be
reduced by the net proceeds, if any, actually received by the Owner from
leasing the Facility to any Person other than the Operator for the same
periods or any portion thereof;
(e) the Owner may demand that the Operator assign to the Owner (or to
a third party designated by the Owner to operate the Facility) all of the
Operator's rights under any agreement or contact entered into by the
Operator in connection with the operation of the Facility, including,
without limitation, the Management Agreement, and the Operator shall
execute and deliver to the Owner (or such third party) such assignments or
other instruments as the Owner may reasonably request in connection
therewith; and
(f) the Owner may exercise any other right or remedy that may be
available to it under applicable law or proceed by appropriate court action
to enforce the terms hereof or to recover damages for the breach hereof.
Section 14.02. Survival of Operator's Obligations. Except as provided in
subsection 14.01(d) above, no termination of this Operating Agreement, in whole
or in part, or repossession of all or any portion of the Facility or exercise of
any remedy under Section 14.01 hereof shall, except as specifically provided
therein, relieve the Operator of any of its liabilities and obligations
hereunder. In addition, the Operator shall be liable, except as otherwise
provided above, for any and all unpaid Rent due hereunder before, during or
after the exercise of any of
26
the foregoing remedies, including all reasonable legal fees and expenses and
other costs and expenses incurred by the Owner by reason of the occurrence of
any Event of Default or the exercise of the Owner's remedies with respect
thereto, and including all costs and expenses incurred in connection with the
return of the Facility in the manner and condition required by, and otherwise in
accordance with the provisions or, Article VI hereof as if such Facility were
being returned at the end of the Term.
Section 14.03. Remedies Cumulative. To the extent permitted by, and subject
to the mandatory requirements of, applicable law, each and every right, power
and remedy herein specifically given to the Owner or otherwise in this Operating
Agreement shall be cumulative and shall be in addition to every other right,
power and remedy herein specifically given or no or hereafter existing at law,
in equity or by statute, and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from time to
time and as often and in such order as may be deemed expedient by the Owner, and
the exercise or the beginning of the exercise of any power or remedy shall not
be construed to be a waiver of the right to exercise at the same time or
thereafter any right, power or remedy. No delay or omission by the Owner in the
exercise of any right, power or remedy or in the pursuit of any remedy shall
impair any such right, power or remedy or be construed to be a waiver of any
default on the part of the Operator or to be an acquiescence therein. No express
or implied waiver by the Owner of any Event of Default shall in any way be, or
be construed to be, a waiver of any future or subsequent Event of Default.
ARTICLE XV
RIGHT TO PERFORM FOR OPERATOR
If the Operator shall fail to perform or comply with any of its agreements
contained herein, the Owner may perform or comply with such agreement, and the
amount of such payment and the amount of the expenses of the Owner incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at the Overdue
Rate, shall be payable by the Operator upon demand.
ARTICLE XVI
INDEMNITIES
Section 16.01. General Indemnity.
(a) Payment of Expenses by Operator. The Operator shall pay, and shall
indemnify and hold harmless each Indemnitee from and against, any and all
liabilities, obligations, losses, damages, penalties, claims, actions,
suits, costs, expenses and disbursements, including legal fees and
expenses, of whatsoever kind and nature (collectively, "Expenses" and
individually, an "Expense"), imposed on, incurred by or asserted against
any Indemnitee (whether because of an action or omission by such Indemnitee
or otherwise), in any way relating to or arising out of the occupation and
operation of the Facility by the Operator and the production and sale of
the Product.
(b) Exceptions. The indemnities contained in Section 16.01(a) hereof
with regard to any particular Indemnitee shall not extend to any Expense
(i) resulting from the
27
willful misconduct or gross negligence of such Indemnitee (other than
willful misconduct or gross negligence imputed to such Indemnitee solely by
reason of its interest in the Facility), (ii) resulting solely from the
breach by such Indemnitee of any of its representations, warranties or
covenants in any of the Operative Documents, (iii) unless an Event of
Default shall have occurred and be continuing and Owner shall be exercising
remedies with respect thereto, to the extent such Expense shall relate to
acts or events not attributable to the Operator that occur after the Term,
(iv) so long as no Event of Default shall have occurred and be continuing,
to the extent attributable solely to the disposition or attempted
disposition of the Facility or any interest in any thereof, by or on behalf
of any Indemnitee, other than a transfer of the Facility pursuant to
Article XIV hereof or as required by any Operative Documents, (v)
constituting Fees, Taxes or Other Charges or (vi) which constitutes
internal, overhead expenses of the Indemnitee.
(c) Notice. If any party entitled to indemnity under this Section
16.01 or the Operator shall have received written notice of any liability
indemnified against under this Section 16.01, it shall give prompt notice
thereof to the Operator, or the party entitled to be indemnified, as the
case may be, but the failure to give such notice shall not affect any
obligation under this Section 16.01. In case of action, including any
investigatory proceeding, shall be brought against, or commenced with
respect to, any indemnitee in respect of which the Operator is required to
indemnify such Indemnitee pursuant to the provisions of this Section 16.01,
the Operator shall have the right to assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnitee and
the payment of all expenses. In the event the Operator assumes the defense
of any such action, any Indemnitee shall have the right to employ separate
counsel in such action and participate therein, but the fees and expenses
of such counsel shall be at the expense of such Indemnitee, unless (i) the
employment of such counsel has been specifically authorized by the
Operator, or (ii) the named parties to such action (including any impleaded
parties) include both such Indemnitee and the Operator and representation
of such Indemnitee and the Operator by the same counsel would be
inappropriate under applicable standards of professional conduct due to
actual or potential conflicting interests between them or (iii) the counsel
employed by the Operator and satisfactory to such Indemnitee has advised
such Indemnitee, in writing, that such counsel's representation of such
Indemnitee would be likely to involve such counsel in representing
differing interests which could adversely affect either the judgment or
loyalty of such counsel to such Indemnitee, whether it be a conflicting,
inconsistent, diverse or other interest (in which case the Operator shall
not have the right to assume the defense of such action on behalf of such
Indemnitee; it being understood, however, that the Operator shall not, in
connection with any one such action, or separate but substantially similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys, and of any local
counsel retained by such firm, at any one time for each such Indemnitee,
which firm shall be designated in writing by such Indemnitee). The Operator
shall not be liable for any settlement of any such action effected without
its consent, but if settled with the consent of the Operator or if there by
a final judgment, beyond further review or appeal, in any such action, the
Operator agrees to indemnify and hold harmless any Indemnitee from and
against any loss or liability by reason of such settlement or judgment.
28
(d) Payment. The Operator covenants and agrees to pay all amounts
required to be paid under this Section 16.01 on demand by the relevant
Indemnitee.
Section 16.02. Fees, Taxes and Other Charges.
(a) Payment by Operator.
(i) The Operator hereby agrees to pay and assume liability for,
and on written demand to indemnify, protect, defend, save and hold
harmless each Indemnitee from and against, any and all governmental or
quasi-governmental fees (including without limitation license and
registration fees), taxes (including without limitation gross
receipts, franchise, sales, use, property, real or person, tangible or
intangible), interest equalization and stamp taxes, assessments,
levies, imposts, duties, charges or withholdings of any nature
whatsoever, together with any and all penalties, fines or interest
thereon ("Fees, Taxes and Other Charges") imposed against any
Indemnitee, the Operator or the Facility or any portion thereof by any
Federal, state or local governmental or taxing authority in the United
States of America or by any foreign government or any subdivision or
taxing authority thereof, upon or with respect to the occupation and
operation of the Facility by the Operator and the production and sale
of the Product.
(ii) Notwithstanding anything to the contrary set forth above,
the provisions of this Section 16.02 shall not apply to:
(A) Fees, Taxes and Other Charges on, or measured in whole
or in part by (y) the net income or gross income of an Indemnitee
or (z) the franchise, capital, conduct of business, net worth or
tax preference of an Indemnitee;
(B) Fees, Taxes and Other Charges to the extent on, levied
on, or measured by, any fees or compensation received by an
Indemnitee for services rendered in connection with this
Agreement;
(C) Fees, Taxes and Other Charges which result from any
Indemnitee engaged in activities not related to this Agreement;
(D) So long as no Event of Default has occurred and is
continuing, Fees, Taxes or other Charges imposed as a result of
the voluntary sale, transfer, assignment or other disposition of
any interest in the Facility by an Indemnitee, if such
disposition shall not be pursuant to or in connection with
Article XIV hereof;
(E) Fees, Taxes or Other Charges imposed solely with respect
to any period after the Term unless an Event of Default has
occurred and is continuing and the Owner shall be exercising
remedies with respect thereto;
29
(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, ▇▇▇▇ or any advice
received by it concerning any such Fees, Taxes and Other Charges and
will, at Operator's expense, use its best efforts and take such lawful
and reasonable steps as may be proposed by the Operator in writing to
minimize any of the same for which the Operator is responsible under
this Section 16.02.
(iv) The amount which the Operator shall be required to pay to or
for the account of any Indemnitee with respect to any Fees, Taxes and
Other Charges which are subject to indemnification under this Section
16.02 shall be an amount sufficient to restore the Indemnitee to the
same position the Indemnitee would have been in had such Fees, Taxes
and Other Charges not been incurred or imposed. If the payment by the
Operator under this Section 16.02 of an amount equal to such Fees,
Taxes and Other Charges would be more or less than the amount which
would be required to make such Indemnitee whole as a result of any tax
effect to an Indemnitee in connection with such payment of such Fees,
Taxes and Other Charges, including, without limitation (A) the
inclusion of any payment to be made by the Operator under this Section
16.02 in the taxable income of any Indemnitee in one year and the
deduction of the Fees, Taxes and Other Charges with respect to which
such payment is made from the taxable income of such Indemnitee in a
different year, (B) the nondeductibility of such Fees, Taxes and Other
Charges from the taxable income of such Indemnitee or (C) the
anticipated realization by such Indemnitee in a different year of tax
benefits resulting from the transaction giving rise to such Fees,
Taxes and Other Charges, the amount of the indemnity to be paid by the
Operator shall be adjusted to an amount which (after taking into
account all tax effects on such Indemnitee, any loss of use of money
resulting from differences in timing between the inclusion of such
indemnity in the taxable income of such Indemnitee and the anticipated
realization by such Indemnitee of tax benefits resulting from the
transaction to which such indemnity is related and the present value
of any anticipated future tax benefits to be realized by such
Indemnitee as a result of deducting such Fees, Taxes and Other Charges
or as a result of the transaction
30
giving rise thereto) will be sufficient to place the Indemnitee in the
same position such Indemnitee would have been in had such Fees, Taxes
and Other Charges not been imposed. All computations for purposes
hereof shall be based on tax rates in effect on the date payment
pursuant to this Section 16.02 is made. Computations involving the
loss of use of money or calculations of present value shall be based
on the Overdue Rate as adjusted for applicable income tax effects and
compounded monthly on the Basic Rent Payment Dates. Each Indemnitee
shall in good faith use reasonable efforts to seek and claim all tax
benefits available with respect to items referred to herein.
(b) Refunds. If any Indemnitee shall obtain a refund or credit of
all or any part of any Fees, Taxes and Other Charges, payment of or
indemnity for which shall have been made by the Operator pursuant to
this Section 16.02, such Indemnitee shall, unless a Default or an
Event of Default shall have occurred and be continuing, promptly pay
to the Operator (i) the amount of such refund or credit (together with
any interest paid to such Indemnitee with respect to such refund or
credit) plus (ii) an amount equal to all tax benefits realized by such
Indemnitee as the result of the payment of the amounts referred to in
clause (i) above and this clause (ii).
Section 16.03. Survival. The obligations of the Operator under this Article
XVI shall survive the termination of this Agreement and are expressly made for
the benefit of and shall be enforceable by any Indemnitee, separately or
together, without declaring this Agreement to be in default and notwithstanding
any assignment by the Owner of this Operating Agreement or any of its rights
hereunder. The extension of applicable statutes of limitations by an Indemnitee
or the Operator shall not affect the survival of the Operator's or any
Indemnitee's obligations, as the case may be, under this Article XVI. The
obligations of the Indemnitees shall survive the termination of this Operating
Agreement. All payments required to be paid pursuant to Article XVI shall be
made directly to, or as otherwise requested by, the Indemnitee entitled thereof,
upon written demand by such Indemnitee. All such written demands shall specify
the amounts payable and the facts upon which the right to indemnification is
based.
Section 16.04. Waiver. The Operator hereby waives all tort claims and
causes of action in tort it may have at any time against any Indemnitee in any
way relating to or arising from or alleged to relate to or arise from any
Operative Document, except with regard to circumstances constituting an
exception to the Operator's obligation to indemnify pursuant to Section 16.01(b)
hereof.
ARTICLE XVII
COVENANTS AND REPRESENTATIONS OF OPERATOR
Section 17.01. Operation of Facility. During the Term, the Operator shall
use its best efforts to operate the Facility (including the sowing, growing,
harvesting and packaging of the Product) at its fullest productive capacity as
would a prudent commercial greenhouse operator under the same or similar
circumstances and to market the Product with substantially the same effort and
on the same terms as used for product produced at other facilities operated by
the Operator or its Affiliates. The Operator hereby agrees to give prompt
written notice to the Owner if at any time the Operator becomes aware that the
Facility is not being operated at its
31
fullest productive capacity. The Operator further agrees that it will not use
the Facility for any purpose other than the production of tomatoes or, with the
Owner's consent, any other agricultural product.
Section 17.02. Affiliated Transactions.
(a) In the event the Operator uses the Facility to pack, store, grade,
separate or distribute Product grown in greenhouses other than the Facility
owned, leased, operated or managed by the Operator, then the Operator
agrees to charge such greenhouses a fee per pound that is satisfactory to,
and approved in advanced by, the Owner plus an amount equal to at least the
Operator's cost for boxes and packing materials. Without the prior written
consent of the Owner, the Operator shall not use the Facility for any
product other than the Product.
(b) In the event the Operator purchases any equipment, supplies or
other items from any Affiliate, such purchases shall be on terms no less
favorable than those available for unaffiliated parties.
(c) The Operator shall provide to the Owner on a monthly basis in
detail satisfactory to the Owner a list of all Product handled by the
Facility for greenhouses pursuant to subsection 17.02(a) and all items
purchased from Affiliates and the purchase price thereof pursuant to
subsection 17.02(b).
Section 17.03. Waiver of Operating or Efficiency Standards. Operator
shall use its reasonable best efforts to assist Owner in obtaining and
maintaining all necessary permits and approvals for the operation of the
greenhouse and shall fully cooperate with Birchwood in the event Birchwood seeks
a waiver of the operating or efficiency standards for a "Qualifying Facility"
under the Federal Power Act or the Federal Energy Regulatory Commission's
regulations, as any of the foregoing may be now or hereafter amended.
Section 17.04. Representations and Warranties of Operator. Operator hereby
warrants and represents to Owner, Master Landlord, and each Fee Mortgagee that:
(a) Operator has not entered into any contract or agreement with other
Persons regarding the provision of thermal supply relating to the
Greenhouse Facility, and Operator will not, without the consent of Owner
and Master Landlord, enter into any successor or additional contracts for
thermal energy or steam supply to the Greenhouse Facility.
(b) There is not pending or threatened against Operator or any of its
Affiliates, and Operator knows of no facts or circumstances that might give
rise to, any civil, criminal or administrative action, suit, demand, claim,
hearing, notice or demand letter, notice of violation, environmental lien,
investigation, or proceeding relating in any way to Environmental
Requirements.
(c) Neither this Operating Agreement nor any other instrument,
document, agreement, financial statement, financial projections or
certificate furnished to Owner or Master Landlord by or on behalf of
Operator or any affiliate of Operator in connection
32
herewith contains an untrue statement of a material fact or omits to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or omits to state
any fact which may in the future have a material adverse effect on the
financial condition or business prospects of Operator.
ARTICLE XVIII
MISCELLANEOUS
Section 18.01. Further Assurances. The Operator shall cause the Operative
Documents and any amendments and supplements to any of them (together with any
other instruments, financing statements, continuation statements, records or
papers necessary in connection therewith) to be recorded and/or filed and
rerecorded and/or refiled in each jurisdiction as and to the extent required by
law in order to, and shall take such other actions as may from time to time be
necessary to, establish, perfect and maintain the Owner's right, title and
interest in and to the Facility, not subject to any Liens except Permitted
Liens. The Operator will promptly and duly execute and deliver to the Owner such
documents and assurances and take such further action as the Owner may from time
to time reasonably request in order to carry out more effectively the intent and
purpose of the Operative Documents and to establish and protect the rights and
remedies created or intended to be created in favor of the Owner, to establish,
perfect and maintain the Owner's right, title and interest in and to the
Facility, including without limitation if requested by the Owner at the expense
of the Operator, the recording or filing of counterparts or appropriate
memoranda of the Operative Documents, or of such financing statements or other
documents with respect thereto as the Owner may from time to time reasonably
request, and the Owner agrees promptly to execute and deliver such of the
foregoing financing statements or other documents as may require execution by
the Owner.
Section 18.02. Quiet Enjoyment. The Owner covenants that it will not
interfere in the Operator's quiet enjoyment of the Facility hereunder during the
Term, so long as (a) the Operator is in compliance with each term and condition
hereof and (b) no Event of Default has occurred or is continuing.
Section 18.03. Notices. Unless otherwise specifically provided herein, all
notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person shall be in writing and any such notice shall become effective three (3)
Business Days after being deposited in the mails, certified or registered with
appropriate postage prepaid for first-class mail or, if delivered by hand or in
the form of a telex or telegram, when received, and shall be directed to the
Address of such Person.
Section 18.04. Severability. Any provision of this Agreement that shall be
prohibited or unenforceable in any jurisdiction, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the Operator hereby waives any provision of law that renders
any provision hereof prohibited or unenforceable in any respect.
33
Section 18.05. Amendment. Neither this Agreement nor any of the terms
hereof may be terminated, amended, supplemented, waived or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or modification
shall be sought.
Section 18.06. Headings. The Table of Contents and headings of the various
Articles and Sections of this Agreement are for convenience of reference only
and shall not modify, define or limit any of the terms or provisions hereof.
Section 18.07. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
Section 18.08. Governing Law. This Agreement has been delivered in, and
shall in all respects be governed by, and construed in accordance with, the laws
of the Commonwealth of Virginia applicable to agreements made and to be
performed entirely within such State, including all matters of construction,
validity and performance.
Section 18.09. Binding Effect; Successors and Assigns; Survival. The terms
and provisions of this Agreement, and the respective rights and obligations
hereunder of the Owner and the Operator, shall be binding upon their respective
successors and assigns (including, in the case of the Owner, any Person to whom
the Owner may transfer all or any portions of the Facility), and inure to the
benefit of their respective permitted successors and assigns. The obligations of
the Operator under this Agreement shall survive the termination of this
Agreement.
Section 18.10. Divisible Operating Agreement. It is the intention of the
parties hereto that this Agreement shall constitute the lease of both personal
property and real property and, to such extent, shall be deemed divisible. It is
the intention and understanding of the parties hereto that the Equipment
constitutes personal property and all the Site and Plant constitute real
property for all purposes of this Operating Agreement and the other documents
referred to herein and for all purposes of bankruptcy laws of the United States;
provided, however, that nothing herein shall affect the rights and obligations
of Owner or Operator under Section 18.01 hereof, it being understood that no
filing, refiling, recording, re-recording, registration or re-registration in
any office for the filing, recording or registration of interests in real
property shall constitute or be deemed to constitute evidence or an admission by
Owner or Operator that the Equipment is real property.
Section 18.11. Effectiveness. This Agreement shall become effective upon
the date (the "Effective Date") the last of the following events occurs:
(a) the Closing Date;
(b) the receipt of any necessary consent of the Owner's lenders
under the Owner's financing documents; and
(c) upon Notice of Substantial Completion (as defined in the
General Contractor's Agreement) of the Plant.
34
ARTICLE XIX
STEAM SALES AGREEMENT, FEE MORTGAGE
AND MASTER LEASE
Section 19.01. Subject to Fee Mortgage and Master Lease. This Operating
Agreement is subject and subordinate to the Fee Mortgage and Master Lease. As
used in this Section 19.01, "Applicable Documents" shall mean, collectively, the
Master Lease, Fee Mortgage and Steam Sales Agreement. Operator shall not do or
permit to be done anything which would constitute a default under all or any one
or more of the Applicable Documents or cause all or any one or more of the
Applicable Documents to be terminated or forfeited; in the event Operator causes
or permits what Owner reasonably deems to be a default under all or any one or
more of the Applicable Documents, in addition to all other remedies available to
Owner, Owner shall be entitled to enter the Site, without Operator's consent,
and cure said default whereupon all expenses incurred by Owner thereby shall be
additional rent due and payable upon demand. Operator shall duly comply with all
obligations and undertakings of Master Tenant under the Master Lease with regard
to those obligations and undertakings related to the Site, except for the
payment of "Annual Rent" due Master Landlord under the Master Lease.
Notwithstanding anything herein contained to the contrary, the services,
reimbursements, indemnities, repairs, restoration and maintenance to which
Operator is entitled hereunder shall in no event exceed those to which Owner is
entitled under the Master Lease and the Steam Sales Agreement and for all such
services, reimbursements, indemnities, repairs, restoration and maintenance
Operator will look to the appropriate party under the Master Lease and the Steam
Sales Agreement, whichever is applicable, and no default of Owner shall occur
under this Operating Agreement on account of any failure to provide such
services, reimbursements, indemnities, repairs, restoration and maintenance.
Owner shall cooperate with Operator in enforcing such obligations. Operator and
Owner shall execute and deliver to Master Landlord and Fee Mortgagee,
contemporaneously with this Operating Agreement, an agreement in recordable
form, wherein and whereby Operator acknowledges the right of Master Landlord and
Fee Mortgagee to continue or terminate this Operating Agreement, in Master
Landlord's sole discretion, upon termination of the Master Lease, and Operator
agrees to recognize and attorn to Master Landlord in the event that Master
Landlord elects to continue this Operating Agreement.
Section 19.02. Cooperation with Lenders. Operator shall reasonable
cooperate with Owner and Master Landlord and their respective financiers and
equity investors (including but not limited to Fee Mortgagee) from time to time
in connection with Master Landlord's financing, development and/or refinancing
of the Power Station and the Greenhouse Facility, including, without limitation,
the furnishings of such information, the giving of such certificates and the
furnishing of such opinions of counsel and other matters as Master Landlord,
Owner, and their respective financiers and equity investors may reasonably
request. Operator shall provide such reasonable corporate information and
approvals to the entity(s) providing the funding for the Power Station as may be
required to have the Power Station financed or refinanced on a "project finance"
or nonrecourse financing basis where the lending equity's principal source of
payment is the revenues from the Power Station and will execute amendments to
this Operating Agreement which do not materially affect the Operator's rights
and obligations hereunder.
35
Section 19.03. Steam Sales Agreement.
(a) Operator agrees to accept and use the thermal energy produced by the
Power Station which is delivered to the Steam Interconnection Points. Owner will
make available to Operator such steam, if any, as is provided by Birchwood to
Owner under the Steam Sales Agreement. Operator shall accept and use steam
necessary to meet the requirements set forth in the QF Application, a copy of
which has been provided to Operator. Owner shall notify Birchwood to give
Operator notice prior to delivery of any steam to the Steam Interconnection
Points. Title to and full responsibility for all steam generated by the Power
Station will pass to Operator upon its delivery at the Steam Interconnection
Points to Owner, and neither Owner nor Birchwood shall have any responsibility
for such steam thereafter.
(b) Without limiting the generality of the foregoing, Operator
unconditionally agrees that Operator will accept delivery of and use sufficient
steam based on per hour basis form Owner for heating and cooling purposes to
allow Birchwood to maintain the status of the Power Station as a "Qualifying
Facility" within the meaning of the Public Utility Regulatory Policies Act of
1978, as now or hereafter amended, on an annual basis, as described in the QF
Application. If Operator fails to accept such minimum requirements, then, in
addition to Owner's rights hereunder and as may be allowed by law, Birchwood
shall have the right, without Operator's approval, to sell steam from the Power
Station to any other person or entity to the extent required to maintain such
status, and such failure shall be deemed an Event of Default by Operator
hereunder. Operator shall not use alternative means of providing such heating or
cooling unless, and then only to the extent that, either (i) steam is not
delivered as contemplated in Section 19.03(a) hereof, or (ii) Operator is
accepting and using all the steam provided by Birchwood. Operator shall not
resell any thermal energy which it receives pursuant to this Operating Agreement
without the express written consent of Master Landlord.
(c) Operator agrees to provide Master Landlord at the Power Station all
storm water runoff from the Greenhouse Facility for use with the Power Station,
without additional cost to Owner or Master Landlord, by means of the Storm Water
Piping in a manner to be specified by Master Landlord. Operator shall not use or
divert any storm water runoff without the consent of Master Landlord.
(d) Without limiting any right or remedy which Owner or Birchwood might
have at law or in equity as a result of such breach, Operator agrees that breach
by Operator of any covenant contained in Sections 19.03(a), (b) or (c) hereof
will cause irreparable injury to Birchwood and to Owner and that Birchwood and
Owner have no adequate remedy at law in respect of such breach and, as a
consequence, Operator agrees that the covenants contained in Sections 19.03(a),
(b) or (c) hereof shall be specifically enforceable by Birchwood and by Owner,
and by either of them, against Operator and Operator waives and agrees not to
assert any defense against an action for specific performance of such covenants
except for a defense that such covenants have not been breached.
36
(e) Owner shall direct Birchwood to give Operator notice simultaneously
with notice to Owner under the Steam Sales Agreement of any scheduled outages or
scheduled shutdown periods significantly affecting the steam delivery components
of the Power Station. Notification of such shutdowns may be made by telephone
and confirmed by written notice.
(f) Operator shall give Owner and Birchwood two (2) weeks notice of any
scheduled activities that will cause Operator's steam requirements from the
Power Station to cease for a period of more than twenty-four (24 ) hours, but
such notice shall not reduce or affect Operator's obligations hereunder to
accept steam. Notification of such activities shall be made by telephone and
confirmed by written notice.
(g) Condensate shall be returned by Operator to the Steam Interconnection
Points, and shall be of a quality suitable for use with the Power Station.
Condensate return may be monitored by Birchwood.
(h) As used in this Section 19.03, "Force Majeure" means causes beyond the
reasonable control of and without the fault or negligence of the party claiming
Force Majeure, including without limitation sabotage, strikes, acts of God,
accidents, appropriation or diversion of steam, steam equipment or materials or
commodities by rule or order of any governmental authority having jurisdiction
thereof, and necessity of temporary interruption on account of system operating
conditions, including disruptions in the transportation, receipt or delivery of
necessary materials and equipment or in Virginia Power's ability to take
electrical output from the Power Station. Economic hardship shall not be an
event of Force Majeure.
(i) If Operator or Owner is rendered wholly or party unable to perform its
obligations under this Section 19.03 because of Force Majeure, that party shall
be executed from whatever performance is affected by the Force Majeure to the
extent so affected, and only to the extent such performance is excused pursuant
to the provisions of Section 22.2 of the Steam Sales Agreement.
(j) Neither Operator nor Owner nor Birchwood shall be liable or responsible
for any loss, damage, injury or expense (including consequential damages and
costs of replacement of steam) resulting from or arising out of any delay in the
performance of, or the inability to perform, any duty or obligation under or
pursuant to or identified in this Section 19.03 in an event of Force Majeure
applicable to it, in accordance with and subject to the limitation set forth in
Section 19.03(i). The party suffering an event of Force Majeure shall use its
best efforts to remedy as soon as possible the cause(s) preventing the
performance of this Operating Agreement.
Section 19.04. Storm Water Piping, Power Station Piping, Steam Equipment,
Steam Interconnection Facilities and Metering Devices. Master Landlord owns and,
pursuant to the Steam Sales Agreement, shall maintain Master Landlord's
Facilities. An authorized representative of Birchwood will read the Metering
Devices at the end of each calendar month. Owner will designate Operator as the
recipient of a notice from Birchwood of the amounts of steam delivered to the
Steam Interconnection Points during such calendar month. Owner owns
37
the Steam Equipment together with all equipment for the distribution within the
Greenhouse Facility of the heating and cooling provided by the Steam Equipment.
Operator, at Operator's sole cost, shall operate and maintain (except for Master
Landlord's maintenance obligations with respect to the Steam Equipment under the
Steam Sales Agreement) the Steam Equipment, shall operate and maintain all
equipment required for the distribution within the Greenhouse Facility of the
heating and cooling provided by the Steam Equipment, and shall purchase and
install all equipment required for the distribution within the Greenhouse
Facility of the heating and cooling provided by the Steam Equipment after the
date hereof. The Improvements are designed to facilitate the collection in the
Storm Water Piping of storm water runoff from the Improvements for use by Master
Landlord at the Power Station. Owner and Master Landlord shall be entitled to
use all storm water runoff without compensation to Operator, and Operator shall
not use or divert any storm water runoff without the consent of Owner, which
consent may be granted or withheld in the sole discretion of Owner.
IN WITNESS WHEREOF, the undersigned have caused this Operating Agreement to
be duly executed and delivered and their corporate seals to be hereunto affixed
and attested by their respective officers thereunto duly authorized as of the
day and year first above written.
Attest: GREENHOST, INC.
____________________________________ By:________________________________
, Secretary Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: CFO
[Corporate Seal]
Attest: VILLAGE FARMS OF VIRGINIA, INC.
____________________________________ By:________________________________
, Secretary Name: J. ▇▇▇▇▇ ▇▇▇▇
Title: Vice president
[Corporate Seal]
Unconditional Guarantee of Payment and Performance
APD is an Affiliate of the Operator and is under common ownership with the
Operator. To induce the Owner to enter into this Operating Agreement and in
consideration for the benefits to be derived by APD from the transactions
contemplated hereby, APD unconditionally guarantees the payment when due and
timely performance of any and all obligations of Operator under this Operating
Agreement; provided, however, that APD's liability under this provision shall be
limited to a maximum aggregate amount of $2,000,000.00 during the Term. Upon
default by the Operator in making payment hereunder or any other failure to
perform its obligations hereunder, APD shall make such payment or cause such
obligation to be performed (subject to the limitation of liability set forth in
the preceding sentence), promptly upon the demand of the Owner. Notwithstanding
the foregoing, in the event the Operator, for whatever reason, ceases to occupy
and/or operate the Greenhouse Facility, Owner agrees to use its commercially
reasonable efforts, but shall not be obligated, to find a replacement
tenant/operator
38
for the Greenhouse Facility. Any replacement rent received by the Owner shall
mitigate APD's liability under this Guarantee. APD agrees that the Owner and/or
the Operator may from time to time extend or renew provisions of this Operating
Agreement for any period and may grant any releases, compromises or indulgences
with respect thereto (including, but not limited to, the failure or refusal to
exercise one or more of the right or remedies provided herein), without notice
to or consent of APD, and without affecting the liability of APD hereunder.
AGRO POWER DEVELOPMENT, INC.
By:____________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
39
SCHEDULE 1.01(a)
TO OPERATING AGREEMENT
Description of Facility
PART 1: Description of Equipment
The Equipment described on Annex A hereto.
PART 2: Description of Plant
The greenhouse plant including fixtures containing approximately 38
acres and the headhouse building located on the Site described in Part 3.
PART 3: Description of Site
The property described on Annex B hereto.
40
ANNEX A to
Schedule 1.01(a)
Description of Equipment
o All existing Greenhost office equipment, furniture, fixtures and computers
(including radios and phone systems).
o 3 Caterpillar GP 18 forklifts
o 13 Electric Golf Carts
o EZ Go PC956 Personnel Carrier
o Security System and hardware
o ▇▇▇▇ Deere 5300 4WD 50 HP Tractor with blade, mower and tiller
o 7 Trash Dumpsters
o Motorized sweeper
o All existing Greenhouse safety and maintenance equipment (excluding scissor
lifts), tools and spare parts.
41
Description of Site
TRACT ONE:
All those certain pieces, or parcels of land lying and being in Potomac
Magisterial District, King ▇▇▇▇▇▇ County, Virginia, and being designated as
Parcel "C" on plat of survey entitled "ALTA/ACSM Survey of the Land of ▇▇▇▇▇▇ &
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and A Portion of the Land of ▇▇▇▇▇ ▇. & ▇▇▇▇▇ ▇. ▇▇▇▇▇▇", made
by Springfield Engineering Corporation, P.C. , dated February 7, 1991, last
revised February 3, 1994, and being more particularly described as follows:
PARCEL "C":
BEGINNING at a point in the southerly line of ▇▇▇▇▇ ▇▇▇▇▇ # ▇▇▇ (30' wide) said
point also being the northeasterly line of the land now or formerly ▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇, and running thence with said line of State Route #665 the following
courses and distances: N.80(0) 50' 09" E. 376.78 feet to a point; with the arc
of a curve to the left whose radius is 503.62 feet, and whose chord bearing and
chord are N. 62(0) 26' 24" E. and 317.88 feet, respectively, a distance of
323.41 feet to a point; with the arc of another curve to the left whose radius
is 2,426.45 feet, and whose chord bearing and chord are N. 39(0) 42' 43" E. and
366.45 feet, respectively, a distance of 366.80 feet to a point; N. 35(0) 22'
52" E. 524.45 feet to a point; with the arc of a curve to the right whose radius
is 4,934.53 feet, and whose chord bearing and chord are N. 37(0) 45' 47" E. and
410.16 feet, respectively, a distance of 410.28 feet to a point; N. 40(0) 08'
42" E. 257.85 feet to a point; and with the arc of a curve to the left whose
radius is 1,043.00 feet, and whose chord bearing and chord are N. 38(0) 12' 23"
E. and 70.57 feet, respectively, a distance of 70.58 feet to a point in the
westerly line of the land of the Solite Corporation; thence leaving said line of
State Route #665 and running with the said line of the land of the Solite
Corporation, the following courses and distances; S. 11(0) 13' 48" W. 218.27
feet to a point; with the arc of a curve to the left whose radius is 408.06
feet, and whose chord bearing and chord are S. 09(0) 49' 34" and 293.20 feet,
respectively, a distance of 299.1 feet to a point; S. 30(0) 52' 52" E. 494.72
feet to a point; S. 30(0) 04' 38" E. 555.68 feet to a point; thence leaving the
easterly line of the land of Solite Corporation S. 68(0) 14' 39" W. 2124.04 feet
to a point; thence N. 21(0) 20' 39" W. 733.81 feet to a point marking the point
and place of beginning, containing 42.31913 acres.
BEING a portion of the same property conveyed to Birchwood Power Partners, L.P.,
by deed from ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, husband and wife, dated
February 11, 1994, recorded February 11, 1994, in the Clerk's Office, Circuit
Court, King ▇▇▇▇▇▇ County, Virginia, in Deed Book 259, page 627.
TRACT TWO:
ALL that tract or parcel of land lying and being in the Potomac magisterial
District, King ▇▇▇▇▇▇ County, Virginia, and being more particularly described as
follows:
TO FIND THE POINT OF BEGINNING, COMMENCE at the point of intersection of the
centerline of ▇▇▇▇▇ ▇▇▇▇▇ ▇▇. ▇ with the centerline of State Route No. 665;
running thence along the centerline of State Route No. 665 a distance of 2,027
feet, more or less, to a point; continuing thence along the centerline of State
Route No. 665 a distance of 1,030,.68 feet to an iron pin set;
42
thence leaving the centerline of State Route No. 665; thence leaving the
centerline of ▇▇▇▇▇ ▇▇▇▇▇ ▇▇. ▇▇▇ and running South 9 degrees 09 minutes 51
seconds East a distance of 15.00 feet to a point on the southerly line of State
Route No. 665, the northeasterly corner of the land now or formerly ▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇; thence leaving the southerly line of State Route No. 665 with the
easterly line of ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇ South 21 degrees 20 minutes 39 second East
a distance of 733.81 feet to a point, which point is the northwesterly corner of
the land of ▇▇▇▇▇ ▇. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ which marked the POINT OF BEGINNING;
FROM SAID POINT OF BEGINNING AS THUS ESTABLISHED, running thence with the
southerly line of land now or formerly ▇▇▇▇▇▇ ▇. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ North 68
degrees 14 minutes 39 seconds East, 2,124.04 feet to a point in the westerly
line of the land of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (Deed Book 138, page 516); thence with the
said line of ▇▇▇▇▇▇ and continued with the westerly line of the land now or
formerly C. T. ▇▇▇▇▇▇ South 28 degrees 45 minutes 02 seconds East, 1,637.25 feet
to a point; thence leaving the said line of C. T. ▇▇▇▇▇▇ and running through the
land of ▇▇▇▇▇ ▇. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ South 72 degrees 31 minutes 12 seconds West
2,340,.35 feet to a point in the aforesaid easterly line of ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇;
thence with the said line of ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇ North 21 degrees 20 minutes 39
seconds West 1,450.61 feet to the point of beginning, containing 78.50000 acres,
being a portion of the land of ▇▇▇▇▇ ▇. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (Deed Book 81, page
413) and being more particularly shown on a plat of survey prepared by
Springfield Engineering Corporation, P.C., engineers, planners, surveyors
landscape architects, dated August 23, 1993, and revised September 10, 1993, and
entitled "Plat of a Portion of the Land of ▇▇▇▇▇ ▇. & ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Deed Book
81, page ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇.
BEING the same property conveyed to Birchwood Power Partners, L.P., a Delaware
Limited partnership, by deed from ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, dated
March 18, 1994, recorded March 18, 1994, in the Clerk's Office, Circuit Court,
King ▇▇▇▇▇▇ County, Virginia, in Deed Book 261, page 161.
43
Schedule A-1
Access and Utility Easement Parcel
A 100 foot, perpetual easement for vehicular access to and from Tract One and
Tract Two for the installation, repair, replacement, maintenance and operation
of such gas, water, telephone, power, steam, and other utility lines and related
equipment as Birchwood Power Partners, L.P. or Dominion Growers of
Fredericksburg, Inc., deems necessary or appropriate to serve their respective
properties and any improvements now or hereafter located thereon (the "Access
and Utility Easement") at the location designated as the "100' Ingress-Egress
and Utility Easement" on that plat of survey entitled "Plat Showing A Portion of
the Property of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ & ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Potomac Magisterial District,
King ▇▇▇▇▇▇ County, Virginia, dated March 10, 1994, revised April 29, 1994, and
prepared by ▇▇▇▇ ▇. ▇▇▇▇▇▇ and being more particularly described in that certain
Access and Utility Easement among ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (sic) and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Dominion Growers of Fredericksburg, Inc. and Birchwood Power Partners, L.P.,
dated as of April 21, 1994, recorded May 4, 1994, in Deed Book 262, page 765.
44
Schedule A-2
Stormwater and Surface Water Runoff Easement Parcel
A PERPETUAL EASEMENT OVER, UNDER, UPON AND ACROSS the below described property
for the purposes of the discharge of stormwater and other surface water runoff
as more particularly set out in that certain easement agreement dated as of
April 22, 1994 between Dominion Growers of Fredericksburg, Inc. and Birchwood
Power Partners, L.P. recorded May 4, 1994, in the Clerk's Office of the Circuit
Court of King ▇▇▇▇▇▇, Virginia, in Deed Book 262, page 781, as amended and
restated by that certain amended and restated easement agreement dated as of May
18, 1994, between Dominion Growers of Fredericksburg, Inc. and Birchwood Power
Partners, L.P., recorded May 25, 1994, in the Clerk's Office of the circuit
Court of King ▇▇▇▇▇▇, Virginia, in Deed Book 263, page 491:
ALL that tract or parcel of land lying and being in the Potomac Magisterial
District, King ▇▇▇▇▇▇ County, Virginia, containing 21.6610 acres, more or less,
and further described on a plat of survey made by ▇▇▇▇ ▇. ▇▇▇▇▇▇, Land Surveyor,
dated March 10, 1994, and recorded among the land records of King ▇▇▇▇▇▇ County,
Virginia, in Deed Book 261, at page 169.
45
Schedule A
Land Description
All that tract or parcel of land lying and being in the Potomac
Magisterial District, King ▇▇▇▇▇▇ County, Virginia, containing 21.6610 acres,
more or less, and further described on a plat of survey made by ▇▇▇▇ ▇. ▇▇▇▇▇▇,
Land Surveyor, dated March 10, 1994, and recorded among the land records of King
▇▇▇▇▇▇ County, Virginia in Deed Book 261, page 169.
46
Schedule A
Land Description
All that tract or parcel of land located in the Potomac Magisterial
District, King ▇▇▇▇▇▇ County, Virginia, containing an area of 13.7155 acres,
more or less, and as shown on a plat of survey by ▇▇▇▇ ▇. ▇▇▇▇▇▇, Land Surveyor,
dated January 3, 1995, and recorded in Plat Book 15, Page 268.
47
Schedule A
All that tract of parcel of land, lying and being in the Potomac
Magisterial District, King ▇▇▇▇▇▇ County, Virginia, containing 1.343 acres, as
shown on a plat of survey made by ▇▇▇▇ ▇. ▇▇▇▇▇▇, Surveyor, dated October 31,
1994, and recorded in the Potomac Magisterial District in Deed Book 271, Page
879.
48
Schedule A-3
At Greenhost request, Village Farms of Virginia, Inc. agrees to release a
portion of undeveloped property located north of the Greenhouse and west of the
point where the steam line crosses state route 665.
Greenhost will be responsible for the cost associated with the release of this
property including surveys.
Greenhost will restrict the use of this property from vegetable growing.
49
SCHEDULE 1.01(b)
TO OPERATING AGREEMENT
Calculation of Internal Rate of Return
Internal Rate of Return Calculation
The calculation of the Internal Rate of Return in connection with determining
the Owner's Supplemental Rent will be based upon the cash outflows (Capital
Improvements Costs and Base Rent Discount) and cash inflows (Supplemental Rent)
of the Owner. The Internal Rate of Return shall be computed utilizing Microsoft
Excel software version 5.0. The Internal Rate of Return shall be computed
utilizing the @XIRR function in Excel. For purposes of calculating the Internal
Rate of Return, the cash inflows and cash outflows to the Owner shall consist
solely of the following:
Capital Improvement Costs
All Capital Improvement Costs made by the Owner will be reflected as a cash
outflow as of the date such costs were paid under the General Contractor's
Agreement.
In addition, for purposes of calculating the Internal Rate of Return, the Owner
will be credited with a cash outflow of $100,000 to reflect the base rent
discount on each March 31, June 30, September 30 and December 31 through the
term of the lease commencing March 31, 1998.
Supplemental Rent
The amount to be reflected as a cash inflow to the Owner for purposes of
calculating the Internal Rate of Return will be equal to the Supplemental Rent
received by the Owner as of the date such payment was received by the Owner
subject to an adjustment to reduce such cash received by 38.9%. As an example,
if the Owner receives $1 million on January 1, 1999, such amount will be
reflected as a cash inflow of $611,000 as of January 1, 1999 for purposes of
calculating the Internal Rate of Return.
50
SCHEDULE 3.01
TO OPERATING AGREEMENT
SCHEDULE OF BASIC RENT
March 31, 1998 * March 31, 2003 *
June 30, 1998 * June 30, 2003 *
September 30, 1998 * September 30, 2003 *
December 31, 1998 * December 31, 2003 *
March 31, 1999 * March 31, 2004 *
June 30, 1999 * June 30, 2004 *
September 30, 1999 * September 30, 2004 *
December 31, 1999 * December 31, 2004 *
March 31, 2000 * March 31, 2005 *
June 30, 2000 * June 30, 2005 *
September 30, 2000 * September 30, 2005 *
December 31, 2000 * December 31, 2005 *
March 31, 2001 * March 31, 2006 *
June 30, 2001 * June 30, 2006 *
September 30, 2001 * September 30, 2006 *
December 31, 2001 * December 31, 2006 *
March 31, 2002 * March 31, 2007 *
June 30, 2002 * June 30, 2007 *
September 30, 2002 * September 30, 2007 *
December 31, 2002 * December 31, 2007 *
*Information omitted and subject to request for confidential treatment
51
SCHEDULE 3.02
TO OPERATING AGREEMENT
SCHEDULE OF SUPPLEMENTAL RENT
Supplemental Rent shall be payable to the Owner on each Supplemental Basic Rent
Payment Date in an amount equal to the percentage (Supplemental Rent Percentage)
of cash flow for the calendar quarter preceding the Supplemental Basic Rent
Payment Date. The Supplemental Rent Percentage is defined as follows:
o Supplemental Rent Percentage shall equal *% as long as the Owner's Internal
Rate of Return shall be less than or equal to *%.
o Subsequent to the date that the Owner's Internal Rate of Return exceeds *%,
the Supplemental Rent Percentage shall equal *% through the end of the Term
of the Operating Agreement.
*Information omitted and subject to request for confidential treatment
52
