EXHIBIT 10.10
GREENHOUSE OPERATION AND
MANAGEMENT AGREEMENT
(BGPII)
This GREENHOUSE OPERATION AND MANAGEMENT AGREEMENT (this "Agreement") is
made and entered into as of December 29, 1994 to be effective January 1, 1994,
between BRUSH GREENHOUSE PARTNERS II LIMITED LIABILITY COMPANY, a Colorado
limited liability company ("BGPII") and COLORADO GREENHOUSE LIMITED LIABILITY
COMPANY, a Colorado limited liability company ("Colorado Greenhouse").
A. Brush Cogeneration Partners, a Colorado general partnership ("BCP")
is the owner and developer of a 68 megawatt gas-fired cogeneration facility
consisting of an electrical generating facility (the "Power Plant") and an
approximately 15-acre greenhouse facility and related packing facility
(collectively, the "Greenhouse") located in Brush, Colorado.
B. BCP and BGPII have previously entered into an Amended and Restated
Cogeneration and Greenhouse Lease Agreement, dated as of June 1, 1992 (the
"Greenhouse Lease"), a copy of which is attached hereto as Exhibit A, pursuant
to the terms of which BCP leased the Greenhouse to BGPII.
C. BGPII has previously entered into a Greenhouse Management Agreement,
dated as of January 22, 1992 (the "Management Agreement") with Spring Gardens,
Inc. ("Spring Gardens") pursuant to the terms of which BGPII retained Spring
Gardens to manage the Greenhouse.
D. The Management Agreement was subsequently terminated pursuant to a
Termination Agreement, dated as of August 1, 1992, between BGPII and Spring
Gardens.
E. BGPII and Colorado Greenhouse desire to enter into this Agreement in
order for BGPII to engage Colorado Greenhouse to operate and manage the
Greenhouse on the terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
AGREEMENT
Article 1. Engagement of Colorado Greenhouse.
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BGPII hereby engages Colorado Greenhouse, and Colorado Greenhouse
hereby agrees, to operate and manage the Greenhouse in accordance with the terms
and conditions of this Agreement.
Article 2. Definitions.
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Unless otherwise specifically set forth in this Agreement, the
Definitions that shall apply are as set forth in this Article 2.
"Allocated Percentage" means the percentage set forth in Exhibit B
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attached hereto, as the same may be amended from time to time as provided in
Section 15.15.
"Annual Operating Budget" means an operating budget submitted by
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Colorado Greenhouse to BGPII and approved by BGPII for two year operating
periods beginning with the Commencement Date, showing for each month of the
following two years (or, as the case may be, for the balance of the current
calendar year and then for the following calendar year) Greenhouse Revenues and
Greenhouse Operating Expenses.
"Applicable Laws" means all laws, treaties, ordinances, judgments,
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decrees, injunctions, writs and orders of any court, arbitrator or governmental
agency or authority and rules, regulations, orders, interpretations and permits
of any federal, state, county, municipal, regional, environmental or other
governmental body, instrumentality, agency, authority, court or other body
having jurisdiction over performance of the Services to be performed hereunder,
or operation of the Greenhouse, as may be in effect and as amended from time to
time.
"Applicable Permits" means all permits, licenses and similar items
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required to be obtained or maintained in connection with performance of the
Services to be performed hereunder, or operation of the Greenhouse, as may be in
effect from time to time and as amended from time to time.
"BGP" means Brush Greenhouse Partners, a Colorado general partnership.
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"BGP Greenhouse" means the greenhouse leased to BGP and to be operated
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by Colorado Greenhouse, located adjacent to the Facility.
"Colorado Greenhouse Gross Margin" means, with respect to any calendar
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year, Net Revenues for such year minus (a) the
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aggregate Primary Fee for such year and (b) the aggregate primary fees for such
year paid by Colorado Greenhouse with respect to the other Greenhouses.
"Colorado Greenhouse Operating Expenses" mean, with respect to any
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period, the following amounts incurred (or accrued in accordance with prudent
accounting practices and the Annual operating Budget) by Colorado Greenhouse
during such period in connection with the operation and management of the
Greenhouse and the Other Greenhouses (to the extent not reimbursed by BGPII, BCP
or a third party): (i) all greenhouse labor and general and administrative labor
expenses, including all salaries, employee benefits (including related taxes and
contributions) and other compensation paid to Colorado Greenhouse's employees
and independent contractors, (ii) all packaging and delivery expenses, (iii) all
direct costs including propagation materials, seed, fertilizer, fungicides,
insect, biological, bee and CO costs, (iv) all operating expenses including
utilities (including costs of water), repairs and maintenance and equipment
leases, (v) insurance premiums, (vi) fees for accounting, legal and other
professional services, (vii) general and administrative expenses, (viii)
permitting fees and expenses, (ix) payments made with respect to loans made to
Colorado Greenhouse in connection with its formation and operations, (x) sales
and marketing expenses, and (xi) all other cash expenditures relating to the
operation, management, repair and maintenance costs of the Greenhouse and the
Other Greenhouses.
"Colorado Greenhouse Revenues" mean, with respect to any period, all
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revenues and payments made to Colorado Greenhouse during such period in
connection with the operation of the Greenhouse and the Other Greenhouses,
including, without limitation, all amounts payable or owed to Colorado
Greenhouse under contracts relating to the Greenhouse and the Other Greenhouses,
all other payments received by Colorado Greenhouse from the sale of vegetables
or other produce or crops produced by the Greenhouse and the Other Greenhouses,
and proceeds received from business interruption insurance.
"Commencement Date" means the earlier of (i) the date specified by
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BGPII in a written notice to Colorado Greenhouse or (ii) the date on which BGPII
notifies Colorado Greenhouse that the Greenhouse is completed and available for
use.
"Contingent Fee" means an amount, payable within 30 days after the end
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of each calendar year during the term of this Agreement, equal to either (a) the
Allocated Percentage of Colorado Greenhouse Gross Margin or (b) such lesser
amount as is necessary to cause the balance on deposit in the Reserve Account to
equal the Reserve Amount.
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"Facility" means the Power Plant and the Greenhouse.
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"FERC Order" means the Order Granting Application for Certification as a
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Qualifying Cogeneration Facility issued February 21, 1992, by the Federal Energy
Regulatory Commission, as the same may be amended, supplemented or replaced.
"Ft. Xxxxxx Greenhouse" means the greenhouse leased to Rocky Mountain
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and to be operated by Colorado Greenhouse Practices, located in Ft. Xxxxxx,
Colorado.
"Good Greenhouse Practices" mean the practices, methods and acts that
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are applied by prudent operators of cogeneration facility related greenhouses in
a manner consistent with applicable industry codes, standards and regulations,
and Applicable Laws, and designed to optimize productivity, reliability, safety,
environmental protection, economy and expediency.
"Greenhouse Operation Expenses" mean, with respect to any period, the
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following amounts incurred (or accrued in accordance with prudent accounting
practices and the Annual Operating Budget) by Colorado Greenhouse during such
period in connection with the operation and management of the Greenhouse ( to
the extent not reimbursed by BGPII, BCP or a third party): (i) all greenhouse
labor and general and administrative labor expenses, including all salaries,
employee benefits (including related taxes and contributions) and other
compensation paid to Colorado Greenhouse's employees and independent
contractors, (ii) all packaging and delivery expenses, (iii) all direct costs
including propagation materials, seed, fertilizer, fungicides, insect,
biological, bee and CO costs, (iv) all operating expenses including utilities
(including water), repairs and maintenance and equipment leases, (v) insurance
premiums, (vi) fees for accounting, legal and other professional services, (vii)
general and administrative expenses, (viii) permitting fees and expenses, (ix)
sales and marketing expenses, and (x) all other cash expenditures relating to
the operation, management, repair and maintenance costs of the Greenhouse.
"Greenhouse Revenues" mean, with respect to any period, all revenues and
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payments made to Colorado Greenhouse during such period in connection with the
operation of the Greenhouse, including, without limitation, all amounts owed to
Colorado Greenhouse under contracts relating to the Greenhouse, all other
payments received by Colorado Greenhouse from the sale of vegetables or other
produce or crops produced by the Greenhouse and proceeds received from business
interruption insurance with respect to the Greenhouse.
"Lender" means, collectively, the lender(s) providing the construction
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and long-term financing for the Facility pursuant to
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the Loan Agreement (including any other refinancing thereof), and any trustee or
agent acting on their behalf.
"Loan Agreement" means the agreement between BCP and the Lender
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providing financing for construction and operation of the Facility, as such
agreement may be amended or supplemented from time to time.
"Other Greenhouses" mean, collectively, the BGP Greenhouse and the Ft.
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Xxxxxx Greenhouse (to the extent that the above are being operated and managed
by Colorado Greenhouse), or such other greenhouses as Colorado Greenhouse may
operate or manage during the term of this Agreement with the consent of BGPII
and BCP.
"Net Revenues" mean, with respect to any period, Colorado Greenhouse
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Revenues minus Colorado Greenhouse Operating Expenses for such period.
"Party or Parties" means BGPII or Colorado Greenhouse or both, as the
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context may require.
"Primary Fee" means an amount, payable within 30 days after the end of
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each calendar quarter during the term of this Agreement, equal to the Allocated
Percentage of Net Revenues, which amount shall not exceed (i) $500,000 for 1994
or (ii) the Allocated Percentage of $2,740,000 for any calendar year thereafter.
"Primary Fee Deficiency" means an amount, to be calculated by BGPII
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within 30 days of the end of each calendar year during the term of this
Agreement, equal to the amount, if any, by which the Allocated Percentage of
$2,740,000 exceeds the aggregate payments made on account of the Primary Fee for
such calendar year.
"Primary Fee Deficiency Balance" means an amount determined at any time
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equal to the difference between (a) the sum of each prior year's Primary Fee
Deficiency minus (b) the sum of all amounts withdrawn during the term of this
Agreement from the Reserve Account and applied against a Primary Fee Deficiency
or the Primary Fee Deficiency Balance.
"Program" means the program for marketing, production and maintenance
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of the Greenhouse as prepared by Colorado Greenhouse and reviewed and approved
at least annually by BGPII, which program, shall cover the marketing, production
and maintenance necessary for the Greenhouse (including capital improvements
which shall be specified as such), a detailed staffing plan providing for the
necessary personnel and all other matters relevant to the operation of the
Greenhouse and Colorado Greenhouse's duties under this Agreement.
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"Project Documents" mean any and all agreements, contracts and permits,
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now or hereafter existing, relating to or affecting the operation of the
Greenhouse, as the same may be amended, supplemented or replaced from time to
time.
"Qualifying Facility" means a facility meeting all of the requirements
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for a "qualifying cogeneration facility" set forth in the regulations
implementing the Public Utility Regulatory Policies Act of 1978, as amended from
time to time, and in Part 292 of Title 18 of the Code of Federal Regulations, as
amended from time to time.
"Reserve Account" means the account entitled "Greenhouse Reserve
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Account" to be maintained by BGPII.
"Reserve Amount" means an amount equal to the product of the Allocated
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Percentage of $2,740,000.
"Rocky Mountain" means Rocky Mountain Produce Limited Liability
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Company, a Colorado limited liability company.
"Services" mean the services and work performed by Colorado Greenhouse
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according to the terms and conditions of this Agreement, including, without
limitation, the work described in Article 3 as the duties of Colorado
Greenhouse and specified in the Program.
"Subcontractor" means, in relation to Colorado Greenhouse, any
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individual, firm, organization, or supplier under contract to Colorado
Greenhouse for the performance of any part of Colorado Greenhouse's Services,
provided that any such contract under which Colorado Greenhouse has payment
obligations in excess of $250,000 in the aggregate in any one year period or
material liabilities or risks to the Greenhouse shall be subject to prior
approval by BGPII.
"Uncontrollable Forces" mean any cause beyond the control of the Party
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affected, including but not limited to acts of God, flood, earthquake, storm,
fire, lightning, explosion, epidemic, war, riot, civil disturbance, sabotage,
and restraint by court order or public authority, strike or labor disturbance,
which by exercise of due foresight such Party could not reasonably have been
expected to avoid, and which by exercise of due diligence, it is unable to
overcome. Neither Party shall, however, be relieved of liability for failure of
performance if such failure is due to causes arising out of its own negligence
or to removable or remediable causes which it fails to remove or remedy with
reasonable dispatch.
Article 3. Duties of Colorado Greenhouse.
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3.1. Enumeration of Duties. Colorado Greenhouse hereby agrees to
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perform the activities as generally described in this
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Article, and as contained elsewhere in this Agreement related to the operation
and management of the Greenhouse consistent with the Annual Operating Budget and
the Program. From and after the Commencement Date, Colorado Greenhouse shall,
subject to BGPII's discretion:
(a) Safely and efficiently operate and maintain the Greenhouse in
accordance with (i) the Annual Operating Budget, (ii) the Program and (iii)
operations and maintenance manuals and warranties and procedures provided by the
contractor for the Greenhouse.
(b) Continuously operate the Greenhouse exclusively for the growing,
processing, packaging and marketing of tomatoes and other greenhouse vegetables
as provided in the Greenhouse Lease, a copy of which is attached hereto as
Exhibit A.
(c) Assume and comply with the obligations of BGPII under the
Greenhouse Lease (excluding the obligation to pay rent and establish rent
reserves) including, without limitation, utilizing the thermal heat from the
Power Plant in such quantities and for such purposes as necessary to maintain
the Qualifying Facility status of the Facility, provided, however, that such
quantities must be practicable without enlargement or other material alteration
of the Greenhouse or if enlargement or material alteration is required then the
cost thereof must be borne by BGPII or other third parties. Upon request by
BGPII, Colorado Greenhouse will provide satisfactory evidence of its compliance
with such lease terms.
(d) Pay, as the same become due, the Greenhouse Operating Expenses.
(e) Use its best efforts to market the produce from the Greenhouse.
(f) Employ, pay, train and supervise that number of personnel in
accordance with the staffing requirements set forth in the Annual Operating
Budget, and plan and administer all matters pertaining to such employed
personnel in the areas of labor relations, salaries, wages, working conditions,
hours of work, termination of employment, employee benefits, safety and related
matters. Colorado Greenhouse shall use reasonable care in the hiring of all its
employees. All employees shall be employees of Colorado Greenhouse and their
wages or other compensation shall be controlled and disbursed by Colorado
Greenhouse.
(g) Repair or replace, as may be necessary in accordance with a
manufacturer's directions, Good Greenhouse Practices and in a good and
workmanlike manner any Greenhouse equipment that fails or malfunctions (except
as otherwise provided
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in Section 4.1(d) of this Agreement). If any such failure or malfunction is
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covered by a warranty, Colorado Greenhouse shall submit a timely warranty claim
on behalf of BGPII.
(h) Subject to BGPII's approval as required for a Subcontractor,
engage any independent contractors necessary for making repairs to, or
performing maintenance on, or installing improvements to the Greenhouse in the
event that Colorado Greenhouse is not available or is otherwise unable to make
or perform such repairs, maintenance or installations.
(i) Maintain accurate records of all changes to the Greenhouse and up
to date as built drawings of the Greenhouse reflecting such changes.
(j) Maintain regular communication with BGPII, regarding the operation
and management of the Greenhouse, including monthly production and sales
reports, safety reports and other reports reasonably requested by BGPII,
specifying all operations at the Greenhouse during such period and noting any
other material occurrences or operational results, and communicate in each
instance, either by telephone or in writing, material changes in the anticipated
operation of the Greenhouse or the marketing of produce therefrom, maintenance
problems related to the Greenhouse and any notice or knowledge of violation or
variance of any Applicable Law or Applicable Permit.
(k) Make, in the name of BGPII, contracts for janitorial, water,
electricity, telephone and other applicable services, or such of them as
Colorado Greenhouse shall deem advisable, and place orders for such equipment,
tools, appliances, materials and supplies as are necessary to properly maintain
and operate the Greenhouse.
(l) Maintain a system of office records, books, and accounts with
respect to the Greenhouse as required by the Loan Agreement, which records shall
be subject to examination by BGPII, BCP and the Lender or authorized agents or
designees of each during all regular business hours. Records, books, and
accounts shall be kept for a minimum of five years. So long as Colorado
Greenhouse operates all or any of the Other Greenhouses, Colorado Greenhouse
shall allocate costs and revenues for the Greenhouse in accordance with the
Allocation Percentage set forth on Exhibit B attached hereto.
(m) Be cognizant of and adhere to the requirements set forth in the
Project Documents insofar as they relate to the operation of the Greenhouse and
the duties of Colorado Greenhouse under this Agreement.
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(n) Prior to the Commencement Date, submit to BGPII a proposed Annual
Operating Budget for the year in which this Agreement commences and the
following year and cooperate with BGPII to review and modify the same as
necessary to obtain the approval of BGPII's Management Committee prior to the
Commencement Date; and thereafter submit to BGPII a proposed Annual Operating
Budget by November 1 of each year for the following two-year period and
cooperate with BGPII to review and modify the same as necessary to obtain the
approval of BGPII's Management Committee by December 1 of each year. If for any
reason the approval of BGPII's Management Committee is not so obtained, the
Annual Operating Budget previously approved shall, until the approval of an
Annual Operating Budget for the following two-year period, be deemed to be in
force and be effective as the Annual Operating Budget for such year.
(o) Review all federal, state and local laws and regulations
establishing compliance requirements in connection with the operation and
management of the Greenhouse. Advise BGPII on the need to secure or renew, as
necessary, appropriate permits, licenses and approvals, and assist BGPII in
securing as appropriate, such permits, licenses and renewals as required.
(p) Keep the Greenhouse free of all materialmen's, mechanics' and
other liens for materials or services furnished to the Greenhouse at Colorado
Greenhouse's direction.
(q) Pay all real estate taxes attributable to the Greenhouse (as
equitably apportioned by BGPII provided that in no event shall Colorado
Greenhouse be obligated for any portion of real estate or property taxes
attributable to the heat storage units or the heat generating portions of the
Facility) within five days of receipt of an invoice submitted by BGPII. In
addition, Colorado Greenhouse shall be responsible for all taxes payable to the
appropriate taxing authorities for any sales, excise or other tax levied,
imposed or assessed in the State of Colorado or by any other taxing authority in
connection with the operation of the Greenhouse and the sale of produce
therefrom.
(r) By November 1 of each year, submit to BGPII a proposed Program and
cooperate with BGPII to review and modify the same as necessary to obtain the
approval of BGPII's Management Committee.
(s) Perform other normal business functions and otherwise operate and
manage the Greenhouse in accordance with and as limited by the Greenhouse Lease
and this Agreement.
3.2 Limitations on Authority. Notwithstanding any provision of this
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Agreement to the contrary, unless previously expressly approved in the Annual
Operating Budget or otherwise
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approved in writing by BGPII, Colorado Greenhouse or any Subcontractor, or any
of their respective agents or representatives, shall not:
(a) sell, lease, pledge or mortgage, convey, or make any license,
exchange or other transfer of property or assets of BGPII;
(b) make, enter into, execute, amend, modify or supplement any contract
or agreement on behalf of or in the name of BGPII;
(c) make any recoverable expenditure or acquire on a recoverable cost
basis any equipment, materials, assets or other items, except for emergency
expenditures and except in substantial conformity with the Annual Operating
Budget and the Program; it being understood and agreed that Colorado Greenhouse
shall not be entitled to reimbursement for any expenditures not made in
accordance with this paragraph (c) .
(d) take or agree to take any other action that materially varies from
the applicable Annual Operating Budget, the Program or any Applicable Law;
(e) take, agree to take or fail to take any action that would cause
a default under the Project Documents;
(f) settle, compromise, assign, pledge, transfer, release or consent to
the settlement, compromise, assignment, pledge, transfer or release of any
claim, suit, debt, demand or judgment against or due by BGPII or Colorado
Greenhouse, or submit any such claim, dispute or controversy to arbitration or
judicial process, or stipulate in respect thereof to a judgment, or consent to
do the same;
(q) modify or alter the type of crop grown in the Greenhouse.
3.3 Limitation on Other Activities. During the term of this Agreement,
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Colorado Greenhouse shall not:
(a) engage in any business or activity or make any investments
(either directly or indirectly) other than operating and managing the Greenhouse
and the Other Greenhouses, growing crops therein and marketing such crops and
products thereof;
(b) make any alterations, renovations, improvements or other
installations in or about any part of the Greenhouse in excess of $25,000 unless
and until Colorado Greenhouse shall cause plans and specifications therefor to
have been reviewed by BGPII and
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shall have obtained BGPII's written approval thereof. If approval is granted,
Colorado Greenhouse shall cause the work described in plans and specifications
to be performed, at its expense, promptly, efficiently, completely and in a good
and workmanlike manner by duly qualified or licensed persons or entities. All
such work shall comply with all applicable codes, rules, regulations and
ordinances. Ordinary and customary repairs and replacements in and on the
Greenhouse shall be promptly undertaken and promptly completed and need not have
BGPII's prior approval, unless such repairs or replacements materially decrease
the value of usefulness of the Greenhouse or the Facility;
(c) without the prior written consent of BGPII, agree to any
increase of the fees to be paid by Colorado Greenhouse under the greenhouse
management and operating agreements for the Other Greenhouses; or
(d) without the prior written consent of BGP II and BCP, cause any
greenhouse or other business to be treated under this Agreement as an Other
Greenhouse except the BGP Greenhouse, the Ft. Xxxxxx Greenhouse and that
certain greenhouse near Rifle, Colorado built in connection with the American
Atlas cogeneration Project.
3.4 Payments by Colorado Greenhouse. (a) During the term of this
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Agreement, Colorado Greenhouse shall pay BGPII, on a timely basis (i) the
Primary Fee and (ii) the Contingent Fee, provided, however, that no Primary Fee
shall be due hereunder for any calendar quarter until the calendar quarter in
which rent is first due under the Greenhouse Lease. Any amount which is not paid
within ten days after the same is due shall bear interest at a default rate
equal to the rate of interest publicly announced or as published from time to
time by Bank of America NT and SA as its "reference rate" plus six percent per
annum from the first day due until paid.
(b) BGPII and Colorado Greenhouse understand and agree, that
except as provided in this Section 3.4, all amounts paid on account of the
Contingent Fee shall be used by BGPII as requested by BCP under the Greenhouse
Lease. Without limiting the foregoing, BGPII shall withdraw from the Reserve
Account, annually, the lesser of (x) all of the funds in such account or (y) an
amount equal to the sum of (i) the Primary Fee Deficiency for such year and (ii)
an amount equal to the Primary Fee Deficiency Balance.
(c) In addition to the foregoing payments Colorado Greenhouse shall
reimburse BGPII for prior advances made to Colorado Greenhouse in connection
with its formation and start-up in the amount of $630,000. Such amount together
with interest on any unpaid portion of such amount accruing from January 1, 1995
at an annual rate of eight percent shall be payable as follows: $375,000
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plus accrued interest shall be paid on or before December 31, 1996 and S255,000,
or such other amount of remaining principal as shall be then outstanding plus
accrued interest shall be paid on or before December 31, 1997. Colorado
Greenhouse shall also pay to BGPII on or before December 31, 1995, the amount of
$700,000, without interest, which amount was advanced to Colorado Greenhouse by
BGPII for working capital purposes.
Article 4. Duties of BGPII.
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4.1. Enumeration of Duties. The following shall be BGPII's
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responsibility to provide in support of the uninterrupted operation and
maintenance of the Greenhouse:
(a) Use reasonable efforts to maintain the Greenhouse Lease or any
replacement contracts for the supply of thermal heat in sufficient quantities to
maintain the Facility's FERC Order.
(b) Providing a liaison person(s) available to Colorado Greenhouse
twenty-four hours per day, authorized to make decisions on the part of BGPII.
(c) Enforcing diligently any claim BGPII may have under insurance
policies, equipment guarantees and warranties pertaining to the Greenhouse.
(d) Paying for capital improvements as set forth in the Program.
Except as otherwise agreed by Colorado Greenhouse, BGPII shall pay for all
capital improvements which (i) the Parties agree are required for continued
usefulness of the Greenhouse and (ii) are required in connection with the
expansion of the Greenhouse to maintain compliance with the FERC Order. Any
other improvements that are made at the request of Colorado Greenhouse or that,
in BGPII's reasonable judgment, are to be made solely for the purpose of
enhancing Colorado Greenhouse's growing programs, shall be made at Colorado
Greenhouse's cost and expense, and may be made only with the prior written
consent of BGPII.
Article S. Term.
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5.1. Term. This Agreement shall continue for a term equal to the term
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of the Greenhouse Lease, unless sooner terminated as hereinafter provided.
5.2. Termination Upon Default. If any of the following events occur,
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BGPII shall have the right upon written notice to Colorado Greenhouse, to
terminate this Agreement:
(a) If Colorado Greenhouse defaults in the performance of any
obligation under this Agreement (other than the
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obligations under Section 3.4 of this Agreement) and such default is not cured
by Colorado Greenhouse within 5 days after receipt of a notice specifying the
default.
(b) If (i) the Primary Fee Deficiency Balance exceeds $1,000,000
at any time before December 31, 1996, (ii) the Primary Fee Deficiency for
calendar year 1997 or any year thereafter exceeds $500,000 or (iii) the Primary
Fee Deficiency Balance exceeds $750,000 at any time after January 1, 1998.
(c) If Colorado Greenhouse is adjudicated a bankrupt or insolvent
and such adjudication is not vacated within ten (10) days.
(d) The filing of a voluntary or involuntary bankruptcy or
insolvency petition of Colorado Greenhouse or the reorganization of Colorado
Greenhouse whether pursuant to the federal Bankruptcy Act or any similar federal
or state proceedings, unless such petition is filed by a party other than
Colorado Greenhouse and is withdrawn or dismissed within 30 days after the date
of filing.
(e) The appointment of a receiver or trustee for the business or
property of Colorado Greenhouse, unless such appointment shall be vacated within
ten days of its entry.
(f) The making by Colorado Greenhouse of an assignment for the
benefit of its creditors, or in any other manner Colorado Greenhouse's interests
in this Agreement shall pass to another by operation of law.
5.3. Payment of Expenses and Allocation of Crops After Termination.
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Except as set forth in this Section 5.3 and except for Colorado Greenhouse's
obligations under Article 7 and Article 11, on the effective date of a
termination, BGPII and Colorado Greenhouse shall he relieved of all obligations
thereafter accruing under this Agreement. Notwithstanding such termination,
neither Party shall be relieved from any obligations or liabilities accruing
prior to the effective date of termination, including in the case of Colorado
Greenhouse, its obligation to make payment to BGPII of all sums due BGPII under
this Agreement. After the effective date of a termination BGPII shall either
grant Colorado Greenhouse such use of the Greenhouse as is necessary to care for
and harvest any crop planted before such date or compensate Colorado Greenhouse
for the value of such crop as of the effective date of termination, subject to
any right of offset that BGPII may have for amounts owed to it hereunder.
5.4. Termination Upon Loan Agreement Default. If there has been an
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event of default under the Loan Agreement, then Lender or
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any successor owner of the Facility may terminate this Agreement upon ten days
advance written notice. The provisions of this Section 5.4 were made for the
express benefit of the Lender as a third party beneficiary, and subject to the
terms and conditions of this Section 5.4, the Lender shall have the right to
exercise and enforce the rights granted to it herein.
5.5. Termination of Greenhouse Lease. In the event that the Greenhouse
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Lease is terminated for any reason whatsoever, this Agreement shall
automatically terminate without any further act or instrument.
5.6. Surrender of Greenhouse. Upon the termination of this Agreement
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but subject to the terms of Section 5.3, Colorado Greenhouse will surrender the
Greenhouse in as good condition as when received, excepting depreciation caused
by ordinary wear and tear.
5.7. Training of New Personnel. Upon termination of this Agreement,
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Colorado Greenhouse will make available to BGPII one qualified employee for a
period of two months after the termination of this Agreement for the purpose of
training new personnel in the operation and management of the Greenhouse.
Article 6. BGPII's Right to Audit.
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BGPII shall have the right, at any time and from time to time to audit
or cause an independent audit to be made of Colorado Greenhouse's books and
records for the purposes of verifying compliance with the provisions of this
Agreement. In the event that comp. any such audit indicates that Colorado
Greenhouse underpaid any amount due to BGPII under this Agreement, Colorado
Greenhouse shall pay such additional sum and such audit shall be deemed to be
binding and conclusive, unless a request is made, within fifteen days after
receipt of a copy of such audit by Colorado Greenhouse, for a consultation with
such auditors. Such audit, after consultation and modification, if any, shall be
binding and conclusive unless the consultation results in irreconcilable
differences with respect to any material item in the report. In such event, the
disputed item will be submitted to a firm of independent certified public
accountants, acceptable to BGPII, for resolution, and the fees of such firm
shall be paid equally by Colorado Greenhouse and BGPII, unless Colorado
Greenhouse is obligated for full payment pursuant to this Article 6. If the
submission to the independent certified public accountants results in changes in
the audit report, the report as so changed shall be binding and conclusive. In
the event that the audit indicates that there were deficiencies 'in the
aggregate amount of $10,000 or more in the amounts which should have been paid
by Colorado Greenhouse to BGPII pursuant to this agreement, Colorado Greenhouse
shall pay all costs of audits
-14-
incurred by BGPII under this Article 6 together with interest an the amount of
the deficiency payable at the interest rate set forth in Section 3.4(a) of this
Agreement.
Article 7. Exclusive warranties; Remedies.
------------------------------------------
7.1. Warranty. Colorado Greenhouse warrants to BGPII that the Services
--------
performed under this Agreement shall be performed in a competent, prudent and
efficient manner, in accordance with this Agreement, Good Greenhouse Practices,
all warranties and procedures for the Greenhouse and all safety, fire protection
and other requirements of applicable insurance policies.
7.2. No Consequential Damages. In no event shall Colorado Greenhouse,
------------------------
BGPII or any of their respective affiliates, owners, members, managers,
employees or agents, be liable for any consequential, incidental or special
damages or any other liabilities not expressly set forth herein, regardless of
whether based on contract, warranty, indemnity, tort, strict liability or
otherwise.
7.3. No limitation on Claims Against Third Parties. Nothing
---------------------------------------------
contained in this Article 7 or any other provision of this Agreement shall be
deemed to waive, limit or impair in any way any claims that BGPII may have
against Subcontractors, manufacturers of equipment or any other person.
Article 8. Insurance.
---------------------
8.1. Colorado Greenhouse's Coverage. At all times after the Commencement
------------------------------
Date, Colorado Greenhouse will carry and maintain, at its expense:
(a) public liability insurance including insurance against assumed
or contractual liability under this Agreement, in such amount as BGPII may
request.
(b) all-risk casualty insurance covering all of the personal
property in, on or about the Greenhouse including all improvements installed in,
on or about the Greenhouse by or on behalf of Colorado Greenhouse, in such
amounts as BGPII may request;
(c) if and to the extent required by law, workers compensation or
similar insurance in form and amounts required by law; and
(d) such other insurance as BGPII may require, including, but not
limited to, insurance that BGPII or BC is required to provide pursuant to the
terms of any applicable credit agreement affecting the Facility.
-15-
8.2. Subcontractor's Coverage. Colorado Greenhouse shall require all of
------------------------
its Subcontractors engaged in work at the Greenhouse to maintain insurance
coverage of the types and in the amounts at least equal to the insurance
coverage that Colorado Greenhouse is required to maintain in accordance with
Section 8.1 above.
8.3. Umbrella Coverage. Umbrella coverage may cover any portion of the
-----------------
limits of liability required in Sections 8.1 and 8.2 above, provided it has all
the coverages and requirements for the type of coverage.
8.4. Insurance Provisions. The company or companies writing such
--------------------
insurance policies, as well as the form of such insurance shall at all times be
subject to BGPII's approval. Public liability and all-risk casualty insurance
policies evidencing such insurance shall name BGPII or its designee as
additional insureds, and shall contain such other provisions and endorsements as
BGPII may request.
8.5. Evidence of Insurance. Before the date on which such insurance
---------------------
first is required to be carried by Colorado Greenhouse, and thereafter, at least
30 days before the effective date of any renewal of any such policy, Colorado
Greenhouse will deliver to BGPII either a duplicate original of the aforesaid
policy or a certificate evidencing such insurance.
Article 9. Applicable Permits.
------------------------------
All Applicable Permits shall be obtained and maintained by Colorado
Greenhouse on behalf of BGPII. BGPII shall cooperate with Colorado Greenhouse in
the securing of such Applicable Permits.
Article 10. Applicable Laws.
----------------------------
10.1. Applicable Laws. Colorado Greenhouse shall operate and maintain
---------------
the Greenhouse in conformance with all Applicable Laws and Applicable Permits,
including without limitation the disposing of any hazardous waste generated by
the Greenhouse in accordance with all Applicable Laws.
10.2. Changes in Laws. Colorado Greenhouse shall comply with
-----------------
applicable changes in the Applicable Laws and shall inform BGPII of such
changes. To the extent that such changes require alterations in the Greenhouse
configuration, operation, maintenance procedures or other aspects of Greenhouse
operation and maintenance, the cost thereof shall be borne by BGPII. The parties
acknowledge that any material alteration in the Greenhouse may necessitate a
change in the Allocated Percentage for the Greenhouse and each of the other
Greenhouses.
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Article 11. Indemnification.
----------------------------
11.1. Indemnification by Colorado Greenhouse. (a) Colorado Greenhouse
----------------------------------------
shall indemnify and hold harmless BGPII and Lender and their respective
affiliates, officers, directors, managers, shareholders, members, employees and
agents, from any loss, liability or damage incurred or suffered by any such
person by reason of Colorado Greenhouse's failure to perform its obligations
hereunder or its negligence or willful misconduct, including, without
limitation, any judgment, award or settlement, other costs and expenses, and
reasonable attorneys, fees incurred in connection with the defense of any actual
or threatened claim or action based on any such act or omission, unless such
loss, liability or damage results from such indemnified person's fraud,
negligence or willful misconduct. Such attorneys' fees shall be paid as
incurred.
(b) Colorado Greenhouse shall indemnify and hold harmless BGPII
and Lender and their respective affiliates, officers, directors, managers,
shareholders, members, employees and agents from any and all liability, claims,
demands, actions and causes of action whatsoever (including without limitation
reasonable attorneys' fees and expenses, and costs and expenses reasonably
incurred in investigating, preparing or defending against any -litigation or
claim, action, suit, proceeding or demand of any kind or character) arising out
of or related to alleged contamination of the property underlying the Facility
(the "Premises") by any hazardous or toxic substance, pollutant or
contaminant, or alleged injury or threat of injury, to health, safety or the
environment, or alleged noncompliance with any federal, state and local
environmental statutes, regulations, ordinances, and any permits, approvals or
judicial or administrative orders issued thereunder, giving rise to liability
under any federal, state or local environmental statutes or ordinances,
including without limitation the Comprehensive Environmental Response,
Compensation and Liability Act, 42 (S)(S) SS 9601 et seq., as amended from time
-- ---
to time, or under any common law claim, including claims for personal injury or
property damage or for any claim by any governmental or private party for
remedial or removal costs, natural resource damages, property damages, damages
for personal injuries, or other costs, expenses or damages or any claim for
injunctive relief arising from any alleged injury or threat of injury to health,
safety or the environment relating to the Premises.
11.2. Indemnification by BGPII. BGPII shall indemnify and hold
--------------------------
harmless Colorado Greenhouse and its affiliates, managers, members, employees
and agents, from any loss, liability or damage incurred or suffered by any such
person by reason of BGPII's failure to perform its obligations hereunder or its
negligence or willful misconduct, including, without limitation, any judgment,
award or settlement, other costs and expenses, and reasonable attorneys' fees
-17-
incurred in connection with the defense of any actual or threatened claim or
action based on any such act or omission, unless such loss, liability or damage
results from such indemnified person's fraud, negligence or willful misconduct.
Such attorneys' fees shall be paid as incurred. Any such indemnification shall
be paid only from the assets of BGPII and neither Colorado Greenhouse nor any
third party shall have recourse against the personal assets of any member of
BGPII or their respective affiliates for such indemnification.
Any indemnification required herein to be made by BGPII or Colorado Greenhouse
shall be made promptly following the determination of the loss, liability or
damage incurred or suffered by final judgment of any court, settlement, contract
or otherwise.
Article 12. Representations.
----------------------------
12.1. Representations of Colorado Greenhouse. Colorado Greenhouse
--------------------------------------
represents and warrants to BGPII as follows:
(a) that it is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Colorado;
(b) that it has personnel available to it with the expertise in
connection with the management of greenhouses sufficient for it to perform its
obligations under this Agreement in a manner consistent with Good Greenhouse
Practices;
(c) that the execution, delivery and performance of this
Agreement by Colorado Greenhouse has been duly authorized by all necessary
limited liability company action and this Agreement has been duly executed and
delivered by Colorado Greenhouse and, subject to due execution and delivery by
BGPII, this Agreement will be enforceable against Colorado Greenhouse in
accordance with its terms, and does not constitute a default under its operating
agreement, or any instrument to which it is a party, nor does it violate any
provision of any law, rule, regulation, order, judgment, decree, determination,
or award presently in effect having applicability to it;
(d) that it has all necessary permits, licenses, and other
governmental approvals required to perform its obligations hereunder, except for
permits BGPII is required to obtain; and
(e) that there are no actions, suits, or proceedings pending or,
to its knowledge, threatened against it in any court or before any governmental
department, agency, instrumentality, or any arbitrator, in which there is a
reasonable possibility of an adverse decision which could materially and
adversely affect its ability to perform its obligations under this Agreement.
-18-
12.2. Representations by BGPII. BGPII represents and warrants to
------------------------
Colorado Greenhouse as follows:
(a) that it is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Colorado;
(b) that the execution, delivery and performance of this
Agreement by BGPII has been duly authorized by all necessary limited liability
company action and this Agreement has been duly executed and delivered by BGPII
and, subject to due execution and delivery by Colorado Greenhouse, this
Agreement will be enforceable against BGPII in accordance with its terms, and
does not constitute a default under its operating agreement, or any instrument
to which it is a party, nor does it violate any provision of any law, rule,
regulation, order, judgment, decree, determination, or award presently in effect
having applicability to it; and
(c) that there are no actions, suits, or proceedings pending
or, to its knowledge, threatened against it in any court or before any
governmental department, agency, instrumentality, or any arbitrator, in which
there is a reasonable possibility of an adverse decision which could materially
and adversely affect its ability to perform its obligations under this
Agreement.
Article 13. Colorado Greenhouse as Independent Contractor.
----------------------------------------------------------
13.1. Independent Contractor. Colorado Greenhouse shall be an
----------------------
independent contractor in the performance of this Agreement and shall have
complete charge of the Services and personnel engaged in the performance of the
Services. Nothing contained herein shall be deemed to create a relationship of
employer-employee, master-servant, partnership, or joint venture.
13.2. Subcontractors. Colorado Greenhouse's Services may be
--------------
performed by Colorado Greenhouse acting in its own name, or by Colorado
Greenhouse's subcontracting portions to other Subcontractors or suppliers.
(a) Colorado Greenhouse will assume the responsibility for,
and liability arising in connection with, negotiating with, and performance by,
its Subcontractors.
(b) Colorado Greenhouse will have authority and control over
the Subcontractors, work, including overtime and any special methods required,
in the judgment of Colorado Greenhouse, to complete the Subcontractors work in a
correct and timely manner.
-19-
Article 14. Survival.
----------------------
The provisions of Articles 7 and 11 shall survive termination,
cancellation or expiration of this Agreement.
Article 15. Miscellaneous.
--------------------------
15.1 Notices. Notices and other communications with respect to this
-------
Agreement shall be in writing and shall be delivered by hand or overnight
courier service, mailed or sent by telecopy. Unless other addresses or telecopy
numbers are specified in writing pursuant to this Section 15.1 to each other
Party, such notices or other communications shall be sent to the following
addresses or telecopy numbers as the case may be.
BGPII: Brush Greenhouse Partners II
Limited Liability Company
0000 Xxxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxxx
Telephone: (000) 000-0000 FAX: (000) 000-0000
Colorado Greenhouse:
Colorado Greenhouse Limited Liability Company
X.X. Xxx 000
Xxxx Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx xxxx
Telephone: (000) 000-0000 FAX: (000) 000-0000
15.2 Arbitration. All claims, disputes and other matters in
-----------
question arising out of, or relating to this Agreement or the interpretation or
breach thereof, shall be decided by arbitration in accordance with the
Arbitration Rules of the American Arbitration Association then in effect unless
the Parties mutually agree otherwise. Said arbitration shall be before a panel
of three arbitrators and shall be held in Denver, Colorado. This agreement to
arbitrate shall be specifically enforceable under applicable law in any court of
competent jurisdiction. Notice of the demand for arbitration shall be filed in
writing with the other Party to this Agreement and with the American Arbitration
Association. The demand for arbitration shall be made within a reasonable time
after the claim, dispute or other matter in question has arisen, and in no event
shall it be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in question would be
barred by the applicable contractual or other statute of limitations. The award
rendered by the arbitrators shall be final and judgment may be entered in
accordance with applicable law and in any court having jurisdiction thereof.
Attorneys' fees and expenses may be payable to the prevailing party in such
arbitration in the discretion of the arbitrators.
-20-
15.3 Counterparts. This Agreement may be executed in two or more
--------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15.4 Headings. Titles and headings of the sections and
--------
subsections of this Agreement are for the convenience of reference only and do
not form a part of this Agreement, and shall not in any way affect the
interpretation of this Agreement.
15.5 Assignments. This Agreement shall not be assignable by either
-----------
Party hereto without the prior written consent of the other Party; provided,
however, that BGPII's rights under this Agreement may be assigned to the Lender
to secure obligations under the Loan Agreement and, so long as is required by
the Loan Agreement, no change in the terms or provisions hereof shall be made
without prior written consent of the Lender.
15.6 Inspections and Access by BGPII and Lenders. Colorado
--------------------------------------------
Greenhouse will permit BGPII, its agents, employees and contractors and Lender
and its representative to enter all parts of the Greenhouse during Colorado
Greenhouse's business hours to inspect the same and to enable BGPII to enforce
or carry out any provision of this Agreement.
15.7 Lender Protection. Colorado Greenhouse agrees to give any
-----------------
Lender by registered or certified mail, a copy of any notice or claim of
default served upon BGPII by Colorado Greenhouse, provided that prior to such
notice Colorado Greenhouse has been notified in writing of the address of such
Lender. Colorado Greenhouse further agrees that if BGPII shall have failed to
cure such default within 20 days after such notice to BGPII (or if such default
cannot be cured or corrected within that time, "then such additional time as may
be necessary if BGPII has commenced within such 20 days and is diligently
pursuing the remedies or steps necessary to cure or correct such default) , then
any Lender shall have an additional 30 days within which to cure or correct such
default (or if such default cannot be cured or corrected within that time and
such default is not having a material adverse effect on Colorado Greenhouse,
then such additional time as may be necessary if such Lender has commenced
within such 30 days and is diligently pursuing the remedies or steps necessary
to cure or correct such default, including the time necessary to obtain
possession if possession is necessary to cure or correct such default) .
15.8 Force Major. Neither Party hereto shall be deemed to be in
-----------
breach or in violation of this Agreement if such Party is prevented from
performing any of its obligations hereunder by reason of Uncontrollable Forces
that in fact prevent or delay performance hereunder. To the extent that any
performance of any obligation is so prevented pursuant to this Section 15.6,
such performance shall
-21-
be suspended during the continuance of the Uncontrollable Forces and during the
period following the cessation of such Uncontrollable Forces required to repair
and rebuild the Facility to the extent necessary to place it back into
commercial operation in accordance with Good Greenhouse Practices and Applicable
Laws. Notwithstanding this foregoing, in the event of the inability of Colorado
Greenhouse to substantially perform the Services for a period of 45 days or more
by virtue of Uncontrollable Forces (which Uncontrollable Forces are not of a
type affecting other persons generally) , BGPII may elect to terminate this
Agreement upon five days, prior written notice to Colorado Greenhouse; it being
understood and agreed that if such Uncontrollable Forces apply to, relate to or
affect all persons as a general matter, then BGPII will not terminate this
Agreement pursuant to the provisions of this Section 15.8, unless such
Uncontrollable Forces continue for a period of 180 days.
15.9 Waiver. The waiver of any breach of any term or condition hereof
------
shall not be deemed a waiver of any other or subsequent breach, whether of like
or different nature. No failure to exercise and no delay in exercising, on the
part of either Party hereto, any right, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and not exclusive of any rights or
remedies at law.
15.10 Severability. If any term or provision of this Agreement or the
------------
performance thereof shall to any extent be invalid or unenforceable, such
invalidity or unenforceability shall not affect or render invalid or
unenforceable any other provision of this Agreement, and this Agreement shall be
valid and enforced to the fullest extent permitted by law.
15.11 Amendment. No modification or amendment of this Agreement shall
-----------
be valid unless in writing and executed by both Parties hereto.
15.12 Governing Law. This Agreement shall be governed by and construed
---------------
under the laws of the State of Colorado. The parties hereby consent to the
jurisdiction of the courts of the State of Colorado for the purposes of
enforcing the arbitration provisions of Section 15.2.
15.13 Entire Agreement. This Agreement sets forth the entire
----------------
agreement and understanding between the Parties hereto with respect to the
subject matter hereof and supersedes and replaces all prior written agreements
and negotiations and oral understandings, if any, with respect thereto.
-22-
15.14 No Third Party Beneficiaries. Except as specifically provided
----------------------------
herein or by the Loan Agreement, no person or party except Lender shall have any
rights or interest, direct or indirect, in this Agreement or the Services to be
provided hereunder, or both, except Colorado Greenhouse and BGPII. The Parties
specifically disclaim any intent to create any rights in any person or party as
a third-party beneficiary to this Agreement or the Services to be provided
hereunder except for the Lender and BCP.
15.15 Amendment of Allocated Percentage. The Allocated Percentage may
-----------------------------------
be amended at any time by mutual agreement of the Parties hereto and shall be
amended to reflect any change in size of any Other Greenhouse. If any of the
Other Greenhouses decreases in size or is increased in size by the addition of
space of like quality to its existing space then the Allocated Percentage shall
be adjusted in proportion to the ratio that the change in size bears to the
total size of the Greenhouse and the Other Greenhouses.
This Agreement has been executed and delivered as of the date first
above written.
BGPII:
------
BRUSH GREENHOUSE PARTNERS II LIMITED
LIABILITY COMPANY
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------
---------------------------------
Manager
COLORADO GREENHOUSE:
-------------------
COLORADO GREENHOUSE LIMITED LIABILITY
COMPANY
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------
---------------------------------
Manager
and
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------
---------------------------------
Manager
-23-
EXHIBIT A
---------
Greenhouse Lease
-24-
EXHIBIT B
---------
Allocation Percentage
A percentage, as the same may be modified from time-to-time, and as in
effect on the dates set forth below:
Commencement Date 50.000%
Commencement of Operation
of the Fort Xxxxxx Greenhouse 31.135%
-25-
