Colorado-Colorado Springs-Greenhouse Facility Lease - Ripe Touch Greenhouses Inc. and Village Farms of Colorado Inc.
LEASE AGREEMENT
Dated as of January 29, 1998
between
RIPE TOUCH GREENHOUSES, INC.,
as Lessor,
and
VILLAGE FARMS OF COLORADO, INC.
as Lessee
Greenhouse Facility
Located in Colorado Springs, Colorado
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS; CONSTRUCTION OF REFERENCES . . . . . . . . 1
Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Construction of References. . . . . . . . . . . . . .10
ARTICLE II OPERATION OF FACILITY . . . . . . . . . . . . . . . . .10
ARTICLE III RENT AND SERVICES . . . . . . . . . . . . . . . . . . .10
Section 3.01 Basic Rent. . . . . . . . . . . . . . . . . . . . . .10
Section 3.02 Supplemental Rent . . . . . . . . . . . . . . . . . .11
Section 3.03 Late Payment. . . . . . . . . . . . . . . . . . . . .11
Section 3.04 Net Lease; No Setoff; Etc.. . . . . . . . . . . . . .11
Section 3.05 Hot Water Charges . . . . . . . . . . . . . . . . . .11
Section 3.06 Services Provided by Lessor . . . . . . . . . . . . .12
ARTICLE IV DISCLAIMER OF WARRANTIES. . . . . . . . . . . . . . . .12
ARTICLE V RESTRICTION ON LIENS. . . . . . . . . . . . . . . . . .12
ARTICLE VI OPERATION AND MAINTENANCE; ALTERATIONS,
MODIFICATIONS AND ADDITIONS. . . . . . . .13
Section 6.01 Operation and Maintenance . . . . . . . . . . . . . .13
Section 6.02 Repair and Replacement. . . . . . . . . . . . . . . .13
Section 6.03 Alterations Required by Law . . . . . . . . . . . . .14
Section 6.04 Plans and Specifications; Operating Manual. . . . . .14
Section 6.05 Operational Alterations . . . . . . . . . . . . . . .14
Section 6.06 Lessor's Option to Pay Costs of Alterations . . . . .14
Section 6.07 Reports of Alterations. . . . . . . . . . . . . . . .14
Section 6.08 Title to Parts. . . . . . . . . . . . . . . . . . . .15
Section 6.09 Removal of Parts. . . . . . . . . . . . . . . . . . .16
Section 6.10 Parts Free and Clear of Liens . . . . . . . . . . . .16
Section 6.11 Permitted Contests. . . . . . . . . . . . . . . . . .16
Section 6.12 Operating Logs. . . . . . . . . . . . . . . . . . . .16
Section 6.13 Return of Facility. . . . . . . . . . . . . . . . . .16
ARTICLE VII IDENTIFICATION. . . . . . . . . . . . . . . . . . . . .17
<PAGE>
ARTICLE VIII INSURANCE. . . . . . . . . . . . . . . . . . . . . . .17
Section 8.01 Coverage. . . . . . . . . . . . . . . . . . . . . . .17
Section 8.02 Policy Provisions . . . . . . . . . . . . . . . . . .19
Section 8.03 Evidence of Insurance . . . . . . . . . . . . . . . .20
Section 8.04 No Duty of Lessor to Verify . . . . . . . . . . . . .20
ARTICLE IX LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE . . . . . . .21
Section 9.01 Occurrence of Event of Loss . . . . . . . . . . . . .21
Section 9.02 Repair of Loss or Destruction . . . . . . . . . . . .21
ARTICLE X INTEREST CONVEYED TO LESSEE . . . . . . . . . . . . . .22
ARTICLE XI ASSIGNMENT AND SUBLEASE; LOCATION . . . . . . . . . . .22
Section 11.01 Assignment and Sublease. . . . . . . . . . . . . . .22
Section 11.02 Location . . . . . . . . . . . . . . . . . . . . . .22
Section 11.03 Mortgaging the Estate of Lessor. . . . . . . . . . .22
ARTICLE XII INSPECTION AND REPORTS. . . . . . . . . . . . . . . . .24
Section 12.01 Condition and Operation. . . . . . . . . . . . . . .24
Section 12.02 Annual Insurance Report. . . . . . . . . . . . . . .24
Section 12.03 Financial Reports. . . . . . . . . . . . . . . . . .24
Section 12.04 Budget Approval. . . . . . . . . . . . . . . . . . .25
Section 12.05 Liability. . . . . . . . . . . . . . . . . . . . . .25
Section 12.06 Liens. . . . . . . . . . . . . . . . . . . . . . . .26
ARTICLE XIII EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . .26
ARTICLE XIV ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . .27
Section 14.01 Remedies . . . . . . . . . . . . . . . . . . . . . .27
Section 14.02 Survival of Lessee's Obligations . . . . . . . . . .28
Section 14.03 Remedies Cumulative. . . . . . . . . . . . . . . . .29
ARTICLE XV RIGHT TO PERFORM FOR LESSEE . . . . . . . . . . . . . .29
ARTICLE XVI INDEMNITIES . . . . . . . . . . . . . . . . . . . . . .29
Section 16.01 General Indemnity. . . . . . . . . . . . . . . . . .29
Section 16.02 Fees, Taxes and Other Charges. . . . . . . . . . . .31
Section 16.03 Survival . . . . . . . . . . . . . . . . . . . . . .33
Section 16.04 Waiver . . . . . . . . . . . . . . . . . . . . . . .34
<PAGE>
ARTICLE XVII COVENANTS AND REPRESENTATIONS OF LESSEE . . . . . . . .34
Section 17.01 Operation of Facility. . . . . . . . . . . . . . . .34
Section 17.02 Affiliated Transactions. . . . . . . . . . . . . . .34
Section 17.03 Waiver of Operating or Efficiency Standards. .. . . 34
Section 17.04 Representations and Warranties of Lessee . . . . . .35
ARTICLE XVIII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . .35
Section 18.01 Further Assurances . . . . . . . . . . . . . . . . .35
Section 18.02 Quiet Enjoyment. . . . . . . . . . . . . . . . . . .36
Section 18.03 Notices. . . . . . . . . . . . . . . . . . . . . . .36
Section 18.04 Severability . . . . . . . . . . . . . . . . . . . .36
Section 18.05 Amendment. . . . . . . . . . . . . . . . . . . . . .36
Section 18.06 Headings . . . . . . . . . . . . . . . . . . . . . .36
Section 18.07 Counterparts . . . . . . . . . . . . . . . . . . . .36
Section 18.08 Governing Law. . . . . . . . . . . . . . . . . . . .36
Section 18.09 Binding Effect; Successors and Assigns, Survival . .36
Section 18.10 Divisible Lease Agreement. . . . . . . . . . . . . .36
Section 18.11 Effectiveness. . . . . . . . . . . . . . . . . . . .37
SCHEDULES
SCHEDULE 1.01(a) Description of Facility
SCHEDULE 1.01(b) Intentionally Blank
SCHEDULE 3.01 Basic Rent
SCHEDULE 3.02 Supplemental Rent
<PAGE>
LEASE AGREEMENT dated as of January 29, 1998 between RIPE TOUCH
GREENHOUSES, INC., a Delaware corporation (the "Lessor"), and VILLAGE FARMS OF
COLORADO, INC., a Delaware corporation (the "Lessee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Lessor desires to lease the Plant (as defined below) and the
Site (as defined below) to the Lessee and the Lessee desires to lease the Plant
and the Site from the Lessor and operate the Facility (as defined below), all on
the terms and conditions herein contained.
In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, the parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION OF REFERENCES
---------------------------------------
Section 1.01. Definitions. As used in this Agreement, the following terms
shall have the following meanings (such definitions to be equally applicable to
both the singular and plural forms of the terms defined):
"Address" shall mean:
(a) with respect to the Lessor, P. O. Box 69 Castlerock, CO 80104,
Attn: Chief Executive Officer; and
(b) with respect to the Lessee, 10 Alvin Court, East Brunswick, New
Jersey 08816, ATTN: President;
or such other address as such party shall give by notice to the other party
hereto.
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlling, controlled by or under common control with, such Person.
"Alterations" shall mean, with respect to the Facility, alterations,
improvements, modifications and additions to the Facility (but excluding any
replacement of Parts incorporated in the Facility).
"APD" shall mean Agro Power Development, Inc., a New York corporation.
"Basic Rent" shall mean $100,000 payable on the Basic Rent Payment Date for
the term of this Agreement.
<PAGE>
"Basic Rent Payment Date" shall mean the last day of each month during the
term of this Agreement, commencing at the end of the first full calendar month
following the substantial completion of construction.
"Board of Directors", with respect to the Lessee or the Lessor, means
either the Board of Directors or any duly authorized committee of that Board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Lessee or Lessor, as the case may be, to have
been duly adopted by its Board of Directors and to be in full force and effect
on the date of such certification.
"Box Handling Fee" shall mean the fee payable to VF in accordance with the
Marketing and Sales Agreement to be entered into between the Lessee and VF, as
it may be amended, supplemented or otherwise modified with the prior written
consent of the Lessor and in effect from time to time, pursuant to which VF will
provide certain marketing and sales services to the Lessee, which Marketing
Agreement shall be approved in advance by the Lessor in writing.
"Budget" shall have the meaning specified in Section 12.04.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banks are authorized to be closed in New York, New York, Denver,
Colorado or Charlotte, North Carolina.
"Cash Flow" shall mean for any Lease Year (a) the sum of (i) gross revenues
from the sale of Product, plus (ii) all amounts received by the Lessee pursuant
to the Line of Credit Facility Agreement, plus, (iii) insurance proceeds
received by the Lessee from policies of the type described in subsection
8.01(a)(iii) or any other insurance proceeds paid with respect to the loss or
damage to Product, plus, (iv) revenues received pursuant to Article XVII plus
(v) all other revenues and income of the Facility, minus (b) all Greenhouse
Expenses paid in the ordinary course of business (but excluding any Greenhouse
Expenses that are prepaid by the Lessee).
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. Section 9601 et seq.), as presently in effect and
as the same may hereafter be amended, together with any regulations pursuant
thereto.
"Closing Date" shall mean the date this Agreement is executed and delivered
by the parties.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
comparable successor law.
"Default" means any event or condition which, with notice or lapse of time
or both, would become an Event of Default.
<PAGE>
"Equipment" shall mean the equipment and other property described in Part 1
of Schedule 1.01(a) of this Agreement, together with any Parts which may from
time to time be incorporated in such equipment or other property and title to
which shall have vested in the Lessor.
"Effective Date" shall have the meaning specified in Section 18.11.
"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 Lessorship, construction or operation thereof), the Lessee,
or the Borrower relating to the environment or natural resources, or to
emissions, discharges, or releases or threatened releases of Hazardous
Substances, or to protection of the environment or natural resources, or to
emissions, discharges, Releases or threatened Releases of Hazardous Substances,
including but not limited to the CERCLA, the Hazardous Materials Transportation
Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act
(42 U.S.C. Section 6901 et seq.), the Toxic Substances Control Act (15 U.S.C.
Section 2601 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), and the
Safe Drinking Water Act (42 U.S.C. Section 300f et seq.), all as presently in
effect and as the same may hereafter be amended, any regulation pursuant
thereto, and also including, but not limited to, any obligations, duties, or
requirements arising from or related to Hazardous Substances under common law.
"Event of Default" shall have the meaning specified in Article XIII of this
Agreement.
"Event of Loss" shall mean (a) the actual or constructive total loss of all
or substantially all the Facility, or the condemnation, confiscation or seizure
of, or requisition of title to, or requisition by any Governmental Authority of
the use of, all or substantially all the Facility, or (b) the loss, destruction
or damage of or condemnation, confiscation or seizure of, or requisition by any
Governmental Authority of the use of, such portion of the Facility as to render
the Facility unable to operate at substantially the same level of operation as
prior to the occurrence of such event, unless (x) it is feasible to restore,
rebuild or replace the affected portion of the Facility and (y) in the opinion
of the Lessor, sufficient funds are or will be available to the Lessor (i) to
restore, rebuild or replace the affected portion of the Facility so that the
Facility will be able to operate at substantially the same level of operation as
prior to the occurrence of such event within twelve (12) months after the
occurrence of such event and (ii) to pay all Rent until such restoration,
rebuilding or replacement is completed.
"Expense" shall have the meaning specified in Section 16.01 of the Lease
Agreement.
"Facility" shall mean the Lessor's rights in and to the Plant, the Site and
the Equipment.
"Fee Mortgagee" shall have the meaning set forth in Section 11.03(c)
hereof.
"Fees, Taxes and Other Charges" shall have the meaning specified in Section
16.02 of this Lease Agreement.
<PAGE>
"GDP/IPD" shall have the meaning specified in Section 3.05 of this Lease
Agreement.
"Greenhouse Expenses" shall mean the sum (without duplication) of (a)
direct labor costs paid, (b) seed expense paid, (c) packaging supplies expense
paid, (d) fertilizer and chemical expenses paid, (e) biological control,
including bees, expense paid, (f) freight expense paid, (g) growing medium and
supplies expense paid, (h) carbon dioxide expense paid, (i) utility (including
hot water, electricity and natural gas) expense paid, (j) recurring maintenance
expense paid, including repairs and replacements paid, (k) Management,
Marketing, and Box Handling Fees paid, (l) Basic Rent paid, (m) insurance
premiums and property taxes paid, (n) principal and interest paid with respect
to the Line of Credit Facility Agreement and (o) all other cash expenses paid
relating to the operation of the Facility, to the extent contained in the
Budget; provided, however, that there shall be excluded from Greenhouse Expenses
(a) all expenses to be paid from the Management Fee, (b) all payments with
respect to federal, state and local income taxes, (c) payment of principal,
interest and fees with respect all indebtedness of the Lessee for non capital
expenditures other than the Line of Credit Facility Agreement, (d) payment of
principal, interest, lease payments and fees with respect to the acquisition by
the Lessee of capital equipment, except to the extent consented to in advance by
the Lessor in writing, and (e) expenses paid by the Lessee pursuant to Section
16.01.
"Greenhouse Facility" shall mean the approximately 20-acre greenhouse
located on the Site.
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Hazardous Substances" shall mean and include those elements or compounds
which are contained in the lists of hazardous substances or wastes now or
hereafter adopted by the United States Environmental Protection Agency (the
"EPA") or the lists of toxic pollutants designated now or hereafter by Congress
or the EPA or which are defined as hazardous, toxic, pollutant, contaminant,
infectious or radioactive by CERCLA, by any Environmental Requirement, or by any
so called federal, state or local "Superfund" or "Superlien" laws, or by any
other Federal, state or local statute, law, ordinance, code, rule, regulation,
order or decree regulating, relating to, or imposing liability or standards of
conduct concerning, any hazardous, toxic or dangerous waste, substance or
material, as now or at any time hereafter in effect, including, without
limitation, the Air Pollution Control Act, Va. Code Ann. Section 10.1-1300 et
seq., the Solid Waste Management Act, Va. Code Ann. Section 10.1-1400 et seq.,
the State Water Control Law, Va. Code Ann. Section 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.
<PAGE>
"Incorporated in" shall have the meaning specified in Section 6.02 of the
Lease Agreement.
"Indemnitee" shall mean the Lessor and the respective successors, assigns,
officers, directors, employees and agents of any thereof.
"Inspecting Parties" shall have the meaning specified in Section 12.01 of
this Lease Agreement.
"Lien" shall mean any lien, mortgage, encumbrance, pledge, charge, lease,
easement, servitude, right of others or security interest of any kind, including
any thereof arising under any conditional sale or other title retention
agreement.
"Management Agreement" shall mean the Management, Operation, Maintenance,
Marketing and Sales Agreement to be entered into between the Lessee and APD, as
it may be amended, supplemented or otherwise modified with the prior written
consent of the Lessor and in effect from time to time, pursuant to which APD
will provide certain management, operation, maintenance, services to the Lessee,
which Management Agreement shall be approved in advance by the Lessor in
writing.
"Management Fee" shall mean the management fee paid to APD pursuant to the
Management Agreement for (a) all internal accounting services of the Lessee, (b)
salary and other benefits paid to the Lessee's grower and sales representatives,
(c) all internal management services performed by principals of the Lessee or
APD and (d) 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).
"Marketing Agreement" shall mean the Marketing and Sales Agreement to be
entered into between the Lessee and VF, as it may be amended, supplemented or
otherwise modified with the prior written consent of the Lessor and in effect
from time to time, pursuant to which VF will provide certain marketing and sales
services to the Lessee, which Marketing Agreement shall be approved in advance
by the Lessor in writing.
"Marketing Fee" shall mean the marketing fee paid to VF pursuant to the
Marketing Agreement for (a) all sales efforts related to identifying and calling
on actual and potential customers, (b) marketing efforts related to identifying
the best methods to sell the product, (c) evaluating the credit quality of all
customers, (d) accepting the risk of non collection from all customers, (e)
working cooperatively with the Lessee to ensure the highest net return for the
greenhouse products.
"Metering Devices" shall mean all necessary meters and associated equipment
to be utilized in measuring the steam output of the Power Station and for
measuring the condensate return to the Power Station.
<PAGE>
"Nonseverable" shall describe (i) with respect to any Alteration, an
Alteration which is a "nonseverable improvement" within the meaning of Revenue
Procedure 79-48 and (ii) with respect to any part not constituting an Alteration
or part of an Alteration, a part which cannot be readily removed from the
equipment without causing material damage to the Facility.
"Officer's Certificate" means a certificate signed by a Responsible Officer
of the party required to give such certificate.
"Operating Manual" shall mean such operating manuals as are ordinarily
maintained by the Lessee with respect to the Facility and any such manuals
provided by any manufacturer of any component of the Facility.
"Lease Year" shall mean each period commencing on January 1 and ending on
December 31 during the term of this Lease Agreement.
"Lease Documents" shall mean this Lease Agreement and the Line of Credit
Facility Agreement.
"Lessee" shall mean Village Farms of Colorado, Inc., a Delaware
corporation, and its permitted successors and permitted assigns.
"Overdue Rate" shall mean an interest rate equal to the rate announced from
time to time by First Union National Bank of North Carolina as its prime or
reference rate plus two percent (2%) per annum.
"Lessor" shall mean Ripe Touch Greenhouses, Inc., a Delaware corporation,
and its successors and permitted assigns.
"Parts" shall have the meaning specified in Section 6.02.
"Permitted Liens" shall mean (a) the respective rights and interests of the
Lessor and the Lessee as provided in the Lease Documents, (b) liens for taxes
either not yet due or being contested in good faith and by appropriate
proceedings, so long as such proceedings shall not involve any danger of the
sale, forfeiture or loss of any part of the Facility, title thereto or any
interest therein and shall not interfere with the use or disposition of the
Facility or the payment of Rent, (c) materialmen's, mechanics', workers,
repairmen's, employees' or other similar Liens arising in the ordinary course of
business for amounts either not yet due or being contested in good faith and by
appropriate proceedings so long as such proceedings shall not involve any danger
of the sale, forfeiture or loss of any part of the Facility, title thereto or
any interest therein and shall not interfere with the use or disposition of the
Facility or the payment of Rent, and (d) Liens arising out of judgments or
awards with respect to which at the time an appeal or proceeding for review is
being prosecuted in good faith and either which have been bonded or for the
payment of which adequate reserves shall have been provided.
<PAGE>
"Person" shall mean individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Plans and Specifications" shall mean the plans and specifications for the
Plant and the Equipment identified as such, as the same may be revised from time
to time in accordance with the terms of this Agreement.
"Plant" shall mean those buildings and other properties specifically
described in Part 2 of Schedule 1.01(a) to the Lease Agreement, together at all
times with any and all Parts which may from time to time be incorporated in the
Plant.
"Power Station" means the electric power generation facility located in
Calhan, Colorado, which Lessor will construct and own.
"Power Station Piping" shall mean the pump and piping system necessary for
the return of water from the detention pond on the Site to the Power Station.
"Product" shall mean tomatoes or any other agricultural product approved in
writing by the Lessor.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment (including without limitation the abandonment or discarding of
barrels, containers or other closed or open receptacles containing any Hazardous
Substances or pollutant or contaminant).
"Rent" shall mean Basic Rent and Supplemental Rent, collectively.
"Responsible Officer" shall mean the Chairman or Vice Chairman of the Board
of Directors, the Chairman or Vice Chairman of the Executive Committee of the
Board of Directors, the President, any Vice President (whether or not designated
by a number or a word or words added before or after the title "Vice President",
including any Assistant Vice President), the Secretary, any Assistant Secretary,
the Treasurer, any Assistant Treasurer or any other officer of any of them
customarily performing functions similar to those performed by any of the above
designated officers.
"Site" shall mean the land described in Part 3 of Schedule 1.01(a) of the
Lease Agreement.
"Steam Equipment" shall mean the heat exchange systems, cooling tower,
thermal storage tank, steam and condensate lines and the other equipment
required for the conversion of steam into a form usable in the heating and
cooling of the Greenhouse Facility and the lines required to deliver the hot
water from such equipment to the Greenhouse Facility.
"Steam Interconnection Facilities" shall mean the lines and other devices
necessary to interconnect the steam and condensate lines of the Power Station
with the Steam Equipment.
<PAGE>
"Storm Water Piping" shall mean the pump and piping system and other
equipment necessary for the return of storm water runoff from the Greenhouse
Facility to the detention pond on the Site.
"Supplemental Rent" shall mean the rent payable pursuant to Section 3.02 of
this Agreement.
"Supplemental Basic Rent Payment Date" shall mean the last date of each
January, April, July and October during the term of this Agreement and the
Termination Date commencing April 30, 1999
"Term" shall mean (a) the period commencing on July 1, 1998 and ending on
December 31, 2008 or (b) such shorter period as may result from earlier
termination of this Lease Agreement as provided herein.
"Termination Date" shall mean the last day of the Term.
"Trust Property" has the meaning given in Section 1.1 of the Deed of Trust.
"VF" shall mean Village Farms, Inc., a Delaware corporation.
"Water Charge" shall have the meaning specified in Section 3.05 of this
Lease Agreement.
Section 1.02. Construction of References. All references in this instrument
to designated sections and other subdivisions are to designated sections and
other subdivisions of this instrument, and the words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Lease Agreement as a
whole and not to any particular section or other subdivision.
Except as otherwise indicated, all the agreements or instruments herein
defined shall mean such agreements or instruments as the same may from time to
time be supplemented or amended or the terms thereof waived or modified to the
extent permitted by, and in accordance with, the terms thereof.
ARTICLE II
OPERATION OF FACILITY
---------------------
As of the later to occur of (i) January 1, 1999 and (ii) Notice of
Substantial Completion (as defined in the General Contractor's Agreement) of the
Plant, subject to all the terms and conditions of this Agreement, the Lessor
shall provide and lease the Facility to the Lessee, and the Lessee shall operate
and lease, and hereby as of the Effective Date does operate and lease, the
Facility from the Lessor for the Term.
<PAGE>
ARTICLE III
RENT AND SERVICES
-----------------
Section 3.01. Basic Rent. Subject to adjustment as provided below, during
the Term, the Lessee shall pay Basic Rent to the Lessor in arrears on each Basic
Rent Payment Date for the Facility in an amount equal to the amount set forth on
Schedule 3.01 for such Basic Rent Payment Date (in the case of the last Basic
Rent Payment Date if such date is other than a Basic Rent Payment Date, such
Basic Rent shall be prorated based on the number of days during which the Lessee
leased the Facility). Basic Rent shall be increased in accordance with any
agreement reached in connection with the payment by the Lessor of the costs of
any Alterations in accordance with Section 6.06 hereof.
Section 3.02. Supplemental Rent. In addition to Basic Rent, the Lessee
shall pay to the Lessor Supplemental Rent in an amount equal to the percentage
of Cash Flow set forth on Schedule 3.02 during the Term. Supplemental Rent shall
be payable for each calendar quarter on the Supplemental Rent Payment Date
immediately following the end of such calendar quarter.
Section 3.03. Late Payment. If any Rent or any other amount required to be
paid hereunder shall not be paid when due, the Lessee shall pay to the Lessor
interest (to the extent permitted by law) on such overdue amount from and
including the due date thereof to but excluding the date of payment thereof
(unless such payment shall be made after 11:00 A.M., local time, in which case
such date of payment shall be included) at the Overdue Rate. If any Rent shall
be paid on the date when due, but after 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; Setoff; Etc. This Lease Agreement is a net lease
and, notwithstanding any other provision of this Lease Agreement, it is intended
that Rent and all other amounts payable by Lessee hereunder to Lessor shall be
paid without notice, demand, defense and without abatement, suspension, or
deferment. Lessor shall be responsible for all property taxes associated with
the real property and any improvements thereon. In the event that Lessor is
unable to supply any or all of the Utilities as provided for in Section 3.05,
then Lessee shall have the right to setoff against any Base Lease or
Supplemental Lease payments all amounts disbursed to provide such Utilities to
operate the facility.
Section 3.05. Utilities. The Lessor agrees to provide to the Lessee during
the Term, all of the water, electricity, and heat requirements (collectively the
"Utilities") for the operation of the Facility at no cost to the Lessee. In the
event that Lessor is unable to supply the Utilities for the operation of the
Facility to the Lessee, then the Lessee shall have the right of setoff in
accordance with Section 3.04 herein.
Section 3.06. Services Provided by Lessor. At the request of the Lessee,
the Lessor may, at its option, provide, at the Lessee's expense, general
maintenance services. The Lessor shall charge the Lessee an amount equal to its
actual cost in providing such services and shall invoice the Lessee for such
services monthly as incurred. Such invoices shall be payable within thirty (30)
days of invoice.
<PAGE>
ARTICLE IV
DISCLAIMER OF WARRANTIES
------------------------
THE FACILITY IS BEING PROVIDED AND LEASED PURSUANT TO THIS AGREEMENT ON AN
"AS-IS, WHERE-IS" BASIS. THE LESSOR HAS NOT MADE NOR SHALL BE DEEMED TO HAVE
MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, VALUE,
MERCHANTABILITY, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN, OPERATION,
ABSENCE OF LATENT DEFECTS OR FITNESS FOR USE OF THE FACILITY (OR ANY PART
THEREOF), OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO THE FACILITY (OR ANY PART THEREOF). It is agreed that
except as expressly provided herein all risks incident to the matters discussed
in the preceding sentence, as between the Lessor, on the one hand, and the
Lessee, on the other, are to be borne by the Lessee. The provisions of this
Article IV have been negotiated, and, except to the extent otherwise expressly
stated in this Agreement, the foregoing provisions are intended to be a complete
exclusion and negation of any representations or warranties by the Lessor,
express or implied, with respect to the Facility, that may arise pursuant to any
law now or hereafter in effect, or otherwise.
ARTICLE V
RESTRICTION ON LIENS
--------------------
The Lessee shall not directly or indirectly create, incur, assume or suffer
to exist any Lien on or with respect to the Facility, title thereto or any
interest therein, except Permitted Liens. The Lessee shall promptly, at its own
expense, take such action as may be necessary duly to discharge or eliminate or
bond in a manner satisfactory to the Lessor any such Lien if the same shall
arise at any time. The Lessee further agrees that it shall pay or cause to be
paid on or before the time or times prescribed by law (after giving effect to
any applicable grace period) any taxes, assessments, fees or charges imposed on
the Lessee (or any affiliated or related group of which the Lessee is a member)
under the laws of any jurisdiction that, if unpaid, might result in any Lien
prohibited by this Lease Agreement.
ARTICLE VI
OPERATION AND MAINTENANCE; ALTERATIONS,
MODIFICATIONS AND ADDITIONS
--------------------------------------
Section 6.01. Operation and Maintenance. The Lessee, at its own expense,
shall at all times operate, maintain, service and repair the Facility in
accordance with (a) prudent commercial operating maintenance practices,
including all manufacturers' warranty requirements to the extent such
requirements are made known to the Lessee, (b) the then current Operating
Manual, (c) except to the extent Section 6.11 hereof shall apply, all applicable
requirements of law and of any court and of any Governmental Authority
<PAGE>
(including without limitation all zoning, environmental protection, pollution,
sanitary and safety laws, and all Environmental Requirements) noncompliance with
which would have a material adverse effect on the Lessee's right to operate the
Facility, the Lessee's business or financial condition or the rights of the
Lessor in the Facility or would, in the opinion of the Lessor, involve a
material risk of any of the items enumerated in Section 6.11(i) through (iv),
and (d) all requirements contained in permits and licenses relating to the
Facility in effect from time to time during the Term. In connection therewith,
the Lessee shall (i) maintain the Facility in good operating condition, ordinary
wear and tear excepted, (ii) cause the Facility to continue to have the capacity
and functional ability to produce Product on a continuing basis, in normal
commercial operation, in a commercially efficient manner, (iii) comply with the
standards imposed by any insurance policies in effect at any time with respect
to the Facility or any part thereof, and (iv) bear the expense associated with
changes in permitting requirements relating to the Facility during the Term.
Section 6.02. Repair and Replacement. Except after the occurrence of an
Event of Loss, and except as provided below, the Lessee, at its own expense,
shall keep the Facility in good operating condition (reasonable wear and tear
excepted), and shall make all repairs, replacements and renewals of all
necessary or useful appliances, parts, instruments, accessories and
miscellaneous property of whatever nature (collectively, the "Parts") necessary
to maintain the Facility in good operating condition. The Lessee shall be
responsible for making (a) all structural and nonstructural repairs and
replacements to the Facility up to fifteen thousand dollars ($15,000) in the
aggregate in each Lease Year and (b) all repairs and replacements, with the
exception of (i) the greenhouse structure, including the ventilation system;
(ii) the heating system, including pumps, boilers, expansion vessels and piping;
(iii) the curtain system; (iv) the CO2 system; (v) the irrigation system; and
(vi) the cold storage facility; provided that notwithstanding anything contained
herein to the contrary, the Lessee shall be responsible for all repair and
replacements relating to normal wear and tear. The Lessor shall be responsible
for making all necessary structural and nonstructural repairs in excess of
fifteen thousand dollars ($15,000) in the aggregate in any Lease Year other than
repairs and replacements of items referred to in clause (b) above; provided,
however, that if such repairs or replacements are necessitated by the negligent
or willful acts of the Lessee, its employees, agents or invitees, then the cost
of such repairs or replacements shall be borne by the Lessee. In the ordinary
course of maintenance, service, repair or testing, the Lessee may remove any
Parts, but the Lessee shall cause such Parts to be replaced as promptly as
practicable. All replacement Parts shall be free and clear of all Liens except
Permitted Liens and shall be in at least as good operating condition as, and
shall have a value and utility at least equal to, the Parts replaced, assuming
such replaced Parts were in the condition and repair required to be maintained
by the terms hereof.
Section 6.03. Alterations Required by Law. The Lessor shall make such
Alterations to the Facility as may be required from time to time to meet the
requirements of and be in conformity with all applicable requirements of law, of
any court and of any Governmental Authority and the Lessee will maintain the
same in proper operating condition under such laws and requirements, except to
the extent Section 6.11 hereof shall apply.
Section 6.04. Plans and Specifications; Operating Manual. As soon as
practicable following the Effective Date, the Lessor shall provide to the Lessee
the Operating Manual and a set of Plans and Specifications (which shall in the
aggregate reflect the Facility as of the Effective Date). The Lessee shall
<PAGE>
maintain throughout the Term, and keep on file at the Facility, a current
Operating Manual and a set of Plans and Specifications (which shall in the
aggregate reflect all Parts incorporated in the Facility and all Alterations
made pursuant to this Article VI) with respect to the Facility. Upon any
expiration of the Term or the exercise of remedies pursuant to Article XIII
hereof, the Lessee shall deliver to the Lessor a complete set, current as of the
date of such return or exercise of remedies, of such Plans and Specifications
and all work drawings and similar documents with respect to the operation of the
Facility. The Plans and Specifications shall not be revised, amended or modified
in any manner which would adversely affect the operating capacity, cost
efficiency, utility, reliability or value of the Facility.
Section 6.05. Operational Alterations. In addition to the foregoing, the
Lessee, at its own expense (subject to Section 6.06 hereof), may from time to
time make such Alterations to the Facility as the Lessee may deem desirable in
the proper conduct of its business, which shall be approved by the Lessor in
advance, provided that such Alterations shall not adversely affect the operating
capacity, cost efficiency, utility, reliability or value of the Facility.
Section 6.06. Lessor's Option to Pay Costs of Alterations. If requested to
do so by the Lessee, the Lessor may at its option pay for any Alteration title
to which will vest or has vested in the Lessor pursuant to Section 6.08 hereof,
subject to agreement as to adjustments in Basic Rent in accordance with Section
3.01 hereof.
Section 6.07. Reports of Alterations. On or before March 15 of each
calendar year commencing in 1999 and on the date on which the Term shall expire,
the Lessee shall furnish the Lessor with a report stating the total cost (as
determined in accordance with the Lessee's normal accounting practices) of all
Alterations which are Nonseverable and which were not financed pursuant to
Section 6.06 hereof and which are not described in clause (i) or (ii) of Section
4(4).03(c) of Revenue Procedure 75-21 as modified by Revenue Procedure 79-48 and
which were made during the period from the date of this Lease Agreement to the
end of the preceding calendar year in the case of the first such report or
during the period from the end of the period covered by the last previous report
to one month prior to such report in the case of subsequent reports and briefly
describing all such Alterations. Each such report shall be accompanied by an
Officer's Certificate stating that no Alteration has been made that would
adversely affect the operating capacity, cost efficiency, utility, reliability
or value of the Facility or the ability of the Lessee to perform its obligations
hereunder.
Section 6.08. Title to Parts. Title to each Part (including any Alteration)
incorporated in the Facility pursuant to this Article VI shall without further
act vest in the Lessor and shall be deemed to constitute a part of the Facility
and be subject to this Lease Agreement in the following cases:
(a) such Part shall be in replacement of or in substitution for, and
not in addition to, any Part originally incorporated in the Equipment or
any Part title to which shall have vested in the Lessor pursuant to this
Section 6.08;
(b) such Part shall be required to be incorporated in the Facility
pursuant to the terms of Sections 6.02 and 6.03 hereof;
<PAGE>
(c) such Part shall be Nonseverable; or
(d) such Part shall be paid for by the Lessor.
If such Part or Parts are incorporated in the Facility pursuant to this
Article VI and are not within any of the categories set forth in clauses (a)
through (d) above, then title to such Part or Parts shall vest in the Lessee,
subject to the rights of the Lessor provided in Section 6.09 hereof.
All Parts (other than Parts the title to which is vested in the Lessee in
accordance with the preceding sentence) at any time removed from the Facility
shall remain the property of the Lessor, no matter where located, until such
time as such Parts shall be replaced by Parts that have been incorporated in the
Facility and that meet the requirements for replacement Parts specified in
Section 6.02 hereof. On or before March 15 of each calendar year commencing in
1999 and on the date on which the Term shall expire, the Lessee shall furnish
the Lessor with a report which provides a breakout of the total cost (as
determined in accordance with the Lessee's normal accounting practices) of all
Parts the title to which is vested in the Lessee and all parts the title which
is vested in the Lessor as provided in this Section 6.08 (other than those Parts
that were paid for by the Lessor) and which were incorporated in the Facility
during the period from the date of this Lease Agreement to the end of the
preceding calendar year in the case of the first such report or during the
period from the end of the period covered by the last previous report to one
month prior to such report in the case of subsequent reports and briefly
describing all such Parts. Each such report shall be accompanied by an Officer's
Certificate stating that no Part has been incorporated in the Facility that
would adversely affect the operating capacity, cost efficiency, utility,
reliability or value of the Facility or the ability of the Lessee to perform its
obligations hereunder. Immediately upon any replacement Part becoming
incorporated in the Facility as provided in Section 6.02 hereof, without further
act, (a) title to the removed Part shall thereupon vest in such Person as shall
be designated by the Lessee, free and clear of all rights of the Lessor, (b)
title to such replacement Part shall thereupon vest in the Lessor and (c) such
replacement Part shall become subject to this Lease Agreement and be deemed part
of the Facility for all purposes heeof to the same extent as the parts
originally incorporated in the Facility.
Section 6.09. Removal of Parts. All Parts incorporated in the Facility to
which the Lessee (or any other Person other than the Lessor) shall have title
pursuant to the provisions of Section 6.08 hereof may, (a) subject to any right
of the Lessor to use such Part as provided herein and (b) so long as such
removal shall be permitted by this Agreement and shall not result in any
violation of any law or governmental regulation and (c) so long as no Default or
Event of Default shall have occurred and be continuing, be removed at any time
by the Lessee (or such other Person) and shall be removed by the Lessee (or the
Lessee shall cause such other Person so to remove such Parts) prior to the
delivery of the Facility to the Lessor in accordance with the provisions of the
Lease Agreement, other than upon the termination of this Lease Agreement
pursuant to Article XIV hereof, and title to such Parts shall at all times
remain in the Lessee (or such other Person).
Section 6.10. Parts Free and Clear of Liens. Any Part title to which shall
vest in the Lessor pursuant to Section 6.08 hereof shall be free and clear of
all Liens except Permitted Liens.
<PAGE>
Section 6.11. Permitted Contests. If, to the extent and for so long as (a)
a test, challenge, appeal or proceeding for review of any applicable requirement
of law or of a Governmental Authority relating to the operation or maintenance
of the Facility shall be prosecuted in good faith by the Lessee or (b)
compliance with such requirement shall have been excused or exempted by a
nonconforming use permit, waiver, extension or forbearance, the Lessee shall not
be required to comply with such requirement but only if such test, challenge,
appeal, proceeding or noncompliance shall not, in the opinion of the Lessor,
involve a material risk of (i) foreclosure, sale, forfeiture or loss of, or
imposition of any Lien other than a Permitted Lien on, any part of the Facility
or of impairment of the operation of the Facility, (ii) extending the ultimate
imposition of such requirement beyond the termination of the Term (unless there
shall have been furnished indemnification satisfactory to the Lessor), (iii) any
material claim against the Lessor (unless there shall have been furnished
indemnification satisfactory to the Lessor) or (iv) the nonpayment of Rent.
Section 6.12. Operating Logs. The Lessee shall keep maintenance and repair
reports in sufficient detail to indicate the nature and date of major work done.
Such reports shall be kept on file by the Lessee at its offices or at the
Facility for as long as they would be kept by a prudent Lessor or Lessee of the
Facility (but in no event less than three (3) years following the end of the
Term), and shall be made available to the Lessor upon reasonable request.
Section 6.13. Return of Facility. Upon termination of this Agreement, the
Lessee, at its own expense, shall return the Facility to the Lessor by
surrendering the same into the possession of the Lessor free and clear of all
Liens and in the condition required by Section 6.01 hereof.
ARTICLE VII
IDENTIFICATION
--------------
The Lessee shall maintain throughout the Term in a prominent location at
each entrance to each of the buildings comprising the Facility at least one (1)
plate or other clear and durable marking stating "THE EQUIPMENT AND ALL RELATED
EQUIPMENT IN THIS FACILITY IS OWNED BY RIPE TOUCH GREENHOUSES, INC.," in letters
not less than one-half inch in height. On the Closing Date the Lessee shall
certify that it has complied with the preceding sentence. Except as provided
herein or as otherwise directed by the Lessor, the Lessee shall not allow the
name of any Person other than that of the Lessee to be placed on any Part of the
Facility as a designation that might reasonably be interpreted as a claim of
Lessorship or right to possession or use thereof.
ARTICLE VIII
INSURANCE
------------
Section 8.01. Coverage.
(a) Subject to subsection 8.01(b), the Lessee shall maintain:
<PAGE>
(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 Lessee against all claims for any bodily injury or death
of persons and for damage to or destruction of property occurring on,
in or about the Premises and the adjoining streets, sidewalks and
passageways and arising out of the use or occupation of the Premises
by Lessee. Coverages provided by the foregoing insurance policy shall
include (but not be limited to) all of the coverages commonly referred
to by the insurance industry as: Premises/Operations Liability;
Products/Completed Operations Liability; Lessors and Contractors
Protective Liability; Blanket Contractual Liability; Broad Form
Property Damage Liability; Personal Injury, Stop-Gap or Employers'
Contingent Liability; Explosion, Collapse and Underground Liability;
Automobile Liability, including coverage for Owned, Non-Owned, Hired,
or Borrowed Vehicles and "Mobile Equipment". The foregoing insurance
shall apply as primary insurance, irrespective of any insurance which
Lessor or Master Landlord may carry and shall include a "Cross
Liability" clause (Severability of Interests). The foregoing insurance
shall have a combined single limit of not less than $5,000,000, with
separate aggregate for product and general liability, which policy
shall be written on an occurrence basis;
(iv) (x) workers' compensation insurance or occupational
disability benefits insurance (in at least the statutory amounts) and
such other forms of insurance which the Lessee is required by law to
maintain or cause to be maintained, covering loss resulting from
injury, sickness, disability or death of the employees of the Lessee
and (y) employers' liability insurance in an amount not less than
$500,000 single limit;
<PAGE>
(v) comprehensive automobile liability insurance
against claims of personal injury (including bodily injury and death)
and property damage covering all owned, leased, non-owned and hired
vehicles with a $1,000,000.00 minimum limit per occurrence for
combined bodily injury and property damage liability; and
(vi) such other insurance with respect to the Facility
in such amounts and against such insurable hazards as is usually
carried by Persons operating similar properties in the same general
region, but any loss of the type customarily covered by the policies
described in subsections 8.01(a)(i), (ii) and (iii), whether actually
covered in whole or in part by such policies, shall be the
responsibility of the Lessee and the absence of such coverage shall
not relieve the Lessee from any of its obligations under any of the
Lease Documents;
provided, however, that the amount of insurance coverage specified in
subsections 8.01(a)(i) and (a)(ii) above with respect to the Facility shall
not in any event be less than the replacement cost of the Facility, as
determined by the Lessor, including agreed amount waiving coinsurance.
All insurance policies carried in accordance with Section 8.01 shall
be maintained with Florists Mutual Insurance Company or any other insurers
with a Best rating of A minus or better and a Best size rating of IX or
better (except for policies underwritten by Lloyds of London and approved
English companies acceptable to the Lessor) approved by the Lessor and not
disqualified from insuring risks in 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;
(2) Boiler and Machinery. . . . . . . . . . .$25,000;
and
(3) Public Liability. . . . . . . . . . . . .$25,000.
Notwithstanding anything to the contrary in this Article VIII, the
Lessee shall at all times ensure that the insurance it maintains with
respect to the Facility is not less extensive or inclusive in type or
amount of coverage than that maintained by it in accordance with its
standard corporate minimum practice with respect to other similar
facilities.
<PAGE>
(b) During the Term and unless the Lessor gives the Lessee sixty (60)
days prior written notice, the Lessor shall provide the insurance coverage
specified in subsection 8.01(a)(i) and 8.01(a)(ii) at the Lessor's cost.
Section 8.02. Policy Provisions. Any insurance policy maintained by the
Lessee pursuant to Section 8.01 hereof shall:
(a) specify Lessor, affiliates, the Lessor and Lessor's affiliates as
additional insured (the "Additional Insured"), as its respective interests
may appear;
(b) specify Fee Mortgagee as mortgagee and loss payee;
(c) provide, except in the case of public liability insurance and
workers' compensation insurance, that all loss or occurrence shall be
adjusted with the Lessee and Lessor, unless an Event of Default shall have
occurred and be continuing, in which case such loss or occurrence shall be
adjusted with the Lessor, and payable (x) in respect of payments not
exceeding $25,000, provided no Default or Event of Default shall have
occurred or be continuing, to the Lessee, and (y) in all other
circumstances, to the Lessor;
(d) include effective waivers by the insurer of all claims for
insurance premiums or commissions or (if such policies provide for the
payment thereof) additional premiums or assessments against any Additional
Insured;
(e) provide that in respect of the interests of the Additional
Insured, such policies shall not be invalidated by any action or inaction
of the Lessee or any other Person and shall insure the Additional Insured
regardless of, and any claims for the losses shall be payable
notwithstanding:
(i) the occupation or use of the Facility for purposes more
hazardous than permitted by the terms of the policy;
(ii) any foreclosure or other proceeding or notice of sale
relating to all or any portion of the Facility; or
(iii) any change in the title to or Lessorship of all or any
portion of the Facility.
(f) provide that such insurance shall be primary insurance and that
the insurers under such insurance policies shall be liable under such
policies without right of contribution from any other insurance coverage
effected by or on behalf of any Additional Insured under any other
insurance policies covering a loss that is also covered under the insurance
policies maintained by the Lessee pursuant to this Article VIII and shall
expressly provide that all provisions thereof, except the limits of
liability (which shall be applicable to all insureds as a group) and
liability for premiums (which shall be solely a liability of the Lessee),
shall operate in the same manner as if there were a separate policy
covering each insured;
<PAGE>
(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
Lessor, and Fee Mortgagee in all other material respects.
Section 8.03. Evidence of Insurance. The Lessee shall deliver to each of
the Additional Insured at least two (2) days before the Effective Date copies of
all policies of insurance required hereby and, on the date this Lease Agreement
is executed and on each December 31 thereafter during the Term, certificates of
insurance, copies of all policies of insurance evidencing the provisions
described in Section 8.02(a) hereof executed by the insurer by its duly
authorized agent, and a certification from the Lessee's insurance agent or
broker to the effect that all premiums required to have been paid have been paid
in full.
Section 8.04. No Duty of Lessor to Verify. No provision of this Article
VIII or any provision of any other Operative Document shall impose on the Lessor
any duty or obligation to verify the existence or adequacy of the insurance
coverage maintained by the Lessee nor shall the Lessor be responsible for any
representation or warranty made by or on behalf of the Lessee to any insurance
company or underwriter.
ARTICLE IX
LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE
-----------------------------------------
Section 9.01. Occurrence of Event of Loss. If an Event of Loss shall occur,
the Lessee shall give the Lessor prompt written notice of such occurrence and
the date thereof. Unless the Lessor agrees in writing within thirty (30) days
after such occurrence to restore, rebuild or replace the Facility in accordance
with the provisions contained in the definition of "Event of Loss," then this
Agreement shall terminate effective on the thirtieth day following the
occurrence of the Event of Loss. Any payments (except for payments under
insurance policies maintained by the Lessee other than pursuant to Article VIII
hereof) received at any time by the Lessor or by the Lessee from any
Governmental Authority or other Person as a result of the occurrence of an Event
of Loss shall be retained by the Lessor or promptly paid to the Lessor by the
Lessee; provided, however, that so long as no Default or Event of Default shall
have occurred and be continuing, the Lessee may retain any proceeds of
requisition of use payments made by any Governmental Authority and attributable
to the Facility for a period equal to the then current Term.
<PAGE>
Section 9.02. Repair of Loss or Destruction.
(a) In the event of loss or destruction of all or a portion of the
Facility which (x) does not constitute an Event of Loss or (y) constitutes
an Event of Loss but the Lessor agrees to restore, rebuild or replace the
Facility, then the Lessor shall give prompt notice thereof to the Lessee,
and the Lessor, at its own cost and expense, shall promptly repair, replace
and rebuild the Facility, at least to the extent of the value and as nearly
as practicable to the character of the Facility existing immediately prior
to such occurrence; provided, however, that the Lessee shall pay the
difference, if any, between the insurance proceeds received by the Lessor
as a result of such loss or destruction and the costs and expenses incurred
by the Lessor in restoring, rebuilding or replacing the Facility if the
loss or destruction thereof resulted from the negligent, willful, reckless
or wanton act or failure to act of the Lessee, its employees, agents,
invitees or independent contractors.
(b) Except as provided in Section 9.01, this Agreement shall not
terminate or be affected in any manner by reason of the destruction or
damage in whole or in part of the Facility, or by reason of the
untenantability of the Facility, and the Rent reserved in this Agreement
and all other charges payable hereunder shall be paid by the Lessee in
accordance with the terms, covenants and conditions of this Agreement,
without abatement, diminution or reduction.
ARTICLE X
INTEREST CONVEYED TO LESSEE
---------------------------
This Lease Agreement is an agreement of lease and does not convey to the
Lessee any right, title or interest in or to the Facility except as an Lessee.
ARTICLE XI
ASSIGNMENT AND SUBLEASE; LOCATION
---------------------------------
Section 11.01. Assignment and Sublease. The Lessor shall be permitted to
assign this Agreement and any and all of its right, title or interest in, to or
under this Agreement, voluntarily or by operation of law, without the consent of
the Lessee. The Lessee may not sublease the Facility or any part thereof or
assign any of its rights or interest hereunder without the prior written consent
of the Lessor; provided, however, that any such sublease or assignment by the
Lessee to which the Lessor may, in its discretion, grant its consent (a) shall
not release the Lessee from any of its obligations or liabilities of any nature
whatsoever arising under this Agreement; (b) shall be expressly subject to and
subordinate to this Agreement; (c) shall be accompanied by an unconditional
guarantee of the Lessee's obligations under the Lease Agreement issued by a
party having financial strength satisfactory to the Lessor; and (d) shall not be
permitted if a Default or Event of Default has occurred and is continuing.
Section 11.02. Location. The Lessee shall not remove, or permit to be
removed, the Plant or Equipment or any part thereof from the Site without the
prior written consent of the Lessor, except that the Lessee or any other Person
may remove any Part in accordance with the provisions of Sections 6.02 and 6.09
hereof.
Section 11.03. Mortgaging the Estate of Lessor.
(a) Without limiting the generality of Section 11.01(a) hereof, Lessee
acknowledges receipt of a copy of the Deed of Trust and agrees that, to the
extent provided therein, any notice, demand or action which Lessor may give
or take hereunder may be given or taken by Lender or any other Fee
Mortgagee with the same force and effect as if given or taken by Lessor,
and that this Lease Agreement is and shall be subordinate to the Deed of
Trust and to any other such pledge, conveyance, deed of trust, assignment,
mortgage or ground lease now existing or hereafter executed (herein, a "Fee
Mortgage"), with no further instrument of subordination being necessary,
provided Fee Mortgagee may subordinate the same to this Lease Agreement by
executing and recording a written instrument including language to that
effect.
(b) Lessee hereby agrees that within ten (10) days after request from
Lessor, or from any Fee Mortgagee, Lessee shall execute a subordination,
non-disturbance and attornment agreement in a commercially reasonable form
subordinating this Lease Agreement to the interest of Fee Mortgagee.
(c) The holder or beneficiary of any Fee Mortgage is herein referred
to as a "Fee Mortgagee". The term "Fee Mortgagee" as used in this Lease
Agreement shall also include the "Fee Mortgagee" as that term is defined in
the Master Lease.
(d) Without limiting the effect of the preceding provisions of this
Article XI, Lessee, in the event of any foreclosure or deed in lieu of
foreclosure or other final conveyance and transfer of Lessor's interest as
aforesaid, shall, upon request of the grantee thereof, recognize and attorn
to the grantee thereof as "landlord" under this Lease Agreement.
<PAGE>
ARTICLE XII
INSPECTION AND REPORTS
----------------------
Section 12.01. Condition and Operation. The Lessor and its authorized
representatives (the "Inspecting Parties") may inspect, at its own expense, the
Facility. After an Event of Default has occurred and is continuing, the
Inspecting Parties may also inspect, at their expense, the books and records of
the Lessee relating to the Facility and make copies and abstracts therefrom. The
Lessee shall furnish to the Inspecting Parties statements accurate in all
material respects regarding the condition and state of repair of the Facility,
all at such times and as often as may be reasonably requested. None of the
Inspecting Parties shall have any duty to make any such inspection or inquiry.
To the extent permissible, the Lessee shall prepare and file in timely fashion,
or, where the Lessor shall be required to file, the Lessee shall prepare and
deliver to the Lessor within a reasonable time prior to the date for filing, any
reports with respect to the condition or operation of the Facility that shall be
required to be filed with any Governmental Authority.
Section 12.02. Annual Insurance Report. On or before March 15 of each year
during the Term, and within ten (10) days after any material adverse change in
the information set forth in the certificates provided pursuant to Section 8.03
hereof, the Lessee shall deliver to the Lessor a report of a Responsible Officer
of the Lessee setting forth (a) a complete list of all insurance policies
obtained and maintained by the Lessee pursuant to Article VIII, (b) stating
whether such insurance policies comply with the requirements of Article VIII and
(c) stating whether all premiums then due thereon have been paid.
Section 12.03. Financial Reports. During the Term, the Lessee shall provide
to the Lessor the following:
(a) As soon as available, and in any event within thirty (30) days
after the end of each month, unaudited financial statements for the
Facility, including a balance sheet as at the end of such month and
statements of income and retained earnings and of cash flow for such month
and for the period from the beginning of the Lease Year. There shall be
included with such financial statements (i) a certificate of a Responsible
Officer stating in effect that, to the best of his knowledge and belief,
such financial statements are true and correct and have been prepared in
accordance with generally accepted accounting principles, consistently
applied, subject to changes resulting from year-end adjustments and (ii) a
certificate of a Responsible Officer setting forth in detail reasonably
satisfactory to the Lessor a calculation of Cash Flow of the Facility for
such month and for the Lease Year through the end of such month.
(b) In addition, as soon as available and in any event within one
hundred twenty (120) days after the end of each Lease Year, financial
statements for the Facility, including a balance sheet as of the end of
such Lease Year, and statements of income and retained earnings and of cash
flow for such Lease Year, prepared in accordance with generally accepted
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accounting principles consistently applied and accompanied by the audit
opinion of a recognized firm of independent certified public accountants
acceptable to the Lessor. There shall be included with such financial
statements a certificate of a Responsible Officer setting forth in detail
reasonably satisfactory to the Lessor a calculation of Cash Flow of the
Facility for such Lease Year. The Lessor shall have the right at any time
to audit the certificate of Cash Flow required to be provided hereunder.
Such audit shall be performed by an independent certified public accounting
firm selected by the Lessor and shall be at the Lessor's expense, unless
such audit results in the upward adjustment of Cash Flow for any Lease Year
in an amount equal to two percent (2%) or more of the Cash Flow reflected
on the certificate provided to the Lessor by the Lessee, in which case the
cost of such audit shall be paid by the Lessee and shall not be considered
Greenhouse Expenses. Any payments required to be made as a result of any
adjustment to the Cash Flow shall be made within ten (10) Business Days
following receipt of the results of the audit.
(c) The Lessor shall have the right to review the books and records of
the Lessee relating to the Facility for the purpose of verifying the
accuracy of the financial statements and calculations of Cash Flow provided
pursuant to Sections 12.03(a) and (b). and
(d) On or before January 31 of each year during the Term (commencing
on January 31, 1999), a certificate of a Responsible Officer of the Lessee
stating that such Responsible Officer has made or caused to be made a
review of all transactions relating to the Facility and the financial and
operating condition of the Lessee for the immediately preceding Lease Year
and that, based on such review, no Default or Event of Default has occurred
during such year (or, if a Default or Event of Default shall have occurred,
specifying the nature thereof and the action the Lessee has taken or
prepares to take with respect thereto).
Section 12.04. Budget Approval. No later than the thirty (30) days prior to
the commencement of any Lease Year, the Lessee shall present to the Lessor, its
budget for the Facility for the following Lease Year, prepared in satisfactory
detail.
Section 12.05. Liability. The Lessee shall, promptly after obtaining
knowledge thereof, give prompt written notice to the Lessor of each accident
likely to result in material damages or claims for material damages against the
Lessee or any other Person with respect to the Facility in excess of $100,000
(if such claims and damages are insured) or $25,000 (if not insured), and
occurring in whole or in part (whenever asserted) during the Term, and on
request shall furnish to the Lessor information as to the time, place and nature
thereof, the names and addresses of the parties involved, any Persons injured,
witnesses and Lessors of any property damaged and such other information as may
be known to it, and shall promptly upon request furnish the Lessor with copies
of all correspondence, papers, notices and documents whatsoever received by the
Lessee in connection therewith.
Section 12.06. Liens. The Lessee shall promptly, and in no event later than
five (5) Business Days after it shall have obtained knowledge of the attachment
of any Lien that it shall be obligated to discharge or eliminate pursuant to
Article V hereof, notify the Lessor of the attachment of such Lien and the full
particulars thereof unless the same shall have been removed or discharged by the
Lessee.
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ARTICLE XIII
EVENTS OF DEFAULT
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The following events shall constitute Events of Default (whether any such
event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any Governmental
Authority):
(a) the Lessee shall fail to make any payment of Rent within five (5)
days after the same shall have become due; or
(b) the Lessee shall fail to make any payment of any other amount
payable hereunder within ten (10) days after notice of such failure from
the Lessor; or
(c) the Lessee shall fail to perform or observe any covenant,
condition or agreement to be performed or observed by it under Article VIII
or Article XI hereof within five (5) days after notice of such failure from
the Lessor; or
(d) the Lessee shall fail to perform or observe any covenant,
condition of agreement (not included in clause (a), (b) or (c) of this
Article XIII) to be performed or observed by it hereunder or under any
other Operative Document and such failure shall continue unremedied for a
period of thirty (30) days after written notice thereof from the Lessor; or
(e) the filing by the Lessee of any petition for dissolution or
liquidation of the Lessee or the commencement by the Lessee of a voluntary
case under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or the Lessee shall have consented to the entry of
an order for relief in an involuntary case under any such law, or the
failure of the Lessee or generally to pay its debts as such debts become
due (within the meaning of the Bankruptcy Reform Act of 1978, as amended),
or the failure by the Lessee promptly to satisfy or discharge any
execution, garnishment or attachment of such consequence as will impair its
ability to carry out its obligations under this Agreement, or the
appointment of or taking possession by a receiver, custodian or trustee (or
other similar official) for the Lessee or any substantial part of its
property, or a general assignment by the Lessee for the benefit of its
creditors, or the entry by the Lessee into an agreement of composition with
its creditors, or the Lessee shall have taken any corporate action in
furtherance of any of the foregoing; or the filing against the Lessee of an
involuntary petition in bankruptcy which results in an order for relief
being entered or, notwithstanding that an order for relief has not been
entered, the petition is not dismissed within forty-five (45) days of the
date of the filing of the petition, or the filing under any law relating to
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bankruptcy, insolvency or relief of debtors of any petition against the
Lessee for reorganization, composition, extension or arrangement with
creditors which either (i) results in a finding or adjudication of
insolvency of the Lessee or (ii) is not dismissed within forty-five (45)
days of the date of the filing of such petition; or
(f) any representation or warranty by the Lessee in any Operative
Document or in any certificate or document delivered pursuant thereto shall
have been materially false when made; or
(g) the occurrence of an Event of Default under the Line of Credit
Facility Agreement.
ARTICLE XIV
ENFORCEMENT
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Section 14.01. Remedies. Upon the occurrence of any Event of Default and at
any time thereafter so long as the same shall be continuing, the Lessor may, at
its option, by notice to the Lessee, declare this Lease Agreement to be in
default, and at any time thereafter the Lessor may do one or more of the
following as the Lessor in its sole discretion shall determine:
(a) the Lessor may, by notice to the Lessee, rescind or terminate this
Lease Agreement;
(b) the Lessor may (i) demand that the Lessee, and the Lessee shall
upon the written demand of the Lessor, return the Facility promptly to the
Lessor in the manner and condition required by, and otherwise in accordance
with all of the provisions of, Article VI hereof as if the Facility were
being returned at the end of the Term, and the Lessor shall not be liable
for the reimbursement of the Lessee for any costs and expenses incurred by
the Lessee in connection therewith, (ii) enter upon the Site and take
immediate possession of (to the exclusion of the Lessee) the Facility or
remove the Plant or Equipment or both, by summary proceedings or otherwise,
all without liability to the Lessee for or by reason of such entry or
taking of possession, whether for the restoration of damage to property
caused by such taking or otherwise and (iii) offer employment to the
Lessee's employees;
(c) the Lessor may sell all or any part of the Equipment and its
rights to the Plant and the Site at public or private sale, as the Lessor
may determine, free and clear of any rights of the Lessee and without any
duty to account to the Lessee with respect to such action or inaction or
any proceeds with respect thereto;
(d) the Lessor may lease to others all or any part of the Facility as
the Lessor in its sole discretion may determine, free and clear of any
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rights of the Lessee and without any duty to account to the Lessee with
respect to such action or for any proceeds with respect to such action or
inaction, except that the Lessee's obligation to pay Rent with respect to
the Facility for periods commencing after the Lessee shall have been
deprived of use of the Facility pursuant to this paragraph (d) shall be
reduced by the net proceeds, if any, actually received by the Lessor from
leasing the Facility to any Person other than the Lessee for the same
periods or any portion thereof;
(e) the Lessor may demand that the Lessee assign to the Lessor (or to
a third party designated by the Lessor to operate the Facility) all of the
Lessee's rights under any agreement or contract entered into by the Lessee
in connection with the operation of the Facility, including, without
limitation, the Management Agreement, and the Lessee shall execute and
deliver to the Lessor (or such third party) such assignments or other
instruments as the Lessor may reasonably request in connection therewith;
and
(f) the Lessor may exercise any other right or remedy that may be
available to it under applicable law or proceed by appropriate court action
to enforce the terms hereof or to recover damages for the breach hereof.
Section 14.02. Survival of Lessee's Obligations. Except as provided in
subsection 14.01(d) above, no termination of this Lease Agreement, in whole or
in part, or repossession of all or any portion of the Facility or exercise of
any remedy under Section 14.01 hereof shall, except as specifically provided
therein, relieve the Lessee of any of its liabilities and obligations hereunder.
In addition, the Lessee shall be liable, except as otherwise provided above, for
any and all unpaid Rent due hereunder before, during or after the exercise of
any of the foregoing remedies, including all reasonable legal fees and expenses
and other costs and expenses incurred by the Lessor by reason of the occurrence
of any Event of Default or the exercise of the Lessor's remedies with respect
thereto, and including all costs and expenses incurred in connection with the
return of the Facility in the manner and condition required by, and otherwise in
accordance with the provisions of, Article VI hereof as if such Facility were
being returned at the end of the Term.
Section 14.03. Remedies Cumulative. To the extent permitted by, and subject
to the mandatory requirements of, applicable law, each and every right, power
and remedy herein specifically given to the Lessor or otherwise in this Lease
Agreement shall be cumulative and shall be in addition to every other right,
power and remedy herein specifically given or now or hereafter existing at law,
in equity or by statute, and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from time to
time and as often and in such order as may be deemed expedient by the Lessor,
and the exercise or the beginning of the exercise of any power or remedy shall
not be construed to be a waiver of the right to exercise at the same time or
thereafter any right, power or remedy. No delay or omission by the Lessor in the
exercise of any right, power or remedy or in the pursuit of any remedy shall
impair any such right, power or remedy or be construed to be a waiver of any
default on the part of the Lessee or to be an acquiescence therein. No express
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or implied waiver by the Lessor of any Event of Default shall in any way be, or
be construed to be, a waiver of any future or subsequent Event of Default.
ARTICLE XV
RIGHT TO PERFORM FOR LESSEE
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If the Lessee shall fail to perform or comply with any of its agreements
contained herein, the Lessor may perform or comply with such agreement, and the
amount of such payment and the amount of the expenses of the Lessor incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at the Overdue
Rate, shall be payable by the Lessee upon demand.
ARTICLE XVI
INDEMNITIES
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Section 16.01. General Indemnity.
(a) Payment of Expenses by Lessee. The Lessee shall pay, and shall
indemnify and hold harmless each Indemnitee from and against, any and all
liabilities, obligations, losses, damages, penalties, claims, actions,
suits, costs, expenses and disbursements, including legal fees and
expenses, of whatsoever kind and nature (collectively, "Expenses" and
individually, an "Expense"), imposed on, incurred by or asserted against
any Indemnitee (whether because of an action or omission by such Indemnitee
or otherwise), in any way relating to or arising out of the occupation and
operation of the Facility by the Lessee and the production and sale of the
Product.
(b) Exceptions. The indemnities contained in Section 16.01(a) hereof
with regard to any particular Indemnitee shall not extend to any Expense
(i) resulting from the willful misconduct or gross negligence of such
Indemnitee (other than willful misconduct or gross negligence imputed to
such Indemnitee solely by reason of its interest in the Facility), (ii)
resulting solely from the breach by such Indemnitee of any of its
representations, warranties or covenants in any of the Lease Documents,
(iii) unless an Event of Default shall have occurred and be continuing and
Lessor shall be exercising remedies with respect thereto, to the extent
such Expense shall relate to acts or events not attributable to the Lessee
that occur after the Term, (iv) so long as no Event of Default shall have
occurred and be continuing, to the extent attributable solely to the
disposition or attempted disposition of the Facility or any interest in any
thereof, by or on behalf of any Indemnitee, other than a transfer of the
Facility pursuant to Article XIV hereof or as required by any Lease
Documents, (v) constituting Fees, Taxes or Other Charges or (vi) which
constitutes internal, overhead expenses of the Indemnitee.
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(c) Notice. If any party entitled to indemnity under this Section
16.01 or the Lessee shall have received written notice of any liability
indemnified against under this Section 16.01, it shall give prompt notice
thereof to the Lessee, or the party entitled to be indemnified, as the case
may be, but the failure to give such notice shall not affect any obligation
under this Section 16.01. In case any action, including any investigatory
proceeding, shall be brought against, or commenced with respect to, any
Indemnitee in respect of which the Lessee is required to indemnify such
Indemnitee pursuant to the provisions of this Section 16.01, the Lessee
shall have the right to assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnitee and the
payment of all expenses. In the event the Lessee assumes the defense of any
such action, any Indemnitee shall have the right to employ separate counsel
in such action and participate therein, but the fees and expenses of such
counsel shall be at the expense of such Indemnitee, unless (i) the
employment of such counsel has been specifically authorized by the Lessee,
or (ii) the named parties to such action (including any impleaded parties)
include both such Indemnitee and the Lessee and representation of such
Indemnitee and the Lessee by the same counsel would be inappropriate under
applicable standards of professional conduct due to actual or potential
conflicting interests between them or (iii) the counsel employed by the
Lessee and satisfactory to such Indemnitee has advised such Indemnitee, in
writing, that such counsel's representation of such Indemnitee would be
likely to involve such counsel in representing differing interests which
could adversely affect either the judgment or loyalty of such counsel to
such Indemnitee, whether it be a conflicting, inconsistent, diverse or
other interest (in which case the Lessee shall not have the right to assume
the defense of such action on behalf of such Indemnitee; it being
understood, however, tht the Lessee shall not, in connection with any one
such action, or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys, and of any local counsel retained by such
firm, at any one time for each such Indemnitee, which firm shall be
designated in writing by such Indemnitee). The Lessee shall not be liable
for any settlement of any such action effected without its consent, but if
settled with the consent of the Lessee or if there be a final judgment,
beyond further review or appeal, in any such action, the Lessee agrees to
indemnify and hold harmless any Indemnitee from and against any loss or
liability by reason of such settlement or judgment.
(d) Payment. The Lessee covenants and agrees to pay all amounts
required to be paid under this Section 16.01 on demand by the relevant
Indemnitee.
<PAGE>
Section 16.02. Fees, Taxes and Other Charges.
(a) Payment by Lessee.
(i) The Lessee hereby agrees to pay and assume
liability for, and on written demand to indemnify, protect, defend,
save and hold harmless each Indemnitee from and against, any and all
governmental or quasi-governmental fees (including without limitation
license and registration fees), taxes (including without limitation
gross receipts, franchise, sales, use, property, real or personal,
tangible or intangible), interest equalization and stamp taxes,
assessments, levies, imposts, duties, charges or withholdings of any
nature whatsoever, together with any and all penalties, fines or
interest thereon ("Fees, Taxes and Other Charges") imposed against any
Indemnitee, the Lessee or the Facility or any portion thereof by any
Federal, state or local governmental or taxing authority in the United
States of America or by any foreign government or any subdivision or
taxing authority thereof, upon or with respect to the occupation and
operation of the Facility by the Lessee and the production and sale of
the Product.
(ii) Notwithstanding anything to the contrary set forth
above, the provisions of this Section 16.02 shall not apply to:
(A) Fees, Taxes and Other Charges on, or measured in whole
or in part by (y) the net income or gross income of an Indemnitee
or (z) the franchise, capital, conduct of business, net worth or
tax preference of an Indemnitee;
(B) Fees, Taxes and Other Charges to the extent on, levied
on, or measured by, any fees or compensation received by an
Indemnitee for services rendered in connection with this
Agreement;
(C) Fees, Taxes or Other Charges which result from any
Indemnitee engaged in activities not related to this Agreement;
(D) so long as no Event of Default has occurred and is
continuing, Fees, Taxes or other Charges imposed as a result of
the voluntary sale, transfer, assignment or other disposition of
any interest in the Facility by an Indemnitee, if such
disposition shall not be pursuant to or in connection with
Article XIV hereof;
(E) Fees, Taxes or Other Charges imposed solely with respect
to any period after the end of the Term unless an Event of
Default has occurred and is continuing and the Lessor shall be
exercising remedies with respect thereto;
<PAGE>
(F) Fees, Taxes or Other Charges imposed as the result of
any transfer or disposition of any interest in the Facility by
any Indemnitee resulting from bankruptcy or other proceedings for
the relief of debtors (voluntary or involuntary) in which the
transferor is the debtor; or
(G) Fees, Taxes and Other Charges imposed solely as a result
of the willful misconduct or gross negligence of the Indemnitee.
(iii) In case any report or return is required to be made
with respect to any obligations of the Lessee under this Section 16.02
or arising out of this Section 16.02, the Lessee shall, to the extent
permitted by law, either make such report or return in such manner
(including the making thereof in the Lessor's name) as will show the
Lessorship of the Equipment in the Lessor and send a copy of such
report or return to the Lessor, or shall notify the Lessor of such
requirement and make such report or return in such manner as shall be
reasonably satisfactory to the Lessor. Each Indemnitee agrees that it
will promptly forward to the Lessee any notice, bill or any advice
received by it concerning any such Fees, Taxes and Other Charges and
will, at Lessee's expense, use its best efforts and take such lawful
and reasonable steps as may be proposed by the Lessee in writing to
minimize any of the same for which the Lessee is responsible under
this Section 16.02.
(iv) The amount which the Lessee shall be required to
pay to or for the account of any Indemnitee with respect to any Fees,
Taxes and Other Charges which are subject to indemnification under
this Section 16.02 shall be an amount sufficient to restore the
Indemnitee to the same position the Indemnitee would have been in had
such Fees, Taxes and Other Charges not been incurred or imposed. If
the payment by the Lessee under this Section 16.02 of an amount equal
to such Fees, Taxes and Other Charges would be more or less than the
amount which would be required to make such Indemnitee whole as a
result of any tax effect to an Indemnitee in connection with such
payment of such Fees, Taxes or Other Charges, including, without
limitation (A) the inclusion of any payment to be made by the Lessee
under this Section 16.02 in the taxable income of any Indemnitee in
one year and the deduction of the Fees, Taxes and Other Charges with
respect to which such payment is made from the taxable income of such
Indemnitee in a different year, (B) the nondeductibility of such Fees,
Taxes and Other Charges from the taxable income of such Indemnitee or
(C) the anticipated realization by such Indemnitee in a different year
of tax benefits resulting from the transaction giving rise to such
Fees, Taxes and Other Charges, the amount of the indemnity to be paid
<PAGE>
by the Lessee shall be adjusted to an amount which (after taking into
account all tax effects on such Indemnitee, any loss of use of money
resulting from differences in timing between the inclusion of such
indemnity in the taxable income of such Indemnitee and the anticipated
realization by such Indemnitee of tax benefits resulting from the
transaction to which such indemnity is related and the present value
of any anticipated future tax benefits to be realized by such
Indemnitee as a result of deducting such Fees, Taxes and Other Charges
or as a result of the transaction giving rise thereto) will be
sufficient to place the Indemnitee in the same position such
Indemnitee would have been inhad such Fees, Taxes and Other Charges
not been imposed. All computations for purposes hereof shall be based
on tax rates in effect on the date payment pursuant to this Section
16.02 is made. Computations involving the loss of use of money or
calculations of present value shall be based on the Overdue Rate as
adjusted for applicable income tax effects and compounded monthly on
the Basic Rent Payment Dates. Each Indemnitee shall in good faith use
reasonable efforts in filing its tax returns and in dealing with
taxing authorities to seek and claim all tax benefits available with
respect to items referred to herein.
(b) Refunds. If any Indemnitee shall obtain a refund or credit of all
or any part of any Fees, Taxes and Other Charges, payment of or indemnity
for which shall have been made by the Lessee pursuant to this Section
16.02, such Indemnitee shall, unless a Default or an Event of Default shall
have occurred and be continuing, promptly pay to the Lessee (i) the amount
of such refund or credit (together with any interest paid to such
Indemnitee with respect to such refund or credit) plus (ii) an amount equal
to all tax benefits realized by such Indemnitee as the result of the
payment of the amounts referred to in clause (i) above and this clause
(ii).
Section 16.03. Survival. The obligations of the Lessee under this Article
XVI shall survive the termination of this Agreement and are expressly made for
the benefit of and shall be enforceable by any Indemnitee, separately or
together, without declaring this Agreement to be in default and notwithstanding
any assignment by the Lessor of this Lease Agreement or any of its rights
hereunder. The extension of applicable statutes of limitations by an Indemnitee
or the Lessee shall not affect the survival of the Lessee's or any Indemnitee's
obligations, as the case may be, under this Article XVI. The obligations of the
Indemnitees shall survive the termination of this Lease Agreement. All payments
required to be paid pursuant to Article XVI shall be made directly to, or as
otherwise requested by, the Indemnitee entitled thereof, upon written demand by
such Indemnitee. All such written demands shall specify the amounts payable and
the facts upon which the right to indemnification is based.
Section 16.04. Waiver. The Lessee hereby waives all tort claims and causes
of action in tort it may have at any time against any Indemnitee in any way
relating to or arising from or alleged to relate to or arise from any Operative
Document, except with regard to circumstances constituting an exception to the
Lessee's obligation to indemnify pursuant to Section 16.01(b) hereof.
<PAGE>
ARTICLE XVII
COVENANTS AND REPRESENTATIONS OF LESSEE
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Section 17.01. Operation of Facility. During the Term, the Lessee shall use
its best efforts to operate the Facility (including the sowing, growing,
harvesting and packaging of the Product) at its fullest productive capacity as
would a prudent commercial greenhouse Lessee under the same or similar
circumstances and to market the Product with substantially the same effort and
on the same terms as used for product produced at other facilities operated by
the Lessee or its Affiliates. The Lessee hereby agrees to give prompt written
notice to the Lessor if at any time the Lessee becomes aware that the Facility
is not being operated at its fullest productive capacity. The Lessee further
agrees that it will not use the Facility for any purpose other than the
production of tomatoes or, with the Lessor's consent, any other agricultural
product.
Section 17.02. Affiliated Transactions.
(a) In the event the Lessee uses the Facility to pack, store, grade,
separate or distribute Product grown in greenhouses other than the Facility
owned, leased, operated or managed by the Lessee, then the Lessee agrees to
charge such greenhouses a fee per pound that is satisfactory to, and
approved in advanced by, the Lessor plus an amount equal to at least the
Lessee's cost for boxes and packing materials. Without the prior written
consent of the Lessor, the Lessee shall not use the Facility for any
product other than the Product.
(b) In the event the Lessee purchases any equipment, supplies or other
items from any Affiliate, such purchases shall be on terms no less
favorable than those available from unaffiliated parties.
(c) The Lessee shall provide to the Lessor on a monthly basis in
detail satisfactory to the Lessor a list of all Product handled by the
Facility for greenhouses pursuant to subsection 17.02(a) and all items
purchased from Affiliates and the purchase price thereof pursuant to
subsection 17.02(b).
Section 17.03. Waiver of Operating or Efficiency Standards. Lessee shall
use its reasonable best efforts to assist Lessor in obtaining and maintaining
all necessary permits and approvals for the operation of the greenhouse and
shall fully cooperate with Birchwood in the event Birchwood seeks a waiver of
the operating or efficiency standards for a "Qualifying Facility" under the
Federal Power Act or the Federal Energy Regulatory Commission's regulations, as
any of the foregoing may be now or hereafter amended.
Section 17.04. Representations and Warranties of Lessee. Lessee hereby
warrants and represents to Lessor, Master Landlord, and each Fee Mortgagee that:
(a) Lessee has not entered into any contract or agreement with other
Persons regarding the provision of thermal supply relating to the
Greenhouse Facility, and Lessee will not, without the consent of Lessor,
enter into any successor or additional contracts for thermal energy or
steam supply to the Greenhouse Facility.
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(b) There is not pending or threatened against Lessee or any of its
Affiliates, and Lessee knows of no facts or circumstances that might give
rise to, any civil, criminal or administrative action, suit, demand, claim,
hearing, notice or demand letter, notice of violation, environmental lien,
investigation, or proceeding relating in any way to Environmental
Requirements.
(c) Neither this Lease Agreement nor any other instrument, document,
agreement, financial statement, financial projections or certificate
furnished to Lessor or Master Landlord by or on behalf of Lessee or any
affiliate of Lessee in connection herewith contains an untrue statement of
a material fact or omits to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading or omits to state any fact which may in the future
have a material adverse effect on the financial condition or business
prospects of Lessee.
ARTICLE XVIII
MISCELLANEOUS
-------------
Section 18.01. Further Assurances. The Lessee shall cause the Lease
Documents and any amendments and supplements to any of them (together with any
other instruments, financing statements, continuation statements, records or
papers necessary in connection therewith) to be recorded and/or filed and
rerecorded and/or refiled in each jurisdiction as and to the extent required by
law in order to, and shall take such other actions as may from time to time be
necessary to, establish, perfect and maintain the Lessor's right, title and
interest in and to the Facility, not subject to any Liens except Permitted
Liens. The Lessee will promptly and duly execute and deliver to the Lessor such
documents and assurances and take such further action as the Lessor may from
time to time reasonably request in order to carry out more effectively the
intent and purpose of the Lease Documents and to establish and protect the
rights and remedies created or intended to be created in favor of the Lessor, to
establish, perfect and maintain the Lessor's right, title and interest in and to
the Facility, including without limitation if requested by the Lessor at the
expense of the Lessee, the recording or filing of counterparts or appropriate
memoranda of the Lease Documents, or of such financing statements or other
documents with respect thereto as the Lessor may from time to time reasonably
request, and the Lessor agrees promptly to execute and deliver such of the
foregoing financing statements or other documents as may require execution by
the Lessor.
Section 18.02. Quiet Enjoyment. The Lessor covenants that it will not
interfere in the Lessee's quiet enjoyment of the Facility hereunder during the
Term, so long as (a) the Lessee is in compliance with each term and condition
hereof and (b) no Event of Default has occurred or is continuing.
Section 18.03. Notices. Unless otherwise specifically provided herein, all
notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person shall be in writing and any such notice shall become effective three (3)
Business Days after being deposited in the mails, certified or registered with
appropriate postage prepaid for first-class mail or, if delivered by hand or in
the form of a telex or telegram, when received, and shall be directed to the
Address of such Person.
<PAGE>
Section 18.04. Severability. Any provision of this Agreement that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the Lessee hereby waives any provision of law that renders
any provision hereof prohibited or unenforceable in any respect.
Section 18.05. Amendment. Neither this Agreement nor any of the terms
hereof may be terminated, amended, supplemented, waived or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or modification
shall be sought.
Section 18.06. Headings. The Table of Contents and headings of the various
Articles and Sections of this Agreement are for convenience of reference only
and shall not modify, define or limit any of the terms or provisions hereof.
Section 18.07. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
Section 18.08. Governing Law. This Agreement has been delivered in, and
shall in all respects be governed by, and construed in accordance with, the laws
of the Commonwealth of Virginia applicable to agreements made and to be
performed entirely within such State, including all matters of construction,
validity and performance.
Section 18.9. Binding Effect; Successors and Assigns; Survival. The terms
and provisions of this Agreement, and the respective rights and obligations
hereunder of the Lessor and the Lessee, shall be binding upon their respective
successors and assigns (including, in the case of the Lessor, any Person to whom
the Lessor may transfer all or any portions of the Facility), and inure to the
benefit of their respective permitted successors and assigns. The obligations of
the Lessee under this Agreement shall survive the termination of this Agreement.
Section 18.10. Divisible Lease Agreement. It is the intention of the
parties hereto that this Agreement shall constitute the lease of both personal
property and real property and, to such extent, shall be deemed divisible. It is
the intention and understanding of the parties hereto that all the Equipment
constitutes personal property and all the Site and Plant constitute real
property for all purposes of this Lease Agreement and the other documents
referred to herein and for all purposes of bankruptcy laws of the United States;
provided, however, that nothing herein shall affect the rights and obligations
of Lessor or Lessee under Section 18.01 hereof, it being understood that no
filing, refiling, recording, re-recording, registration or re-registration in
any office for the filing, recording or registration of interests in real
property shall constitute or be deemed to constitute evidence or an admission by
Lessor or Lessee that the Equipment is real property.
Section 18.11. Effectiveness. This Agreement shall become effective upon
the date (the "Effective Date") the last of the following events occurs:
(a) the Closing Date;
<PAGE>
(b) the receipt of any necessary consent of the Lessor's lenders under
the Lessor's financing documents; and
(c) upon Notice of Substantial Completion (as defined in the General
Contractor's Agreement) of the Plant
IN WITNESS WHEREOF, the undersigned have each caused this Lease Agreement
to be duly executed
and delivered and their corporate seals to be hereunto affixed and attested by
their respective officers thereunto duly authorized as of the day and year first
above written.
Attest: RIPE TOUCH GREENHOUSES, INC.
______________________________ By:_____________________________________
__________________ Secretary Name:
Title:
[Corporate Seal]
Attest: VILLAGE FARMS OF COLORADO, INC.
______________________________ By:_____________________________________
__________________ Secretary Name: J. Kevin Cobb
Title: Vice President
[Corporate Seal]
<PAGE>
SCHEDULE 1.01(a)
TO LEASE AGREEMENT
Description of Facility
PART 1: Description of Equipment
------------------------
The Equipment described on Annex A hereto.
PART 2: Description of Plant
--------------------
The greenhouse plant including fixtures containing approximately 38
acres and the headhouse building located on the Site described in Part 3.
PART 3: Description of Site
-------------------
The property described on Annex B hereto.
<PAGE>
SCHEDULE 3.01
TO LEASE AGREEMENT
INTENTIONALLY LEFT BLANK
<PAGE>
SCHEDULE 3.02
TO LEASE AGREEMENT
SCHEDULE OF SUPPLEMENTAL RENT
-----------------------------
Supplemental Rent shall be payable to the Lessor on each Supplemental Basic Rent
Payment Date in an amount equal to the percentage (Supplemental Rent Percentage)
of cash flow for the calendar quarter preceding the Supplemental Basic Rent
Payment Date. The Supplemental Rent Percentage is defined as follows:
Supplemental Rent Percentage shall equal 40%.
Notwithstanding anything contrary herein or in the Lease Agreement, the
Supplemental Rent will be determined after paying all Greenhouse Expenses
including but not limited to Management and Marketing Fees and Lease Payments to
the Lessor.