Exhibit 10.64
LEASE AGREEMENT
Dated as of September 21, 1993
between
COGENTRIX OF PENNSYLVANIA, INC.,
as Lessor,
and
KEYSTONE VILLAGE FARMS, INC.
as Lessee
Greenhouse Facility
Located in Ringgold, Pennsylvania
TABLE OF CONTENTS
(Lease Agreement)
PARTIES
ARTICLE I DEFINITIONS; CONSTRUCTION OF REFERENCES..................1
Section 1.01. Definitions..............................................1
Section 1.02. Construction of References...............................7
ARTICLE II LEASE OF FACILITY........................................7
ARTICLE III RENT AND SERVICES........................................7
Section 3.01. Basic Rent...............................................7
Section 3.02. Supplemental Rent........................................7
Section 3.03. Method of Payment........................................8
Section 3.04. Late Payment.............................................8
Section 3.05. Net Lease; No Setoff; Etc................................8
Section 3.06. Utilities................................................8
Section 3.07. Services Provided by Lessor..............................9
ARTICLE IV DISCLAIMER OF WARRANTIES.................................9
ARTICLE V RESTRICTION ON LIENS.....................................9
ARTICLE VI OPERATION AND MAINTENANCE; ALTERATIONS,
MODIFICATIONS AND ADDITIONS..............................9
Section 6.01. Operation and Maintenance................................9
Section 6.02. Repair and Replacement...................................10
Section 6.03. Alterations Required by Law..............................10
Section 6.04. Plans and Specifications; Operating Manual...............10
Section 6.05. Operational Alterations..................................11
Section 6.06. Title to Parts...........................................11
Section 6.07. Lessor's Option to Pay Costs of Alterations..............12
Section 6.08. Reports of Alterations...................................12
Section 6.09. Removal of Parts.........................................12
Section 6.10. Parts Free and Clear of Liens............................12
Section 6.11. Permitted Contests.......................................12
Section 6.12. Operating Logs...........................................13
Section 6.13. Return of Facility.......................................13
ARTICLE VII IDENTIFICATION...........................................13
i
ARTICLE VIII INSURANCE................................................13
Section 8.01. Coverage.................................................13
Section 8.02. Policy Provisions........................................15
Section 8.03. Evidence of Insurance....................................16
Section 8.04. No Duty of Lessor to Verify..............................17
ARTICLE IX LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE................17
Section 9.01. Occurrence of Event of Loss..............................17
Section 9.02. Repair of Loss or Destruction............................17
Section 9.03. Other Dispositions.......................................18
ARTICLE X INTEREST CONVEYED TO LESSEE..............................18
ARTICLE XI ASSIGNMENT AND SUBLEASE; LOCATION........................18
Section 11.01. Assignment and Sublease..................................18
Section 11.02. Location.................................................18
ARTICLE XII INSPECTION AND REPORTS...................................19
Section 12.01. Condition and Operation..................................19
Section 12.02. Annual Insurance Report..................................19
Section 12.03. Financial Reports........................................19
Section 12.04. Budget Approval..........................................20
Section 12.05. Liability................................................21
Section 12.06. Liens....................................................21
ARTICLE XIII EVENTS OF DEFAULT........................................21
ARTICLE XIV ENFORCEMENT..............................................22
Section 14.01. Remedies.................................................22
Section 14.02. Survival of Lessee's Obligations.........................23
Section 14.03. Remedies Cumulative......................................23
ARTICLE XV RIGHT TO PERFORM FOR LESSEE..............................24
ARTICLE XVI INDEMNITIES..............................................24
Section 16.01. General Indemnity........................................24
Section 16.02. Fees, Taxes and Other Charges............................25
Section 16.03. Survival.................................................28
Section 16.04. Waiver...................................................28
ii
ARTICLE XVII COVENANTS OF LESSEE......................................29
Section 17.01. Operation of Facility....................................29
Section 17.02. Affiliated Transactions..................................29
ARTICLE XVIII MISCELLANEOUS............................................29
Section 18.01. Further Assurances.......................................29
Section 18.02. Quiet Enjoyment..........................................30
Section 18.03. Facility as Security for Lessor's Obligations............30
Section 18.04. Notices..................................................30
Section 18.05. Severability.............................................30
Section 18.06. Amendment................................................30
Section 18.07. Headings.................................................31
Section 18.08. Counterparts.............................................31
Section 18.09. Governing Law............................................31
Section 18.10. Performance of Obligations to Lender.....................31
Section 18.11. Binding Effect; Successors and Assigns; Survival.........31
Section 18.12. Divisible Lease..........................................31
Section 18.13. Effectiveness............................................31
Section 18.14. Security Agreement.......................................32
SCHEDULES
SCHEDULE 1.01(a) Description of Facility
SCHEDULE 3.01 Basic Rent
SCHEDULE 3.02 Supplemental Rent
EXHIBITS
EXHIBIT 1.01 Lender Consent and Agreement
iii
LEASE AGREEMENT dated as of September 21, 1993 between COGENTRIX OF
PENNSYLVANIA, INC., a Delaware corporation (the "Lessor"), and KEYSTONE VILLAGE
FARMS, INC., a Pennsylvania corporation (the "Lessee").
W I T N E S S E T H:
WHEREAS, the Lessor owns a greenhouse facility in Ringgold, Pennsylvania;
and
WHEREAS, the Lessor desires to lease the Facility (as defined below) to the
Lessee and the Lessee desires to lease the Facility from the Lessor, 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, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ATTN: President; and
(b) with respect to the Lessee, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ATTN: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇; and
(c) with respect to the Lender, Banque Paribas, New York Branch, as
Agent, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ATTN:
▇▇▇▇▇ ▇▇▇▇▇▇, Specialized Industries Group.
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlling, controlled by or under common control with, such Person.
"Agent" shall mean Banque Paribas, New York Branch as agent for the Lender.
"Alterations" shall mean, with respect to the Facility, alterations,
improvements, modifications and additions to the Facility (but excluding any
replacement of Parts incorporated in the Facility).
"APD" shall mean Agro Power Development, Inc., a New York corporation.
"Basic Rent" shall mean the rent payable pursuant to Section 3.01. of this
Agreement.
"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.
"Bonus" with respect to the Lessee's grower and sales representatives,
shall mean bonuses paid to such persons pursuant to bonus plans the specific
terms of which are approved by the Lessor in writing prior to the commencement
of the Lease Year in which such bonuses are paid.
"Budget" shall have the meaning specified in Section 12.04.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banks are authorized to be closed in New York, New York or
Charlotte, North Carolina.
"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 Lessor 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 operating revenues 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).
"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.
"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 18.13.
"Escrow Agent" shall have the meaning specified in Section 3.02. of this
Agreement.
"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
2
(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 Lender and 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.
"Facility" shall mean the Lessor's rights in and to the Plant, the Site and
the Equipment.
"Fees, Taxes and Other Charges" shall have the meaning specified in Section
16.02. of the Lease.
"Gas Supply Contract" shall mean the Gas Supply Contract dated June 15,
1989 among the ▇▇▇▇▇▇, ▇.▇. Enterprises and Cogentrix, Inc., as the same may be
amended, supplemented or otherwise modified from time to time.
"Greenhouse Expenses" shall mean the sum (without duplication) of (a)
direct labor costs paid (excluding the salary and benefits paid to the Lessee's
grower and sales representatives but including a Bonus paid with respect
thereto), (b) seed expense paid, (c) packaging supplies expense paid, (d)
fertilizer and chemical expenses paid, (e) biological control, including bees,
expense paid, (f) freight expense paid, (g) growing medium and supplies expense
paid, (h) carbon dioxide expense paid, (i) utility (including hot water,
electricity and natural gas) expense paid, (j) Management Fee paid, (k) Basic
Rent paid, (1) insurance premiums and property taxes paid, (m) principal and
interest paid with respect to the Line of Credit Facility Agreement and (n) all
other cash expenses paid relating to the operation of the Facility, to the
extent contained in the Budget; provided, however, that there shall be excluded
from Greenhouse Expenses (a) all expenses to be paid from the Management Fee,
(b) all payments with respect to federal, state and local income taxes, (c)
payment of principal, interest and fees with respect all indebtedness of the
Lessee for non capital expenditures other than the Line of Credit Facility
Agreement and (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.
"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.
"Incorporated in" shall have the meaning specified in Section 6.02. of the
Lease.
"Indemnitee" shall mean the Lessor, the Lender 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
the Lease.
3
"Insurance and Condemnation Proceeds Accounts" shall mean the account
referred to as the Insurance and Condemnation Proceeds Account established by
the Security Agent pursuant to the terms of the Security Deposit Agreement.
"Lease Security Agreement" shall have the meaning specified in Section
18.14. of the Lease.
"Lease Term" shall mean (a) the period commencing on December 1, 1993 and
ending on December 31, 2003, or (b) such shorter period as may result from
earlier termination of the Lease as provided herein.
"Lease Termination Date" shall mean the last day of the Lease Term.
"Lease Year" shall mean each period commencing on January 1 and ending on
December 31 during the term of this Lease; provided, however, that the first
Lease Year shall commence on December 1, 1993 and end on December 31, 1994.
"Lender" shall mean Banque Paribas, New York Branch, and each other banking
institution that is a party to the Loan Agreement, and their respective
successors and assigns.
"Lender Consent and Agreement" shall mean the Lender Consent and Agreement
in the form of Exhibit 1.01. hereto.
"Lessee" shall mean Keystone Village Farms, Inc., a Pennsylvania
corporation, and its permitted successors and permitted assigns.
"Lessor" shall mean Cogentrix of Pennsylvania, Inc., a Delaware
corporation, and its successors and permitted assigns.
"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.
"Line of Credit Facility Agreement" shall mean the Line of Credit Facility
Agreement dated as of December 1, 1993 between Cogentrix, Inc. and the Lessee,
as the same may be amended, modified or supplemented from time to time in
accordance with the provisions thereof.
"Loan Agreement" shall mean the Construction and Term Loan Agreement dated
as of June 15, 1989 between the Lessor and the Lender, as the same may be
amended, modified or supplemented from time to time in accordance with the
provisions thereof.
"Management Agreement" shall mean the Management Agreement to be entered
into between the Lessee and APD pursuant to which APD will provide certain
management 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
4
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). The Management Fee shall be two hundred fifty thousand dollars
($250,000.00) per year (except that for the first Lease Year, the Management Fee
shall be two hundred seventy-one thousand dollars ($271,000.00)) and shall
increase on an annual basis as of May 1 of each Lease Year following the first
Lease Year at a rate equal to the percentage increase in the gross national
product implicit price deflator, but in no event shall the increase in the
Management Fee exceed five percent (5%) per Lease Year. The Management Agreement
shall provide that the Management Fee be paid in twelve (12) equal monthly
installments in arrears during each Lease Year (except for the first Lease Year,
in which the Management Fee shall be paid in thirteen (13) equal monthly
installments in arrears.)
"Mortgage" shall mean the mortgage by the Lessor to the Lender dated as of
April 15, 1989, as amended from time to time.
"Nonseverable" shall describe (i) with respect to any Alteration, an
Alteration which is a "nonseverable improvement" within the meaning of Revenue
Procedure 79-48 and (ii) with respect to any part not constituting an Alteration
or part of an Alteration, a part which cannot be readily removed from the
equipment without causing material damage to the Facility.
"Notes" shall mean the term loan notes issued by the Lessor to the Lender
pursuant to the Loan Agreement.
"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.
"Operative Documents" shall mean this Lease Agreement, the Line of Credit
Facility Agreement and the Consent and Agreement.
"Overdue Rate" shall mean an interest rate equal to ten percent (10%) per
annum.
"Parts" shall have the meaning specified in Section 6.02.
"Permitted Liens" shall mean (a) the respective rights and interests of the
Lessor, the Lessee and the Lender as provided in the Operative Documents, (b)
liens for taxes either not yet due or being contested in good faith and by
appropriate proceedings, so long as such proceedings shall not involve any
danger of the sale, forfeiture or loss of any part of the Facility, title
thereto or any interest therein and shall not interfere with the use or
disposition of the Facility or the payment of Rent, (c) materialmen's,
mechanics', workers, repairmen's, employees' or other similar Liens arising in
the ordinary course of business for amounts either not yet due or being
contested in good faith and by appropriate proceedings so long as such
proceedings shall not involve any danger of the sale, forfeiture or loss of any
part of the Facility, title thereto or any interest therein and shall not
interfere with the use or disposition of the Facility or the payment of
5
Rent, (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 and (e) Liens created pursuant to the Security
Agreement.
"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, together at all times
with any and all Parts which may from time to time be incorporated in the Plant.
"Product" shall mean tomatoes or any other agricultural product approved in
writing by the Lessor and the Lender.
"Rent" shall mean Basic Rent and Supplemental Rent, collectively.
"Rent Payment Date" shall mean the first day of each April, May, June,
July, August, September, October, November and December during the term of this
Agreement and the Lease Termination Date.
"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.
"Revenue Account" shall mean the account referred to as the Revenue Account
and established by the Security Agent pursuant to the terms of the Security
Deposit Agreement.
"Security Agent" shall mean First Union National Bank of North Carolina or
any bank acting as successor security agent under the Security Deposit
Agreement.
"Security Agreement" shall mean the Security Agreement to be dated as of
December 1, 1993 between Cogentrix, Inc. and the Lessee, as the same may be
amended, supplemented or otherwise modified from time to time.
"Security Deposit Agreement" shall mean the Security Deposit Agreement
dated as of June 15, 1989 by and among the Lessor, the Agent and the Security
Agent, as the same may be amended, supplemented or otherwise modified from time
to time.
6
"Site" shall mean the land described in Part 3 of Schedule 1.01.(a) of the
Lease.
"Supplemental Rent" shall mean the rent payable pursuant to Section 3.02.
of this Agreement.
"Supplemental Rent Payment Date" shall mean for any Lease Year the March 31
following the end of such Lease Year.
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 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
LEASE OF FACILITY
As of December 1, 1993, subject to all the terms and conditions of this
Agreement, the Lessor shall lease, and hereby as of the Effective Date does
lease, the Facility to the Lessee, and the Lessee shall lease, and hereby as of
the Effective Date does lease, the Facility from the Lessor for the Lease Term.
ARTICLE III
RENT AND SERVICES
Section 3.01. Basic Rent. Subject to adjustment as provided below, during
the Lease Term, the Lessee shall pay to the Lessor in arrears on each Rent
Payment Date Basic Rent for the Facility in an amount equal to the amount set
forth on Schedule 3.01. for such Rent Payment Date (in the case of the last Rent
Payment Date if such date is other than a 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 6.07. 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 Lease Term. Supplemental
Rent shall be payable for each Lease Year on the Supplemental Rent Payment Date.
On or before the last day of each month of each Lease Year (commencing in
February, 1994), the Lessee shall pay into an escrow account established with a
bank satisfactory to the Lessor (the "Escrow Agent") an amount equal to (a) the
cumulative year-to-date Cash Flow for the Lease Year through the end of the
preceding month minus (b) amounts previously paid into the escrow account, all
as reflected on the certificate provided pursuant to Section 12.03(a)(ii). On
the Supplemental Rent Payment Date following the end of each Lease Year, the
Escrow Agent shall pay to the Lessor an amount equal to the
7
Supplemental Rent for the preceding Lease Year required to be paid pursuant to
this Section 3.02, as reflected on the certificate required to be delivered
pursuant to Section 12.03(b), and shall pay the remaining amounts held in such
account with respect to the prior Lease Year to the Lessee.
Section 3.03. Method of Payment. Basic Rent and Supplemental Rent shall be
paid into the Revenue Account as provided in this Section 3.03 hereof; provided,
however, that after all indebtedness of the Lessor arising under the Loan
Agreement has been paid in full, such amounts shall be payable to the Lessor in
accordance with instructions to be provided by the Lessor. Each payment of Rent
shall be made by the Lessee in immediately available funds prior to 11:00 A.M.,
local time, at the place of payment on the scheduled date when such payment
shall be due, unless such scheduled date shall not be a Business Day, in which
case such payment shall be made on the preceding Business Day, with the same
force and effect as though made on such scheduled date.
Section 3.04. 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 3.05. Net Lease, No Setoff; Etc. This Lease is a net lease and,
notwithstanding any other provision of this Lease, it is intended that Rent
shall be paid without notice, demand, counterclaim, setoff, deduction or defense
and without abatement, suspension, deferment, diminution or reduction.
Section 3.06. Utilities. The Lessor agrees to provide to the Lessee the
following services at the prices set forth below:
(a) electricity at no additional charge;
(b) natural gas to be consumed by the Lessee, which shall be
separately metered, at a rate equal to the contract price in effect for
each billing period under the Gas Supply Contract, up to a maximum of
twenty-five thousand dollars ($25,000.00) per year ; provided, however,
that the Lessee shall not be required to pay for natural gas consumed as a
result of scheduled or unscheduled outages of the Lessor's electric power
plant located adjacent to the Facility;
(c) hot water, at a rate equal to $15,000 per Lease Year; and
(d) water, at a rate equal to fifty cents ($0.50) per one thousand
gallons.
The Lessor shall invoice the Lessee for such services monthly as incurred,
and such invoices shall be payable within thirty (30) days of invoice.
8
Section 3.07. Services Provided by Lessor. At the request of the Lessee,
the Lessor shall also provide at the Lessee's expense general maintenance
services currently being provided to the Facility. 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.
ARTICLE IV
DISCLAIMER OF WARRANTIES
THE FACILITY IS BEING LEASED PURSUANT TO THIS AGREEMENT ON AN "AS-IS,
WHERE-IS" BASIS. NEITHER THE LESSOR NOR THE LENDER HAS MADE OR 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 or the
Lender, 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 or the Lender, 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.
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
9
Manual, (c) except to the extent Section 6.11 hereof shall apply, all applicable
requirements of law and of any court and of any Governmental Authority
(including without limitation all zoning, environmental protection, pollution,
sanitary and safety laws) 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 Lease
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 Lease 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 ten thousand dollars ($10,000) in the
aggregate in each Lease Year and (b) all repairs and replacements relating to
movable, grading, packaging and distribution equipment. The Lessor shall be
responsible for making all necessary structural and nonstructural repairs in
excess of ten thousand dollars ($10,000) 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. Upon completion of such Alterations,
the Basic Rent shall be automatically increased on an annual basis by an amount
equal to sixty-five dollars ($65.00) for every one thousand dollars ($1,000) of
costs paid by the Lessor in connection with the Alterations.
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 complete set of "as-built" Plans and Specifications
(which shall in the aggregate reflect the
10
Facility as of the Effective Date). The Lessee shall maintain throughout the
Lease Term, and keep on file at the Facility, a current Operating Manual and a
complete set of "as-built" 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 Lease 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 6.07 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. 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 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 6.06;
(b) such Part shall be required to be incorporated in the Facility
pursuant to the terms of Sections 6.02 and 6.03 hereof;
(c) such Part shall be Nonseverable; or
(d) such Part shall be paid for by the 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
Equipment and that meet the requirements for replacement Parts specified in
Section 6.02 hereof. Immediately upon any replacement Part becoming incorporated
in the Equipment 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 and be deemed part of the
Facility for all purposes hereof to the same extent as the parts originally
incorporated in the Facility.
11
Section 6.07. 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 6.06 hereof,
subject to agreement as to adjustments in Basic Rent in accordance with Section
3.01 hereof.
Section 6.08. Reports of Alterations. On or before March 15 of each
calendar year commencing in 1995 and on the date on which the Lease 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 6.07 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 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 6.09. 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 6.06 hereof may, subject to any right of
the Lessor to use such Part as provided herein and 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 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, other than upon the
termination of this Lease 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 6.06 hereof shall be free and clear of
all Liens except Permitted Liens.
Section 6.11. Permitted Contests. If, to the extent and for so long as (a)
a test, challenge, appeal or proceeding for review of any applicable requirement
of law or of a Governmental Authority relating to the operation or maintenance
of the Facility shall be prosecuted in good faith by the 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 Lease 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.
12
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 owner or operator of the
Facility (but in no event less than three (3) years following the end of the
Lease 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 Lease 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 COGENTRIX OF PENNSYLVANIA, 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 ownership 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:
(i) property damage insurance with respect to the Facility
insuring against loss or damage 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 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) business interruption insurance with respect to
interruptions in the operation of the Facility;
(iv) comprehensive general public liability, including blanket
contractual, personal injury, product liability, property damage
13
(including broad form property damage and explosion, collapse and
underground property damage) and loss of use of property of others,
insurance applicable to the Facility in such amounts as are usually
carried by Persons operating similar facilities presenting comparable
risks in the same general region but in any event with 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;
(v) (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;
(vi) 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
(vii) 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 Operative Documents;
provided, however, that the amount of insurance coverage specified in
subsections 8.01(a)(i) and (a)(ii) above with respect to the Facility shall
not in any event be less than the replacement cost of the Facility, as
determined by the Lessor, including agreed amount waiving coinsurance.
All insurance policies carried in accordance with Section 8.01 shall
be maintained with 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
Pennsylvania.
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
14
as shall not exceed the following amounts specified with respect to such
policies:
(1) Property Damage....................................$10,000;
(2) Boiler and Machinery...............................$10,000;
and
(3) Public Liability...................................$10,000.
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.
(b) During the Lease 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) with respect to the building
only and the Lessee shall reimburse the Lessor for the cost of such
coverage.
Section 8.02. Policy Provisions. Any insurance policy maintained by the
Lessee pursuant to Section 8.01 hereof shall:
(a) specify the Lessor and the Lender as additional insureds, as their
respective interests may appear;
(b) 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 $10,000, provided no Default or Event of Default shall have
occurred or be continuing, to the Lessee, and (y) in all other
circumstances (A) unless and until receipt of notice from the Lender
stating that the Loan Agreement shall have been satisfied and discharged,
to the Lender for deposit in the Insurance and Condemnation Proceeds
Account and (B) thereafter, to the Lessor;
(c) 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 the Lessor and
the Lender;
(d) provide that in respect of the interests of the Lessor and the
Lender, such policies shall not be invalidated by any action or inaction of
the
15
Lessee or any other Person and shall insure the Lessor and the Lender
regardless of, and any claims for the losses shall be payable
notwithstanding:
(i) the occupation or use of the Facility for purposes more
hazardous than permitted by the terms of the policy;
(ii) any foreclosure or other proceeding or notice of sale
relating to all or any portion of the Facility; or
(iii) any change in the title to or ownership of all or any
portion of the Facility.
(e) 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 the Lessor or the Lender 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;
(f) provide that any cancellation thereof or material adverse change
therein shall not be effective as to the Lessor and the Lender until at
least sixty (60) days after receipt by the Lessor and the Lender of written
notice thereof;
(g) waive any right of subrogation of the insurers against the Lessor
and the Lender, 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 Lessor or the Lender;
(h) provide that the whole or any part of the right, title and
interest of the Lessor or the Lessee therein may be assigned to the Lender;
and
(i) subject to Section 8.01 hereof, be reasonably satisfactory to the
Lessor and the Lender in all other material respects.
Section 8.03. Evidence of Insurance. The Lessee shall deliver to the Lessor
and the Lender at least two (2) days before the Effective Date copies of all
policies of insurance required hereby and, on the date this Lease is executed
and on each December 31 thereafter during the Lease 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.
16
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 and Lender prompt written notice of such
occurrence and the date thereof. Unless the Lessor and the Lender agree 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 Lease
Term.
Section 9.02. Repair of Loss or Destruction.
(a) In the event of loss or destruction of all or a portion of the
Facility which (x) does not constitute an Event of Loss or (y) constitutes
an Event of Loss but the Lessor and the Lender agree 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.
17
Section 9.03. Other Dispositions. Notwithstanding the foregoing provisions
of this Article IX, so long as a Default or an Event of Default shall have
occurred and be continuing, any amount that would otherwise be payable to or for
the account of, or that would otherwise be retained by, the Lessee pursuant to
this Article IX shall be paid to the Lender (or to the Lessor after the lien of
the Loan Agreement shall have been released) as security for the obligations of
the Lessee under this Lease and, at such time thereafter as no Default or Event
of Default shall be continuing, such amount shall be paid promptly to the Lessee
unless the Lessor shall have theretofore declared this Lease to be in default
pursuant to Section 14.01 hereof, in which event such amount shall be disposed
of by the Lender in accordance with the provisions of the Loan Agreement or by
the Lessor in accordance with the provisions of this Agreement, as the case may
be.
ARTICLE X
INTEREST CONVEYED TO LESSEE
This Lease is an agreement of lease and does not convey to the Lessee any
right, title or interest in or to the Facility except as a lessee.
ARTICLE XI
ASSIGNMENT AND SUBLEASE; LOCATION
Section 11.01. Assignment and Sublease. The Lessor shall be permitted to
assign any of its right, title or interest in, to or under this Agreement
without the consent of the Lessee if the assignee is (a) a lender or group of
lenders providing financing to the Lessor or (b) a purchaser of the Facility.
All other assignments of any right, title or interest in, to or under this
Agreement shall be made only with the prior written consent of the Lessee, which
consent shall not be unreasonably withheld. Except as provided below, the Lessee
may not sublease the Facility or any part thereof or assign any of its rights or
interest hereunder without the written consent of the Lessor, which consent
shall not be unreasonably withheld; provided, however, that any such sublease or
assignment by the Lessee (a) shall not release the Lessee from any of its
obligations or liabilities of any nature whatsoever arising under this Agreement
and the Lender Consent and 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 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. Notwithstanding
the foregoing, the Lessee shall be permitted to assign this Agreement without
the consent of the Lessor only in the event the Lessee is being merged into,
consolidated with or otherwise combined with other corporations a majority of
whose voting capital stock is owned by the shareholders of the Lessee on the
Effective Date, so long as following such merger, consolidation or combination,
the majority of voting capital stock of the surviving entity is owned by the
shareholders of the Lessee on the Effective Date. These provisions shall be
binding on any subsequent assignee or sublessee of the Lessee's or the Lessor's
rights or interest hereunder. The rights and obligations of the Lessor and the
Lessee hereunder shall inure to the benefit of, and be binding upon, the
permitted successors and permitted assigns of the Lessor and the Lessee,
respectively.
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
18
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.
ARTICLE XII
INSPECTION AND REPORTS
Section 12.01. Condition and Operation. The Lender and the Lessor and their
authorized representatives (the "Inspecting Parties") may inspect, at their 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 Lease 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 and the Lender 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 Lease Term, the Lessee shall
provide to the Lessor and the Lender 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 ninety
(90) 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
19
income and retained earnings and of cash flow for such Lease Year, prepared
in accordance with generally accepted accounting principles consistently
applied and accompanied by the review 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 financial statements
and 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 Lease Term
(commencing on January 31, 1995), 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 forty-five (45) days
prior to the commencement of any Lease Year, the Lessee shall present to the
Lessor for its approval, which shall not be unreasonably withheld, its budget
for the Facility for the following Lease Year, prepared in detail satisfactory
to the Lessor (the budget prepared pursuant to this Section 12.04 shall be
referred to herein as the "Budget"). In the event the Lessor withholds its
approval of any Budget, it shall provide to the Lessee a written statement of
specific objections to the Budget. The Budget presented shall be deemed to be
approved with respect to all items except those to which the Lessor has
objected. In the event the Lessee disputes the Lessor's objections, the Lessor
and the Lessee shall appoint a mutually agreeable independent advisor with
experience in the operation of greenhouse facilities, which advisor shall review
the disputed amounts and decide the appropriate level of expenditures for such
items. The decision of such advisor shall be binding upon the Lessor and the
Lessee and shall become part of the Budget for such Lease Year.
20
Section 12.05. Liability. The Lessee shall, promptly after obtaining
knowledge thereof, give prompt written notice to the Lessor and the Lender 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 Lease
Term, and on request shall furnish to the Lessor and the Lender information as
to the time, place and nature thereof, the names and addresses of the parties
involved, any Persons injured, witnesses and owners of any property damaged and
such other information as may be known to it, and shall promptly upon request
furnish the Lessor and the Lender 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 and the Lender of the attachment of such
Lien and the full particulars thereof unless the same shall have been removed or
discharged by the Lessee.
ARTICLE XIII
EVENTS OF DEFAULT
The following events shall constitute Events of Default (whether any such
event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any Governmental
Authority):
(a) the 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 the Lender; 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 the Lender; 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 or APD 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
21
Lessee 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 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
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 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;
(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 Lease 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,
22
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
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; and
(e) 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, 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 and the Lender 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 Lease 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
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
23
Lessee or to be an acquiescence therein. No express 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
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
INDEMNITEES
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 Operative Documents,
(iii) unless an Event of Default shall have occurred and be continuing and
Lessor or Lender 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 Lease Term, (iv) so long as no Event of Default
shall have occurred and be continuing, to the extent attributable solely to
the disposition or attempted disposition of the Facility or any interest in
any thereof, by or on behalf of any Indemnitee, other than a transfer of
the Facility pursuant to Article XIV hereof or as required by any Operative
Documents, (v) constituting Fees, Taxes or Other Charges or (vi) which
constitutes internal, overhead expenses of the Indemnitee.
24
(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, that 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.
Section 16.02. Fees, Taxes and Other Charges.
(a) Payment by Lessee.
25
(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 Lease Term unless an Event of
Default has occurred and is continuing and the Lessor or the
Lender shall be exercising remedies with respect thereto;
26
(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
ownership 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, ▇▇▇▇ 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 by the Lessee
shall be adjusted to an amount which (after
27
taking into account all tax effects on such Indemnitee, any loss of
use of money resulting from differences in timing between the
inclusion of such indemnity in the taxable income of such Indemnitee
and the anticipated realization by such Indemnitee of tax benefits
resulting from the transaction to which such indemnity is related and
the present value of any anticipated future tax benefits to be
realized by such Indemnitee as a result of deducting such Fees, Taxes
and Other Charges or as a result of the transaction giving rise
thereto) will be sufficient to place the Indemnitee in the same
position such Indemnitee would have been in had such Fees, Taxes and
Other Charges not been imposed. All computations for purposes hereof
shall be based on tax rates in effect on the date payment pursuant to
this Section 16.02 is made. Computations involving the loss of use of
money or calculations of present value shall be based on the Overdue
Rate as adjusted for applicable income tax effects and compounded
monthly on the 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 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. 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.
28
ARTICLE XVII
COVENANTS OF LESSEE
Section 17.01. Operation of Facility. During the Lease 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 operator under the same or
similar circumstances and to market the Product with substantially the same
effort and on the same terms as used for product produced at other facilities
operated by the 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.
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).
ARTICLE XVIII
MISCELLANEOUS
Section 18.01. Further Assurances. The Lessee shall cause the Operative
Documents and any amendments and supplements to any of them (together with any
other instruments, financing statements, continuation statements, records or
papers necessary in connection therewith) to be recorded and/or filed and
rerecorded and/or refiled in each jurisdiction as and to the extent required by
law in order to, and shall take such other actions as may from time to time be
necessary to, establish, perfect and maintain (a) the Lessor's right, title and
interest in and to the Facility, not subject to any Liens except Permitted
Liens, (b) for the benefit of the Lender and other holders of Notes, the first
mortgage lien and first priority security interest in the Facility provided for
in the Loan Agreement and including any Parts made subject to this Lease or the
Loan Agreement or the Mortgage pursuant to Article VI hereof and (c) each of the
other rights and interests created by the Loan Agreement and the Mortgage or by
any other Operative Document in the Lessor or the Lender. The Lessee will
promptly and duly execute and deliver to
29
each of the Lessor and the, Lender 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 Operative Documents
and to establish and protect the rights and remedies created or intended to be
created in favor of the Lessor and the Lender, to establish, perfect and
maintain the Lessor's right, title and interest in and to the Facility and, for
the benefit of the Lender, the first mortgage lien and first priority security
interest in the Facility provided for in the Loan Agreement and the Mortgage,
including without limitation if requested by the Lessor or the Lender at the
expense of the Lessee, the recording or filing of counterparts or appropriate
memoranda of the Operative Documents, or of such financing statements or other
documents with respect thereto as the Lessor or the Lender 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
Lease Term, so long as (a) the Lessee is in compliance with each ten-n and
condition hereof and (b) no Event of Default has occurred or is continuing.
Section 18.03. Facility as Security for Lessor's Obligations. In order to
secure the indebtedness evidenced by the Notes, the Lessor provides in the Loan
Agreement and the Mortgage, among other things, for the creation in favor of the
Lender of a first mortgage lien and first priority security interest for the
benefit of the Lender and any other holder of Notes in the Plant and the Site
and for the assignment by the Lessor to the Lender of the right, title and
interest of the Lessor in and to this Agreement and the other Operative
Documents, to the extent provided in the Loan Agreement and the Mortgage. The
Lessee hereby agrees to execute and deliver to the Lender the Lender Consent and
Agreement.
Section 18.04. Notices. Unless otherwise specifically provided herein, all
notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
person shall be in writing and any such notice shall become effective three (3)
Business Days after being deposited in the mails, certified or registered with
appropriate postage prepaid for first-class mail or, if delivered by hand or in
the form of a telex or telegram, when received, and shall be directed to the
Address of such person.
Section 18.05. 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 18.06. 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 and, for so long as the Loan Agreement is in effect, with the
prior written consent of the Lender.
30
Section 18.07. 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 18.08. 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 18.09. 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 State of New York applicable to agreements made and to be performed
entirely within such State, including all matters of construction, validity and
performance; provided, however, that matters relating to rights in real property
shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania.
Section 18.10. Performance of Obligations to Lender. The provisions of this
Agreement which require or permit action by, the consent, approval or
authorization of, the furnishing of any document, paper or information to, or
the performance of any other obligation to, the Lender shall not be effective,
and the Sections hereof containing such provisions shall be read as though there
were no such requirements of permissions, after all the Notes shall have been
paid in full in accordance with their terms.
Section 18.11. 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, and the rights
hereunder of the Lender shall inure (subject to such conditions as are contained
herein) 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 18.12. Divisible Lease. 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 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 reregistration 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 18.13. Effectiveness. This Agreement shall become effective upon
the date (the "Effective Date") the last of the following events occurs:
(a) the Closing Date;
(b) the receipt of the Lender Consent and Agreement; and
31
(c) the termination of the Lessor's arrangement with Ringgold
Nurseries, Inc. and VHB Greenhouse Management, Inc. and the vacation of the
Facility thereby.
The Lessor agrees to indemnify and hold harmless the Lessee from all
Expenses incurred by the Lessee as a result of the Lessor's termination of its
arrangement with Ringgold Nurseries, Inc. and VHB Greenhouse Management, Inc.;
provided, however, that the Lessor shall not indemnify the Lessee from Expenses
incurred by the Lessee as a result of discussions held by the Lessee with
employees of Ringgold Nurseries, Inc., VHB Greenhouse Management, Inc. or their
Affiliates. In addition, this Lease may be terminated by either party in the
event a mutually agreeable Line of Credit Facility Agreement has not been
executed by December 1, 1993.
Section 18.14. Security Agreement. On or before the Effective Date, the
Lessee shall execute a security agreement (the "Lease Security Agreement") in
favor of the Lessor granting the Lessor a security interest in all the Lessee's
property to secure the Lessee's obligations under the Lease, which security
interest shall be expressly subordinated to the security interest granted
pursuant to the Security Agreement.
32
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: COGENTRIX OF PENNSYLVANIA, INC.
_______________________________ By:____________________________________
_____________________ Secretary Name:
Title:
[Corporate Seal]
Attest: KEYSTONE VILLAGE FARMS, INC.
_______________________________ By:____________________________________
_____________________ Secretary Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
[Corporate Seal]
Unconditional Guarantee of Payment and Performance
APD is an Affiliate of the Lessee and is under common ownership with the
Lessee. To induce the Lessor to enter into this Lease Agreement and in
consideration for the benefits to be derived by APD from the transactions
contemplated hereby, APD unconditionally guarantees the payment when due and
timely performance of any and all obligations of Lessee under this Lease
Agreement. Upon default by the Lessee in making payment hereunder or any other
failure to perform its obligations hereunder, APD shall make such payment or
cause such obligation to be performed, promptly upon the demand of the Lessor.
APD agrees that the Lessor and/or the Lessee may from time to time extend or
renew provisions of this Lease Agreement for any period and may grant any
releases, compromises or indulgences with respect thereto (including, but not
limited to, the failure or refusal to exercise one or more of the right or
remedies provided herein), without notice to or consent of APD, and without
affecting the liability of APD hereunder.
AGRO POWER DEVELOPMENT, INC.
By:____________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
33
SCHEDULE 1.01(a)
TO LEASE AGREEMENT
Description of Facility
PART 1: Description of Equipment
Description of Equipment
1 Trailer w/Spray Equipment
18 Tube Trolleys
1 Tomato Grading Machine
PART 2: Description of Plant
The greenhouse facility containing approximately 9.7 acres and the
headhouse facility, each as reflected on Exhibit B hereto.
PART 3: Description of Site
That portion of the property described on Annex A hereto that is described
on the survey attached as Annex B hereto as the Greenhouse and the Headhouse.
34
SCHEDULE 3.01
TO LEASE AGREEMENT
BASIC RENT
Basic Rent shall be payable as follows:
1998 and
Rent Payment Date 1994 1995 1996 1997 Thereafter
----------------- ---- ---- ---- ---- ----------
April 1 * * * * *
May 1 * * * * *
June 1 * * * * *
July 1 * * * * *
August 1 * * * * *
September 1 * * * * *
October 1 * * * * *
November 1 * * * * *
December 1 * * * * *
----- ----- ----- ----- -----
TOTAL * * * * *
*Information omitted and subject to request for confidential treatment
35
SCHEDULE 3.02
TO LEASE AGREEMENT
SUPPLEMENTAL RENT
Supplemental Rent
First $100,000 Cash Flow Between $100,000 and Cash Flow in
of Cash Flow $600,000 Excess of $600,000
---------------- -------------------------------- --------------------
*% *% *%
*Information omitted and subject to request for confidential treatment
36