FIRST AMENDMENT TO OPERATING AGREEMENT
THIS FIRST AMENDMENT TO OPERATING AGREEMENT (the "Amendment") is made and
entered into this 19th day of July, 1999 (the "Execution Date") by and among
Greenhost, Inc., a Delaware corporation (the "Owner"), Village Farms of
Virginia, Inc., a Delaware corporation (the "Operator"), and Agro Power
Development, Inc., a Delaware corporation ("APD"), and it amends that certain
Operating Agreement, dated as of November 14, 1997 (the "Operating Agreement").
WITNESSETH:
WHEREAS, pursuant to the Operating Agreement, Operator leases the Plant
from Owner and operates the Facility, and APD unconditionally guarantees
Operator's payment and performance obligations thereunder (the "Existing
Guarantee");
WHEREAS, the parties hereto desire to amend the Operating Agreement on the
terms and conditions set forth below.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby expressly
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINED TERMS
Capitalized terms used and not otherwise defined herein shall have the
meanings set forth in the Operating Agreement.
ARTICLE II
AMENDMENTS TO THE OPERATING AGREEMENT
2.01 Section 1.01. Section 1.01 of the Operating Agreement is hereby
amended as follows:
(a) by inserting the phrase "(including, without limitation, salary
and other benefits paid to the Operator's facility manager/head grower and
sales representatives)" after the phrase "(a) all expenses to be paid from
the Management Fee" in the proviso to the definition of "Greenhouse
Expenses";
(b) by deleting the definition of "Internal Rate of Return";
(c) by inserting the phrase ", propagated tomato plants" between the
word "tomatoes" and the phrase "or any other" in the definition of
"Product"; and
(d) by inserting the phrase "in Article XVI or otherwise" between the
words "provided" and "herein" in the definition of "Term."
2.02 Section 3.01. Section 3.01 of the Operating Agreement is hereby
amended by deleting it in its entirety and inserting in lieu thereof the
following:
"Section 3.01. Basic Rent. Subject to adjustment as provided below,
during the Term, the Operator shall pay Basic Rent to the Owner in arrears
on each Basic Rent Payment Date for the Facility in an amount equal to the
amount set forth opposite such Basic Rent Payment Date as follows:
Basic Rent Payment Date Basic Rent
----------------------- ----------
June 30, 1999 $100,000
September 30, 1999 $500,000
December 31, 1999 $500,000
Each Basic Rent
Payment Date thereafter $400,000
(in the case of the last Basic Rent Payment Date if such date is other than
a Basic Rent Payment Date, such Basic Rent shall be prorated based on the
number of days during which the Operator leased the Facility). Basic Rent
shall be increased in accordance with any agreement reached in connection
with the payment by the Owner of the costs of any Alterations in accordance
with Section 6.06 hereof."
2.03 Section 3.02. Section 3.02 of the Operating Agreement is hereby
amended by deleting it in its entirety and inserting in lieu thereof the
following:
"Section 3.02. Supplemental Rent. Commencing with the second
Supplemental Rent Payment Date in calendar year 2000 and on each
Supplemental Rent Payment Date thereafter during the Term, and in addition
to Basic Rent, the Operator shall pay to the Owner Supplemental Rent in an
amount equal to fifty percent (50%) of Cash Flow for the calendar quarter
immediately preceding such Supplemental Rent Payment Date. Supplemental
Rent shall be payable for each calendar quarter in arrears on the
Supplemental Rent Payment Date immediately following the end of such
calendar quarter."
2.04 Section 3.05. Section 3.05 of the Operating Agreement is hereby
amended by deleting it in its entirety and inserting in lieu thereof the
following:
"Section 3.05. Hot Water. The Owner agrees to provide to the Operator
during the Term hot water for the operation of the Facility. The Owner
shall be responsible for contracting and paying for any fuel necessary for
providing hot water."
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2.05 Article VI. Article VI of the Operating Agreement is hereby amended by
inserting the following as Sections 6.13 and 6.14 and sequentially renumbering
the existing Section 6.13 as Section 6.15:
"Section 6.13. Manager. The Operator shall employ a manager who is
reasonably satisfactory to Owner to manage the Facility. Such manager shall
not be replaced without the consent of Owner, which consent may not be
unreasonably withheld.
Section 6.14. New Employee. As of the date of this Agreement, Owner
agrees to employ ▇▇▇▇ ▇▇▇▇▇▇ on the same terms as he is presently employed
by Operator. Even though ▇▇. ▇▇▇▇▇▇ will be employed by and will ultimately
report to the President of the Owner, at the Owner's direction, ▇▇. ▇▇▇▇▇▇
will be under the daily supervision and control of Operator's facility
manager/head grower."
2.06 Section 16.02. Section 16.02(a)(i) of the Operating Agreement is
hereby amended by deleting the second parenthetical in Section 16.02(a)(i) and
inserting in lieu thereof the following: "other than real property taxes
(including without limitation gross receipts, franchise, sales, use, personal
property, tangible or intangible)".
2.07 Article XVII. Article XVII of the Operating Agreement is hereby
amended as follows:
(a) The last sentence of Section 17.01 of the Operating Agreement is
amended to read in its entirety as follows: "The Operator further agrees
that it will not use the Facility for any purpose other than (a) the
production of tomatoes, propagated tomato plants, or, with the Owner's
consent, any other agricultural product, or (b) the warehouse operations of
Agro Dynamics described in Section 17.02(d) below."
(b) Section 17.02 is hereby amended by adding at the end thereof two
new paragraphs reading as follows:
"(d) Operator and APD shall each use its best efforts to cause
Agro Dynamics, Inc., a Delaware corporation ("Agro Dynamics"), to move
its warehouse operations to the Greenhouse Facility on or before)
December 31, 1999. Operator shall charge Agro Dynamics a reasonable
market amount per year to be mutually agreed upon between Owner and
Operator, payable monthly in arrears in equal monthly installments,
for use of a portion of the Greenhouse Facility.
(e) The Operator shall use its best efforts to commence tomato
plant propagation operations at the Facility on or before August 1,
1999.
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The Operator shall sell propagated plants to third parties at fair
market value; provided, however, that if the Operator shall sell
propagated plants to its Affiliates, such plants shall be sold at a
reasonable price approved in advance by the Owner."
(c) Paragraph (c) of Section 17.02 is hereby amended to read in its
entirety as follows:
"(c) The Operator shall provide to the Owner on a monthly basis
in detail satisfactory to the Owner the following items:
(i) a list of all Product handled by the Facility for
greenhouses pursuant to subsection 17.02(a),
(ii) a list of all items purchased from Affiliates and the
purchase price thereof pursuant to subsection 17.02(b),
(iii) the amount of rent received from Agro Dynamics
pursuant to subsection 17.02(d), and
(iv) a list of sales of propagated plants made to third
parties and affiliates and the sales price thereof pursuant to
subsection 17.02(e)."
2.08 Article XX. The Operating Agreement is hereby amended by inserting the
following as Article XX:
"ARTICLE XX
TERMINATION
Owner may terminate this Operating Agreement, effective as of June 30,
2001, for its convenience, without cause, upon at least six (6) months
prior written notice to Operator. In the event of a termination of this
Operating Agreement pursuant to this Article XX, (a) the Owner shall have
no liability to the Operator (including, without limitation, liability for
any termination or cancellation payment or reimbursement of any costs or
expenses of the Operator) and (b) the Operator's obligation to pay Rent to
Owner shall cease following payment of all Rent payable through June 30,
2001 and upon the Operator's compliance with Section 6.13 hereof; provided,
however, that in no event shall such termination relieve any party hereto
of liability which has accrued or arisen prior to the date of such
termination."
2.10 Existing Guarantee. The Operating Agreement is hereby amended by
deleting from the signature page the Existing Guarantee and inserting in lieu
thereof the following:
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"Unconditional Guarantee of Payment and Performance"
APD is an Affiliate of the Operator. To induce the Owner to amend the
Operating Agreement and in consideration for the benefits to be derived by
APD for the transactions contemplated hereby, APD unconditionally
guarantees the payment when due and timely performance of any and all
obligations of Operator under this Operating Agreement; provided, however,
that APD's liability under this provision shall be limited to the maximum
aggregate amount of $2,000,000.00 during the Term. Upon default by the
Operator in making payment hereunder or any other failure of performance
obligations hereunder, APD shall make such payment or cause such obligation
to be performed (subject to the limitation of liabilities set forth in the
preceding sentence), promptly upon the demand of the Owner. Notwithstanding
the foregoing, in the event the Operator, for whatever reason, ceases to
occupy and/or operate the Greenhouse Facility, Owner agrees to use its
commercially reasonable efforts, but shall not be obligated, to find a
replacement tenant/operator for the Greenhouse Facility. Any replacement
rent received by the Owner shall mitigate APD's liability under this
Guarantee. APD agrees that the Owner and/or the Operator may from time to
time extend or renew provisions of this Operating Agreement for any period
and may grant any releases, compromises or indulgences with respect thereto
(including, but not limited to, the failure or refusal to exercise one or
more of the rights or remedies provided herein), without notice to or
consent of APD, and without affecting the liability of APD hereunder.
APD covenants that it will not consolidate with, merge with or into,
or transfer all or substantially all of its assets (as an entirety or
substantially an entirety in one transaction or a series of related
transactions), to any Person unless:
(a) APD shall be the continuing Person, or the Person (if other
than APD) formed by such consolidation or into which APD is merged or to
which properties and assets of APD are transferred shall be a corporation
organized and existing under the laws of the United States or any state
thereof or the District of Columbia and shall expressly assume all the
obligations of APD under this Guarantee;
(b) Immediately after giving effect to such transaction no Event
of Default or event or condition which through the giving of notice or
lapse of time or both would become an Event of Default shall have occurred
and be continuing; and
(c) The net worth of APD or the surviving entity (including their
respective consolidated subsidiaries), as the case may be, on a pro forma
basis after giving effect to such transaction is not less than the net
worth of APD (and its consolidated subsidiaries) immediately prior to such
transaction (as
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determined in accordance with Generally Accepted Accounting Principles in
the U.S.)."
2.11 Schedule 1.01(a). Schedule 1.01(a) to the Operating Agreement is
hereby deleted in its entirety.
2.12 Schedule 3.01. Schedule 3.01 to the Operating Agreement is hereby
deleted it in its entirety.
2.13 Schedule 3.02. Schedule 3.02 to the Operating Agreement is hereby
deleted in its entirety.
ARTICLE III
EFFECTIVE DATE
This Amendment is being made and entered into on the Execution Date, but
the parties hereto hereby agree that the provisions of the Amendment will be
retroactively effective as of June 30, 1999.
ARTICLE IV
COVENANT
On or prior to July 31, 1999, Operator hereby covenants and agrees to cause
Village Farms International Finance Association (a) to convert the then
outstanding principal of and interest on all advances under the Line of Credit
Facility Agreement to equity, and (b) to contribute such equity as capital to
Operator. The parties hereto hereby agree that breach of this covenant shall
constitute an Event of Default under the Operating Agreement.
ARTICLE V
REPRESENTATIONS
5.01 Representations of Operator. Operator represents that (a) it is duly
organized, validly existing and in good standing under the laws of the State of
Delaware, (b) it has the corporate power and authority, and the legal right, to
own its property and to conduct the business in which it is currently engaged,
(c) to its knowledge, it is in compliance with all statutes, ordinances, laws,
rules, regulations, judgments, orders or decrees of any court or other
governmental or regulatory authority by which it is bound except to the extent
that the failure to comply would not, in the aggregate, have a material adverse
effect, (d) it has the corporate power and authority to make, execute and
deliver this Amendment and the Operating Agreement, as amended by this
Amendment, (e) it has taken all corporate action necessary to authorize the
execution, delivery and performance of this Amendment and the Operating
Agreement, as amended by this Amendment, and has duly executed and delivered
this Amendment, (f) no consent or authorization of, approval by, filing with,
notice to or other act by or in respect of, any governmental authority or other
person or entity is required in connection with the execution, delivery,
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performance, validity or enforceability of this Amendment which has not already
been obtained, (g) each of this Amendment and the Operating Agreement, as
amended by this Amendment, is a legal, valid and binding obligation of Operator,
enforceable against Operator in accordance with its terms, subject to the effect
of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors rights' generally and to
the effect of general equitable principals, (h) the execution, delivery and
performance by Operator of this Amendment and Operator's continuing performance
of the Operating Agreement, as amended by this Amendment, will not violate the
Certificate of Incorporation or Bylaws of Operator or any law or regulation or
determination of any court or arbitrator applicable to Operator, (i) Operator is
not subject to any pending, or to its knowledge, threatened litigation or
arbitration proceeding that, if determined adversely, would have a material
adverse effect on its ability to perform under the Amendment or the Operating
Agreement, as amended by this Amendment, and (j) the execution, delivery and
performance by Operator of the Amendment and Operator's continuing performance
of the Operating Agreement, as amended by this Amendment, will not constitute a
default under any material contract or agreement to which Operator is a party.
5.02 Representations of APD. APD represents that (a) it is duly organized,
validly existing and in good standing under the laws of the State of Delaware,
(b) it has the corporate power and authority, and the legal right, to own its
property and to conduct the business in which it is currently engaged, (c) to
its knowledge, it is in compliance with all statutes, ordinances, laws, rules,
regulations, judgments, orders or decrees of any court or other governmental or
regulatory authority by which it is bound except to the extent that the failure
to comply would not, in the aggregate, have a material adverse effect, (d) it
has the corporate power and authority to make, execute and deliver this
Amendment, (e) it has taken all corporate action necessary to authorize the
execution, delivery and performance of this Amendment and its guarantee of the
Operating Agreement and has duly executed and delivered this Amendment and its
guarantee of the Operating Agreement, (f) no consent or authorization of,
approval by, filing with, notice to or other act by or in respect of, any
governmental authority or other person or entity is required in connection with
the execution, delivery, performance, validity or enforceability of this
Amendment and its guarantee of the Operating Agreement which has not already
been obtained, (g) each of this Amendment and its guarantee of the Operating
Agreement is a legal, valid and binding obligation of APD, enforceable against
APD in accordance with its terms, subject to the effect of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors rights' generally and to the effect of
general equitable principals, (h) the execution, delivery and performance by APD
of this Amendment and APD's performance of its guarantee of the Operating
Agreement will not violate the Certificate of Incorporation or Bylaws of APD or
any law or regulation or determination of any court or arbitrator applicable to
APD, (i) APD is not subject to any pending, or to its knowledge, threatened
litigation or arbitration proceeding that, if determined adversely, would have a
material adverse effect on its ability to perform under the Amendment or its
guarantee of the Operating Agreement, and (j) the execution, delivery and
performance by APD of the Amendment and APD's performance of its guarantee of
the Operating Agreement will not constitute a default under any material
contract or agreement to which APD is a party.
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ARTICLE VI
MISCELLANEOUS
6.01 Full Force and Effect. Except as expressly set forth herein, the
Operating Agreement shall be and remain in full force and effect as originally
written, and shall constitute the legal, valid, binding and enforceable
obligations of Owner and Operator. APD hereby acknowledges the full force and
effect of the Operating Agreement and its continuing guarantee of the Operating
Agreement, as amended hereby.
6.02 Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which, when so executed and delivered, shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
6.03 Successors and Assigns. This Amendment shall be binding upon and inure
to the benefit of the successors and permitted assigns of the parties hereto.
6.04 Governing Law. This Amendment shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Virginia.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
"Owner"
GREENHOST, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
"Operator"
VILLAGE FARMS OF VIRGINIA, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
"APD"
AGRO POWER DEVELOPMENT, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
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