EXHIBIT 10.60
AGREEMENT REGARDING FUTURE PROJECTS
THIS AGREEMENT is made and effective as of February 6, 1996 by and between
COGENTRIX ENERGY, INC., a North Carolina corporation ("Cogentrix"), and AGRO
POWER DEVELOPMENT, INC. a New York corporation ("Agro Power").
Agro Power is in the business of, among other things, developing, owning
and operating greenhouse projects. Agro Power and its Affiliates (as hereinafter
defined) own all of the interests of, and are the sole member of, Village Farms
of Delaware, L.L.C. ("VF Delaware") and Village Farms, L.L.C. ("VF"), both of
which are limited liability companies organized under Delaware law. At the
request of Agro Power, contemporaneous with the execution and delivery of this
Agreement, wholly-owned subsidiaries of Cogentrix have entered into an Agreement
of Limited Partnership with VF Delaware and VF and contributed all of the cash
equity investment to the limited partnership created thereby to fund, in part,
the development and operation of a venlo style greenhouse located in the
vicinity of Fort Xxxxx, Texas for the purpose of producing and selling beefsteak
tomatoes (the "Fort Xxxxx Project"). In order to induce Cogentrix to permit such
subsidiaries to execute such Agreement of Limited Partnership and contribute
such funds to the Fort Xxxxx Project, Agro Power has agreed to grant to
Cogentrix a right of first option on all Future Projects (as hereinafter
defined) on the terms set forth herein. Without the agreement of Agro Power to
grant to Cogentrix this option, Cogentrix would not have allowed its
subsidiaries to enter into the Agreement of Limited Partnership or make the
related contributions to the Fort Xxxxx Project.
Accordingly, in consideration of the premises, the mutual covenants and
conditions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Cogentrix and Agro
Power hereby agree as follows:
1. As used in this Agreement, the following terms shall have the following
meanings (such definitions to be equally applicable to both the singular and the
plural forms of the terms defined):
(a) "Affiliate" of any designated Person, means each Person which,
directly or indirectly, controls or is controlled by or is under common
control with such designated Person and, without limiting the generality of
the foregoing, shall include (a) any Person which beneficially owns or
holds fifty percent (50%) or more of any class of voting securities of such
designated Person or ten percent (10%) or more of the equity interest in
such designated Person and (b) any Person of which such designated Person
beneficially owns and holds fifty percent (50%) or more of any class of
voting securities or in which such designated Person beneficially owns or
holds ten percent (10%) or more of the equity interest. For the purposes of
this definition, the terms "controls", "controlled by" and "under common
control with," as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of voting securities or by contract or otherwise.
Notwithstanding the foregoing, (i) neither Cogentrix
- 1 -
nor Agro Power, nor any of their affiliates or subsidiaries shall be deemed
to be Affiliates of one another solely as a result of the participation in
the Fort Xxxxx Project or any Future Project, and (ii) EcoScience
Corporation, Inc. shall not be deemed to be an Affiliate of Agro Power.
(b) "Business Day" means a day other than a Saturday, a Sunday or any
other day on which commercial banks in North Carolina or New Jersey are
authorized or required by law or executive order to be closed.
(c) "Cash Equity Investment" means an Equity Investment acquired
solely for cash or cash equivalents.
(d) "Future Project" means the development, acquisition, owning or
agreement to operate by Agro Power or any of its Affiliates, of any
greenhouse facility at which fruit or vegetables are grown and which is
developed, acquired, or first owned or operated after the date hereof,
wherever located, other than the projects described on Schedule 1 attached
hereto and incorporated herein by reference.
(e) "Equity Investment" means common stock, preferred stock or other
shares of capital stock, interests in a limited liability company,
partnership interests in a limited or general partnership, or any similar
right to participate in the profits or losses of any Person or any other
security (other than debt that has no conversion features) including, but
not limited to, (i) any note, debenture or other instrument that is
convertible (at the option of the Person issuing it or the Person holding
it) into, or grants the right or option to acquire, any foregoing and (ii)
any note, debenture or other instrument that is subordinated to senior
debt.
(f) "Internal Rate of Return" (whether or not capitalized) means the
return on investment calculated in accordance with Schedule 2, attached
hereto and incorporated herein by reference.
(g) "Non-APD Equity Investment" means an Equity Investment made by any
Person other than Agro Power or any Affiliate of Agro Power.
(h) "Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or agency or other entity of whatever
nature.
2. (a) Agro Power hereby grants, itself and on behalf of and as agent for
its Affiliates, to Cogentrix an option to acquire not less than (i) one hundred
percent (100%) of the Non-APD Equity Investment in all Future Projects and (ii)
at least fifty percent (50%) of the Equity Investment in all Future Projects
whether or not Agro Power or its Affiliates otherwise desires or intends to
permit Non-APD Equity Investment in a Future Project. If Cogentrix exercises its
option under this Agreement, it must exercise the option with respect to all of
the Non-APD Equity Investment offered to it by Agro Power.
- 2 -
(b) Any Equity Investment in any Future Project (other than a Future
Project that is solely the purchase of an existing greenhouse or an
agreement to manage such a greenhouse) offered or available to be made by
Cogentrix hereunder shall be for a Cash Equity Investment and shall
provide, and Agro Power shall (and shall cause its Affiliates to) structure
each such Cash Equity Investment to provide, Cogentrix with a preferential
return on each such Cash Equity Investment that is no less favorable than
the following:
First, Cogentrix and any other holder of a Cash Equity Investment
(including Agro Power, if applicable) in such Future Project (collectively,
the "Cash Equity Investors") will receive (sharing on a pro rata basis
based on their relative Cash Equity Investment in the Future Project)
ninety percent (90%) of all cash distributions to equity holders from such
Future Project until such time as such Cash Equity Investors have received
cash distributions from such Future Project that provide the Cash Equity
Investors with a [information omitted and subject to request for
confidential treatment]% Internal Rate of Return on their Cash Equity
Investment in such Future Project.
Thereafter, the Cash Equity Investors will receive (sharing on a pro
rata basis based on their relative Cash Equity Investment in the Future
Project) sixty-five and seven tenths percent (65.7%) of all cash
distributions to equity holders from such Future Project until such time as
such Cash Equity Investors have received cash distributions from such
Future Project that provide the Cash Equity Investors with, in the case of
the first Future Project offered to Cogentrix, [Information omitted and
subject to request for Confidential Treatment] Internal Rate of Return on
their Cash Equity Investment in such Future Project, and, in the case of
the second Future Project offered to Cogentrix, a [information omitted and
subject to request for confidential treatment]% Internal Rate of Return on
their Cash Equity Investment in such Future Project and, with respect to
all other Future Projects, a [information omitted and subject to request
for confidential treatment]% Internal Rate of Return on their Cash Equity
Investment in such Future Project.
Thereafter, such Cash Equity Investors in such Future Project will
receive fifty percent (50%) of all cash distributions to equity holders
from such Future Project.
For these purposes, Internal Rate of Return will be calculated at each
calendar quarter end and shall be calculated on an after-tax basis (which
shall mean after deducting Cogentrix's share of the notional project
Federal and state income tax (assuming for tax purposes that any investment
is made in a stand-alone tax-paying entity)).
3. Agro Power shall provide Cogentrix with a written description of each
Future Project in which Cogentrix may invest hereunder and of the terms of
Cogentrix's proposed Equity Investment which shall include a summary (in
reasonable detail) of the material terms of such Future Project and the bases
and assumptions used in creating related forecasts. At reasonable times and on
reasonable notice, Agro Power shall permit Cogentrix and its representatives
access to the project site, responsible personnel, records, contracts and such
other information as Cogentrix may reasonably request to confirm the summary
provided to it by Agro Power and to otherwise inspect and investigate the Future
Project in order to allow Cogentrix to make an informed decision of whether to
exercise its option hereunder with respect to such Future Project. Furthermore,
Agro
- 3 -
Power shall provide Cogentrix and its representatives with reasonable access to
all third parties whose services or products are material to the Future Project.
Cogentrix shall have forty-five (45) days after its receipt of such written
description to complete its investigation of the Future Project and notify Agro
Power of its desire to make a Cash Equity Investment in the Future Project. If
Cogentrix gives notice to Agro Power that it desires to pursue a Cash Equity
Investment in the Future Project within such period, then Cogentrix and Agro
Power and their respective Affiliates shall negotiate in good faith towards the
execution of definitive agreements related to such Cash Equity Investment, it
being understood that at any time prior to the execution of such definitive
agreements, for any reason, Cogentrix may notify Agro Power of its decision to
terminate discussions with respect to such Future Project and any such notice
must be in writing and state the reason for its decision.
4. If Cogentrix does not exercise its right under Section 2 hereof to make
a Cash Equity Investment in a Future Project within the time allowed for it to
exercise such right under Section 3 hereof, then Agro Power or such Affiliate
may offer the Equity Investment in such Future Project to another Person but
only on terms no more favorable to such Person than those offered to Cogentrix.
Agro Power shall not, and shall not permit any of its Affiliates to, permit
Non-APD Equity Investments to be made in any Future Project on terms and
conditions more favorable than the terms and conditions offered to Cogentrix
hereunder.
5. Cogentrix shall have the option provided in this Agreement until the
earlier of:
(a) Such time as Cogentrix and its Affiliates have made Cash Equity
Investments in an initial aggregate amount of $20 million in Future
Projects, or
(b) if Cogentrix declines to acquire the interest being offered to it
in any Future Project offered by Agro Power or one of its Affiliates under
Section 2 hereof (which is a Future Project of the type described in
Section 2(b)) which provides at least the Internal Rate of Return described
in Section 2(b) [Information omitted and subject to request for
Confidential Treatment] on Cogentrix's proposed Cash Equity Investment
(using reasonable assumptions and forecasts) by the end of the fifth year
of operations and thereafter a Person (other than Agro Power or one of its
Affiliates) makes such Equity Investment in such Future Project on the same
or less favorable terms and conditions as were offered to Cogentrix.
6. Nothing in this Agreement shall require Cogentrix or any of its
Affiliates to participate in any Future Projects or acquire any Equity
Investments. Cogentrix and any of its Affiliates may decline at any time an
offer to make an Equity Investment in a Future Project for any or no reason,
without any liability or obligation to Agro Power or any of its Affiliates,
whether arising under contract, tort or any other legal theory, including, but
not limited to, liability for lost profits or other consequential, incidental,
special, exemplary or indirect damages that may be incurred or suffered by Agro
Power (even if Cogentrix has been advised of the possibility of such damages).
7. Except as contemplated by this Agreement, if Cogentrix makes or agrees
to make a Cash Equity Investment in any fruit or vegetable greenhouse project
(other than a greenhouse project which involves a cogeneration or power facility
developed by a third party in which
- 4 -
Cogentrix has made an Equity Investment) which competes with any then existing
greenhouse project owned, operated or managed by Agro Power or one of its
Affiliates, then the option granted to Cogentrix hereunder shall expire.
8. Any provision of this Agreement which is invalid, prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such invalidity,
prohibition or unenforceability in any such jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
9. Neither this Agreement nor any rights or obligations hereunder, in whole
or in part, shall be assigned or otherwise transferred without Cogentrix's or
Agro Power's prior written consent. Cogentrix may exercise its option hereunder
with respect to any or all Future Projects itself or through one or more of its
now existing or hereafter formed or acquired Affiliates.
10. Any notice required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given and/or delivered (a) when
personally delivered, (b) when sent by telefax, (c) the second day following the
day on which the same has been delivered prepaid to a national courier service
(in the case of notices within the continental United States) or the third day
following the day on which the same has been delivered to an international
courier service (in the case of notices to be delivered across national
boundaries) or (d) in the case of notices within the United States, three (3)
days after the deposit in the mail, registered or certified, return receipt
requested and postage prepaid, in each case addressed to the party to whom such
notice is to be given at the following address(es), or at the most recent
address(es) specified by written notice given to the other party in the same
manner provided in this section; provided, however, that notice of an address
change shall not be effective until actually received:
Cogentrix: Cogentrix Energy, Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: General Counsel
Telefax: (000) 000-0000
Agro Power: Agro Power Development, Inc.
00 Xxxxx Xxxxx
Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: President
Telefax: (000) 000-0000
11. Cogentrix and Agro Power shall keep (and shall cause their respective
Affiliates to keep) this Agreement and its terms confidential except in
connection with the enforcement of their rights hereunder and except as required
by law.
12. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of North Carolina, other than its rules regarding
choice of law.
- 5 -
13. Each party hereto shall be deemed to be an independent contractor with
respect to the performance of its obligations and duties hereunder. Nothing in
this Agreement or the arrangement for which it is written shall constitute or
create a joint venture, partnership, agency or any other similar arrangement
between the parties. No party hereto shall have the authority to assume or
create obligations on behalf of the other party, and no party hereto shall take
any action which has the effect of creating the appearance of its having such
authority.
14. No failure of either party to enforce any provision hereof or to resort
to any remedy or to exercise any one or more alternate remedies and no delay in
enforcing, resorting to or exercising any remedy shall constitute a waiver by
that party of its right subsequently to enforce the same or any other provision
hereof or to resort to any one or more of such rights or remedies on account of
any such ground then existing or which may subsequently occur.
15. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same agreement.
16. Each party shall bear its own expenses in connection with this
Agreement and the rights and obligations granted and imposed hereunder except
that, in connection with the enforcement of this Agreement in an arbitral or
court proceeding, the prevailing party shall be entitled to reimbursement of its
reasonable attorney fees and expenses incurred in connection with such
enforcement.
17. This Agreement contains the final, complete and exclusive statement of
the agreement between the parties with respect to the transactions contemplated
herein and all prior written agreements and all prior and contemporaneous oral
agreements with respect to the subject matter hereof are merged herein. This
Agreement may not be amended, supplemented or modified (or any right or power
granted hereunder waived) except by a written instrument signed by the parties
hereto (or, in the case of a waiver, signed by the party to be bound thereby).
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assignees.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
duplicate originals as of the date first above written.
COGENTRIX ENERGY, INC. AGRO POWER DEVELOPMENT, INC.
By:____________________________ By:____________________________
Name:__________________________ Name:__________________________
Title:_________________________ Title:_________________________
- 6 -
SCHEDULE 1
TO
AGREEMENT REGARDING FUTURE PROJECTS
1. The following types of greenhouse project developments are specifically
excluded from the option granted by Agro Power to Cogentrix under the
Agreement Regarding Future Projects.
A. Any greenhouse project developed by a third party in which
participation by Agro Power or its Affiliates is solely as a lessee
under a lease agreement or a management operator under a management
agreement, neither of which involves an Equity Investment by Agro
Power or any of its Affiliates.
B. Any greenhouse project developed by a third party in which
participation by Agro Power or its Affiliates is solely as a marketing
agent under a marketing agreement and which involves no Equity
Investment by Agro Power or any of its Affiliates.
C. Any operating greenhouse project acquired by Agro Power or its
Affiliates which involves no Equity Investment by Agro Power or any of
its Affiliates.
D. Any greenhouse project identified and developed by a third party
developer in which Agro Power has been invited to participate in such
development effort with no Equity Investment by Agro Power or any of
its Affiliates, and in which the greenhouse development was initiated
by such third party developer.
2. Agro Power is currently working on the following third party greenhouse
developments which are excluded:
Developer Location
--------- --------
1. AAS Services, Inc. & Sagamore Corp. Pennsylvania
2. Xxxxxx Xxxxxxxx, Inc. California
3. ATDM Corp. New York
4. Independent Energy Investors Colorado
5. R.D. Environmental Oregon
6. Xxxxxxx & Associates Maine
3. The following greenhouse projects and marketing agreements which are
currently being developed internationally with the following partners in
the following locations are excluded:
Partner Location
------- --------
1. Village Farms of Morocco Casablanca, Morocco
2. International APD (IAPD) United Kingdom
3. Gas Prom Russia
SCHEDULE 2
TO
AGREEMENT REGARDING FUTURE PROJECTS
Calculation of Internal Rate of Return
Internal Rate of Return Calculation
The calculation of the Internal Rate of Return in connection with determining
the First Priority Return and Second Priority Return will be based upon the cash
inflows and cash outflows for Cogentrix GP and Cogentrix LP. The Internal Rate
of Return shall be computed utilizing Microsoft Excel software version 5.0. The
Internal Rate of Return shall be computed utilizing the @XIRR function in Excel.
For purposes of calculating the Internal Rate of Return, the cash inflows and
cash outflows to Cogentrix GP and Cogentrix LP shall consist solely of the
following:
Partner Contributions
All contributions made by Cogentrix GP and Cogentrix LP will be reflected
as a cash inflow as of the date such contribution was received by the
Partnership. Cogentrix GP and Cogentrix LP will be credited for a partner
contribution at any time such Partner funds cash into the Partnership. In
addition, to the extent Cogentrix Energy, Inc. or any of its Affiliates
funds cash directly into the Partnership or pays amounts to other persons
to fulfill obligations under the Partnership Agreement or any of the
Project Documents or Project Loan Documents or incurs costs or fees
associated with securing an obligation to make a contribution to the
Partnership, then such funding into the Partnership or such other payments
and/or such costs or fees will be deemed a capital contribution by
Cogentrix GP and Cogentrix LP as of the day on which such funding or
payment is made or such costs or fees are incurred.
Distributions to Partners
All cash distributions will be reflected as a cash outflow on a net
After-Tax basis (based on allocations of the Partnership's taxable income
(loss) in accordance with Section 4.1) as of the date such cash
distribution was received by the Partner. In addition, any construction
profits received by Cogentrix Energy, Inc. in excess of $400,000 shall be
considered a distribution to Cogentrix GP and Cogentrix LP (in an aggregate
amount equal to such excess) for purposes of the Internal Rate of Return
calculation.
The Internal Rate of Return calculation shall be performed by Agro Power as of
the end of each calendar quarter and is subject to the approval of Cogentrix GP
and Cogentrix LP.
All capitalized terms used in this Schedule 1.1(a) and not otherwise defined
herein shall have the meaning set forth in the Agreement of Limited Partnership
dated February 6, 1996 by and among Cogentrix of Fort Xxxxx I, Inc., Cogentrix
of Fort Davis II, Inc., Village Farms of Delaware, L.L.C. and Village Farms,
L.L.C.
