EXHIBIT 10.4
GREENHOUSE OPERATION AND
MANAGEMENT AGREEMENT
(BGP)
This GREENHOUSE OPERATION AND MANAGEMENT AGREEMENT (this "Agreement")
is made and entered into as of December 29, 1994 to be effective January 1,
1994, between BRUSH GREENHOUSE PARTNERS, a Colorado general partnership ("BGP")
and COLORADO GREENHOUSE LIMITED LIABILITY COMPANY, a Colorado limited liability
company ("Colorado Greenhouse").
RECITALS
A. Colorado Power Partners, a Colorado general partnership ("CPP") is
the owner and developer of a 50 megawatt gas-fired cogeneration facility
consisting of an electrical generating facility (the "Power Plant") and an
approximately 18-acre greenhouse facility and related packing facility
(collectively, the "Greenhouse") located in Brush, Colorado.
B. CPP and BGP have previously entered into a Greenhouse Lease
Agreement, dated as of June 8, 1989 (the "Greenhouse Lease"), a copy of which is
attached hereto as Exhibit A, pursuant to the terms of which CPP leased the
Greenhouse to BGP.
C. BGP has previously entered into a Greenhouse Management Agreement,
dated as of March 26, 1989, and as amended on August 16, 1989, and as further
amended on June 19, 1990 and July 11, 1990 (collectively, the "Management
Agreement") with Spring Gardens, Inc. ("Spring Gardens") pursuant to the terms
of which BGP retained Spring Gardens to manage the Greenhouse.
D. Spring Gardens' duties under the Management Agreement were
terminated pursuant to a Second Amendment to Greenhouse Management Agreement,
dated as of August 1, 1992, among BGP, Spring Gardens, Xxxxxx X. Xxxx and CPP
Engineers and Constructors.
E. BGP and Colorado Greenhouse desire to enter into this Agreement in
order for BGP to engage Colorado Greenhouse to operate and manage the Greenhouse
on the terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
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AGREEMENT
Article 1. Engagement of Colorado Greenhouse.
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BGP hereby engages Colorado Greenhouse, and Colorado Greenhouse hereby
agrees to be engaged by BGP, to operate and manage the Greenhouse in accordance
with the terms and conditions of this Agreement.
Article 2. Definitions.
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Unless otherwise specifically set forth in this Agreement, the
Definitions that shall apply are as set forth in this Article 2.
"Allocated Percentage" means the percentage set forth in Exhibit B
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attached hereto, as the same may be amended from time to time as provided in
Section 15.15.
"Annual Operating Budget" means an operating budget submitted by
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Colorado Greenhouse to BGP and approved by BGP for two year operating periods
beginning with the Commencement Date, showing for each month of the following
two years (or, as the case may be, for the balance of the current calendar year
and then for the following calendar year) Greenhouse Revenues and Greenhouse
Operating Expenses.
"Applicable Laws" means all laws, treaties, ordinances, judgments,
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decrees, injunctions, writs and orders of any court, arbitrator or governmental
agency or authority and rules, regulations, orders, interpretations and permits
of any federal, state, county, municipal, regional, environmental or other
governmental body, instrumentality, agency, authority, court or other body
having jurisdiction over performance of the Services to be performed hereunder,
or operation of the Greenhouse, as may be in effect and as amended from time to
time.
"Applicable Permits" means all permits, licenses and similar items
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required to be obtained or maintained in connection with performance of the
Services to be performed hereunder, or operation of the Greenhouse, as may be in
effect from time to time and as amended from time to time.
"BGPII" means Brush Greenhouse Partners II Limited Liability Company, a
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Colorado limited liability company.
"BGPII Greenhouse" means the greenhouse leased to BGPII and to be
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operated by Colorado Greenhouse, located adjacent to the Facility.
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"Colorado Greenhouse Gross Margin" means, with respect to any calendar
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year, Net Revenues for such year minus (a) the aggregate Primary Fee for such
year and (b) the aggregate primary fees for such year paid by Colorado
Greenhouse with respect to the Other Greenhouses.
"Colorado Greenhouse Operating Expenses" mean, with respect to any
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period, the following amounts incurred (or accrued in accordance with prudent
accounting practices and the Annual Operating Budget) by Colorado Greenhouse
during such period in connection with the operation and management of the
Greenhouse and the Other Greenhouses (to the extent not reimbursed by BGP, CPP
or a third party): (i) all greenhouse labor and general and administrative
labor expenses, including all salaries, employee benefits (including related
taxes and contributions) and other compensation paid to Colorado Greenhouse's
employees and independent contractors, (ii) all packaging and delivery expenses,
(iii) all direct costs including propagation materials, seed, fertilizer,
fungicides, insect, biological, bee and CO costs, (iv) all operating expenses
including utilities (including costs of water), repairs and maintenance and
equipment leases, (v) insurance premiums, (vi) fees for accounting, legal and
other professional services, (vii) general and administrative expenses, (viii)
permitting fees and expenses, (ix) payments made with respect to loans made to
Colorado Greenhouse in connection with its formation and operations, (x) sales
and marketing expenses, and (xi) all other cash expenditures relating to the
operation, management, repair and maintenance costs of the Greenhouse and the
Other Greenhouses.
"Colorado Greenhouse Revenues" mean, with respect to any period, all
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revenues and payments made to Colorado Greenhouse during such period in
connection with the operation of the Greenhouse and the Other Greenhouses,
including, without limitation, all amounts payable or owed to Colorado
Greenhouse under contracts relating to the Greenhouse and the Other Greenhouses,
all other payments received by Colorado Greenhouse from the sale of vegetables
or other produce or crops produced by the Greenhouse and the Other Greenhouses,
and proceeds received from business interruption insurance.
"Commencement Date" means the earlier of (i) the date specified by BGP
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in a written notice to Colorado Greenhouse or (ii) the date on which BGP
notifies Colorado Greenhouse that the Greenhouse is available for use.
"Contingent Fee" means an amount, payable within 30 days after the end
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of each calendar year during the term of this Agreement, equal to either (a) the
Allocated Percentage of Colorado Greenhouse Gross Margin or (b) such lesser
amount as is necessary to
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cause the balance on deposit in the Reserve Account to equal the Reserve Amount.
"Facility" means the Power Plant and the Greenhouse.
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"FERC Order" means the Order Granting Application for Certification as
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a Qualifying Cogeneration Facility issued May 8, 1989, by the Federal Energy
Regulatory Commission, as the same may be amended, supplemented or replaced.
"Ft. Xxxxxx Greenhouse" means the greenhouse leased to Rocky Mountain
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and to be operated by Colorado Greenhouse, located in Ft. Xxxxxx, Colorado.
"Good Greenhouse Practices" mean the practices, methods and acts that
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are applied by prudent operators of cogeneration facility related greenhouses in
a manner consistent with applicable industry codes, standards and regulations,
and Applicable Laws, and designed to optimize productivity, reliability, safety,
environmental protection, economy and expediency.
"Greenhouse Operating Expenses" mean, with respect to any period, the
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following amounts incurred (or accrued in accordance with prudent accounting
practices and the Annual Operating Budget) by Colorado Greenhouse during such
period in connection with the operation and management of the Greenhouse (to the
extent not reimbursed by BGP, CPP or a third party): (i) all greenhouse labor
and general and administrative labor expenses, including all salaries, employee
benefits (including related taxes and contributions) and other compensation paid
to Colorado Greenhouse's employees and independent contractors, (ii) all
packaging and delivery expenses, (iii) all direct costs including propagation
materials, seed, fertilizer, fungicides, insect, biological, bee and CO costs,
(iv) all operating expenses including utilities (including water), repairs and
maintenance and equipment leases, (v) insurance premiums, (vi) fees for
accounting, legal and other professional services, (vii) general and
administrative expenses, (viii) permitting fees and expenses, (ix) sales and
marketing expenses, and (x) all other cash expenditures relating to the
operation, management, repair and maintenance costs of the Greenhouse.
"Greenhouse Revenues" mean, with respect to any period, all revenues
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and payments made to Colorado Greenhouse during such period in connection with
the operation of the Greenhouse, including, without limitation, all amounts owed
to Colorado Greenhouse under contracts relating to the Greenhouse, all other
payments received by Colorado Greenhouse from the sale of vegetables or other
produce or crops produced by the Greenhouse and proceeds received from business
interruption insurance with respect to the Greenhouse.
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"Lender" means, collectively, the lender(s) providing the construction
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and long-term financing for the Facility pursuant to the Loan Agreement
(including any other refinancing thereof), and any trustee or agent acting on
their behalf.
"Loan Agreement" means the agreement between CPP and the Lender
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providing financing for construction and operation of the Facility, as such
agreement may be amended or supplemented from time to time.
"Other Greenhouses" mean, collectively, the BGPII Greenhouse and the
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Ft. Xxxxxx Greenhouse (to the extent that the above are being operated and
managed by Colorado Greenhouse), or such other greenhouses as Colorado
Greenhouse may operate or manage during the term of this Agreement with the
consent of BGP and CPP.
"Net Revenues" mean, with respect to any period, Colorado Greenhouse
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Revenues minus Colorado Greenhouse Operating Expenses for such period.
"Party or Parties" means BGP or Colorado Greenhouse or both, as the
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context may require.
"Primary Fee" means an amount, payable within 30 days after the end of
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each calendar quarter during the term of this Agreement, equal to the Allocated
Percentage of Net Revenues, which amount shall not exceed (i) $500,000 for 1994
or (ii) the Allocated Percentage of $2,740,000 for any calendar year thereafter.
"Primary Fee Deficiency" means an amount, to be calculated by BGP
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within 30 days of the end of each calendar year during the term of this
Agreement, equal to the amount, if any, by which the Allocated Percentage of
$2,740,000 exceeds the aggregate payments made on account of the Primary Fee for
such calendar year.
"Primary Fee Deficiency Balance" means an amount determined at any time
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equal to the difference between (a) the sum of each prior year's Primary Fee
Deficiency minus (b) the sum of all amounts withdrawn during the term of this
Agreement from the Reserve Account and applied against a Primary Fee Deficiency
or the Primary Fee Deficiency Balance.
"Program" means the program for marketing, production and maintenance
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of the Greenhouse as prepared by Colorado Greenhouse and reviewed and approved
at least annually by BGP, which program shall cover the marketing, production
and maintenance necessary for the Greenhouse (including capital improvements
which shall be specified as such), a detailed staffing plan providing for the
necessary personnel and all other matters relevant to the operation of the
Greenhouse and Colorado Greenhouse's duties under this Agreement.
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"Project Documents" mean any and all agreements, contracts and permits,
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now or hereafter existing, relating to or affecting the operation of the
Greenhouse, as the same may be amended, supplemented or replaced from time to
time.
"Qualifying Facility" means a facility meeting all of the requirements
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for a "qualifying cogeneration facility" set forth in the regulations
implementing the Public Utility Regulatory Policies Act of 1978, as amended from
time to time, and in Part 292 of Title 18 of the Code of Federal Regulations, as
amended from time to time.
"Reserve Account" means the account entitled "Greenhouse Reserve
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Account" to be maintained by BGP.
"Reserve Amount" means an amount equal to the product of the Allocated
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Percentage of $2,740,000.
"Rocky Mountain" means Rocky Mountain Produce Limited Liability
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Company, a Colorado limited liability company.
"Services" mean the services and work performed by Colorado Greenhouse
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according to the terms and conditions of this Agreement, including, without
limitation, the work described in Article 3 as the duties of Colorado Greenhouse
and specified in the Program.
"Subcontractor" means, in relation to Colorado Greenhouse, any
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individual, firm, organization, or supplier under contract to Colorado
Greenhouse for the performance of any part of Colorado Greenhouse's Services,
provided that any such contract under which Colorado Greenhouse has payment
obligations in excess of $250,000 in the aggregate in any one year period or
material liabilities or risks to the Greenhouse shall be subject to prior
approval by BGP.
"Uncontrollable Forces" mean any cause beyond the control of the Party
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affected, including but not limited to acts of God, flood, earthquake, storm,
fire, lightning, explosion, epidemic, war, riot, civil disturbance, sabotage,
and restraint by court order or public authority, strike or labor disturbance,
which by exercise of due foresight such Party could not reasonably have been
expected to avoid, and which by exercise of due diligence it is unable to
overcome. Neither Party shall, however, be relieved of liability for failure of
performance if such failure is due to causes arising out of its own negligence
or to removable or remediable causes which it fails to remove or remedy with
reasonable dispatch.
Article 3. Duties of Colorado Greenhouse.
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3.1. Enumeration of Duties. Colorado Greenhouse hereby agrees to
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perform the activities as generally described in this
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Article, and as contained elsewhere in this Agreement related to the operation
and management of the Greenhouse consistent with the Annual Operating Budget and
the Program. From and after the Commencement Date, Colorado Greenhouse shall,
subject to BGP's discretion:
(a) Safely and efficiently operate and maintain the Greenhouse in
accordance with (i) the Annual Operating Budget, (ii) the Program and (iii)
operations and maintenance manuals and warranties and procedures provided by the
contractor for the Greenhouse.
(b) Continuously operate the Greenhouse exclusively for the growing,
processing, packaging and marketing of tomatoes and other greenhouse vegetables
as provided in the Greenhouse Lease, a copy of which is attached hereto as
Exhibit A.
(c) Assume and comply with the obligations of BGP under the
Greenhouse Lease (excluding the obligation to pay rent and establish rent
reserves) including, without limitation, utilizing the thermal heat from the
Power Plant in such quantities and for such purposes as necessary to maintain
the Qualifying Facility status of the Facility, provided, however, that such
quantities must be practicable without enlargement or other material alteration
of the Greenhouse or if enlargement or material alteration is required then the
cost thereof must be borne by BGP or other third parties. Upon request by BGP,
Colorado Greenhouse will provide satisfactory evidence of its compliance with
such lease terms.
(d) Pay, as the same become due, the Greenhouse Operating Expenses.
(e) Use its best efforts to market the produce from the Greenhouse.
(f) Employ, pay, train and supervise that number of personnel in
accordance with the staffing requirements set forth in the Annual Operating
Budget, and plan and administer all matters pertaining to such employed
personnel in the areas of labor relations, salaries, wages, working conditions,
hours of work, termination of employment, employee benefits, safety and related
matters. Colorado Greenhouse shall use reasonable care in the hiring of all its
employees. All employees shall be employees of Colorado Greenhouse and their
wages or other compensation shall be controlled and disbursed by Colorado
Greenhouse.
(g) Repair or replace, as may be necessary in accordance with a
manufacturer's directions, Good Greenhouse Practices and in a good and
workmanlike manner any Greenhouse equipment that fails or malfunctions (except
as otherwise provided in Section 4.1(d) of this
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Agreement). If any such failure or malfunction is covered by a warranty,
Colorado Greenhouse shall submit a timely warranty claim on behalf of BGP.
(h) Subject to BGP's approval as required for a Subcontractor, engage
any independent contractors necessary for making repairs to, or performing
maintenance on, or installing improvements to the Greenhouse in the event that
Colorado Greenhouse is not available or is otherwise unable to make or perform
such repairs, maintenance or installations.
(i) Maintain accurate records of all changes to the Greenhouse and up
to date as-built drawings of the Greenhouse reflecting such changes.
(j) Maintain regular communication with BGP, regarding the operation
and management of the Greenhouse, including monthly production and sales
reports, safety reports and other reports reasonably requested by BGP,
specifying all operations at the Greenhouse during such period and noting any
other material occurrences or operational results, and communicate in each
instance, either by telephone or in writing, material changes in the anticipated
operation of the Greenhouse or the marketing of produce therefrom, maintenance
problems related to the Greenhouse and any notice or knowledge of violation or
variance of any Applicable Law or Applicable Permit.
(k) Make, in the name of BGP, contracts for janitorial, water,
electricity, telephone and other applicable services, or such of them as
Colorado Greenhouse shall deem advisable, and place orders for such equipment,
tools, appliances, materials and supplies as are necessary to properly maintain
and operate the Greenhouse.
(l) Maintain a system of office records, books, and accounts with
respect to the Greenhouse as required by the Loan Agreement, which records shall
be subject to examination by BGP, CPP and the Lender or authorized agents or
designees of each during all regular business hours. Records, books, and
accounts shall be kept for a minimum of five years. So long as Colorado
Greenhouse operates all or any of the Other Greenhouses, Colorado Greenhouse
shall allocate costs and revenues for the Greenhouse in accordance with the
Allocation Percentage set forth on Exhibit B attached hereto.
(m) Be cognizant of and adhere to the requirements set forth in the
Project Documents insofar as they relate to the operation of the Greenhouse and
the duties of Colorado Greenhouse under this Agreement.
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(n) Prior to the Commencement Date, submit to BGP a proposed Annual
Operating Budget for the year in which this Agreement commences and the
following year and cooperate with BGP to review and modify the same as necessary
to obtain the approval of BGP's Management Committee prior to the Commencement
Date; and thereafter submit to BGP a proposed Annual Operating Budget by
November 1 of each year for the following two-year period and cooperate with BGP
to review and modify the same as necessary to obtain the approval of BGP's
Management Committee by December 1 of each year. If for any reason the approval
of BGP's Management Committee is not so obtained, the Annual Operating Budget
previously approved shall, until the approval of an Annual Operating Budget for
the following two-year period, be deemed to be in force and be effective as the
Annual Operating Budget for such year.
(o) Review all federal, state and local laws and regulations
establishing compliance requirements in connection with the operation and
management of the Greenhouse. Advise BGP on the need to secure or renew, as
necessary, appropriate permits, licenses and approvals, and assist BGP in
securing as appropriate, such permits, licenses and renewals as required.
(p) Keep the Greenhouse free of all materialmen's, mechanics' and
other liens for materials or services furnished to the Greenhouse at Colorado
Greenhouse's direction.
(q) Pay all real estate taxes attributable to the Greenhouse (as
equitably apportioned by BGP provided that in no event shall Colorado Greenhouse
be obligated for any portion of real estate or property taxes attributable to
the heat storage units or the heat generating portions of the Facility) within
five days of receipt of an invoice submitted by BGP. In addition, Colorado
Greenhouse shall be responsible for all taxes payable to the appropriate taxing
authorities for any sales, excise or other tax levied, imposed or assessed in
the State of Colorado or by any other taxing authority in connection with the
operation of the Greenhouse and the sale of produce therefrom.
(r) By November 1 of each year, submit to BGP a proposed Program and
cooperate with BGP to review and modify the same as necessary to obtain the
approval of BGP's Management Committee.
(s) Perform other normal business functions and otherwise operate and
manage the Greenhouse in accordance with and as limited by the Greenhouse Lease
and this Agreement.
3.2 Limitations on Authority. Notwithstanding any provision of this
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Agreement to the contrary, unless previously expressly approved in the Annual
Operating Budget or otherwise approved in writing by BGP, Colorado Greenhouse or
any
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Subcontractor, or any of their respective agents or representatives, shall not:
(a) sell, lease, pledge or mortgage, convey, or make any license,
exchange or other transfer of property or assets of BGP;
(b) make, enter into, execute, amend, modify or supplement any
contract or agreement on behalf of or in the name of BGP;
(c) make any recoverable expenditure or acquire on a recoverable cost
basis any equipment, materials, assets or other items, except for emergency
expenditures and except in substantial conformity with the Annual Operating
Budget and the Program; it being understood and agreed that Colorado Greenhouse
shall not be entitled to reimbursement for any expenditures not made in
accordance with this paragraph (c);
(d) take or agree to take any other action that materially varies
from the applicable Annual Operating Budget, the Program or any Applicable Law;
(e) take, agree to take or fail to take any action that would cause a
default under the Project Documents;
(f) settle, compromise, assign, pledge, transfer, release or consent
to the settlement, compromise, assignment, pledge, transfer or release of any
claim, suit, debt, demand or judgment against or due by BGP or Colorado
Greenhouse, or submit any such claim, dispute or controversy to arbitration or
judicial process, or stipulate in respect thereof to a judgment, or consent to
do the same;
(g) modify or alter the type of crop grown in the Greenhouse.
3.3 Limitation on Other Activities. During the term of this Agreement,
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Colorado Greenhouse shall not:
(a) engage in any business or activity or make any investments
(either directly or indirectly) other than operating and managing the Greenhouse
and the Other Greenhouses, growing crops therein and marketing such crops and
products thereof;
(b) make any alterations, renovations, improvements or other
installations in or about any part of the Greenhouse in excess of $25,000 unless
and until Colorado Greenhouse shall cause plans and specifications therefor to
have been reviewed by BGP and shall have obtained BGP's written approval
thereof. If approval is
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granted, Colorado Greenhouse shall cause the work described in such plans and
specifications to be performed, at its expense, promptly, efficiently,
completely and in a good and workmanlike manner by duly qualified or licensed
persons or entities. All such work shall comply with all applicable codes,
rules, regulations and ordinances. Ordinary and customary repairs and
replacements in and on the Greenhouse shall be promptly undertaken and promptly
completed and need not have BGP's prior approval, unless such repairs or
replacements materially decrease the value of usefulness of the Greenhouse or
the Facility;
(c) without the prior written consent of BGP, agree to any increase of
the fees to be paid by Colorado Greenhouse under the greenhouse management and
operating agreements for the Other Greenhouses; or
(d) without the prior written consent of BGP and CPP, cause any
greenhouse or other business to be treated under this Agreement as an Other
Greenhouse except the BGP II Greenhouse, the Ft. Xxxxxx Greenhouse and that
certain greenhouse near Rifle, Colorado built in connection with the American
Atlas cogeneration project.
3.4 Payments by Colorado Greenhouse. (a) During the term of this
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Agreement, Colorado Greenhouse shall pay BGP, on a timely basis (i) the Primary
Fee and (ii) the Contingent Fee, provided, however, that no Primary Fee shall be
due hereunder for any calendar quarter until the calendar quarter in which rent
is first due under the Greenhouse Lease. Any amount which is not paid within
ten days after the same is due shall bear interest at a default rate equal to
the rate of interest publicly announced or as published from time to time by
Bank of America NT and SA as its "reference rate" plus six percent per annum
from the first day due until paid.
(b) BGP and Colorado Greenhouse understand and agree, that except as
provided in this Section 3.4, all amounts paid on account of the Contingent Fee
shall be used by BGP as requested by CPP under the Greenhouse Lease. Without
limiting the foregoing, BGP shall withdraw from the Reserve Account, annually,
the lesser of (y) all of the funds in such account or (x) an amount equal to the
sum of (i) the Primary Fee Deficiency for such year and (ii) an amount equal to
the Primary Fee Deficiency Balance.
(c) In addition to the foregoing payments, Colorado Greenhouse shall
reimburse BGP for prior advances made to Colorado Greenhouse in connection with
its formation and start-up in the total amount of $615,000. Such amount
together with interest on any unpaid portion of such amount accruing from
January 1, 1995 at an annual rate of eight percent shall be payable as follows:
$375,000 plus accrued interest shall be paid on or before December 31, 1996
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and $240,000, or such other amount of remaining principal as shall be then
outstanding plus accrued interest shall be paid on or before December 31, 1997.
Article 4. Duties of BGP.
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4.1. Enumeration of Duties. The following shall be BGP's
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responsibility to provide in support of the uninterrupted operation and
maintenance of the Greenhouse:
(a) Use reasonable efforts to maintain the Greenhouse Lease or any
replacement contracts for the supply of thermal heat in sufficient quantities to
maintain the Facility's FERC Order.
(b) Providing a liaison person(s) available to Colorado Greenhouse
twenty-four hours per day, authorized to make decisions on the part of BGP.
(c) Enforcing diligently any claim BGP may have under insurance
policies, equipment guarantees and warranties pertaining to the Greenhouse.
(d) Paying for capital improvements as set forth in the Program.
Except as otherwise agreed by Colorado Greenhouse, BGP shall pay for all capital
improvements which (i) the Parties agree are required for continued usefulness
of the Greenhouse and (ii) are required in connection with the expansion of the
Greenhouse to maintain compliance with the FERC Order. Any other improvements
that are made at the request of Colorado Greenhouse or that, in BGP's reasonable
judgment, are to be made solely for the purpose of enhancing Colorado
Greenhouse's growing programs, shall be made at Colorado Greenhouse's cost and
expense, and may be made only with the prior written consent of BGP.
Article 5. Term.
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5.1. Term. This Agreement shall continue for a term equal to the term
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of the Greenhouse Lease, unless sooner terminated as hereinafter provided.
5.2. Termination Upon Default. If any of the following events occur,
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BGP shall have the right upon written notice to Colorado Greenhouse, to
terminate this Agreement:
(a) If Colorado Greenhouse defaults in the performance of any
obligation under this Agreement (other than the obligations under Section 3.4 of
this Agreement) and such default is not cured by Colorado Greenhouse within 5
days after receipt of a notice specifying the default.
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(b) If (i) the Primary Fee Deficiency Balance exceeds $1,000,000
at any time before December 31, 1996, (ii) the Primary Fee Deficiency for
calendar year 1997 or any year thereafter exceeds $500,000 or (iii) the Primary
Fee Deficiency Balance exceeds $750,000 at any time after January 1, 1998.
(c) If Colorado Greenhouse is adjudicated a bankrupt or insolvent
and such adjudication is not vacated within ten (10) days.
(d) The filing of a voluntary or involuntary bankruptcy or
insolvency petition of Colorado Greenhouse or the reorganization of Colorado
Greenhouse whether pursuant to the federal Bankruptcy Act or any similar federal
or state proceedings, unless such petition is filed by a party other than
Colorado Greenhouse and is withdrawn or dismissed within 30 days after the date
of filing.
(e) The appointment of a receiver or trustee for the business or
property of Colorado Greenhouse, unless such appointment shall be vacated within
ten days of its entry.
(f) The making by Colorado Greenhouse of an assignment for the
benefit of its creditors, or in any other manner Colorado Greenhouse's interests
in this Agreement shall pass to another by operation of law.
5.3. Payment of Expenses and Allocation of Crops After Termination.
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Except as set forth in this Section 5.3 and except for Colorado Greenhouse's
obligations under Article 7 and Article 11, on the effective date of a
termination, BGP and Colorado Greenhouse shall be relieved of all obligations
thereafter accruing under this Agreement. Notwithstanding such termination,
neither Party shall be relieved from any obligations or liabilities accruing
prior to the effective date of termination, including in the case of Colorado
Greenhouse, its obligation to make payment to BGP of all sums due BGP under this
Agreement. After the effective date of a termination BGP shall either grant
Colorado Greenhouse such use of the Greenhouse as is necessary to care for and
harvest any crop planted before such date or compensate Colorado Greenhouse for
the value of such crop as of the effective date of termination, subject to any
right of offset that BGP may have for amounts owed to it hereunder.
5.4. Termination Upon Loan Agreement Default. If there has been an
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event of default under the Loan Agreement, then Lender or any successor owner of
the Facility may terminate this Agreement upon ten days advance written notice.
The provisions of this Section 5.4 were made for the express benefit of the
Lender as a third party beneficiary, and subject to the terms and conditions of
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this Section 5.4, the Lender shall have the right to exercise and enforce the
rights granted to it herein.
5.5. Termination of Greenhouse Lease. In the event that the Greenhouse
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Lease is terminated for any reason whatsoever, this Agreement shall
automatically terminate without any further act or instrument.
5.6. Surrender of Greenhouse. Upon the termination of this Agreement
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but subject to the terms of Section 5.3, Colorado Greenhouse will surrender the
Greenhouse in as good condition as when received, excepting depreciation caused
by ordinary wear and tear.
5.7. Training of New Personnel. Upon termination of this Agreement,
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Colorado Greenhouse will make available to BGP one qualified employee for a
period of two months after the termination of this Agreement for the purpose of
training new personnel in the operation and management of the Greenhouse.
Article 6. BGP's Right to Audit.
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BGP shall have the right, at any time and from time to time to audit or
cause an independent audit to be made of Colorado Greenhouse's books and records
for the purposes of verifying compliance with the provisions of this Agreement.
In the event that any such audit indicates that Colorado Greenhouse underpaid
any amount due to BGP under this Agreement, Colorado Greenhouse shall pay such
additional sum and such audit shall be deemed to be binding and conclusive,
unless a request is made, within fifteen days after receipt of a copy of such
audit by Colorado Greenhouse, for a consultation with such auditors. Such
audit, after consultation and modification, if any, shall be binding and
conclusive unless the consultation results in irreconcilable differences with
respect to any material item in the report. In such event, the disputed item
will be submitted to a firm of independent certified public accountants,
acceptable to BGP, for resolution, and the fees of such firm shall be paid
equally by Colorado Greenhouse and BGP, unless Colorado Greenhouse is obligated
for full payment pursuant to this Article 6. If the submission to the
independent certified public accountants results in changes in the audit report,
the report as so changed shall be binding and conclusive. In the event that the
audit indicates that there were deficiencies in the aggregate amount of $10,000
or more in the amounts which should have been paid by Colorado Greenhouse to BGP
pursuant to this Agreement, Colorado Greenhouse shall pay all costs of audits
incurred by BGP under this Article 6 together with interest on the amount of the
deficiency payable at the interest rate set forth in Section 3.4(a) of this
Agreement.
-14-
Article 7. Exclusive Warranties; Remedies.
------------------------------------------
7.1. Warranty. Colorado Greenhouse warrants to BGP that the Services
--------
performed under this Agreement shall be performed in a competent, prudent and
efficient manner, in accordance with this Agreement, Good Greenhouse Practices,
all warranties and procedures for the Greenhouse and all safety, fire protection
and other requirements of applicable insurance policies.
7.2. No Consequential Damages. In no event shall Colorado Greenhouse,
------------------------
BGP or any of their respective affiliates, owners, members, managers, employees
or agents, be liable for any consequential, incidental or special damages or any
other liabilities not expressly set forth herein, regardless of whether based on
contract, warranty, indemnity, tort, strict liability or otherwise.
7.3. No limitation on Claims Against Third Parties. Nothing contained
---------------------------------------------
in this Article 7 or any other provision of this Agreement shall be deemed to
waive, limit or impair in any way any claims that BGP may have against
Subcontractors, manufacturers of equipment or any other person.
Article 8. Insurance.
---------------------
8.1. Colorado Greenhouse's Coverage. At all times after the
------------------------------
Commencement Date, Colorado Greenhouse will carry and maintain, at its expense:
(a) public liability insurance including insurance against
assumed or contractual liability under this Agreement, in such amount as BGP may
request.
(b) all-risk casualty insurance covering all of the personal
property in, on or about the Greenhouse including all improvements installed in,
on or about the Greenhouse by or on behalf of Colorado Greenhouse, in such
amounts as BGP may request;
(c) if and to the extent required by law, workers compensation or
similar insurance in form and amounts required by law; and
(d) such other insurance as BGP may require, including, but not
limited to, insurance that BGP or CPP is required to provide pursuant to the
terms of any applicable credit agreement affecting the Facility.
8.2. Subcontractor's Coverage. Colorado Greenhouse shall require all
------------------------
of its Subcontractors engaged in work at the Greenhouse to maintain insurance
coverage of the types and in the amounts at
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least equal to the insurance coverage that Colorado Greenhouse is required to
maintain in accordance with Section 8.1 above.
8.3. Umbrella Coverage. Umbrella coverage may cover any portion of the
-----------------
limits of liability required in Sections 8.1 and 8.2 above, provided it has all
the coverages and requirements for the type of coverage.
8.4. Insurance Provisions. The company or companies writing such
--------------------
insurance policies, as well as the form of such insurance shall at all times be
subject to BGP's approval. Public liability and all-risk casualty insurance
policies evidencing such insurance shall name BGP or its designee as additional
insureds, and shall contain such other provisions and endorsements as BGP may
request.
8.5. Evidence of Insurance. Before the date on which such insurance
---------------------
first is required to be carried by Colorado Greenhouse, and thereafter, at least
30 days before the effective date of any renewal of any such policy, Colorado
Greenhouse will deliver to BGP either a duplicate original of the aforesaid
policy or a certificate evidencing such insurance.
Article 9. Applicable Permits.
------------------------------
All Applicable Permits shall be obtained and maintained by Colorado
Greenhouse on behalf of BGP. BGP shall cooperate with Colorado Greenhouse in
the securing of such Applicable Permits.
Article 10. Applicable Laws.
----------------------------
10.1. Applicable Laws. Colorado Greenhouse shall operate and
---------------
maintain the Greenhouse in conformance with all Applicable Laws and Applicable
Permits, including without limitation the disposing of any hazardous waste
generated by the Greenhouse in accordance with all Applicable Laws.
10.2. Changes in Laws. Colorado Greenhouse shall comply with
---------------
applicable changes in the Applicable Laws and shall inform BGP of such changes.
To the extent that such changes require alterations in the Greenhouse
configuration, operation, maintenance procedures or other aspects of Greenhouse
operation and maintenance, the cost thereof shall be borne by BGP. The parties
acknowledge that any material alteration in the Greenhouse may necessitate a
change in the Allocated Percentage for the Greenhouse and each of the Other
Greenhouses.
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Article 11. Indemnification.
----------------------------
11.1. Indemnification by Colorado Greenhouse. (a) Colorado
--------------------------------------
Greenhouse shall indemnify and hold harmless BGP and its partners and their
respective affiliates, officers, directors, managers, shareholders, partners,
employees and agents, from any loss, liability or damage incurred or suffered by
any such person by reason of Colorado Greenhouse's failure to perform its
obligations hereunder or its negligence or willful misconduct, including,
without limitation, any judgment, award or settlement, other costs and expenses,
and reasonable attorneys' fees incurred in connection with the defense of any
actual or threatened claim or action based on any such act or omission, unless
such loss, liability or damage results from such indemnified person's fraud,
negligence or willful misconduct. Such attorneys' fees shall be paid as
incurred.
(b) Colorado Greenhouse shall indemnify and hold harmless BGP and
Lender and their respective affiliates, officers, directors, managers,
shareholders, members, employees and agents from any and all liability, claims,
demands, actions and causes of action whatsoever (including without limitation
reasonable attorneys' fees and expenses, and costs and expenses reasonably
incurred in investigating, preparing or defending against any litigation or
claim, action, suit, proceeding or demand of any kind or character) arising out
of or related to alleged contamination of the property underlying the Facility
(the "Premises") by any hazardous or toxic substance, pollutant or contaminant,
or alleged injury or threat of injury, to health, safety or the environment, or
alleged noncompliance with any federal, state and local environmental statutes,
regulations, ordinances, and any permits, approvals or judicial or
administrative orders issued thereunder, giving rise to liability under any
federal, state or local environmental statutes or ordinances, including without
limitation the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. (S)(S) 9601 et seq., as amended from time to time, or under any
-- ---
common law claim, including claims for personal injury or property damage or for
any claim by any governmental or private party for remedial or removal costs,
natural resource damages, property damages, damages for personal injuries, or
other costs, expenses or damages or any claim for injunctive relief arising from
any alleged injury or threat of injury to health, safety or the environment
relating to the Premises.
11.2. Indemnification by BGP. BGP shall indemnify and hold
----------------------
harmless Colorado Greenhouse and its affiliates, managers, members, employees
and agents, from any loss, liability or damage incurred or suffered by any such
person by reason of BGP's failure to perform its obligations hereunder or its
negligence or willful misconduct, including, without limitation, any judgment,
award or settlement, other costs and expenses, and reasonable attorneys' fees
-17-
incurred in connection with the defense of any actual or threatened claim or
action based on any such act or omission, unless such loss, liability or damage
results from such indemnified person's fraud, negligence or willful misconduct.
Such attorneys' fees shall be paid as incurred. Any such indemnification shall
be paid only from the assets of BGP and neither Colorado Greenhouse nor any
third party shall have recourse against the personal assets of any member of BGP
or their respective affiliates for such indemnification.
Any indemnification required herein to be made by BGP or Colorado Greenhouse
shall be made promptly following the determination of the loss, liability or
damage incurred or suffered by final judgment of any court, settlement, contract
or otherwise.
Article 12. Representations.
----------------------------
12.1 Representations of Colorado Greenhouse. Colorado Greenhouse
--------------------------------------
represents and warrants to BGP as follows:
(a) that it is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Colorado;
(b) that it has personnel available to it with the expertise in
connection with the management of greenhouses sufficient for it to perform its
obligations under this Agreement in a manner consistent with Good Greenhouse
Practices;
(c) that the execution, delivery and performance of this Agreement
by Colorado Greenhouse has been duly authorized by all necessary limited
liability company action and this Agreement has been duly executed and delivered
by Colorado Greenhouse and, subject to due execution and delivery by BGP, this
Agreement will be enforceable against Colorado Greenhouse in accordance with its
terms, and does not constitute a default under its operating agreement, or any
instrument to which it is a party, nor does it violate any provision of any law,
rule, regulation, order, judgment, decree, determination, or award presently in
effect having applicability to it;
(d) that it has all necessary permits, licenses, and other
governmental approvals required to perform its obligations hereunder, except for
permits BGP is required to obtain; and
(e) that there are no actions, suits, or proceedings pending or,
to its knowledge, threatened against it in any court or before any governmental
department, agency, instrumentality, or any arbitrator, in which there is a
reasonable possibility of an adverse decision which could materially and
adversely affect its ability to perform its obligations under this Agreement.
-18-
12.2 Representations by BGP. BGP represents and warrants to Colorado
----------------------
Greenhouse as follows:
(a) that it is a general partnership duly organized and validly
existing under the laws of the State of Colorado;
(b) that the execution, delivery and performance of this Agreement
by BGP has been duly authorized by all necessary partnership action and this
Agreement has been duly executed and delivered by BGP and, subject to due
execution and delivery by Colorado Greenhouse, this Agreement will be
enforceable against BGP in accordance with its terms, and does not constitute a
default under its operating agreement, or any instrument to which it is a party,
nor does it violate any provision of any law, rule, regulation, order, judgment,
decree, determination, or award presently in effect having applicability to it;
and
(c) that there are no actions, suits, or proceedings pending or,
to its knowledge, threatened against it in any court or before any governmental
department, agency, instrumentality, or any arbitrator, in which there is a
reasonable possibility of an adverse decision which could materially and
adversely affect its ability to perform its obligations under this Agreement.
Article 13. Colorado Greenhouse as Independent Contractor.
----------------------------------------------------------
13.1 Independent Contractor. Colorado Greenhouse shall be an
----------------------
independent contractor in the performance of this Agreement and shall have
complete charge of the Services and personnel engaged in the performance of the
Services. Nothing contained herein shall be deemed to create a relationship of
employer-employee, master-servant, partnership, or joint venture.
13.2. Subcontractors. Colorado Greenhouse's Services may be
--------------
performed by Colorado Greenhouse acting in its own name, or by Colorado
Greenhouse's subcontracting portions to other Subcontractors or suppliers.
(a) For its Services, Colorado Greenhouse will assume the
responsibility for, and liability arising in connection with, negotiating with,
and performance by, its Subcontractors.
(b) Colorado Greenhouse will have authority and control over the
Subcontractors' work, including overtime and any special methods required, in
the judgment of Colorado Greenhouse, to complete the Subcontractors' work in a
correct and timely manner.
-19-
Article 14. Survival.
---------------------
The provisions of Articles 7 and 11 shall survive termination,
cancellation or expiration of this Agreement.
Article 15. Miscellaneous.
--------------------------
15.1 Notices. Notices and other communications with respect to
-------
this Agreement shall be in writing and shall be delivered by hand or overnight
courier service, mailed or sent by telecopy. Unless other addresses or telecopy
numbers are specified in writing pursuant to this Section 15.1 to each other
Party, such notices or other communications shall be sent to the following
addresses or telecopy numbers as the case may be.
BGP: Brush Greenhouse Partners
0000 Xxxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxxx
Telephone: (000) 000-0000 FAX: (000) 000-0000
Colorado Greenhouse:
Colorado Greenhouse Limited Liability Company
X.X. Xxx 000
Xxxx Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxx
Telephone: (000) 000-0000 FAX: (000) 000-0000
15.2 Arbitration. All claims, disputes and other matters in question
-----------
arising out of, or relating to this Agreement or the interpretation or breach
thereof, shall be decided by arbitration in accordance with the Arbitration
Rules of the American Arbitration Association then in effect unless the Parties
mutually agree otherwise. Said arbitration shall be before a panel of three
arbitrators and shall be held in Denver, Colorado. This agreement to arbitrate
shall be specifically enforceable under applicable law in any court of competent
jurisdiction. Notice of the demand for arbitration shall be filed in writing
with the other Party to this Agreement and with the American Arbitration
Association. The demand for arbitration shall be made within a reasonable time
after the claim, dispute or other matter in question has arisen, and in no event
shall it be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in question would be
barred by the applicable contractual or other statute of limitations. The award
rendered by the arbitrators shall be final and judgment may be entered in
accordance with applicable law and in any court having jurisdiction thereof.
Attorneys' fees and expenses may be payable to the prevailing party in such
arbitration in the discretion of the arbitrators.
-20-
15.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15.4 Headings. Titles and headings of the sections and subsections of
--------
this Agreement are for the convenience of reference only and do not form a part
of this Agreement, and shall not in any way affect the interpretation of this
Agreement.
15.5 Assignments. This Agreement shall not be assignable by either
-----------
Party hereto without the prior written consent of the other Party; provided,
however, that BGP's rights under this Agreement may be assigned to the Lender to
secure obligations under the Loan Agreement and, so long as is required by the
Loan Agreement, no change in the terms or provisions hereof shall be made
without prior written consent of the Lender.
15.6 Inspections and Access by BGP and Lenders. Colorado Greenhouse
-----------------------------------------
will permit BGP, its agents, employees and contractors and Lender and its
representative to enter all parts of the Greenhouse during Colorado Greenhouse's
business hours to inspect the same and to enable BGP to enforce or carry out any
provision of this Agreement.
15.7 Lender Protection. Colorado Greenhouse agrees to give any Lender
-----------------
by registered or certified mail, a copy of any notice or claim of default served
upon BGP by Colorado Greenhouse, provided that prior to such notice Colorado
Greenhouse has been notified in writing of the address of such Lender. Colorado
Greenhouse further agrees that if BGP shall have failed to cure such default
within 20 days after such notice to BGP (or if such default cannot be cured or
corrected within that time, then such additional time as may be necessary if BGP
has commenced within such 20 days and is diligently pursuing the remedies or
steps necessary to cure or correct such default), then any Lender shall have an
additional 30 days within which to cure or correct such default (or if such
default cannot be cured or corrected within that time and such default is not
having a material adverse effect on Colorado Greenhouse, then such additional
time as may be necessary if such Lender has commenced within such 30 days and is
diligently pursuing the remedies or steps necessary to cure or correct such
default, including the time necessary to obtain possession if possession is
necessary to cure or correct such default).
15.8 Force Majeure. Neither Party hereto shall be deemed to be in
-------------
breach or in violation of this Agreement if such Party is prevented from
performing any of its obligations hereunder by reason of Uncontrollable Forces
that in fact prevent or delay performance hereunder. To the extent that any
performance of any obligation is so prevented pursuant to this Section 15.6,
such performance shall
-21-
be suspended during the continuance of the Uncontrollable Forces and during the
period following the cessation of such Uncontrollable Forces required to repair
and rebuild the Facility to the extent necessary to place it back into
commercial operation in accordance with Good Greenhouse Practices and Applicable
Laws. Notwithstanding the foregoing, in the event of the inability of Colorado
Greenhouse to substantially perform the Services for a period of 45 days or more
by virtue of Uncontrollable Forces (which Uncontrollable Forces are not of a
type affecting other persons generally), BGP may elect to terminate this
Agreement upon five days' prior written notice to Colorado Greenhouse; it being
understood and agreed that if such Uncontrollable Forces apply to, relate to or
affect all persons as a general matter, then BGP will not terminate this
Agreement pursuant to the provisions of this Section 15.8, unless such
Uncontrollable Forces continue for a period of 180 days.
15.9 Waiver. The waiver of any breach of any term or condition hereof
------
shall not be deemed a waiver of any other or subsequent breach, whether of like
or different nature. No failure to exercise and no delay in exercising, on the
part of either Party hereto, any right, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and not exclusive of any rights or
remedies at law.
15.10 Severability. If any term or provision of this Agreement or the
------------
performance thereof shall to any extent be invalid or unenforceable, such
invalidity or unenforceability shall not affect or render invalid or
unenforceable any other provision of this Agreement, and this Agreement shall be
valid and enforced to the fullest extent permitted by law.
15.11 Amendment. No modification or amendment of this Agreement shall
---------
be valid unless in writing and executed by both Parties hereto.
15.12 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of Colorado. The parties hereby consent to the
jurisdiction of the courts of the State of Colorado for the purposes of
enforcing the arbitration provisions of Section 15.2.
15.13 Entire Agreement. This Agreement sets forth the entire agreement
----------------
and understanding between the Parties hereto with respect to the subject matter
hereof and supersedes and replaces all prior written agreements and negotiations
and oral understandings, if any, with respect thereto.
-22-
15.14 No Third Party Beneficiaries. Except as specifically provided
----------------------------
herein or by the Loan Agreement, no person or party except Lender shall have any
rights or interest, direct or indirect, in this Agreement or the Services to be
provided hereunder, or both, except Colorado Greenhouse and BGP. The Parties
specifically disclaim any intent to create any rights in any person or party as
a third-party beneficiary to this Agreement or the Services to be provided
hereunder except for the Lender and CPP.
15.15 Amendment of Allocated Percentage. The Allocated Percentage may
---------------------------------
be amended at any time by mutual agreement of the Parties hereto and shall be
amended to reflect any change in size of any Other Greenhouse. If any of the
Other Greenhouses decreases in size or is increased in size by the addition of
space of like quality to its existing space then the Allocated Percentage shall
be adjusted in proportion to the ratio that the change in size bears to the
total size of the Greenhouse and the Other Greenhouses.
This Agreement has been executed and delivered as of the date first
above written.
BGP:
----
BRUSH GREENHOUSE PARTNERS
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------
_________________________________
Management Committee Member
COLORADO GREENHOUSE LIMITED LIABILITY
COMPANY
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------
_________________________________
Manager
and
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------
_________________________________
Manager
-23-
EXHIBIT B
---------
Allocation Percentage
A percentage, as the same may be modified from time-to-time, and as in
effect on the dates set forth below:
Commencement Date
until the Ft. Xxxxxx
Commencement Date 50.000%
Commencement of Operation
of the Ft. Xxxxxx Greenhouse 31.135%
