Exhibit 10.1

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS NOTE MUST NOT
TRADE THIS NOTE BEFORE MARCH 3, 2020.

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), OR UNDER THE SECURITIES LAWS OF APPLICABLE STATES. THIS NOTE IS
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION UNDER SUCH LAWS OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED
TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE ISSUER OF THIS NOTE MAY REQUIRE AN OPINION OF COUNSEL OR SUCH OTHER EVIDENCE
IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH OR EXEMPT FROM THE ACT AND ALL
APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE THE SUBJECT OF HEDGING
TRANSACTIONS UNLESS SUCH TRANSACTIONS ARE CONDUCTED IN COMPLIANCE WITH THE ACT.

 

SECURED Promissory Note

PRINCIPAL AMOUNT:  $19,900,000

DATE OF ISSUANCE:  November 2, 2020

 

Subject to the terms and conditions of this Note, for value received, Village
Farms International, Inc., a corporation existing pursuant to the laws of Canada
(the “Company”), hereby promises to pay in lawful money of Canada to Emerald
Health Therapeutics Inc. or its registered assigns (“Holder”), the principal sum
of NINETEEN MILLION NINE HUNDRED THOUSAND dollars ($19,900,000), or such lesser
amount as shall then equal the outstanding principal amount hereunder, together
with all interest accrued on unpaid principal at the Applicable Rate (as defined
below). Interest shall begin to accrue on the date of this Note and shall
continue to accrue on the outstanding principal until the entire Balance is
paid, and shall be computed based on the actual number of days elapsed and a
year of 365 days.

This Note has been issued in conjunction with a share purchase agreement dated
as of September 8, 2020 (the “Purchase Agreement”) by and among the Company and
the original holder of this Note and is subject to the provisions of the
Purchase Agreement.

The following is a statement of the rights of the Holder and the terms and
conditions to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees.

1.DEFINITIONS

The following terms used in this Note have the meanings set forth or referenced
below:

“Applicable Rate” means a rate equal to the lower of: (a) the Highest Lawful
Rate; and (b) 12% per annum.

 

 

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‑ 2 ‑

“Balance” means, at the applicable time, the sum of all then outstanding
principal of this Note, all then accrued but unpaid interest and all other
amounts (including fees and expenses) then accrued but unpaid under this Note.

“Business Day” means a weekday on which banks are open for general banking
business in Toronto, Ontario and Vancouver, British Columbia.

“Company” shall include, in addition to the Company identified in the opening
paragraph of this Note, any Successor.

“Event of Default” has the meaning set forth in Section 5.

“Highest Lawful Rate” means the maximum non-usurious rate of interest, as in
effect from time to time, which may be charged, contracted for, reserved,
received or collected by the Holder in connection with this Note under
applicable law.

“Holder” has the meaning set out in the Preamble.

“Maturity Date” means the date that is the six month anniversary of the date of
issuance of this Note as indicated on the first page hereof, or if such
anniversary date is not a Business Day, the next Business Day thereafter.

“NI 45-106” has the meaning set forth in Section 7.1.

“Note” means this Secured Promissory Note.

“Person” means any individual, partnership, corporation, trust, estate,
cooperative association, government or governmental subdivision or agency or
other entity.

“Principal Balance” means, at the applicable time, all then outstanding
principal of this Note.

“Purchase Agreement” has the meaning set out in the Preamble.

“Security Interest” has the meaning set forth in Section 6.

“Successor” means any Person which succeeds to the Company’s obligations under
this Note, whether by permitted assignment, by merger, arrangement or
consolidation, by operation of law or otherwise.

“U.S. Person” means “U.S. person” as defined in Regulation S under the U.S.
Securities Act.

“U.S. Securities Act” means the U.S. Securities Act of 1933, as amended.

2.PAYMENT AT MATURITY DATE; INTEREST

 

2.1

Payment at Maturity Date. The Balance of this Note shall be due and payable in
full on the Maturity Date.  Payment on this Note shall be made in lawful money
of Canada by wire transfer or delivery of immediately available funds to the
address of Holder of this Note as the Holder has designated in writing to the
Company.

 

 

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‑ 3 ‑

 

2.2

Interest. Interest on the Principal Balance shall accrue at the Applicable Rate
from (and including) the date of issuance of this Note to (but excluding) the
date of repayment in full. Such interest shall not compound and shall be payable
on the Maturity Date.

3.PREPAYMENT

The Company may at its option prepay all or a portion of the Balance owing
hereunder at any time and from time to time without premium or penalty.

4.APPLICATION OF PAYMENTS

All payments will be applied first to the repayment of accrued fees and expenses
under this Note, then to accrued interest until all then outstanding accrued
interest has been paid in full, and then to the repayment of the Principal
Balance until the entire Principal Balance has been paid in full.

5.EVENTS OF DEFAULT

Each of the following events shall constitute an “Event of Default” hereunder:

 

(a)

the Company fails to make any payment when due under this Note on the applicable
due date;

 

(b)

the Company ceases to carry on business, a receiver is appointed for any
material part of the Company’s property, the Company makes a general assignment
for the benefit of creditors, or the Company becomes a debtor or alleged debtor
in a case under the Bankruptcy and Insolvency Act (Canada) or similar
legislation or becomes the subject of any other bankruptcy or similar proceeding
for the general adjustment of its debts or for its liquidation, and, if
involuntary, such proceeding is not dismissed within 60 days; or

 

(c)

the Company’s board of directors or shareholders adopt a resolution for the
liquidation, dissolution or winding-up of the Company.

Upon the occurrence of any Event of Default, all accrued but unpaid expenses,
accrued but unpaid interest, all principal and any other amounts outstanding
under this Note shall (i) in the case of any Event of Default under Section 5(b)
or 5(c) become immediately due and payable in full without further notice or
demand by the Holder and (ii) in the case of any Event of Default under
Section 5(a), become immediately due and payable upon written notice by or on
behalf of the Holder to the Company.

6.SECURITY

In order to secure the Company’s payment and performance hereunder and to secure
the Company’s prompt, full and faithful performance and observance of all of the
provisions under this Note, the Company has entered into a share pledge
agreement (the “Pledge Agreement”), in the form attached as Appendix A hereto
with such changes as the collateral agent thereunder may require, with the
Holder and Computershare Trust Company of Canada, as collateral agent, pursuant
to which the Company has granted to the Holder, as security for the payment and
performance of the Company’s obligations hereunder, a security interest in
9,239,625 common shares of Pure Sunfarms Corp., which common shares are to be
held as collateral by Computershare Trust Company of Canada, as collateral
agent, and all as more specifically described, and on the terms and conditions
set forth in, the Pledge Agreement. If the payments contemplated hereunder are
not received by the Holder in accordance with the terms of this Note, then the

 

 

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‑ 4 ‑

Holder shall be entitled to exercise all its rights under applicable law against
the collateral as further described in the Pledge Agreement.

7.REPRESENTATIONS AND WARRANTIES

 

7.1

Representations of the Holder. In order to induce the Company to issue this Note
to the original Holder, the original Holder has made representations and
warranties to the Company as set forth in the Purchase Agreement. In addition,
by accepting and acknowledging receipt of this Note, the Holder:

(A) represents and warrants to the Company that it (i) is an “accredited
investor” as such term is defined in National Instrument 45-106 – Prospectus
Exemptions (“NI 45-106”), (ii) is acquiring this Note as principal, (iii) was
not created or used solely to purchase or hold securities as an accredited
investor as described in paragraph (m) of the definition of “accredited
investor” in NI 45‑106, (iv) it is a resident of the Province of British
Columbia and is entitled under applicable securities legislation to acquire this
Note without the benefit of a prospectus qualified under securities legislation,
and (v) will, if requested by the Company, provide reasonable evidence of the
basis of its above representations;

(B) acknowledges to the Company that the Holder has been notified by the Company
that: (a) the Company is required to provide information pertaining to the
Holder, referred to as “personal information”, that is required to be disclosed
in Schedule 1 of Form 45-106F1 under National Instrument 45-106 (including its
name, address, telephone number and the number and value of securities
purchased), which Form 45-106F1 is required to be filed by the Company under
National Instrument 45-106; (b) the personal information may be delivered to the
British Columbia Securities Commission, referred to as the “Regulator”, in
accordance with National Instrument 45-106; (c) such personal information is
being collected indirectly by the Regulator under the authority granted to it in
securities legislation; (d) such personal information is being collected for the
purposes of the administration and enforcement of British Columbia securities
legislation; and (e) the public official who can answer questions about the
Regulator’s indirect collection of personal information is: P.O. Box 10142,
Pacific Centre, 701 West Georgia Street, Vancouver, British Columbia, V7Y 1L2,
Inquiries: (604) 899-6854, Toll free in Canada: 1-800-373-6393, Facsimile: (604)
899-6581, email: inquiries@bcsc.bc.ca. Accordingly, the Holder has authorized
the indirect collection of the personal information by the Regulator, and
acknowledges that its name and other specified information, including the number
and value of securities it will receive hereunder, may be disclosed to other
Canadian securities regulatory authorities and stock exchanges and may become
available to the public in accordance with the requirements of applicable laws
and consents to the disclosure of that information; and

(C) represents and warrants to the Company that it is not a U.S. Person or a
person within the United States, this Note is not being or will be acquired,
directly or indirectly, for the account or benefit of a U.S. Person or a person
within the United States, the Holder was not offered this Note in the United
States, the Holder did not execute or deliver any agreement in connection
herewith in the United States, and the Holder is aware that this Note has not
been and will not be registered under the U.S. Securities Act or the securities
laws of any State of the United States and that this Note may not be offered or
sold in the United States without registration under the U.S. Securities Act or
except in compliance with the requirements of an exemption from registration,
and that this Note shall bear the following legend (or substantially equivalent
language):

 

 

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‑ 5 ‑

 

7.2

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), OR UNDER THE SECURITIES LAWS OF APPLICABLE STATES. THIS NOTE IS
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION UNDER SUCH LAWS OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED
TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE ISSUER OF THIS NOTE MAY REQUIRE AN OPINION OF COUNSEL OR SUCH OTHER EVIDENCE
IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH OR EXEMPT FROM THE ACT AND ALL
APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE THE SUBJECT OF HEDGING
TRANSACTIONS UNLESS SUCH TRANSACTIONS ARE CONDUCTED IN COMPLIANCE WITH THE ACT.

provided, however, if any such securities are being sold, the legend may be
removed by delivery to the Company’s registrar and transfer agent and the
Company of an opinion of counsel of recognized standing or such other evidence
reasonably satisfactory to the Company, that such legend is no longer required
under applicable requirements of the U.S. Securities Act and U.S. state
securities laws.

 

7.3

Representations of the Company. In order to induce the original Holder to
provide credit to the Company in respect of the Principal Balance hereunder, the
Company has made representations and warranties to the original Holder as set
forth in the Purchase Agreement.

8.GENERAL PROVISIONS

 

8.1

Waivers. The Company and all endorsers of this Note hereby waive notice,
presentment, protest and notice of dishonour.

 

8.2

Attorneys’ Fees. If any party is required to engage the services of an attorney
for the purpose of enforcing this Note, or any provision hereof, the prevailing
party shall be entitled to recover its reasonable and documented expenses and
costs in enforcing this Note, including attorneys’ fees.

 

8.3

Transfer. Neither this Note nor any of the rights or obligations of the Holder
hereunder may be assigned, conveyed or transferred, in whole or in part, without
the Company’s prior written consent. Neither this Note nor any of the rights or
obligations of the Company hereunder may be assigned, in whole or in part, by
the Company without the prior written consent of the Holder, other than to a
Successor. Subject to the foregoing, the rights and obligations of the Company
and the Holder under this Note shall be binding upon and enure to the benefit of
their respective permitted successors, assigns, heirs, administrators and
transferees.

 

8.4

Currency. All dollar amounts referred to in this Note are stated in Canadian
currency.

 

 

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‑ 6 ‑

 

8.5

Governing Law. This Note shall be governed by and construed under the laws of
the Province of British Columbia and the federal laws of Canada applicable
therein, without reference to principles of conflict of laws or choice of laws.

 

8.6

Dispute Resolution. The parties (a) hereby irrevocably and unconditionally
submit to the jurisdiction of the courts of the Province of British Columbia for
the purpose of any suit, action or other proceeding arising out of or based upon
this Note, (b) agree not to commence any suit, action or other proceeding
arising out of or based upon this Note except in the courts of the Province of
British Columbia, and (c) hereby waive, and agree not to assert, by way of
motion, as a defence, or otherwise, in any such suit, action or proceeding, any
claim that it is not subject personally to the jurisdiction of the above-named
courts, that its property is exempt or immune from attachment or execution, that
the suit, action or proceeding is brought in an inconvenient forum, that the
venue of the suit, action or proceeding is improper or that this Note or its
subject matter may not be enforced in or by any such court.

 

8.7

Headings. The headings and captions used in this Note are used only for
convenience and are not to be considered in construing or interpreting this
Note. In this Note, (a) the meaning of defined terms shall be equally applicable
to both the singular and plural forms of the terms defined, and (b) unless
otherwise expressly indicated in any particular instance, the words “including”,
“includes” and “include” shall be deemed to be followed by the words “without
limitation”. All references in this Note to sections, paragraphs, exhibits and
schedules shall, unless otherwise provided, refer to sections and paragraphs
hereof and exhibits and schedules attached hereto, all of which exhibits and
schedules are incorporated herein by this reference and form an integral part of
this Note.

 

8.8

Notices. All notices and other communications given or made pursuant to this
Note shall be in writing and shall comply with the requirements and deeming
provisions in the Purchase Agreement.

 

8.9

Severability. If one or more provisions of this Note are held to be
unenforceable under applicable law, then such provision(s) shall be excluded
from this Note to the extent they are held to be unenforceable and the remainder
of this Note shall be interpreted as if such provision(s) were so excluded and
shall be enforceable in accordance with its terms.

 

8.10

Entire Agreement. This Note and the Purchase Agreement constitute the full and
entire understanding and agreement of the parties hereto with respect to the
subject matter hereof, and supersede any and all prior negotiations,
correspondence, agreements, understandings duties or obligations between any of
the parties with respect to the subject matter hereof.

 

8.11

Counterparts. This Note may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. Counterparts may be delivered via electronic mail
(including via pdf) or other transmission method and any counterpart so
delivered is deemed to have the same effect as if the original signature had
been delivered to the other parties and is valid and effective for all purposes.

[Signature page follows]

 

 

 

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IN WITNESS WHEREOF, the Company has caused this Secured Promissory Note to be
signed in its name as of the date first written above.

 

 

VILLAGE FARMS INTERNATIONAL, INC.

 

 

 

By:

/s/ Stephen C. Ruffini

 

 

 

 

Name:Stephen C. Ruffini

Title:Executive Vice-President & Chief Financial Officer

 

 

 

 

 

 

AGREED AND ACKNOWLEDGED:

 

 

 

 

 

EMERALD HEALTH THERAPEUTICS, INC.

 

 

 

By:

/s/ Riaz Bandali

 

 

 

 

Name:Riaz Bandali

Title:President & Chief Executive Officer

 

 

 

 

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Appendix A

SHARE PLEDGE AGREEMENT

This Share Pledge Agreement is made as of ●, 2020 among Village Farms
International, Inc., a corporation existing pursuant to the laws of Canada (the
"Pledgor"), Emerald Health Therapeutics Inc., a corporation existing pursuant to
the laws of the Province of British Columbia (the "Holder") and Computershare
Trust Company of Canada, in its capacity as collateral agent for the Holder (as
defined below) (in such capacity, the "Agent").

For valuable consideration, receipt whereof is hereby acknowledged, the Parties
hereto hereby covenant and agree as follows:

Article 1
DEFINITIONS AND INTERPRETATION

1.1

Definitions

Wherever used in this Agreement (including in the recitals and schedule hereto),
all capitalized terms used and not defined have the meanings assigned to them in
the Promissory Note and the following terms have the meanings set forth below:

"Agent" has the meaning ascribed to it in the preamble hereto.

"Agreement" means this agreement (including the recitals and schedule).

"Business Day" means any day, other than a Saturday, Sunday or statutory or
civic holiday in Toronto, Ontario or Vancouver, British Columbia.

"Event of Default" has the meaning ascribed to it in the Promissory Note.

"Lien" means any interest in property securing an obligation owed to, or a claim
by, a person, whether such interest is based on the common law, statute or
contract, and includes a security interest, hypothec, prior claim, charge, claim
or lien arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, agreement, security agreement,
conditional sale or trust receipt.

"Holder" has the meaning ascribed to it in the preamble hereto.

"Promissory Note" means the interest bearing, secured promissory note dated the
date hereof issued by the Pledgor in favour of the Holder evidencing a debt in
the principal amount of C$19,900,000.

"Obligations" means, with respect to the Pledgor, (a) all amounts now or
subsequently owing by the Pledgor to the Holder, matured or unmatured, direct,
indirect or contingent, whether or not due and payable, in connection with the
Promissory Note and (b) the strict performance and observance by the Pledgor of
all agreements, warranties, representations, covenants and conditions of the
Pledgor made pursuant to this Agreement.

"Parties" means the Pledgor, the Holder and the Agent and their respective
successors and permitted assigns; and "Party" means any one of the Parties.

"person" means any individual, sole proprietorship, partnership, limited
partnership, joint venture, syndicate, body corporate (with or without share
capital), unincorporated association, trust, governmental

 

 

 

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or regulatory body or agency and, where the context requires, includes an
individual or body corporate acting as trustee, executor, administrator or other
legal representative.

"Pledgor" has the meaning ascribed to it in the preamble hereto.

"PPSA" means the Personal Property Security Act (Ontario).

"Pledged Shares" means 9,239,625 common shares in the capital of PSF.

"PSF" means Pure Sunfarms Corp.

"Security Interest" means the security interest granted under Section 3.1.

"STA" means the Securities Transfer Act, 2006 (Ontario).

1.2

Defined Statutory Terms

Unless the context otherwise requires or unless otherwise specified, all the
terms used in this Agreement without initial capitals, which are defined in the
PPSA or the STA, have the same meanings in this Agreement as in the PPSA or the
STA, as applicable.

1.3

Certain Rules of Interpretation

In this Agreement:

 

(a)

Headings and Cross-References – Headings of Articles and Sections are inserted
for convenience of reference only and shall not affect the construction or
interpretation of this Agreement.  References to "Articles" or "Sections" means
the specified Articles or Sections of this Agreement.

 

(b)

Including – Where the word "including" or "includes" is used in this Agreement,
it means "including (or includes) without limitation".

 

(c)

Number and Gender – The use of words in the singular or plural, or with a
particular gender, shall not limit the scope or exclude the application of any
provision to such person(s) or circumstance(s) as the context otherwise permits.

 

(d)

Severability – If, in any jurisdiction, any provision of this Agreement or its
application to any Party or circumstance is restricted, prohibited or
unenforceable, such provision shall, as to such jurisdiction, be ineffective
only to the extent of such restriction, prohibition or unenforceability without
invalidating the remaining provisions of this Agreement and without affecting
the validity or enforceability of such provision in any other jurisdiction or
its application to other parties or circumstances.

 

(e)

References – A reference to a statute includes all regulations made pursuant to
such statute and, unless otherwise specified, the provisions of any statute or
regulation which amends, revises, restates, supplements or supersedes any such
statute or any such regulation or, in each case, any provision thereof.  A
reference to an agreement or other document includes all schedules, amendments,
supplements, modifications, extensions, renewals, replacements, novations or
restatements from time to time.

 

(f)

Time – Time is of the essence in the performance of the Parties' respective
obligations.

 

 

 

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Article 2
appointment of agent

2.1

Appointment of Agent

 

(a)

The Holder irrevocably appoints and authorizes the Agent to act on behalf of the
Holder and to exercise such powers hereunder as are specifically delegated to
the Agent by the terms hereof, together with such powers as may be reasonably
incidental thereto.  In performing its functions and duties under this
Agreement, the Agent shall act solely as agent of the Holder and does not assume
and shall not be deemed to have assumed any obligation towards or relationship
of agency or trust with or for the Pledgor.

 

(b)

The Agent shall have no duties or responsibilities except those expressly set
forth herein, and shall not, by reason of this Agreement or otherwise, have a
fiduciary relationship with the Holder.

 

(c)

The Agent may resign as such at any time upon at least sixty (60) days prior
notice to the Pledgor and the Holder. If the Agent at any time shall resign the
Holder shall appoint a successor agent ("Successor Agent"); provided, however
that any such Successor Agent shall be a trust company or other institution
which is authorized to conduct business as a trust company in Canada maintains
an office in the Province of Ontario.  Such Successor Agent shall thereupon
become the Agent hereunder, as applicable, and the Agent shall deliver or cause
to be delivered to any Successor Agent such documents of transfer and assignment
as such Successor Agent may reasonably request.  If a Successor Agent is not so
appointed or does not accept such appointment before the resigning Agent's
resignation becomes effective, the resigning Agent may appoint a temporary
successor to act until such appointment by the Holder is made and
accepted.  Such Successor Agent shall succeed to all of the rights and
obligations of the resigning Agent as if originally named.

 

(d)

The Holder, subject to the terms and conditions of this Agreement, grants the
Agent full power and authority as attorney-in-fact to institute and maintain
actions, suits or proceedings for the collection and enforcement of any the
Security Interest granted pursuant to this Agreement and to file such documents
as may be necessary to have the claims of the Holder allowed in any proceeding
relative to the Pledgor and to take such other actions which the Agent considers
to be necessary or desirable for the protection, collection and enforcement of
this Agreement.

 

(e)

It is expressly understood and agreed that the Agent shall be entitled to assume
that no Event of Default has occurred and is continuing, unless the Agent has
received written notice from the Holder specifying such Event of Default has
occurred.

 

(f)

Except as otherwise expressly provided herein, whenever the Agent is authorized
and empowered hereunder to take any other action on behalf of the Holder
(including the exercise of any right or remedy hereunder), the Agent shall be
required to take such action only when so requested by the Holder.

 

(g)

Except as otherwise expressly provided under this Agreement, the Agent will take
such action, assert such rights and pursue such remedies under this Agreement as
the Holder shall direct.

 

 

 

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(h)

The Agent is authorized on behalf of the Holder, without the necessity of any
notice to or further consent from the Holder to take any action with respect to
any Pledged Shares which may be necessary to perfect and maintain a perfected
security interest in and Liens upon the Pledged Shares granted pursuant to this
Agreement.

 

(i)

The Parties hereto shall equally pay the Agent all of the reasonable and
documented fees, expenses and disbursements of the Agent and counsel to the
Agent incurred in connection with the preparation, negotiation, delivery and
execution of this Agreement and all other reasonable and documented costs and
expenses of the Agent from time to time in connection with the fulfillment of
the Agent's duties under this Agreement.

Article 3
PLEDGE AND SECURITY INTEREST

3.1

Pledge

As continuing security for the payment and performance of the Obligations, the
Pledgor grants to the Agent, for and on behalf of the Holder, a security
interest in the Pledged Shares (the "Security Interest").  The Pledgor shall
deliver to and deposit with the Agent all security certificates evidencing the
Pledged Shares together with all other necessary documents and effective
endorsements to enable the Agent or its agent or nominee, as the Agent may
direct, to be registered as the owner of and to transfer or sell or cause to be
transferred or sold the Pledged Shares upon any enforcement of the Agent's
rights and remedies hereunder or under applicable laws.

3.2Attachment and Value

The Pledgor acknowledges:

 

(a)

receipt of a copy of this Agreement;

 

(b)

that value has been given, that the Pledgor has rights in the Pledged Shares and
the Pledgor and the Agent have not agreed to postpone the time for attachment of
the Security Interest; and

 

(c)

that the Security Interest created by this Agreement is intended to attach, as
to the Pledged Shares, upon the execution by the Pledgor of this Agreement and
operates as a present, fixed and specific charge on the Pledged Shares.

The Parties further agree that the Security Interest created by this Agreement
is intended to attach to the Pledged Shares and to any securities for which the
Pledged Shares are exchanged or substituted as a result of any amalgamation,
arrangement or similar proceeding.

 

 

 

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Article 4
PLEDGOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS

4.1

Representations and Warranties

The Pledgor represents and warrants to the Agent as follows:

 

(a)

Status – The Pledgor is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, with the
power and authority to own its assets and carry on its business as now being
conducted.

 

(b)

Authority – The Pledgor is duly and validly authorized by all necessary
corporate action, has full power and authority to and has taken or caused to be
taken all necessary action to authorize it to execute and deliver this
Agreement, and to perform and comply with the terms, conditions, and agreements
set forth herein and therein.

 

(c)

Enforceability – This Agreement has been duly executed and delivered by the
Pledgor and is a legal, valid and binding obligation of the Pledgor enforceable
against the Pledgor in accordance with its terms, except to the extent that
enforcement thereof may be limited by any applicable bankruptcy, insolvency or
similar laws now or hereafter in effect affecting creditors' rights generally
and by general principles of equity.

 

(d)

Ownership of the Pledged Shares

 

(i)

The Pledgor is the registered and beneficial owner of, and has good title to,
the Pledged Shares subject only to the Security Interest created by this
Agreement;

 

(ii)

Other than the Security Interest, the Pledgor has not granted, nor has it agreed
to grant, a Lien in, or any right to acquire an interest in, any of the Pledged
Shares and there are no restrictions on the transfer of the Pledged Shares to
the Holder (other than ordinary course private company restrictions); and

 

(iii)

None of the rights of the Pledgor arising as the legal and beneficial owner of
the Pledged Shares have been surrendered, cancelled or terminated.

 

(e)

Ability to Transfer Pledged Shares – All corporate approval and consents,
including approvals from the board of directors of PSF, in regards to the
transfer of the Pledged Shares in the event the Agent exercises the rights
granted to it pursuant to this Agreement have been obtained and such approvals
and consents have not been withdrawn, amended or rescinded and the Pledgor
covenants agrees that it will not, and will not permit PSF to withdraw, amend or
rescind any such approval or consent.

All representations and warranties of the Pledgor made in this Agreement or in
any certificate or other document delivered by or on behalf of the Pledgor to or
for the benefit of the Agent are material, shall survive and shall not merge
upon the execution and delivery of this Agreement and shall continue in full
force and effect.  The Agent shall be deemed to have relied upon such
representations and warranties notwithstanding any investigation made by or on
behalf of the Agent at any time.

 

 

 

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4.2

Covenants

The Pledgor covenants and agrees with the Agent and the Holder as follows:

 

(a)

Defend

The Pledgor shall promptly notify the Holder and the Agent of any Lien or other
claim made or asserted against any of the Pledged Shares and shall defend the
Security Interest in the Pledged Shares against any and all claims and demands
whatsoever including any adverse claim as defined in the STA;

(b)No Other Grant of Security Interest

The Pledgor shall not grant a security interest or any other Lien in the Pledged
Shares to any person other than the Agent.

(c)No Transfer

The Pledgor shall not sell, dispose of, assign, convey or otherwise transfer any
of the Pledged Shares, or any rights thereunder without the prior written
consent of the Agent.

Article 5
RIGHTS RELATING TO THE PLEDGED SHARES

5.1

Voting Rights

 

(a)

Until the occurrence of an Event of Default which is continuing, the Pledgor
shall be entitled to exercise all voting rights in respect of the Pledged Shares
and to give consents, waivers, directions, notices and ratifications and to take
other action in respect thereof, provided, however, that no votes shall be cast
or consent, waiver, directions, notice or ratification given or action taken
which would:

 

(i)

be prejudicial to the Security Interest;

 

(ii)

impair or reduce the value of or restrict the transferability of the Pledged
Shares; or

 

(iii)

be inconsistent with or violate any provisions of this Agreement or any other
agreement between the Pledgor and the Agent in connection herewith.

 

(b)

Until the occurrence of an Event of Default which is continuing, if any of the
Pledged Shares are registered in the Agent's, its agent's or nominee's name, the
Agent, on the Pledgor's written request, shall execute and deliver or cause its
agent or nominee to execute and deliver to the Pledgor suitable proxies, voting
powers or powers of attorney in favour of the Pledgor or its nominee or nominees
for voting, giving consents, waivers, directions, notices or ratifications or
taking any other action the Pledgor is permitted to take in respect of the
Pledged Shares.

5.2

Dividends and Distributions

Until the occurrence of an Event of Default which is continuing, the Pledgor
shall be entitled to receive and deal with any cash dividends or other amounts
at any time paid in respect of the Pledged Shares free and

 

 

 

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clear of any Lien in favour of the Agent, and the Agent shall immediately
deliver to the Pledgor any cash dividends or such other amounts received by the
Agent prior to the occurrence of an Event of Default.

5.3

Rights and Duties of the Agent

Upon the occurrence of an Event of Default which is continuing, all of the
Pledgor's rights pursuant to Section 5.1 and Section 5.2 shall cease and the
Agent may enforce any of the Pledgor's rights with respect to the Pledged
Shares.  The Agent and its nominee shall not have any duty of care with respect
to the Pledged Shares other than to use the same care in the custody and
preservation of the Pledged Shares as it would with its own property.  The Agent
or its nominee may take no steps to defend or preserve the Pledgor's rights
against the claims or demands of others.  The Agent or its nominee, however,
shall use its reasonable best efforts to give the Pledgor notice of any claim or
demand of which it becomes aware to permit the Pledgor to have a reasonable
opportunity to defend or contest the claim or demand.

Article 6
REMEDIES

6.1

Remedies

Upon the occurrence of an Event of Default which is continuing, the Security
Interest created by this Agreement shall immediately become enforceable and the
Agent may, at the direction of the Holder, take any one or more of the following
actions:

 

(a)

Sale

Realize upon or dispose of all or part of the Pledged Shares by private sale,
public sale or otherwise as the Agent may determine (whether commercially
reasonably or not), and apply and allocate any proceeds arising from the
realization of the Pledged Shares to the Obligations as set forth in Section 4
of the Promissory Note;

 

(b)

Retain

Irrevocably elect to retain all or part of the Pledged Shares by giving notice
to the Pledgor;

 

(c)

Rights as Owners

Exercise any or all of the rights and privileges attaching to the Pledged Shares
and deal with the Pledged Shares as if the Agent were the absolute owner of the
Pledged Shares (including causing the Pledged Shares to be registered in the
name of the Agent or its agent or nominee as the Agent may direct) and collect,
draw upon, receive, appropriate and sell all or any part of the Pledged Shares;

 

(d)

Bankruptcy Claims

File proofs of claims or other documents as may be necessary or desirable to
have its claim lodged in any bankruptcy, winding-up, liquidation, arrangement,
dissolution or other proceedings (voluntary or otherwise) relating to the
Pledgor;

 

 

 

--------------------------------------------------------------------------------

 

 

(e)

Enforcing Third Party Obligations

In the Pledgor's name, perform, at the Pledgor's expense, any and all of the
Pledgor's obligations or covenants relating to the Pledged Shares and enforce
performance by any other parties of their obligations in relation to the Pledged
Shares and settle any disputes with other parties upon terms that the Agent
deems appropriate, in its discretion;

 

(f)

Appointment of Receiver

Appoint any person to be a receiver (which term shall include a receiver and
manager) of all or part of the Pledged Shares and remove any receiver and
appoint another receiver (any receiver shall have the authority to take
possession of and collect dividends, interest, distributions and other payments
payable to the Pledgor in respect of the Pledged Shares and pay all charges in
respect of the Pledged Shares);

 

(g)

Application to Debt

Apply any dividends, interest, distributions and other payments payable to the
Pledgor in respect of the Pledged Shares to the Obligations, in accordance with
Section 4 of the Promissory Note;

 

(h)

Payment of Deficiency

If the proceeds of realization are insufficient to pay all Obligations, the
Pledgor shall forthwith pay or cause to be paid to the Agent any deficiency and
the Agent may sue the Pledgor to collect the amount of such deficiency; or

 

(i)

All Other Action

Take any other action permitted by this Agreement, by law or in equity.

6.2

Sale of Pledged Shares

The Agent shall give to the Pledgor at least five (5) Business Days’ written
notice of any sale pursuant to Subsection 6.1(a).  Any sale pursuant to this
Section 6.2 may be made, whether commercially reasonable or not, with or without
any special condition as to the upset price, reserve bid, title or evidence of
title or other matter and may be made from time to time as the Agent in its sole
discretion deems fit, with power to vary or rescind any sale or buy in at any
public sale and resell without being answerable for any loss.  The Agent may
sell the Pledged Shares for a consideration payable by instalments either with
or without taking security for the payment of the instalments and may make and
deliver to any purchaser good and sufficient conveyances of the Pledged Shares
and give receipts for the purchase money, and the sale shall be a perpetual bar,
both at law and in equity, against the Pledgor and all those claiming an
interest by, from, through or under the Pledgor.

6.3

Realization Proceeds

Subject to applicable laws and the provisions of the Promissory Note, the Agent
shall apply the proceeds of any collection or sale of the Pledged Shares to the
Obligations in accordance with Section 4 of the Promissory Note at all times and
from time to time have the right to change any appropriation as the Agent sees
fit and any surplus shall be accounted for as required by applicable laws.

 

 

 

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6.4

The Agent's Obligations

The Agent shall not be under any obligation, or be liable or accountable for any
failure, to:

 

(a)

enforce payment or performance of the Obligations;

 

(b)

seize, collect, realize or obtain payment with respect to the Pledged Shares;

 

(c)

preserve any rights of the Agent, the Pledgor or any other person in respect of
the Pledged Shares;

 

(d)

exercise or exhaust any of its rights and remedies under this Agreement or with
respect to the Pledged Shares;

 

(e)

protect the Pledged Shares from depreciating in value or becoming worthless; or

 

(f)

institute proceedings for any of the purposes listed above.

The Agent shall not be responsible for any loss occasioned by:

 

(a)

any sale or other dealing with the Pledged Shares (whether on commercially
reasonable terms or not); or

 

(b)

the retention of, or failure to sell or otherwise deal with the Pledged Shares.

Article 7
POWER OF ATTORNEY

7.1

Grant

The Pledgor irrevocably constitutes and appoints the Agent as its true and
lawful attorney with power of substitution in the name of the Pledgor to do any
and all acts and things, complete any endorsements or registrations and execute
and deliver all agreements, documents and instruments as the Agent, in its
reasonable discretion, considers necessary or desirable to carry out the
provisions and purposes of this Agreement or to exercise its rights and remedies
provided that such power of attorney shall not be exercised until an Event of
Default has occurred and is continuing.   The Pledgor ratifies and agrees to
ratify all acts of any attorney taken or done in accordance with this Section
7.1.  This power of attorney being coupled with an interest shall not be revoked
or terminated by any act and shall remain in full force and effect until this
Agreement has been terminated.

Article 8
GENERAL

8.1

Notices

Any notice or other communication (a "Notice") given pursuant to or in
connection with this Agreement shall be in writing and shall be sufficiently
given to a Party to whom it is addressed if transmitted by email or delivered in
person to or for such Party at the address of such Party indicated below or at
such other address as such Party shall have theretofore notified to the other
Parties in accordance herewith. Any Notice so addressed and transmitted or
delivered as aforesaid shall be deemed to have been sufficiently given or made
on the date on which it was so transmitted by email or delivered (provided that
if such day is not a

 

 

 

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Business Day or if such transmittal or delivery is made after 5:00 p.m. local
time of the recipient, the Notice shall be deemed given or made on the Business
Day following transmission or delivery)

To the Pledgor

Village Farms International, Inc.
4700-80th Street

Delta, British Columbia

V4K 3N3

Attention:Stephen C. Ruffini

Email: sruffini@villagefarms.com

With a copy to:

Torys LLP
79 Wellington Street West
TD Centre, Suite 3000
Toronto, Ontario

M5K 1N2

Attention:John Emanoilidis and Michael Zackheim

Email: jemanoilidis@torys.com and mzackheim@torys.com

To the Holder:

Emerald Health Therapeutics, Inc.
210-800 West Pender Street

Vancouver, British Columbia

V6C 1J8

Attention:Avtar Dhillon and Riaz Bandali
Email:avtar@emerald.care and rbandali@emerald.life

With a copy to:

Bennett Jones LLP
2500 Park Place

666 Burrard Street

Vancouver, British Columbia

V6C 2X8

Attention:James Beeby
Email:beebyj@bennettjones.com

To the Agent:

Computershare Trust Company of Canada
510 Burrard Street
Vancouver, British Columbia
V6C 3B9

 

 

 

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Attention:●
Email:●

With a copy to:

●

Attention:●
Email:●

8.2

Amendment

No amendment, supplement, modification, waiver or termination of this Agreement
and, unless otherwise specified, no consent or approval by any Party, shall be
binding unless executed in writing by the Parties hereto.

8.3

Assignment and Enurement

This Agreement may be assigned by the Agent in connection with any substitution
of the Agent in accordance with Article 2, and any such assignee shall be
entitled to exercise any and all discretions, powers and rights of the Agent
under this Agreement.  The Pledgor may not assign this Agreement or any of its
rights or obligations under this Agreement without the prior written consent of
the Agent.  All of the Agent's rights under this Agreement shall enure to the
benefit of its successors and permitted assigns and all of the Pledgor's
obligations under this Agreement shall bind the Pledgor and its successors and
permitted assigns.

8.4

Further Assurances

The Pledgor shall at all times do all such things and provide all such
reasonable assurances as may be required to consummate the transactions
contemplated by this Agreement, and shall provide such further documents or
instruments required by the Agent as may be reasonably necessary or desirable to
effect the purpose of this Agreement and carry out its provisions, and for the
better granting, transferring, assigning, charging, setting over, assuring,
confirming or perfecting the Security Interest and the priority accorded to it
by applicable laws or under this Agreement.

8.5

Filings

The Agent is authorized to make such registrations, filings or recordings or
such re-registrations, re-filings or re-recordings against the Pledgor as it may
deem necessary or appropriate to perfect, maintain or protect the Security
Interest created under this Agreement.

8.6

Governing Law and Attornment

This Agreement is a contract made under and shall be governed by and construed
in accordance with the laws of the Province of Ontario and the federal laws of
Canada applicable in the Province of Ontario without prejudice to or limitation
of any other rights or remedies available under the laws of any jurisdiction
where property or assets of the Pledgor may be found.  Each of the Parties
irrevocably submits to the non-exclusive jurisdiction of any court in the
Province of Ontario for the purposes of any legal or equitable suit, action or
proceeding in connection with this Agreement.

 

 

 

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8.7

Execution and Delivery

This Agreement and any amendments, waivers, consents or supplements hereto may
be executed in any number of counterparts, and by different Parties hereto in
separate counterparts, each of which when so delivered shall be deemed an
original, but all of which counterparts shall constitute but one and the same
instrument, and counterparts may be effectively delivered by facsimile (fax)
transmission or other electronic means.

8.8

Waiver of Financing Statement, Etc.

The Pledgor hereby waives the right to receive from the Agent a copy of any
financing statement, financing change statement or other statement or document
filed or registered at any time in respect of this Agreement or any verification
statement or other statement or document issued by any registry that confirms or
evidences registration of or relates to this Agreement.

8.9

Discharge

The Pledgor and the Pledged Shares shall not be discharged from the Security
Interest or from this Agreement except by a release or discharge in writing
signed by the Agent. After receipt by the Pledgor of such written release or
discharge, this Agreement shall terminate and the Agent shall, at the expense of
the Pledgor, make and do all such acts and things and execute and deliver all
such other instruments, agreements and documents as the Pledgor shall reasonably
request to discharge all registrations or notices filed or registered in respect
of the Security Interests.

[Signature page follows]

 

 

 

 

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IN WITNESS WHEREOF the Parties hereto have executed and delivered this Agreement
as of the date first above written.

 

 

VILLAGE FARMS INTERNATIONAL, INC.

 

 

 

By:

 

 

 

 

 

Name:Stephen C. Ruffini

Title:Executive Vice-President & Chief Financial Officer

 

 

 

 

 

 

 

 

EMERALD HEALTH THERAPEUTICS, INC.

 

 

 

By:

 

 

 

 

 

Name:Riaz Bandali

Title:President & Chief Executive Officer

 

 

 

 

 

 

 

 

COMPUTERSHARE TRUST COMPANY OF CANADA

 

 

 

By:

 

 

 

 

 

Name:

Title:

 

 

 

 

 

 

 

 

 

 

1