Secured Promissory Note by and between the Company and Emerald Health Therapeutics, Inc., dated November 2, 2020

EX-10.1 2 vff-ex101_43.htm EX-10.1 vff-ex101_43.htm

 

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

 

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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“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

 

 

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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:

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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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

(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 ###-###-####, Facsimile: (604) 899-6581, email: ***@***. 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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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.

8.GENERAL PROVISIONS

 

 

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[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.

 

 

 

 

 

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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

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).

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.

In this Agreement:

 

 

 

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Article 2
appointment of agent

 

 

 

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Article 3
PLEDGE AND SECURITY INTEREST

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:

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

The Pledgor represents and warrants to the Agent as follows:

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

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

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.

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

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:

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;

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

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;

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;

 

 

 

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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;

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);

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;

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

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

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.

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

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

Article 7
POWER OF ATTORNEY

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

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: ***@***

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: ***@*** and ***@***

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: ***@***

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:●

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.

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.

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.

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.

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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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.

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.

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.

 

 

 

 

 

 

 

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