10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark one)

☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019.

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-38783

VILLAGE FARMS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Canada	98-1007671
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4700-80th Street

Delta, British Columbia Canada

V4K 3N3

(Address of principal executive offices)

(604) 940-6012

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, without par value	VFF	The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     YES  ☐    NO  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     YES  ☐    NO  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  ☒    NO  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  ☒    NO  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b 2 of the Act).    YES  ☐    NO  ☒

The aggregate market value of the voting stock and nonvoting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked prices of such common equity, as of June 30, 2019 was $442,067,203.

As of April 1, 2020, the registrant had 56,250,419 common shares outstanding.

TABLE OF CONTENTS

		Page
PART I.			1
Item 1.	Business		1
	Item 1A. RISK FACTORS		12
	Item 1B. UNRESOLVED STAFF COMMENTS		36
Item 2.	PROPERTIES		36
Item 3.	LEGAL PROCEEDINGS		36
Item 4.	MINE SAFETY DISCLOSURES		36
PART II			37
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		37
Item 6.	Selected Financial Data		39
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		39
	Item 7A. Qualitative and Quantitative Disclosures About Market Risk		52
Item 8.	Financial Statements and Supplementary Data		52
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		52
	Item 9A. Controls and Procedures		52
	Item 9B. Other Information		53
PART III			54
Item 10.	Directors, Executive Officers and Corporate Governance		54
Item 11.	Executive Compensation		56
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		62
Item 13.	Certain Relationships and Related Transactions, and Director Independence		65
Item 14.	Principal Accounting Fees and Services		66
PART IV.			67
Item 15.	Exhibits, Financial Statement Schedules		67
Item 16.	Form 10-K Summary		68

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As used in this report, the terms “Village Farms,” “Village Farms International,” the “Company,” “we,” “us,” “our” and similar references refer to Village Farms International, Inc. and our consolidated subsidiaries, and the term “Common Shares” refers to our common shares, no par value. Our financial information is presented in U.S. dollars and all references in this prospectus to “$” means U.S. dollars and all references to “C$” means Canadian dollars.

Beginning with this Annual Report on Form 10-K, Village Farms will be filing reports with the Securities and Exchange Commission as a domestic issuer instead of a foreign private issuer.

This report contains the following trademarks, trade names and service marks of ours: Village Farms^®, Delectable TOV^®, From Our House To Your Home^®, Mini Sensations^®, Sinfully Sweet Campari^®, Heavenly Villagio Marzano^®, BC Grown Logo^®, Texas Grown Logo^®, Good for the Earth ^®, Village Farms Greenhouse Grown ^® and Village Fields^®. This report also contains trademarks, trade names and service marks that are owned by other persons or entities.

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is subject to the safe harbor created by those sections. This Annual Report on Form 10-K also contains “forward-looking information” within the meaning of applicable Canadian securities law. We refer to such forward-looking statements and forward-looking information collectively as “forward-looking statements”. Forward-looking statements may relate the Company’s future outlook or financial position and anticipated events or results and may include statements regarding the financial position, business strategy, budgets, expansion plans, litigation, projected production, projected costs, capital expenditures, financial results, taxes, plans and objectives of or involving the Company. Particularly, statements regarding future results, performance, achievements, prospects or opportunities for the Company, the greenhouse vegetable industry or the cannabis industry are forward-looking statements. In some cases, forward-looking information can be identified by such terms as “outlook”, “may”, “might”, “will”, “could”, “should”, “would”, “occur”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “try”, “estimate”, “predict”, “potential”, “continue”, “likely”, “schedule”, “objectives”, or the negative or grammatical variation thereof or other similar expressions concerning matters that are not historical facts. The forward-looking statements in this report are subject to risks that may include, but are not limited to: our limited operating history, including that of our Pure Sunfarms Corp. joint venture for the production of cannabis in Canada (our “Joint Venture”) and our start-up operations of growing hemp in the United States (“VF Hemp”); the legal status of our Joint Venture; risks relating to obtaining additional financing, including our dependence upon credit facilities; potential difficulties in achieving and/or maintaining profitability; variability of product pricing; risks inherent in the cannabis, hemp and agricultural businesses; the ability of our Joint Venture to cultivate and distribute cannabis in Canada; existing and new governmental regulations, including risks related to regulatory compliance and licenses (e.g., our Joint Venture’s ability to obtain licenses for its Delta 2 greenhouse facility as well as additional licenses under the Canadian act respecting cannabis to amend to the Controlled Drugs and Substances Act, the Criminal Code and other Acts, S.C. 2018, c. 16 (Canada) (the “Cannabis Act”) for its Delta 3 greenhouse facility), and changes in our regulatory requirements; risks relating to conversion of our greenhouses to cannabis production for our Joint Venture; risks related to rules and regulations at the U.S. federal (Food and Drug Administration (“FDA”) and United States Department of Agriculture (“USDA”)), state and municipal levels with respect to produce and hemp; retail consolidation, technological advances and other forms of competition; transportation disruptions; product liability and other potential litigation; retention of key executives; labor issues; uninsured and underinsured losses; vulnerability to rising energy costs; environmental, health and safety risks, foreign exchange exposure, risks associated with cross-border trade; difficulties in managing our growth; restrictive covenants under our credit facilities; natural catastrophes; the ongoing and developing COVID-19 pandemic; and tax risks.

The Company has based these forward-looking statements on factors and assumptions about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. Although the forward-looking statements contained in this report are based upon assumptions that management believes are reasonable based on information currently available to management, there can be no assurance that actual results will be consistent with these forward-looking statements. Forward-looking statements necessarily involve known and unknown risks and uncertainties, many of which are beyond the Company’s control, that may cause the Company’s or the industry’s actual results, performance, achievements, prospects and opportunities in

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future periods to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the factors contained in the Company’s filings with securities regulators, including this Annual Report on Form 10-K. In particular, we caution you that our forward-looking statements are subject to the ongoing and developing circumstances related to the COVID-19 pandemic, which may have a material adverse effect on our business, operations and future financial results.

When relying on forward-looking statements to make decisions, the Company cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties and should not be read as guarantees of future results, performance, achievements, prospects and opportunities. The forward-looking statements made in this report relate only to events or information as of the date on which the statements are made in this report. Except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

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PART I.

ITEM 1. BUSINESS

Business Overview

Through our majority ownership position in our joint venture, the British Columbia-based Pure Sunfarms Corp. (our “Joint Venture” or “Pure Sunfarms”), we have one of the single largest cannabis growing operations in the world. We are also one of the largest and longest-operating vertically integrated greenhouse growers in North America and the only publicly traded greenhouse produce company in Canada, and we have joint venture operations in hemp and CBD products.

Our Joint Venture leverages our 30 years of experience as a vertically integrated greenhouse grower for the rapidly emerging cannabis opportunity following legalization of cannabis in Canada. Our Joint Venture is currently one of the largest producers of cannabis in Canada with distribution in three of the provinces. Its long-term objective is to be the leading low cost, high quality cannabis producer in Canada. In our greenhouse operations, we produce and distribute fresh, premium-quality produce with consistency 365 days a year to national grocers in the U.S. and Canada from more than nine million square feet of Controlled Environment Agriculture (“CEA”) greenhouses in British Columbia and Texas, as well as from our partner greenhouses in British Columbia, Ontario and Mexico. We are also pursuing opportunities to become a vertically integrated leader in the U.S. hemp-derived CBD market, subject to compliance with all applicable U.S. federal and state laws. We have established two joint ventures, Village Fields Hemp USA, LLC, and Arkansas Valley Green and Gold Hemp LLC, for multi-state outdoor hemp cultivation and CBD extraction and plans to pursue controlled environment hemp production at our Texas greenhouse operations, which total 5.7 million square feet of production area, subject to legalization of hemp in Texas.

Our Canadian Cannabis Joint Venture – Pure Sunfarms Corp.

Joint Venture Corporate History

In June 2017, the Company formed a Canadian joint venture with Emerald Health Therapeutics (“Emerald”) to commence Canadian cannabis operations in anticipation of the adult use cannabis market becoming legal in October 2017. The Company contributed one of its Delta, B.C. greenhouses – called “Delta 3” – to the joint venture in exchange for 50% of the ownership. Emerald contributed C$20 million, which was paid in installments, in exchange for the other 50% ownership in the joint venture. Village Farms also contributed its experienced grower management and Delta 3 workforce to the joint venture and Emerald contributed its existing cultivation license and cannabis expertise. The Company also granted options to the joint venture to lease or own its two remaining Delta greenhouses – Delta 1 and Delta 2.

The Shareholder Agreement, dated June 6, 2017, between Village Farms and Emerald (“Joint Venture Agreement”) stipulates that both companies have similar rights and responsibilities to the Joint Venture. The Joint Venture Agreement stipulates a joint venture board consisting of six board members – three members from Village Farms and three members from Emerald. Thus there is joint control of the Joint Venture and as such the financial results of the Joint Venture are not consolidated with Company’s financial results. The Joint Venture Agreement also provides for other rights such as corporate matters, management of operations, defaults and remedies, distributions, preferential purchase rights, standstill provisions and other ordinary course terms and governance provisions.

During the course of 2019, the two shareholders entered into a dispute over certain provisions in the Joint Venture Agreement and other related matters, including a dispute over an existing supply agreement entered into between Emerald and the Joint Venture in 2018, pertaining to an interpretation of pricing in the supply agreement. The parties entered into a Settlement Agreement dated March 2, 2020 settling all of these matters and resulting in Village Farms owning 57.4% of the Joint Venture on March 6, 2020.

Business of the Joint Venture

During the course of 2017, the Joint Venture, applied for a cultivation license for the Delta 3 facility. In March 2018, Pure Sunfarms received its initial cultivation license for a portion of the Delta 3 facility and expanded its cultivation space via amendments to its cultivation license throughout 2018, culminating with the complete cultivation license for the entire 25 acre facility (1.1 million square feet) in March 2019. Pure Sunfarms commenced cultivation in the spring of 2018, after receiving its initial cultivation license. During 2018, the Joint Venture also hired a chief executive officer as well as adopted a name for the Joint Venture – Pure Sunfarms Corp.

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In July 2018, Pure Sunfarms received its wholesale sales license and commenced sales of its production in late September 2018, including sales to Emerald under a supply agreement for up to 40% of the production from Pure Sunfarms. Emerald continued to purchase cannabis from Pure Sunfarms until late June 2019 when it reduced taking its full 40% and eventually ceased purchasing cannabis during the third quarter of 2019. In October 2019, Emerald notified Pure Sunfarms it was disputing its liabilities to Pure Sunfarms under the supply agreement. The dispute was settled pursuant to the Settlement Agreement dated March 2, 2020 and the supply agreement was cancelled as part of the dispute.

Pure Sunfarms received an amendment to its sales license in September 2019 allowing it to commence sales to Provincial boards. As of the date of this filing, Pure Sunfarms is directly selling three provincial boards – Ontario, British Columbia and most recently Alberta.

In March 2019, Pure Sunfarms exercised its option on the Delta 2 facility. The Company contributed the facility to the joint venture in exchange for additional shares in Pure Sunfarms and Emerald contributed C$2.5 million and entered into an escrow agreement for an additional C$22.5 million in exchange for additional shares in the joint venture – subject to payments under the escrow agreement. All the escrow payments were made by Emerald but for the November 2019 payment of C$5.9 million. The Company pursuant to its interpretation of the Joint Venture Agreement made the escrow payment to Pure Sunfarms but Emerald disputed the Company’s ability to do so. The Company in turn exercised its right to request for an arbitration to hear the dispute. In January 2020, the Company received its escrow payment back while continuing the arbitration process. Subsequently, on March 2, 2020, the matter was settled and pursuant to all of the terms of the settlement agreement – the Company’s effective ownership of the joint venture was 53.5% on November 19, 2019 and effective on March 6, 2020, the Company’s ownership in the Joint Venture was 57.4%.

Pure Sunfarms produced approximately 50,000 kgs of cannabis in 2019 noting that the entire Delta 3 facility was not fully licensed for the entire 2019 calendar year. We expect the Delta 3 facility will generate in excess of 75,000 kgs of cannabis on an annual basis in a normal calendar year basis. For the first nine months of 2019, Pure Sunfarms was predominately a wholesale supplier to other licensed producers including Emerald. As noted, in September 2019 Pure Sunfarms received its provincial sales license and commenced sales to the Ontario Cannabis Store (OSC) and British Columbia Liquor Distribution Branch (BCLDB) in late September 2019. In the fourth quarter almost all of Pure Sunfarms sales were to the OSC and BCLDB as due to the over supply situation very few licensed producers were buying wholesale dried flower. Pure Sunfarms has continued expansion of its direct to provincial sales (retail sales) in early 2020 and is now the top selling brand in Ontario based on weekly point of sales data.

The retail channel, or adult use channel, is very competitive and is currently experiencing an oversupply situation as there licensed producers are producing more cannabis than the current legal adult use market is purchasing, this is a function of too many licensed producers, as well as a slow roll out of adult use licensed retail stores in the provinces such as Ontario, Quebec and British Columbia. Over the course of 2020 and 2021, we expect the number of adult use retail stores to expand especially in Ontario, Quebec and British Columbia (subject to the ongoing and developing COVID-19 pandemic) and a significant number of the licensed producers to go out of business or be consolidated into existing licensed producers who will reduce the number of cultivation facilities.

To date Pure Sunfarms is the low-cost high-quality producer in the Canadian market and its low-cost structure, primarily driven be economies of scale and large-scale greenhouse experience, that most of the other licensed producers do not have, will continue. Our cost structure will allow us to continue to pick up incremental market share as we go to market at a lower price than other licensed producers can sustain. Due to the Health Canada marketing, branding and packaging rules it is very hard to distinguish one’s products anywhere but in store, which places more emphasis on price and quality.

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Canadian Cannabis Industry Overview

Legal History of Medical Cannabis in Canada

Prior to October 17, 2018, the production, distribution, and use of cannabis for medical use was and had been legal in Canada since 2001, first under the federal Medical Marihuana Access Regulations, which established a legal regime for the licensing of cannabis producers and the sale of dried cannabis to registered patients pursuant to a medical document provided by a health care practitioner. The Medical Marihuana Access Regulations were later replaced with the Marihuana for Medical Purposes Regulations (“MMPR”), and then the Access to Cannabis for Medical Purposes Regulations (“ACMPR”) as a result of a decision by the Federal Court of Canada (the “Federal Court”) in Allard v. Canada. The Federal Court held that requiring individuals to obtain cannabis only from federally licensed cannabis producers (“License Holders”) violated liberty and security rights protected by section 7 of the Canadian Charter of Rights and Freedoms. The Federal Court found that individuals who require cannabis for medical purposes did not have “reasonable access” under the MMPR regime. Accordingly, the ACMPR contemplated both access to medical cannabis through a License Holder or through personal production exemptions, thereby giving patients reasonable access to, and choice of, cannabis product. The ACMPR provided three possible alternatives for individuals to access cannabis for medical purposes:

• they can continue to access quality-controlled cannabis by registering with federal License Holders;

• they can register with Health Canada to produce a limited amount of cannabis for their own medical purposes (starting materials must be obtained from a License Holder); or

• they can designate someone else who is registered with Health Canada to produce cannabis on their behalf (starting materials must be obtained from a License Holder).

Current Applicable Regulatory Regime

On October 17, 2018, the federal Cannabis Act and accompanying Regulations, including the Cannabis Regulations, the new Industrial Hemp Regulations (“IHR”) (together with the Cannabis Regulations, collectively, the “Regulations”), came into force, legalizing the production, distribution and sale of cannabis for adult non-medicinal (i.e. recreational) purposes, as well as incorporating the existing medical cannabis regulatory scheme under one complete framework.

On October 17, 2019, the Cannabis Regulations were amended to expand the legally permitted categories of cannabis products and support the production and sale of edible cannabis, cannabis extracts and cannabis topicals. The amendments, among other things, outline the rules relating to packaging, labelling and advertising, shelf-stability, cannabinoid concentration levels, restrictions on ingredients, and production and sanitation standards for edible cannabis, cannabis extracts and cannabis topical products. December 16, 2019 was the earliest date that the new classes of cannabis products could be available for sale. Edible cannabis, as well as extracts and topicals, are all now available for sale in the legalized recreational market in Canada.

Pursuant to the federal regulatory framework in Canada, each province and territory may adopt its own laws governing the distribution, sale and consumption of cannabis and cannabis accessories within the province or territory. All Canadian provinces and territories have implemented mechanisms for the distribution and sale of cannabis for recreational purposes within those jurisdictions, and retail models vary between jurisdictions.

The Cannabis Act maintains separate access to cannabis for medical purposes, including providing that import and export licences and permits will only be issued in respect of cannabis for medical or scientific purposes or in respect of industrial hemp. Part 14 of the Cannabis Regulations sets out the regime for medical cannabis following legalization, which is substantively the same as the ACMPR with adjustments to create consistency with rules for non-medical use, improve patient access, and reduce the risk of abuse within the medical access system. Patients who have the authorization of their healthcare provider continue to have access to cannabis, either purchased directly from a federal License Holder authorized to sell for medical purposes, or by registering to produce a limited amount of cannabis for their own medical purposes, or designating someone to produce cannabis for them.

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Adult Use Cannabis

The Company intends to participate in the Canadian adult use market for cannabis in compliance with all applicable federal and provincial laws and regulations concerning the Canadian adult use cannabis market. The Cannabis Act and the Cannabis Regulations provide a licensing scheme for the production, importation, exportation, testing, packaging, labelling, sending, delivery, transportation, sale, possession and disposal of cannabis for non-medicinal use (i.e., adult recreational use). Transitional provisions of the Cannabis Act provide that every licence issued under the ACMPR that is in force immediately before the day on which the Cannabis Act comes into force is deemed to be a licence issued under the Cannabis Act, and that such licence will continue in force until it is revoked or expires.

Below are additional highlights of the Cannabis Act:

• Places restrictions on the amount of cannabis that individuals can possess and distribute, and on public consumption and use, and prohibits the sale of cannabis unless authorized by the Cannabis Act.

• Permits individuals who are 18 years of age or older to cultivate, propagate, and harvest up to and including four cannabis plants in their dwelling-house, propagated from a seed or plant material authorized by the Cannabis Act.

• Restricts (but does not strictly prohibit) the promotion and display of cannabis, cannabis accessories and services related to cannabinoids to consumers, including restrictions on branding and a prohibition on false or misleading promotion and on sponsorships.

• Permits the informational promotion of cannabis by entities licensed to produce, sell or distribute cannabis in specified circumstances to individuals 18 years and older.

• Introduces packaging and labelling requirements for cannabis and cannabis accessories and prohibits the sale of cannabis or cannabis accessories that could be appealing to young persons.

• Provides the designated minister with the power to recall any cannabis or class of cannabis on reasonable grounds that such a recall is necessary to protect public health or public safety.

• Establishes a national cannabis tracking system to monitor the movement of cannabis from where it is grown, to where it is processed, to where it is sold.

• Provides powers to inspectors for the purpose of administering and enforcing the Cannabis Act and a system for administrative monetary penalties.

Licenses, Permits and Authorizations

The Cannabis Regulations establish the following classes of licenses:

• license for cultivation;

• license for processing;

• license for analytical testing;

• license for sale;

• license for research; and

• a cannabis drug license.

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The Cannabis Regulations also create subclasses for cultivation licenses (standard cultivation, micro-cultivation and nursery) and processing licenses (standard processing and micro-processing). Different licenses and each sub-class therein, carry differing rules and requirements that are intended to be proportional to the public health and safety risks posed by each license category and each sub-class. Licenses that were issued under the ACMPR are deemed to be licenses issued under the Cannabis Act. Licenses issued under the Cannabis Act have associated expiry dates and are subject to renewal requirements.

Security Clearances

Certain individuals associated with cannabis licensees, including individuals occupying “key positions”, directors, officers, individuals who exercise, or are in a position to exercise, direct control over the corporate licensee, and other individuals identified by the Minister of Health (the “Minister”), must hold a valid security clearance issued by the Minister. Under the Cannabis Regulations, the Minister may refuse to grant security clearances to individuals with associations to organized crime or with past convictions for, or an association with, drug trafficking, corruption or violent offences. This was largely the approach in place under the ACMPR and other related regulations governing the licensed production of cannabis for medical purposes. Individuals having a history of nonviolent, lower-risk criminal activity (for example, simple possession of cannabis, or small-scale cultivation of cannabis plants) are not precluded from participating in the legal cannabis industry, however, grant of security clearance to such individuals is at the discretion of the Minister and such applications are reviewed on a case-by-case basis.

Cannabis Tracking System

Under the Cannabis Act, the Minister is authorized to establish and maintain a national cannabis tracking system. The purpose of this system is to track cannabis throughout the supply chain, to help prevent cannabis from being diverted to an illicit market or activity and to help prevent illicit cannabis from being a source of supply of cannabis in the legal market. Pursuant to the Ministry of Health’s Cannabis Tracking System Order (the “Order”), a holder of a federal license for cultivation, a license for processing or a license for sale for medical purposes that authorizes the possession of cannabis must report monthly to the Minister with specific information about their authorized activities with cannabis (e.g. cannabis inventory quantities), in the form and manner specified by the Minister. The Order also provides for monthly reporting by provincial bodies and provincially authorized private retailers of certain information in the form and manner specified by the Minister.

Cannabis Products

The Cannabis Regulations set out the requirements for cannabis products that are permitted for sale at the retail level, including the limit on THC content, permitted ingredients, limit on pest control product residues, as well as microbial and chemical contaminants. As of October 17, 2019, the Cannabis Act and Cannabis Regulations permit the sale of the following classes of products: dried cannabis, cannabis oil, fresh cannabis, cannabis plants, cannabis plant seeds, as well as cannabis edibles, cannabis extracts and cannabis topicals.

Packaging and Labeling

The Cannabis Regulations set out strict requirements pertaining to the packaging and labelling of cannabis products. These requirements are intended to promote informed consumer choice and safe consumption and allow for the safe handling and transportation of cannabis, while also reducing the appeal of cannabis to youth.

The Cannabis Regulations require all cannabis products to be packaged in a manner that is tamper-proof and child-resistant. Strict limitations are also imposed on the use of colors, graphics, and other special characteristics of packaging. For example, all-over package coverings must be clear, and the interior surface and exterior surface of any container in which a cannabis product is packaged must be one uniform color. Cannabis package labels must include specific information, such as (i) product source information, including brand name, the class of cannabis and the name, phone number and email of the licensed processor or cultivator, (ii) mandatory warnings, including rotating health warning messages on Health Canada’s list of standard health warnings; (iii) the Health Canada standardized cannabis symbol; and (iv) information specifying THC and CBD content.

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A cannabis product’s brand name may only be displayed once on the principal display panel or, if there are separate principal display panels for English and French, only once on each principal display panel. It can be in any font style and any size, so long as it is equal to or smaller than the health warning message. The font must not be in metallic or fluorescent color. In addition to the brand name, only one other brand element can be displayed. Such brand element must meet the same requirements noted above as the brand name, and if an image, it must be in a size equal to or smaller than the surface area of the standardized cannabis symbol.

Health Products Containing Cannabis

Health Canada is taking a scientific, evidenced-based approach for the oversight of health products with cannabis that may be approved with health claims, including prescription and non-prescription drugs, veterinary drugs and medical devices. Under the current regulatory framework, health products are subject to the Food and Drugs Act (Canada) and its regulations, and may be additionally regulated by the Cannabis Act and the Cannabis Regulations. For many of these products, pre-market approval from Health Canada is required.

Provincial and Territorial Regulatory Framework for Recreational Cannabis

While the Cannabis Act provides for the regulation of the commercial production of cannabis and related matters by the federal government, the Cannabis Act provides the provinces and territories of Canada with authority to adopt their own laws governing the distribution, sale and consumption of cannabis and cannabis accessory products within the province or territory, permitting for example, provincial and territorial governments to set lower possession limits for individuals and higher age requirements. Currently, each of the Canadian provincial and territorial jurisdictions has established the minimum age for cannabis use to be 19 years old, except for Québec and Alberta, where the minimum age is 21 and 18 respectively.

The provinces and territories are responsible for the establishment of a retail distribution system for adult use cannabis in their respective jurisdictions. All Canadian provinces and territories have implemented mechanisms for the distribution and sale of cannabis for recreational purposes within those jurisdictions, and retail models vary between jurisdictions. Provincial/territorial bodies act as intermediaries between entities licensed federally under the Cannabis Act and consumers, such bodies acting in some jurisdictions as exclusive cannabis wholesalers and distributors, and in some instances such bodies acting as exclusive retailers. The laws continue to evolve, and differences in provincial and territorial regulatory frameworks could result in, among other things, increased compliance costs, and increased supply costs.

Municipal and regional governments may choose to impose additional requirements and regulations on the sale of recreational cannabis, adding further uncertainty and risk to the company’s business. Municipal by-laws may restrict the number of recreational cannabis retail outlets that are permitted in a certain geographical area or restrict the geographical locations wherein such retail outlets may be opened.

There is no assurance that the provincial, territorial, regional and municipal regulatory frameworks and distribution models will remain unchanged, or that the Company will be able to navigate such changes in the regulatory frameworks and distribution models or conduct its intended business thereunder. See: “Risk Factors”.

Ontario: Pursuant to the Cannabis Control Act, 2017 (Ontario), the distribution and retail sale of recreational cannabis is currently conducted through the Ontario Cannabis Retail Corporation (“OCRC”), a subsidiary of the Liquor Control Board of Ontario. Recreational cannabis has been sold on-line through the OCRC-operated Ontario Cannabis Store (“OCS”) platform, as of October 17, 2018.

On October 17, 2018, the Cannabis License Act, 2018 (Ontario) became law and other legislation, including the Cannabis Control Act, 2017, the Ontario Cannabis Retail Corporation Act, 2017 and the Liquor Control Act were amended to create a private retail framework for the sale of recreational cannabis in Ontario. As of April 1, 2019, recreational cannabis has been available for sale by private retailers that operate brick-and-mortar stores licensed by the Alcohol and Gaming Commission of Ontario (“AGCO”).

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The recreational cannabis retail regulatory regime in Ontario has the following requirements and features:

• Private retailers are required to obtain both a retail operator license and a retail store authorization. Retail store authorizations are only to be issued to persons holding a retail operator license. Separate retail store authorizations are to be required for each cannabis retail store, but a licensed retail operator may hold more than one retail store authorization and operate multiple stores. Private retailers are not permitted to sell cannabis online, but may only sell cannabis in person at an authorized retail store.

• The AGCO is the government entity responsible for issuing retail store authorizations for privately run recreational cannabis stores. Until December 13, 2019, a temporary cap of 25 retail store authorizations was imposed while cannabis supply stabilizes. On July 3, 2019, the Government of Ontario announced its plans for a second allocation of 50 additional cannabis retail store authorizations. The AGCO held a lottery draw for the allocation of 42 retail store authorizations. A separate process governed the allocation of eight retail store authorizations for those who wish to operate a store on a First Nations reserve. On March 2, 2020, the restrictions on the total number of store authorizations permitted in Ontario, and their regional distribution, will be revoked. The AGCO will begin accepting applications for retail store authorizations from all interested applicants.

• Retail store operators are only permitted to purchase cannabis from the OCRC, which may set a minimum price for cannabis or classes of cannabis.

• Every authorized cannabis retail store in Ontario must have a licensed retail manager. Individual who supervises employees, oversees cannabis sales, manages compliance or has signing authority to purchase cannabis, enters into contracts or hires employees is required to have a cannabis retail manager license.

• Federal License Holders (and their affiliates) are limited to operating one retail cannabis store in the province, which must be located at the site listed on such producer’s federal license. A broad definition of affiliate is included in the regulations. An affiliate relationship exists if a corporation beneficially owns or controls voting shares, or securities that may be converted to voting shares, constituting more than 25% of voting rights. If a person, or group acting together, holds 50% voting control for the election of directors or market share of the corporation, they are considered affiliates. Additionally, an affiliate relationship may be established through involvement in a trust, partnership or joint venture, among others. The definition of affiliate may have the effect of restricting the ability of federal License Holders from effectively entering into the consumer retail market in Ontario.

• Federal License Holders are prohibited from providing any material inducement to cannabis retailers for the purpose of increasing the sale of a particular type of cannabis.

• Municipalities and reserve band councils were permitted to opt out of the retail cannabis market by resolution. Municipalities had until January 22, 2019 to pass such by-laws, and several municipalities have formally opted-out of the retail market. Municipalities that opted out can later lift the prohibition on retail cannabis stores by subsequent resolution, which cannot be reversed at a later date. Municipalities may not pass bylaws providing for a further system of licensing over the retail sale of cannabis.

Manitoba: The Government of Manitoba has implemented a ‘‘hybrid model’’ for cannabis distribution, whereby supply is secured and tracked by the Manitoba Liquor and Lotteries Corp.; however, licensed private retail stores are also permitted to sell recreational cannabis.

Alberta: The Government of Alberta has implemented a cannabis framework providing for the purchase of cannabis products from private retailers that receive their products from a government-regulated distributor, the Alberta Gaming and Liquor Commission, similar to the distribution system currently in place for alcohol in the province. Only licensed retail outlets are permitted to sell cannabis with online sales run by the Alberta Gaming and Liquor Commission.

New Brunswick: All recreational cannabis is managed and sold through a network of tightly-controlled, stand-alone “Cannabis NB” stores managed by the Cannabis Management Corporation, a subsidiary of New Brunswick Liquor Corporation and is available for sale online through the Cannabis NB platform.

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Quebec: All recreational cannabis is managed and sold by Société québécoise du cannabis (the “SQDC”) outlets and is available for sale online, the entire process controlled by the SQDC.

Newfoundland and Labrador: Recreational cannabis is sold through private stores, with the crown-owned liquor corporation, the Newfoundland and Labrador Liquor Corp. (the “NLC”), issuing private retailer licenses and overseeing the distribution to private sellers who may sell to consumers. The NLC also controls the possession, sale and delivery of cannabis, and sets prices. NLC is also the online retailer, although licenses may later be issued to private interests.

Yukon: Yukon had initially limited the distribution and sale of recreational cannabis to government outlets and government-run online stores, but has since opened up its retail market to permit licensed private retailers in the territory. Cannabis retail licenses are issued by the Cannabis Licensing Board. Authorized retailers must purchase cannabis from the Yukon Liquor Corporation, acting as the wholesaler and distributor in the territory.

Northwest Territories: The Northwest Territories Liquor Commission controls the importation and distribution of cannabis, whether through retail outlets or by mail order service run by the commission. Communities in the Northwest Territories are able to hold a plebiscite to prohibit cannabis, similar to the options currently available to restrict alcohol.

British Columbia: Recreational cannabis is sold through both public and licensed privately operated stores, with the provincial Liquor and Cannabis Regulation Branch handling wholesale distribution.

Saskatchewan: The Government of Saskatchewan implemented a framework in which both wholesale and retail recreational cannabis are conducted by the private sector and regulated by the Saskatchewan Liquor and Gaming Authority (“SLGA”). A number of retail permits have been issued to private stores. Beginning in April 2020, SLGA will accept applications for cannabis retail permits in Saskatchewan communities with populations less than 2,500. In September 2020, SLGA will begin accepting permit applications for stores in all communities in the province. SLGA is currently accepting applications for wholesale cannabis permits as well as federally licensed producer registrations. Permitted wholesalers can sell to permitted retailers and other permitted wholesalers but not to the general public. Wholesale operations must be physically located within Saskatchewan and product can only be sold and distributed within Saskatchewan. Further, only federally licensed producers registered with SLGA will be allowed to sell into the Saskatchewan market.

Nova Scotia: The Nova Scotia Liquor Corporation is responsible for the regulation of cannabis in the province, and recreational cannabis is only sold publicly through government-operated storefronts and online sales.

Prince Edward Island: Similar to Nova Scotia, Prince Edward Island requires cannabis to be sold publicly, through government stores and online, overseen by the Prince Edward Island Cannabis Management Corporation.

Nunavut: Nunavut allows for the sale of cannabis through both public and private retail and online. In Nunavut, a person can submit an application with the Nunavut Liquor and Cannabis Commission for a license to operate a cannabis store, remote sales store, or cannabis lounge.

Several of the provinces and territories have been actively working to secure supply agreements from existing federal License Holders. The Joint Venture has entered into supply agreements with the Ontario Cannabis Store (OCS), British Columbia Liquor Distribution Branch (BCLDB) and Alberta Gaming, Liquor and Cannabis Commission (AGLC) and is in discussions with several other provinces with respect to entering supply agreements.

Industrial Hemp

The new IHR under the Cannabis Act replaced the previous Industrial Hemp Regulations under the Controlled Drugs and Substances Act (“CDSA”) as of October 17, 2018. The regulatory scheme for industrial hemp production largely remains the same, however the IHR permits the sale of hemp plants to licensed cannabis producers, and licensing requirements under the new IHR are softened in accordance with the lower risk posed by industrial hemp. The IHR defines industrial hemp as a cannabis plant, or any part of that plant, in which the concentration of THC is 0.3 % w/w or less in the flowering heads and leads.

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Our Greenhouse Produce Business

The Company commenced its produce operations in 1989. It operates produce operations under both its US subsidiary – Village Farms L.P. and its Canadian subsidiary – Village Farms Canada Limited Partnership. The Company owns and operates four greenhouse facilities in west Texas and one produce greenhouse in Delta, British Columbia. The Company also represents third party growers (based in Canada and Mexico) on a sales commission basis, which represents approximately 37% of the Company’s 2019 revenues.

The Company primarily grows tomatoes at its own facilities and approximately 88% of its 2019 produce sales were tomatoes, 6% peppers, 5% cucumbers and 1% mini-cukes, the percentages were similar in calendar year 2018. The Company sells produce predominantly to retailers in the United States and Canada. For both 2019 and 2018 roughly 83% of the Company’s sales were in the United States with two customers comprising more than 10% of total produce sales. Retail direct sales were roughly 78% of total produce sales for both 2019 and 2018, with the balance to wholesale customers who service small retailers or other markets such as food service.

While the Company grows in greenhouses as does its supply partners, the winter production of produce is always lower in the winter months as compared to the summer months. As such, the produce business has seasonality to its produce sales. Historically, the Company has had higher sales in its second and third quarters and lower sales, due to lower volumes, in the first and fourth quarters.

The produce business is very competitive and while the Company has some primary large commercial competitors, there is an abundance of growers as shown the Greenhouse Vegetable Industry Overview, which has created an oversupplied market resulting in our retail customers continually pressing for price reduction. Due to the perishable nature of the produce business pricing is very sensitive to the daily demand versus supply in each produce category, with the Company’s primary category being tomatoes. The Company tries to combat the commoditization of the tomato category by offering unique tomatoes such as the Heavenly Villagio Marzano^® and Sinfully Sweet Campari^® as a means of distinguishing Village Farms to it retail customers but the large tomato varieties such as tomatoes on the vine (“TOVs”) and Beefsteak are still a predominant part of Company and industry sales. The produce business has limited trademark or brand loyalty.

Greenhouse Vegetable Industry Overview

(A) The North American Industry

The greenhouse vegetable industry in North America has experienced rapid growth over the past 20 years, particularly in the western regions of the United States, southwest British Columbia and southern Ontario in Canada, and concentrated areas in Mexico.

Mexico is the largest producer of greenhouse tomatoes, accounting for 57% of North American greenhouse vegetable sales, followed by Canada and the United States. Based on figures from 2016, greenhouse tomatoes accounted for over 45% tomato volume sold at retail stores in the United States. It is estimated that retail sales represent over 50% of the total fresh tomato market, including both field and hothouse grown. The balance of fresh tomato sales are to the food service industry, which is primarily serviced by field tomato producers.

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The following table illustrates estimated greenhouse tomato area and production for the U.S., Mexico and Canada in 2016 (the most recent date for which this information is available):

Item	United States		Canada		Mexico1		Total North America
Greenhouse tomato production (millions of pounds)		645		609		2,400		4,312
Greenhouse tomato area (hectares)		680		591		14,000		15,271
Conversion: 1 hectare = 2.471 acres

¹  The figures for Mexico include all protected crop most of which is a shadehouse rather than a greenhouse and is based on management estimates.

Sources: The State of the N. American Hothouse Vegetable Industry, by Dr. Roberta Cook, March 2018; Greenhouse Consultants; and Perishables Group Freshfact, Nielsen Business Media, Inc.

(B) Greenhouse Industry — United States

The majority of greenhouse vegetable producers in the United States are located in the southwestern and western states, where the growing conditions are more ideal for winter growing operations and in some areas year-round production. New greenhouse facilities have recently been completed in the United States and more are planned. These facilities will have lights to allow them to produce in the winter months. Producing in the winter months is advantageous as produce prices are generally higher, although with increasing Mexican production, seasonal fluctuations are decreasing. The majority of greenhouse tomatoes produced in the United States are used for domestic consumption. In addition, the United States imports a significant portion of its supply of greenhouse tomatoes from Canada and Mexico to meet domestic demand, it is estimated that Mexican greenhouse vegetables comprise between 50 to 60% of consumption in the United States. Producers in the United States benefit from high yields, consistent product quality, year-round supply and closer proximity to its customers.

(C) Greenhouse Industry — Canada

Among the North American greenhouse vegetable producers, Canada is the largest supplier from April to October of each year. Several factors, including climatic advantages (cooler summer temperatures) and the proximity of greenhouse producers to consumer markets, contribute to Canada’s favorable positioning relative to the United States during that time period. The primary markets for greenhouse produce grown in British Columbia include the west and northwest regions of the United States, as well as western Canada, while the primary markets for Ontario produce include the east and central regions of the United States, as well as eastern Canada.

The strengths of the Canadian greenhouse vegetable industry include its high yields and consistent product quality. The main weakness of the Canadian greenhouse industry relates to its lack of production during the historically higher priced winter months. However, because of the high volume of tomatoes produced in Canada during the April to October growing season, profits generated during this time period generally are sufficient to sustain producers through the full year.

(D) Greenhouse Industry — Mexico

Although Mexico was the last to enter the greenhouse tomato industry in North America, it has more greenhouse tomato acreage than the United States and Canada combined. It should be noted there is no formal definition of a “greenhouse” and a significant portion of the greenhouse acreage in Mexico is very low-tech, employing shade field structures. The product from the shade facilities is in some instances marketed as greenhouse-grown, which until the recent update on the Suspension Agreement between the United States and Mexico (as described above) was not in violation of any regulations, but for the State of California regulations, which has a definition of greenhouse for produce sold within the state. Average yields and product quality in Mexico are comparatively low, as compared to U.S. and Canadian greenhouse operations. Currently, Mexican producers tend to grow a majority of their production during the fall, winter and spring seasons as they have sufficient light levels to grow and cooler temperatures during these months, although the trend towards more sophisticated greenhouses is permitting a longer growing season, as well as increased yields.

Over the last several years, the greenhouse industry in Mexico has continued to make significant advances with respect to its growing expertise and ability to extend its growing season, which continues to put pressure on produce pricing.

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Pricing

Prices for vegetables fluctuate depending upon availability of supply and consumer demand. Greenhouse vegetable producers typically command a higher price for their products compared to field producers, as a result of the vegetables’ consistent quality, taste, appearance and year-round availability. This higher price, combined with higher production yields for greenhouse produce, typically offset the higher costs associated with greenhouse production relative to field production. Production costs for greenhouse grown produce are generally higher due to greater energy, labor, infrastructure, technological requirements and more intense crop yields per acre. As the fresh produce market share of big box retailers increases, pricing is moving towards more contract pricing for six, nine or even twelve-month periods reducing some of the traditional seasonal pricing. Contract pricing does not provide volume guarantees. Average pricing over the last five years has continued to decrease in large part due to the increasing supply of greenhouse tomatoes.

Our U.S. Hemp Business

The Company entered the U.S. Hemp business in the spring of 2019 after the passing of the 2018 Farm Bill. As the Company was not experienced in outdoor field growing it created two U.S. based joint ventures – Village Fields Hemp, Inc. (“VFH”), in which it owns 65% and Arkansas Valley Green and Gold Hemp (“AVGGH”), in which it owns 60%, with 5% owned by VFH. The remaining interests in both U.S. hemp joint ventures were partners who had experience in outdoor growing of hemp (VFH) and cannabis (AVGGH). Additionally, the Company commenced conversion of a portion of one of its Texas greenhouse facilities in anticipation of the State of Texas approving hemp cultivation within the state of Texas, which occurred in June 2019.

The initial crop results from VFH were encouraging. VFH contracted with over 50 independent farmers to grow hemp on a results basis producing over 800,000 pounds of hemp biomass. AVGGH lost is crop after harvesting its initial crop in October 2019 to a windstorm, as hemp grown in Colorado is dried in the field.

During the Company’s hemp joint venture’s cultivation activities, the FDA announced that CBD – the primary reason for growing hemp – was a deemed to be a ‘medicine’ and as such would require further science-based studies on its safety. As such, the FDA has concluded that for the time being CBD can not be added to foods or beverages unless the product is specifically approved by the FDA, which is an expensive and time-consuming process. Subsequent to the VFH harvest, primarily due to the FDA’s position on the safe consumption of CBD – sales of hemp biomass have been very slow. The result being our U.S. Hemp business is in a holding pattern at this time and is limiting its activities to selling the VFH biomass. The Company has applied for Texas hemp license for one of its Texas locations, in March 2020, in the instance the FDA adjusts its position on CBD, so the Company could commence hemp operations quickly if a sufficient market demand for CBD products.

United States Hemp Industry Overview

In December 2018, the passage of the 2018 Farm Bill removed hemp from the schedule of federally controlled substances, including products made with derivative extracts such as cannabinoid, or CBD, oil. Hemp is defined as cannabis plants and their derivatives containing not more than 0.3% THC. Specifically, the Farm Bill allows the transfer of hemp-derived products across state lines for commercial or for other purposes. It also puts no restrictions on the sale, transport, or possession of hemp-derived products, so long as those items are produced in a manner consistent with the law.

Although hemp has been removed from the schedule of federally controlled substances, each state that treats cannabis as a controlled substance will determine whether to legalize hemp to allow farming and extraction in that state. Under the 2018 Farm Bill, states that have legalized hemp and choose to license and regulate it must devise a regulatory plan and submit it to the Secretary of the U.S. Department of Agriculture (“USDA”). A state’s plan to license and regulate hemp can only commence once the Secretary of the USDA approves that state’s plan. In states opting not to devise a hemp regulatory program, USDA will construct a regulatory program under which hemp cultivators in those states must apply for licenses and comply with a federally-run program.

In June 2019, Texas adopted a law authorizing the production and sale of hemp (as defined in the 2018 Farm Bill). In December 2019, the Texas Department of Agriculture submitted a plan to regulate and license hemp production to the USDA, which the USDA approved in January 2020. The Texas Department of Agriculture published proposed rules to administer its hemp plan in January 2020. Those rules have not yet been adopted, however, so hemp production remains illegal in Texas. The Texas Department of Agriculture has announced that it anticipates opening the hemp permit application process “in early 2020.”

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Intellectual Property

We own and have registered many trademarks and service marks in the United States as well as some in Canada and other jurisdictions. The following is a list of the key trademarks registered in the United States, our primary distribution market for produce and CBD products: Village Farms^®, Delectable TOV^®, From Our House To Your Home^®, Sinfully Sweet Campari^®, Heavenly Villagio Marzano^®, BC Grown Logo^®, Texas Grown Logo^®, Good for the Earth ^®, Village Farms Greenhouse Grown ^® and Village Fields^®.

Employees

We have approximately 1,000 employees and contract workers, the majority of whom are employed in our greenhouse operations. None of our employees are covered by a collective bargaining agreement. We believe we enjoy a good working relationship with our employees.

The Joint Venture has approximately 400 employees and contract workers, the majority of whom are employed in its greenhouse operations. None of its employees are covered by a collective bargaining agreement. We believe the Joint Venture enjoys a good working relationship with its employees.

Corporate Information

Village Farms is a publicly traded company incorporated pursuant to the Canada Business Corporations Act (“CBCA”) in 2003. Our headquarters are located at 4700-80th Street Delta, British Columbia, Canada V4K 3N3 (telephone: 604-940-6012).

We file annual, quarterly, current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). We make available free of charge at our website, www.villagefarms.com, all of our reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, including our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K and amendments to those reports. The information on our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered a part of this Annual Report on Form 10-K, and the reference to our website in this Annual Report on Form 10-K is an inactive textual reference only.

Prior to December 31, 2019, Village Farms was a foreign private issuer, and in compliance with SEC regulations, filed its interim financial statements on Form 6-K, and its Annual Report on Form F-40. These reports are made available on our website as soon as reasonably practicable after their filing with, or furnishing to, the SEC. The SEC maintains an internet site that contains our public filings with the SEC and other information regarding the Company, at www.sec.gov. We are also a reporting issuer under the securities laws of the Province of British Columbia in Canada.

ITEM 1A. RISK FACTORS

Any of the risks and uncertainties described below could significantly and negatively affect our business, prospects, financial condition, operating results, or credit ratings, which could cause the trading price of our Common Shares to decline. In particular, we caution you that we may face substantial risks and uncertainties due to the ongoing and developing circumstances related to the COVID-19 pandemic, which may have a material adverse effect on our business, operations and future financial results. Additional risks and uncertainties not presently known to us, or risks that we currently consider immaterial, could also impair our business operations or financial condition.

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Risks Related to Our Business

We may be unable to attain profitability.

Our ability to generate net earnings and become profitable is based, in part, on our ability to manage our tomato production at a low-cost structure to reestablish our produce EBITDA margins. These margins are dependent upon our ability to continue to profitably sell our products and to be the supplier of choice to our customers. The failure to execute on our low-cost produce structure at favorable margins or an increase in cost of goods or operating costs could have a material adverse effect on the financial condition, results of operations, and cash available.

A principal objective of ours is to pursue operational efficiencies. Profitability depends in significant measure on its ability to, among other things, successfully manage, identify and implement operational efficiencies. There can be no assurance that we will be successful in managing our cost control and productivity improvement measures. In addition, a failure to achieve a low-cost structure through economies of scale or improvements in cultivation and manufacturing processes could have a material adverse effect on our commercialization plans and our business, prospects, results of operations and financial condition.

The ongoing and developing COVID-19 pandemic has caused a broad impact globally. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, the pandemic and any resulting recession or economic slowdown (particularly in Canada and/or in the United States) could reduce our productive capacity, labor availability (see “—Our operations are dependent on labor availability” below) and operations generally, may reduce demand for our products (see “—Our Joint Venture may be affected by cannabis supply and demand fluctuations” below) and could overall affect our ability to achieve profitability. In addition, any significant disruption of global financial markets, reducing our ability to access capital or our credit facilities, could negatively affect our liquidity. Any of the foregoing effects from the COVID-19 pandemic could materially adversely affect our business, prospects and future results of operations, and the value of our Common Shares.

We may need additional financing to further develop our business.

The continued operational and development of our business will likely require additional financing, which may be in the form of future equity securities offerings or any form of debt financing. In March 2020, we raised C$11.5 million through an equity offering of 3,593,750 of our Common Shares; however, we may require additional equity financing which may have a dilutive effect, and may not be achievable due to market conditions (including as a result of the COVID-19 pandemic) or other reasons . The failure to raise such capital could result in the delay or indefinite postponement of our current business objectives or may require us to cease to carry on business. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favorable to us.

In addition, we are subject to fluctuations in our working capital on a month to month basis, and as a result, we are dependent on access to financing under our Term Loan with Farm Credit Canada (“FCC”) and an Operating Loan with Bank of Montreal (“BMO”) together referred to herein as our “Credit Facilities”. Consistent with our past practice, we may draw down on revolving credit facilities available under our Operating Loan. We are currently not in compliance with the covenants of our Term Loan and obtained a waiver from FCC for our financial covenants until June 30, 2020. There can be no assurance that this waiver will continue to remain in place. Management is currently in discussions to amend or enter into a new Term Loan with FCC in the second quarter of 2020 and can give no assurance that we will be successful in our negotiations, or that the amended term facility (if any) will be on terms that are favorable to us. Accordingly, there can be no assurance that we will continue to have access to appropriate credit facilities on reasonable terms and conditions, if at all. An inability to draw down upon our Credit Facilities, or to amend or replace the Credit Facilities on favorable terms (or at all), could have a material adverse effect on our business, financial condition and results of operations.

There is no assurance that sufficient financing will be available when needed to allow us to continue as a going concern. The perception that we may not be able to continue as a going concern may also make it more difficult to operate our business due to concerns about our ability to meet our contractual obligations. Our ability to continue as a going concern is contingent upon, among other factors, obtaining additional financing. We cannot provide any assurance that we will be able to raise additional capital.

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We are dependent on the success of our Joint Venture, which has a limited operating history in the cannabis industry.

Our Joint Venture, which represented a material portion of our net income for the year ended December 31, 2019, has a limited operating history. Our Joint Venture is therefore subject to many of the risks common to early-stage enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial, and other resources and lack of significant revenues. In addition, we have incurred and anticipate that we will continue to incur substantial expenses relating to the development and initial operations of our Joint Venture. The payment and amount of any future dividends and shareholder loan repayments to us from our Joint Venture will depend upon, among other things, its available cash flows, after taking into account its operating and capital requirements. There is no assurance that we will be successful in achieving a return on our Joint Venture and the likelihood of success must be considered in light of the early stage of its operations.

Our Joint Venture may incur significant losses in the future for a number of reasons, including as a result of unforeseen expenses, regulatory impediments, unforeseen difficulties, complications and delays, the other risks described in these “Risk Factors” and other unknown events. The amount of any future net losses will depend, in part, on the growth of our future expenses and our ability to generate revenue. Because of the numerous risks and uncertainties associated with producing and selling cannabis and cannabis-derived products, we are unable to accurately forecast operating results to predict when, or if, we will be able to sustain our profitability. If our Joint Venture is unable to sustain profitability, the market price of our Common Shares may significantly decrease and our ability to raise capital, expand our business or continue our operations may be impaired.

The ability of our Joint Venture to grow will depend on a number of factors, many of which are beyond our control, including, but not limited to, the number of licensed retail cannabis stores, the availability of sufficient capital on suitable terms, changes in laws and regulations respecting the production and sale of cannabis products, competition from other entities licensed under the Cannabis Act, its ability to recruit and retain sufficient experienced personnel and its ability to expand into international operations and sales. In addition, our Joint Venture is subject to a variety of business risks generally associated with developing companies. Future development and expansion could place significant strain on our management personnel and likely will require us to recruit additional management personnel, and there is no assurance that we will be able to do so. As the operations of our Joint Venture grow in size, scope and complexity and as it identifies and pursues new opportunities, our Joint Venture may need to increase in scale its infrastructure (financial, management, informational, personnel and otherwise).

Our future cash flows, earnings, results of operations and financial condition will in part depend on our retaining our ownership interest in our Joint Venture. Under our Joint Venture Agreement, either the Company or Emerald may exercise the Buy-Sell provision in certain circumstances, which could result in us having to either sell all of our interest in the Joint Venture or acquire all of Emerald’s interest in the Joint Venture. In addition, any dilution of our interest in the Joint Venture would adversely affect the amount of revenue we can derive from our Joint Venture.

Any strain on, or breakdown of, the working relationship between us and Emerald, or a successor in Emerald’s interest in the Joint Venture, could adversely affect the governance and operations of our Joint Venture. Since the Buy-Sell becomes effective on or after June 6, 2019 and upon a deadlock of the board of directors of our Joint Venture with respect to Material Decisions or the inability of the board of directors of our Joint Venture to pass an annual budget by March 1 (for the 2020 calendar year only the deadlock of the board would result in the Buy-Sell becoming effective), any breakdown in the relationship between Emerald and us may ultimately result in the exercise of the Buy-Sell provision. We recently settled a dispute with Emerald pursuant to the Settlement Agreement, but we can provide no assurance that future disputes between Village Farms and Emerald will not arise. If we are required to sell our interest in our Joint Venture pursuant to the Buy-Sell, this would result in a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

We are subject to restrictive covenants under our Credit Facilities.

Under the terms of our Credit Facilities, we are subject to a number of covenants, including debt service covenants. These covenants could reduce our flexibility in conducting our operations by limiting our ability to borrow money and expand into new business lines. Currently, we are not in compliance with certain financial covenants and have received a waiver on our Term Loan, until June 30, 2020; we can provide no assurance that any such waiver will remain in place and our Credit Facilities will not be amended or renewed as currently contemplated. In addition, our non-compliance with our covenants may increase a risk of default on our debt (including by a cross-default to other credit agreements) if we continue to be in non-compliance with these covenants. In the event that we remain in non-

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compliance with our debt covenants, or if we are unable to comply with our debt covenants in the future, we may seek additional waivers and/or amendment(s) from the applicable lenders in respect of any such covenant in order to avoid any breach or default that might otherwise result therefrom. If we default under any of the Credit Facilities and the default is not waived by the applicable lenders, the debt extended pursuant to all of our debt instruments could become due and payable prior to their stated due dates. We cannot give any assurance that (i) our lenders will agree to any covenant amendments or continue to waive any covenant breaches or defaults that may occur under the applicable debt instruments, or (ii) we could pay this debt if any of it became due prior to its stated due date. Accordingly, any default by us under our existing debt that is not waived by the applicable lenders could materially adversely impact our results of operations and financial results and may have a material adverse effect on the trading price of our Common Shares.

Our operations are dependent on labor availability.

Our operations are labor intensive, particularly during peak harvest months. In Canada, most of our labor is supplied by contract labor suppliers on short-term contracts and workers hired through the Seasonal Agriculture Workers Program. There can be no assurance that we will be able to source sufficient skilled laborers in the future. Recently, due the COVID-19 pandemic, the Canadian government closed its borders to all foreign people, but subsequently, due to the negative impact on the Canadian agricultural industry, decided that foreign worker program will continue subject to new rules and regulations such as a mandatory 14-day quarantine period. Any disruption in the Canadian foreign worker program could have a detrimental impact on our ability to cultivate fresh produce.

In the case of the facilities in west Texas, a significant portion of our labor are documented workers in Mexico who cross the U.S. border on a daily basis into Texas. Recently, as a response to the COVID-19 pandemic, the U.S. government has closed the U.S./Mexico border but has determined that agricultural workers are essential. Currently, our Mexican employees have permission to continue to cross the border. There can be no assurance that we would be able to continue our Texas operations without our Mexican based workforce, if any decision is made to permanently or temporarily close the U.S./Mexico border. In the case of our facility in Monahans, Texas, we are situated in the middle of the Texas oil and gas patch and finding and retaining farm workers at affordable rates is an ongoing challenge. Any shortage of such labor could restrict our ability to operate our greenhouses profitably, or at all.

Efforts by labor unions to organize our employees could divert management attention away from regular day-to-day operations and increase our operating expenses. Labor unions may make attempts to organize our non-unionized employees. We are not aware of any activities relating to union organizations at any of our greenhouse facilities. We cannot predict which, if any, groups of employees may seek union representation in the future or the outcome of any collective bargaining. If we are unable to negotiate acceptable collective bargaining agreements, we may have to wait through “cooling off” periods, which are often followed by union-initiated work stoppages, including strikes. Depending on the type and duration of any work stoppage, our operating expenses could increase significantly, which could have a material adverse effect on our financial condition, results of operations and cash flows.

Risks Related to the Cannabis Operations of Our Joint Venture

Our Joint Venture operations in Canada require licenses to grow, store and sell cannabis.

Our Joint Venture’s ability to grow, store and sell cannabis in Canada is solely dependent on its ability to maintain licenses to cultivate and sell cannabis under the Cannabis Act (a “License”) for each of the greenhouses at which it proposes to grow cannabis. Under the Cannabis Act, our Joint Venture is required to obtain authorization for each licensable activity including cultivation, processing, testing, sale and distribution. Once obtained, each License is subject to ongoing compliance and reporting requirements. Failure by our Joint Venture to comply with the requirements of a License or to maintain such License would have a material adverse impact on our business, prospects, financial condition, results of operations and cash flows. Although we believe our Joint Venture will obtain and maintain any required License and meet the requirements for extension of any License, there can be no guarantee that any License will be granted, extended or renewed, or if it is extended or renewed, that it will be extended or renewed on the same or similar terms. Should a License not be granted, extended or renewed or should it be renewed on different terms, our business, prospects, financial condition, results of the operation and cash flows would be materially adversely affected.

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We cannot predict the time required to secure all appropriate regulatory approvals for our Joint Venture’s products and operations, or the extent of testing and documentation that may be required by governmental authorities. Any delays in obtaining, or failure to obtain the necessary regulatory approvals will significantly delay the development of our Joint Venture’s markets and products and could have a material adverse effect on our business, results of operations and financial condition.

Our Joint Venture is subject to laws, regulations and guidelines related to the cannabis industry.

The activities of our Joint Venture are subject to various laws, regulations and guidelines by governmental authorities, particularly under the Cannabis Act, relating to the cultivation, processing, manufacture, management, marketing, packaging/labelling, advertising, pricing, sale, distribution, transportation, storage, and disposal of cannabis, but also including laws and regulations relating to drugs, controlled substances, health and safety, insurance coverage, the conduct of operations and the protection of the environment, among other areas. Laws and regulations, applied generally, grant government agencies and self-regulatory bodies broad administrative discretion over the Joint Venture’s activities, including the power to limit or restrict business activities as well as impose additional disclosure requirements on its products and services. We endeavor to comply with all relevant laws, regulations and guidelines. Health Canada inspectors routinely assess our Joint Venture’s facilities for compliance with applicable regulatory requirements. Furthermore, the import and export of its products from and into any jurisdiction is subject to the regulatory requirements of each such jurisdiction. To the best of our knowledge, we are in material compliance with all such laws, regulations and guidelines; however, any failure by our Joint Venture to comply with the applicable regulatory requirements could lead to possible sanctions, including the revocation or imposition of additional conditions on licenses to operate its business; the suspension or expulsion from a particular market or jurisdiction or of its key personnel; and/or the imposition of additional or more stringent inspection, testing and reporting requirements. Any of the foregoing could require extensive changes to the operations of our Joint Venture; result in regulatory or agency proceedings or investigations, increased compliance costs, damage awards, civil or criminal fines or penalties or restrictions on its operations; harm our reputation or give rise to material liabilities or a revocation of our Joint Venture’s licenses and other permits. There can be no assurance that any future regulatory or agency proceedings, investigations or audits will not result in substantial costs, a diversion of management’s attention and resources or other adverse consequences to us and our business, and may have material adverse effect on our results of operations and financial condition.

In addition, changes in regulations, government or judicial interpretation of regulations, or more vigorous enforcement thereof or other unanticipated events could require extensive changes to our Joint Venture’s operations, increase compliance costs or give rise to material liabilities or a revocation of its licenses and other permits, which could have a material adverse effect on our business, results of operations and financial condition. Furthermore, governmental authorities may change their administration, application or enforcement procedures at any time, which may adversely impact our ongoing costs relating to regulatory compliance.

On April 13, 2017, the Government of Canada released Bill C-45, which proposed the enactment of the Cannabis Act to regulate the production, distribution and sale of cannabis for recreational adult use. On November 27, 2017, the House of Commons passed Bill C-45. On June 19, 2018, the Senate approved Bill C-45 and the Act received Royal Assent on June 21, 2018. The Cannabis Act came into force on October 17, 2018. On December 22, 2018, the Canadian federal government published draft regulations for edible cannabis, cannabis extracts, and cannabis topicals. On October 17, 2019, the Cannabis Act and Regulations were amended to permit the production and sale of these new classes of cannabis.

In addition, the governments of every Canadian province and territory have, to varying degrees, established regulatory regimes for the distribution and sale of cannabis for adult use purposes within those jurisdictions. There is no guarantee that legislation respecting adult-use retail will remain unchanged or create the growth opportunities that we currently anticipate. As the laws continue to evolve, and the distribution models mature, there is no assurance that provincial and territorial legislation enacted for the purpose of regulating recreational cannabis will continue to allow, or be conducive to, our business model. Differences in provincial and territorial regulatory frameworks could result in, among other things, increased compliance costs, and increased supply costs. Any of the foregoing could result in a material adverse effect on our business, financial condition and results of operations.

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Additionally, although we do not have any federally prohibited cannabis-related operations in the United States as certain members of our management team are located in the United States, we may be subject to risks with respect to changes in cannabis regulation and enforcement in the United States. Any changes in the United States regulatory regime, or the scope and extent of the enforcement thereof, could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

Our Joint Venture is subject to marketing restrictions under the Cannabis Act.

The development of our Joint Venture’s business and operating results may be hindered by applicable restrictions on production, sales and marketing activities imposed on our Joint Venture and other entities licensed under the Cannabis Act by Health Canada. All products distributed by our Joint Venture into the Canadian adult use market need to comply with requirements under Canadian legislation, including with respect to product formats, product packaging and labelling, and marketing activities around such products. Among other restrictions, the Cannabis Act prohibits testimonials and endorsements, lifestyle branding, and promotion that is appealing to young persons. As such, our Joint Venture’s portfolio of brands and products must be specifically adapted, and our marketing activities carefully structured, to enable our Joint Venture to develop its brands in an effective and compliant manner. If our Joint Venture is unable to effectively market cannabis products and compete for market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through increased selling prices for cannabis products, then our sales and operating results could be adversely affected.

Our Joint Venture is subject to Canadian supplier standards.

Government-run provincial and territorial distributors in Canada require suppliers to meet certain service and business standards, and routinely assess for compliance with such standards. Any failure by our Joint Venture to comply with such standards could result in it being downgraded, disqualified as a supplier, and could lead to the termination or cessation of orders under existing or future supply contracts. Further, provincial purchasers may terminate or cease ordering under existing contracts at their will. Any of these could severely impede or eliminate our Joint Venture’s ability to access certain markets within Canada, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

The cannabis industry is relatively new, and we cannot predict whether it will continue to grow as anticipated.

As a federal License Holder under the Cannabis Act, our Joint Venture is operating in a relatively new industry and market. In addition to being subject to general business risks, we must continue to build brand awareness in this industry and market share through significant investments in our strategy, production capacity, quality assurance and compliance with regulations. Research in Canada, the United States and internationally regarding the medical benefits, viability, safety, efficacy and dosing of cannabis or isolated cannabinoids, such as CBD and THC, remains in relatively early stages. Few clinical trials on the benefits of cannabis or isolated cannabinoids have been conducted. Future research and clinical trials may draw opposing conclusions to statements contained in the articles, reports and studies currently favored, or could reach different or negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing or other facts and perceptions related to medical cannabis, which could adversely affect social acceptance of cannabis and the demand for our Joint Venture’s cannabis products and VF Hemp’s CBD products.

Accordingly, there is no assurance that the cannabis industry and market will continue to exist and grow as currently estimated or anticipated or function and evolve in the manner consistent with management’s expectations and assumptions. Any event or circumstance that adversely affects the cannabis industry, such as the imposition of further restrictions on sales and marketing or further restrictions on sales in certain areas and markets could have a material adverse effect on our business, financial condition and results of operations.

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Our Joint Venture’s success in the cannabis industry depends on its ability to attract and retain customers.

Our Joint Venture’s success depends on its ability to attract and retain customers. There are many factors which could impact its ability to attract and retain customers, including but not limited to its ability to continually produce desirable and effective products, the successful implementation of its customer acquisition plan and the continued growth in the aggregate number of potential customers. Even if our Joint Venture’s products achieve initial retail success, our Joint Venture’s long-term success is significantly dependent upon its ability to develop new and improved product lines. In addition, we can provide no assurance that campaigns to promote our Joint Venture’s products will be successful in attracting customers, and any such campaigns are heavily regulated and can entail significant expense. Our Joint Venture’s failure to acquire and retain customers could have a material adverse effect on our business, operating results and financial condition.

Our Joint Venture may be affected by cannabis supply and demand fluctuations.

Entities licensed under the Cannabis Act have most recently been, and may continue to produce more cannabis than the current adult use demand. In order to meet the initial adult use demand, our Joint Venture and other entities licensed under the Cannabis Act built special purpose cultivation facilities with additional production capacity to be licensed. Recently, due to the over supply, some Licensed Producers are reducing capacity by shuttering cultivation facilities. Adult use demand for cannabis products is dependent on a number of social, political and economic factors that are beyond our control including the pace of new retail cannabis stores, which could be slowed by the impact of COVID-19. In addition, the initial demand that has been experienced following legalization in Canada may not continue at comparable levels or may not be sustainable as a portion of such demand may have been a result of the novelty of legalization.

Currently, our Joint Venture and other entities licensed under the Cannabis Act are producing more cannabis than is needed to satisfy the collective demand of the Canadian adult use markets. As a result, the available supply of cannabis exceeds demand, resulting in a significant decline in the market price for cannabis. If this continues, there is no assurance that our Joint Venture would be able to generate sufficient revenue from the sale of adult use cannabis to be profitable.

Ultimately, Canadian adult use market demand may not be sufficient to support our current or future products or business.

Customer Credit Risk

In light of the recent volatility in the cannabis sector generally, certain of the Joint Venture’s wholesale customers may encounter financial difficulties that could result in the Joint Venture being unable to collect some or all of its accounts receivable from those customers. Accordingly, the Joint Venture is subject to credit risk in relation to its accounts receivable with its spot market and other wholesale customers. Disputes between the Joint Venture and its wholesale customers may arise in the future relating to the non-payment of accounts receivable and may escalate to litigation or other dispute resolution processes, which could be protracted, time consuming and expensive, and there can be no assurance that the Joint Venture will be successful in any such disputes. The foregoing could have a material adverse impact on the business, financial condition, results of operations and prospects of the Joint Venture, which could in turn have a material adverse effect on the Company’s business, financial condition, results of operations and prospects.

We may be negatively affected by unfavorable publicity, adverse scientific findings and/or negative consumer perception of cannabis.

We believe that the cannabis and CBD industries are highly dependent upon positive consumer and investor perception regarding the benefits, safety, efficacy and quality of the cannabis or CBD product distributed to consumers. Such categories of products having previously been commonly associated with various other narcotics, violence and criminal activities, there is a risk that our business might attract negative publicity. Perception of the cannabis or CBD industry and cannabis or CBD products, currently and in the future, may be significantly influenced by scientific research or findings, regulatory investigations or proceedings, regulatory enforcement activities, litigation, political statements, media attention and other publicity (whether or not accurate or with merit) both in Canada and in other countries relating to the consumption of cannabis or CBD products, including unexpected safety or efficacy concerns arising with respect to cannabis or CBD products or the activities of industry participants.

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There can be no assurance that future scientific research, findings, regulatory investigations or proceedings, regulatory enforcement activities, litigation, political statements, media attention or other research findings or publicity will be favorable to the cannabis or CBD markets or any particular cannabis or CBD product or will be consistent with earlier publicity. Adverse future scientific research reports, findings, regulatory investigations or proceedings, and political statements, that are, or litigation, media attention or other publicity that is, perceived as less favorable than, or that questions, earlier research reports, findings or publicity (whether or not accurate or with merit) could result in a significant reduction in the demand for our Joint Venture’s cannabis or CBD products. There is little long-term data with respect to unknown side effects and/or interaction with individual human biochemistry of various cannabis products. As a result, our Joint Venture’s cannabis products could have certain side effects if not taken as directed or if taken by an end user that has certain known or unknown medical conditions.

Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of cannabis and CBD, our Joint Venture’s current or future products, the use of cannabis or CBD for medical purposes or associating the consumption of cannabis or CBD with illness or other negative effects or events, could adversely affect us. This adverse publicity could arise even if the adverse effects associated with cannabis or CBD products resulted from consumers’ failure to use such products legally, appropriately or as directed.

There is also a risk that the actions of other entities licensed under the Cannabis Act or of companies and service providers in the cannabis or CBD industries may negatively affect the reputation of the industry as a whole and thereby negatively impact our reputation. The increased usage of social media and other web-based tools used to generate, publish and discuss user-generated content and to connect with other users has made it increasingly easier for individuals and groups to communicate and share negative opinions and views regarding our activities and the cannabis and CBD industries in general, whether true or not.

Although we believe that we operate in a manner that is respectful to all stakeholders and that we take care in protecting our image and reputation, we do not ultimately have direct control over how we or the cannabis or CBD industry is perceived by others. Reputational issues may result in decreased investor confidence, increased challenges in developing and maintaining community relations and present an impediment to our overall ability to advance our projects, thereby having a material adverse impact on our financial performance, financial condition, cash flows and growth prospects.

Third parties with whom we contract may be concerned about their reputational risks in respect of cannabis.

The parties with whom we do business, or would like to do business with, may perceive that they are exposed to reputational risk as a result of our business activities relating to cannabis, which could hinder our ability to establish or maintain business relationships. These perceptions relating to the cannabis industry may interfere with our relationship with service providers in Canada and other countries, particularly in the financial services and insurance industries.

We face significant competition in the cannabis industry.

Our Joint Venture faces significant competition from individuals and business entities who are licensed under the Cannabis Act to participate in the adult-use cannabis industry. The Cannabis Act has established a licensing regime for the production, testing, packaging, labeling, delivery, transportation, distribution, sale, possession and disposal of cannabis for adult use. While, pursuant to transitional provisions in the Cannabis Regulations, existing holders of licenses relating to medical cannabis under the former ACMPR have, subject to satisfying certain requirements, automatically been deemed licensed under the Cannabis Act for corresponding activities, other individuals and corporations are now able to apply for such licenses.

Subject to certain restrictions, the Cannabis Act allows adults to cultivate, propagate, harvest and distribute up to four cannabis plants per household, provided that each plant meets certain requirements. Although there are barriers to personal cultivation, including the start-up costs of obtaining equipment and materials to produce cannabis, depending on the number of consumers who choose to pursue personal cultivation, there could be significant competition from individual growers for our Joint Venture’s cannabis products. If our Joint Venture is unable to effectively compete with other suppliers to the adult use cannabis market, or a significant number of individuals take advantage of the ability to cultivate and use their own cannabis, our anticipated addressable market may be reduced, and could adversely affect our ability to meet our business and financial targets, and our results of operations may be adversely affected.

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Our Joint Venture also faces competition from existing entities licensed under the Cannabis Act. Certain of these competitors have significantly greater financial, production, marketing, research and development and technical and human resources than we do. As a result, our Joint Venture’s competitors may be more successful in gaining market penetration and market share. Our Joint Venture’s commercial opportunity in the adult use market could be reduced or eliminated if our competitors produce and commercialize products for the adult use market that, among other things, are safer, more effective, more convenient or less expensive than the products that we may produce, have greater sales, marketing and distribution support than our Joint Venture’s products, enjoy enhanced timing of market introduction and perceived effectiveness advantages over our Joint Venture’s products and receive more favorable publicity than our Joint Venture’s products. If our Joint Venture’s adult use products do not achieve an adequate level of acceptance by the adult use market, it may not generate sufficient revenue from these products, and its adult use business may not sustain our profitability.

If the number of users of cannabis in Canada increases, the demand for products will increase and we expect that competition will become more intense, as current and future competitors begin to offer an increasing number of diversified products. To remain competitive, our Joint Venture will require a continued level of investment in research and development, marketing, sales and client support. Our Joint Venture may not have sufficient resources to maintain research and development, marketing, sales and client support efforts on a competitive basis which could materially and adversely affect our business, financial condition and results of operations.

Our Joint Venture also faces competition from illegal cannabis operations that are continuing to sell cannabis to individuals, despite not having a valid license under the Cannabis Regulations. We do not expect the Canadian government to actively enforce current laws against the illegal cannabis operations but rather over the course of time the Canadian government expects legal operators for force the closure of the illegal cannabis operations due to economics.

Increasing legalization of cannabis and rapid growth and consolidation in the cannabis industry may further intensify competition.

The cannabis industry is undergoing rapid growth and substantial change, and the legal landscape for medical and recreational cannabis is rapidly changing internationally. An increasing number of jurisdictions globally are passing legislation allowing for the production and distribution of medical and/or recreational cannabis in some form or another. Entry into the cannabis market by international competitors might lower the demand for our Joint Venture’s products on a global scale.

The foregoing legalization and growth trends in the cannabis industry has resulted in an increase in competitors, consolidation and formation of strategic relationships. Such acquisitions or other consolidating transactions could harm us in a number of ways, including by losing strategic partners if they are acquired by or enter into relationships with a competitor, losing customers, revenue and market share, or forcing us to expend greater resources to meet new or additional competitive threats, all of which could harm our operating results. As competitors enter the market and become increasingly sophisticated, competition in the cannabis industry may intensify and place downward pressure on retail prices for products and services, which could negatively impact profitability.

We expect to incur ongoing costs and obligations related to infrastructure, growth, regulatory compliance and operations for our Joint Venture.

Our Joint Venture expects to incur significant ongoing costs and obligations related to its investment in infrastructure and growth and for regulatory compliance, which could have a material adverse impact on our results of operations, financial condition and cash flows. In addition, future changes in regulations, more vigorous enforcement thereof or other unanticipated events could require extensive changes our operations, increased compliance costs or give rise to material liabilities, which could have a material adverse effect on our business, results of operations and financial condition. Our efforts to grow our business may be costlier than expected, and we may not be able to increase our revenue enough to offset our higher operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described in these “Risk Factors”, and unforeseen expenses, difficulties, complications and delays, and other unknown events.

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The ability of our Joint Venture to sell cannabis may be restricted by the Canadian Free Trade Agreement.

Article 1206 of the Canadian Free Trade Agreement specifically excludes the application of the agreement to cannabis for non-medical purposes. Article 1206 states that the provinces and territories of Canada shall commence negotiations regarding the application of the Canada Free Trade Agreement to cannabis for non-medical purposes following Royal Assent of federal legislation legalizing cannabis for non-medical purposes. There is a risk that the outcome of the negotiations will result in the interprovincial and interterritorial trade of cannabis for non-medical purposes in Canada being entirely restricted or subject to conditions that will negatively impact our Joint Venture’s ability to sell cannabis in other Canadian provinces and territories.

We may be liable for the illegal activities of our Joint Venture employees, contractors or consultants.

Our Joint Venture is exposed to the risk that its employees, independent contractors, consultants, service providers and licensors may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or activities that violate: (i) government regulations, specifically Health Canada regulations; (ii) manufacturing standards; (iii) the Cannabis Act and the Cannabis Regulations; (iv) provincial cannabis laws and regulations; (v) federal and provincial healthcare fraud and abuse laws and regulations; (vi) laws that require the true, complete and accurate reporting of financial information or data; or (v) the terms of our Joint Venture’s agreements with insurers. In particular, our Joint Venture could be exposed to class actions and other litigation, increased Health Canada inspections and related sanctions, lost sales and revenue or reputational damage as a result of prohibited activities that are undertaken in the growing or production process of our Joint Venture’s products without our knowledge or permission and contrary to the internal policies, procedures and operating requirements of our Joint Venture.

It is not always possible for our Joint Venture to identify and prevent misconduct by its employees and other third parties, and the precautions taken by our Joint Venture to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting our Joint Venture from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against our Joint Venture, and we are not successful in defending or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our Joint Venture’s operations, any of which could have a material adverse effect on our business, financial condition and results of operations.

Our Joint Venture is subject to cannabis-related security breaches, which could result in significant losses.

Given the nature of our Joint Venture’s product and the limited legal channels for distribution, as well as the concentration of inventory in our facilities, despite meeting or exceeding Health Canada’s security requirements, there remains a risk of shrinkage as well as theft and other security breaches. A security breach at one of our facilities could result in a significant loss of available product and could expose us to additional liability under applicable regulations and to potentially costly litigation, increase expenses relating to the resolution and future prevention of these breaches and may deter potential patients from choosing our Joint Venture’s products, any of which could have an adverse effect on our business, financial condition, results of operations and prospects.

Risks Relating to Our U.S. Hemp Operations

Our VF Hemp operations are dependent on U.S. state legalization.

Our VF Hemp business involves the growing of hemp in the United States. Although the 2018 Farm Bill removed hemp (as defined in the bill) from the schedule of U.S. federally controlled substances, each U.S. state and Indian tribe may choose whether to regulate hemp production within its jurisdiction and whether to remove hemp from its definition of controlled substances. For us to commence hemp operations in our Texas greenhouse facilities, the Texas Department of Agriculture must grant us a license to grow hemp at our Texas locations. Our Village Field Hemp operations were licensed under the Farm Bill of 2014 legislation during 2019. Our ability to operate our field hemp operations in future periods may be subject to licensure and other requirements in each such jurisdiction.

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Our VF Hemp business is subject to FDA and USDA regulation.

CBD derived from hemp as defined in the 2018 Farm Bill is subject to various laws relating to health and safety. Specifically, CBD is governed by the U.S. Food Drug and Cosmetic Act (“FD&C Act”) as a drug. The FD&C Act is intended to assure the consumer that drugs and devices are safe and effective for their intended uses and that all labeling and packaging is truthful, informative and not deceptive. The FD&C Act and FDA regulations define the term drug by reference to its intended use, as “articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease” and “articles (other than food) intended to affect the structure or any function of the body of man or other animals.” Therefore, almost any ingested or topical or injectable product that, through its label or labeling (including internet website, promotional pamphlets, and other marketing material), is claimed to be beneficial for such uses will be regulated by the FDA as a drug. The definition also includes components of drugs, such as active pharmaceutical ingredients. The FD&C Act defines cosmetics by their intended use, as “articles intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the human body…for cleansing, beautifying, promoting attractiveness, or altering the appearance.” See FD&C Act, sec. 201(i). Among the products included in this definition are skin moisturizers, perfumes, lipsticks, fingernail polishes, eye and facial makeup preparations, cleansing shampoos, permanent waves, hair colors and deodorants, as well as any substance intended for use as a component of a cosmetic product. Under the FD&C Act, cosmetic products and ingredients with the exception of color additives do not require FDA approval before they go on the market. Drugs, however, must generally either receive premarket approval by the FDA through the New Drug Application (“NDA”) process or conform to a “monograph” for a particular drug category, as established by the FDA’s Over-the-Counter (“OTC”) Drug Review.

CBD is an active ingredient in drug products that have been approved or authorized for investigation by the FDA and therefore, under FDA’s current position, cannot be used in dietary supplements or as a food additive.

Laws and regulations governing the use of hemp in the U.S. are broad in scope; subject to evolving interpretations, and subject to enforcement by several regulatory agencies and law enforcement entities. Under the 2018 Farm Bill, a state that desires to have primary regulatory authority over the production of hemp in the state must submit a plan to monitor and regulate hemp production to the Secretary of the USDA. The Secretary must then approve the state plan after determining if the plan complies with the requirements set forth in the 2018 Farm Bill. The Secretary may also audit the state’s compliance with the federally-approved plan. If the Secretary does not approve the state’s plan, then the production of hemp in that state will be subject to a plan established by the USDA. The USDA has not yet established such a plan. It is anticipated that many states will seek to have primary regulatory authority over the production of hemp. States that seek such authority may create new laws and regulations that permit the use of hemp in food and beverages.

Federal and state laws and regulations on hemp may address production, monitoring, manufacturing, distribution, and laboratory testing to ensure that the hemp has a THC concentration of not more than 0.3%. Federal laws and regulations may also address the transportation or shipment of hemp or hemp products, as the 2018 Farm Bill prohibits states from prohibiting the transportation or shipment of hemp or hemp products produced in accordance with that law through the state, as applicable. Violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our results of operations, as well as adverse publicity and potential harm to our reputation.

Additional Risks Related to Our Business

Our revenues may be impacted by fluctuating market prices for our products.

Our revenues will in large part be derived from the production, sale and distribution of agriculturally based consumer goods – specifically tomatoes, peppers, cucumbers, cannabis and hemp. The price of production, sale and distribution of these goods will fluctuate widely primarily due to, the natural economic balance of demand versus supply, as well as the impact of numerous factors beyond our control including international, economic and political trends, expectations of inflation, global or regional consumptive patterns, speculative activities and increased production due to new production and distribution developments and improved production and distribution methods. The effects of these factors on the price of our goods and, therefore, the economic viability of our business, cannot accurately be predicted. This may have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

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The greenhouse vegetable and cannabis industries are highly competitive and sensitive to changes in demand and supply. The price of greenhouse produce is affected by many factors including control of the distribution channel by large big box retailers, quality and general economic conditions, all of which could have a material adverse effect on our results of operations and financial condition. Demand for our products is subject to fluctuations resulting from adverse changes in general economic conditions, evolving consumer preferences, nutritional and health-related concerns and public reaction to food spoilage or food contamination issues. General supply of all our goods is subject to fluctuations relating to weather, insects, plant disease and changes in greenhouse acreage. There can be no assurance that consumption will increase or that present consumption levels will be maintained. If consumer demands for greenhouse goods decreases, our financial condition and results of operations may be materially adversely affected.

We face risks inherent in an agricultural business.

Our revenues are derived from the growing of agricultural products, including cannabis and greenhouse produce. In addition, our VF Hemp business and the potential conversion of some of our Texas facilities involve the growing of hemp, an agricultural product. As such, we are subject to the risks inherent in an agricultural business, such as weather, insects, plant and seed diseases, shortage of qualified labor and similar agricultural risks, which may include crop losses, for which we are not insured. There can be no assurance that natural elements or labor issues will not have a material adverse effect on any such future production. Although our vegetable produce and our Joint Venture’s cannabis products are grown in climate-controlled greenhouses, and we carefully monitor the growing conditions within our greenhouses and retain experienced production personnel, there can be no assurance that natural elements will not have a material adverse effect on the production of these products. Any such agricultural risks could have a material adverse effect on our business, prospects, financial condition, results of operations and our cash flows.

In particular, cannabis plants can be vulnerable to various pathogens including bacteria, fungi, viruses and other miscellaneous pathogens. Such instances often lead to reduced crop quality, stunted growth and/or death of the plant. Moreover, cannabis is phytoremediative meaning that it may extract toxins or other undesirable chemicals or compounds from the ground in which it is planted. Various regulatory agencies have established maximum limits for pathogens, toxins, chemicals and other compounds that may be present in agricultural materials. If our Joint Venture’s cannabis is found to have levels of pathogens, toxins, chemicals or other undesirable compounds that exceed established limits, our Joint Venture’s product may not be suitable for commercialization and our Joint Venture may have to destroy the applicable portions of our crops. Crops loss due to pathogens, toxins, chemicals or other undesirable compounds may have a material adverse effect on our business and financial condition.

Our Joint Venture’s operations currently rely on a single facility.

To date, our Joint Venture’s activities and resources have been primarily focused on the Delta 3 Greenhouse. Our Joint Venture expects to continue the focus on this facility for the foreseeable future. Adverse changes or developments affecting the existing facility could have a material adverse effect on our Joint Venture’s ability to continue producing cannabis and our business, prospects, financial condition, results of operations and cash flows.

Our operations are subject to natural catastrophes.

Our operations may be adversely affected by severe weather including wind, snow, hail and rain, which may result in our operations having reduced harvest yields due to lower light levels, or a more catastrophic event as occurred at our Marfa, Texas facilities on May 31, 2012, when we lost three of our operating greenhouses to a short but powerful hail storm. Although we anticipate and factor in certain periods of lower than optimal light levels, extended periods of severe or unusual light levels may adversely impact our financial results due to higher costs and missed sales opportunities arising from reduced production yields.

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Our business operations, some of which are located on the British Columbia coast, are located in an area that is geologically active and considered to be at risk from earthquakes. Our earthquake deductible is 10% of our loss caused by the earthquake, subject to a maximum deductible of C$5,000,000. In addition, climate change over time is predicted to lead to changes in the frequency of storm events as well as their severity. We are unable to predict the impact of climate change on our business. Our Texas facilities, due to our claim in respect of the May 31, 2012 hailstorm, are also subject to high deductibles as well as a total claim limit that if all four facilities were simultaneously impacted by the same storm or catastrophic event may result is less than adequate coverage.

While we maintain insurance coverage, we cannot predict that all potential insurable risks have been foreseen or that adequate coverage is maintained against known risks.

Our operations require certain key inputs, including raw materials and energy, and we are subject to their costs and potential supply disruptions.

Our business is dependent on a number of key inputs and their related costs including raw materials, packaging materials and supplies related to our growing operations, as well as electricity, water and other local utilities. Any significant interruption or negative change in the availability or economics of the supply chain for key inputs could materially impact our business, financial condition and operating results. Any inability to secure required supplies and services or to do so on appropriate terms could have a materially adverse impact on our business, financial condition and operating results. Our greenhouse operations consume considerable energy for heat and carbon dioxide production, and are vulnerable to rising energy costs. Energy costs have shown volatility, which has and may continue to adversely impact our cost structure. Should the cost of energy rise, and should we face difficulties in sustaining price increases to offset the impact of increasing fuel costs, gross profit margins could be adversely impacted. In addition, our Joint Venture’s cannabis cultivation operations consume considerable energy, making it vulnerable to rising energy costs and power outages. Rising or volatile energy costs may adversely impact our business, and our Joint Venture’s operations could be significantly affected by a prolonged power outage.

Our ability to compete and grow will be dependent on having access, at a reasonable cost and in a timely manner, to skilled labor, equipment, parts and components. No assurances can be given that we will be successful in maintaining the required supply of skilled labor, equipment, parts and components. It is also possible that the expansion plans contemplated by our Joint Venture may cost more than anticipated, in which circumstance our Joint Venture may curtail, or extend timeframes for completing the expansion plans. This could have a material adverse effect on our financial results and operations.

We face risks associated with cross-border trade.

Our Canadian and U.S. product is actively sold cross-border. Markets in the United States and other countries may be affected from time to time by trade rulings and the imposition of customs, duties and other tariffs. There can be no assurance that our financial condition and results of operations will not be materially adversely affected by trade rulings and the imposition of customs duties or other tariffs in the future. Furthermore, there is no assurance that further trade actions will not be initiated by U.S. producers of greenhouse or field grown vegetables. Any prolonged disruption in the flow of our product across the U.S.-Canada border could have an adverse effect on our financial condition and results of operations.

Our greenhouse produce business is subject to certain regulations.

Our greenhouse produce business is subject to extensive laws and regulations with respect to the production, handling, distribution, packaging and labelling of our products. Such laws, rules, regulations and policies are administered by various federal, state, provincial, regional and local health agencies and other governmental authorities. Changes to any of these laws and regulations could have a significant impact on us. There can be no assurance that we will be able to cost effectively comply with future laws and regulations. Our failure to comply with applicable laws and regulations may subject us to civil or regulatory proceedings, including fines, injunctions, recalls or seizures, which may have a material adverse effect on our financial condition and results of operations.

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In addition, we voluntarily submit to guidelines set by certain private industry associations. Failure to comply with such guidelines or to adopt more stringent guidelines set by such associations in the future may result in lower sales in certain retail markets and may adversely affect our financial condition and results of operations. Among the regulations to which we are subject are those administered by the BCVMC. The BCVMC grants each licensed producer that it regulates an annual quota to produce specified products in a given year. The BCVMC also has the authority to set the prices at which a regulated product may be bought or sold in British Columbia. There can be no assurance that the BCVMC will not alter its quota allocation policy or that the BCVMC will not introduce pricing restrictions in a manner that could adversely affect our financial condition and results of operations. There can be no assurance that a modification of the current regulatory schemes will not have an adverse effect on our financial condition, or results of operations.

Our competitive position may be affected by technological advances.

Rapidly changing markets, technology, emerging industry standards and frequent introduction of new products characterize our business, particularly in the cannabis and CBD markets. The introduction of new products embodying new technologies, including new manufacturing processes, and the emergence of new industry standards may render our cannabis and CBD products obsolete, less competitive or less marketable. The process of developing our cannabis and CBD products is complex and requires significant continuing costs, development efforts and third-party commitments. If we fail to develop new technologies and products and address the obsolescence of existing technologies, our business, prospects, financial condition, results of operations and cash flows may be adversely affected. In addition, it is possible that more economical or efficient greenhouse production technology than what we currently use will be developed, thereby potentially adversely affecting our competitive position.

We may be unable to anticipate changes in our customer requirements for our cannabis and CBD that could make our existing technology obsolete. Our success will depend, in part, on our ability to continue to enhance our existing technologies, develop new technology that addresses the increasing sophistication and varied needs of the market, and respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis. Although we are committed to researching and developing new markets and products and improving existing products, there can be no assurances that such research and market development activities will prove profitable or that the resulting markets and/or products, if any, will be commercially viable or successfully produced and marketed. The development of our proprietary technology entails significant technical and business risks, and may require significant continuing costs, development efforts and third-party commitments. We may not be successful in using new technologies or exploiting niche markets effectively or adapting our cannabis and CBD businesses to evolving customer or medical requirements or preferences or emerging industry standards. This may have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

Retail consolidation in the markets in which we participate may negatively affect our operations and profitability.

Our top ten produce customers accounted for approximately 66% of total produce revenue for the year ended December 31, 2019 and represented similar percentages in 2018 and 2017. As a result of continuing retail consolidation, our U.S. retail customers grow larger and become more sophisticated enabling them to demand lower pricing, special packaging or varieties as well as increased promotional programs. If we are unable to use our scale, marketing expertise and market leadership position to respond to these trends, such retail consolidation may have a material adverse effect on our financial condition and results of operations.

We may be negatively affected by the use of third-party transportation services for our products.

Canadian adult use distribution rules take various forms on a province-by-province basis and often require our cannabis business to employ third parties to deliver to central government sites. Any prolonged disruption of third-party transportation services could have a material adverse effect on our Joint Venture’s sales volumes or end- users’ satisfaction with our Joint Venture’s products. Rising costs associated with third-party transportation services used by our Joint Venture to ship our products may also adversely impact our profitability, and more generally our business, financial condition, results of operations and prospects.

In addition, the use of third-party transportation services can cause logistical problems with and delays in customers obtaining their orders and cannot be directly controlled by us. Any delay by third party transportation services may adversely affect our financial performance.

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Moreover, security of the product during transportation to and from our Joint Venture’s facilities is critical due to the nature of the product. A breach of security during transport could impact our future ability to continue operating under our Licenses or the prospect of renewing our Licenses and could have a material adverse effect on our business and results of operations.

Due to the perishable and premium nature of our produce products, we depend on fast and efficient road transportation to distribute our products. Any prolonged disruption of this transportation network could have an adverse effect on our financial condition and results of operations.

We rely on third-party distributors.

We may rely on third-party distributors for the distribution of our products. In particular, our Joint Venture relies on Canadian provincial regulatory boards and private retailers and may in the future rely on other third parties, to distribute cannabis products. If these distributors do not successfully carry out their contractual duties, if there is a delay or interruption in the distribution of our products or if these third parties damage our products, it could negatively impact our revenue from product sales. Any damage to our products, such as product spoilage, could expose us to potential product liability, damage our reputation and otherwise harm our business.

Our business and operating results rely on effective quality control.

The quality and safety of our products are critical to the success of our business and operations. As such, it is imperative that our (and our service providers’) quality control systems operate effectively and successfully. Quality control systems can be negatively impacted by the design of the quality control systems, the quality training program, and adherence by employees to quality control guidelines. Although we strive to ensure that all of our service providers have implemented and adhered to high caliber quality control systems, any significant failure or deterioration of such quality control systems could have a material adverse effect on our business and operating results.

Our operations depend on our key executives.

We depend heavily on each member of our management team and the departure of a member of management could cause our operating results to suffer. We maintain “key man” insurance policies on one member of our management team. Our future success will depend on, among other things, our ability to keep the services of these key executives and to hire other highly qualified employees at all levels. We compete with other potential employers for employees, and we may not be successful in hiring and retaining the services of executives and other employees that we require. The loss of the services of, or our inability to hire, executives or key employees could hinder our business operations and growth.

In addition, our Joint Venture is dependent on its ability to retain employees and attract and retain sufficient additional employees or engineering and technical support resources. Shortages in qualified personnel or the loss of key personnel could adversely affect the financial condition of our Joint Venture, results of operations of the business and could limit our Joint Venture’s ability to develop and market our cannabis-related products. The loss of any of our Joint Venture’s senior management or key employees could materially adversely affect our Joint Venture’s ability to execute our business plan and strategy, and our Joint Venture may not be able to find adequate replacements on a timely basis, or at all.

Further, each director and officer of a company that holds a license for cultivation, processing or sale under the Cannabis Regulations is subject to the requirement to obtain and maintain a security clearance under the Cannabis Regulations. Certain additional key personnel are also required to obtain and maintain a security clearance. Under the Cannabis Regulations, a security clearance cannot be valid for more than five years and must be renewed before the expiry of a current security clearance. There is no assurance that any of the existing personnel who presently or may in the future require a security clearance will be able to obtain or renew such clearances or that new personnel who require a security clearance will be able to obtain one. A failure by an individual in a key operational position to maintain or renew his or her security clearance could result in a reduction or complete suspension of our Joint Venture’s operations.

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If an individual in a key operational position leaves our Joint Venture, and it is unable to find a suitable replacement who is able to obtain a security clearance required by the Cannabis Act in a timely manner, or at all, our Joint Venture may not be able to conduct its operations at planned production volume levels or at all. The Cannabis Regulations require our Joint Venture to designate a senior person in charge (“SPIC”) and a qualified person in charge (“QPIC”). The SPIC has overall responsibility for the management of the cannabis activities authorized under the license. The QPIC must work at the licensed site and is responsible for supervising the authorized cannabis activities and ensuring regulation compliance, and must meet certain educational requirements. If our Joint Venture’s current designated SPIC and QPIC fail to maintain their security clearance, or if its current designated SPIC and QPIC leave and it is unable to find a suitable replacement who meets these requirements, our Joint Venture may no longer be able to conduct activities with respect to cannabis.

We may suffer from uninsured and underinsured losses.

We maintain insurance coverage in respect of our potential liabilities and the accidental loss of value of our assets from risks, in those amounts, with those insurers, and on those terms as we consider appropriate to purchase and which is readily available, taking into account all relevant factors including the practices of owners of similar assets and operations, as well as costs. However, not all risks are covered by insurance or the insurance may have high deductibles, and no assurance can be given that insurance will be consistently available or will be consistently available on an economically feasible basis, or that the amounts of insurance will at all times be sufficient to cover each and every loss or claim that may occur involving the assets or our operations and loss payments may not be as timely and responsive as our working capital needs require. In particular, because our Joint Venture is engaged in and operates within the cannabis industry, there are exclusions and additional difficulties and complexities associated with such insurance coverage that could cause our Joint Venture to suffer uninsured losses, which could adversely affect our business, results of operations, and profitability. Further, our insurance coverage is subject to coverage limits and exclusions and may not be available for the risks and hazards to which our Joint Venture is exposed. There is no assurance that our Joint Venture will be able to fully utilize such insurance coverage, if necessary, or that such insurance will be generally available in the future or, if available, that premiums will be commercially justifiable. If our Joint Venture were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, our Joint Venture may be exposed to material uninsured liabilities that could impede liquidity, profitability or solvency.

In addition, damage caused by an accidental or natural disaster to any or all of our key production facilities may result in significant replacement costs and loss of business that may not be fully recoverable or is subject to a high deductible (such as an earthquake in British Columbia) under any insurance policy. Furthermore, we do not carry crop loss or cyber security insurance, and accordingly, we would have to bear the cost of any significant losses related to crop losses or cyber attacks in the future.

We may be subject to product liability claims.

As our Joint Venture’s cannabis products are designed to be ingested by humans, we face a risk of exposure to product liability claims, regulatory action and litigation if these products are alleged to have caused significant loss or injury. In addition, the sale of these products involves the risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Previously unknown adverse reactions resulting from human consumption of our cannabis products alone or in combination with other medications or substances could occur. As a result, we may be subject to various product liability claims, including, among others, that our products caused injury or illness or that we provided inadequate instructions for use or inadequate warnings concerning possible side effects or interactions with other substances. A product liability claim or regulatory action against us could result in increased costs, could adversely affect our reputation with our clients and consumers generally, and could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows. There can be no assurance that we will be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of our potential products.

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In addition, as a producer of food products, we are subject to potential product liabilities connected with our operations and the marketing and distribution of these products, including liabilities and expenses associated with contaminated or unsafe products. There can be no assurance that the insurance against all such potential liabilities we maintain will be adequate in all cases. In addition, even if a product liability claim was not successful or was not fully pursued, the negative publicity surrounding any such assertion could harm our reputation with our customers. The consequences of any of the foregoing events may have a material adverse effect on our financial condition and results of operations.

Our products may be subject to recalls.

Manufacturers of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labelling disclosure. If any of our products are recalled due to an alleged product defect or for any other reason, we could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall. We may lose a significant amount of sales and may not be able to replace those sales at an acceptable margin or at all. In addition, a product recall may require significant management attention. Although we have put in place detailed procedures for testing our products, there can be no assurance that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory action or lawsuits. A recall for any of the foregoing reasons could lead to decreased demand for products and could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows. Additionally, product recalls may lead to increased scrutiny of our operations by Health Canada and other regulatory agencies, requiring further management attention and potential legal fees and other expenses.

Any product recall affecting the cannabis industry more broadly, whether or not involving us, could also lead consumers to lose confidence in the safety and security of the products sold by entities licensed under the Cannabis Act generally, including the cannabis products sold by our Joint Venture.

We face risks related to cyber security attacks and other incidents.

Cyber security has become an increasingly problematic issue for issuers and businesses in Canada and around the world, including us. Cyber attacks against organizations of all sizes are increasing in sophistication and are often focused on financial fraud, compromising sensitive data for inappropriate use or disrupting business operations. A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. More specifically, a cyber incident is an intentional attack or an unintentional event that can include gaining unauthorized access to information systems to disrupt operations, corrupt data or steal confidential information. As our reliance on technology has increased, so have the risks posed to our systems. Our primary risk that could directly result from the occurrence of a cyber incident include operational interruption, damage to our reputation, damage to our business relationships, disclosure of confidential information regarding our employees and third parties with whom we interact, and may result in negative consequences, including remediation costs, loss of revenue, additional regulatory scrutiny and litigation. We have implemented processes, procedures and controls to help mitigate these risks, but these measures, as well as our increased awareness of a risk of a cyber-incident, do not guarantee that our financial results will not be negatively impacted by such an incident.

Our marketing programs use customer information and other personal and confidential information as well as digital communications, which may subject us to liability if we misuse this information.

Our current and future marketing programs may depend on our ability to collect, maintain and use data and sensitive person information on individuals, and our ability to do so is subject to evolving laws and enforcement trends in Canada and other jurisdictions. We strive to comply with all applicable laws and other legal obligations relating to privacy, data protection and consumer protection, including those relating to the use of medical information and data for marketing purposes. It is possible, however, that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another, conflict with other rules, conflict with our practices or fail to be observed by our employees or business partners. If so, we may suffer damage to our reputation and become subject to proceedings or actions against it by governmental entities or others. Any such proceeding or action could hurt our reputation, force us to spend significant amounts to defend our practices, distract our management or otherwise have an adverse effect on our business.

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Certain of our marketing practices may rely upon e-mail, social media and other means of digital communication to communicate with consumers on our behalf. We may face risk if our use of e-mail, social media or other means of digital communication is found to violate applicable laws. We intend to post our privacy policy and practices concerning the use and disclosure of user data on our website. Any failure by us to comply with our posted privacy policy, anti-spam legislation or other privacy-related laws and regulations could result in proceedings which could potentially harm our business. In addition, as data privacy and marketing laws change, we may incur additional costs to ensure we remain in compliance. If applicable data privacy and marketing laws become more restrictive at the international, federal, provincial or state levels, our compliance costs may increase, our ability to effectively engage customers via personalized marketing may decrease, our investment in its e-commerce platform may not be fully realized, our opportunities for growth may be curtailed by our compliance burden and our potential reputational harm or liability for security breaches may increase.

We are subject to environmental, health and safety other governmental regulations and we may incur material expenses in order to comply with these regulations.

Our operations are governed by a broad range of federal, state, provincial and local environmental, health and safety laws and regulations, permits, approvals, and common law and other requirements that impose obligations relating to, among other things: worker health and safety; the release of substances into the natural environment; the production, processing, preparation, handling, storage, transportation, disposal, and management of substances (including liquid and solid, non-hazardous and hazardous wastes and hazardous materials); and the prevention and remediation of environmental impacts such as the contamination of soil and water (including groundwater). Government approvals and permits are currently, and may in the future be, required in connection with our operations. To the extent such approvals are required and not obtained, our operations may be curtailed or enjoined, which may be for an extended period of time, which could result in a reduction in our proposed levels of production or require abandonment or delays in development of our production facilities and otherwise negatively affect our growth. Our failure to comply with applicable laws, rules, regulations and policies may subject us to civil or regulatory proceedings, including fines, injunctions, administrative orders or seizures, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions, any of which may have a material adverse effect on our financial condition and results of operations. Also, as a result of the above requirements, our operations and ownership, management and control of property carry an inherent risk of environmental liability (including potential civil actions, compliance or remediation orders, fines and other penalties), including with respect to the disposal of waste and the ownership, management, control or use of transport vehicles and real estate. Compliance with all such laws and future changes to them may impose material costs on us. We have incurred and expect to continue to incur significant capital and operating expenditures to comply with such laws. Future discovery of previously unknown environmental issues, including contamination of property underlying or in the vicinity of our present or former properties or manufacturing facilities, could require us to incur material unforeseen expenses. All of these risks and related potential expenses may have a material adverse effect on our financial condition and results of operations.

In addition, environmental laws, rules and regulations in Canada and the United States is evolving in a manner which may require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect our compliance costs, result in future liabilities or otherwise have an adverse effect on our results of operations or financial condition.

We may experience environmental, health and safety incidents.

Our greenhouse facilities could experience incidents, malfunctions or other unplanned events that could result in discharges in excess of permitted levels resulting in personal injury, fines, penalties or other sanctions and property damage. We must maintain a number of environmental and other permits from various governmental authorities in order to operate. Failure to maintain compliance with these requirements could result in operational interruptions, fines or penalties, or the need to install potentially costly pollution control technology. Compliance with current and future environmental laws and regulations, which are likely to become more stringent over time, including those governing greenhouse gas emissions, may impose additional capital costs and financial expenditures, which could adversely affect operational results and profitability.

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We may be unable to manage our growth successfully.

We may not be able to successfully manage our growth. Our growth strategy will place significant demands on our financial, operational and management resources. In order to continue our growth, we will need to add administrative, management and other personnel, and make additional investments in operations and systems. We may not be able to locate and train qualified personnel, or do so on a timely basis, or expand our operations and systems to the extent, and in the time, required.

In particular, we may not have the capacity to meet customer demand or to meet future demand when it arises in respect of our Joint Venture’s cannabis business and our VF Hemp business. In addition, delays in obtaining, or conditions imposed by, regulatory approvals and quality control and health concerns in respect of these businesses could have a negative effect on our growth strategy. If we cannot manage growth in these markets effectively, it may have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

In addition, we will need to effectively execute on business opportunities and continue to build on and deploy corporate development and marketing assets as well as access sufficient new capital, as may be required. The ability to successfully complete acquisitions and to capitalize on other growth opportunities may redirect our limited resources. This may require us to commit substantial financial, operational and technical resources in advance of an increase in the volume of business, with no assurance that the volume of business will increase. There can be no assurance we will be able to respond adequately or quickly enough to the changing demands that material expansion of our business will impose on management, team members and existing infrastructure, and changes to our operating structure may result in increased costs or inefficiencies that we cannot anticipate. Changes as we grow may have a negative impact on our operations, and cost increases resulting from our inability to effectively manage our growth could adversely impact our profitability. In addition, continued growth could also strain our ability to maintain reliable service levels for our clients, develop and approve our operational, financial and management controls, enhance our reporting systems and procedures and recruit, train and retain highly-skilled personnel.

Failure to effectively manage our growth could result in difficulty or delays in servicing clients, declines in quality or client satisfaction, increases in costs, difficulties in introducing new products or applications or other operational difficulties, and any of these difficulties could adversely impact our business performance and results of operations. There can be no assurance that we will effectively be able to manage our expanding operations, including any acquisitions, that our growth will result in profit, that we will be able to attract and retain sufficient management personnel necessary for growth or that we will be able to successfully make strategic investments or acquisitions.

In addition, acquisitions of additional businesses that we may pursue in the future may be financed wholly or partially with debt, which may temporarily increase our debt levels above industry standards. Any debt financing secured in the future could involve additional restrictive covenants relating to capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including other future potential acquisitions.

Our potential international expansion may heighten our operational risks.

Any expansion by us into jurisdictions outside of Canada and the United States is subject to additional risks, including political, economic, legal and other risks and uncertainties associated with operating in or exporting to these jurisdictions. These risks and uncertainties include, but are not limited to, changes in the laws, regulations and policies governing the production, sale and use of cannabis, cannabis-based products, hemp, CBD, political instability, currency controls, fluctuations in currency exchange rates and rates of inflation, labor unrest, changes in taxation laws, regulations and policies, restrictions on foreign exchange and repatriation and changing political conditions and governmental regulations relating to foreign investment and the cannabis, hemp and CBD businesses more generally.

Changes, if any, in the laws, regulations and policies relating to the advertising, production, sale and use of cannabis and cannabis-based products or in the general economic policies in these international jurisdictions, or shifts in political attitude related thereto, may adversely affect the operations or profitability related to international operations in these countries. Specifically, operations may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on advertising, production, price controls, export controls, controls on currency remittance, increased income taxes, restrictions on foreign investment, land and water use restrictions and

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government policies rewarding contracts to local competitors or requiring domestic producers or vendors to purchase supplies from a particular jurisdiction. Failure to comply strictly with applicable laws, regulations and local practices could result in additional taxes, costs, civil or criminal fines or penalties or other expenses being levied, as well as other potential adverse consequences such as the loss of necessary permits or governmental approvals.

We must rely on international advisors and consultants in the foreign countries in which we intend to operate.

The legal and regulatory requirements in the foreign countries (outside of Canada and the United States) in which we intend to operate with respect to the cultivation and sale of cannabis and hemp, banking systems and controls, as well as local business culture and practices are different from those in Canada and the United States. Our officers and directors must rely, to a great extent, on local legal counsel and consultants in order to keep abreast of material legal, regulatory and governmental developments as they pertain to and affect our business operations, and to assist with governmental relations. We must rely, to some extent, on those members of management and the board of directors who have previous experience working and conducting business in these countries, if any, in order to enhance our understanding of and appreciation for the local business culture and practices. We must also rely on the advice of local experts and professionals in connection with current and new regulations that develop in respect of the cultivation and sale of cannabis and hemp, as well as in respect of banking, financing, labor, litigation and tax matters in these jurisdictions. Any developments or changes in such legal, regulatory or governmental requirements or in local business practices are beyond our control. The impact of any such changes may adversely affect our business, financial condition, results of operations and prospects.

We face risks related to intellectual property

The ownership, licensing and protection of trademarks and other intellectual property rights are significant aspects of our future success. It is possible that we will not be able to register, maintain registration for or enforce all of our intellectual property, including trademarks, in all key jurisdictions. The intellectual property registration process can be expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable intellectual property applications at a reasonable cost or in a timely manner or may obtain intellectual property registrations which are invalid. It is also possible that we will fail to identify patentable aspects of inventions made in the course of their development and commercialization activities before it is too late to obtain patent protection for them. Further, changes in either intellectual property laws or interpretation of intellectual property laws in Canada, and other countries may diminish the value of our intellectual property rights or narrow the scope of our intellectual property protection. As a result, our current or future intellectual property portfolio may not provide us with sufficient rights to protect our business, including our products, processes and brands.

Termination or limitation of the scope of any intellectual property license may restrict or delay or eliminate our ability to develop and commercialize our products, which could adversely affect our business. We cannot guarantee that any third-party technology we license will not be unenforceable or licensed to our competitors or used by others. In the future, we may need to obtain licenses, renew existing license agreements in place at such time or otherwise replace existing technology. We are unable to predict whether these license agreements can be obtained or renewed or the technology can be replaced on acceptable terms, or at all.

Unauthorized parties may attempt to replicate or otherwise obtain and use our products, brands and technology. Policing the unauthorized use of our current or future trademarks, patents or other intellectual property rights could be difficult, expensive, time consuming and unpredictable, as may be enforcing these rights against unauthorized use by others. Identifying the unauthorized use of intellectual property rights is difficult as we may be unable to effectively monitor and evaluate the products being distributed by our competitors, including parties such as unlicensed dispensaries and black market participants, and the processes used to produce such products. In addition, in any infringement proceeding, some or all of our trademarks or other intellectual property rights or other proprietary know-how, or those we license from others, or arrangements or agreements seeking to protect the same for our benefit, may be found invalid, unenforceable, anti-competitive or not infringed; may be interpreted narrowly; or could put existing intellectual property applications at risk of not being issued.

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In addition, other parties may claim that our products, or those it licenses from others, infringe on their intellectual property, including their proprietary or patent protected rights. Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources and legal fees, result in injunctions or temporary restraining orders or require the payment of damages. As well, we may need to obtain licenses from third parties who allege that we have infringed on their lawful rights. Such licenses may not be available on terms acceptable to us, or at all. In addition, we may not be able to obtain or utilize on terms that are favorable to us, or at all, licenses or other rights with respect to intellectual property that we do not own.

We also rely on certain trade secrets, technical know-how and proprietary information that are not protected by patents to maintain our competitive position. Our trade secrets, technical know-how and proprietary information, which are not protected by patents, may become known to or be independently developed by competitors, which could adversely affect us.

Risks Related to Tax

VF Canada GP and VF Canada LP may be deemed to maintain a U.S. permanent establishment for tax purposes.

Under the Canada U.S. Tax Convention, a Canadian resident will be subject to U.S. income taxation with respect to the business profits of such Canadian resident attributable to a permanent establishment (“PE”) of such Canadian resident located in the United States. A Canadian resident generally will be treated as maintaining a PE in the United States if, among other situations, an agent of the Canadian resident (other than an independent agent acting in the ordinary course of its business) has, and habitually exercises in the United States, authority to conclude contracts in the name of the Canadian resident.

Due to the cross-border activity of certain of our employees, the United States may deem VF Canada GP and VF Canada LP to maintain a U.S. permanent establishment. In the event that such a U.S. permanent establishment is deemed to exist, VF Canada GP and VF Canada LP generally will be required to file U.S. federal income tax returns and will be subject to U.S. federal income tax with respect to the business profits allocable to such permanent establishment.

The IRS may assert that the Advances by VF Opco to U.S. Holdings was equity in the U.S. borrower for income tax purposes.

In connection with the completion of the Combination Transaction, VF Opco loaned approximately C$20,000,000 to U.S. Holdings (the “Advances”). As at December 31, 2019, the Advances stood at US$45,301,000. U.S. Holdings has claimed interest deductions with respect to the interest paid on the Advances in computing its income for U.S. federal income tax purposes. There can be no assurance that the IRS will not assert that any portion of the advances was equity in the U.S. borrower for U.S. federal income tax purposes. If the IRS were successful in this assertion, payments made by U.S. Holdings on such Advances would be treated as non-deductible distributions paid by U.S. Holdings to VF Opco and subject to U.S. federal withholding taxes. The Company anticipates that the amount of any such withholding taxes, net of positive tax consequences that may arise from related circumstances, will not be material. In addition, the deductibility of interest paid or accrued may be subject to various limitations. The Company anticipates that the amount of interest charged on such Advances that might otherwise be claimed as a deduction, will not be material.

The IRS and the Canada Revenue Agency may challenge our transfer pricing.

Pursuant to an annual sales agreement, VF Opco has agreed to sell some of its inventory to VFLP for resale in the United States, as well as VFLP has agreed to sell some of its inventory to VF Opco for resale in Canada. VF Opco and VFLP take the position that the amounts charged by VF Opco and VFLP for such inventory represent the fair market value of the goods sold. The IRS or the Canada Revenue Agency have and may, in the future, challenge the pricing as being in excess of fair market value. If the IRS or the Canada Revenue Agency were successful in challenging the pricing, VFLP’s U.S. or Canadian taxable income could be increased. The consequences being a higher overall effective tax rate, as well as the potential for higher tax payments.

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U.S. Holdings may be considered a U.S. real property holding corporation, which may result in income and withholding taxes with respect to a distribution by U.S. Holdings to VF Opco.

If U.S. Holdings is, or has been within the prior five years, a United States real property holding corporation as defined under section 897 of the Internal Revenue Code, any portion of a distribution by U.S. Holdings to VF Opco which is treated as a gain for U.S. federal income tax purpose would be subject to United States federal income and withholding taxes.

Risks Related to Our Common Shares

Our market price of our Common Shares has been and is likely to continue to be volatile and an investment in our Common Shares could suffer a decline in value.

You should consider an investment in our Common Shares as risky and invest only if you can withstand a significant loss and wide fluctuations in the market value of your investment. The market price of our Common Shares has been highly volatile and is likely to continue to be volatile. This leads to a heightened risk of securities litigation pertaining to such volatility. Factors affecting our Common Share price include but are not limited to:

• our ability to operate in the U.S. and Canada as well our Joint Venture under the circumstances of the ongoing and developing COVID-19 pandemic;

• our ability to continue as a going concern;

• the status of our Joint Venture and its ability to continue as a going concern;

• continued slow roll out of cannabis retail stores in Canada and the impact of the COVID-19 pandemic on new store openings;

• general market conditions;

• our ability to raise additional capital and/or secure additional financing;

• market and/or industry developments in produce, cannabis or hemp that may directly or indirectly affect us;

• regulatory developments, particularly with respect to cannabis and/or CBD, in Canada, the United States or elsewhere to the extent applicable;

• published reports by securities analysts;

• public concern as to the safety of the products that we and our competitors develop; and

• shareholder interest in our Common Shares.

Because the cannabis industry is in a nascent stage, there is a lack of information about comparable companies available for potential investors to review in deciding about whether to invest in us, including our Joint Venture structure. Accordingly, investors will have to rely on their own estimates in deciding about whether to invest in us. There can be no assurance that our estimates are accurate or that the market size is correctly measured and/or sufficiently large for our business to grow as projected, which may negatively impact and/or increase volatility in the market price of our Common Shares.

Future sales of our Common Shares by us or by our existing shareholders could cause our share price to fall.

The issuance of Common Shares by us could result in significant dilution in the equity interest of existing shareholders and adversely affect the market price of our Common Shares. Sales by existing shareholders of a large number of our Common Shares in the public market and the issuance of Common Shares in connection with strategic alliances, or the perception that such additional sales could occur, could cause the market price of our Common Shares to decline and have an undesirable impact on our ability to raise capital.

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Certain Canadian laws could delay or deter a change of control.

Limitations on the ability to acquire and hold our Common Shares may be imposed by the Competition Act in Canada. This legislation permits the Commissioner of Competition of Canada to review any acquisition of a significant interest in us. This legislation grants the Commissioner jurisdiction to challenge such an acquisition before the Canadian Competition Tribunal if the Commissioner believes that it would, or would be likely to, result in a substantial lessening or prevention of competition in any market in Canada. The Investment Canada Act subjects an acquisition of control of a company by a non-Canadian to government review if the value of our assets, as calculated pursuant to the legislation, exceeds a threshold amount. A reviewable acquisition may not proceed unless the relevant minister is satisfied that the investment is likely to result in a net benefit to Canada. Any of the foregoing could prevent or delay a change of control and may deprive or limit strategic opportunities for our shareholders to sell their shares.

The exercise of all or any number of outstanding stock options, the award of any additional options, restricted stock units or other stock-based awards or any issuance of shares to raise funds or acquire a business may dilute your Common Shares.

We have in the past and may in the future grant to some or all of our directors, officers and employees’ options to purchase our Common Shares and other stock-based awards as non-cash incentives to those persons. The issuance of any equity securities could, and the issuance of any additional Common Shares will, cause our existing shareholders to experience dilution of their ownership interests.

Any additional issuance of Common Shares or a decision to acquire other businesses through the sale of equity securities may dilute our investors’ interests, and investors may suffer dilution in their net book value per share depending on the price at which such securities are sold. Such issuance may cause a reduction in the proportionate ownership and voting power of all other shareholders. The dilution may result in a decline in the price of our Common Shares or a change in control.

We do not expect to pay dividends for the foreseeable future.

We have not paid any cash dividends to date and we do not intend to declare dividends for the foreseeable future, as we anticipate that we will reinvest future earnings, if any, in the development and growth of our business. Therefore, investors will not receive any funds unless they sell their Common Shares, and shareholders may be unable to sell their shares on favorable terms or at all. We cannot assure you of a positive return on investment or that you will not lose the entire amount of your investment in our Common Shares. Prospective investors seeking or needing dividend income or liquidity should not purchase our Common Shares.

It may be difficult for non-Canadian investors to obtain and enforce judgments against us because of our Canadian incorporation and presence.

We are a corporation existing under the laws of Canada. Some of our directors and officers, and many of the experts named in this Annual Report on Form 10-K, are residents of Canada, and all or a substantial portion of their assets, and a substantial portion of our assets, are located outside the United States. Consequently, although we have appointed an agent for service of process in the United States, it may be difficult for holders of our Common Shares who reside in the United States to effect service within the United States upon our directors and officers and experts who are not residents of the United States. It may also be difficult for holders of our Common Shares who reside in the United States to realize in the United States upon judgments of courts of the United States predicated upon our civil liability and the civil liability of our directors, officers and experts under the United States federal securities laws. Investors should not assume that Canadian courts (i) would enforce judgments of United States courts obtained in actions against us or our directors, officers or experts predicated upon the civil liability provisions of the United States federal securities laws or the securities or “blue sky” laws of any state within the United States or (ii) would enforce, in original actions, liabilities against us or our directors, officers or experts predicated upon the United States federal securities laws or any such state securities or “blue sky” laws. In addition, we have been advised by our Canadian counsel that in normal circumstances, only civil judgments and not other rights arising from United States securities legislation are enforceable in Canada and that the protections afforded by Canadian securities laws may not be available to investors in the United States.

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We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Common Shares less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”), reduced disclosure obligations regarding executive compensation in our periodic reports and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

We will cease to be an emerging growth company upon the earliest of:

• the last day of the fiscal year during which we have total annual gross revenues of $1.07 billion (as such amount is indexed for inflation every five years by the SEC) or more;

• the last day of our fiscal year following the fifth anniversary of the completion of our first sale of common equity securities pursuant to an effective registration statement under the Securities Act;

• the date on which we have, during the previous three-year period, issued more than $1,000,000,000 in non- convertible debt; or

• the date on which we are deemed to be a “large accelerated filer”, as defined in Rule 12b–2 of the Exchange Act, which would occur if the market value of our ordinary shares that are held by non-affiliates exceeds $700,000,000 as of the last day of our most recently-completed second fiscal quarter.

We cannot predict if investors will find our Common Shares less attractive because we may rely on these exemptions. If some investors find our Common Shares less attractive as a result, there may be a less active trading market for our Common Shares and our share price may be more volatile.

Any failure to maintain an effective system of internal controls may result in material misstatements of our consolidated financial statements or cause us to fail to meet our reporting obligations or fail to prevent fraud; and in that case, our shareholders could lose confidence in our financial reporting, which would harm our business and could negatively impact the price of our Common Shares.

Section 404(a) of the SOX requires that our management assess and report annually on the effectiveness of our internal controls over financial reporting and identify any material weaknesses in our internal controls over financial reporting. Although Section 404(b) of the SOX requires our independent registered public accounting firm to issue an annual report that addresses the effectiveness of our internal controls over financial reporting, we have opted to rely on the exemptions provided to us by virtue of being an emerging growth company, and consequently will not be required to comply with SEC rules that implement Section 404(b) of SOX until we lose our emerging growth company status.

Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. If we fail to maintain an effective system of internal controls, we might not be able to report our financial results accurately or prevent fraud; and in that case, our shareholders could lose confidence in our financial reporting, which would harm our business and could negatively impact the price of our Common Shares. While we believe that we have sufficient personnel and review procedures to allow us to maintain an effective system of internal controls, we cannot assure you that we will not experience potential material weaknesses in our internal control. Even if we conclude that our internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. generally

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accepted accounting principles (“GAAP”), because of its inherent limitations, internal control over financial reporting may not prevent or detect fraud or misstatements. Failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our results of operations or cause us to fail to meet our future reporting obligations.

If we fail to timely achieve and maintain the adequacy of our internal control over financial reporting, we may not be able to produce reliable financial reports or help prevent fraud. Our failure to achieve and maintain effective internal control over financial reporting could prevent us from complying with our reporting obligations on a timely basis, which could result in the loss of investor confidence in the reliability of our consolidated financial statements, harm our business and negatively impact the trading price of our Common Shares.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None

ITEM 2. PROPERTIES

Our headquarters are located at 4700-80th Street Delta, British Columbia, Canada V4K 3N3.

The following table outlines the Company’s operating greenhouse facilities.

			Growing Area
Greenhouse Facility	Square Feet		Square Meters		Acres		Products Grown
Marfa, TX (2 greenhouses)		2,527,312		234,795		60	Tomatoes on-the-vine and beefsteak tomatoes
Fort Davis, TX (1 greenhouse)		1,684,874		156,530		40	Specialty tomatoes
Monahans, TX (1 greenhouse) (Permian Basin facility)		1,272,294		118,200		30	Tomatoes on-the-vine and long English cucumbers
Delta, BC (1 greenhouse)		2,588,860		240,513		60	Tomatoes on-the-vine, beefsteak tomatoes, specialty tomatoes
Total produce operations		8,073,340		750,038		190
Delta, BC (1 greenhouse)		1,075,530		99,920		25	Leased to Pure Sunfarms
Total		9,148,870		849,958		215
Delta, BC (1 greenhouse) Owned by Pure SunFarms		1,100,000		100,000		25	Cannabis

We believe that our existing facilities are adequate for our needs. Should we require additional facilities in the future, we believe that such facilities can be acquired or leased on commercially reasonable terms.

ITEM 3. LEGAL PROCEEDINGS

We are not currently party to any material legal proceedings.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our Common Shares are currently traded on The NASDAQ Capital Market and on the Toronto Stock Exchange under the symbol “VFF”.

Holders of Record

As of March 25, 2020, there were approximately 11 shareholders of record of our Common Shares, which included Cede & Co., a nominee for Depository Trust Company, or DTC, and CDS & Co., a nominee for The Canadian Depository for Securities Ltd., or CDS. Common shares that are held by financial institutions as nominees for beneficial owners are deposited into participant accounts at either DTC or CDS and are considered to be held of record by Cede & Co. or CDS & Co. as one shareholder.

Dividend Policy

We have not paid any cash dividends or distributions on any class of our securities and we have no current plans to pay dividends as we are growth focused.

Recent Sales of Unregistered Securities

On October 22, 2019, the Company closed an equity offering. This public offering raised approximately C$28.8 million (net proceeds) through the issuance of 3,059,000 Common Shares, which includes a full exercise of the underwriters’ over-allotment option of 399,000 Common Shares, at a price of C$9.40 per Common Share for aggregate gross proceeds to the Company of C$28,754,600. The offering was conducted by a syndicate of underwriters co-led by Beacon Securities Limited, as sole bookrunner, and GMP Securities L.P. Upon closing of the offering, the Company paid the underwriters a cash commission equal to 6% of the gross proceeds of the offering. The Common Shares were not offered or sold in the United States to, or for the account or benefit of, United States persons and were not registered under the Securities Act, pursuant to Regulation S.

Securities Authorized for Issuance under Equity Compensation Plans

Information about our equity compensation plan is incorporated herein by reference to Item 12 of Part III of this Annual Report on Form 10-K.

Repurchases of Equity Securities

There were no repurchases of equity securities during the fourth quarter of 2019.

Exchange and Foreign Ownership Controls

We are not aware of any Canadian federal or provincial laws, decrees, or regulations that restrict the export or import of capital, including foreign exchange controls, or that affect the remittance of dividends, interest or other payments to non-Canadian holders of the Common Shares. There are no limitations under the laws of Canada or by the charter or our other constituent documents on ownership of our voting shares by non-Canadians, except the Investment Canada Act which may require review and approval by the Minister of Innovation (Canada) of certain acquisitions of control of us by non-Canadians. The threshold for acquisitions of control is generally defined as being one-third or more of our voting shares, provided certain financial thresholds are also exceeded. If the investment is potentially injurious to national security, it may be subject to review under the Investment Canada Act notwithstanding the percentage interest acquired or amount of the investment. “Non-Canadian” generally means an individual who is not a Canadian citizen, or a corporation, partnership, trust or joint venture that is ultimately controlled by non-Canadians.

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Certain Canadian Federal Income Tax Considerations for U.S. Residents

The following is a summary of the principal Canadian federal income tax considerations generally applicable under the Income Tax Act (Canada) (together with the regulations thereto, the “Tax Act”) to a beneficial holder of our Common Shares who, for the purposes of the Tax Act and the Canada-United States Income Tax Convention (1980) (the “Treaty”), and at all relevant times, (i) is not and is not deemed to be a resident in Canada, (ii) is a resident of the United States for the purposes of the Treaty and is entitled to the full benefits thereunder, (iii) holds all Common Shares as capital property, (iv) deals at arm’s length with and is not affiliated with the Company, and (v) does not use or hold and is not deemed to use or hold our Common Shares in connection with a business carried on in Canada (each such holder, a “U.S. Resident Holder”). This summary is not generally applicable to a U.S. Resident Holder that is: (i) an insurer carrying on an insurance business in Canada and elsewhere, or (ii) an “authorized foreign bank,” each as defined in the Tax Act. Such U.S. Resident Holders should consult their own tax advisors.

Generally, a U.S. Resident Holder’s Common Shares will be considered to be capital property of a U.S. Resident Holder provided the U.S. Resident Holder does not hold such shares in the course of carrying on a business of trading or dealing in securities and has not acquired them in one or more transactions considered to be an adventure or concern in the nature of trade.

This summary is based upon the current provisions of the Tax Act, the current administrative policies and assessing practices of the Canada Revenue Agency published in writing prior to the date hereof, and the Treaty. This summary takes into account all specific proposals to amend the Tax Act publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Tax Proposals”), and assumes that all Tax Proposals will be enacted in the form proposed. However, no assurances can be given that the Tax Proposals will be enacted as proposed, or at all. This summary does not otherwise take into account or anticipate any changes in law or administrative policy or assessing practice whether by legislative, administrative or judicial action or decision, nor does it take into account tax legislation or considerations of any province, territory or foreign jurisdiction, which may differ from those discussed herein.

This summary is of a general nature only and is not intended to be, and should not be construed to be, legal, business or tax advice to any particular holder or prospective holder of our Common Shares, and no opinion or representation with respect to the tax consequences to any holder or prospective holder of our Common Shares is made. Accordingly, holders and prospective holders of our Common Shares should consult their own tax advisors with respect to the income tax consequences of purchasing, owning and disposing of our Common Shares in their particular circumstances.

Dividends

Dividends paid or credited, or deemed to be paid or credited, on our Common Shares to a U.S. Resident Holder will be subject to Canadian withholding tax at the rate of 25% of the gross amount of the dividends, subject to reduction under the provisions of the Treaty. Under the Treaty, the rate of Canadian withholding tax applicable to a U.S. Resident Holder that is the beneficial owner of dividends is generally reduced to 15% of the gross amount of the dividends, and, if such U.S. Resident Holder is a company that owns at least 10% of our voting shares at the time of the dividends, the rate of Canadian withholding tax is reduced to 5% of the gross amount of the dividends. U.S. Resident Holders who may be eligible for a reduced rate of withholding tax on dividends pursuant to the Treaty should consult with their own tax advisors with respect to taking all appropriate steps in this regard.

Disposition of Common Shares

A U.S. Resident Holder who disposes or is deemed to dispose of a Common Share will not be subject to tax under the Tax Act on any capital gain realized on such disposition, unless the Common Share constitutes “taxable Canadian property,” within the meaning of the Tax Act, of the U.S. Resident Holder at the time of the disposition and the U.S. Resident Holder is not entitled to relief under the Treaty.

Generally, a Common Share of a particular U.S. Resident Holder will not be “taxable Canadian property” of such U.S. Resident Holder at any time at which such Common Share is listed on a “designated stock exchange,” within the meaning of the Tax Act (which includes the Toronto Stock Exchange and Nasdaq) unless, at any particular time during the 60-month period that ends at that time, both of the following conditions are met concurrently: (a) 25% or more of the issued shares of any class of the capital stock of the Company were owned by or belonged to one or any combination of (i) the U.S. Resident Holder, (ii) persons with whom the U.S. Resident Holder did not deal at arm’s length for purposes of the Tax Act, and (iii) partnerships in which the U.S. Resident Holder or a person described in (ii) holds a membership interest directly or indirectly through one or more partnerships; and (b) more than 50% of the fair market value of the Common Share was derived, directly or indirectly, from one or any combination of: (i) real or immovable property situated in Canada, (ii) “Canadian resource properties” (as defined in the Tax Act), (iii) “timber resource properties” (as defined in the Tax Act), and (iv) options in respect of, or interests in, or for civil law rights in, property described in any of (b)(i) to (iii), whether or not the property exists. A Common Share may also be deemed to be “taxable Canadian property” in certain circumstances as set out in the Tax Act. In the case of a U.S. Resident Holder to whom a Common Share of the Company represents “taxable Canadian property”, under the Treaty, such a U.S. Resident Holder will generally not be subject to tax under the Tax Act on a capital gain realized on the disposition of such share unless the value of such share is derived principally from real property situated in Canada (within the meaning of the Treaty).

In the event that a Common Share is “taxable Canadian property,” within the meaning of the Tax Act, to a U.S. Resident Holder at the time of disposition, such U.S. Resident Holder should consult its own tax advisor as to the Canadian federal income tax consequences of the disposition.

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ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data have been derived from, and should be read in conjunction with, the accompanying audited consolidated financial statements for the years ended December 31, 2019, 2018 and 2017, respectively, and related notes appearing elsewhere in this Annual Report on Form 10-K, which are prepared in accordance with GAAP. You should read the selected financial data set forth below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

Annual Consolidated Financial Performance

	Years ended December 31,
(amounts in US thousands except for per share data)	2019			2018			2017
Sales	$	144,568		$	150,000		$	158,406
Cost of Sales		(151,913	)		(140,683	)		(144,433	)
Selling, general and administrative		(16,762	)		(14,108	)		(14,875	)
Stock compensation expense		(4,714	)		(1,454	)		(1,519	)
Interest expense, net		(1,578	)		(2,483	)		(2,695	)
Foreign exchange (loss) gain		433			(1,047	)		26
Other income (expense), net		268			131			46
Share of income (loss) from joint venture		13,777			(171	)		(468	)
(Gain) loss on disposal of assets		13,564			—			(8	)
Recovery of income taxes		5,866			2,300			763
Net income (loss)		2,325			(7,515	)		(4,757	)
Adjusted EBITDA(1)		851			2,638			6,450
Earnings (loss) per share – basic and diluted	$	0.05		($	0.17	)	($	0.12	)
Cash dividends declared per Common Share	$	nil		$	nil		$	nil

⁽¹⁾  Adjusted EBITDA is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP. Therefore, Adjusted EBITDA may not be comparable to similar measures presented by other issuers. See “Non-GAAP Measures” for a definition and reconciliation of Adjusted EBITDA to net income (loss), the nearest comparable measurement under GAAP. Management believes that Adjusted EBITDA is a useful supplemental measure in evaluating the performance of the Company. Adjusted EBITDA includes the Company’s majority non-controlling interest in Pure Sunfarms, 65% interest in VFH and 60% interest in AVGGH.

Selected Statement of Financial Position Data

	Year ended December 31,
(amounts in US thousands)	2019		2018		2017
Total assets	$	183,408	$	141,448	$	125,817
Total liabilities		56,949		57,015		58,928
Total long-term liabilities		34,920		33,413		39,491
Shareholders’ equity	$	126,459	$	84,433	$	66,889

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion contains forward-looking statements that involve risks and uncertainties. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that impact our business. In particular, we encourage you to review the risks and uncertainties described in “Risk Factors” in Part I, Item 1A in this Annual Report on Form 10-K. These risks and uncertainties could cause actual results to differ materially from those projected or implied by our forward-looking statements contained in this report. These forward-looking statements are made as of the date of this management’s discussion and analysis, and we do not intend, and do not assume any obligation, to update these forward-looking statements, except as required by law.

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All amounts are expressed in thousands of United States dollars unless otherwise stated.

Overview

VFF is a corporation existing under the Canada Business Corporations Act. The Company’s principal operating subsidiaries are Village Farms Canada Limited Partnership (“VFCLP”), Village Farms, L.P. (“VFLP”) and VF Clean Energy, Inc. (“VFCE”). On June 6, 2017, VFF entered into a shareholders’ agreement in respect of the operation and governance of Pure Sunfarms Corp. (“Pure Sunfarms”) in which pursuant to the settlement agreement dated as of March 2, 2020 (the “Settlement Agreement”) entered into with Emerald Health Therapeutics Inc. (“Emerald”), VFF currently owns a 57.4% interest (at December 31, 2019 owned 53.5% interest). On February 27, 2019, VFF entered into a joint venture agreement in respect of the operation and governance of Village Fields Hemp USA LLC (“VFH”) in which VFF owns a 65% interest. On May 21, 2019, the Company entered into a joint venture agreement in respect of Arkansas Valley Green and Gold Hemp (“AVGGH”). AVGGH is 60% owned by VFF, 35% owned by Arkansas Valley Hemp, LLC (“AV Hemp”) and 5% owned by VFH.

Our operating Segments

JV Cannabis Segment

The Company’s Joint Venture, Pure Sunfarms is a licensed producer and supplier of cannabis products to be sold to other licensed providers and provincial governments across Canada and internationally. Pure Sunfarms-branded dried cannabis products are sold directly to private retailers and provincial/territorial wholesalers.

Produce Segment

We are marketers and distributors of premium-quality, greenhouse-grown tomatoes, bell peppers and cucumbers in North America. These premium products are grown in sophisticated, highly intensive agricultural greenhouse facilities located in British Columbia and Texas. The Company also markets and distributes premium tomatoes, peppers and cucumbers produced under exclusive arrangements with other greenhouse producers. The Company primarily markets and distributes under its Village Farms^® brand name to retail supermarkets and dedicated fresh food distribution companies throughout the United States and Canada.

Energy Segment

Through its subsidiary VFCE, owns and operates a 7.0-megawatt power plant from landfill gas that generates electricity and provides thermal heat, in colder months, to one of the Company’s adjacent British Columbia greenhouse facilities and sells electricity to the British Columbia Hydro and Power Authority (“BC Hydro”).                

Presentation of Financial Results

Our consolidated results of operations (prior to net income) for each of the three years ended December 31, 2019, 2018 and 2017 presented below reflect the operations of our consolidated wholly- owned subsidiaries, which as of December 31, 2019, does not include our Pure Sunfarms, VFH and AVGGH joint ventures. The equity in earnings from those joint ventures is reflected in our net income for each of the three years ended December 31, 2019, 2018 and 2017 presented below. For information regarding the results of operations from our joint ventures, see “Reconciliation of GAAP Results to Proportionate Results” below.

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Results of Operations

Consolidated Financial Performance

(In thousands of U.S. dollars, except per share amounts)

	For the year ended December 31,
	2019			2018			2017
Sales	$	144,568		$	150,000		$	158,406
Cost of sales		(151,913	)		(140,683	)		(144,433	)
Selling, general and administrative expenses		(16,762	)		(14,108	)		(14,875	)
Stock compensation expense		(4,714	)		(1,454	)		(1,519	)
Interest expense		(2,614	)		(2,794	)		(2,695	)
Interest income		1,036			311			—
Foreign exchange gain (loss)		433			(1,047	)		26
Other income, net		268			131			46
Gain (loss) on disposal of assets		13,564			—			(8	)
Loss on write-down of investment		(1,184	)		—			—
Recovery of income taxes		5,866			2,300			763
Net loss from consolidated entities		(11,452	)		(7,344	)		(4,289	)
Equity in earnings of unconsolidated entities		13,777			(171	)		(468	)
Net income (loss)	$	2,325		($	7,515	)	($	4,757	)
Adjusted EBITDA (1)	$	851		$	2,638		$	6,450
Earnings (loss) per share - basic	$	0.05		($	0.17	)	($	0.12	)
Earnings (loss) per share - diluted	$	0.05		($	0.17	)	($	0.12	)

(1) Adjusted EBITDA is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP. Therefore, Adjusted EBITDA may not be comparable to similar measures presented by other issuers. See “Non-GAAP Measures” for a definition and reconciliation of Adjusted EBITDA to net income (loss), the nearest comparable measurement under GAAP. Management believes that Adjusted EBITDA is a useful supplemental measure in evaluating the performance of the Company. Adjusted EBITDA includes the Company’s majority non-controlling interest in Pure Sunfarms, 65% interest in VFH and 60% interest in AVGGH.

A summary of sales by product group in our greenhouse produce business, follows:

	For the year ended December 31,
Percent of Sales by Product Group	2019			2018			2017
Tomatoes		86	%		86	%		87	%
Peppers		5	%		5	%		3	%
Cucumbers		9	%		9	%		10	%
		100	%		100	%		100	%

We caution you that our results of operations for the three years ended December 31, 2019 may not be indicative of our future performance, particularly in light of the ongoing and developing COVID-19 pandemic. We are currently unable to assess the ultimate impact of the COVID-19 pandemic on our business and our results of operations for future periods.

JV Cannabis Business ⁽¹⁾

For the year ended December 31, 2019 compared to the year ended December 31, 2018.

Sales

Our majority non-controlling share of sales of Pure Sunfarms for the year ended December 31, 2019 was $37,000 from $1,845 for the year ended December 31, 2018. Total Pure Sunfarms sales consisted of close to 25,675 kilograms of flower and trim during the year ended December 31, 2019, at an average sales price of approximately $2.25 per gram (CAD $2.92 per gram). Included in the sales is the amount from the settlement with Emerald.

During 2019 8% of sold grams went directly to retail, 82% was sold wholesalers as flower and 10% to wholesales as trim.

Cost of Goods

Our majority non-controlling share of cost of sales of Pure Sunfarms for the year ended December 31, 2019 was $9,009 from $576 for the year ended December 31, 2018 (based on total grams sold of close to 24,600 kilograms), or approximately $0.59 per gram (CAD$0.78 per gram).

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Selling, General and Administrative Expense

Our majority non-controlling share of selling, general and administrative expenses of Pure Sunfarms for the year ended December 31, 2019 was $4,568 from $1,349 for the year ended December 31, 2018 the increase is mostly related to increases in sales and marketing cost as well as Health Canada Regulatory fees.

Net Income

Our majority non-controlling share of net income for the year ended December 31, 2019 was $16,276 versus a loss of ($171) for the year ended December 31, 2018.

Adjusted EBITDA

Our majority non-controlling share of Adjusted EBITDA for the year ended December 31, 2019 was $20,558 versus ($14) for the year ended December 31, 2018. The increase is related to increases in sales.

Notes:

⁽¹⁾ The GAAP treatment of our equity earning of our Joint Venture (“Pure Sunfarms”) is different than under IFRS. Under GAAP the Emerald shares held in escrow and not fully paid for by Emerald are not considered issued pursuant to the GAAP concept of ‘hypothetical liquidation’. As a result, under GAAP, our ownership percentage for all of 2017, January through March of 2018 and March through December of 2019 was higher than its economic interest of 50% (53.5% effective November 19, 2019). Accordingly, for those periods with a higher deemed ownership percentage, we received a higher allocation of profits and losses during the periods in which there were outstanding escrow shares. The effective profit and loss allocation – on a weighted average basis in 2019 were 57.9%, in 2018 was 52.2% and in 2017 was 87.5%.

Consolidated Results

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Sales

Sales for the year ended December 31, 2019 decreased ($5,432), or (4%), to $144,568 compared to $150,000 for the year ended December 31, 2018. The decrease in sales is primarily due to a decrease in our own production revenues of ($9,348) partially offset by an increase in supply partner revenues of $5,191. The decrease in our own production revenues of ($9,348) or (12%) is primarily due to a decrease of (8%) in our product volume. The decrease in our own production volume is primarily due to a clean-out in one of our facilities (which did not occur in the last three years) and ongoing plant disease pressure at our Texas facilities.

The net price for all tomato pounds sold decreased (1.4%) for the year ended December 31, 2019 compared to the year ended December 31, 2018 due to a decrease in the average selling price of the commodity items; beefsteak and TOVs as compared to 2018. The decrease in net price in the commodity item prices was due to the continual push by retailers to lower prices. Pepper prices increased 7% and pepper pounds increased 8% over the comparable period in 2018. Cucumber prices decreased (7%) and cucumber pieces decreased (13%) for the year ended December 31, 2019 as compared to the year ended December 31, 2018.

Cost of Sales

Cost of sales for the year ended December 31, 2019 increased $11,230, or 8%, to $151,913 from $140,683 for the year ended December 31, 2018, due to an increase in the 2019 contract sales cost of 11% versus 2018 and an increase in the cost per pound of our own grown product in Texas due to decreased volume and higher labor costs. The increase in labor cost is due to the utilization of higher hourly rate contract laborers versus VFF employees for the 2018/2019 crop as compared to prior years. The decrease in our own production volume is primarily due to ongoing plant disease pressure at our Texas facilities and a clean-out in one of our facilities (which did not occur in the last three years).

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Selling, General and Administrative Expenses

Selling, general and administrative expenses for the year ended December 31, 2019 increased $2,654, or 19%, to $16,762 from $14,108 for the year period ended December 31, 2018. The increase is due to public company costs such as investor relations, legal, listing fees and incremental costs of converting to full U.S. GAAP and U.S. reporting compliance.

Stock Compensation Expenses

Stock compensation expenses for the year ended December 31, 2019 was $4,714 from $1,454 for the year ended December 31, 2018. The incremental increase in stock compensation is primarily related to the vesting of performance share grants in 2019 that were earned in relation to developments in Pure Sunfarms, as well as the incremental cost of issuing higher valued stock options.    

Interest Expense

Interest expense, for the year ended December 31, 2019 decreased $180 to $2,614 from $2,794 for the year period ended December 31, 2018. The decrease is due to lower debt balances.    

Share of Income from Joint Ventures

Our share of income from its joint ventures for the year ended December 31, 2019 was $13,777 compared to a loss of ($171) for the year ended December 31, 2018. The increase in income is primarily attributed to the Joint Venture having selling operations for the entire year ended December 31, 2019 whereas it started selling operations in October for the year ended December 31, 2018. For information regarding the results of operations from our joint ventures, see “Reconciliation of U.S. GAAP Results to Proportionate Results” below.

Income Taxes (Recovery)

Income tax recovery for the year ended December 31, 2019 was a recovery $5,866 compared to a recovery of $2,300 for the year ended December 31, 2018. The increase is due to a decrease in taxable income in year-ended December 31, 2019 from the year-ended December 31, 2018. Pure Sunfarms, VFH and AVGHH are all reported post-tax and therefore do not affect our tax calculation.

Gain on Disposal of Assets

The Company recognized for the year ended December 31, 2019 a gain of $13,564 primarily from the contribution of one of our greenhouse facilities in Delta, British Columbia to Pure Sunfarms. The gain represents the difference between book value and C$25,000.

Net Income (Loss)

Net income (loss) for the year ended December 31, 2019 had an income of $2,325 from a loss of ($7,515) for the year ended December 31, 2018. The increase is a result as an equity pick-up from Pure Sunfarms, partially offset by an increase in the loss from our produce business.

Adjusted EBITDA

Adjusted EBITDA for the year period ended December 31, 2019 decreased ($1,787) to $851 from $2,638 for the year period ended December 31, 2018, primarily as a result of a decrease in sales and an increase in cost of sales and selling, general and administrative expenses. See the reconciliation of Adjusted EBITDA to net income in “Non-GAAP Measures—Reconciliation of Net Earnings to Adjusted EBITDA”.

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Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017

Sales

Sales for the year ended December 31, 2018 decreased ($8,406), or (5%), to $150,000 compared to $158,406 for the years ended December 31, 2017. The decrease in sales is due to the loss of tomato production from the Delta 3 facility, which was contributed to the Joint Venture in 2017, and our decreased production at its Texas facilities.

The net price for all tomato pounds sold was an increase of 4% for the year ended December 31, 2018 compared to the year ended December 31, 2017 due to a higher percent of higher priced tomato production in 2018 compared to 2017. Pepper prices decreased (2%) and pounds increased 38% over the comparable period in 2017. Cucumber prices decreased (1%) and pieces decreased (15%) for the year ended December 31, 2018 as compared to the year ended December 31, 2017.

Cost of Sales

Cost of sales for the year ended December 31, 2018 decreased ($3,750), or (3%), to $140,683 from $144,433 for the year ended December 31, 2017, primarily due to no tomato production from the Delta 3 facility ($5,371) and a decrease in costs in Texas due to a decrease in pounds sold from the Texas facilities partially offset by an increase of 6% in contract sales costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the year ended December 31, 2018 decreased ($767), or (5%), to $14,108 from $14,875 for the year period ended December 31, 2017. The decrease is due to legal costs occurred in the year ended December 31, 2017 during formation of the Joint Venture.

Stock Compensation Expenses

Stock compensation expenses for the year ended December 31, 2018 was $1,454 which was a slight decrease from $1,519 for the year ended December 31, 2017.

Interest Expense

Interest expense for the year ended December 31, 2018 increased $99 to $2,794 from $2,695 for the year period ended December 31, 2017. The increase is due to interest rate increases partially offset by a decrease in the outstanding debt balances.

Share of Loss from Joint Ventures

Our share of loss from its Joint Venture for the year ended December 31, 2018 was ($171) from ($468) for the year ended December 31, 2017. The decreased loss is primarily attributed to the Joint Venture’s commencing selling operation in October 2018. This income was able to offset most of the salaries and other administrative costs. For information regarding the results of operations from our joint ventures, see “Reconciliation of U.S. GAAP Results to Proportionate Results” below.

Income Taxes (Recovery)

Income tax recovery for the year ended December 31, 2018 was a recovery of $2,300 compared to a recovery of $763 for the year ended December 31, 2017. The increased income tax recovery is due lower gross profit from operations.

Gain on Sale of Assets

No gains were recognized in 2018. The Company recognized for the year period ended December 31, 2017 a loss of ($8) related to a write-off of an asset from our Texas facility.

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Net Income (Loss)

Net income (loss) for the year ended December 31, 2018 decreased to a loss of ($7,515) from the loss of ($4,757) for the year ended December 31, 2017. The increased (loss) is due to a decrease in net sales caused by the loss of the Delta 3 facility and production shortfalls in Texas which were partially offset by a decrease in the cost of sales. The production shortfall in Texas increases the cost per pound of tomatoes sold as fixed costs are expensed over less pounds.

Adjusted EBITDA

Adjusted EBITDA for the year period ended December 31, 2018 decreased ($3,812) to $2,638 from $6,450 for the year period ended December 31, 2017, primarily as a result of an increase in income loss from consolidated entities. See the reconciliation of Adjusted EBITDA to net income in “Non-GAAP Measures—Reconciliation of Net Earnings to Adjusted EBITDA”.

Liquidity and Capital Resources

Capital Resources

The Company expects to provide or obtain adequate financing to maintain and improve its property, plant and equipment, to fund working capital produce needs and invest in the Joint Venture for the foreseeable future from cash flows from operations, and, as needed, from additional borrowings under the Credit Facilities (as defined below) or additional equity financing. As described below, we are currently not in compliance with the covenants of our Credit Facilities and have had to obtain waivers from our lenders, and we are currently in discussions to amend or enter into new Credit Facilities in the second quarter of 2020.

(in thousands of U.S. dollars unless otherwise noted)	Maximum		Outstanding December 31, 2019
Operating Loan	C$	13,000	$	2,000
Term Loan	$	31,306	$	31,306
VFCE Loan	C$	1,526	C$	1,526

The Company has a term loan financing agreement with a Canadian creditor (the “FCC Loan”). This non-revolving variable rate term loan has a maturity date of May 1, 2021 and a balance of $31,306 as at December 31, 2019 (December 31, 2018—$34,385). The outstanding balance is repayable by way of monthly installments of principal and interest based on an amortization period of 15 years, with the balance and any accrued interest to be paid in full on May 1, 2021. As at December 31, 2019, borrowings under the FCC Loan were subject to an interest rate of 6.391% (December 31, 2018 – 7.082%), which is determined based on our debt to EBITDA ratio and the applicable LIBOR rate.

Our Company is also party to a variable rate line of credit agreement with BMO that has a maturity date of May 31, 2021 (the “Operating Loan” and together with the FCC Loan, the “Credit Facilities”). The Operating Loan is subject to margin requirements stipulated by the bank based on produce sales. As at December 31, 2019, $2,000 was drawn on the Operating Loan (December 31, 2018—$2,000), which is available to a maximum of C$13,000, less outstanding letters of credit of US$150 and C$38.

As security for the FCC Loan, the Company has provided promissory notes, a first mortgage on the VFF-owned greenhouse properties (excluding the Delta 3 and Delta 2 greenhouse facilities) and general security agreements over its assets. In addition, the Company has provided full recourse guarantees and has granted security therein. The carrying value of the assets and securities pledged as collateral as at December 31, 2019 was $146,377 (December 31, 2018 – $101,263).

As security for the Operating Loan, the Company has provided promissory notes and a first priority security interest over its accounts receivable and inventory. In addition, the Company has granted full recourse guarantees and security therein. The carrying value of the assets pledged as collateral as at December 31, 2019 was $24,915 (December 31, 2018 - $36,248).

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The borrowings are subject to certain positive and negative covenants, which include debt coverage ratios. As at December 31, 2019, the Company received a waiver for its annual debt service coverage and debt to EBITDA covenants under its Term Loan for the year ended December 31, 2019 and was in compliance with all of its other Credit Facility covenants under its Credit Facilities.

Accrued interest payable on the credit facilities and loans as at December 31, 2019 was $162 (December 31, 2018—$184) and these amounts are included in accrued liabilities in the consolidated statements of financial position.

On February 13, 2019, the Joint Venture entered into a credit agreement with BMO, as agent and lead lender, and FCC, as lender, in respect of a C$20,000 secured non-revolver term loan (the “PSF Credit Facility”). At December 31, 2019 the outstanding amount on the loan was C$19,000. The PSF Credit Facility, which matures on February 7, 2022, is secured by the Delta 3 greenhouse facility and contains customary financial and restrictive covenants. The Company is not a party to the PSF Credit Facility but has guaranteed up to C$10 in connection with the PSF Credit Facility.

The Company closed equity offerings on October 22, 2019 and March 24, 2020. The October 22, 2019 public offering raised C$26,934 (net proceeds) through the issuance of 3,059,000 Common Shares at a price of C$9.40 per Common Share. The March 24, 2020 public offering raised C$10,711 (net proceeds) through the issuance of 3,593,750 Common Shares at a price of C$3.20 per Common Share.

Summary of Cash Flows

	For the year ended December 31,
(in Thousands)	2019			2018
Cash beginning of year	$	11,920		$	7,091
Net cash flow provided by/(used in):
Operating activities		(14,387	)		(4,677	)
Investing activities		(16,838	)		(13,490	)
Financing activities		31,387			22,998
Net cash increase (decrease) for the year		162			4,831
Effect of exchange rate changes on cash		(93	)		(2	)
Cash, end of the year	$	11,989		$	11,920

Operating Activities

For the year ended December 31, 2019, cash flows from operating activities before changes in non-cash working capital, totalled ($19,902) (2018 – $1,527). The decrease in cash flows from operating activities is due to a decrease in sales and an increase in cost of sales for the year ended December 31, 2019.

Investing Activities

For the year ended December 31, 2019, cash flow from investing activities consisted of ($14,507) in note to Joint Venture, ($2,287) in capital expenditures and ($96) investment in our joint ventures (2018 – $10,462 in note to Joint Venture and $3,093 in net capital expenditures). The joint venture notes made for the year ended December 31, 2019 was $13,323 to VF Hemp and $1,184 to AVGGH and for the year ended December 31, 2018 $10,873 to Pure Sunfarms.

Financing Activities

For the year ended December 31, 2019, the cash provided by financing activities primarily consisted of the issuance of Common Shares of $34,226, proceeds from the exercise of share options and warrants of $674, debt payments of, net ($3,423), and payments on capital lease obligations of ($90) (2018 – proceeds from the issuance of Common Shares of $23,492, proceeds from the exercise of share options of $283, offset by net term debt payments of ($706), and payments on capital lease obligations of ($71)).

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Contractual Obligations and Commitments

Information regarding our contractual obligations as at December 31, 2019 is set forth in the table below:

Financial liabilities	Total		1 year		2-3 years		4-5 years		More than 5 years
Long-term debt	$	32,389	$	3,423	$	28,804	$	162	$	—
Line of credit		2,000		2,000		—		—		—
Trade payables		12,653		12,653		—		—		—
Accrued liabilities		3,017		3,017		—		—		—
Lease liabilities		3,660		936		1,770		864		90
Other liabilities		1,357		—		1,357		—		—
Total	$	55,076	$	22,029	$	31,931	$	1,028	$	90

We intend to make additional equity contributions to the Joint Venture estimated to be up to C$16,000 in the early part of 2020. As of March 27, 2020, we have made equity contributions to the Joint Venture of C$8,000 with the intention of making an additional $8,000 in late March or early April. The Company may be required to make additional equity contributions to Pure Sunfarms based on Pure Sunfarms ability to generate positive cash flow from its operations.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

Non-GAAP Measures

References in this MD&A to “Adjusted EBITDA” are to earnings (including the equity in earnings of the Joint Venture) before interest, taxes, depreciation and amortization (“EBITDA”), as further adjusted to exclude foreign currency exchange gains and losses on translation of long-term debt, unrealized gains on the changes in the value of derivative instruments, stock compensation, and gains and losses on asset sales. Adjusted EBITDA is a cash flow measure that is not recognized under GAAP and does not have a standardized meaning prescribed by GAAP. Therefore, Adjusted EBITDA may not be comparable to similar measures presented by other issuers. Investors are cautioned that Adjusted EBITDA should not be construed as an alternative to net income or loss determined in accordance with GAAP as an indicator of our performance or to cash flows from operating, investing and financing activities as measures of liquidity and cash flows. Management believes that Adjusted EBITDA is an important measure in evaluating the historical performance of the Company.

We also present Adjusted EBITDA, earnings per share and diluted earnings per share on a proportionate segment basis. Each of the components of Adjusted EBITDA, on a proportionate segment basis (which include our proportionate share of the Joint Venture and VFH and AVGGH (“Hemp”) operations), are presented in the table Reconciliation of GAAP to Proportionate Results below. We believe that the ability of investors to assess our overall performance may be improved by the disclosure of proportionate segment Adjusted EBITDA, earnings per share and diluted earnings per share, given that our joint ventures represent a significant percentage of our net income.

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Reconciliation of Net Income to Adjusted EBITDA

The following table reflects a reconciliation of net income to Adjusted EBITDA, as presented by the Company:

	For the year ended December 31,
(in thousands of U.S. dollars)	2019			2018			2017
Net income (loss)	$	2,325		($	7,515	)	($	4,757	)
Add:
Amortization		7,442			7,103			7,659
Foreign currency exchange loss (gain)		(433	)		1,047			(26	)
Interest expense, net		1,578			2,483			2,695
Income taxes (recovery)		(5,866	)		(2,300	)		(763	)
Stock based compensation		4,714			1,454			1,519
Interest expense for JVs		811			72			—
Amortization for JVs		1,227			209			—
Foreign currency exchange loss (gain) for JVs		(2	)		92			2
Income taxes (recovery) from JVs		6,575			(55	)		(148	)
Gain on disposal of assets		(13,564	)		—			8
True Economic value for Pure Sunfarms(1)		(3,956	)		48			261
Adjusted EBITDA	$	851		$	2,638		$	6,450
Adjusted EBITDA for JVs (See table below)	$	18,432		$	195		($	351	)
Adjusted EBITDA excluding JVs(produce)	($	17,581	)	$	2,443		$	6,801

Notes:

⁽¹⁾ The GAAP treatment of our equity earning of our Joint Venture (“Pure Sunfarms”) is different than under IFRS. Under GAAP the Emerald shares held in escrow are not considered issued until paid for pursuant to the GAAP concept of ‘hypothetical liquidation’. As a result, under GAAP, our ownership percentage for all of 2017, January through March of 2018 and March through December of 2019 was higher than its economic interest of 50% (53.5% effective November 19, 2019). Accordingly, for those periods with a higher deemed ownership percentage, we received a higher allocation of profits and losses during the periods in which there were outstanding escrow shares that were not yet paid for by Emerald. The effective profit and loss allocation – on a weighted average basis in 2019 was 57.9%, in 2018 was 52.2% and in 2017 was 87.5%.

Breakout of JV Adjusted EBITDA	For the year ended December 31,
(in thousands of U.S. dollars)	2019			2018		2017
Pure Sunfarms Adjusted EBITDA	$	20,558		$	195	($	351	)
VFH Adjusted EBITDA		(2,106	)		—		—
AVGGH Adjusted EBITDA		(20	)		—		—
Total JV Adjusted EBITDA	$	18,432		$	195	($	351	)

Reconciliation of U.S. GAAP Results to Proportionate Results

The following tables are a reconciliation of the GAAP results to the proportionate results (which include our proportionate share of the Joint Venture and VFH and AVGGH (“Hemp”) operations):

	For the year ended December 31, 2019
	Produce			Pure Sunfarms (1)			Hemp (1)			Total
Sales	$	144,568		$	37,000		$	69		$	181,637
Cost of sales		(151,913	)		(9,009	)		(1,682	)		(162,604	)
Selling, general and administrative expenses		(16,762	)		(4,568	)		(591	)		(21,921	)
Stock compensation expense		(4,714	)		—			—			(4,714	)
Write down of investment		(1,184	)					—			(1,184	)
Gain on disposal of assets		13,564			(78	)		—			13,486
Other income (expense) net		(877	)		(497	)		(298	)		(1,672	)
Recovery of income taxes		5,866			(6,572	)		3			(703	)
Net income (loss)	($	11,452	)	$	16,276		($	2,499	)	$	2,325
Adjusted EBITDA (2)	($	17,581	)	$	20,558		($	2,126	)	$	851
Earnings (loss) per share – basic	($	0.23	)	$	0.33		($	0.05	)	$	0.05
Earnings (loss) per share – diluted	($	0.22	)	$	0.32		($	0.05	)	$	0.05

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	For the year ended December 31, 2018
	Produce			Pure Sunfarms (1)			Hemp (1)		Total
Sales	$	150,000		$	1,845		$	—	$	151,845
Cost of sales		(140,683	)		(576	)		—		(141,259	)
Selling, general and administrative expenses		(14,108	)		(1,349	)		—		(15,457	)
Stock compensation expense		(1,454	)		—			—		(1,454	)
Write down of investment		—			—			—		—
Gain on disposal of assets		—			—			—		—
Other income (expense) net		(3,399	)		(146	)		—		(3,545	)
(Provision for) recovery of income taxes		2,300			55			—		2,355
Net income (loss)	($	7,344	)	($	171	)		—	($	7,515	)
Adjusted EBITDA (2)	$	2,443		$	195			—	$	2,638
Earnings (loss) per share – basic	($	0.17	)	$	0.00			—	($	0.17	)
Earnings (loss) per share – diluted	($	0.17	)	$	0.00			—	($	0.17	)

	For the year ended December 31, 2017
	Produce			Pure Sunfarms (1)			Hemp (1)		Total
Sales	$	158,406		$	—		$	—	$	158,406
Cost of sales		(144,433	)		—			—		(144,433	)
Selling, general and administrative expenses		(14,875	)		(614	)		—		(15,489	)
Stock compensation expense		(1,519	)		—					(1,519	)
Write down of inventory
Write down of investment
Gain (loss) on sale of assets		(8	)		—			—		(8	)
Other income (expense) net		(2,623	)		(2	)		—		(2,625	)
Recovery of income taxes		763			148			—		911
Net income (loss)	($	4,289	)	($	468	)	$	—	($	4,757	)
Adjusted EBITDA (2)	$	6,801		($	351	)	$	—	$	6,450
Earnings (loss) per share – basic	($	0.11	)	($	0.01	)	$	—	($	0.12	)
Earnings (loss) per share – diluted	($	0.11	)	($	0.01	)	$	—	($	0.12	)

Notes:

(1) The adjusted consolidated financial results have been adjusted to include our share of revenues and expenses from Pure Sunfarms and Hemp on a proportionate accounting basis, on which management bases its operating decisions and performance evaluation. GAAP does not allow for the inclusion of the joint ventures on a proportionate basis. These results include additional non-GAAP measures such as Adjusted EBITDA.

The adjusted results are not generally accepted measures of financial performance under GAAP. Our method of calculating these financial performance measures may differ from other companies and accordingly, they may not be comparable to measures used by other companies.

(2) Adjusted EBITDA is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP. Therefore, Adjusted EBITDA may not be comparable to similar measures presented by other issuers. See “Non-GAAP Measures”. Management believes that Adjusted EBITDA is a useful supplemental measure in evaluating the performance of the Company. Consolidated Adjusted EBITDA includes our majority non-controlling interest Pure Sunfarms, our 65% interest in VFH and our 60% interest in AVGGH.

New Accounting Pronouncements Adopted

In February 2016, the Financial Account Standard Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02, Leases, and has subsequently issued several supplemental and/or clarifying ASUs (collectively, “Topic 842”), which requires a dual approach for lease accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases may result in the lessee recognizing a right of use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize lease expense on a straight-line basis.

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On January 1, 2019, the Company adopted Topic 842, using the modified retrospective method and did not restate prior periods. The Company elected to utilize the package of practical expedients that allows us to 1) not reassess whether any expired or existing contracts are or contain leases, 2) retain the existing classification of lease contracts as of the date of adoption, and 3) not reassess initial direct costs for any existing leases. Our classes of assets include land leases, building leases and equipment leases.

On adoption, the Company recognized lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of Topic 842. These lease liabilities were measured at the present value of the remaining lease payments, discounted using the borrowing rate of the Company. The weighted average incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 6.25%. These leases are included in right-of-use assets, short-term lease liabilities and long-term lease liabilities in the consolidated statements of financial position. Right-of-use assets are amortized on a straight-line basis over the lease term.

For leases previously classified as finance leases the entity recognized the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right-of-use asset and the lease liability at the date of initial application.

Additionally, the Company has elected the short-term lease exception for all classes of assets, and does not apply the recognition requirements for leases of 12 months or less, and recognizes lease payments for short-term leases as expense either straight-line over the lease term or as incurred depending on whether the lease payments are fixed or variable.

These elections are applied consistently for all leases.

	2019
Operating lease commitments disclosed as at December 31, 2018	$	5,064
Less: short-term leases recognized on a straight-line basis as expense		(210	)
		4,854
Discounted using the lessee’s incremental borrowing rate of 6.25% at the date of initial application		4,269
Add: additional leases identified on adoption of Topic 842		88
Add: finance lease liabilities recognized as at December 31, 2018		180
Lease liability recognized as at January 1, 2019	$	4,537
Of which are:
Current lease liabilities		871
Non-current lease liabilities		3,666
	$	4,537

The recognized right-of-use assets relate to the following types of assets:

	December 31, 2018		January 1, 2019
Land	$	—	$	140
Building		—		4,017
Equipment		176		380
Total right-of-use assets	$	176	$	4,537

New Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” ASU 2019-12 simplifies the accounting for income taxes by removing exceptions within the general principles of Topic 740 regarding the calculation of deferred tax liabilities, the incremental approach for intraperiod tax allocation, and calculating income taxes in an interim period. In addition, the ASU adds clarifications to the accounting for franchise tax (or similar tax). which is partially based on income, evaluating tax basis of goodwill recognized from a business combination, and reflecting the effect of any enacted changes in tax laws or rates in the

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annual effective tax rate computation in the interim period that includes the enactment date. The ASU is effective for fiscal years beginning after December 15, 2020 and will be applied either retrospectively or prospectively based upon the applicable amendments. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on our consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820)—Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 removes the disclosure requirement for the amount and reasons for transfers between Level 1 and Level 2 fair value measurements as well as the process for Level 3 fair value measurements. In addition, the ASU adds the disclosure requirements for changes in unrealized gains and losses included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period as well as the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years and will be applied on a retrospective basis to all periods presented. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on our consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses.” The standard, including subsequently issued amendments, requires a financial asset measured at amortized cost basis, such as accounts receivable and certain other financial assets, to be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and requires the modified retrospective approach. Early adoption is permitted. Based on the composition of our trade receivables and other financial assets, current market conditions, and historical credit loss activity, the adoption of this standard is not expected to have a material impact on our consolidated financial statements and related disclosures.

Critical Accounting Estimates and Judgments

Inventories and cost of sales

Cost of sales is based upon incurred costs, and estimated costs to be incurred, of each crop allocated to both actual and estimated future yields over each crop cycle. The estimates of future yields are reviewed at each reporting period for accuracy. However, numerous factors such as weather, diseases and prevailing market conditions can impact the estimation of pricing, costs, and future yields. The estimated costs to be incurred are based on references to historical costs and updated for discussions with suppliers and senior management. Inventories include the actual cost of the crop not yet defined as a biological asset, packaging supplies, and purchased produce, less the amounts that have been expensed in cost of sales.

Income taxes and deferred income tax assets or liabilities

Management uses judgment and estimates in determining the appropriate rates and amounts in recording deferred taxes, giving consideration to timing and probability. Actual taxes could vary significantly from these estimates as a result of future events, including changes in income tax law or the outcome of reviews by tax authorities and related appeals. The resolution of these uncertainties and the associated final taxes may result in adjustment to our tax assets and tax liabilities. The recognition of deferred income tax assets is subject to judgment and estimation over whether these amounts can be realized.

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ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its long-term debt, for which the interest rates charged fluctuate based on the 90-day LIBOR rate. If interest rates had been 50 basis points higher, the net income during the years ended December 31, 2019 and 2018 would have been lower by $164 and $138, respectively. This represents $164 and $138 in increased interest expense for the years ended December 31, 2019 and 2018, respectively.

While we cannot predict our ability to refinance existing debt or the significance of the impact that interest rate movements will have on our existing debt, management evaluates our financial position on an ongoing basis.

Foreign Exchange Risk

As of December 31, 2019 and 2018, the Canadian/U.S. foreign exchange rate was C$1.00 = US$0.7682 and C$1.00 = US$0.7336, respectively. Assuming that all other variables remain constant, an increase of $0.10 in the Canadian dollar would have the following impact on the ending balances of certain statements of financial position items at December 31, 2019 and December 31, 2018 with the net foreign exchange gain or loss directly impacting net income (loss).

	December 31,2019 30, 2019			December 31, 2018
Financial assets
Cash and cash equivalents	$	1,081		$	839
Trade receivables		218			328
JV notes receivable		2,007			1,335
Financial liabilities
Trade payables and accrued liabilities		(351	)		(373	)
Loan payable		(153	)		(193	)
Net foreign exchange gain (loss)	$	2,802		$	1,936

Our exposure to foreign exchange risk and the impact of foreign exchange rates are monitored by the Company’s management but generally the Company tries to match its sales (trade receivables) and vendor payments (trade payables) such that the net impact is not material.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements required by this item are included beginning on page F-1 of this Annual Report on Form 10-K. See also Item 15, “Exhibits, Financial Statement Schedules.”

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls

Our management has evaluated, with the participation of our principal executive and financial officers, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K, and has concluded that our disclosure controls and procedures were effective as of December 31, 2019.

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Internal Controls

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our principal executive and financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

As of December 31, 2019, our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 Framework). Based on this assessment, our management concluded that, as of December 31, 2019, our internal control over financial reporting was effective based on those criteria.

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of SOX.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during our fiscal quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

The members of our Board of Directors as of April 1, 2020, positions and their respective ages on that date were:

Name	Age	Position
Michael A. DeGiglio	64	Director, Chief Executive Officer and President
John R. McLernon	79	Chairman, Compensation Committee Chair
Christopher C. Woodward	62	Director, Compensation Committee, Audit Committee
John Henry	72	Director, Audit Committee Chair
David Holewinski	80	Director, Compensation Committee, Audit Committee
Dr. Roberta Cook	65	Director, Compensation Committee
Stephen C. Ruffini	60	Director, Chief Financial Officer and Executive Vice President

No Family Relationships

There are no family relationships between any director and executive officer.

Business Experience and Background of Directors and Executive Officers

We believe that all the current members of our Board of Directors possess the professional and personal qualifications necessary for board service. The principal occupation and business experience, for at least the past five years, of each current director is as follows:

Michael A. DeGiglio is a founder of Village Farms International through predecessor companies and has served as its Chief Executive Officer since its inception in 1989. Mr. DeGiglio joined EcoScience Corporation (NASDAQ) a bio-technology company, in November 1992 upon its acquisition of Agro-Dynamics Inc., a company Mr. DeGiglio founded in 1984 and where he served as President since its inception. Additionally, he served as President and Chief Executive Officer of EcoScience from 1995 until its merger with Village Farms in 1999. Prior to commencing his business career in 1983, Mr. DeGiglio served on active duty in the United States Navy from 1976 through 1983, and in the Naval Air reserves from 1983 through 2001, retiring at the rank of Captain. Throughout his Naval career, Captain DeGiglio held multiple Department head positions, successfully completed a tour as Commanding Officer of a jet squadron, performed multiple tours overseas, accumulated over 5,000 hours of military flight time, and completed numerous senior management and military courses. Mr. DeGiglio received a Bachelor of Science degree in Aeronautical Science from Embry Riddle Aeronautical University (ERAU) in Daytona Beach, Florida. He has served as the former Chairman of the Presidential Advisory Board of ERAU.

John R. McLernon has been the Chairman and a Director of the Company since 2006. Mr. McLernon is President of McLernon Consultants Ltd. He is Honorary Chairman and Co-Founder of Colliers International (“Colliers”), a global commercial real estate services company operating from 485 offices in 65 countries. He served as Chairman and Chief Executive Officer of Colliers from 1977 to 2002 and as Chairman until December 2004. Mr. McLernon also serves as a director of several public and private companies as well as major nonprofit organizations, and is Chairman of A&W Revenue Royalties Income Fund and City Office REIT, Inc.

Christopher C. Woodward has been a Director of the Company since 2006. Mr. Woodward serves as chair or director of a number of private and public companies as well as charitable institutions. These include the P.A. Woodward Medical Foundation, Brentwood College, the Sea to Sky Gondola Corp., Cambie Surgeries Corp. and Great Western Brewery. He is currently Chair of the Keg Royalty Trust and he is past Chair of the Vancouver Coastal Health Authority. Mr. Woodward received his Bachelor of Arts (Economics) degree from the University of Western Ontario.

John P. Henry has been a director of the Company since 2006. From 1981 to 2000, Mr. Henry was employed by Ocean Spray Cranberries, Inc. (“Ocean Spray”), retiring as Senior Vice-President of Grower Relations and Chief Financial Officer in 2000. Ocean Spray grew from $400 million to $1.3 billion in revenues during his tenure. Mr. Henry also served as a Director of Nantucket Allserve Inc., a majority owned subsidiary of Ocean Spray. From

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1980 to 1981, he was Chief Financial Officer of Castle Toy Co, Inc., and prior to that, Mr. Henry was employed by Laventhol and Horwath providing auditing, consulting and tax services to large public and private companies. He received a Bachelor of Science degree in Business Administration and a Masters in Taxation degrees from Bryant College in Smithfield, Rhode Island. Mr. Henry is a non-practicing Certified Professional Accountant in the State of Rhode Island.

David Holewinski has been a Director of the Company since 2011. Mr. Holewinski is a Management Consultant. He served as a director of Agro Power Development Inc. (“APDI”) from 2004 until October 2006. Between 1995 and 2000, Mr. Holewinski served as Senior Vice President of Business Development for APDI. Mr. Holewinski has co-founded two biotechnology companies, co-founded a company with computer and internet security, as well as co-founded a company with novel precast concrete technology for the construction industry. Between 1983 and 1988, Mr. Holewinski was a Manager of Business Development for ConAgra Foods, Inc. Mr. Holewinski has a Bachelor of Arts degree from Pennsylvania State University and a Master of Business Administration degree from Harvard University.

Dr. Roberta Cook has been a Director of the Company since 2016. On July 1, 2016, Dr. Cook retired from her 31-year position as a Cooperative Extension Marketing Economist in the Department of Agricultural and Resource Economics (ARE) at the University of California, Davis. She is currently an Emerita faculty member, and consults on a broad range of fresh produce marketing issues. She has a PhD in Agricultural Economics from Michigan State University. She served on the board of directors of Ocean Mist Farms, Naturipe Farms and Sunkist, as well as numerous other advisory boards in the produce industry. For nearly a decade, Dr. Cook was Faculty Director of the California Agribusiness Executive Seminar co-sponsored by University of California, Davis and Wells Fargo Bank. In 2011, The Packer honored her as one of the top 25 produce industry leaders.

Stephen C. Ruffini has been a Director of the Company since 2014 and Chief Financial Officer of the Company since 2009. From 2001 to 2005, Mr. Ruffini was a Director and Chief Financial Officer of HIT Entertainment, Ltd., which was the preeminent young children’s entertainment company listed on the London Stock Exchange. From 2006 to 2008, he was the Chief Financial Officer of Performing Brands, which was a publicly listed U.S. company in the beverage industry. He was a Tax Manager with Arthur Andersen from 1984 to 1993. Mr. Ruffini has a Masters of Business Administration degree from the University of Texas and a Bachelor of Business Administration degree from Southern Methodist University.

Involvement in Certain Legal Proceedings

During the past ten years, our directors and executive officers have not been involved in any bankruptcy, criminal convictions or proceedings, order or judgement or decree limiting the person from engaging in any type of business or securities, nor found by a court or the SEC to have violated a Federal or state securities law.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership with the SEC. Such persons are required by SEC regulation to furnish us with copies of all Section 16(a) forms that they file.

To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations form our directors and executive officers, we believe that all the initial Section 16(a) filing requirements for our executive officers, directors and greater than 10% shareholders were filed in a timely manner. Prior to January 1, 2020, our officers and directors were exempt from Section 16(a) reporting in reliance on our prior status as a “foreign private issuer” under SEC rules and regulations, and accordingly, no Section 16(a) reports for our officers and directors were due during the calendar year ended December 31, 2019.

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Code of Ethics

We have adopted a code of ethics that applies to all our employees, officers and directors, including our Chief Executive Officer and Chief Financial Officer. The Code of Ethics is available on our website at http://www.villagefarms.com under the Corporate Governance section of our Investor Relations page. We intend to disclose future amendments to, or waiver of, a provision of our code of ethics to our directors or executive officers on our website.

Audit Committee

The Company has a separately designated standing audit committee established in accordance with the Exchange Act. The Audit Committee reviews with management and Company’s independent registered public accounting firm our financial statements, the accounting principles applied in their preparation, the scope of the audit, any comments made by the independent registered public accounting firm upon the financial condition of the Company and its accounting controls and procedures and such other matters as the Audit Committee deems appropriate. The Audit Committee’s charter is available on our website, http://www.villagefarms.com, under the Corporate Governance section of our Investor Relations page.

The Audit Committee consists of three directors: Mr. Henry (Chair), Mr. Woodward and Mr. Holewinski. The Board has determined that each member of the Audit Committee is independent and a financial expert.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

We are currently considered an emerging growth company for purposes of the SEC’s executive compensation disclosure rules. In accordance with such rules, we are required to provide a Summary Compensation Table for two years for three “Named Executive Officers” with respect to 2019. The Summary Compensation Table below provides a summary of compensation earned by each of our chief executive officer, our chief financial officer and our next-most highly compensated employee in 2018 and 2019 (collectively, the “Named Executive Officers” or “NEOs”), as determined pursuant to the SEC’s disclosure requirements for executive compensation in Item 402 of Regulation S-K.

SUMMARY COMPENSATION TABLE

(in United States dollars)

Name and Principal Position	Year		Salary		Bonus		Share-Based Awards(1)		Option- Based Awards(2)		All Other Compensation			Total Compensation
Michael A. DeGiglio,		2019	$	661,250		—	$	543,407	$	798,525	$	25,713	(3)	$	2,028,895
Chief Executive Officer		2018	$	639,687		—	$	1,827,072		—	$	25,659	(3)	$	2.492,418
Stephen C. Ruffini,		2019	$	402,500		—	$	543,407	$	798,525	$	21,582	(4)	$	1,766,014
Executive Vice President and Chief Financial Officer		2018	$	389,375		—	$	1,225,475		—	$	62,400	(4)	$	1,677,250
Brett Wiley,		2019	$	290,000		—		—		—	$	3,625	(5)	$	293,625
Senior Vice President – Produce		2018	$	282,500		—		—		—	$	3,531	(5)	$	296,031
Sales and Operations		2017	$	275,000		—		—		—	$	3,438	(5)	$	278,438

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(1) The amounts listed in this column represent the grant date fair value of the Performance-based restricted share units granted to Named Executive Officers in 2019 and 2018, some of which have vested based on performance events involving our cannabis joint venture and have been settled in Common Shares and some of which are still unvested and will only vest if certain performance events are achieved. The grant date fair value is calculated based on the number of Performance-based restricted share units granted multiplied by the price of the Common Shares on the date of grant, converted into United States dollars based on the Bank of Canada closing exchange rate on the grant date.

(2) The amounts listed in this column represent the grant date fair value of the Options granted to Named Executive Officers as calculated using the Black-Scholes option pricing model resulting in a value of $7.985 per option.    

(3) Mr. DeGiglio received a $24,000 auto allowance and $1,713 in employer 401(k) matches during 2019 and a $24,000 auto allowance and $1,659 in employer 401(k) matches during fiscal 2018.

(4) Mr. Ruffini received $4,025 and $3,894 in employer 401(k) matches during fiscal 2019 and 2018, respectively Additionally, Mr. Ruffini received a distribution from our 409A deferral plan of $17,557 in 2019 and $58,506 in 2018, which represents prior year wages that Mr. Ruffini deferred into a future period pursuant to the executive deferral plan.

(5) Mr. Wiley received $3,625 and $3,531 in employer 401(k) matches during fiscal 2019 and 2018, respectively.    

Narrative Description of Summary Compensation Table

Total compensation paid to the Named Executive Officers is comprised of three principal components: Salary, Bonus and Equity-based awards (performance share grants and options). Salary is generally fixed and does not vary based on our financial or operational performance. Bonuses, which have not been paid in over three years, is strictly based exceeding our operating budget for a given fiscal year and is based on a percentage of the NEO’s salary. Equity based compensation is two-fold: stock options are granted at the Compensation Committees discretion with a 3-year vesting schedule (33% per year) and performance stock grants are awarded to the NEO’s based on specific short term or longer-term achievement of certain strategic objectives. Our Compensation Committee reviews total compensation, including a review by an outside compensation consulting firm, to see if NEO’s compensation packages are in line with peer companies. For calendar years 2018 and 2019, the Compensation Committee determined that our NEO compensation program was generally competitive with the members of our peer group.

All Other Compensation

The Company maintains a 401(k) Retirement Plan covering all of its eligible employees. Matching contributions made by the Company are determined based on our matching of 25% of up to 4% of an eligible employee’s contribution to the 401(k) Plan. The Company also maintains a Section 409A deferral compensation plan allowing NEO and other executives to defer a portion of their base salary to future years. There is no matching employer contribution to our 409A plan. Any compensation shown in the Summary of Compensation Table represents base compensation from prior years paid in the year shown. Additionally, the Company paid an auto allowance to Mr. DeGiglio as shown in the Summary Compensation Table.

Employment Agreements

The Company had an employment agreement with Mr. DeGiglio that expired on December 31, 2019. At this time the Compensation Committee and Mr. DeGiglio are negotiating a new agreement, and currently Mr. DeGiglio is being compensated his base salary plus benefits as previously provided under his now-expired employment agreement. Mr. Ruffini and Mr. Wiley each currently have an employment agreement. Each employment agreement contains standard terms for nondisclosure of proprietary information, inventions assignment and non-competition terms, as well as, if necessary, complying with Section 409A(a)(2)(B) of the Internal Revenue Code which may cause the delay of any severance payments until the first business day of the seventh month following termination.

Employment Agreement – Mr. DeGiglio

Mr. DeGiglio’s employment agreement was effective January 1, 2017 for a term of three years, and it expired on December 31, 2019. Under the terms of the employment agreement, Mr. DeGiglio continues to receive his base salary plus benefits for an additional 36 months after expiration.

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Under the employment agreement, Mr. DeGiglio was entitled to receive a base salary, subject to such increases but not decreases as the Compensation Committee determines and an opportunity to earn a short-term incentive plan (bonus) of up to 80% of Mr. DeGiglio’s then base salary and a monthly auto allowance. Additionally, Mr. DeGiglio was entitled to participate in the Compensation Plan (as defined below), which provides for stock options and stock grants, as well as participation in our 401(k) Plan and Section 409A deferral plan as well as other welfare benefit plans including health and dental.

Pursuant to Mr. DeGiglio’s employment agreement, Mr. DeGiglio was entitled to receive severance benefits in the following manner. If Mr. DeGiglio were to die or become disabled during the term of his employment agreement, he would have been entitled to receive his base compensation and benefits for the greater of the remaining term of the agreement or 12-months. Mr. DeGiglio was also entitled to a lump sum payment of 36 months of his then base salary payable within thirty days of his last date of employment, if terminated without cause, as well participation in any welfare benefit plans for a 36-month period. Under the agreement, the Company could terminate Mr. DeGiglio for cause with no severance payments and Mr. DeGiglio could terminate his employment with the Company by providing the Chairman with 30-days’ notice.

Employment Agreement – Mr. Ruffini

Mr. Ruffini’s employment agreement was effective April 1, 2017 for a term of three years. If the term is not extended for an additional three-year term or a new employment agreement is not entered into, Mr. Ruffini shall continue to receive his base salary plus benefits for an additional 18 months. The employment agreement entitles Mr. Ruffini to receive a base salary, subject to such increases but not decreases as the CEO and Compensation Committee shall determine as well as an opportunity to earn a short-term incentive plan (bonus) of up to 50% of Mr. Ruffini’s then base salary based on 80% quantitative measures and 20% qualitative measures. Additionally, Mr. Ruffini is entitled to participate in the Compensation Plan (as defined below), which provides for stock options and stock grants, as well as participation in our 401(k) Plan and Section 409A deferral plan as well as other welfare benefit plans including health and dental.

Pursuant to Mr. Ruffini’s employment agreement, Mr. Ruffini is entitled to receive severance benefits in the following manner. If Mr. Ruffini were to die or become disabled during the term of his employment agreement, he is entitled to receive his base compensation and benefits for the greater of the remaining term of the agreement or 12-months. Mr. Ruffini is also entitled to a lump sum payment of 18 months of his then base salary payable within thirty days of his last date of employment, if terminated without cause, as well participation in any welfare benefit plans for an 18-month period. Mr. Ruffini, as a result of termination without cause or death or disability or good reason, is entitled to a prorated bonus for the portion of the calendar year he was employed. The Company may terminate Mr. Ruffini for cause with no severance payments and Mr. Ruffini may terminate his employment with the Company by providing the Chief Executive Officer with 30-days’ notice.

Mr. Ruffini may also terminate his employment agreement for good reason by providing the Chief Executive Office with a 60-day notice. Good Reason shall mean i) a change materially adverse to Mr. Ruffini’s position, functions, powers or responsibilities, ii) a breach of the employment agreement by the Company, iii) a change in location from our Lake Mary, Florida office or iv) a change in control of the Company.

Employment Agreement – Mr. Wiley

Mr. Wiley’s employment agreement was effective June 1, 2018 for a term of two years. If the term is not extended for an additional two years or a new employment agreement is not entered into, Mr. Wiley shall continue to receive his base salary plus benefits for an additional 2 months. The employment agreement entitles Mr. Wiley to receive a base salary, subject to such increases as the CEO shall determine as well as an opportunity to earn a short-term incentive plan (bonus) of up to 30% of Mr. Wiley’s then base salary. Additionally, Mr. Wiley is entitled to participate in the Compensation Plan (as defined below), which provides for stock options and stock grants, as well as participation in our 401(k) Plan and Section 409A deferral plan as well as other welfare benefit plans including health and dental.

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Pursuant to Mr. Wiley’s employment agreement, Mr. Wiley is entitled to receive severance benefits in the following manner. If Mr. Wiley were to die or become disabled during the term of his employment agreement, he is entitled to receive a lump sum equal to six months of his base salary. Mr. Wiley is also eligible to a salary continuation of 12 months of his then base salary payable in the normal course, subject to the Company receiving a full release, for termination without cause by the Company or for good reason by the Employee. Mr. Wiley can terminate his employment agreement for good reason which shall mean i) a change materially adverse to Mr. Wiley’s position, functions, powers or responsibilities or ii) a breach of the employment agreement by the Company, by providing the Company with a 30-day notice. Mr. Wiley does not have any change-in-control benefits in his employment agreement.

Share-Based Compensation Plan

The Company adopted an equity compensation plan (the “Compensation Plan”), effective January 1, 2010, on completion of its conversion into a corporation, in order to attract and retain directors, officers, employees and service providers to the Company and to motivate them to advance the interests of the Company by affording them with the opportunity to acquire an equity interest in the Company. The Compensation Plan has been drafted to comply with the policies of the Toronto Stock Exchange (the “TSX”) as they exist at the date of this Information Circular. The Compensation Plan was most recently approved by the Shareholders on June 14, 2018. The following information is intended as a summary of the Compensation Plan.

The TSX permits the adoption of a “rolling” type of share-based compensation plan whereby the number of shares available for issuance under the plan will not be greater than a rolling maximum percentage of the outstanding shares. The Compensation Plan provides that the number of Common Shares reserved for issuance upon the exercise or redemption of awards granted under the Compensation Plan is a rolling maximum of ten percent (10%) of the outstanding Common Shares at any point in time. Currently, the Company has 56,250,419 Common Shares outstanding. Therefore, up to 5,625,419 Common Shares may be reserved for issuance under the Compensation Plan. The purpose of adopting a “rolling” type of share- based compensation plan is to ensure that a sufficient number of Common Shares remain issuable under the Compensation Plan to meet the overall objective of the Compensation Plan. Any exercise, redemption, expiry or lapse of awards will make new grants available under the Compensation Plan effectively resulting in a “re-loading” of the number of awards available to be granted. The Compensation Plan must be approved by shareholders every three years.

The Compensation Plan is an omnibus share-based compensation plan, pursuant to which the Company is authorized to award Options, stock appreciation rights, deferred share units, restricted share units (performance based), restricted stock and other share-based awards, which may be settled in shares issued from the treasury or in cash. To date, only Options and Performance based restricted share units have been awarded under the Compensation Plan. As of December 31, 2019, Options to purchase 2,452,666 Common Shares were outstanding, and 739,000 performance-based restricted share units were outstanding.

The Compensation Plan authorizes the Board (or a committee of the Board if so authorized by the Board) to grant awards to “Eligible Persons”. Eligible Persons are directors, officers, employees, consultants, management, company employees and any other service providers of the Company or its affiliates.

The aggregate number of Common Shares issued to insiders of the Company within any one (1) year period under the Compensation Plan, together with any other security-based compensation arrangement, cannot exceed 10% of the outstanding Common Shares. In addition, the aggregate number of Common Shares issuable to insiders of the Company at any time under the Compensation Plan, together with any other security-based compensation arrangement, cannot exceed ten percent (10%) of the outstanding Common Shares. There are otherwise no limits on the maximum number of awards that may be issued to any single Eligible Person.

The date of grant, the number of Common Shares, the term, the vesting period and any other terms and conditions of awards granted pursuant to the Compensation Plan are determined by the Board, subject to the express provisions of the Compensation Plan.

The exercise price of an Option and a stock appreciation right will be the closing price of the Common Shares on the TSX for the trading day immediately preceding the date of the grant. There is no exercise price for other awards. The purchase price for restricted stock will generally be nil, although past service may be treated as consideration for the grant of restricted stock.

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Unless otherwise specified by the Board at the time an Option is granted under the Compensation Plan, (i) the term of the Option will be ten (10) years from the date of the grant (which is the maximum allowable term under the Compensation Plan), unless the expiry of the term falls during a blackout (or within ten (10) days following the end of a blackout) from trading in the securities of the Company imposed on certain persons including the optionee pursuant to any policies of the Company; and where such a blackout applies, the expiry of the term of the Option shall automatically be extended to ten (10) business days following the end of the blackout; and (ii) the Option will vest as to one-third (¹⁄₃) on each of the first three anniversaries of the date of grant.

Subject to the terms of the award agreement and the discretion of the Company to accelerate the vesting of an award, or extend the term of an award (but not to later that the original expiry date of the awards), awards will terminate immediately upon the holder ceasing to be an Eligible Person, provided however, in the event of: (i) death, the vested award continues to be exercisable or redeemable for a period up to six (6) months from the date of death, or (ii) termination without cause or resignation, the vested award continues to be exercisable or redeemable for a period up to ninety (90) days from the date of termination. No award is exercisable following expiry of the term.

For stock appreciation rights, the market appreciation is the fair market value of a Common Share, based on the closing price on the date prior to the exercise date, minus the exercise price. Stock appreciation rights can be granted in relation to an Option either at the date of grant or at a later date.

For stock appreciation rights which are granted in relation to an Option, the vesting, term and other terms and conditions will be the same as for the related Option and the exercise of the stock appreciation right will result in a cancellation of the related Option and vice versa.

For stock appreciation rights which are not granted in relation to an Option and for all other awards, the vesting, redemption and expiry terms will be set out in the award agreement and the terms and conditions of the award will be as set out in the award agreement, or as otherwise set out in the Compensation Plan.

Performance-based restricted share units vest as certain performance related events are achieved. Once the Participant is vested, the Participant may elect to receive the vested units in the form of Common Shares. If the performance related event does not occur or does not occur in the time provided in the grant, the Performance-based restricted share units expire and will be cancelled.    

In the event an offer is made for the Common Shares which would result in the offeror exercising control of the Company within the meaning of applicable securities laws, the Board may, in its discretion, provide that any award under the Compensation Plan then outstanding which are not otherwise exercisable may be exercised, in whole or in part, so as to allow the holder to tender the Common Shares received upon such an exercise. No financial assistance is provided to any Eligible Person to facilitate the purchase of Common Shares under the Compensation Plan.

The Compensation Plan contains a formal amendment procedure. The Board may amend certain terms of the Compensation Plan without requiring the approval of the Company shareholders, subject to those provisions of applicable law and regulatory requirements (including the rules, regulations and policies of the TSX), if any, that require the approval of Shareholders. Amendments not requiring shareholder approval include, without limitation: altering, extending or accelerating Option vesting terms and conditions; amending the termination provisions of an Option; accelerating the expiry date of an Option; determining adjustments pursuant to the provisions of the Compensation Plan concerning corporate changes; amending the definitions contained in the Compensation Plan; amending or modifying the mechanics of exercising or redeeming awards; amending provisions relating to the administration of the Compensation Plan; making “housekeeping” amendments, such as those necessary to cure errors or ambiguities contained in the Compensation Plan; effecting amendments necessary to comply with the provisions of applicable laws; and suspending or terminating the Compensation Plan.

The Compensation Plan specifically provides that the following amendments require shareholder approval: increasing the number of Common Shares issuable under the Compensation Plan, except by operation of the “rolling” maximum reserve; amending the Compensation Plan which amendment could result in the aggregate number of Common Shares issued to insiders within any one year period or issuable to insiders at any time under the Compensation Plan, together with any other security based compensation arrangement, exceeding 10% of the outstanding Common Shares; extending the term of any award beyond the expiry of the original term of the award; reducing the exercise price of

60

an Option or cancelling and replacing Options with Options having a lower exercise price; amending the class of Eligible Persons which would have the potential of broadening or increasing participation in the Compensation Plan by insiders; amending the formal amendment procedures; and making any amendments required to be approved by our shareholders under applicable law.

Outstanding Option Awards at Fiscal Year-End

The following table sets out the option and performance-based restricted share unit awards outstanding for the Named Executive Officers as at December 31, 2019.

Name	Number of Common Shares Underlying Unexercised Options Exercisable		Number of Common Shares Underlying Unexercised Options Unexercisable	Option Exercise Price (C$)1		Option Expiration Date	Number of Performance Shares That Have Not Vested		Market Value of Performance Shares That Have Not Vested (US$)2
Michael A. DeGiglio		100,000		$	0.98	March 14, 2022		230,000	$	1,432,900
		100,000		$	1.14	March 18, 2024
		100,000		$	1.10	March 29, 2026
		—	100,000	$	14.00	March 12, 2029
Stephen C. Ruffini		50,000		$	0.95	May 20, 2021		170,000	$	1,059,100
		50,000		$	0.98	March 13, 2022
		100,000		$	0.65	March 14, 2023
		75,000		$	1.14	March 18, 2024
		—	100,000	$	14.00	March 12, 2029
Brett Wiley		50,000		$	0.95	May 20, 2021
		27,000		$	0.85	September 26, 2023
		50,000		$	1.19	June 30, 2026

(1) The Option Exercise Price is determined by the fixed Canadian option exercise price times the US/ CA dollar exchange rate of $0.769 on December 31, 2019 rounded to the nearest US penny.

(2) The Market Value of the Performance Share not vested (not earned) is based on the closing stock price of VFF on Nasdaq on December 31, 2019 of US$6.23.

Director Compensation

Each non-management director of the Company receives a retainer of C$18,000 per year, payable in monthly installments of C$1,500, plus C$1,500 per meeting and C$750 per teleconference. The Chairman receives an additional annual fee of C$10,000 payable in monthly installments. The Audit Committee Chairman receives an additional C$5,000 per year, payable monthly. The Compensation Committee Chairman receives an additional C$3,000 per year, payable monthly. The Audit Committee members receive an annual fee of C$6,000, payable monthly, plus C$1,000 per meeting and C$500 per teleconference. The Compensation Committee members receive an annual fee of C$3,000, payable monthly, plus C$1,000 per meeting and C$500 per teleconference. Directors are also entitled to be reimbursed for reasonable out of pocket expenses incurred by them in connection with their services as directors. Directors of the Company are also eligible to participate in the Compensation Plan. Options were granted to non-management directors in 2019, as well as two non-management directors also received stock performance grants in 2019 for specific strategic objectives, one of which was earned in 2019 and one of which is unearned.

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The following table provides compensation information for the calendar year ended December 31, 2019 for each non-employee member of the Board.

Name	Fees Earned		Share- Based Awards(3)		Option- Based Awards(4)		Total
John R. McLernon(1)	$	33,998	$	271,733	$	159,705	$	465,436
Christopher C. Woodward(1)	$	28,896	$	271,733	$	159,705	$	460,334
John P. Henry(2)	$	31,717		—	$	119,779	$	151,496
Dave Holewinski(2)	$	30,211		—	$	119,779	$	149,990
Roberta Cook(2)	$	21,165		—	$	79,852	$	101,017

⁽¹⁾  Paid in Canadian dollars. The US dollar amount shown was converted monthly at the average exchange rate for each month as posted by the Bank of Canada.

⁽²⁾  Paid in US dollars.

⁽³⁾ The amounts listed in this column represent the grant date fair value of the Performance-based restricted share units granted to the non-employee director based on performance events involving our cannabis joint venture and other global cannabis business opportunities of which our cannabis joint venture event has been earned and the other global business opportunity is still in preliminary discussion. The grant date fair value is calculated based on the number of Performance-based restricted share units granted multiplied by the price of the Common Shares on the date of grant, converted into United States dollars based on the Bank of Canada closing exchange rate on the grant date.

⁽⁴⁾ The amounts listed in this column represent the grant date fair value of the Options granted to Named Executive Officers as calculated using the Black-Scholes option pricing model resulting in a value of $7.985 per option.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCHOLDER MATTERS

The following table sets forth information as of March 24, 2020 with respect to beneficial ownership of our common stock by (i) each director and NEO, (ii) each person known by the Company to own beneficially more than 5% of our outstanding common stock and (iii) all directors and NEO as a group. This table has been prepared based on 56,250,419 shares of Common Stock outstanding as of April 1, 2020. We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws. In addition, the rules include shares of our common stock issuable pursuant to the exercise of stock options and performance stock grants that are either immediately exercisable or exercisable within 60 days of March 24, 2020. These shares are deemed to be outstanding and beneficially owned by the person holding those options for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

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Name and address of beneficial owner	Ownership or Control Over Common Shares		Percentage if Common Stock beneficially owned
Greater than 5% Stockholders:
Michael A. DeGiglio (also a Director and NEO) c/o Village Farms 90 Colonial Center Parkway Suite 100 Lake Mary, FL 32746(1)		9,774,882		17.4	%
Directors and Named Executive Officers:(2)
John P. Henry(3)		102,000		*
John R. McLernon(4)		182,234		*
Christopher C. Woodward(5)		222,367		*
David Holewinski(6)		200,000		*
Stephen C. Ruffini(7)		972,732		1.7	%
Dr. Roberta Cook(8)		48,333		*
Brett Wiley(9)		151,200		*
All Directors and Executive Officers as Group (7)		11,502,548		20.4	%

63

* Denotes less than 1% beneficial ownership.

(1) Consists of 9,441,549 Common Shares and options to purchase 333,333 Common Shares that are exercisable within 60 days of March 24, 2020.

(2) The address of each of the directors and NEOs is c/o Village Farms International, 4700 80th Street, Delta, British Columbia, Canada, V4K 3N3.

(3) Consists of 35,000 Common Shares and options to purchase 67,000 Common Shares that are exercisable within 60 days of March 24, 2020.

(4) Consists of 108,900 Common Shares and options to purchase 73,334 Common Shares that are exercisable within 60 days of March 24, 2020.

(5) Consists of 153,700 Common Shares and options to purchase 68,667 Common Shares that are exercisable within 60 days of March 24, 2020.

(6) Consists of 133,000 Common Shares and options to purchase 67,000 Common Shares that are exercisable within 60 days of March 24, 2020.

(7) Consists of 664,399 Common Shares and options to purchase 308,333 Common Shares that are exercisable within 60 days of March 24, 2020.

(8) Consists of 20,000 Common Shares and options to purchase 28,333 Common Shares that are exercisable within 60 days of March 24, 2020.

(9) Consists of 24,200 Common Shares and options to purchase 127,000 Common Shares that are exercisable within 60 days of March 24, 2020.

Securities Authorized for Issuance Under Equity Compensation Plan

The following table presents information as of December 31, 2019 with respect to compensation plans under which our Common Shares may be issued. For information regarding our Compensation Plan, see Item 11, “Executive Compensation—Share-Based Compensation Plan” above.

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Plan Category	(a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights		(b) Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights		(c) Number of Securities Remaining Available for Future Issuance Under the Equity Compensation Plans (Excluding Securities Reflected in Column (a))
Equity Compensation Plans Approved by Stockholders		3,191,666	C$	3.93		2,074,001
Equity Compensation Plans Not Approved by Stockholders		—		—		—
Total		3,191,666				2,074,001

(1) Includes performance-based restricted share units that are exercisable for no consideration. Excluding performance-based restricted share units, the weighted-average exercise price reported in this column would be CAD$5.12.

ITEM 13. CERTAIN RELATIONSHIPS and RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Certain Relationships and Related Transactions

Except as described below, there have been no transactions since January 1, 2018 to which the Company has been a participant in which any of our directors, NEO or holders of more than five percent of our capital stock, or any members of their immediate family, had or will have a direct or indirect material interest, other than compensation arrangements which are described under “Executive Compensation” and “Director Compensation” as described in this Form 10-K.

Securityholders’ Agreement with Mr. DeGiglio

Michael DeGiglio, our Chief Executive Officer, is party to the Amended and Restated Securityholders’ Agreement, by and among the Company, VF Operations Canada Inc., Mr. DeGiglio, Albert Vanzeyst and Kenneth Hollander and certain related entities, dated December 31, 2009 (the “Securityholders’ Agreement”), pursuant to which the Company has granted to Mr. DeGiglio certain pre-emptive rights, as well as “demand” and “piggy back” registration rights. These rights enable Mr. DeGiglio to require the Company to file a prospectus (in the case of a demand registration) and otherwise assist with a public offering of Common Shares, subject to certain limitations. In the event of a “piggy back” offering, our financing requirements are to take priority. Subject to the approval of the TSX, in the event that the Company decides to issue equity securities or securities convertible into or exchangeable for equity securities of the Company other than to officers, employees, consultants or directors of the Company or any subsidiary of the Company pursuant to a bona fide incentive compensation plan, the Securityholders’ Agreement provides, among other things, Mr. DeGiglio with pre-emptive rights to purchase such number of newly issued equity securities in order to maintain his pro rata ownership interest in the Company.

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Independence of the Board and Board Committees

Our Board of Directors is currently composed of seven directors, five of whom (Ms. Cook, Mr. McLernon, Mr. Henry, Mr. Holewinski and Mr. Woodward) meet the independence standards under the listing standards of Nasdaq. Each member of the Audit Committee and Compensation Committee also meet such independence standards, and in the case of Audit Committee members, the additional independence requirements of Rule 10A-3 of the Exchange Act). Each year the Board of Directors reviews the composition of the Board of Directors, the Audit Committee and the Compensation Committee, and assesses whether a Board or Committee member is “independent” under the applicable standards. In making such determinations, the Board of Directors has considered all transactions, relationships or arrangements involving the directors, whether or not disclosed as “related party transactions” above.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

FEE CATEGORY	2019		2018
Audit Fees (1)	C$	513,500	C$	341,827
Audit-related fees (2)	C$	100,047	C$	71,400
Tax Fees (3)	C$	67,500	C$	254,246
Total fees C$	C$	681,047	C$	667,473

(1) Audit fees include fees for professional services provided by PwC in connection with the audit of our consolidated financial statements, review of our quarterly financial statements and related services such as work in connection with registration statements.

(2) Audit-related fees include fees billed for assurance and related services reasonably related to the performance of the audit and other US securities rules and regulations.

(3) Tax fees include fees for tax compliance, advice and planning.

Policy on Audit Committee Pre-Approval or Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firms

Our Audit Committee generally pre-approves all audit and permitted non-audit and tax services provided by independent registered public accounting firms. Pre-approval is detailed as to the particular service and is generally subject to a specific budget. The independent registered public accounting firm and management are required to periodically report to the Audit Committee regarding the extent of services performed to date. All of the services relating to the fees described in the table were approved by the Audit Committee.

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PART IV.

ITEM 11. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) Documents filed as part of this report.

1. Financial Statements. We have included the following financial statements as part of this Annual Report, including the financial statements of Pure Sunfarms, as required by Rule 3-09 of Regulation S-X.

Village Farms:

	Page
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Statements of Financial Position	F-2
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)	F-3
Consolidated Statements of Changes in Shareholders’ Equity	F-4
Consolidated Statements of Cash Flows	F-5
Notes to Financial Statements	F-6

Pure Sunfarms:

	Page
Report of Independent Registered Public Accounting Firm	F-29
Consolidated Statements of Financial Position	F-30
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)	F-31
Consolidated Statements of Changes in Equity	F-32
Consolidated statements of Cash Flows	F-33
Notes to Financial Statements	F-35

2. Financial Statement Schedules.

All schedules are omitted because they are not applicable, or the required information is shown in the Financial Statements or notes thereto.

(b) Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this report:

3.1	Articles of Amalgamation (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-8 (File No. 333-230298) filed on March 15, 2019)
3.2	By-laws (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-8 (File No. 333-230298) filed on March 15, 2019)
3.3	By-laws amendment (incorporated by reference to Exhibit 99.1 to the Company’s Report on Form 6-K filed on December 20, 2019)
4.1	Specimen Common Share Certificate (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-8 (File No. 333-230298) filed on March 15, 2019)
4.2	Description of Common Shares
4.3	Securityholders’ Agreement, as amended and restated on December 31, 2009
10.1	Village Farms International, Inc. Share-Based Compensation Plan adopted on December 31, 2009 +

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10.2	Credit Facility Agreement by and between Village Farms Canada Limited Partnership and Farm Credit Canada, dated March 28, 2013
10.3	Credit Agreement by and between Village Farms Canada Limited Partnership and Village Farms, L.P. and Bank of Montreal, dated August 29, 2013.
10.4	Amendment to Credit Agreement by and between Village Farms Canada Limited Partnership and Village Farms, L.P. and Farm Credit Canada, dated March 24, 2016.
10.5	Second Amendment to Credit Agreement by and between Village Farms Canada Limited Partnership and Village Farms, L.P. and Bank of Montreal, dated May 31, 2016.
10.6	Delta 1 – Option to Lease Agreement by and between the registrant, Village Farms Canada Limited Partnership, 1121371 B.C. LTD. and Emerald Health Botanicals Inc., dated June 6, 2017. ^
10.7	Shareholders Agreement by and between the registrant and Emerald Health Therapeutics, Inc., dated June 6, 2017. ^
10.8	Settlement Agreement and Mutual Release by and between the registrant, Emerald Health Therapeutics Inc., Emerald Health Therapeutics Canada Inc., and Pure Sunfarms Corp., dated March 2, 2020. ^
10.9	Employment Agreement by and between Bret Wiley and the Company. + (1)
21.1	List of Subsidiaries.
23.1	Consent of Independent Registered Accounting Firm PricewaterhouseCoopers LLP
24.1	Powers of Attorney (included on signature page).
31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1*	The following financial statements from the Village Farms International, Inc. Annual Report on Form 10-K for the years ended December 31, 2019, 2018 and 2017, formatted in eXtensible Business Reporting Language (XBRL): (i) statements of operations and comprehensive income, (ii) balance sheets, (iii) statements of shareholders’ equity, (iv) statements of cash flows, and (v) the notes to the financial statements.

+ Indicates management contract or compensatory plan.

^ Certain confidential portions of this exhibit have been redacted pursuant to Item 601(b)(10) of Regulation S-K. The Company agrees to furnish to the Securities and Exchange Commission a copy of any omitted portions of the exhibit upon request.

* In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act, is deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise is not subject to liability under these sections

⁽¹⁾  When entered into, each of the new employment agreements for our Chief Executive Officer and Chief Financial Officer will be filed as an exhibit to a Current Report on Form 8-K or in the Company’s next periodic report under Section 13(a) of the Exchange Act.

ITEM 12. FORM 10-K SUMMARY

None.

68

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 1st day of April 2020.

Village Farms International, Inc.
By:	/s/ Michael A. DeGiglio
	Name:	Michael A. DeGiglio
	Title:	Chief Executive Officer and Director

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael A. DeGiglio and Stephen C. Ruffini, and each of them, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on April 1, 2020.

Signature	Title
/s/ Michael A. DeGiglio Michael A. DeGiglio	Chief Executive Officer and Director (Principal Executive Officer)
/s/ Stephen C. Ruffini Stephen C. Ruffini	Chief Financial Officer and Director (Principal Financial and Accounting Officer)
/s/ John R. McLernon John R. McLernon	Director, Chair
/s/ Dr. Roberta Cook Dr. Roberta Cook	Director
/s/ John P. Henry John P. Henry	Director
/s/ Dave Holewinski David Holewinski	Director
/s/ Christopher C. Woodward Christopher C. Woodward	Director

69

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Village Farms International, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial position of Village Farms International, Inc. and its subsidiaries (together, the Company) as of December 31, 2019 and 2018, and the related consolidated statements of income (loss) and comprehensive income (loss), changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2019, including the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Chartered Professional Accountants

Vancouver, Canada

April 1, 2020

We have served as the Company’s auditor since 2006.

F-1

Village Farms International, Inc.

Consolidated Statements of Financial Position

(In thousands of United States dollars)

	December 31, 2019			December 31, 2018
ASSETS
Current assets
Cash and cash equivalents	$	11,989		$	11,920
Trade receivables, less allowance for doubtful accounts of $5 and $50, respectively		8,997			11,292
Inventories (note 2)		15,918			24,956
Amounts due from joint venture (note 12)		15,418			10,873
Other receivables		342			332
Income tax receivable		713			—
Prepaid expenses and deposits		1,259			889
Total current assets		54,636			60,262
Non-current assets
Property, plant and equipment (note 4)		63,158			72,188
Operating right-of-use assets (note 8)		3,485			—
Finance right-of-use assets (note 8)		97			176
Investment in joint ventures (note 5)		41,334			6,341
Note receivable - joint ventures (note 12)		10,865			—
Deferred tax asset		7,999			274
Other assets		1,834			2,207
Total assets	$	183,408		$	141,448
LIABILITIES
Current liabilities
Line of credit	$	2,000		$	2,000
Trade payables		12,653			14,601
Current maturities of long-term debt (note 6)		3,423			3,414
Operating lease liabilities - current (note 8)		875			—
Finance lease liabilities - current (note 8)		61			78
Accrued liabilities (note 7)		3,017			3,509
Total current liabilities		22,029			23,602
Non-current liabilities
Long-term debt (note 6)		28,966			32,261
Deferred tax liability (note 13)		1,873			—
Operating lease liabilities - long term (note 8)		2,690			—
Finance lease liabilities - long term (note 8)		34			102
Other liabilities		1,357			1,050
Total liabilities		56,949			57,015
Commitments and contingencies (note 9)
SHAREHOLDERS’ EQUITY
Common stock, no par value per share - unlimited shares authorized; 52,656,669 shares issued and outstanding at December 31, 2019 and 47,642,672 shares issued and outstanding at December 31, 2018		98,333			60,872
Additional paid in capital		4,351			2,198
Accumulated other comprehensive loss		(475	)		(562	)
Retained earnings		24,250			21,925
Total shareholders’ equity		126,459			84,433
Total liabilities and shareholders’ equity	$	183,408		$	141,448

The accompanying notes are an integral part of these consolidated financial statements.

F-2

Village Farms International, Inc.

Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

For the Years Ended December 31, 2019, 2018 and 2017

(In thousands of United States dollars, except per share data)

	2019			2018			2017
Sales (note 14)	$	144,568		$	150,000		$	158,406
Cost of sales		(151,913	)		(140,683	)		(144,433	)
Gross margin (note 14)		(7,345	)		9,317			13,973
Selling, general and administrative expenses		(16,762	)		(14,108	)		(14,875	)
Stock compensation		(4,714	)		(1,454	)		(1,519	)
Interest expense		(2,614	)		(2,794	)		(2,695	)
Interest income		1,036			311			—
Foreign exchange gain (loss)		433			(1,047	)		26
Other income		268			131			46
Gain on disposal of assets (note 5)		13,564			—			(8	)
Loss on write-off of investment (note 5)		(1,184	)		—			—
(Loss) before taxes and earnings of unconsolidated entities		(17,318	)		(9,644	)		(5,052	)
Recovery of (provision for) income taxes (note 13)		5,866			2,300			763
Loss from consolidated entities after income taxes		(11,452	)		(7,344	)		(4,289	)
Equity earnings from unconsolidated entities (note 5)		13,777			(171	)		(468	)
Net income (loss)	$	2,325		$	(7,515)		$	(4,757)
Basic income(loss) per share (note 15)	$	0.05		$	(0.17)		$	(0.12)
Diluted income (loss) per share (note 15)	$	0.05		$	(0.17)		$	(0.12)
Weighted average number of common shares used in the computation of net income (loss) per share:
Basic		49,418,228			44,356,699			39,143,912
Diluted		51,178,981			44,356,699			39,143,912
Net income (loss)	$	2,325		$	(7,515	)	$	(4,757	)
Other comprehensive income (loss):
Foreign currency translation adjustment		87			(171	)		150
Comprehensive income (loss)	$	2,412		$	(7,686	)	$	(4,607	)

The accompanying notes are an integral part of these consolidated financial statements.

F-3

Village Farms International, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

For the Years Ended December 31, 2019, 2018 and 2017

(In thousands of United States dollars, except for shares outstanding)

	Number of Common Shares		Common Stock		Additional Paid In Capital			Accumulated Other Comprehensive (Loss) Income			Retained Earnings			Total Shareholders’ Equity
Balance at January 1, 2017		38,882,945	$	24,954	$	1,392		$	(541	)	$	34,197		$	60,002
Shares issued pursuant to public offering, net of issuance costs		2,500,000		9,769		—			—			—			9,769
Shares issued on exercise of stock options (note 16)		91,667		59		—			—			—			59
Issuance of warrants for common shares		—		—		148			—			—			148
Share-based compensation (note 16)		768,000		1,333		186			—			—			1,519
Cumulative translation adjustment		—		—		—			150			—			150
Net loss		—		—		—			—			(4,757	)		(4,757	)
Balance at December 31, 2017		42,242,612	$	36,115	$	1,726		$	(391	)	$	29,440		$	66,890
Shares issued pursuant to public offerings, net of issuance costs		3,097,200		15,737		—			—			—			15,737
Shares issued pursuant to private placement of common shares, net of issuance costs		1,886,793		7,755		—			—			—			7,755
Shares issued on exercise of stock options (note 16)		365,733		434		(151	)		—			—			283
Share-based compensation (note 16)		50,334		831		623			—			—			1,454
Cumulative translation adjustment		—		—		—			(171	)		—			(171	)
Net loss		—		—		—			—			(7,515	)		(7,515	)
Balance at December 31, 2018	$	47,642,672	$	60,872	$	2,198		$	(562	)	$	21,925		$	84,433
Shares issued pursuant to public offering, net of issuance costs		4,059,000		34,225					—			—			34,225
Shares issued on exercise of stock options (note 16)		212,332		324		(116	)		—			—			208
Share-based compensation (note 16)		442,665		2,298		2,417			—			—			4,715
Warrants		300,000		614		(148	)		—			—			466
Cumulative translation adjustment		—		—		—			87			—			87
Net loss		—		—		—			—			2,325			2,325
Balance at December 31, 2019		52,656,669	$	98,333	$	4,351		$	(475	)	$	24,250		$	126,459

The accompanying notes are an integral part of these consolidated financial statements.

F-4

Village Farms International, Inc.

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2019, 2018 and 2017

(In thousands of United States dollars)

	2019			2018			2017
Cash flows from operating activities:
Net income (loss)	$	2,325		$	(7,515	)	$	(4,757	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization		7,366			7,027			7,659
Amortization of deferred charges		76			76			—
(Gain) loss on disposal of assets (note 5)		(13,564	)		—			8
Loss on write-off of investment in joint venture (note 5)		1,184			—			—
Share of (income) loss from joint venture (note 8)		(13,777	)		170			470
Interest expense		2,614			2,718			2,695
Interest income		(1,036	)		(311	)		—
Share-based compensation		4,714			1,454			1,519
Lease payments		(1,043	)		—			—
Deferred income taxes		(5,855	)		(2,730	)		(792	)
Interest paid on long-term debt		(2,635	)		(2,417	)		(2,614	)
Changes in non-cash working capital items (note 17)		5,244			(3,149	)		(3,519	)
Net cash (used in) provided by operating activities		(14,387	)		(4,677	)		669
Cash flows from investing activities:
Purchases of property, plant and equipment		(2,287	)		(3,093	)		(1,696	)
Investment in joint venture		(96	)		—			—
Notes receivable loaned to joint ventures (note 11)		(14,507	)		(10,462	)		—
Proceeds from sale of land		52			65			—
Net cash used in investing activities		(16,838	)		(13,490	)		(1,696	)
Cash flows from financing activities:
Proceeds from borrowings		4,000			7,000			7,306
Repayments on borrowings		(7,423	)		(7,706	)		(14,320	)
Proceeds from issuance of common stock, net		34,226			23,492			9,769
Proceeds from exercise of stock options		208			283			59
Proceeds from exercise of warrants		466			—			—
Payments lease obligations		(90	)		(71	)		(59	)
Net cash provided by financing activities		31,387			22,998			2,755
Effect of exchange rate changes on cash and cash equivalents		(93	)		(2	)		(10	)
Increase in cash and cash equivalents		69			4,829			1,718
Cash and cash equivalents, beginning of year		11,920			7,091			5,373
Cash and cash equivalents, end of year	$	11,989		$	11,920		$	7,091
Supplemental cash flow information:
Income taxes paid (recovered)	$	904		$	290		$	(25	)
Supplemental disclosure of non-cash information:
Purchases of capital expenditures by financing capital lease	$	—		$	—		$	190
Issuance of warrants	$	—		$	—		$	148

The accompanying notes are an integral part of these consolidated financial statements.

.

F-5

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

1 NATURE OF OPERATIONS

Village Farms International, Inc. (“VFF”) the parent company, together with its subsidiaries (collectively, the “Company”, “we”, “us”, or “our”) is incorporated under the Canada Business Corporation Act. VFF’s principal operating subsidiaries as of December 31, 2019 are Village Farms Canada Limited Partnership (“VFCLP”), Village Farms, L.P. (“VFLP”), and VF Clean Energy, Inc. (“VFCE”). The address of the registered office of VFF is 4700 80th Street, Delta, British Columbia, Canada, V4K 3N3. VFF owns a 65% equity interest in Village Fields Hemp USA LLC (“VF Hemp”), a 60% equity interest in Arkansas Valley Green and Gold Hemp (“AVGG Hemp) and a 53.5% equity interest in Pure Sunfarms Corp. (“Pure Sunfarms”), all of which are recorded as equity investees, see Investments in Joint Ventures (note 5).

The Company’s shares are listed on the Toronto Stock Exchange under the symbol VFF and are also listed in the United States on the Nasdaq Capital Market (“Nasdaq”) under the symbol VFF.

The Company owns and operates sophisticated, highly intensive agricultural greenhouse facilities in British Columbia and Texas, where it produces, markets and sells premium-quality tomatoes, bell peppers, and cucumbers. The Company, through its subsidiary VFCE, owns and operates a 7.0 MW power plant that generates electricity. The Company’s joint venture, Pure Sunfarms, is a licensed producer and supplier of cannabis products to be sold to other licensed providers and provincial governments across Canada. The Company’s joint ventures, VF Hemp and AVGG Hemp, are cultivators of high cannabidiol (“CBD”) hemp in multiple states in the United States.

2 BASIS OF PRESENTATION

Basis of Presentation

These financial statements have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”) and the following accounting policies have been consistently applied in the preparation of the consolidated financial statements. Previously, the Company prepared its consolidated financial statements under International Financial Reporting Standards (“IFRS”) as permitted by securities regulators in Canada, as well as in the United States under the status of a Foreign Private Issuer as defined by the United States Securities and Exchange Commission (“SEC”). At the end of the second quarter of 2019, the Company determined that it no longer qualified as a Foreign Private Issuer under the SEC rules. As a result, beginning January 1, 2020 the Company is required to report with the SEC on domestic forms and comply with domestic company rules in the United States. The transition to US GAAP was made retrospectively for all periods from the Company’s inception.

Principles of Consolidation

Our consolidated financial statements include the accounts of our wholly owned subsidiaries. We consolidate variable interest entities (VIEs) when we have variable interests and are the primary beneficiary. We continually evaluate our involvement with VIEs to determine when these criteria are met. Material intercompany transactions and accounts have been eliminated in consolidation.

All intercompany transactions, balances and unrealized gains and losses from intercompany transactions are eliminated on consolidation.    

Functional and Presentation Currency

The functional currency for each entity included in these consolidated financial statements is the currency of the primary economic environment in which the entity operates. These consolidated financial statements are presented in United States dollars (“U.S. dollars”) which have been rounded to the nearest thousands, except per share amounts. Currency conversion to U.S. dollars is performed in accordance with ASC 830, Foreign Currency Matters.

3 SIGNIFICANT ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATION UNCERTAINTY

The significant accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

F-6

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

Use of Estimates

The preparation of our financial statements in accordance with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Actual results could differ from these estimates and those differences could be material.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash deposits held with banks, and other highly liquid short-term interest bearing securities with maturities at the date of purchase of three months or less.

Sales, Trade Receivables and Concentrations of Credit Risk

For both 2019 and 2018, approximately 83% of the Company’s sales were in the United States. In 2019 three customers, Wal-mart, Kroger and Publix Super Markets, comprised 11.8%, 10.9% and 10.6% of sales, respectively. In 2018 two customers, Publix Super Markets and Kroger comprised 12.0% and 11.4% of sales, respectively.

Trade receivables, net of the allowance for doubtful accounts, represent their estimated net realizable value, which approximates fair value. Provisions for doubtful accounts are recorded based on historical collection experience and the age of the receivables. Receivables are written off when they are deemed uncollectible.

As of December 31, 2019, the Company’s trade receivables had one customer that represented more than 10% of the balance of trade receivables, representing 16.9% of the balance. As of December 31, 2018, the Company’s trade receivables had two customers that represented more than 10% of the balance of trade receivables, representing 13.8% and 11.5%. The Company believes that its expected credit losses are limited due to the protection afforded to the Company by the Perishable Agricultural Commodities Act (the “PACA”) for its sales in the United States, which represents the majority of the Company’s annual sales and accounts receivable at year end. The PACA protection gives a claim filed under the PACA first lien on all PACA assets (which include cash and trade receivables of the debtor).

Inventories

Inventories, consisting of crop inventory, purchased produce inventory and spare parts inventory are valued at the lower of cost or net realizable value determined using weighted average cost or first-in first out methods. Costs included in crop inventory include but are not limited to raw material packaging, direct labor, overhead, and the depreciation of growing equipment and facilities determined at normal capacity. These costs are expensed as cost of sales when the crops are harvested and delivered throughout the various crop cycles, which end at various times throughout the year. Inventories consisted of the following:

	December 31, 2019		December 31, 2018
Crop inventory	$	15,281	$	24,249
Purchased produce inventory		530		643
Spare parts inventory		107		64
	$	15,918	$	24,956

As of December 31, 2019 and 2018 crop inventory was written down by $218 and $401, respectively, to its net realizable value.

Equity Method Investments and Variable Interest Entities

The Company evaluates the method of accounting for investments in which it does not hold an equity interest of at least 50% based on the amount of control it exercises over the operations of the investee, exposure to losses in excess of its investment, the ability to significantly influence the investee and whether the Company is the primary beneficiary of the investee. Investments not qualifying for consolidation are accounted for under the equity method whereby the ongoing investment in the entity, consisting of its initial investment adjusted for distributions, gains and losses of the entity are classified as a single line in the consolidated statements of financial position and as a non-operating item in the consolidated statements of income (loss) and comprehensive income (loss).

F-7

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

The Company regularly monitors and evaluates the fair value of its equity investments. If events and circumstances indicate that a decline in the fair value of these assets has occurred and is other than temporary, the Company will record a charge in earnings from joint ventures in the consolidated statements of income (loss). The Company’s investments do not have a readily determinable fair value as none of them are publicly traded. The fair values of the Company’s equity investments are determined by discounting the estimated future cash flows of each entity. These cash flow estimates include assumptions on growth rates and future currency exchange rates (Level 3). The Company did not record an impairment charge on any of its equity investments in fiscal years 2019, 2018, or 2017, except as noted in Note 4.

Prior to the adoption of Accounting Standards Codification (“ASC”) 606 - ”Revenues from Contracts with Customers” the Company measured its nonmonetary equity contributions at the book value of the assets being contributed with no gain or loss being recognized. Following the adoption of ASC 606, the Company measures nonmonetary equity contributions at fair value, which provides for recognizing a gain or loss upon the derecognition of the nonmonetary assets.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is allocated between cost of sales and SG&A expenses depending on the type of asset and is determined using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the remaining life of the lease or useful life of the asset, whichever is shorter. Maintenance and repairs are charged to cost of sales when incurred. Significant expenditures, which extend the useful lives of assets, are capitalized. Land is not depreciated. The estimated useful lives of the class of assets for the current and comparative periods are as follows:

Classification	Estimated Useful Lives
Leasehold and land improvements	5-20 years
Greenhouses and other buildings	4-30 years
Greenhouse equipment	3-30 years
Machinery and equipment	3-12 years

Construction in process reflects the cost of assets under construction, which are not depreciated until placed into service.

Revenue Recognition

Prior to January 1, 2018, revenue from the sale of produce in the course of ordinary activities was measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue from the production and sale of power was measured at the fair value of the consideration received or receivable. Revenue was recognized when persuasive evidence existed that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration was probable, the associated costs and possible return of goods could be estimated reliably, there was no continuing management involvement with the goods, and the amount of revenue could be measured reliably. If it was probable that discounts would be granted and the amount could be measured reliably, then the discount was recognized as a reduction of revenue as the sales were recognized. The timing of the transfer of risks and rewards occurred at the time the produce had been successfully delivered, the risk of loss had passed to the customer, and collectability was reasonably assured.

Following the adoption of ASC 606 on January 1, 2018 using the modified retrospective transition approach the Company now recognizes revenue when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. In order to achieve this core principle, the Company applies a five-step process. The Company generates its revenue through the sale of grown produce and third party produce, with standard shipping terms and discounts, and through the production and sale of power. The Company’s produce revenue transactions consist of single performance obligations to transfer promised goods at a fixed price. Quantities to be delivered to the customer are determined at a point near the date of delivery through purchase orders they receive from the customer. The Company recognizes revenue when it has fulfilled a performance obligation, which is typically when the customer receives the goods and their performance obligation is complete. Revenue is measured as the amount of consideration the Company expects to receive in exchange for

F-8

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

transferring product. The amount of revenue recognized is reduced for estimated returns and other customer credits, such as discounts and rebates, based on the expected value to be realized. Payment terms are consistent with terms standard to the markets the Company serves. The Company maintains an allowance for doubtful accounts for the loss that would be incurred if a customer was unable to pay amounts due. The Company initially estimates the allowance required at the time of revenue recognition based on historical experience and makes changes to the allowance based on various factors, including changes in the customer’s financial condition or payment patterns.

The Company sells electricity to British Columbia Hydro and Power Authority. Revenues are recognized as the electricity is delivered to/consumed by the customer and is based on contractual usage rates and meter readings that measure electricity consumption. The Company has elected to exclude taxes collected from its customers assessed by government authorities that are both imposed on and concurrent with a specific revenue-producing transaction from our determination of transaction price.

Revenue received from shipping and handling fees is reflected in net sales. Shipping and handling costs are included in cost of sales as incurred or at the time revenue is recognized for the related goods, whichever comes first.

Impairments of Long-Lived Assets

Long-lived assets, including intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Long-lived assets are grouped with other assets to the lowest level to which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Management assesses the recoverability of the carrying cost of the assets based on a review of projected undiscounted cash flows. If an asset is held for sale, management reviews its estimated fair value less cost to sell. Fair value is determined using pertinent market information, including appraisals or broker’s estimates, and/or projected discounted cash flows. In the event an impairment loss is identified, it is recognized based on the amount by which the carrying value exceeds the estimated fair value of the long-lived asset.

Segment Reporting

Operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer (“CEO”). Based on the aggregation criteria in ASC 280, Segment Reporting, the Company has identified two operating segments, the Produce Business and the Energy Business.

Foreign Currency Translation

Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rates in effect at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated to the functional currency at the exchange rate in effect when the fair value was determined. Foreign currency differences are generally recognized in net income. Non-monetary items that are measured based on historical cost in a foreign currency are translated to the functional currency using the exchange rate in effect at the date of the transaction giving rise to the item.

Fair Value Measurements

Pursuant to the provisions of Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures (ASC 820), the Company measures certain assets and liabilities at fair value or discloses the fair value of certain assets and liabilities recorded at cost in the consolidated financial statements. Fair value is calculated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). ASC 820 establishes a fair value hierarchy which requires assets and liabilities measured at fair value to be categorized into one of three levels based on the inputs used in the valuation. The Company classifies assets and liabilities in their entirety based on the lowest level of input significant to the fair value measurement.

F-9

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

The three levels are defined as follows:

Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Observable inputs, other than those included in Level 1, based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.

Level 3: Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.

Transfers between levels of the fair value hierarchy are deemed to have occurred at the end of the reporting period in which the event or change of circumstances caused the transfer to occur.

Advertising

Advertising costs are included in selling, general and administrative expenses and are expensed as incurred. These expenses totaled $83, $160 and $201 for the years ended 2019, 2018 and 2017, respectively.

Share-Based Compensation

The Company grants stock options and performance-based restricted stock (“RS”) to certain employees and directors.

The Company recognizes stock-based compensation using the fair value provisions prescribed by ASC Topic 718, Compensation — Stock Compensation. Accordingly, compensation costs for awards of stock-based compensation settled in shares are determined based on the fair value of the share-based instrument at the time of grant and are recognized as expense over the vesting period of the share-based instrument. The Company recognizes forfeitures as they occur.

Stock options generally vest over three years (33% per year following the grant date) and expire after ten years. Each tranche in an award is considered a separate award with its own vesting period. The fair value of each tranche is measured at the date of grant using the Black-Scholes option pricing model. Compensation expense is recognized over the tranche’s vesting period by increasing additional paid-in capital based on the number of awards expected to vest. The number of awards expected to vest is reviewed at least annually, with any impact recognized immediately.

The RS granted will be settled using the Company’s own equity and issued from treasury if the performance standard is met. The equity-settled share-based compensation is measured at the fair value of the Company’s common shares as at the grant date in accordance with the terms of the Company’s Stock Compensation Plan. The fair value determined at the grant date is charged to income when performance based vesting conditions are met, based on the number of RS that will eventually be converted to common shares, with a corresponding increase in equity.

Income Taxes

Deferred income taxes are provided to recognize temporary differences between the financial reporting basis and the income tax basis of the Company’s assets and liabilities using currently enacted tax rates and laws. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

The Company evaluates uncertain income tax positions in a two-step process. The first step is recognition, where the Company evaluates whether an individual tax position has a likelihood of greater than 50% of being sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation processes. For tax positions that are currently estimated to have a less than 50% likelihood of being sustained, zero tax

F-10

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

benefit is recorded. For tax positions that have met the recognition threshold in the first step, the Company performs the second step of measuring the benefit to be recorded. The actual benefits ultimately realized may differ from the Company’s estimates. In future periods, changes in facts and circumstances and new information may require the Company to change the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recorded in results of operations and financial position in the period in which such changes occur.

Basic and Diluted Income (Loss) Per Share

Basic income per share is computed using the weighted average number of common shares outstanding during the period. The treasury stock method is used for the calculation of diluted income per share. Under this method, the weighted average number of common shares outstanding assumes that the proceeds to be received on the exercise of dilutive share options are applied to repurchase common shares at the average market price for the period. Share options are dilutive when the average market price of the common shares during the period exceeds the exercise price of the options. Options to purchase shares of common stock and RS are not included in the calculation of net income (loss) per share when the effect is anti-dilutive.

F-11

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

New Accounting Pronouncements Adopted

Prior to the adoption of ASU 2016-02, Leases, for leases where the Company assumed substantially all the risks and rewards of ownership were classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset was accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases and rent expenses were recognized in the Company’s consolidated statements of (loss) income.

In February 2016, the FASB issued ASU 2016-02, Leases, and has subsequently issued several supplemental and/or clarifying ASU’s (collectively, “Topic 842”), which requires a dual approach for lease accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases may result in the lessee recognizing a right of use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize lease expense on a straight-line basis.

On January 1, 2019, the Company adopted Topic 842, using the modified retrospective method and did not restate prior periods. The Company elected to utilize the package of practical expedients that allows us to 1) not reassess whether any expired or existing contracts are or contain leases, 2) retain the existing classification of lease contracts as of the date of adoption, and 3) not reassess initial direct costs for any existing leases. The Company’s classes of assets include land leases, building leases and equipment leases.

On adoption, the Company recognized lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of Topic 842. These lease liabilities were measured at the present value of the remaining lease payments, discounted using the borrowing rate of the Company. The weighted average incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 6.25%. These leases are included in right-of-use assets, short-term lease liabilities and long-term lease liabilities in the consolidated statements of financial position. Right-of-use assets are amortized on a straight-line basis over the lease term.

For leases previously classified as finance leases the entity recognized the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right-of-use asset and the lease liability at the date of initial application.

Additionally, the Company has elected the short-term lease exception for all classes of assets, and does not apply the recognition requirements for leases of 12 months or less, and recognizes lease payments for short-term leases as expense either straight-line over the lease term or as incurred depending on whether the lease payments are fixed or variable. These elections are applied consistently for all leases.

	2019
Operating lease commitments disclosed as at December 31, 2018	$	5,064
Less: short-term leases recognized on a straight-line basis as expense		(210	)
		4,854
Discounted using the lessee’s incremental borrowing rate of 6.25% at the date of initial application		4,269
Add: additional leases identified on adoption of Topic 842		88
Add: finance lease liabilities recognized as at December 31, 2018		180
Lease liability recognized as at January 1, 2019	$	4,537
Of which are:
Current lease liabilities		871
Non-current lease liabilities		3,666
	$	4,537

F-12

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

The recognized right-of-use assets relate to the following types of assets:

	December 31, 2018		January 1, 2019
Land	$	—	$	140
Building		—		4,017
Equipment		176		380
Total right-of-use assets	$	176	$	4,537

New Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” ASU 2019-12 simplifies the accounting for income taxes by removing exceptions within the general principles of Topic 740 regarding the calculation of deferred tax liabilities, the incremental approach for intraperiod tax allocation, and calculating income taxes in an interim period. In addition, the ASU adds clarifications to the accounting for franchise tax (or similar tax). which is partially based on income, evaluating tax basis of goodwill recognized from a business combination, and reflecting the effect of any enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The ASU is effective for fiscal years beginning after December 15, 2020, and will be applied either retrospectively or prospectively based upon the applicable amendments. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 removes the disclosure requirement for the amount and reasons for transfers between Level 1 and Level 2 fair value measurements as well as the process for Level 3 fair value measurements. In addition, the ASU adds the disclosure requirements for changes in unrealized gains and losses included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period as well as the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years and will be applied on a retrospective basis to all periods presented. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses.” The standard, including subsequently issued amendments, requires a financial asset measured at amortized cost basis, such as accounts receivable and certain other financial assets, to be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and requires the modified retrospective approach. Early adoption is permitted. Based on the composition of the Company’s trade receivables and other financial assets, current market conditions, and historical credit loss activity, the adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

4 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

	December 31, 2019			December 31, 2018
Land	$	3,204		$	3,932
Leasehold and land improvements		3,820			3,821
Buildings		72,772			76,989
Machinery and equipment		61,871			64,937
Construction in progress		1,697			552
Less: Accumulated depreciation		(80,206	)		(78,043	)
Property, plant and equipment, net	$	63,158		$	72,188

F-13

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

Depreciation expense on property, plant and equipment, was $7,366, $7,027 and $7,659 for the years ending December 31, 2019, 2018 and 2017, respectively. On March 31, 2019, Pure Sunfarms exercised its option to acquire the Delta 2 assets and operations (note 5).

5 INVESTMENTS – EQUITY METHOD AND JOINT VENTURES

Pure Sunfarms Corp.

On June 6, 2017, the Company entered into an agreement to form Pure Sunfarms, a B.C. corporation, with Emerald Health Therapeutics Inc. (“Emerald”). The purpose of Pure Sunfarms is to produce, market and distribute cannabis in Canada. Village Farms held a 50% equity ownership interest in Pure Sunfarms in the form of common shares until November 19, 2019, at which time, upon entering the Settlement Agreement, the Company’s ownership increased to 53.5% through December 31, 2019.

Pursuant to the terms of a Supply Agreement that Pure Sunfarms had with Emerald, Emerald had a right to purchase 40% of Pure Sunfarms cannabis production at a fixed price, subject to the terms and conditions of the Supply Agreement. To the extent that Emerald did not fulfill its purchase obligation, Pure Sunfarms was able to sell that excess production to other parties in the open market. The Supply Agreement stipulated that Emerald was required to pay Pure Sunfarms the difference between the fixed price and the selling price realized from other parties. During the quarter ended September 30, 2019, Emerald did not fulfill its purchase obligation and Pure Sunfarms sold the product on the open market to arm’s length parties at prices lower than the fixed price in the Supply Agreement. As a result, under the terms of the Supply Agreement, Pure Sunfarms invoiced Emerald for the difference which amounted to approximately CA$7.2 million. These charges were disputed by Emerald when initially invoiced.

On March 6, 2020 the Company and Emerald closed a Settlement Agreement in order to settle all outstanding disputes with respect to their joint venture Pure Sunfarms. Under the terms of the Settlement Agreement:

• The 5,940,000 common shares of Pure Sunfarms that were placed in escrow pending Emerald’s CA$5,940 equity contribution to Pure Sunfarms (originally due in November 2019) were cancelled, effective as of November 19, 2019, and Village Farms and Emerald have ceased arbitration proceedings on the matter;

• Emerald forfeited and waived repayment by Pure Sunfarms of its outstanding CA$13.0 million shareholder loan to Pure Sunfarms (plus accrued interest of CA$1.1 million) and Emerald issued a promissory note to Pure Sunfarms in the amount of CA$952 related to certain amounts it owed Pure Sunfarms under the terms of the Supply Agreement;

• Pure Sunfarms released Emerald from all liabilities arising from their Supply Agreement under which Emerald had the provision to purchase 40% of Pure Sunfarms’ aggregate production in 2018 and 2019 including $7.2 million from the quarter ended September 30, 2019;

• On March 20, 2020, Emerald transferred 2.5% of additional equity in Pure Sunfarms to Village Farms;

• Pure Sunfarms and Emerald have released each other from their current supply agreement under which Emerald had the provision to purchase 25% of Pure Sunfarms’ aggregate cannabis production from the Delta facilities in 2020, 2021 and 2022; and

• Village Farms and Emerald have mutually released each other from all claims related to or arising from the disputes.

F-14

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

The net impact of the Settlement Agreement on the ownership of Pure Sunfarms, is that as of December 31, 2019, Village Farms owned 53.5% of Pure Sunfarms and Emerald owned 46.5% of Pure Sunfarms. Effective on the settlement date, March 6, 2020, Village Farms owned 57.4% of Pure Sunfarms (note 18).

In conjunction with the formation of Pure Sunfarms, Village Farms contributed the rights to lease and purchase the Delta 3 land and greenhouse facility to the joint venture. The contribution of the rights has been accounted for as a reduction of the land and greenhouse facility in exchange for the investment in Pure Sunfarms Corp. The net book value of the contributed land and greenhouse facility was $13,950. The Company recorded the investment at net book value. No gain was recognized. Prior to the adoption of ASC 606 the Company measured its nonmonetary equity contributions at the net book value of the assets being contributed with no gain or loss being recognized.

On March 31, 2019, Pure Sunfarms exercised its option to utilize the Delta 2 assets and operations. The contribution of the assets has been accounted for as a disposal of the land, greenhouse facility and other assets in exchange for 25,000,000 common shares of Pure Sunfarms. This was a non-cash transaction, and it was estimated that the fair value of the land, building and other assets was $18.7 million (CA$25 million) at the date of contribution. The Company recognized a gain of $13.6 million on the contribution of the fixed assets. As of December 31, 2019 and 2018, the total investment in Pure Sunfarms of US$41.3 million and US$6.3 million, respectively, is recorded in the consolidated statements of financial position. Following the adoption of ASC 606, the Company measures nonmonetary equity contributions at fair value, which provides for recognizing a gain or loss upon the de-recognition of the nonmonetary assets. This is contrary to the non-monetary contribution of Delta 3 whereby a gain could not be recognized and the investment was recognized at net book value, as at the time ASC 606 was not applicable.

The Company accounts for its investment in Pure Sunfarms, in accordance with ASC 323 – Equity Method and Joint Ventures (“ASC 323”), using the equity method. The Company has determined that Pure Sunfarms is a variable interest entity (“VIE”), however the Company does not consolidate Pure Sunfarms because the Company is not the primary beneficiary. Although the Company is able to exercise significant influence over the operating and financial policies of Pure Sunfarms through its 53.5% ownership interest and joint power arrangement with Emerald, the Company shares joint control of the Board of Directors and therefore is not the primary beneficiary. The Company’s maximum exposure to loss as a result of its involvement with Pure Sunfarms as of December 31,2019 relates primarily to the recovery of the outstanding loan to Pure Sunfarms.

The Company applies the hypothetical liquidation at book value (“HLBV”) method to determine the ownership percentage for the Company and Emerald. When determining the ownership, the HLBV method only considers shares that have been fully paid for. Therefore, due to the monthly escrow payments being made by Emerald in accordance with the Delta 2 Option Agreement, the ownership will change each month escrow payment(s) are made.

The Company’s share of the joint venture consists of the following: (in $000’s of USD):

Balance, January 1, 2018	$	6,511
Share of loss for the year		(171	)
Balance, December 31, 2018	$	6,341
Balance, January 1, 2019	$	6,341
Investments in joint venture		18,717
Share of net income for the year		16,276
Balance, December 31, 2019	$	41,334

Summarized financial information of Pure Sunfarms (in $000’s of USD):

	December 31, 2019		December 31, 2018
Current assets
Cash and cash equivalents (including restricted cash)	$	7,356	$	1,731
Trade receivables		8,687		962

F-15

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

Inventory		21,745			5,101
Other current assets		6,964			730
Non-current assets		108,652			49,074
Current liabilities
Trade payables		(4,938	)		(6,862	)
Borrowings due to joint venture partners		(26,413	)		(2,244	)
Income taxes payable		(8,489	)		—
Borrowings - current		(1,423	)		(19,442	)
Other current liabilities		(5,021	)		(380	)
Non-current liabilities
Borrowings – long term		(13,089	)		—
Deferred tax liability		(2,473	)		—
Net assets	$	91,558		$	28,670

Summarized financial information of Pure Sunfarms (in $000’s of USD):

	December 31,
	2019		2018
Reconciliation of net assets:
Accumulated retained earnings	$	26,679	$	(734	)
Contributions from joint venture partners		63,481		31,008
Currency translation adjustment		1,398		(1,604	)
Net assets	$	91,558	$	28,670

Summarized financial information of Pure Sunfarms (in $000’s of USD):

	Year ended December 31,
	2019			2018			2017
Revenue	$	62,341		$	3,691		$	—
Cost of sales*		(15,067	)		(1,154	)		—
Gross margin		47,274			2,537			—
Selling, general and administrative expenses		(7,882	)		(2,584	)		(701	)
Income (loss) from operations		39,392			(47	)		(701	)
Interest expense		(884	)		(72	)		—
Foreign exchange gain (loss)		(9	)		(176	)		(3	)
Write down of fixed assets		(144	)		—			—
Other income, net		26			18			—
Income (loss) before taxes		38,381			(277	)		(704	)
Provision for income taxes		(10,967	)		55			192
Net income (loss)	$	27,414		$	(222	)	$	(512	)

* Included in cost of sales for the years ended December 31, 2019, 2018 and 2017 is $2,671, $796 and $0 of depreciation expense.

Village Fields Hemp USA LLC

On February 27, 2019, the Company entered into a joint venture with Nature Crisp, LLC (“Nature Crisp”) to form VF Hemp for the objective of outdoor cultivation of high percentage cannabidiol (“CBD”) hemp and CBD extraction in multiple states throughout the United States. VF Hemp is 65% owned by the Company and 35% owned by Nature Crisp.

F-16

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

Under the terms of the VF Hemp agreement, the Company has agreed to lend up to approximately US$15 million to VF Hemp for start-up costs and working capital.

The Company accounts for its investment in VF Hemp, in accordance with ASC 323, using the equity method. The Company has determined that VF Hemp is a VIE, however it does not consolidate VF Hemp because the Company is not the primary beneficiary. Although the Company is able to exercise significant influence over the operating and financial policies of VF Hemp through its 65.0% ownership interest and joint power arrangement with Nature Crisp, the Company shares joint control of the Board of Directors and therefore is not the primary beneficiary. The Company’s maximum exposure to loss as a result of its involvement with VF Hemp relates directly to the recovery of the outstanding loan to VF Hemp.

On March 25, 2019, the Company entered into a Grid Loan Agreement (the “Grid Loan”) with VF Hemp, whereby, as of December 31, 2019, the Company had advanced $13,323 in the form of a grid loan to VF Hemp. The Grid Loan has a maturity date of March 25, 2022, and bears simple interest at the rate of 8% per annum, calculated monthly (note 12).

The Company is not legally obligated for the debts, obligations or liabilities of VF Hemp.

The Company’s share of the joint venture consists of the following:

Balance, beginning of the period	$	—
Investments in joint venture		7
Share of net loss		(2,464	)
Losses applied against joint venture note receivable		2,457
Balance, December 31, 2019	$	—

Summarized financial information of VF Hemp:

	December 31, 2019
Current assets
Cash and cash equivalents	$	510
Inventory		9,308
Prepaid expenses and deposits		36
Non-current assets		1,476
Current liabilities		(1,788	)
Borrowings due to Village Farms		(13,323	)
Net assets	$	(3,781	)

	December 31, 2019
Reconciliation of net assets:
Net loss for the year ended December 31, 2019	$	(3,791	)
Contributions from joint venture partners		10
Net assets	$	(3,781	)

	Year ended December 31, 2019
Service revenue	$	106
Cost of sales		(232	)
General and administrative expenses		(869	)
Interest expense		(440	)
Write down of inventory		(2,356	)
Net loss	$	(3,791	)

F-17

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

Arkansas Valley Green and Gold Hemp

On May 21, 2019, the Company entered into a joint venture with Arkansas Valley Hemp, LLC (“AV Hemp”) for the objective of outdoor cultivation of high percentage cannabidiol (CBD) hemp and CBD extraction in Colorado. The joint venture, AVGG Hemp, was 60% owned by the Company, 35% owned by AV Hemp, and 5% owned by VF Hemp.

Immediately following the fourth quarter harvest for AVGG Hemp, all of the hemp was destroyed by a severe windstorm. As a result of the loss, the Company wrote off its $1,184 loan to AVGG Hemp.

6 DEBT

The Company has a Term Loan financing agreement with a Canadian creditor (“FCC Loan”). The non-revolving variable rate term loan has a maturity date of May 1, 2021 and a balance of $31,306 as of December 31, 2019. The outstanding balance is repayable by way of monthly installments of principal and interest based on an amortization period of 15 years, with the balance and any accrued interest to be paid in full on May 1, 2021. As of December 31, 2019 and 2018, borrowings under the FCC Loan agreement were subject to an interest rate of 6.391% and 7.082%, respectively.

The Company’s subsidiary VFCE has a loan agreement with a Canadian Chartered Bank that includes a non-revolving fixed rate loan of CA$3.0 million with a maturity date of June 2023 and fixed interest rate of 4.98%. As of December 31, 2019 and 2018, the balance was US$1,066 and US$1,279, respectively. The loan agreement also includes an uncommitted, non-revolving credit facility for up to CA$300 to cover Letters of Guarantee issued by the bank on behalf of the Company, with a maximum term of 365 days, renewable annually. The loan agreement also includes an uncommitted credit facility for up to CA$700 to support financing of certain capital expenditures. The Company received an initial advance of CA$250 in October 2017. Each advance is to be repaid on a five-year, straight-line amortization of principal, repaid in monthly installments of principal plus interest at an interest rate of CA$ prime rate plus 200 basis points. As of December 31, 2019 and 2018, the balance was US$106 and US$138, respectively.

The weighted average interest rate on short-term borrowings as of December 31, 2019 and 2018 was 6.2% and 6.9%, respectively.

The Company has a line of credit agreement with a Canadian Chartered Bank (“Operating Loan”). The revolving Operating Loan has a line of credit up to CA$13,000, less outstanding letters of credit totaling US$150 and CA$38, and variable interest rates with a maturity date on May 31, 2021. The Operating Loan is subject to margin requirements stipulated by the bank. As of December 31, 2019 and 2018, the amount drawn on this facility was US$2,000.

The Company’s borrowings (“Credit Facilities”) are subject to certain positive and negative covenants and is required to maintain certain minimum working capital. The Company received a waiver for its annual Debt Service Coverage and Debt to EBITDA covenants as of December 31, 2019.

Accrued interest payable on the credit facilities and loans as of December 31, 2019 and 2018 was $162 and $184, respectively, and these amounts are included in accrued liabilities in the statements of financial position.

As collateral for the FCC Loan, the Company has provided promissory notes, a first mortgage on the VFF-owned greenhouse properties (excluding the Delta 3 and Delta 2 greenhouse facilities), and general security agreements over its assets. In addition, the Company has provided full recourse guarantees and has granted security therein. The carrying value of the assets and securities pledged as collateral as at December 31, 2019 and 2018 was $155,548 and $101,537, respectively.

As collateral for the Operating Loan, the Company has provided promissory notes and a first priority security interest over its accounts receivable and inventory. In addition, the Company has granted full recourse guarantees and security therein. The carrying value of the assets pledged as collateral as at December 31, 2019 and 2018 was $24,915 and $36,248, respectively.

The aggregate annual principal maturities of long-term debt for the next five years and thereafter are as follows:

F-18

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

2020	$	3,423
2021		28,459
2022		345
2023		162
2024		—
Thereafter		—
	$	32,389

7 ACCRUED LIABILITIES

	December 31, 2019		December 31, 2018
Accrued third party accounts payable	$	804	$	774
Accrued audit and tax compliance fees		647		137
Accrued taxes		527		106
Accrued payroll		296		247
Accrued utilities		261		403
Accrued interest		162		184
Accrued rebates		131		57
Accrued propagation		51		550
Other		138		1,051
	$	3,017	$	3,509

8 LEASES

The Company leases a parcel of land in Marfa, Texas that one of its greenhouses resides on as well as two distribution centers located in Fort Worth, Texas and Surrey, British Columbia. The Company also leases production related equipment at its greenhouses in Texas and British Columbia. In January the Company commenced leasing of an office building located in Lake Mary, Florida for its corporate headquarters.

The components of lease related expenses are as follows:

	Year Ended December 31, 2019
Operating lease expense (a)	$	2,410
Finance lease expense:
Amortization of right-of-use assets		80
Interest on lease liabilities		7
Total finance lease expense	$	87

^(a) Includes short-term lease costs of $1,287 for the year ended December 31, 2019.

Cash paid for amounts included in the measurement of lease liabilities:

	Year Ended December 31, 2019
Operating cash flows from operating leases	$	1,043
Operating cash flows from finance leases	$	7
Financing cash flows from finance leases	$	83

F-19

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

	December 31, 2019
Weighted average remaining lease term:
Operating leases		4.1 years
Finance leases		1.7 years
Weighted average discount rate:
Operating leases		6.25	%
Finance leases		6.25	%

Maturities of lease liabilities are as follows:

	Operating leases			Finance leases
2020	$	1,073		$	65
2021		1,090			30
2022		869			9
2023		641			—
2024		276			—
Thereafter		113			—
Undiscounted lease cash flow commitments		4,062			104
Reconciling impact from discounting		(497	)		(9	)
Lease liabilities on consolidated balance sheet as of December 31, 2019	$	3,565		$	95

The following table presents the Company’s unadjusted lease commitments as of December 31, 2018 as a required disclosure for companies adopting the lease standard prospectively without revising comparative period information.

	Operating leases		Finance leases
2019	$	1,253	$	78
2020		1,039		62
2021		1,052		30
2022		841		10
2023		618		—
Thereafter		261		—
	$	5,064	$	180

9 FINANCIAL INSTRUMENTS

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2019:

	Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	11,989		—		—	$	11,989
Trade receivables		8,997		—		—		8,997
JV notes receivable		26,283		—		—		26,283
Right-of-use assets		3,582		—		—		3,582
Total	$	50,851		—		—	$	50,851
Financial liabilities
Trade payables and accrued liabilities	$	15,496		—		—	$	15,496
Line of credit		2,000		—		—		2,000
Lease liabilities		3,660		—		—		3,660
Debt		—		32,389		—		32,389
Total	$	21,156	$	32,389		—	$	53,545

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2018:

	Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	11,920		—		—	$	11,920
Trade receivables		11,292		—		—		11,292
JV notes receivable		10,873		—		—		10,873
Right-of-use assets		176		—		—		176
Total	$	34,261		—		—	$	34,261
Financial liabilities
Trade payables and accrued liabilities	$	18,110		—		—	$	18,110
Line of credit		2,000		—		—		2,000
Lease liabilities		180		—		—		180
Debt		—		35,675		—		35,675
Total	$	20,290	$	35,675		—	$	55,965

There were no financial instruments categorized as Level 3 at December 31, 2019 and December 31, 2018. There were no transfers of assets or liabilities between levels during the years ended December 31, 2019 and 2018, respectively.

10 COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Company and its subsidiaries may become defendants in certain employment claims and other litigation. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. The Company is not involved in any legal proceedings other than routine litigation arising in the normal course of business, none of which the Company believes will have a material adverse effect on the Company’s business, financial condition or results of operations.

F-20

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

11 DEFINED CONTRIBUTION PLAN AND GROUP RETIREMENT SAVINGS PLAN

The Company sponsors a defined contribution plan established pursuant to Section 401(k) of the Internal Revenue Code. Subject to certain dollar limits, employees may contribute a percentage of their salaries to the plan, and the Company will match a portion of each employee’s contribution. This plan is in effect for U.S.-based employees only. The expense pertaining to this plan was $125 for 2019, $133 for 2018 and $138 for 2017.

The Company also sponsors a group registered retirement savings plan established pursuant to the Capital Accumulation Plan guidelines and applicable legislation. Subject to certain dollar limits, employees may contribute a percentage of their salaries to the plan, and the Company will match a portion of each employee’s contribution. This plan is in effect for Canada-based employees only. The expense pertaining to this plan was $11 for 2019, $9 for 2018 and $16 for 2017.

12 RELATED PARTY TRANSACTIONS AND BALANCES

On February 13, 2019, the Company announced that Pure Sunfarms had entered into a credit agreement with Bank of Montreal, as agent and lead lender, and Farm Credit Canada, as lender, in respect of a CA$20 million secured non-revolver term loan (the “Credit Facility”). The Credit Facility, which matures on February 7, 2022, is secured by the Delta 3 facility, and contains customary financial and restrictive covenants. The Company is not a party to the Credit Facility but has provided a limited guarantee in the amount of CA$10 million in connection with the Credit Facility.

As of December 31, 2019 and 2018, the Company had amounts due from its joint venture, Pure Sunfarms, totaling $4,610 and $1,079, respectively. The December 31, 2019 amount due from joint venture primarily relates to an equity contribution of CA$5,940 (US$4,494) to Pure Sunfarms made by the Company, on November 19, 2019 when Emerald failed to make a required escrow equity payment to Pure Sunfarms on November 1, 2019. Emerald disputed the Company’s additional November equity contribution, as well as the cancellation of 5.94 million common shares of Pure Sunfarms that related to the failure to pay the CA$5,940 equity contribution. In an effort to narrow the issues in dispute and accelerate the resolution of this shareholder dispute, which occurred on March 6, 2020 with the Settlement Agreement, Village Farms unwound its November equity contribution in January with Pure Sunfarms providing Village Farms with a CA$5,940 refund. For the calendar year end December 31, 2019 this was recorded as part of the amount due from Joint Venture. The balance of the 2019 and December 31, 2018 amount due from joint venture are non-interest bearing and due on demand.

On July 5, 2018, the Company entered into a Shareholder Loan Agreement (the “Loan Agreement”) with Pure Sunfarms, whereby, as of December 31, 2019, the Company contributed CA$13,000 (US$9,959) in the form of a demand loan to Pure Sunfarms. Effective January 1, 2019, the loan amounts bear simple interest at the rate of 6.2% per annum, calculated semi-annually. Interest will accrue and be payable upon demand being made by both Shareholders (see note 12).

On March 25, 2019, the Company entered into a Grid Loan Agreement (the “Grid Loan”) with VF Hemp, whereby, as of December 31, 2019, the Company had contributed approximately $13,323 in the form a grid loan to VF Hemp. The Grid Loan has a maturity date of March 25, 2022, and bears simple interest at the rate of 8% per annum, calculated monthly.

Under the terms of the AVGG Hemp Joint Venture Agreement, the Company agreed to lend approximately US$5 million to AVGG Hemp for start-up costs and working capital. The loan bore simple interest at the rate of 8% per annum, calculated monthly. As of December 31, 2019, the Company had loaned AVGG Hemp approximately $1,184. Immediately following AVGG Hemp’s fourth quarter harvest, all of the hemp was destroyed by a severe windstorm. As a result of the loss, the Company wrote off its $1,184 loan to AVGG Hemp.

Amounts due from the joint ventures, including interest, as of December 31, 2019 and 2018 and included in the statements financial position:

	2019		2018
Pure Sunfarms	$	15,418	$	10,873
VF Hemp		10,865		—
AVGG Hemp		—		—
Total	$	26,283	$	10,873

One of the Company’s employees is related to a member of the Company’s executive management team and received approximately $110, $115 and $101 in salary and benefits during the years ended December 31, 2019, 2018 and 2017, respectively.

Included in other assets as of December 31, 2018 is a $64 promissory note that represents the unpaid amount the Company advanced to an employee in connection with a relocation at the request of the Company. The promissory note was paid in full June 10, 2019.

13 INCOME TAXES

The components of the provision for (recovery of) income tax for the years ended December 31, 2019 and 2018 are as follows:

	2019
	Current			Deferred			Total
Federal	$	—		$	(5,922	)	$	(5,922	)
State		8			(751	)		(743	)
Foreign		(19	)		818			799
	$	(11	)	$	(5,855	)	$	5,866

F-21

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

	2018
	Current		Deferred			Total
Federal	$	—	$	(1,786	)	$	(1,786	)
State		8		(187	)		(179	)
Foreign		422		(757	)		(335	)
	$	430	$	(2,730	)	$	(2,300	)

	2017
	Current			Deferred			Total
Federal	$	(232	)	$	(1,044	)	$	(1,276	)
State		24			(120	)		(96	)
Foreign		237			372			609
	$	29		$	( 792	)	$	(763	)

The provision for (recovery of) income taxes reflected in the consolidated statements of (loss) income for the years ended December 31, 2019, 2018 and 2017 differs from the amounts computed at the federal statutory tax rates. The principal differences between the statutory income tax (recovery) and the effective provision for (recovery of) income taxes are summarized as follows:

	Year Ended December 31,
	2019			2018			2017
(Loss) income before income taxes	$	(3,541	)	$	(9,815	)	$	(5,520	)
Tax (recovery) calculated at domestic tax rates applicable in the respective countries		(744	)		(2,061	)		(1,877	)
State tax adjustments		(350	)		—			(36	)
Non-deductible items		1,304			394			422
Capitalized debt amortization costs		(631	)		—			—
Share of (income) losses from joint venture		(4,367	)		(75	)		66
Unrealized foreign exchange		(276	)		(309	)		116
Deferred gains on non-cash contributions to joint venture		(2,407	)		—			(1,114	)
Differences attributed to joint venture capital transactions		(42	)		(56	)		(698	)
Tax rate differences on deferred items		1,472			92			(268	)
Foreign exchange on translation		—			—			132
Permanent and state true-up		63			(209	)		—
Statutory rate difference		—			—			2,550
Other		112			(76	)		(56	)
Provision for (recovery of) income taxes	$	(5,866	)	$	(2,300	)	$	(763	)

The statutory tax rate in effect in Canada for the years ended December 31, 2019, 2018 and 2017 was 27.0%, 27.0% and 26.0%, respectively, and 21.0%, 21.0% and 34.0%, respectively, in the United States.

The blended effective tax rate for 2019 was 165.6% compared to 23.4% and 13.8% in 2018 and 2017, respectively.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The deferred tax assets and liabilities presented on the consolidated statements of financial positions

The deferred tax assets and liabilities presented on the consolidated statements of financial position are net amounts corresponding to their reporting jurisdiction. The deferred tax assets and liabilities presented in the note disclosure are grouped based on asset and liability classification without consideration of their corresponding reporting jurisdiction.

F-22

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

Significant components of the Company’s net deferred income taxes at December 31, 2019 and 2018 are as follows:

	2019			2018
Deferred tax assets:
Other assets	$	2,536		$	2,239
Long-term debt		1,040			1,289
Tax losses: Non-capital and farm losses		11,553			5,974
Provisions: Debt and unit issuance costs		800			372
Tax losses: Capital losses		—			228
Joint venture shares		1,154			—
Joint venture property, plant and equipment: Valuation allowance		—			(478	)
Tax losses: Valuation allowance		(31	)		(25	)
		17,052			9,599
Deferred tax liabilities:
Joint venture shares		(2,593	)		(867	)
Property, plant and equipment		(8,333	)		(8,458	)
		(10,926	)		(9,535	)
Net tax assets	$	6,126		$	274

In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon available positive and negative evidence and future taxable income, the Company has recorded a $30 valuation allowance on their deferred tax assets for the year ended December 31, 2019. The valuation allowance reflected on the consolidated balance sheets is approximately $504 and $607 at December 31, 2018 and 2017, respectively.

Included in the schedule of deferred tax assets and liabilities above are US federal net operating losses carryforwards of approximately $48,285 and $24,340 at December 31, 2019 and 2018, respectively, which will begin to expire in 2031. At the state level, the Company has a combined states net operating loss carry forward of approximately $12,572 and $7,711 as of December 31, 2019 and 2018, respectively, which start to expire in 2020. The Canadian Non-Capital Losses carry forwards are $1,770 and $408 as of December 31, 2019 and 2018, respectively, which begin to expire in 2027.

At December 31, 2019 and 2018, the balance of uncertain tax benefits is zero. The Company does not anticipate that the amount of the uncertain tax benefit will significantly increase within the next 12 months. The Company recognizes accrued interest related to uncertain tax benefits and penalties as income tax expense. As of December 31, 2019 and 2018, there are no recognized liabilities for interest or penalties.

The Company is subject to taxation in the U.S. and various states, as well as Canada and its provinces. As of December 31, 2019, the Company’s tax years for 2016, 2017 and 2018 are subject to examination by the tax authorities. As of December 31, 2019, the Company is no longer subject to U.S. federal, state or local examinations by tax authorities for years before 2015.

F-23

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

14 SEGMENT AND GEOGRAPHIC INFORMATION

Segment reporting is prepared on the same basis that the Company’s Chief Executive Officer, who is the Company’s Chief Operating Decision Maker, manages the business, makes operating decisions and assesses performance. Management has determined that the Company operates in three segments. The Company’s three segments include the Produce business, the Energy business and the Company’s cannabis and hemp business. The Produce business produces, markets, and sells the product group which consists of premium quality tomatoes, bell peppers and cucumbers. The Energy business produces power that it sells per a long-term contract to its one customer. For segment information regarding the Company’s cannabis and hemp business refer to Note 5 – Investments – Equity Method and Joint Ventures.

The Company’s primary operations are in the United States and Canada. Segment information as of and for the years ended December 31, 2019, 2018 and 2017:

	2019			2018		2017
Sales
Produce – U.S.	$	120,745		$	124,699	$	132,464
Produce – Canada		22,674			23,355		24,020
Energy – Canada		1,149			1,946		1,922
	$	144,568		$	150,000	$	158,406
Interest expense
Produce – U.S.	$	36		$	37	$	31
Produce - Canada		2,507			2,668		2,563
Energy – Canada		71			89		101
	$	2,614		$	2,794	$	2,695
Interest income
Corporate	$	1,036		$	311	$	—
	$	1,036		$	311	$	—
Depreciation
Produce – U.S.	$	4,545		$	4,591	$	5,056
Produce - Canada		1,917			1,564		1,807
Energy – Canada		904			872		796
	$	7,366		$	7,027	$	7,659
Gross margin
Produce – U.S.	$	(14,153	)	$	494	$	5,931
Produce - Canada		7,486			8,659		7,946
Energy – Canada		(678	)		164		96
	$	(7,345	)	$	9,317	$	13,973

Total assets	2019		2018
United States	$	88,395	$	79,126
Canada		92,067		58,690
Energy - Canada		2,946		3,632
	$	183,408	$	141,448
Property, plant and equipment, net	2019		2018
United States	$	41,656	$	42,886
Canada		18,759		25,933
Energy - Canada		2,743		3,369
	$	63,158	$	72,188

F-24

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

15 INCOME PER SHARE

Basic net income (loss) per share is computed using the weighted average number of common shares outstanding for the period. Basic and diluted net income per ordinary share is calculated as follows:

	For the Years Ended December 31,
	2019		2018			2017
Numerator:
Net income (loss)	$	2,325	$	(7,515	)	$	(4,757	)
Denominator:
Weighted average number of common shares - Basic		49,418,228		44,356,699			39,143,912
Effect of dilutive securities- share-based employee options and awards		1,760,753		—			—
Weighted average number of common shares - Diluted		51,178,981		44,356,699			39,143,912
Antidilutive options and awards (1)		310,000		2,174,999			1,163,648
Net income (loss) per ordinary share:
Basic	$	0.05	$	(0.17	)	$	(0.12	)
Diluted	$	0.05	$	(0.17	)	$	(0.12	)

(1) Options to purchase shares of common stock and unvested RSUs are not included in the calculation of net income (loss) per share because the effect would have been anti-dilutive.

On March 24, 2020, the Company completed an underwritten public offering of 3,125,000 common shares in the capital of the Company (“Common Shares”), plus the exercise in full of the over-allotment option of 468,750 Common Shares (the “Offered Shares”) (note 18).

16 SHARE-BASED COMPENSATION PLAN

The Company’s Share-Based Compensation Plan (the “Plan”), dated January 1, 2010 was most recently approved by Shareholders on June 14, 2018. The Plan provides that the number of Common Shares reserved for issuance upon the exercise or redemption of awards granted under the Plan is a rolling maximum of ten percent (10%) of the outstanding Common Shares at any point in time. Approximately 2,074,000 shares remain available for issuance at December 31, 2019.

Stock options have been granted with an exercise price equal to the fair market value of the common stock on the date of grants and have a ten-year contractual term. The stock options vest ratably over a 3- year period. Compensation expense is recognized on a straight-line basis.

The fair market value of stock options is estimated using the Black-Scholes-Merton valuation model and the Company uses the following methods to determine its underlying assumptions: expected volatilities are based on the historical volatilities of the weekly closing price of the Company’s common stock; the expected term of options granted is based historical exercises and forfeitures; the risk-free interest rate is based on Canadian Treasury bonds issued with similar life terms to the expected life of the grant; and the expected dividend yield is based on the current annual dividend amount divided by the stock price on the date of grant. Forfeitures are recorded when incurred.

The following key assumptions were used in the valuation model to value stock option grants for each respective period:

	2019			2018			2017
Expected volatility		60.7	%		55.5	%		50.8	%
Dividend		$nil			$nil			$nil
Risk-free interest rate		1.86	%		2.30	%		1.43	%
Expected life		5.7 years			5.9 years			6.0 years
Fair value		CA$9.7259			CA$3.2541			CA$3.1869

F-25

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

Stock option transactions under the Company’s plan for the years ended December 31, 2019, 2018 and 2017 are summarized as follows:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2017		2,116,065			CA$1.19		6.24
Granted during 2017		320,000			CA$4.04		9.71
Exercised during 2017		(91,667	)		CA$0.90		4.09
Forfeited/expired during 2017		(6,666	)		CA$1.48
Outstanding at December 31, 2017		2,337,732			CA$1.59		5.89	$	14,125
Exercisable at December 31, 2017		1,752,739			CA$1.20		4.86	$	11,295
Granted during 2018		203,000			CA$5.79		9.44
Exercised during 2018		(365,733	)		CA$0.98		2.68
Forfeited during 2018		(10,000	)		CA$1.48
Outstanding at December 31, 2018		2,164,999			CA$2.10		5.69	$	5,553
Exercisable at December 31, 2018		1,648,670			CA$1.43		4.74	$	5,012
Granted		510,000			CA$16.32		9.19
Exercised		(212,332	)		CA$1.29		4.85
Forfeited		(10,001	)		CA$2.20
Outstanding at December 31, 2019		2,452,666			CA$5.12		5.60	$	11,435
Exercisable at December 31, 2019		1,707,337			CA$1.78		4.18	$	10,736

The weighted-average grant-date fair value of options granted during the years 2019, 2018 and 2017 was $9.58, $3.22 and $2.09, respectively. The total intrinsic value of options exercised during the years ended December 31, 2019, 2018 and 2017, was $1,999, $2,162 and $219, respectively.

A summary of the status of the Company’s non-vested stock options, and the changes during the year ended December 31, 2019, is presented below:

	Number of Options			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Non-vested at January 1, 2019		516,329			CA$2.27
Granted		510,000			CA$9.58
Vested		(270,999	)		CA$1.89
Forfeited		(10,001	)		CA$1.06
Non-vested at December 31, 2019		745,329			CA$7.43	$	CA$699

As of December 31, 2019, there was $855 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the stock option plan; that cost is expected to be recognized over a period of 8.98 years.

The Company has also issued performance-based restricted share units to Village Farms employees involved with future developments of the Company. Once a performance target is met and the share units are deemed earned and vested, compensation expense is recognized, based on the fair value of the share units on the grant date.

F-26

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

Performance-based restricted share unit activity for the years ended December 31, 2019, 2018 and 2017 is as follows:

	Number of Performance-based Restricted Share Units			Weighted Average Grant Date Fair Value
Outstanding at January 1, 2017		—
Issued		885,000			CA$2.20
Issued		21,000			CA$6.00
Exercised		(768,000	)		CA$2.20
Forfeited/expired		(10,000	)		CA$2.20
Outstanding at December 31, 2017		128,000			CA$2.82
Earned but unissued at December 31, 2017		—			—
Issued		979,000			CA$5.79
Exercised		(50,334	)		CA$3.06
Forfeited		—			—
Outstanding at December 31, 2018		1,056,666			CA$5.56
Earned but unissued at December 31, 2018		175,333			CA$5.08
Issued		355,000			CA$14.94
Exercised		(442,666	)		CA$7.82
Forfeited/expired		(230,000	)		CA$12.90
Outstanding at December 31, 2019		739,000			CA$6.58
Earned but unissued at December 31, 2019		30,000			CA$12.87

A summary of the status of the Company’s non-vested performance-based restricted share units, and the changes during the year ended December 31, 2019, is presented below:

	Number of Performance-based Restricted Share Units			Weighted Average Grant Date Fair Value
Non-vested at January 1, 2019		881,333			CA$5.63
Granted		355,000			CA$14.94
Vested		(297,333	)		CA$7.54
Forfeited		(230,000	)		CA$12.90
Non-vested at December 31, 2019		709,000			CA$10.21

Total share-based compensation expense for the years ended December 31, 2019, 2018 and 2017 of $4,714, $1,454 and $1,519, respectively, was recorded in selling, general and administrative expenses and the corresponding amount credited to additional paid in capital.

17 CHANGES IN NON-CASH WORKING CAPITAL ITEMS

	For the Years Ended December 31,
	2019			2018			2017
Trade receivables	$	2,301		$	(33	)	$	(1,059	)
Inventories		9,042			(5,435	)		(895	)
Due from joint ventures		(3,530	)		—			—
Other receivables		(448	)		1,239			(1,062	)
Prepaid expenses and deposits		(370	)		(79	)		(134	)
Trade payables		(1,953	)		1,649			241
Accrued liabilities		(369	)		(284	)		207
Other assets, net of other liabilities		571			(206	)		(817	)
	$	5,244		$	(3,149	)	$	(3,519	)

F-27

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)

18 SUBSEQUENT EVENTS

On March 6, 2020 the Company and Emerald closed a settlement agreement in order to settle all outstanding disputes with respect to Pure Sunfarms (note 5).

On March 24, 2020, the Company completed an underwritten public offering of 3,125,000 Common Shares in the capital of the Company plus the exercise in full of the over-allotment option of 468,750 Common Shares at a price of $3.20 per Offered Share for aggregate gross proceeds to the Company of $11,500,000 (the “Offering”). The Offering was conducted by Beacon Securities Limited (the “Underwriter”), as sole underwriter. (All figures are expressed in Canadian dollars.)

The net proceeds to the Company from the Offering, after deducting the Underwriter’s fee of $0.69 million, but before deducting the expenses of the Offering, were $10.71 million.

On March 28, 2020, Pure Sunfarms secured a CA$7,500 revolving line of credit and CA$12,500 term credit facility. The Company, along with Emerald, are guarantors of the loan and as a condition of funding, the shareholders are required to contribute CA$16,000 of additional equity, of which CA$8,000 has been contributed by the Company (note 5). The Company has committed to contributing a further CA$8,000.

F-28

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Pure Sunfarms Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial position of Pure Sunfarms Corp. and its subsidiaries (together, the Company) as of December 31, 2019 and 2018, and the related consolidated statements of income (loss) and comprehensive income (loss), changes in equity and cash flows for each of the two years in the period ended December 31, 2019 and the period from incorporation to December 31, 2017 including the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and its financial performance and its cash flows for each of the two years in the period ended December 31, 2019 and the period from incorporation to December 31, 2017 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Chartered Professional Accountants

  Vancouver, Canada

  March 31, 2020

We have served as the Company’s auditor since 2017.

F-29

Pure Sunfarms Corp.

Consolidated Statements of Financial Position

As at December 31, 2019 and 2018

	2019		2018
	$		$
Assets
Current assets
Cash and cash equivalents		6,459,395		2,361,948
Restricted cash (note 2)		3,095,809		—
Trade receivables (note 10)		11,283,003		1,312,113
GST receivable		1,530,259		530,338
Inventories (note 5)		40,137,546		8,356,615
Biological assets (note 6)		11,608,822		7,387,840
Short-term deposits		6,768,162		383,371
Prepaid expenses		747,315		82,215
		81,630,311		20,414,440
Property and equipment (note 7)		141,094,523		66,603,930
Intangible assets (note 8)		22,575		30,100
		222,747,409		87,048,470
Liabilities
Current liabilities
Trade and other payables		6,413,191		9,361,186
Accrued liabilities		6,522,043		519,962
Income taxes payable		11,025,820		—
Due to related parties (note 10)		6,182,335		3,061,244
Borrowings – Current portion		1,848,584		—
Borrowings – Shareholder loan (note 10)		28,123,490		26,523,328
		60,115,463		39,465,720
Deferred tax liabilities (note 12)		9,558,444		2,059,283
Borrowings – Long term (note 9)		17,000,000		—
		86,673,907		41,525,003
Shareholders’ Equity
Share capital (note 11)		83,350,000		40,000,000
Retained earnings		52,723,502		5,523,467
		136,073,502		45,523,467
		222,747,409		87,048,470
Commitments (note 19)
Subsequent events (note 20)

The accompanying notes are an integral part of these consolidated financials.

F-30

Pure Sunfarms Corp.

Consolidated Statements of Income (loss) and Comprehensive Income (loss)

For the years ended December 31, 2019, 2018 and the period from incorporation to December 31, 2017

	2019			2018			2017
	$			$			$
Sales		82,809,620			4,916,607			—
Cost of sales – production (notes 5 and 14)		(20,020,954	)		(1,542,231	)		—
		62,788,666			3,374,376			—
Realized fair value amounts included in inventory sold (note 5)		(62,614,906	)		(3,757,540	)		—
Change in fair value of biological asset (note 6)		79,465,146			12,542,592			—
Impairment loss on inventory (note 5)		(2,131,913	)		—			—
		77,506,993			12,159,428			—
Selling, general and administrative expenses (note 14)		10,444,812			3,385,500			(880,247	)
Income (loss) from operations		67,062,181			8,773,928			(880,247	)
Interest expense, net		1,169,902			96,984			—
Foreign exchange loss		10,463			234,257			3,529
Other income		(33,673	)		(23,839	)		—
Write down of property and equipment (note 7)		190,474			—			—
Income (loss) before taxes		65,725,015			8,466,526			(883,776	)
Provision for (recovery of) income tax (note 13)
Current		11,025,819			—			—
Future		7,499,161			2,297,903			(238,620	)
		18,524,980			2,297,903			(238,620	)
Net income (loss) and comprehensive income (loss)		47,200,035			6,168,623			(645,156	)

The accompanying notes are an integral part of these consolidated financial statements.

F-31

Pure Sunfarms Corp.

Consolidated Statements of Changes in Equity

For the years ended December 31, 2019, 2018 and the period from incorporation to December 31, 2017

	Number of common shares			Share capital		Retained earnings			Total equity
				$		$			$
Balance – June 2, 2017 (date of incorporation)		—			—		—			—
Shares issued (note 11)		26,000,000			26,000,000		—			26,000,000
Shares issued and held in escrow		14,000,000			—		—			—
Net loss		—			—		(645,156	)		(645,156	)
Balance – December 31, 2017		40,000,000			26,000,000		(645,156	)		25,354,844
Shares issued (note 11)		14,000,000			14,000,000		—			14,000,000
Shares held in (released from) escrow (note 11)		(14,000,000	)		—		—			—
Net income		—			—		6,168,623			6,168,623
Balance – December 31, 2018		40,000,000			40,000,000		5,523,467			45,523,467
Shares issued (note 11)		43,350,000			43,350,000		—			43,350,000
Shares issued and held in escrow		6,650,000			—		—			—
Shares cancelled (note 11)		(5,940,000	)		—		—			—
Net income		—			—		47,200,035			47,200,035
Balance – December 31, 2019		84,060,000			83,350,000		52,723,502			136,073,502

The accompanying notes are an integral part of these consolidated financial statements.

F-32

Pure Sunfarms Corp.

Consolidated Statements of Cash Flows

For the years ended December 31, 2019, 2018 and for the period from incorporation to December 31, 2017

	2019			2018			2017
	$			$			$
Cash provided by (used in)
Operating activities
Net comprehensive income/(loss) for the year/period		47,200,035			6,168,623			(645,156	)
Adjustment for items not affecting cash
Depreciation and amortization		3,541,887			1,035,739			—
Fair value changes in biological asset included in inventory sold and other charges		(10,497,341	)		(1,397,213	)		—
Unrealized gain on changes in fair value of biological asset		(79,465,146	)		(12,542,592	)		—
Impairment loss on inventory		2,131,913			—			—
Accrued interest on related party debt		1,193,151			96,984			—
Deferred income tax (recovery) expense		7,499,161			2,297,903			(238,620	)
Unrealized foreign exchange loss		(134,974	)		105,563			3,529
Write-down of property and equipment		190,474			—			—
Amortization of deferred financing fees		77,378			(9,531	)		—
		(28,263,462	)		(4,244,524	)		(880,247	)
Changes in non-cash working capital
Trade receivables		(9,970,889	)		(1,312,113	)		—
GST receivable		(999,921	)		(319,748	)		(210,590	)
Short-term deposits		(6,384,791	)		(383,371	)		—
Prepaid expenses		(665,100	)		(82,215	)		—
Inventories		(23,415,503	)		(6,934,028	)		(25,375	)
Biological assets		75,244,164			5,154,752			—
Trade and other payables		(6,301,730	)		2,192,714			252,977
Accrued liabilities		3,574,133			1,331,000			59,905
Income taxes payable		11,025,820			—			—
Due to related parties		3,121,091			1,332,065			858,236
		16,963,812			(3,265,468	)		54,906
Investing activities
Purchase of intangible assets		—			(15,117	)		(22,508	)
Purchase of property and equipment		(45,873,927	)		(37,264,377	)		(3,121,959	)
		(45,873,927	)		(37,279,494	)		(3,144,467	)
Financing activities
Proceeds from issuance of shares to Emerald Health		18,350,000			14,000,000			6,000,000
Proceeds from related party borrowings		—			26,000,000			—
Proceeds from bank loan, net transaction costs		18,777,959			—			—
Interest paid on bank loan		(1,024,588	)		—			—
		36,103,371			40,000,000			6,000,000
Effects of foreign exchange rate changes on cash		—			—			(3,529	)
Net increase (decrease) in cash and cash equivalents		7,193,256			(544,962	)		2,906,910

F-33

Pure Sunfarms Corp.

Consolidated Statements of Cash Flows—continued

For the years ended December 31, 2019, 2018 and for the period from incorporation to December 31, 2017

	2019			2018		2017
	$			$		$
Cash and cash equivalents – Beginning of year		2,361,948			2,906,910		—
Restricted cash – End of year		(3,095,809	)		—		—
Cash and cash equivalents – End of year		6,459,395			2,361,948		2,906,910
Supplementary schedule of non-cash investing activities
Property, plant and equipment purchases unpaid at year-end		5,919,437			6,809,932		—
Property, plant and equipment – capitalized interest		1,427,987			—		—
Acquisition of property and equipment through issuance of shares to Village Farms International, Inc.		25,000,000			—		20,000,000

The accompanying notes are an integral part of these consolidated financial statements.

F-34

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

1 General information

Pure Sunfarms Corp. (PSC or the Company) was incorporated under the Canada Business Corporation Act on June 2, 2017 and its principal office located at 4431 80th Street, Delta, British Columbia, Canada. The Company is a joint venture owned by Village Farms International Inc. (Village Farms) and Emerald Health Therapeutics Inc. (Emerald Health Inc.). As of December 31, 2019, Village Farms International Inc. have 53.5% of PSC and Emerald Health Therapeutics Inc. have 46.5% of ownership in the Company.

The Company completed the conversion of its 1^st 25-acre greenhouse in April 2019 and is in the process of converting its second 25-acre greenhouse facility in British Columbia for the purpose of growing, packaging and selling cannabis and cannabis extracts pursuant to the regulations of the Cannabis Act.

On December 21, 2018, PSC acquired a 100% interest in Pure Sunfarms Canada Corp. (PSCC) from Emerald Health Therapeutics Canada Inc. (Emerald Health), a wholly-owned subsidiary of Emerald Health Inc., pursuant to a Share Purchase Option Agreement dated October 31, 2017, for consideration of $1.

On January 23, 2019, PSC and its subsidiaries, PSCC and 1174076 B.C. Ltd., amalgamated pursuant to section 273 of the Business Corporation Act.

The consolidated financial statements have been prepared in Canadian dollars, which is the Company’s presentation currency, and are prepared on the historical cost basis, except for biological assets which are measured at fair value.

The consolidated financial statements were authorized for issue by the Board of Directors on March 31, 2020 and have been prepared in accordance with the International Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).

F-35

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

2 Significant accounting policies

Consolidation

Subsidiaries are all entities over which the Company has control. The Company controls an entity where the company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases.

The Company consolidated the results of its subsidiaries up until January 23, 2019, the date of amalgamation with its subsidiaries.

Foreign currency translation

Transactions denominated in foreign currencies are translated using the exchange rate in effect on the transaction date or at an average rate. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange in effect at the consolidated statement of financial position date. Non-monetary items are translated using the historical rate on the date of the transaction. Foreign exchange gains and losses are included in the consolidated statement of income and comprehensive income.

Cash and cash equivalents

Cash and cash equivalents consist of cash deposits held with banks and other highly liquid short-term interest bearing securities with maturities at the date of purchase of three months or less.

Restricted cash

Restricted cash consists of deposit in the amount of one-year non-blended principal and interest payments for the Term Loan drawn from the bank. The deposit was released on January 2, 2020 upon compliance with the financial covenants.

Financial instruments

a) Recognition

Financial assets and liabilities are recognized when the Company becomes party to the contractual provisions of the financial instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognized when the obligation specified in the contract is discharged, cancelled or expired.

Financial assets and liabilities are offset and the net amount is reported on the consolidated statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.

F-36

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

b) Measurement

At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed in income (loss).

For assets measured at fair value, gains and losses will either be recorded in income (loss) or other comprehensive income (OCI). For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments that are not held for trading, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).

The Company reclassifies debt investments only when its business model for managing those assets changes. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. Changes in the fair value of financial assets at FVTPL are recognized in the consolidated statement of income (loss) as applicable.

Financial liabilities held by the Company under IFRS 9 are initially measured at fair value and subsequently at amortized cost. Trade payables, accrued liabilities and debt are initially recognized at the amount required to be paid less, when material, a discount to reduce the payables to fair value. Subsequently, trade payables, accrued liabilities and debt are measured at amortized cost using the effective interest method. Financial liabilities are classified as current liabilities if payment is due within 12 months. Otherwise, they are presented as non-current liabilities.

The Company applies the fair value hierarchy based on the significance of the inputs used in making the measurements. The levels in the hierarchy are:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 – Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices);

Level 3 – Inputs for the asset or liability that are not based on observable market data (i.e., unobservable inputs).

c) Impairment of financial assets

The Company assesses, on a forward-looking basis, the expected credit losses associated with its debt instruments carried at amortized cost and FVOCI. The impairment methodology depends on whether there has been a significant increase in credit risk.

F-37

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

Biological assets

The Company’s biological assets consist of cannabis plants which are not yet harvested. These biological assets are measured at fair value less cost to sell. The Company capitalizes all related direct and indirect costs of production to the biological assets to fair value less costs to sell at each reporting date. At the point of harvest, the biological assets are transferred to inventory at their fair value less costs to sell.

Short-term deposits

Short term deposits include prepayment to construction vendors for Delta 3 and Delta 2 facilities and security deposit for excise tax.

Inventories

The cost of cannabis inventories are transferred from biological assets at their fair value less cost to sell at the point of harvest, which becomes their initial deemed cost. The cost of inventory also includes capitalized production costs, including labour, materials, post-harvest costs and depreciation. Packaging materials are valued at the lower of cost or replacement cost. The cost of packaging materials is determined on a standard cost basis. Inventoriable costs are expensed to cost of goods sold on the consolidated statement of income (loss) in the same period as when the cannabis products are sold.

Finished goods and capitalized production costs and biological asset adjustment are valued at the lower of cost or net realizable value. The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period when the write-down or loss occurs.

Property, plant and equipment

a) Recognition and measurement

Property, plant and equipment is initially recorded at cost. Cost includes expenditures that are directly attributable to the acquisition of the asset. Directly attributable costs incurred for major capital projects and site preparation are capitalized until the asset is brought to the location and condition necessary for it to be used in the manner intended by management. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located and borrowing costs.

Where an item of property, plant and equipment comprises significant components with different useful lives, the components are accounted for as separate items of property, plant and equipment. Expenditures incurred to replace a component of an item of property, plant and equipment that is accounted for separately, including major inspection and overhaul expenditures, are capitalized.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost can be measured reliably. Repairs and maintenance costs are charged to the consolidated statement of comprehensive income (loss) during the period in which they are incurred.

F-38

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

Items of property, plant and equipment acquired in a non-monetary transaction are measured at fair value, unless the transaction has no commercial substance or the fair value of both the asset received and the asset given up cannot be reliably measured. If an item of property, plant and equipment acquired in a non-monetary transaction cannot be measured at fair value, it is measured at the carrying amount of the asset given up in the exchange.

Subsequent to initial recognition, property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses.

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of the property, plant and equipment, and is presented net within gain/loss on disposal of assets in the consolidated statement of comprehensive income.

b) Depreciation

Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed, and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately.

Depreciation expense is recognized on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term. Land is not depreciated. The estimated useful lives of the class of assets for the current and comparative periods are as follows:

Leasehold and land improvements	5 - 20 years
Greenhouses and other buildings	4 - 30 years
Greenhouse equipment	3 - 30 years
Machinery and equipment	3 - 20 years
Furniture and fixtures	3 - 15 years

Construction in progress reflects the cost of assets under construction, which are not depreciated until placed into service.

Borrowing costs

Borrowing costs attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. Where funds have been borrowed specifically for the construction or acquisition of a qualifying asset, the amount capitalized is the actual borrowing cost incurred. Any outstanding borrowing made specifically to obtain that qualifying asset will be treated as part of the funds that it has borrowed generally. Where general borrowings have been used, the amount capitalized is calculated using the weighted average capitalization rate of the general borrowings. The capitalization of borrowing costs ceases when the qualifying asset is substantially complete.

F-39

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

Intangible assets

The Company’s intangible assets are purchased and have finite useful lives. They are measured at cost less accumulated amortization and any accumulated impairment losses. Amortization is calculated based on the cost of the intangible assets less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognized in profit or loss. Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted where necessary.

Impairment of non-financial assets

At the end of each reporting period, the Company reviews the carrying amounts of its non-financial assets with finite lives to determine whether there is any indication that those assets have suffered an impairment loss. Property, plant and equipment and intangible assets are tested for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. For the purpose of testing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units or CGUs). An impairment loss is recognized for the amount, if any, by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use (being the present value of the expected future cash flows of the relevant asset or CGUs).

Leased assets

The Company has adopted IFRS 16, Leases, as issued by the IASB (International Accounting Standards Board) in January 2016 with a date of transition of January 1, 2019, which resulted in changes in accounting policies. There were no adjustments to the amounts previously recognized in the consolidated financial statements were recorded as a result of transition.

In applying IFRS 16 for the first time, the Company has used the following practical expedients permitted by the standard: (i) relying on previous assessments on whether leases are onerous as an alternative to performing an impairment review – there were no onerous contracts as at January 1, 2019; and (ii) accounting for operating leases with a remaining lease term of less than 12 months as at January 1, 2019 as short-term leases.

The Company has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date, the Company relied on its assessment by applying International Accounting Standards (IAS) 17 – Leases, and IFRS Interpretations Committee (IFRIC) 4 – Determining Whether an Arrangement Contains a Lease.

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation or impairment losses and adjusted for certain remeasurements of the lease liability. The Company recognizes the associated depreciation of the right-of-use assets on a straight-line basis over the course of the remaining lease term.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily

F-40

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

determined, the Company’s incremental borrowing rate. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised. Lease payments are allocated between principal and interest expense. The interest expense is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Payments associated with short-term leases and all leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.

Prior to January 1, 2019 and the adoption of IFRS 16, the Company measured and classified its leases under IAS 17—Leases: leases where the Company assumed substantially all the risks and rewards of ownership were classified as finance leases. Upon initial recognition, the leased asset was measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset was accounted for in accordance with the accounting policy applicable to that asset. Other leases were operating leases and rent expenses were recognized in the Company’s consolidated statement of comprehensive income.

Revenue recognition

Revenue from the sale of cannabis in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts, volume rebates and excise duty. The Company’s revenue transactions consist of single performance obligations to transfer promised goods. Quantities to be delivered to the customer are determined at a point near the delivery date through purchase orders received from the customer. The Company recognizes revenue when it has fulfilled a performance obligation to the customer. The amount of revenue recognized is reduced by excise duty, estimated returns and other customer credits, such as discounts and rebates, based on the expected value to be realized. Payment terms are consistent with standard terms to the markets the Company serves.

Provisions

Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. The timing or amount of the outflow may still be uncertain.

Provisions are measured at management’s best estimate of the expenditure required to settle the obligation at the end of the reporting period and are discounted to present value using the expected future cash flows at a rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Income taxes

Current tax expense is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at period-end.

F-41

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

Deferred tax is provided using the consolidated statement of financial position liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the consolidated statement of financial position reporting date applicable to the period of expected realization or settlement.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Income taxes recoverable represent the current estimated refund of taxes from taxation authorities.

3 Significant accounting estimates and judgments

The preparation of these consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. These estimates and judgments have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Significant accounting estimates and judgments

a) Estimated useful lives of property, plant and equipment

Management estimates the useful lives of property, plant and equipment based on the period during which the assets are expected to be available for use. The amounts and timing of recorded expenses for depreciation of property, plant and equipment for any period are affected by these estimated useful lives. The estimates are reviewed at least annually and are updated if expectations change as a result of physical wear and tear, technical or commercial obsolescence and legal or other limits to use. It is possible that changes in these factors may cause significant changes in the estimated useful lives of the Company’s property, plant and equipment in the future.

b) Inventories

Capitalized production costs are expenditures relating to upcoming harvests which are deferred and become part of costing in subsequent periods. To calculate the deferral, estimates are made concerning the expected life cycle and timing of harvests for cannabis plants. Finished goods cannabis inventory and capitalized production costs in inventory are carried at the lower of cost or net realizable value. Management’s estimate of net realizable value is calculated as the estimated selling cost in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

F-42

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

c) Biological assets

Management is required to make a number of estimates to calculate the fair value of its biological assets. This includes estimating the stage of growth of the cannabis at the reporting period-end date, costs to complete which include crop costs up to harvest, harvesting costs and selling costs, sales price, wastage, potency and expected yields of the cannabis plants. Management has used judgment in determining the point at which biological transformation has occurred to the point they expect it is probable that future economic benefits associated with the cannabis plants will flow to the Company.

Impairment losses are recognized when the carrying amount of the asset exceeds its recoverable amount and is recorded in the consolidated statement of income and comprehensive income.

d) Income taxes and deferred income tax assets or liabilities

Management uses judgment and estimates in determining the appropriate rates and amounts in recording deferred taxes, giving consideration to timing and probability. Actual taxes could vary significantly from these estimates as a result of future events, including changes in income tax law or the outcome of reviews by tax authorities and related appeals. The resolution of these uncertainties and the associated final taxes may result in adjustment to the Company’s tax assets and tax liabilities. The recognition of deferred income tax assets is subject to judgment and estimation over whether these amounts can be realized.

F-43

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

4 Adoption of new and revised standards and interpretations

The Company adopted IFRS 16, Leases, on January 1, 2019. The standard required lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognized. The Company assessed the requirements under IFRS 16 and there are no changes to accounting policies on leases for PSC.

Standards effective January 1, 2020

IAS 1, Financial Statements Presentation and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors—Amendments to IAS 1, Financial Statements Presentation and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors were issued to clarify the definition of ‘material’. Under IAS 1, information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. The amendments are effective for annual periods beginning on or after January 1, 2020. The Company does not anticipate any material impact to the Company’s financial position.

Conceptual Framework—Conceptual Framework sets out the fundamental concepts for financial reporting and to ensure similar transactions are treated the same way, to provide useful information to investors, lenders and other creditors. The revised Conceptual Framework sets out revised definition of an asset and a liability as well as new guidance on measurement and derecognition, presentation and disclosure. For companies that use the Conceptual Framework to develop accounting policies when no IFRS standard applies to a particular transaction, the revised Conceptual Framework is effective for annual reporting periods beginning on or after January 1, 2020. The Company is in the process of assessing the impact of revised Conceptual Framework.

IFRS 3, Business Combinations—Amendments were issued to clarify the definition of a business under IFRS 3, Business Combinations. The amendments clarify the minimum attributes that the acquired set of activities and assets must have to be considered a business; remove the assessment of whether market participants are capable of replacing any missing elements; add guidance to help entities assess whether an acquired process is substantive; narrow the definition of a business and outputs; and introduce an optional fair value concentration test. The amendments are effective for business combinations for which the acquisition date is on or after the annual reporting period beginning on or after January 1, 2020. The Company does not anticipate any material impact to the Company’s financial position.

F-44

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

5 Inventories

	2019		2018
	$		$
Capitalized production costs		11,527,154		5,832,547
Available for sale inventory		15,984,878		1,126,855
Packaging materials		730,960		—
Biological asset adjustment		11,894,554		1,397,213
		40,137,546		8,356,615

The cost of inventories expensed and included in the cost of sales for the year ended December 31, 2019 amounted to $20,020,954 related to production cost of sales (2018 - $1,542,231 and 2017 - nil) and $62,614,916 related to realized fair value included in inventory (2018 - $3,757,540 and 2017 - nil). Depreciation expense included in cost of sales was $1,885,636 (2018 - $275,589 and 2017 - nil).

The Company recorded an impairment loss on Biological asset adjustment of $2,131,913 (2018- nil and 2017 - nil), in which net realized value on cannabis flowers and trims exceeds its costs.

6 Biological assets

	2019			2018
	$			$
Opening, biological assets		7,387,840			—
Increase in biological assets due to capitalized costs		32,564,713			4,137,019
Changes in fair value due to biological transformation		79,465,146			12,542,592
Transferred to inventory upon harvest		(107,808,877	)		(9,291,771	)
Ending, biological assets		11,608,822			7,387,840

The following table summarizes the unobservable inputs for the period ended December 31, 2019:

Unobservable inputs	Input values	Sensitivity analysis
Average selling price Obtained through average selling price or estimated future selling prices if historical results are not available	$0.70 – $2.00 per gram	A 5% increase (decrease) in average selling price would have resulted in an increase or decrease of approximately $704,961 in valuation
Yield per plant Varies by strain and is obtained through historical harvest yield results	65 – 167 grams per plant	A 5% increase (decrease) in yield per plant would have resulted in an increase or decrease of approximately $554,957 in valuation

F-45

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

7 Property and equipment

	Land		Land Improvement			Buildings			Machinery and equipment			Information technology			Construction in progress			Total
	$		$			$			$			$			$			$
Year ended December 31, 2018
Opening net book value		3,700,000		—			16,300,000			—			—			3,121,959			23,121,959
Additions (transfers)		—		—												44,500,185			44,500,185
Placed in service		—		405,215			29,119,777			2,784,427			255,027			(32,564,446	)		—
Depreciation expense		—		(8,050	)		(873,350	)		(105,817	)		(40,997	)		—			(1,028,214	)
		3,700,000		397,165			44,546,427			2,678,610			214,030			15,057,698			66,593,930
At December 31, 2018
Cost		3,700,000		405,215			45,419,777			2,784,427			255,027			15,067,698			67,632,144
Accumulated depreciation		—		(8,050	)		(873,350	)		(105,817	)		(40,997	)		—			(1,028,214	)
Net book value		3,700,000		397,165			44,546,427			2,678,610			214,030			15,067,698			66,603,930
Year ended December 31, 2019
Opening net book value		3,700,000		397,165			44,546,427			2,678,610			214,030			15,067,698			66,603,930
Additions (transfers)		731,227		—			2,868,415			370,713			6,798			74,238,277			78,215,430
Placed in service		—		21,600			14,771,323			5,559,817			81,450			(20,434,190	)		—
Write down of property and equipment		—		—			—			—			—			(190,474	)		(190,474	)
Depreciation expense		—		(20,061	)		(2,896,686	)		(558,149	)		(59,467	)		—			(3,534,363	)
		4,431,227		398,704			59,289,479			8,050,991			242,811			68,681,311			141,094,523
At December 31, 2019
Cost		4,431,227		426,814			63,059,515			8,714,957			343,275			68,681,311			145,657,099
Accumulated depreciation		—		(28,110	)		(3,770,036	)		(663,966	)		(100,464	)		—			(4,562,576	)
Net book value		4,431,227		398,704			59,289,479			8,050,991			242,811			68,681,311			141,094,523

The property and equipment includes $3,700,000 of contributed land and $41,300,000 of contributed assets for Delta 2 & 3 facilities. The contribution represents the rights to lease and purchase the land and the greenhouse facility for both locations. These rights were contributed by Village Farms in exchange for 45,000,000 shares in the Company. It was determined that Delta 2 land and greenhouse facility had a fair value of $25,000,000 at the date of contribution. The fair value of the land was determined through an appraisal performed by an independent valuator. The fair value of the greenhouse was determined using the replacement cost model.

F-46

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

8 Intangible assets

The Company’s intangible assets consist of purchased computer software.

	2019			2018
	$			$
Definite-lived intangible assets
Cost		37,625			37,625
Accumulated amortization		(15,050	)		(7,525	)
Definite-lived intangible assets – net		22,575			30,100

9 Long term loan

On February 7, 2019, the Company obtained a $20,000,000 loan facility from the Bank of Montreal (BMO) and Farm Credit Canada. Interest is payable at the Canadian Bank’s prime rate plus the applicable margin level. The effective rate for the loan was 6.29%. The Company’s shareholders are guarantors of the loan.

The loan has a maximum repayment term of three years and mandatory repayments will consist of interest only to June 30, 2019, and non-blended quarterly scheduled repayments of $500,000 plus monthly interest thereafter.

The Company is required to comply with financial covenants, measured quarterly. The Company is required to maintain minimum Fixed Charge Coverage Ratio of 1:50: 1 and Senior Funded Debt to EBITDA shall not exceed 1.50:1. As at December 31, 2019, the Company was in compliance with the financial covenants.

F-47

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

10 Related party transactions

a) Borrowings

On July 5, 2018, the Company entered into a loan agreement with its shareholders to finance its construction project and to finance general working capital requirements. At December 31, 2019, the principal amount advanced through equal contributions made by each shareholder was $26,000,000.

Interest will accrue and be payable on demand being made by either shareholder. The shareholder loan bears simple interest of 8% calculated semi-annually. The loan agreement provides for a retroactive interest rate adjustment should the Company secure financing from an arm’s length lender, in which case the interest on the shareholder loan amounts would be adjusted to equal the third-party interest rate.

On February 7, 2019, the interest rate was reduced to 6.2% and subsequently reduced to 5.2% on December 2, 2019 to reflect the interest rate obtained from third-party.

	$
Loan principal		26,000,000
Accrued interest		2,132,490
		28,123,490

b) Due to related parties

At December 31, 2019, the Company recorded the below amounts payable and accrued to its shareholders, primarily for consulting services and the reimbursement of expenses which occurred during the year:

	2019		2018
	$		$
Emerald Health
Payable to Emerald Health		777		779,685
Accrued to Emerald Health		87,415		904,700
		88,192		1,684,385
Village Farms
Payable to Village Farms		66,997		1,410,616
Accrued to Village Farms		87,146		—
Receivable from Village Farms		—		(33,757	)
Amount of terminated additional equity infusion refundable (note 20)		5,940,000		—
		6,094,143		1,376,859
		6,182,335		3,061,244

F-48

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

All amounts are non-interest bearing and are due on demand.

c) Sales and other income

On December 21, 2018, the Company entered into a Supply Agreement with Emerald Health, whereby Emerald agreed to purchase 40% of the bud and 40% of the Trim produced by the Company until December 31, 2019.

During the year, the Company made sales of dried flower (bud) and Trim pursant to the supply agreement with Emerald Health totaled $17,506,450 and $7,137,300 for unconfirmed products pricing shortfall chargeback (note 20).

The Supply Agreement was extended to December 31, 2022 whereby Emerald has the provision to purchase 25% of the bud and 25% of the trim produced by PSC (note 20).

By way of a Storage Agreement entered into on December 31, 2018, the Company has agreed to act as a temporary custodian of product purchased by Emerald Health. On occasion, ownership of the product, including title, risk of loss and control, will pass to Emerald Health pursuant to the Supply Agreement but may be stored at the Company’s premises for a fee. For the year ended December 31, 2019, the Company recognized storage fees arising from this arrangement in the amount of $54,024.

d) Key management compensation

Key management personnel are those persons having authority and responsibility for planning, directing, and controlling the activities of the entity, directly or indirectly, at the executive level. Compensation provided to the key management for 2019 and 2018 :

	2019		2018
	$		$
Salaries		1,413,647		430,386
Benefits		26,040		7,786
		1,439,687		438,172

There was no key management compensation for the year ended 2017.

F-49

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

11 Share capital

Authorized

Unlimited number of Class A voting common shares without par value

Issued

The Company issued 40,000,000 shares during 2017, for which consideration of $26,000,000 was received in exchange for 26,000,000 shares. Consideration consisted of $20,000,000 in contributed assets and $6,000,000 in cash. The remaining 14,000,000 shares were held in escrow, pending receipt of consideration from Emerald Health.

The Emerald Health initial capital contribution of $20,000,000 has been advanced to the Company in multiple instalments based on milestones set out in the Shareholders’ Agreement between Emerald Health and Village Farms. Upon receipt of payment, shares have been released from escrow on the basis of one share per dollar contributed.

On March 2, 2018, Health Canada issued a Cultivation Licence to the Company under Canada’s Access to Cannabis for Medical Purposes Regulations (ACMPR). A $10,000,000 contribution was received by the Company from Emerald Health upon issuance of the cultivation licence, resulting in the release of 10,000,000 shares from escrow. As of April 27, 2018, the Company had received the remaining $4,000,000 contribution from Emerald Health, resulting in the release of 4,000,000 shares from escrow.

On March 29, 2019 the Company agreed to issue 50,000,000 shares, for which consideration of $43,350,000 was received in exchange for 43,350,000 shares. Consideration consisted of $25,000,000 in contributed assets from Village Farms and $18,350,000 in cash from Emerald Health. For $18,350,000 cash contribution from Emerald, 2,500,000 shares were released from escrow and 15,850,000 shares were held in escrow. Pursuant to the settlement agreement, 5,940,000 shares were cancelled as of November 19, 2019 (note 20). The remaining 710,000 shares pending receipt of consideration from Emerald Health were held in escrow as of December 31, 2019. Subsequent to December 31, 2019,the 710,000 shares were released from escrow upon receipt of consideration from Emerald Health.

F-50

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

12 Deferred taxes

The income tax expense charged to loss during the period is as follows:

	Biological assets and tax losses			Property and equipment			Other			Total
	$			$			$			$
Deferred tax assets
At June 2, 2017		—			—			—			—
(Changed) credited to consolidated statement of income		160,434			78,186			—			238,620
At December 31, 2017		160,434			78,186			—			238,620
(Changed) credited to consolidated statement of income		468,556			(78,186	)		—			390,370
At December 31, 2018		628,990			—			—			628,990
(Changed) credited to consolidated statement of income		(628,990	)		—			—			(628,990	)
At December 31, 2019		—			—			—			—
Deferred tax liabilities
At June 2, 2017		—			—			—			—
(Changed) credited to consolidated statement of income		—			—			—			—
At December 31, 2017		—			—			—			—
(Changed) credited to consolidated statement of income		(2,371,964	)		(315,794	)		(515	)		(2,688,273	)
At December 31, 2018		(2,371,964	)		(315,794	)		(515	)		(2,688,273	)
(Changed) credited to consolidated statement of income		(3,973,948	)		(2,883,718	)		(12,505	)		(6,870,171	)
At December 31, 2019		(6,345,912	)		(3,199,512	)		(13,020	)		(9,558,444	)

F-51

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

The analysis of deferred tax assets and deferred tax liabilities is as follows:

	$
Deferred tax liabilities
Expected to be settled in more than 12 months		(3,297,237	)
Expected to be settled within 12 months		(6,261,207	)
		(9,558,444	)

Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through future profits is probable.

13 Income tax expense

The provision for (recovery of) income taxes reflected in the consolidated statement of income for the years ended December 31, 2019 and December 31, 2018 differs from the amounts computed at the federal statutory tax rates. The principal differences between the statutory income tax (recovery) and the effective provision for (recovery of) income taxes are summarized as follows:

	2019		2018		2017
	$		$		$
Pre-tax income (loss) per financial statements		65,725,015		8,466,526		(883,776	)
Tax expense (recovery) calculated at the statutory rate		17,745,754		2,285,962		(229,782	)
Permanent difference on assets contributed by Village Farms		766,612		—		—
Temporary differences on deferred taxes		12,614		11,941		(8,838	)
Provision for (recovery of) income taxes		18,524,980		2,297,903		(238,620	)

The statutory rate in effect for the year ended December 31, 2019 was 27% (2018 – 27%, 2017 – 26%).

F-52

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

14 Expenses by nature

The Company’s significant expenses by nature are as follows:

	2019		2018		2017
	$		$		$
Cost of sales
Labour		6,989,496		696,668		—
Supplies and materials		3,158,399		335,759		—
Overhead		7,987,423		234,215		—
Depreciation		1,885,636		275,589		—
		20,020,954		1,542,231		—
Selling, general and administration
Professional services		2,377,500		1,899,760		862,852
Employee compensation and benefits		3,079,654		827,023		5,413
Office expenses		2,000,545		535,376		7,162
Other		611,717		96,595		2,765
Health Canada Regulatory Fee		1,150,995		—		—
Repairs and maintenance		165,391		19,764		—
Marketing		1,059,010		6,982		2,055
		10,444,812		3,385,500		880,247

15 Sales

The Company’s principal source of revenue is from the sale of dried flower (bud) and trim to fulfill purchase orders received from customers. Trim is the by-product of a harvested cannabis plant. During the year, sales were made to other licensed cannabis producers and 2 provincial wholesalers, Ontario Retail Cannabis Corporation and BC Liquor Distribution Branch. Revenue earned during the period from product sales was $82,809,620. The sales to two largest customers represent 35% and 30% of the total sales.

16 Financial instruments

The following table summarizes the carrying value and fair value of the Company’s financial instruments:

	2019 Carrying value		2019 Fair value
	$		$
Cash and cash equivalents		6,459,395		6,459,395
Restricted cash		3,095,809		3,095,809
Trade receivables		11,283,003		11,283,003
Trade payables, accrued liabilities and due to related parties		19,117,569		19,117,569
Debt borrowings – related party		28,123,490		22,910,442
Debt borrowings – bank		18,848,584		17,050,164

F-53

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

Management of financial risks

a) Price risk

i) Foreign exchange rate risk

Foreign exchange risk arises from fluctuations in the future cash flows of a financial instrument because of changes in foreign exchange rates. The Company is exposed to foreign exchange rate risk on its foreign currency denominated cash and cash equivalents, accounts receivable, trade payables and accrued liabilities. The Company has elected not to actively manage this exposure at this time. Notwithstanding, the Company continuously monitors this exposure to determine if any mitigation strategies become necessary.

For the year ended December 31, 2019, the Company recognized a foreign exchange loss of $10,463 in the consolidated statement of income and comprehensive income. Based on the balances as at December 31, 2019, a 1% increase (decrease) in the Euro/Canadian dollar exchange rates on that day would have resulted in an increase or decrease of approximately $8,116 in foreign exchange (gain) or loss.

ii) Interest rate risk

The Company is exposed to interest rate risk on its shareholder loan. Interest on the loan is variable, in that it equals the rate of any third-party borrowings and will be retrospectively adjusted. As of December 2, 2019, the interest rate on the loan was adjusted to 5.20%, to equal the third-party interest rate on a credit facility secured by the Company (note 18). This rate is variable and is calculated as the Canadian prime rate plus the Canadian bankers’ acceptance rate.

Changes in the interest rates could result in an increase or decrease in the amount of interest accrued on the loan. When assessing the potential impact of forward interest rate changes, the Company believes an interest rate volatility of 25 basis points is a reasonable measure. If interest rates applicable to the floating rate debt at December 31, 2019 were to have increased or decreased by 25 basis points, it is estimated that the Company’s income before tax would change by approximately $86,486.

b) Credit risk

Financial instruments that may subject the Company to credit risk consist of cash, restricted cash, and accounts receivable. The carrying amount of these financial assets recorded in the consolidated financial statements, net of any allowances for losses, represent the Company’s maximum exposure to credit risk.

Cash and cash equivalents are maintained with financial institutions in Canada and are redeemable on demand. Due to the nature of the customers and the generally short payment terms, management does not consider it has any significant credit risk exposure on its accounts receivable.

F-54

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

c) Liquidity risk

The following liabilities have maturities due within one year:

	$
Trade and other payables		6,413,191
Accrued liabilities		6,522,043
Due to related parties		6,182,335
Borrowings – current portion		2,000,000

The Company’s borrowings, including accrued interest, are due on demand and consist of shareholder loan amounts advanced by Emerald Health and Village Farms.

Liquidity risk is the risk that the Company will encounter difficulty in meeting financial obligations as they come due. The degree to which the Company is leveraged may reduce its ability to obtain additional financing for working capital and to finance investments to maintain and grow the current levels of cash flows from operations.

The Company expects that it will continue to be able to meet its obligations for the next 12 months. The Company manages its liquidity risk by closely monitoring cash requirements and by making regular updates to short-term cash flow projections. To the extent that the Company does not believe it has sufficient liquidity to fulfill its obligations, the Company will consider securing additional debt or equity financing through its shareholders or third-party lenders.

17 Capital management

The Company considers its capital resources as the aggregate of shareholders’ equity, borrowings when applicable, net of cash and cash equivalents, and investments. The Company manages the capital structure and makes adjustments in light of changes in economic conditions and risk considerations, in the context of its financial objectives and strategic plan.

The Company has a planning and budgeting process to help determine the funds required to ensure the Company has the appropriate liquidity to meet its operating and expansion objectives. The Company’s objectives in managing capital are to ensure sufficient liquidity to pursue its growth and expansion strategy, safeguard its ability to continue as a going concern, and to provide an adequate return on investment to its shareholders while taking a conservative approach towards financial leverage and management of financial risk.

F-55

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

18 Economic dependence

The Company’s initial source of cash funding was from equity and shareholder loans from Village Farms and Emerald Health. Those initial contributions were used by the Company to finance the greenhouse retrofitting and to fund operations. Additional cash contributions of $18,350,000 in exchange for equity were received from Emerald Health during the year ended December 31, 2019, of $18,350,000 (note 11). Subsequent to year-end, the Company obtained a loan facility from a third-party banking syndicate. Both Emerald Health and Village Farms are guarantors on the loan and the shareholders are required to contribute $16,000,000 of additional equity as part of the loan agreement (note 20).

19 Commitments

At December 31, 2019, the Company had commitments of $10,743,361 in respect of purchase orders relating to the construction and acquisition of capital assets.

20 Subsequent events

a) On January 16, 2020, PSC repaid $5,940,000 to Village Farms relating to an additional equity contribution originally made by Village Farms on November 19, 2019 (note 10b) and cancelled pursuant to a settlement agreement (c) below.

b) Village Farms made an additional equity contribution of $4,000,000 on January 24, 2020 and an additional $4,000,000 on February 14, 2020 pursuant to the contribution notice issued by PSC to the shareholder on January 16, 2020.

c) On March 2, 2020, the joint venture partners, Emerald Health and Village Farms, entered into a settlement agreement that resolved certain disputes between the two parties. The items arising from the settlement are:

i) Under the shareholders agreement, Emerald Health was obligated to contribute $5,940,000 equity payment to PSC on November 1, 2019 and defaulted on the equity payment. The 5,940,000 common shares placed in escrow pending Emerald Health contributing a $5,940,000 equity amount was cancelled effective as of November 19, 2019.

ii) Under the Supply Agreement (note 10c), Emerald Health may only sell the purchased products through retail channels. If Emerald Health sells product to other licensed producers (LPs), it must remit to PSC the difference between the fixed purchase price in the supply agreement less the sellers fee. During fiscal year 2019, Emerald sold product purchased from PSC to other LPs resulting in $952,237 due to PSC for which Emerald has issued a promissory note on March 6, 2020, to the company.

Under the Supply Agreement PSC agreed to sell Emerald Health 40% of its products at a fixed price per gram for flower and trim. If Emerald Health did not provide confirmation to purchase the product, it became unconfirmed product and PSC could sell it to any third party at market price. If the product was sold for less than the fixed purchase price, Emerald Health was required to reimburse PSC for the price difference. The amounts owed under the Supply Agreement for unconfirmed products pricing shortfall chargeback was $7,494,165 in 2019 and $636,720 in 2020. These amounts were offset against the Emerald Health shareholders loan (note 10a) on March 2, 2020.

F-56

PURE SUNFARMS CORP.

Notes to Consolidated Financial Statements

December 31, 2019, 2018 and 2017

Effective March 2, 2020, Emerald Health has forfeited and waived repayment of its outstanding $13,000,000 shareholder loan (plus accrued interest of $1,061,745) to PSC. The shareholder loan was offset by $8,130,885 for unconfirmed products charges (above) and $5,930,860 as payment to terminate the Supply Agreement that expired on December 31, 2022.

Pursuant to the settlement agreement, PSC released Emerald Health from all liability arising from their 2018 and 2019 Supply Agreement under which Emerald had the requirement to purchase 40% of PSC aggregate production.

Pursuant to the settlement agreement, PSC and Emerald Health released each other from their current Supply Agreement under which Emerald had the requirement to purchase 25% of the bud and 25% of the trim produced annually by PSC from January 1, 2020 to December 31, 2022

d) On March 28, 2020, the Company secured a $7,500,000 Revolving line of credit and $12,500,000 term credit facility from a third-party banking syndicate. The loan has a maximum repayment term of two years and bears a variable rate of interest which is consistent with the current term loan (note 9). Mandatory repayments will consist of interest only to June 30, 2020, and non-blended scheduled repayments of principal plus interest thereafter. The Company is required to comply with financial covenants, measured quarterly. The Company’s shareholders are guarantors of the loan. As part of the agreement shareholders are required to contribute $16,000,000 of additional equity, of which $8,000,000 has been contributed by Village Farms in 2020 (b) above. Funding of the secured debt facility is contingent on the acceptance of various conditions precedent which are substantially completed as of the reporting period end and authorization date of the consolidated financial statements.

e) On March 11, 2020, the World Health Organization characterized the COVID-19 outbreak as a pandemic. The outbreak has caused uncertainty in the financial markets and closure of non-essential businesses in many jurisdictions in Canada and United States. The province of British Columbia, Ontario and Quebec included cannabis stores and producers in the essential service list. The development and impact of COVID-19 on the overall economy is uncertain and there might be impact to the supply chain and retail markets. We are unable to quantify the potential impact this may have on our future financial results. The impact may be material.

F-57

EX-4.2

Exhibit 4.2

Description of the Registrant's Securities
Registered Pursuant to Section 12 of the
Securities Exchange Act of 1934

The common shares ("Common Shares") of Village Farms International, Inc. (the "Company") are registered under Section 12 of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") and are traded on the Nasdaq Stock Market LLC under the symbol "VFF". No other securities of the Company are registered under Section 12 of the Exchange Act.

The following description of our Common Shares is a summary of the material terms of such securities. For more information, we refer you to our Articles of Amalgamation, By-laws and By-laws amendment, copies of which are filed as exhibits to our Annual Report on Form 10-K of which this Exhibit 4.2 is a part.

Authorized Capital Stock

The Company is authorized to issue an unlimited number of Common Shares, no par value, an unlimited number of preferred shares ("Preferred Shares") and an unlimited number of special voting shares ("Special Shares") of the Company. As of April 1, 2020, the Company had 56,250,419 Common Shares and no Preferred Shares and no Special Shares issued and outstanding.

Common Shares

Each Common Share entitles the holder thereof to receive notice of and to attend all meetings of shareholders of the Company and to one vote per Common Share at such meetings (other than meetings at which only the holders of another class of shares are entitled to vote separately as a class). The Common Shares entitle the holders thereof to receive, in any year, dividends on the Common Shares as and when declared by the board of directors of the Company, provided that payment of such dividends is not prohibited under law and after payment of any applicable amounts to which holders of any Preferred Shares may be entitled. In the event of the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, after payment of or other proper provision for all of the liabilities of the Company and the payment of any amounts payable to holders of the Preferred Shares, the holders of the Common Shares will be entitled to share pro rata in all remaining property or assets of the Company.

The ability of a beneficial owner of Common Shares to pledge such Common Shares or otherwise take action with respect to such shareholder's interest in such Common Shares (other than through a participant in the depository service provided by CDS Clearing and Depository Services Inc.) may be limited due to the lack of a physical Common Share certificate.

Preferred Shares

The Company is authorized to issue an unlimited number of Preferred Shares. The Company's board of directors will fix the number of Preferred Shares, as well as the designation, rights, privileges, restrictions and conditions for each series of Preferred Shares that may be issued, subject to the Company filing the applicable articles of amendment under the Canada Business Corporations Act. Preferred Shares will have preference over Common Shares with respect to the payment of dividends and in the distribution of assets in the event of the liquidation, dissolution or winding-up of the Company, be it voluntary or involuntary, or any other distribution of the assets of the Company among its shareholders for the purpose of winding-up its affairs. Preferred Shares will have no right to vote on shareholder matters, subject to certain exceptions. No changes to the provisions of the Preferred Shares may be made without the approval of the holders of the Preferred Shares.

Special Shares

We are authorized to issue an unlimited number of Special Shares and the holders of such Special Shares will be entitled to one vote per Special Shares held at all meetings of shareholders of the Company. However, in no event shall the votes attached to the Special Shares exceed 45% of the votes otherwise attached to the Common Shares and the Special Shares then outstanding. The authorization of Special Shares will make it possible for us to issue shares with voting or other rights or preferences that could have an effect of delaying, deferring or preventing a change in control of the Company. The authorization of Special Shares is a historical framework that was carried over from the capital structure of Village Farms Income Fund, the Company's predecessor. No Special Shares are issued or outstanding and the Company does not intend to issue Special Shares in the future.

- 2 -

Retained Interest of Michael DeGiglio

Pursuant to the terms of the Amended and Restated Securityholders' Agreement, by and among the Company, VF Operations Canada Inc., Michael DeGiglio, Albert Vanzeyst and Kenneth Hollander and certain related entities, dated December 31, 2009 (the "Securityholders' Agreement"), the Company has granted to its Chief Executive Officer, Michael DeGiglio, certain pre-emptive rights, as well as "demand" and "piggy back" registration rights. These rights will enable Mr. DeGiglio to require the Company to file a prospectus (in the case of a demand registration) and otherwise assist with a public offering of Common Shares, subject to certain limitations. In the event of a "piggy back" offering, the Company's financing requirements are to take priority. Subject to the approval of the TSX, in the event that the Company decides to issue equity securities or securities convertible into or exchangeable for equity securities of the Company other than to officers, employees, consultants or directors of the Company or any subsidiary of the Company pursuant to a bona fide incentive compensation plan, the Securityholders' Agreement provides, among other things, Michael DeGiglio with pre-emptive rights to purchase such number of newly issued equity securities in order to maintain his pro rata ownership interest in the Company.

EX-4.3

Exhibit 4.3

AMENDED AND RESTATED

SECURITYHOLDERS’ AGREEMENT

among

VILLAGE FARMS INTERNATIONAL, INC.

(“ParentCo”)

and

VF OPERATIONS CANADA INC.

(“VF Opco”)

and

MICHAEL DEGIGLIO, ALBERT VANZEYST AND KENNETH HOLLANDER

and certain related entities

(the “VF Owners”)

December 31, 2009

TABLE OF CONTENTS

		Page
ARTICLE 1 INTERPRETATION			1
1.1	Definitions		1
1.2	Construction		5
ARTICLE 2 EXCHANGE RIGHT			6
2.1	Exercise		6
2.2	Exchange Notice		6
2.3	Exchange Consideration		7
2.4	Exchange Closing		7
2.5	VF Opco Exchange Right		8
2.6	Changes in Shares		9
2.7	ParentCo Information		10
2.8	Tender Offers		10
2.9	ParentCo Call Rights on Take-Over Bid		11
2.10	ParentCo Guarantee		11
ARTICLE 3 PARENTCO SUCCESSORS			11
3.1	ParentCo Successor		11
ARTICLE 4 AMENDMENTS AND SUPPLEMENTAL AGREEMENTS			12
4.1	Changes in Capital of ParentCo or U.S. Holdings		12
4.2	Execution of Supplemental Agreements		12
ARTICLE 5 COVENANTS OF PARENTCO			13
5.1	Covenants Regarding Participating Preferred Shares		13
5.2	Validity of Shares		13
5.3	Reservation of Shares		13
5.4	Securities Law Compliance		13
5.5	Stock Exchange Listing		14
ARTICLE 6 REGISTRATION AND PRE-EMPTIVE RIGHTS			14
6.1	Demand Registration Rights		14
6.2	Piggy-Back Registration Rights		16
6.3	Pre-emptive Rights		17
ARTICLE 7 TERMINATION			18
7.1	Term		18
ARTICLE 8 GENERAL			18
8.1	Successors and Assigns		18
8.2	Severability		18

-i-

TABLE OF CONTENTS

(continued)

		Page
8.3	Notices to Parties		18
8.4	Counterparts		19
8.5	Governing Law		19
8.6	Attornment		20
8.7	Waiver of Jury Trial		20
8.8	Authorship		20
8.9	Waiver		20
8.10	Remedies		20
8.11	Entire Agreement		20
8.12	Further Assurances		21
8.13	Time of the Essence		21
SCHEDULE “A” REGISTRATION PROCEDURES			A-I
SCHEDULE “B” FORM OF EXCHANGE NOTICE			B-1

-ii-

AMENDED AND RESTATED

SECURITYHOLDERS’ AGREEMENT

This Amended and Restated Securityholders’ Agreement is made as of the 31^st day of December, 2009 among Village Farms International, Inc., a Canadian corporation (formerly known as Hot House Growers Inc. and Village Farms Canada Inc.) (“ParentCo”), VF Operations Canada Inc., a Canadian corporation (“VF Opco”) and the VF Owners (as defined below).

WHEREAS Village Farms Income Fund (the “Fund”), VF Opco and the VF Owners entered into a securityholders’ agreement dated as of October 18, 2006 (the “Original Securityholders’ Agreement”);

AND WHEREAS ParentCo entered into an arrangement agreement (the “Arrangement Agreement”) dated November 2, 2009, by and among ParentCo, the Fund, Village Farms Operating Trust, Village Farms Canada GP Inc., Village Farms Canada Limited Partnership, VF Opco and VF U.S. Holdings Inc. (“U.S. Holdings”) providing for a plan of arrangement (the “Arrangement”) under section 192 of the Canada Business Corporations Act pursuant to which holders of ordinary trust units (the “Units”) of the Fund will transfer their Units to ParentCo in exchange for common shares of ParentCo (“Shares”);

AND WHEREAS pursuant to the Arrangement, the participating preferred shares of U.S. Holdings (the “Participating Preferred Shares”) will remain outstanding following the Arrangement but will become exchangeable for Shares, instead of Units, based on the number of Units into which the Participating Preferred Shares are exchangeable on December 31, 2009;

AND WHEREAS pursuant to the Arrangement, U.S. Holdings will subscribe for 25,267,000 special voting shares in the capital of ParentCo (the “Special Shares”);

AND WHEREAS in connection with the completion of the transactions described in the Arrangement Agreement, ParentCo, VF Opco and the VF Owners have agreed to amend and restate the Original Securityholders’ Agreement by entering into this Agreement in order to provide the VF Owners with the rights specified in this Agreement;

NOW THEREFORE, in consideration of the premises and the covenants and agreements herein contained, the parties hereto agree as follows:

ARTICLE 1

INTERPRETATION

1.1 Definitions. In this Agreement, unless something in the subject matter or context is inconsistent therewith:

“1933 Act” means the U.S. Securities Act of 1933.

“Agreement” means this agreement, including the recitals, and the schedules, exhibits and appendices hereto, as amended, supplemented or restated from time to time.

“Business Day” means a day other than a Saturday, Sunday or statutory holiday when banks are generally open in the City of Vancouver, British Columbia and the City of New York, New York for the trat1saction of banking business.

“CBCA” means the Canada Business Corporations Act, as amended from time to time.

“CDS” means CDS Clearing and Depository Services Inc. and its successors.

“CDS Participant” means a broker, dealer, bank, other financial institution or other Person who, directly or indirectly, from time to time, effects book-based transfers with CDS and pledges of securities deposited with CDS.

“DeGiglio Holdings Company” means the Nova Scotia unlimited liability company indirectly wholly-owned by Michael DeGiglio and a signatory to this Agreement.

“Demand Cash Right” has the meaning given to that term in Section 2.3.

“Demand Registration” has the meaning given to that term in Section 6.1.

“Determination Date” means the Business Day prior to the date of delivery of the Exchange Notice.

“Directors” means the duly appointed Persons acting as directors of ParentCo, or any successors thereof.

“Distribution” means a distribution of Shares to the public by way of a Prospectus under Securities Laws in any applicable jurisdiction in Canada.

“Distribution Cash” means the gross proceeds received by ParentCo from a Distribution of the aggregate applicable number of Exchange Shares less the Selling Expenses actually incurred in connection with such Distribution.

“Distribution Cash Transaction” has the meaning given to that term in Section 2.3.

“Distribution Expenses” means all reasonable out-of-pocket expenses incurred by ParentCo in connection with a Distribution, including all distribution and filing fees, printing expenses, fees and disbursements of outside counsel for ParentCo and independent public accountants or chartered accountants for ParentCo, fees and expenses (including counsel fees) incurred in connection with complying with applicable securities laws, stock exchange listing fees, transfer taxes, fees of transfer agents and registrars, but excluding any Selling Expenses.

“Exchange Consideration Option” has the meaning given thereto in Section 2.3.

“Exchange Consideration” means Exchange Shares or Distribution Cash, as applicable.

“Exchange Notice” means a notice in the form attached as Schedule “B” delivered by a VF Owner to effect the exchange of the Participating Preferred Shares into Exchange Consideration in accordance with the terms of this Agreement.

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“Exchange Procedure” means the procedure for exchanging Participating Preferred Shares into Shares or cash set forth in Article 2.

“Exchange Ratio” means 100: 1 being one hundred (100) Shares for one (1) Participating Preferred Share, as adjusted from time to time in accordance with Section 2.6 and as adjusted to account for any stock dividend, stock split, stock issuance, reverse stock split, contribution, recapitalization, reclassification, reorganization, merger, consolidation or other similar event relating to U.S. Holdings.

“Exchange Right” has the meaning given thereto in Section 2.1.

“Exchange Shares” means, with respect to the exercise of an Exchange Right pursuant to Article 2, the number of Shares equal to the product of (i) the number of Participating Preferred Shares subject to the corresponding Exchange Notice and (ii) the then applicable Exchange Ratio.

“Governmental Authority” means the Government of Canada or of the United States or a province or state or other political subdivision thereof and any court or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government in Canada or the United States or any province or state or other political subdivision thereof.

“Hollander Holdings Company” means the Nova Scotia unlimited liability company indirectly wholly-owned by Kenneth Hollander and a signatory to this Agreement.

“Lien” means any lien, pledge, security interest, charge, claim, mortgage, deed of trust, option, warrant, purchase right or option, right of first refusal or similar right, lease, easement or other encumbrance or restriction of any kind.

“Market Price” means, as of any given date, the price per Share on the TSX based on the weighted average trading price for the three trading days ending on and including such date.

“Offering” means an offering of Shares of ParentCo.

“ParentCo” has the meaning given thereto in the recitals to this Agreement.

“ParentCo Cash Election” has the meaning given thereto in Section 2.3.

“ParentCo Election” has the meaning given thereto in Section 2.3.

“Participating Preferred Shares” means the participating preferred shares in the capital of U.S. Holdings and any shares into which such shares may be converted, exchanged, subdivided, consolidated or otherwise changed from time to time in accordance with this Agreement and any shares of any successor corporation to U.S. Holdings that such shares may become as a result of any merger or reorganization.

“Permitted Transferee” means the recipient of securities which were transferred in accordance with and subject to the transfer restrictions regarding Participating Preferred Shares contained in the certificate of incorporation of U.S. Holdings (as though such securities were Participating Preferred Shares thereunder).

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“Person” means individuals, corporations, limited partnerships, general partnerships, joint stock companies, limited liability companies, joint ventures, associations, companies, trusts, banks, trust companies, pension funds, business trusts or other organizations, whether or not legal entities, and governments, governmental agencies and political subdivisions thereof.

“Piggy-Back Cash Right” has the meaning given thereto in Section 2.3.

“Piggy-Back Registration” has the meaning given thereto in Section 6.2.

“Prospectus” means a “preliminary prospectus” and a “prospectus” as those terms are used in the Securities Act, including all amendments and supplements thereto.

“Qualifying Shares” means any Shares indirectly issued by ParentCo to a YF Owner pursuant to Article 2 or Section 6.3 and held by a YF Owner at the relevant time.

“Registrable Securities” means any Shares issuable upon exercise of the Exchange Right and any other Shares held by YF Owners. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when they have been distributed to the public pursuant to a Distribution or sold to the public through a broker, dealer, or market maker in compliance with applicable Securities Laws. For purposes of this Agreement, a Person shall be deemed to be the holder of Registrable Securities, and the Registrable Securities shall be deemed to be in existence, whenever such Person has the right to acquire such Registrable Securities (upon conversion or exercise or otherwise, but disregarding any restrictions or limitations upon exercise of such right), whether or not the acquisition has actually been effected, and such Person shall be entitled to exercise the rights of a holder of Registrable Securities hereunder.

“Requesting Holders” means the YF Owners requesting a Demand Registration pursuant to Section 6.1.

“Securities Act” means the Securities Act (British Columbia).

“Securities Laws” means, collectively, the applicable securities laws of each of the provinces and territories of Canada and the respective regulations and rules made under those securities laws, together with all applicable blanket orders and rulings of the securities commissions of such jurisdictions.

“Selling Expenses” means all underwriting fees, discounts and selling commissions applicable to a particular Distribution.

“Share” means a common share of ParentCo.

“Share Certificate” means a certificate, in form approved by ParentCo’s board of directors, evidencing one or more Shares, issued and certified in accordance with ParentCo’s constating documents.

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“Shareholder” means a holder from time to time of one or more Shares and includes, while the Shares are registered in the book-based system administered by CDS, the beneficial owners of Shares and the registered holders of Shares.

“Special Shares” means the special shares of ParentCo issued to U.S. Holdings.

“Tax Act” means the Income Tax Act (Canada) and the regulations thereunder.

“Tender Offer” has the meaning given thereto in Section 2.8.

“Transaction” has the meaning given thereto in Section 2.8.

“TSX” means the Toronto Stock Exchange.

“U.S. Holdings” has the meaning given thereto in the recitals to this Agreement.

“Vanzeyst Holdings Company” means the Nova Scotia unlimited liability company indirectly wholly-owned by Albert Vanzeyst and a signatory to this Agreement.

“VF Opco” has the meaning give thereto in the recitals to this Agreement and its successors.

“VF Opco Cash” has the meaning given thereto in Section 2.5.

“VF Opco Exchange Right” has the meaning given thereto in Section 2.5.

“VF Opco Shares” has the meaning given thereto in Section 2.5.

“VF Owner NSULCs” means, collectively Vanzeyst Holdings Company, Hollander Holdings Company and DeGiglio Holdings Company.

“VF Owners” means Michael DeGiglio, Albert Vanzeyst, Kenneth Hollander, the VF Owner NSULCs, and their Permitted Transferees.

1.2 Construction. Unless the context otherwise requires: (i) “or” is not exclusive; (ii) the tenns “this Agreement”, “hereof”, “herein” and “hereunder” and similar expressions refer to this Agreement and not to any particular Article, Section or other portion hereof and include any agreement or instrument supplementary or ancillary; (iii) terms defined in this Agreement in their singular or plural forms have correlative meanings when used herein in their plural or singular forms, respectively; (iv) pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require; (v) any date specified for any action that is not a Business Day shall be deemed to mean the first Business Day after such date; (vi) a reference to a Person includes its successors and permitted assigns; (vii) the word “including” shall mean “including without limitation”; (viii) except where otherwise expressly provided, all references herein to dollar amounts shall mean Canadian dollars; (ix) any reference to any federal, state, provincial, local or foreign statute or law shall be to such statute or law as amended at the applicable time, and shall be deemed also to refer to all rules and regulations promulgated thereunder at the applicable time; and (x) the inclusion of headings and a table of contents in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof and, unless otherwise indicated, all references to an “Article” or “Section” followed by a number and/or a letter refer to the specified Article or Section of this Agreement.

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ARTICLE 2

EXCHANGE RIGHT

2.1 Exercise. ParentCo and VF Opco hereby agree that, from and after the date of this Agreement until October 18, 2013, the VF Owners shall be entitled to exchange the Participating Preferred Shares collectively held by the VF Owners for the applicable Exchange Consideration in accordance with the terms of this Agreement (the “Exchange Right”).

2.2 Exchange Notice. A VF Owner may exercise the Exchange Right by delivering to VF Opco, during regular business hours in accordance with Section 8.3 or at such other place as may be designated by VF Opco, a written notice (an “Exchange Notice”) stating:

(a) the number of Participating Preferred Shares the VF Owner wishes to exchange;

(b) subject to Section 2.3, that such VF Owner is requesting Shares or in the event that such VF Owner is entitled to the Exchange Consideration Option, whether such VF Owner is requesting Shares or Distribution Cash;

(c) if such VF Owner is requesting Shares in respect of an exercise of the Exchange Right, that the VF Owner is aware that any Shares delivered to the VF Owner have not been and will not be registered under the 1933 Act and that the Shares may not be offered or sold in the United States without registration under the 1933 Act or compliance with requirements of an exemption from such registration;

(d) if such VF Owner is requesting Shares in respect of an exercise of the Exchange Right, that the VF Owner will not (i) offer or sell any Shares delivered to such VF Owner pursuant to the exercise of the Exchange Right in violation of any applicable federal or state securities laws of the United States or (ii) resell any Shares delivered to such VF Owner pursuant to the exercise of the Exchange Right except in accordance with the Securities Laws and the applicable rules of the TSX;

(e) if such VF Owner is requesting Shares in respect of an exercise of the Exchange Right, the VF Owner’s account particulars and other details necessary to record through CDS or a CDS Participant the VF Owner’s interest in any Shares delivered to such VF Owner pursuant to the exercise of the Exchange Right;

(t) if such VF Owner is entitled to the Exchange Consideration Option and elects to receive Distribution Cash, the account to which such cash should be delivered pursuant to Section 2.4;

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(g) if such VF Owner is requesting Shares in respect of an exercise of the Exchange Right, whether such VF Owner is an “accredited investor” under Rule 501(a) under the 1933 Act; and

(h) that such VF Owner has good title to and owns the Participating Preferred Shares that are subject to the Exchange Notice free and clear of all Liens.

2.3 Exchange Consideration. In connection with an exercise by a VF Owner of an Exchange Right, such VF Owner shall be entitled to elect to receive (i) Exchange Shares or (ii) in the event that such VF Owner would have the right to request a Piggy-Back Registration (“Piggy-Back Cash Right”) or a Demand Registration (“Demand Cash Right”) at such time (assuming the VF Owner exercising the Exchange Right at such time held the Shares they would be entitled to receive pursuant to the exchange), Distribution Cash (such right to elect Distribution Cash, a VF Owner’s “Exchange Consideration Option”). To the extent that a VF Owner is not entitled to an Exchange Consideration Option, the form of Exchange Consideration delivered to the VF Owner shall be Exchange Shares, subject to the right of ParentCo, upon the decision of a majority of its directors who are not required by the CBCA to declare an interest in the matter, to elect whether to deliver such Exchange Shares or Distribution Cash (an election to deliver Distribution Cash, a “ParentCo Cash Election”). In the event that the Exchange Consideration is Distribution Cash, (i) if Distribution Cash has been elected by the VF Owner pursuant to a Demand Cash Right or has been elected by ParentCo pursuant to a ParentCo Cash Election, the corresponding Distribution shall be conducted in accordance with the procedures specified in Section 6.1 as if such Distribution were a Demand Registration and as if such VF Owner was a Requesting Holder thereunder entitled to the rights specified in such section, including the right to terminate such distribution and withdraw the relevant Exchange Notice at any time prior to the closing thereof (provided, that notwithstanding Section 6.1 CD, no withdrawal shall be permitted after the date ParentCo signs an underwriting agreement with respect to such Distribution) and (ii) if Distribution Cash has been elected by the VF Owner pursuant to a Piggy-Back Cash Right, the corresponding Distribution shall be conducted in accordance with the procedures specified in Section 6.2 (any such transaction, a “Distribution Cash Transaction”). In connection with an exercise of the Exchange Right and as specified in Section 2.9, ParentCo shall guarantee the performance of the obligations of VF Opco and any other subsidiary of ParentCo delivering the Exchange Consideration and, in the event that there is a legal restriction or impediment to VF Opco’s honoring the Exchange Right or exercising the VF Opco Exchange Right (as defined below), or if ParentCo so elects, ParentCo shall designate (and will guarantee the performance of) another subsidiary of ParentCo, to deliver the applicable Exchange Consideration to the exchanging VF Owner (a “ParentCo Election”); provided that, for the avoidance of doubt, no such designation shall release ParentCo from its obligations hereunder.

2.4 Exchange Closing. Upon the delivery of an Exchange Notice, the Exchange Consideration shall be delivered by VF Opco (or, in the event of a ParentCo Election, another applicable subsidiary of ParentCo) to the requesting VF Owner as promptly as practicable and in no event later than (i) three (3) Business Days after delivery of such Exchange Notice in the event that the Exchange Consideration is paid in Shares and (ii) in the event ParentCo undertakes a Distribution Cash Transaction pursuant to the exercise of a YF Owner’s Demand Cash Right or a ParentCo Cash Election or in connection with a VF Owner’s Piggy-Back Cash Right, on the

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date of completion of the relevant Distribution (such date of delivery of the Exchange Consideration, the “Closing Date”). In the event that some or all of the Exchange Consideration is in the form of Shares, on the Closing Date, VF Opco (or, in the event of a ParentCo Election, another applicable subsidiary of ParentCo) will cause to be delivered, through the book-based system administered by CDS, to and for the account of the requesting VF Owner or as such VF Owner may otherwise direct in the Exchange Notice, ·the number of Shares deliverable pursuant hereto upon receipt of all required documents and instruments of transfer as required hereunder. If any or all of the Exchange Consideration is in the form of cash, VF Opco (or, in the event of a ParentCo Election, another applicable subsidiary of ParentCo) will deliver or cause to be delivered to the requesting VF Owner or as such VF Owner may otherwise direct in the Exchange Notice such cash amount by wire transfer of immediately available funds to the account(s) specified in the Exchange Notice. On the Closing Date, the VF Owner shall deliver to VF Opco (or, in the event of a ParentCo Election, another applicable subsidiary of ParentCo) the certificate or certificates for the Participating Preferred Shares subject to the Exchange Right, duly endorsed or assigned in blank to VF Opco (or, in the event of a ParentCo Election, such other designated subsidiary of ParentCo). VF Opco will exchange such Participating Preferred Shares for additional common stock of U.S. Holdings and will cause U.S. Holdings to cancel such Participating Preferred Shares.

2.5 VF Opco Exchange Right.

(a) ParentCo hereby grants VF Opco the right (the “VF Opco Exchange Right”), at any time that VF Opco is required to deliver the Exchange Consideration pursuant to the terms of this Agreement, to require ParentCo to deliver cash and/or Shares to VF Opco, or to such Persons as VF Opco may direct. The amount of cash that ParentCo will be required to deliver shall be the amount required to be delivered as the Exchange Consideration in respect of the applicable Exchange Notice (“VF Opco Cash”). The number of Shares that ParentCo shall be required to issue shall be the number required to be delivered as the Exchange Consideration in respect of the relevant Exchange Notice (the “VF Opco Shares”). The VF Opco Exchange Right shall be assignable to any other subsidiary of ParentCo that is designated by ParentCo to deliver the Exchange Consideration.

(b) To exercise the VF Opco Exchange Right, VF Opco shall, not later than 5:00 p.m. (Toronto time) on the second Business Day prior to the Closing Date, deliver to ParentCo, in accordance with Section 8.3, written notice of exercise which shall state that:

(i) VF Opco is exercising the VF Opco Exchange Right so as to require ParentCo to deliver VF Opco Cash or VF Opco Shares on a date specified, which shall be no later than 9:00 a.m. (Toronto time) on the Closing Date specified by Section 2.4;

(ii) as applicable, the number of VF Opco Shares issuable by ParentCo in connection with the exercise of the VF Opco Exchange Right;

(iii) if VF Opco Shares are being issued, that VF Opco, or in the event of a ParentCo Election, such other designated subsidiary of ParentCo is, at the delivery date of the notice, an “accredited investor” under Rule 501(a) under the 1933 Act;

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(iv) if YF Opco Shares are being issued and YF Opco so elects, in lieu of recording or causing to be recorded the interest of YF Opco in any or all of the YF Opco Shares issuable as part of the YF Opco Exchange Right, ParentCo is directed to record or cause to be recorded the interest of the exchanging YF Owner or its designee in such number of YF Opco Shares as are specified in the notice, and such notice shall provide the account particulars of such holder’s CDS Participant and other details necessary to record such interest in the book-entry only system administered by CDS; and

(v) each of YF Opco and any other subsidiary of ParentCo which is delivering Exchange Consideration to the exchanging YF Owner hereby represents and warrants in favour of ParentCo and covenants with ParentCo, that (A) its equity interests (if any) being issued in connection therewith will be duly authorized and validly issued as fully paid and non-assessable’ and shall be free and clear of all Liens; and (B). if YF Opco Shares are being issued and delivered to it that it is an “accredited investor” within the meaning of the Securities’ Laws and/or “accreditor investor” under Rule 501(a) of the 1933 Act.

2.6 Changes in Shares.

(a) In the event that at any time or from time to time after the date hereof, ParentCo shall (i) pay a dividend on its Shares in Shares, (ii) subdivide its outstanding Shares into a larger number of Shares, (iii) combine its outstanding Shares into a smaller number of Shares or (iv) increase or decrease the number of Shares outstanding by reclassification of its Shares, then the Exchange Ratio shall be adjusted so that, immediately after the happening of such event, after giving effect to such adjustment, each YF Owner shall be entitled to receive the number of Shares upon exercise of the Exchange Right (assuming an exercise with respect to all of such YF Owner’s then outstanding Participating Preferred Shares) that such YF Owner would have been entitled to receive had the Exchange Right been exercised in full immediately prior to the happening of the events described above (or, in the case of a dividend of Shares, immediately prior to the record date therefor).

(b) In the event that at any time or from time to time after the date hereof, ParentCo shall issue, sell, distribute or otherwise grant any rights to subscribe for or to purchase, or any options or warrants for the purchase of, or any securities convertible or exchangeable into, Shares to all holders of Shares, entitling such holders to subscribe for or purchase Shares or securities convertible into Shares, whether or not immediately exercisable, convertible or exchangeable, as the case may be, and the subscription or purchase price per Share or the price per Share issuable upon exercise, conversion or exchange thereof is lower at the record date for such issuance than the then Market Price per Share, the Exchange Ratio will be adjusted so that, immediately after the happening of such event, after giving effect to such adjustment, the YF Owners shall be entitled to receive the number of Shares upon the exercise of the Exchange Right (assuming an exercise with respect to all of the YF Owner’s then outstanding Participating Preferred Shares) equal to the product of (i) the number of Shares that the YF Owners would be entitled to receive upon the exercise of the Exchange Right (assuming an exercise with respect to all of the YF Owner’s then outstanding Participating Preferred Shares) prior to the record date and (ii) a fraction, (A) the numerator of which shall be the number of Shares outstanding on the date of issuance of such rights, options, warrants or securities plus the number of additional Shares offered for subscription or purchase or into or for which such securities are convertible or

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exchangeable, and (B) the denominator of which shall be the number of Shares outstanding on the date of issuance of such rights, options, warrants or securities plus the total number of Shares which could be purchased at the Market Price with the aggregate consideration to be received through the issuance of such rights, warrants, options, or convertible securities.

(c) In case ParentCo shall reorganize its capital or reclassify its capital equity (in each case, other than pursuant to a transaction to which Section 2.6(a) is applicable), consolidate or merge with or into another Person (where ParentCo is not the surviving entity or where there is a change in or distribution with respect to the Shares of ParentCo), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another Person and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares (or equivalent equity securities) of the successor or acquiring Person, or any cash, shares of stock or other securities or property of any nature whatsoever in addition to or in lieu of shares (or equivalent equity securities) of the successor or acquiring Person (“Other Property”), are to be received by or distributed to the holders of Shares of ParentCo, then each VF Owner shall have the right thereafter to receive, upon exercise of its Exchange Right, the number of shares (or equivalent equity securities) of the successor or acquiring Person or of ParentCo, if it is the surviving entity, and/or Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by the VF Owner with respect to or in exchange for the number of Shares that would have been received upon exercise of the number of its Participating Preferred Shares for which the Exchange Right is exercisable immediately prior to such event.

(d) In connection with any exchange of Participating Preferred Shares, in the event that there are any Accrued Dividends (as defined in the certificate of incorporation of U.S. Holdings) with respect to such Participating Preferred Shares at such time, subject to the approval of the TSX, the Exchange Ratio shall be adjusted with respect to such Participating Preferred Shares so that, after giving effect to such adjustment, such VF Owner shall be entitled to receive an additional number of Shares upon exercise of the Exchange Right equal to the quotient of the aggregate amount of the Accrued Dividends with respect to such Participating Preferred Shares over the Market Price per Share at such time.

2.7 ParentCo Information. ParentCo will deliver to the VF Owners who hold Participating Preferred Shares copies of all proxy materials, information statements, reports (including all interim and annual financial statements) and other written communications that, in each case, are to be distributed from time to time to holders of Shares at the same time as those materials are first sent to holders of Shares.

2.8 Tender Offers. In the event that a tender offer, share exchange offer, issuer bid, take-over bid or similar transaction with respect to Shares (a “Tender Offer”), or an amalgamation, plan of arrangement or other business combination or reorganization involving all of the interest in, or the rights of, U.S. Holdings, or all or substantially all of the Shares or assets of ParentCo (any such transaction, or any Tender Offer, a “Transaction”) is proposed by ParentCo or is proposed to ParentCo or its shareholders, ParentCo and VF Opco shall waive Section 2.1 and ParentCo will use its reasonable efforts expeditiously and in good faith to take all such actions and do all such things as are reasonably necessary or desirable to enable and permit the VF Owners to participate in such Transaction to the same extent and on an

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economically equivalent basis as the holders of Shares, without discrimination. Without limiting the generality of the foregoing, ParentCo will expeditiously and in good faith take all such actions and do all such things as are reasonably necessary or desirable to ensure that the VF Owners may participate in each such Transaction, without being required to effect the Exchange Procedure (or, if so required, to ensure that any such Exchange Procedure, shall be effective only upon, and shall be conditional upon, the closing of such Transaction and only to the extent necessary to tender or deposit to the Transaction).

2.9 ParentCo Call Rights on Take-Over Bid

(a) ParentCo shall have the overriding right (the “ParentCo Take-over Bid Call Right”) (but not the obligation), to require each VF Owner to exchange all of the Participating Preferred Shares held by the VF Owner in the event that (i) an offer is made to acquire all of the issued and outstanding Shares and the rights to the Shares to be issued upon exchange of the Participating Preferred Shares; (ii) holders of Shares representing at least 90% of the Shares on a fully-diluted basis (other than Shares held on the date of the offer by or on behalf of the offeror or associates or affiliates of the offeror or Persons acting jointly or in concert with the offeror (“acting in concert” as defined in the Securities Act at the date of this Agreement) accepts the offer within the time period for its acceptance or within 45 days after the date the offer is made, whichever period is shorter; and (iii) the offeror is bound to take up and payor has taken up and paid for the Shares of those Shareholders who accepted the offer.

(b) To exercise the ParentCo Take-over Bid Call Right, ParentCo must notify each VF Owner, within 60 days after the termination of the offer or the completion of the merger or sale transaction of ParentCo with another entity giving rise to the exercise by ParentCo of the ParentCo Take-over Bid Call Right, of ParentCo’s intention to exercise (the “ParentCo Take-over Bid Call Right Notice”) the ParentCo Take-over Bid Call Right. IfParentCo exercises the ParentCo Take-over Bid Call Right, the exchange procedure as set forth in Article 2 hereof will be implemented with respect to all Participating Preferred Shares held by the VF Owners on or before the date provided for in the Take-over Bid Call Right Notice (which date shall not be later than 10 days from the date that the Take-over Bid Call Right Notice was given.)

2.10 ParentCo Guarantee. ParentCo hereby guarantees, for the express benefit of the VF Owners, the performance by VF Opco and, in the event of a ParentCo Election, any other applicable subsidiary of ParentCo of all of their respective obligations hereunder.

ARTICLE 3

PARENTCO SUCCESSORS

3.1 ParentCo Successor.

(a) Subject to Section 3.l(c), ParentCo will not consummate any transaction (whether by way of reconstruction, reorganization, consolidation, amalgamation, merger, arrangement, transfer, sale, lease or otherwise) whereby all or substantially all of its undertaking, property and assets would become the property of any other Person or, in the case of an amalgamation or a merger, of the continuing Person resulting therefrom unless:

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(i) such other Person (the “ParentCo Successor”), by operation of law, becomes bound by the terms and provisions of this Agreement or, if not so bound, executes, prior to or contemporaneously with the consummation of such transaction, an agreement supplemental hereto and such other instruments (if any) as are reasonably necessary or advisable to evidence the assumption by the ParentCo Successor of liability for all amounts payable and property deliverable hereunder and the covenant of such ParentCo Successor to pay and deliver or cause to be delivered the same and its agreement to observe and perform all the covenants and obligations of ParentCo under this Agreement; and

(ii) such transaction shall be upon such terms and conditions as substantially to preserve and not to impair in any material respect any of the rights, duties, powers and authorities of the other parties hereunder or of the VF Owners.

(b) Whenever the conditions of Section 3.l(a) have been duly observed and performed, the VF Owners and, if required by Section 3.1, the ParentCo Successor and the other parties hereto will execute and deliver the supplemental agreement provided for herein and thereupon the ParentCo Successor will possess and from time to time may exercise each and every right and power and will be subject to each and every obligation of ParentCo under this Agreement in the name of ParentCo or otherwise and any act or proceeding under any provision of this Agreement required to be done or performed by ParentCo or any officer of ParentCo may be done and performed with like force and effect by the directors or officers of such ParentCo Successor.

(c) Nothing herein will be construed as preventing the merger or similar transaction of any direct or indirect subsidiary of ParentCo with or into ParentCo or any other direct or indirect subsidiary of ParentCo or the winding-up, liquidation or dissolution of any subsidiary of ParentCo provided that all of the assets of such subsidiary are transferred to ParentCo or another direct or indirect subsidiary of ParentCo.

ARTICLE 4

AMENDMENTS AND SUPPLEMENTAL AGREEMENTS

4.1 Changes in Capital of ParentCo or U.S. Holdings. At all times after the occurrence of any event the result of which is that either the Shares or the Participating Preferred Shares or both are in any way changed, this Agreement will forthwith be amended and modified as necessary in order that it will apply with full force and effect, with appropriate changes, to all new securities into which the Shares or the Participating Preferred Shares or both are so changed and the parties hereto will execute and deliver a supplemental agreement giving effect to and evidencing such necessary amendments and modifications.

4.2 Execution of Supplemental Agreements. No amendment to, modification of or waiver of any of the provisions of this Agreement will be effective unless made in writing and executed by (i) ParentCo and VF Opco and (ii) the VF Owners owning Registrable Securities representing at least a majority of all Shares and Participating Preferred Shares (on an as-if-exchanged basis) owned by the VF Owners at the time of such proposed amendment or waiver. From time to time, the parties hereto may, subject to the provisions of this Section 4.2, and they will, when so directed under this Section 4.2, execute and deliver by their proper officers, agreements or other instruments supplemental hereto, which thereafter will fonn part hereof, for anyone or more of the following purposes:

(a) evidencing the succession of the ParentCo Successors and the covenants of and obligations assumed by each such ParentCo Successor in accordance with the provisions of Article 3; and

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(b) making any additions to, deletions from or alterations of the provisions of this Agreement to incorporate, reflect or comply with any legislation the provisions of which apply to any of the parties hereto or this Agreement and which, in the opinion of the VF Owners, will not be prejudicial to the interests of the VF Owners.

ARTICLES

COVENANTSOFPARENTCO

5.1 Covenants Regarding Participating Preferred Shares. Each of ParentCo and VF Opco will, and ParentCo will cause any other subsidiary of ParentCo to take all such actions and do all such things as shall be necessary or advisable to perfonn and comply with and to ensure perfonnance and compliance by ParentCo and VF Opco and any other subsidiary of ParentCo with all provisions of this Agreement applicable to ParentCo and VF Opco and any other subsidiary of ParentCo, respectively, in accordance with the tenns thereof including taking all such actions and doing all such things as shall be necessary or advisable to enforce to the fullest extent possible for the direct benefit of the VF Owners all rights and benefits in favour of the VF Owners under or pursuant hereto.

5.2 Validity of Shares. ParentCo hereby represents, warrants and covenants that any Shares issuable as described herein will be duly authorized and validly issued as fully paid and non-assessable and shall be free and clear of all Liens.

5.3 Reservation of Shares. ParentCo hereby represents, warrants and covenants in favour of the VF Owners that ParentCo has reserved for issuance and will, at all times while any Participating Preferred Shares are outstanding, keep available, free from pre-emptive and other rights, out of its authorized and unissued Shares such number of Shares as are now and may hereafter be required to enable and pennit ParentCo to meet its obligations under this Agreement and under any other security or commitment pursuant to which ParentCo may now or hereafter be required to issue Shares.

5.4 Securities Law Compliance. ParentCo covenants and agrees that it shall make such filings, obtain such approvals, registrations and qualifications and take such other steps as may be necessary, as applicable, in order that the distribution of the Shares issuable hereunder to any VF Owner on exercise of the Exchange Right by such VF Owner will not be subject to the prospectus qualification requirements of the Securities Laws and, subject to Section 5.5, that all Shares received by such VF Owner will be freely tradable on the TSX; provided, however, that ParentCo shall not be required to obtain any such approvals, registration or qualifications to waive or abridge any resale restrictions applicable to a “control distribution” as defined in

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National Instrument 45-102 of the Canadian securities regulatory authorities; and provided further that the obligations of ParentCo hereunder with respect to the delivery of Shares shall be subject to the receipt from such VF Owner of such representations, agreements and undertakings including as to future dealings in such securities as ParentCo and its counsel determine to be reasonably necessary or advisable in order to safeguard the violation of securities laws in any jurisdiction.

5.5 Stock Exchange Listing. ParentCo covenants and agrees that it will make such filings and take such other reasonable steps as may be necessary in order (i) that the Shares issuable hereunder will be approved for listing and posted for trading on the TSX or any stock exchange or automated quotation system on which the Shares are then traded from the date of issuance thereof and (ii) to preserve the listing on the TSX of all outstanding Shares, provided that, for greater certainty, ParentCo will not be prohibited from repurchasing and cancelling the Shares.

ARTICLE 6

REGISTRATION AND PRE-EMPTIVE RIGHTS

6.1 Demand Registration Rights.

(a) Subject to Section 6.1 (c), upon the written request of one or more VF Owners made at any time and from time to time (a “Demand Registration”), ParentCo shall use its best efforts to file one or more Prospectuses under the Securities Laws in order to permit the Distribution in Canada of all or any portion of such VF Owners’ Registrable Securities. ParentCo shall cooperate in a timely manner in connection with such Distribution and shall comply with the procedures in Schedule “A”.

(b) Notwithstanding Section 6.1(a), ParentCo shall not be obliged to effect:

(i) a Demand Registration during the period starting fourteen (14) days prior to, and ending ninety (90) days after, the effective date of ParentCo’s most recent Prospectus filed under Securities Laws, except as may otherwise be agreed upon by ParentCo, the managing underwriter and the Requesting Holder(s);

(ii) more than two (2) Demand Registrations in any twelve (12) month period;

(iii) a Demand Registration in respect of Shares held by the Requesting Holder(s) reasonably expected to result in gross sales of less than Cdn$IO,OOO,OOO (not including, for purposes of this Section 6.1(b)(iii), the portion of any such sales allocable to Shares subject to such demand that were received pursuant to Section 6.3);

(iv) a Demand Registration if ParentCo shall furnish to the Requesting Holder(s) a certificate signed by one member of the board of directors of ParentCo (the “Board of Directors”) and prepared in good faith stating that in the good faith judgment of the Board of Directors it would be seriously detrimental to ParentCo and its Shareholders for such Demand Registration to be effected at such time (a “Valid Business Reason”), in which case ParentCo

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may postpone filing a Prospectus relating to a Demand Registration once in a given l2-month period until such Valid Business Reason no longer exists, but in no event for more than 60 days, and, in the event that a Prospectus has been filed relating to a Demand Registration prior to the giving of such notice, ParentCo may cause such Prospectus to be withdrawn; provided, however, that if ParentCo determines to postpone or withdraw such Prospectus pursuant to this Section 6.1 (b)(iv), ParentCo shall give written notice to the Requesting Holder(s) of its determination to postpone or withdraw such Prospectus and, when applicable, the fact that the Valid Business Reason for such request for a postponement or withdrawal no longer exists, in each case, promptly after the occurrence thereof. If a Prospectus is withdrawn pursuant to this Section 6.l(b)(iv), the Demand Right, if applicable, which required the filing of that Prospectus will not count towards the limit specified in Section 6.l(b)(ii) and no VF Owner shall be obliged to pay any expenses relating to such failed Demand Registration.

(c) Any request for a Demand Registration by a VF Owner shall:

(i) specify the number of Shares which such VF Owner intends to offer and sell;

(ii) express the intention of such VF Owner to offer or cause the Distribution of such Shares;

(iii) describe the nature or methods of the proposed offer and sale thereof and the jurisdictions in which such offer shall be made;

(iv) contain the undertaking of such VF Owner to provide all such information regarding its holdings and the proposed manner of distribution thereof as may be required in order to permit ParentCo to comply with all Securities Laws and applicable tax laws; and

(v) request whether such offer and sale be made by an underwritten Distribution.

(d) The final decision regarding the matters addressed in Section 6.l(c) and the matters addressed in Section 6.1(f) shall be made by Requesting Holder(s) holding a majority of the Shares requested to be included in such Distribution.

(e) In the case of an underwritten Distribution initiated pursuant to this Section 6.1, the Requesting Holder(s) shall have the right to select the managing underwriter or underwriters of such Shares, provided, however, that such selection shall also be agreed to by ParentCo, acting reasonably. ParentCo shall have the right to retain counsel of its choice to assist it in fulfilling its obligations under this Agreement, which retention shall be agreed to by the Requesting Holder(s), acting reasonably, and the fees and expenses of which shall constitute Distribution Expenses.

(f) A Demand Registration exercised by Requesting Holder(s) shall be deemed to be withdrawn by such Requesting Holdei(s) at any time until the earlier of (i) the signing of an underwriting agreement by such Requesting Holder(s) in respect of such Demand Registration and (ii) Closing, if such Requesting Holder(s) so requests and agrees to either (x)

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pay all the reasonable out-of-pocket costs and expenses incurred by ParentCo prior to such withdrawal in complying with the Demand Registration or (y) pay 50% of the reasonable out-of-pocket costs and expenses incurred by ParentCo prior to such withdrawal and treat such withdrawn request as a Demand Registration for purposes of Section 6.l(b)(ii). If, following any request for a Demand Registration, a Distribution is not completed (other than pursuant to the request of the Requesting Holder(s) pursuant to the preceding sentence), any notice of exercise of the applicable Demand Registration hereunder shall be deemed to be withdrawn and shall not count as a Demand Registration for purposes of Section 6.l(b)(ii).

(g) If a Demand Registration is an underwritten Distribution and the lead underwriter or underwriters advise ParentCo in writing that in their opinion the number of Registrable Securities requested to be included in such Distribution exceed the number of securities which can be sold in an orderly manner in such Distribution within a price range acceptable to the majority of the applicable Requesting Holder(s) (determined based on the number of Shares that are the subject of such Demand Registration), then the Requesting Holder(s) shall include in such Distribution only the number of Shares requested to be included which in the opinion of such underwriters can be sold in an orderly manner within the price range of such Distribution; provided, that, in any such event ParentCo shall include in such Distribution, first, all Registrable Securities that are requested to be sold by the Requesting Holder(s) in such Distribution, reduced pro rata according to the aggregate number of Shares beneficially held by each Requesting Holder participating in such Demand Registration relative to the other Requesting Holder(s) participating in such Demand Registration, second, all Registrable Securities that are requested to be included in such sale by YF Owners pursuant to Section 6.2, third, all Shares that ParentCo proposes to sell for its own account (not including any of the Registrable Securities referred to in the first clause above), and fourth, any other Shares requested to be included in such sale.

6.2 Piggy-Back Registration Rights.

(a) If ParentCo proposes to make a Distribution for its own account or pursuant to a Demand Registration, ParentCo will, at that time, promptly give each YF Owner written notice of the proposed Distribution (a “Piggy-Back Notice”).

(b) Upon the written request of a YF Owner given within five (5) Business Days after delivery of the Piggy-Back Notice, ParentCo will use its reasonable commercial efforts, in conjunction with the proposed Distribution, to cause to be included in such Distribution all of the Shares that such YF Owner has requested to be included pursuant to the Securities Laws (a “Piggy-Back Registration”) unless the underwriters for ParentCo advise ParentCo in writing that, in their opinion, the number of securities requested to be included in such Distribution exceeds the number of securities which can be sold in an orderly manner in such Distribution within a price range acceptable to ParentCo, in which event ParentCo shall include in such Distribution: if such Distribution is effected pursuant to a Demand Registration, Shares allocated in the manner contemplated by Section 6.1 (g), and otherwise first, all Shares that ParentCo proposes to sell for its own account (not including any of the Registrable Securities referred to in the second clause below), second, all Registrable Securities beneficially held by the VF Owners that are requested to be sold pursuant to this Section 6.2(b), reduced pro rata according to the aggregate number of Shares beneficially held by each such VF Owner partIcIpating in such Distribution relative to the other VF Owners participating In such Distribution, and third, any other Shares requested to be included in such sale.

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(c) The procedures in Schedule “A” shall apply to Piggy-Back Registrations.

6.3Pre-emptive Rights.

(a) Subject to the prior approval of the TSX, if ParentCo authorizes the issuance or sale of any equity securities or any options or warrants to purchase, or securities convertible into or exchangeable for, equity securities, other than pursuant to any issuance of securities to officers, employees, consultants, directors of ParentCo or any subsidiary of ParentCo pursuant to a bona fide incentive compensation plan (in each case, a “New Issuance”), (i) each VF Owner owning Qualifying Shares and Participating Preferred Shares (a “Qualifying Holder”) shall have the right to acquire a portion of such New Issuance equal to the product of the New Issuance and a fraction (expressed as a percentage), calculated prior to such New Issuance, in which the numerator is the number of Qualifying Shares beneficially held by such Qualifying Holder (including for purposes of such calculation, the product of the Exchange Ratio and any outstanding Participating Preferred Shares held by such Qualifying Holder) and the .denominator is the sum of (x) the aggregate outstanding Shares and (y) the product of the Exchange Ratio and the outstanding Participating Preferred Shares (such portion, the “Holder Election Amount”) and (ii) ParentCo shall deliver notice of the New Issuance to the Qualifying Holder (the “Pre-emption Notice”). Each Qualifying Holder shall have the right to purchase a portion of the New Issuance equal to the Holder Election Amount.

(b) Each Qualifying Holder shall be entitled to purchase its Holder Election Amount at the most favourable price and on the most favourable terms and conditions as the New Issuance is to be sold to any other Person.

(c) In order to exercise its rights hereunder, the Qualifying Holder must, within ten (10) Business Days after receipt of the Pre-emption Notice, deliver written notice to ParentCo describing its election to purchase a portion of the New Issuance offered to it. The Qualifying Holder shall tender payment in full for any such purchase on the date of closing of the New Issuance (immediately following which, the securities elected to be purchased representing the aggregate Owner Election Amount shall be delivered to the Qualifying Holder or its designee(s)), failing which the rights of the Qualifying Holder to purchase any portion of the New Issuance shall terminate and ParentCo shall be entitled to sell such unpurchased portiones) in accordance with Section 6.3(d) below.

(d) Upon the expiration of the offering period described in Section 6.3(c) above, ParentCo shall be entitled to sell any portion of the New Issuance which a Qualifying Holder has not elected to purchase during the ninety (90) days following such expiration on terms and conditions no more favourable to the purchasers thereof than those offered to the Qualifying Holder(s).

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ARTICLE 7

TERMINATION

7.1 Term.

The term of this Agreement will continue until the earliest to occur of the following events:

(a) no outstanding Participating Preferred Shares or Qualifying Shares are held by or may be held by any party hereto; or

(b) each of the parties hereto elects in writing to terminate this Agreement.

ARTICLE 8

GENERAL

8.1 Successors and Assigns. This Agreement will be binding upon and enure to the benefit of each of the parties hereto and each of their respective successors and Permitted Transferees.

8.2 Severability; The provisions of this Agreement are severable. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or law, or public policy, all other terms and provisions of this Agreement will nevertheless remain in full force and effect. Upon any determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto will negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated by this Agreement are fulfilled to the fullest extent possible.

8.3 Notices to Parties.

(a) All notices and other communications among the parties to this Agreement shall be in wntmg and shall be deemed to have been given if delivered personally or by confirmed facsimile to the parties at the following addresses (or at such other address for any such party as shall be specified in like notice):

To ParentCo and VF Opco:

4700-80^th Street

Delta, British Columbia, V4K 3N3

Attention:             Senior Vice-President and Chief Financial Officer

Facsimile No.:     (604) 940-6312

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with a copy to:

Torys LLP

79 Wellington Street West, Suite 3000

Box 270, TD Centre

Toronto, Ontario, M5K IN2

Attention:             Richard Willoughby

Facsimile No.:     (416) 865-7380

To the VF Owners:

Michael DeGiglio, Albert Vanzeyst and Kenneth Hollander

7 Christopher Way

Eatontown, New Jersey, 07724

Attention:             Michael DeGiglio

Facsimile No:      (732) 676-3031

with a copy to:

Torys LLP

79 Wellington Street West, Suite 3000

Box 270, TD Centre

Toronto, Ontario, M5K IN2

Attention:             Richard Willoughby

Facsimile No.:     (416) 865-7380

(b) Any notice or other communication given personally shall be deemed to have been given and received upon delivery thereof and if given by telecopy shall be deemed to have been given and received on the date of confirmed receipt thereof unless such day is not a Business Day, in which case it shall be deemed to have been given and received upon the immediately following Business Day.

8.4 Counterparts. This Agreement may be executed in several counterparts (including by fax or email of a PDF file), each of which when so executed shall be deemed to be an original and shall have the same force and effect as an original but such counterparts together shall constitute but one and the same instrument.

8.5 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York and the federal laws of the United States applicable therein, without given effect to any conflict of laws principles thereof which would have the effect of causing the application of the laws of any other jurisdiction.

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8.6 Attornment. Each of the parties hereto irrevocably submits to the jurisdiction of the United States District Court for the Southern District of New York in connection with any civil action concerning any controversy, dispute or claim arising out of or relating to this Agreement or the breach hereof unless such court would not have subject matter jurisdiction thereof, in which event the parties hereto consent to the jurisdiction of the Supreme Court of the State of New York, County of New York. Each party hereto waives any objection which it may have now or hereafter to the venue of any such action or proceeding, agrees to be bound by any judgment of the said courts and not to seek, and hereby waives, any review of the merits of any such judgment by the courts of any other jurisdiction.

8.7 Waiver of Jury Trial. THE PARTIES HERETO HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION DOCUMENTS, OR THE BREACH HEREOF OR THEREOF, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT OR OTHERWISE. THE PARTIES HERETO AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS PROVISION WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE TRIAL BY JURY, AND THAT ANY SUCH PROCEEDING WHATSOEVER BETWEEN THEM SHALL INSTEAD BE TRIED BY A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

8.8 Authorship. The parties hereto agree that the terms and language of this Agreement and all agreements contemplated hereby were the result of negotiations among the parties hereto and, as a result, there shall be no presumption that any ambiguity in this Agreement shall be resolved against any party hereto.

8.9 Waiver. The failure of any party hereto to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach hereof shall not constitute a waiver of the provision or limit the party’s rights thereafter to enforce any provision or exercise any right, power or remedy. No waiver of any of the provisions of this Agreement shall be deemed to be or shall constitute a waiver of any other provision, nor shall any such waiver constitute a continuing waiver unless otherwise expressly stated.

8.10 Remedies. Each party hereto acknowledges that its failure to observe or perform its covenants and agreements herein contained will result in damages to another party hereto which could not be adequately compensated for by a monetary award and accordingly each party hereto agrees that in addition to all other remedies available to a party at law or in equity in the event another party hereto fails to observe or perform its covenants herein, a party will be entitled as a matter of right to apply to a court of competent jurisdiction for such relief by way of restraining order, injunction, decree of specific performance or otherwise, as may be appropriate to ensure compliance by each party hereto with this Agreement.

8.11 Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto (including, for greater certainty, each of the VE Owners) pertaining to the subject matter hereof. There are no warranties, conditions, or representations (including any that may be implied by statute) and there are no agreements in connection with such subject matter except as specifically set forth or referred to in this Agreement. No reliance is placed on any warranty,

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representation, opinion, advice or assertion of fact made by any party hereto or its directors, officers, employees or agents, to any other party hereto or its directors, officers, employees or agents, except to the extent that the same has been reduced to writing and included as a term of this Agreement. Accordingly, there shall be no liability, either in tort or in contract, assessed in relation to any such warranty, representation, opinion, advice or assertion of fact, except to the extent aforesaid.

8.12 Further Assurances. Each party hereto shall do and perform all acts and things and execute and deliver all instruments, documents and writings and give all further assurances as may be reasonably necessary to give full effect to the provisions of this Agreement.

8.13 Time of the Essence. Time is of the essence in respect of this Agreement.

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IN WITNESS WHEREOF, this agreement has been executed as of the first date written above by each of the undersigned, and in respect of the VF Owners, by the holders of at least a majority of the outstanding Participating Preferred Shares of U.S. Holdings, constituting the requisite consent of the outstanding Participating Preferred Shares to make the foregoing effective.

VILLAGE FARMS INTERNATIONAL, INC.
By:
	Name:
	Title:
VF OPERATIONS CANADA INC.
By:
	Name:
	Title:
/s/ Michael A. DeGiglio
Michael A. DeGiglio
/s/ Albert W. Vanzeyst
Albert W. Vanzeyst
DEGIGLIO HOLDINGS COMPANY
By:	/s/ Michael A. DeGiglio
	Name: Michael A. DeGiglio
	Title:
VANZEYST HOLDINGS COMPANY
By:	/s/ Albert W. Vanzeyst
	Name: Albert W. Vanzeyst
	Title:

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SCHEDULE “A”

REGISTRATION PROCEDURES

1. REGISTRATION PROCEDURES

1.1 Registration Procedures

Whenever ParentCo is under an obligation pursuant to the provisions of this Agreement to effect the qualification for the offer and sale or other disposition or Distribution of any Registrable Securities on behalf of a VF Owner (a “Selling Person”) or on its own behalf in connection with an exercise of an Exchange Right pursuant to which ParentCo is effecting a Distribution in order to raise Distribution Cash in response to an Exchange Notice (the applicable Selling Person in such a transaction is known as a “Liquidity Person”) ParentCo shall do the following:

(a) prepare and file with the appropriate regulatory authorities as soon as reasonably practicable and in all events within forty-five (45) days of a request from a Selling Person, a Prospectus and any other documents necessary, including amendments and supplements in respect of those documents, to permit the sale or other disposition and, in so doing, act as expeditiously as is practicable and in good faith to settle all deficiencies and obtain those receipts and clearances and provide those undertakings and commitments as may be reasonably required by any securities regulatory authority, all as may be necessary to permit the offer and sale or Distribution in compliance with all applicable Securities Laws;

(b) furnish to such Selling Persons such number of copies of the Prospectus (including any preliminary prospectus), any documents incorporated by reference in such Prospectus and such other documents as such Selling Persons may reasonably request in order to facilitate the offer and sale or Distribution of the Shares;

(c) if ;ill underwritten Offering is contemplated, execute and perform the obligations under an underwriting agreement in a form reasonably satisfactory to ParentCo containing customary representations, warranties and indemnities for the benefit of such Selling Persons and the underwriter(s);

(d) subject to applicable laws, keep the Prospectus effective until such Selling Persons have completed the sale or Distribution described in the Prospectus but no longer than one hundred twenty (120) days, provided that such Selling Persons use reasonable commercial efforts to complete the sale or disposition as soon as reasonably practicable;

(e) use its reasonable commercial efforts to furnish to the underwriter or underwriters involved in the Distribution all documents as they may reasonably request;

(f) notify such Selling Persons promptly when a Prospectus is required to be delivered under the Securities Laws in respect of the Shares, of the happening of any event as a result of which any of the aforesaid Prospectus includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing or if it is necessary to amend or supplement such Prospectus to comply with law, and to promptly prepare and file with the

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appropriate securities regulatory authorities a supplement to or amendment of such document as may be necessary to correct such untrue statement or eliminate such omission and so that such document, as amended or supplemented, will comply with law, and furnish to such Selling Persons as many copies of such supplement or amendment as such Selling Persons request;

(g) make available for inspection during its regularly scheduled business hours by such Selling Persons and/or their advisors or any underwriter and/or its advisors participating in any Distribution pursuant to such Prospectus (collectively, the “Inspectors”), all financial and other records, pertinent corporate documents, material contracts and properties of ParentCo as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause ParentCo’s officers, trustees and employees to supply all information reasonably requested by any Inspector in connection with such Prospectus and participate in marketing efforts such as road shows, institutional investor meetings and similar events;

(h) use its best efforts to list such Shares on each securities exchange or quotation system on which Shares are then listed or quoted, if such Shares are not already so listed or quoted;

(i) make every reasonable effort to prevent the issuance of any cease trade order suspending the use of any Prospectus and, if any such order is issued, to obtain the withdrawal of any such order at the earliest possible moment;

(j) in connection with the preparation and filing of each Prospectus, ParentCo will give such Selling Persons and their counsel, accountants and other agents the opportunity to participate in the preparation of the Prospectus, and each amendment thereof or supplement thereto, and will give each of them such access to its books and records and such opportunities to discuss the business of ParentCo with its officers and the independent public accountants who have issued a report on its financial statements as shall be necessary, in the opinion of such holders and such underwriters or their respective counsel, to conduct a reasonable investigation;

(k) usc: its best efforts to furnish, at the request of any Selling Person, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a qualification of Registrable Securities hereunder, if such Registrable Securities are sold through underwriters, or, if such Registrable Securities are not being sold through underwriters, on the closing date related to the applicable distribution of Registrable Securities (i) an opinion, dated such date, of the counsel representing ParentCo for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public Offering in Canada, addressed to the underwriters, if any, and to the Selling Persons; and (ii) a “long form comfort” letter dated the date of the relevant Prospectus (and brought down on the closing date related to the applicable Distribution of Registrable Securities) from the auditors of ParentCo, in form and substance as is customarily given by auditors to underwriters in an underwritten public Offering in Canada, addressed to the underwriters, if any, and to the Selling Persons; and

(I) take such other actions and execute and deliver such other documents as may be reasonably necessary to give full effect to the rights of such Selling Persons under this Agreement.

A-2

1.2 Rights and Obligations of the Selling Persons

Selling Persons shall furnish to ParentCo such information and execute such documents regarding the Shares and the intended method of disposition thereof as ParentCo may reasonably request in order to effect the requested qualification for sale or other disposition. If an underwritten Offering is contemplated, such Selling Persons shall execute an underwriting agreement containing customary representations, warranties and indemnities for the benefit of the underwriters and ParentCo with respect to written information furnished by them expressly for use in the Prospectus; provided that the obligation to indemnify shall be individual, not joint and several, for each Selling Person and shall be limited to the net amount of proceeds received by such Selling Person from the sale of Registrable Securities pursuant to such Distribution. Subject to Section 6.1(f), such Selling Persons shall have the right to withdraw from ‘a proposed underwritten Offering at any time prior to the signing of the underwriting agreement, without incurring any obligation to ParentCo or any proposed underwriter other than the obligation set forth in Section 2.1 below. Such Selling Persons shall notify ParentCo immediately upon the occurrence of any event as a result of which any of the aforesaid Prospectuses includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they are made.

2. EXPENSES

2.1 Distribution Expenses

ParentCo will pay all Distribution Expenses attributable to the Shares to be sold (i) on behalf of the Selling Persons and (ii) by ParentCo in connection with the exercise of an Exchange Notice, in connection with all Prospectuses filed under Sections 6.1 and 6.2 of this Agreement. Each of ParentCo and its Subsidiaries, on the one hand, and such Selling Person or Liquidity Person, as applicable, on the other hand, will bear any other expenses incurred by either of them.

2.2 Selling Expenses

All Selling Expenses in connection with each Prospectus under Sections 6.1 and 6.2 of this Agreement will be borne by such Selling Persons or Liquidity Persons (as applicable) and any other participating sellers (including ParentCo, if applicable) in proportion to the number of Shares sold by each relative to the total number of Shares sold pursuant to the Prospectus.

2.3 Indemnification

(1) In the event of a registration of any Registrable Securities pursuant to Sections 6.1 and 6.2 of this Agreement, ParentCo will hold harmless and indemnify the Selling Persons and each of their officers, directors and employees (the “Indemnified Parties”), to the fullest extent permitted by law, from and against any losses (other than loss of profit), claims, damages or liabilities to which the Indemnified parties may be subject under any applicable securities law or otherwise, insofar as those losses, claims, damages or liabilities (or actions in respect of them) arise out of or are based upon any untrue or alleged untrue statement of any material fact contained in any Prospectus under which Registrable Securities were distributed under Sections 6.1 and 6.2 of this Agreement, or any document incidental to the qualification of those

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Registrable Securities, or that arise out of or are based upon the omission or alleged omission to state any material fact required to be stated or necessary to make any statement not misleading, or any violation by ParentCo of any applicable securities laws in connection with the qualification or sale of Shares under applicable securities laws; provided, however, that ParentCo will not be liable in any case to the extent that any loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Prospectus or other document in reliance upon and in conformity with information furnished in writing to ParentCo by any Indemnified Party or its agent pertaining to that Indemnified Party specifically for use in the preparation of the Prospectus; and provided further, that ParentCo shall not be liable to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue or alleged untrue statement or an omission or alleged omission contained in such Prospectus corrected in an amendment to the Prospectus, such amendment was delivered to the applicable Indemnified Party in sufficient quantities and a reasonable period of time prior to the closing of any Offering and such Indemnified Party failed to deliver or failed to cause to be delivered such Prospectus as so amended to the Person asserting such loss, claim, damage of liability. Each Selling Person that participates in a Distribution will severally, and not jointly, hold harmless and indemnify ParentCo and each other, and their respective officers, directors and employees, up to an amount equal to the net proceeds to the Selling Person pursuant to that Distribution from and against any losses (other than a loss of profit), claims damages or liabilities to which any of them may be subject under any applicable securities laws or otherwise, insofar as those losses, claims, damages or liabilities (or actions in respect of them) arise out of or are based upon any untrue or alleged untrue statement of any material fact contained in any Prospectus under which Registrable Securities were distributed under Sections 6. I and 6.2 of this Agreement, or any document incidental to the qualifications of those Registrable Securities, in each case which was made in reliance upon and in conformity with information furnished in writing to ParentCo by such Selling Person or its agent pertaining to that Indemnified Party specifically for use in the preparation of the Prospectus, or that arise out of or are based upon the omission or alleged omission to state any material fact required to be stated or necessary to make any such statement not misleading, or any violation by that Selling Person of any applicable securities laws in connection with the qualification or sale of Shares under applicable securities laws; provided, for greater certainty, however, that no Selling Person will be liable in any case to the extent that any loss, claim, damage or liability is based upon an untrue statement or omission made in any Prospectus or other document which is not in reliance upon or in conformity with information pertaining to that Selling Person furnished in writing to ParentCo by that Selling Person or the agents of that Selling Person specifically for use in the preparation of the Prospectus. Solely for the purposes of this indemnity, ParentCo and the Selling Persons shall be the trustee for and act on behalf of each of their respective officers, directors and employees.

(2) If any claim contemplated by this Section 2.3 is asserted against any party hereto, or if any potential claim contemplated by this Section 2.3 comes to the knowledge of any party hereto, the party concerned will notify ParentCo or the Selling Person (whichever is the indemnifying party), as the case may be, as soon as possible of the nature of the claim and ParentCo or the Selling Person, as the case may be, will be entitled (but not required) to assume the defense of any suit brought to enforce that claim. Any defense will be through legal counsel approved by the party making the claim for indemnification (which approval will not be unreasonably withheld or delayed) and no admission of liability will be made by ParentCo or the

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Selling Person, as the case may be, or the party making the claim for indemnification without, in each case, the consent of the other party, which consent will not be unreasonably withheld or delayed. The party making the claim for indemnification will have the right to employ separate counsel in any suit and participate in its defense but the fees and expenses of counsel will be at the expense of the party making the claim for indemnification unless (i) ParentCo or the Selling Person, as the case may be, fails to assume the defense of the suit on behalf of the party making the claim for indemnification within 20 days of receiving notice of the suit; or (ii) the retainer of separate counsel has been authorized by ParentCo or the Selling Person, as the case may be (in each of which cases ParentCo or the Selling Person, as the case may be, will not have the right to assume the defence of the suit on behalf of the party making the claim for indemnification but will be liable to pay the reasonable fees and expenses of counsel for the party making the claim for indemnification). Each Indemnified Party will furnish that information regarding itself or the claim in question as an indemnifying party may reasonably request in writing and as will be reasonably required in connection with the defence of that claim and litigation resulting from that claim. Notwithstanding the foregoing, to the extent that the provisions on indemnification contained in an underwriting agreement entered into in connection with the underwritten public Offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement will prevail as among the parties to the underwriting agreement.

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SCHEDULE “B”

FORM OF EXCHANGE NOTICE

Note: This form of Exchange Notice assumes the VF Owner is requesting Shares. If the VF Owner is requesting Distribution Cash, the following must be revised to conform with the Exchange Notice requirements for Distribution Cash set forth in Section 2.2 of the Amended and Restated Securityholders’ Agreement.

TO: VILLAGE FARMS INTERNATIONAL, INC. (“ParentCo”)

AND TO: VF OPERATIONS CANADA INC. (“VF Opco”)

This notice is given pursuant to Article 2 of the Amended and Restated Securityholders’ Agreement (the “Securityholders’ Agreement”) dated December 31, 2009 among ParentCo, VF Opco, Michael DeGiglio, Kenneth Hollander, Albert Vanzeyst, DeGiglio Holdings Company, Hollander Holdings Company and Vanzeyst Holdings Company. All capitalized tenns used herein and not otherwise defined have the meanings given thereto in the Securityholders’ Agreement.

The undersigned hereby notifies ParentCo that the undersigned desires to have exchanged, in accordance with Article 2 of the Securityholders’ Agreement:

	Certificate No.	No. of Securities Represented by Certificate
Participating Preferred Shares to be exchanged
Number of Shares to be issued

The undersigned acknowledges, agrees, represents and warrants that that:

(a) the undersigned is requesting Shares;

(b) the undersigned is aware that any Shares delivered to the VF Owner have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “1933 Act”) and that the Shares may not be offered or sold in the United States without registration under the 1933 Act or compliance with requirements of an exemption from such registration;

(c) the undersigned will not (i) offer or sell any Shares delivered to such VF Owner pursuant to the exercise of the Exchange Right in violation of any applicable federal or state securities laws of the United States or (ii) resell any Shares delivered to such VF Owner pursuant to the exercise of the Exchange Right except in accordance with the Securities Laws and the applicable rules of the TSX;

(d) the undersigned is an “accredited investor” under Rule 501(a) under the 1933 Act; and

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(e) the undersigned has good title to and owns the Participating Preferred Shares that are subject to this Exchange Notice free and clear of all Liens.

The undersigned hereby represents and warrants to ParentCo that the undersigned:

☐ is

(select one)

☐ is not

a resident in Canada for purposes of the Tax Act. The undersigned acknowledges that in the absence of an indication that the undersigned is a resident in Canada, withholding on account of Canadian tax may be made from amounts payable to the undersigned on the purchase of the Shares.

  (Date)   (Signature of Shareholder)

NOTE: A completed and executed copy of this Exchange Notice, together with the certificates evidencing the Participating Preferred Shares in respect of which this Exchange Notice is delivered and such additional documents as the applicable transfer agent may require, must be deposited with YF Opco. The Shares issued upon the exchange of the Participating Preferred Shares will be issued and registered in the name of the undersigned as it appears on the register of U.S. Holdings and delivered to the undersigned as indicated above, unless the form appearing immediately below is duly completed.

Date

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Name of Person in Whose Name Securities¹

are to be Registered, Issued or

Delivered (please print):                                                                                                                         

Street Address or P.O. Box:                                                                                                                   

Signature of Shareholder:                                                                                                                       

City, Province and Postal Code:

¹  For so long as Shares are held in the Book-Entry System administered by CDS Clearing and Depository Services Inc., the following additional information shall be provided:

Name of CDS participant through which Shares will be held:                                                                                                                   

FINS Number of CDS participant:                                                                                                                                                               

Name and telephone number of

Registered Representative at CDS participant:                                                                                                                                            

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EX-10.1

Exhibit 10.1

VILLAGE FARMS INTERNATIONAL, INC.

SHARE-BASED COMPENSATION PLAN

ARTICLE 1

PURPOSE

1.1    Purpose. The purpose of this share-based compensation plan of the Corporation is to advance the interests of the Corporation and its Affiliates by encouraging Eligible Persons to increase their proprietary interest in the Corporation and to remain associated with the Corporation, rewarding significant performance achievements and providing Eligible Persons with additional incentive in their efforts on behalf of the Corporation and its Affiliates.

1.2    Effective Date. The effective date of the Plan is December 31, 2009.

ARTICLE 2

DEFINED TERMS

2.1    Definitions. The following terms used herein shall have the following meanings:

(a) “Affiliate” means an entity which is an “affiliate” of the Corporation for the purposes of National Instrument 45-106 Prospectus and Registration Exemptions as amended or replaced from time to time;

(b) “Award” means an Option, Stock Appreciation Right, Restricted Share Unit, Deferred Share Unit, Restricted Stock or other Share-Based Award granted pursuant to the Plan;

(c) “Award Shares” has the meaning set out in Section 6.1;

(d) “Black-Out Period” means a time when, pursuant to any policies of the Corporation, any securities of the Corporation may not be traded by certain persons as designated by the Corporation, including any holder of an Award;

(e) “Board” means the board of directors of the Corporation or, if established and duly authorized to act in respect of the Plan, a committee of the board of directors of the Corporation;

(f) “Business Day” means any day, other than a Saturday or a Sunday, on which the Exchange is open for trading;

(g) “Code” means the U.S. Internal Revenue Code of 1986, as amended or replaced from time to time;

(h) “Consultant” means an individual or Consultant Company, other than a Director, Officer, Employee or Management Company Employee that:

(i) is engaged to provide on an ongoing bona fide basis, consulting, technical, management or other services to the Corporation or an Affiliate, other than services provided in relation to a distribution of securities;

(ii) provides the services under a written contract with the Corporation or an Affiliate; and

(iii) spends or will spend a significant amount of time on the affairs and business of the Corporation or an Affiliate;

(i) “Consultant Company” means for an individual consultant, a company or partnership of which the individual is an employee, shareholder or partner;

(j) “Corporation” means Village Farms International Inc., a corporation incorporated under the laws of Canada, and any successor corporation;

(k) “Deferred Share Units” has the meaning set out in Section 10.1;

(l) “Director” means a member of the board of directors of the Corporation or of any of its Affiliates;

(m) “Eligible Person” means any Director, Officer, Employee or Consultant of the Corporation or any Affiliate determined by the Board as eligible for participation in the Plan;

(n) “Employee” means an individual who is considered an employee of the Corporation or its Affiliates for the purposes of applicable income tax legislation;

(o) “Exchange” means the TSX or, if the Shares are not then issued and posted for trading on the TSX, on such stock exchange in Canada on which such Shares are listed and posted for trading as may be selected for such purpose by the Board;

(p) “Fixed Term” means the period of time during which the Options must be exercised pursuant to the terms of the Plan;

(q) “Insider” has the meaning given under applicable securities legislation, as amended or replaced from time to time, and also includes associates and affiliates of such an insider;

(r) “Management Company Employee” means an individual employed by a person providing management services to the Corporation, who is required for the ongoing successful operation of the business enterprise of the Corporation;

(s) “Market Price” means the closing price of the Shares on the Exchange on the date immediately preceding the applicable date rounded up to the nearest cent. In the event that such Shares are not then listed and posted for trading on any Exchange, the Market Price in respect thereof shall be the fair market value of such Shares as determined by the reasonable application by the Board of a reasonable valuation method in compliance with Section 409A of the Code and that is acceptable to the Canada Revenue Agency;

(t) “Offer” has the meaning set out in Section 6.1;

(u) “Officer” means a senior officer of the Corporation or its Affiliates;

(v) “Option” means an option granted to purchase Shares for the Option Price under the terms of the Plan;

(w) “Option Price” means the price per share at which Shares may be purchased under the Option and based on which the SAR Amount is determined, as the same may be adjusted from time to time in accordance with Article 6 hereof;

(x) “Other Awards” has the meaning set out in Section 12.1;

(y) “Participant” means an Eligible Person who holds an Award under the terms of the Plan;

(z) “Plan” means this share-based compensation plan;

(aa) “Restricted Share Units” has the meaning set out in Section 9.1;

(bb) “Restricted Stock” has the meaning set out in Section 11.1;

(cc) “SAR Amount” has the meaning set out in Section 8.2;

(dd) “Separation from Service” means with respect to a US Participant a “separation from service” with the Company within the meaning of, and that satisfies the requirements of, Section 409A of the Code, including Treasury Regulation §1.409A-1(h); provided that it shall only include a circumstance where the employee dies, retires or otherwise has a termination of employment;

(ee) “Shares” mean the common shares of the Corporation as currently constituted or, in the event of an adjustment as contemplated by Article 6, such other shares or securities to which a Participant may be entitled or on which the value of an Award may be based, as a result of such adjustment;

(ff) “Specified Employee” has the meaning set forth in Section 409A(a)(2)(B) of the Code;

(gg) “Stock Appreciation Rights” has the meaning set out in Section 8.1;

(hh) “Termination Date” means the date a Participant ceases to be an Eligible Person and does not include any period of statutory, contractual or reasonable notice or any period of salary continuance or deemed employment;

(ii) “Treasury Regulations” means the United States Treasury Regulations promulgated under the Code;

(jj) “TSX” means the Toronto Stock Exchange; and

(kk) “U.S. Participant” means any Eligible Person that is subject to tax under the laws of the United States.

ARTICLE 3

ADMINISTRATION OF PLAN

3.1    General. This Plan shall be administered by the Board which shall have the power, subject to the specific provisions of the Plan:

(a) to establish policies and to adopt rules and regulations for carrying out the purposes, provisions and administration of the Plan;

(b) to interpret and construe the Plan and to determine all questions arising out of the Plan and any Award granted pursuant to the Plan, where every such interpretation, construction or determination made by the Board shall be final, binding and conclusive for all purposes;

(c) to determine the Eligible Persons to whom Awards are granted and to grant Awards;

(d) to determine the number of Awards;

(e) to determine the Option Prices provided that the Option Price shall not be less than the Market Price;

(f) to determine the time or times when Awards will be granted and exercisable or redeemable;

(g) to determine if the Shares that are subject to an Award will be subject to any restrictions upon the exercise or redemption of such Award; and

(h) to prescribe the form of the instruments relating to the grant, exercise, redemption and other terms of Awards.

The power described in this Section 3.1 shall be exercised in accordance with applicable securities laws and rules and policies of the Exchange.

3.2    Award Agreement. Each Participant shall execute an award agreement in the form determined by the Board from time to time. In the event of any inconsistency between the terms of any award agreement and this Plan, the terms of this Plan shall govern.

3.3    Section 409A. This Plan is intended to comply with the applicable requirements of Section 409A of the Code and shall be administered in accordance with Section 409A of the Code. All Awards under the Plan shall be structured in a manner consistent with the requirements of Section 409A of the Code to the extent subject thereto and payments with respect thereto shall only be made in a manner and upon an event permitted under Section 409A. To the extent required under Section 409A, payments to a U.S. Participant who is a Specified Employee upon his or her Separation from Service shall be postponed and subject to a 6 month delay and shall be paid on the first business day of the seventh month following Separation from Service, or if such U.S. Participant dies during the postponement period prior to the payment of postponed amount, the amounts withheld on account of Section 409A of the Code shall be paid to the personal representative of such U.S. Participant’s estate within 60 days after the date of such U.S. Participant’s death. Except where otherwise expressly provided, to the extent that any provision of the Plan would cause a conflict with the requirements of Section 409A of the Code, or would cause the administration of the Plan to fail to satisfy the requirements of Section 409A of the Code, such provision shall be deemed null and void to the extent permitted by applicable law.

ARTICLE 4

SHARES SUBJECT TO THE PLAN

4.1    10% Rolling Plan. Subject to adjustment as provided in Article 6, the Shares to be offered under the Plan shall consist of the Corporation’s authorized but unissued Shares. The aggregate number of Shares to be delivered upon the exercise or redemption of all Awards granted under the Plan shall not exceed the

greater of ten percent (10%) of the issued and outstanding Shares at the time of granting of Awards (on a non-diluted basis) or such other number or percentage as may be approved by the Exchange and the shareholders of the Corporation from time to time.

4.2    Awards to Insiders. Under no circumstances shall this Plan, together with all other security-based compensation arrangements of the Corporation, result, at any time, in:

(a) the number of Shares issuable to Insiders exceeding ten percent (10%) of the issued and outstanding Shares (on a non-diluted basis); or

(b) the issuance to Insiders, within a one-year period, of a number of Shares exceeding ten percent (10%) of the issued and outstanding Shares (on a non-diluted basis).

4.3    Exercise or Redemption of Awards. Any exercise of Options or redemption of Awards will make new grants available under the Plan effectively resulting in a re-loading of the number of Shares available to grant under the Plan.

4.4    Awards That Expire or Terminate. If any Award granted hereunder shall expire or terminate for any reason without having been exercised or redeemed in full, the Shares underlying the Award shall again be available for the purpose of the Plan.

4.5    Restrictions on Exercise or Redemption. Notwithstanding any of the provisions contained in the Plan or any Award, the Corporation’s obligation to issue Shares to a Participant pursuant to the exercise or redemption of an Award shall be subject to:

(a) completion of such registration or other qualification of such Shares or obtaining approval of the Exchange or such regulatory authority as the Corporation shall determine to be necessary or advisable in connection with the authorization, issuance or sale thereof;

(b) the admission of such Shares to listing on the Exchange; and

(c) the receipt from the Participant of such representations, agreements and undertakings, including as to future dealings in such Shares as the Corporation or its counsel determines to be necessary or advisable in order to safeguard against the violation of the securities laws of any jurisdiction.

In this connection, the Corporation shall, to the extent necessary, take all reasonable steps to obtain such approvals, registrations and qualifications as may be necessary for the issuance of such Shares in compliance with applicable securities laws and for the listing of such Shares on the Exchange. If any Shares cannot be issued to any Participant for any reason including, without limitation, the failure to obtain necessary shareholder, regulatory or stock exchange approval, then the obligation of the Corporation to issue such Shares shall terminate and any amounts paid by the Participant to the Corporation to exercise or redeem an Award shall be returned to the Participant.

4.6    Non-Assignable. An Award is personal to the Participant and is non-assignable and non-transferable. Where an Award is granted to a company wholly-owned by a Participant, such company must agree, at the time of the grant, not to effect or permit any transfer of ownership of the Award or shares of such company, nor issue any additional shares to any individual or entity for so long as the Award remain outstanding to the credit of that company, except with the prior written consent of the Corporation and any required consent of the Exchange and any other applicable regulatory authority.

ARTICLE 5

ELIGIBILITY AND CEASING TO BE AN ELIGIBLE PERSON

5.1    Eligible Persons. Awards may only be granted to Eligible Persons.

5.2    Compliance with Laws. Notwithstanding any provision contained in this Plan, no Participant may exercise or redeem any Award granted under this Plan and no Shares may be issued upon exercise or redemption of an Award unless such exercise or redemption and issuance are in compliance with all applicable securities laws or other legislation of the jurisdiction of residence of such person. Unless the potential Participant is a resident of Canada, the Corporation may require, as a condition of the grant of an Award, that the potential Participant provide a written acknowledgement that the grant of the Award does not violate any such laws.

5.3    Termination Date. Subject to Section 5.4, Section 5.5 and any express resolution passed by the Board, all Awards, and all rights to acquire Shares pursuant thereto, granted to an Eligible Person shall expire and terminate immediately upon the Participant’s Termination Date.

5.4    Circumstances When Options and Stock Appreciation Rights are Exercisable. If, before the expiry of an Option or Stock Appreciation Right in accordance with the terms thereof, a Participant ceases to be an Eligible Person for any reason whatsoever, other than termination by the Corporation for cause (in which case all unexercised Options and Stock Appreciation Rights (vested or unvested) shall cease immediately), such Options and Stock Appreciation Rights may be exercised, subject to:

(i) the terms set out in the award agreement;

(ii) any determination made by the Board to accelerate the vesting of or to extend the expiry of an Option or Stock Appreciation Right; and

(iii) any other terms of the Plan

(b) if the Participant is deceased, by the heirs of the Participant or by legal personal representative(s) of the estate of the Participant at any time within six (6) months following the death of the Participant; or

(c) by the Participant at any time within ninety (90) days following the Termination Date.

But, in any case, the exercise of the Option or Share Appreciation Right must be: (i) prior to the expiry of the Fixed Term of the Option or the expiry of the Stock Appreciation Right with the terms thereof, and (ii) only to the extent that the Option or Share Appreciation Right was vested and the Participant was otherwise entitled to exercise the Option or Share Appreciation Right at the Termination Date.

5.5    Another Listed Category. Awards shall not be affected in the event the Participant ceases to fall within a listed category contained in the definition of an “Eligible Person” hereunder where such Participant falls within another listed category of such definition.

ARTICLE 6

CERTAIN ADJUSTMENTS

6.1    Offer for Shares. If a bona fide offer (“Offer”) for Shares is made to the Participant or to shareholders generally or to a class of shareholders which includes the Participant, which Offer, if accepted

in whole or in part, would result in the offeror exercising control over the Corporation within the meaning of subsection 1(3) of the Securities Act (Ontario) (as amended from time to time), then the Board may, in its discretion, notify each Participant of the Offer, with full particulars thereof, whereupon, the Board may in its discretion, provide that notwithstanding the terms of the Award, such Award (other than a Deferred Share Unit) may be exercised in whole or in part by the Participant so as to permit the Participant to tender the Shares received upon such exercise (the “Award Shares”) pursuant to the Offer.

6.2    Changes in Shares. In the event of any stock dividend, stock split, combination or exchange of shares, merger, amalgamation, acquisition, divestiture, consolidation, spin-off or other distribution (other than normal cash dividends) of the Corporation’s assets to shareholders, or any other change in the capital of the Corporation affecting Shares, the Board will make such proportionate adjustments, if any, as the Board in its discretion may deem appropriate, in compliance with Section 409A of the Code, to reflect such change, with respect to (i) the number or kind of shares or other securities reserved for issuance pursuant to this Plan; (ii) the number or kind of shares or other securities subject to unexercised or unredeemed Awards previously granted; and (iii) the Option Price, if applicable, of Awards.

6.3    No Fractional Shares. The Corporation will not issue fractional Shares in satisfaction of any of its obligations hereunder.

6.4    Accelerated Exercise or Redemption of Awards. Notwithstanding any other provisions of the Plan, the Board may at any time give written notice to all Participants advising that their respective Awards (other a than Deferred Share Unit) are all immediately exercisable or redeemable and may be exercised or redeemed only within 30 days of such written notice or such other period as determined by the Board and not thereafter and that all rights of the Participants under any Awards (other than a Deferred Share Unit) not exercised or redeemed within such period will terminate all the expiration of such period; provided that with respect to any U.S. Participant, the acceleration of the time or schedule of any payment of compensation under the Plan that is subject to Section 409A of the Code is prohibited, except as provided in the Treasury Regulations and administrative guidance promulgated under Section 409A of the Code.

ARTICLE 7

OPTIONS

7.1    Grant of Options. The Board may grant Options to Eligible Persons.

7.2    Option Exercise Term. Options shall be for a Fixed Term and exercisable from time to time as determined in the discretion of the Board at the time of grant, provided that, subject to Section 7.3, no Option shall have a term exceeding ten (10) years (or such shorter period as is permitted by the Exchange from time to time).

7.3    Black-Out Period. Except where not permitted by the Exchange, where an Option would expire during a Black-Out Period or within ten (10) Business Days following the end of a Black-Out Period, the term of such Option shall be extended to the date which is ten (10) Business Days following the end of such Black-Out Period.

7.4    Terms of Options. Subject to this Article, the number of Shares subject to each Option, the Option Price, the expiration date of each Option, the extent to which each Option is exercisable from time to time during the term of the Option and other terms and conditions relating to each such Option shall be determined by the Board; provided, however, if no specific determination is made by the Board with respect to any of the following matters, each Option shall, subject to any other specific provisions of the Plan, contain the following terms and conditions:

(a) the Fixed Term shall be ten (10) years from the date the Option is granted to the Participant; and

(b) the Option shall vest in installments, with ¹⁄₃ of such Option exercisable in whole or in part on or after the first anniversary following the grant of the Option, and a further ¹⁄₃ vesting and becoming exercisable on each of the second and third anniversaries following the grant of the Option.

7.5    Restrictions on Option Price. The Option Price shall in no circumstances be lower than the greatest of: (i) the price permitted by the Exchange; (ii) the price permitted by any other regulatory body having jurisdiction; or (iii) the Market Price.

7.6    Exercise of Options. Subject to the provisions of the Plan and award agreement, an Option may be exercised from time to time by delivery to the Corporation at its principal office of a written notice of exercise addressed to the Secretary or the Chief Financial Officer of the Corporation in a form approved by the Board from time to time and accompanied by payment in full of the Option Price for the Shares to be purchased. Upon receipt of payment in full and subject to the terms of this Plan, the number of Shares in respect of which the Option is exercised will be duly issued to the Participant as fully paid and non-assessable. Upon the exercise of any Option with a related Stock Appreciation Right, the corresponding portion of the related Stock Appreciation Right shall be surrendered to the Corporation and cancelled.

ARTICLE 8

STOCK APPRECIATION RIGHTS

8.1    Grants of Share Appreciation Rights. The Board may grant rights (“Stock Appreciation Rights”) to Eligible Persons either on a stand-alone basis or in relation to any Option. Where a Stock Appreciation Right is granted in relation to an Option, it shall be a right in respect of the same number of Shares and shall have the same Option Price as the Option. Where a Stock Appreciation Right is granted on a stand-alone basis, the Board shall designate the number of Shares in respect of which the Stock Appreciation Right is granted and shall designate the Option Price, which shall be not less than the Market Price on the date of grant.

8.2    Stock Appreciation Rights. A Stock Appreciation Right is the right to the excess, if any, of:

(a) the Market Price of a Share on the date such Stock Appreciation Right is exercised over

(b) the Option Price

multiplied by the number of Shares in respect of which the Stock Appreciation Right is being exercised, less any amount required to be withheld by applicable law (the “SAR Amount”).

8.3    Terms of Stock Appreciation Rights Granted in Connection with an Option. Stock Appreciation Rights granted in relation to an Option shall be exercisable only at the same time, by the same persons and to the same extent, that the related Option is exercisable. Upon exercise of any Stock Appreciation Right related to an Option, the corresponding portion of the related Option shall be surrendered to the Corporation and cancelled. In the sole discretion of the Corporation, the Corporation may elect to satisfy the exercise of a Stock Appreciation Right by issuing to the Participant Shares which have a Market Price as at the date of exercise of the Stock Appreciation Right, equal to the SAR Amount.

8.4    Terms of Stock Appreciation Rights Granted on a Stand Alone Basis. Stock Appreciation Rights granted on a stand-alone basis shall be granted on such terms as shall be determined by the Board and set out in the award agreement, provided that the Option Price shall not be less than the Market Price on the date of grant.

8.5    Exercise of Stand Alone Stock Appreciation Rights. Subject to the provisions of the Plan and award agreement, a Stock Appreciation Right may be exercised from time to time by delivery to the Corporation at its principal office of a written notice of exercise addressed to the Secretary or the Chief Financial Officer of the Corporation. Upon receipt of the notice and subject to the terms of this Plan, the Corporation shall within ten (10) business days pay to the Participant the SAR Amount or issue to the Participant a number of Shares (disregarding fractions) having an aggregate value, based on Market Price at the date of exercise, equal to the SAR Amount or any combination of payment and issuance of Shares.

ARTICLE 9

RESTRICTED SHARE UNITS

9.1    Grants of Restricted Share Units. The Board may grant rights (“Restricted Share Units”) to Eligible Persons. The Board shall designate the number of Restricted Share Units granted.

9.2    Restricted Share Units. A Restricted Share Unit is the right to receive one Share issued from treasury for each Restricted Share Unit redeemed or, at the election of the Corporation, a payment equal to the number of Restricted Share Units redeemed, multiplied by the Market Price on the date of vesting or any combination of payment and issuance of Shares. When dividends are paid on the Shares an additional number of Restricted Share Units will be credited to the Participant determined as the amount of the dividend multiplied by the number of Restricted Share Units credited to the Participant at the dividend payment date divided by the Market Price on the dividend payment date.

9.3    Terms of Restricted Share Units. Restricted Share Units shall be granted on such terms as shall be determined by the Board and set out in the award agreement.

9.4    Redemption of Restricted Share Units. Subject to the provisions of the Plan and award agreement, a Restricted Share Unit shall be redeemed and paid (or Shares issued) on, or as soon as practical following, the date the Restricted Share Unit vests, but in any event not later than the earlier of: (i) December 31 of the third year following the year in respect of which they were granted; and (ii) March 15 of the calendar year following the calendar year in which such Restricted Share Units are no longer subject to a substantial risk of forfeiture.

ARTICLE 10

DEFERRED SHARE UNITS

10.1    Grants of Deferred Share Units. The Board may grant rights (“Deferred Share Units”) to Eligible Persons, other than Consultants. The Board shall designate the number of Deferred Share Units granted.

10.2    Deferred Share Units. A Deferred Share Unit is the right to receive one Share issued from treasury for each Deferred Share Unit redeemed or, at the election of the Corporation, a payment equal to the number of Deferred Share Units redeemed, multiplied by the Market Price on the date of redemption or any combination of payment and issuance of Shares. When dividends are paid on the Shares an additional number of Deferred Share Units will be credited to the Participant determined as the amount of the dividend multiplied by the number of Deferred Share Units credited to the Participant at the dividend payment date divided by the Market Price on the dividend payment date.

10.3    Terms of Deferred Share Units. Deferred Share Units shall be granted on such terms as shall be determined by the Board and set out in the award agreement.

10.4    Redemption of Deferred Share Units. Subject to the provisions of the Plan and award agreement, a Deferred Share Unit held by a Participant other than a U.S. Participant may be redeemed from time to time by delivery to the Corporation at its principal office of a written notice of redemption addressed to the Secretary or the Chief Financial Officer of the Corporation in a form approved by the Board from time to time, provided that Deferred Share Units may not be redeemed earlier that the date the Participant ceases to hold all positions with the Corporation and may not be redeemed later than December 15 of the year following the year in which the Participant ceased to hold all positions with the Corporation. Upon receipt of the notice and subject to the terms of this Plan, the Deferred Share Unit shall be redeemed.

10.5    Redemption of Deferred Share Units Held by U.S. Participants. Notwithstanding anything to the contrary in this Plan, with respect to any U.S. Participants, all Deferred Share Units shall be redeemed and paid (or Shares issued) within thirty days of such U.S. Participant’s Separation from Service; provided that in the event that a U.S. Participant is a Specified Employee such payment shall be made (or Shares issued) at the time described in Section 3.3 hereof, provided that notwithstanding Section 3.3 hereof such payment shall not be made later than the end of the first calendar year commencing after the year in which the Separation from Service occurred. Any cash payment shall be based on the Market Price of a Share on the date of such U.S. Participant’s Separation from Service.

ARTICLE 11

RESTRICTED STOCK

11.1    Grants of Restricted Stock. The Board may grant shares (“Restricted Stock”) to Eligible Persons.

11.2    Restricted Stock. Restricted Stock is a Share which vests based on the achievement of performance targets, the passage of time or both.

11.3    Terms of Restricted Stock. Restricted Stock shall be granted on such terms as shall be determined by the Board and set out in the award agreement.

11.4    Lapse of Restrictions. Subject to the provisions of the Plan and award agreement, Restricted Stock may be sold, transferred or otherwise dealt with, only when all restrictions have lapsed.

ARTICLE 12

OTHER AWARDS

12.1    Grants of Other Awards. The Board may grant other share-based awards (“Other Awards”) to Eligible Persons. Other Awards shall be granted on such terms as shall be determined by the Board and set out in the award agreement and will be subject to the approval of the TSX.

ARTICLE 13

AMENDMENT PROCEDURE

13.1    Amendment Procedure. The Corporation retains the right to amend or terminate the terms and conditions of the Plan by resolution of the Board. If required, any amendments shall be subject to the prior consent of any applicable regulatory bodies, including the Exchange. Any amendment to the Plan shall take effect with respect to all outstanding Awards on the date of, and all Awards granted after, the effective date of such amendment, provided that in the event any amendment materially and adversely effects any outstanding Options it may apply to such outstanding Awards only with the mutual consent of the Corporation and the Participants to whom such Awards have been granted. The Board shall have the power and authority to approve amendments relating to the Plan or to Awards, without further approval of the shareholders of the Corporation, including the following non-exhaustive list of such amendments:

(a) altering, extending or accelerating the terms and conditions of vesting of any Awards;

(b) amending the termination provisions of an Award, which amendment shall include determining that any provisions of Article 5 concerning the effect of the Participant ceasing to be an Eligible Person shall not apply for any reason acceptable to the Board;

(c) accelerating the expiry of the Fixed Term of any Option;

(d) determining adjustments pursuant to Article 6 hereof;

(e) amending the definitions contained within the Plan, including but not limited to the definition of “Eligible Person” under the Plan except as provided in Section 13.2(e);

(f) amending or modifying the mechanics of exercise or redemption of the Awards as set forth in the Plan;

(g) effecting amendments of a “housekeeping” nature including, without limiting the generality of the foregoing, any amendment for the purpose of curing any ambiguity, error, inconsistency or omission in or from the Plan;

(h) effecting amendments necessary to comply with the provisions of applicable laws (including, without limitation, the rules, regulations and policies of the Exchange);

(i) effecting amendments respecting the administration of the Plan;

(j) effecting amendments necessary to suspend or terminate the Plan;

provided that no amendment shall be made with respect to any Award of a U.S. Participant if such amendment would cause such Award to be subject to tax under Section 409A of the Code.

13.2    Shareholder Approval. Notwithstanding the foregoing, approval of the shareholders of the Corporation shall be required for the following types of amendments:

(a) increasing the number of Shares issuable under the Plan, except such increase by operation of Section 4.1 and in the event of an adjustment contemplated by Article 6;

(b) amending the Plan which amendment could result in the aggregate number of Shares of the Corporation issued to Insiders within any one (1) year period under the Plan together with any other security-based compensation arrangement, or issuable to Insiders at any time under the Plan together with any other security-based compensation arrangement, exceeding ten percent (10%) of the issued and outstanding Shares;

(c) extending the Fixed Term of an Option;

(d) reducing the Option Price of an Option or cancelling an Option and replacing such Option with a lower Option Price under such replacement Option, except as permitted pursuant to Article 6;

(e) amending the listed categories contained in the definition of “Eligible Persons” hereunder which would have the potential of broadening or increasing participation in the Plan by Insiders;

(f) extending the term (fixed or otherwise) of an Option held by an Insider beyond the expiry of the original Fixed Term of the Option;

(g) amending Section 13.1 hereof and this Section 13.2; and

(h) making any amendments required to be approved by shareholders under applicable law (including, without limitation, pursuant to the rules, regulations and policies of the Exchange).

Where required by the policies of the Exchange, the shareholder approval required by this Section 13.2 shall be by the majority vote of the shareholders of the Corporation excluding any votes cast by Insiders who are entitled to participate as Eligible Persons under the Plan or who will specifically benefit from the proposed amendment.

13.3    Conflict. In the event of any conflict between Sections 13.1 and Section 13.2, the latter shall prevail to the extent of the conflict.

ARTICLE 14

GENERAL

14.1    No Rights as Shareholder. The holder of an Award, other than Restricted Stock, shall not have any rights as a Shareholder of the Corporation with respect to any Shares covered by such Award until such holder shall have exercised or redeemed such Award and been issued Shares in accordance with the terms of the Plan (including tender of payment in full of the Option Price of the Shares in respect of which an Option is being exercised) and the Corporation shall issue such Shares to the Participant in accordance with the terms of the Plan in those circumstances.

14.2    No Rights Conferred.

(a) Nothing contained in this Plan or any Award shall confer upon any Participant any right with respect continuance as a Director, Officer, Employee, Consultant or Management Company Employee of the Corporation or its Affiliates, or interfere in any way with the right of the Corporation or its Affiliates to terminate the Participant’s employment at any time.

(b) Nothing contained in this Plan or any Award shall confer on any Participant who is not a Director, Officer, Employee, Consultant or Management Company Employee any right to continue providing ongoing services to the Corporation or its Affiliates or affect in any way the right of the Corporation or its Affiliates to determine to terminate his, her or its contract at any time.

14.3    Tax Consequences. It is the responsibility of the Participant to complete and file any tax returns which may be required under any applicable tax laws within the periods specified in those laws as a result of the Participant’s participation in the Plan. The Corporation shall not be responsible for any tax consequences to the Participant as a result of the Participant’s participation in the Plan. The Corporation shall make any withholdings or deductions in respect of taxes as required by law or the interpretation or administration thereof. The Corporation shall be entitled to make arrangements to sell a sufficient number of Shares to be issued pursuant to the exercise of an Award to fund the payment and remittance of such taxes that are required to be deducted or withheld and any associated costs.

14.4    No Representation. The Corporation makes no representation or warranty as to the future market value of any Shares issued in accordance with the provisions of the Plan.

14.5    Governing Law. This Plan shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein.

14.6    Severance. If any provision of this Plan or any agreement entered into pursuant to this Plan contravenes any law or any order, policy, by-law or regulation of any regulatory body or Exchange having authority over the Corporation or this Plan then such provision shall be deemed to be amended to the extent required to bring such provision into compliance therewith.

ARTICLE 15

SHAREHOLDER AND REGULATORY APPROVAL

This Plan shall be subject to the approval of the shareholders of the Corporation to be given by a resolution passed at a meeting of the shareholders of the Corporation, and to acceptance by the Exchange and any other relevant regulatory authority. Any Awards granted hereunder prior to such approval and acceptance shall be conditional upon such approval and acceptance being given, and no such Awards may be exercised unless and until such approval and acceptance is given.

EX-10.2

Exhibit 10.2

\

Credit Agreement
	PROTECTED
March 28, 2013
	Customer number(s): 200621699

VILLAGE FARMS CANADA LIMITED PARTNERSHIP

Dear Sir/Madam:

Farm Credit Canada (“FCC” or “us” or "we" or "our") agrees to extend a credit facility to Village Farms Canada Limited Partnership (“you” or “your” or “Borrower”) in the principal amount of $58,000,000USD (the “Loan”).

The Loan is subject to the terms and conditions set out in this credit agreement and the attached Schedules (collectively the “Credit Agreement” or the “Agreement”). If a conflict arises between any clause, term or condition of this Credit Agreement and a clause, term or condition of the attached Schedules, the clause, term or condition in the body of this Credit Agreement will prevail over the clause, term or condition in the attached Schedules. Standard Terms and Conditions are contained in the attached Schedule B and capitalized terms used in this Agreement shall have the meanings given to them in Schedule C or otherwise as set out herein. Upon the making of the advance contemplated under this Agreement, this Agreement shall replace and supersede all previous credit or loan agreements between you and FCC, which includes any facility letters as amended from time to time issued by HSBC Bank Canada (“HSBC”) to the Borrower as agent for HSBC and FCC.

1. Credit Facility Information

Credit Facility number:	TBD
Borrower(s):	Village Farms Canada Limited Partnership
Chief Place of Business/Chief Executive Office:	4526-80th Street, Delta, BC V4K 3N3
Head/Registered office:	4526-80th Street, Delta, BC V4K 3N3
Guarantor(s):	Village Farms International, Inc.
Chief Place of Business/Chief Executive Office:	4526-80th Street, Delta, BC V4K 3N3
Head/Registered office:	4526-80th Street, Delta, BC V4K 3N3
Guarantor(s):	VF Operations Canada Inc.
Chief Place of Business/Chief Executive Office:	4526-80th Street, Delta, BC V4K 3N3
Head/Registered office:	4526-80th Street, Delta, BC V4K 3N3
Guarantor(s):	Village Farms Canada GP Inc.
Chief Place of Business/Chief Executive Office:	4526-80th Street, Delta, BC V4K 3N3
Head/Registered office:	4526-80th Street, Delta, BC V4K 3N3

Credit Agreement-LCD-10-02-2012 Page 1 of 62

Guarantor(s):	Agro Power Development, Inc.
Chief Place of Business/Chief Executive Office:	195 International Parkway, Suite 100
	Heathrow, Florida, U.S.A. 32746
Head/Registered office:	195 International Parkway, Suite 100
	Heathrow, Florida, U.S.A. 32746
Guarantor(s):	VF U.S. Holdings Inc.
Chief Place of Business/Chief Executive Office:	195 International Parkway, Suite 100
	Heathrow, Florida, U.S.A. 32746
Head/Registered office:	195 International Parkway, Suite 100
	Heathrow, Florida, U.S.A. 32746
Guarantor(s):	Village Farms of Delaware, L.L.C.
Chief Place of Business/Chief Executive Office:	195 International Parkway, Suite 100
	Heathrow, Florida, U.S.A. 32746
Head/Registered office:	195 International Parkway, Suite 100
	Heathrow, Florida, U.S.A. 32746
Guarantor(s):	Village Farms, L.P.
Chief Place of Business/Chief Executive Office:	195 International Parkway, Suite 100
	Heathrow, Florida, U.S.A. 32746
Head/Registered office:	195 International Parkway, Suite 100
	Heathrow, Florida, U.S.A. 32746

Sources and uses:

Sources		Uses
FCC	$58,000,000 (USD)	Retire HSBC term debt	*$22,964,097.74 (USD)
		Retire FCC Credit Facility	*$34,492,416.54 (USD)
		000513865000
Total	$58,000,000 (USD)		$58,000,000 (USD)

*Represents amounts owing by March 26, 2013, figures to be updated and settled for purposes of the advance of the Loan, and for greater certainty, FCC acknowledges and agrees that if the HSBC and FCC term debt to be retired together with all applicable fees, disbursements and taxes is less than $58,000,000 (USD), any surplus funds shall be remitted to the Borrower for its working capital.

New Credit Facility information

1.1 New Credit Facility details

(a)  New Credit Facility number:	TBD
Borrower(s):	Village Farms Canada Limited Partnership
Guarantor(s):	Village Farms International, Inc.
	VF Operations Canada Inc.
	Agro Power Development, Inc.
	VF U.S. Holdings Inc.
	Village Farms of Delaware, L.L.C.
	Village Farms, L.P.
	Village Farms Canada GP Inc.

Credit Agreement-LCD-10-02-2012 Page 2 of 62

Credit facility details
Loan number	01
Principal amount	$58,000,000 (USD)
Credit facility type	Real Property
Interest type	Open Variable
Product type	American Currency
Term	5 years
Amortization period	14 years
Interest rate	Based on Grid pricing "see below"
Loan Approval Expiry Date	August 27, 2013
Balance Due Date	2018-04-01

Subsequent payment schedule details
First payment type details
First payment type	Interest only (USD)
Start date	*2013-04-01
Payment frequency	Monthly
Payment month(s)	*April
Payment amount	Interest only
End date	*2013-04-30
Second payment type details
Second payment type	**Fixed Principal + Interest (USD)
Start date	***2013-05-01
Payment frequency	Monthly
Payment month(s)	***April to March
Payment amount	$345,238.10 + Interest (USD)
End date	2018-04-01

*Assumes funding by March 31, 2013; if in April, 2013 or beyond, then Start date, Payment months and End date deemed to be adjusted by adding such additional months as are necessary.

**Fixed principal to be determined by FCC based on date of advance and amortization period set forth above.

***Assumes funding by March 31, 2013, if in April 2013 or beyond, then Start date and Payment months deemed to be adjusted by adding such additional months as are necessary.

1.2Interest Rate Determination

The interest rate applicable under the Loan shall be determined on the basis of the following grid based on the Borrower’s Debt to EBITDA ratio as provided below.

Level	Debt to EBITDA Ratio	Interest Rate Spread - Libor Plus
1	4.01x-4.50x	500 bps
2	4.00x – 3.76x	450 bps
3	3.75x – 3.51x	400 bps
4	3.50x-3.01x	350 bps
5	< 3.01x	300 bps

(a)The Borrower shall pay interest, compounded semi-annually, in arrears, on the first day of each month, on the daily amount outstanding under the FCC Loan at the variable rate which is equal to Libor (adjusted as provided in Section 1 of Schedule A) plus the applicable Interest Rate Spread (adjusted from time to time as described in this section 1 and in section 1 of Schedule A), both before and after maturity, default and judgment, with interest on overdue interest at the same rate;

Credit Agreement-LCD-10-02-2012 Page 3 of 62

(b)For purposes of determining the applicable Level in the Grid above, upon the advance being made under the Loan, the applicable level in the Grid shall be set at Level 1 until such time thereafter as such rate can be determined by FCC in accordance with Clause (d) below, with reference to annual audited financial statements received by FCC in accordance with Section 6.2 below;

(c)Upon receipt of the annual audited financial statements for the Borrower, FCC shall, based thereon, determine the Debt to EBITDA ratio for the Borrower as at the last day of the fiscal year just ended and, based on such determination:

FCC shall then determine the Level in the Grid above that corresponds to such Debt to EBITDA ratio and the applicable Interest Rate Spread above Libor applicable under such Level, which aggregate rate (i.e. the Libor, plus the applicable Interest Rate Spread so determined) shall apply effective as and from May 1 in accordance with this clause; FCC may from time to time adjust the monthly blended payments payable by the Borrower in respect of amounts outstanding under the FCC Loan to reflect changes in the interest rate payable by the Borrower hereunder, which interest rate changes are reflected in Schedule A; and

(d)If at the time of determination by FCC of any applicable Interest Rate Spread, the Borrower has, for any reason, failed to deliver the annual audited financial statements for the Borrower as required under this Agreement, then the applicable Interest Rate Spread shall be determined based upon Level 1 in the Grid for the applicable fiscal year, unless otherwise agreed by FCC.

See Schedule A for Special Terms and Conditions applicable to the Credit Facility.

2. Security for the Credit Facility

The Loans(s) and the obligations and liabilities of the Borrower under this Credit Agreement will be secured by:

2.1Mortgage and Deeds of Trust

(1)Collateral mortgage and assignment of rents in the minimum principal amount of $70,000,000 USD, from Village Farms International, Inc. creating a first fixed mortgage and assignment of rents over the Canadian Real Property (the “Canadian Real Property Mortgage”):

(2)First Leasehold Deed of Trust, Assignment of Rents and Security Agreement from Village Farms, L.P. (Presidio County) over the Presidio Leasehold Lands;

(3)First Deed of Trust, Assignment of Rents and Security Agreement (Presidio County) from Village Farms, L.P. over the Presidio Fee Lands;

(4)First Deed of Trust, Assignment of Rents and Security Agreement from Village Farms, L.P. (Jeff Davis County) over the Jeff Davis Lands;

(5)First Leasehold Deed of Trust, Assignment of Rents, and Security Agreement (Ward County) from Village Farms, L.P. over the Ward County Lands.

Village Farms International, Inc.

(1) The Canadian Real Property Mortgage as previously referenced above;

Credit Agreement-LCD-10-02-2012 Page 4 of 62

(2)An unlimited guarantee of the obligations and liabilities under the Loan and an assignment and postponement of all present and future claims due and owing to it by the Borrower;

(3)A general security agreement granting FCC a first security interest in all Village Farms International, Inc. presently owned and after-acquired personal property and a first floating charge over all of its other presently owned and after-acquired property, assets and undertaking not subject to that security interest, subject to Permitted Liens and the Operating Lender Security Interest if applicable;

(4)A debt service agreement;

(5)Beneficial Mortgage and Direction to Charge granted by Village Farms International, Inc. as trustee of the Canadian Real Property and the Borrower as beneficial owner of the Canadian Real Property.

Village Farms Canada Limited Partnership (our Borrower)

(1)A general security agreement granting FCC a first security interest in all the Borrower’s presently owned and after-acquired personal property and a first floating charge over all of the Borrower’s other property, assets and undertaking not subject to that security interest, subject to Permitted Liens and the Operating Lender Security Interest, if applicable;

(2)An attornment and non-disturbance agreement, to be executed by Village Farms International, Inc., FCC and Maxim Power (B.C.) Inc. with respect to lease agreements held by Maxim Power (B.C.) Inc. over a portion of the Canadian Real Property; provided that in the event this attornment and non-disturbance agreement is not delivered to FCC or its solicitors by the date of Advance, then it shall be delivered, in the form requested by FCC, by not later than June 1, 2013, failing which the Borrower shall pay FCC a fee of $5,000 USD per month on the first day of each month (commencing June 1, 2013) for each month in which the attornment and non-disburbance agreement has not been delivered by the first of such month.

VF Operations Canada Inc.

(1)An unlimited guarantee of the obligations and liabilities under the Loan and an assignment and postponement of all present and future claims due and owing to it by the Borrower;

(2)A general security agreement granting FCC a first security interest in all VF Operations Canada Inc. presently owned and after-acquired personal property and a first floating charge over all of its other presently owned and after-acquired property, assets and undertaking not subject to that security interest, subject, in each case, to Permitted Liens and the Operating Lender Security Interest, if applicable;

(3)A debt service agreement.

VF U.S. Holdings, Inc.

(1)An unlimited guarantee of the obligations and liabilities under the Loan and an assignment and postponement of all present and future claims due and owing to it by the Borrower;

Credit Agreement-LCD-10-02-2012 Page 5 of 62

(2)A general security agreement granting FCC a first security interest in all VF US Holdings Inc., presently owned and after-acquired personal property, subject to Permitted Liens and the Operating Lender Security Interest, if applicable.

Agro Power Development, Inc.

(1)An unlimited guarantee of the obligations and liabilities under the Loan and an assignment and postponement of all present and future claims due and owing to it by the Borrower;

(2)A general security agreement granting FCC a first security interest in all Agro Power Development, Inc. presently owned and after-acquired personal property, subject only to Permitted Liens and the Operating Lender Security Interest, if applicable.

Village Farms Delaware, L.L.C.

(1)An unlimited guarantee of the obligations and liabilities under the Loan and an assignment and postponement of all present and future claims due and owing to it by the Borrower;

(2)A general security agreement granting FCC a first security interest in all Village Farms, L.P.’s presently owned and after acquired-personal property, subject only to Permitted Liens and the Operating Lender Security Interest, if applicable.

Village Farms, L.P.

(1)US Real Property Deeds of Trust as previously referenced above;

(2)An unlimited guarantee of the obligations and liabilities under the Loan and an assignment and postponement of all present and future claims due and owing to it by the Borrower.

Village Farms Canada GP Inc.

(1)An unlimited guarantee of the obligations and liabilities under the Loan and an assignment and postponement of all present and future claims due and owing to it by the Borrower;

(2)A general security agreement granting FCC a first security interest in all Village Farms Canada GP Inc. presently owned and after acquired-personal property, subject only to Permitted Liens and the Operating Lender Security Interest, if applicable.

2.2Inter-lender Priority Agreement

(1)Inter-Lender Priority Agreement between you, FCC and the Operating Lender (the

“FCC/Operating Lender Priority Agreement”). FCC will postpone its interest in inventory and accounts receivable in the amount required to secure the operating loan, and the Operating Lender will have a second priority interest over all other personal property of the Borrower and the Guarantors. FCC will have a first priority interest in all your present and after acquired personal property other than a second priority interest in your inventory and accounts receivable and a first priority interest in the Real Property.

2.3Intellectual Property Agreement

(1)Intellectual Property Security Agreement granted by Village Farms, L.P.

Credit Agreement-LCD-10-02-2012 Page 6 of 62

2.4Hazardous Material Agreement

(1)Hazardous Material Indemnity Agreement granted by Agro Power Development, Inc.,VF U.S. Holdings, Inc., Village Farms of Delaware, L.L.C, and Village Farms, L.P.

2.5Environmental Indemnity Agreement

(1)Environmental Indemnity Agreement granted by Village Farms Canada Limited Partnership, Village Farms International Inc. and VF Operations Canada Inc.

2.6Representation, Warranty and Covenant Agreement

(1)Limited Partnership Representation, Warranty and Covenant Agreement granted by Village Farms Canada Limited Partnership.

2.7Landlord Waiver

(1)Landlord Waiver and Consent Agreement from Sealy & Smith Foundation with respect to lease agreements held by Village Farms, L.P. over the Ward County Lands.

(2)Landlord Waiver and Consent Agreement from The County of Presidio, Texas,

by and through Presidio County Commissioners Court with respect to lease agreements held by Village Farms, L.P. over the Presidio Leasehold Lands; provided that in the event this waiver and consent is not delivered to FCC or its solicitors by the date of Advance, then it shall be delivered, in the form requested by FCC, by not later than June 1, 2013, failing which the Borrower shall pay FCC a fee of $10,000 USD per month on the first day of each month (commencing June 1, 2013) for each month in which the waiver and consent has not been delivered by the first of such month.

2.8Insurance

In addition to Section 6 (k) of the attached Schedule B, you will:

(1)maintain the following policies of insurance, each satisfactory to FCC, which will contain a mortgage clause and /or a loss payable clause directing first payment to FCC:

(a)Business interruption insurance to provide insurance for a minimum amount of $10,000,000;

(b)Comprehensive commercial general liability insurance against claims for personal injury, bodily injury and property damage occurring on, in or about the lands and buildings upon the Real Property and covering all operations of the Borrower; such insurance shall be in an amount not less than $2,000,000 per occurrence.

(2)have purchased lender’s title insurance in respect of the US Real Property, with an insurer, in a form and an amount satisfactory to FCC and its solicitors.

Credit Agreement-LCD-10-02-2012 Page 7 of 62

3Repayment, Prepayment and Maturity

3.1 Mandatory Repayments

The Loan and all Indebtedness shall be repaid in full and the Loan will be cancelled on the Balance Due Date set out in section 1 above, unless it is extended in writing by FCC on or before that date, in which case that extended date shall become the new Balance Due Date. Extensions may be requested by the Borrower. Extensions will be granted at the discretion of FCC.

3.2 Time and Place of Payment by Borrower

Each payment or prepayment required or permitted to be made by the Borrower hereunder (whether on account of principal, interest, costs, or any other amount) shall be made to FCC at its corporate office in Regina, Saskatchewan not later than 11:00 a.m. (Regina time) on the date for payment of the same in immediately available funds, and if any payment made by the Borrower hereunder is made after 11:00 a.m., such payment will be deemed to have been made on the immediately following Banking Day and interest will continue to accrue on the amount of such payment until such following Banking Day.

3.3 Payments to be Made on Banking Days

Whenever any payment to be made hereunder is due on a day that is not a Banking Day, such payment shall be made on the immediately following Banking Day unless the following Banking Day falls in another calendar month, in which case payment shall be made on the immediately preceding Banking Day.

3.4. Pre-Authorized payment authority (the “Authority”)

(a)Bank account information

Branch transit #: 1 0 2 7 0 FI #: 0 1 6 Account #: 0 8 9 6 8 3 0 7 0

Financial institution name:

Address:

(b)Pre-authorized payment details - Credit Facility

Payment type	Payment amount	Payment start date	Frequency
Variable	Interest only	2013-04-01	2013-04-01
	Fixed principal + Interest	2013-05-01	Monthly

You hereby instruct and authorize FCC to debit your above bank account (the “Account”) with the above payments for the purpose of repaying your New Credit Facility(s) and related indebtedness to FCC. A specimen cheque for the Account has been marked “void” and attached to this Authority. You undertake to inform FCC, in writing, of any change in the Account information provided in this Agreement prior to the next due date of the pre-authorized payment.

(read and initial box) ☐ You waive the pre-notification requirements of the Canadian Payments Association. You acknowledge that FCC may send you payment notices but that these payment notices do not constitute the pre-notification requirements of the Canadian Payments Association.

The above payment(s) are made for (check one) ☐ personal ☐ business purposes.

Credit Agreement-LCD-10-02-2012 Page 8 of 62

FCC reserves the right to cancel this Authority at its discretion and without notice. This Authority may be cancelled at any time upon notice being provided by you, either in writing or orally with proper authorization to verify your identity, to FCC within 30 days before the next payment is to be made. You may obtain a sample cancellation form, or more information on your rights to cancel this Authority, by contacting your financial institution or by visiting www.cdnpay.ca.

You have certain recourse rights if any debit does not comply with this Authority. For example, you have the right to receive reimbursement for any debit that is not authorized or is not consistent with this Authority. To obtain more information on your recourse rights, you may contact your financial institution or visit www.cdnpay.ca.

You may contact FCC to make inquiries or obtain information about this Authority at:

Farm Credit Canada

Customer Service Centre

1800 Hamilton Street, P.O. Box 4320

Regina, SK S4P 4L3

Telephone: 1-888-332-3301 Fax: 1-306-780-8919 email: csc@fcc-fac.ca

You warrant and guarantee that you are duly authorized, in accordance with your account agreement at the financial institution identified above, to debit the Account.

You agree that if the Borrower’s operating loan with HSBC Bank Canada is refinanced at any time, then the Borrower shall promptly provide to FCC new pre-authorized payment details from which to debit its new operating account.

3.5Manner of Payment; No Set-Off / Right of compensation

All payments to be made pursuant to this Credit Agreement including principal. interest and costs will, except as otherwise expressly provided herein, be payable in US Dollars and all payments to be made pursuant to this Credit Agreement are to be made in immediately available funds and without set-off, right of compensation, withholding or deduction of any kind whatsoever.

4Interest Rates, Fees and Charges

4.1 Interest Rates

Subject to the provisions of this Credit Agreement (including without limitation Section 1.2 hereof and Section 1 of Schedule A hereto), interest shall accrue on the aggregate principal amount of the Loan outstanding from time to time, both before and after maturity, default and judgment, with interest on overdue interest at the same rate, commencing on and including the day on which the Loan is advanced and ending on, but excluding, the day on which it is repaid, such interest to be calculated on the daily outstanding principal balance and payable monthly, in arrears, on the first Banking Day of each and every month during which the Loan remains unpaid, based upon a year of 360 days, for the actual days that the amounts are outstanding under the Loan on this basis, at the variable rate of interest per annum, compounded semi-annually, specified and calculated in the manner set forth in section 1 above and in Schedule A attached hereto.

4.2For the purpose of the Interest Act (Canada), the annual rate of interest to which interest computed on the basis of a year of 360 days is equivalent is the rate of interest as provided in this Agreement multiplied by the number of days in such year and divided by 360.

4.3Expenses and Legal Fees

Regardless of whether any or all of the transactions contemplated herein shall be consummated, the Borrower shall pay to FCC all reasonable legal fees and disbursements and all reasonable fees, costs and out-of-pocket expenses incurred by FCC with respect to the negotiation, preparation and registration of this Agreement and the other Documents including, without limitation, amendments of the Documents and their registration. The Borrower shall, in addition, reimburse FCC on demand for all fees, cost and out-of-pocket expenses including, without limitation, legal fees and disbursements (on a solicitor and own client basis) incurred by FCC following the Closing Date in connection with the exercising or defending of any or all of the rights, recourses, remedies and powers of FCC hereunder or under any other Documents or the realization on any assets or property of the Security Parties, or the taking of any proceedings for the purpose of enforcing the remedies provided herein or permitted in connection herewith.

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4.4 Other Charges

In addition to the obligations of the Borrower to pay interests, costs, and expenses as provided in this Agreement, the Borrower shall pay the following non-refundable fees:

(a)annual fees related to the Loan that are set out in this Agreement;

(b)if applicable, the fees set out in Schedule D;

(c)if applicable, the non-compliance fees set out in Schedule D;

(d)if applicable, the Conversion Fee set out in Schedule A;

(e)if applicable, the Pre-payment Fee set out in Schedule A; and

(f)all reasonable fees from time to time imposed by FCC for the administration of this Credit Agreement.

All such fees are due and payable by within 30 days of demand or invoice by FCC.

5Conditions Precedent

5.1 Conditions to the Advance

The obligation of FCC to make available the Advance under this Agreement is subject to and conditional upon the representations and warranties contained in this Agreement being true and correct on and as of the Closing Date with reference to the facts subsisting at such time with the same effect as if made on such date, and upon each of the following terms and conditions being satisfied:

(a)Confirmation that the Borrower has available to it an operating loan in an amount not less than CAD $8,000,000 on terms and conditions acceptable to FCC, which shall include the review by FCC and its solicitors of the governing credit agreement and /or facility letter, as applicable for such operating loan;

(b)Discharge and cancellation of any encumbrances that secures indebtedness on the Borrower’s and each Guarantor’s assets other than Permitted Liens and the Operating Lender Security Interest (subject to Section 5.1(a) in any event);

(c)Repayment of any amount outstanding and cancellation of the Borrower’s term lending facility with HSBC;

(d)Nothing shall have occurred which FCC shall determine is reasonably likely to have a MAE;

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(e)No event shall have occurred and be continuing which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse, or both;

(f)All documents required to grant and as necessary pledge the security described in section 2 shall have been executed and delivered to FCC together with confirmation of registration as applicable and shall be in full force and effect, in form and substance satisfactory to FCC;

(g)All other documents and instruments required by the terms hereof shall have been duly executed and delivered by all parties thereto and shall be in full force and effect, in form and substance satisfactory to FCC;

(h)FCC shall be satisfied in all respects with the business, operations and prospects and assets and liabilities (including without limitation as to environmental matters) of the Security Parties, the corporate and capital structure of the Security Parties, the sources of funding available to the Borrower on and after the Closing Date and the proposed disbursement of funds by the Borrower on and following such date;

(i)All consents and approvals necessary or desirable in connection with the completion of the transactions contemplated pursuant to this Credit Agreement and the other Documents shall have been obtained on terms and conditions acceptable to FCC;

(j)FCC must have received and approved the form of lease agreement with the applicable landlords with respect to the Ward County Lands and the Presidio Leasehold Lands, and the Canadian Real Property that is subject to a leasehold interest (to be reviewed in advance of funding to ensure mortgages of leased lands or leasehold interests are unaffected by lease agreements);

(k)FCC must have entered into the FCC/Operating Lender Priority Agreement satisfactory to it;

(l)FCC is satisfied that you are in possession of and in good standing/compliance with all necessary permits, licences, authorizations and other approvals required to legally undertake and carry on your business in the province and states where you carry on business;

(m)FCC must be satisfied in its sole discretion, that all regulatory agency requirements relating directly or indirectly to environmental impacts, potential environmental hazards, environmental, health or safety risks or environmental issues related to your current or projected business operations have been met or to past operations that may have caused or contributed to a breach of regulatory requirements have been rectified;

(n)FCC must have reviewed and be satisfied with the organizational documents governing the Borrower and any Guarantors including any applicable partnership agreements, articles of incorporation and bylaws;

(o)FCC must be satisfied in its sole discretion with the lender’s title insurance policies to be obtained in respect of the US Real Property and the US Real Property Deeds of Trust;

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5.2 Discretion of FCC

Notwithstanding the non-fulfillment of any term or condition set out above, FCC may make an Advance in its unfettered discretion. The making of any Advance by FCC, either before or after the fulfillment of all applicable conditions, will not constitute an approval, acceptance, or waiver by FCC of any condition, Default or Event of Default.

5.3 Conditions Solely for FCC’s Benefit

All conditions precedent to the obligation of FCC to make any Advance are imposed solely and exclusively for the benefit of FCC and no other Person will have standing to require satisfaction of such conditions or be entitled to assume that FCC will refuse to make any Advance available in the absence of strict compliance with any or all such conditions and no other Person will, under any circumstances, be deemed to be beneficiary of such conditions.

5.4 Langage

The parties have requested that this Agreement and all other Documents be drafted in English. Les parties ont requis que cette convention et tous les autres documents soient rédigés en anglais.

[The remainder of this page has been intentionally left blank]

Credit Agreement-LCD-10-02-2012 Page 12 of 62

Acceptance

If this Agreement is acceptable to you, please sign in the space indicated below and return it to us by March 28, 2013 (the "Loan Acceptance Date"), after which this Agreement shall be null and void (unless extended in writing by us). Each Borrower and Guarantor of a Loan must sign this Agreement in that capacity

Borrower

VILLAGE FARMS CANADA LIMITED PARTNERSHIP
by its general partner, Village Farms Canada GP Inc.,
by its authorized signatory

Per:

_______________________________________________
Authorized Signatory

Guarantors

VILLAGE FARMS INTERNATIONAL, INC.

Per:

_______________________________________________
Authorized Signatory

 VF OPERATIONS CANADA INC.

Per:

_______________________________________________
Authorized Signatory

 AGRO POWER DEVELOPMENT, INC.

Per:

_______________________________________________
Authorized Signatory

 VILLAGE FARMS, L.P.
 by its general partner, Village Farms of Delaware, L.L.C.,
 by its authorized signatory

Per:

_______________________________________________
Authorized Signatory

Credit Agreement-LCD-10-02-2012 Page 13 of 62

Credit Agreement-LCD-10-02-2012 Page 14 of 62

Schedule A – Special Terms and Conditions

1. U.S. Dollar Loans

You agree that this Loan has been made in U.S. currency and must be repaid in U.S. currency.

You must give FCC written notice at least 3 business days prior to the date any advance is required.

Any prepayment, late payment, or unscheduled payment of this Loan whether voluntary or involuntary will result in a fee payable to FCC equivalent to all costs or losses incurred by FCC as a result of the prepayment, late payment, or unscheduled payment. These costs or losses, will be determined exclusively by FCC and could include foreign exchange losses, foreign currency costs, applicable fees required to change foreign exchange hedging contracts, FCC administrative costs, interest paid on U.S. currency held by FCC for application on a future scheduled payment date, loss of profit, lost interest-bearing days, interest differential and reinvestment or re-lending, and loss on account of funds borrowed, contracted for, or utilized to fund such portion, damages, penalties and expenses, and any other costs reasonably incurred by FCC as a result of the prepayment, late payment or unscheduled payment.

You agree that the initial Interest Rate applicable to this Loan will be Libor on the date of disbursement plus the Interest Spread in accordance with the Grid in section 1.2 above. Interest will be compounded semi-annually not in advance. The Interest Rate for this Loan will be adjusted on the first day of each May, August, November and February following the date of disbursement to be Libor on such day plus the applicable Interest Spread on such day. If the date for adjusting the Interest Rate falls on a weekend or statutory holiday in Canada or the United States, then the Libor used to establish the Interest Rate will be the Libor on the next business day. You will not be advised of any interest rate change, but can obtain the rate applicable to your loan by contacting your Account Manager. At the discretion of FCC, this Loan may be renewed on the Balance Due Date. Information on the current Libor rate is available on the Bloomberg Website located at www.bloomberg.com.

The terms of this Loan will be documented by this Credit Agreement. You authorize FCC, upon disbursement, to use the applicable 3 month U.S. dollar LIBOR rate to calculate and then apply the Interest Rate for purposes of this Credit Agreement.

Prepayments

This loan can be prepaid at any time on 2 Banking Days notice, subject to payment to FCC of any costs or losses as set out in the third paragraph of this Schedule A, provided that notwithstanding the second paragraph of this Schedule A, in relation to the prepayment fees, if you repay or prepay the Loan or any part thereof on a day other than the first day of February, May, August or November (each, a “LIBOR Calculation Date”), the costs or losses which you shall be responsible for shall be determined by FCC and shall be limited to the costs or losses suffered or incurred (but only for such losses or expenses suffered or incurred up to the next LIBOR Calculation Date), by reason of the liquidation or redeployment of deposits or other funds acquired by or howsoever deployed by FCC to effect or maintain such portion of the Loan being prepaid or any interest or other charges payable to lenders of funds borrowed by FCC in order to maintain such portion of the Loan being prepaid.

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Schedule B – Standard Terms and Conditions

6Covenants of the Borrower

6.1 Affirmative Covenants

The Borrower covenants and agrees with FCC that until there is no Indebtedness outstanding, the Loan has been terminated, and FCC has no commitment or obligation hereunder:

(a)Payment of Principal, Interest and Expenses

The Borrower shall duly and punctually pay or cause to be paid to FCC, all moneys due to FCC under or by virtue of the Documents, whether principal, interest, fees or other expenses, at the times and places and in the manner provided for herein.

(b)Use of Funds

The Borrower will use and employ the funds received from FCC pursuant to this Credit Agreement solely for the purposes set forth in this Agreement or in the loan approval.

(c)Books and Records

The Borrower shall, and shall cause the Security Parties and each of its and their Subsidiaries, to maintain at all times, a system of accounting established and administered in accordance with the Accounting Standard, consistently applied and in accordance with sound business practices and shall therein make complete, true and correct entries of all dealings and transactions relating to its business. All Financial Statements furnished to FCC shall fairly present the financial condition and the results of the operations of the Borrower and each of its Subsidiaries or the other Security Parties and their Subsidiaries reported upon therein, and all other information, certificates, schedules, reports and other papers and data furnished to FCC will be accurate, complete and correct in all material respects determined, in respect of the Borrower and each other Security Party.

(d)Access and Information

The Borrower shall, and shall cause each of the Security Parties, to discuss and review with FCC and any of their authorized representatives any matters directly relevant to this Credit Agreement and relating to the business of the Security Parties or pertaining to all or any part of its or their properties as FCC may reasonably request, and each of them shall permit any authorized representative of FCC to visit, inspect and have access to its property and assets at any and all reasonable times during normal business hours, subject in any event and so long as there does not exist a Default or Event of Default to food safety regulations and protocol in respect of its real property facilities. The Borrower shall and shall cause each of the Security Parties to permit, at any and all reasonable times during normal business hours, FCC, and its authorized representatives, to examine all of its books of account, records, reports, documents, papers and data and to make copies and take extracts thereof, and to discuss respective business, affairs, finances and accounts with its and their executive officers, senior financial officers, accountants and other financial advisors.

(e)Notices

The Borrower shall promptly give notice to FCC of:

(1)any Default or Event of Default;

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(2)any notice of expropriation of any of the assets charged by any of the Security Documents;

(3)any claim, proceeding or litigation in respect of the Borrower or any other Security Party which does or may cause a MAE, whether or not any such claim, proceeding or litigation is covered by insurance;

(4)any violation of any law, statute, rule or regulation which could reasonably be expected to cause a MAE;

(5)any Lien other than Permitted Liens registered against any Collateral;

(6)any MAE;

(7)any default or alleged notice of default issued by the applicable landlords of the Presidio Leasehold Lands and Ward County Lands together with such details as are then required by FCC; and

(8)any default or alleged notice of default issued by the Borrower’s operating lender to the Borrower together with such details as are then required by FCC.

(f)Corporate Status and Qualification

The Borrower shall, and shall cause each of the other Security Parties to, at all times, preserve and maintain its existence and to preserve and maintain its qualification to do business where such qualification is necessary and diligently preserve and at all times renew or cause to be preserved and renewed all the rights, powers, privileges, franchises and goodwill owned by them and at all times comply with all laws applicable to it, if, in each case, failure to do so would result in a material adverse effect on the relevant Security Party.

(g)Conduct of Business

The Borrower shall, and shall cause each of the other Security Parties to, conduct its business in the ordinary course and not make any material adverse changes to its business and maintain and operate its properties and assets in a prudent manner and, subject to the terms hereof, take all necessary steps to maintain and preserve its assets and properties and its title thereto.

(h)Government Compliance

The Borrower shall, and shall cause each of the other Security Parties to, comply with all applicable laws, regulations, orders, restrictions and regulations of any Governmental Authority having jurisdiction and obtain and maintain in good standing all material licences, permits, quotas and approvals required (as and when same are, by law, required) from any and all Governmental Authorities, and ensure that its business and operations are at all times in compliance in all respects with all applicable laws, regulations, building codes, ordinances and zoning requirements, the non-compliance with which would have a material adverse effect on such Security Party.

(i)Security

The Borrower shall ensure that the Security Documents create at all times valid, enforceable and perfected charges and security interests on the assets purported to be charged thereby, ranking in priority to all other mortgages, charges, liens and security interests with the exception of Permitted Liens, the Operating Lender Security Interest and any other security interests which, according to the terms of this Credit Agreement, are allowed to rank pari passu with or senior to (in the case of the Operating Lender Security Interest) the charges created by the Security Documents.

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(j)Taxes

The Borrower shall, and shall cause each of the other Security Parties to, pay or cause to be paid all Taxes lawfully levied, assessed or imposed upon it or in respect of its property as and when the same shall become due and payable, and exhibit or cause to be exhibited to FCC when required, the receipts and vouchers establishing such payment, and duly observe and conform to all valid requirements of any Governmental Authority relative to its property or rights and relative to all covenants, terms and conditions upon or under which any such property or rights are held; provided, however, that it shall have the right to contest in good faith by appropriate and timely legal proceedings any such taxes or other amounts and, upon such contest, may delay or defer payment or discharge thereof if such contestation will involve no forfeiture of Collateral or the subordination of the charges created by the Security Documents to such taxes unless collateral or other security satisfactory to FCC have been deposited with FCC in respect thereof.

(k)Insurance

The Borrower shall, and shall cause each of the other Security Parties to, maintain or cause to be maintained with reputable insurers, over the insurable Collateral, coverage against risks of loss or damage to its properties, assets and business, (including fire and extended perils, public liability, and damage to property of third parties) of such types as are customary in the case of persons with established reputation engaged in the same or similar businesses, to the full insurable value of such properties and assets, such policies (except third party liability insurance) to contain standard mortgage clauses or other mortgage clauses satisfactory to FCC and shall, otherwise than in respect of damage to or destruction of leased assets, assets secured by Purchase Money Security Interests and such other assets as FCC may in writing agree to exclude, be assigned to and endorsed in favour of FCC, as first mortgagee and first loss payee subject to ranking pari passu with holders of debt secured by the same Collateral pursuant to any intercreditor agreement entered into by FCC with the holders of such debt. For greater certainty, the form of insurance that exists as at the date of this Agreement in respect of the insurable collateral is satisfactory to FCC.

(l)Repairs

The Borrower shall, and shall cause each of the other Security Parties to, at all times, make or cause to be made such expenditures, replacements, repairs, and maintenance as shall be necessary to maintain, preserve and keep at all times the Collateral in good repair, physical condition, working order and a state of good operating efficiency, as would a prudent owner of comparable property conducting a similar business.

(m)Environmental Compliance

The Borrower shall, and shall cause each of the other Security Parties to:

(1)use and operate all of its facilities and properties in compliance with all environmental laws, keep all necessary permits, approvals, certificates, licences and other authorizations relating to environmental matters in effect and remain in compliance therewith, and handle all contaminants in compliance with all applicable environmental laws;

(2)immediately notify FCC and provide copies upon receipt of any written claim, complaint, notice or inquiry to the Security Party relating to the release of contaminants at any facility which would result in the Security Party being in material non-compliance with any environmental law; and

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(3)provide such information and certifications which FCC may reasonably and specifically request from time to time to evidence compliance with this section.

(n)Environmental Review

The Borrower shall permit or cause to be permitted, at any and all reasonable times during normal business hours, a representative of FCC to visit and inspect the premises and assets of each Security Party for the purposes of reviewing the environmental status thereof.

(o)Observance of Agreements, etc.

The Borrower shall, and shall cause each of the other Security Parties to, observe and perform in a timely fashion all of its Obligations, the failure of which to perform or observe would have a material adverse effect on such Security Party, and shall provide or cause to be provided to FCC copies of any written communications delivered to it by any of the other parties thereto alleging any default or threatening the exercise of any remedy thereunder.

(p)Rectification of Defaults by FCC

In the event that FCC receives any notice of default or breach by any Security Party of any term, covenant or condition in an agreement which default or breach, in the reasonable opinion of FCC, is likely to have a material adverse effect on the business or operations of such Security Party, or upon a material portion of the Collateral, the Borrower shall permit or cause to be permitted FCC to take any action as FCC in its reasonable opinion may deem necessary or desirable to rectify or prevent such default or breach notwithstanding that the existence of such default or breach or the nature or extent thereof may be questioned or denied by the Borrower or other Security Party, including the absolute and immediate right to enter onto the property of any Security Party or any part thereof to the extent that FCC deem necessary or desirable, but without taking possession thereof, to enable FCC to rectify or prevent any such default or breach, provided always that FCC shall not incur or be subject to any liability under any lease or contract by reason of having taken such action nor shall FCC have any obligation to take any action referred to in this subsection.

(q)Insurance Proceeds

Except for any further insurance proceeds arising from the May 31, 2012 storm (the “2012 Storm”) in Texas relating to business interruption only which shall not need to be remitted to FCC, any physical damage insurance proceeds arising from the damage or destruction of any assets of any Security Party shall be paid to FCC to be applied as a prepayment of Indebtedness owing under the Loan (and which for greater certainty shall include any additional physical damage insurance proceeds in respect of the 2012 Storm). FCC acknowledges that the Borrower may request that the physical damage insurance proceeds be utilized to rebuild damaged facilities (be they from the 2012 Storm or otherwise), and which request, if made, will be considered by FCC, without obligation.

6.2Financial Statements and Other Information

Until there is no Indebtedness outstanding, the Loan has been terminated, and FCC has no commitment or obligation hereunder, the Borrower(s) and Guarantor(s) shall deliver to FCC annually within 90 days of the Borrower's fiscal year end:

(1)Consolidated Audited Financial Statements for the Borrower and Guarantors prepared by a Qualifying Accounting Firm, and which statements must include a balance, sheet, an income statement, a statement of retained earnings and a statement of changes in financial position, and must be prepared in accordance with IFRS applied on a basis consistent with the statements for the previous fiscal year;

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(2)Accountant or financial controller will provide an annual compliance letter for the FCC Loan in a form satisfactory to FCC for Covenants and Conditions accompanying the fiscal year end financial statement. Explanations are to be included for any non-compliance issues. For greater certainty, the form of compliance letter provided to date to FCC is in a form satisfactory to FCC;

(3)Annual budget and cash flow forecast including a detailed Capital Expenditure Budget of the following year to be supplied to FCC within 15 days of approval but not later than 90 days following the fiscal year-end and must be deemed acceptable to FCC. Any subsequent revisions to the budgets must be confirmed in writing and authorized by FCC before changes are implemented.

(4)Such additional financial statement and information as and when requested by FCC acting reasonably.

6.3Financial Covenants

For as long as this Agreement is in force and any portion of the Loans(s) referred to in this Agreement remains unpaid, the Borrower and the Guarantors shall maintain the following financial covenants:

(1)Current ratio

The Borrower will not permit its Current Ratio to be less than:

1.10:1.00 for its 2013 fiscal year

1.25:1.00 for its 2014 fiscal year; and each fiscal year thereafter;

The Current Ratio is defined as Current Assets divided by Current Liabilities.

(2)Debt Service Coverage ratio

The Borrower will not permit its Debt Service Coverage Ratio to be less than: 1.50:1.00 for its 2013 fiscal year;

1.65:1.00 for its 2014 fiscal year;

1.75:1.00 for its 2015 fiscal year; and each fiscal year thereafter.

The Debt Service Coverage is defined as Earnings Before Interest, Taxes, Depreciation, Amortization (EBITDA) divided by Interest Expense and Current Portion of Long Term Debt (as has been customarily circulated and previously provided to FCC).

(3)Total Debt To Tangible Net Worth

The Borrower will not permit its Total Debt to Tangible Net Worth to exceed 3.00:1.00;

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(4)Debt to EBITDA

The Borrower will not permit its ratio of Debt to EBITDA to be greater than: 4.50:1.00 for its 2013 year; and

4.00:1.00 for its 2014 fiscal year and each fiscal year thereafter; EBITDA means the aggregate of the following:

•net income of Village Farms International, Inc. on a consolidated basis, including any business interruption insurance proceeds but excluding insurance proceeds for capital assets, and excluding asset and inventory write downs and incremental costs related to insurance recovery and cleanup of damage resulting from the May 31, 2012 hail storm in Marfa, Texas;

•adding back Bank charges for the month, on a consolidated basis;

•adding back expenses related to refinancing;

•adding back the amount of consolidated income tax expense;

•adding back the amount of depreciation expense incurred, on a consolidated basis;

•adding back the amount of amortization expense incurred, on a consolidated basis,

•In each case determined in accordance with IFRS on a consolidated basis, with the exception that the insurance proceeds on capital or fixed assets shall not be included in EBITDA which FCC acknowledges may not be in accordance with IFRS;

These financial covenants shall be measured annually, or more frequently as determined by FCC, if there exists an Event of Default. And for greater certainty, the calculation of these financial covenants shall be measured in the same manner as was presented by the Borrower to FCC and HSBC Bank Canada in the most recent compliance certificate delivered to them (as part of the existing loan requirements).

6.4 Negative Covenants

Until there is no Indebtedness outstanding, the Loan has been terminated, and FCC has no commitment or obligation hereunder, the Borrower will not, and will ensure that each of the Security Parties will not, without the prior written consent of FCC:

(a)No Amalgamation or Merger

Enter into any transaction (whether by way of amalgamation, merger, winding-up, consolidation, liquidation, dissolution, reorganization, transfer, sale, lease, or otherwise) whereby all or substantially all of its undertaking, properties, rights, or assets would become the property of any Person other than the Borrower excepting any transaction between Security Parties and provided that the Borrower has received the prior written consent of FCC;

(b)Change in Control of Borrower or Security Parties

Issue any shares in its capital stock or issue any limited partnership units (or securities convertible or exchangeable into any such shares) or any options to acquire shares or limited partnership units or permit any transfer or any change in the ownership or control of any such shares or limited partnership units (whether by sale, assignment, exchange, transfer, devise, bequest, amalgamation, reorganization, operation of law or otherwise) or take or permit any other action which would result in a Change in Control of the Borrower or any wholly-owned subsidiary or any of the Security Parties;

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(c)Environmental Damage

Cause or permit to be caused any environmental damage which would result in a MAE;

(d)Distributions

Declare or pay or make any Distributions, including any payment or repayment of principal, interest, fees or costs with respect to any subordinated debt if there exists any Default or Event of Default or the declaration or payment would cause there to exist a Default or an Event of Default;

(e)Material Change

Make any material change in the nature of its business taken as a whole;

(f)Fiscal Year End

Change its Financial Year end;

(g)Limitation on Liens

Permit the creation, assumption or existence of any Lien upon any assets of a Security Party or any Subsidiary of a Security Party now owned or hereafter acquired except for Permitted Liens and the Operating Lender Security Interest;

(h)Limitation on Investments

Make, directly or indirectly, any investment except an investment made by the Security Party or any Wholly-owned Subsidiary of such Security Party in assets to be used by it or such Wholly-owned Subsidiary to carry on its Core Business;

(i)Limitation on Sale of Assets

Except for the sale of inventory in the ordinary course of its business, permit the sale, assignment, lease or other disposal of all or any part of its business or property, whether now owned or hereafter acquired, provided however, that a Security Party and its Wholly-owned Subsidiaries may do so, so long as no Default or Event of Default then exists or would result therefrom and:

(1)the assets sold, leased or otherwise transferred are done so in the ordinary course of business or consist of surplus or obsolete buildings, machinery, equipment and inventory; or

(2)the assets are sold, leased or otherwise transferred by a Security Party to another Security Party; and

the assets sold, leased or otherwise transferred are done so for a consideration equal to at least the fair market value thereof and if such proceeds and are not utilized, within six (6) months, to acquire other assets for the Core Business operated by the Borrower, then such proceeds shall be applied as a reduction in the current amount owing under the Loan; provided that notwithstanding the foregoing, the sale proceeds of all or any part of the Real Property that is sold shall be applied as a prepayment of indebtedness owing under the Loan.

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(j)Creation of Subsidiaries

Not to create any subsidiary unless such subsidiary agrees to become a Security Party at FCC’s request;

(k)Acquisitions

Acquire or enter into any agreement to acquire any shares or other securities or any other interest in any Person or any assets of any Person unless:

(1)In the case of the acquisition of any shares, securities or other interest in any Person, the business of such Person is the same as the Core Business and in the case of acquisition of any assets of any Person, such assets are used and will continue to be used in the Core Business;

Before making any such acquisitions or entering into any such agreement, the Borrower shall have provided to FCC such pro forma financial information as FCC may require that shows that after such acquisition the Borrower and the Security Parties shall be in compliance with their respective covenants under the Documents for the four (4) fiscal quarters following the completion of such acquisition.

(l)Limitation on Financial Assistance

Make loans to or investments in, or provide guarantees or indemnities or otherwise give financial assistance to any Person, other than in the ordinary course of business or among any Security Party where the aggregate value of the loans, investments, guarantees or indemnities exceed CAD1,000,000;

(m)Alterations of Constating Documents

Alter (or allow the alteration of) its constating instruments (including in the case of the Borrower, the limited partnership agreement forming the Borrower and in the case of Village Farms L.P., the limited partnership agreement forming the Village Farms, L.P.) or its corporate organization;

(n)Share or Unit Changes

Change or allow any change to the beneficial ownership of a majority of its share or units as set forth in Schedule “G”;

(o)Funded Debt

Issue, grant, permit or incur any Funded Debt except for the Loan and an operating loan with the Operating Lender;

(p)Real Property Sales

Sell, transfer, assign, convey, lease or otherwise dispose of all or any part of either its legal or beneficial interest in any real property owned by it including the Real Property;

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(q)Nature of Business

Change the nature of its business (i.e. greenhouse operation and sale of assets arising therefrom) or expand the jurisdictions outside Canada, the United States or the Dominican Republic;

(r)Name Change

Change its name or the name of any Security Party without providing FCC with at least 30 days prior written notice along with such additional security or assumption agreements as FCC may reasonably require;

(s)Amending Existing Agreements

Amend, terminate or replace any agreement relating to the business carried on by it or the property, assets or undertaking used therein if to do so would have a MAE;

(t)Existing Leases

Amend in any material respect, terminate or surrender the existing leases of the Presidio Leasehold Lands or Ward County Lands; or

(u)Operating/Management Agreements

Enter into any operating or management agreement with respect to the operation and management of the business of any Security Party in whole or in part with a Person who is not an officer or holder of equity in a Security Party.

7Demand and Acceleration

7.1 Events of Default

All Obligations and Indebtedness hereunder or pursuant to any other Document, whether any such Obligation or Indebtedness is absolute or contingent, matured and/or unmatured, shall, at the option of FCC, become immediately due and payable and the Security shall become immediately enforceable when any of the following events (each such event an “Event of Default”) occurs:

(a)Failure to Pay Principal

If the Borrower fails to make payment, within two (2) Banking Days when due of any principal amount of the Indebtedness of the Borrower to FCC;

(b)Failure to Pay Interest or Fees

If the Borrower fails to make payment, within five (5) days of when due of any interest or fee payable under this Agreement or any other Document;

(c)False Representations

If any representation or warranty made or given by any Security Party herein or in any Document is materially false or incorrect, or lacking in any material facts, at the time that it is made or given, so as to make it materially misleading;

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(d)Default in Covenants

If any Security Party fails in the observance or performance of any of the terms, conditions, provisions or covenants to be performed or observed by it hereunder or contained in any Document, and such Default shall have continued for a period of thirty (30) days after written notice thereof has been delivered to the Borrower by FCC, or is not capable of being cured within such notice period, in which case an Event of Default shall have occurred upon the breach of such covenant without the requirement of notice or lapse of time;

(e)Cross-Default

If the Borrower, or any Security Party shall default under or any other credit facility, loan or security agreement with FCC or with the Operating Lender or any other lender, under the Borrower’s operating loan with such lender;

(f)Voluntary Proceedings

If:

(1)any Security Party or any Wholly-owned Subsidiary of a Security Party ceases, or threatens to cease, to carry on a material portion of its business;

(2)any proceeding or filing is instituted or made by a Security Party or any Wholly-owned Subsidiary of a Security Party;

(1)seeking liquidation, winding-up, reorganization, arrangement, adjustment, compromise or composition of the Security Party or Wholly-owned Subsidiary’s debt under any law relating to bankruptcy, insolvency or relief of debtors (including without limitation the Bankruptcy and Insolvency Act (Canada) and the Companies’ Creditors Arrangement Act (Canada)) where such liquidation, winding-up, reorganization, arrangement, adjustment, compromise or composition affects any of its properties or assets; or

(2)seeking appointment of a receiver, trustee, liquidator, custodian or other similar official for the Security Party or any Wholly-owned Subsidiary where such appointment would affect any of the Security Party’s properties or assets; or

(3)If a Security Party or a Wholly-owned Subsidiary of a Security Party shall take any corporate action to authorize any of the actions set forth in this paragraph.

(g)Involuntary Proceedings

If any proceeding or filing is instituted or made against any Security Party or any Wholly- owned Subsidiary of a Security Party:

(1)seeking liquidation, winding-up, reorganization, arrangement, adjustment, compromise or composition under any law relating to bankruptcy, insolvency, reorganization or relief of debtors (including without limitation, the Bankruptcy and Insolvency Act (Canada) and the Companies’ Creditors Arrangement Act (Canada)) where such relief, liquidation, winding- up, reorganization, arrangement, adjustment, compromise or composition affects any of the Borrower’s or any other Security Party’s or a Wholly Owned Subsidiary of a Security Party properties or assets; or

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(2)seeking appointment of a Receiver, trustee, liquidator, custodian or other similar official where such where such appointment would affect a material portion of the property or assets of a Security Party or a Wholly-owned Subsidiary of a Security Party;

unless the same is being contested actively and diligently in good faith by appropriate and timely proceedings, in a manner satisfactory to FCC in its discretion;

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(h)Appointment of Receiver

If a Receiver, liquidator, trustee, or other person or officer with like powers shall be appointed with respect to, or an encumbrancer shall take possession of, any material part of the properties or assets of a Security Party;

(i)Material Adverse Change In Risk

If in FCC’s opinion acting in good faith, there exists a MAE;

(j)Security

If any material provision of this Credit Agreement or any other Document is terminated or becomes illegal, invalid, prohibited or unenforceable in any relevant jurisdiction or any charge created by the Security Documents shall not rank in priority to all other Liens on the undertaking, property and assets of the Security Parties with the exception of Permitted Liens and any other security interests which, according to the terms of this Credit Agreement are allowed to rank pari passu with the charges created by Security Documents;

(k)Judgments

If any final judgement of any court of competent jurisdiction or any final decision of any Governmental Authority is made or entered against any Security Party or any Wholly-owned Subsidiary of a Security Party which, in the reasonable opinion of FCC, will have a material adverse affect on:

(i)a Security Party; or

(ii)the security created by the Security Documents.

(l)Execution, Distress

If any execution, sequestration, distress, or other similar process of any court shall become enforceable against a Security Party or any Wholly-owned Subsidiary of a Security Party having a value in any case of in excess of $100,000 USD;

(m)Change of Control

If there is a Change in Control of any Security Party without the prior written consent of FCC.

7.2 Rights Upon Event of Default

Upon the occurrence of an Event of Default, FCC and a Receiver, as applicable, will to the extent permitted by law have the following rights:

(a)Appointment of Receiver

FCC may by instrument in writing appoint any Person as a Receiver of all or any part of the Collateral. FCC may from time to time remove or replace a Receiver, or make application to any court of competent jurisdiction for the appointment of a Receiver. Any Receiver appointed by FCC will (for purposes relating to responsibility for the Receiver’s acts or omissions) be considered to be the Borrower’s or any other Security Party’s agent as the case may be. FCC may from time to time fix the Receiver’s remuneration and the Borrower will pay FCC the amount of such remuneration. FCC will not be liable to the Borrower or any Security Parties or any other Person in connection with appointing or not appointing a Receiver or in connection with the Receiver’s actions or omissions.

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(b)Dealings with the Collateral

FCC or a Receiver may take possession of all or any part of the Collateral and retain it for as long as FCC or the Receiver considers appropriate, receive any rents and profits from the Collateral, carry on (or concur in carrying on) all or any part of the Borrower’s or the Security Parties’ business or refrain from doing so, borrow on the security of the Collateral, repair the Collateral, process the Collateral, prepare the Collateral for sale, lease or other disposition, and sell or lease (or concur in selling or leasing) or otherwise dispose of the Collateral on such terms and conditions (including among other things by arrangement providing for deferred payment) as FCC or the Receiver considers appropriate. FCC or the Receiver may (without charge and to the exclusion of all other Persons including the Borrower and any Security Parties) enter upon any place of business of the Borrower or any Security Parties. Without limitation, FCC or Receiver may enter upon any such place of business for the purpose of exercising remedies in relation to the Collateral that is personal/movable property without taking control or possession of such place of business or being deemed to have done so.

(c)Realization

FCC or a Receiver may use, collect, sell, lease or otherwise dispose of, realize upon, release to any Security Party or other Persons and otherwise deal with, the Collateral in such manner, upon such terms (including among other things by arrangement providing for deferred payment) and at such times as FCC or the Receiver considers appropriate. FCC or the Receiver may make any sale, lease or other disposition of the Collateral in the name of and on behalf of any Security Party. In addition to the foregoing, the Receiver shall have all rights, powers and authorities granted to FCC or FCC under any Security as if all such rights, powers and authorities were set out and repeated herein, together with such additional rights, powers and authorities as may be necessary or desirable to enable FCC and the Receiver to effectively realize upon any Collateral. No such right, power or authority will be exclusive of or dependent upon or merge in any other right, power or authority and one or more of such rights, powers and authorities may be exercised independently or in combination from time to time.

(d)Application of Proceeds After Default

All Proceeds of Collateral received by FCC or a Receiver may be applied to discharge or satisfy any expenses (including among other things the Receiver’s remuneration and other expenses of enforcing FCC’s or any Lender’s rights under this Credit Agreement), Liens, borrowings, taxes and other outgoings affecting the Collateral or which are considered advisable by FCC or the Receiver to preserve, repair, process, maintain or enhance the Collateral or prepare it for sale, lease or other disposition, or to keep in good standing any Liens on the Collateral ranking in priority to any Lien created by the Security or to sell, lease or otherwise dispose of the Collateral. The balance of such Proceeds will be applied to the Obligations in such manner and at such times as FCC consider appropriate and thereafter will be accounted for as required by law.

7.3 Rights Under PPSA

Before and after an Event of Default, FCC or a Receiver will have, in addition to the rights specifically provided in this Credit Agreement, the rights of a secured party under the PPSA (and under the equivalent legislation of any other applicable jurisdiction) as well as the rights recognized at law and in equity.

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7.4Deficiency

The Borrower and the other Security Parties will remain liable to FCC for payment of any Indebtedness that remains outstanding following realization of all or any parts of the Collateral.

7.5 FCC not Liable

Neither FCC nor any Receiver will be liable to any Security Party or any other Person for any failure or delay in exercising any of its rights under this Agreement or under any Security Document (including among other things any failure to take possession of, collect, or sell, lease or otherwise dispose of, any Collateral). Neither FCC, any Receiver or any agent of FCC (including, in Alberta, any sheriff) is required to take, or will have any liability for any failure to take or delay in taking, any steps necessary or advisable to preserve rights against other Persons under any Chattel Paper, Securities or Instrument (as those terms are respectively defined in the PPSA) in possession of FCC, a Receiver or their respective agents.

7.6 Remedies Cumulative

It is expressly understood and agreed that the rights and remedies of FCC under this Credit Agreement and the Security Documents are cumulative and are in addition to and not in substitution of any rights or remedies provided by law and any single or partial exercise by FCC of any right or remedy for a default or breach of any term, covenant, condition or agreement herein contained shall not be deemed to be a waiver of or to alter, affect, or prejudice any other right or remedy or other rights or remedies to which FCC may be lawfully entitled for the same default or breach, and any waiver by FCC of the strict observance, performance or compliance with any term, covenant, condition or agreement which contained and any indulgence granted by FCC shall be deemed not to be a waiver of any subsequent default. In the event that FCC shall have proceeded to enforce any such right, remedy or power contained therein or in the Security Documents and such proceedings shall have been discontinued or abandoned for any reason by written agreement between FCC and any Security Party, then in each such event such Security Party and FCC shall be restored to their former positions and the rights, remedies and powers of FCC shall continue as if no such proceedings have been taken.

8Representations and Warranties

8.1 Representations and Warranties

The Borrower makes and gives the following representations and warranties to FCC, upon each of which FCC has relied in entering into this Credit Agreement, and each of which will be deemed to be repeated on each Advance:

(a)Incorporation and Corporate Power

Each of the Security Parties is duly incorporated, organized or formed pursuant to the laws of its organization or formation, is properly registered in every jurisdiction it does business and is current in all of its corporate filings, and has all necessary power and authority to own or lease its properties and assets and to carry on its business as now being conducted by it, and to authorize, create, execute, deliver and perform all of its respective obligations under the Documents to which it is party in accordance with their respective terms.

(b)Licences

Each Security Party has obtained all material licences, permits, registrations, and approvals necessary to own its properties and assets and to carry on its business in each jurisdiction in which it does so, except where the failure to do so would not have a MAE.

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(c)Due Authorization and No Conflict

Each Security Party has taken or has caused to be taken all necessary action to authorize the creation, execution, delivery and performance of this Credit Agreement, the other Documents and all other instruments contemplated hereunder and the borrowing of money hereunder, and no such action requires the consent or approval of any Governmental Authority or any other Person, nor is any such action in contravention of or in conflict with any applicable law, rule or regulation, or the articles, by-laws, partnership agreement or resolutions of directors, shareholders or partners or shareholders agreement of any Security Parties, or the provisions of any judgment, order, indenture, instrument, agreement or undertaking to which any Security Parties is a party, or by which its assets or properties are bound, except where the failure to do so would not have a MAE.

(d)Compliance with Law

None of the Security Parties is in violation of any terms of its articles of incorporation, amalgamation or formation, partnership agreement, by-laws, resolutions of directors, shareholders or partners, shareholders agreement, or any law, regulation, rule, order, judgment, writ, injunction, decree, determination or award, currently in effect and applicable to it, the violation of which would have a MAE in respect of such Security Party.

(e)Enforceability

Each of the Documents will, when executed and delivered, constitute legal, valid and binding obligations of each party thereto (other than FCC) enforceable against each such party in accordance with the terms thereof.

(f)Taxes

Each Security Party has filed all tax returns required to be filed by it with any Governmental Authority and has paid all Taxes which were due and payable and all assessments and reassessments, and all other Taxes, governmental charges, penalties, interest and fines due and payable by it on or before the date of this Credit Agreement, and there are no agreements, waivers, or other arrangements providing for an extension of time with respect to the filing of any tax return by it or the payment of any tax, governmental charges, penalties, interest or fines against it other than waivers of the normal reassessment period; there are no material actions, suits, proceedings, investigations or claims now threatened or pending against any of the Security Parties which, not resolved in favour of such Security Party, would result in a material liability of such Security Party, in respect of taxes, governmental charges, penalties, interest, fines, assessments and reassessments or any matters under discussion with any Governmental Authority relating to Taxes, governmental charges, penalties, interest, fines, or assessments and reassessments asserted by any such authority which, if not resolved in favour of such Security Party, would result in a material liability of such Security Party, and each Security Party has withheld from each payment to each of its present and former officers, directors, and employees the amount of all Taxes and other amounts, including, but not limited to, income tax and other deductions, required to be withheld therefrom, and has paid the same or will pay the same when due to the proper tax or other receiving officers within the time required under the applicable tax legislation.

(g)No Litigation

There are no actions, suits, proceedings, inquiries or investigations existing, pending or, to the knowledge of the Borrower, threatened against or adversely affecting any of the Security Parties in any court or before any federal, provincial, municipal or governmental department, commission, board, tribunal, bureau or agency, whether Canadian or foreign, or before any arbitrator, which might, if not resolved in favour of such Security Party, cause a MAE.

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(h)No Defaults or Events of Defaults

No Default or Event of Default has occurred and is continuing.

(i)Financial Statements

The Financial Statements of the Borrower which have been furnished to FCC have been duly prepared in accordance with the Accounting Standard and fairly present the financial condition and the results of the operations of the Borrower and its Subsidiaries as applicable, and disclose all liabilities, contingent, absolute or otherwise, required to be disclosed therein.

(j)Title

Each of the Security Parties has good and marketable title to all of its property and assets including, without limitation, the lands owned by it (including the Lands), other than property leased or licensed to it, free and clear of any Lien, subject only to Permitted Liens and no person has any agreement or right to acquire its interest in any of such properties, including leased or licensed properties, out of the ordinary course of business.

(k)Priority of Security

The Security Documents create assignments, fixed and specific mortgages and charges, floating charges, pledges, security interests or hypothecs, as applicable, on the undertaking, property and assets of each Security Parties purported to be mortgaged, hypothecated and charged thereby, and rank in priority, save and except as specifically agreed to by FCC, to all other registered Liens with the exceptions of Permitted Liens and any other Liens which, according to the terms of this Credit Agreement and the Priority Agreement, are allowed to rank pari passu with the security created pursuant to the Security Documents.

(l)Environmental Compliance

(1)All facilities and property owned or leased by the Security Parties including, without limitation, the lands pledged as security under the Documents have been maintained in material compliance with all environmental laws;

(2)there have been no past, and there are no pending and, to the best of the knowledge of the Borrower, there are no:

(1)written claims, complaints, notices of violation or requests for information received by any of the Security Parties or any of their Wholly-owned Subsidiaries from any Governmental Authority with respect to any alleged violation of any Environmental Law; or

(2)written complaints, notices or inquiries to any Security Parties regarding potential liability of any Security Party under any Environmental Law;

that, in any case, could reasonably be expected to have a MAE;

(3)to the knowledge of the Borrower, there have been no releases of contaminants at, on or under any property owned or leased by any of the Security Parties at any time while owned or leased by the Security Party that, singly or in the aggregate, have, or may reasonably be expected to have, a MAE;

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(4)each Security Party has been issued and is in material compliance with all permits, certificates, approvals, licences and other authorizations relating to environmental matters and required under any applicable Environmental Laws in connection with the operation of its business;

(5)no property now or previously owned or leased by any Security Party including, without limitation, the lands, is listed or, to the knowledge of any Security Party, proposed for listing on any publicly published and promulgated federal or provincial governmental list of sites requiring investigation or clean-up;

(6)to the knowledge of the Borrower, there are no underground storage tanks, active or abandoned, including petroleum storage tanks, on or under any property now or previously owned or leased by any Security Party including, without limitation, the lands, that, singly or in the aggregate, have, or may reasonably be expected to have, a MAE;

(7)no Security Party has directly transported or directly arranged for the transportation of any Contaminant to any location, except in compliance with environmental laws;

(8)no property of any Security Party is the subject of federal, provincial or local enforcement actions or other investigations which may lead to claims against a Security Party or any Wholly-owned Subsidiary of a Security Party for any remedial work, damage to natural resources or personal injury; and

(9)to the knowledge of the Borrower, there are no polychlorinated biphenyls or friable asbestos present at any property now or previously owned or leased by any Security Party including, without limitation, the Real Property, that, singly or in the aggregate, have or may reasonably be expected to have, a MAE.

(m)Location of Chief Place of Business /Chief Executive Office/ Head / Registered Office

The chief place of business / chief executive office of each Security Party within the meaning of the PPSA and the head / registered office are the location indicated on the first page of this Credit Agreement.

(n)Wholly-owned Subsidiaries

As of the Closing Date, none of the Security Parties has any active Wholly-owned Subsidiaries other than the Security Parties and none has entered into any agreements for the acquisition or creation of any Wholly-owned Subsidiaries, (with the exception of Village Farms DR, S.R.L.).

(o)Employee Claims

There are no claims against any Security Party, brought by such Security Party’s employees, arising from salary or benefits, which would rank pari passu with, or prior to, the charges created pursuant to the Security Documents.

(p)Pension Plans

All pension and benefit plans maintained by the Security Parties, if any, are in good standing and no steps have been taken to terminate any such plan. All premiums, contributions and other amounts required to be paid or accrued under applicable law or any agreement have been paid or accrued as required.

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(q)Full Disclosure

None of the information and material delivered to FCC by or on behalf of any of the Security Parties contains any untrue statement of a material fact or has omitted a material fact necessary to make the statements contained therein not materially misleading, and all such statements, taken as a whole, together with this Credit Agreement, do not contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained herein or therein not materially misleading. There is no fact which the Borrower has not disclosed to FCC in writing which causes there to exist a MAE.

(r)Organizational Chart

Schedule G is an accurate and complete organizational chart with respect to the Borrower and the Guarantors, its issued and outstanding shares or units and the beneficial ownership thereof.

8.2 Survival of Representations and Warranties

All representations and warranties of the Security Parties as set forth herein shall survive any advance of funds by FCC and shall continue until this Credit Agreement has been fully performed and all Indebtedness of the Borrower to FCC has been repaid and satisfied in full.

9Change in Circumstances and Indemnities

9.1 Losses

The Borrower shall, from time to time, fully indemnify and hold FCC, and its directors, officers, employees and agents harmless from and against any and all costs, losses, expenses, damages or liabilities which such party may sustain or incur as a direct result of, without duplication:

(a)the failure of the Borrower to utilize the Loan in the manner specified herein (including if such failure was caused by the failure of the Borrower to meet all conditions precedent except those conditions which have been waived by FCC in writing);

(b)the failure of the Borrower to pay any sum on its due date or within any cure period whichever is later; or

(c)any Default or Event of Default.

Without prejudice to the generality of the foregoing, the foregoing indemnity shall extend to any loss, premium, penalty or expense which may be incurred by FCC in liquidating deposits from third parties acquired to make, maintain or fund an Advance or any part thereof or any amount due or to become due under this Credit Agreement.

9.2Environmental Indemnity

(a)The Borrower shall at all times indemnify and hold FCC and its directors, officers, employees and agents harmless against and from any and all claims, liabilities, suits, actions, debts, damages, costs, losses, obligations, judgments, charges, and expenses, of any nature whatsoever suffered or incurred by any such party (including any reasonable costs and expenses of defending or denying same) whether upon realization of any security for the Loan, or as lender to the Borrower, or as successor to or assignee of any right or interest of the Borrower or any Security Party, or as a result of any order, investigation or action by any Governmental Authority relating to the Borrower or any Security Party or its business or assets, or as mortgagee in possession, or as successor-in-interest to the Borrower or any Security Party by foreclosure deed or deed in lieu of foreclosure, under or on account of any Environmental Law including, without limitation, the assertion of any lien thereunder, with respect to:

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(1)the release, discharge or emission of a Contaminant, the threat of the release, discharge or emission of any Contaminant, or the presence of any Contaminant;

(2)any costs of removal or remedial action incurred by any Governmental Authority or any costs incurred by any other Person or damages from injury to, destruction of, or loss of natural resources, including reasonable costs of assessing such injury, destruction or loss incurred pursuant to any Environmental Law;

(3)liability for personal injury or property damage arising under any statutory or common law tort theory, including, without limitation, damages assessed for the maintenance of a public or private nuisance or for the carrying on of a dangerous activity; or

(4)any other environmental matter within the jurisdiction of any Governmental Authority.

(b)The Borrower acknowledges that FCC has agreed to make the Loan available in reliance upon the Borrower’s indemnity in this paragraph. For this reason, it is the intention of the Borrower, and FCC that the provisions of this paragraph shall supersede any other provisions of this Credit Agreement or any other Document which might in any way limit the liability of the Borrower and that the Borrower shall be liable for any obligations arising under this paragraph even if the amount of liability incurred exceeds the amount of the Loan outstanding at any time, provided that the Borrower and FCC may enter into a mutually accepted agreement to limit such liability.

(c)This indemnity shall constitute an obligation separate and independent from the other obligations contained in this Credit Agreement, shall give rise to a separate and independent cause of action, and shall apply irrespective of any indulgence granted by FCC from time to time. A separate action or actions may be brought and prosecuted against the Borrower in respect of this indemnity, whether or not any action is brought against any other person or whether or not any other person is joined in such action or actions.

9.3Survival

The obligations of the Borrower under this paragraph shall survive the payment of all Advances and the cancellation or termination of the Loan.

10Assignment and Participation

10.1Benefit of Agreement

This Credit Agreement shall enure to the benefit of and be binding on the parties hereto, their respective successors and any permitted assignee or transferee of the parties’ rights or obligations hereunder.

10.2Assignment by Borrower

This Credit Agreement shall be binding upon and enure to the benefit of the Borrower and its successors and permitted assigns, provided that neither the rights nor obligations of the Borrower hereunder may be assigned by it without the prior written consent of FCC which may be refused in the absolute discretion of FCC.

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10.3Assignment by FCC

From time to time FCC may sell or assign all or any part of its rights under this Credit Agreement to a financial institution resident in Canada and FCC shall be released and discharged from its obligations hereunder to the extent it assigns all or any part of such rights. For the purposes of any such assignment FCC may disclose on a confidential basis to a potential assignee such information about any Security Parties as FCC may see fit. The Borrower agrees to execute and deliver, and to cause the other Security Parties to execute and deliver, at the request and expense of FCC, such deeds, documents, instruments, and assurances as FCC may reasonably request in connection with any such assignment.

11Miscellaneous

11.1Performance by FCC

If any Security Party fails to perform any of its obligations under any Document, FCC may, but shall not be obligated to, perform any or all such obligations, and all costs, charges, expenses, fees, outlays and premiums incurred by FCC in connection with such performance shall be payable by the Borrower forthwith upon demand by FCC and shall bear interest from the date incurred by FCC at the highest rate provided for herein, calculated and compounded monthly and payable on demand, with interest on overdue interest at the same rate. Any such performance by FCC shall not constitute a waiver by FCC of any right, power, or privilege under this Credit Agreement or any Document.

11.2Non-Merger

The taking of a judgment or judgments (other than a final order of foreclosure) or any other action or dealing whatsoever by FCC in respect of any security created by the Security Documents shall not operate as a merger of any Indebtedness or liability of any Security Party or in any way suspend payment or affect or prejudice the rights, remedies and powers, legal or equitable, which FCC may have in connection with such liabilities, and the surrender, cancellation or any other dealings with any security for such liabilities shall not release or affect the liability of any Security Party hereunder or under any Security Document held by FCC.

11.3Appropriation of Funds

The Borrower agrees that FCC may from time to time appropriate all monies realized by FCC from the enforcement of any Security Document on or towards the payment of the Indebtedness of the Borrower to FCC hereunder or such part thereof as FCC in their sole discretion may determine, and the Borrower shall have no right to require or enforce any appropriation inconsistent therewith, and FCC shall have the right to change the application of any such proceeds and re-apply the same to any part or parts of the Indebtedness as FCC may see fit notwithstanding any previous application.

11.4Notice

(a)Any notice or other communication which may be or is required to be given or made pursuant to this Credit Agreement shall, unless otherwise expressly provided herein, be in writing and shall be deemed to have been sufficiently and effectively given if signed by or on behalf of the party giving notice and delivered or transmitted by telecopier to the party for which it is intended:

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(1)Communications sent to the Borrower shall be addressed to it at the address indicated on the first page of this Credit Agreement.

(2)Communications sent to FCC shall be addressed to it at:

Farm Credit Canada

Loan Administration Center

12040 149^th Street NW, 2^nd Floor

Edmonton, AB T5V 1P2

Fax No. (780) 495-5665

Any notice or communication which may or is required to be given or made shall be made or given as herein provided or to such other address or to such other officer as a party may from time to time advise the other parties hereto by notice in writing as aforesaid and shall not be deemed received until actual receipt thereof by the party to whom such notice is given except if sent by telecopier, in which case it shall be deemed received on the Banking Day next following the date of transmission.

11.5Statements and Reports

Except as otherwise provided herein, all statements, reports, certificates, opinions, appraisals and other documents or information required to be furnished to FCC by the Borrower under this Credit Agreement shall be supplied by the Borrower without cost to FCC.

11.6Approvals

Where in this Credit Agreement any matter is subject to the consent or approval of FCC, FCC will make a determination or assessment of the materiality of any event or circumstance, such consent, approval, determination or assessment shall be made in the sole and unfettered discretion of FCC, as the case may be, acting in good faith, unless otherwise expressly provided herein.

11.7Invalidity of Provisions

Any provision of this Credit Agreement which is prohibited by the laws of jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition without invalidating the remaining terms and provisions hereof and no such invalidity shall affect the obligation of the Borrower to repay the Loan.

11.8Governing Law

This Credit Agreement shall be construed, interpreted and performed in accordance with the laws of the Province of British Columbia and the applicable laws of Canada.

11.9Time of Essence

Time is of the essence of this Credit Agreement, and any forbearance by FCC of the strict application of this provision shall not operate as a continuing or subsequent forbearance.

11.10Further Assurances

The Borrower shall from time to time and at all times hereafter, upon every reasonable request of FCC, make, do, execute, and deliver or cause to be made, done, executed and delivered all such further acts, deeds, assurances and things as may be necessary in the opinion of FCC, acting reasonably, for implementing and carrying out the true intent and meaning of this Credit Agreement.

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11.11Entire Agreement

This Credit Agreement contains the entire understanding of the parties with respect to the subject matter hereof. There are no restrictions, agreements, promises, warranties, covenants or undertakings made by FCC other than those set forth in the Documents. No amendment, modification, or termination of the Documents shall be effective unless made in writing and signed by the party intended to be bound thereby.

11.12Conflict

In the event that there is any conflict or inconsistency between the provisions contained in this Credit Agreement and the provisions contained in any other Document, such that the conflicting or inconsistent provisions cannot reasonably co-exist, then the provisions of this Credit Agreement shall govern and shall override the provisions contained in such other Document.

11.13No Third Party Beneficiaries

Subject to Article 11 hereof, this Credit Agreement shall be for the sole benefit of FCC and the Borrower, and is not for the benefit of any other person.

11.14Counterparts

This Credit Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original and all of which when taken together constitute but one and the same agreement; any party may execute this Credit Agreement by signing any counterpart of it.

11.15Relationship to Parties

The provisions contained in this Credit Agreement shall not create or be deemed to create any relationship as between the Borrower and FCC other than that of borrower and lender.

11.16Amendments

This Credit Agreement may not be amended or modified in any respect except in accordance with the provisions hereof, however, the Borrower hereby agrees to make such amendments to this Credit Agreement as may be reasonably requested by FCC to facilitate the granting by FCC of participations or assignments, provided that no such amendment shall have the effect of increasing any costs payable by the Borrower hereunder or increasing the obligations of the Borrower hereunder.

11.17Review

FCC shall conduct an annual review prior to June 30 of each year with respect to the Borrower, and any other matters related to this Credit Agreement as reasonably determined by FCC. The Borrower agrees to accept changes to the Credit Agreement including the terms of the Loan, the Security for the Loan and the Covenants of the Borrower requested by FCC and agrees to make, do, execute and deliver or cause to be made, done, executed and delivered, upon reasonable request of FCC, all such information, assurances and things as may be necessary in the opinion of each of FCC, acting reasonably, to satisfactorily complete the above referenced annual review.

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11.18Confidentiality

FCC agrees to use reasonable efforts to ensure that any financial statement or other information relating to the business, assets or condition, financial or otherwise, of the Security Parties which may be delivered to FCC pursuant to this Credit Agreement which is not publicly filed or otherwise made available to the public generally (and which is not independently known to FCC) will, to the extent permitted by law, be treated confidentially by FCC and will not, except with the consent of the Borrower, be distributed or otherwise made available by FCC to any Person other than FCC’s employees, authorized agents, counsel or other representatives (provided such other representatives have agreed to keep all information confidential) required, in the reasonable opinion of FCC, to have such information. FCC is hereby authorized to deliver a copy of any financial statement or other information relating to the business, assets or financial condition of the Security Parties which may be furnished to it under this Credit Agreement or otherwise, to (i) any actual or potential participant or assignee provided notice thereof is given to the Borrower and the participant or assignee agrees to keep all such information confidential in accordance with the provisions hereof; (ii) any court, regulatory body or agency having jurisdiction over FCC pursuant to any court order requiring such information to be given by it, provided that where FCC receives such an order, FCC shall, to the extent it is reasonably able to do so and it is appropriate in the circumstances, advise the Borrower of the order prior to disclosing such information; and

(iii)any Affiliate of FCC required, in the reasonable opinion of FCC, to have such information such Affiliate agrees to keep all such information confidential in accordance with the provisions hereof.

11.19Evidence of Debt

The Indebtedness of the Borrower under this Credit Agreement shall be evidenced by the records of FCC which shall constitute proof of such Indebtedness, absent manifest error.

11.20Joint and Several Liability

In the event there is more than one person constituting the Borrower, all covenants, representations and warranties of the Borrower as contained in this Credit Agreement shall be deemed to be joint and several in favor of FCC.

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Schedule C – Definitions

In this Credit Agreement, unless the context otherwise requires, the following terms shall have the meaning set out below:

(1)“Accounting Standard” means International Financial Reporting Standards;

(2)“Advance” means an advance as permitted under this Credit Agreement, and “Advances” means all such advances as permitted under the Loan.

(3)“Affiliate” means with respect to any person, any person which, directly or indirectly, controls or is controlled by or is under common control with such person and for the purposes of this definition, “control” (including with correlative meanings, the terms “controlled by” and “under common control with”) shall have the meaning set forth in the Canada Business Corporations Act as amended, revised, replaced or re-enacted from time to time;

(4)“Agreement” or “Credit Agreement” means this Credit Agreement and all Schedules hereto and includes all written amendments, modifications, supplements, restatements, renewals and replacements hereto from time to time;

(5)“Banking Day” means a day other than Saturday or Sunday, on which FCC’s corporate office in Regina, Saskatchewan, is open for normal business;

(6)“Canadian Real Property” means those lands set out in Schedule E;

(7)“Capital Expenditures” means any and all expenditures incurred in connection with the acquisition, whether by way of purchase, lease or otherwise, of capital property;

(8)“Change in Control” means:

(1)with respect to the Borrower, any change, direct or indirect, in the capital stock, units or beneficial interest, as the case may be, of the Borrower,;

(2)with respect to each of the Subsidiaries of the Borrower or any of the Guarantors any change, direct or indirect, which would result in the Borrower no longer controlling a Subsidiary;

(9)“Closing Date” means March 28, 2013;

(10)“Collateral” means any and all real and personal property now owned or hereafter acquired by the Borrower or any Security Party and all Proceeds thereof, including without limitation all real and property upon which FCC has, or is entitled to have, or may hereafter have, any Lien under or pursuant to any of the Security Documents;

(11)“Contaminant” means any pollutants, dangerous substances, liquid waste, industrial waste, hauled liquid waste, toxic substances, hazardous wastes, hazardous materials, hazardous substances or contaminants or other like substances or material regulated by any environmental law;

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(12)"Core Business" means agri-business including without limitation, businesses related to or ancillary to the agricultural and food processing industries and the current operations of the Security Parties and their Wholly-owned Subsidiaries;

(13)“Current Assets” means those assets which are determined to be current assets in accordance with IFRS;

(14)“Current Portion of Long Term Debt” means those debts which are determined to be long term debts in accordance with IFRS;

(15)“Current Liabilities” means those liabilities which are determined to be current liabilities in accordance with IFRS;

(16)“Debt” of any Person means, without duplication:

17.1all debt for borrowed money of such Person, including obligations with respect to bankers’ acceptances, letters of credit and letters of guarantee;

17.2all indebtedness of such Person for the deferred purchase price of property or services represented by a note or other evidence of indebtedness or other securities;

17.3all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of a seller or lender under such agreement in the event of default are limited to repossession or sale of such property);

17.4all obligations under leases which, in accordance with GAAP, are recorded as capital leases, in respect of which such Person is liable as lessee;

17.5the aggregate amount at which capital stock, limited partnership units or other equity interest in such Person which are redeemable or retractable at the option of the holder thereof may be retracted or redeemed; and

17.6all debt for borrowed money or other obligation which could trigger an amount owing guaranteed by such Person,

and all renewals, extensions or refinancing thereof;

(17)“Distributions” means all dividends or other distributions to shareholders, partners or other person (including for greater certainty all management fees), redemptions or repurchases of shares or units or repayment of any shareholders, partners or trustees loans or any other like payment to shareholders, partners or trustees, whether made in cash or by transfer of property;

(18)”Default” means any event or circumstance that with the passage of time or giving of notice to the Security Parties would be an Event of Default;

(19)”Documents” means, collectively, this Agreement and the Security Documents;

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(20)“Environmental Activity” means any past, present or future activity, event or circumstance in respect of a contaminant, including, without limitation, its storage, use, holding, collection, purchase, accumulation, assessment, generation, manufacture, construction, processing, treatment, stabilization, disposition, handling or transportation, or its release, escape, leaching, dispersal or migration into the natural environment, including the movement through or in the air, soil, surface water or groundwater;

(21)“Environmental Law” means any federal, provincial, state, municipal or local law, statute, regulation, treaty, order, judgment, decree, ordinance, official directive or authorization, relating to the environment, occupational health and safety, or any Environmental Activity;

(22)“Financial Year” means, with respect to any Security Party, the 12-month fiscal period on which such Security Party reports it annual financial results in accordance with the Accounting Standards;

(23)”Funded Debt” means the sum of borrowed monies, capital leases, net negative mark to market of hedging contracts and obligations under guarantees;

(24)“Governmental Authority” means any nation, federal government, province, state, municipality or other political subdivision of any of the foregoing, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled (through stock or capital ownership or otherwise) by any of the foregoing;

(25)“IFRS” means the International Financial Reporting Standard as adopted and developed by the International Accounting Standards Board;

(26)“Indebtedness” means all debt and liabilities of the Borrower and the other Security Parties to FCC arising or incurred pursuant to this Credit Agreement or the other Documents whether present or future, direct or indirect, matured or not, absolute or contingent, including, without limitation, all principal, interest, fees, charges and expenses required to be paid by the Borrower and Security Parties hereunder or pursuant to the other Documents;

(27)“Interest Expense” means, with respect to any Person for any period, without duplication, the aggregate amount of interest and other financing charges expensed by such Person on account of such period with respect to its indebtedness, including interest, discount financing fees, commissions, discounts, the interest or time value of money component of costs related to factoring or securitizing receivables or monetizing inventory and other fees and charges payable with respect to letters of credit, letters of guarantee and bankers’ acceptance financing, standby fees, the interest component of capital leases and net payments (if any) pursuant to interest rate hedging arrangements, but excluding any amount, such as amortization of debt discount and expenses, that would qualify as depreciation expense and the amount reflected in net income for such period in respect of gains (or losses) attributable to translation of Financial Indebtedness from one currency to another currency, all as determined on a consolidated basis in accordance with IFRS.

(28)“Interest Rate Spread” means the percentage per annum above Libor applicable to each level in the Grid set out in Section 1.2;

(29)“Jeff Davis Lands” means those lands described as the Jeff Davis Lands set out in Schedule F;

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(30)“Libor” means, on any day, the rate of interest (rounded upwards if necessary to the nearest full multiple of one-sixteenth of one percent) at which FCC, in accordance with its normal practice, would be prepared to offer to leading banks on the London prime inter-bank market for delivery on the first day of a Libor Period, on a deposit of a comparable amount of United States dollars to be outstanding during such Libor Period, at or about 11:00 a.m. London, England local time, two Banking Days prior to the commencement of the Libor Period;

(31)“Libor Period” means, on any day, a period of 3 months;

(32)“Lien” means any mortgage, hypothec, title retention, prior claim, pledge, lien, right of set-off/compensation, charge, security interest or other encumbrance whatsoever, whether fixed or floating and howsoever created or arising;

(33)“MAE” means a material adverse effect on (i) the financial condition, business, property, assets, liabilities or condition of the Borrower or any of the Guarantors; or

(ii)the rights or remedies of FCC or the ability of the Borrower and Guarantors to perform their obligations to FCC under the Loan or to the Operating Lender under the credit agreement and/or facility letters governing the Borrower’s operating loan;

(34)“Materially” and “material” when used to qualify the impact or outcome of an event on the financial condition or business prospects of a Security Party, shall be determined on a consolidated basis and, if applicable, in accordance with the Accounting Standard;

(35)“Obligations” means all covenants, agreements, liabilities and obligations of the Borrower and the other Security Parties to FCC under or in connection with this Credit Agreement and the other Documents, including but not limited to all Indebtedness, whether arising from dealings between FCC and any Security Parties or from any other dealings or proceedings by which FCC may be or become in any manner whatever creditors of any Security Parties or any Subsidiaries under or in connection with this Credit Agreement and the other Documents and wherever incurred, and whether incurred by any Security Parties alone or with another or others and whether as principal or surety, and all interest, fees, legal and other costs, charges and expenses;

(36)“Operating Lender” means the lender that extends an operating loan or loans to the Borrower against the security of the Borrower’s inventory and accounts receivable which as at the date of this Agreement will be HSBC Bank Canada;

(37)“Operating Lender Security Interest” means the first priority Lien over the accounts receivable and inventory of any of the Borrower and Guarantors and the second priority Lien over all other personal property of the Borrower and the Guarantors, in favour of the Operating Lender (and for greater certainty, not any Liens over any of the Borrower and Guarantors’ real property, including the Real Property);

(38)“Permitted Liens” means, with respect to any property or asset of any Person, the following Liens:

(1)encumbrances, including, without limitation, easements, rights of way, encroachments, restrictive covenants, servitudes or other similar rights in land granted to or reserved by other Persons, rights of way for sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real / immovable properties which encumbrances, easements, servitudes, rights of way, other similar rights and restrictions do not in the aggregate materially detract from the value of the said properties or materially impair their use in the operation of the business of such Persons;

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(2)any right reserved to or vested in any Governmental Authority by the terms of any lease, licence, franchise, grant or permit acquired by such Person, or by any statutory provision to terminate any such lease, licence, franchise, grant or permit, or to require annual or other periodic payments as a condition of the continuance thereof;

(3)security or deposits given by such Person to a public utility or any Governmental Authority when required by such utility or Governmental Authority in connection with the operations of such Person and in the ordinary course of its business;

(4)reservations, limitations, provisos and conditions, if any, expressed in any original grants from the Crown;

(5)any lien for taxes or assessments not yet due or being contested in good faith by appropriate proceedings and for which a reasonable reserve satisfactory to FCC has been provided;

(6)any carriers, warehousemen, contractors, subcontractors, suppliers, mechanics or material liens in respect of charges accruing in favour of any Person, so long as such charges are not yet due or are being contested in good faith by appropriate proceedings and for which a reasonable reserve satisfactory to FCC has been provided;

(7)undetermined or inchoate liens, privileges, hypothecs or charges incidental to current operations which have not at such time been filed (or are not required to be filed) pursuant to law against such person’s property or assets or which relate to obligations not due or delinquent;

(8)Purchase Money Liens; and

(9)any Lien created by any security referred to in this Agreement;

(39)“Person” or “person” includes an individual, a partnership, a corporation, a trust, an unincorporated organization, a government or any department or agency thereof or any other entity whatsoever and the heirs, executors, administrators or other legal representatives of an individual;

(40)“PPSA” means the Personal Property Security Act applicable to the Borrower based on the Borrower’s location, as such legislation is amended, revised, replaced or re-enacted from time to time;

(41)“Presidio Leasehold Lands” means those lands described as the Presidio Leasehold Lands set out in Schedule F;

(42)“Presidio Fee Lands” means those lands described as the Presidio Fee Lands set out in Schedule F;

(43)“Proceeds” has the meaning given thereto in the PPSA;

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(44)“Purchase Money Lien” means any Lien on any asset, other than accounts receivable or inventory, of a Person which is assumed, created, guaranteed or reserved to secure the unpaid purchase price of such asset, interest thereon and proceeds in respect thereof, provided that any such Lien is limited to the asset so acquired;

(45)“Qualifying Accounting Firm” means any one of Pricewaterhouse Coopers, Deloitte Touche Tohmatsu Limited, KPMG LLP or Ernst & Young;

(46)“Real Property” means together the Canadian Real Property and the US Real Property;

(47)”Receiver” means a receiver or a receiver and manager and includes, without limitation, an interim receiver under the Bankruptcy and Insolvency Act (Canada);

(48)“Required Notice” means a written notice from the Borrower to FCC pursuant to which the Borrower notifies FCC of the selected interest period for its borrowing under Libor, which Required Notice shall be given at least three Business Days or such shorter period as FCC may in writing agree prior to the date specified in the Required Notice for the designation of the term and which Required Notice shall be in such form and contain such information as FCC may require in accordance with its policies and procedures at the time;

(49)“Security Documents” means all mortgages, hypothecs, security agreements, pledges and charges executed by the Borrower or Security Party at the request of FCC, including any preexisting mortgages, Security Documents, pledges and charges, which are by their terms or the terms of this Credit Agreement intended to secure payment and performance of the Security Parties’ Obligations;

(50)“Security Parties” means, collectively, the Borrower and the other party or parties designated as Security Parties in section 1 of the Credit Agreement;

(51)“Subsidiary” means, with respect to any Person, any corporation controlled by such Person and for the purposes of this definition “control” (including with correlative meaning the term “controlled by”) shall have the same meaning as set forth in the Canada Business Corporations Act as amended, revised, replaced or re-enacted from time to time;

(52)“Tangible Net Worth” means

(i)paid up capital, retained earnings and any indebtedness owed by the Borrower to any of its shareholders or limited partners which has been assigned and postponed to FCC in a manner acceptable to FCC and its solicitors; and

(ii)excludes the value of goodwill and any intangible assets; and

“intangible assets” shall include, without limitation, any prepaid expenses, deferred charges, investments or advances to or other indebtedness owed by:

(i)any Affiliates of the Borrower;

(ii)any shareholders or limited partners of the Borrower; or

(iii)any Affiliates of any shareholders of the Borrower; or

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(53)“Taxes” means, with respect to any Person, for any particular period, all taxes, rates, levies, imposts, assessments, government fees, dues, stamp taxes, duties, ad valorem taxes or levies, charges to tax, fees, deductions, withholdings and similar impositions paid or payable, levied, collected, withheld or assessed by any Governmental Authority;

(54)“US Real Property” means those lands set out in Schedule F;

(55)“US Real Property Deeds of Trust” means the 4 deeds of trust being granted by Village Farms, L.P. to FCC charging the US Real Property, as set out in Section 2.1;

(56)“Ward County Lands” means those lands described as the Ward County Lands set out in Schedule F;

(57)“Wholly-owned Subsidiaries” means, with respect to any Person, Subsidiaries in respect of which such Person, directly or indirectly, owns 100% of all issued and outstanding capital stock in such Subsidiary; and

(58)“Year“ and “Month“ means a calendar year and month as the case may be.

1.1Currency:

Unless otherwise expressly stated, all monetary amounts set out herein refer to the lawful money of Canada.

1.2Words and Phrases

Where the context so requires, words importing the singular include the plural, and vice versa, and words importing gender include the masculine, feminine and neuter genders.

1.3Headings and Table of Contents

The table of contents and the headings of all articles, sections and paragraphs herein are inserted for convenience of reference only and shall not affect the construction or interpretation of this Credit Agreement.

1.4Accounting Practices

In the event of any change in Accounting Standards or practices used by a Security Party, including any change resulting from a change in Accounting Standards made after the Closing Date, or the adoption of International Financial Reporting Standards by such Security Party, which, in any material respect, changes, or results in a change in the method of calculation of, or has an impact on, any financial covenant, financial ratio, term or provision applicable to a Security Party, as determined by FCC acting reasonably, the Borrower and FCC (with the approval of FCC) will negotiate in good faith to revise (if applicable) such financial covenant, financial ratio, term or provision. If the Borrower and FCC are unable to agree upon revisions to such financial covenant, financial ratio, term or provision, the Borrower shall continue to provide Financial Statements, certificates and other information required under this Agreement in accordance with the Accounting Standard as they exist on the Closing Date and all financial covenants, financial ratios, terms and provisions shall be applied, calculated and interpreted in accordance with the Accounting Standard as they exist on the Closing Date.

1.5Computation of Time Periods

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The computation of any time period referred to herein which is not a defined term shall exclude the day of the occurrence of the event to which the period relates and shall include the last day of such period. Unless otherwise specifically provided herein in the event that any time period referred to herein ends on a day which is not a Banking Day, such time period shall be deemed to end on the next following Banking Day.

1.6Extended Meaning

A reference to any one or more of the parties to this Credit Agreement shall be deemed to be a reference to the respective successors and permitted assigns of such party, as the case may be.

1.7Statutory References

References herein to any statute or any provision thereof includes such statute or provision thereof as amended, revised, re-enacted and/or consolidated from time to time and any successor statute thereto or other legislation in pari passu material therewith.

1.8Certificates and Opinions, etc.

Whenever the delivery of a certificate or opinion is a condition precedent to the taking of any action by FCC under any Document, the truth and accuracy of the facts and opinions stated in such certificate or opinion shall in each case be conditions precedent to the right of the Borrower to have such action taken, and each statement of fact contained therein shall be deemed to be a representation and warranty of the Borrower for the purpose of this Credit Agreement. Whenever any certificate is to be delivered by the Borrower, such certificate shall be signed on behalf of the Borrower by a senior officer of the Borrower.

1.9Determinations by Borrower

All provisions contained herein requiring the Borrower to make a determination or assessment of any event or circumstance or other matter to the best of its knowledge shall be deemed to require the Borrower to make all inquiries and investigations as may be necessary or reasonable in the circumstances before making any such determination or assessment.

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Schedule D – Fees

Loan processing Fees

(1)FCC acknowledges receipt of the non-refundable loan processing fee in the amount of $150,000USD.

Annual Review and Non-Compliance Risk Adjustment Fees:

(2)Annual Review and Non-Compliance Risk Adjustment Fees:

Annual review fee of $30,000USD to accompany annual provision of financial statements. Given the application fee of $150,000USD, we will not be collecting the annual review for the 2012 year end review, and deem it received as part of the application fee.

In the event the Borrower is at any time in a fiscal year not in compliance with the FCC Loan covenants, the Borrower will pay a minimum risk adjustment fee equal to up to 50 basis points (.50%) multiplied by the fiscal year end principal loan balance(s) under the FCC Loans to compensate for the higher than forecast risk and for nonperformance for the year just concluded. This payment is due not later than 90 days following the i.e. December 31, fiscal year end and is to accompany the Annual Certificate of Compliance for FCC Loan Covenants and Conditions. Note based on the proposed FCC exposure of $58,000,000USD, this fee would be up to $290,000 USD, such fee to be adjusted by FCC upon prepayment of the FCC Loans for any reason whatsoever.

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Schedule E – CANADIAN REAL PROPERTY

(“Canadian Real Property”)

4526 80th Street, Delta, BC and legally described as Parcel Identifier No. 024-579-254, Parcel 1 Except: Part Road Plan LMP50211; Section 32 Township 3 New Westminster District Plan LMP42884; and

4431 80th Street, Delta, BC legally described as Parcel Identifier No. 001-402-064, The South Half of the North East Quarter of Section 31 Township 3 Except: Firstly: Part included in a 5.16 acre portion shown on Reference Plan 8317, Secondly: Portion included in that part of the North Half of Section 31 shown on Expropriation Plan 7066; and Thirdly: Parcel D Reference Plan 38003 New Westminster District.

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Schedule F – U.S. REAL PROPERTY

(“Ward County Lands”)

SURFACE ESTATE ONLY IN AND TO BLOCK ONE (1}, TRACT (1), OF THE MONAHANS INDUSTRIAL SUBDIVISION NO. 7,to the City of Monahans, Ward County, Texas, according to a map or plat now of record in Volume 6, page 69, Plat Records in the Office of the County Clerk, Ward County, Texas and more particularly described by metes and bounds as follows, to-wit:

DESCRIPTION OF A 328.09 ACRE TRACT OF LAND BEING 286.60 ACRES OUT OF SECTION 80, BLOCK A, G&MMB&A RR CO SURVEY AND 40.49 ACRES OUT OF SECTION 81, BLOCK A,

G&MMB&A CO SURVEY, WARD COUNTY, TEXAS AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT A 1" IRON ROD FOUND IN THE NORTH RIGHT OF WAY OF THE UNION PACIFIC RAILROAD MAIN TRACK MARKING THE SOUTHWEST CORNER OF THE HOGG AND DERRICK SUBD. RECORDED IN VOL. 3, PAGE 2, PLAT RECORDS FOR THE SOUTHEAST CORNER OF THIS TRACT;

THENCE S 73 Deg. 30' W – WITH THE NORTH RIGHT OF WAY LINE OF THE UNION PACIFIC RAIL ROAD PASSING AT 2661.01 FT THE SOUTHWEST CORNER OF SAID SECTION 80 AND SOUTHEAST CORNER OF SECTION 81 AND CONTINUING IN ALL3255.68 FT. TO A 1/2" IRON PIN SET WITH CAP FOR THE SOUTHWEST CORNER OF THIS TACT;

THENCE N 12 Deg. 41' 07" W- 3697.05 FT. TO A 1/2" IRON PIN SET WITH CAP FOR THE NORTH WEST CORNER OF THIS TRACT;

THENCE N 56 Deg.26' 50" E- 3040.0 FT. WITH THE SOUTH LINE OF A CALICHE ROAD TO A 1/2" IRON PIN SET FOR A NORTHEASTERLY ANGLE POINT OF THIS TRACT;

THENCE N 85 Deg. 56' 53" E - 225.6 FT. TO A 1/2" IRON PIN SET IN THE WESTERLY LINE OF A PAVED ROAD TO THE CITY LAND FILL FOR AN ANGLE POINT OF THIS TRACT;

THENCE S 49 Deg. 30' 47" E- 694.34 FT. WITH THE WEST LINE OF SAID PAVED ROAD TO A 4" IRON PIPE FENCE CORNER POST AT THE GATE TO SAID PAVED ROAD FOR AN ANGLE POINT OF THIS TRACT;

THENCE S 49 Deg. 31' 10" E- 720.12 FT. TO A 1/2" IRON PIN SET WITH CAP A POINT IN THE WESTERLY RIGHT OF WAY OF LOOP ROAD 464 FOR AN ANGLE POINT OF THIS TRACT;

THENCE WITH A CURVE TO THE LEFT HAVING A RADIUS OF 1970.21 FT., AN ARC LENGTH OF 469.25 FT. AND CHORD OF S 42 Deg. 58’45” E 468.14 FT.TO A 1/2" IRON PIN SET WITH CAP AT THE END OF CURVE FOR AN ANGLE POINT OF THIS TRACT;

THENCE S 49 Deg. 39' 18" E- 341.46 FT. WITH THE WEST LINE OF LOOP ROAD 464 TO A 1/2" IRON PIN FOUND WITH CAP "HOWELL" IN THE NORTH LINE OF SAID HOGG AND DERRICK SUBDIVISION FOR A NORTHERLY NORTHEAST CORNER OF THIS TRACT;

THENCE S 73 Deg. 27' 58" W- 1283.12 FT. WITH THE NORTH LINE OF THE HOGG AND DERRICK SUBD.TO A 1/2" IRON PIN SET WITH CAP FOR AN INTERIOR CORNER OF THIS TRACT AND THE NORTHWEST CORNER OF THE SUBDIVISION;

THENCE S 16 Deg. 30' E 2640.0 FT. WITH THE WEST LINE OF HOGG AND DERRICK SUBDIVISION TO THE POINT OF BEGINNING AND CONTAINING 328.09 ACRES OF LAND MORE OR LESS.

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(“Presidio Leasehold Lands”)

A 155.72 acre tract of land out of Sections 249, 250, 251 and 252, Block Eight (8), G. H. & S. A. Ry. Co. Survey, located in Presidio County, Texas, as the same appears in the Metes and Bounds Description as follows:

FIELD NOTES DESCRIBING A 155.72 ACRE TRACT OF LAND, IN SECTIONS 249, 250, 251, AND 252, BLOCK 8, GH&SA RR COMPANY SURVEY, PRESIDIO COUNTY, TEXAS. THE 155.72 ACRE TRACT IS PART OF THE PROPERTY CONVEYED FROM DOROTHY GAGE FORKER, ET AL TO PRESIDIO COUNTY BY WARRANTY DEED RECORDED IN VOLUME 113, PAGE 223 AND FROM MRS. W.A. MIMMS, ET AL BY WARRANTY DEED RECORDED IN VOLUME 113, PAGE 221, DEED RECORDS. SAID 155.72 ACRE TRACT OF LAND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING at a 5/8 inch rebar set at the intersection of the West right-of-way line of State Highway 17, as marked on the ground, and the Southwest BRL of runway 12-30 of Marfa Municipal Airport, for the Northeast corner of this tract said BRL is parallel to and 390 feet Southwest of the centerline of said runway 12-30, whence a concrete highway right-of-way marker found in said right-of-way line bears North 17°15’36” East 1403.75 feet and a ½ inch iron pipe with an aluminum cap marked “Piper Surveying Company, 249, 250, 251 and 252, BLK 8, PLS 1974”, found at the common corner of Sections 249, 250, 251, and 252, Block 8, GH&SA RR Company Survey, Presidio County, Texas, bears South 70°45’24” West 1341.99 feet and from said found, ½ inch iron pipe a one inch iron pipe marked “SE150, NE153, NW249, SW252”, found in center of a rock mound, at the common corner of Sections 150, 153, 249, and 252, of Sections 150, 153, 249, and 252, said Block 8, bears South 89°58’53” West 5303.86 feet property for State Highway 17 conveyed from A.S. Gage Estate to State of Texas right-of-way recorded in Volume 113 Page 180 deed records, property in Section 250 and Section 251 said Block 8 conveyed from Dorothy Gage Forker, et al, to Presidio County by warranty deed recorded in Volume 113, Page 223 deed records, and property in Section 249 and Section 252 said Block 8, conveyed from Mrs. W.A. Mimms, et al, to Presidio County by warranty deed recorded in Volume 113, Page 221 deed records;

THENCE South 17°15’36” West with said West right-of-way line at 462.77 feet the common line of Section 251 and Section 250 said Block 8 and at 695.48 feet past a found concrete highway right-of-way marker, continuing for a total distance of 1047.62 feet to a six inch wood post, a fence corner at the Southeast corner of said airport, for the Southeast corner of this tract;

THENCE South 89°56’24” West with the South boundary line of said airport property and a wire fence line, at 955.19 feet the common line of said Section 250 and Section 249, continuing for a total distance of 4326.42 feet to a 5/8 inch rebar set at the intersection of said South boundary line and the Southeast BRL of runway 3-21 of said airport, for the Southwest corner of this tract, said BRL is parallel to and 265 feet Southeast of the projected centerline of said runway 3-21;

THENCE North 45’01’32” East with said BRL at 794.83 feet the common line of said Section 249 and Section 252, continuing for a total distance of 1148.62 feet to a 5/8 inch rebar set at the intersection of said BRL and the Southwest line of the protection zone of runway 3-21, for a corner of this tract;

THENCE South 44°58’28” East 85.0 feet with said protection zone Southwest line, to a 5/8 inch rebar set at the South corner of said protection zone, for an interior corner of this tract;

THENCE North 39°18’53” East 854.25 feet with the Southeast line of said protection zone to a 5/8 inch rebar set at the intersection of said protection zone Southeast line and said BRL, for a corner of this tract;

THENCE North 45°01’32” East 312.24 feet with said BRL to a 5/8 inch rebar set at a BRL corner, being 65.5 feet Southwest of the centerline of taxiway entering said runway 3-21, for a corner of this tract;

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THENCE South 89°59’14” East 424.65 feet with said BRL to a 5/8 inch rebar set at a BRL corner for a corner of this tract;

THENCE North 45°00’01” East 1269.14 feet with said BRL to a 5/8 inch rebar set at a BRL corner for a corner of this tract;

THENCE South 89°59’35” East 155.54 feet with said BRL to a 5/8 inch rebar set at a BRL corner for a corner of this tract;

THENCE South 44°59’11” East with said BRL being parallel to and 390 feet Southwest of the centerline of runway 12-30 of said airport, at 371.13 feet the common line of said Section 252 and Section 251, continuing for a total distance of 2157.03 feet to the “Point of Beginning”.

CONTAINING 39.74 acres in Section 249, 13.37 acres in Section 250, 30.51 acres in Section 251, and 72.10 acres in Section 252, for a total of 155.72 acres, more or less.

Bearings Based: Record bearing (South 00°18’ West) along the West boundary line of Section 252, Block 8, GH&SA RR Company Survey, Presidio County, Texas, found markers.

(“Presidio Fee Lands”)

A tract of land being 974.82 acres out of Surveys 153, 154, 248, 249 and 250 lying west of Highway 17, Presidio County, Texas, being more particularly described as follows:

BEGINNING at a 1” iron rod and rock mound found for the common corner of Surveys 150, 153, 249 and 252, said Block 8;

THENCE South 87deg.15’14” East 1729.06 feet to a 3/4” pipe found in a fence line in the West line of the Marfa Airport Tract described in Vol. 113, P. 221, Deed Records;

THENCE South 2deg.42’09” West 561.68 feet to a fence corner post found for the Southwest corner of said Airport Tract;

THENCE South 87deg.17’40” East with an existing fence line along the South line of said Airport Tract, at 204.5 feet pass a 5/8” iron rod found for the Southwest corner of a 155.72 acre tract described in Vol. 303, P. 153, Deed Records, at 3578.12 feet pass a point in the East line of said Survey 249 and the West line of said Survey 250, 4530.92 feet in all to a fence corner post found in the West Right-of-Way of Highway 17 described in Vol. 113, P. 180 and Vol. 113, P. 176, Deed Records, for the Southeast corner of said 155.72 acre tract, the Northeast corner of a 32.86 acre tract described in Vol. 113, P. 193, Deed Records, and the Northeast corner of this tract;

THENCE South 20deg.01’40” West with the West Right-of-Way of said Highway 17, at 3147.22 feet pass a point in the West line of said Survey 250 AND THE East line of said Survey 249, at 4941.90 feet pass a point in the South line of said Survey 249 and the North line of said Survey 248, 8441.58 feet in all to a 1/2” iron rod and cap marked “WALKER 4425” set for the Southeast corner of this tract;

THENCE North 87deg.18’ West 3652.08 feet to a 1/2” iron rod and cap marked “WALKER 4425” set in an existing fence line for the Southwest corner of this tract;

THENCE North 19deg.59’ West with said existing fence line, at 137.9 feet pass a point in the West line of said Survey 248 and the East line of said Survey 154, 353.85 feet in all to a fence angle post;

THENCE North 0deg.38’00” West 2582.28 feet with said existing fence line to a 1/2” iron rod and cap marked “WALKER 4425” set;

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THENCE South 87deg.20’ East, at 231.84 feet pass a point in the East line of said Survey 154 and the West line of said Survey 248, 695.10 feet in all to a 1/2” iron rod and cap marked “WALKER 4425” set;

THENCE North 2deg.40’ East, at 436.50 feet pass a point in the North line of said Survey 248 and the South line of said Survey 249, 600.00 feet in all to a 1/2” iron rod and cap marked “WALKER 4425” set;

THENCE North 43deg.44’06” West, at 178.00 feet pass a corner of an existing fence line, 645.34 feet in all to a fence angle post in the West line of said Survey 249 and the East line of said Survey 153;

THENCE North 2deg.30’17” East 1756.43 feet with said existing fence line to a fence angle post;

THENCE North 17deg.41’33” West with said existing fence line, at 20.0 feet pass a point in the West line of said Survey 249 and the East line of said Survey 153, 2011.64 feet in all to a fence angle post;

THENCE North 3deg.21’51” West 1030.02 feet with said existing fence line to a fence corner post found in the South line of Survey 150 and the North line of said Survey 153 for the Northwest corner of this tract;

THENCE South 87deg.32’ East 781.58 feet with the North line of said Survey 153 to the point of beginning.

(“Jeff Davis Lands”)

TRACT 1:

A 202.00 ACRE TRACT OF LAND OUT OF SECTIONS 12 AND 13, BLOCK 2, H. & T.C.RY.CO. SURVEY; SECTION 2, BLOCK E, SCRAP FILE #14443, J.W. ESPY SURVEY; SECTIONS 1 AND 18, BLOCK 1, H. & T.C.RY.CO. SURVEY, JEFF DAVIS COUNTY, TEXAS, AS MORE PARTICULARLY DESCRIBED IN A METES AND BOUNDS DESCRIPTION ATTACHED HERETO AS EXHIBIT “A” DATED JANUARY 24, 1996, PREPARED BY JOHN SPANGEL, R.P.L.S. NO 4761, AS FOLLOWS:

SAVE AND EXCEPT:

AN 87.88 TOTAL ACRE TRACT OF LAND OUT OF A 202.00 TRACT DESCRIBED IN VOL. 153, P.487, DEED RECORDS, BEING 38.67 ACRES OUT OF SURVEY 1 AND 37.44 ACRES OUT OF SURVEY 18, BLOCK 1, T.& P.RY CO., SURVEYS, 4.51 ACRES OUT OF SURVEY 12, BLOCK 2, H.& T.C.RY.CO.

SURVEYS, AND 7.26 ACRES OUT OF SURVEY 2, BLOCK E.SF 14443, J.W.ESPY, JEFF DAVIS COUNTY, TEXAS. SAID 87.88 ACRE TRACT BEING MORE PARTICULARLY DESCRIBED IN A METES AND BOUNDS DESCRIPTION DATED FEBRUARV 24, 2009, ATTACHED HERETO AS EXHIBIT “B” AND AS SHOWN ON PLAT ATTACHED HERETO AS EXHIBIT "D" DATED OCTOBER 22, 10, BOTH PREPARED BY STEVEN F. WALKER, R.P.L.S. #4425, SAID EXHIBITS ARE ATTACHED HERETO AND MADE A PART HEREOF FOR ALL PURPOSES;

AND A 0.69 ACRE TRACT OF LAND OUT OF A 202.00 ACRE TRACT DESCRIBED IN VOL 153, P, 487, DEED RECORDS, AND BEING OUT OF SURVEY 12, BLOCK 2, H. & T.C.RY.CO. SURVEY, JEFF DAVIS COUNTY, TEXAS. SAID 0.69ACRE TRACT BEING MORE PARTICULARLY DESCRIBED IN A METES AND BOUNDS DESCRIPTION DATED FEBRUARY 24,2009, ATTACHED HERETO AS EXHIBIT “C” AND AS SHOWN ON PLAT ATTACHED HERETO EXHIBIT “D” DATED OCTOBER 22, 2010, BOTH PREPARED BY STEVEN F.WALKER, R.P.L.S. #4425, SAID EXHIBITS ARE ATTACHED HERETO AND MADE APART HEREOF FOR ALL PURPOSES.

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TRACT 2:

TRACT CONTAINING 80.0 TOTAL ACRES, BEING 19.85 ACRES OUT OF SECTION 18, BLOCK 1, T.& P.RY.CO. SURVEYS, 49.48 ACRES OUT OF SECTION 13, BLOCK 2,H.& T. C. RY.CO, SURVEY AND 10.86 ACRES OUT OF SECTION 2, BLOCK E, SF 14443, J.W.ESPY, JEFF DAVIS COUNTY, TEXAS, SAID 80.0 ACRE TRACT MORE PARTICULARLY DESCRIBED IN A METES AND BOUNDS DESCRIPTION ATTACHED HERETO AS EXHIBIT “E” AND AS SHOWN ON PLAT OF THE SURVEY ATTACHED HERETO AS EXHIBIT "F" DATED DECEMBER 16, 2010, PREPARED BY STEVEN F.WALKER.R.P.L.S. NO.4425, SAID EXHIBITS ARE ATTACHED HERETO AND MADE APART HEREOF FOR ALL PURPOSES.

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EXHIBIT A

METES AND BOUNDS DESCRIPTION of a survey of a 202.0 acre tract of land out of Survey 12 (Partition Deed, Vol. 61, Pg. 295-303) and Survey 13, (W.D., Vol. 70, Pg. 512 - 513), H. & T.C. Ry. Co. Block 2; Survey 2, Block E - S.F. 14443, J.W. Espy (W.D., Vol. 70, Pg. 506): and Surveys 1 and 18, T. & P. Ry. Co. Block 1 (Partition Deed, Vol. 61, Pg.295-303); Jeff Davis County, Texas. Said 202.0 acre tract of land being more particularly described as follows:

BEGINNING at a 5/8-inch rebar with cap marked “SPANGEL RPLS 4761” set in a fence line and in the West right-of-way line of State Highway 17 (Right-of-Way Easement, Vol. 47, Pg. 235) and from which a rock mound of three large, partially buried rocks found in the East line of the hereinbefore cited Survey 2, Block E - S.F. 14443, J.W. Espy to mark the West common corner of Surveys 13 and 24 of said H. & T.C. Ry. Co. Block 2 bears South 19°13’11” West 4361.38 feet;

THENCE North 69°34’ West, at 1563.61 feet the common line of said Survey 2, Block E - S.F. 14443, J.W. Espy and said Survey 13, Block 2 at a point from which the hereinbefore cited rock mound of three large, partially buried rocks bears South 00°21’44” East 4664.84 feet and a set 60d nail in a partially buried rock mound found in the East line of said Survey 2, Block E - S.F. 14443, J.W. Espy to mark the West common corner of the hereinbefore cited Surveys 12 and 13, H. & T.C. Ry. Co. Block 2 bears North 00°21’44” West 615.92 feet, on in all 1800.46 feet to a 5/8 inch rebar with cap marked “SPANGEL RPLS 4761” set to mark a corner of this tract;

THENCE South 20°26’ West at 26.52 feet the West line of said Survey 2, Block E - S.F. 14443, J.W. Espy and the East line of the hereinbefore cited Survey 18, Block 1, T. & P. Ry. Co. at a point from which a 2-inch pipe found in the West line of said Survey 2, Block E - S.F. 14443, J.W. Espy to mark the East common corner of Surveys 18 and 19 of said T. & P. Ry. Co. Block 1 bears South 00°22’36” East 4636.81 feet and another 2-inch pipe found in the West line of said Survey 2, Block E - S.F. 14443, J.W. Espy to mark the East common corner of the hereinbefore cited Surveys 1 and 18, T. & P. Ry. Co. Block 1 bears North 00°22’36” West 636.48 feet, on in all 551.78 feet to a 5/8 inch rebar with cap marked “SPANGEL RPLS 4761” set to mark a corner of this tract;

THENCE North 69°34’ West 2208.69 feet to a 5/8 inch rebar with cap marked “SPANGEL RPLS 4761” set to mark the most Westerly corner of this tract;

THENCE North 39°00’ East, at 443.35 feet the common line of said Surveys 1 and 18 T. & P. Ry. Co. Block 1, on in all 1793.34 feet to a 5/8 inch rebar with cap marked “SPANGEL RPLS 4761” set to mark the Northwest corner of this tract;

THENCE North 82°40’ East, at 1121.76 feet the common line of said Survey 1, T. & P. Ry. Co. Block 1 and said Survey 2, Block E - S.F. 14443, J.W. Espy, at a point from which the hereinbefore cited 2-inch pipe found in the West line of said Survey 2, Block E - S.F. 14443, J.W. Espy to mark the East common corner of said Surveys 1 and 18, T. & P. Ry. Co. Block 1 bears South 00°22’36” East 1179.32 feet, at 1354.77 feet the common line of said Survey 2, Block E - S.F. 14443, J.W. Espy and the hereinbefore cited Survey 12, H. & T.C. Ry. Co. Block 2 at a point from which the hereinbefore cited set 60d nail in a partially buried rock mound found in the East line of said Survey 2, Block E - S.F. 14443, J.W. Espy to mark the West common corner of said Surveys 12 and 13, H. & T.C. Ry. Co. Block 2 bears South 00°21’44” East 1287.46 feet on in all 3688.43 feet to a 5/8 inch rebar with cap marked “SPANGEL RPLS 4761” set to mark the most Northerly corner of this tract;

THENCE South 63°29’55” East 161.47 feet to a 5/8 inch rebar with cap marked “SPANGEL RPLS 4761” set to mark a corner of this tract;

THENCE South 26°30’05” West 210.45 feet to a 5/8 inch rebar with cap marked “SPANGEL RPLS 4761” set to mark a corner of this tract;

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THENCE South 63°29’55” East 315.00 feet to a 5/8 inch rebar with cap marked “SPANGEL RPLS 4761” set in a fence line and in the hereinbefore cited West right-of- way line of State Highway 17 (Vol. 47, Pg. 235) to mark a corner of this tract and from which a large stone on its end in ground with two other large stones by its side marking the common corner of Surveys 1, 2, 11, and 12 of said H. & T.C. Ry. Co. Block 2 bears North 32°15’53” East 4883.79 feet;

THENCE South 26°30’05” West, with the said West right-of-way line of said State Highway 17, at 1308.89 feet a 5/8 inch rebar with cap marked “SPANGEL RPLS 4761” set in the hereinbefore cited fence line and in the common line of said Surveys 12 and 13, H. & T.C. Ry. Co. Block 2, on in all 2621.61 feet to THE POINT OF BEGINNING and containing 78.07 acres in said Survey 12, H. & T.C. Ry. Co. Block 2,

37.96acres in said Survey 13, H. & T.C. Ry. Co. Block 2, 9.79 acres in said Survey 2, Block E - S.F. 14443, J.W. Espy 37.51 acres in said Survey 18, T. & P. Ry. Co. Block 1 and 38.67 in said Survey 1, T. & P. Ry. Co. Block 1 for a total of 202.0 acres.

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EXHIBIT B

Metes and bounds description of an 87.88 total acre tract of land out of a 202.0 acre tract described in Vol. 153, P. 487, Deed Records, being 38.67 acres out of Survey 1 and 37.44 acres out of Survey 18, Block 1, T&P. Ry.Co. Surveys, 4.51 acres out of Survey 12, Block 2, H. & T. C. Ry. Co. Surveys and 7.26 acres out of Survey 2, Block E, SF 14443, J.P. Espy, Jeff Davis County, Texas, said 87.86 acre tract being more particularly described as follows:

BEGINNING at 5/6” iron rod and cap marked “SPANAGEL RPLS 4761” FOUND AT A FENCE CORNER FOR THE Southwest corner of a 202.0 acre tract described in Vol. 153, P. 487, Deed Records, and the Southwest corner of this tract;

THENCE North 39 deg, 00’ East, at 443.35 feet past the North line of said Survey 18 and the South line of said Survey 1, 1793.34 feet in all to a 5/8” iron rod and cap marked “SPANAGEL RPLS 4761” found at a fence corner for the Northwest corner of said 202.0 acre tract and the Northwest corner of this tract;

THENCE North 82deg. 40’ East with a fence line along the North line of said 202.0 acre tract, at 1121.76 feet pass the East line of said Survey 1, T.&P. Ry. Co. Block 1, and the West line of said Survey 2, Block E, at 1354.77 feet pass the East line of said Survey 2, Block E, and the West line of said Survey 12, H. & T. C. Ry. Co. Block 2, 1587.0 feet in all to a fence corner post found for the Northeast corner of this tract;

THENCE South 6deg. 53’ East 402.10 feet with an existing fence line to a fence angle;

THENCE South 2deg. 48’ West with said existing fence, at 764.81 feet pass the West line of said Survey 12, Block 2, and the East line of said Survey 2, Block E, at 1404.38 feet pass the West line of said Survey 2, Block E, and the East line of said Survey 16, Block 1, 1530.29 feet in all to a fence corner post;

THENCE South 69deg. 34’ East 58.6 feet to a 5/8” iron rod and cap marked “SPANAGEL RPLS 4761” found at a fence corner for a corner of said 202.0 acre tract;

THENCE South 20deg.26’ West 551.78 feet to 5/8” iron rod and cap marked “SPANAGEL RPLS 4761” found at a fence corner for a corner of said 202.0 acre tract and the Southeast corner of this tract;

THENCE North 69deg.34’ West 2208.69 feet to the point of beginning.

Bearings are based on the record North line of 202.0 acre tract.

A plat of this survey accompanies this description.

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EXHIBIT C

Metes and bounds description of a 0.68 acre tract of land out of a 202.0 acre tract described in Vol. 153 P 487 Deed Records and being out of Survey 12, Block 2 H. & T. C. Ry. Co. – Surveys Jeff Davis County Texas ___ 0.69 acre track being more particularly described as follows:

BEGINNING at ___ 57 ___ rod and cap packed SPANAGEL RPLS 4761 found at a fence corner for the northeast corner of said 202.0 acre tract and the Northeast corner of this tract.

THENCE South 63 deg 79 55 East 161 ___ of iron rod and can marked SPANAGEL RPLS 4761 found at a fence corner for a corner of said 202.0 acre tract.

THENCE South 26 deg 30 05 West 210.45 feet to a 5/8 iron rod and cap marked SPANAGEL RPLS 4761 found at a fence corner for a corner of said 202.0 acre tract and the South corner of this tract.

THENCE North 31 deg 10 West 289.40 feet to an iron rod and can marked WALKER 4425 set in a fence line along the North line to a fence 202.0 acre tract for the Northwest corner of this tract.

THENCE North 82 deg 40 East 100.0 feet to the point of beginning.

Bearings are based on the record North line of the 202.0 acre tract.

A plat of this survey accompanies this description.

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EXHIBIT E

Metes and bounds description of an 80.0 total acre tract of land, being 19.65 acres out of Survey 18, Block 1, T. & P. Ry. Co. Surveys, 49.48 acres out of Survey 13, Block 2, H. & T. C. Ry. Co. Surveys, and 10.86 acres out of Survey 2, Block E, SF 14443, J. W. Espy, Jeff Davis County, Texas, said 80.0 acre tract being more particularly described as follows:

BEGINNING at a 5/8” iron rod and cap marked “SPANAGEL RPLS 4761” found at a fence corner in the West Right-of-Way of Highway 17 for the Southeast corner of a 202.0 acre tract described in Vol. 153, p. 487, Deed Records, and the Northeast corner of this tract;

THENCE South 26deg. 30’05” West 2043.31 feet with the West Right-of-Way of said Highway 17 to a 1/3” iron rod and cap marked “WALKER 4425” set for the Southeast corner of this tract;

THENCE North 63deg. 29’55” West, at 603.51 feet pass the West line of said Survey 13, Block 2, and the East line of said Survey 2, Block E, at 861.70 feet pass the West line of said Survey 2, Block E, and the East line of said Survey 18, Block 1, 1800.46 feet in all to a 1/3” iron rod and cap marked “WALKER 4425” set for the Southwest corner of this tract;

THENCE North 20deg. 30’05” East 1297.02 feet to a 1/3” iron rod and cap marked “WALKER 4425” set in the South line of said 202.0 acre tract;

THENCE South 69deg. 34’ East 68.82 feet to a 5/8” iron rod and cap marked “SPANAGEL RPLS 4761” found at a fence corner for a corner of said 202.0 acre tract;

THENCE North 20deg. 26’ East 551.78 feet to a 5/8” iron rod and cap marked “SPANAGEL RPLS 4761” found at a fence corner for a corner of said 202.0 acre tract;

THENCE South 69deg. 34’ East with a fence along the South line of said 202.0 acre tract, at 236.85 feet pass the East line of said Survey 2, Block E, and the West line of said Survey 13, Block 2, 1800.46 feet in all to the point of beginning.

Bearings are based on the record North line of the 202.0 acre tract.

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EXHIBIT F

REDUCED FOR EXHIBIT ONLY

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Schedule G

ORGANIZATIONAL CHART OF THE BORROWER

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Credit Agreement-LCD-10-02-2012 Page 62 of 62

EX-10.3

Exhibit 10.3

Execution Copy

CREDIT AGREEMENT

Dated as of August 29, 2013

among

VILLAGE FARMS CANADA LIMITED PARTNERSHIP and

VILLAGE FARMS, L.P.

as Borrowers

and

certain affiliates of the Borrowers

as Guarantors

and

BANK OF MONTREAL

as Lender

TABLE OF CONTENTS
ARTICLE 1 INTERPRETATION		1
Section 1.1	Definitions	1
Section 1.2	Business Day	28
Section 1.3	Accounting Principles and Calculations	28
Section 1.4	Conflict	29
Section 1.5	Currency	29
Section 1.6	Time of Essence	29
Section 1.7	Headings and Table of Contents	29
Section 1.8	General Interpretation	29
Section 1.9	Computation of Time Periods	30
Section 1.10	Severability	30
Section 1.11	Schedules and Exhibits	30
ARTICLE 2 CREDIT FACILITY		31
Section 2.1	Facility	31
Section 2.2	Advances	31
Section 2.3	Availments	31
Section 2.4	Purpose of Advances	32
Section 2.5	Borrowing Procedures	32
Section 2.6	Reserves	33
Section 2.7	Bank Products	34
Section 2.8	Conversion of Loans and Bankers’ Acceptances	34
Section 2.9	Conversion and Rollover Not Repayment	35
Section 2.10	Deposit of Proceeds of Advances	35
Section 2.11	Evidence of Obligations	35
ARTICLE 3 INTEREST, FEES AND EXPENSES		35
Section 3.1	Interest on Loans	35
Section 3.2	Overdue Amounts	36
Section 3.3	Confirmation of Certain Rates	36
Section 3.4	Inability to Determine Rates	37
Section 3.5	Payment of Interest	37
Section 3.6	Acceptance Fees	38
Section 3.7	Standby Commitment Fee	39
Section 3.8	Arrangement Fee	39
Section 3.9	Cash Management Fees	39
Section 3.10	Field Examination Expenses	39
Section 3.11	Monthly Administration Fees	39
Section 3.12	Termination Fee	39
Section 3.13	Fees for Hedging Arrangements	40
Section 3.14	Indemnity	40
Section 3.15	Breakage Costs	41
Section 3.16	Change in Circumstances	41
Section 3.17	Illegality	43

(i)

ARTICLE 4 BANKERS’ ACCEPTANCES		43
Section 4.1	Purchase of Bankers’ Acceptances	43
Section 4.2	Form of Drafts	43
Section 4.3	Procedure for Drawing	43
Section 4.4	Presigned Draft Forms	44
Section 4.5	Payment, Conversion or Renewal of Bankers’ Acceptances	44
ARTICLE 5 LETTERS OF CREDIT		45
Section 5.1	Letter of Credit	45
Section 5.2	Drawings	45
Section 5.3	Rollover	46
Section 5.4	Fees for Letters of Credit	46
ARTICLE 6 LIBOR LOANS		46
Section 6.1	Minimum Advance.	46
Section 6.2	Term.	46
Section 6.3	Rollover of Libor Loans	46
ARTICLE 7 HEDGING ARRANGEMENTS		47
Section 7.1	Hedging Arrangements	47
ARTICLE 8 PAYMENTS AND REPAYMENTS OF FACILITIES		48
Section 8.1	Place and Application of Payments and Collections	48
Section 8.2	Maturity of Revolving Loans	48
Section 8.3	Mandatory Repayments	48
Section 8.4	Payments Generally	49
Section 8.5	Taxes	49
Section 8.6	No Set-Off	50
ARTICLE 9 COLLATERAL		50
Section 9.1	Collateral	50
Section 9.2	Collateral Proceeds	51
Section 9.3	Security Documents	51
Section 9.4	Additional Credit Parties	52
ARTICLE 10 CONDITIONS PRECEDENT		52
Section 10.1	Conditions Precedent to Disbursements of Advances	52
Section 10.2	Conditions Precedent to All Advances	54
Section 10.3	Waiver of any Condition Precedent	55
ARTICLE 11 REPRESENTATIONS AND WARRANTIES		55
Section 11.1	Representations and Warranties of the Credit Parties	55
Section 11.2	Deemed Repetition	63
ARTICLE 12 COVENANTS		63
Section 12.1	Affirmative Covenants	63
Section 12.2	Negative Covenants	71
Section 12.3	Financial Covenants of the Borrower	75

(ii)

ARTICLE 13 DEFAULT AND ENFORCEMENT		76
Section 13.1	Events of Default	76
Section 13.2	Rights upon Default and Event of Default	79
Section 13.3	Waiver of Default	79
ARTICLE 14 REMEDIES		80
Section 14.1	Remedies Cumulative	80
Section 14.2	Remedies Not Limited	80
Section 14.3	Set-Off	80
Section 14.4	Lender May Perform Covenants	81
ARTICLE 15 GENERAL PROVISIONS		81
Section 15.1	Assignment	81
Section 15.2	Amendments	82
Section 15.3	Notice	82
Section 15.4	Disruption of Postal Service	82
Section 15.5	Environmental Indemnity	82
Section 15.6	Further Assurances	83
Section 15.7	Judgment Currency	83
Section 15.8	Waivers	83
Section 15.9	Reimbursement of Expenses	84
Section 15.10	Governing Law	84
Section 15.11	Submission to Jurisdiction	84
Section 15.12	Waiver of Trial by Jury	84
Section 15.13	Counterparts	84
Section 15.14	Excluded Subsidiaries	85
Section 15.15	Entire Agreement	85
Section 15.16	Acknowledgement	85

SCHEDULES AND EXHIBITS
SCHEDULE11.1(d)	Business and Operations
SCHEDULE 11.1(e)	Approvals
SCHEDULE 11.1(j)	Litigation
SCHEDULE 11.1(l)	Taxes
SCHEDULE 11.1(m)	Equity Interests
SCHEDULE 11.1(s)	Intellectual Property
SCHEDULE 11.1(t)	Real Property and Locations of Collateral
SCHEDULE 11.1(u)(i)	Environmental Matters
SCHEDULE 11.1(w)	Material Contracts and Licences
SCHEDULE 11.1(x)	Existing Debt
SCHEDULE 11.1(hh)	Deposit Accounts
SCHEDULE 12.1(4)	Insurance
SCHEDULE 12.2(8)	Transactions with Affiliates
EXHIBIT “A”	Form of Borrowing Base Certificate
EXHIBIT “B”	Compliance Certificate

(iii)

EXHIBIT “C”	Drawdown Notice
EXHIBIT “D”	Rollover/Conversion Notice
EXHIBIT “E”	Permitted Liens

(iv)

CREDIT AGREEMENT

This Credit Agreement is made as of August 29, 2013 among VILLAGE FARMS CANADA LIMITED PARTNERSHIP and VILLAGE FARMS, L.P. as borrowers, CERTAIN AFFILIATES OF THE BORROWERS, as guarantors, and BANK OF MONTREAL, as lender.

WHEREAS the Borrowers have requested that the Lender establish a credit facility in favour of the Borrower; and

WHEREAS the Lender has agreed to establish such credit facility in favour of the Borrowers, subject to the terms and conditions set forth herein; and

WHEREAS the Guarantors have agreed to guarantee the obligations of the Borrowers hereunder and to secure their respective obligations under such guarantees by granting security therefor, as set out herein;

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by each of the parties hereto), the parties hereto make the following agreements.

ARTICLE 1

INTERPRETATION

Section 1.1 Definitions

In this Agreement, the following terms shall have the following meanings, unless the context expressly or by necessary implication requires otherwise:

“Acceptable A/R Insurance” means accounts receivable insurance issued by an insurer satisfactory to the Lender at all times, in its sole discretion, and administered by a broker satisfactory to the Lender at all times, in its sole discretion, and in an amount and upon terms satisfactory to the Lender at all times, in its sole discretion, in respect of which the Borrower has assigned in favour of the Lender all proceeds payable thereunder and such insurer has provided a written acknowledgement to the Lender, including an agreement to pay the proceeds of such accounts receivable insurance policy directly to the Lender.

“Acceptance Fee” means, with respect to any particular Bankers’ Acceptance, a fee payable in advance to the Lender, calculated on the face amount of such Bankers’ Acceptance at an annual rate (based on a 365 day year), equal to 1.50%.

“Accommodation” means any Advance made by way of Loan, purchase of a Bankers’ Acceptance, issuance of a Letter of Credit or Hedging Arrangement.

“Accommodations Outstanding” means, at any particular date of determination with respect to the Facility, the aggregate outstanding amount of all Accommodations made under such Facility as of such date including the Aggregate Revolver Outstandings and the Aggregate Actual Hedge Exposure.

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“Actual Hedge Exposure” means, with respect to any particular Hedging Arrangement, the amount owing pursuant thereto (in Canadian Dollars, or the Exchange Equivalent thereof if such amount is owing in US Dollars), if any, by any Credit Party in the event of a default or termination thereunder, determined in accordance with the terms of the applicable Hedging Arrangement.

“Additional Compensation” has the meaning set forth in Section 3.16.

“Advance” means an extension of credit under the Facility by the Lender to the Borrower.

“Affiliate” means, with respect to any particular Person, any other Person that directly or indirectly Controls (including any member of the senior management group of such Person), is Controlled by, or is under common Control with, such Person, or which owns, directly or indirectly, not less than 5% of the outstanding Equity Interests of such Person.

“Aggregate Actual Hedge Exposure” means, as of any particular date of determination, the aggregate amount of the Actual Hedge Exposure under all Hedging Arrangements.

“Aggregate Deemed Hedge Exposure” means, as of any particular date of determination, the aggregate of (a) the Deemed Hedge Exposure for all Hedging Arrangements made in Canadian Dollars, plus (b) the Exchange Equivalent in Canadian Dollars of the Deemed Hedge Exposure for all Hedging Arrangements made in US Dollars.

“Aggregate Revolver Outstandings” means, as of any particular date of determination, the aggregate of (a) the aggregate outstanding Principal Amount of all Revolving Loans, plus (b) the aggregate face amount of all outstanding Bankers’ Acceptances, plus (c)one hundred percent (100%) of the aggregate undrawn face amount of all outstanding Letters of Credit, plus (d) the aggregate amount of any unpaid reimbursement obligations in respect of Letters of Credit, plus (e) the Aggregate Deemed Hedge Exposure for all Hedging Arrangements, plus (f) all other Obligations for Bank Products. If any such amount is in US Dollars, for purposes of this definition, such amount shall be the Exchange Equivalent in Canadian Dollars.

“Agreement” means, this agreement, including all Schedules and Exhibits hereto, together with all amendments, renewals, supplements, variations, restatements, amendments and restatements or replacements hereof from time to time hereafter, made in accordance with the terms hereof.

“Applicable Law” means, at any particular time in respect of any particular Person, property, transaction or event, all laws, statutes, regulations, treaties, judgments and decrees applicable to that Person, property, transaction or event (whether or not having the force of law) and all applicable requirements, requests, official directives, consents, approvals, authorizations, guidelines, decisions, rules, orders and policies of any Governmental Authority having or purporting to have authority over such Person, property, transaction or event.

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“Applicable Margin” means the Base Rate Margin, Prime Rate Margin, LIBOR Margin, US Prime Rate Margin, Letter of Credit Fee or Acceptance Fee, as applicable.

“Assignee” has the meaning set forth in Section 15.1(2).

“Associate” has the meaning given to such term in Section 195(1) of the Business Corporations Act (British Columbia), as in effect on the Closing Date.

“Audited Financial Statements” means, in respect of any particular Fiscal Year, the audited consolidated and consolidating balance sheet of the Borrower Group as at the last day of such Fiscal Year and the accompanying notes thereto and the related audited consolidated and consolidated income statements, cash flow statements and changes in shareholders’ equity for such Fiscal Year, as applicable, and the accompanying notes thereto, all prepared in accordance with GAAP and setting forth in each case, in comparative form, figures for the corresponding period in the preceding Fiscal Year, all in reasonable detail and fairly presenting in all material respects the financial position and the results of operations of the Borrower, its Subsidiaries and each other Credit Party as at the date thereof and for the Fiscal Year then ended, certified by the Auditor.

“Auditor” means PricewaterhousCoopers LLP or any other independent chartered accounting firm selected by the Borrower that is of national standing or is otherwise acceptable to the Lender.

“Authorized Representative” means, with respect to any Person that is not an individual, the chief executive officer, chief financial officer or president of such Person (or a Person in a similar capacity with respect to non-corporate entities).

“Bank Products” means (a) all Hedging Arrangements, and (b) all products and services provided under or in connection with any agreement or other Credit Document executed by the Borrower or any Affiliate of the Borrower in respect of Cash Management Obligations, (c) to the extent not otherwise included in the foregoing, all other types of banking products, services and facilities (other than Letters of Credit) that are provided to the Borrower by the Lender, or any Person that was an Affiliate of the Lender at the time at which such Person agreed to provide such services, products or facilities.

“Bankers’ Acceptance” means, a bill of exchange subject to the Bills of Exchange Act (Canada) or a depository note as defined in, and issued in accordance with, the Depository Bills and Notes Act (Canada), denominated in Canadian Dollars, drawn by the Canadian Borrower and accepted by the Lender.

“Base Rate” means, on any particular date of determination, the fluctuating rate per annum equal to the higher of (a) the rate of interest per annum publicly announced from time to time by the Lender as its reference rate for determining rates on US Dollar denominated commercial loans made by it in Canada and (b) the Federal Funds Rate plus 100 Basis Points per annum.

“Base Rate Loan” means, a Loan that bears interest at a rate based upon the Base Rate.

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“Base Rate Margin” means 0.25% per annum.

“Basis Point” means one one-hundredth of one percent (.01%).

“Blocked Account” shall have the meaning given thereto in the Lockbox Agreement.

“Blocked Account Agreement” means the blocked account agreement made as of August 29, 2013 between Bank of Montreal, in its capacity as provider of banking services, the Canadian Borrower and the Lender, in its capacity as lender under this Agreement, as amended, restated or replaced from time to time.

“Borrowers” means the Canadian Borrower and the US Borrower; “Borrower” means any one of them, as applicable.

“Borrower’s Account” means any account of any Borrower maintained at the Branch of Account or at any other branch of the Lender (or an Affiliate of the Lender) or an account of any Borrower maintained at the Chicago Branch or at any other branch of the Lender (or an Affiliate of the Lender) in the United States of America.

“Borrowing Base” means, as of any particular date of determination, an amount equal (without duplication) to the aggregate of:

(a)85% (or such lesser or greater percentage as the Lender may determine appropriate at any time) of the Value of all Eligible Receivables other than Insured Receivables and other than Designated Receivables; plus

(b)90% (or such lesser or greater percentage as the Lender may determine appropriate at any time) of the Value of all Insured Receivables; plus

(c)90% (or such lesser or greater percentage as the Lender may determine appropriate at any time) of the Value of all Designated Receivables; plus

(d)100% (or such lesser percentage as the Lender may deem appropriate at any time) of cash of the Borrower maintained in blocked accounts, and subject to the blocked account agreements, with the Lender; minus

(e)all Reserves (other than Priority Payables); minus

(f)all Priority Payables.

“Borrowing Base Certificate” means a Certificate executed by an Authorized Representative of the Borrower, substantially in the form of Exhibit “A”.

“Borrower Group” means Village Farms International Inc., and each Subsidiary including without limitation the Canadian Borrower and the US Borrower.

“Branch of Account” means the branch of the Lender located at First Canadian Place, Toronto, Ontario or such other branch of the Lender (or an Affiliate of the Lender, as applicable) in Canada or the United States of America as the Lender may advise the Borrower in writing from time to time.

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“Business Day” means any day on which the Lender is open for over-the-counter business in Toronto, Ontario, and excludes (a) Saturday, Sunday and any other day that is a statutory holiday in Toronto, Ontario (b) with respect to LIBOR Loans, any other day that is not a day on which dealings in US Dollar deposits are conducted by and between banks in the London interbank Eurodollar market, and (c) with respect to the Chicago Branch, any Saturday, Sunday or any other day on which commercial banks in Chicago, Illinois are authorized or required by law to close.

“Business Plan” means, with respect to any particular Fiscal Year, the business plan of the Borrower and each other Credit Party for such Fiscal Year (including any amendments thereto from time to time approved by the Lender), prepared on a consolidated and unconsolidated basis for the Borrower and each other Credit Party, and including a projected monthly and year to date income statement, balance sheet, statement of cash flows, listing of proposed Capital Expenditures, financial covenant calculations, borrowing base availability, major assumptions to be utilized and financial projections for such Fiscal Year on a month-to-month basis, and such other information as is requested by the Lender, all in form and content satisfactory to the Lender.

“Canadian Benefit Plan” means, with respect to any Canadian Credit Party, any employee benefit plan of any nature or kind whatsoever that is maintained by or contributed to, or required to be contributed to, by such Canadian Credit Party for any of its Canadian employees or former Canadian employees (excluding any statutory employee benefit plans with respect to which such Canadian Credit Party is required to comply, including the Canada Pension Plan and the Quebec Pension Plan).

“Canadian Borrower” means Village Farms Canada Limited Partnership, a limited partnership formed and existing under the laws of British Columbia, and its successors and permitted assigns.

“Canadian Credit Party” means any Credit Party organized and existing under the federal laws of Canada or any province or territory thereof.

“Canadian Dollar Equivalent” means, as at any particular date of determination with respect to any amount denominated in US Dollars, the Exchange Equivalent in Canadian Dollars of such amount on such date.

“Canadian Dollars”, ”$”, “Cdn$” and “C$” each refer to the lawful money of Canada.

“Canadian Pension Plans” means, with respect to any Canadian Credit Party, a Canadian Benefit Plan that is considered to be a pension plan for the purposes of any applicable pension benefits or tax statute or regulation in Canada established, maintained or contributed to by such Credit Party for any of its Canadian employees or former Canadian employees.

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“Capital Expenditure” means, for any particular period, with respect to any particular Credit Party, any expenditure made by such Credit Party during such period in connection with the acquisition, improvement or maintenance of any capital or fixed asset of such Credit Party that is required in accordance with GAAP to be capitalized on the balance sheet of such Credit Party.

“Capitalized Lease Obligations” means, for any particular period, the aggregate liability in respect of all Capital Leases of the Credit Parties on a consolidated basis for such period, determined in accordance with GAAP.

“Capital Lease” means, with respect to any particular Credit Party, any lease or other arrangement relating to property or assets that is required in accordance with GAAP to be listed as a capital lease on the balance sheet of such Credit Party.

“Cash Equivalents” means, as at any particular date of determination:

(a)any bond, debenture or other evidence of indebtedness issued, or fully and unconditionally guaranteed or insured, by the Government of Canada or the government of a province of Canada, or any agency or political subdivision thereof, and maturing not more than six months from the date of issuance thereof;

(b)certificates of deposit, time deposits, repurchase agreements, reverse repurchase agreements, or bankers’ acceptances issued by any commercial bank organized under the laws of Canada, having combined capital and surplus of not less than $1,000,000,000 and a rating of at least “A-1”(or the equivalent thereof) from Standard & Poor’s Corporation, or the equivalent rating from Moody’s Investors Services Inc. or DBRS Ltd., and maturing not more than six months from the date of issuance or execution thereof, as applicable;

(c)commercial paper having a rating of at least “A-1” from Standard & Poor’s Corporation, or the equivalent rating from Moody’s Investors Services Inc. or DBRS Ltd., and maturing not more than three months after the date of issuance thereof;

(d)any bond, debenture or other evidence of indebtedness issued, or fully and unconditionally guaranteed or insured, by the Government of the United States of America or any agency or political subdivision thereof, payable in US Dollars, having a rating of at least “A-1” (or the equivalent thereof) from Standard & Poor’s Corporation or an equivalent rating from DBRS Ltd. or Moody’s Investors Services, Inc., and maturing not more than six months after the date of issuance thereof.

“Cash Management Obligations” means, with respect to any particular Person, any direct or indirect liability, contingent or otherwise, of such Person in respect of cash management services, (including treasury, depository, overdraft, controlled disbursement, credit, electronic funds transfer, automatic clearing house transfer and other cash management arrangements), including obligations for the payment of fees, interest, charges, expenses, legal fees and disbursements relating to any of the foregoing.

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“CDOR Rate” means, on any particular date of determination, the annual rate of interest that is the arithmetic average of the rates posted by all listed institutions for bankers’ acceptances for the relevant period, as displayed and identified as such on the Reuters Screen CDOR Page (as defined at such time of determination in the International Swap Dealer Association, Inc. definitions) at approximately 10:00 a.m. on such date or, if such date is not a Business Day, on the immediately preceding Business Day (as adjusted by the Lender after 10:00 a.m. to reflect any error in any posted rate or in the posted average annual rate); and if such rate does not appear at such time on such Reuters Screen CDOR Page, then the CDOR Rate shall be the rate quoted at such time on such date by the Lender for banker’s acceptances accepted by the Lender.

“CERCLA” means the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended.

“Certificate” means, with respect to any Person that is not an individual, a written certificate signed on behalf of such Person by an Authorized Person and, with respect to a Person that is an individual, a written certificate signed by such individual.

“Change of Control” means any event or circumstance whereby Village Farms International, Inc. shall cease to directly or indirectly, beneficially own and control at least 50.01% (on a fully diluted basis) of the economic and voting Equity Interests of the Borrowers.

“Chicago Branch” means the branch of the Lender located at 115 South LaSalle St., 12- W, Chicago Illinois 60603 or such other branch in Illinois as the Lender may designate from time to time.

“Claim” means any claim, demand, cause of action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration (whether or not purportedly on behalf of any Credit Party) at law or in equity, or before or by any Governmental Authority, domestic or foreign of any nature whatsoever, whether pending or, to the knowledge of any Credit Party, threatened against or affecting any Credit Party or any property of a Credit Party.

“Closing Date” means __________________, 2013.

“Code” means the United States Internal Revenue Code of 1986, as amended.

“Collateral” means, collectively, all of the present and future undertaking, property and assets (excluding real property) against or in respect of which Liens in favour of the Lender are now or are hereafter granted (or purported to be granted) pursuant to the Security documents.

“Collateral Access Agreement” means a landlord waiver, bailee letter, non-disturbance agreement, acknowledgement agreement or similar agreement executed by any lessor, mortgagee, warehouseman, processor, consignee or other Person (other than a Credit Party) in possession of, having a lien upon, or having rights or interests in any location at which Collateral is situate, in favour of and for the benefit of the Lender, its successors and assigns, and in form and content satisfactory to the Lender.

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“Collection Accounts” shall have the meaning given thereto in the Blocked Account Agreement.

“Commitment” means the Revolving Commitment.

“Compliance Certificate” means a Certificate executed by the Borrowers substantially in the form of Exhibit “B”.

“Contingent Obligations” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person: (a) with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against Loss with respect thereto; (b) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (c) under any Hedging Arrangement; (d) to make, take-or-pay or similar payments if required regardless of non-performance by any other party or parties to an agreement; (e) for the obligations of another through any agreement to purchase, repurchase or otherwise acquire any obligation of another Person or any property constituting security therefor, or to provide funds for the payment or discharge of such obligation; and (f) to maintain the solvency, financial condition or any balance sheet item or level of income of another Person. The amount of any Contingent Obligation (other than in respect of a Hedging Arrangement) shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed or supported. The amount of any Contingent Obligation in respect of a Hedging Arrangement shall equal the Deemed Hedge Exposure for such Hedging Arrangement.

“Contract Period” means, with respect to any particular Bankers’ Acceptance, Letter of Credit or Hedging Arrangement, the period selected by the Borrower in accordance with the terms of this Agreement during which such instrument, commitment or arrangement will be outstanding.

“Contractual Obligation” means, with respect to any Person, any provision of any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument (including any Equity Interest issued by such Person) to which such Person is a party or by which, whether in writing or orally, such Person or any of its assets is bound or to which such Person or any of its assets is subject.

“Control” (including, with correlative meanings, the terms “Controlling,” “Controlled by” and “under common Control with”) means, with respect to any Person, the possession, directly or indirectly, of the power to direct, or to cause the direction of, the management and policies of such Person, whether through the ability to exercise voting power over any Equity Interests, whether by contract or otherwise.

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“Controlled Group” means all members of a controlled group of corporations or other business entities and all trades or businesses (whether or not incorporated) under common control, which together with a Borrower and any of its Subsidiaries, are treated as a single employer under Section 414 of the Code or Section 4001 of ERISA.

“Conversion” means the conversion of an outstanding Advance, or a portion of an outstanding Advance, into another Type of Advance under Section 2.8.

“Conversion Date” means the Business Day on which a Conversion occurs.

“Credit Documents” means, collectively, this Agreement, the Security, the Guarantees, each Letter of Credit Application, the Hedging Arrangements, any certificate completed and executed by a Credit Party and all other Certificates, instruments, agreements and other documents (including without limitation any agreements pertaining to Hedging Arrangements and Bank Products) delivered, or to be delivered, to the Lender under or in connection with this Agreement or any of the Facilities provided for herein and any fee letters entered into between the Borrower and the Lender in respect of fees payable to the Lender.

“Credit Parties” means, collectively, the Canadian Borrower, the US Borrower and each other Person that may now or hereafter become a Guarantor.

“Debt” means, in respect of any particular Credit Party:

(a)all indebtedness of such Credit Party for borrowed money;

(b)any obligation, contingent or otherwise, that is required to be classified as a liability in accordance with GAAP on the balance sheet of such Credit Party;

(c)any obligation secured by a Lien on any property, assets or undertaking owned or acquired by such Credit Party, whether or not such obligation has been assumed;

(d)any debt or liability of such Credit Party that represents the deferred acquisition cost of property or assets created or arising under any conditional sale agreement or other title retention agreement regardless of whether the rights and remedies of the seller under such agreement in the event of default are limited to repossession or sale of the property or assets covered thereby;

(e)any liabilities, contingent, unmatured or otherwise, under indemnities given in respect of any bankers’ acceptance, letter of credit or letter of guarantee;

(f)any operating lease under which such Credit Party has furnished a residual value guarantee in respect of which such Credit Party is liable as lessee; and

(g)any Capital Lease by which such Credit Party is bound.

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“Debt Service” means, for any period, the amount required by the Borrower Group (on a consolidated basis) to service its outstanding Debt during that period and includes (without limitation) interest, required principal payments, payments required or made under any Capital Lease, fees payable in respect of letters of credit or letters of guarantee and the stamping fees and discount rates associated with bankers’ acceptances facilities and shares which, by their terms, or upon the happening of any event, mature or are mandatorily redeemable or are redeemable at the option of the holder and which shares are not fully subordinated to the Lien created by the Security documents.

“Deemed Hedge Exposure” means, with respect to any particular Hedging Arrangement, 10% of the principal amount thereof, or such other percentage thereof as is determined appropriate by the Lender in accordance with its policies in effect from time to time for Hedging Arrangements.

“Default” means any event, circumstance or omission that constitutes an Event of Default or that, after the giving of notice, the passage of time or the failure to remedy such event, circumstance or omission within a period of time, would constitute an Event of Default.

“Default Rate” means a fluctuating per annum interest rate at all times equal to the sum of (a) the otherwise applicable Interest Rate plus (b) the Applicable Margin plus (c) two percentage points (2.00%) per annum. Each Default Rate shall be adjusted simultaneously with any change in the applicable Interest Rate. In addition, the Default Rate shall result in an increase in the Letter of Credit Fee by two percentage points per annum.

“Deposit Account” means any bank, deposit or similar account in which cash proceeds or Cash Equivalents are deposited or held.

“Designated Receivables” means Eligible Receivables owing to a Credit Party from certain designated persons which are approved in writing from time to time by the Lender in its sole discretion.

“Discount Proceeds” means, for any Bankers’ Acceptance issued hereunder, an amount calculated on the applicable Drawdown Date (which is rounded to the nearest full cent) as follows:

1

___________
1 + (DR(CP)) xBA

365

Where:

(a)BA = the face amount of the Bankers’ Acceptance;

(b)DR = the Discount Rate applicable to the BA expressed as a decimal;

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(c)CP = the applicable Contract Period in days; and

(d)the product of (DR(CP/365)) is rounded up or down to the fifth decimal place and .000005 is rounded up.

“Discount Rate” means as of any particular date of determination, with respect to the issuance of any Bankers’ Acceptance, the CDOR Rate quoted as of such date for bankers’ acceptances with the same maturity date.

“Drafts” means drafts drawn by the Canadian Borrower to be accepted as Bankers’ Acceptances.

“Drawdown Date” means any Business Day on which an Advance is made or is deemed to be made.

“Drawdown Notice” is defined in Section 2.5(1).

“EBITDA” means, with reference to any particular Person for any particular period, Net Income of such Person for such period plus, without duplication, all amounts deducted in arriving at such Net Income amount in respect of (i) Interest Expense for such period, plus (ii) income taxes for such period, plus (iii) all amounts properly charged for depreciation of fixed assets and amortization of intangible assets during such period on the books of such Person, plus or minus any adjustments for (iv) non cash gains or losses and extraordinary/unusual non-recurring items (such latter items to be agreed upon by the Lender in its sole discretion) for the respective period. Notwithstanding the foregoing, proceeds in respect of business interruption insurance for losses which have occurred prior to the Closing Date will not be included in the calculation of EBITDA, whereas proceeds in respect of business interruption insurance for losses which have occurred after the Closing Date will be included in the calculation of EBITDA.

“EDC” means Export Development Canada and its successors and assigns.

“Eligible Receivable” means any Receivable arising from the sale of Inventory in the ordinary course of a Credit Party’s business, which the Lender determines to be an “Eligible Receivable”, and, without limiting the discretion of the Lender to make such determination, the Lender may include Receivables that satisfy all of the following criteria:

(a)such Receivable is subject to the Lender’s perfected, first priority Lien and no other Liens (other than Permitted Liens, if applicable);

(b)such Receivable is evidenced by an invoice or other documentary evidence satisfactory to the Lender;

(c)such Receivable does not arise out of a sale made by the relevant Credit Party to an Affiliate of the relevant Credit Party or to a Person controlled by an Affiliate of the relevant Credit Party;

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(d)such Receivable is not unpaid more than 90 days after the original invoice date or more than 60 days after the invoice due date;

(e)such Receivable is not owing from an account debtor in respect of which 25% or more of the aggregate amount of all Receivables from such account debtor are unpaid more than 60 days after the invoice due dates or 90 after the original invoice dates;

(f)such Receivable would not cause the aggregate amount of all Receivables owing by any account debtor and its Affiliates to exceed 10% (25% in respect of Wal- Mart Stores, Inc. and its Affiliates, Loblaw Companies Limited and its Affiliates and Publix Super Markets, Inc. and its Affiliates) of all Eligible Receivables;

(g)no covenant, representation or warranty contained in this Agreement with respect to such Receivable has been breached;

(h)the account debtor in respect of such Receivable is not a creditor or supplier of the applicable Credit Party, and such account debtor has not disputed its liability or made any claim with respect to any other Receivable due from such account debtor to such Credit Party;

(i)none of the following events has occurred and is continuing with respect to the applicable account debtor for such Receivable: (i) death or judicial declaration of incompetency of an account debtor who is an individual; (ii) the filing by or against the account debtor of a request, proposal, notice of intent to file a proposal, proceeding, action or petition for liquidation, reorganization, arrangement, adjustment of debts, adjudication as a bankrupt, winding-up, or other relief under any bankruptcy, insolvency, restructuring, liquidation, winding-up, corporate or similar laws of Canada, any province or territory thereof, or any foreign jurisdiction, now or hereafter in effect; (iii) the making of a general assignment by the account debtor for the benefit of creditors; (iv) the appointment of a receiver, trustee, monitor, custodian, liquidator, administrator, interim receiver, receiver and manager, monitor or trustee or other official for the account debtor or for any of the assets of the account debtor, including “trustee” under the Bankruptcy and Insolvency Act, (Canada); (v) the institution by or against the account debtor of any other type of insolvency, liquidation, bankruptcy, winding-up or reorganization proceeding (under the laws of Canada, the United States of America or otherwise, including applicable corporate statutes, the Bankruptcy and Insolvency Act (Canada) and the Companies’ Creditors Arrangement Act (Canada) or of any formal or informal proceeding for the dissolution or liquidation of, settlement of claims against, or winding up of affairs of, the account debtor; (vi) the sale, assignment, or transfer of all or any material part of the assets of the account debtor; (vii) the non-payment generally by the account debtor of its debts as they become due; (viii) the failure, cessation of the business of the account debtor as a going concern or insolvency of the account debtor; or (ix) the account debtor calling a meeting of its creditors or indicating its consent to any proceeding or action hereinabove described;

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(j)the sale giving rise to such Receivable was not made to an account debtor outside Canada or the United States of America, unless the sale is on letter of credit, guarantee or acceptance terms, in each case, as applicable, acceptable to the Lender in its reasonable credit judgment, or unless the Receivable is an Insured Receivable;

(k)shipment of the merchandise or the rendition of services has been completed and the sale giving rise to such Receivable was not made on a bill and hold, guaranteed sale, sale-and-return, sale on approval, consignment or any other repurchase or return basis and is not evidenced by chattel paper unless endorsed to the Lender and the account debtor’s obligation to pay is absolute and is not otherwise conditional upon completion of any further performance under any contract, agreement or arrangement or fulfillment of any condition or other matter;

(l)the Lender has not determined, in its sole discretion that the prospect of collection of such Receivable is impaired or that such Receivable is uncollectible or collection is otherwise doubtful or that such Receivable may not be paid by reason of the account debtor’s financial position;

(m)the account debtor is not the Government of the United States of America, any state, or any department, agency or instrumentality of any of them, unless the applicable Credit Party assigns its right to payment of such Receivable to the Lender pursuant to the Assignment of Claims Act of 1940, as amended or has otherwise complied with all other Applicable Laws, statutes, regulations and ordinances;

(n)the account debtor is not located in any State of the United States of America or any Province of Canada which requires the filing of a Notice of Business Activities Report or registration or licencing to carry on business or similar report, registration or licencing in order to permit the relevant Credit Party to seek judicial enforcement in such State of the United States of America or Province of Canada of payment of such Receivable, unless the relevant Credit Party has qualified to do business in such Province or State or has filed a Notice of Business Activities Report or registration or licencing to carry on business or equivalent report, registration or licencing for the then current year;

(o)the account debtor is not the Government of Canada nor, any province thereof, or any department, agency or instrumentality thereof, unless the Borrower applicable Credit Party has complied with all Applicable Laws, statutes (including the Financial Administration Act (Canada)), regulations and ordinances in order to duly and validly assign such Receivable to the Lender;

(p)the goods giving rise to such Receivable have been shipped and delivered to and accepted by the customer or the services giving rise to such Receivable have been performed by the relevant Credit Party and accepted by the customer and the Receivable otherwise represents a final sale;

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(q)the aggregate Receivables of such account debtor do not exceed a credit limit determined by the Lender, in its sole discretion, in respect of which the Borrower has received prior written notice, to the extent such Receivables exceed such limit;

(r)such Receivable does not represent amounts that have been rebilled or that are subject to any credit notes, allowances, or rebates, including volume rebates;

(s)such Receivable is not subject to any offset, deduction (other than ordinary course volume rebates deducted as provided in paragraph (r) above), defence, or any cause asserted for non-payment of any Receivables, including any dispute, claim, complaint, set-off, defence, contra account or counterclaim (real or asserted), lawful or unlawful, whether arising from or relating to a sale of merchandise by a Credit Party or any other transaction or occurrence, or otherwise contingent in any respect or for any reason;

(t)the applicable Credit Party has not made any agreement with such account debtor for any extension of the time for payment or any deduction from payment, except for discounts or allowances made in the ordinary course of business for prompt payment, all of which discounts or allowances are reflected in the calculation of the face value of each applicable invoice related to such Receivable;

(u)no return, rejection or repossession of the merchandise has occurred; and

(v)such Receivable is payable to the applicable Credit Party and is not subject to any right, claim or interest of any Person, other than the Lender.

“Environmental Claim” means any Claim in respect of a breach of any Environmental Law, including any remedial order, control order, stop order or other administrative order, complaint or sanction.

“Environmental Laws” means all Applicable Laws pertaining to environmental or occupational health and safety matters, in effect as at the date hereof and as may be brought into effect or amended at a future date, including those pertaining to reporting, licensing, permitting, investigation, remediation and clean-up in connection with any presence or Release of a Hazardous Substance or threat of same or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, handling and the like of a Hazardous Substance.

“Environmental Permit” means any permit, approval, identification number, license or other authorization required pursuant to any applicable Environmental Law.

“Equipment” means all equipment and any other machinery, tools, fixtures, trade fixtures, furniture, furnishings, office equipment, vehicles and all other goods now or hereafter used or usable in connection with a Credit Party’s business (other than Inventory), together with all parts, accessories and attachments relating to any of the foregoing.

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“Equity Interest” means any shares, interests, participations or other rights to participate in the voting or equity ownership of a corporation and any equivalent ownership interests in any Person that is not a corporation, including any partnership or membership interest, and any warrant, option or other right to acquire or that is convertible into any ownership interest, and any other arrangement or right to, directly or indirectly, acquire any of the foregoing.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, a statute promulgated under the laws of the United States of America, together with the regulations thereunder as the same may be amended or replaced from time to time.

“ERISA Affiliate” means as applied to any Person (i) any corporation that is a member of a controlled group of corporations (within the meaning of Section 414(b) of the Code) of which that Person is a member, (ii) any trade or business (whether or not incorporated) that is a member of a group of trades or businesses under common control (within the meaning of Section 414(c) of the Code) of which that Person is a member, (iii) any member of an affiliated service group (within the meaning of Section 414(m) or Section 414(o) of the Code) of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member, and (iv) any Person that was formerly a Person described in clause (i), clause (ii) or clause (iii) above, with respect to the period during which such Person was a Person described in clause (i), clause (ii) or clause (iii) and to the extent that any liabilities arise after such period for which any Credit Party or any Subsidiary of such Credit Party may be liable under the Code or ERISA.

“Event of Default” is defined in Section 13.1.

“Excess Amount” is defined in Section 8.3(1).

“Excess Availability” means, as at any particular date of determination, (i) the lesser of the Revolving Commitment and the Borrowing Base, minus (ii) the Aggregate Revolver Outstandings.

“Exchange Equivalent” means, as of any particular date of determination, with reference to any particular amount expressed in one currency, the amount of another applicable currency required to purchase such amount in the first currency on such date either (i) in the case of any amount derived directly or indirectly from any Financial Statements of the Credit Parties, the exchange rate used to convert from Canadian Dollars to US Dollars or US Dollars to Canadian Dollars, as applicable, in the preparation of such Financial Statements, and (ii) in all other cases, the applicable rate for the purchase by the Lender of the applicable amount of Canadian Dollars or US Dollars through its principal foreign exchange trading office at approximately 11:00 a.m. (Toronto time) on such date it is a Business Day and on the immediately preceding Business Day if such date is not a Business Day.

“Excluded Subsidiaries” means Village Farms DR, S.R.L.;

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“Excluded Taxes” means, (a) any Taxes imposed on or measured by the Lender’s net income and franchise taxes imposed on it by the jurisdiction (or any political subdivision thereof) under the laws of which the Lender is organized or in which its principal office or applicable lending office is located, and (b) any branch tax, branch profits tax or any similar tax imposed by any jurisdiction.

“Facility” means the Revolving Facility.

“FCC” means Farm Credit Canada.

“FCC Credit Agreement” means the Credit Agreement dated March 28, 2013 between FCC and Village Farms Canada Limited Partnership, as amended, restated or replaced from time to time.

“FCC Credit Documents” means the FCC Credit Agreement and all loan documents, instruments, agreements, guarantees, security and mortgages entered into by any of the Credit Parties from time to time pursuant to the FCC Credit Agreement.

“FCC Debt” means Debt owing to FCC under the FCC Credit Agreement.

“FCC Lien” means the Liens arising under or created by the FCC Credit Documents.

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) of the quotations for the day of such transactions received by the Lender from three federal funds brokers of recognized standing selected by it.

“Financial Statements” means Audited Financial Statements or Unaudited Financial Statements, as applicable.

“Fiscal Year” means the fiscal year of each Credit Party, all of which currently end on December 31.

“Fixed Charge Coverage Ratio” means, with reference to the Borrower Group (on a consolidated basis) in respect of any particular Twelve Month Period (a) EBITDA, less cash Taxes, dividends paid and non-financed Capital Expenditures, divided by (b) Debt Service.

“GAAP” means generally accepted accounting principles in Canada as in effect from time to time as set forth in the opinions and pronouncements of the relevant Canadian public and private accounting boards and institutes which are applicable to the relevant Person and the circumstances as of the date of determination consistently applied (including, without limitation, to the extent the same are adopted (subject to Section 1.3 hereof) by the Borrower, the International Financial Reporting Standards adopted by the Accounting Standards Board of the Canadian Institute of Chartered Accountants).

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“Governmental Approvals” means, at any particular date of determination with respect to any Person or its property assets, all licenses, permits, consents, authorizations and approvals required from Governmental Authorities for the conduct of such Person’s business on such date.

“Governmental Authority” means any domestic or foreign government including any federal, provincial, state, territorial or municipal government and any executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, government or any Person, body, department, bureau, agency, board, tribunal, commission branch or office thereof or having or claiming to have jurisdiction over the Credit Parties or any of their respective property or assets.

“Guarantees” means all guarantees held from time to time by or on behalf of the Lender guaranteeing or intending to guarantee, directly or indirectly, repayment of all, or any part of, the Obligations.

“Guarantor” means each Person that now or hereafter guarantees, or is intended to guarantee, repayment of all, or any part of, the Obligations. As of the Closing Date, the Guarantors are set out on the signature pages hereto.

“Hazardous Substance” means any solid, liquid, gas, odour, heat, sound, vibration, radiation or combination of them that may impair the natural environment, injure or damage property or plant or animal life or harm or impair the health of any individual and includes, but is not limited to, petroleum, its derivatives, by-products or other hydrocarbons, asbestos, controlled products, wastes and any other materials are regulated by Environmental Laws or which may not by their nature be hazardous, either in fact or as defined in or pursuant to any Environmental Laws but which become prohibited, controlled or regulated by any Governmental Authority.

“Hedging Arrangement” means (a) any and all forward foreign exchange transactions, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transactions is governed by a or subject to any master agreement and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any international foreign exchange master agreement, or any other master agreement, including any such obligations or liabilities under any such master agreement and its related schedules, in each case for the purpose of hedging the Credit Parties’ exposure to exchange rates or currency valuations.

“Honour Date” means, with respect to any particular Letter of Credit, the date on which the Borrower receives notice of any payment by the Lender under such Letter of Credit.

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“Indemnified Person” means the Lender, its Affiliates, agents, representatives, attorneys any receiver or receiver and manager appointed by the Lender, and the respective officers, directors and employees of each of the foregoing Persons.

“Insured Receivables” means, at any particular time of determination, any Receivable that is insured at such time by Acceptable A/R Insurance.

“Intellectual Property” means all trade or brand names, business names, trade-marks (including logos), trade-mark registrations and applications, brand names, service marks, service mark registrations and applications, copyrights, copyright registrations and applications, issued patents and pending applications and other patent rights, industrial design registrations, pending applications and other industrial design rights, trade secrets, proprietary information and know-how, equipment and parts lists and descriptions, instruction manuals, inventions, inventors’ notes, research data, blue prints, drawings and designs, formulae, processes, technology and other intellectual property, together with all registered user agreements, technology transfer agreements and other agreements or instruments relating to any of the foregoing.

“Intercreditor Agreement” means the intercreditor agreement dated as of August 29, 2013 entered into among FCC, the Lender and the Obligors, as the same may be amended, varied, supplemented, modified, amended and restated, renewed or replaced at any time and from time to time.

“Interest Expense” means, with reference to any period, the sum of all interest charges (including imputed interest charges with respect to Capital Leases and all amortization of debt discount and expense) of the Borrower for such period determined in accordance with GAAP.

“Interest Payment Date” means, (a) with respect to any particular LIBOR Loan, the last day of each three month period during the Interest Period applicable to such LIBOR Loan and the Maturity Date, and (b) with respect to any other Loan, the last Business Day of each calendar month and the Maturity Date.

“Interest Period” means, with respect to any particular LIBOR Loan, the period commencing on the date on which such LIBOR Loan is advanced or continued or another Loan is converted into such LIBOR Loan, as applicable, and ending on the date that is one, two, three or six months (each month being a period of 30 days for purposes of this definition) thereafter, as selected by the Borrower in its Drawdown Notice; provided that:

(a)any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

(b)any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

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(c)no Interest Period shall extend beyond the Maturity Date.

“Interest Rate” means each or any of the interest rates referred to herein, including without limitation the Default Rate and the interest rates set out in Section 3.1.

“Inventory” means all “inventory”, as such term is defined in the PPSA, now or hereafter acquired by any Credit Party, including and any other goods which are held for sale or lease or are to be furnished under contracts of service or consumed in a Credit Party’s business, all raw materials, work in process and finished goods, all goods that are returned or repossessed that would otherwise have constituted inventory as otherwise set out herein, and all materials and supplies of every kind and nature used or usable in connection with the acquisition, manufacture, processing, supply, servicing, storing, packing, shipping, advertising, selling, leasing or furnishing of the foregoing, and any other components or parts thereof.

“Investment” means, with respect to any particular Person, any loan made, guarantee given, other contingent liability incurred, debt or equity investment made in any other Person, by such Person.

“Issuance Date” means the date on which a Letter of Credit is issued pursuant to this Agreement.

“ITA” means the Income Tax Act (Canada) and any successor thereto, and any regulations promulgated thereunder.

“Landlord” means any Person that is leasing a Real Property Interest to a Credit Party pursuant to a Lease between such Person and such Credit Party, whether oral or in writing.

“Laws” means, collectively, all international, foreign, federal, provincial, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority.

“Lease” means, any lease of real or personal property in respect of which any Credit Party has a leasehold interest, as lessee.

“Lender” means Bank of Montreal and its successors and assigns.

“Letter of Credit” means any commercial or standby letter of credit or letter of guarantee issued by the Lender or an affiliate of the Lender at the request of the Borrower pursuant to and in accordance with Article 5.

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“Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit, executed by the Borrower in the form required by the Lender at the time such application is made.

“Letter of Credit Fee” means, as of any particular date of determination in respect of any particular Letter of Credit, the rate per annum payable to the Lender on such date in respect of the face amount of such Letter of Credit, equal to 2.25% per annum, and calculated and payable quarterly in advance.

“LIBOR” means, with respect to any particular Interest Period for any particular LIBOR Loan, the rate per annum appearing on the Telerate Page 3750 at approximately 11:00 a.m. (London, England time) on the second Business Day prior to the first day of such Interest Period, and if such rate is not available in respect of such Interest Period, then the rate of interest per annum, calculated on the basis of a year of 360 days, at which the Lender is offered deposits in US Dollars by prime banks in the London interbank market at approximately 11:00 a.m. (London, England time) on the second Business Day prior to the first day of such Interest Period; in each case, for a period comparable to such Interest Period and in an amount approximately equal to the amount of the LIBOR Loan outstanding during such Interest Period.

“LIBOR Loan” means a Loan that bears interest at a rate based upon LIBOR.

“LIBOR Margin” means 1.50% per annum.

“Lien” means any lien (whether statutory or otherwise), mortgage, pledge, deposit arrangement, preference, priority assignment, security interest, deed of trust, hypothecation, sequestration, deemed trust, charge or other encumbrance or preferential arrangement of any kind or nature whatsoever (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease in the nature thereof, easement, right of way, or capitalized Lease, any option, trust or other preferential arrangement having the practical effect of any of the foregoing, and in the case of Equity Interest, any purchase option, call or similar right of a third party with respect to such Equity Interest.)

“Loan” means any Revolving Loan, including a Prime Rate Loan, a Base Rate Loan, a US Prime Rate Loan or a LIBOR Loan.

“Lockbox Agreement” means the lockbox and blocked account agreement dated August 29, 2013 between BMO Harris Bank N.A., the US Borrower and the Lender, as amended, restated or replaced from time to time.

“Loss” means any loss whatsoever, whether direct or indirect, including expenses, costs, damages, judgments, penalties, awards, assessments, fines and any and all fees, disbursements and expenses of counsel, experts and consultants.

“Material Adverse Change” means a change that results in, or would reasonably be expected to result in a Material Adverse Effect.

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“Material Adverse Effect” means (a) a material adverse effect on the business, operations, assets, liabilities (actual or contingent), property or financial condition of the Credit Parties, taken as a whole; (b) a material adverse effect on the ability of the Credit Parties, taken as a whole, to perform their obligations under the Credit Documents; or (c) a material adverse effect on the rights and remedies of the Lender under the Credit Documents or the Lender’s ability to enforce its rights or remedies under this Agreement or any other Credit Document.

“Material Contract” means, with respect to any particular Person, any contract, licence or other agreement to which such Person is a party or by which it is bound that is material to such Person’s business, operations, properties, assets or prospects, having regard to the subject matter thereof or the potential consequences of a breach or termination thereof.

“Maturity Date” means the earlier of (i) the third anniversary of the Closing Date (namely __________________, 2016), and (ii) the date on which the Facility is terminated earlier pursuant to this Agreement.

“Mortgage” means any deed of trust, trust deed, hypothec, charge or mortgage in respect of a freehold or leasehold interest in real property made, or required to be made, by any Credit Party in favour or for the benefit of the Lender, in form and substance reasonably satisfactory to the Lender.

“Net Income” means, with respect to the Borrower (on a consolidated basis) for any period, net income of the Borrower for such period.

“Obligations” means all loans, advances, debts, liabilities and obligations for the performance of covenants, tasks or duties or for the payment of monetary amounts (whether or not performance is then required or contingent, or whether or not those amounts are liquidated or determinable) owing by the Borrower to the Lender or any of its Affiliates, of any kind or nature, present or future, whether or not evidenced by any agreement or other instrument, owing under or in connection with any or all of the Credit Documents (including without limitation Bank Products), including all obligations owing by the Borrower to the Lender under the Facility.

“Original Currency” is defined in Section 15.7.

“Other Currency” is defined in Section 15.7.

“PACA” means the Perishable Agricultural Commodities Act (PACA) of 1930 – (P.L. 71-325 (June 10, 1930), as amended from time to time.

“PACA Priority Payables” means any amount due and payable by a Credit Party to a third party producer that is secured by a Lien or trust created pursuant to PACA, that encumbers any Eligible Receivables and that ranks, or is capable of ranking prior to or pari passu with any Lien on such Eligible Receivables granted in favour of the Lender.

“Permitted Collateral Location” is defined in Section 12.1(gg).

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“Permitted Liens” means, with respect to any property or asset of any Person:

(a)Liens created by the Security documents;

(b)Liens for Taxes which are not delinquent or remain payable without penalty or which are being contested in good faith by appropriate proceedings commenced in a timely manner and diligently pursued and for which appropriate reserves have been taken in accordance with GAAP, provided that, the aggregate amount of all outstanding Taxes secured by such Liens do not at any time exceed $100,000 and there is no material risk, as determined by the Bank in its sole discretion, that enforcement proceedings in respect of any such Lien will result in the seizure or sale of any Collateral;

(c)carriers’, warehousemen’s, mechanics’, landlords’, materialmen’s, repairmen’s or other similar Liens arising in the ordinary course of business which are not delinquent for more than 90 days or remain payable without penalty or which are being contested in good faith by appropriate proceedings, provided that the aggregate amount of all such Liens does not at any time exceed $100,000 and there is no material risk, as determined by the Bank in its sole discretion, that enforcement of any such Lien would result in the seizure or sale of any Collateral;

(d)Liens (other than any Lien imposed in respect of a Canadian Pension Plan) consisting of pledges or deposits required in the ordinary course of business in connection with workplace safety insurance, employment insurance and other social security legislation or to secure the performance of tenders, statutory obligations, surety, stay, customs and appeals bonds, bids, leases, governmental contracts, trade contracts, performance and return of money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money) or to secure liability to insurance carriers;

(e)Purchase Money Liens securing indebtedness not in excess of $100,000 in the aggregate;

(f)Liens arising solely in respect of indebtedness between Credit Parties provided that such indebtedness is assigned to the Lender and such Liens are subordinated to Liens arising under the Security;

(g)permits, licenses, agreements, restrictions, easements, rights-of-way and other similar interests in land (including permits, licenses, agreements, restrictions, easements and rights-of-way for sidewalks, public ways, sewers, drains, gas steam and water mains, utilities, telephone and telegraph conduits, poles, wires and cables) which do not, in the reasonable opinion of the Lender, materially impair the use or the value of the real property and improvements thereon;

(h)title defects or irregularities in respect of real property, and reservations, limitations, provisos and conditions, if any, expressed in any original grants from the Crown, provided that in the opinion of the Lender, such matters do not materially impair or detract from the use or the value of the real property and improvements thereon or materially interfere with the business of the Credit Parties;

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(i)Liens held by Landlords in respect of property held under Lease and any other Liens of a similar nature which do not, in the opinion of the Lender, materially impair the use of such property in the operation of the business of the Credit Parties or the value of such property for the purposes of such business;

(j)applicable municipal and other governmental restrictions affecting the use of real property or the nature of any structure which may be erected thereon, provided that in the reasonable opinion of the Lender, such matters do not materially impair or detract from the use or the value of the real property and improvements thereon or materially interfere with the business of the Credit Parties;

(k)the right reserved to or vested in any Governmental Authority to terminate any lease, licence, franchise, grant or permit, or to require annual or other payments as a condition to the continuance thereof, provided that any such right does not, in the opinion of the Lender, materially impair the value thereof or materially interfere with the business of the Credit Parties;

(l)the FCC Lien which is subject to the provisions of the Intercreditor Agreement;

(m)Liens arising in respect of any PACA Priority Payables; and

(n)Liens disclosed in Exhibit “E” as of the Closing Date and any other Lien consented to in writing by the Lender.

provided that the use of the term “Permitted Liens” to describe the foregoing Liens shall mean that such Liens are permitted to exist (whether in priority to or subsequent in priority to the Security, as determined by Applicable Law); and for greater certainty such Liens shall not be entitled to priority over the Security by virtue of being described in this Agreement as “Permitted Liens”.

“Person” means any natural person, sole proprietorship, partnership, syndicate, trust, joint venture, Governmental Authority or any incorporated or unincorporated entity or association of any nature.

“PPSA” shall mean the Personal Property Security Act (British Columbia) together with any regulations thereunder, in each case as in effect on the date hereof.

“Prime Rate” means, on any particular date of determination, the greater of (a) the rate of interest, expressed as an annual rate, announced on such date by the Lender as its reference rate then in effect for determining interest rates on Canadian Dollar denominated commercial loans made by it in Canada, and (b) the CDOR Rate in effect from time to time, plus 100 Basis Points per annum.

“Prime Rate Loan” means a Loan in Canadian Dollars that bears interest at a rate based upon the Prime Rate.

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“Prime Rate Margin” means 0.25% per annum.

“Principal Amount” means (a) with reference to any Loan, the principal amount thereof; (b) with reference to a Bankers’ Acceptance, the face amount thereof; (c) with reference to a Letter of Credit, the maximum amount payable to the beneficiary thereof; and (d) with reference to a Hedging Arrangement, the Deemed Hedge Exposure.

“Priority Payables” means, as at any particular time of determination, any amount due and payable at such time by a Credit Party that is secured by a Lien (whether choate or inchoate) or a statutory right in favour of a Governmental Authority, that encumbers any Collateral and that ranks, or is capable of ranking prior to or pari passu with any Lien on such Collateral granted in favour of the Lender, including without limitation, amounts due deducted or withheld, as applicable, and not yet paid, contributed or remitted, as applicable, by any Credit Party in respect of vacation pay, termination and severance pay, realty, municipal or similar Taxes, or pursuant to any legislation relating to workers’ compensation, employment insurance, the ITA, any Canadian Pension Plan, the Wage Earners Protection Act or any similar legislation. Notwithstanding the foregoing, only 50% of all PACA Priority Payables shall be excluded from the calculation of Priority Payables as at the Closing Date, provided, however, that after the Closing Date the Lender may in its sole discretion revoke such exclusion of 50% (or change the percentage amount of such exclusion, including down to 0%) of all PACA Priority Payables by notice to the Borrower.

“Purchase Money Lien” means any Lien on specific fixed assets (including Capital Leases but, for greater certainty, excluding real property) granted by such Credit Party to secure payment of the purchase price thereof, and all extensions, renewals or replacements of such loan, provided that the obligations secured thereby do not at any time exceed 100% of the lesser of the cost or fair market value of such fixed assets of a Credit Party and, with respect to any extension, renewal or replacement of such Lien, the obligations secured thereby are not increased.

“Real Property Interest” means, at any particular time of determination, any interest (whether fee, leasehold or otherwise) in real property owned at such time by any Credit Party.

“Receivables” means all “accounts”, as such term is defined in the PPSA, now or hereafter acquired by any Credit Party and includes all accounts, contract rights, instruments, and chattel paper relating to accounts, drafts and acceptances of such Credit Party, and all other obligations owing to any other Credit Party arising out of or in connection with the sale or lease of Inventory, the performance of services or otherwise, all guarantees and other security therefor, whether secured or unsecured, now existing or hereafter created, and whether or not specifically sold or assigned to the Lender hereunder or in connection herewith.

“Release” means a discharging, spraying, injection, abandonment, depositing, spilling, leaking, seeping, pouring, emitting, emptying, throwing, dumping, placing, pumping, escaping, leaching, migrating, dispensing, dispersal, disposing, and exhausting, and when used as a noun has a correlative meaning.

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“Reserves” means reserves that limit the Excess Availability under the Revolving Facility, consisting of reserves against Eligible Receivables established from time to time by the Lender, in the Lender’s sole discretion in accordance with Section 2.6, including without limitation rent reserves, reserves in respect of Bank Products, reserves in respect of suppliers the Lender has identified would be likely to exercise unpaid seller’s thirty (30) day goods rights to repossess goods or revendication rights, reserves in respect of dilution in excess of the percentage assumed by the Lender for the purpose of establishing the advance rates used to calculate the Borrowing Base, warehousemen’s and bailees’ charges reserves established from time to time by the Lender in its sole discretion in respect of Priority Payables and with respect to amounts that the Lender believes may be required to be paid in connection with the preservation, protection, collection or realization of Collateral, or in connection with any obligation of any Credit Party set forth in any Credit Document.

“Revolving Commitment” means the commitment of the Lender to make Revolving Loans and to issue Letters of Credit under the Revolving Facility, up to an aggregate outstanding Principal Amount not exceeding $10,000,000.

“Revolving Facility” means the revolving facility established pursuant to Section 2.1 hereof.

“Revolving Loan” means any Loan made under the Revolving Facility.

“Rollover” means the extension of any existing LIBOR Loan, Bankers’ Acceptance or Letter of Credit for an additional Interest Period or Contract Period, as applicable.

“Rollover Date” means the date on which a Rollover occurs.

“Schedules” means the schedules to this Agreement, which are listed in Section 1.11.

“Securities” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), including, without limitation, partnership interests and membership interests, and any and all warrants, rights or options to purchase or other arrangements or rights to acquire any of the foregoing.

“Security” means all security agreements and other documents held by the Lender from time to time which secure or are intended to secure, directly or indirectly, repayment of the Obligations, and the security interests, assignments and Liens constituted thereby;

“Solvent” means:

(a)with respect to a Canadian Credit Party that, as of the particular date of determination, (i) the aggregate property of such Credit Party is sufficient, if disposed of at a fairly conducted sale under legal process, to enable payment of all its obligations, due and accruing due; (ii) the aggregate property of such Credit Party is, at a fair valuation, sufficient to enable payment of all its obligations, due and accruing due; (iii) such Credit Party is able to meet its obligations as they generally become due; and (iv) such Credit Party has not ceased paying its current obligations in the ordinary course of business as they generally become due;

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(b)with respect to any US Credit Party that, as of the date of determination, (i) the sum of such Credit Party’s debt (including contingent liabilities) does not exceed the fair market value of such Credit Party’s assets; (ii) such Credit Party’s capital is not unreasonably small in relation to its business as contemplated on the Closing Date and reflected in the projections and Business Plan delivered to the Lender prior to the Closing Date or with respect to any transaction contemplated or undertaken after the Closing Date; (iii) such Credit Party has not incurred and does not intend to incur, and does not believe (nor should it reasonably believe) that it will incur, debts beyond its ability to pay as they become due (whether at maturity or otherwise); and (iv) such Credit Party is “solvent” within the meaning given that term and similar terms under Applicable Laws relating to fraudulent transfers and conveyances; and

(c)with respect to any other Credit Party that, as of the particular date of determination, such Credit Party is “solvent” under Applicable Law;

and for purposes of this definition, the amount of any Contingent Obligation at such time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Subordinated Debt” means Debt owing by any Credit Party in respect of which the payee has agreed to postpone payment of all principal and interest thereon to payment and satisfaction in full of the Obligations and such payee has subordinated any security taken in respect of such Debt to the Lien of the Lender, all in form and substance satisfactory to the Lender in its sole discretion.

“Subsidiary” of any particular Person means any other Person in respect of which such Person and/or any one of its Affiliates holds, directly or indirectly, other than by way of security only, Securities or other Equity Interests to which are attached more than 50% of the votes that may be cast (or, through operation of law or otherwise, has the ability to elect or cause the election of a majority of the directors, members, or individuals holding similar positions, or having similar powers, to the board of directors, or other governing body of such other Person or otherwise control its activities.

“Tax” and “Taxes” include, at any time, all taxes, surtaxes, duties, levies, imposts, rates, fees, assessments, withholdings, dues and other charges of any nature imposed by any Governmental Authority (including income, capital (including large corporations), withholding, consumption, sales, use, transfer, goods and services or other value-added, excise, customs, anti-dumping, countervail, net worth, stamp, registration, franchise, payroll, employment, health, education, business, school, property, local improvement, development, education development and occupation taxes, together with all fines, interest, penalties on or in respect of, or in lieu of or for non-collection of, those taxes, surtaxes, duties, levies, imposts, rates, fees, assessments, withholdings, dues and other charges.

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“Telerate Page 3750” means the display of interest settlement rates for US Dollar deposits in the London Interbank Eurocurrency Market designated as page 3750 on the service provided by Bridge Telerate (or such other display as may replace it on that service for the purpose of displaying LIBOR).

“Twelve Month Period” means the period of twelve (12) calendar months ending on or immediately prior to such date of determination.

“Type of Advance” means any type of Accommodation, determined by reference to the interest or discount option applicable thereto.

“Unaudited Financial Statements” means in respect of any month, the unaudited consolidated balance sheets of the Borrower Group as at the last day of such month and the related unaudited consolidated and consolidating income statements, cash flow statements and changes in shareholders’ equity for such month, as applicable, and the accompanying notes thereto, all prepared in accordance with GAAP and setting forth in each case, in comparative form, figures for the corresponding period for the preceding month, as applicable, all in reasonable detail and fairly presenting in all material respects the financial position and the results of operations of the Borrower Group as at the date thereof and for the month then ended.

“US Benefit Plan” means, with respect to any US Credit Party, any “employee benefit plan” as defined in Section 3(3) of ERISA (other than a multiemployer plan as defined in Section 3(37) or Section 4001(a)(3) of ERISA) which is sponsored, maintained or contributed to, or required to be contributed to, by such Credit Party or any of its ERISA Affiliates for the benefit of current or former U.S. employees of such Credit Party or any of its ERISA Affiliates.

“US Borrower” means Village Farms, L.P., a limited partnership formed and existing under the laws of Delaware, and its successors and permitted assigns.

“US Credit Party” means any Credit Party organized and existing under the laws of the United States of America or any state or subdivision thereof.

“US Dollars” and the symbol “US$” each means lawful money of the United States of America.

“US Pension Plan” means a US Benefit Plan that is a “pension plan”, as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which an Credit Party, or any corporation, trade or business that is, along with any other Person, a member of a Controlled Group, may reasonably be expected to have liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.

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“US Prime Rate Margin” means 0.25% per annum.

“US Prime Rate Loan” means a Loan in US Dollars made by the Chicago Branch that bears interest at a rate based upon the US Prime Rate.

"US Prime Rate" means a fluctuating rate of interest per annum, expressed on the basis of a year of 360 days, as applicable, which is equal at all times to the greater of (a) the reference rate of interest (however designated) of the Chicago Branch for determining interest chargeable by it on United States Dollar commercial loans in the United States and (b) the sum of (i) the Federal Funds Rate and (ii) 100 Basis Points per annum. Any change in the US Prime Rate shall be effective on the date the change becomes effective generally.

“Value” means, as at any particular date of determination: (a) with respect to Receivables, the face amount thereof, exclusive of all sales, excise and similar taxes; and (b) with respect to Purchase Money Liens, the lesser of cost and fair market value, determined in accordance with GAAP.

“written” or “in writing” includes printing, typewriting, or any electronic means of communication capable of being legibly reproduced at the point of reception.

Section 1.2 Business Day

Except as otherwise expressly provided herein, if any payment or calculation is to be made pursuant to this Agreement, or any other action is to be taken pursuant to this Agreement, on or as of a day which is not a Business Day, such payment, calculation or other action, as applicable will be made or taken, as applicable, on or as of the next day that is a Business Day unless the Business Day next following the day is in the next following month, in which event the payment, calculation or action shall be made or taken, as applicable, on or as of the immediately preceding Business Day.

Section 1.3 Accounting Principles and Calculations

Unless otherwise specifically provided herein, any accounting term used in this Agreement shall have the meaning customarily given such term in accordance with GAAP, and all financial computations hereunder shall be computed in accordance with GAAP consistently applied. That certain items or computations are explicitly modified by the phrase “in accordance with GAAP” shall in no way be construed to limit the foregoing. If there occurs after the date hereof any change in GAAP from that used in the preparation of the financial statements referred to in Section 12.1(5) or if, after the date hereof the Borrowers and its Subsidiaries (if any) adopt any other accounting principles for use in the preparation of their financial statements (such changes in GAAP and such adoption being referred to herein as “Accounting Changes”) that affects in any respect the calculation of any covenants contained in this Agreement (including those in Section 13.3), the Lender and the Borrower shall negotiate in good faith amendments to the provisions of this Agreement that relate to the calculation of such covenants with the intent of having the respective positions of the Lender and the Borrower after such Accounting Changes conform as nearly as possible to their respective positions as of the date of this Agreement and, until any such amendments have been agreed upon by the Lender and the Borrower, or if no such changes are mutually agreed upon, the covenants in this Agreement (including those in Section 12.3) shall be calculated as if no Accounting Changes have occurred and all financial statements of the Borrower and its Subsidiaries (if any) shall be prepared and delivered in accordance with GAAP.

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Section 1.4 Conflict

Except as otherwise provided in Article 5 with respect to Letters of Credit or in Article 7 with respect to Hedging Arrangements, if there is a conflict or inconsistency between any provision of this Agreement and any provision of another Credit Document contemplated by or delivered under or in connection with this Agreement, the relevant provision of this Agreement shall prevail. For greater certainty, notwithstanding events of default set forth in such other Credit Documents, the events of default contained in such other Credit Documents will only be applicable to the extent that the relevant representation, warranty and/or covenant relating specifically to the property secured, charged or hypothecated by such other Credit Document is not addressed in the Credit Agreement.

Section 1.5 Currency

Unless otherwise specified, all dollar amounts stated herein refer to Canadian Dollars. For greater certainty the Borrower may satisfy any of its reporting obligations hereunder using figures in Canadian or US Dollars, at its option.

Section 1.6 Time of Essence

Time shall be of the essence in all provisions of this Agreement.

Section 1.7 Headings and Table of Contents

The division of this Agreement into sections, the insertion of headings and the provision of a table of contents are for convenience of reference only and are not to affect the construction or interpretation of this Agreement.

Section 1.8 General Interpretation

Unless otherwise specified, words importing the singular include the plural and vice versa and words importing gender include all genders. Unless otherwise specified, references in this Agreement to Sections, Schedules and exhibits are to sections of, and schedules and exhibits to, this Agreement. Unless otherwise specified, each reference to an enactment of legislation is deemed to be a reference to that enactment of legislation, and to the regulations made under that enactment, as amended or re-enacted from time to time. Unless otherwise specified, references to time of day or date mean the local time or date in the City of Toronto, Ontario. “Including” means “including without limitation” and the term “including” shall not be construed to limit any general statement that precedes such term to the specific or similar items or matters immediately following it.

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Section 1.9 Computation of Time Periods

In this Agreement and any other Credit Document, except where expressly otherwise provided, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” mean “to but excluding”.

Section 1.10 Severability

If any provision of this Agreement is or becomes illegal, invalid or unenforceable in any jurisdiction, such provision shall be deemed to be severable and the illegality, invalidity or unenforceability of such provision shall not affect the legality, validity or enforceability of the remaining provisions of this Agreement or the legality, validity or enforceability of such provision in any other jurisdiction in which such provision is not illegal, invalid or unenforceable.

Section 1.11 Schedules and Exhibits

The following Schedules and Exhibits are attached to and form part of this Agreement:

Schedule	Description
Schedule 11.1(d)	Business and Operations
Schedule 11.1(e)	Approvals
Schedule 11.1(j)	Litigation
Schedule 11.1(l)	Taxes
Schedule 11.1(m)	Equity Interests
Schedule 11.1(s)	Intellectual Property
Schedule 11.1(t)	Real Property and Locations of Collateral
Schedule 11.1(u)(i)	Environmental Matters
Schedule 11.1(w)	Material Contracts and Licences
Schedule 11.1(x)	Existing Debt
Schedule 11.1(hh)	Deposit Accounts
Schedule 12.1(4)	Insurance
Schedule 12.2(8)	Transactions with Affiliates

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Exhibit	Description
Exhibit “A”	Borrowing Base Certificate
Exhibit “B”	Compliance Certificate
Exhibit “C”	Drawdown Notice
Exhibit “D”	Rollover/Conversion Notice
Exhibit “E”	Permitted Liens

ARTICLE 2

CREDIT FACILITY

Section 2.1 Facility

Subject to the terms and conditions set forth in this Agreement, the Lender hereby agrees to make available to the Borrowers a revolving credit facility (the “Revolving Facility”) in a maximum Principal Amount not exceeding the Revolving Commitment.

Section 2.2 Advances

Subject to the terms and conditions set forth in this Agreement the Borrowers may borrow, repay and reborrow under the Revolving Facility provided that the Aggregate Revolver Outstandings do not at any time exceed the lesser of the Revolving Commitment and the Borrowing Base at such time.

Section 2.3 Availments

The Borrowers may avail themselves of the Facility at any time and from time to time prior to the Maturity Date, subject to and in accordance with the terms and conditions set forth herein. Subject to the terms and conditions set forth in this Agreement, the Lender agrees to make Accommodations available to (a) the Canadian Borrower under the Facility by way of Prime Rate Loans, Base Rate Loans, Bankers’ Acceptances, LIBOR Loans, Letters of Credit and Hedging Arrangements, and (b) to the US Borrower under the Facility by way of Letters of Credit and US Prime Rate Loans. For greater certainty, all Advances to the US Borrower shall be made by the Chicago Branch. The Borrowers have the option of allocating any portion of the Facility to the US Borrower in US Dollars and to change such allocation on a quarterly basis at the end of each fiscal quarter upon providing the Lender with ten (10) Business Days prior written notice of such allocation. As of the Closing Date, the current allocation of the Facility to the US Borrower and BMO Chicago is US$1,650,000.

.

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Section 2.4 Purpose of Advances

The Borrowers shall use the proceeds of all Advances hereunder for such legal and proper purposes as are consistent with all Applicable Laws and with the terms of this Agreement; and without limiting the foregoing, the Borrowers shall use the proceeds of any particular Advance as follows:

(a)the proceeds of all Advances under the Revolving Facility shall be used solely to provide for the ongoing general corporate and working capital purposes of the Borrower and other relevant Credit Parties, and to repay certain existing indebtedness of the Borrower; and

(b)for greater certainty, the proceeds of all Advances under the Hedging Arrangements shall be used solely to assist in foreign exchange risk management by the Canadian Borrower in the normal course of its operations.

Section 2.5 Borrowing Procedures

(1)Drawdown Notice. Each Drawdown (other than an Advance under a Hedging Agreement) shall be made upon the relevant Borrower’s irrevocable written notice, substantially in the form attached as Exhibit “C” (a “Drawdown Notice”), delivered to the Lender at or before the applicable time specified below for such Type of Advance:

Type of Advance	Notice
Prime Rate Loans	Before 11:00 a.m. on the applicable
	Drawdown Date.
Base Rate Loans	Before 11:00 a.m. on the applicable
	Drawdown Date.
US Prime Rate Loans	Before 11:00 a.m. on the applicable
	Drawdown Date.
Bankers’ Acceptances	Before 11:00 a.m. two Business Days prior
	to the requested Drawdown Date.
LIBOR Loans	Before 11:00 a.m. three Business Days prior
	to the requested Drawdown Date.
Letters of Credit	Before 11:00 a.m. five Business Days prior
	to the requested Issuance Date.

Each Drawdown Notice must specify the Borrower’s requested Type of Advance, Drawdown Date (which must be a Business Day), Principal Amount and the Contract Period or Interest Period, if applicable.

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(2)Drawdown Notice Irrevocable. Any Drawdown Notice made pursuant to Section 2.5(1) shall be irrevocable and the Borrower shall be bound to borrow the funds requested therein in accordance therewith. The crediting of the applicable Advance to the Borrower in the Lender’s records conclusively establishes, in the absence of manifest error, the Borrower’s obligation to repay such Advance as provided herein.

(3)No Liability. The Lender shall be entitled to rely upon, and shall not incur any liability to the Borrower as a result of acting upon, any Drawdown Notice. The Lender shall not be responsible for any error or omission in any Drawdown Notice or in the performance thereof and the Borrower shall indemnify the Lender for any Loss or expense suffered or incurred by the Lender as a consequence of the Lender acting upon instructions given in any such Drawdown Notice.

(4)Limits on Advances. Notwithstanding any other term of this Agreement, the Borrower shall not request an Advance under the Facility, and the Lender shall not be obligated to make an Advance under the Facility, if:

(a)the amount of such Advance would exceed the Excess Availability under the Facility;

(b)such Advance would have a maturity date, Contract Period or Interest Period, as applicable, that extends beyond the Maturity Date of the Facility;

(c)Section 3.4 would be applicable to such Advance;

(d)such Advance is a Bankers’ Acceptance and after issuing such Bankers’ Acceptance, more than three (3) different Contract Periods would be in effect for outstanding Bankers’ Acceptances; or

(e)such Advance is a LIBOR Loan and after making such Advance, more than three (3) different Interest Periods would be in effect for outstanding LIBOR Loans.

(5)Determination of Rates and Fees. Each determination by the Lender of any applicable rate or fee shall, in the absence of manifest error, be final, conclusive and binding on the Borrowers.

Section 2.6 Reserves

Notwithstanding any other provision of this Agreement to the contrary, the Lender shall have the right at any time and from time to time to establish Reserves, and to adjust the amount of any existing Reserve, against the amount of Revolving Loan which the Borrower may otherwise request hereunder, in such amounts and with respect to such matters as the Lender shall deem necessary or appropriate, including, without limitation, (i) Reserves in respect of dilution and Reserves in respect of amounts owing by any Credit Party to holders of Liens that may have priority over the Liens of the Lender (regardless of whether such third party Liens are Permitted Liens) and (ii) Reserves in respect of any accounts payable that are more than thirty (30) days past the date on which payment thereof is due. The amount of all Reserves established by the Lender shall be subtracted from the Borrowing Base when calculating the Excess Availability in respect of the Facility. In addition, the Lender may from time to time reduce the percentages applicable to Eligible Accounts as they relate to the Borrowing Base, to the extent determined necessary or appropriate by the Lender.

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Section 2.7 Bank Products

The Borrower may request and the Lender may, in its sole and absolute discretion, arrange for the Borrower to obtain, Bank Products. If Bank Products are provided by an Affiliate of the Lender, the Borrower agrees to indemnify and hold the Lender harmless from all costs and obligations now or hereafter incurred by the Lender which arise from any indemnity given by the Lender to such Affiliate related to such Bank Products. This indemnity obligation shall survive payment of the Obligations and termination of this Agreement. The Borrower acknowledges and agrees that the obtaining of Bank Products from the Lender or any of its Affiliates is subject to all rules and regulations of the Lender or such Affiliate that are applicable to such Bank Products.

Section 2.8 Conversion of Loans and Bankers’ Acceptances

Subject to this Agreement, the Canadian Borrower may, during the term of this Agreement, effective on any Business Day, convert, in whole or in part, any outstanding Advance (other than Advances by way of Letter of Credit or Hedging Arrangement) under the Facility into another Type of Advance permitted under the Facility (other than an Advance by way of Letter of Credit or Hedging Arrangement) upon the Borrower’s irrevocable written notice, substantially in the form attached hereto as Exhibit “D” (in either case, a “Conversion Notice”, delivered to the Lender at or before the applicable time specified in Section 2.5(1) for the Type of Advance into which the outstanding Advance is to be converted under Section 2.5(1), subject to the following conditions:

(a)notwithstanding any other term in this Agreement, no Advance denominated in Canadian Dollars may be converted into an Advance denominated in US Dollars and no Advance denominated in US Dollars may be converted into an Advance denominated in Canadian Dollars;

(b)each Conversion shall be for minimum aggregate amounts and whole multiples in excess thereof as are specified in respect of that Type of Advance in this Article 2;

(c)a LIBOR Loan may only be converted on the last day of the relevant Interest Period;

(d)a Bankers’ Acceptance may only be converted on the last day of the relevant Contract Period;

(e)a Conversion into a LIBOR Loan shall only be made to the extent that the conditions outlined in Section 3.4 shall not exist on the relevant Conversion Date; and

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(f)no Event of Default shall have occurred and be continuing on the relevant Conversion Date or after giving effect to the Conversion to be made on such Conversion Date.

Section 2.9 Conversion and Rollover Not Repayment

No Conversion or Rollover shall constitute a repayment of any Advance or a new Advance.

Section 2.10 Deposit of Proceeds of Advances

The Lender shall credit to the Canadian Borrower’s Account or the US Borrower’s Account, as applicable, on the applicable Drawdown Date (a) the proceeds of each Advance made by way of Prime Rate Loan, Base Rate Loan, US Prime Rate Loan or LIBOR Loan, and

(b)with respect to each Bankers’ Acceptance purchased by the Lender on such Drawdown Date, the amount by which the face amount of such Bankers’ Acceptance exceeds the purchase price paid by the Lender.

Section 2.11 Evidence of Obligations

The Lender shall open and maintain at its Branch of Account, accounts and records evidencing the Obligations of the Borrowers under this Agreement and all Advances and repayments made hereunder, which shall constitute conclusive evidence thereof in the absence of manifest error provided, however, that the obligations of the Borrowers and the other Credit Parties to make payment under and in connection with this Agreement and the other Credit Documents shall not be affected by any failure of the Lender to make or maintain any such account or record. The Lender may, but shall not be obligated to, require the Borrower to execute and deliver to the Lender promissory notes from time to time as additional evidence of the Obligations.

ARTICLE 3

INTEREST, FEES AND EXPENSES

Section 3.1 Interest on Loans

(1)The Borrower shall pay to the Lender interest calculated and payable in accordance with this Article 3, both before and after maturity, default and judgment on the unpaid Principal Amount of each Loan made hereunder from the date of the Advance until the Principal Amount of such loan is repaid in full, at the following rates per annum:

(a)with respect to each Prime Rate Loan, at a rate per annum equal to the Prime Rate plus the Prime Rate Margin;

(b)with respect to each Base Rate Loan, at a rate per annum equal to the Base Rate plus the Base Rate Margin;

(c)with respect to each US Prime Rate Loan, at a rate per annum equal to the US Prime Rate plus the US Prime Rate Margin; and

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(d)with respect to each LIBOR Loan, at a rate per annum equal, at all times during each LIBOR Interest Period for such LIBOR Loan, to the sum of the LIBOR for such LIBOR Interest Period plus the LIBOR Margin.

(2)Each change in the Prime Rate, Base Rate or US Prime Rate announced by the Lender shall result in a corresponding change in the rate of interest payable hereunder for Prime Rate Loans or Base Rate Loans, as applicable.

(3)If any Event of Default occurs and is continuing and the Lender in its discretion so elects, then, while any such Event of Default is continuing, and, after notification of the Borrower, all of the Obligations shall bear interest at the Default Rate applicable thereto.

Section 3.2 Overdue Amounts

(1)The Borrowers shall pay to the Lender interest as prescribed in this Agreement both before and after demand, default and judgment. Interest on any overdue amounts hereunder or in connection herewith is payable upon demand by the Lender (a) for overdue amounts in Canadian Dollars, at the Prime Rate plus the Applicable Margin plus 2.00% per annum, (b) for overdue amounts in US Dollars from the Canadian Borrower at the Base Rate plus the Applicable Margin plus 2.00% per annum, and (c) for overdue amounts in US Dollars from the US Borrower (including in respect of any overdue amounts required to indemnify the Lender in respect of a drawing made under a Letter of Credit issued at the request of the US Borrower), at the US Prime Rate plus the Applicable Margin plus 2.00% per annum in each case calculated on a daily basis on the actual number of days elapsed in a 360, 365 or 366 day year, as applicable, computed from the date the amount becomes due until such overdue amount is paid in full, and shall be compounded on the last Business Day of each month ending during such period of arrears. Without duplication, the Borrower shall pay interest on any Excess Amount, upon demand by the Lender (a) for Excess Amounts in Canadian Dollars, at the Prime Rate plus the Applicable Margin plus 2.00% per annum, and (b) for Excess Amounts in US Dollars, at the Base Rate plus the Applicable Margin plus 2.00% per annum, in each case calculated on a daily basis on the actual number of days elapsed in a 365 or 366 day year, as applicable, computed from the date on which such Excess Amount arises to, but excluding, the date on which such Excess Amount is repaid and shall be compounded on the last Business Day of each month ending during such period of arrears.

Section 3.3 Confirmation of Certain Rates

(1)The Lender shall, prior to 11:00 a.m. (Toronto time) on the third Business Day immediately preceding the commencement of each Interest Period in respect of a LIBOR Loan, including the first such Interest Period, endeavour to inform the Borrower of the prevailing LIBOR for the relevant Interest Period.

(2)The Lender shall, prior to 11:00 a.m. (Toronto time) on the Business Day immediately preceding the date on which any Bankers’ Acceptance is issued, endeavour to inform the Borrower of the applicable discount rate which will be used to determine the purchase price thereof.

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Section 3.4 Inability to Determine Rates

(1)If the Lender determines that for any reason a market for Bankers’ Acceptances does not exist at any time or the Lender cannot for other reasons, after reasonable efforts, readily sell Bankers’ Acceptances or perform its other obligations under this Agreement with respect to Bankers’ Acceptances, the Lender will promptly so notify the Borrower. Thereafter, the Borrower’s right to request the acceptance of Bankers’ Acceptances shall be and remain suspended until the Lender determines, and the Lender notifies the Borrower, that the condition causing such suspension no longer exists.

(2)If the Lender determines for any reason that adequate and reasonable means do not exist for determining the LIBOR for any requested LIBOR Interest Period with respect to a proposed LIBOR Advance, or that the LIBOR for any requested LIBOR Interest Period with respect to a proposed LIBOR Advance does not adequately and fairly reflect the cost to the Lender of funding such LIBOR Advance, the Lender will promptly so notify the Borrower. Thereafter, the obligation of the Lender to make or maintain LIBOR Advances shall be suspended until the Lender revokes such notice. Upon receipt of such notice, the Borrower may, upon two Business Days’ prior written notice to the Lender, revoke any pending request for a borrowing, conversion or continuation of LIBOR Advances and, unless the Lender receives such revocation notice not less than two Business Days’ prior to the applicable proposed date for the LIBOR Advance, the Borrower will be deemed to have converted such request into a request for a borrowing of Base Rate Advances in the amount specified therein.

Section 3.5 Payment of Interest

(1)Accrued interest in relation to each LIBOR Loan shall be payable in arrears on the earlier of the last day of (i) the relevant Interest Period; and (ii) the 90 day period commencing with the first day of such Interest Period, provided that if such last day of such 90 day period is not a Business Day, such last day shall be extended to the next succeeding Business Day unless such next succeeding Business Day falls in the next calendar month in which event such last day shall be the preceding Business Day. Accrued interest in relation to each Prime Rate Loan, each Base Rate Loan and each US Prime Rate Loan shall be payable monthly in arrears on the first Business Day of the following month.

(2)Interest on each Loan hereunder on which interest is payable shall accrue from day to day from the first day of an Interest Period, Contract Period or the Drawdown Date, as the case may be, to the last day of the Interest Period, Contract Period or Drawdown Date, as the case may be, and shall be calculated on the basis of the actual number of days elapsed divided by, in the case of a LIBOR Loan and US Prime Rate Loan, 360, and, in the case of each Prime Rate Loan and Base Rate Loan, the actual number of days in the relevant calendar year, whether 365 or 366, as the case may be.

(3)For the purposes of the Interest Act (Canada), whenever any interest or fee under this Agreement is calculated using a rate based on a period other than a calendar year, such rate determined pursuant to such calculation, when expressed as an annual rate, is equivalent to such rate as determined multiplied by the actual number of days in the calendar year in which the period for which such interest or fee is payable (or compounded) ends and divided by the number of days comprising such other period.

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(4)The Lender’s certificate as to each amount and/or each rate of interest payable hereunder shall, in the absence of error which the Borrower can demonstrate to the reasonable satisfaction of the Lender, be conclusive evidence of such amount and/or rate.

(5)If any provision of this Agreement or any other Credit Document would obligate the Borrower or a Credit Party to make any payment of interest or other amount payable to the Lender in an amount or calculated at a rate which would be prohibited by law or would result in a receipt by the Lender of interest at a criminal rate (as construed under the Criminal Code (Canada)), then notwithstanding that provision, that amount or rate shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by law or result in a receipt by the Lender of interest at a criminal rate, the adjustment to be effected, to the extent necessary, as follows:

(a)first, by reducing the amount or rate of interest required to be paid to the Lender under this Article 3; and

(b)thereafter, by reducing any fees, commissions, premiums and other amounts required to be paid to the Lender which would constitute interest for purposes of the Criminal Code (Canada);

provided that, notwithstanding the foregoing, and after giving effect to all adjustments contemplated thereby, if the Lender receives an amount in excess of the maximum permitted by the Criminal Code (Canada), then the Borrower shall be entitled, by notice in writing to the Lender, to obtain reimbursement from the Lender in an amount equal to the excess, and pending reimbursement, the amount of the excess shall be deemed to be an amount payable by the Lender to the Borrower.

(6)Any amount or rate of interest referred to in this Agreement shall be determined in accordance with generally accepted actuarial practices and principles as an effective annual rate of interest over the term that any Advance remains outstanding on the assumption that any charges, fees or expenses that fall within the meaning of “interest” (as defined in the Criminal Code (Canada)) shall, if they relate to a specific period of time, be pro-rated over that period of time and otherwise be pro-rated over the period from the earlier of the date of advance and the Closing Date to the relevant Maturity Date and, in the event of a dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Lender shall be conclusive for the purposes of that determination.

Section 3.6 Acceptance Fees

The Canadian Borrower shall pay to the Lender, in advance on the date of issuance of each Bankers’ Acceptance, an Acceptance Fee with respect to each Bankers’ Acceptance issued hereunder.

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Section 3.7 Standby Commitment Fee

Commencing on the Closing Date, the Borrowers shall pay to the Lender a standby commitment fee in Canadian Dollars at an annual rate (based on a 365 day year, or 366 days in the case of a leap year) of 0.375% on the undrawn portion of the amount of the Revolving Commitment, such fee to be calculated and payable monthly, in arrears, on the first Business Day following the end of each calendar month, on the outstanding daily undrawn portion of the Revolving Credit, for the period from the Closing Date to and including the last day of the first calendar month ending after the Closing Date and thereafter from the first day of each calendar month to and including the last day of such calendar month. The Lender will debit the Borrower’s Account for the amount of each standby commitment fee payable hereunder. For purposes of determining the undrawn portion of the Revolving Credit in respect of any Advance in US Dollars, the Lender shall determine the Exchange Equivalent of such Advance in Canadian Dollars on the first Business Day of the month in which such commitment fee is payable.

Section 3.8 Arrangement Fee

The Borrowers shall pay to the Lender on the Closing Date an arrangement fee in the amount of $25,000, which arrangement fee shall be due and payable and fully-earned on the Closing Date.

Section 3.9 Cash Management Fees

The Borrowers shall pay to the Lender monthly cash management fees, on a per transaction basis, as agreed between the Borrower and the Lender.

Section 3.10 Field Examination Expenses

The Borrowers shall, forthwith upon request by the Lender, reimburse the Lender for all reasonable out-of-pocket expenses incurred in connection with each field examination of the Collateral performed by the Lender or its agents or representatives.

Section 3.11 Monthly Administration Fees

The Borrowers shall pay to the Lender an administration fee in the amount of $1,200 on the first Business Day of each calendar month (provided that the monthly administration fee for the calendar month during which the initial Advance is made hereunder shall be pro rated, based upon the number of days in such calendar month) and such administration fee shall be paid by the Borrowers so long as any Obligations remain owing to the Lender or the Lender has any obligation to make any Accommodation available to the Borrower.

Section 3.12 Termination Fee

(1)The Borrowers may terminate all of the Facility in whole (but not in part) at any time prior to the third anniversary of the Closing Date if: (i) the Borrowers provide the Lender with not less than thirty (30) days’ prior written notice of its intention to terminate the Facilities, and (ii) the Borrowers repay in full all outstanding Obligations, together with all accrued and unpaid interest thereon, all accrued and unpaid commitment fees and all other fees due hereunder (including any prepayment fee payable pursuant to Section 3.12(2)) to the Maturity Date, and (iii) all outstanding Letters of Credit and Hedging Arrangements are terminated to the satisfaction of the Lender, or the obligations pursuant to all such Letters of Credit and Hedging Arrangements are cash collateralized or otherwise secured in such form and in such amount as is satisfactory to the Lender, acting reasonably.

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(2)If the Borrowers terminate the Facility prior to the third anniversary of the Closing Date, or if all or any of the Obligations are declared due and payable pursuant to Article 13, the Borrowers shall pay a prepayment fee to the Lender, as liquidated damages for the loss of bargain and not as a penalty, in an amount equal to (i) three percent (3%) of the aggregate Commitments under the Facility, if such termination or declaration occurs on or prior to the first anniversary of the Closing Date, or (ii) two percent (2%) of the aggregate Commitments under the Facility, if such termination or declaration occurs after the first anniversary of the Closing Date, but on or prior to the second anniversary of the Closing Date, or (iii) zero percent (0%) of the aggregate Commitments under the Facility, if such termination or declaration occurs after the second anniversary of the Closing Date.

(3)Notwithstanding the foregoing, the Borrowers shall not be obligated to pay any prepayment fee that would otherwise be payable pursuant to Section 3.12(2) if the Borrowers terminate the Facility as a result of (a) the transfer of such Facility to another division of Bank of Montreal or (b) any increase by the Lender to 100% of PACA Priority Payables being excluded from the Borrowing Base.

Section 3.13 Fees for Hedging Arrangements

Hedging Arrangements shall be provided at the Lender’s rates in effect on the date on which such Hedging Arrangements become effective, as determined by the Lender, and any such determination shall, in the absence of manifest error, be final, conclusive and binding upon the Borrower.

Section 3.14 Indemnity

(1)General. Each Credit Party shall, and does hereby, jointly and severally indemnify the Indemnified Persons against all suits, actions, proceedings, claims, Losses, expenses (including fees, charges and disbursements of counsel), damages and liabilities including, without limitation, liabilities arising under Environmental Laws that the Lender may sustain or incur as a consequence of (i) any default under this Agreement or any other Credit Document, (ii) any misrepresentation contained in any writing delivered to the Lender in connection with this Agreement, (iii) the use of proceeds of any Facility, or (iv) the operations of any of the Credit Parties or any Affiliate of any of the Credit Parties, except that no Indemnified Person shall be indemnified for any of the foregoing matters to the extent the same resulted from its own gross negligence or wilful misconduct as determined by a court of competent jurisdiction.

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(2)Certificate. A certificate of the Lender setting out the basis for the determination of the amount necessary to indemnify the relevant Person pursuant to this Section 3.14(2) shall be conclusive evidence, absent manifest error, of the correctness of that determination.

(3)Survival. It is the intention of each of the Credit Parties and the Lender this Section 3.14 shall supersede any other provisions in this Agreement which in any way limit the liability of any of the Credit Parties and that each of the Credit Parties shall be liable for any obligations arising under this Section 3.14 even if the amount of the liability incurred exceeds the amount of the other Obligations. The obligations of the Credit Parties under this Section 3.14(3) are joint and several and absolute and unconditional and shall not be affected by any act, omission or circumstance whatsoever, whether or not occasioned by the fault of the Lender, except in respect of gross negligence or wilful misconduct by it. The obligations of each of the Credit Parties under this Section 3.14 shall survive the repayment of the other Obligations and the termination of the Facilities.

Section 3.15 Breakage Costs

(1)The Canadian Borrower may not repay, prepay or cancel any Advance made by way of a Bankers’ Acceptance prior to the expiry of the Contract Period relating thereto without the prior written consent of the Lender and the provision of cash collateral by the Borrower to the Lender in an amount determined by the Lender in its discretion, acting reasonably.

(2)If a Borrower repays, prepays or cancels an Advance (including repayment pursuant to Section 3.12, by way of LIBOR Loan, Letter of Credit or Hedging Arrangement prior to the last day of the applicable Contract Period), the applicable Borrower shall indemnify the Lender for any loss or expense suffered or incurred by the Lender including any loss of profit or expenses which the Lender incurs by reason of the liquidation prior to the last day of the applicable Contract Period or redeployment of deposits or other funds acquired by it to effect or maintain the Advance or any interest or other charges payable to lenders of funds borrowed by the Lender in order to maintain the Advance until the last day of the applicable Contract Period together with any other charges, costs or expenses incurred by the Lender relative thereto.

(3)A certificate of the Lender setting out the basis for the determination of the amount necessary to indemnify the Lender pursuant to this Section 3.15 shall be conclusive evidence, absent manifest error, of the correctness of such determination.

Section 3.16 Change in Circumstances

(1)Reduction in Rate of Return. If at any time the Lender determines, acting reasonably, that any change in any Applicable Law or any interpretation thereof after the date of this Agreement, or compliance by the Lender with any direction, requirement, guidelines or policies or request from any Governmental Authority given after the date of this Agreement, whether or not having the force of law, has or would have, as a consequence of the Lender’s obligations under this Agreement, and taking into consideration the Lender’s policies with respect to capital adequacy, the effect of reducing the rate of return on the Lender’s capital (in respect of making, maintaining or funding an Advance hereunder) to a level below that which the Lender would have achieved but for the change or compliance, then from time to time, upon demand of the Lender, the Borrowers shall pay the Lender such additional amounts as will compensate the Lender for the reduction.

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(2)Taxes, Reserves, Capital Adequacy, etc. If, after the date of this Agreement, the introduction of any Applicable Law or any change or introduction of a change in any Applicable Law (whether or not having the force of law) or in the interpretation or application thereof by any court or by any Governmental Authority, central bank or other authority or entity charged with the administration thereof, or any change in the compliance of the Lender therewith now or hereafter:

(a)subjects the Lender to, or causes the withdrawal or termination of a previously granted exemption with respect to, any Tax or changes the basis of taxation, or increases any existing Tax on payments of principal, interest, fees or other amounts payable by the Borrowers to the Lender under or by virtue of this Agreement (except for Excluded Taxes); or

(b)imposes, modifies or deems applicable any reserve, special deposit, deposit insurance or similar requirement against assets held by, or deposits in or for the account of, or loans by or any other acquisition of funds by, an office of the Lender in respect of any Advance or any other condition with respect to this Agreement;

and the result of any of the foregoing, in the sole determination of the Lender acting reasonably, shall be to increase the cost to, or reduce the amount received or receivable by the Lender or its effective rate of return in respect of making, maintaining or funding an Advance hereunder, the Lender shall, acting reasonably, determine that amount of money which shall compensate the Lender for the increase in cost or reduction in income.

(3)Payment of Additional Compensation. If the Lender determines that it is entitled to compensation in accordance with the provisions of this Section 3.16 (“Additional Compensation”), the Lender shall promptly so notify the Borrowers and shall provide to the Borrowers a photocopy of the relevant Applicable Law or direction, requirement, guideline, policy or request, as applicable, and a certificate of an officer of the Lender setting forth the Additional Compensation and the basis of calculation thereof, which shall be conclusive evidence of the Additional Compensation in the absence of manifest error. The Borrowers shall pay to the Lender within 30 Business Days of the giving of notice the Additional Compensation for the account of the Lender accruing from the date of the notification. The Lender shall be entitled to be paid Additional Compensation from time to time to the extent that the provisions of this Section 3.16 are then applicable notwithstanding that the Lender has previously been paid Additional Compensation.

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Section 3.17 Illegality

If any Applicable Law, or any change therein or in the interpretation or application thereof by any court or by any Governmental Authority or central bank or other authority or entity charged with the interpretation or administration thereof, or compliance by the Lender with any request or direction (whether or not having the force of law) of any Governmental Authority, central bank or other authority or entity charged with the administration or interpretation thereof, now or hereafter makes it unlawful or impossible for the Lender to make, fund or maintain an Advance or to perform its obligations under or by virtue of this Agreement, the Lender may, by written notice thereof to the Borrowers, terminate its obligations to make further Advances under this Agreement, and the Borrowers, if required by the Lender, shall repay forthwith (or at the end of such longer period as the Lender in its discretion has agreed) the Principal Amount of the Advance together with accrued interest without penalty or bonus (and in the case of Bankers’ Acceptances, the face amount thereof) and such Additional Compensation as may be applicable to the date of payment and all other outstanding Obligations to the Lender. If any change shall only affect a portion of the Lender’s obligations under this Agreement which is, in the opinion of the Lender, severable from the remainder of this Agreement so that the remainder of this Agreement may be continued in full force and effect without otherwise affecting any of the obligations of the Lender or the Borrowers under this Agreement, the Lender shall only declare its obligations under that portion so terminated by written notice to the Borrowers.

ARTICLE 4

BANKERS’ ACCEPTANCES

Section 4.1 Purchase of Bankers’ Acceptances

The Lender agrees, subject to and on the terms and conditions of this Agreement and from time to time on any Business Day prior to the Maturity Date to accept Bankers’ Acceptances in accordance with Section 4.3(1).

Section 4.2 Form of Drafts

Each Bankers’ Acceptance accepted by the Lender shall (i) be in a minimum amount of Cdn. $1,000,000 and in an integral multiples of Cdn. $100,000, (ii) be dated the date of the Advance, and (iii) mature and be payable by the Canadian Borrower (in common with all other Bankers’ Acceptances purchased in connection with such Advance) on a Business Day which occurs, at the election of the Borrower 30 through 180 days after the Drawdown Date and on or prior to the Maturity Date.

Section 4.3 Procedure for Drawing

(1)The Canadian Borrower shall request the issuance of a Bankers’ Acceptance by delivering a Drawdown Notice to the Lender in accordance with Section 2.5(1). Upon satisfaction of the applicable conditions set forth in Article 10 and this Article 4, the Lender shall, not later than 3:00 p.m. (Toronto time) on the applicable Drawdown Date, complete and accept the requested Bankers’ Acceptance in accordance with the Drawdown Notice. The Lender also agrees to purchase such Bankers’ Acceptance for a purchase price equal to the Discount Proceeds applicable thereto. The Lender shall remit the applicable purchase price, less the applicable Acceptance Fee, to the Canadian Borrower in accordance with Article 2.

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(2)Bankers’ Acceptances purchased by the Lender may be held by the Lender for its own account until the expiry of the Contract Period or sold by the Lender at any time prior to the expiry of the Contract Period, in the Lender’s sole discretion.

(3)The Canadian Borrower agrees not to claim any days of grace for the payment at maturity of any Bankers’ Acceptance, and hereby waives any defences to payment which might otherwise exist if a Bankers’ Acceptance is held by the Lender for its own account at maturity.

(4)The Canadian Borrower hereby appoints the Lender as its true and lawful attorney to complete and issue Bankers’ Acceptances on behalf of the Borrower in accordance with written, verbal or facsimile transmitted instructions provided by any of the Borrower’s officers or by any other Person authorized to provide such instructions in accordance with the most recent banking resolution or certificate provided by the Borrower to the Lender. The Borrower hereby ratifies such completion and issuance of Bankers’ Acceptances that its said attorney may do by virtue hereof. The Borrower agrees to indemnify and hold harmless the Indemnified Persons from and against any charges, complaints, costs, damages, expenses, losses or liabilities of any kind or nature which they may incur, sustain or suffer, arising from or by reason of acting, or failing to act, as the case may be, on any verbal or facsimile transmitted instructions or in reliance upon this power of attorney. The Borrower hereby agrees that each Bankers’ Acceptance completed and issued and accepted by the Lender on behalf of the Borrower is a valid, binding and negotiable instrument of the Borrower as drawer and endorser. The Borrower agrees that the Lender’s accounts and records will constitute prima facie evidence of the execution and delivery by the Borrower of Bankers’ Acceptances. This power of attorney shall continue in force until written notice of revocation has been served upon the Lender by the Borrower at the Lender’s address provided in this Agreement.

Section 4.4 Presigned Draft Forms

To enable the Lender to create Bankers’ Acceptances or complete Drafts in the manner specified in this Article 4, the Canadian Borrower shall supply the Lender with such number of Drafts as the Lender reasonably requests, duly endorsed and executed on behalf of the Borrower. The signature of any officer of the Borrower on a Draft may be mechanically reproduced and Drafts bearing such facsimile signature shall be binding upon the Borrower as if they had been manually signed. If the individuals whose manual or facsimile signature appears on any Draft no longer hold office at the date of signature, at the date of its acceptance by the Lender or at any time after such date, any Drafts so signed shall be valid and binding upon the Borrower.

Section 4.5 Payment, Conversion or Renewal of Bankers’ Acceptances

(1)Upon the maturity of a Bankers’ Acceptance, the Canadian Borrower may (i) elect to issue a replacement Bankers’ Acceptance by giving a Drawdown Notice in accordance with Section 2.5(1), (ii) elect to have all or a portion of the Principal Amount of the Bankers’ Acceptance converted to another Type of Advance by giving a Conversion Notice in accordance with Section 2.8, or (iii) pay, on or before 1:00 p.m. (Toronto time) on the Contract Date for such Bankers’ Acceptance, an amount in Canadian Dollars equal to the Principal Amount of such Bankers’ Acceptance (notwithstanding that the Lender may be the holder). Any such payment or action shall satisfy the Borrower’s obligations under such Bankers’ Acceptance.

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(2)If the Canadian Borrower fails to pay any Bankers’ Acceptance when due or to issue a replacement Draft having a Principal Amount equal to such Bankers’ Acceptance or converted the Principal Amount of the Bankers’ Acceptance converted to another Type of Advance, in accordance with Section 4.5(1), the unpaid amount due and payable shall be converted to a Prime Rate Loan made by the Lender under the Revolving Facility and shall bear interest calculated and payable as provided in Article 3. This Conversion shall occur as of the applicable maturity date of such Bankers’ Acceptance and without any necessity for the Borrower to give a Conversion Notice.

ARTICLE 5

LETTERS OF CREDIT

Section 5.1 Letter of Credit

The Lender agrees, on the terms and subject to the conditions hereinafter set forth, to issue Letters of Credit in Canadian Dollars or US Dollars or such other major currency as the Lender may agree in its sole discretion for the account of the applicable Borrower from time to time on any Business Day prior to 5 Business Days before the Maturity Date. The aggregate Principal Amount of Letters of Credit issued and outstanding at any time hereunder shall not exceed an amount equal to the lesser of (a) $3,500,000 (including the Exchange Equivalent thereof in Canadian Dollars of any letters of Credit issued in a different currency) and (b) the Excess Availability under the Revolving Credit on the applicable date of determination. No Letter of Credit issued hereunder shall expire on a date that is later than the earlier of (a) the date immediately preceding the first anniversary of the date on which such Letter of Credit was issued or renewed, if applicable, and (b) the Maturity Date. Each Drawdown Notice for a Letter of Credit shall be accompanied by a Letter of Credit Application, completed and duly executed and delivered by the Borrower, and shall be governed by and subject to the Lender’s customary Letter of Credit terms and procedures from time to time in effect.

Section 5.2 Drawings

Any drawing under a Letter of Credit shall be funded by a Loan by way of a Prime Rate Loan (if drawn by the Canadian Borrower in Canadian Dollars under the Revolving Facility), or by way of a Base Rate Loan (if drawn by the Canadian Borrower in US Dollars or any other currency under the Revolving Facility), or by way of a US Prime Rate Loan (if drawn by the US Borrower in US Dollars or any other currency under the Revolving Facility).

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Section 5.3 Rollover

At least three Business Days before the maturity date of any Letter of Credit the applicable Borrower shall notify the Lender, by notice substantially in the form attached as Exhibit “D” if it wishes the issue of a replacement Letter of Credit on the maturity date or if it wishes to extend the maturity date of any Letter of Credit. If the applicable Borrower fails to provide the foregoing notice, the maturing Letter of Credit shall expire on its maturity date. Notwithstanding the foregoing, the Lender shall have the sole discretion in determining whether or not to issue any replacement Letter of Credit or to extend the maturity date thereof.

Section 5.4 Fees for Letters of Credit

The applicable Borrower shall pay a Letter of Credit Fee to the Lender in respect of each Letter of Credit issued hereunder.

ARTICLE 6

LIBOR LOANS

Section 6.1 Minimum Advance.

Each Advance by way of Libor Loan shall be in a minimum aggregate amount of US$1,000,000 and whole multiples of US$100,000.

Section 6.2 Term.

Each Libor Loan shall have an Interest Period of one, two, three or six months (each month being a period of 30 days for purposes of this Section), subject to availability. No Interest Period of a Libor Loan shall extend beyond the Maturity Date.

Section 6.3 Rollover of Libor Loans.

At least three Business Days before the expiry of the Interest Period of each Libor Loan, the Canadian Borrower shall notify the Lender in form and substance substantially in accordance with Exhibit “D”, if it intends to:

(a)enter into a new Interest Period with respect to the maturing Libor Loan, or

(b)repay the maturing Libor Loan.

If the Canadian Borrower fails to provide the foregoing notice or make the required payment, payment of its Obligations to the Lender with respect to that maturing Libor Loan shall be funded with an Advance under a Base Rate Loan in the amount outstanding under that Libor Loan.

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ARTICLE 7

HEDGING ARRANGEMENTS

Section 7.1 Hedging Arrangements

(1)The Canadian Borrower may from time to time enter into Hedging Arrangements with the Lender pursuant to which the Lender will, in the sole discretion of the Lender, provide to the Borrower, at rates determined by the Lender, foreign exchange rate protection in respect of such foreign exchange rate transactions in the ordinary course of the Borrower’s business, subject to the terms of this Agreement and the applicable Credit Documents relating to such Hedging Arrangement. The Borrower agrees that no Hedging Arrangement will be entered into for speculative purposes.

(2)The Aggregate Deemed Hedge Exposure under all outstanding Hedging Arrangements shall not at any time exceed $500,000 and the aggregate face amount of all outstanding Hedging Agreements shall not exceed at any time $5,000,000.

(3)With respect to foreign exchange rate agreements, the term of such agreement shall expire not later than the earlier of (a) one (1) year from the date such Hedging Arrangement is executed by the Borrower and (b) the Maturity Date.

(4)The Canadian Borrower agrees to complete such Credit Documents and to pay such fees as the Lender may require in respect of each such Hedging Arrangement.

(5)The Security documents shall secure all obligations owing under or in respect of each Hedging Arrangement entered into between the Borrower and the Lender.

(6)If an Event of Default has occurred and is continuing, the Canadian Borrower shall, upon request by the Lender, immediately pay to the Lender an amount equal to 10% (or such other percentage as the Lender, acting reasonably, shall determine appropriate) of the Aggregate Actual Hedge Exposure for all outstanding Hedging Agreements in respect of which the Lender has not already been fully reimbursed, and pay all other amounts owing to the Lender under the terms of all outstanding Hedging Arrangements, and the Borrower agrees that the Lender would not have an adequate remedy at law for failure of the Borrower to honour any such demand and that the Lender shall have the right to require the Borrower to specifically perform such undertaking without regard to the date upon which the Lender is required under any outstanding Hedging Arrangements to purchase any currency on behalf of the Borrower, the date upon which the Borrower is obligated to reimburse the Lender for currency purchased by the Lender on its behalf or the date upon which the Borrower is obligated to pay to the Lender any other amounts owing to such Lender under the terms of any Hedging Arrangements.

(7)The Borrowers will not enter into arrangements similar to the Hedging Arrangements with any Person other than the Lender. Notwithstanding the foregoing and for greater certainty, the Borrower may, on an unsecured basis, enter into commodity Hedging Arrangements in respect of natural gas with persons other than the Lender.

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ARTICLE 8

PAYMENTS AND REPAYMENTS OF FACILITIES

Section 8.1 Place and Application of Payments and Collections

(1)All payments of principal, interest, fees and all other Obligations payable hereunder and under the other Credit Documents shall be made to the Lender at its office at the address set out on the signature page hereof (or at such other place as the Lender may specify). All such payments shall be made in the currency in which such Obligations are denominated, in immediately available funds at the place of payment, without set-off or counterclaim and without reduction for, and free from, any and all present or future taxes, levies, imposts, duties, fees, charges, deductions, withholdings, restrictions or conditions of any nature imposed by any government or any political subdivision or taxing authority thereof (but excluding any taxes imposed on or measured by the net income of the Lender).

(2)Any voluntary prepayment of a Revolving Loan shall be applied to repay such Revolving Loan to the full extent thereof and any excess shall be returned to the Borrowers.

(3)Any mandatory repayment of Accommodations Outstanding made by the Borrower pursuant to Section 8.3 shall, upon receipt by the Lender, be applied by the Lender to the Obligations then due and payable, in such order and such manner as the Lender determines appropriate. The Borrower hereby irrevocably waives the right to direct the application of payments and collections at any time received by the Lender from or on behalf of the Borrower, and the Borrower hereby irrevocably agrees that the Lender shall have the continuing exclusive right to apply and reapply any and all such payments and collections received at any time by the Lender against the Obligations in such manner as the Lender determines appropriate.

(4)The Borrower hereby irrevocably authorizes the Lender to charge any of the Deposit Accounts for the amounts from time to time necessary to pay any then due Obligations; provided that the Borrower acknowledges and agrees that the Lender shall be under no obligation to do so and the Lender shall incur no liability to the Borrower or any other Person for the Lender’s failure to do so.

Section 8.2 Maturity of Revolving Loans

The Borrower shall repay in full the outstanding Principal Amount under the Revolving Facility, and all accrued and unpaid interest thereon, on the Maturity Date.

Section 8.3 Mandatory Repayments

(1)Currency Fluctuations. The Borrowers covenant and agree that if at any time the Exchange Equivalent in Canadian Dollars of the aggregate Principal Amount of all outstanding Accommodations under the Facility exceeds lesser of (i) the Revolving Commitment, and (ii) the Borrowing Base, or any other limit set herein in respect of the Facility is exceeded at any time, whether or not as a result of any change in the exchange rate between Canadian Dollars and US Dollars (the amount by which the Accommodation thereunder exceeds the Excess Availability being herein referred to as the “Excess Amount”), the Borrowers shall immediately and without notice or demand prepay such Facility to the extent necessary to ensure that the aggregate Principal Amount outstanding under such Facility does not exceed the Excess Availability thereunder.

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(2)Asset Dispositions. Each Credit Party agrees that, subject to the provisions of the Intercreditor Agreement and the FCC Credit Documents all proceeds derived from the sale or disposition (whether voluntary or involuntary, including as a result of expropriation), or on account of damage or destruction, of Collateral consisting of real estate, Equipment or other fixed assets of such Credit Party shall, upon the occurrence and during the continuation of an Event of Default or in circumstances where there is not a sufficient Borrowing Base to support the Accommodations Outstanding, be paid to the Lender as a mandatory prepayment of the Facility (but in circumstances where there is not sufficient Borrowing Base to support the Accommodations Outstanding, only to the extent required to reduce the Accommodations Outstanding to the Borrowing Base).

(3)Insurance Proceeds. Each Credit Party agrees that, subject to the provisions of the Intercreditor Agreement, all insurance proceeds which may become payable to such Credit Party in respect of any Collateral consisting of Receivables and/or Inventory shall, upon the occurrence and continuation of an Event of Default or in circumstances where there is not a sufficient Borrowing Base to support the Accommodations Outstanding, be paid to the Lender as a mandatory prepayment of the Facility (but in circumstances where there is not sufficient Borrowing Base to support the Accommodations Outstanding, only to the extent required to reduce the Accommodations Outstanding to the Borrowing Base).

Section 8.4 Payments Generally

All amounts owing in respect of the Facility, whether on account of principal, interest or fees or otherwise, shall be paid in the currency in which the Advance is outstanding. Each payment under this Agreement shall be made for value on the day the payment is due. All interest and other fees shall continue to accrue until payment has been received by the Lender. Each payment shall be made by debit to the Borrower’s Account by the Lender at or before 1:00 p.m. (Toronto time) on the day that payment is due. Each Borrower hereby authorizes the Lender to debit the Borrower’s Account in respect of any and all payments to be made by such Borrower or any Credit Party under or in connection with this Agreement and the other Credit Documents.

Section 8.5 Taxes

(1)Payments. All payments to be made by or on behalf of the Borrowers under or with respect to the Credit Documents shall be made free and clear of and without deduction or withholding for, or on account of, any present or future Taxes, unless such deduction or withholding is required by Applicable Law. If a Borrower is required to deduct or withhold any Taxes from any amount payable to the Lender (i) the amount payable shall be increased as may be necessary so that after making all required deductions or withholdings (including deductions and withholdings applicable to, and taking into account all Taxes on, or arising by reason of the payment of, additional amounts under this Section 8.5), the Lender receives and retains an amount equal to the amount that it would have received had no such deductions or withholdings been required, (ii) the relevant Borrower shall make such deductions or withholdings, and (iii) the relevant Borrower shall remit the full amount deducted or withheld to the relevant taxing authority in accordance with Applicable Law. Notwithstanding the foregoing, the Borrowers shall not be required to pay additional amounts in respect of Excluded Taxes.

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(2)Indemnity. Each of the Borrowers shall indemnify the Lender for the full amount of any Taxes (other than Excluded Taxes) imposed by any jurisdiction on amounts payable by the Borrowers under this Agreement and paid by the Lender and any liability (including penalties, interest and reasonable expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted, and any Taxes levied or imposed with respect to any indemnity payment made under this Section 8.5. Each of the Borrowers shall also indemnify the Lender for any Taxes (other than Excluded Taxes) that may arise as a consequence of the execution, sale, transfer, delivery or registration of, or otherwise with respect to this Agreement or any other Credit Document. The indemnifications contained in this Section 8.5 shall be made within 30 days after the date the Lender makes written demand therefor.

(3)Evidence of Payment. Within 30 days after the date of any payment of Taxes by a Borrower, the relevant Borrower shall furnish to the Lender the original or a certified copy of a receipt evidencing payment by the Borrower of such Taxes with respect to any amount payable to the Lender hereunder.

(4)Survival. Each of the Borrower’s obligations under this Section 8.5 shall survive the termination of this Agreement and the payment of all amounts payable under or with respect to this Agreement.

Section 8.6 No Set-Off

All payments to be made by the Borrowers shall be made without set-off or counterclaim and without any deduction of any kind.

ARTICLE 9

COLLATERAL

Section 9.1 Collateral

The payment and performance of the Obligations shall at all times, unless otherwise explicitly agreed in writing by the Lender, be secured by, among other things, all of the Credit Parties’ assets, including without limitation, all Receivables, Inventory, Equipment, chattel paper, documents of title, instruments, intangibles, and property of the Credit Parties (other than real property), in each case whether now or hereafter acquired or arising and subject to Permitted Liens, pursuant to the Security required by the Lender, including all documents listed in Section 9.3.

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Section 9.2 Collateral Proceeds

Each Borrower shall make such arrangements as shall be necessary or appropriate in the Lender’s opinion to ensure, subject to the Intercreditor Agreement, that all proceeds of the Collateral are promptly paid into the Blocked Account or the Collection Accounts to be dealt with in accordance with the Lockbox Agreement and the Blocked Account Agreement, as applicable; and until so remitted, such proceeds shall, subject to the Intercreditor Agreement, be deemed to be held in trust for the Lender until deposited into the Blocked Account or the Collection Accounts and without limiting the foregoing, each Borrower and each other Credit Party agrees to make such arrangements as shall be necessary or appropriate to assure that all proceeds of the Collateral are deposited (in the same form as received) in the Blocked Account or the Collection Accounts to be dealt with in accordance with the Lockbox Agreement and the Blocked Account Agreements, as applicable. Any proceeds of Collateral received by any Credit Party shall be held in trust for the Lender until deposited into the Blocked Account or the Collection Accounts in the same form in which received, shall not be commingled with any assets of such Credit Party, and, subject to the Intercreditor Agreement, shall be deposited immediately to the Blocked Account or the Collection Accounts to be dealt with in accordance with the Lockbox Agreement and the Blocked Account Agreement, as applicable. Each Borrower, and each of the other Credit Parties, acknowledges that all funds in the Blocked Account and the Collection Accounts are to be dealt with in accordance with the Lockbox Agreement and the Blocked Account Agreement, as applicable, and that, to the extent of any interest of the Credit Parties therein, the Lender, subject to the Intercreditor Agreement, has (and is hereby granted to the extent it does not already have) a Lien on such accounts and all funds contained therein to secure the Obligations. Notwithstanding the foregoing and for greater certainty, prior to the occurrence of an Event of Default and in circumstances where there is sufficient Borrowing Base to support the Accommodations Outstanding, all funds in the Blocked Account and the Collection Accounts shall be transferred to accounts controlled by the Borrower in accordance with the Lockbox Agreement and the Blocked Account Agreement, as applicable. Upon the occurrence of an Event of Default or in circumstances where there is not a sufficient Borrowing Base to support the Accommodations Outstanding, no amounts deposited in the Blocked Accounts and the Collection Accounts shall be released to the Credit Parties, but shall, subject to the Intercreditor Agreement, instead be applied to, or otherwise held for application to, or as Security for, the outstanding Obligations (but in circumstances where there is not a sufficient Borrowing Base to support the Accommodations Outstanding, only to the extent required to reduce the Accommodations Outstanding to the Borrowing Base) and (to the extent so provided in any other Credit Document) any and all other indebtedness, liabilities and obligations, present or future, of each of the Credit Parties to the Lender, it being understood and agreed that the Borrower notwithstanding such application shall have the right to obtain additional Loans under this Agreement subject to the terms and conditions hereof.

Section 9.3 Security Documents

The Credit Parties shall cause the following Security Documents and guarantee to be executed and delivered to the Lender on or prior to the Closing Date, to secure the Obligations, each in form and substance satisfactory to the Lender:

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(a)a general security agreement executed by each Credit Party, creating a security interest in all of the present and future personal property, assets and undertaking of such Credit Party, including Securities (or the equivalent), Receivables and Inventory registered in every location where such Credit Party has assets, subject only to Permitted Liens;

(b)a general assignment of book debts executed by each Canadian Credit Party;

(c)an assignment of the interest of each Credit Party in all insurance policies held by or for the benefit of such Credit Party (subject to the terms of the Intercreditor Agreement);

(d)a Guarantee, executed by each Guarantor; and

(e)such other security agreements as may be requested by the Lender, acting reasonably.

Section 9.4 Additional Credit Parties

Village Farms International, Inc. shall ensure that each Person that becomes a Subsidiary of the Borrower or a Guarantor after the Closing Date and that is not a party hereto shall forthwith execute and deliver to the Lender a guarantee and other Security documents similar to those delivered by the other Credit Parties. The Borrowers shall deliver or cause the delivery of such legal opinions and other supporting documents as the Lender reasonably requires.

ARTICLE 10

CONDITIONS PRECEDENT

Section 10.1 Conditions Precedent to Disbursements of Advances

The obligation of the Lender to make available the initial Advance under the Facility is subject to and conditional upon the satisfaction of the following conditions:

(a)Delivery of Credit Documents. The Lender shall have received sufficient copies, in form and substance satisfactory to the Lender, of the following:

(i)all documents relating to the Security and all other Credit Documents, duly executed by all the parties thereto (other than the Lender);

(ii)a Certificate of an Authorized Representative of each Credit Party, dated the Closing Date, with respect to its constating documents and by-laws and the due authorization, execution and delivery of all Credit Documents to which it is a party and all the transactions contemplated thereby, and confirming that all representations and warranties contained in this Agreement are true and correct as if made on the date of the Certificate;

(iii)the Lender shall have received a good standing, status or compliance certificate (as applicable) for each of the Credit Parties (dated as of the date no earlier than five (5) days prior to the date hereof) from the applicable government office in the jurisdiction of its incorporation and each jurisdiction in which it is qualified to do business;

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(iv)opinions of counsel to the Credit Parties, addressed to the Lender and its counsel with respect to, inter alia, due authorization, execution, delivery, and enforceability of the Credit Documents and the creation, validity and perfection of the security interests constituted by the Security;

(v)duly executed and binding certificate(s) of insurance evidencing the insurance required under this Agreement, that: (A) all losses under all insurance policies are payable to the Lender, as first loss payee (subject to the terms of the Intercreditor Agreement), (B) the Lender has been added as an additional insured in respect of all liability policies, (C) the policies contain a standard mortgage clause approved by the Insurance Bureau of Canada, and (D) that the Lender will be given at least 30 days prior written notice of any cancellation or termination of any policy;

(vi)such other Credit Documents as the Lender may reasonably request, including (A) the Security documents listed in Section 9.3 hereof, (B) all applicable Collateral Access Agreements, (C) the Lender shall have received and reviewed, to its satisfaction, original copies of the environmental questionnaires or checklists in form and substance acceptable to the Lender completed by the applicable Borrower in respect of each premise occupied by each Credit Party; and (D) standard credit documentation used by the Lender in connection with the issuance of Letters of Credit, and Hedging Arrangements, if applicable, prior to any Advance in respect thereof;

(vii)estoppel letters, discharges, subordination agreements and/or intercreditor agreements (including in respect of Farm Credit Canada), as applicable, in respect of existing security filings;

(viii)an executed Borrowing Base Certificate, together with an executed Compliance Certificate prepared by the Canadian Borrower on behalf of the Borrowers; and

(ix)such other documents or agreements as may be requested by the Lender including without limitation blocked account agreements

(b)Payout and Discharge. All funds owed by the Credit Parties to those creditors identified (based upon information provided by any Credit Party) by the Lender shall be repaid in full and all Liens (other than Permitted Liens and any related existing Debt incurred in connection therewith) and/or security registrations made in favour of such creditors shall be discharged or the Lender shall have received an undertaking from such creditors to discharge all such Liens and/or security registrations in form and substance satisfactory to the Lender.

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(c)Registration of Security. All registrations, recordings and filings of or with respect to the Security which in the opinion of counsel to the Lender are necessary to render effective the Lien intended to be created thereby (subject to Permitted Liens) shall have been completed.

(d)Fees. All fees payable in accordance with this Agreement on or before the Closing Date (including legal fees and expenses of the Lender) shall have been paid to the Lender.

(e)Due Diligence. The Lender shall have completed, to its satisfaction, its business, legal and accounting due diligence review with the respect to the Credit Parties, including but not limited to all required financial results including monthly projections for the balance of the 2013 Fiscal Year, the assets (field examination), the corporate structure and organizational documents, environmental (including environmental checklists and indemnity in the Lender’s standard form and environmental reports as deemed necessary), material contracts, insurance (including business interruptions insurance, claims made in respect thereof and the impact of May 2012 hail storm on the operations of the Credit Parties), claims and lawsuits, background checks on key management and key management contracts as required by the Lender.

(f)Excess Availability. Immediately after giving effect to the initial Advance hereunder, the Excess Availability with respect to the Revolving Facility on a pro forma basis shall be not less than $1,000,000 after taking into account the payment of all fees and expenses owing in connection with the transaction and any Reserves established as of the Closing Date.

(g)Material Adverse Change. No Material Adverse Change shall have occurred with respect to the Credit Parties.

(h)Financial Statements. The Lender shall have received the Borrower’s consolidated and non-consolidated financial statements for the last three (3) Fiscal Years, together with the most recently prepared month-end financial reports.

Section 10.2 Conditions Precedent to All Advances

The obligation of the Lender to make available any Advance, (except Rollovers or Conversions), including the first Advance, are subject to and conditional upon each of the conditions below being satisfied on the applicable Drawdown Date:

(a)No Default. No Default or Event of Default exist has occurred and is continuing on the Drawdown Date, or would result from making the Advance.

(b)Representations Correct. The representations and warranties contained in Section 12.1 shall be true and complete on each Drawdown Date as if made on that date.

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(c)No Breach of Laws. Such Advance shall not violate any order, judgment or decree of any court or other authority or any provision of law or regulation applicable to the Lender as then in effect;

(d)Notice of Advance. The applicable Borrower shall have provided notice in respect of such Advance as required hereunder.

(e)Borrowing Base Certificate. The Borrower shall have provided a current Borrowing Base Certificate in accordance with Section 12.1(5)(a).

(f)Certain Advances. The Borrower shall execute and deliver to the Lender customary credit documentation required by the Lender from time to time in connection with each Letter of Credit, Bankers’ Acceptance and Hedging Arrangement.

Section 10.3 Waiver of any Condition Precedent

The conditions stated in Section 10.1 and Section 10.2 are inserted for the sole benefit of the Lender and the conditions stated therein may only be waived by the Lender, and any such waiver may be made in whole or in part, with or without terms or conditions and in respect of all or any portion of the Advances, without affecting the right of the Lender to assert terms and conditions in whole or in part in respect of any other future Advance.

ARTICLE 11

REPRESENTATIONS AND WARRANTIES

Section 11.1 Representations and Warranties of the Credit Parties

Each Credit Party, for and on behalf of itself as applicable, makes the following representations and warranties to the Lender, all of which shall survive the execution and delivery of this Agreement, and acknowledges and confirms that the Lender is, among other things, relying upon such representations and warranties as a basis for its decision to enter into this Agreement and to make Advances hereunder:

(a)Status. Each Credit Party is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation and it has the power and authority to own its property and assets and to transact the business in which it is engaged and presently proposes to engage. Each Credit Party is duly qualified to carry on its business, and is in good standing, in each jurisdiction where the ownership, leasing or operation of its property or the conduct of its business requires such qualification except where not being so qualified would not have a Material Adverse Effect.

(b)Power and Authority. It has the corporate or other equivalent power to execute, deliver and perform the terms and provisions of each Credit Document to which it is a party and has taken all necessary action to authorize the execution, delivery and performance by it of each Credit Document to which it is a party. Each Credit Party has duly executed and delivered each Credit Document to which it is a party,

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(c)No Violation. Neither the execution, delivery or performance by each Credit Party of the Credit Documents to which it is a party, nor compliance by it with the terms and provisions thereof, contravenes any Applicable Law, conflicts with or results in any breach of any of the terms, covenants, conditions or provisions of, or constitutes a default under, or results in the creation or imposition of (or the obligation to create or impose) any Lien (except pursuant to the Credit Documents) upon any of its property or assets pursuant to, any indenture, mortgage, deed of trust, credit agreement, loan agreement or any other agreement or instrument to which it is a party or by which it or any of its property or assets is bound or to which it may be subject, or breaches or violates any provision of its constating documents or any Contractual Obligation to which it is a party.

(d)Business and Operations. The business and operations of each Credit Party, and the locations thereof, are accurately described in Schedule 11.1(d).

(e)Approvals. Except as set forth in Schedule 11.1(e), no order, consent, certificate, approval, permit, license, authorization or validation of, or filing, recording or registration with, or exemption by, any Person (including any Governmental Authority, shareholder, member, partner or other owner of Issued Equity, or any Person that is party to a Contractual Obligation of any Credit Party) is required to authorize, or is required in connection with, the execution, delivery or performance by any Credit Party of any Credit Document to which it is a party, or the legality, validity, binding effect or enforceability with respect to it of any such Credit Document, or the consummation of the transactions contemplated therein, other than filings and recordings with respect to the Collateral to be made, or otherwise delivered to the Lender for filing or recordation, on or prior to the Closing Date.

(f)Security Documents. The Security documents create, and grant to the Lender, valid and enforceable first priority Liens upon the Collateral, subject only to the terms of this Agreement and to Permitted Liens, on the terms set out therein, and the Security documents have been registered or recorded, as applicable, in all places where registration or recording, as applicable, is necessary to perfect the charges and security interests created thereby.

(g)Title to Collateral. Each Credit Party has good and marketable title to all of its Collateral, free and clear of all Liens other than Permitted Liens.

(h)Financial Statements; Financial Condition; Undisclosed Liabilities.

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(i)The Financial Statements submitted to the Lender for the Fiscal Year ended 2012 and for the period ended May 31, 2013, present fairly, in all material respects and all Financial Statements submitted to the Lender during the term of this Agreement, present or will present fairly (subject, in the case of any interim Financial Statements prepared by management of the applicable Person in the Credit Parties, to normal year end adjustments), the financial position, on a consolidated basis, of the Borrower Group and, on an unconsolidated basis, of each Credit Party, as applicable, as at the date thereof and the results of operations and cash flows, on a consolidated or unconsolidated basis, as applicable, for the periods covered thereby, and all such Financial Statements have been, or will be, as applicable, prepared in accordance with GAAP. Since May 31, 2013, there has been no Material Adverse Change.

(ii)Except as fully reflected in the Financial Statements described in Section 11.1(h), there are no liabilities or obligations with respect to any Credit Party of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due) which, either individually or in aggregate, would be material; and no Credit Party is aware of any basis for the assertion against it of any liability or obligation of any nature whatsoever that is not fully reflected in the Financial Statements described in Section 11.1(h) that, either individually or in the aggregate, would be material.

(i)Projections. The financial projections of the Credit Parties for the Fiscal Year ending December 31, 2013 to and including the Fiscal Year ending December 31, 2013, including monthly projections for each remaining calendar month during the Fiscal Year ending December 31, 2013 and annual projections thereafter, are based upon good faith estimates and assumptions made by the management of the Borrower and, notwithstanding that such projections are not to be viewed as facts and that actual results during the period covered by such projections may differ from such projections, as of the Closing Date, the Borrower believes the assumptions made in such projections are reasonable and that such projections are attainable.

(j)Litigation. Except as set forth on Schedule 11.1(j), there are no Claims.

(k)Disclosure. No Credit Document furnished to the Lender by or on behalf of any Credit Party for use in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made. There are no facts known (or which should upon the reasonable exercise of diligence be known) to any Credit Party (other than matters of a general economic nature) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect and that have not been disclosed herein, in the other Credit Documents or otherwise to the Lender for use in connection with the transactions contemplated hereby.

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(l)Taxes. Except as set forth on Schedule 11.1(l) or as otherwise permitted pursuant to Section 12.1(3), (i) all Tax returns and reports required to be filed by each Credit Party for its five most recent taxation years or Fiscal Years have been filed in a timely manner, and all Taxes due and payable on such Tax returns, and all assessments, fees and other governmental charges levied against any Credit Party, and upon their respective assets, have been paid when due; and (ii) no Credit Party has received notice of any proposed tax audits with respect to any Credit Party, or of any tax assessments against any Credit Party, that are not being actively contested in good faith by appropriate proceedings by the applicable Credit Party and in respect of which adequate reserves or other appropriate provisions, if any, have been made in accordance with GAAP and the details thereof have been provided to the Lender to its satisfaction.

(m)Equity Interests. Schedule 11.1(m) sets forth a true and complete list of all Subsidiaries of the Borrower and of each other Credit Party, each registered owner of Equity Interests in the Borrower, each Subsidiary of the Borrower and each other Credit Party (other than in respect of Village Farms International, Inc. which is a public corporation) and the number and percentage ownership of such Equity Interests held by each such owner thereof. All outstanding Equity Interests in each Credit Party have been duly authorized and validly issued and are fully paid and non-assessable. Except as set forth on Schedule 11.1(m), there is no existing option, warrant, phantom stock or unit, call, right, commitment or other agreement to which any Credit Party is a party requiring, or any other Equity Interest that upon conversion or exchange would require, the issuance by any Credit Party of any additional Equity Interests.

(n)No Restrictions. There is no encumbrance or restriction on the ability of any Credit Party to (i) pay dividends or make any other distributions on its Equity Interests, or to pay any Debt owed by it, (ii) make loans or advances, or (iii) transfer any of its properties or assets, except, in each case, such encumbrances or restrictions existing under or by reason of (A) Applicable Law, (B) this Agreement or the other Credit Documents, (C) customary provisions restricting subletting or assignment of any lease governing any of its leasehold interests, (D) customary provisions restricting the assignment of contracts, permits and/or licenses, or (E) the FCC Credit Documents.

(o)Compliance with Applicable Laws. Each Credit Party (i) has obtained and is in compliance with all Governmental Approvals that are necessary for the conduct of its business as presently conducted, and the use of its property and assets (both real and personal), each of which is in full force and effect, is a good, valid and subsisting approval that has not been surrendered, forfeited or become void or voidable, and (ii) is in compliance in all material respects with all Applicable Laws, including Environmental Laws.

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(p)Labour Matters. Except as could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect (i) there are no strikes or other labour disputes against any Credit Party that are pending or, to the knowledge of each Credit Party, threatened, (ii) all payments due from any Credit Party on account of employee insurance of any kind and vacation pay have been paid or accrued as a liability on its books and each Credit Party has withheld and remitted all amounts on behalf of all employees of such Credit Party required to be withheld or remitted by it, and has made all employer contributions to be made by it, in each case, in accordance with Applicable Laws, (iii) there is no obligation of any Credit Party under any collective agreements or under any consulting or management agreement requiring payments which cannot be cancelled without material liability, (iv) each Credit Party is in material compliance with the terms and conditions of all consulting agreements, management agreements and employment agreements, if any, (v) there is no organizing activity involving any Credit Party or, to the knowledge of any Credit Party, threatened by any labour union or group of employees, (vi) no labour union or group of employees has made a pending demand for recognition, and (vii) there are no complaints or charges against any Credit Party pending or threatened to be filed with any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment of any individual by any Credit Party.

(q)Insurance. Each Credit Party maintains insurance in compliance with Section 12.1(4) and all premiums and other sums of money payable for that purpose have been paid.

(r)Locations of Collateral. All of the Collateral is located at the Permitted Collateral Locations or is in transit to or from such locations. Other than Village Farms DR S.R.L., there are no material account debtors of any Credit Party resident outside of Canada or the United States of America that are not insured to at least 90% of their book value.

(s)Intellectual Property. All Intellectual Property owned or used by any Credit Party is listed on Schedule 11.1(s).

(t)Real Property. All Real Property Interests of each Credit Party and the nature of its interest (both registered and beneficial) Credit Party therein, is correctly set forth on Schedule 11.1(t). Each Credit Party has legal and marketable title to all of its Real Property Interests, free and clear of all Liens other than Permitted Liens.

(u)Environmental Matters.

(i)No Credit Party, nor any of its premises or operations used in the conduct of its business, is subject to any outstanding written order, consent decree or settlement agreement with any Person relating to any Environmental Law, any Environmental Claim, or any activity relating to any Hazardous Substance. No Credit Party has received any letter or request for

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information under any provincial, federal or state law or law of any other jurisdiction applicable to it, in respect of any Hazardous Substance or any activity relating thereto that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Each Credit Party’s premises and operations is free from the presence of all Hazardous Substances except for such presence permitted by Environmental Laws or that could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect. No Credit Party has caused or suffered to occur any Release of any Hazardous Substance on, at, in, under, above, to or from any real property owned, leased or otherwise used by it or any other real property that could individually or in the aggregate reasonably be expected to have a Material Adverse Effect. The Borrower has no knowledge of any conditions, occurrences or activities relating to any Hazardous Substance (other than in accordance with Environmental Laws) which could reasonably be expected to form the basis of an Environmental Claim against any Credit Party. No Credit Party nor any predecessor of any Credit Party has filed any notice under any Environmental Law indicating past or present treatment of any Hazardous Substance at any real property owned, leased or otherwise used by it or any other real property, and no Credit Party’s operations involve the generation, transportation, treatment, storage or disposal of any Hazardous Substance. Each Credit Party is, and, except as set forth in Schedule 11.1(u)(i), has been, in compliance with all Environmental Laws, except for such non- compliance that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Each Credit Party has obtained, and is in compliance with, all Environmental Permits required by Environmental Laws for the operations of its businesses as presently conducted or as proposed to be conducted and all such Environmental Permits are valid, uncontested and in good standing. Compliance by the Credit Parties with all current requirements pursuant to or under Environmental Laws could not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. No event or condition has occurred or is occurring with respect to any Credit Party relating to any Environmental Law, any Release of any Hazardous Substances, or any activity relating to any Hazardous Substance which individually or in the aggregate has had, or could reasonably be expected to have, a Material Adverse Effect. The Borrower on its own and on behalf of each other Credit Party, hereby acknowledges and agrees that neither the Lender nor any of its officers, directors, employees, attorneys and representatives (i) is now, or has ever been, in control of any Credit Party’s premises or operations or any Credit Party’s affairs, and (ii) has the capacity or the authority through the provisions of the Credit Documents or otherwise to direct or influence any (A) Credit Party’s conduct with respect to the ownership, operation or management of any Credit Party’s premises or operations or any Credit Party’s affairs, (B) undertaking, work or task performed by any employee, Lender or contractor of any Credit Party or the manner in which such undertaking, work or task may be carried out or performed, or (C) Credit Party’s compliance with Environmental Laws or Environmental Permits.

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(v)No Defaults. No Credit Party is in default in the performance, observance or fulfillment of any of its obligations, covenants or conditions contained in any Contractual Obligations, and no condition exists which, with the giving of notice or the lapse of time or both, could constitute such a default, except where the consequences, directly or indirectly, of such default or defaults, if any, could not reasonably be expected to have a Material Adverse Effect.

(w)Material Contract. All Material Contracts are listed on Schedule 11.1(w), and a true and complete copy of each Material Contract has been provided to the Lender. All Material Contracts are in full force and effect, and there are no defaults thereunder.

(x)Debt. All Debt of the Credit Parties, as of the Closing Date, is disclosed in the Audited Financial Statements of the Credit Parties for the most recently completed Fiscal Year or on Schedule 11.1(x).

(y)CERCLA. No portion of any Credit Party’s property has been listed, designated or identified in the National Priorities List or the CERCLA Information System both as published by the United States Environmental Protection Agency, or any similar list of sites published by any federal, state or local authority proposed for requiring clean up or remedial or corrective action under any requirements of Applicable Laws.

(z)US Benefit Plans. Except as could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect, (i) each US Benefit Plan has been maintained and is in compliance with Applicable Laws including, without limitation, all requirements relating to employee participation, investment of funds, benefits and transactions with the Credit Parties and Persons related to them, (ii) with respect to US Benefit Plans: (a) no condition exists and no event or transaction has occurred with respect to any US Benefit Plan that is reasonably likely to result in any Credit Party, to the best of its knowledge, incurring any liability (other than ordinary course funding obligations and claims for benefits), fine or penalty; and (b) no Credit Party has a material contingent liability with respect to any post-retirement benefit under a “welfare plan”, as such term is defined in Section 3(1) of ERISA, and (iii) all contributions (including employee contributions made by authorized payroll deductions or other withholdings) required to be made have been made in accordance with all Applicable Laws and the terms of each US Benefit Plan, . Each of the US Benefit Plans that is intended to be “qualified” within the meaning of Section 401(a) of the Code either (a) has received a favourable determination letter from the Internal Revenue Service, (b) is or will be the subject of an application for a favourable determination letter, and no circumstances exist that have resulted or could reasonably be expected to result in the revocation or denial of any such determination letter, or (c) is entitled to rely on an appropriately updated prototype plan Credit Document that has received a national office determination letter and has not applied for a favourable determination letter of its own.

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(aa)Canadian Benefit Plans. No Credit Party sponsors, contributes to or administers any Canadian Pension Plans. Except as could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect, (i) all obligations of each Credit Party (including fiduciary, contribution, funding, investment and administration obligations) required to be performed in connection with the Canadian Benefit Plans and any funding agreements therefor under the terms thereof and applicable statutory and regulatory requirements, have been performed in a timely and proper fashion, and (ii) there have been no improper withdrawals or applications of the assets of any Credit Party’s Canadian Benefit Plans. There are no outstanding material disputes concerning the assets or liabilities of any Credit Party’s Canadian Benefit Plans.

(bb)Not an Investment Company. No Credit Party is an “investment company” or a company “controlled” by an “investment company” within the meaning of the United States Investment Company Act of 1940.

(cc)No Margin Stock. No Credit Party is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock. None of the proceeds of any Advance shall be used to purchase or carry, or to reduce or retire or refinance any credit incurred to purchase or carry, any margin stock (within the meaning of Regulations U and X of the Board of Governors of the Federal Reserve System of the United States) or to extend credit to others for the purpose of purchasing or carrying any margin stock.

(dd)Solvency. Each Credit Party is Solvent.

(ee)Default. No Default or Event of Default has occurred which is continuing.

(ff)Receivables.

(i)Each Eligible Receivable is valid and subsisting and arises out of a bona fide sale of Inventory sold and delivered by the applicable Credit Party to, or in the process of being delivered to, or out of and for services theretofore actually rendered by it to, the account debtor named therein.

(ii)No Eligible Receivable is evidenced by any instrument or chattel paper unless such instrument or chattel paper has been endorsed by the owner thereof and delivered to the Lender (except to the extent the Lender specifically requests the owner thereof not to do so with respect to any such instrument or chattel paper).

(iii)No surety bond was required or given in connection with any Eligible Receivable or the contracts or purchase orders out of which the same arose.

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(iv)The amount of each Eligible Receivable represented as owing thereunder is the correct amount of such Eligible Receivable actually and unconditionally owing, except for normal cash discounts on normal trade terms in the ordinary course of business.

(v)The amount of each Eligible Receivable represented as owing is not disputed and is not subject to any set-off, credits, deductions or counterclaims other than those arising in the ordinary course of the applicable Credit Party’s business.

(gg)Inventory.

(i)All Inventory and Equipment is located at a location set forth on Schedule 11.1(t) (each, a “Permitted Collateral Location”).

(ii)No Inventory is or will be consigned to any other Person without the Lender’s prior written consent except in the ordinary course of business.

(hh)Deposit Accounts. The location, description and beneficiary of each Deposit Account is accurately set forth on Schedule 11.1(hh).

Section 11.2 Deemed Repetition

The representations and warranties made in Section 11.1 shall be deemed to be repeated on each Drawdown Date, Interest Payment Date, Rollover Date and Conversion Date, and as of the last day of each calendar month, as if made on and as of each such date unless specifically made as of a certain date.

ARTICLE 12

COVENANTS

Section 12.1 Affirmative Covenants

While any obligation of any Credit Party or the Lender is outstanding under any Credit Document and the Commitment has not been terminated, each of the Credit Parties agrees as follows:

(1)Maintenance of Business. Except as provided in Section 12.2(4), it shall preserve and maintain its existence, and preserve and keep in force and effect all licenses, permits and franchises necessary to the proper conduct of its business.

(2)Maintenance of Properties. Except with respect to its assets and operations located in Marfa, Texas, it shall maintain, preserve and keep its property, plant, Equipment and other assets in good repair, working order and condition (ordinary wear and tear excepted) and shall from time to time make all needed and proper repairs, renewals, replacements, additions and improvements thereto so that at all times the efficiency thereof shall be fully preserved and maintained except with the prior written consent of the Lender (such consent not to be unreasonably withheld).

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(3)Taxes and Assessments. It shall duly pay and discharge, all Taxes, rates, assessments, fees and governmental charges upon or against it or its property and assets or in respect of this Agreement or any other Credit Document, in each case before the same become delinquent and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith and by appropriate proceedings which prevent enforcement of the matter under contest and adequate reserves are provided therefor.

(4)Insurance.

(a)It shall maintain in force, with good and responsible insurance companies, insurance coverage on its property, assets and undertaking that is substantially similar to the coverage listed in Schedule 12.1(4). The Borrower shall upon request, furnish to the Lender a certificate setting forth in summary form the nature and extent of the insurance maintained pursuant to this Section 12.1(4).

(b)All insurance required hereby shall be maintained in amounts and under policies and with insurers acceptable to the Lender, acting reasonably, and all such policies shall name the Lender as first loss payee in respect of Receivables and Inventory (to the extent such insurance is held by such Credit Party), loss payee and mortgagee in respect of other Collateral as its interests may appear and additional insured, as applicable, and shall contain a standard mortgage clause all in form and content acceptable to the Lender acting reasonably. The Credit Parties shall pay or caused to be paid, when due all premiums on such insurance. Certificates of insurance evidencing compliance with the foregoing and, at the Lender’s request, the policies of such insurance shall be delivered by the Borrower to the Lender. All insurance required hereby shall provide that no cancellation thereof shall be effective until at least 30 days after receipt by the applicable Credit Party and the Lender of written notice thereof, and shall be satisfactory to the Lender in all other respects. In case of any material loss, damage to or destruction of the Collateral or any part thereof, the Borrower shall promptly give written notice thereof to the Lender generally describing the nature and extent of such damage or destruction. In case of any loss, damage to or destruction of the Collateral or any part thereof, the Credit Parties, at their cost and expense, shall, except as required under the FCC Credit Documents, use all proceeds of insurance to promptly cause to be repaired or replaced the Collateral so lost, damaged or destroyed. Upon the occurrence and during the continuation of an Event of Default or in circumstances where there is not a sufficient Borrowing Base to support the Accommodations Outstanding, if any Credit Party receives any proceeds of insurance for any loss, damage to or destruction of Collateral, such proceeds shall, subject to the provisions of the Intercreditor Agreement, immediately be paid to the Lender as a mandatory prepayment of the Facility (but in circumstances where there is not sufficient Borrowing Base to support the Accommodation Outstanding, only to the extent required to reduce the Accommodations Outstanding to the Borrowing Base). Upon the occurrence and during the continuation of an Event of Default, each Credit Party hereby authorizes the Lender, subject to the provisions of the Intercreditor Agreement, at the Lender’s option, to adjust, compromise and settle any Losses under any insurance afforded to such Credit Party, and hereby irrevocably constitutes the Lender, and each of its nominees, officers, agents, attorneys, and any other Person whom the Lender may designate, as its attorney in fact, with full power and authority to effect such adjustment, compromise and/or settlement and to endorse any drafts drawn by an insurer of the Collateral or any part thereof and to do everything necessary to carry out such purposes. All insurance proceeds shall, subject to the provisions of the Intercreditor Agreement, be subject to the Lien of the Lender under the Security Documents and subject to Permitted Liens. For greater certainty, unless an Event of Default has occurred and is continuing, the Lender shall pay over and transfer to the Borrowers any insurance proceeds in respect of the Collateral which are received by the Lender in excess of any amounts required to reduce the Accommodations Outstanding to the then available Borrowing Base.

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(c)Unless it provides the Lender with evidence of the insurance coverage required by this Agreement, the Lender may purchase insurance at the Credit Parties’ expense to protect the Lender’s interests in the Collateral, and the Lender shall not be required to require such coverage to apply to claims made by or against any Credit Party. The Borrower may later cancel any such insurance purchased by the Lender, but only after providing the Lender with evidence that the Borrower has obtained insurance as required by this Agreement. If the Lender purchases insurance for the Collateral, the Borrower shall be responsible for all of the costs of that insurance, including interest thereon and any other out of pocket costs and expenses that the Lender may suffer or incur in connection with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance. The costs of the insurance shall be added to the Obligations. The costs of the insurance may be more than the cost of insurance the Borrower may be able to obtain on its own.

(5)Financial Reports. It shall maintain a standard system of accounting in accordance with GAAP and shall promptly furnish to the Lender and its duly authorized representatives such information respecting its business and financial condition as the Lender may reasonably request; and without limiting the foregoing, it shall provide the following information to the Lender:

(a)as soon as available, and in any event not more than three (3) Business Days after the last Business Day of each calendar week (or not more than three (3) Business Days after the last Business Day of each month in circumstances where there are no Obligations owing to the Lender), a Borrowing Base Certificate, showing the computation of the Borrowing Base in reasonable detail as of the close of business on the last Business Day of such calendar week (or such calendar month, as applicable), together with such other information as is therein required, prepared by the Borrower. For greater certainty, all calculations of availability in any Borrowing Base Certificate shall originally be made by the Borrower and certified by an Authorized Representative of the Borrower, provided that the Lender shall from time to time in its sole discretion, and at such intervals as the Lender determines, review and adjust any such calculation (A) to reflect its reasonable estimate of declines in value of any Collateral, due to collections of Receivables received or otherwise and (B) to the extent the calculation is not made in accordance with this Agreement or does not accurately reflect the reserves determined by the Lender;

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(b)as soon as available, and in any event within 30 days after the close of each monthly accounting period of the Borrower (or more frequently if requested by the Lender):

(i)a copy of the Unaudited Financial Statements as of the last day of such monthly accounting period;

(ii)a Receivables aging report on an “invoice date” basis, including reconciliation of cash and accounts receivable;

(iii)an accounts payable aging report;

(iv)a priority claims and statutory deductions report; and

(v)a report reconciling accounts payable and Receivables set out in the reports provided pursuant to Section 12.1(5)(b)(ii), Section 12.1(5)(b)(iii) and Section 13.1(b)(iv) for the applicable monthly accounting period to the corresponding figures for such items in the Unaudited Financial Statements for such monthly accounting period provided pursuant to Section 12.1(5)(b)(i);

in each case (A) accompanied by management commentary on the results reported as compared to performance in the previous Fiscal Year and as against the budget prepared for the current Fiscal Year of the Borrower, (B) prepared by the Borrower in such format and detail as is required by the Lender, and (C) certified by an Authorized Representative of the Borrower;

(c)as soon as available, and in any event within 90 days after the last day of each Fiscal Year of the Borrower:

(A)a copy of the Audited Financial Statements for such Fiscal Year in respect of the Borrower Group, certified by an Authorized Representative of the Borrower and accompanied by an unqualified opinion of the Auditor, confirming that the financial statements have been prepared in accordance with GAAP and present fairly in accordance with GAAP the consolidated financial condition of the Borrower as of the close of such Fiscal Year and the results of its operations and cash flows for the fiscal year then ended and that an examination of such accounts in connection with such financial statements has been made in accordance with generally accepted auditing standards and, accordingly, such examination included such tests of the accounting records and such other auditing procedures as were considered necessary in the circumstances; and

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(B)a report reconciling accounts payable and Receivables amounts provided pursuant to Section 13.1(5)(b)(ii) and (iii) for such Fiscal Year to the corresponding amounts for such items in the Audited Financial Statements and Unaudited Financial Statements for such Fiscal Year;

(d)promptly after receipt thereof, any additional written reports, management letters or other detailed information contained in writing concerning significant aspects of the operations and financial affairs of any Credit Party relevant to the preparation of the Financial Statements;

(e)as soon as available, and in any event not less than 30 days after the end of each Fiscal Year, a copy of the Business Plan for the next Fiscal Year; and

(f)promptly after knowledge thereof shall come to the attention of any officer or director of any Credit Party, written notice of any threatened or pending litigation or governmental proceeding or labour controversy against the Borrower, the Guarantor or any Credit Party that, if adversely determined, would have a Material Adverse Effect, or of the occurrence of any Default or Event of Default;

(g)promptly after knowledge thereof shall come to the attention of any officer or director of any Credit Party, written notice of any Default or Event of Default.

Each of the financial statements of the Borrower and/or the Borrower Group furnished to the Lender pursuant to this Section 12.1(5) shall be accompanied by a Compliance Certificate prepared by the Canadian Borrower on behalf of the Borrowers (which such certificate shall include for greater certainty the requisite financial covenant calculations hereunder).

(6)Inspection; Appraisals; Verification.

(a)It shall at reasonable times and on reasonable notice permit (and arrange for all access required to permit) the Lender and its duly authorized representatives and agents, to (i) examine and make copies of the corporate books and books of accounts and other financial records of each Credit Party, (ii) discuss the affairs, finances and accounts of each Credit Party with, and to be advised as to the same by, their officers, employees and independent chartered accountants (and each Credit Party hereby authorizes its accountants to discuss with the Lender the finances and affairs of such Credit Party), and (iii) visit and inspect any of the premises of the Credit Parties and to conduct field examinations, provided that the Lender shall not conduct more than two (2) field examinations during any particular Fiscal Year; provided that if an Event of Default has occurred and is continuing, the Lender shall be entitled to conduct field examinations of the Credit Parties at such times and intervals as the Lender determines appropriate in its sole discretion. Notwithstanding the foregoing and the for greater certainty, the number of visits to and examinations, at reasonable times and on reasonable notice, of the Credit Parties which do not constitute field examinations shall not be restricted.

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(b)It shall, upon request by the Lender at any time and from time to time, deliver to the Lender such evidence of the existence, identity and location of the Collateral and of its availability as collateral security pursuant hereto (including, without limitation, reports stating the book value of Inventory by major category and location). It agrees that the Lender shall have the right to verify all or any part of the Collateral in any manner, and through any medium, that the Lender considers appropriate, and it agrees to furnish all assistance and information, and perform any acts, that the Lender may require in connection therewith. It agrees to promptly notify the Lender of any Collateral that such Credit Party has determined is obsolete, and it shall provide the prior book value of such Collateral, a description thereof and its location.

(7)Location of Collateral and Offices.

(a)The Collateral is and shall remain in the possession or control of the applicable Credit Party at the Permitted Collateral Locations.

(b)A Credit Party shall at all times own or lease each Permitted Collateral Location, except to the extent otherwise permitted by the Lender. If a Permitted Collateral Location is not owned by a Credit Party, the Borrower shall, if so requested by the Lender, deliver a Collateral Access Agreement. For greater certainty, as of the Closing Date, the Lender only requires Collateral Access Agreements in respect of those leased premises where the Credit Parties maintain books and records relating to Receivables. Upon the occurrence of a Default or an Event of Default, the Borrower shall, if so requested by the Lender, make commercially reasonable best efforts to deliver or cause to be delivered a Collateral Access Agreement in respect of such other Permitted Collateral Locations as the Lender may require in the circumstances.

(8)Settlements on Receivables.

(a)If an Event of Default has occurred and is continuing, the proceeds of any Collateral sold by it shall be set aside at the request of the Lender and held by it as trustee for the Lender and such shall remain part of the Collateral.

(b)Unless an Event of Default has occurred and is continuing, each Credit Party may settle and adjust disputes and claims with its customers and account debtors, handle returns and recoveries and grant discounts, credits and allowances in the ordinary course of its business as presently conducted for amounts and on terms which it in good faith considers advisable. If an Event of Default has occurred and is continuing, unless the Lender requests otherwise, each Credit Party shall promptly notify the Lender of (i) all returns and recoveries, and (ii) all disputes and claims and settle or adjust them at no expense to the Lender, provided that no discount, credit or allowance shall be granted to any customer or account debtor and no returns of merchandise or other goods shall be accepted by any Credit Party without the Lender’s consent. Notwithstanding the foregoing, the Lender may, if an Event of Default has occurred and is continuing, settle or adjust disputes and claims directly with customers or account debtors for amounts and upon terms which the Lender considers advisable.

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(9)Collection of Receivables.

(a)Regardless of whether an Event of Default has occurred and is continuing, and regardless of whether the Lender has exercised any or all of its rights under other provisions of this Agreement or any other Credit Document, and without prejudice to any other right or remedy available to the Lender at law or in equity, if the Lender requests any Credit Party to do so:

(i)all instruments and chattel paper at any time constituting part of the Receivables or any other Collateral (including any post-dated cheques) shall, upon receipt by such Credit Party, be immediately endorsed to and deposited with the Lender; and

(ii)the Credit Party shall instruct all customers and account debtors to remit all payments in respect of Receivables or any other Collateral to a lockbox or lockboxes under the sole custody and control of, and in such locations as are specified by, the Lender or to a blocked account or blocked accounts, satisfactory to the Lender.

(b)If an Event of Default has occurred and is continuing, and without prejudice to any other rights or remedies available to the Lender at law or in equity, the Lender or its designee may notify any Credit Party’s customers and account debtors at any time that Receivables or any other Collateral have been assigned to the Lender or of the Lender’s security interest therein, and (subject to the provisions of the Intercreditor Agreement) either in its own name, or the applicable Credit Parties’ name, or both, demand, collect (including, without limitation, through a lockbox or blocked account analogous to that described in Section 12.1(9)(a)(ii)), receive, bring enforcement proceedings in respect of, compound and give acquittances for, any or all amounts due or to become due on Receivables or any other Collateral, and in the Lender’s discretion file any claim or take any other action or proceeding which the Lender may deem necessary or appropriate to protect or realize upon the Lien of the Lender in the Receivables or any other Collateral.

(c)Any proceeds of Receivables or other Collateral transmitted to or otherwise received by the Lender pursuant to Sections 12.1(9)(a) and 12.1(9)(b) may be handled and administered by the Lender in and through one or more remittance accounts at the Lender (such remittance accounts to constitute special restricted accounts for purposes of and subject to the provisions of this Agreement), and each Credit Party acknowledges that the maintenance of such remittance accounts by the Lender is solely for the Lender’s convenience and that no Credit Party has any right, title or interest in such remittance account or any amounts at any time standing to the credit thereof.

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(d)Upon the occurrence and during the continuation of an Event of Default and/or in the circumstances where there is not a sufficient Borrowing Base to support the Accommodations Outstanding, the Lender shall apply proceeds of Receivables and other Collateral received by it from any source to the payment of the Obligations (whether or not then due and payable, but in circumstances where there is not sufficient Borrowing Base to support the Accommodations Outstanding, only to the extent required to reduce the Accommodations Outstanding to the Borrowing Base), such applications to be made in accordance with Section 8.1(3). Except for purposes of computing interest on the Obligations in accordance with this Agreement, the Lender need not apply or give credit for any item included in proceeds of Receivables or other Collateral until the Lender has received final payment therefor at its office in cash or Cash Equivalents, acceptable to the Lender; provided that, if the Lender does give credit for any item prior to receiving final payment therefor and the Lender fails to receive such final payment or an item is charged back to the Lender for any reason, the Lender shall be entitled to charge the amount of such item back against any Deposit Account maintained with the Lender, together with interest thereon at the rate referred to in Section 3.5(2) hereof which applies to Revolving Loans in the currency of the amount involved. Concurrently with each transmission of any proceeds of Receivables or other Collateral to the Deposit Account, the Borrower shall furnish the Lender with a report in such form as the Lender shall require, identifying the particular Receivable or other Collateral from which the same arises or relates.

(10)Inventory and Equipment.

(a)It shall at its own cost and expense maintain, keep and preserve its Inventory in good condition; provided that, notwithstanding the foregoing, it may, until an Event of Default, (i) use, consume and sell the Inventory in the ordinary course of business, but a sale in the ordinary course of business shall not under any circumstance include any transfer or sale in satisfaction, partial or complete, of a debt owing by any Credit Party; and (ii) sell obsolete, worn out or unusable Equipment which is concurrently replaced, on a reasonably expeditious basis, consistent with past practices and having regard to the particular Equipment, replacing same with similar Equipment at least equal in quality and condition to that sold and owned by such Credit Party, free of any Lien other than Permitted Liens, in a manner consistent with the past practices of such Credit Party.

(b)If an Event of Default has occurred and is continuing, if any of the Inventory is at any time evidenced by a document of title, such document of title shall be promptly delivered by such Credit Party to the Lender unless the Lender expressly agrees otherwise.

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(11)Compliance with Laws. It shall comply in all material respects with the requirements of all Applicable Laws.

(12)Insolvency Applications. It acknowledges that its business and financial relationships with the Lender are unique, and that the Lender does not have a common interest with any of its other creditors; and it agrees that if it files any plan of arrangement under the Companies’ Creditors Arrangement Act or makes any proposal under the Bankruptcy and Insolvency Act, the Lender will be placed in its own class for voting and distribution purposes, and the Credit Party will not permit or acquiesce in, directly or indirectly, the classification of the Lender with any other creditor for any purpose of such plan or proposal or otherwise.

(13)US Benefit Plan Matters. It will maintain each US Benefit Plan in compliance in all material respects with all requirements of Applicable Law. It will promptly notify the Lender on becoming aware of (a) the institution of any steps by any Person to terminate any US Pension Plan, (b) the failure of any Credit Party to make a required contribution to any US Pension Plan if such failure is sufficient to give rise to an Encumbrance under Section 302(f) of ERISA, (c) the taking of any action with respect to a US Pension Plan which is reasonably likely to result in the requirement that any Credit Party furnish a bond or other security to the US Pension Benefit Guaranty Corporation under ERISA or such US Pension Plan, or (d) the occurrence of any event with respect to any US Benefit Plan which is reasonably likely to result in any Credit Party incurring any material liability (other than ordinary course funding obligations and claims for benefits), fine or penalty, and in the notice to the Lender thereof, provide copies of all Credit Documents relating thereto.

Section 12.2 Negative Covenants

While any obligation of any Credit Party to the Lender is outstanding under any Credit Document and the Commitments have not been terminated, each Borrower agrees as follows:

(1)Change of Name. It shall not change its name, and it shall ensure that no other Credit Party changes its name, without first giving the Lender at least thirty (30) days’ prior written notice of its intent to do so.

(2)Limitation on Liens. It shall not, and it shall ensure that each other Credit Party does not, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any Collateral, whether now owned or hereafter acquired, other than Permitted Liens.

(3)Disposition of Assets. It shall not, and it shall ensure that each other Credit Party does not, sell, lease, transfer, assign, convey or otherwise dispose of any of its properties or assets except in the ordinary course of business and in accordance with the terms of the Credit Documents.

(4)Consolidations and Mergers. It shall not, and it shall ensure that each other Credit Party does not, merge, consolidate, amalgamate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favour of any Person, except that any Credit Party may merge, amalgamate with, or dissolve or liquidate into, any other Credit Party (so long as it remains an Credit Party), provided that in any such transaction, other than an amalgamation, the Credit Party shall be the continuing or surviving corporation.

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(5)Formation of New Entities. It shall not, and it shall ensure that each other Credit Party does not, form or acquire or otherwise permit to exist any Subsidiary, without the prior written consent of the Lender (such consent not to be unreasonably withheld).

(6)Maintenance of Equity Interests. It shall not, and it shall ensure that each other Credit Party does not, assign, sell or transfer, or permit the assignment, sale or transfer of, any of its Equity Interests or any Equity Interest of any other Credit Party; and the Borrower shall not permit a Change of Control to occur.

(7)Limitations on Debt. It shall not, and it shall ensure that each other Credit Party does not, create, incur, assume, suffer to exist, or otherwise become or remain directly or indirectly liable with respect to, Debt in an aggregate amount exceeding $5,000,000, determined on a consolidated basis, except: (i) the FCC Debt; (ii ) Debt incurred pursuant to this Agreement; (iii) Debt existing on the Closing Date and described in Section 11.1(x); (iv) Debt secured by Permitted Liens (subject to the $5,000,000 aggregate limit described above); (v) Debt for amounts payable to suppliers in the ordinary course of business; (vi) Capitalized Lease Obligations in an aggregate amount not exceeding $100,000 at any time, determined in accordance with GAAP on a consolidated basis for the Borrower and each other Credit Party; (vii) unsecured Debt owing to another Credit Party; and (viii) Debt incurred for the purpose of acquiring the use or possession of any property under a lease or similar arrangement, whether or not the Credit Party has the express or implied right to acquire title to or purchase such property, if, after giving effect thereto, the aggregate amount of fixed rentals and other consideration payable by all Credit Parties under all such leases and similar arrangements would (i) exceed $11,000,000 or (ii) exceed $2,000,000 during any Fiscal Year.

(8)Transactions with Affiliates or Associates. It shall not, and it shall ensure that each other Credit Party does not, enter into any contract, arrangement or transaction with any Affiliate or Associate, except: (i) as expressly permitted by this Agreement or listed on Schedule 12.2(8) hereto; (ii) agreements approved by the Lender in respect of Subordinated Debt, (iii) agreements in the ordinary course of, and pursuant to the reasonable requirements of, business and at prices and on terms substantially the same as those that the Credit Party would reasonably expect to receive in a comparable arm’s length transaction with another Person (excluding any requirement for security that might otherwise be required from an arm’s length party), or (iv) as otherwise disclosed in writing to, and approved by, the Lender.

(9)Management Fees and Compensation. It shall not, and it shall ensure that each other Credit Party does not, pay any management, consulting or similar fees to any Affiliate or to any officer, director or employee of it or any Affiliate except (i) payment of reasonable compensation and expense reimbursement to officers and employees for actual services rendered to, and expenses incurred for, it in the ordinary course of business, and (ii) payment of directors’ fees and reimbursement of actual out-of-pocket expenses incurred in connection with attending board of director meetings not to exceed in the aggregate for the Credit Parties with respect to all such items $700,000 in any Fiscal Year provided that no such payment shall be made if an Event of Default has occurred and is continuing or if the making of such payment will result in an Event of Default.

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(10)Contingent Obligations. It shall not, and it shall ensure that each other Credit Party does not, create, incur, assume or suffer to exist any Contingent Obligations, other than in respect of the Obligations, except: (i) endorsements for collection or deposit in the ordinary course of business; (ii) Contingent Obligations incurred in the ordinary course of business with respect to surety and appeal bonds, performance bonds and other similar obligations; and (iii) Contingent Obligations arising with respect to customary indemnification obligations in favour of purchasers in connection with dispositions permitted under Section 12.2(3), and (iv) Contingent Obligations described in clause (b) of the definition thereof and permitted pursuant to Section 12.2(10); provided that, in any such case, such Contingent Obligations are not otherwise expressly restricted or prohibited by this Agreement.

(11)Restricted Payments.

(a)It shall not, and it shall ensure that each other Credit Party does not, directly or indirectly, (i) declare or make any payment or other distribution of assets, properties, cash, rights, obligations or Securities on account of any of Equity Interests (except that any Credit Party may declare and pay dividends to another Credit Party (so long as it remains an Credit Party)), or (ii) purchase, redeem or otherwise acquire for value any of its, or any of its Affiliate’s, shares of capital stock, partnership interests, membership interests or other equity securities or any warrants, rights or options to acquire such interests or Securities now or hereafter outstanding, or (iii) make any payment in respect of Subordinated Debt, or (iv) make any other payment or distribution to any of its shareholders or Affiliates or any other non-arm’s length party.

(12)Change in Business. It shall not, and it shall ensure that each other Credit Party does not, engage in any material line of business substantially different from those lines of business carried on by it on the date hereof and it shall not change the location from which such line of business is carried on by it, all as described in Section 11.1(d).

(13)Change in Structure. It shall not, and it shall ensure that each other Credit Party does not, make any changes in its equity capital structure (including a change in the terms of its outstanding equity securities), or amend its constating documents (including any shareholder agreement), except as necessary to effect transactions permitted under Section 12.2(3).

(14)Accounting Changes. It shall not, and it shall ensure that each other Credit Party does not, make any significant change in accounting treatment or reporting practices, except as required by GAAP, or change its Auditor (unless it is another independent accounting firm of national standing which is acceptable to the Lender acting reasonably) or Fiscal Year.

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(15)Deposit Accounts. It shall not, and it shall ensure that each other Credit Party does not, open or maintain any Deposit Account except with the Lender or as disclosed in Schedule 11.1(hh) provided, however, that (i) Deposit Accounts indicated as “Permanent Accounts” on Schedule 11.1(hh) maintained other than with the Lender or its Affiliates shall not at any time have, in the aggregate, funds deposited therein in excess of US$400,000 or, if the Marfa, Texas facility is in operation, US$800,000, and (ii) Deposit Accounts indicated as “Temporary Accounts” on Schedule 11.1(hh) may remain open for a period of up to 60 days following the Closing Date for purposes of transferring all relevant Deposit Accounts and other bank accounts to the Lender.

(16)Material Contracts. It shall not and it shall ensure that each other Credit Party does not,

(i) cancel or terminate any Material Contract; (ii) waive any default or breach under any Material Contract; (iii) amend or otherwise modify any Material Contract; or (iv) take any other action in connection with any Material Contract or Licence, that would, in each case, have a Material Adverse Effect.

(17)Limitation on Sale and Leaseback Transactions. It shall not, and it shall ensure that each other Credit Party does not, directly or indirectly, enter into any sale and leaseback transaction with respect to any property or assets (whether now owned or hereafter acquired).

(18)Loans and Investments. It will not, and it shall ensure that each other Credit Party does not, on an aggregate basis in excess of $500,000 prior to the Maturity Date without the prior written approval of the Lender, (i) purchase or acquire, or make any commitment to purchase or acquire, any capital stock, equity interest, or any obligations or other Securities of, or any interest in, any Person, including, without limitation, the establishment or creation of a Subsidiary, or (ii) make or commit to make any acquisition of all or substantially all of the assets of another Person, or of any business or division of any Person, including without limitation, by way of merger, consolidation, amalgamation or other combination or (iii) make or commit to make any advance, loan, extension of credit or capital contribution to or any other investment in or guarantee of, any Person including any Affiliate or make any payments in respect thereof (the items described in clauses (i), (ii), and (iii) are referred to as “Investments”), except for: (A) Investments in cash and Cash Equivalents; (B) extensions of credit by one Credit Party to another Credit Party (so long as it remains an Credit Party), as the case may be and interest and other payments made in connection with such extensions of credit; and (C) extensions of credit which constitute trade receivables in the ordinary course of business.

(19)Use of Cash. Use any cash on deposit with the Lender which is subject to an offset agreement in breach of any term or covenant contained in this Agreement or any other Credit Document.

(20)Location of Assets in Other Jurisdictions. It will not, and it shall ensure that each other Credit Party does not, except for any Collateral in transit for delivery to a customer in the ordinary course of business of such Credit Party, as part of the performance of its obligations or the provision of its services to such customer under a contract entered into with such customer in the ordinary course of business of such Credit Party, (i) acquire any Collateral outside of the jurisdictions identified in Schedule 11.1(t), or (ii) move any Collateral to a jurisdiction where the Lender would not have, or continue to have, a first priority Lien over such Collateral under Applicable Law, or (iii) knowingly suffer or permit in any other manner any of its Collateral to not be subject to the Lender’s Lien or to be or become located in a jurisdiction as a result of which the Lender’s Lien over such Collateral is not perfected.

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(21)Excluded Subsidiaries. It will not, and it shall ensure that each other Credit Party does not, without the prior written approval of the Lender, allow or cause any Excluded Subsidiary to (i) incur any Debt, other than Debt to a Credit Party or Debt secured by or which could be secured by Permitted Liens or Debt for amounts payable to suppliers in the ordinary course of business, (ii) grant, incur or suffer any Lien other than a Permitted Lien, (iii) purchase or acquire, or make any commitment to purchase or acquire, any capital stock, equity interest, or any obligations or other Securities of, or any interest in, any Person, including, without limitation, the establishment or creation of a Subsidiary, (iv) make or commit to make any acquisition of all or substantially all of the assets of another Person, or of any business or division of any Person, including without limitation, by way of merger, consolidation, amalgamation or other combination or (v) make or commit to make any advance, loan, extension of credit or capital contribution to or any other investment in, any Person including any Affiliate or make any payments in respect thereof.

(22)Loans to Excluded Subsidiaries. It will not, and it shall ensure that each other Credit Party does not, make loans or advance funds or make or increase, as the case may be, any equity investment in any Excluded Subsidiary. Notwithstanding the foregoing, the Credit Parties may make loans available to Village Farms DR. S.R.L. (“VFDR”) provided, however, that the gross amount of loans owing by VFDR to the Credit Parties shall not at any time exceed $3,000,000.

(23)Pension Plans. It will not, and it shall ensure that each other Credit Party does not create or establish a defined benefit pension plan.

Section 12.3 Financial Covenants of the Borrower

While any Obligation of any Credit Party or any Obligation of the Lender is outstanding under any Credit Document, each Credit Party agrees as follows:

(1)Fixed Charge Coverage Ratio. The Borrower Group shall, at all times on a cumulative basis during 2013, and at all times during each Twelve Month Period thereafter, maintain a Fixed Charge Coverage Ratio of not less than 1.1:1.0, calculated and tested as of the last day of each calendar month and at such other times as the Lender determines necessary or appropriate.

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(2)Capital Expenditures. The Borrowers and the other Credit Parties will not without the prior written consent of the Lender expend or become obligated for any Capital Expenditures in an aggregate amount exceeding $3,000,000 during any Fiscal Year, determined in accordance with GAAP on a consolidated basis for the Borrower Group.

ARTICLE 13

DEFAULT AND ENFORCEMENT

Section 13.1 Events of Default

The occurrence of any of the following events shall constitute an event of default (an “Event of Default”) under this Agreement:

(a)Payment Defaults. Failure by any Credit Party to pay to the Lender when due all amounts owing to the Lender under any Credit Document, including without limitation, all Accommodations Outstanding, interest and other Obligations.

(b)Non-Payment Defaults under Article 12. Failure of any Credit Party to comply with any covenant in Article 12 hereof and that failure, if capable of being remedied, is not remedied within 15 days after either the Credit Party has become aware of its occurrence or the Lender has notified the Borrower of its occurrence.

(c)Other Non-Payment Defaults under Credit Documents. Failure of any Credit Party to comply with any covenant given in favour of the Lender in any Credit Document (other than a Default pursuant to Section 13.1(a) or Section 13.1(b)) if such failure is capable of being remedied and such failure has not been remedied within 15 days after the earlier of (A) the date on which an officer of any Credit Party became aware of its occurrence, and (B) the date on which the Borrower received notice of its occurrence from the Lender.

(d)Default in Other Agreements. (i) Failure of any Credit Party to pay when due any principal, interest or other amount payable in respect of any indebtedness owing by such Credit Party (other than indebtedness owing pursuant to any Credit Document) in an individual principal amount of $250,000 or more or in an aggregate principal amount of $250,000 or more, after the expiry of any applicable grace period provided therefor; or (ii) breach or default by any Credit Party with respect to any other term of any indebtedness owing by any Credit Party (other than covenants in respect of indebtedness owing pursuant to any Credit Document), including any loan agreement, Mortgage, indenture or other agreement relating thereto, after the expiry of any applicable grace period provided therefor, in each case, if the effect of such breach or default is to cause, or to permit such indebtedness to become or be declared due and payable (or subject to a compulsory repurchase or redemption) prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be.

(e)Breach of Representations and Warranties. Any representation, warranty, certification or statement made or deemed to be made by any Credit Party in any Credit Document is untrue in any material respect as of the date on which such representation, warranty, certification or statement was made or deemed to have been made.

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(f)Action by Other Creditors. Any judgment, writ, warrant of attachment, distress or any similar process in an amount exceeding $250,000 is entered or filed against one or more of the Credit Parties or against any Collateral (or which, when combined with other judgments, writs, warrants of attachment, distress or other similar proceedings entered or filed against one or more Credit Parties or against any Collateral, exceeds an aggregate amount of $250,000), and such judgment, writ, warrant of attachment, distress or any similar process is not diligently appealed in good faith and vacated, bonded, stayed or satisfied within 30 days thereafter or, within such 30 day period, any Collateral is possessed or seized by any third party creditor.

(g)Invalidity and Contest. (i) Any Credit Document, or any provision thereof, shall at any time cease to be a legally binding and enforceable obligation of any Credit Party that is a party thereto in accordance with its terms or be declared null and void, (ii) the legality, validity, binding nature or enforceability of any Credit Document, or any provision thereof, shall be contested by any Credit Party, or (iii) any Credit Party shall deny that it has any further liabilities or obligations under any Credit Document to which it is a party except as permitted under such Credit Document.

(h)Governmental Approvals. Any Governmental Approval required for any Credit Party to conduct its business substantially in the manner presently conducted or to perform its obligations under any Credit Document is not obtained or is withdrawn or ceases to be in full force and effect and same would have a Material Adverse Effect and (i) in the Lender’s opinion, it is not possible for such Credit Party to obtain such Governmental Approval within 60 days after the date on which such Governmental Approval was required or withdrawn, as applicable, or (ii) in the Lender’s opinion, it is possible for such Credit Party to obtain such Governmental Approval within 60 days after the date on which such Governmental Approval was required or withdrawn, as applicable, but such Governmental Approval is not obtained within such 60 day period.

(i)Voluntary Proceedings. Any Credit Party (i) institutes proceedings for substantive relief in any bankruptcy, insolvency, debt restructuring, reorganization, readjustment of debt, dissolution, liquidation, winding-up or other similar proceedings (including proceedings under the Bankruptcy and Insolvency Act (Canada), the Winding-up and Restructuring Act (Canada), the Companies’ Creditors Arrangement Act (Canada), the United States Bankruptcy Code, incorporating statute (or other legislation, document or agreement creating such Credit Party), including proceedings for the appointment of a trustee, interim receiver, receiver, receiver and manager, administrative receiver, custodian, liquidator, provisional liquidator, administrator, sequestrator or other like official with respect to such Credit Party or all or any material part of the Collateral, or (ii) makes an assignment for the benefit of creditors, or (iii) is unable, or admits in writing its inability, to pay its debts as they become due or otherwise acknowledges its insolvency or commits any other act of bankruptcy or is insolvent under any applicable legislation, or (iv) voluntarily suspends the conduct of its business or operations, or (v) acquiesces in, or takes any action in furtherance of, any of the foregoing.

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(j)Involuntary Proceedings. If any third party (i) makes any application under the Companies’ Creditors Arrangement Act (Canada), the United States Bankruptcy Code or similar legislation in Canada or the United States of America in respect of any Credit Party, or (ii) files a proposal or notice of intention to file a proposal under the Bankruptcy and Insolvency Act (Canada), the United States Bankruptcy Code or similar legislation in Canada or the United States of America in respect of any Credit Party, or (iii) institutes any winding-up proceeding under the Winding-up and Restructuring Act (Canada), the United States Bankruptcy Code, any relevant incorporating statute or any similar legislation in Canada or the United States of America in respect of any Credit Party, or (iv) presents a petition in bankruptcy under the Bankruptcy and Insolvency Act (Canada) or any similar legislation in Canada or the United States of America in respect of any Credit Party, or (v) files, institutes or commences any other petition, proceeding or case under any other bankruptcy, insolvency, debt restructuring, reorganization, incorporation, readjustment of debt, dissolution, liquidation, winding-up or similar law now or hereafter in effect, seeking bankruptcy, liquidation, reorganization, dissolution, winding-up, composition or readjustment of debt of any Credit Party, the appointment of a trustee, interim receiver, receiver, receiver and manager, administrative receiver, custodian, liquidator, provisional liquidator, administrator, sequestrator or other like official for any Credit Party, or any material part of any Credit Party’s assets or any similar relief in Canada or the United States of America; unless such application, filing, proceeding, petition or case, as applicable, is being contested in good faith by bona fide action on the part of the relevant Credit Party and is dismissed, stayed or withdrawn within 30 days after the commencement thereof.

(k)Material Adverse Change. At any time an event or circumstance occurs that, in the opinion of the Lender, is or will be a Material Adverse Change.

(l)Change of Control. A Change of Control occurs or, in the opinion of the Lender, will occur, each without the prior written consent of the Lender.

(m)Pension Plans. (i) The institution of any steps by any Credit Party or any member of its Controlled Group or any applicable regulatory authority to terminate a Canadian Pension Plan or US Pension Plan (in whole or in part) if, as a result of such termination, any Credit Party is required to make an additional contribution to such Canadian Pension Plan or US Pension Plan, or to incur an additional material liability or obligation to such Canadian Pension Plan or US Pension Plan, or (ii) a contribution failure occurs with respect to any US Pension Plan sufficient to give rise to a lien or charge under Section 302(f) of ERISA or under any applicable pension benefits legislation in any other jurisdiction.

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(n)Loss of Collateral, etc. Any loss, theft, damage or destruction occurs with respect to any Collateral if the amount not covered by insurance exceeds $250,000 (excluding any related deductible under insurance policies).

(o)Dissolution, etc. The dissolution, liquidation, wind-up or termination of existence of any Credit Party or if any proceedings are commenced in respect thereof unless, in the case of proceedings not brought by an Obligor, such proceedings are being actively and diligently contested in good faith by bona fide action on the part of the relevant Credit Party and is dismissed, stayed or withdrawn within 30 days after the commencement thereof.

Section 13.2 Rights upon Default and Event of Default

Upon the occurrence of a Default, which is continuing, the Lender may, on notice to the Borrowers, declare that the ability of the Borrowers to require any further Advances under the Facilities shall be suspended. Upon the occurrence of an Event of Default which is continuing, the Lender may do either or both of the following:

(a)declare that the Commitment under any or all of the Facility has expired and that the Lender’s obligation to make Advances has terminated; and

(b)declare the entire principal amount of all Advances outstanding, all unpaid accrued interest and all fees and other amounts required to be paid by the Borrowers hereunder to be immediately due and payable without the necessity of presentment for payment, notice of non-payment and of protest (all of which are hereby expressly waived) and proceed to exercise any and all rights and remedies hereunder and under any other Credit Document.

From and after the issuance of any declaration referred to in this Section 13.2, the Lender shall not be required to honour any cheque or other instrument presented to it by the Borrower regardless of the date of issue or presentation. Immediately upon receipt of a declaration under Section 13.2(b), the Borrowers shall pay to the Lender all amounts outstanding hereunder including, without limitation, the Deemed Hedge Exposure owing under each Hedging Arrangement. Without limiting the generality of the foregoing, the applicable Borrower shall pay to the Lender the face amount of all Bankers’ Acceptances which have not matured and the maximum amount payable under all outstanding Letters of Credit, which are unmatured or unexpired, which amounts shall be held by the Lender as collateral security for the Borrower’s obligations with respect to those Bankers’ Acceptances and Letters of Credit, as applicable. The Deemed Hedge Exposure under any Hedging Arrangement shall be determined in accordance with the applicable Hedge Agreement.

Section 13.3 Waiver of Default

No express or implied waiver by the Lender of any demand, Default or Event of Default shall in any way be or be construed to be a waiver of any future or subsequent Default or Event of Default. To the extent permitted by Applicable Law, the Credit Parties hereby waive any rights now or thereafter conferred by statute or otherwise which may limit or modify any of the Lender’s rights or remedies under any Credit Document. Each Credit Party agrees that the exercise by the Lender of any rights or remedies under any Credit Document without having declared an acceleration shall not in any way alter, affect or prejudice the right of the Lender to make a declaration pursuant to Section 13.2 at any time and, without limiting the foregoing, shall not be construed as or deemed to constitute a waiver of any rights under Section 13.2.

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ARTICLE 14

REMEDIES

Section 14.1 Remedies Cumulative

For greater certainty, the rights and remedies of the Lender under this Agreement and the other Credit Documents are cumulative and are in addition to and not in substitution for any rights or remedies provided by law. Any single or partial exercise by the Lender of any right or remedy upon the occurrence of a demand, Default or Event of Default shall not be deemed to be a waiver of, or to alter, affect or prejudice any other right or remedy to which the Lender may be lawfully entitled as a result of the demand, Default or Event of Default, and any waiver by the Lender of the strict observance of, performance of or compliance with any term, covenant, condition or agreement herein contained, and any indulgence granted thereby, shall be deemed not to be a waiver of any subsequent demand, Default or Event of Default.

Section 14.2 Remedies Not Limited

The Lender may, to the extent permitted by Applicable Law, bring suit at law, in equity or otherwise, for any available relief or purpose including, but not limited to: (a) the specific performance of any covenant or agreement contained in this Agreement or in any other Credit Document; (b) an injunction against a violation of any of the terms of this Agreement or any other Credit Document; (c) in aid of the exercise of any power granted by this Agreement or any other Credit Document or by law; or (d) the recovery of any judgment for any and all amounts due in respect of the Obligations.

Section 14.3 Set-Off

Upon the occurrence of demand, Default or Event of Default, the Lender and each of its branches (including the Chicago Branch) and offices are hereby authorized by each Credit Party from time to time, without notice to: (a) set-off and apply any and all amounts owing by the Lender or any of its branches or offices to any Credit Party (whether payable in Canadian Dollars or any other currency and any amounts so owing in any other currency may be converted into one or more currencies in which the Obligations are denominated at such rate or rates as the party may be able to obtain, acting reasonably, and whether matured or unmatured, and in the case of deposits, whether general or special, time or demand and however evidenced) against and on account of the Obligations (whether or not any declaration under Section 13.2 has been made and whether or not those Obligations are unmatured or contingent); (b) hold any amounts owing by the Lender as collateral to secure payment of the Obligations owing to it to the extent that those amounts may be required to satisfy any contingent or unmatured Obligations owing to it; and (c) return as unpaid for insufficient funds any and all cheques and other items drawn against any deposits so held as the Lender in its sole discretion may elect. For greater certainty, and in addition to the rights, powers and remedies set out above, the Lender and each of its branches and offices may exercise at their discretion any and all set-off and other rights and remedies afforded to each of them pursuant to Applicable Law.

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Section 14.4 Lender May Perform Covenants

If any Credit Party fails to perform any of its obligations under any covenant contained in this Agreement or any other Credit Document, the Lender may (but has no obligation to), upon notice to the Borrower, perform any covenant on behalf of such Credit Party and, if the covenant requires the payment or expenditure of money, the Lender may make Advances to fund such expenditure, and such Advances shall constitute Prime Rate Loans under the Revolving Facility and shall be repaid by the Borrower upon demand by the Lender.

ARTICLE 15

GENERAL PROVISIONS

Section 15.1 Assignment

(1)This Agreement shall enure to the benefit of and be binding upon the parties hereto, their respective successors and any permitted Assignees. The Credit Parties shall not assign, delegate or transfer all or any part of their rights or obligations under this Agreement without the prior written consent of the Lender, which consent may be withheld in the Lender’s sole discretion.

(2)Subject to Section 15.1(3), the Lender may, provided such assignment is at no additional cost to the Credit Parties, without the prior written consent of the Borrowers, assign all or any part of its rights and obligations in respect of the Credit Documents to one or more financial institutions or other entities (each an “Assignee”), and any such assignment shall become effective upon receipt by the Borrower of (i) written notice from the Lender that it has assigned all or any part of its rights under the Credit Documents and (ii) a written undertaking from the Assignee (addressed to all the parties to this Agreement) agreeing to be bound by this Agreement and to perform the obligations assigned to it. Any Assignee shall be treated as a lender for all purposes of this Agreement, shall be entitled to the full benefit hereof and shall be subject to the obligations of the Lender to the same extent as if it were an original party in respect of the rights or obligations assigned to it, and the Lender shall be released and discharged accordingly and to the same extent, and the Schedules hereto, as applicable, shall be amended accordingly from time to time without further notice or other requirement.

(3)Notwithstanding Section 15.1(2), the Lender may not assign all or any part of its rights to or have any of its obligations assumed by any private equity fund or hedge fund that in the ordinary course of business invests in debt (a) considered to be very weak, (b) where the issuer of such debt is in imminent default to its creditor(s), or (c) where the issuer of such debt is in insolvency proceedings, unless, in each case, an Event of Default shall have occurred and be continuing or upon the exercise of any rights pursuant to Section 13.2.

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(4)The Lender may disclose to any prospective Assignee, on a confidential basis, such information concerning the Credit Parties, their businesses and properties as it considers appropriate, without liability to any Credit Party.

Section 15.2 Amendments

No amendment or waiver of any provision of this Agreement or consent to any departure by a party from any provision of this Agreement will be effective unless it is in writing, and any such amendment, modification, waiver or consent will be effective only in the specific instance, for the specific purpose and for the specific length of time for which it is given.

Section 15.3 Notice

Unless otherwise specified, any notice or other communication required or permitted to be given to a party under this Agreement shall be in writing and may be delivered personally or sent by prepaid registered mail, e-mail, PDF or facsimile, to the address, e-mail address or facsimile number of the party set out beside its name at the foot of this Agreement to the attention of the Person there indicated or to such other address, e-mail address, facsimile number or other Person's attention as the party may have specified by notice in writing given under this Section. Any notice or other communication shall be deemed to have been given (i) if delivered personally, when received; (ii) if mailed, subject to Section 15.4, on the fifth Business Day following the date of mailing; (iii) if sent by facsimile or e-mail, on the Business Day when the appropriate confirmation of receipt has been received if the confirmation of receipt has been received before 3:00 p.m. on that Business Day or, if the confirmation of receipt has been received after 3:00 p.m. on that Business Day, on the next succeeding Business Day; and (iv) if sent by facsimile or e-mail on a day which is not a Business Day, on the next succeeding Business Day on which confirmation of receipt has been received. All communication with any Credit Party hereunder may be directed through the Canadian Borrower. For greater certainty, any notice or other document or instrument which is required to be given or delivered to any Credit Party hereunder shall be deemed (unless notice to such Credit Party is required by Applicable Law) to have been given to and received by such Credit Party if given to the Canadian Borrower.

Section 15.4 Disruption of Postal Service

If a notice has been sent by prepaid registered mail and before the fifth Business Day after the mailing there is a discontinuance or interruption of regular postal service so that the notice cannot reasonably be expected to be delivered within five Business Days after the mailing, the notice will be deemed to have been given when it is actually received (or upon refusal of receipt).

Section 15.5 Environmental Indemnity

Each Credit Party shall, and does hereby, indemnify and hold each Indemnified Person harmless from and against any and all Claims and Losses incurred or suffered by, or asserted against, the Indemnified Person, with respect to or as a direct or indirect result of, (a) the presence on or under, or any Release of any Hazardous Substance from any of the Collateral, comprising real property or any other real properties owned or used by any of the Credit Parties or any Subsidiary or any of their successors and assigns; or (b) the breach of any Applicable Laws by any mortgagor, owner, lessee or occupant of such properties. The obligations of each of the Credit Parties under this Section 15.5 shall survive the repayment of the other Obligations and the termination of the Facilities.

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Section 15.6 Further Assurances

Each Credit Party agrees to comply with all terms and conditions of each of the Credit Documents and, at any time and from time to time, upon request of the Lender, to execute and deliver to the Lender, such further Credit Documents or instruments and shall do or cause to be done such further acts as the Lender may deem necessary or desirable to ensure such compliance, to give effect to the intent of the Credit Documents and to secure the Obligations, including, without limitation, executing and delivering, or causing to be executed and delivered, such further Credit Documents or instruments as may be necessary or desirable to (i) give the Lender a first priority Lien in any and all property and assets now or hereafter acquired by any Credit Party, subject only to Permitted Liens, and (ii) to assign all or any part of the Lender’s rights and obligations hereunder to any Assignee.

Section 15.7 Judgment Currency

If for the purpose of obtaining judgment in any court it is necessary to convert all or any part of the liabilities or any other amount due to the Lender in respect of any of the Borrowers’ obligations under this Agreement in any currency (the “Original Currency”) into another currency (the “Other Currency”), each Credit Party to the fullest extent that it may effectively do so, agrees that the rate of exchange used shall be that at which, in accordance with normal banking procedures, the Lender could purchase the Original Currency with the Other Currency on the Business Day preceding that on which final judgment is paid or satisfied. The obligations of the applicable Borrower in respect of any sum due in the Original Currency from it to the Lender shall, notwithstanding any judgment in any Other Currency, be discharged only to the extent that on the Business Day following receipt by the Lender of any sum adjudged to be so due in such Other Currency the Lender may, in accordance with its normal banking procedures, purchase the Original Currency with such Other Currency. If the amount of the Original Currency so purchased is less than the sum originally due to the Lender in the Original Currency, each Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Lender against such Loss, and if the amount of the Original Currency so purchased exceeds the sum originally due to the Lender in the Original Currency, the Lender agrees to remit such excess to the applicable Borrower.

Section 15.8 Waivers

No failure to exercise, and no delay in exercising, on the part of the Lender, any right, remedy, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, remedy, power or privilege shall preclude the exercise of any other right, remedy, power or privilege.

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Section 15.9 Reimbursement of Expenses

The Credit Parties jointly and severally agree to: (a) pay or reimburse the Lender on demand, for all of its reasonable out-of-pocket costs and expenses (including reasonable legal fees and disbursements) incurred in connection with the preparation, negotiation and execution of this Agreement and the other Credit Documents including any subsequent amendments of this Agreement or any other Credit Document, and the consummation and the administration of the transactions contemplated hereby including the reasonable fees and disbursements of counsel to the Lender; and (b) pay or reimburse, on demand, the Lender for all its costs and expenses (including legal fees) incurred in connection with the determination, preservation and enforcement of any responsibilities, rights and remedies under this Agreement and the other Credit Documents, including the reasonable fees and disbursements of its counsel. The obligations of the Credit Parties under this Section 15.9 shall survive the repayment of all Advances and the termination of the Facilities.

Section 15.10 Governing Law

This Agreement and each of the Credit Documents (unless the particular Credit Document otherwise provides) are governed by, and are to be construed and interpreted in accordance with, the laws of the Province of British Columbia and the laws of Canada applicable therein.

Section 15.11 Submission to Jurisdiction

Each Credit Party irrevocably submits to the non-exclusive jurisdiction of the courts of the Province of British Columbia and hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such court. Each Credit Party hereby irrevocably waives, to the fullest extent it may effectively do so, the defence of an inconvenient forum to the maintenance of such action or proceeding. Each Credit Party hereby irrevocably consents to the service of any and all process in such action or proceeding by the delivery of such process to such Borrower at its address provided in accordance with Section 15.3.

Section 15.12 Waiver of Trial by Jury

Each Credit Party hereby knowingly voluntarily and intentionally waive any rights they may have to a trial by jury in respect of any litigation based on, or arising out of, under, or in connection with, this Agreement or any other Credit Document, or any course of conduct, course of dealing, statements (whether oral or written) or actions of the Lender or of the applicable Borrower or any other Credit Parties. Each Credit Party acknowledge and agree that they have received full and sufficient consideration for this provision (and each other provision of each other Credit Document to which it is a party) and that this provision is a material inducement for the Lender entering into this Agreement and each other Credit Document.

Section 15.13 Counterparts

This Agreement and the Credit Documents may be executed and delivered in any number of counterparts, each of which when executed and delivered is an original but all of which taken together constitute one and the same instrument. This Agreement and the Credit Documents may be executed and delivered by facsimile transmission or PDF and each of the parties hereto may rely on such facsimile signature of PDF as though that facsimile signature or PDF were an original hand-written signature.

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Section 15.14 Excluded Subsidiaries

The parties hereto acknowledge and agree that each Excluded Subsidiary is not a Credit Party for purposes of this Agreement or any of the Credit Documents.

Section 15.15 Entire Agreement

This Agreement and all other Credit Documents constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and supersede all prior agreements, negotiations, discussions, undertakings, representations, warranties and understandings, whether written or oral.

Section 15.16 Acknowledgement

Each Credit Party hereby acknowledges, confirms and agrees that all Credit Documents (including without limitation Security documents) previously, now or hereafter delivered by such Credit Party in favour of the Lender remain in full force and effect in accordance with their respective terms, subject to any amendments thereof from time to time. For greater certainty, each Credit Party that has previously executed and delivered a Security Document hereby acknowledges and confirms that each such Security document secures the obligations of such Credit Party under and in connection with this Agreement and all other relevant Credit Documents.

[SIGNATURE PAGES FOLLOW]

SCHEDULE 11.1 (d)

BUSINESS AND OPERATIONS

Village Farms International, Inc. is a corporation incorporated under the laws of Canada and extra-provincially registered in the Province of British Columbia with its principal place of business at 4700 8^th Street, Delta, BC V4K 3N3.

Village Farms Canada GP, Inc. is a corporation incorporated under the laws of Canada and extra- provincially registered in the Province of British Columbia with its principal place of business at 4700 8^th Street, Delta, BC V4K 3N3 and is the general partner of Village Farms Canada Limited Partnership.

Village Farms Canada Limited Partnership is a partnership formed under the laws of the Province of British Columbia with its principal place of business at 4700 8^th Street, Delta, BC V4K 3N3.

VF Operations Canada, Inc. is a corporation incorporated under the laws of Canada and extra- provincially registered in the Province of British Columbia with its principal place of business at 4700 8^th Street, Delta, BC V4K 3N3.

Agro Power Development, Inc. is a corporation incorporated under the laws of Delaware with its principal place of business at 195 International Parkway, Suite 100, Heathrow, Florida 32746.

Village Farms of Delaware, L.L.C. is a corporation incorporated under the laws of Delaware with its principal place of business at 195 International Parkway, Suite 100, Heathrow, Florida 32746.

VF US Holdings, Inc. is a corporation incorporated under the laws of Delaware with its principal place of business at 195 International Parkway, Suite 100, Heathrow, Florida 32746.

Village Farms, L.P. is a partnership formed under the laws of Delaware with its principal place of business at 195 International Parkway, Suite 100, Heathrow, Florida 32746.

SCHEDULE 11.1 (e)

APPROVALS

Village Farms Canada Limited Partnership

•GST/HST #837792126RT00001

•Greenhouse Producer Class 1 – Producer No. 2254, License #12439

•B.C. Marketing Commission – Class I Designated Agency Licence – License No. 2013/14 – 3990.

Village Farms L.P.

•PACA License #20020270

SCHEDULE 11.1 (j)

LITIGATION

None.

SCHEDULE 11.1 (l)

TAXES

None.

SCHEDULE 11.1 (m)

EQUITY INTERESTS

Village Farms International, Inc.

		Total
	# of Units/Shares	Units/Shares
Issuer	Owned	Outstanding	Certificate No.
Village Farms Canada	36,500,000 Class	36,500,010	◆
Limited Partnership	B Units
Inc.
Village Farms Canada	10 Common	10	C2
GP, Inc.	Shares

Village Farms Canada GP, Inc.

		Total
	# of Units	Units
Issuer	Owned	Outstanding	Certificate No.
Village Farms Canada	10 Class A Units	36,500,010	A-1
Limited Partnership
Inc.

Village Farms Canada Limited Partnership

		Total
	# of Shares	Shares
Issuer	Owned	Outstanding	Certificate No.
VF Operations Canada,	500,010 Common	500,010	C2 (for 10 Common
Inc.	shares		shares) and C3 (for
			500,000 Common shares)

VP Operations Canada, Inc.

		Total
		Common
	# of Shares	Shares
Issuer	Owned	Outstanding	Certificate No.
VF U.S. Holdings Inc.	3,000	3,000

Agro Power Development, Inc.

		Total
	# of Shares/Units	Shares/Units
Issuer	Owned	Outstanding	Certificate No.
Village Farms of	N/A	N/A	N/A
Delaware, L.L.C.
Village Farms L.P.	99% LP Interest

Village Farms of Delaware, L.L.C.

		Total
		Units
Issuer	Units Owned	Outstanding	Certificate No.
Village Farms L.P.	1% GP Interest

VF US Holdings, Inc.

		Total
		Common
	# of Shares	Shares
Issuer	Owned	Outstanding	Certificate No.
Agro Power	.2556 Class B	.2556 Class B shares	16B
Development, Inc.	shares

Village Farms, L.P.

Nil.

SCHEDULE 11.1 (s)

INTELLECTUAL PROPERTY

Village Farms, L.P.

Mark ↓	Country	App.	App.	Reg.	Reg. Date	Classes	Goods	Next Action Due
		Number	Date	Number
BABY BEEFS	USA	75/528439	7/29/1998	2,422,551	1/23/2001	(31)	fresh fruit	REGISTERED
							and
							vegetables	Renewal Due:
								01/23/2021
DELECTABL	USA	85/388190	8/3/2011	4,227,181	10/16/2012	(31)	Fresh fruit	REGISTERED
E TOV							and
							vegetables	Sec. 8&15 Aff. Due:
								10/16/2018
EXQUISITE	USA	85/371657	7/14/2011			(31)	Fresh fruit	REGISTERED
HEIRLOOM							and
							vegetables	Renewal Due:
								04/16/2018
FROM OUR	USA	77/451941	4/18/2008	3,530,916	11/11/2008	(31)	fresh fruits	REGISTERED
HOUSE TO							and
YOUR HOME							vegetables	Sec. 8&15 Aff. Due:
								11/11/2014
FROM OUR	USA	75/234479	1/31/1997	2,142,404	3/10/1998	(31)	fresh	REGISTERED
HOUSE TO							greenhouse
YOUR HOME							tomatoes	Renewal Due:
								03/10/2018
GOOD FOR	Canada	1551959	11/14/2011			()	Fresh fruits	PENDING
THE EARTH							and
							vegetables	Advertised in the
								Trade-marks Journal on
								12/26/2012
HEAVENLY	USA	85/371713	7/14/2011	4,124,908	4/10/2012	(31)	Fresh fruit	REGISTERED
VILLAGIO							and
MARZANO							vegetables	Sec. 8 & 15 Aff. Due:
								4/10/2018
HEAVENLY	Canada	1551958	11/14/2011			()	Fresh fruit	PENDING
VILLAGIO							and
MARZANO							vegetables	Declaration of Intent to
								Use Due: 11/14/2014
HOME	USA	75/528441	7/29/1998	2,601,432	7/30/2002	(31)	fresh fruit	REGISTERED
CHOICE							and
							vegetables	Renewal Due:
								7/30/2022
HYDRO	USA	77/563397	9/5/2008	3,687,265	9/22/2009	(31)	fresh	REGISTERED
BITES							vegetables;
							raw	Sec. 8&15 Aff. Due:
							vegetables;	9/22/2015
							fresh fruits;
							unprocessed
							fruits
HYDROPERF	Canada	1454391	10/6/2009	781,352	11/2/2010	()	fresh	REGISTERED
ECT							vegetables
							and fresh	Renewal Due:
							fruits	11/2/2025
HYDROPERF	Mexico	1063658	1/28/2010	1,151,189	1/28/2010	(31)	fresh fruits	REGISTERED
ECT							& vegetables
							and	Renewal Due:
							tomatoes,	01/28/2020

Mark ↓	Country	App.	App.	Reg.	Reg. Date	Classes	Goods	Next Action Due
		Number	Date	Number
							cucumbers
							and peppers
HYDROPERF	USA	77/451943	4/18/2008	3,530,917	11/11/2008	(31)	fresh fruits	REGISTERED:
ECT								Sec. 8&15 Aff. Due:
								11/11/2014
HYDROPERF	USA	78/406394	4/22/2004	2,993,371	9/6/2005	(31)	unprocessed	REGISTERED
ECT							vegetables;
							fresh	Renewal Due:
							vegetables	9/6/2015
HYDROPERF	USA	77/443507	4/9/2008			(31)	Fresh	PENDING
ECT							tomatoes
CAMPARI								Application suspended
								as of 8/6/2008
HYDROPERF	Mexico	1151455	1/31/2011	1,215,081	4/29/2011	(31)	fresh fruit &	REGISTERED
ECT							vegetables
VILLAGE							and	Renewal Due:
FARMS &							tomatoes,	1/31/2021
DESIGN							cucumbers
							and peppers; transport; packaging and storage of goods
HYDROPERF	Mexico	1063660	1/28/2010	1,182,912	10/7/2010	(39)	transport	REGISTERED
ECT							services;
VILLAGE							packing and	Renewal Due:
FARMS							storage of	1/28/2020
GREENHOUS							merchandise
E GROWN &							, excluding
DESIGN							specifically
							gas
							transportatio n and storage l.p.
JUICY	USA	85/371632	7/14/2011	4,092,589	1/24/2012	(31)	Fresh fruit	REGISTERED
BEEFSTEAK							and
							vegetables	A Sec. 8&15 Aff. Due:
								1/24/2018
LIP-SMACKN'	USA	85/388208	8/3/2011	4,234,981	10/30/2012	(31; 35;	fresh fruits	REGISTERED
GRAPES						42)	and
							vegetables;	A Sec. 8&15 Aff. Due:
							business	10/30/2018
							consulting
							services in
							the field of
							monitoring,
							controlling
							and
							managing
							greenhouse
							environment
							s of others,
							business
							management
							of
							greenhouses
							for others;

Mark ↓	Country	App.	App.	Reg.	Reg. Date	Classes	Goods	Next Action Due
		Number	Date	Number
							research and
							development
							; design and
							development
							of
							greenhouses
							for others
MINI	USA	78/479281	9/7/2004	3,160,160	10/17/2006	(31)	fresh	REGISTERED
SENSATIONS							tomatoes	Renewal Due:
								10/17/2016
PURE REBEL	USA	85/388204	8/3/2011			(31)	Fresh fruit	PENDING
							and
							vegetables	The Notice of Approval
								of the Second Extension
								of Time Request to file
								a Statement of Use was
								sent on 3/19/2013
RED	USA	76/387890	3/26/2002	2,738,773	7/15/2003	(31)	fresh	REGISTERED
SPLENDOR							vegetables,
							namely	Renewal Due:
							tomatoes	7/15/2013
RED	USA	77/443508	4/9/2008			(31)	Fresh	PENDING
SPLENDOR							tomatoes
CAMPARI								Application suspended
								as of 8/6/2008
SAVORY	USA	85/371660	7/14/2011	4,092,590	1/24/2012	(31)	Fresh fruit	REGISTERED
ROMA							and
							vegetables	Sec. 8&15 Aff. Due:
								1/24/2018
SCRUMPTIO	USA	85/388197	8/3/2011	4,231,065	10/23/2012	(31)	Fresh	REGISTERED
US MINIS							vegetables	Sec. 8&15 Aff. Due:
								10/23/2018
SINFULLY	Canada	1456301	10/21/2009	778,523	9/30/2010	()	Fresh	REGISTERED
SWEET							vegetables
							and fresh	Renewal Due:
							fruits	9/30/2025
SINFULLY	USA	77/443511	4/9/2008			(31)	Fresh	PENDING
SWEET							tomatoes
CAMPARI								Application suspended
								as of 8/6/2008
SWEET	USA	85/371628	7/14/2011	4,148,072	5/22/2012	(31)	Fresh	REGISTERED
BELLS							vegetables	Sec. 8&15 Aff. Due:
								5/22/2018
TRIANA	USA	77/167599	4/27/2007	3,481,665	8/5/2008	(31)	Fresh	REGISTERED
							vegetables;
							Raw	Sec. 8&15 Aff. Due
							vegetables;	8/5/2014
							Raw fruits;
							Unprocessed
							fruits
VILLAGE	Canada	1454390	10/6/2009	786,166	12/30/2010	()	fresh	REGISTERED
FARMS							vegetables
							and fresh	Renewal Due:
							fruits	12/30/2025

Mark ↓	Country	App.	App.	Reg.	Reg. Date	Classes		Goods	Next Action Due
		Number	Date	Number
VILLAGE	Turkey	2010/16443	3/12/2010	2010/16443	06/16/2011	(31;	44;	fresh fruit	REGISTERED
FARMS						45)		and
								vegetables;	Renewal Due:
								greenhouse	3/12/2020
								services;
								licensing
								and
								consulting in
								the fields of
								greenhouse
								technology
								and know-
								how
VILLAGE	USA	74/140519	2/19/1991	1,704,348	7/28/2002	(31)		agricultural	REGISTERED
FARMS								products;
								namely,	Renewal Due:
								fresh	7/28/2022
								vegetables
								and fresh
								fruits
VILLAGE	USA	85/374049	7/18/2011	4,227,034	10/16/2012	(31;	35;	fresh fruits	REGISTERED
FARMS						42)		and
GREENHOUS								vegetables;	Sec. 8&15 Aff. Due:
E GROWN &								business	10/16/2018
DESIGN								consulting
								services in
								the field of monitoring, controlling and managing greenhouse environment s of others; business management of greenhouses for others; research and development ; design and development of greenhouses for others
VILLAGE	Canada	1554840	12/02/2011			()		fresh fruits	PENDING
FARMS								and
GREENHOUS								vegetables	Advertised in the
E GROWN &									Trade-marks Journal on
DESIGN									1/23/2013

Mark ↓	Country	App.	App.	Reg.	Reg. Date	Classes	Goods	Next Action Due
		Number	Date	Number
Villagefarms.x	Domain		12/1/2011					“BLOCK” registration
xx								(prevents others from
								registering or using .xxx
								domain)
								Renewal Due:
								12/1/2021
WHERE	USA	78/532675	12/15/2004	3,091,531	5/9/2006	(31)	fresh fruits	REGISTERED
FRESHNESS							and
IS ALWAYS							vegetables	Renewal Due: 5/9/2016
IN SEASON

SCHEDULE 11.1 (t)

REAL PROPERTY AND LOCATIONS OF COLLATERAL

Village Farms International, Inc.

Owned Real Property

•4700 80^th Street, Delta, British Columbia

•4431 80^th Street, Delta, British Columbia

•4526 80^th Street, Delta, British Columbia

Leased Real Property

None.

Village Farms Canada GP, Inc.

Owned Real Property

None.

Leased Real Property

None.

Village Farms Canada Limited Partnership

Owned Real Property

None.

Leased Real Property

5355 152^nd Street, Surrey, British Columbia

VP Operations Canada, Inc.

Owned Real Property

None.

Leased Real Property

None.

Agro Power Development, Inc.

Owned Real Property

None.

Leased Real Property

None.

Village Farms of Delaware, L.L.C.

Owned Real Property

None.

Leased Real Property

None.

VF US Holdings, Inc.

Owned Real Property

None.

Leased Real Property

None.

Village Farms L.P.

Owned Real Property

•State Highway 17 North, Marfa, Presidio, Texas.

•State Highway 17 North, Fort Davis, Jeff Davis, Texas.

•713 North Loop 464, Monahans, Ward, Texas

Leased Real Property

•2901 Northern Cross Blvd. Suite 121, Fort Worth, Tarrant, Texas.

•3985 70^th Ave. E, Suite C, Fife, Pierce, Washington.

•200 Center Point Blvd., New Castle, New Castle, Delaware.

•195 International Parkway, Suite 100, Seminole, Florida.

•99 Corbett Way, Eatontown, Monmouth, New Jersey.

SCHEDULE 11.1 (u)(i)

ENVIRONMENTAL MATTERS

None.

SCHEDULE 11.1 (w)

MATERIAL CONTRACTS AND LICENCES

Village Farms Canada Limited Partnership

•GST/HST #837792126RT00001

•Greenhouse Producer Class 1 – Producer No. 2254, License #12439

•B.C. Marketing Commission – Class I Designated Agency Licence – License No. 2013/14 – 3990.

Village Farms L.P.

•PACA License #20020270

SCHEDULE 11.1 (x)

EXISTING DEBT

Existing intercompany debt between the Credit Parties entered into in the ordinary course of business, including intercompany debt owing by Village Farms DR SRL to Village Farms L.P. in the amount of $1,857,322 as of July 31, 2013.

Indebtedness to Farm Credit Canada in the maximum principal amount of US$58,000,000 pursuant to the credit agreement dated March 28, 2013.

SCHEDULE 11.1 (hh)

DEPOSIT ACCOUNTS

Temporary Accounts (to be Closed once BMO accounts are fully operational and all outstanding checks clear) 

Account Name	Financial Institution	Account Number
Village Farms L.P. Operating Account	Wells Fargo	2030000517529
Village Farms L.P. Payroll Account	Wells Fargo	4125502898
Village Farms L.P. Lockbox	Wells Fargo	N/A
Village Farms Canada Limited Partnership Operating - CAD	HSBC	10270016089683001
Village Farms Canada Limited Partnership Operating - USD	HSBC	10270016089683070
Village Farms Canada Limited Partnership Operating - EUR	HSBC	10270016089683270
Village Farms Canada Limited Partnership Payroll - CAD	HSBC	10270016089683003

Permanent Accounts (accounts to remain open till BMO opens banking operations in local area)

Account Name	Financial Institution	Account Number
Village Farms L.P. – Presidio Operating Account	Marfa National Bank	1362687
Village Farms L.P. – Presidio Payroll Account	Marfa National Bank	1362695
Village Farms L.P. – Fort Davis Operating Account	Fort Davis State Bank	519693
Village Farms L.P. – Fort Davis Payroll Account	Fort Davis State Bank	519693
Village Farms L.P. – Monahans Operating Account	West Texas State Bank	1850334
Village Farms L.P. – Monahans Payroll Account	West Texas State Bank	1850337

SCHEDULE 12.1 (4)

INSURANCE

See Attached

SCHEDULE 12.2(8)

TRANSACTIONS WITH AFFILIATES

Non arms-length sales of inventory for cash and/or debt entered into between the Credit Parties from time to time.

EXHIBIT “A”

FORM OF BORROWING BASE CERTIFICATE

See Attached

EXHIBIT “B”

COMPLIANCE CERTIFICATE

This Compliance Certificate is furnished on behalf of the Canadian Borrower and the US Borrower to Bank of Montreal, as Lender, pursuant to, as applicable, Sections 11.1(a) and/or 13.1(5) of the credit agreement dated as of August 29, 2013, entered into among, inter alia, Village Farms Canada Limited Partnership and Village Farms, L.P., as Borrowers, and Bank of Montreal, as Lender, (as such agreement may be amended, restated, amended and restated, renewed or replaced at any time and from time to time, the “Credit Agreement”). Unless otherwise defined herein, the terms used in this Compliance Certificate have the meanings ascribed thereto in the Credit Agreement.

THE UNDERSIGNED HEREBY CERTIFIES ON BEHALF OF THE BORROWERS THAT:

1.I am the duly elected ______________________________ of Village Farms Canada GP Inc. (in its capacity as general partner of the Borrower).

2.I have reviewed the terms of the Credit Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of each of the Canadian Borrower and the US Borrower during the accounting period covered by the attached financial statements.

3.The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or the occurrence of any event which constitutes a Default or Event of Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below.

4.The financial statements required by Section 13.1(5) of the Credit Agreement and being furnished to you concurrently with this certificate are, to the best of my knowledge, true, correct and complete, as of the dates and for the periods covered thereby.

5.The attachment hereto sets forth financial data and computations evidencing compliance with the covenants in Section 13.3 of the Credit Agreement, all of which data and computations are, to the best of my knowledge, true, complete and correct, and have been made in accordance with the relevant Sections of the Credit Agreement.

6.Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which the Borrowers have taken, is taking, or proposes to take with respect to each such condition or event:

[insert details]

7.None of the issued and outstanding shares of the capital stock of the Borrower is subject to a Lien other than Permitted Liens.

8.The Borrower and each other Credit Party is Solvent.

2

9.All property of the Borrower and each other Credit Party is free and clear of all Liens other than Permitted Liens.

The foregoing certifications, together with the computations set forth in the attachment hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this ______ day of ___________________, _____.

VILLAGE FARMS CANADA LIMITED

PARTNERSHIP, by its general partner, VILLAGE

FARMS CANADA GP INC.

Per: _____________________________________________

Name:

Title:

EXHIBIT “C”

DRAWDOWN NOTICE

Date: ________________________

To:Bank of Montreal, as Lender

Ladies and Gentlemen:

The undersigned [Village Farms Canada Limited Partnership/Village Farms, L.P.] (the “Borrower”) refers to the credit agreement dated as of August 29¸ 2013 (as the same may be amended, varied, supplemented, restated, amended and restated, renewed or replaced at any time and from time to time, the “Credit Agreement”) entered into among, inter alia, the Borrower, as Borrower, and Bank of Montreal, as Lender. Capitalized terms used but not defined herein have the meaning assigned to such terms in the Credit Agreement. The Borrower hereby notifies you, pursuant to Section 2.5 of the Credit Agreement, of its request for the following Advance:

1)Credit Facility:

2)Amount and Currency:

3)Drawdown Date:

4)Prime Rate Loan, Base Rate Loan, LIBOR Loan, US Prime Rate Loan, Bankers’ Acceptances Letters of Credit or Hedging Arrangements:

5)Contract Period for LIBOR Loan, Bankers’ Acceptances, Letters of Credit or Hedging Arrangements:

6)Beneficiary:

[for Letters of Credit only]

The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the Drawdown Date, immediately after the Advance and the application of the proceeds therefrom:

(a)immediately after such Advance, (i) the sum in Canadian Dollars of the aggregate outstanding principal amount of all Advances outstanding from the Lender under that Facility shall not exceed the maximum aggregate principal amount available under that Facility or the Borrowing Base, (ii) no Advance under any Facility shall have a Contract Period that extends beyond, if applicable, the Maturity Date of that Facility, and (iii) the aggregate amount of Letters of Credit outstanding will not exceed Cdn.$3,500,000 in respect of the Revolving Facility;

(b)no Default or Event of Default shall have occurred and be continuing; and

2

(c)the representations and warranties of the Borrower and each other Credit Party contained in the Credit Agreement are and will be accurate.

VILLAGE FARMS CANADA LIMITED

PARTNERSHIP, by its general partner, VILLAGE

FARMS CANADA GP INC.

Per: __________________________________________

Name:

Title:

VILLAGE FARMS, L.P. by its general partner,

VILLAGE FARMS OF DELAWARE, LLC

Per: __________________________________________

Name:

Title:

EXHIBIT “D”

NOTICE OF ROLLOVER/CONVERSION

Date: ________________________

To:Bank of Montreal, as Lender

Ladies and Gentlemen:

The undersigned [Village Farms Canada Limited Partnership/Village Farms, L.P.] (the “Borrower”) refers to the credit agreement dated as of August 29, 2013 (as the same may be amended, restated, amended and restated, renewed or replaced from time to time, the “Credit Agreement”) entered into among, inter alia, the Borrower, as Borrower, and Bank of Montreal, as Lender. Capitalized terms used but not defined herein have the meaning assigned to such terms in the Credit Agreement. The Borrower hereby notifies you, pursuant to Section 2.9 of the Credit Agreement, of the following:

1.Accommodation (or portions thereof) to which notice applies

2.Date of Rollover/Conversion

3.New Type of Advance [if Advance are to be converted] or repayment

4.Next succeeding Contract Period [if Advances are converted rolled over to Libor Loans, Letters of Credit, Letters of Guarantee or Bankers’ Acceptances]

The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the Rollover Date, as applicable, immediately after the Rollover, as applicable, and the application of the proceeds therefrom:

(a)immediately after such Rollover or Conversion (i) the sum in Canadian Dollars of the aggregate outstanding principal amount of all Advances outstanding from the Lender under the relevant Facility shall not exceed the maximum aggregate principal amount available under that Facility or, in the case of the Revolving Facility, the Borrowing Base, (ii) no Advance under any Facility shall have a Contract Period that extends beyond, if applicable, the Maturity Date of that Facility, and (iii) the aggregate amount of Letters of Credit will not exceed Cdn$3,500,000 in respect of the Revolving Facility;

(b)no Default or Event of Default shall have occurred and be continuing; and

2

(c)the representations and warranties of the Borrower and each other Credit Party contained in the Credit Agreement are true and correct on the date hereof and will be true and correct on the date of such Rollover Date.

VILLAGE FARMS CANADA LIMITED

PARTNERSHIP, by its general partner, VILLAGE

FARMS CANADA GP INC.

Per: ____________________________________________

Name:

Title:

VILLAGE FARMS, L.P. by its general partner,

VILLAGE FARMS OF DELAWARE, LLC

Per: ____________________________________________

Name:

Title:

EXHIBIT “E”

PERMITTED LIENS

British Columbia - PPSA

	Secured Party(ies)	File/Registration No.	Debtor(s)	Collateral Description
1.	Royal Bank of Canada	827809C	Village Farms Canada Ltd.	All goods and equipment leased pursuant to Master Lease Agreement #000013600 dated February 6, 2006
2.	ARPAC Storage Systems Corporation	337867H	Village Farms Canada	All equipment purchased by debtor from secured party
3.	ARPAC Storage Systems Corporation	346327H	Village Farms Canada	All equipment purchased by debtor from secured party
4.	Farm Credit Canada	252171H	Village Farms Canada Limited Partnership, Village Farms Canada GP Inc., Village Farms International, Inc., VF Operations Canada Inc.	All personal property

Delaware - UCC

	Secured Party(ies)	File/Registration No.	Debtor(s)	Collateral Description
1.	Raymond Leasing Corporation	20102359838	Village Farms LP	Specific equipment
2.	Raymond Leasing Corporation	20122381806	Village Farms LP	Specific equipment
3.	Farm Credit Canada	20131137315	Village Farms LP, Village Farms of Delaware LLC, VF US Holdings Inc., Agro Power Development Inc.	All assets of debtor

EX-10.4

Exhibit 10.4

EX-10.5

EX-10.6

Exhibit 10.6

Certain identified information has been excluded from this exhibit because it is both (i) not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed. Such excluded information has been marked with [Redacted: Commercially Sensitive Information].

DELTA 1 -

OPTION TO LEASE AGREEMENT

VILLAGE FARMS INTERNATIONAL, INC.

– and –

VILLAGE FARMS CANADA LIMITED PARTNERSHIP

– and –

1121371 B.C. LTD.

– and –

EMERALD HEALTH BOTANICALS INC.

Dated: June 6, 2017

- 2 -

DELTA 1 -

OPTION TO LEASE AGREEMENT

MADE this 6th day of June, 2017 (the “Effective Date”).

AMONG:

VILLAGE FARMS INTERNATIONAL, INC.

(“Village Farms”)

and

VILLAGE FARMS CANADA LIMITED PARTNERSHIP
(“VFCLP”, and together with Village Farms, the “Grantors”)

and

1121371 B.C. LTD.

(the “Company”)

and

EMERALD HEALTH BOTANICALS INC.

(“Emerald”)

WHEREAS Village Farms is the registered owner of the lands described in Schedule “A” attached hereto (the “Lands”) and VFCLP is the registered owner of the greenhouses and other structures and improvements located on the Lands (the “Greenhouses”);

AND WHEREAS the Grantors have leased the Delta 3 Assets and Operations (as defined in the Shareholders Agreement) to the Company pursuant to a lease agreement dated the Effective Date between the Company and the Grantors;

AND WHEREAS the parties have agreed to enter into this Agreement with effect as of the Effective Date to grant the Company an Option (as defined below) to lease the Lands and the Greenhouses as described in Schedule “B” attached hereto and all personal property thereat (other than property which is applicable only to the production of tomatoes or that is related to the co-generation facility) (collectively, the “Delta 1 Assets and Operations”) on an “as-is, where-is” basis;

AND WHEREAS capitalized terms used herein and not otherwise defined shall have the meanings provided in the shareholders agreement among the Company, Village Farms, Emerald Health Botanicals Inc. and Emerald Health Therapeutics Inc. dated the Effective Date (such agreement, as same may be amended, supplemented, amended and restated or otherwise modified, the “Shareholders Agreement”);

- 3 -

NOW THEREFORE in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the parties hereto covenant and agree as follows:

1.Option.

The Grantors hereby grant to the Company a sole, irrevocable, non-assignable and exclusive option to lease the Delta 1 Assets and Operations (the “Option”) from the Grantors, on an as-is, where-is basis, subject to the terms, provisions and conditions contained in this Agreement.

2.Consideration for Grant of Option to Lease

Concurrent with the execution of this Agreement, the Company will pay to the Grantors One Dollar ($1.00), the receipt and sufficiency of which is hereby acknowledged, in consideration of the grant of the Option.

3.Option Term.

(a)Subject to Section 3(b), the term during which the Option may be exercised shall commence on the date on which the Delta 3 Assets and Operations have obtained Licenses for its full production capacity (the “Licensing Date”), and shall expire on the earlier of:

[Redacted: Commercially Sensitive Information]

(b)[Redacted: Commercially Sensitive Information]

(c)After the expiration of Option Period 1 or Option Period 2, as applicable, unless the Company has exercised the Option, the Option shall terminate and cease to have force or effect.

4.Exercise of Option

(a)The Company may exercise the Option by notice in writing delivered to the Grantors in accordance with Section 11(b) (the “Exercise Notice”) at any time during Option Period 1 or Option Period 2, as applicable.

(b)[Redacted: Commercially Sensitive Information]

(c)Upon delivery by the Grantors to the Company of [Redacted: Commercially Sensitive Information], then:

(i)the Company and the Grantors shall forthwith execute and deliver a lease of the Delta 1 Assets and Operations in substantially the same form as the lease among Village Farms, VFLP and the Company, with such amendments as described in Schedule “C” attached hereto, upon the terms and conditions provided therein (the “Lease”) and all agreements and instruments referred to therein, including without limitation the Short Form Lease, each as defined therein. The term of the Lease (the “Term”) shall commence on a date mutually determined by the Grantors and the Company, acting reasonably, in order to allow the Grantors sufficient time to close their Tomato Growing Operations at the Delta 1 Assets and Operations prior to the commencement of the Term without incurring undue financial losses.

- 4 -

(ii)the Grantors will allow the Company and Emerald to have access to the Delta 1 Assets and Operations prior to the applicable commencement date of the Lease but after the exercise of the Option, in order to ensure that the application process for any Licenses with respect to the Delta 1 Assets and Operations is not delayed and can be pursued in an expeditious manner, provided that reasonable prior notice of such access is given to the Grantors, and further provided that such access shall not interfere with the Grantors’ Tomato Growing Operations. The Grantors and the Company agree that they shall cooperate with each other with respect to the scheduling and coordination of any work to be performed by the Company at the Delta 1 Assets and Operations during the period prior to the applicable commencement date of the Lease so as to minimize any disruption to the Grantors’ Tomato Growing Operations.

(iii)[Redacted: Commercially Sensitive Information];

(iv)[Redacted: Commercially Sensitive Information]; and

(v)The parties shall make such amendments to the Shareholders Agreement as are reasonably necessary to ensure that any such Shares and amounts will be treated in a manner substantially similar to the corresponding Shares and amounts with respect to the parties’ respective initial investments into the Company and that any escrowed Shares and amounts will be dealt with equitably pursuant to any transaction of a nature similar to those set out in Sections 10.3, 10.4 and 10.5 of the Shareholders Agreement.

(d)[Redacted: Commercially Sensitive Information]

5.Sale/Lease of Delta 1 Assets and Operations for Cannabis Production

(a)Prior to (i) the earlier of the expiration of Option Period 1 or if and only if the Company exercises its option to acquire the Delta 1 Assets and Operations pursuant to Section 3(a) of the Delta 1 Call Agreement, the period ending on the last day of Option Period 2 or,

(ii)if the Company has exercised the Option in accordance with Section 4(a), the date of expiry of the 90 day period referred to in Section 4(b) (the “Hold Period”), the Grantors shall not:

(i)apply for a license for the production, cultivation or distribution of Cannabis or Cannabis extract products in connection with the Delta 1 Assets and Operations, nor

(ii)enter into any agreement or understanding with respect to the acquisition or purchase by any person or group of persons acting jointly or in concert of any interest in the Delta 1 Assets and Operations for the purposes of Cannabis production (or any lease, licence, royalty, long-term supply agreement or other arrangement having a similar economic effect).

Thereafter, the Grantors shall be free to apply for licenses for the production, cultivation or distribution of Cannabis or Cannabis extract products in connection with the Delta 1 Assets and Operations and/or enter into any agreement or understanding with respect to the acquisition or purchase by any person or group of persons acting jointly or in concert of any interest in the Delta 1 Assets and Operations for the purposes of Cannabis production (or any lease, licence, royalty, long-term supply agreement or other arrangement having a similar economic effect).

- 5 -

(b)In addition to the restrictions set out in Section 5(a), commencing on the date of this Agreement and ending on the conclusion of the Hold Period, the Grantors shall not be permitted to enter into an agreement with a third party (the “Third Party”) for the sale, lease, license, long term supply or other arrangement with respect to the Delta 1 Assets and Operations (the “Delta 1 Third Party Arrangements”) unless:

(i)the Third Party does not propose to use the Delta 1 Assets and Operations for the purpose of Cannabis production;

(ii)the Third Party provides a restrictive covenant in favour of the Company not to use the Delta 1 Assets and Operations for the purpose of Cannabis production during the Hold Period;

(iii)to the extent that the Delta 1 Third Party Arrangements are in respect of the sale of the Delta 1 Assets and Operations separately from the Delta 2 Assets and Operations, then the proposed purchase agreement from the Third Party must include subdivision language such that the Delta 1 Assets and Operations may be transferred separately from the Delta 2 Assets and Operations; and

(iv)the Grantors have provided the Company with the ROFR Notice (as defined below) and the Company shall not have provided an Acceptance Notice (as defined below) prior to the end of the Acceptance Period (as defined below).

The Grantors hereby grant the Company a right of first refusal (the “ROFR”) to acquire, lease, license, obtain a long term supply agreement or other arrangement in respect of the Delta 1 Assets and Operations on no less favourable terms than the Delta 1 Third Party Arrangements. The Grantors shall deliver to the Company a copy of the proposed purchase agreement, lease, license, long term supply agreement or other arrangement with the Third Party within five (5) days following execution of such agreement by the Grantors and the Third Party (the “ROFR Notice”). The Company shall have fifteen

(15)days from receipt of a ROFR Notice to advise the Grantors in writing whether the Company intends to acquire, lease, license, obtain a long term supply agreement or other arrangement in respect of the Delta 1 Assets and Operations on no less favourable terms than the Delta 1 Third Party Arrangements (the “Acceptance Notice”). If the Company fails to deliver the Acceptance Notices within said fifteen (15) day period (the “Acceptance Period”) the ROFR shall be null and void and the Grantors shall be entitled to complete the sale, lease, license, long term supply arrangement or other arrangement with the Third Party on the terms and conditions of the Delta 1 Third Party Arrangements.

6.Access to Delta 1 Assets and Operations.

From and after the Effective Date, the Company, its representatives and advisors shall have full access to the Delta 1 Assets and Operations at any time and from time to time, subject to 48 hours prior written notice and subject further to the Company using commercially reasonable efforts to minimize interference with the Grantors’ operations at the Delta 1 Assets and Operations, to carry out such tests and inspections as the Company, its representatives or advisors may deem necessary, which actions shall not deem the Company to have taken possession, management or control of the Delta 1 Assets and Operations. In the event that the Company intends to do any invasive testing at the Delta 1 Assets and Operations, the prior written consent of the Grantors, acting reasonably, shall be required. Any damage caused to the Delta 1 Assets and Operations solely as a result of the Company’s entry upon the Delta 1 Assets and Operations or as a result of tests carried out by the Company or its representatives at the Delta 1 Assets and Operations (absent the negligence or willful misconduct of the Grantors or their employees, agents or representatives) shall be promptly repaired by the Company, at its sole cost and expense.

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7.Representations and Warranties of the Grantors

The Grantors represent and warrant that, as of the date of this Agreement and as of the date of the Lease:

(a)Village Farms is the owner of and has good and marketable title to all of the Lands, whether tangible or intangible, free and clear of all Encumbrances other than Permitted Encumbrances. The Grantors are not aware of any facts or circumstances which might materially adversely limit, affect or prejudice its ownership rights over the Lands.

(b)VFCLP is the owner of and has good and marketable title to all of the Greenhouses, whether tangible or intangible, free and clear of all Encumbrances other than Permitted Encumbrances. The Grantors are not aware of any facts or circumstances which might materially adversely limit, affect or prejudice VFCLP’s ownership rights over the Greenhouses.

(c)The Delta 1 Assets and Operations are in good working order, subject to reasonable wear and tear from the Tomato Growing Operations.

(d)The Grantors are in compliance in all material respects with Applicable Laws and regulations pertaining to the operation of their business at the Delta 1 Assets and Operations.

(e)As at the date hereof, the conduct of business by the Grantors of the Delta 1 Assets and Operations has been in compliance with all applicable Environmental Laws;

(f)There has been no Release by the Landlord of any Hazardous Substance in breach of Environmental Laws in the course of the business from, at, on, or under the Delta 1 Assets and Operations;

(g)The Grantors have not received notice of any kind of any Release or possible Release of any Hazardous Substance in breach of Environmental Laws from, at, on, or under the Delta 1 Assets and Operations, or from or on to any properties adjoining the Delta 1 Assets and Operations;

(h)No Remedial Order or pending Remedial Order has been received by the Grantors in respect of the Delta 1 Assets and Operations; and

(i)The representations and warranties set out in Section 3.2(c), (d) and (f) of the Shareholders Agreement, remain true and correct in all material respects.

For purposes of this Section, the following terms shall have the meanings described below:

(i)“Environment” means the natural environment, including the soil, ambient air, surface water, ground water, land surface or subsurface strata and those living organisms that interact therewith;

(ii)“Environmental Laws” means any Applicable Laws relating to the Environment, transportation of dangerous goods or occupational health and safety, including Applicable Laws with respect to asbestos or the protection or enhancement of the Environment;

(iii)“Hazardous Substance” means any chemical, pollutant, contaminant, waste, toxic substance, hazardous substance or other substance or material defined in or regulated pursuant to Environmental Laws;

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(iv)“Permitted Encumbrances” means, as of any particular time, any of the following Encumbrances in respect of the Delta 1 Assets and Operations:

(A)the reservations, limitations, exceptions, provisos and conditions expressed in the original grant from the Crown or in the Crown Patent including, without limitation, the reservations of any mines or minerals;

(B)all applicable municipal, provincial or federal statutes, by-laws, regulations or ordinances (including, without limitation, all building and zoning by-laws and regulations), airport zoning regulations;

(C)all non-financial charges and interests registered on title to the Lands as of the Commencement Date;

(D)the lease and related easements with VF Clean Energy, Inc.;

(E)[Redacted: Commercially Sensitive Information];

(v)“Release” means to release, spill, leak, pump, pour, emit, empty, discharge, deposit, inject, leach, dispose, dump or permit to escape;

(vi)“Remedial Order” means any remedial order, including any notice of non- compliance, order, other complaint, direction or sanction issued, filed or imposed by any Governmental Authority pursuant to Environmental Laws, with respect to the existence of Hazardous Substances on, in or under the Delta 1 Assets and Operations, or neighbouring or adjoining properties, or the Release of any Hazardous Substance from, at or on any of the Delta 1 Assets and Operations, or with respect to any failure or neglect to comply with Environmental Laws; and

(vii)“Tomato Growing Operations” means those operations in connection with tomato growing conducted by the Grantors at the Delta 1 Assets and Operations in accordance with past practice.

8.Covenant to Operate in Ordinary Course.

From the Effective Date until the date on which this Agreement terminates or is terminated, subject to Force Majeure, the Grantors covenant and agree that the Grantors shall continue to operate the Delta 1 Assets and Operations in the ordinary course of business consistent with past practice conduct all of their respective operations on the Delta 1 Assets and Operations in a diligent, careful and workmanlike manner, and in compliance with the provisions of any statutes, regulations, orders or directives of any Governmental Authority to such operations.

9.[Redacted: Commercially Sensitive Information]

10.Relationship Between Parties and Obligations to Others.

(a)Nothing in this Agreement shall create a relationship of partnership, co-tenancy or agency between the parties with respect to any activities whatsoever, and each party hereby disclaims any intention to create any such relationship.

(b)Neither party shall have any authority to act for, bind or assume any obligation or responsibility on behalf of the other party.

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(c)Each party hereby agrees:

(i)to promptly notify the other parties of all material matters coming to the attention of such party, its directors, officers or shareholders, concerning the Delta 1 Assets and Operations;

(ii)to observe, satisfy and perform its covenants, liabilities and obligations under this Agreement;

(iii)not to do any act or thing, or fail to do any act or thing it has agreed to do, which could cause it to be in breach or default under this Agreement;

(iv)to execute and deliver or cause the execution and delivery of such documents and instruments as may from time to time be required in order to carry out the purposes herein; and

(v)to act reasonably and in good faith in respect of all matters relating to the Delta 1 Assets and Operations.

11.Miscellaneous.

(a)Time of the Essence. Time shall be of the essence in all respects hereof provided that the time for doing or completing any matter provided for herein may be extended or abridged by written instrument executed by both the Company and the Grantors.

(b)Notice. Any notice, approval or any other communication required or permitted to be given hereunder, shall be in writing and shall be given by actual delivery or sent by email to its address or email address, as applicable, set forth below, addressed to the recipient as follows:

(i)Notice to the Grantors:

Village Farms International, Inc. 4700 – 80th Street

Delta, British Columbia V4K 3N3

Attention:	Stephen Ruffini, Chief Financial Officer
Telephone:	(407) 936-1190 x340
Email:	◼
with a copy to:

Torys LLP

79 Wellington Street West

Box 270, TD Centre

Toronto, Ontario M5K 1N2

Attention:	Sabrina Gherbaz
Telephone:	(416) 865-8179
Email :	sgherbaz@torys.com

(ii)Notice to the Company:

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1121371 B.C. Ltd.

4431 80^th Street

Delta, British Columbia

Attention: President

with a copy to Emerald and Village Farms

(iii)Notice to Emerald:

PO Box 24076

4420 West Saanich Road

Victoria, British Columbia V8Z 7E7

Attention:	Avtar Dhillon and Jim Heppell
Email:	◼

with a copy to:

McCullough O’Connor Irwin LLP

2600 - 1066 West Hastings Street

Vancouver, British Columbia V6E 3X1

Attention:	James Beeby
Facsimile:	(604) 687-7099
Email:	jbeeby@moisolicitors.com

or to such other address, email address or facsimile number or individual as may be designated by notice given by any party to the others. Any notice, request or other communication shall be effective, if delivered at or prior to 5:00 p.m. on any Business Day, when so delivered or, if delivered at any other time, on the next Business Day.

(c)Assignment, Successors, etc. This Agreement shall enure to the benefit of and be binding upon the Parties hereto and their respective permitted successors and permitted assigns. Except as expressly provided herein, no Party shall assign this Agreement or any of the benefits hereof or obligations hereunder without the prior written consent of each of the other Parties.

(d)Entire Agreement, Etc. This Agreement shall constitute the entire agreement between the parties and there is no representation, warranty, collateral agreement or condition affecting this Agreement other than as expressed herein or otherwise by writing. Any reference in this Agreement to gender shall include the other gender, and words importing the singular only shall include the plural and vice versa. The division of this Agreement into articles, sections and paragraphs and the insertion of headings are for convenience of reference only and shall not affect or be used in its construction or interpretation.

(e)Severability. Every provision of this Agreement is intended to be several, and accordingly, if any provision of this Agreement is determined to be invalid, illegal or unenforceable in any respect, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party hereto. To the extent that any provision is found to be invalid, illegal or unenforceable, the Parties shall act in good faith to substitute for such provision, to the extent possible, a new provision with content and purpose as close as possible to the provision so determined to be invalid, illegal or unenforceable.

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(f)Amendment and Waiver. No amendment or waiver of any provision of this Agreement shall be binding on a Party unless consented to in writing by such Party. No failure or delay to exercise, or other relaxation or indulgence granted in relation to, any power, right or remedy under this Agreement shall operate as a waiver of it or impair or prejudice it nor shall any single or partial exercise or waiver of any power, right or remedy preclude its further exercise or the exercise of any other power, right or remedy. The failure of any Party to insist upon strict adherence to any provision of this Agreement on any occasion shall not be considered a waiver or deprive that Party of the right thereafter to insist upon strict adherence to such provision or any other provision of this Agreement. No purported waiver shall be effective as against any Party unless consented to in writing by such Party. The waiver by any Party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent or other breach.

(g)Governing Law.

(i)This Agreement will be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein.

(ii)Each of the Parties hereby irrevocably attorns and submits to the non-exclusive jurisdiction of the courts of Ontario, Canada respecting all matters relating to this Agreement and the rights and obligations of the Parties hereunder. Each of the Parties hereby agrees that service of any legal proceedings relating to this Agreement may be made by physical delivery thereof to its address provided in, or in accordance with, Section 11(b), as applicable.

(h)Counterparts. This Agreement may be executed in several counterparts (including by pdf or other electronic format), each of which shall be deemed an original, but all of which shall constitute one and the same document.

(i)Registration. The Company shall not register this Agreement nor a notice thereof on title to the Lands.

(j)Currency. All currency amounts herein are expressed in Canadian dollars.

(k)Joint and Several Liability. The liabilities and obligations of each of the Grantors under this Agreement are joint and several.

[Signature page to follow]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written.

VILLAGE FARMS INTERNATIONAL, INC.
By:
	Name: Title:
I have the authority to bind the Corporation
VILLAGE FARMS CANADA LIMITED PARTNERSHIP, by its general partner, VILLAGE FARMS CANADA GP INC.
By:
	Name: Title:
I have the authority to bind the Corporation and the Partnership
1121371 B.C. LTD.
By:
	Name: Title:
I have the authority to bind the Corporation

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EMERALD HEALTH BOTANICALS INC.
By:
	Name: Title:
I have the authority to bind the Corporation

SCHEDULE “A”

LEGAL DESCRIPTION OF THE LANDS

SCHEDULE “B”

DELTA 1 DESCRIPTION

Delta 1 is an approximately 60 acre facility on the north side of the Lands, as shown outlined in blue below.

SCHEDULE “C”

FORM OF LEASE

[Redacted: Commercially Sensitive Information]

EX-10.7

Exhibit 10.7

Certain identified information has been excluded from this exhibit because it is both (i) not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed. Such excluded information has been marked with [Redacted: Commercially Sensitive Information].

VILLAGE FARMS INTERNATIONAL, INC.

– and –

EMERALD HEALTH BOTANICALS INC.

- and –

EMERALD HEALTH THERAPEUTICS INC.

-and –

1121371 B.C. LTD.

SHAREHOLDERS AGREEMENT

June 6, 2017

TABLE OF CONTENTS

ARTICLE 1 INTERPRETATION		1
1.1	Defined Terms	1
1.2	Rules of Construction	15
1.3	Currency	16
1.4	Schedules	16
1.5	Additional Shares	16
1.6	Company to Be Bound	16
ARTICLE 2 NATURE AND SCOPE OF AGREEMENT		17
2.1	Purpose and Goal of Company	17
2.2	Purposes of Agreement	17
2.3	No Partnership or Agency; Ability to Pursue Business Interests	17
2.4	Priority of Agreements	17
2.5	Liability Several	17
2.6	Implied Covenants	18
ARTICLE 3 REPRESENTATIONS AND WARRANTIES; CONDITIONS		18
3.1	Representations and Warranties of Emerald and Emerald Therapeutics	18
3.2	Representations and Warranties of Village Farms	19
3.3	Survival	21
ARTICLE 4 TRANSITION PERIOD		21
4.1	Administrative Services	21
4.2	Emerald to Lead Licensing on Behalf of the Company	22
4.3	Employee Matters	23
4.4	[Redacted: Commercially Sensitive Information]	25
4.5	Distribution	25
ARTICLE 5 CORPORATE MATTERS		25
5.1	Board	25
5.2	Meetings of the Board	26
5.3	Powers and Functions of the Board	27
5.4	Matters Requiring Approval	28
5.5	Shareholder Approval	30
5.6	[Redacted: Commercially Sensitive Information]	30
5.7	Auditors	30
5.8	Fiscal Year	30
5.9	Legend	30
5.10	Agreement to Take Corporate Actions	30
ARTICLE 6 MANAGEMENT OF OPERATIONS		31
6.1	Designation of President	31
6.2	Nature of Rights and Obligations of the President	31
6.3	Specified Obligations of the President	31
6.4	Reporting Requirements.	32
6.5	Designation of Controller	33
6.6	Designation of Head of Quality Assurance	33
6.7	Designation of Senior Person in Charge	33
6.8	Designation of Head of Quality Control	33

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6.9	Designation of Head Grower	34
6.10	Inspection and Access	34
6.11	Performance by President of Approved Operating Plans	34
ARTICLE 7 OPERATING PLANS; FUNDING		34
7.1	Initial Funding	34
7.2	Operating Plans	36
7.3	Procedures Related to Operating Plans	37
7.4	[Redacted: Commercially Sensitive Information]	37
7.5	Funding Obligations	37
7.6	Method of Funding	38
7.7	Emergency or Unexpected Funding	38
ARTICLE 8 DEFAULTS AND REMEDIES		38
8.1	Defaults	38
8.2	Funding Default	39
8.3	Dilution Mechanism	40
8.4	Non-Funding Default	40
8.5	Appraisers	41
8.6	No Penalty	41
8.7	Continuing Liabilities Upon Adjustment of Proportionate Interests	42
8.8	Indemnities	42
ARTICLE 9 DISTRIBUTIONS		42
9.1	Payment of Distributions	42
ARTICLE 10 TRANSFERS; PREFERENTIAL PURCHASE RIGHTS		43
10.1	Restrictions on Transfer	43
10.2	Transfers to Affiliates	44
10.3	[Redacted: Commercially Sensitive Information]	44
10.4	[Redacted: Commercially Sensitive Information]	44
10.5	[Redacted: Commercially Sensitive Information]	45
10.6	[Redacted: Commercially Sensitive Information]	45
10.7	Tax Matters	45
10.8	Shareholder Cross Pledge	45
ARTICLE 11 STANDSTILL		45
11.1	Emerald Standstill	45
11.2	Village Farms Standstill	46
ARTICLE 12 CONFIDENTIALITY; NON-SOLICITATION; PUBLIC DISCLOSURE		48
12.1	Confidentiality of Transaction Confidential Information	48
12.2	Use of Confidential Information	49
12.3	Compelled Disclosure	49
12.4	Return of Confidential Information	49
12.5	Acknowledgments	50
12.6	Equitable Relief	50
12.7	Public Announcements	50
ARTICLE 13 INTELLECTUAL PROPERTY LICENCE		50
13.1	Ownership and Licensing	50
13.2	Infringement	52

- ii -

ARTICLE 14 EXCLUSIVITY; OPTION TO PURCHASE		53
14.1	Exclusivity	53
14.2	Option to Purchase/Lease Other Projects	54
14.3	Emerald Carve Outs	54
ARTICLE 15 TERM AND TERMINATION		55
15.1	Term	55
ARTICLE 16 GOVERNING LAW; DISPUTES		57
16.1	Governing Law	57
16.2	Disputes	57
16.3	Amicable Resolution of Disputes	57
16.4	Resolution by Mediation	58
16.5	Arbitration	58
16.6	Restrictions	60
ARTICLE 17 GENERAL PROVISIONS		60
17.1	Guarantee of Emerald Therapeutics	60
17.2	Notices	60
17.3	Notice of Claims	62
17.4	Force Majeure	62
17.5	Assignment, Successors, etc.	62
17.6	Entire Agreement	62
17.7	Further Assurances	63
17.8	Amendment and Waivers	63
17.9	Severability	63
17.10	References	63
17.11	[Redacted: Commercially Sensitive Information]	63
17.12	Time of Essence	63
17.13	Currency	63
17.14		64
17.15	No Contra Proferentem	64
17.16	Counterparts	64
Schedule A PROPERTY		A-1
Schedule B Initial Budget		B-1
Schedule C Illustration of Dilution Calculation		C-1
Schedule D Background intellectual property		D-1
Schedule E Accession Agreement		E-1
Schedule F [Redacted: Commercially Sensitive Information]		F-1

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SHAREHOLDERS AGREEMENT

THIS SHAREHOLDERS AGREEMENT made as of June 6, 2017 (the “Execution Date”)

AMONG:

EMERALD HEALTH BOTANICALS INC., a corporation existing under the laws of the Province of British Columbia (“Emerald”)

- and –

EMERALD HEALTH THERAPEUTICS INC., a corporation existing under the laws of the Province of British Columbia (“Emerald Therapeutics”)

- and -

VILLAGE FARMS INTERNATIONAL, INC., a corporation existing under the Federal laws of Canada (“Village Farms”)

- and -

1121371 B.C. LTD., a corporation existing under the laws of the Province of British Columbia (the “Company”)

WHEREAS the Company was formed under the laws of the Province of British Columbia;

AND WHEREAS Emerald and Village Farms wish to enter into this Agreement to govern the business and affairs of the Company;

AND WHEREAS concurrent with the entering into of this Agreement, Village Farms, Emerald and/or the Company will enter into the Transaction Documents (as hereinafter defined), as applicable;

NOW THEREFORE THIS AGREEMENT WITNESSES THAT for good and valuable consideration (the receipt and sufficiency of which are hereby conclusively acknowledged), the parties hereby agree as follows:

ARTICLE 1

INTERPRETATION

1.1Defined Terms

In this Agreement, the following terms shall have the respective meanings set out below and grammatical variations of such terms shall have the corresponding meanings:

(a)“2 Year Hold Period” means the period commencing on the Execution Date and ending on the date which is two (2) years following the Execution Date;

(b)“ACMPR” means the Access to Cannabis for Medical Purposes Regulations which came into force on August 24, 2016, and as may be amended from time to time;

(c)“Acting Jointly or In Concert” means a Party acting jointly or in concert with another Person within the meaning of National Instrument 62-104 – Take-Over Bids and Issuer Bids;

(d)“Administrative Services” means the following services:

(i)providing internal accounting and bookkeeping services, including reports and financial statements in accordance with Section 6.4; cash management services, including accounts payable and accounts receivable;

(ii)communicating with the Auditor and audit administration;

(iii)maintaining all required documentation required for the Company’s tax filings and compliance with all tax reporting obligations for the Company on a timely basis;

(iv)providing services related to human resources, including, but not limited to: recruitment/selection of employees to provide services; managing payroll and employee benefits; services to cover employees and fixed term contractors; onboarding and induction service to new employees and contractors; organizational planning and advice; employee management and general administration to include workforce departure reports, management of employee data within agreed system of record, as well as, employee departure processing, leave management; and labour relations support-advice and policy management;

(v)providing services related to the establishment of the Company’s own independent information technology systems, including, but not limited to: set- up, programming, maintenance, repairs, and troubleshooting on all hardware, software, and communications devices; back-up all data; set-up, maintenance, and troubleshooting of any web sites, email addresses, and other internet based applications; installation and maintenance or internet connection with appropriate firewalls; and any required training and ongoing support;

(vi)providing assistance with transitioning the Administrative Services to the applicable officers of the Company pursuant to mandate descriptions at the expiry of the Administrative Services Period; and

(vii)providing such other assistance, services or work related to the administration and general supervision of the Operations reasonably requested by the Company from time to time during the Administrative Services Period;

(e)“Administrative Services Period” has the meaning given to such term in Section 4.1(a);

(f)“Affiliate” of a Person means a Person which, directly or indirectly, is Controlled by such Person, or directly or indirectly Controls such Person or is directly or indirectly Controlled by a Person which also, directly or indirectly, Controls such Person;

(g)“Agreement” means this shareholders agreement, as it may be amended or supplemented from time to time in accordance with the terms hereof;

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(h)“Applicable Law” means (a) any domestic or foreign statute, law (including common and civil law), treaty, code, ordinance, rule, regulation (including, but not limited to, the ACMPR) or by-law (zoning or otherwise); (b) any judgement, order, writ, injunction, decision, ruling, decree or award; (c) any regulatory instrument, policy, practice, protocol, guideline or directive; or (d) any franchise, licence, qualification, authorization, consent, exemption, waiver, right, permit or other approval, in each case, of any Governmental Authority and having the force of law, binding on or affecting the Person referred to in the context in which the term is used or binding on or affecting the property of such Person;

(i)“Appraiser” means the qualified appraiser licensed in British Columbia or such other Province in which the Other Project is located, at Arm’s Length to the Shareholder appointing such appraiser and having a minimum of 10 years’ experience in agricultural business valuations as appointed in accordance with Section 8.5;

(j)“Approved Operating Plan” means any Operating Plan that is approved by the Board;

(k)“Arm’s Length” has the meaning set out in the Income Tax Act (Canada);

(l)“Auditor means ◼;

(m)“Available Cash” means cash generated from operations of the Company, cash available from lenders, cash previously provided to the Company by any Shareholder (including without limitation, in the form of a Shareholder Contribution pursuant to a previous Approved Operating Plan or a Shareholder Contribution pursuant to a current Approved Operating Plan), and cash available from other sources (excluding any cash allocated to contingencies and reserves established by the Board) which, as determined by the President can be prudently used for the payment of expenses without adversely affecting to a material extent ongoing Operations (including contingencies and reserves established by the Board) or the satisfaction of Applicable Law;

(n)“Bankruptcy Proceeding” means, in respect of any Person:

(i)the filing by the Person of a petition or similar originating process for bankruptcy, reorganization or protection under Applicable Law;

(ii)the commencement against the Person, with or without its consent or approval, of any proceeding, seeking its bankruptcy, liquidation or reorganization, the appointment of a receiver of its assets, or comparable relief, that in each case, is not stayed or dismissed within 30 days;

(iii)the entry by a court of competent jurisdiction of a final and unappealable order granting the Person relief of the type described in clause (i) or (ii) above;

(iv)the admission in writing by the Person of its inability to pay its debts generally as they become due; or

(v)the making by the Person of a general assignment for the benefit of its creditors;

(n)“Board” means the board of directors of the Company;

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(o)“Budget” means the annual operating and capital budget of the Company once approved by the Board;

(p)“Business Day” means any day other than a Saturday or Sunday or any other day which shall be a statutory or civic holiday or day on which banking institutions are closed in the City of Toronto, Ontario or Vancouver, British Columbia;

(q)“Cannabis” means all living or dead material, plants, seeds, plant parts or plant cells from any cannabis species or subspecies (including sativa, indica and ruderalis), including wet and dry material, trichomes, oil and extracts from cannabis;

(r)“Change of Control” means the occurrence of any change in the Control or Effective Control of a Person. For greater certainty, a change in either the equity ownership or the voting control of a Person which results in a decrease in the beneficial ownership of or control over the equity value or voting rights or interests, respectively, of that Person from more than 50% to 50% or less of the outstanding equity values or voting rights or interests, respectively, shall be considered a Change of Control;

(s)“Chargeable Cost” means all costs and expenses incurred for or in connection with Operations to the extent reflected in a Budget or otherwise expressly permitted under this Agreement, including but not limited to, Section 7.7 and will include, without limitation and without duplication, the following attributable thereto:

(i)the rent payments under the Lease;

(ii)all costs and expenses incurred to retrofit the Property and Structures to grow commercial Cannabis crops;

(iii)License Costs; and

(iv)all reasonable legal, accounting and advisory fees incurred by the Company and the Shareholders including, without limitation, in connection with the formation of the Company. With respect to such legal fees, $◼ of Village Farms’ historical legal fees will constitute legal fees in connection with the formation of the Company.

(t)“Company Assets” means all real and personal property owned by or on behalf of the Company, including all intangibles, contracts, the Lease, plans, drawings, specifications, trade-names, the leasehold interests in the Property and the structures and improvements located on the Property and all monies and other real or personal property of the Company;

(u)“Company Confidential Information” means (i) all information and material of the Company, the Company’s affiliates, and/or their respective licensors, in oral, written, graphic, electronic or any other form or medium, that has or shall come into Village Farms’ or Emerald’s possession or knowledge in connection with or as a result of such party’s respective ownership interest in the Company, including information and material concerning the past, present or future customers, suppliers, technology, or business of the Company; (ii) any analyses, compilations, studies or other Documents prepared containing, incorporating or reflecting any Company Confidential Information; and (iii) all information about an identifiable individual or other information that is subject to any federal, provincial or other applicable statute, law or regulation of any governmental or regulatory authority in Canada relating to the collection, use, storage and/or disclosure of information about an identifiable individual, including the Personal Information and Protection of Electronic Documents Act (Canada) and equivalent provincial legislation, whether or not such information is confidential. For the purposes of this definition, “information” and “material” includes Know-How, data, patents, copyrights, trade secrets, processes, business rules, tools, business processes, techniques, programs, designs, formulae, marketing, advertising, financial, commercial, sales or programming materials, equipment configurations, system access codes and passwords, written materials, compositions, drawings, diagrams, computer programs, studies, works in progress, visual demonstrations, ideas, concepts, and other data. Notwithstanding the foregoing, with respect to Emerald or Village Farms, “Company Confidential Information” does not include information or material:

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(i)that is or becomes publicly available other than as a result of disclosure by such Party in violation of its obligations under this Agreement;

(ii)that is already in such Party’s possession at the time of disclosure, provided that the source of such information was not known to such Party to be subject to a duty of confidentiality in respect of such information;

(iii)that such Party independently develops without any use of or reference to the Company Confidential Information and which such independent development can be established by evidence that would be acceptable to a court of competent jurisdiction; or

(iv)that such Party receives in good faith from a source (other than Company) which is not known by such Party to have made the disclosure in violation of any confidentiality obligations;

(v)“Company Improvement Intellectual Property” has the meaning set out in Section 13.1(d);

(w)“Company Proposed Acquisition Notice” has the meaning set out in Section 14.2(b);

(x)“Confidential Documents” means any embodiment, in written, graphic, audio, video, electronic, or any other form or medium, which contains any Confidential Information, including any and all copies, papers, reproductions, slides and microfilms and any electronic media such as disks, tapes, other magnetic media, computer software and computer storage systems and, where this agreement calls for Confidential Documents to be destroyed, in the case of electronic media that can be permanently erased, such obligation means that such Confidential Documents shall be permanently erased. Notwithstanding the foregoing, the obligation to return or destroy Confidential Information shall not apply to Confidential Information that is maintained on routine computer system backup tapes, disks or other backup storage devices as long as such backed-up Confidential Information is not used, disclosed, or otherwise recovered from such backup devices;

(y)“Confidential Information” means, collectively, the Company Confidential Information, Emerald Confidential Information and the Village Farms Confidential Information;

(z)“Contribution Notice” has the meaning set out in Section 7.5(b);

(aa)“Control” means:

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(i)when applied to the relationship between a Person and a corporation, the beneficial ownership by such Person at the relevant time of shares of such corporation: (A) carrying more than 50% of the voting rights ordinarily exercisable at meetings of shareholders of such corporation, or (B) representing more than 50% of the equity value of the corporation;

(ii)when applied to the relationship between a Person and a partnership or joint venture, (A) the beneficial ownership by such Person at the relevant time of: (1) more than 50% of the voting interests of the partnership or joint venture, or (2) partnership or joint venture interests representing more than 50% of the equity value of the partnership or joint venture and (B) it can be reasonably expected that the Person directs the affairs of the partnership or joint venture; or

(iii)when applied to the relationship between a person and a limited partnership, the beneficial ownership at the relevant time of: (A) shares of the general partner or general partners of such limited partnership carrying more than 50% of the voting rights ordinarily exercisable at meetings of shareholders of such general partner or general partners such that it can reasonably be expected that the Person directs the affairs of the limited partnership, or (B) partnership interests representing more than 50% of the equity value of the limited partnership; and

(i)the term “Controlled by” has a corresponding meaning; provided that a Person (the “first-mentioned Person”) who Controls a corporation, partnership, limited partnership or joint venture (the “second-mentioned Person”) shall be deemed to Control a corporation, partnership, limited partnership or joint venture which is Controlled by the second-mentioned Person and so on.

(bb)“Cost of the Administrative Services” has the meaning set forth in Section 4.1(c);

(cc)“Cultivation License” means a license issued to the Company (i) pursuant to paragraph 35 of the ACMPR, as such paragraph may be revised or modified from time to time, and (ii) pursuant to any Applicable Laws granting the Company the authority to produce, possess and destroy Cannabis at the Property for medical uses and if permitted under Applicable Laws, non-medical uses;

(dd)“Deadlock” means the members of the Board are unable to reach a decision with respect to a Vote in respect of an action listed in Section 5.4 of this Agreement, despite considering the matter at three (3) meetings of the Board;

(ee)“Defaulted Amount” has the meaning set out in Section 8.2(a)(i);

(ff)“Defaulting Shareholder” has the meaning set out in Section 8.1;

(gg)“Delta 1 Assets and Operations” has the meaning ascribed thereto in the Delta 1 Call Agreement;

(hh)“Delta 2 Assets and Operations” has the meaning ascribed thereto in the Delta 2 Call Agreement;

(ii)“Delta 3 Assets and Operations” means the Lands, the Greenhouses and the Personal Property, as such terms are defined in the Lease;

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(jj)“Delta 1 Call Agreement” means the agreement entered into contemporaneous herewith between Village Farms, as vendor, and the Company, as purchaser, pursuant to which the Company, has the right to acquire the Delta 1 Assets and Operations, as the agreement may be amended, amended and restated, supplemented, replaced or otherwise modified from time to time;

(kk)“Delta 2 Call Agreement” means the agreement entered into contemporaneous herewith between Village Farms, as vendor, and the Company, as purchaser, pursuant to which the Company, has the right to acquire the Delta 2 Assets and Operations, as the agreement may be amended, amended and restated, supplemented, replaced or otherwise modified from time to time;

(ll)“Dilution Day” has the meaning set out in Section 8.2(a)(i);

(mm)“Director” means a director of the Company;

(nn)“Disclosing Party” means a Party disclosing information as contemplated by this Agreement;

(oo)“Dispute Resolution Procedures” has the meaning set out in Section 16.2(a);

(pp)“Disputes” means all differences, disagreements, questions, controversies or claims (including claims for indemnification) between the Shareholders as to the interpretation, application or administration of this Agreement, any aspect of the performance by a Shareholder of its obligation under this Agreement, any failure of the Board to reach agreement on any matter despite considering the matter at three (3) meetings of the Board or where agreement is otherwise called for under this Agreement or any other matter or question arising out of or relating to this Agreement;

(qq)“Distribution License” means a license issued to the Company (i) pursuant to the ACMPR, and (ii) pursuant to any Applicable Laws granting the Company the authority to sell, provide, ship, deliver and transport Cannabis for medical uses and if permitted under Applicable Laws, non-medical uses;

(rr)“Distributions” means dividends, share purchase and redemption moneys and distributions paid to the Shareholders by the Company;

(ss)“Documents” has the meaning set out in Section 16.2(b);

(tt)“Effective Control” means control in fact by one Person, together with its Affiliates and those with whom it is acting in concert, exercising effective control over another Person or over the decision-making of that other Person either directly or indirectly, whether through the holding of shares of the corporation or of any other corporation or through the holding of a significant portion of any class of shares of the corporation or through the holding of units in a partnership or limited partnership or the outstanding debt of the corporation, the partnership or limited partnership or of any shareholder or member of the corporation, partnership or limited partnership or by any other means; any Person which holds voting or equity securities (as defined in the Securities Act (Ontario)) representing, in the aggregate, 50% or more of the outstanding voting securities of the Person shall be deemed to have “Effective Control” of that Person;

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(uu)“Emerald Background Intellectual Property” means the Intellectual Property detailed in Part 1 of Schedule D;

(vv)“Emerald Confidential Information” means (i) all information and material of Emerald and Emerald’s affiliates, and/or their respective licensors, in oral, written, graphic, electronic or any other form or medium, that has or shall come into Village Farms’ possession or knowledge in connection with or as a result of its ownership interest in the Company, including information and material concerning the past, present or future customers, suppliers, technology, or business of Emerald and Emerald’s affiliates; (ii) any analyses, compilations, studies or other Documents prepared by Village Farms or for Village Farms’ use containing, incorporating or reflecting any Emerald Confidential Information; and (iii) all information about an identifiable individual or other information that is subject to any federal, provincial or other applicable statute, law or regulation of any governmental or regulatory authority in Canada relating to the collection, use, storage and/or disclosure of information about an identifiable individual, including the Personal Information and Protection of Electronic Documents Act (Canada) and equivalent provincial legislation, whether or not such information is confidential. For the purposes of this definition, “information” and “material” includes Know-How, data, patents, copyrights, trade secrets, processes, business rules, tools, business processes, techniques, programs, designs, formulae, marketing, advertising, financial, commercial, sales or programming materials, equipment configurations, system access codes and passwords, written materials, compositions, drawings, diagrams, computer programs, studies, works in progress, visual demonstrations, ideas, concepts, and other data. Notwithstanding the foregoing, “Emerald Confidential Information” does not include information or material:

(i)that is or becomes publicly available other than as a result of disclosure by Village Farms or the Company in violation of their respective obligations under this Agreement;

(ii)that is already in Village Farms’ possession at the time of disclosure, provided that the source of such information was not known to Village Farms to be subject to a duty of confidentiality in respect of such information;

(iii)that Village Farms independently develops without any use of or reference to the Emerald Confidential Information and which such independent development can be established by evidence that would be acceptable to a court of competent jurisdiction; or

(iv)that Village Farms receives in good faith from a source (other than Emerald) which is not known by Village Farms to have made the disclosure in violation of any confidentiality obligations;

(ww)“Emerald Improvement Intellectual Property” means all Improvements made solely by Emerald to the Emerald Background Intellectual Property after the Execution Date;

(xx)“Emerald Initial Capital Contribution” means the capital contribution to be made by Emerald to the Company in the aggregate amount of $20,000,000 which capital contribution will be advanced in accordance with Section 7.1;

(yy)“Employees” means those of the employees employed by Village Farms, selected and determined by Village Farms in its sole discretion;

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(zz)“Encumbrance” means any lien, charge, hypothec, pledge, mortgage, title retention agreement, covenant, condition, lease, license, security interest of any nature, claim, exception, reservation, easement, encroachment, right of occupation, right-of-way, right-of- entry, matter capable of registration against title, option, assignment, right of pre-emption, royalty, right, privilege or any other encumbrance or title defect of any nature whatsoever, regardless of form, whether or not registered or registrable and whether or not consensual or arising by any Applicable Law, and includes any contract to create any of the foregoing;

(aaa)“Escrow Agreement” means the escrow agreement in respect of the $10,000,000 Portion of the Initial Contribution and the Escrowed Shares among Emerald, Village Farms and Torys LLP entered into on the date hereof;

(bbb)“Escrowed Shares” has the meaning set out in Section 7.1(c);

(ccc)“Expert” has the meaning set out in Section 16.5(a);

(ddd)“Expert Appointment Deadline” has the meaning set out in Section 16.5(b);

(eee)“Fair Market Value” means the fair market value of the Company or a Proportionate Interest or an Other Project, as the case may be, as determined by an Appraiser assuming that the Company or a Proportionate Interest or the Other Project, as the case may be, is offered for sale in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of the appraisal date and the passing of title from the seller to the buyer whereby: (i) the buyer and seller are typically motivated; (ii) both parties are well informed or well advised and acting in what they consider their own best interests; (iii) a reasonable time is allowed for exposure in the open market; (iv) payment is made in terms of cash in Canadian dollars or in terms of financial arrangements comparable thereto; and (v) the price represents the normal consideration for the Company unaffected by special or creative financing or sales concessions granted by anyone associated with the sale, but taking into account the assumption by the buyer of any financing to the extent that it may be assumed by the buyer. For clarity, there shall be no premium for a control position or discount for a minority position; and the Company shall be valued on a going-concern basis;

(fff)“Force Majeure” means an event beyond the reasonable control of the applicable Party and not due to the act or omission by such Party and which by the exercise of reasonable diligence of the Party, the Party is unable to prevent or provide against (but does not include a failure by a Party to fund) that prevents or delays it from conducting the activities and performing the obligations contemplated by this Agreement, provided that the affected Party makes a good faith effort to resolve or avoid such delay; such events shall include, but not be limited to any fire or other casualty, acts of God, war, civil commotion, strike, lockout, picketing or other industrial disturbances, insurrection, terrorism, riots or action or inaction of any Governmental Authorities;

(ggg)“Geographic Area” means anywhere in Canada;

(hhh)“Governmental Authorities” means any municipal, regional, provincial or federal governments and their agencies, authorities, branches, departments, commissions, boards, having or claiming jurisdiction over the applicable Person or subject matter and any stock exchange on which the shares of the applicable Person are listed and “Governmental Authority” shall mean any one of the Governmental Authorities as the context requires;

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(iii)“Greenhouse” means a fully-enclosed permanent aluminum or fixed steel structure clad in glass, impermeable plastic, or polycarbonate used for the growing of crops utilizing direct sunlight;

(jjj)“Hired Employee” has the meaning set out in Section 4.3(b);

(kkk)“Improvements” means any and all improvements, variations, updates, modifications, extensions, enhancements or other changes made to Intellectual Property at any time after the Execution Date;

(lll)“Indemnified Parties” has the meaning set forth in Section 4.3(f);

(mmm)“Initial Budget” means, collectively the initial capital Budget of the Company as set forth in Schedule B;

(nnn)“Intellectual Property” means (i) agricultural products, such as plants, seeds and germplasm of Cannabis, that have been characterized prior to the Execution Date, all trade secrets, Confidential Information, Know-How, standard operating procedures, processes, business rules, tools, business processes, techniques, specifications, designs and industrial designs, works of authorship, trade-marks (whether registered or unregistered), inventions and improvements and modifications thereto (including all related designs, technical information, models, drawings, specifications, formulas, schemas, prototypes, and architectural plans), patents, copyrights, software, computer programs, programming code, data, compilations of data, computer databases, system access codes and passwords, designs, marketing, advertising, financial, commercial, sales or programming materials, equipment configurations, written materials, compositions, drawings, diagrams, studies, works in progress, visual demonstrations, ideas, concepts, and all other related material and data, (ii) all drawings and proposed or implemented retrofitting of the Delta 3 Assets and Operations, or the assets and operations of an Other Project, and (iii) all vested, contingent and future rights, in any jurisdiction, to all of the foregoing under any applicable statutory provision or common law principle, and all rights of action, powers and benefits relating thereto, including the right to bring proceedings and claim or recover damages or other remedies in relation to any infringement;

(ooo)“Know-How” means all information not publicly known or not independently developed by a third party that is used or required to be used in or in connection with any product existing in any form (including, but not limited to that comprised in or derived from horticultural, engineering, chemical and other data, specifications, formulae, experience, drawings, manuals, component lists, instructions, designs and circuit diagrams, brochures, catalogues and other descriptions) and relating to:

(i)the design, development, manufacture or production of any products;

(ii)the design or retrofitting of any building;

(iii)the operation of any process;

(iv)the provision of any services;

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(v)the selection, procurement, construction, installation, maintenance or use of raw materials, plant, machinery or other equipment or processes;

(vi)the rectification, repair or service or maintenance of products, plant, machinery or other equipment;

(vii)the supply, storage, assembly or packing of raw materials, components or partly manufactured or finished products; or

(viii)quality control, testing or certification;

(ppp)“Lease” means the agreement entered into contemporaneous herewith with Village Farms and Village Farms Canada Limited Partnership, as the landlord and the Company, as the tenant, constituting a lease of the Property and the Structures, as the agreement may be amended, amended and restated, supplemented, replaced or otherwise modified from time to time;

(qqq)“License Costs” has the meaning set out in Section 4.2;

(rrr)“License Termination Date” means the date on which there is an affirmative Vote of at least a majority of the votes cast at a Board meeting at which a quorum is present that the Company cease pursuing a Cultivation License and/or Distribution License in connection with the Delta 3 Assets and Operations;

(sss)“Licenses” means all licenses required from Governmental Authorities to grow, cultivate, and produce Cannabis at the Property and, if applicable, at the Delta 1 Assets and Operations, at the Delta 2 Assets and Operations and any other property leased or owned by the Company for the Operations, and to sell, provide, ship, deliver and transport Cannabis in Canada and all other licenses required by the Company to carry on the Operations, including but not limited to the Cultivation License and the Distribution License;

(ttt)“Losses” means damages, fines, penalties, deficiencies, losses, liabilities, including settlements and judgments, costs and expenses of any kind, character or description (including payments, refunds and delivery of additional goods and/or services, interest, reasonable fees and expenses of legal counsel, or other professionals);

(uuu)“Marketable Securities” means any equity securities which are listed on the TSX Venture Exchange, Toronto Stock Exchange, the New York Stock Exchange, the NASDAQ National Market, the NASDAQ Small Cap Market or, NYSE MKT and in respect of which (1) the amount to be distributed to a Shareholder amounts to less than 25% of the average daily trading volume of such securities on the relevant exchange or market for the immediately preceding 30 trading day period, and (2) such equity securities are not subject to any statutory, regulatory, contractual, or other hold period or resale restriction other than a restriction requiring the filing of a notice only (without requiring any approval);

(vvv)“Minister” means the Minister of Health;

(www)“Non-Defaulting Shareholder” has the meaning set out in Section 8.1;

(xxx)“Notice of Dispute” has the meaning set out in Section 16.3(c);

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(yyy)“Operating Plan” means for each calendar year: (a) a description of the proposed Operations for such year; (b) an estimate of revenue to be received by the Company from the sale of Cannabis products; (c) the Budget, including a description of the sources of funding to be utilized in the implementation of an Operating Plan, the particulars of the methods of funding from such sources and estimates of when the funds will be needed for the Operating Plan; and

(d) such other matters as the President may reasonably consider to be necessary to illustrate the results intended to be achieved by the Operating Plan;

(zzz)“Operations” means the growth, cultivation, extraction, production, sale and distribution of Cannabis and Cannabis-related products from Greenhouse facilities in Canada for therapeutic, and if permitted by Applicable Law, non-therapeutic use purposes, together with ancillary activities in connection therewith;

(aaaa)“Option Notice” has the meaning set out in Section 14.2(a);

(bbbb)“Option Period” has the meaning set out in Section 14.2(a);

(cccc)“Other Project” has the meaning set out in Section 14.2;

(dddd)“Other Shareholder” has the meaning set out in Section 10.3(a);

(eeee)“Panel” has the meaning set out in Section 16.5(a);

(ffff)“Parties” means, collectively, Emerald, Emerald Therapeutics, Village Farms and the Company, and their respective successors and permitted assigns;

(gggg)“Person” means any individual, corporation or other body corporate, partnership, trustee, trust or unincorporated association, joint venture, syndicate, sole proprietorship, other form of business enterprise, executor, administrator or other legal representatives, regulatory body or agency or Governmental Authority, however designated or constituted;

(hhhh)“Prime Rate” means, for any day, the annual rate of interest equal to the rate which The Bank of Montreal establishes at its principal office in Toronto as the reference rate of interest to determine interest rates it will charge on such day for commercial loans in Canadian dollars made to its customers in Canada and which it refers to as its “prime rate of interest”;

(iiii)“Property” means the lands and premises municipally known as 4431 80th Street, Delta, British Columbia and legally described in Schedule A but expressly excluding the Greenhouses and the other structures and improvements located thereon;

(jjjj)“Proportionate Interest” means, at any time, for a Shareholder, the amount (expressed as a percentage) determined by the formula A ÷ B, where:

Ais the total Shares of the Company held by the Shareholder

Bis the total Shares of the Company held by all Shareholders at that time.

The Parties acknowledge that a Shareholder’s Proportionate Interest may be recalculated from time to time in accordance with Section 8.3;

(kkkk)“Prospective Seller” has the meaning set out in Section 10.3(a);

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(llll)“Prospective Seller’s Offer” has the meaning set out in Section 10.3(a);

(mmmm)“Purchase Notice” has the meaning set out in Section 8.4(b);

(nnnn)“Purpose” means the purpose of growing, cultivating, extracting, producing, selling and distributing Cannabis grown in a Greenhouse for medical, and if permitted by Applicable Law, non-medical purposes;

(oooo)“Receiving Party” means a Party receiving confidential information as contemplated by this Agreement;

(pppp)“Redaction Requirement” has the meaning set forth in Section 12.1(a);

(qqqq)“Related Party” means an Affiliate of a Shareholder and any other Person that is not at Arm’s Length to a Shareholder;

(rrrr)“Representative” means, in the case of either Party, such Party’s and its Affiliates’ respective directors, officers, employees, lawyers, accountants, consultants, agents or financial advisors;

(ssss)“Required Documents” has the meaning set out in Section 8.4(c)(ii);

(tttt)“Security Clearance” means a security clearance granted by the Minister under Section 112 of the ACMPR, as such section may be revised or modified from time to time , or pursuant to Applicable Laws;

(uuuu)“Security Discharge Termination Notice” has the meaning set forth in Section 4.4;

(vvvv)“Severance Costs” has the meaning set forth in Section 4.3(h);

(wwww)“Share Capital” means payments made to the Company for the issue of Shares in the capital of the Company;

(xxxx)“Shareholder Contributions” means funds provided to the Company by the Shareholders as Share Capital;

(yyyy)“Shareholder Loan” has the meaning set out in Section 8.2(a)(ii);

(zzzz)“Shareholders” at any particular time means, individually, any Person who at that time owns any Shares and who, in accordance with the provisions hereof or by operation of law, becomes bound by the provisions of this Agreement, and its respective successors and permitted assigns hereunder, and “Shareholders” means the Shareholders collectively;

(aaaaa)“Shares” means the common shares in the Company, any securities into which those common shares may be converted, exchanged, reclassified, redesignated, subdivided, consolidated or otherwise changed from time to time and any securities of any successor corporation to or corporation continuing from the Company into which those common shares or such other securities may be changed or converted as a result of any merger, recapitalization or reorganization, statutory or otherwise;

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(bbbbb)“Structures” means the Greenhouses and other structures and improvements located on the Property;

(ccccc)“Third Party” has the meaning set out in Section 10.3(a);

(ddddd)“Third Party Offer” has the meaning set out in Section 10.3(a);

(eeeee)“Transaction Confidential Information” means the terms of this Agreement and any other information and Intellectual Property concerning any matters affecting or relating to the business, Operations, assets, results or prospects of any Party, including information regarding plans, budgets, costs, processes, results of experimentation and other data, except to the extent that such information has already been publicly released by a Party as allowed herein or that the Party providing such information can demonstrate was previously publicly released by a Person who did not do so in violation or contravention of any duty or agreement;

(fffff)“Transaction Documents” means the Lease, Delta 1 Call Agreement, Delta 2 Call Agreement, and Escrow Agreement;

(ggggg)“Transfer” means to sell, transfer, grant, assign, donate, create an Encumbrance or otherwise convey or dispose of (including by way of an earn-in, back-in right or any synthetic disposal of economic rights), or commit to do any of the foregoing;

(hhhhh)“Village Farms Confidential Information” means: (i) all information and material of Village Farms and Village Farms’ affiliates, and/or their respective licensors, in oral, written, graphic, electronic or any other form or medium, that has or shall come into Emerald’s possession or knowledge in connection with or as a result of its ownership interest in the Company, including information and material concerning the past, present or future customers, suppliers, technology, or business of Village Farms and Village Farms’ affiliates;

(ii)any analyses, compilations, studies or other Documents prepared by Emerald or for Emerald’s use containing, incorporating or reflecting any Village Farms Confidential Information; and (iii) all information about an identifiable individual or other information that is subject to any federal, provincial or other applicable statute, law or regulation of any governmental or regulatory authority in Canada relating to the collection, use, storage and/or disclosure of information about an identifiable individual, including the Personal Information and Protection of Electronic Documents Act (Canada) and equivalent provincial legislation, whether or not such information is confidential. For the purposes of this definition, “information” and “material” includes Know-How, data, patents, copyrights, trade secrets, processes, business rules, tools, business processes, techniques, programs, designs, formulae, marketing, advertising, financial, commercial, sales or programming materials, equipment configurations, system access codes and passwords, written materials, compositions, drawings, diagrams, computer programs, studies, works in progress, visual demonstrations,

ideas, concepts, and other data. Notwithstanding the foregoing, “Village Farms Confidential Information” does not include information or material:

(i)that is or becomes publicly available other than as a result of disclosure by Emerald or the Company in violation of their respective obligations under this Agreement;

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(ii)that is already in Emerald’s possession at the time of disclosure, provided that the source of such information was not known to Emerald to be subject to a duty of confidentiality in respect of such information;

(iii)that Emerald independently develops without any use of or reference to the Village Farms Confidential Information and which such independent development can be established by evidence that would be acceptable to a court of competent jurisdiction; or

(iv)that Emerald receives in good faith from a source (other than Village Farms) which is not known by Emerald to have made the disclosure in violation of any confidentiality obligations.

(iiiii)“Village Farms Background Intellectual Property” means the Intellectual Property detailed in Part 2 of Schedule D;

(jjjjj)“Village Farms Improvement Intellectual Property” means all Improvements made solely by Village Farms to the Village Farms Background Intellectual Property after the Execution Date;

(kkkkk)“Village Farms Indemnified Parties” has the meaning set out in Section 4.1(f); and

(lllll)“Vote” has the meaning set out in Section 5.2(f).

1.2	Rules of Construction
	In this Agreement:

(a)the terms “Agreement”, “this Agreement”, “the Agreement”, “hereto”, “hereof”, “herein”, “hereby”, “hereunder” and similar expressions refer to this Agreement in its entirety and not to any particular provision hereof;

(b)references to an “Article”, “Section” or “Schedule” followed by a number or letter refer to the specified Article or Section of or Schedule to this Agreement;

(c)the division of this Agreement into articles and sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement;

(d)words importing the singular number only shall include the plural and vice versa and words importing the masculine gender shall include the feminine and neuter genders and vice versa;

(e)unless otherwise indicated, any reference to a statute, regulation or rule shall be construed to be a reference thereto as the same may from time to time be amended, re-enacted or replaced, and any reference to a statute shall include any regulations or rules made thereunder;

(f)the words “include”, “includes” and “including” mean “include”, “includes” or “including”, in each case, “without limitation”;

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(g)reference to any agreement or other instrument in writing means such agreement or other instrument in writing as amended, modified, replaced or supplemented from time to time;

(h)unless otherwise indicated, time periods within which a payment is to be made or any other action is to be taken hereunder shall be calculated excluding the day on which the period commences and including the day on which the period ends; and

(i)whenever any payment to be made or action to be taken hereunder is required to be made or taken on a day other than a Business Day, such payment shall be made or action taken on the next following Business Day.

1.3Currency

Unless otherwise indicated, all dollar amounts in this Agreement are expressed in Canadian dollars.

1.4Schedules

The following Schedules are attached to and form an integral part of this Agreement:

Schedule A	-	Property
Schedule B	-	Initial Budget
Schedule C	-	Illustration of Dilution Calculation
Schedule D	-	Background Intellectual Property
Schedule E	-	Accession Agreement
Schedule F	-	[Redacted: Commercially Sensitive Information]
Schedule G	-	Emerald Organizational Chart

1.5Additional Shares

Each Shareholder agrees that all Shares hereafter acquired by such Shareholder shall be subject in all respects to the provisions of this Agreement.

1.6Company to Be Bound

The Company covenants and agrees that to the full extent it has the capacity and power at law to do so, it will carry on its business and operations in accordance with the provisions of this Agreement and take no action which would constitute a contravention of any of the terms or provisions hereof.

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ARTICLE 2

NATURE AND SCOPE OF AGREEMENT

2.1Purpose and Goal of Company

The Shareholders formed the Company with the principal purpose of undertaking the Purpose. The goal of the Company is to operate as the lowest cost Greenhouse producer of Cannabis in the Canadian industry without sacrificing product quality. The Company will have the exclusive responsibility to develop Intellectual Property as it relates to the Purpose.

2.2Purposes of Agreement

In addition to the other matters set forth herein, the Shareholders have entered into this Agreement to establish terms for the governance of the Company, the ownership of the Shares, the funding of the Company and the conduct of Operations.

2.3No Partnership or Agency; Ability to Pursue Business Interests

(a)Nothing in this Agreement will be deemed to constitute Emerald or Village Farms as the partner, agent or legal representative of the other or to create any fiduciary relationship between them. It is not the intention of the Parties to create, nor shall this Agreement be construed to create, any commercial or other partnership.

(b)Except as expressly provided herein to the contrary or in the Transaction Documents, nothing in this Agreement shall be deemed or construed to restrict, in any way, the freedom of either of Village Farms or its Affiliates or Emerald or its Affiliates to conduct or engage in any other business or activity whatsoever, without any accountability whatsoever to the other Parties hereto, and without requiring the consent of the other Parties hereto.

2.4Priority of Agreements

The Shareholders agree that to the extent permitted by Applicable Law, in the event of any conflict between the terms of this Agreement and the constating documents of the Company, the terms of this Agreement are intended to govern and shall prevail, and the Shareholders shall use their best efforts and vote their Shares from time to time to cause the constating documents of the Company, as applicable, to be amended to remove such conflict, ambiguity or inconsistency and to permit the Company and its affairs to be carried out in accordance with this Agreement to the greatest extent possible.

2.5Liability Several

Except as otherwise provided herein, the rights, duties, obligations and liabilities of the Shareholders under the Company’s constating documents and this Agreement shall be several and not joint or collective. Except as otherwise provided herein or in the Transaction Documents, each Shareholder shall be responsible only for its obligations as set out in the Company’s constating documents, in this Agreement and in the Transaction Documents and shall be liable only for its share of costs and expenses as provided herein.

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2.6Implied Covenants

There are no implied covenants contained in this Agreement other than those of good faith and honest dealing. In deliberating matters before the Board, each Director will act in good faith and in the best interests of the Company provided that he or she may also consider the interests of the Shareholder that nominated such Director.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES; CONDITIONS

3.1Representations and Warranties of Emerald and Emerald Therapeutics

As of the Execution Date, each of Emerald and Emerald Therapeutics represents and warrants to Village Farms and the Company as follows, and each of Emerald and Emerald Therapeutics acknowledges that Village Farms and the Company are relying upon such representations and warranties in connection with the execution and delivery of this Agreement:

(a)Organization; Status; Formation and Organization Documents. Each of Emerald and Emerald Therapeutics is duly formed and organized and validly subsisting under the laws of Province of British Columbia, is qualified to do business in the Province of British Columbia and has all requisite power and authority to execute, deliver and perform its obligations under this Agreement and the Transaction Documents to which Emerald is a party.

(b)Approval. This Agreement and the Transaction Documents to which each of Emerald and Emerald Therapeutics is a party have been duly approved, executed and delivered by each of Emerald and Emerald Therapeutics, as applicable, and constitute legal, valid and binding obligations of each of Emerald and Emerald Therapeutics, as applicable, enforceable against each of Emerald and Emerald Therapeutics, as applicable, in accordance with their terms, subject to bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and other Applicable Laws relating to or affecting the availability of equitable remedies and the enforcement of creditors’ rights generally and general principles of equity and public policy and to the qualification that equitable remedies such as specific performance and injunction may be granted only in the discretion of a court of competent jurisdiction.

(c)Corporate Organization. The chart attached hereto as Schedule G accurately sets out the ownership structure of Emerald and Emerald Therapeutics as of the Execution Date.

(d)No Breach. All material indentures, mortgages, deeds of trust, agreements or other instruments to which either of Emerald or Emerald Therapeutics is party are valid and subsisting and no breach exists in respect thereof on the part of either Emerald or Emerald Therapeutics, in each case, which would or could have a material adverse effect upon the Company or its business or, to the best of its knowledge, information and belief, the Company Assets.

(e)No Conflicts. The execution, delivery and performance of this Agreement and each Transaction Document to which each of Emerald and Emerald Therapeutics is a party by each of Emerald and Emerald Therapeutics does not and will not: (i) in any material way, conflict with or result in or cause any violation under any Applicable Law; (ii) in any material way, conflict with or result or cause a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement, partnership agreement, operating agreement or other agreement or instrument to which each of Emerald and Emerald Therapeutics is party; or (iii) result in the creation or imposition of any Encumbrance upon any Company Assets.

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(f)Governmental Consents. No consent, approval, authorization or order of, or qualification with, any court or Governmental Authority is required in connection with the execution, delivery or performance by any of Emerald or Emerald Therapeutics of this Agreement or any of the Transaction Documents to which Emerald or Emerald Therapeutics is a party.

(g)No Litigation. There are no actions, suits or proceedings at law or in equity by or before any Governmental Authority or other Person now pending or threatened against or affecting any of Emerald or Emerald Therapeutics, which would or could have a material adverse effect upon the Company or its business or, to the best of its knowledge, information and belief, the Company Assets.

(h)Charges and Convictions. Neither Emerald nor Emerald Therapeutics has been charged, threatened to be charged or convicted under any Applicable Law nor disbarred by any Governmental Authority. Neither Emerald nor Emerald Therapeutics has been and, to the best of its knowledge, is not under investigation by any Governmental Authority.

(i)Solvency. Each of Emerald and Emerald Therapeutics is solvent as of the Execution Date. Neither Emerald nor Emerald Therapeutics is a debtor in any outstanding action or proceeding

pursuant to any Bankruptcy Proceeding and neither Emerald nor Emerald Therapeutics is:

(i)contemplating either the filing of a petition or application by Emerald under any Bankruptcy Proceeding or the liquidation of all or any portion of its assets or property; or (ii) aware that any other Person is contemplating the filing against Emerald of a petition or application under any Bankruptcy Proceeding.

(j)Residency. Each of Emerald and Emerald Therapeutics is not and at all times during the term of this Agreement shall not be a non-resident of Canada for purposes of the Tax Act.

(k)Intellectual Property. Emerald holds all right, title and interest in and to all of the Emerald Background Intellectual Property and has the right to grant to the Company the licenses to the Emerald Background Intellectual Property as set forth in this Agreement. No other Person has infringed, misappropriated, violated or otherwise conflicted with or harmed any of the Emerald Background Intellectual Property. The Emerald Background Intellectual Property does not comprise any royalty- bearing Intellectual Property licenses to Emerald or Emerald Therapeutics. To the best of Emerald’s knowledge, use of the Emerald Background Intellectual Property for the Purpose does not infringe, misappropriate, violate or otherwise conflict with or harm the intellectual property rights of any other Person and no related actions or proceedings have been instituted or are pending or threatened. To the best of Emerald’s knowledge, the Emerald Background Intellectual Property is the only Intellectual Property owned by Emerald or Emerald Therapeutics (or to which Emerald or Emerald Therepeutics’ has a right to use) as of the Execution Date that is required to fulfill the Purpose.

(l)Current Health Canada Cannabis Licenses. Emerald holds license 10-MM0005/201 issued by Health Canada to grow, produce, cultivate, extract and sell Cannabis and such license is in good standing and in full force and effect. To the best of the knowledge of Emerald there are no pending or threatened actions by Health Canada in relation to such license.

3.2Representations and Warranties of Village Farms

As of the Execution Date, Village Farms represents and warrants to Emerald and the Company as follows, and Village Farms acknowledges that Emerald and the Company are relying upon such representations and warranties in connection with the execution and delivery of this Agreement:

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(a)Organization; Status; Formation and Organization Documents. Village Farms is duly formed and organized and validly subsisting under the Federal laws of Canada, is qualified to do business in the Province of British Columbia and has all requisite power and authority to execute, deliver and perform its obligations under this Agreement and the Transaction Documents to which Village Farms is a party.

(b)Approval. This Agreement and the Transaction Documents to which Village Farms is a party have been duly approved, executed and delivered by Village Farms and constitute legal, valid and binding obligations of Village Farms enforceable against Village Farms in accordance with their terms, subject to bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and other Applicable Laws relating to or affecting the availability of equitable remedies and the enforcement of creditors’ rights generally and general principles of equity and public policy and to the qualification that equitable remedies such as specific performance and injunction may be granted only in the discretion of a court of competent jurisdiction.

(c)Share Ownership and Management Control.The ownership structure of Village Farms is, as of the Execution Date, as set out in its current annual information form dated March 31, 2017, which is available under Village Farms’ profile on SEDAR at www.sedar.com.

(d)[Redacted: Commercially Sensitive Information]

(e)No Breach. All material indentures, mortgages, deeds of trust, agreements or other instruments to which Village Farms is party are valid and subsisting and no breach exists in respect thereof on the part of Village Farms, in each case, which would or could have a material adverse effect upon the Company or its business or, to the best of its knowledge, information and belief, the Company Assets.

(f)Governmental Consents. No consent, approval, authorization or order of, or qualification with, any court or Governmental Authority is required in connection with the execution, delivery or performance by Village Farms of this Agreement or any of the Transaction Documents to which Village Farms is a party.

(g)No Litigation. There are no actions, suits or proceedings at law or in equity by or before any Governmental Authority or other Person now pending or threatened against or affecting Village Farms, the Property or the Structures which would or could have a material adverse effect upon the Company or its business or, to the best of its knowledge, information and belief, the Company Assets.

(h)Charges and Convictions. Village Farms has not been charged, threatened to be charged or convicted under any Applicable Law nor disbarred by any Governmental Authority. Village Farms has not been and is not under investigation by any Governmental Authority.

(i)Solvency. Village Farms is solvent as of the Execution Date. Village Farms is not a debtor in any outstanding action or proceeding pursuant to any Bankruptcy Proceeding and Village Farms is not: (i) contemplating either the filing of a petition or application by Village Farms under any Bankruptcy Proceeding or the liquidation of all or any portion of its assets or property; and (ii) aware that any other Person is contemplating the filing against Village Farms of a petition or application under any Bankruptcy Proceeding.

(j)Residency. Village Farms is not and at all times during the term of this Agreement shall not be a non-resident of Canada for purposes of the Tax Act.

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(k)Intellectual Property. Village Farms holds all right, title and interest in and to all of the Village Farms Background Intellectual Property and has the right to grant to the Company the licenses to the Village Farms Background Intellectual Property as set forth in this Agreement. No other Person has infringed, misappropriated, violated or otherwise conflicted with or harmed any of the Village Farms Background Intellectual Property. The Village Farms Background Intellectual Property does not comprise any royalty-bearing Intellectual Property licenses to Village Farms. To the best of Village Farms’ knowledge, use of the Village Farms Background Intellectual Property for the Purpose does not infringe, misappropriate, violate or otherwise conflict with or harm the intellectual property rights of any other Person and no related actions or proceedings have been instituted or are pending or threatened. To the best of Village Farms’ knowledge, the Village Farms Background Intellectual Property is the only Intellectual Property owned by Village Farms (or which Village Farms has a right to use) as of the Execution Date that is required to fulfill the Purpose.

3.3Survival

(a)The foregoing representations and warranties made by Emerald in Section 3.1 and Village Farms in Section 3.2 shall survive the execution and delivery of this Agreement and shall not merge on the Execution Date.

ARTICLE 4

TRANSITION PERIOD

4.1Administrative Services

(a)Village Farms covenants and agrees that it shall provide the Administrative Services without charge or fee (except in respect of the Cost of the Administrative Services) to the Company for a period of six months commencing on the Execution Date and ending at 5:00 p.m. (Vancouver time) on the six month anniversary of the Execution Date (the “Administrative Services Period”).

(b)Village Farms will use reasonable commercial efforts, skill and judgment in performing the Administrative Services. Without limiting the foregoing, Village Farms will perform, or cause to be performed, the Administrative Services in a timely and workmanlike manner and will furnish competent and adequate staff as is necessary to conduct the Administrative Services. Any staff engaged by Village Farms to provide the Administrative Services shall not be employees of the Company and, subject to Section 4.1(c), all costs relating to their employment, termination or severance shall be the sole responsibility of Village Farms. The withholding and payment of any amounts required to be withheld and paid to any Governmental Authority, including without limitation, workers compensation premiums, unemployment insurance premiums, Canada Pension Plan payments, federal or provincial income taxes, and employer’s health taxes, shall be withheld and paid by Village Farms.

(c)Village Farms shall be reimbursed by the Company for all properly documented reasonable costs and expenses incurred by Village Farms in connection with the provision of the Administrative Services including without limitation, a reasonable allocation (pro rata based on time spent) of any salaries, benefits and taxes (including without limitation, workers compensation premiums, unemployment insurance premiums, Canada Pension Plan payments, federal or provincial income taxes, and employer’s health taxes) paid to Village Farms’ employees who dedicate only a portion of their time to the provision of the Administrative Services and related payments/contributions to Governmental Authorities (collectively the “Cost of the Administrative Services”). There shall be no mark-up by Village Farms on the Cost of the Administrative Services.

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(d)Village Farms will be entitled to submit to the Company monthly invoices together with reasonable supporting documentation for the Cost of the Administrative Services during the calendar month immediately preceding, which invoices will show the total amount due to Village Farms from the Company, any applicable credits, and applicable Taxes, each set out as specific line items. The Company will pay, and Village Farms will remit, taxes to all applicable Governmental Authorities as required by Applicable Law. The Company will pay all invoices within 30 days from date of receipt of the invoice together with reasonable supporting documentation. For clarity, Village Farms will not be entitled to withdraw funds from any bank account it shall establish on behalf of the Company in order to pay the said invoices. If there shall be an unresolved dispute concerning the monthly invoices, either Shareholder shall have the right to submit the matter to the Dispute Resolution Procedures; prior to resolution of the dispute, the Company shall not be required to pay Village Farms for the items on the invoice that are in dispute.

(e)Forthwith following the expiry of the Administrative Services Period, Village Farms shall promptly deliver all books and records maintained by Village Farms to the President or to such third party as directed by the President, including all information relating to the Operations which is stored by Village Farms in any computer, microfiche records or other information storage medium.

(f)The Company shall defend, indemnify and save Village Farms and its Affiliates and its and their directors, officers and employees (collectively, the “Village Farms Indemnified Parties”) harmless from and against any and all Losses incurred by the Village Farms Indemnified Parties of any nature in connection with, resulting from or relating to the provision of the Administrative Services, including as a result of personal injury including death and property damage and Losses suffered by third parties; provided that the Company shall not be required to reimburse or indemnify any Village Farms Indemnified Party for any Losses to the extent such Losses arise from the negligence or wilful misconduct of any Village Farms Indemnified Party or any breach or default under this Section 4.1(f). Notwithstanding any other provision in this Agreement, the Company shall not be required to indemnify the Village Farms Indemnified Parties, or to be liable to the Village Farms Indemnified Parties, for special, indirect, incidental, contingent or consequential damages, however occasioned, even if the Village Farms Indemnified Parties has advised the Company of the possibility of such damages.

4.2Emerald to Lead Licensing on Behalf of the Company

(a)Immediately following the Execution Date, the Company will commence the process of applying for the Licenses in connection with the Delta 3 Assets and Operations with Emerald, subject to guidance and direction from the Board, taking the lead in this process. Emerald will act diligently and in good faith in pursuing the Licenses on behalf of the Company. Emerald covenants and agrees to:

(i)license to the Company all Emerald Background Intellectual Property and other assets in its control which are reasonably necessary to allow the Company to secure all Licences in connection with the Delta 3 Assets and Operations; and

(ii)grant to the Company a right to cross-reference all regulatory submissions on file in connection with the Licenses in connection with the Delta 3 Assets and Operations, if such cross-reference facilitates the screening, review or issuance of the Licenses in connection with the Delta 3 Assets and Operations.

(b)Emerald shall be reimbursed by the Company for all properly documented reasonable costs and expenses incurred by Emerald in connection with obtaining the Licenses in connection with the Delta 3 Assets and Operations including without limitation, a reasonable allocation (pro rata based on time spent) of any salaries, benefits and taxes (including without limitation, workers compensation premiums, unemployment insurance premiums, Canada Pension Plan payments, federal or provincial income taxes, and employer’s health taxes) paid to Emerald’s employees who dedicate only a portion of their time to assisting the Company with obtaining the Licenses in connection with the Delta 3 Assets and Operations and related payments/contributions to Governmental Authorities (collectively the “License Costs”). There shall be no mark-up by Emerald on the License Costs.

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(c)Emerald will be entitled to submit to the Company monthly invoices together with reasonable supporting documentation for the License Costs during the calendar month immediately preceding, which invoices will show the total amount due to Emerald from the Company, any applicable credits, and applicable Taxes, each set out as specific line items. The Company will pay, and Emerald will remit, taxes to all applicable Governmental Authorities as required by Applicable Law. The Company will pay all invoices within 30 days from date of receipt of the invoice together with reasonable supporting documentation. For clarity, Emerald will not be entitled to withdraw funds from any bank account it shall establish on behalf of the Company in order to pay the said invoices. If there shall be an unresolved dispute concerning the monthly invoices, either Shareholder shall have the right to submit the matter to the Dispute Resolution Procedures; prior to resolution of the dispute, the Company shall not be required to pay Emerald for the items on the invoice that are in dispute.

(d)After receiving the Licenses in connection with the Delta 3 Assets and Operations, which Licenses shall be owned by the Company, the Company shall plant, grow and distribute Cannabis in accordance with the terms of the Licenses, the Operating Plan and this Agreement as soon as possible.

4.3Employee Matters

(a)Prior to the Company’s receipt of the initial Cultivation License in connection with the Delta 3 Assets and Operations (or earlier), Village Farms will identify the Employees to the Company and will provide the Company with the following information for each of the Employees: years of service; position; salary or wage rate; a description of any group insurance or retirement benefits arrangements; and bonus eligibility.

(b)Following the Company’s receipt of the initial Cultivation License in connection with the Delta 3 Assets and Operations and in any event no later than five Business Days thereafter, the Company will offer in writing continuation of employment to those Employees who it wishes to hire, subject to examination and approval by Emerald and subject further to each such Employee being eligible to receive the necessary Security Clearance with the Minister under the ACMPR or other approvals required under Applicable Laws in order to be employed by the Company and provide services pursuant to the Licences and Applicable Laws, in each case on terms and conditions no less favourable than the Employee holds with Village Farms as at such date and with recognition of all of the Employee’s prior service with Village Farms for all purposes. Each Employee who accepts an offer of employment with the Company will be a “Hired Employee”, and each such offer shall include an assignment to the Company of any and all Intellectual Property created by the Hired Employee during the course of the Hired Employee’s employment with the Company.

(c)Upon the commencement of each Hired Employee’s employment with the Company, the Company shall assume and be responsible for, and shall defend, indemnify and save Village Farms and its directors, officers and employees harmless from and against, all liabilities and obligations for, and any Losses arising out of or related to, the employment and any termination of employment of such Hired Employee, except as set out in Section 4.3(d) and Section 4.3(h).

(d)Village Farms will be responsible for and pay each Hired Employee in full for any unpaid salary, wages, bonus entitlement and vacation pay accrued during each such Hired Employee’s employment with Village Farms prior to the date that such Hired Employee commences employment with the Company and will indemnify the Company from and against any and all Losses incurred by the Company in connection therewith.

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(e)From time-to-time, as reasonably requested by the Company, Village Farms and Emerald will second employees to the Company to provide certain services. In such cases, Village Farms and Emerald, as applicable, will, in consultation with the Company, determine the appropriate manner in which such employees will be seconded to comply with Applicable Laws and to ensure no adverse impact on the good standing of the Licenses. The Company will reimburse Village Farms and Emerald on an out- of-pocket cost-recovery basis for each such seconded employee’s reasonable time spent and reasonable expenses incurred by the seconded employee in providing such services.

(f)In accordance with the Intellectual Property licenses granted to the Company in Section 13.1(b) of this Agreement, each of Village Farms and Emerald will provide necessary growing oversight and input from its senior growing and development teams as needed and shall be reimbursed, on a monthly basis, by the Company for all properly documented reasonable costs and expenses incurred by Village Farms or Emerald, as the case may be, in connection with providing such oversight and input. There shall be no mark-up by Emerald or Village Farms on such costs and expenses.

(g)The Company shall defend, indemnify and save Emerald, Village Farms and their Affiliates and their respective directors, officers and employees (collectively, the “Indemnified Parties”) harmless from and against any and all Losses incurred by the Indemnified Parties of any nature in connection with, resulting from or relating to the secondment of any employees of Emerald, Village Farms and their Affiliates to the Company, including as a result of personal injury including death and property damage and Losses suffered by third parties; provided that the Company shall not be required to reimburse or indemnify any Indemnified Party for any Losses to the extent such Losses arise from the negligence or wilful misconduct of any Indemnified Party or any breach or default under this Section 4.2.

(h)Where the Company terminates a Hired Employee’s employment relationship on a “without cause” basis, either Village Farms or Emerald shall be given an opportunity to offer employment to the Hired Employee. If Village Farms or Emerald offers such Hired Employee employment and the Hired Employee accepts the offer, the other Party, as between Village Farms and Emerald, will have no liability for any Losses arising from or relating to the cessation of the employee’s employment with the Company. If neither Village Farms nor Emerald makes an offer of employment to such Hired Employee, or Village Farms or Emerald offers the Hired Employee employment but the Hired Employee rejects the offer, then Village Farms will reimburse the Company for its pro rata portion of the reasonable out-of- pocket costs for pay in lieu of notice of termination or severance (but excluding working notice), if any, incurred by the Company that arise from the termination of the Hired Employee’s employment with the Company (“Severance Costs”) to be determined based on the ratio, expressed as a percentage, obtained by dividing: (i) the number of months (including part months) the Hired Employee was employed by Village Farms, by (ii) the aggregate of the number of months (including part months) the Hired Employee was employed by Village Farms and the Company; provided that:

(i)if the Hired Employee ceases employment with the Company on a date following the first anniversary of the Hired Employee commencing employment with the Company, Village Farms shall have no liability for Severance Costs relating to such Hired Employee; and

(ii)in no event will Village Farms reimburse the Company for more than 100% of the Severance Costs relating to a Hired Employee.

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4.4[Redacted: Commercially Sensitive Information]

4.5Distribution

The Company will be the distributor of Cannabis produced by it in accordance with the terms of the Licenses, the Operating Plan and this Agreement. Emerald, in its sole discretion, will have the right to offer to purchase, and the Company, in its sole discretion will have the right to sell to Emerald, up to the entire amount of Cannabis produced by the Company at a wholesale price and other terms and conditions to be agreed upon between the Company and Emerald from time to time in the context of the market. Emerald will not be required to purchase any minimum amount of Cannabis produced by the Company and will be entitled to purchase Cannabis from third parties on such terms as it may see fit. The Company will not be obligated to sell any minimum amount of Cannabis produced by it to Emerald.

ARTICLE 5

CORPORATE MATTERS

5.1Board

(a)Each of the Shareholders shall at all times vote or cause to be voted the Shares held by such Shareholder to elect and maintain as directors of the Company the applicable nominees in accordance with this Section 5.1.

(b)As at the Execution Date and subject to the terms and conditions herein contained, the Board shall consist of six (6) Directors. The Company will not pay any remuneration to an individual for being a Director if such individual is a director, officer or employee of a Shareholder or any of its Affiliates. For the avoidance of doubt, this Section 5.1(b) does not apply to any remuneration due to an individual in their capacity as an employee of the Company, if applicable. As at the Execution Date and thereafter, so long as the Proportionate Interests of a Shareholder shall be 35% or greater such Shareholder shall be entitled to nominate three (3) Directors. If the Proportionate Interests of a Shareholder shall be less than 35% such Shareholder shall only be entitled to nominate two (2) Directors and shall cause one of its three (3) Directors to immediately resign. Initially, the Board nominees of Emerald shall be Dr. Avtar Dhillon, Jim Heppell and Dr. Bin Huang and the Board nominees of Village Farms shall be Michael DeGiglio, Stephen Ruffini and Christopher Woodward. Subject to compliance with Section 5.1(c), each Shareholder will be entitled to replace any of its nominee Directors from time to time on notice to the Company and the Shareholders shall take all necessary action to cause any such replacement Director to be appointed as a Director in place of the Director being removed. The Shareholders shall do all such acts and things as shall be required in order to give full force and effect to any decreases to the Board and in the number of nominees to the Board to which each Shareholder is entitled, including without limitation, to forthwith execute a Shareholders’ resolution to remove a director required to resign under this Section 5.1.

(c)Each of the initial Directors listed in Section 5.1(b) will, as soon as practicable after the Execution Date and in conjunction with the Company’s application for the Licenses, apply to the Minister under the ACMPR or Applicable Law for Security Clearance. If a Director is unable to obtain such Security Clearance with the Minister under the ACMPR or Applicable Law prior to the issuance of the Licenses, such Director shall resign from the Board and the Shareholder entitled to nominate such Director shall nominate a new Director who has Security Clearance. After the date of the initial grant of the Licenses, no person may become a Director unless such person has obtained Security Clearance.

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(d)The office of a Director shall be vacated upon the occurrence of any of the following events:

(i)if a Bankruptcy Proceeding is commenced against him/her or if he/she commences a Bankruptcy Proceeding in respect of his/herself;

(ii)if an order is made declaring him/her to be a mentally incompetent Person or incapable of managing his/her affairs;

(iii)if he/she is notified by the Minister that his/her Security Clearance has been suspended or cancelled pursuant to Section 117 of the ACMPR or Applicable Law;

(iv)if he/she is removed from office by a notice from the Shareholder that appointed him/her as provided herein; or

(v)if by notice in writing to the Shareholders he/she resigns his/her office and such resignation, if not effective immediately, becomes effective in accordance with its terms.

(e)If a Director ceases to hold office for any reason (other than pursuant to Section 5.1(b)), the Shareholder that nominated the former Director shall as soon as practicable nominate a replacement Director, subject to the terms of Section 5.1(c) and the Shareholders shall forthwith fill the vacancy on the Board by appointing the individual who has been so nominated as the replacement Director. If a Shareholder wishes to replace a Director nominated by it from time to time, each Shareholder and/or Director shall execute all such resolutions or other documents and do all such other acts and things as the Company or the Shareholder wishing to replace the Director, acting reasonably, may request for the purpose of effecting any such replacement. The Company and Shareholders may not appoint or remove Directors except in accordance with the nomination rights provided by this Section 5.1.

(f)Each Director nominated or elected pursuant to this Section 5.1 shall be an individual who is qualified to act as a director under the constating documents of the Company and Applicable Law.

(g)Each Director may provide its appointing Shareholder with any information acquired by the Director in his or her capacity as an officer or Director of the Company (such information to be maintained by the relevant Shareholder in accordance with the obligations set out in Article 16).

5.2Meetings of the Board

(a)The Board shall hold regular meetings on a quarterly basis. The Secretary shall give not less than 30 days’ notice to the Directors of such regular meetings. Additionally, any Director may call a special meeting of the Board on not less than 10 days’ notice to the other Directors. In case of emergency, reasonable notice of a special meeting shall suffice. Meetings of the Board shall be held at the principal office of the Company or at such other location as unanimously agreed by the Directors. The Board may hold meetings without complying with the above notice requirements if all Directors are present at a meeting and waive the applicable notice requirements.

(b)For so long as the Proportionate Interests of each of the Shareholders is 35% or greater and subject to Section 5.6, there shall be a quorum only if an equal number of Directors nominated by each Shareholder are present, provided that if a greater number of Directors nominated by one Shareholder than the other are present, such additional Directors shall abstain from voting at such meeting (but may otherwise participate in such meeting) and in such event a quorum will be deemed to be present. If the Proportionate Interest of one of the Shareholders shall be less than 35%, subject to Section 5.6, there shall be quorum if the Shareholder whose Proportionate Interest is 35% or greater has a greater number of Directors nominated by it present than the Shareholder whose Proportionate Interest is less than 35%. If quorum is not present within 30 minutes following the time at which the meeting is scheduled to take place, any Director present may adjourn the meeting to the same day in the immediately following week (or, if that day is not a Business Day, the next following Business Day) at the same time and place. The Secretary shall give notice to the Directors of the rescheduled meeting but otherwise shall be under no obligation to give any Director notice thereof. The quorum for such rescheduled meeting will be as set forth in the first two sentences (as applicable) of this Section 5.2(b). Only those items included on the agenda for the original meeting may be acted upon at such a rescheduled meeting, but any additional matters may be considered with the consent of all Directors present.

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(c)The Directors appointed by each Shareholder may, upon notice provided to the Secretary and at the expense of such Shareholder, invite a reasonably limited number of other persons who have a reasonable business purpose for being present, to attend any meeting of the Board; provided that the Director(s) representing the other Shareholders consent, which consent need not be in writing, may be given by acquiescence and may not be unreasonably withheld. If personnel employed by either Shareholder are required to attend a Board meeting, reasonable costs incurred in connection with such attendance shall be paid for as a Chargeable Cost. All other costs in respect of invited persons shall be paid for by the Shareholder whose appointed Director extended the invitation.

(d)Each notice of a meeting shall include an itemized agenda prepared by the Secretary in the case of a regular meeting or by the Director calling the meeting in the case of a special meeting, but any additional matters may be considered with the consent of all Directors present. The Secretary shall prepare minutes of all meetings, including a rescheduled meeting, and shall distribute a copy of such minutes to the Directors within 20 days after the meeting. The minutes must be signed by one Director nominated by each of the Shareholders and who was in attendance at the Meeting. The minutes, when approved by each Director in attendance at the meeting, shall be the official record of the decisions made by the Board and shall be binding on the Company and the Shareholders. The minutes of a Board meeting shall be deemed to have been approved by a Director unless such Director objects in writing within 10 days after being provided with such minutes. Approval of the minutes shall not be a condition to the effectiveness of actions properly taken by the Board.

(e)Directors may attend meetings of the Board by telephone or by video conference as long as all participants are able to hear and speak to each other and decisions are confirmed in writing by the Directors (which confirmation may be made by approval of the minutes of the meeting pursuant to Section 5.2(d)).

(f)A vote of the Directors present in respect of a proposal submitted for a vote of the Board at a meeting at which a quorum is present is referred to as a “Vote”. Subject to Section 5.6, approval of a resolution or other proposal brought before the Board shall require a greater than 50% affirmative Vote of the Directors present at a meeting at which a quorum is present.

5.3Powers and Functions of the Board

(a)The role of the Board is to provide strategic direction and oversight to the President in the management of Operations, the carrying out of the Purpose and to make, subject to this Agreement, all strategic decisions relating to the conduct of Operations and the Purpose.

(b)The Board will not be involved in the day-to-day management of Operations.

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5.4Matters Requiring Approval

(a)Without limiting the general power and authority of the Board, subject to Section 5.6, the Company shall not take, and none of the Shareholders shall cause or permit the Directors or the Company to take, any of the following actions unless the proposed action is first approved by the affirmative Vote of a majority of the votes cast at a Board meeting at which a quorum is present:

(i)to no longer pursue the Cultivation License and the Distribution Licenses, in each case, in connection with the Delta 3 Assets and Operations;

(ii)to no longer pursue any other License which the Company was pursuing;

(iii)any fundamental change in the Purpose, the purpose or scope of the Operations or the purpose or scope of the Licenses sought or obtained by the Company;

(iv)any proposal to, directly or indirectly, license, sub-license, sell, transfer, pledge or otherwise dispose of or grant rights in one or more of the Licenses sought or obtained by the Company;

(v)any proposal to, directly or indirectly, license, sub-license, sell, transfer, pledge or otherwise dispose of or grant rights in any of the Intellectual Property owned by the Company that is otherwise not contemplated in this Agreement;

(vi)any proposed response to investigations, audits or inspections by Governmental Authorities in relation to the Licenses;

(vii)any proposed response to proposed corrective action, voluntary or involuntary, in relation to the Licenses;

(viii)any proposed response to a Governmental Authority in connection with a threatened or actual suspension or cancellation of the Licences;

(ix)any proposal to amend, suspend, or cancel the Licenses;

(x)any proposal to allow a third party to cross-reference the regulatory submissions for the Licences;

(xi)policies to be adopted by the Company to ensure that the Company complies with the terms of the Licenses and Applicable Laws;

(xii)the annual operating or capital budget of the Company, any material revisions or amendments thereto and any cost or expense which, when added to all other costs or expenses covered by such Budget would make the total expenditures exceed the expenditures set forth in the Budget by 10% or more;

(xiii)the annual Operating Plan and any material revisions or amendments thereto;

(xiv)except as expressly authorized in the Approved Operating Plan or the Transaction Documents, any merger, sale, lease, license, assignment or other disposition for value of any of the Company’s assets with a fair market value in excess of $100,000 at any one time, or as part of a series of related transactions other than pursuant to the sale of products in the ordinary course of business;

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(xv)except as expressly authorized in the Approved Operating Plan or authorized under specifically delegated authority, the incurring or guaranteeing of any debts, whether or not secured by the Company Assets, or any grant of any security interest in the Company Assets, but excluding amounts incurred in the ordinary course of business which are owed by the Company to suppliers of goods, materials and/or services to the Company and which may be payable on deferred terms;

(xvi)the issuance of Distributions to any Shareholder;

(xvii)any use of the name of, or any information regarding, any Shareholder of the Company or any Related Party, in any promotional materials or public relations for the Company, except as expressly permitted in writing by such Shareholder or Related Party;

(xviii)any determination to initiate or forego any claim or litigation and any settlement, compromise or confession of judgment as to any claim, controversy or litigation regarding in each case an amount in excess of $25,000 and involving the Company as claimant or defendant;

(xix)any change of the Auditor;

(xx)any change in the fiscal year end;

(xxi)any merger, amalgamation or consolidation of the Company with any other Person;

(xxii)the filing of any petition in bankruptcy or engaging in any reorganization or instituting or pursuing any other type of bankruptcy, reorganization or insolvency proceeding with respect to the Company, consenting to the institution of any involuntary bankruptcy, reorganization or insolvency proceedings with respect to the Company, the admission in writing by the Company of its inability to pay its debts generally as they become due, or the making by the Company of a general assignment for the benefit of its creditors;

(xxiii)the liquidation, termination, winding-up or dissolution of the Company;

(xxiv)an initial public offering of the Company;

(xxv)the acquisition by the Company of shares of capital stock of, or of other ownership interests in, any Person, whether incorporated or not;

(xxvi)the making of any loan or extension of credit to, or acting as guarantor or surety for or on behalf of, any other Person by the Company but excluding amounts incurred in the ordinary course of business which are owed by the Company to suppliers of goods, materials and/or services to the Company and which may be payable on deferred terms;

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(xxvii)the issuance of additional Shares or other securities of the Company;

(xxviii) the acquisition or long term lease by the Company of any other land or real property interest other than the Property; and

(xxix)   the appointment and termination of the President, Controller and Head Grower, subject to Article 6.

5.5Shareholder Approval

Each of the Shareholders covenants agrees to vote or cause to be voted its respective Shares in accordance with and to give effect to any of the matters set forth in Section 5.4 so approved by the Directors.

5.6[Redacted: Commercially Sensitive Information]

5.7 Auditors

The Auditor shall be the initial external auditors of the Company unless and until replaced in accordance with Section 5.4(a)(xix).

5.8Fiscal Year

The fiscal year of the Company shall end on December 31 in each year.

5.9Legend

All certificates, notes or other instruments issued on or after the Execution Date representing Shares or the share register of the Company, as applicable, shall have the following legend noted conspicuously thereon:

“The shares represented by this certificate are subject to the provisions of a shareholders’ agreement originally made as of June 6, 2017 among Emerald Health Botanicals Inc., Emerald Health Therapeutics Inc., and Village Farms International, Inc. which agreement contains restrictions on the right to transfer, pledge, encumber or otherwise deal with such securities and requires any transferee of such securities to sign an accession agreement in the agreed form prior to such transfer becoming effective. Notice of such restrictions is hereby given.”

5.10Agreement to Take Corporate Actions

(a)The Shareholders shall themselves do, and/or cause the Company to do, or otherwise cause to be done, all such acts, including amendment or supplement of the constating documents of the Company, and from time to time execute and deliver or cause to be executed and delivered all such documents, instruments and agreements as may be required under Applicable Law or as may be necessary or advisable in the reasonable opinion of either Shareholder, to give effect to the terms and provisions of this Agreement or to any duly adopted resolution of the Board or the Shareholders so that the Company and the Shareholders will be subject to all of the obligations and liabilities expressed to be imposed upon

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the Company and the Shareholders respectively hereunder and the intentions of the Parties hereunder can be implemented.

(b)The Shareholders shall refrain from challenging the validity of any decision adopted by the Company and/or action performed by the Company or the other Shareholder(s) in accordance with the terms of this Agreement.

ARTICLE 6

MANAGEMENT OF OPERATIONS

6.1Designation of President

(a)The Board shall appoint a President of the Company, as determined by a Vote of the Board. The President will be responsible for the overall management for the Operations, subject to oversight and direction by the Board and shall carry out the Operations and shall be compensated by the Company in accordance with the Approved Operating Plan.

6.2Nature of Rights and Obligations of the President

(a)Subject to the terms and conditions of this Agreement, including without limitation, the Administrative Services, and to Applicable Law, the President shall manage, direct and control Operations and shall:

(i)carry out and cause the employees of the Company to carry out the decisions of the Board and the Shareholders, as applicable, including the Approved Operating Plans, and to carry out other activities provided for in this Agreement. The President shall conduct, or cause to be conducted, all Operations in a good, workmanlike and efficient manner, using the skill and judgment and exercising such degree of care and skill as would reasonably be exercised by an experienced grower of agricultural products; and

(ii)to the extent that any of the duties of the President set forth herein are carried out by employees of the Company, such duties shall be carried out under the supervision of the President.

6.3Specified Obligations of the President

(a)If the Board has not provided requisite approval for those matters enumerated in Section 5.4(a)(vi), Section 5.4(a)(vii) and Section 5.4(a)(viii) and 5.4(a)(ix), the President may nonetheless take all actions he or she may consider reasonably necessary in order to respond and protect the Licenses of the Company.

(b)Subject to the provisions of this Agreement, including without limitation, the Administrative Services, the President shall keep, or cause to be kept, full and accurate records and accounts of all transactions entered into by or on behalf of the Company and of all Chargeable Costs made for the account of the Company, and of all funds disbursed by the President or under its direction.

(c)Subject to any modifying instruction given by the Board and the provisions of this Agreement, including without limitation, the Administrative Services, the President shall promptly submit to the Board quarterly statements of account showing:

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(i)the current balance of Available Cash at the end of the most recent quarter;

(ii)estimates of the amounts needed by the Company for expenditures to be made during the succeeding calendar quarter pursuant to the applicable Approved Operating Plan and otherwise including amounts needed to cover the quarterly general expenses of the Company;

(iii)the estimated portions of such amounts that will be funded by the Company during such calendar quarter from general revenues, financing arrangements or other sources; and

(iv)the estimated portions of such amounts, if any, that will need to be funded by Shareholder Contributions during such calendar quarter pursuant to the applicable Approved Operating Plan or otherwise hereunder.

(d)Subject to the provisions of this Agreement, including without limitation, the Administrative Services, the President shall cause the Company to maintain, complete financial and cost accounting books and records and internal financial controls showing all costs, expenditures, receipts and disbursements hereunder. These accounts shall include general ledgers and supporting and subsidiary journals, invoices, checks and other customary documentation sufficient to provide a record of revenues and expenditures and periodic statements of financial position and the results of the Operations and other activities of the Company for managerial, tax and other financial reporting purposes.

(e)The President shall, subject to any modifying instructions approved by the Board, prepare or cause to be prepared the reports for the Shareholders and Board as contemplated in Section 6.4.

(f)The President shall be responsible for managing the overall implementation of the Intellectual Property obligations under this Agreement, and shall allocate sufficient resources in the Approved Operating Plan in order for the Company to carry out all necessary such Intellectual Property obligations relating to the implementation of this Agreement by incorporating the following items into the Approved Operating Plan:

(i)developing a standard operating procedure for the identification and disclosure of new Company Improvement Intellectual Property by the Hired Employees;

(ii)in respect of the prosecution, maintenance, management and enforcement of the Company Improvement Intellectual Property, developing the necessary plans, milestones, timelines, budgets and deliverables; and

(iii)seeking out approval from the Board on a timely basis for any and all matters or issues relating to the implementation of this Agreement’s Intellectual Property obligations as required in accordance with Section 5.4 of this Agreement.

6.4Reporting Requirements.

The Company will provide to each Shareholder the following statements and reports, to be prepared or caused to be prepared by the President, subject to any modifying instructions approved by the Board, unless waived by any such Shareholder:

(a)monthly reports by the 10th Business Day of each month describing, with respect to the preceding month, the Operations undertaken and expenditures incurred by the Company and the results of such Operations, with accompanying and supporting documents and information, including all documentation that may be reasonably required by either Shareholder to comply with its continuous disclosure reporting obligations and a detailed summary of all expenditures made during such calendar month and a comparison of such expenditures and all prior reported expenditures in reasonable detail to estimates set forth in the applicable Approved Operating Plan;

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(b)within 75 days of the end of each fiscal year, audited annual financial statements of the

Company;

(c)within 30 days of the end of each fiscal quarter, unaudited quarterly financial statements of the Company including a rolling twelve (12) month forecast and reconciliation between actual and budgeted expenditures (based on the Approved Operating Plan) and comparisons between the objectives and results; and

(d)a detailed final report within 45 days after completion of each Approved Operating Plan, which shall include comparisons between actual and budgeted expenditures and comparisons between the objectives and results.

6.5Designation of Controller

The Company shall at all times after the Administrative Services Period have a Controller, to be appointed by the Board, as determined by a Vote of the Board. The Controller shall possess and exercise such authority and powers and perform such duties as may be determined by the Board and the President. The Controller shall: (i) act as the Secretary of the Company; (ii) be subject to oversight and direction by the President and the Board; (iii) carry out its responsibilities designated by the President and the Board; and (iv) be compensated by the Company in accordance with the Approved Operating Plan.

6.6Designation of Head of Quality Assurance

The Board shall, as soon as possible after the Execution Date, appoint a Head of Quality Assurance of the Company, as determined by a Vote of the Board. The Head of Quality Assurance shall possess and exercise such authority and powers and perform such duties as may be determined by the Board. The Head of Quality Assurance shall: (i) be subject to oversight and direction by the President; (ii) carry out his/her responsibilities designated by the President; and (iii) be compensated by the Company in accordance with the Approved Operating Plan.

6.7Designation of Senior Person in Charge

The Board shall, as soon as possible after the Execution Date, appoint a Senior Person in Charge of the Company, as determined by a Vote of the Board. The Senior Person in Charge shall possess and exercise such authority and powers and perform such duties as may be determined by the President. The Senior Person in Charge shall: (i) be subject to oversight and direction by the President; (ii) carry out his/her responsibilities designated by the President; and (iii) be compensated by the Company in accordance with the Approved Operating Plan.

6.8Designation of Head of Quality Control

The President shall appoint a Head of Quality Control of the Company. The Head of Quality Control shall possess and exercise such authority and powers and perform such duties as may be determined by the President. The Head of Quality Control shall: (i) be subject to oversight and direction by the President; (ii) carry out his/her responsibilities designated by the President; and (iii) be compensated by the Company in accordance with the Approved Operating Plan.

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6.9Designation of Head Grower

The Board shall appoint a Head Grower of the Company, as determined by a Vote of the Board. The Head Grower shall possess and exercise such authority and powers and perform such duties as may be determined by the Board and the President. The Head Grower shall: (i) be subject to oversight and direction by the President; (ii) carry out his/her responsibilities designated by the President; and (iii) be compensated by the Company in accordance with the Approved Operating Plan.

6.10Inspection and Access

(a)A Shareholder or any representative of such Shareholder shall be entitled, at its own risk and expense, to enter upon any portion of the properties of the Company upon reasonable advance notice to the President and at convenient times during normal working hours and in accordance with applicable safety procedures and Applicable Law to inspect the Company’s assets and Operations provided that if the Company suffers Losses of any nature in connection with, resulting from or relating to such access, the Shareholder shall indemnify and hold the Company harmless for all such Losses.

(b)A Shareholder or its representatives, at its own risk and expense, shall also be permitted to inspect and copy the books, records and data pertaining to the performance of Operations and to the Company’s assets, upon reasonable advance notice to the Controller and at convenient times during normal working hours and in accordance with applicable safety procedures. The rights granted to the Shareholders in this Section shall be subject to the confidentiality provisions in Article 16.

6.11Performance by President of Approved Operating Plans

(a)Except as otherwise provided herein or otherwise authorized by the Board, the President shall conduct, or cause the Company to conduct, Operations, incur expenses and purchase assets for the Company in accordance with the then applicable Approved Operating Plan.

(b)In the event that the President reasonably anticipates that costs and expenses: (i) will exceed 110% of substantially similar costs and expenses set out in an Approved Operating Plan; or (ii) will be different than those set out in an Approved Operating Plan will be incurred, the President shall promptly notify the Board. Except as approved in advance by the Board in accordance with Section 5.4(a)(xii), the President may not spend more in any year than 110% on costs and expenses which are substantially similar to those costs and expenses set out in the Approved Operating Plan for that year.

ARTICLE 7

OPERATING PLANS; FUNDING

7.1Initial Funding

(a)The Emerald Initial Capital Contribution shall constitute Share Capital and shall be advanced by Emerald in installments to the Company as follows:

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(i)the first installment of $2,000,000 shall be advanced to the Company on the Execution Date (the “First Installment of the Emerald Initial Capital Contribution”);

(ii)$8,000,000 (the “$8,000,000 Portion of the Initial Contribution”) shall be advanced to the Company in multiple instalments based on milestones set out in the Initial Budget provided that in the event the initial Cultivation License for the Delta 3 Assets and Operations has been obtained and all or any part of the $8,000,000 Portion of the Initial Contribution has not been advanced to the Company any unadvanced portion of the $8,000,000 Portion of the Initial Contribution shall be advanced to the Company within 10 Business Days of the date on which such Cultivation License has been obtained;

(iii)$10,000,000 (the “$10,000,000 Portion of the Initial Contribution”) shall be advanced to Torys LLP, in escrow, within 10 Business Days of the receipt by Emerald of notice from Village Farms [Redacted: Commercially Sensitive Information] shall be released from escrow and advanced to the Company in multiple instalments based on milestones set out in the Initial Budget following the date on which the $8,000,000 Portion of the Initial Contribution has been fully advanced to the Company provided that in the event the initial Cultivation License for the Delta 3 Assets and Operations has been obtained and all or any part of the $10,000,000 Portion of the Initial Contribution has not been advanced to the Company any unadvanced portion of the $10,000,000 Portion of the Initial Contribution shall be released from escrow and advanced to the Company on the date on which such Cultivation License has been obtained,

all as more particularly described in the Escrow Agreement. Upon payment of any amounts to the Company when due pursuant to Section 7.1(a)(ii) or 7.1(a)(iii) Shares will be released from escrow on the basis of one Share for one dollar pursuant to Section 7.1(c) and the amount paid to the Company shall be added to the Share Capital of Emerald’s Shares which, for greater certainty, will be $2,000,000 upon payment of the First Installment of the Emerald Initial Capital Contribution.

The Company acknowledges receipt from Emerald of the First Installment of the Emerald Initial Capital Contribution, in the amount of $2,000,000, on the Execution Date. The Parties agree that Chargeable Costs shall initially be funded by the Emerald Initial Capital Contribution.

(b)The demise of the Delta 3 Assets and Operations to the Company by Village Farms pursuant to the terms of the Lease shall constitute Share Capital and shall be deemed to have a value of $20,000,000.

(c)On the Execution Date, the Company has issued:

(i)2,000,000 Shares to Emerald in connection with the First Installment of the Emerald Initial Capital Contribution;

(ii)18,000,000 Shares to Emerald, in escrow (the “Escrowed Shares”). The Escrowed Shares shall be held in escrow by Torys LLP and released from escrow in installments concurrent with installments of the $8,000,000 Portion of the Initial Contribution being advanced by Emerald to the Company and the $10,000,000 Portion of the Initial Contribution being released from escrow by Torys LLP to the Company, in each case, in an amount equal to the amount of each such installment of the $8,000,000 Portion of the Initial Contribution and the $10,000,000 Portion of the Initial Contribution, as the case may be, all as more particularly described in the Escrow Agreement, provided that in the event:

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(A)Emerald fails to make an advance of all or part of the $8,000,000 Portion of the Initial Contribution, within 10 Business Days of the applicable date set out in Section 7.1(b)(iii), an amount of the Escrowed Shares equal to the amount of the $8,000,000 Portion of the Initial Contribution that was not funded shall immediately be cancelled by the Company (on the basis of one share for each dollar) and Emerald’s Share Capital will be reduced by an equivalent amount) and, in the event that Emerald has previously paid the $10,000,000 Portion of the Initial Contribution to Torys LLP in escrow then, that portion of the $8,000,000 Portion of the Initial Contribution which Emerald failed to advance shall be released from escrow and advanced to the Company out of the $10,000,000 Portion of the Initial Contribution which is held in escrow by Torys LLP on the date on which Emerald was to have made such advance from the $8,000,000 Portion of the Initial Contribution, ; and

(B)Emerald fails to advance the $10,000,000 Portion of the Initial Contribution when it is due to Torys LLP, then, within 10 Business Days of the applicable date set out in Section 7.1(a)(a)(iii), that amount of the Escrowed Shares equal to the amount of the $10,000,000 Portion of the Initial Contribution that was not funded shall immediately be cancelled by the Company (on the basis of one share for each dollar) and Emerald’s Share Capital will be reduced by an equivalent amount,

(iii)20,000,000 Shares to Village Farms in connection with the demise of the Delta 3 Assets and Operations to the Company by Village Farms pursuant to the terms of the Lease.

(d)Notwithstanding the foregoing, the Parties agree that subject to further review and consideration by the Board, the Shareholders may elect to use debt instruments to capitalize the Company rather than the procedures set out in this Section 7.1, subject to the consent of each Shareholder in its sole discretion.

7.2Operating Plans

All Operations shall be planned and conducted and all estimates, reports, and statements shall be prepared and made on the basis of a calendar year, save and except with respect to the first (reduced) year of Operations. Not later than 60 days before the commencement of each calendar year, the President shall prepare and submit to the Board for approval a proposed Operating Plan for such calendar year. Any Operating Plan submitted to the Board by the President hereunder may provide for allowances for contingencies as set out in Section 6.11(b). If the President or a Director believes that any Operating Plan should be revised prior to the end of the applicable calendar year, the President or such Director may propose one or more supplemental Operating Plans to the Board to be accomplished by the end of the then-current calendar year. During the 2 Year Hold Period, the Board shall review the Operating Plan on a quarterly basis to determine whether any changes to the Operating Plan are required in the applicable calendar year. Any material revisions or amendments to the Annual Operating Plan will be made in accordance with Section 5.4(a).

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7.3Procedures Related to Operating Plans

(a)Each Director shall within 25 days after submission by the President to the Board of the proposed Operating Plan submit to the Director(s) appointed by the other Shareholder:

(i)notice that such Director approves the proposed Operating Plan;

(ii)proposed modifications of the proposed Operating Plan; or

(iii)notice that such Director rejects the proposed Operating Plan.

If a Director makes a timely submission to the Directors appointed by the other Shareholder pursuant to Sections 7.3(a)(ii) or 7.3(a)(iii), then the Board shall meet within 10 Business Days after such proposals or objections are submitted and shall consider, acting reasonably and in good faith, the proposals or objections of such Director and seek to develop a complete Operating Plan acceptable to all Directors in light of the proposals or objections of a Director. The President shall be authorized at all times to continue Operations sufficient to maintain the Company’s assets and comply with Applicable Law and to maintain production levels in effect when the failure occurs. Operations performed by the President pursuant to this Section 7.3(a) shall be funded by Available Cash to the extent reasonably possible. Unless otherwise determined by the Board, the Shareholders shall provide funding required for such expenditures to the extent that Available Cash is insufficient to cover the same as Shareholder Contributions to the Company in their respective Proportionate Interests in accordance with a Contribution Notice provided by the President.

(b)The Board shall seek to approve each Operating Plan by December 31st in the year immediately preceding the calendar year to which such Operating Plan applies.

7.4[Redacted: Commercially Sensitive Information]

7.5Funding Obligations

(a)The Company shall, to the extent practicable, fund from Available Cash all of its costs, fees and liabilities. Additionally, until depleted, the Company shall first use the Emerald Initial Capital Contribution before using any other Available Cash.

(b)To the extent not covered by Available Cash or other sources of financing as approved by the Board, each Shareholder shall be required to fund its respective Proportionate Interest of all expenditures of the Company, whether incurred pursuant to an Approved Operating Plan or otherwise under this Agreement. The President shall give each Shareholder at least 30 days’ notice that such Shareholder Contributions are required to fund its Proportionate Interest of all expenditures expected to be incurred (as well as reserves, if any) during a period not to exceed three months (such notice, a “Contribution Notice”). Each Contribution Notice shall include: (i) the amount of funds that each Shareholder is required to contribute; (ii) the date by which each such contribution must be paid; and (iii) a summary description of the proposed use of such contribution. Following receipt of a Contribution Notice, each of the Shareholders shall promptly (and in any event, by no later than the date specified in the Contribution Notice) complete the contribution of the required amount of funds to the Company in the

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manner specified by the Board in accordance with Section 7.6. Any default by a Shareholder of its obligations to provide required funding in the amount and manner and within the specified period set forth in a Contribution Notice shall be addressed in accordance with Article 8. For greater certainty, other than the Shares issued in accordance with Section 7.1(c), no Shares shall be issued to Emerald in connection with the Emerald Initial Capital Contribution.

7.6Method of Funding

Unless otherwise determined by the Board from time to time and except as set forth in Section 8.3, the Shareholders shall contribute funds to the Company to satisfy their funding requirements in this Agreement through increases in Share Capital in the same proportion as the number of Shares held by each of the Shareholders immediately prior to the date of such contribution.

7.7Emergency or Unexpected Funding

Notwithstanding any other provisions hereof, in case of emergency or to address unexpected events or to cover unexpected liabilities not covered in an Approved Operating Plan which are necessary to protect Losses to Persons or property, to protect the Company’s assets, or to comply with Applicable Law, the President may take, or cause or permit the Company to take, any reasonable action the President deems necessary and may incur such expenditures on behalf of the Company as he/she deems necessary notwithstanding that such expenditures will exceed allowable expenditures (or allowable overages) under an Approved Operating Plan. The President shall promptly notify the Board and the Shareholders of any such emergency or unexpected expenditures that have been made or actions taken or that must be made or taken. Funds necessary to pay for emergency and unexpected expenditures pursuant to this Section above shall be obtained to the extent reasonably possible, from Available Cash and, if necessary, the Shareholders shall contribute funds to the Company in proportion to their respective Proportionate Interests, as required in accordance with a Contribution Notice provided by the President. The President shall promptly notify the Shareholders of any such emergency or unexpected expenditures that has been made or that must be made.

ARTICLE 8

DEFAULTS AND REMEDIES

8.1Defaults

(a)A Shareholder:

(i)is subject to a Bankruptcy Proceeding; or

(ii)is subject to an execution that is filed against all or any portion of its Shares or its interest in any of the Company Assets, and the effect of same is, or can reasonably be expected to be, materially adverse to the interest or rights of the other Shareholder or the Company; or

(iii)refuses, neglects or otherwise fails to comply with the Transfer restrictions contained in this Agreement; or

(iv)is in default under a Shareholder Loan pursuant to Section 8.2(a); or

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(v)subject to Section 8.2(a)(ii), refuses, neglects or otherwise fails to fund a Contribution Notice within 10 Business Days after payment should have been paid pursuant to such Contribution Notice; or

(vi)fails to comply with any of the covenants or obligations contained herein (other than to the extent such breach of covenant or obligation is the subject of any other Event of Default described in this Section 8.1) and such failure has a material adverse effect or is likely to have a material adverse effect on the Company, the Operations or the other Shareholder and, where such failure is capable of being cured, such failure remains unremedied for a period of thirty

(30)days after written notice of such failure has been given by the other Shareholder or the other party to the Transaction Document or such longer period, as may be required to cure such breach provided that reasonable steps to cure such default are taken and diligently pursued; or

(vii)in the case of any representation or warranty made by such Shareholder under this Agreement, any such representation or warranty shall prove to have been inaccurate in any material respect when made and such inaccuracy has a material adverse effect or is likely to have a material adverse effect on the Company, the Operations or the other Shareholder, and if the circumstances giving rise to such inaccurate representation or warranty are capable of rectification (such that, thereafter, the representation or warranty would be correct), the representation or warranty remains uncorrected for a period of thirty (30) days after written notice from the other Shareholder; or

(viii)fails to comply with any of the covenants or obligations contained in a Transaction Document and, where such failure is capable of being cured, such failure remains unremedied for a period of thirty (30) days after written notice of such failure has been given by the other Shareholder or the other party to the Transaction Document or such longer period, as may be required to cure such breach provided that reasonable steps to cure such default are taken and diligently pursued,

shall be referred to as the “Defaulting Shareholder”, and the other Shareholder shall be referred to as the “Non-Defaulting Shareholder”.

(b)A Non-Defaulting Shareholder shall give the Defaulting Shareholder a written notice of default (a “Notice of Default”), which shall describe the default in reasonable detail and state the date by which the default must be cured, which date for curing or commencing to cure shall be in accordance with the time provisions set out in this Agreement. Advance notice shall not be required prior to the taking of action by the Non-Defaulting Shareholder to provide funds pursuant to Section 8.2 to rectify the default in an emergency or if necessary to avoid Losses or breaches of contractual or regulatory obligations. Failure of a Non-Defaulting Shareholder to give a Notice of Default shall not release the Defaulting Shareholder from any of its duties under this Agreement.

8.2Funding Default

(a)If a Defaulting Shareholder fails to provide the required funding in the amount and manner and within the specified period set forth in a Contribution Notice or as otherwise required pursuant to Section 7.5(b) and, in any case, the 10 Business Day cure period specified by Section 8.1 has elapsed, the Non-Defaulting Shareholder shall have the right (but not the obligation) to:

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(i)fund all or a portion of the amount not funded by the Defaulting Shareholder (the “Defaulted Amount”) during the 10 day period following the expiry of the cure period referred to in Section 8.1 (the last day of such cure period being referred to as the “Dilution Day”) and, subject to the immediately following sentence, cause the dilution of the Proportionate Interest of the Defaulting Shareholder in accordance with Section 8.3. Notwithstanding anything to the contrary contained in this Agreement, for the period of time commencing on the date of this Agreement and ending on the date on which the initial Cultivation License for the Delta 3 Assets and Operations is obtained, the Non-Defaulting Shareholder shall only have a right to cause the dilution of the Defaulting Shareholder if the required funding (including without limitation, the amount) set forth in a Contribution Notice or otherwise required pursuant to Section 7.5(b) is included within the Initial Budget, or

(ii)advance all or a portion of the Defaulted Amount on behalf of the Defaulting Shareholder as a loan to the Defaulting Shareholder, with the principal amount of such loan (and any overdue interest) bearing interest at all times at a rate per annum equal to the sum of Prime Rate plus 15%, as the same shall change from time to time, or at the maximum rate permitted by Applicable Law, whichever is less, calculated and compounded monthly in arrears until paid in full (either by way of a direct payment from the Defaulting Shareholder to the Non-Defaulting Shareholder or through application of future Distributions pursuant to Section 9.1(c)) (a “Shareholder Loan”) and, for greater certainty, the Shareholder Loan shall be considered to cure any default by the Defaulting Shareholder to fund the required amount.

(b)If the Non-Defaulting Shareholder elects to fund all or a portion of the Defaulted Amount in the manner prescribed in Section 8.2(a)(i), such funding by the Non-Defaulting Shareholder shall be allocated to Share Capital in the same manner as the Share Capital held by the Non-Defaulting Shareholder immediately prior to the funding default.

(c)If the Non-Defaulting Shareholder elects to advance all or a portion of the Defaulted Amount on behalf of the Defaulting Shareholder as a loan to the Defaulting Shareholder in the manner prescribed in Section 8.2(a)(ii), such advance by the Non-Defaulting Shareholder shall be allocated to Share Capital in the same manner as the Share Capital held by the Defaulting Shareholder immediately prior to the loan.

8.3Dilution Mechanism

If a Defaulting Shareholder fails to provide the required funding in the amount and manner and within the specified period set forth in a Contribution Notice or as required pursuant to Section 7.5(a) and the Non-Defaulting Shareholder either: (i) elects to fund the Defaulted Amount (rather than advance a Shareholder Loan) in accordance with Section 8.2(a)(i); or (ii) elects not to fund the Defaulted Amount; then the Proportionate Interest of each Shareholder will be recalculated immediately after the Dilution Day in accordance with Schedule C. The Directors shall cause or permit the Company to issue Shares of the Company for nominal consideration to the Non-Defaulting Shareholder in order to reflect a dilution of the Proportionate Interest of the Defaulting Shareholder in accordance with Schedule C.

8.4Non-Funding Default

(a)[Redacted: Commercially Sensitive Information]

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(b)[Redacted: Commercially Sensitive Information]

(c)[Redacted: Commercially Sensitive Information]

(i)[Redacted: Commercially Sensitive Information]

(ii)Solely for the purposes of the exercise of the rights and enforcement of remedies under this Section 8.4, the Defaulting Shareholder hereby irrevocably constitutes and appoints the Non-Defaulting Shareholder as the true and lawful attorney for the Defaulting Shareholder with full power of substitution in the name of and on behalf of the Defaulting Shareholder, with no restriction or limitation in that regard, to execute and deliver all agreements, documents and instruments which the Defaulting Shareholder failed to execute and deliver or cause to be executed and delivered (the “Required Documents”) in order to effect this Section 8.4. The Defaulting Shareholder hereby agrees not to take any action in the future which results in the termination of this power of attorney. Each of the Shareholders and the Company hereby irrevocably consents to the execution and delivery of any and all Required Documents pursuant to the power of attorney granted in this section.

(iii)[Redacted: Commercially Sensitive Information]

8.5Appraisers

(a)If a determination of Fair Market Value is required, both the Defaulting Shareholder and Non-Defaulting Shareholder shall appoint an Appraiser within 10 Business Days of the Dilution Day. The two Appraisers appointed by this Section 8.5(a) will jointly appoint an independent Appraiser within 20 Business Days of their appointment which independent Appraiser will have sole responsibility for determining the Fair Market Value. If either Shareholder does not appoint an Appraiser within said 10 Business Day period, the Appraiser appointed by the other Shareholder shall determine the Fair Market Value.

(b)The Appraiser appointed by Section 8.5(a) shall determine the Fair Market Value within 60 days of the earlier of the appointment of such independent Appraiser or the failure by a Shareholder to appoint an Appraiser.

(c)The Defaulting Shareholder shall pay all fees and expenses charged by the Appraiser(s). The Appraisers shall be entitled to retain such qualified independent appraisers as each may deem appropriate to assist with its valuation.

8.6No Penalty

The Shareholders acknowledge and agree that the rights and remedies conferred by this Article 8 do not constitute a penalty, unlawful forfeiture or penalty interest rates, and that such rights and remedies are necessary to ensure that the interests of the Shareholders are appropriately balanced having regard to the relative funding provided by each Shareholder from time to time. Each Shareholder covenants that it shall not raise any prohibition against penalty clauses as a defence to the terms and conditions of a Shareholder Loan or the dilution contemplated by Section 8.2 or Section 8.3.

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8.7Continuing Liabilities Upon Adjustment of Proportionate Interests

(a)Any dilution or conversion of a Shareholder’s Proportionate Interest under this Article 8 shall not relieve such Shareholder of its share of any liabilities, obligations, costs, expenses (including legal fees), losses, claims, debts, demands, damages, suits, actions and causes of action, penalties or fines (the “Continuing Liabilities”) arising out of Operations conducted prior to each such dilution or conversion.

(b)For the purposes of this Article 8, such Shareholder’s share of Continuing Liabilities arising out of Operations conducted prior to each such dilution or conversion shall be equal to its Proportionate Interest at the time the Continuing Liability was incurred (or the facts or circumstances giving rise to such Continuing Liability occurred) and, for greater certainty, not equal to its diluted or converted Proportionate Interest resulting from such dilution or resulting in such conversion.

8.8Indemnities

(a)Each Shareholder (hereinafter in this Subsection called the “Indemnifier”) indemnifies and agrees to save harmless the Company and the other Shareholder (hereinafter in this Subsection called the “Indemnified Person”) and each of their Affiliates and each of their directors, officers and employees, from and against any and all Losses suffered or incurred by the Indemnified Person or (if applicable) any of their Affiliates, and its and their directors, officers and employees as a result of, on account of or by reason of any and all actions, causes of action, proceedings, claims or demands relating to, arising from or in connection with:

(i)the Indemnifier being a Defaulting Shareholder at any time or in default of any of its obligations under any of the Transaction Documents, other than in connection with a failure to make a capital contribution as required in accordance with this Agreement if, and to the extent that, the Non-Defaulting Shareholder has advanced funds as a contribution or a loan pursuant to Section 8.2(a); or

(ii)the negligence, wilful misconduct, fraud, theft or dishonesty of the Indemnifier or any of its Affiliates and its and their directors, officers and employees.

ARTICLE 9

DISTRIBUTIONS

9.1Payment of Distributions

(a)Unless otherwise determined by the Board, all Available Cash shall be retained by the Company in order to pay operating expenses, fund growth opportunities and capacity expansion.

(b)All Distributions shall be paid to the Shareholders on a pro rata basis according to their respective Proportionate Interest at the time of declaring the Distribution applied in respect of each Shareholder.

(c)For greater certainty, a Defaulting Shareholder shall not be entitled to receive any Distributions if and for so long as any Shareholder Loans that have been made in its favour by a Non- Defaulting Shareholder in accordance with Section 8.2(a)(ii) remain outstanding. Any Distributions that would otherwise be payable to a Defaulting Shareholder shall instead be paid to the Non-Defaulting Shareholder that made the Shareholder Loan until such Shareholder Loan, and all costs, expenses and accrued interest relating thereto, has been repaid in full in the following order of priority:

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(i)first, to pay costs and expenses of the Non-Defaulting Shareholder incurred in connection with the Shareholder Loan;

(ii)second, to pay accrued interest that is due and payable in respect of the Shareholder Loan; and

(iii)third, to pay principal in respect of the Shareholder Loan.

(d)Each Shareholder hereby grants an irrevocable direction and power of attorney to the Company to, in the event that such Shareholder becomes a Defaulting Shareholder and any Shareholder Loan is payable by it, pay in accordance with Section 9.1(c) any Distributions that would otherwise be payable to such Shareholder to the Non-Defaulting Shareholder that made the Shareholder Loan.

(e)The Shareholders agree that the terms of the Shares will require the Company to make the election provided for in Subsection 191.2(i) of the Income Tax Act (Canada).

ARTICLE 10

TRANSFERS; PREFERENTIAL PURCHASE RIGHTS

10.1Restrictions on Transfer

(a)No Shareholder shall Transfer, directly or indirectly, its Shares except in accordance with: (i) Section 10.2 (Transfers to Affiliates); (ii) Section 10.3 (Preferential Purchase Rights); (iii) Section 10.8 (Shareholder Cross Pledge) or (iv) with the prior written consent of the other Shareholder, which consent may be withheld for any reason or conditioned in the other Shareholder’s sole, absolute and subjective discretion. A Transfer shall include a Change of Control if, and only if, a Shareholder’s securities, or the securities of a direct or indirect parent entity, are not listed on a public securities exchange.

(b)Notwithstanding anything in this Article 10, a Transfer by a Shareholder or its Affiliates of less than all of their Shares is not permitted.

(c)Subject to Section 17.5(b), nothing in this Agreement shall prevent the acquisition of Control by any Person by way of a take-over bid or other comparable transaction, the sale by either Shareholder of all or substantially all of its assets and business, or with respect to either Shareholder, the amalgamation, arrangement, merger or combination by, with or into any other Person.

(d)No Transfer shall be effective and no transferee of a Shareholder’s Shares shall have the rights of such Shareholder hereunder unless: (i) the Transfer was completed in compliance herewith (including compliance with Section 10.3, if applicable); (ii) the transferor has provided to the other Shareholder notice of such Transfer; (iii) such Shareholder has assigned all of its right, title and interest in, and the transferee has assumed all of such Shareholders liabilities and obligations under any applicable Transaction Document(s); and (iv) the transferee, as of the effective date of the Transfer, has executed an accession agreement in the form attached as Schedule E. Subject thereto, the transferee shall be deemed to be a Party to this Agreement.

(e)The transferor and the transferee of any Shares shall be responsible for payment of any taxes, fees, levies or other governmental charges payable under Applicable Law in respect of the Transfer and shall indemnify and hold harmless the other Shareholders and the Company in respect thereof.

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(f)The Shareholders agree to ensure that the Company will not cause or permit, and the Company agrees not to permit or effect, the Transfer of Shares to be made on its share register or other books unless the Transfer is permitted or required by the provisions hereof and will not cause or permit any issuance of Shares except in accordance with the terms hereof and the terms of the constating documents of the Company. The Shareholders shall take, or shall cause the Company to take, any actions as may be required to approve any Transfers of Shares that are authorized in accordance with the provisions of this Article 10.

(g)Notwithstanding anything in this Article 10, without the consent of the other Shareholder, neither Shareholder may Transfer its Shares until the Company has obtained the initial Cultivation License for the Delta 3 Assets and Operations.

10.2Transfers to Affiliates

(a)Section 10.1(a) shall not apply to the Transfer by a Shareholder to an Affiliate, provided

that:

(i)the Shareholder is not then a Defaulting Shareholder;

(ii)the Shareholder has provided 30 days written notice to the other Shareholder;

(iii)the Affiliate shall assume the obligations of the Shareholder and become a Party to this Agreement in accordance with Section 10.1(d); and

(iv)the transferor shall agree, in writing, in a form acceptable to the other Shareholder, that: (A) it shall ensure that the representations, warranties and covenants of the transferor will continue to be true and correct at all times; (B) it shall continue to be bound by all of the provisions of this Agreement and the other Transaction Documents notwithstanding the Transfer of any Shares to such transferee and shall not be released from its obligations hereunder; and (C) it shall guarantee the performance by the transferee of all of its obligations hereunder;

(v)the Affiliate shall covenant and agree: (A) to remain an Affiliate of Emerald or Village Farms, as applicable, for so long as it continues to hold any Shares; and

(B)that, prior to ceasing to be an Affiliate, it will Transfer all of its Shares to Emerald or Village Farms, as applicable, or another Affiliate of Emerald or Village Farms, as applicable.

(b)Notwithstanding anything in Section 10.2(a), a Transfer by a Shareholder or its Affiliates of less than all of their Shares to an Affiliate shall not be permitted under this Section 10.2.

10.3[Redacted: Commercially Sensitive Information]

10.4[Redacted: Commercially Sensitive Information]

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10.5[Redacted: Commercially Sensitive Information]

10.6[Redacted: Commercially Sensitive Information]

10.7Tax Matters

If a purchase and sale of Shares is made pursuant to this Agreement, at the time of the sale, the selling Shareholder shall provide to the purchaser either:

(a)a statutory declaration that such selling Shareholder is not a “non-resident” of Canada or a partnership that is not a “Canadian partnership” each for purposes of the Income Tax Act (Canada);

(b)a representation and warranty of the selling Shareholder that the Shares do not constitute “taxable Canadian property” of such selling Shareholder for the purposes of the Income Tax Act (Canada) (and any other applicable provincial tax legislation); or

(c)a certificate from the Canada Revenue Agency (and any other applicable provincial tax authority) under Section 116 of Income Tax Act (Canada) (or the corresponding provisions of any applicable provincial tax legislation) certifying that all taxes payable in connection with the transaction have been paid or that no taxes are payable in respect of the transaction;

provided that if no such declaration, representation and warranty or certificate is delivered by the selling Shareholder, the purchaser shall be entitled to deduct from the purchase price payable to the selling Shareholder an amount equal to the amount of tax for which the purchaser may be liable (as determined solely by the purchaser) under the Income Tax Act (Canada).

10.8Shareholder Cross Pledge

Each Shareholder hereby pledges, assigns, charges, mortgages and grants a security interest in favour of the other Shareholder and the Company in its Shares for its respective obligations under this Agreement (the “Shareholder Cross-Pledges”), which pledge shall be evidenced by registration of a financing statement under Applicable Law. Each of the Shareholder Cross Pledges shall rank subordinate to the charges and security granted in connection with any financing approved by the Board.

ARTICLE 11

STANDSTILL

11.1Emerald Standstill

(a)From and after the Execution Date until the date that is 12 months after the date on which this Agreement has been terminated in accordance with its terms, neither Emerald nor Emerald Therapeutics shall nor shall either of them cause any of its Affiliates and/or any person Acting Jointly or in Concert with Emerald, Emerald Therapeutics or any of their Affiliates, to, without the prior written consent of Village Farms:

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(i)in any manner acquire, agree to acquire or make to securityholders of Village Farms any offer to acquire, directly or indirectly, any securities of Village Farms;

(ii)propose or offer to enter into, directly or indirectly, any amalgamation, plan of arrangement, merger or business combination involving Village Farms or its subsidiaries or to purchase, directly or indirectly, a material portion of the property or assets of Village Farms or its subsidiaries;

(iii)directly or indirectly “solicit” or participate or join with any person in the “solicitation” of any “proxies” (as such terms are defined in the Securities Act (Ontario)) to vote, or seek to influence any person with respect to the voting of, any common shares or other securities of Village Farms;

(iv)seek (a) representation on the board of directors of Village Farms; (b) the removal of any directors on the board of directors of Village Farms; or (c) a change in the size or composition of the board of directors of Village Farms;

(v)otherwise act alone or Act Jointly or In Concert with others to seek to control or to influence the management, the board of directors or policies of Village Farms;

(vi)make any public or private disclosure of any consideration, intention, plan or arrangement inconsistent with any of the foregoing; or

(vii)advise, assist, encourage or Act Jointly or In Concert with any other person in connection with any of the foregoing.

(b)[Redacted: Commercially Sensitive Information]

(c)Notwithstanding Section 11.1(a), Emerald shall be entitled at any time to make a confidential proposal (a “Proposal”) to the board of directors of Village Farms regarding an acquisition of Village Farms, to enter into discussions or negotiations with the board of directors of Village Farms (or a special committee designated by its board of directors for such purpose) with respect to the terms of any such Proposal and to enter into any agreement with Village Farms providing for the consummation of such Proposal.

(d)Notwithstanding any other provision in this Agreement, including the restriction on use of the Confidential Information, when the limitations and prohibitions in Section 11.1(a) are not applicable, whether pursuant to Section 11.1(b) or after the expiry of the period provided in Section 11.1(a), Emerald and its Affiliates shall be permitted to pursue or undertake any of the transactions or activities contemplated in Section 11.1(a) (including without limitation an unsolicited takeover bid) regardless of whether Confidential Information was used in connection with such transactions or activities

(e)For greater certainty, the provisions of this Section supersedes all prior agreements, understandings, negotiations and discussions, whether written or oral, with respect to the subject matter hereof.

11.2Village Farms Standstill

(a)From and after the Execution Date until the date that is 12 months after the date on which this Agreement has been terminated in accordance with its terms, Village Farms shall not and shall cause Village Farms’ officers, directors, agents and/or any of Village Farms’ Affiliates and/or any person Acting Jointly or in Concert with Village Farms or any of Village Farms’ Affiliates, not to, without the prior written consent of Emerald:

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(i)in any manner acquire, agree to acquire or make to securityholders of Emerald any offer to acquire, directly or indirectly, any securities of Emerald;

(ii)propose or offer to enter into, directly or indirectly, any amalgamation, plan of arrangement, merger or business combination involving Emerald or its subsidiaries or to purchase, directly or indirectly, a material portion of the property or assets of Emerald or its subsidiaries;

(iii)directly or indirectly “solicit” or participate or join with any person in the “solicitation” of any “proxies” (as such terms are defined in the Securities Act (Ontario)) to vote, or seek to influence any person with respect to the voting of, any common shares or other securities of Emerald;

(iv)seek (a) representation on the board of directors of Emerald; (b) the removal of any directors on the board of directors of Emerald; or (c) a change in the size or composition of the board of directors of Emerald;

(v)otherwise act alone or Act Jointly or In Concert with others to seek to control or to influence the management, the board of directors or policies of Emerald;

(vi)make any public or private disclosure of any consideration, intention, plan or arrangement inconsistent with any of the foregoing; or

(vii)advise, assist, encourage or Act Jointly or In Concert with any other person in connection with any of the foregoing.

(b)[Redacted: Commercially Sensitive Information]

(c)Notwithstanding Section 11.2(a), Village Farm shall be entitled at any time to make a Proposal to the board of directors of Emerald regarding an acquisition of Emerald, to enter into discussions or negotiations with the board of directors of Emerald (or with a special committee designated by its board of directors for such purpose) with respect to the terms of any such Proposal and to enter into any agreement with Emerald providing for the consummation of such Proposal.

(d)Notwithstanding any other provision in this Agreement, including the restriction on use of the Confidential Information, when the limitations and prohibitions in Section 11.2(a) are not applicable, whether pursuant to Section 11.2(b) or after the expiry of the period provided in Section 11.2(a), Village Farms and its Affiliates shall be permitted to pursue or undertake any of the transactions or activities contemplated in Section 11.2(a) (including without limitation an unsolicited takeover bid) regardless of whether Confidential Information was used in connection with such transactions or activities.

(e)For greater certainty, the provisions of this Section supersedes all prior agreements, understandings, negotiations and discussions, whether written or oral, with respect to the subject matter hereof.

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ARTICLE 12

CONFIDENTIALITY; NON-SOLICITATION; PUBLIC DISCLOSURE

12.1Confidentiality of Transaction Confidential Information

(a)All Transaction Confidential Information shall be treated as confidential by the Parties and shall not be disclosed to any other Person other than in circumstances where a Party has an obligation to disclose such information in accordance with Applicable Law, in which case, such disclosure shall only be made after consultation with the other Parties (if reasonably practicable and permitted by Applicable Law) provided that any public disclosure of such information shall always omit or redact all dollar-related pricing information contained in the Agreement or the Transaction Documents and any public disclosure shall be subject to the provisions of Section 12.1(d) (the “Redaction Requirement”) and, in the case of a public announcement required by Applicable Law, shall only be made in accordance with Section 12.7.

(b)Notwithstanding the foregoing, each of the Parties acknowledges and agrees that:

(i)each of Emerald, Emerald Therapeutics and Village Farms may disclose Transaction Confidential Information, to:

(A)a person providing financing or funding as principal or as agent or underwriter to Emerald, Emerald Therapeutics or Village Farms, as applicable, together with such Person’s consultants and advisors;

(B)any prospective purchaser of the Shares held by Emerald, Emerald Therapeutics or Village Farms, as applicable, together with such prospective purchaser’s financiers, consultants and advisors,

so long as, in each case, prior to receiving any such information the recipient enters into a confidentiality agreement with the disclosing Shareholder pursuant to which the recipient provides a confidentiality undertaking in favour of the Company and the Shareholders to maintain the confidentiality of the Transaction Confidential Information in a manner consistent with this Agreement or is otherwise subject to a duty of confidentiality.

(c)Each of the Parties may disclose Transaction Confidential Information to their respective Representatives as well as any contractors and subcontractors of such Party, provided that each of such individuals to whom Transaction Confidential Information is disclosed is advised of the confidentiality of such information and is directed to abide by the terms and conditions of this Section 12.1. The Receiving Party also agrees to be responsible and liable for any breach of this Agreement by its Representatives (as if its Representatives were parties to and bound by the provisions of this Agreement by which the Receiving Party is bound).

(d)The Parties agree that prior to the date on which this Agreement is to be publicly filed in accordance with applicable securities law, the Parties, each acting reasonably, will come to mutual agreement on which Sections of this Agreement shall be redacted from the publicly filed version of Agreement in accordance with applicable securities laws, and any subsequent public filings by either Party shall incorporate the same redactions as previously agreed.

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12.2Use of Confidential Information

The Confidential Information is to be used by the Receiving Party solely as required for the purpose of operating or monitoring the business and affairs of the Company and related activities and, except with the prior written consent of the Disclosing Party, such information shall be kept strictly confidential by the Receiving Party, except that the Receiving Party may disclose the Confidential Information or relevant portions thereof to the Receiving Party’s Representatives who need to know the Confidential Information in order to assist in the operation of the business and affairs of the Company and related activities. It is understood that only so much of the Confidential Information as is necessary for a particular individual to perform his or her function shall be disclosed to such individual and that Representatives to whom Confidential Information is communicated shall be informed of the confidential nature of the Confidential Information and shall be directed to abide by the terms of this Agreement and not to disclose that information to any other person (except as permitted under this Agreement) without the prior written consent of the Disclosing Party. Except as expressly contemplated by this Agreement, the Receiving Party agrees not to use the Confidential Information, directly or indirectly, for any purpose not expressly contemplated by this Agreement and the Receiving Party agrees to use all reasonable commercial efforts to preserve the confidentiality of the Confidential Information. The Receiving Party also agrees to be responsible and liable for any breach of this Agreement by its Representatives (as if its Representatives were parties to and bound by the provisions of this Agreement by which the Receiving Party is bound).

12.3Compelled Disclosure

If the Receiving Party or any of its Representatives are legally compelled to disclose any of the Confidential Information, the Receiving Party shall (to the extent permitted by Applicable Law) provide the Disclosing Party with prompt written notice of such requirement so that the Disclosing Party may seek a protective order or other appropriate remedy and/or waive compliance with the terms of this Agreement and the Receiving Party agrees to delay such disclosure as long as reasonably possible (without incurring liability for failure to make such disclosure) to permit the Disclosing Party to seek such a protective order or other remedy and to allow for consultation with the Disclosing Party with respect to any reasonable alternatives to such disclosure and with respect to the content of any such disclosure. If such protective order or other remedy is not obtained, or the Disclosing Party waives compliance with the provisions hereof, the Receiving Party agrees to disclose or furnish only that portion of the Confidential Information that the Receiving Party is, in the view of its counsel, legally required to be disclosed or furnished. The Receiving Party agrees in any event, to the extent permitted by applicable law, rule or regulation, to give prompt written notice to the Disclosing Party of any proposed disclosure made by the Receiving Party pursuant to this paragraph.

12.4Return of Confidential Information

(a)Unless otherwise agreed to in writing by the Disclosing Party, the Receiving Party shall:

(i) return to the Disclosing Party or destroy all copies of the Confidential Information and Confidential Documents in the Receiving Party’s possession or in the possession of its Representatives; and (ii) destroy all copies of any analyses, compilations, studies or other Confidential Documents prepared by the Receiving Party or for the Receiving Party’s use containing, incorporating or reflecting any Confidential Information, in any case, before the close of business on the next Business Day following the date of any request by the Disclosing Party to the Receiving Party to return or destroy the Confidential Information. The Receiving Party shall certify in writing its compliance with this paragraph forthwith after having so complied.

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(b)Notwithstanding the foregoing, the Receiving Party: (i) may retain a copy of the Confidential Information and/or Confidential Documents to the extent that such retention is required to demonstrate compliance with Applicable Law, regulation or professional standards or for use in the event of litigation or a dispute relating to this Agreement; (ii) retain any Confidential Information which is contained in the minutes of any of the Receiving Party’s board meetings or any decision-making documents which are based on the Confidential Information and have been submitted to the Receiving Party’s management and that need to be retained pursuant to the Receiving Party’s internal corporate governance rules; and (iii) to the extent that (i) above is inapplicable to Confidential Information and/or Confidential Documents that are electronically stored, destroy such electronically stored Confidential Information and/or Confidential Documents but only to the extent that it is reasonably practical to do so; provided that in the case of either (i), (ii) or (iii), any Confidential Information and/or Confidential Documents retained under this paragraph shall remain subject to the obligations of confidentiality under this Agreement in accordance with the terms of this Agreement.

12.5Acknowledgments

The Receiving Party acknowledges and agrees that none of the Disclosing Party, its affiliates or Representatives is making any representation or warranty hereunder, express or implied, as to the accuracy or completeness of the Confidential Information.

12.6Equitable Relief

The Receiving Party agrees that the Disclosing Party shall be entitled to seek equitable relief, including injunction and specific performance, in the event of any breach or anticipatory breach by the Receiving Party or its Representatives of the provisions of this Agreement, in addition to any other remedies available to the Disclosing Party at law or in equity, and the Receiving Party acknowledges and agrees that an award of damages may not be an effective or adequate remedy to the Disclosing Party in the event of a breach by the Receiving Party or its Representatives of this Agreement.

12.7Public Announcements

During the term of this Agreement, each Party shall, if practicable in advance of making, or any of its Affiliates making, a public announcement concerning this Agreement or the matters contemplated herein to a stock exchange or as otherwise required by Applicable Law, advise the other Parties of the text of the proposed public announcement and, to the extent legally permitted, provide such other Parties with a reasonable opportunity to comment on the content thereof. If any of the Parties determines that it is required to publish or disclose the text of this Agreement in accordance with Applicable Law, it shall comply with the Redaction Requirement. If a Party does not respond to a request for comments within 48 hours (excluding days that are not Business Days) or such shorter period of time as the requesting Party has determined is necessary in the circumstances, acting reasonably and in good faith, the Party making the disclosure shall be entitled to issue the disclosure without the input of the other Parties. The Party making the announcement shall disclose, or permit the disclosure of, only that portion of Transaction Confidential Information required to be disclosed by Applicable Law. The final text of the disclosure and the timing, manner and mode of release shall be the sole responsibility of the Party issuing the disclosure.

ARTICLE 13

INTELLECTUAL PROPERTY LICENCE

13.1Ownership and Licensing

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(a)Emerald, Village Farms and the Company acknowledge and agree that as between them:

(i)Emerald owns all Intellectual Property in all of the Emerald Background Intellectual Property; and

(ii)Village Farms owns all Intellectual Property in all of the Village Farms Background Intellectual Property.

(b)Subject to the terms and conditions of this Agreement:

(i)Emerald hereby grants to the Company a royalty-free, non-exclusive, non- transferable, non-assignable (unless pre-approved) license to use the Emerald Background Intellectual Property in the Geographic Area in order to fulfill the Purpose; and

(ii)Village Farms hereby grants to the Company a royalty-free, non-exclusive, non- transferable, non-assignable (unless pre-approved) license to use the Village Farms Background Intellectual Property in the Geographic Area in order to fulfill the Purpose.

(c)Each of Emerald and Village Farms acknowledge and agree that, as between the Parties, during the period commencing on the Execution Date and ending on the date that is two (2) years following date on which the Cultivation License has been obtained (the “IP Period”), if either of Emerald or Village Farms determines, acting reasonably, that there is Intellectual Property owned or licensed by either Emerald, Emerald Therapeutics or Village Farms as of the Execution Date that was not included in Schedule D but is required to fulfill the Purpose, then upon notice by either of Emerald or Village Farms, as applicable, to the other Shareholder specifying such Intellectual Property during the IP Period, such Intellectual Property shall be licensed to the Company by Emerald, Emerald Therapeutics or Village Farms, as the case may be, on a royalty-free, non-exclusive, non-transferable and non-assignable (unless pre-approved) basis to use such Intellectual Property in the Geographic Area in order to fulfill the Purpose.

(d)Emerald and Village Farms acknowledge and agree that as between the Parties:

(i)all Intellectual Property in and to any Improvements made by the Company to the Emerald Background Intellectual Property and the Village Farms Background Intellectual Property during the IP Period, or any other Intellectual Property developed, created, derived or reduced to practice by any Hired Employee at any time during the Term, will be owned by the Company (the “Company Improvement Intellectual Property”).

(ii)For greater certainty, the Company Improvement Intellectual Property shall not include either the Emerald Improvement Intellectual Property, nor Village Farms Improvement Intellectual Property.

(iii)Emerald shall own all Intellectual Property in and to the Emerald Improvement Intellectual Property.

(iv)Village Farms shall own all Intellectual Property in and to the Village Farms Improvement Intellectual Property.

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(e)Subject to the terms and conditions of this Agreement, the Company hereby grants to:

(i)Emerald a non-exclusive, royalty-free, non-transferable, non-assignable (unless pre-approved) license to use the Company Improvement Intellectual Property:

(A)in the Geographic Area for horticultural use by Emerald or its Affiliates; and

(B)subject to agreement on the terms and conditions of use, outside of the Geographic Area; and

(ii)Village Farms a non-exclusive, royalty-free, non-transferable, non-assignable (unless pre-approved) license to use the Company Improvement Intellectual Property: (A) in the Geographic Area for horticultural use by Village Farms or its Affiliates; and (B) subject to agreement on the terms and conditions of use, outside of the Geographic Area.

(f)Emerald and Emerald Therapeutics acknowledge and agree that neither shall license, sub- license or otherwise make available any of the Village Farms Background Intellectual Property or the Company Improvement Intellectual Property to any Person.

(g)Village Farms acknowledges and agrees that it shall not license, sub-license or otherwise make available any of the Emerald Background Intellectual Property or the Company Improvement Intellectual Property to any Person.

(h)None of the Parties grant to any other Party any license to such Party’s names or trademarks unless specific permission is granted prior to use of such name or trademark.

(i)This Agreement does not grant any Party any license or other right, express or implied, other than as expressly specified in this Agreement.

13.2Infringement

(a)Each of the Company and Emerald shall inform Village Farms promptly of any alleged infringement and of any available evidence of infringement of which they become aware by a third party of the Village Farms Background Intellectual Property or the Village Farms Improvement Intellectual Property.

(b)Each of the Company and Village Farms shall inform Emerald promptly of any alleged infringement of which they become aware and of any available evidence of infringement by a third party of the Emerald Background Intellectual Property or the Emerald Improvement Intellectual Property.

(c)Each of Village Farms and Emerald shall inform the Company promptly of any alleged infringement of which they become aware and of any available evidence of infringement by a third party of the Company Improvement Intellectual Property.

(d)During the Term of this Agreement:

(i)Village Farms shall have the right, but shall not be obligated, to prosecute at its own expense any such infringements of the Village Farms Background Intellectual Property or Village Farms Improvement Intellectual Property and, in furtherance of such right, the Company and Emerald hereby agree that Village Farms may cause the Company and/or Emerald to be joined as a party plaintiff in any such suit, without expense to the Company and Emerald. No settlement, consent judgment or other voluntary final disposition of the suit may be entered into without the consent of the Company and Emerald, which shall not be unreasonably withheld;

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(ii)Emerald shall have the right, but shall not be obligated, to prosecute at its own expense any such infringements of the Emerald Background Intellectual Property or Emerald Improvement Intellectual Property and, in furtherance of such right, the Company and Village Farms hereby agree that Emerald may cause the Company and/or Village Farms to be joined as a party plaintiff in any such suit, without expense to the Company and Village Farms. No settlement, consent judgment or other voluntary final disposition of the suit may be entered into without the consent of the Company and Village Farms, which shall not be unreasonably withheld; and

(iii)the Company shall have the right, but shall not be obligated, to prosecute at its own expense any such infringements of the Company Improvement Intellectual Property and, in furtherance of such right, the Village Farms and Emerald hereby agree that the Company may cause Village Farms and/or Emerald to be joined as a party plaintiff in any such suit, without expense to Village Farms and Emerald. No settlement, consent judgment or other voluntary final disposition of the suit may be entered into without the consent of Village Farms and Emerald, which shall not be unreasonably withheld.

(e)In any infringement suit that any of the Parties may institute to enforce their respective Intellectual Property under this Agreement, at the request and expense of a requesting Party, the other Parties shall cooperate in all respects and, to the extent possible, have their respective employees testify when requested and make available their respective relevant records, papers, information, samples, and the like, and execute such deeds and other instruments as the requesting Party may from time to time reasonably require in connection therewith.

ARTICLE 14

EXCLUSIVITY; OPTION TO PURCHASE

14.1Exclusivity

So long as this Agreement has not been terminated, subject to the Delta 1 Call Agreement, the Delta 2 Call Agreement and the provisions of Sections 14.2 and 14.3:

(a)Village Farms commits to being the exclusive joint venture partner of Emerald for all Greenhouse grown cannabis activities in the Geographic Area;

(b)Each of Emerald and Emerald Therapeutics commits to being the exclusive joint venture partner of Village Farms for all Greenhouse grown cannabis activities in the Geographic Area; and

(c)Village Farms agrees that it will not, directly or indirectly, whether alone or in conjunction with any third party (except through the Company), apply for or otherwise seek to obtain any license to produce, possess, destroy, sell, provide, ship, deliver or transport Cannabis in the Geographic Area.

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14.2Option to Purchase/Lease Other Projects

(a)If at any time during the Term, Village Farms or an Affiliate directly or indirectly owns a Greenhouse property in the Geographic Area (other than the Delta 1 Assets and Operations and the Delta 2 Assets and Operations) which it intends to retrofit for the purposes of growing, cultivating, producing, extracting, selling and/or distributing Cannabis (each such property being an “Other Project”), Village Farms shall offer the Company an opportunity to acquire or lease the Other Project at a price/rent equal to its Fair Market Value by delivery of written notice from Village Farms to the Company (the “Option Notice”). The Option Notice shall remain open and irrevocable until twenty (20) Business Days following receipt by the Company of the Option Notice (the “Option Period”).

(b)At any time prior to the expiration of the Option Period, the Company shall have the right to send Village Farms an irrevocable written notice (the “Company Proposed Acquisition Notice”) stating that the Company intends to acquire or lease the Other Project for a purchase price/rent equal to its Fair Market Value. Closing shall occur on the date which is twenty (20) Business Days following the date of the Company Proposed Acquisition Notice or such later date as may be agreed by Village Farms and the Company if Village Farms and the Company, or an Appraiser(s) selected by Village Farms and the Company, have not agreed to the Fair Market Value of the Other Project by such 20th Business Day. If Village Farms and the Company are not able to agree to the Fair Market Value of the Other Project by the date which is ten (10) Business Days after the date of the Company Proposed Acquisition Notice, an Appraiser(s) shall be appointed in the same manner as described in Section 8.5. All fees and expenses charged by the Appraiser(s) shall be paid by the Company.

(c)If the Company elects during the Option Period to:

(i)lease the Other Project, Village Farms and the Company shall enter into a lease on terms and conditions similar to those contained in the Lease (other than the rental rate which shall be the Fair Market Value, payable in full on execution of such lease), subject to such modifications as the Company and Village Farms may agree, each acting reasonably, or

(ii)acquire the Other Project, Village Farms and the Company shall enter into customary closing documents to transfer the Other Project to the Company. The purchase price shall be subject to customary adjustments.

(d)If the Company does not elect during the Option Period to either acquire or lease the Other Project, Village Farms shall not be permitted to retrofit the Greenhouse property for the purposes of growing, cultivating, producing, extracting, selling and/or distributing Cannabis unless and until it reoffers the Other Project to the Company in writing (the “Reoffer Notice”) no earlier than [Redacted: Commercially Sensitive Information] on the same terms and conditions as contained in Section 14.2(a) and 14.2(b). If Village Farms reoffers the Other Project to the Company and the Company again does not elect to lease or acquire such Other Project during the twenty (20) Business Day period following the Reoffer Notice, Village Farms shall have the right, alone or in conjunction with any third party, to retrofit the Greenhouse property for the purposes of growing, cultivating, producing, extracting, selling and/or distributing Cannabis in the Geographic Area or elsewhere and shall have the right to apply for or otherwise seek to obtain any License in connection with same.

14.3Emerald Carve Outs

Notwithstanding the provisions of Section 14.1(b), Village Farms acknowledges and agrees that:

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(a)Emerald is permitted to continue cultivation and distribution of Cannabis from its existing facilities at 4223 and 4226 Commerce Circle, Victoria, British Columbia and may cultivate and distribute Cannabis products from its proposed facility at 6980 No. 9 Road and 20100 Westminster Highway Richmond, British Columbia. Richmond, British Columbia and any additional indoor facility (expressly excluding any Greenhouse facility) if and when constructed;

(b)Emerald will not be required to purchase any minimum amount of Cannabis produced by the Company and will be entitled to purchase Cannabis from third parties on such terms as it may see fit; and

(c)[Redacted: Commercially Sensitive Information]

ARTICLE 15

TERM AND TERMINATION

15.1Term

(a)This Agreement commences on the Execution Date and it shall automatically terminate

upon either:

(i)the License Termination Date;

(ii)the winding-up or dissolution of the Company;

(iii)the date on which the Company has only one Shareholder;

(iv)the date on which this Agreement is terminated in writing by all of the Shareholders who continue to beneficially own Shares; or

(v)delivery by Emerald to Village Farms of the Security Discharge Termination Notice;

whichever event occurs first (the “Term”), provided, however, that this Agreement shall cease to have effect with regard to any Person who ceases to hold directly or indirectly any Shares pursuant to and in accordance with the terms of this Agreement save for any provisions hereof which, expressly or by implication, are to continue in full force and effect thereafter.

(b)The Parties acknowledge and agree that no termination of this Agreement affects or impairs any Party’s right at law or in equity: (i) with respect to any matter or thing or claim against the other Parties in respect of the event or omission giving rise to the termination of this Agreement; or (ii) with respect to any provision of this Agreement to be observed or performed by any party up to the effective termination of this Agreement.

(c)Upon termination of this Agreement:

(i)if the Agreement terminates pursuant to Section 15.1(a)(i) or Section 15.1(a)(v), then (A) any license to any Intellectual Property granted under this Agreement will be terminated without further act or formality and (B) the Lease, the Delta 1 Call Agreement and the Delta 2 Call Agreement shall terminate;

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(ii)if the Agreement terminates pursuant to Section 15.1(a)(ii) or 15.1(a)(iv), then (A)all Company Improvement Intellectual Property will be jointly owned by the Shareholders, and (B) the Lease, the Delta 1 Call Agreement and the Delta 2 Call Agreement shall terminate;

(iii)if the Agreement terminates pursuant to Section 15.1(a)(iii), then any license to any Intellectual Property granted under this Agreement to (A) the Company shall survive the termination of this Agreement and continue in accordance with the terms hereof (B) any Defaulting Shareholder will be terminated without further act or formality, (C) a Non-Defaulting Shareholder shall survive the termination of this Agreement and (D) the Lease, the Delta 1 Call Agreement and the Delta 2 Call Agreement shall continue in full force and effect;

(iv)the Company shall immediately deliver up to Village Farms and Emerald all copies of all Confidential Information and Confidential Documents of Village Farms and Emerald, respectively, and all summaries, copies and excerpts of Confidential Information and Confidential Documents and all electronic media or records containing or derived from Confidential Information and Confidential Documents;

(v)except as contemplated in this Section 15.1(c), Village Farms and Emerald shall immediately cease use of the Company Improvement Intellectual Property;

(vi)any Escrowed Shares shall immediately be cancelled by the Company and any remaining funds held in escrow under the Escrow Agreement will be released from escrow and returned to Emerald;

(vii)in the case of the termination of this Agreement due to the occurrence of a License Termination Date or pursuant to Section 15.1(a)(v), then Emerald shall have the right, which right shall be exercised within ten (10) Business Days following the License Termination Date or date of delivery of the Security Discharge Termination Notice, as applicable (the “Emerald Exercise Period”), to:

(A)require the Company to use its best efforts to sell any capital improvements owned by the Company and to the extent of available cash (including without limitation the proceeds of the sale of the capital improvements) repay the full amount of the Emerald Initial Capital Contribution which was funded to the Company. To the extent of any deficiency, such deficiency shall constitute a loss to Emerald; or

(B)[Redacted: Commercially Sensitive Information]

If Emerald fails to make an election within the Emerald Exercise Period, Emerald shall be deemed to have elected the option set out in paragraph (A) above; and

(viii)except in the case of a termination pursuant to Section 15.1(a)(iii), the President shall thereafter take all action necessary to wind up the activities of the Company, and all costs and expenses incurred in connection with the termination of the Company shall be expenses chargeable to the Company. The remaining Company Assets shall first be paid, applied, or distributed in satisfaction of all liabilities of the Company to third parties and then to satisfy any debts, obligations, or liabilities owed to the Shareholders. Thereafter, any remaining cash and all other Company Assets shall be distributed in undivided interests to the Shareholders in accordance with their respective number of Shares (provided that prior to such distribution, any Escrowed Shares are cancelled).

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ARTICLE 16

GOVERNING LAW; DISPUTES

16.1Governing Law

(a)This Agreement will be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein.

(b)Each of the Parties hereby irrevocably attorns and submits to the arbitral jurisdiction set forth in Section 16.5 and, with respect to any matters not determined by arbitration, to the non-exclusive jurisdiction of the courts of Ontario, Canada respecting all matters relating to this Agreement and the rights and obligations of the Parties hereunder. Each of the Parties hereby agrees that service of any arbitral or legal proceedings relating to this Agreement may be made by physical delivery thereof to its address provided in, or in accordance with, Section 17.1, as applicable.

16.2Disputes

(a)All Disputes will be resolved in accordance with the procedures set forth in this Article 16 (the “Dispute Resolution Procedures”).

(b)For the purposes of this Article 16, the word “Documents” includes a sound recording, videotape, film, photograph, chart, graph, map, plan, survey, book of account, and data and information in electronic form.

(c)This Article 16 shall survive the expiry or earlier termination of this Agreement.

(d)Except as otherwise provided in Section 16.5(k) or otherwise expressly provided in this Agreement, each Shareholder will be responsible at its sole cost and expense for its own costs in connection with the disclosure of Documents, or the resolution of Disputes, including all fees, disbursements and other charges of all accountants, lawyers and other professionals, experts, whether testifying or not, and witnesses and all costs for preparation for, travel to and attendance at negotiation meetings, mediation conferences or arbitration proceedings commenced, conducted or required in accordance with these Dispute Resolution Procedures regardless of the outcome.

16.3Amicable Resolution of Disputes

(a)The Shareholders will make all reasonable efforts at all times to resolve all Disputes by good faith, amicable negotiations before resorting to resolution by mediation or arbitration pursuant to Section 16.4 and Section 16.5. The dispute resolution by a mediator or an arbitrator contemplated in Section 16.4 and Section 16.5 is not intended to substitute for the Shareholders’ mutual ongoing commitment to resolve Disputes in good faith as between themselves.

(b)The Shareholders agree to provide on an ongoing “without prejudice” basis (subject to any claim for privilege asserted by a Shareholder, including any ruling as to privilege or relevance made by any arbitrator during an arbitration conducted under this Article 16), frank, candid, and timely disclosure of all relevant facts, information and Documents to facilitate negotiations with respect to the resolution of a Dispute.

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(c)Either Shareholder may commence a dispute resolution by delivering a written notice of dispute (“Notice of Dispute”) to the other Shareholder.

(d)The Notice of Dispute shall include:

(i)a demand that the Dispute be referred to dispute resolution pursuant to this Article 16;

(ii)a general description of the Dispute; and

(iii)the relief or remedy sought.

16.4Resolution by Mediation

(a)If a Dispute remains unresolved following negotiations among the Shareholders then either Shareholder may, by delivery of a Notice of Dispute, refer such dispute to non-binding mediation.

(b)Each Shareholder will work with the other to select an acceptable mediator and the appropriate rules of mediation, and to work with the mediator to resolve the Dispute. The mediation process shall continue until the Dispute is resolved or until either the mediator makes a finding that there is no possibility of settlement through the mediation or one of the Shareholders elects not to continue the mediation (“Mediation Termination”).

(c)The place of mediation shall be Toronto, Ontario.

(d)The language of the mediation shall be in English.

16.5Arbitration

(a)In the event of Mediation Termination, either Shareholder may at any time thereafter, by written notice to the other Shareholder, require that such Dispute (other than a Dispute which arises as a result of any failure of the Board to reach an agreement with respect to decisions in accordance with Section 5.4) be resolved on an expedited basis by an independent, qualified and experienced expert (the “Expert”) or a panel of three Experts (the “Panel”).

(b)The Expert or Panel shall be appointed as follows:

(i)if the Shareholders agree on an Expert, the Shareholders shall jointly appoint the Expert as soon as possible and, in any event, within five Business Days after delivery of the notice requiring that the Dispute be resolved by an Expert (the “Expert Appointment Deadline”); and

(ii)if the Shareholders fail to agree or fail to jointly appoint the Expert by the Expert Appointment Deadline, each Shareholder shall appoint one Expert no later than five Business Days after the Expert Appointment Deadline. If a Shareholder fails to appoint an Expert within five Business Days after the Expert Appointment Deadline, the Expert appointed by the other Shareholder shall be deemed to have been jointly appointed by both Shareholders and such Expert shall resolve the Dispute. If an Expert has been appointed by each Shareholder, such Experts shall, within five Business Days after their appointment, jointly appoint a third Expert. If the two Experts fail to appoint a third Expert within the required time, either of the Shareholders may apply to the Ontario Superior Court of Justice for appointment of the third Expert, in which case the court shall appoint the third Expert at the earliest opportunity.

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(c)The Expert or Panel shall be impartial and independent of the Shareholders or any consultant, sub-consultant, contractor or subcontractor of either of them in accordance with the IBA Guidelines on Conflicts of Interest in International Arbitration adopted by resolution of the IBA Council on October 23, 2014. The Expert or Panel shall at all times be neutral and act impartially and shall not act as advocates for the interests of the party who appointed them.

(d)The Expert or Panel, as the case may be, will be appointed on a Dispute by Dispute basis, with each Expert having the qualifications and experience relevant to the issues in the particular Dispute for which the Expert or Panel, as the case may be, is appointed.

(e)The Expert or Panel, as the case may be, shall determine the appropriate process for timely and cost effective resolution of the Dispute and, without limitation, the Expert or Panel, as the case may be, has discretion to, among other things:

(i)solicit submissions and Documents from both parties, and impose deadlines for the receipt of such submissions;

(ii)require some or all of the evidence to be provided by affidavit;

(iii)direct either or both Shareholders to prepare and provide the Expert or Panel, as the case may be, with such Documents or other things as the Expert or Panel, as the case may be, may require to assist it/them in the resolution of the Dispute and rendering of a decision;

(iv)require either Shareholder to supply or prepare for examination by the Expert or Panel, as the case may be, and the other Shareholder, any document or information the Expert or Panel, as the case may be, considers necessary;

(v)convene meetings of the Shareholders to have the Shareholders discuss the issues in Dispute in the presence of the Expert or Panel, as the case may be; and

(vi)take, or require either or both Shareholders to take and provide to the Expert or Panel, as the case may be, such measurements, perform such tests, audit such processes and procedures, and take any and all such other measures and steps as the Expert or Panel, as the case may be, considers necessary to make a final determination in the Dispute.

(f)The Expert or Panel, as the case may be, shall render a decision as soon as possible and, in any event, shall use all reasonable efforts to render a decision no later than ten Business Days after the date of the appointment of the Expert or in the case of a Panel, the appointment of the third Expert, or such longer period of time as agreed to in writing by the parties. The Expert or Panel, as the case may be, shall give reasons or a summary of reasons for the Expert’s or Panel’s decision, as the case may be.

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(g)The Expert or Panel, as the case may be, shall keep all information about the Dispute confidential and shall not disclose such information to anyone other than the Shareholders.

(h)The Shareholders agree that the Expert’s or Panel’s, as the case may be, determination shall be final or binding on the Shareholders and neither Shareholder shall be entitled to appeal such determination, except as may be permitted by Applicable Law in Ontario.

(i)While the Dispute remains outstanding, both Shareholders shall continue to perform their respective obligations, duties and responsibilities under this Agreement.

(j)The Expert or Panel shall be authorized only to interpret and apply the provisions of this Agreement and, except as expressly provided herein, has no power or authority to modify or change this Agreement in any manner.

(k)The Expert or Panel may decide which Shareholder will bear the costs of the Dispute Resolution Procedures including the fees and disbursements of the Expert or Panel, any other costs of the Dispute Resolution Procedures and the costs and expenses of the nature contemplated in Section 16.2 incurred by the successful Shareholder in connection with the Dispute Resolution Procedures. The Expert or Panel may apportion such costs between the Shareholders if the Expert or Panel considers it just and reasonable to do so in the circumstances.

16.6Restrictions

A Shareholder shall not have the right to initiate any Dispute Resolution Procedures in the event that, and for so long as, the Shareholder is a Defaulting Shareholder.

ARTICLE 17

GENERAL PROVISIONS

17.1Guarantee of Emerald Therapeutics

Emerald Therapeutics hereby unconditionally and irrevocably guarantees to Village Farms the due and punctual performance by Emerald of each and every covenant, obligation and undertaking of Emerald which are to be performed under this Agreement as if said covenants and obligations were directly those of Emerald Therapeutics, including, under any judgment or order of any court of competent jurisdiction applicable to Emerald and for losses suffered by Village Farms where the non-performance or non-fulfillment of the relevant covenant or obligation is as a result, in whole or in part, of a breach of covenant, representation or warranty by Emerald hereunder (collectively, the “Obligations”). If Emerald is in default in the performance of any of the Obligations and fails to cure such default, then Emerald Therapeutics shall, promptly following Emerald’s receipt of written notice from Village Farms of Emerald’s default, perform or cause the performance of such Obligation. Emerald Therapeutics shall defend, indemnify and save the Village Farms Indemnified Parties harmless from and against any and all Losses incurred by the Village Farms Indemnified Parties of any nature in connection with, resulting from or relating to Emerald’s default in the performance of any of the Obligations.

17.2Notices

Any notice, certificate, consent, determination or other communication required or permitted to be given or made under this Agreement shall be in writing and shall be given in writing and shall be given by actual delivery or by email to its address, address set forth below, addressed to the recipient as follows:

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(a)if to Emerald or Emerald Therapeutics, at:

PO Box 24076

4420 West Saanich Road

Victoria, British Columbia V8Z 7E7

Attention:	Avtar Dhillon, Executive Chairman and
	Jim Heppell, Lead Director
Email:	◼

with a copy to:

McCullough O’Connor Irwin LLP

2600 - 1066 West Hastings Street

Vancouver, British Columbia V6E 3X1

Attention:	James Beeby
Email:	jbeeby@moisolicitors.com

(b)if to Village Farms, at:

Village Farms International, Inc. 4700 – 80th Street

Delta, BC V4K 3N3

Attention:	Stephen Ruffini
Email:	◼
with a copy to:

Torys LLP

79 Wellington St. W.

Suite 3000

Toronto, ON M5K 1N2

Attention:	Sabrina Gherbaz
Email:	sgherbaz@torys.com

(c)if to the Company, at:

4700 – 80th Street
Delta, BC V4K 3N3

Attention:                President

with a copy to Emerald and Village Farms.

or to such other address or email address or individual as may be designated by notice given by any party to the others. Any notice, certificate, consent, determination or other communication shall be effective, if delivered, faxed or emailed at or prior to 5:00 p.m. on any Business Day, when so delivered, faxed or emailed or, if delivered or emailed at any other time, on the next Business Day.

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17.3Notice of Claims

Each of the Shareholders agrees to give written notice forthwith to the other Shareholder of any third party claim or threatened third party claim made by any Person with respect to the Company, the Shares or any part thereof.

17.4Force Majeure

(a)Notwithstanding anything in this Agreement to the contrary, if any Party is unable wholly or in part by Force Majeure to carry out any obligation of such Party under this Agreement (excluding the obligations to fund or make payments by the Shareholders), then such Party shall forthwith give the other Parties written notice of the Force Majeure and the expected delays in meeting applicable obligations, whereupon that obligation of the Party giving the notice will be suspended so far as it is affected by that Force Majeure during but not longer than its continuance. The affected Party or Parties must use all reasonable diligence to resolve that Force Majeure as quickly as possible.

(b)Forthwith after the resolution of an applicable Force Majeure, the affected Party shall send written notice of such resolution to the other Parties, and the dates for satisfying the applicable obligation shall be deemed to have been extended by the period of time during which the Force Majeure was in effect.

17.5Assignment, Successors, etc.

(a)This Agreement shall enure to the benefit of and be binding upon the Parties hereto and their respective permitted successors and permitted assigns. Except as expressly provided herein, no Party shall assign this Agreement or any of the benefits hereof or obligations hereunder without the prior written consent of each of the other Parties.

(b)Subject to compliance with Article 10, in the event that any Party proposes to enter into any acquisition, amalgamation, arrangement, merger or combination or any transaction pursuant to which another Person or a successor to such Party becomes bound by the provisions of this Agreement by agreement or by operation of law, the Person resulting from such acquisition, amalgamation, arrangement, merger, combination or transaction shall enter into an agreement in form and substance satisfactory to the other Parties pursuant to which such Person agrees to be bound by this Agreement as though it were a Party hereto in the place of the Party entering into the acquisition, amalgamation, arrangement, merger, combination or transaction.

17.6Entire Agreement

This Agreement, including all Schedules annexed hereto which form an integral part hereof together with the Transaction Documents, constitutes the entire agreement among the Parties and supersedes all prior agreements, understandings, negotiations and discussions, whether written or oral, with respect to the subject matter hereof. There are no conditions, covenants, agreements, representations, warranties or other provisions, express or implied, collateral, statutory or otherwise, relating to the subject matter hereof except as provided in this Agreement or in the Transaction Documents.

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17.7Further Assurances

Each of the Parties to this Agreement shall from time to time and at all times do all such further acts and execute and deliver all further agreements and documents as shall be reasonably required in order fully to perform and carry out the terms of this Agreement.

17.8Amendment and Waivers

No amendment or waiver of any provision of this Agreement shall be binding on a Party unless consented to in writing by all Parties. No failure or delay to exercise, or other relaxation or indulgence granted in relation to, any power, right or remedy under this Agreement shall operate as a waiver of it or impair or prejudice it nor shall any single or partial exercise or waiver of any power, right or remedy preclude its further exercise or the exercise of any other power, right or remedy. The failure of any Party to insist upon strict adherence to any provision of this Agreement on any occasion shall not be considered a waiver or deprive that Party of the right thereafter to insist upon strict adherence to such provision or any other provision of this Agreement. No purported waiver shall be effective as against any Party unless consented to in writing by such Party. The waiver by any Party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent or other breach.

17.9Severability

Every provision of this Agreement is intended to be several, and accordingly, if any provision of this Agreement is determined to be invalid, illegal or unenforceable in any respect, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party hereto. To the extent that any provision is found to be invalid, illegal or unenforceable, the Parties shall act in good faith to substitute for such provision, to the extent possible, a new provision with content and purpose as close as possible to the provision so determined to be invalid, illegal or unenforceable.

17.10References

All references in this Agreement to any statute or regulation, including, but not limited to, the ACMPR, shall mean and refer to such statute and all regulations promulgated thereunder, as amended, supplemented, re-enacted or replaced from time to time. Additionally, the Parties will make reasonable efforts to interpret this Agreement in accordance with any statute or regulation introduced after the Execution Date regarding non-therapeutic cannabis.

17.11[Redacted: Commercially Sensitive Information]

17.12Time of Essence

Time shall be of the essence of this Agreement.

17.13Currency

Unless otherwise indicated, all currency amounts herein are expressed in Canadian dollars.

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17.14Remedies; Specific Performance

Except as otherwise provided herein, any and all remedies herein expressly conferred upon a Party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such Party, and the exercise by a Party of any one remedy will not preclude the exercise of any other remedy. The Parties hereby agree that irreparable damage would occur in the event that any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached, and that money damages or other legal remedies would not be an adequate remedy for any such damages. Accordingly, the Parties acknowledge and hereby agree that in the event of any breach or threatened breach by any Party of any of its covenants or obligations set forth in this Agreement, the other Parties shall be entitled to injunctive relief to prevent or restrain breaches or threatened breaches of this Agreement by the other, and to specifically enforce the terms and provisions of this Agreement to prevent breaches or threatened breaches of, or to enforce compliance with, the covenants and obligations of the other under this Agreement. Each of the Parties hereby agrees not to raise any objections to the availability of the equitable remedy of specific performance to prevent or restrain breaches or threatened breaches of this Agreement by it, and to specifically enforce the terms and provisions of this Agreement to prevent breaches or threatened breaches of, or to enforce compliance with, the covenants and obligations of the other Parties under this Agreement.

17.15No Contra Proferentem

Unless otherwise expressly defined in this Agreement, the words used in this Agreement bear their natural meaning. The parties have had equal opportunity to take legal advice and the contra proferentem rule does not apply to the interpretation of this Agreement. Save as otherwise provided in this Agreement, each party shall be responsible for and shall bear all its own fees and expenses with respect to the preparation and negotiation of this Agreement.

17.16Counterparts

This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same instrument. Counterparts may be executed either in original or electronic form, and the Parties adopt any signatures received by means of electronic communication as original signatures of the Parties.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of June 6, 2017.

EMERALD HEALTH BOTANICALS INC.

By:         ______________________________________________

Name:

Title:

By:         ______________________________________________

Name:

Title:

EMERALD HEALTH THERAPEUTICS INC.

By:         ______________________________________________

Name:

Title:

By:         ______________________________________________

Name:

Title:

VILLAGE FARMS INTERNATIONAL, INC.

By:         ______________________________________________

Name:

Title:

By:         ______________________________________________

Name:

Title:

1121371 B.C. LTD.

By:         ______________________________________________

Name:

Title:

By:         ______________________________________________

Name:

Title:

Signature Page – Shareholders Agreement

SCHEDULE A

PROPERTY

A-1

SCHEDULE B

INITIAL BUDGET

[Redacted: Commercially Sensitive Information]

B-1

SCHEDULE C

ILLUSTRATION OF DILUTION CALCULATION

[Redacted: Commercially Sensitive Information]

C-1

SCHEDULE D

BACKGROUND INTELLECTUAL PROPERTY

PART 1: Emerald Background Intellectual Property

1. Characterized plant strains:

[Redacted: Commercially Sensitive Information]

2.General knowledge and knowhow regarding cannabis genetics/botany/cultivation

3.General knowledge and knowhow regarding extraction technologies for cannabinoids and terpenes

4.Seed to sales tracking systems and software

5.General knowledge and experience in the Health Canada licensing process for Cannabis including standard operating procedures related to growing Cannabis in greenhouses

PART 2: Village Farms Background Intellectual Property

1.[Redacted: Commercially Sensitive Information];

2.Climate control algorithms; and

3.General growing and location knowledge.

D-1

SCHEDULE E

ACCESSION AGREEMENT

THIS AGREEMENT made as of the _____ day of _______________, ________,

A M O N G:

[TRANSFEROR],a ■ existing under the laws of ■, (the
“Transferor”),

- and -

[TRANSFEREE], a ■ existing under the laws of ■, (the
“Transferee”),

- and -

[CONTINUING SHAREHOLDER],

a ■ existing under the laws of ■, (the “Continuing
Shareholder”), [NTD: If applicable.]

- and -

1121371 B.C. LTD., a corporation existing under the laws of British Columbia (the “Company”)

WHEREAS the Transferor, the Continuing Shareholder and the Company are parties to a shareholders’ agreement dated as of June 6, 2017 (such agreement, as amended, supplemented, amended and restated or otherwise modified from time to time, the “Shareholders Agreement”) and certain other documents described as the “Transaction Documents”; and

AND WHEREAS capitalized terms used and not otherwise defined herein have the meanings given to them in the Shareholders Agreement;

AND WHEREAS pursuant to the Shareholders Agreement, no Transfer of a Shareholder’s Shares shall be effective unless the provisions of Article 10 of the Shareholders Agreement have been complied with and the transferee has executed an agreement in the form of this Agreement in order to become a party to the Shareholders Agreement;

AND WHEREAS concurrent with the Transfer of a Shareholder’s Shares, said Shareholder is required to assign all of its right, title and interest in each of the Transaction Documents to the transferee and the transferee is required to assume all of the Shareholders obligations and liabilities under each of the Transaction Documents;

NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the respective covenants and agreements of the parties hereinafter contained and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by each party), the parties agree as follows:

E-1

1.Rules of Construction

In this Agreement:

(a)the terms “Agreement”, “this Agreement”, “the Agreement”, “hereto”, “hereof”, “herein”, “hereby”, “hereunder” and similar expressions refer to this Agreement in its entirety and not to any particular provision hereof;

(b)the division of this Agreement into articles and sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement;

(c)words importing the singular number only shall include the plural and vice versa and words importing the masculine gender shall include the feminine and neuter genders and vice versa;

(d)the words “include”, “includes” and “including” mean “include”, “includes” or “including”, in each case, “without limitation”; and

(e)reference to any agreement or other instrument in writing means such agreement or other instrument in writing as amended, modified, replaced or supplemented from time to time.

2.Accession to Shareholders Agreement and Transaction Documents

(a)The Transferee acknowledges that it has received a copy of the Shareholders Agreement and each of the Transaction Documents.

(b)The Transferee covenants and agrees in favour of the Continuing Shareholder and the Company, from and after the Date hereof, to be bound by the Shareholders Agreement and each of the Transaction Documents in all respects as if the Transferee were an original party thereto in place of the Transferor.

(c)For the avoidance of doubt, the parties agree that, from and after the Date hereof, any reference in the Shareholders Agreement and any Transaction Document to the Transferor will be replaced with the Transferee, as if the Transferee was an original party thereto.

3.Consent to Accession

(a)Subject to the terms of this Agreement and compliance with Article 10 of the Shareholders Agreement, with effect from and after the date hereof, the Company and the Continuing Shareholder:

(i)irrevocably consent to the Transferee becoming a party to the Shareholders Agreement as a “Shareholder” and to the Transfer of the Transferor’s Shares and to the Transferee assuming the obligations of the Transferor in accordance with the Shareholders Agreement;

(ii)irrevocably consent to the Transferee becoming a party to each of the Transaction Documents and to the Transferee assuming the obligations of the Transferor in accordance with each such document;

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(iii)agree that the Transferee will be entitled to exercise all of the rights, privileges and benefits of the Transferor in respect of the Transferor’s Shares and under each of the Transaction Documents; and

(iv)agrees to continue to be bound by the Shareholders Agreement and each of the Transaction Documents from and after the date hereof as if the Transferee were named in the Shareholders Agreement and each such Transaction Document as a Shareholder or other Person in the place of the Transferor.

4.Release

(a)With effect from and after the date hereof:

(i)the Continuing Shareholder and the Company release and discharge the Transferor to the extent expressly specified in the Shareholders Agreement and each of the Transaction Documents; and

(ii)for the avoidance of doubt, notwithstanding anything contained in this Agreement, the Transferor will remain fully liable for any breach of the Shareholders Agreement and each of the Transaction Documents, or any liability under the Shareholders Agreement and each of the Transaction Documents, which occurs or relates to, or arises in relation to, conduct prior to the date hereof.

5.Shareholders Agreement and Transaction Documents

Each party agrees that, except as provided in this Agreement, the provisions of the Shareholders Agreement and each of the Transaction Documents remain in full force and effect, unamended.

6.Notices

For purposes of the Shareholders Agreement and each of the Transaction Documents, the notice information for the Transferor is as follows:

⬤

⬤

Attention: ⬤

Email: ⬤

7.No Waiver

The failure of any party to insist upon strict adherence to any provision of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to such provision or any other provision of this Agreement. No purported waiver shall be effective as against any party unless consented to in writing by such party. The waiver by any party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent or other breach.

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8.Severability

Every provision of this Agreement is intended to be several, and accordingly, if any provision of this Agreement is determined to be invalid, illegal or unenforceable in any respect, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party hereto. To the extent that any provision is found to be invalid, illegal or unenforceable, the parties shall act in good faith to substitute for such provision, to the extent possible, a new provision with content and purpose as close as possible to the provision so determined to be invalid, illegal or unenforceable.

9.Further Assurances

Each of the parties to this Agreement shall from time to time and at all times do all such further acts and execute and deliver all further agreements and documents as shall be reasonably required in order fully to perform and carry out the terms of this Agreement.

10.Costs and Expenses

The Transferee must pay all duty, registration fees and other government charges payable in respect of this Agreement and the transaction contemplated by this Agreement and the parties shall otherwise pay their respective costs and expenses in connection with the negotiation, preparation, execution and delivery of this Agreement.

11.Governing Law

(a)This Agreement will be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein.

(a)Each of the Parties hereby irrevocably attorns and submits to the arbitral jurisdiction set forth in Section 16.2 and, with respect to any matters not determined by arbitration, to the non-exclusive jurisdiction of the courts of Ontario, Canada respecting all matters relating to this Agreement and the rights and obligations of the parties hereunder. Each of the parties hereby agrees that service of any arbitral or legal proceedings relating to this Agreement may be made by physical delivery thereof to its address provided in, or in accordance with, Section 17.1 of the Shareholders Agreement or the applicable provision of each of the Transaction Documents, as applicable.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the date of this Agreement.

[TRANSFEROR]

By:         ______________________________________________

Name:

Title:

[TRANSFEREE]

By:         ______________________________________________

Name:

Title:

[CONTINUING SHAREHOLDER]

By:         ______________________________________________

Name:

Title:

1121371 B.C. LTD.

By:         ______________________________________________

Name:

Title:

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SCHEDULE F

[REDACTED: COMMERCIALLY SENSITIVE INFORMATION]

F-1

SCHEDULE G

EMERALD ORGANIZATIONAL CHART

G-1

EX-10.8

Exhibit 10.8

Certain identified information has been excluded from this exhibit because it is both (i) not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed. Such excluded information has been marked with [Redacted: Commercially Sensitive Information].

SETTLEMENT AGREEMENT AND MUTUAL RELEASE

This Settlement Agreement and Mutual Release ("Settlement Agreement") is effective March 2, 2020.

BETWEEN:

VILLAGE FARMS INTERNATIONAL, INC.

("Village Farms")

EMERALD HEALTH THERAPEUTICS INC.

("EHT")

EMERALD HEALTH THERAPEUTICS CANADA INC.

("Emerald Canada")

– and –

PURE SUNFARMS CORP.

("Pure")

(each individually a "Party", and collectively, the "Parties")

WHEREAS:

A.The Parties are each party to a shareholders' agreement in respect of the governance of Pure dated June 6, 2017 and amended as of March 29, 2019 (the "Shareholders' Agreement");

B.Village Farms, Village Farms Canada Limited Partnership, Pure and Emerald Canada are party to the Delta 2 – Option to Lease Agreement dated June 6, 2017 and amended as of March 29, 2019 (the "D2 Option Agreement");

C.Pure, Village Farms and Emerald Canada are party to a shareholder loan agreement in respect of amounts loaned to Pure by Village Farms and Emerald Canada dated July 5, 2018 and amended as of August 27, 2018, October 1, 2018, and November 7, 2018 (the "Shareholder Loan Agreement");

D.The loan amounts Pure currently owes under the Shareholder Loan Agreement are $13,000,000 to Village Farms and $13,000,000 to Emerald Canada, both plus interest at the rate specified in the Shareholder Loan Agreement;

E.Emerald Canada and Pure are party to a supply agreement dated December 21, 2018 (the "2018 Supply Agreement") and a second supply agreement dated March 29, 2019 (the "2019 Supply Agreement");

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F.Emerald Canada, Village Farms, Pure and Torys LLP were party to an escrow agreement dated March 29, 2019 (the "Escrow Agreement") under which Torys LLP resigned its trust effective as of January 31, 2020 in accordance with section 5.2 of the Escrow Agreement;

G.Emerald Canada, Village Farms, Pure and Computershare Trust Company of Canada (“Computershare” or the “Escrow Agent”) are party to an agreement dated as of January 31, 2020 under which the parties appointed Computershare successor to Torys LLP, as escrow agent under the Escrow Agreement, on amended terms as set forth in such agreement (the “Assumption Agreement”);

H.A dispute has arisen as to whether Emerald Canada was obliged to make a payment to Pure of $5,940,000 in November 2019 under the D2 Option Agreement in cash, or whether it could instead satisfy that obligation by way of set-off of a portion of Pure's obligation to Emerald Canada under the Shareholder Loan Agreement, and whether as a result of Emerald Canada's failure to make the payment in cash Village Farms is entitled under the D2 Option Agreement and the Escrow Agreement to have 5,940,000 shares of Pure held in escrow by the Escrow Agent (the “Disputed Shares”) surrendered for cancellation (the "D2 Payment Dispute");

I.Pursuant to a dispute notice issued on November 20, 2019, the D2 Payment Dispute has been submitted to arbitration under the Arbitration Act (Ontario) before a tribunal composed of The Hon. Ed Chiasson, Bill Horton and Angus Gunn (the "Arbitration");

J.A second dispute has arisen in respect of whether Emerald Canada is obliged to make various payments to Pure under the 2018 Supply Agreement (the "Product Dispute"), which dispute has not yet progressed to litigation or arbitration;

K.[Redacted: Commercially Sensitive Information]; and

L.The Parties wish to settle the D2 Payment Dispute, the Arbitration, the Product Dispute [Redacted: Commercially Sensitive Information] (collectively, the “Disputes”).

NOW THEREFORE in consideration of the covenants and other terms set forth in this Settlement Agreement and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

Settlement Mechanics

1.The Parties agree that, upon the date of delivery of the documents set out in Section 2 (the “Settlement Date”), the Parties shall settle and resolve the Disputes as follows:

(a)all outstanding and future liabilities of Emerald Canada under the 2018 Supply Agreement will be extinguished effective as of December 31, 2019 in return for:

(i)Emerald Canada forfeiting, and waiving repayment by Pure of, all amounts due and owing to Emerald Canada from Pure pursuant to the Shareholder Loan Agreement (including accrued and unpaid interest to December 31, 2019) and returning any promissory notes issued to Emerald Canada under the Shareholder Loan Agreement (collectively, the “Emerald Shareholder Loan Promissory Note”) to Pure for cancellation. Emerald Canada will also acknowledge that the entirety of the forfeited amounts was for the settlement purposes of the Product Dispute; and

3-

(ii)the issuance by Emerald Canada to Pure on the Settlement Date of a promissory note (the "Note") in the principal amount of $952,237, which Note will bear simple interest at a rate of 6.2% per annum and will mature on the earlier of (A) December 31, 2020; (B) [Redacted: Commercially Sensitive Information]; or (C) [Redacted: Commercially Sensitive Information]. The form of the Note is attached as Schedule “A” to this Settlement Agreement.

(b)the 2018 Supply Agreement will be terminated in its entirety effective as of December 31, 2019 and Pure and Emerald Canada, respectively, will be released from all current, future and potential obligations or liabilities thereunder;

(c)the 5,940,000 Disputed Shares currently held in escrow pursuant to the Escrow Agreement and the Assumption Agreement will be released from escrow as of November 19, 2019 and returned to Pure for cancellation and the Parties will direct Computershare under the Escrow Agreement and the Assumption Agreement to do so;

(d)Emerald will transfer [Redacted: Commercially Sensitive Information] common shares of Pure (the “Transferred Shares”) it currently owns to Village Farms on the Settlement Date, free and clear of any and all liens or encumbrances therein;

(e)the 2019 Supply Agreement will be terminated effective as of December 31, 2019, and Pure and Emerald Canada, respectively, will be released from all current, future and potential obligations or liabilities thereunder;

(f)the sum of $8,000,000 which has been advanced by Village Farms to Pure prior to the date hereof will be deemed to constitute a subscription by Village Farms for common shares of Pure [Redacted: Commercially Sensitive Information] and Pure will issue to Village Farms such common shares of Pure on the earlier of the Settlement Date and the Termination Date (as defined below);

(g)[Redacted: Commercially Sensitive Information];

(h)Emerald will forfeit any and all of its rights under the Shareholder Loan Agreement and any Emerald Shareholder Loan Promissory Note; and

(i)the Parties will mutually release each other from all claims related to or arising from the Disputes in the terms more particularly described in the form of Mutual Release attached as Schedule "B" to this Settlement Agreement.

2.On the Settlement Date:

(a)Emerald Canada will deliver the following documents:

(i)the Emerald Shareholder Loan Promissory Note;

(ii)the Note in the form attached hereto as Schedule “A”;

(iii)a share certificate representing the Transferred Shares, together with a stock power of attorney transferring such shares to Village Farms;

4-

(iv)a resolution of the board of directors of Pure executed by the nominees on the board of directors appointed by Emerald Canada authorizing and approving the issuance of the additional shares to Village Farms described in Sections 1(f) and 1(g);

(v)such documents as may be reasonably necessary under the Escrow Agreement and the Assumption Agreement to effect release of the Disputed Shares to Pure for cancellation; and

(vi)such documents as may be reasonably necessary discontinue the Arbitration, including all claims and counterclaims therein;

(b)Village Farms will deliver such documents as may be reasonably necessary to discontinue the Arbitration, including all claims and counterclaims therein;

(c)each of the Parties will do all such further acts and execute and deliver such other documents as may be reasonably necessary to effect the transactions set out in Section 1.

On or as soon as reasonably possible following the Settlement Date, Pure will cancel the 5,940,000 Disputed Shares, issue the shares to Village Farms described in Section 1(f), update the shareholders registers and capital accounts of each of Village Farms and Emerald Canada and do such further acts as may be reasonably necessary to effect the transactions set out in this Agreement.

3.Each of the Parties shall use its reasonable commercial efforts to deliver the documents it is required to deliver under Section 2 on or before March 6, 2020.

4.From the date hereof until the earlier of (a) termination of this Settlement Agreement; and (b) the Settlement Date, the Parties agree to hold in abeyance all obligations pursuant to the 2018 Supply Agreement and the 2019 Supply Agreement, which will be suspended until that date.

5.In the event that the Settlement Date does not occur on or before March 31, 2020, this Settlement Agreement will terminate without any further act or formality by any Party and will be void in its entirety (the “Termination Date”) other than any provision of this Agreement which is expressly stated to survive termination. Notwithstanding the termination of this Agreement and the Termination Date, the parties acknowledge and agree that the sum of $8,000,000 referred to in Section 1(f) will be deemed to constitute a subscription by Village Farms for common shares of Pure [Redacted: Commercially Sensitive Information] and Pure on the Termination Date will issue to Village Farms such common shares of Pure. Each of Village Farms and Emerald Canada will cause their respective nominees on the Board of Directors of Pure to execute any resolution of the Board of Directors of Pure required to issue such additional shares to Village Farms. This Section 5 shall survive termination of this Agreement.

Discontinuance of the Arbitration

6.The Parties agree to a discontinuance of the Arbitration, including all claims and counterclaims therein, without costs, effective as of the Settlement Date, and the Parties authorize and direct their respective legal counsel to execute, on their behalf, such documents as the Arbitration tribunal may require to effect the discontinuance.

5 -

Mutual Release

7.The Parties shall, contemporaneously with the execution of this Settlement Agreement, execute and deliver a Mutual Release in the form attached as Schedule "B", such release to be effective as of the Settlement Date and only if all of the actions under this Settlement Agreement occur.

Shareholders’ Agreement Rights Waiver

8.The Parties agree for the period commencing on the date of this Agreement and ending at midnight (Toronto time) on the earlier of December 31, 2020 or the Termination Date, the provisions of Section 10.5(i) of the Shareholders’ Agreement shall be of no force and effect for either Village Farms or Emerald (such that the failure by the board of directors of Pure to approve a Budget (as defined in the Shareholders’ Agreement) for 2020 by March 1, 2020 cannot be utilized by Village Farms or Emerald to invoke the “buy-sell” provisions contained in Section 10.5 of the Shareholders’ Agreement).

Press Release

9.Village Farms and EHT shall each publicly announce the execution of this Settlement Agreement promptly thereafter. The form of press release to be released by EHT regarding this Settlement Agreement will be in the form attached as Schedule “C” to this Settlement Agreement. The form of press release to be released by Village Farms regarding this Settlement Agreement will be in the form attached as Schedule “D” to this Settlement Agreement. This Settlement Agreement shall be subject to each Party’s overriding obligation to make any disclosure required under applicable laws, and the Party making such disclosure shall use all commercially reasonable efforts to give prior oral or written notice to the other Party and reasonable opportunity to review or comment on the disclosure, and if prior notice is not possible, to give such notice immediately following the making of such disclosure. Notwithstanding the foregoing, the Parties acknowledge that this Settlement Agreement may be publicly filed by EHT and/or Village Farms in accordance with applicable securities laws. Village Farms and EHT shall each be permitted to publicly announce the occurrence of the Settlement Date.

No Subrogated Rights

10.The Parties represent and warrant that no person or other party is subrogated to any rights of recovery the Parties may have or may hereafter have or obtain, and the Parties will indemnify and hold harmless each other with respect to any such subrogated claim or proceeding.

No Admission

11.The Parties acknowledge and agree that this Settlement Agreement constitutes a compromise of disputed claims and is not to be construed as an admission by any of the Parties of the existence, absence or amount of any liability, rights or obligations.

Enurement

12.Each of the Parties acknowledge and agree that this Settlement Agreement shall enure to the benefit of and be binding on the Parties and their respective agents, affiliates, subsidiaries, related corporations, successors, assigns, heirs, administrators, and executors.

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Entire Agreement

13.This Settlement Agreement and the Schedules thereto contains the entire Settlement Agreement and resolution between the Parties with respect to the subject matter herein and may be changed only by an agreement in writing signed by all of the Parties to this Settlement Agreement.

Recitals

14.The recitals set out above are accurate and form part of this Settlement Agreement.

Headings

15.Headings used in this Settlement Agreement are used for convenience of reference and do not form a part of this Settlement Agreement.

Waiver

16.The waiver by any Party of any breach of any provision of this Settlement Agreement by the other Party will not be binding unless in writing and will not operate or be construed as a waiver by the non-breaching Party of any other or subsequent breach of this Settlement Agreement.

Severability

17.If any provision of this Settlement Agreement is determined to be invalid or unenforceable by a court of competent jurisdiction, then such provision will be severable from the remainder of this Settlement Agreement, which shall continue in full force and effect.

Independent Legal Advice

18.Each Party acknowledges that it has entered into this Settlement Agreement voluntarily and has been afforded the opportunity of receiving independent legal advice concerning this Settlement Agreement. In the event that any Party has executed this Settlement Agreement without the benefit of independent legal advice, such Party fully understands the provisions of this Settlement Agreement and hereby waives the right to receive any such independent legal advice.

Governing Law

19.This Settlement Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario, and the laws of Canada applicable therein.

Currency

20.All monetary amounts referred to herein shall, unless otherwise indicated, be read as references to the lawful currency of Canada.

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Representations and Warranties

21.Each Party represents and warrants to the others that it has full authority to enter into, execute and deliver this Settlement Agreement, that the terms set forth herein are fully binding and, in the case of each corporate or trust signatory, that such corporation or trust is validly created and is in existence as at the date hereof and that the undersigned representative of each such corporation or trust, as the case may be, is a duly authorized signatory of such corporation or trust and is authorized to execute this Settlement Agreement on its behalf.

Execution

22.This Settlement Agreement may be executed and delivered in counterparts and all of which, when taken together, will be deemed to constitute one and the same agreement. A signed copy of this Settlement Agreement delivered by email or other means of electronic transmission, including electronic signatures, will be deemed to have the same legal effect as delivery of an original signed copy of this Settlement Agreement.

[Signature page follows]

IN WITNESS WHEREOF the Parties execute this Settlement Agreement effective as of the above date.

VILLAGE FARMS INTERNATIONAL, INC.

Per:/s/ "Michael A. DeGiglio"

[Name]: Michael A. DeGiglio

[Title]: President and CEO

EMERALD HEALTH THERAPEUTICS, INC.

Per:/s/ "Riaz Bandali"

[Name]: Riaz Bandali

[Title]: President and CEO

EMERALD HEALTH THERAPEUTICS CANADA INC.

Per:/s/ "Riaz Bandali"

[Name]: Riaz Bandali

[Title]: President and CEO

PURE SUNFARMS CORP.

Per:/s/ "Mandesh Dosanjh"

[Name]: Mandesh Dosanjh

[Title]: President and CEO

SCHEDULE "A"

PROMISSORY NOTE

C$952,237.00 DATED: March ____, 2020

1.Promise to Pay

FOR VALUE RECEIVED EMERALD HEALTH THERAPEUTICS CANADA INC. (the "Borrower") unconditionally promises to pay to PURE SUNFARMS CORP. (the "Creditor"), or to its order, in lawful money of Canada, the amount of $952,237 (the "Principal Amount") together with interest on the Principal Amount outstanding from time to time on the terms set out below. The Principal Amount together with all interest due hereunder shall be due on the earlier of (A) December 31, 2020; (B) [Redacted: Commercially Sensitive Information]; or (C) [Redacted: Commercially Sensitive Information] (the "Maturity Date").

2.Interest

The Principal Amount outstanding at any time, and from time to time, and any overdue interest, shall bear simple interest at 6.2% per annum, both before and after the Maturity Date, default, and judgment. Such interest shall be calculated on the Maturity Date and all interest accrued hereunder shall be due and payable on the Maturity Date.

3.Interest Act (Canada)

Each interest rate which is calculated under this Promissory Note on any basis other than a full calendar year (the "deemed interest period") is, for the purposes of the Interest Act (Canada), equivalent to a yearly rate calculated by dividing such interest rate by the actual number of days in the deemed interest period, then multiplying such result by the actual number of days in the calendar year (365 or 366).

4.Prepayment

When not in default under this Promissory Note, the Borrower shall be entitled to prepay all or any portion of the Principal Amount outstanding at any time without notice, bonus or penalty. Any such prepayment shall be applied firstly towards the Principal Amount and then towards accrued and unpaid interest.

5.Assignment

This Promissory Note may not be assigned in whole or in part by either party without the written consent of the other party having first been obtained.

6.Governing Law and Successors

This Promissory Note is made under and shall be governed by and construed in accordance with the laws of the Province of British Columbia and the federal laws of Canada applicable in the Province of British Columbia, and shall enure to the benefit of the Creditor and its successors and assigns, and shall be binding on the Borrower and its successors and assigns.

[Remainder of page intentionally left blank; signature page follows.]

IN WITNESS WHEREOF the Borrower has duly executed this Promissory Note as of the date and year first above written.

EMERALD HEALTH THERAPEUTICS CANADA INC.

By:___________________________________

Authorized Signatory

SCHEDULE "B"

MUTUAL FINAL RELEASE

WHEREAS the signatories set out below (the “Parties”) have executed a Settlement Agreement dated March 2, 2020 (the "Settlement Agreement"), in which the Parties agreed to fully and finally settle the Disputes on the terms set out therein;

NOW THEREFORE in consideration of the mutual covenants contained in the Settlement Agreement and this Mutual Release and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Party agrees to release the other party on the following terms:

All terms herein commencing with initial capital letters shall bear the respective meanings set out in the Settlement Agreement.

Release

1.The Parties agree that the undersigned, their respective successors, assigns, associated and related partnerships, subsidiaries, affiliated and related companies, and each of their respective directors, officers, shareholders, employees, servants, agents, representatives, administrators, trustees, successors and assigns (and any party or parties who claim a right or interest through any of them) irrevocably and unconditionally release and discharge each other and any and all of their past, present or future respective successors, assigns, associated and related partnerships, subsidiaries, affiliated and related companies, and each of their respective directors, officers, shareholders, employees, servants, agents, representatives, administrators, trustees, successors and assigns from all actions, causes of action, claims, demands, damages, costs and expenses at law or in equity that they had or, now have from or arising out of any cause, matter or thing of which they are aware as of the Settlement Date or of which they could have been aware as of the Settlement Date with the exercise of reasonable diligence (the "Released Matters").

2.The Parties agree that they will make no future claim or take any proceedings against any other person or entity who might reasonably claim contribution, indemnity or other relief from the other Parties to this Mutual Final Release in respect of the Released Matters.

3.This Mutual Final Release shall operate conclusively as an estoppel of any future claim, action, complaint or proceeding regarding or related to the Released Matters. If any such claim, action, complaint or proceeding is brought, this Mutual Final Release may be pleaded as a complete defence and reply, and may be relied upon in any proceeding to dismiss the claim, action, complaint or proceeding on a summary basis and the Party commencing such proceedings shall indemnify the other Party for the full and actual costs and expenses of responding.

No Prior Assignment

4.The Parties declare and confirm that they have not assigned to any person or entity any of the claims, causes of action, suits or demands released by this Mutual Release.

Consideration

5.The Parties agree that the consideration set out in the Settlement Agreement, the receipt and sufficiency of which is acknowledged, is the sole consideration for this Mutual Release. The Parties have agreed further that they have voluntarily accepted the consideration to make full and final compromise, adjustment and settlement of all claims in respect of the Released Matters.

Confidentiality

6.No Party shall issue any press release or otherwise make public announcements with respect to the Settlement Agreement and this Mutual Release, with the exception of the press releases in Schedules “B” and “C” to the Settlement Agreement, without first advising the other Party of the intended press release, provided, however, that the intended press release is required by either Party’s overriding obligation to make any disclosure required under applicable laws, and the Party making such disclosure shall use all commercially reasonable efforts to give prior oral or written notice to the other Party and reasonable opportunity to review or comment on the disclosure, and if prior notice is not possible, to give such notice immediately following the making of such disclosure. Notwithstanding the foregoing, the Parties acknowledge that this Mutual Release may be publicly filed by either Emerald Health Therapeutics Inc. or Village Farms International, Inc. in accordance with applicable securities laws.

Independent Legal Advice

7.Each Party acknowledges that they have received independent legal advice before executing this Mutual Release. If any Party has executed this Mutual Release without the benefit of independent legal advice, such Party fully understands this Mutual Release and waives the right to receive any such independent legal advice.

No Admission of Liability

8.This Mutual Release is being entered to terminate the Disputes and other matters of controversy among the parties and no admissions of liability are made by any party. Each Party agrees that the terms of this Mutual Release are accepted voluntarily and not influenced by any representations of any kind made by the Parties, except such representations as outlined in the recitals to this Mutual Release.

Governing Law

9.This Mutual Release is governed by and shall be construed under the laws of Ontario and the laws of Canada as applicable.

Execution in Counterparts

10.The parties agree that this Mutual Release may be executed in counterparts and delivered by email or facsimile, and together the counterparts shall constitute the same instrument notwithstanding their date of actual execution.

[Signature page follows]

IN WITNESS WHEREOF Emerald and Village Farms have executed this Mutual Release this 2^nd day of March, 2020.

VILLAGE FARMS INTERNATIONAL, INC.

Per:______________________________

[Name]:

[Title]:

EMERALD HEALTH THERAPEUTICS, INC.

Per:______________________________

[Name]:

[Title]:

EMERALD HEALTH THERAPEUTICS CANADA INC.

Per:______________________________

[Name]:

[Title]:

PURE SUNFARMS CORP.

Per:______________________________

[Name]:

[Title]:

SCHEDULE "C"

Please see attached.

SCHEDULE "D"

Please see attached.

EX-10.9

Exhibit 10.9

EMPLOYMENT AGREEMENT

This Agreement (the "Agreement") entered into as of this 1^st day of June, 2018, (the "Effective Date") by and between Village Farms, L.P., a Delaware limited partnership (the "Partnership"); and        Bret T. Wiley (the "Employee").  The Partnership and the Employee are referred to herein collectively as "Parties" and individually as "Party."

WHEREAS, the Partnership desires to employ the Employee upon the terms and conditions set forth in this Agreement; and

WHEREAS, the Employee desires to serve as Senior Vice President of Sales and Sales Operations of the Partnership upon the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises contained herein, the Partnership and the Employee agree as follows:

SECTION 1. Employment Duties

The Partnership hereby employs the Employee, and the Employee hereby accepts employment with the Partnership, upon the terms and conditions set forth in this Agreement.  During the Term (as defined in Section 2 below), the Employee shall serve as the Partnership's Senior Vice President of Sales and Sales Operations, as well as in such other positions or capacities as may be reasonably requested by the Chief Executive Officer of the Partnership (the "CEO) (including, without limitation, serving as an officer of, or member of any committee of, the Partnership and/or any of the Related Companies (as defined in Section 2 below)) and shall have such powers, duties and responsibilities as are provided from time to time or that may be assigned by the CEO consistent with such position(s).  The Employee agrees to (a) devote substantially all of his business time to the business affairs of the Partnership and the Related Companies as directed by the Partnership, (b) perform all duties and fulfill all responsibilities incident to his employment in a manner reasonably expected of management in similar positions, (c) comply with the Partnership's policies and procedures in place from time to time, and (d) serve the Partnership faithfully and to the best of his ability.  The Employee's services under this Agreement shall be subject to reasonably necessary travel requirements of his position(s) and duties hereunder.  The Employee shall be responsible for all facets of the Partnership's global sales programs or other duties that maybe assigned by the CEO.  The foregoing shall not be construed to prohibit the Employee from (i) sitting on boards of directors of companies that are not engaged in a Competitive Business (as defined in Section 5 below) or engaging in charitable activities, provided that such board membership and/or charitable activities do not inhibit, conflict with or prohibit the performance of the Employee's duties hereunder or inhibit or conflict with the business of the Partnership or any of the Related Companies, and ⁽ⁱⁱ⁾ satisfying military obligations.

SECTION 2. TERM

The Employee's term of employment under this Agreement shall run from the Effective Date for a period of two (2) years (the "Term"), unless sooner terminated as provided hereunder.  If (a) the Term is not extended for a two-year period following its expiration, or (b) the Parties do not enter into a new employment agreement reasonably acceptable to all Parties (as applicable, "Non-Renewal"), the Employee shall continue to receive the Employee's then-current salary and benefits for sixty days following the expiration of the Term.

SECTION 3. Compensation and Benefits

For all services to be rendered by the Employee in any capacity during the Term, including, without limitation, services for the Partnership and its Parent, subsidiaries, affiliates or divisions (collectively, the "Related Companies"), the Partnership will pay and provide to the Employee, the following (subject, in each case, to the provisions of Section 4 below):

a)Salary.  During the Term, the Partnership shall pay to the Employee a base salary at a rate of $275,000 on an annualized basis (the "Base Salary"), which Base Salary will be reviewed periodically and subject to the granting of such other compensation, if any, as the CEO, in his discretion, may approve.  Base Salary payments shall be made to the Employee in a manner consistent with the payroll policies of the Partnership.

b)Short Term Incentive Plan.  For each fiscal year ending during the Term, Employee shall be eligible to earn an annual short term incentive performance bonus (the "STIP Bonus") in addition to the Employee's Base Salary.  The maximum STIP Bonus will be up to 30% of the Employee's Base Salary.  The payment of any STIP Bonus will be on or before three (3) months following the Partnership's fiscal year end.  The STIP Bonus for a fiscal year is not earned until the date that it is paid or payable.  Accordingly, in order for the Employee to be eligible to receive the STIP Bonus with respect to a fiscal year, the Employee must be employed by the Partnership on the date that such STIP Bonus is paid or payable. 

c)ParentCo Share-based Compensation Plan.  During the Term, the Employee shall be eligible to participate in the ParentCo's ("Parent-Co") Share-based Compensation Plan dated    January 1, 2010 or any similar successor equity compensation plan as may be in place from time to time (the "Share-based Compensation Plan"). Awards under the Share-based Compensation Plan are discretionary and can only be granted by the Compensation Committee of ParentCo's Board of Directors.  Such awards, if any, will be subject to the terms and conditions established within the Plan and a separate award agreement between the Employee and the Parent-Co that sets forth the terms of the award. 

d)Fringe Benefits.  During the Term, the Employee shall be entitled to participate in all employee benefit plans and programs (excluding severance plans, if any) made available by the Partnership for the benefit of its managerial employees at the Employee's level or to its employees generally, in each case, to the extent permissible under the general terms and provisions of such plans or programs and in accordance with the provisions thereof.  The Partnership may amend, modify or rescind any employee benefit plan or program and/or change employee contribution amounts to benefit costs without notice in its discretion. 

e)Business Expenses.  The Employee shall be entitled to receive reimbursement by the Partnership, subject to such requirements with respect to substantiation and documentation as may be reasonably specified by the Partnership, for all reasonable and necessary travel and other business expenses incurred by the Employee in the performance of his duties hereunder.  The Employee must adhere to the Partnership's policies and procedures for travel & entertainment to receive the requested reimbursement.

f)Vacation.  During the Term, Employee shall be entitled to twenty (20) paid vacation days per calendar year, which vacation days shall accrue, and may be used, in accordance with the policies of the Partnership in place from time to time.  The Employee may not carry-over more than five (5) accrued vacation days from one calendar year to the next calendar year.

g)Personal Days, Etc.  The Employee will be entitled to as many holidays, sick days and personal days as are in accordance with the Partnership's policy then in effect generally for its management, and such days off work will be taken at the same times as any such days off work are taken by the Employee pursuant to any employment agreement the Employee may have with any of the Related Companies (if any).

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h)Moving Expenses.  If the Partnership and Employee mutually agree that the Employee should change his primary office location to Florida, the Partnership will reimburse Employee for reasonable moving expenses.  A budget will be prepared and approved by the CEO prior to any expenses being incurred or reimbursed.   

SECTION 4. Termination

a)Notwithstanding the provisions of Section 2 of this Agreement, the Employee's employment under this Agreement shall terminate by either the Partnership or the Employee pursuant to Section 4(b) below.

b)Events of Termination.  This Agreement and the Employee's employment with Partnership shall terminate upon the occurrence of any one or more of the following events:

i.Death.  In the event of the Employee's death ("Death"), this Agreement and the Employee's employment with the Partnership shall automatically terminate on the date of Death.

ii.Disability.  If the Employee, due to physical or mental illness, is unable to perform the essential functions of the Employee's duties (with or without reasonable accommodation) for a continuous period of ninety (90) days or non-continuous period of one hundred twenty (120) days in any 12-month period ("Disability"), the Partnership may terminate this Agreement and the Employee's employment with the Partnership upon written notice of termination to the Employee ("Disability Termination Notice").  It is understood and agreed that return to work for brief periods, not exceeding five three-day periods during the 90-day period, shall not be deemed to have eliminated the continuity of the 90-day period.  If any question arises as to whether the Employee is unable to perform the essential functions of his duties (with or without reasonable accommodations) due to physical or mental illness, the Employee shall submit to an examination by a physician selected by the mutual agreement of the Partnership and the Employee, at the Partnership's expense.  The decision of the physician shall be certified in writing to the Partnership, shall be sent by the Partnership to the Employee or the Employee's representative, and shall be conclusive for purposes of this Agreement.  If within twenty (20) days after the Partnership's request, the Employee shall fail to submit to a physical examination, a determination by the Partnership shall be conclusive.  A termination due to Disability shall be effective immediately (or such later date that may be set forth in the written notice of termination to the Employee). 

iii.Termination by the Partnership for Cause.  The Partnership may terminate this Agreement and Employee's employment with the Partnership for Cause (as defined herein) upon the Partnership giving written notice of termination to the Employee.  The following acts or omissions by the Employee shall constitute "Cause" for immediate termination of this Agreement: (A) conduct by the Employee constituting a felony or other crime involving dishonesty, theft or an act of moral turpitude; (B) conduct of the Employee which is materially injurious, or reasonably likely to be materially injurious, to the Partnership or any Related Companies, monetarily or otherwise; (C) an act or acts of dishonesty by the Employee involving the Partnership or any Related Companies; (D) willful misconduct or gross negligence in the performance of the Employee's duties under this Agreement, (E) refusal by the Employee to perform his duties hereunder and, to the extent that such refusal or failure is subject to cure (as determined by the Partnership in its reasonable discretion) failure of the Employee to cure same within thirty (30) days after notice thereof to the Employee; provided, however, that no such notice and opportunity shall be required if the same refusal or failure occurs by the Employee after the initial refusal or failure has been cure; (F) any breach of the Employee's obligations under Section 5 of this Agreement, or (G) a material breach by the Employee of any of the other provisions of this Agreement and, to the extent that such breach is subject to cure (as determined by the Partnership in its reasonable discretion) failure of the Employee to cure same within thirty (30) days after notice thereof to the Employee; provided, however, that no such notice shall be required if the same breach occurs by the Employee after the initial breach has been cured.  A termination for "Cause" shall be effective immediately (or on such later date set forth in the written notice of termination to the Employee). 

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iv.Termination by the Partnership Without Cause.  The Partnership may terminate this Agreement and the Employee's employment with the Partnership at any time Without Cause (as defined below) by giving written notice of termination to the Employee. As used in this Agreement, ("Without Cause") means a termination of this Agreement and the Employee's employment by the Partnership for any reason or no reason (other than Cause or due to the Employee's Death or Disability).  A termination "Without Cause" shall be effective immediately (or on such later date set forth in the written notice of termination to the Employee). 

v.Voluntary Termination by the Employee. The Employee may terminate this Agreement and the Employee's employment with the Partnership for any reason or no reason ("Voluntary Termination") by giving at least thirty (30) days prior written notice of Voluntary Termination to the Partnership; provided, however, the Partnership reserves the right, upon written notice to the Employee, to accept the Employee's notice of Voluntary Termination and to accelerate such notice and make the Employee's Voluntary Termination effective immediately or on such other date prior to the Employee's intended last day of work as the Partnership deems appropriate.  It is understood and agreement that the Partnership's election to accelerate the Employee's notice of Voluntary Termination shall not be deemed a termination by the Partnership. The Employee's Voluntary Termination shall be effective as of the date set forth in the Employee's written notice of Voluntary Termination (or such earlier date set forth in the acceleration notice from the Partnership, if any). 

vi.Termination for Good Reason by Employee.  The Employee may terminate this Agreement and the Employee's employment with the Partnership for Good Reason (as defined below) by giving written notice of termination for Good Reason within thirty (30) days after the expiration of the Good Reason Cure Period (defined below); provided, however, the Partnership reserves the right, upon written notice to the Employee, to accept the Employee's notice of termination for Good Reason  and to accelerate such notice and make the Employee's termination for Good Reason effective immediately or on such other date prior to the Employee's intended last day of work as the Partnership deems appropriate.  It is understood and agreed that the Partnership's election to accelerate the Employee's notice of termination for Good Reason shall not be deemed a termination by the Partnership. For purposes of this Agreement, "Good Reason" shall mean the occurrence, without the Employee's prior consent of: (A) a change materially adverse to the Employee in the nature or scope of his position, functions, responsibilities or duties (B) the Partnership's breach of any material provision of this Agreement, as defined herein.  However, clauses (A) or (B) of this Section shall constitute "Good Reason" only if (i) the Employee provides the Partnership with written notice of the Employee's objection to such act or event within thirty (30) days after such event first occurs, (ii) the Partnership is afforded an opportunity to cure such event within thirty (30) days after the Partnership's receipt of such notice (the "Good Reason Cure Period"), and (iii) during the Good Reason Cure Period, the Employee cooperates in good faith with the Partnership's efforts to cure such event. For purposes of clarification, if the Partnership cures the Good Reason event during the Good Reason Cure Period, Good Reason shall not be deemed to have occurred.  The Employee's resignation for Good Reason shall be effective as of the date set forth in the Employee's notice of resignation for Good Reason to the Partnership (or such earlier date set forth in the acceleration notice from the Partnership, if any).

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c)Termination Benefits.

i.If the Employee's employment is terminated due to Cause, Voluntary Termination, Death or Disability, then this Agreement and the Employee's employment with the Partnership shall terminate and the Partnership's sole obligation to the Employee (or the Employee's estate, heirs, executors, administrators, representatives and assigns) under this Agreement or otherwise shall be to: (A) pay to the Employee any Base Salary earned, but not yet paid, prior to the effective date of termination, payable in accordance with the Partnership's standard payroll practices; (B) reimburse the Employee for any expenses incurred by the Employee through the date of termination in accordance with Section 3(f) above; (C) pay to the Employee (or the Employee's estate, heirs, executors, administrators, representatives and assigns) a "Death Benefit" in the amount equivalent to six (6) months' salary (less applicable withholdings and customary payroll deductions, excluding 401(k) contributions); and (D) pay and/or provide any amounts or benefits that are vested amounts or vested benefits or that the Employee is otherwise entitled to receive under any plan, program, policy or practice (with the exception of those, if any, relating to severance) on the effective date of termination, in accordance with such plan, program, policy, or practice (clauses (A), (B), (C) and (D) of this sentence are collectively referred to herein as the "Accrued Obligations").

ii.If the Employee's employment is terminated by the Partnership Without Cause, or is terminated by the Employee for Good Reason, then this Agreement and the Employee's employment hereunder shall terminate and the Partnership's sole obligation to the Employee (or the Employee's estate, heirs, executors, administrators, representatives and assigns) under this Agreement or otherwise shall be to: (A) pay and/or provide to the Employee the Accrued Obligations, in accordance with the terms set forth in Section 4(c)(i) above; and (B) subject to Section 4(c)(iii) below, during the Salary Continuation Period (as defined below) continue to pay to the Employee his Base Salary at the rate in effect immediately prior to the effective date of termination (the "Salary Continuation Payments"). As used herein, the "Salary Continuation Period" means the period beginning on the day following the effective date of termination and ending on the twelve (12) month anniversary of the effective date of termination.  Subject to Section 4(c)(iv) below, the Salary Continuation Payments (less applicable withholdings and customary payroll deductions, excluding 401(k) contributions) shall be payable in substantially equal installments in accordance with the Partnership's customary payroll practices and procedures, commencing on the next regular pay date following the 8th day after the Employee's execution and delivery of the Release (as defined in Section 4(c)(iii) below); provided, however, the first payment of the Salary Continuation Payments shall include the cumulative amount of payments that would have been paid to the Employee during the period of time between the effective date of termination and the date the Salary Continuation Payments commence had such payments commenced immediately following the effective date of termination.   

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Notwithstanding anything set forth in this Section 4(c)(ii) to the contrary, in the event of a breach by the Employee of his obligations under Section 5 of this Agreement or any material breach by the Employee of his obligations under the Release and in addition to any other remedies under this Agreement, the Release or at law or in equity, the Salary Continuation Period shall terminate as of the date of such breach and the Partnership shall have no further obligations under this Section 4(c)(ii) other than to pay the Accrued Obligations (to the extent not previously paid) and the Employee shall be required, upon demand, to return to the Partnership ninety percent (90%) of any Salary Continuation Payments made by the Partnership pursuant to this Section 4(c)(ii).

iii.The Salary Continuation Payments shall be contingent upon the Employee's execution, delivery within 21 days (or 45 days in the case of a group termination) following receipt, and non-revocation of a general release in a form satisfactory to the Partnership (the "Release").  The Release will be delivered to the Employee within ten (10) business days following the effective date of termination and will include, without limitation, a general release from all liability of the Partnership, the Related Companies, each of their respective officers, directors, shareholders, partners, managers, agents, employees and other related parties. Notwithstanding anything to the contrary contained herein, in the event that any payment hereunder is contingent upon the Employee's execution and delivery of the Release and the 21 (or 45 day) period covers more than one calendar year, the payment shall be paid in the second calendar year (on the first regular pay date of such calendar year following the date that the Release becomes effective and is no longer subject to revocation, all subject to Section 4(c)(iv) below), regardless of whether the Employee executes and delivers the Release in the first or the second calendar year encompassed in such 21 (or 45) day period.

iv.Notwithstanding anything set forth in Section 4(c)(ii) above to the contrary, if necessary to comply with the restriction in Section 409A(a)(2)(B) of the Internal Revenue Code of 1986, as amended (the "Code") concerning payments to "specified employees," any payment on account of the Employee's separation from service that would otherwise be due hereunder within six (6) months after such separation shall nonetheless be delayed until the first business day of the seventh month following the Employee's date of termination and the first such payment shall include the cumulative amount of any payments that would have been paid prior to such date if not for such restriction, together with interest on such cumulative amount during the period of such restriction at a rate, per annum, equal to the applicable federate short-term rate (compounded monthly) in effect under Section 1274(d) of the Code on the date of termination.  For purposes of Section 4 of this Agreement, the Employee shall be a "specified employee" for the 12-month period beginning on the first day of the fourth month following each "Identification Date" if the Employee is a "key employee" (as defined in Section 416(i) of the Code without regard to Section 416(i)(5) thereof) of the Partnership at any time during the 12-month period ending on the "Identification Date."  For purposes of the foregoing, the Identification date shall be December 31. 

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SECTION 5. Nondisclosure, Inventions and Noncompetition

a)Nondisclosure and Inventions.

i.Definitions.  For purposes of this Section 5, the following terms shall have the meanings set forth below.

"Competitive Business" means any business engaged in providing products and services competitive with those products and services offered by the Partnership or any Related Companies at the time of termination of Employee's employment.

"Confidential Information" means all information relating to the Partnership and any Related Companies and their respective customers and suppliers considered by the Partnership or any Related Companies to be confidential including, without limitation, (a) business plans, research, developments and marketing strategies, customer names and lists, employee names and information, product and service prices and lines, processes, designs, ideas, formulae, methods, financial information, costs, supplies, pricing information, computer programs, procedures, processes, methods, systems, strategies, production methods and (b) the Inventions and Trade Secrets (as defined below).  "Confidential Information" shall not include the foregoing that is or becomes (i) in the public domain other than through acts by the Employee, (ii) already lawfully in the Employee's  possession at the time of disclosure by the Partnership as evidenced by the Employee's  written records, (c) disclosed to the Employee by a third party who is not prohibited from disclosing the information pursuant to any fiduciary, contractual, or other duty to any Related Companies, or (d) required by law, rule, regulation or court order to be disclosed.

"Inventions" means discoveries, concepts, ideas, methods, formulae, techniques, developments, know-how, inventions, and improvements relating to the business of the Partnership and any of the Related Companies, whether or not patentable, conceived of or made by Employee at any time, whether before, during, or after business hours, or with the use of the facilities of the Partnership or any of the Related Companies, materials, or personnel, either solely or jointly with others after the Effective Date and during Employee's  employment by the Partnership.

"Trade Secrets" means any and all technology and information relating to businesses of the Partnership or any Related Companies or their respective patents, methods, formulae, software, algorithms, financial models, know-how, designs, products, processes, services, research development, inventions, systems, engineering, and manufacturing which have been designated and treated as trade secrets by the Partnership or any Related Companies and which provide competitive advantage to the Partnership or any Related Companies.

ii.Confidentiality; Partnership to Own Inventions.

a.Receipt of Confidential Information.  The Employee acknowledges that during Employee's employment as an Employee of the Partnership and as a result of the confidential relationship with the Related Companies established thereby, the Employee shall be receiving Confidential Information and that the Confidential Information is a highly valuable asset of the Partnership and Related Companies.           

b.Protection of Confidential Information.  The Employee shall use Confidential Information solely for their duties with the Partnership and any Related Companies.  The Employee will not disclose Confidential Information, directly or indirectly, at any time during or after employment by the Partnership except to persons authorized by the Partnership or Related Companies to receive this information or as required by law.  The Employee will not use Confidential Information, directly or indirectly, at any time during or after employment by the Partnership, for any personal benefit, for the benefit of any other person or entity, or in any manner adverse to the Partnership or any Related Companies.  

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c.Return of Confidential Information.  The Employee will immediately return or destroy all materials (including without limitation, written or printed documents, email and computer disks or tapes, whether machine or user readable, computer memory, and other information reduced to any recorded format or medium) containing, summarizing, abstracting or in any way relating to Confidential Information.  At the time Employee returns these materials a release will be signed that Employee has complied with the terms of this agreement. 

d.Disclosure and Ownership.  The Employee shall inform the Partnership promptly and fully of all Inventions by a written report, setting forth in detail a description of the invention, the procedures used and the results achieved.  All Inventions shall be and remain the sole property of the Partnership or any Related Companies designated by the CEO.  The Employee promptly shall execute and deliver to the designated Related Companies any instruments deemed necessary by it to effect disclosure and assignment of all Inventions to the designated Related Companies including, without limitation, assignments satisfactory to the designated Related Companies.  Upon request of the designated Related Companies, during and after the Employee's  employment with the Partnership, the Employee shall execute patent and copyright applications and any other instruments, reasonably deemed necessary by the designated Related Companies for the prosecution of such patent applications or the acquisition of letters patent or registration of copyrights in the United States and foreign countries based on such Inventions; provided, however, that if the Employee takes any action in connection with the foregoing obligation after the Employee's  employment with the Partnership is terminated, the designated Related Companies shall compensate the Employee at a reasonable rate to be agreed upon by the parties and shall promptly reimburse the Employee for any expenses incurred in satisfying such obligation.

e.Works for Hire.  To the extent the Inventions consist of original works of authorship which are made by the Employee (solely or jointly with others) within the scope of the Employee's employment and which are protectable by copyright, the Employee acknowledges that all such original works of authorship are "works for hire" as that term is defined in the United States Copyright Act (17 U.S.C., Section 101).

b)Noncompetition.  In consideration of the Employee's employment with the Partnership and in consideration of this Agreement, the Employee hereby covenants as follows:

i.Covenants.  Without the prior written consent of the CEO, during the Employee's tenure with the Partnership and for the Salary Continuation Period, if the Employee shall leave the employment of the Partnership, whether voluntarily or involuntarily, the Employee shall not directly or indirectly, personally, by agency, as an employee, through a corporation, partnership, limited liability partnership, or by any other entity, artifice, or device:

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a.own, manage, operate, control, employ or have any financial interest in or consult to, or lend the Employee's name to any enterprise, partnership, or other entity engaged in a Competitive Business in North America;

b.assist others in engaging in any Competitive Business in the manner described in the foregoing clause;

c.solicit or service in any way in connection with or relating to a Competitive Business, on behalf of the Employee or on behalf of or in conjunction with others, any supplier, client, customer, or prospective supplier, client, or customer, who had been serviced by the Partnership or any Related Companies in the one year period immediately preceding the date of termination, or any prospective supplier, client, or customer to whom a formal business presentation or substantiated offering of services had been made by Partnership within the 12 months immediately preceding the date of termination; or

d.actively solicit or induce employees of any of the Partnership or Related Companies to terminate their employment with the Partnership or such Related Companies or engage in any Competitive Business;

The covenants in this Section 5(b)(i) shall be specifically enforceable.  However, the covenants in this Section 5(b)(i) shall not be construed to prohibit the ownership of not more than five percent of the equity of any publicly held entity engaged in a Competitive Business, so long as the Employee is not otherwise engaged with such entity in any of the other activities specified in clauses (a) through (d).  Notwithstanding the foregoing, if Severance Payments are required to be made to the Employee and the Partnership does not make any such payments within 30 business days following the date on which the Partnership (by notice to the CEO) is given notice by the Employee that payment was not timely made, then the Employee's obligations under this Section 5(b) shall terminate.

ii.Severability of Covenants.  For purposes of this Section 5(b), the Employee and the Partnership intend that the above covenants-not-to-compete shall be construed as separate covenants, one for each activity and each geographic area.  If one or more of these covenants are adjudicated to be unenforceable, such unenforceable covenant shall be deemed eliminated from this Section 5(b) to the extent necessary to permit the remaining separate covenants to be enforced.

SECTION 6. Conflicting Agreements

The Employee represents and warrants that he is free to enter into this Agreement, that he has not made and will not make any agreements in conflict with the Agreement, and that he will not disclose to the Partnership or any Related Companies, nor use for the benefit of the Partnership or any Related Companies, any trade secrets or confidential information that are the property of any former employer or employers.

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SECTION 7. Indemnification

The Partnership shall indemnify the Employee for acts undertaken as an agent of the Partnership or Related Companies to the fullest extent provided under applicable law. 

SECTION 8. Assignment

a)Nonassignability.  Neither this Agreement nor any right or interest hereunder shall be assignable (i) by the Employee without the prior written consent of the Partnership, or (ii) by the Partnership without the prior written consent of the Employee, except that the Partnership may assign its rights hereunder in connection with the sale or disposition of the business and assets of the Partnership as a whole or in part.

b)No Attachment.  Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or assignment by operation of law; and any attempt, voluntary or involuntary, to effect such action shall be void and of no effect.

SECTION 9. Binding Agreement

This Agreement shall be binding upon the Partnership and inure to the benefit of the Partnership, the Related Companies and their respective successors and permitted assigns (including, without limitation, the purchaser of all or substantially all of the assets of the Partnership or any of the Related Companies).  This Agreement also shall be binding upon and inure to the benefit of the Employee and the Employee's heirs, administrators and permitted assigns. 

SECTION 10. Severability

If any provision of this Agreement shall be declared invalid or unenforceable, the remainder of this Agreement, or the application of such provision in circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each provision of this Agreement shall be valid and be enforceable to the fullest extent permitted by law.  If any provision contained in this Agreement shall be held to be excessively broad as to scope, activity or subject so as to be unenforceable at law, such provision shall be construed by limiting and reducing it so as to be enforceable to the extent compatible with the applicable law as it shall then appear.

SECTION 11. Notice

All notices or other communications which are required or permitted to be given to the parties under this Agreement shall be sufficient in all respects only if given in writing and delivered in person, by telecopy, by overnight courier, or by certified mail, postage prepaid, return receipt requested, to the receiving party and the current business or home address.  Notice shall be deemed given on the date of delivery, in the case of personal delivery or telecopy, or on the delivery or refusal date, as specified on the return receipt, in the case of overnight courier or certified mail.

SECTION 12. Waivers

The failure of any Party to require the performance of any term or obligation of the Agreement, or the waiver by any Party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

SECTION 13. Entire Agreement

This Agreement constitutes the entire understanding of the Employee and the Partnership with respect to the Employee's employment.  As of the Effective Date, this Agreement supersedes any prior agreement or arrangement (whether written or oral) relative to the Employee's employment with the Partnership.  No modification or waiver of any provisions of this Agreement shall be made unless made in writing and signed by the Employee and by such other person on behalf of the Partnership as the CEO may designate for such purpose.

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SECTION 14. Governing Law

Any and all actions or controversies arising out of this Agreement, Employee's employment with the Partnership or the termination hereof or thereof, including, without limitation, tort claims, shall be construed and enforced in accordance with the internal laws of the State of Florida without regard to the choice of law principles thereof. 

SECTION 15. Arbitration

Except with respect to the Partnership's and Employee's right to seek injunctive or other equitable relief (including, without limitation, pursuant to Section 5 above) or claims by the Employee for workers' compensation or unemployment compensation, any dispute, controversy or claim based upon, arising out of or relating to the interpretation and performance of this Agreement, the Employee's employment with the Partnership or any termination hereof or thereof or any matter relating to the foregoing shall be solely submitted to and finally settled by arbitration by a single arbitrator in accordance with the then-current rules of the American Arbitration Association ("AAA"), including, without limitation, claims for discrimination under any applicable federal, state or local law or regulation.  Any such arbitration shall be conducted in the Florida office of the AAA located closest to the Partnership's Florida office.  The single arbitrator shall be appointed from the AAA's list of arbitrators by the mutual consent of the Parties or, in the absence of such consent, by application of any Party to the AAA. A decision of the arbitrator shall be final and binding upon the Parties. The Parties agree that this Section 15 shall be grounds for dismissal of any court action commenced by either Party with respect to this Agreement, other than (i) post-arbitration actions seeking to enforce an arbitration award and the Party against whom enforcement is sought shall bear the expenses, including attorneys' fees, of enforcement, and (ii) actions seeking appropriate equitable or injunctive relief, including, without limitation, pursuant to Section 5 above.  The Partnership shall pay the pay the fees of the arbitrator and each Party shall be responsible for his/its own legal fees, costs of its experts and expenses of his/its witnesses. The arbitrator's remedial authority shall equal the remedial power that a court with competent jurisdiction over the Parties and their dispute would have.  Any award rendered shall be a reasoned award in writing and shall be final, binding and conclusive (without the right to an appeal, unless such appeal is based on fraud by the other Party in connection with the arbitration process) upon the Parties and any judgment on such award may be enforced in any court having jurisdiction, unless otherwise provided by law.  The Partnership and Employee acknowledge that it is the intention of the parties that this Section 15 shall apply to all disputes, controversies and claims, including, without limitation, any rights or claims the Employee may have under the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, the Equal Pay Act, the Florida Civil Rights Act, the Florida Equal Pay Law, the Florida Human Rights Act and all other federal, state or local laws, rules or regulations relating to employment discrimination or otherwise pertaining to this Agreement, Employee's employment or termination thereof. THE PARTNERSHIP AND EMPLOYEE KNOWINGLY AND VOLUNTARILY AGREE TO THIS ARBITRATION PROVISION AND ACKNOWLEDGE THAT ARBITRATION SHALL BE INSTEAD OF ANY CIVIL LITIGATION, MEANING THAT EMPLOYEE AND THE PARTNERSHIP ARE EACH WAIVING ANY RIGHTS TO A JURY TRIAL. 

SECTION 16. CAPTIONS

The captions set forth in this Agreement are for convenience only, and shall not be considered as part of this Agreement or as in any way limiting or amplifying the terms and provisions hereof.

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SECTION 17. 409A COMPLIANCE

a)This Agreement is intended to comply with the requirements of Section 409A of the Code ("Section 409A") and regulations promulgated thereunder.  To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A, the provision shall be read in such a manner so that all payments due under this Agreement shall comply with Section 409A.  For purposes of section 409A, each payment made under this Agreement shall be treated as a separate payment.  In no event may the Employee, directly or indirectly, designate the calendar year of payment.  Notwithstanding anything contained herein to the contrary, the Employee shall not be considered to have terminated employment with Employer for purposes of Section 4 hereof unless he would be considered to have incurred a "termination of employment" from the Employer within the meaning of Treasury Regulation §1.409A-1(h)(1)(ii).

b)All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the Employee's lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange for another benefit.

c)The Employee acknowledges that, while the Parties endeavor to have the Agreement comply with the requirements of Section 409A, any tax liability incurred by the Employee under Section 409A is solely the responsibility of the Employee.

SECTION 18. LEGAL COUNSEL

The Employee represents that the Partnership has previously recommended that the Employee engage counsel to assist him in reviewing this Agreement and all other matters relating to the Employee's employment relationship with the Employer.  The Employee acknowledges that, prior to executing this Agreement; the Employee has been given a reasonable opportunity to review the Agreement and to consult with counsel as to its content and is entering into this Agreement freely and voluntarily.  The Partnership and the Employee shall each bear their own costs and expenses in connection with the negotiation and execution of this Agreement.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

12

IN WITNESS WHEREOF, the Parties have signed, sealed and delivered this Agreement as of the date first written above and below.

VILLAGE FARMS, L.P.
By:	Village Farms of Delaware, L.L.C.       General Partner
By:	Agro Power Development, Inc.       Managing Member
By:
	Michael A. DeGiglio, Chief Executive Officer
Employee:
Bret T. Wiley

13

EX-21.1

EXHIBIT 21.1

Village Farms International, Inc.

Subsidiary Name	State or Country of Organization	Owned by Village Farms International, Inc.
VF Clean Energy, Inc.	Canada		100.0	%
Village Farms GP Inc.	Canada		100.0	%
Village Farms Canada Limited Partnership	British Columbia		1.0	%
Village Farms Canada Limited Partnership	Canada		99.0	%
VF Operations Canada Inc.	Canada		100.0	%
VF U.S. Holdings Inc.	Delaware		100.0	%
Agro Power Development, Inc.	Delaware		100.0	%
Village Farms of Delaware, L.L.C.	Delaware		100.0	%
Village Farms, L.P.	Delaware		99.0	%
Village Fields Hemp USA, LLC	Delaware		65.0	%
Arkansas Valley Green And Gold Hemp LLC	Delaware		60.0	%
Pure Sunfarms Corp.	Canada		57.4	%

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-230298) of Village Farms International, Inc. of:

1) our report dated April 1, 2020 relating to the financial statements of Village Farms International, Inc., and

2) our report dated March 31, 2020 relating to the financial statements of Pure Sunfarms Corp., which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Chartered Professional Accountants

Vancouver, Canada

April 1, 2020

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael A. DeGiglio, certify that:

1 I have reviewed this annual report on Form 10-K of Village Farms International, Inc. for the year ended December 31, 2019;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

April 1, 2020	/s/ Michael A. DeGiglio
	Name:	Michael A. DeGiglio
	Title:	Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stephen C. Ruffini, certify that:

1 I have reviewed this annual report on Form 10-K of Village Farms International, Inc. for the year ended December 31, 2019;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

April 1, 2020	/s/ Stephen C. Ruffini
	Name:	Stephen C. Ruffini
	Title:	Chief Financial Officer (Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of Village Farms International, Inc., (the “Company”) on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael A. DeGiglio, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

April 1, 2020	/s/ Michael A. DeGiglio
	Name:	Michael A. DeGiglio
	Title:	Chief Executive Officer (Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of Village Farms International, Inc., (the “Company”) on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen C. Ruffini, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

April 1, 2020	/s/ Stephen C. Ruffini
	Name:	Stephen C. Ruffini
	Title:	Chief Financial Officer (Principal Financial Officer)

XML

Accrued Liabilities

12 Months Ended

Dec. 31, 2019

Payables and Accruals [Abstract]

Accrued Liabilities

7 ACCRUED LIABILITIES

	December 31, 2019		December 31, 2018
Accrued third party accounts payable	$	804	$	774
Accrued audit and tax compliance fees		647		137
Accrued taxes		527		106
Accrued payroll		296		247
Accrued utilities		261		403
Accrued interest		162		184
Accrued rebates		131		57
Accrued propagation		51		550
Other		138		1,051
	$	3,017	$	3,509

XML

Defined Contribution Plan And Group Retirement Savings Plan

12 Months Ended

Dec. 31, 2019

Retirement Benefits [Abstract]

Defined Contribution Plan And Group Retirement Savings Plan

11 DEFINED CONTRIBUTION PLAN AND GROUP RETIREMENT SAVINGS PLAN

The Company sponsors a defined contribution plan established pursuant to Section 401(k) of the Internal Revenue Code. Subject to certain dollar limits, employees may contribute a percentage of their salaries to the plan, and the Company will match a portion of each employee’s contribution. This plan is in effect for U.S.-based employees only. The expense pertaining to this plan was $125 for 2019, $133 for 2018 and $138 for 2017.

The Company also sponsors a group registered retirement savings plan established pursuant to the Capital Accumulation Plan guidelines and applicable legislation. Subject to certain dollar limits, employees may contribute a percentage of their salaries to the plan, and the Company will match a portion of each employee’s contribution. This plan is in effect for Canada-based employees only. The expense pertaining to this plan was $11 for 2019, $9 for 2018 and $16 for 2017.

XML

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Summary of income tax provision (recovery)

The components of the provision for (recovery of) income tax for the years ended December 31, 2019 and 2018 are as follows:

	2019
	Current			Deferred			Total
Federal	$	—		$	(5,922	)	$	(5,922	)
State		8			(751	)		(743	)
Foreign		(19	)		818			799
	$	(11	)	$	(5,855	)	$	5,866

	2018
	Current		Deferred			Total
Federal	$	—	$	(1,786	)	$	(1,786	)
State		8		(187	)		(179	)
Foreign		422		(757	)		(335	)
	$	430	$	(2,730	)	$	(2,300	)

	2017
	Current			Deferred			Total
Federal	$	(232	)	$	(1,044	)	$	(1,276	)
State		24			(120	)		(96	)
Foreign		237			372			609
	$	29		$	(792	)	$	(763	)

Summary of effective income tax rate reconciliation

The provision for (recovery of) income taxes reflected in the consolidated statements of (loss) income for the years ended December 31, 2019, 2018 and 2017 differs from the amounts computed at the federal statutory tax rates. The principal differences between the statutory income tax (recovery) and the effective provision for (recovery of) income taxes are summarized as follows:

	Year Ended December 31,
	2019			2018			2017
(Loss) income before income taxes	$	(3,541	)	$	(9,815	)	$	(5,520	)
Tax (recovery) calculated at domestic tax rates applicable in the respective countries		(744	)		(2,061	)		(1,877	)
State tax adjustments		(350	)		—			(36	)
Non-deductible items		1,304			394			422
Capitalized debt amortization costs		(631	)		—			—
Share of (income) losses from joint venture		(4,367	)		(75	)		66
Unrealized foreign exchange		(276	)		(309	)		116
Deferred gains on non-cash contributions to joint venture		(2,407	)		—			(1,114	)
Differences attributed to joint venture capital transactions		(42	)		(56	)		(698	)
Tax rate differences on deferred items		1,472			92			(268	)
Foreign exchange on translation		—			—			132
Permanent and state true-up		63			(209	)		—
Statutory rate difference		—			—			2,550
Other		112			(76	)		(56	)
Provision for (recovery of) income taxes	$	(5,866	)	$	(2,300	)	$	(763	)

Summary of deferred tax assets and liabilities

Significant components of the Company’s net deferred income taxes at December 31, 2019 and 2018 are as follows:

	2019			2018
Deferred tax assets:
Other assets	$	2,536		$	2,239
Long-term debt		1,040			1,289
Tax losses: Non-capital and farm losses		11,553			5,974
Provisions: Debt and unit issuance costs		800			372
Tax losses: Capital losses		—			228
Joint venture shares		1,154			—
Joint venture property, plant and equipment: Valuation allowance		—			(478	)
Tax losses: Valuation allowance		(31	)		(25	)
		17,052			9,599
Deferred tax liabilities:
Joint venture shares		(2,593	)		(867	)
Property, plant and equipment		(8,333	)		(8,458	)
		(10,926	)		(9,535	)
Net tax assets	$	6,126		$	274

XML

Accrued Liabilities (Tables)

12 Months Ended

Dec. 31, 2019

Payables and Accruals [Abstract]

Schedule of accrued liabilities

	December 31, 2019		December 31, 2018
Accrued third party accounts payable	$	804	$	774
Accrued audit and tax compliance fees		647		137
Accrued taxes		527		106
Accrued payroll		296		247
Accrued utilities		261		403
Accrued interest		162		184
Accrued rebates		131		57
Accrued propagation		51		550
Other		138		1,051
	$	3,017	$	3,509

XML

Changes In Non-Cash Working Capital Items (Tables)

12 Months Ended

Dec. 31, 2019

Disclosure Of Changes In Non Cash Working Capital Items [Abstract]

Summary of changes in non cash working capital items

	For the Years Ended December 31,
	2019			2018			2017
Trade receivables	$	2,301		$	(33	)	$	(1,059	)
Inventories		9,042			(5,435	)		(895	)
Due from joint ventures		(3,530	)		—			—
Other receivables		(448	)		1,239			(1,062	)
Prepaid expenses and deposits		(370	)		(79	)		(134	)
Trade payables		(1,953	)		1,649			241
Accrued liabilities		(369	)		(284	)		207
Other assets, net of other liabilities		571			(206	)		(817	)
	$	5,244		$	(3,149	)	$	(3,519	)

XML

Financial Instruments - Summary of Fair Value, Assets and Liabilities Measured on Recurring Basis (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Financial assets
Cash and cash equivalents	$ 11,989	$ 11,920
Trade receivables	8,997	11,292
JV notes receivable	26,283	10,873
Right-of-use assets	3,582	176
Total	50,851	34,261
Financial liabilities
Trade payables and accrued liabilities	15,496	18,110
Line of credit	2,000	2,000
Lease liabilities	3,660	180
Debt	32,389	35,675
Total	53,545	55,965
Level 1 [Member]
Financial assets
Cash and cash equivalents	11,989	11,920
Trade receivables	8,997	11,292
JV notes receivable	26,283	10,873
Right-of-use assets	3,582	176
Total	50,851	34,261
Financial liabilities
Trade payables and accrued liabilities	15,496	18,110
Line of credit	2,000	2,000
Lease liabilities	3,660	180
Debt	0	0
Total	21,156	20,290
Level 2 [Member]
Financial assets
Cash and cash equivalents	0	0
Trade receivables	0	0
JV notes receivable	0	0
Right-of-use assets	0	0
Total	0	0
Financial liabilities
Trade payables and accrued liabilities	0	0
Line of credit	0	0
Lease liabilities	0	0
Debt	32,389	35,675
Total	32,389	35,675
Level 3 [Member]
Financial assets
Cash and cash equivalents	0	0
Trade receivables	0	0
JV notes receivable	0	0
Right-of-use assets	0	0
Total	0	0
Financial liabilities
Trade payables and accrued liabilities	0	0
Line of credit	0	0
Lease liabilities	0	0
Debt	0	0
Total	$ 0	$ 0

XML

Debt - Summary of Aggregate Annual Maturities of Long-Term Debt (Detail) $ in Thousands	Dec. 31, 2019 USD ($)
2020	$ 3,423
2021	28,459
2022	345
2023	162
Long-term debt	$ 32,389

XML

Leases - Schedule Includes Other Information About Leases (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($)
Leases [Abstract]
Operating cash flows from operating leases	$ 1,043
Operating cash flows from finance leases	7
Financing cash flows from finance leases	$ 83
Weighted Average Remaining Lease Term [Abstract]
Operating leases	4 years 1 month 6 days
Finance leases	1 year 8 months 12 days
Weighted Average Discount Rate [Abstract]
Operating leases	6.25%
Finance leases	6.25%

XML

Changes In Non-Cash Working Capital Items - (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Disclosure Of Changes In Non Cash Working Capital Items [Abstract]
Trade receivables	$ 2,301	$ (33)	$ (1,059)
Inventories	9,042	(5,435)	(895)
Due from joint ventures	(3,530)
Other receivables	(448)	1,239	(1,062)
Prepaid expenses and deposits	(370)	(79)	(134)
Trade payables	(1,953)	1,649	241
Accrued liabilities	(369)	(284)	207
Other assets, net of other liabilities	571	(206)	(817)
Total	$ 5,244	$ (3,149)	$ (3,519)

XML

Share Based Compensation Plan - Summary Of Stock Option (Detail)	12 Months Ended
	Dec. 31, 2019 USD ($) shares	Dec. 31, 2019 $ / shares shares	Dec. 31, 2018 USD ($) shares	Dec. 31, 2018 $ / shares shares	Dec. 31, 2017 USD ($) shares	Dec. 31, 2017 $ / shares shares	Dec. 31, 2016 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted Average Remaining Contractual Term (years), Beginning balance	10 years
Weighted Average Remaining Contractual Term (years), Ending balance	10 years
Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Options, Beginning balance | shares	2,164,999		2,337,732		2,116,065
Number of Options, Granted | shares	510,000		203,000		320,000
Number of Options, Excercised | shares	(212,332)		(365,733)		(91,667)
Number of Options, Forfeited/expired | shares	(10,001)				(6,666)
Number of Options, Forfeited | shares			(10,000)
Number of Options, Ending balance | shares	2,452,666		2,164,999		2,337,732		2,116,065
Number of Options, Excercisable | shares		1,707,337		1,648,670		1,752,739
Weighted Average Exercise Price, Beginning balance | $ / shares		$ 2.10		$ 1.59		$ 1.19
Weighted Average Exercise Price, Granted | $ / shares		16.32		5.79		4.04
Weighted Average Exercise Price, Exercised | $ / shares		1.29		0.98		0.90
Weighted Average Exercise Price, Forfeited/expired | $ / shares						1.48
Weighted Average Exercise Price, Forfeited | $ / shares		2.20		1.48
Weighted Average Exercise Price, Ending balance | $ / shares		5.12		2.10		1.59	$ 1.19
Weighted Average Exercise Price, Excercisable | $ / shares		$ 1.78		$ 1.43		$ 1.20
Weighted Average Remaining Contractual Term (years), Beginning balance	5 years 7 months 6 days		5 years 8 months 8 days		5 years 10 months 20 days		6 years 2 months 26 days
Weighted Average Remaining Contractual Term (years), Granted	9 years 2 months 8 days		9 years 5 months 8 days		9 years 8 months 15 days
Weighted Average Remaining Contractual Term (years), Exercised	4 years 10 months 6 days		2 years 8 months 4 days		4 years 1 month 2 days
Weighted Average Remaining Contractual Term (years), Ending balance	5 years 7 months 6 days		5 years 8 months 8 days		5 years 10 months 20 days		6 years 2 months 26 days
Weighted Average Remaining Contractual Term (years), Exercisable	4 years 2 months 4 days		4 years 8 months 26 days		4 years 10 months 9 days
Aggregate Intrinsic Value, Ending balance | $	$ 11,435		$ 5,553		$ 14,125
Aggregate Intrinsic Value, Excercisable | $	$ 10,736		$ 5,012		$ 11,295

XML

Summary Of Significant Accounting Policies - Summary Of Right Of Use Assets (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Jan. 01, 2019	Dec. 31, 2018
Lessee, Lease, Description [Line Items]
Right Of Use Assets Total	$ 97	$ 4,537	$ 176
Land [Member]
Lessee, Lease, Description [Line Items]
Right Of Use Assets Total		140
Building [Member]
Lessee, Lease, Description [Line Items]
Right Of Use Assets Total		4,017
Equipment [Member]
Lessee, Lease, Description [Line Items]
Right Of Use Assets Total		$ 380	$ 176

XML

Summary Of Significant Accounting Policies - Additional Information (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($) Customers	Dec. 31, 2018 USD ($) Customers	Dec. 31, 2017 USD ($)	Jan. 01, 2019
Significant Accounting Policies [Line Items]
Number Of Major Customers | Customers	1	2
Advertisement expenses	$ 83	$ 160	$ 201
Stock options vesting period	3 years
Stock options period of expiry	10 years
Description of uncertain position	The first step is recognition, where the Company evaluates whether an individual tax position has a likelihood of greater than 50% of being sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation processes. For tax positions that are currently estimated to have a less than 50% likelihood of being sustained, zero tax benefit is recorded.
Weighted Average Incremental Borrowing Rate				6.25%
Crop Inventory [Member]
Significant Accounting Policies [Line Items]
Inventory Write-down	$ 218	$ 401
Share-based Payment Arrangement, Tranche One [Member]
Significant Accounting Policies [Line Items]
Stock options vesting percentage	33.00%
Share-based Payment Arrangement, Tranche Two [Member]
Significant Accounting Policies [Line Items]
Stock options vesting percentage	33.00%
Share-based Payment Arrangement, Tranche Three [Member]
Significant Accounting Policies [Line Items]
Stock options vesting percentage	33.00%
Maximum [Member]
Significant Accounting Policies [Line Items]
Percentage of tax position likely to be sustained	50.00%
Minimum [Member]
Significant Accounting Policies [Line Items]
Percentage of tax position likely to be sustained	50.00%
Accounts Receivable [Member] | Major Customer [Member]
Significant Accounting Policies [Line Items]
Concentration Risk, Percentage	16.90%
Accounts Receivable [Member] | Major Customer One [Member]
Significant Accounting Policies [Line Items]
Concentration Risk, Percentage		13.80%
Accounts Receivable [Member] | Major Customer Two [Member]
Significant Accounting Policies [Line Items]
Concentration Risk, Percentage		11.50%
Revenue Benchmark [Member] | United States [Member]
Significant Accounting Policies [Line Items]
Concentration Risk, Percentage	83.00%	83.00%
Revenue Benchmark [Member] | Walmart [Member] | United States [Member]
Significant Accounting Policies [Line Items]
Concentration Risk, Percentage	11.80%
Revenue Benchmark [Member] | Kroger [Member] | United States [Member]
Significant Accounting Policies [Line Items]
Concentration Risk, Percentage	10.90%
Revenue Benchmark [Member] | Publix Super Markets [Member] | United States [Member]
Significant Accounting Policies [Line Items]
Concentration Risk, Percentage	10.60%
Produce Revenue [Member] | Kroger [Member]
Significant Accounting Policies [Line Items]
Concentration Risk, Percentage		11.40%
Produce Revenue [Member] | Publix Super Markets [Member]
Significant Accounting Policies [Line Items]
Concentration Risk, Percentage		12.00%

XML

Investment - Equity Method And Joint Ventures - Summary of company share of the joint venture (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Beginning Balance	$ 6,341
Ending Balance	41,334	$ 6,341
Pure Sunfarms [Member]
Beginning Balance	6,341	6,511
Investment in joint venture	18,717
Share of net income and loss	16,276	(171)
Ending Balance	41,334	6,341
Village Fields Hemp USA LLC [Member]
Beginning Balance
Investment in joint venture	7
Share of net income and loss	(2,464)
Losses applied against joint venture note receivable	2,457
Ending Balance	$ 0

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Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Operating Loss Carryforwards [Line Items]
Federal statutory tax rate of Canada	27.00%	27.00%	26.00%
Federal statutory tax rate of United States	21.00%	21.00%	34.00%
Effective tax rate	165.60%	23.40%	13.80%
Valuation allowance	$ 30	$ 504	$ 607
Net operating losses carry forwards	$ 48,285	24,340
Operating loss carry forwards, expiration year	2031
Uncertain tax benefits	$ 0	0
Income Tax Penalties and Interest	0	0
State and Local Jurisdiction [Member]
Operating Loss Carryforwards [Line Items]
Net operating losses carry forwards	$ 12,572	7,711
Operating loss carry forwards, expiration year	2020
Foreign Tax Authority [Member]
Operating Loss Carryforwards [Line Items]
Net operating losses carry forwards	$ 1,770	$ 408
Operating loss carry forwards, expiration year	2027

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Basis of Presentation

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Basis of Presentation

2 BASIS OF PRESENTATION

Basis of Presentation

These financial statements have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”) and the following accounting policies have been consistently applied in the preparation of the consolidated financial statements. Previously, the Company prepared its consolidated financial statements under International Financial Reporting Standards (“IFRS”) as permitted by securities regulators in Canada, as well as in the United States under the status of a Foreign Private Issuer as defined by the United States Securities and Exchange Commission (“SEC”). At the end of the second quarter of 2019, the Company determined that it no longer qualified as a Foreign Private Issuer under the SEC rules. As a result, beginning January 1, 2020 the Company is required to report with the SEC on domestic forms and comply with domestic company rules in the United States. The transition to US GAAP was made retrospectively for all periods from the Company’s inception.

Principles of Consolidation

Our consolidated financial statements include the accounts of our wholly owned subsidiaries. We consolidate variable interest entities (VIEs) when we have variable interests and are the primary beneficiary. We continually evaluate our involvement with VIEs to determine when these criteria are met. Material intercompany transactions and accounts have been eliminated in consolidation.

All intercompany transactions, balances and unrealized gains and losses from intercompany transactions are eliminated on consolidation.    

Functional and Presentation Currency

The functional currency for each entity included in these consolidated financial statements is the currency of the primary economic environment in which the entity operates. These consolidated financial statements are presented in United States dollars (“U.S. dollars”) which have been rounded to the nearest thousands, except per share amounts. Currency conversion to U.S. dollars is performed in accordance with ASC 830, Foreign Currency Matters.

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Segment and Geographic Information - Summary of net sales by the countries and property, plant and equipment, net of accumulated depreciation (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Revenues [Abstract]
Revenues	$ 144,568	$ 150,000	$ 158,406
Interest Expense [Abstract]
Interest expense	2,614	2,794	2,695
Investment Income, Net [Abstract]
Interest income	1,036	311
Depreciation [Abstract]
Depreciation	7,366	7,027	7,659
Gross Profit [Abstract]
Gross Profit	(7,345)	9,317	13,973
Property, Plant and Equipment [Abstract]
Property, plant and equipment, net	63,158	72,188
Assets [Abstract]
Assets	183,408	141,448
Corporate [Member]
Investment Income, Net [Abstract]
Interest income	1,036	311
United States [Member]
Property, Plant and Equipment [Abstract]
Property, plant and equipment, net	41,656	42,886
Assets [Abstract]
Assets	88,395	79,126
United States [Member] | Produce Business [Member]
Revenues [Abstract]
Revenues	120,745	124,699	132,464
Interest Expense [Abstract]
Interest expense	36	37	31
Depreciation [Abstract]
Depreciation	4,545	4,591	5,056
Gross Profit [Abstract]
Gross Profit	(14,153)	494	5,931
Canada [Member]
Property, Plant and Equipment [Abstract]
Property, plant and equipment, net	18,759	25,933
Assets [Abstract]
Assets	92,067	58,690
Canada [Member] | Produce Business [Member]
Revenues [Abstract]
Revenues	22,674	23,355	24,020
Interest Expense [Abstract]
Interest expense	2,507	2,668	2,563
Depreciation [Abstract]
Depreciation	1,917	1,564	1,807
Gross Profit [Abstract]
Gross Profit	7,486	8,659	7,946
Canada [Member] | Energy Business [Member]
Interest Expense [Abstract]
Interest expense	71	89	101
Depreciation [Abstract]
Depreciation	904	872	796
Gross Profit [Abstract]
Gross Profit	(678)	164	96
Energy - Canada [Member]
Property, Plant and Equipment [Abstract]
Property, plant and equipment, net	2,743	3,369
Assets [Abstract]
Assets	2,946	3,632
Energy - Canada [Member] | Energy Business [Member]
Revenues [Abstract]
Revenues	$ 1,149	$ 1,946	$ 1,922

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Consolidated Of Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Income Statement [Abstract]
Sales (note 14)	$ 144,568	$ 150,000	$ 158,406
Cost of sales	(151,913)	(140,683)	(144,433)
Gross margin (note 14)	(7,345)	9,317	13,973
Selling, general and administrative expenses	(16,762)	(14,108)	(14,875)
Stock compensation	(4,714)	(1,454)	(1,519)
Interest expense	(2,614)	(2,794)	(2,695)
Interest income	1,036	311
Foreign exchange gain (loss)	433	(1,047)	26
Other income	268	131	46
Gain on disposal of assets (note 5)	13,564		(8)
Loss on write-off of investment (note 5)	(1,184)
(Loss) before taxes and earnings of unconsolidated entities	(17,318)	(9,644)	(5,052)
Recovery of (provision for) income taxes (note 13)	5,866	2,300	763
Loss from consolidated entities after income taxes	(11,452)	(7,344)	(4,289)
Equity earnings from unconsolidated entities (note 5)	13,777	(171)	(468)
Net income (loss)	$ 2,325	$ (7,515)	$ (4,757)
Earnings per share:
Basic income(loss) per share (note 15)	$ 0.05	$ (0.17)	$ (0.12)
Diluted income (loss) per share (note 15)	$ 0.05	$ (0.17)	$ (0.12)
Weighted average number of common shares used in the computation of net income (loss) per share:
Basic	49,418,228	44,356,699	39,143,912
Diluted	51,178,981	44,356,699	39,143,912
Net income (loss)	$ 2,325	$ (7,515)	$ (4,757)
Other comprehensive income (loss):
Foreign currency translation adjustment	87	(171)	150
Comprehensive income (loss)	$ 2,412	$ (7,686)	$ (4,607)

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Debt (Tables)

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Schedule of maturities of long term debt

The aggregate annual principal maturities of long-term debt for the next five years and thereafter are as follows:

2020	$	3,423
2021		28,459
2022		345
2023		162
2024		—
Thereafter		—
	$	32,389

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Income Per Share

12 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

Income Per Share

15 INCOME PER SHARE

Basic net income (loss) per share is computed using the weighted average number of common shares outstanding for the period. Basic and diluted net income per ordinary share is calculated as follows:

	For the Years Ended December 31,
	2019		2018			2017
Numerator:
Net income (loss)	$	2,325	$	(7,515	)	$	(4,757	)
Denominator:
Weighted average number of common shares - Basic		49,418,228		44,356,699			39,143,912
Effect of dilutive securities- share-based employee options and awards		1,760,753		—			—
Weighted average number of common shares - Diluted		51,178,981		44,356,699			39,143,912
Antidilutive options and awards (1)		310,000		2,174,999			1,163,648
Net income (loss) per ordinary share:
Basic	$	0.05	$	(0.17	)	$	(0.12	)
Diluted	$	0.05	$	(0.17	)	$	(0.12	)

(1) Options to purchase shares of common stock and unvested RSUs are not included in the calculation of net income (loss) per share because the effect would have been anti-dilutive.

On March 24, 2020, the Company completed an underwritten public offering of 3,125,000 common shares in the capital of the Company (“Common Shares”), plus the exercise in full of the over-allotment option of 468,750 Common Shares (the “Offered Shares”) (note 18).

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Significant Accounting Policies, Judgments and Estimation Uncertainty (Policies)

12 Months Ended

Dec. 31, 2019

Significant Accounting Policies [Line Items]

Basis of Presentation

Basis of Presentation

These financial statements have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”) and the following accounting policies have been consistently applied in the preparation of the consolidated financial statements. Previously, the Company prepared its consolidated financial statements under International Financial Reporting Standards (“IFRS”) as permitted by securities regulators in Canada, as well as in the United States under the status of a Foreign Private Issuer as defined by the United States Securities and Exchange Commission (“SEC”). At the end of the second quarter of 2019, the Company determined that it no longer qualified as a Foreign Private Issuer under the SEC rules. As a result, beginning January 1, 2020 the Company is required to report with the SEC on domestic forms and comply with domestic company rules in the United States. The transition to US GAAP was made retrospectively for all periods from the Company’s inception.

Principles of Consolidation

Principles of Consolidation

Our consolidated financial statements include the accounts of our wholly owned subsidiaries. We consolidate variable interest entities (VIEs) when we have variable interests and are the primary beneficiary. We continually evaluate our involvement with VIEs to determine when these criteria are met. Material intercompany transactions and accounts have been eliminated in consolidation.

All intercompany transactions, balances and unrealized gains and losses from intercompany transactions are eliminated on consolidation.    

Foreign Currency

Functional and Presentation Currency

The functional currency for each entity included in these consolidated financial statements is the currency of the primary economic environment in which the entity operates. These consolidated financial statements are presented in United States dollars (“U.S. dollars”) which have been rounded to the nearest thousands, except per share amounts. Currency conversion to U.S. dollars is performed in accordance with ASC 830, Foreign Currency Matters.

Use of Estimates

Use of Estimates

The preparation of our financial statements in accordance with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Actual results could differ from these estimates and those differences could be material.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents consist of cash deposits held with banks, and other highly liquid short-term interest bearing securities with maturities at the date of purchase of three months or less.

Sales, Trade Receivables and Concentrations of Credit Risk

Sales, Trade Receivables and Concentrations of Credit Risk

For both 2019 and 2018, approximately 83% of the Company’s sales were in the United States. In 2019 three customers, Wal-mart, Kroger and Publix Super Markets, comprised 11.8%, 10.9% and 10.6% of sales, respectively. In 2018 two customers, Publix Super Markets and Kroger comprised 12.0% and 11.4% of sales, respectively.

Trade receivables, net of the allowance for doubtful accounts, represent their estimated net realizable value, which approximates fair value. Provisions for doubtful accounts are recorded based on historical collection experience and the age of the receivables. Receivables are written off when they are deemed uncollectible.

As of December 31, 2019, the Company’s trade receivables had one customer that represented more than 10% of the balance of trade receivables, representing 16.9% of the balance. As of December 31, 2018, the Company’s trade receivables had two customers that represented more than 10% of the balance of trade receivables, representing 13.8% and 11.5%. The Company believes that its expected credit losses are limited due to the protection afforded to the Company by the Perishable Agricultural Commodities Act (the “PACA”) for its sales in the United States, which represents the majority of the Company’s annual sales and accounts receivable at year end. The PACA protection gives a claim filed under the PACA first lien on all PACA assets (which include cash and trade receivables of the debtor).

Inventories

Inventories

Inventories, consisting of crop inventory, purchased produce inventory and spare parts inventory are valued at the lower of cost or net realizable value determined using weighted average cost or first-in first out methods. Costs included in crop inventory include but are not limited to raw material packaging, direct labor, overhead, and the depreciation of growing equipment and facilities determined at normal capacity. These costs are expensed as cost of sales when the crops are harvested and delivered throughout the various crop cycles, which end at various times throughout the year. Inventories consisted of the following:

	December 31, 2019		December 31, 2018
Crop inventory	$	15,281	$	24,249
Purchased produce inventory		530		643
Spare parts inventory		107		64
	$	15,918	$	24,956

As of December 31, 2019 and 2018 crop inventory was written down by $218 and $401, respectively, to its net realizable value.

Equity Method Investments And Variable Interest Entities

Equity Method Investments and Variable Interest Entities

The Company evaluates the method of accounting for investments in which it does not hold an equity interest of at least 50% based on the amount of control it exercises over the operations of the investee, exposure to losses in excess of its investment, the ability to significantly influence the investee and whether the Company is the primary beneficiary of the investee. Investments not qualifying for consolidation are accounted for under the equity method whereby the ongoing investment in the entity, consisting of its initial investment adjusted for distributions, gains and losses of the entity are classified as a single line in the consolidated statements of financial position and as a non-operating item in the consolidated statements of income (loss) and comprehensive income (loss).

The Company regularly monitors and evaluates the fair value of its equity investments. If events and circumstances indicate that a decline in the fair value of these assets has occurred and is other than temporary, the Company will record a charge in earnings from joint ventures in the consolidated statements of income (loss). The Company’s investments do not have a readily determinable fair value as none of them are publicly traded. The fair values of the Company’s equity investments are determined by discounting the estimated future cash flows of each entity. These cash flow estimates include assumptions on growth rates and future currency exchange rates (Level 3). The Company did not record an impairment charge on any of its equity investments in fiscal years 2019, 2018, or 2017, except as noted in Note 4.

Prior to the adoption of Accounting Standards Codification (“ASC”) 606 - ”Revenues from Contracts with Customers” the Company measured its nonmonetary equity contributions at the book value of the assets being contributed with no gain or loss being recognized. Following the adoption of ASC 606, the Company measures nonmonetary equity contributions at fair value, which provides for recognizing a gain or loss upon the derecognition of the nonmonetary assets.

Property, Plant and Equipment

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is allocated between cost of sales and SG&A expenses depending on the type of asset and is determined using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the remaining life of the lease or useful life of the asset, whichever is shorter. Maintenance and repairs are charged to cost of sales when incurred. Significant expenditures, which extend the useful lives of assets, are capitalized. Land is not depreciated. The estimated useful lives of the class of assets for the current and comparative periods are as follows:

Classification	Estimated Useful Lives
Leasehold and land improvements	5-20 years
Greenhouses and other buildings	4-30 years
Greenhouse equipment	3-30 years
Machinery and equipment	3-12 years

Construction in process reflects the cost of assets under construction, which are not depreciated until placed into service.

Revenue Recognition

Revenue Recognition

Prior to January 1, 2018, revenue from the sale of produce in the course of ordinary activities was measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue from the production and sale of power was measured at the fair value of the consideration received or receivable. Revenue was recognized when persuasive evidence existed that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration was probable, the associated costs and possible return of goods could be estimated reliably, there was no continuing management involvement with the goods, and the amount of revenue could be measured reliably. If it was probable that discounts would be granted and the amount could be measured reliably, then the discount was recognized as a reduction of revenue as the sales were recognized. The timing of the transfer of risks and rewards occurred at the time the produce had been successfully delivered, the risk of loss had passed to the customer, and collectability was reasonably assured.

Following the adoption of ASC 606 on January 1, 2018 using the modified retrospective transition approach the Company now recognizes revenue when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. In order to achieve this core principle, the Company applies a five-step process. The Company generates its revenue through the sale of grown produce and third party produce, with standard shipping terms and discounts, and through the production and sale of power. The Company’s produce revenue transactions consist of single performance obligations to transfer promised goods at a fixed price. Quantities to be delivered to the customer are determined at a point near the date of delivery through purchase orders they receive from the customer. The Company recognizes revenue when it has fulfilled a performance obligation, which is typically when the customer receives the goods and their performance obligation is complete. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring product. The amount of revenue recognized is reduced for estimated returns and other customer credits, such as discounts and rebates, based on the expected value to be realized. Payment terms are consistent with terms standard to the markets the Company serves. The Company maintains an allowance for doubtful accounts for the loss that would be incurred if a customer was unable to pay amounts due. The Company initially estimates the allowance required at the time of revenue recognition based on historical experience and makes changes to the allowance based on various factors, including changes in the customer’s financial condition or payment patterns.

The Company sells electricity to British Columbia Hydro and Power Authority. Revenues are recognized as the electricity is delivered to/consumed by the customer and is based on contractual usage rates and meter readings that measure electricity consumption. The Company has elected to exclude taxes collected from its customers assessed by government authorities that are both imposed on and concurrent with a specific revenue-producing transaction from our determination of transaction price.

Revenue received from shipping and handling fees is reflected in net sales. Shipping and handling costs are included in cost of sales as incurred or at the time revenue is recognized for the related goods, whichever comes first.

Impairments of Long-Lived Assets

Impairments of Long-Lived Assets

Long-lived assets, including intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Long-lived assets are grouped with other assets to the lowest level to which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Management assesses the recoverability of the carrying cost of the assets based on a review of projected undiscounted cash flows. If an asset is held for sale, management reviews its estimated fair value less cost to sell. Fair value is determined using pertinent market information, including appraisals or broker’s estimates, and/or projected discounted cash flows. In the event an impairment loss is identified, it is recognized based on the amount by which the carrying value exceeds the estimated fair value of the long-lived asset.

Segment Reporting

Segment Reporting

Operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer (“CEO”). Based on the aggregation criteria in ASC 280, Segment Reporting, the Company has identified two operating segments, the Produce Business and the Energy Business.

Foreign Currency Translation

Foreign Currency Translation

Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rates in effect at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated to the functional currency at the exchange rate in effect when the fair value was determined. Foreign currency differences are generally recognized in net income. Non-monetary items that are measured based on historical cost in a foreign currency are translated to the functional currency using the exchange rate in effect at the date of the transaction giving rise to the item.

Fair Value Measurements

Fair Value Measurements

Pursuant to the provisions of Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures (ASC 820), the Company measures certain assets and liabilities at fair value or discloses the fair value of certain assets and liabilities recorded at cost in the consolidated financial statements. Fair value is calculated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). ASC 820 establishes a fair value hierarchy which requires assets and liabilities measured at fair value to be categorized into one of three levels based on the inputs used in the valuation. The Company classifies assets and liabilities in their entirety based on the lowest level of input significant to the fair value measurement.

The three levels are defined as follows:

Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Observable inputs, other than those included in Level 1, based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.

Level 3: Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.

Transfers between levels of the fair value hierarchy are deemed to have occurred at the end of the reporting period in which the event or change of circumstances caused the transfer to occur.

Advertising

Advertising

Advertising costs are included in selling, general and administrative expenses and are expensed as incurred. These expenses totaled $83, $160 and $201 for the years ended 2019, 2018 and 2017, respectively.

Share-Based Compensation

Share-Based Compensation

The Company grants stock options and performance-based restricted stock (“RS”) to certain employees and directors.

The Company recognizes stock-based compensation using the fair value provisions prescribed by ASC Topic 718, Compensation — Stock Compensation. Accordingly, compensation costs for awards of stock-based compensation settled in shares are determined based on the fair value of the share-based instrument at the time of grant and are recognized as expense over the vesting period of the share-based instrument. The Company recognizes forfeitures as they occur.

Stock options generally vest over three years (33% per year following the grant date) and expire after ten years. Each tranche in an award is considered a separate award with its own vesting period. The fair value of each tranche is measured at the date of grant using the Black-Scholes option pricing model. Compensation expense is recognized over the tranche’s vesting period by increasing additional paid-in capital based on the number of awards expected to vest. The number of awards expected to vest is reviewed at least annually, with any impact recognized immediately.

The RS granted will be settled using the Company’s own equity and issued from treasury if the performance standard is met. The equity-settled share-based compensation is measured at the fair value of the Company’s common shares as at the grant date in accordance with the terms of the Company’s Stock Compensation Plan. The fair value determined at the grant date is charged to income when performance based vesting conditions are met, based on the number of RS that will eventually be converted to common shares, with a corresponding increase in equity.

Income Taxes

Income Taxes

Deferred income taxes are provided to recognize temporary differences between the financial reporting basis and the income tax basis of the Company’s assets and liabilities using currently enacted tax rates and laws. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

The Company evaluates uncertain income tax positions in a two-step process. The first step is recognition, where the Company evaluates whether an individual tax position has a likelihood of greater than 50% of being sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation processes. For tax positions that are currently estimated to have a less than 50% likelihood of being sustained, zero tax benefit is recorded. For tax positions that have met the recognition threshold in the first step, the Company performs the second step of measuring the benefit to be recorded. The actual benefits ultimately realized may differ from the Company’s estimates. In future periods, changes in facts and circumstances and new information may require the Company to change the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recorded in results of operations and financial position in the period in which such changes occur.

Basic and Diluted Income (Loss) Per Share

Basic and Diluted Income (Loss) Per Share

Basic income per share is computed using the weighted average number of common shares outstanding during the period. The treasury stock method is used for the calculation of diluted income per share. Under this method, the weighted average number of common shares outstanding assumes that the proceeds to be received on the exercise of dilutive share options are applied to repurchase common shares at the average market price for the period. Share options are dilutive when the average market price of the common shares during the period exceeds the exercise price of the options. Options to purchase shares of common stock and RS are not included in the calculation of net income (loss) per share when the effect is anti-dilutive.

New Accounting Pronouncements Adopted

New Accounting Pronouncements Adopted

Prior to the adoption of ASU 2016-02, Leases, for leases where the Company assumed substantially all the risks and rewards of ownership were classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset was accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases and rent expenses were recognized in the Company’s consolidated statements of (loss) income.

In February 2016, the FASB issued ASU 2016-02, Leases, and has subsequently issued several supplemental and/or clarifying ASU’s (collectively, “Topic 842”), which requires a dual approach for lease accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases may result in the lessee recognizing a right of use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize lease expense on a straight-line basis.

On January 1, 2019, the Company adopted Topic 842, using the modified retrospective method and did not restate prior periods. The Company elected to utilize the package of practical expedients that allows us to 1) not reassess whether any expired or existing contracts are or contain leases, 2) retain the existing classification of lease contracts as of the date of adoption, and 3) not reassess initial direct costs for any existing leases. The Company’s classes of assets include land leases, building leases and equipment leases.

On adoption, the Company recognized lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of Topic 842. These lease liabilities were measured at the present value of the remaining lease payments, discounted using the borrowing rate of the Company. The weighted average incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 6.25%. These leases are included in right-of-use assets, short-term lease liabilities and long-term lease liabilities in the consolidated statements of financial position. Right-of-use assets are amortized on a straight-line basis over the lease term.

For leases previously classified as finance leases the entity recognized the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right-of-use asset and the lease liability at the date of initial application.

Additionally, the Company has elected the short-term lease exception for all classes of assets, and does not apply the recognition requirements for leases of 12 months or less, and recognizes lease payments for short-term leases as expense either straight-line over the lease term or as incurred depending on whether the lease payments are fixed or variable. These elections are applied consistently for all leases.

	2019
Operating lease commitments disclosed as at December 31, 2018	$	5,064
Less: short-term leases recognized on a straight-line basis as expense		(210	)
		4,854
Discounted using the lessee’s incremental borrowing rate of 6.25% at the date of initial application		4,269
Add: additional leases identified on adoption of Topic 842		88
Add: finance lease liabilities recognized as at December 31, 2018		180
Lease liability recognized as at January 1, 2019	$	4,537
Of which are:
Current lease liabilities		871
Non-current lease liabilities		3,666
	$	4,537

The recognized right-of-use assets relate to the following types of assets:

	December 31, 2018		January 1, 2019
Land	$	—	$	140
Building		—		4,017
Equipment		176		380
Total right-of-use assets	$	176	$	4,537

New Accounting Pronouncements Not Yet Adopted

New Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” ASU 2019-12 simplifies the accounting for income taxes by removing exceptions within the general principles of Topic 740 regarding the calculation of deferred tax liabilities, the incremental approach for intraperiod tax allocation, and calculating income taxes in an interim period. In addition, the ASU adds clarifications to the accounting for franchise tax (or similar tax). which is partially based on income, evaluating tax basis of goodwill recognized from a business combination, and reflecting the effect of any enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The ASU is effective for fiscal years beginning after December 15, 2020, and will be applied either retrospectively or prospectively based upon the applicable amendments. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 removes the disclosure requirement for the amount and reasons for transfers between Level 1 and Level 2 fair value measurements as well as the process for Level 3 fair value measurements. In addition, the ASU adds the disclosure requirements for changes in unrealized gains and losses included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period as well as the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years and will be applied on a retrospective basis to all periods presented. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses.” The standard, including subsequently issued amendments, requires a financial asset measured at amortized cost basis, such as accounts receivable and certain other financial assets, to be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and requires the modified retrospective approach. Early adoption is permitted. Based on the composition of the Company’s trade receivables and other financial assets, current market conditions, and historical credit loss activity, the adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

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Investment - Equity Method And Joint Ventures - Summary of summarized financial information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Current liabilities
Borrowings – long term
Deferred tax liability
Village Fields Hemp USA LLC [Member]
Current assets
Cash and cash equivalents	$ 510
Inventory	9,308
Prepaid expenses and deposits	36
Non-current assets	1,476
Current liabilities
Current liabilities	(1,788)
Borrowings due to joint venture partner	(13,323)
Net assets	(3,781)
Reconciliation of net assets:
Accumulated retained earnings	(3,791)
Contributions from joint venture partners	10
Net assets	(3,781)
Revenue	106
Cost of sales	(232)
Selling, general and administrative expenses	(869)
Interest expense	(440)
Write down of inventory	(2,356)
Net income (loss)	(3,791)
Pure Sunfarms [Member]
Current assets
Cash and cash equivalents	7,356	1,731
Trade receivables	8,687	962
Inventory	21,745	5,101
Other current assets	6,964	730
Non-current assets	108,652	49,074
Current liabilities
Borrowings due to joint venture partner	(26,413)	(2,244)
Trade payables	(4,938)	(6,862)
Other current liabilities	(5,021)	(380)
Income taxes payable	(8,489)
Borrowings - current	(1,423)	(19,442)
Borrowings – long term	(13,089)
Deferred tax liability	(2,473)
Net assets	91,558	28,670
Reconciliation of net assets:
Accumulated retained earnings	26,679	(734)
Contributions from joint venture partners	63,481	31,008
Currency translation adjustment	1,398	(1,604)
Net assets	91,558	28,670
Revenue	62,341	3,691
Cost of sales	(15,067)	(1,154)
Gross margin	47,274	2,537
Selling, general and administrative expenses	(7,882)	(2,584)	$ (701)
Income (loss) from operations	39,392	(47)	(701)
Interest expense	(884)	(72)
Foreign exchange gain (loss)	(9)	(176)	(3)
Write down of fixed assets	(144)
Other income, net	26	18
Income (loss) before taxes	38,381	(277)	(704)
Provision for income taxes	(10,967)	55	192
Net income (loss)	$ 27,414	$ (222)	$ (512)

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Property, Plant and Equipment - Summary of Property, Plant and Equipment (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Property, Plant and Equipment [Line Items]
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	$ (80,206)	$ (78,043)
Property, plant and equipment, net	63,158	72,188
Land [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	3,204	3,932
Leaseholds and Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	3,820	3,821
Building [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	72,772	76,989
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	61,871	64,937
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 1,697	$ 552

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Summary Of Significant Accounting Policies - Summary of Inventory Current (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Inventory, Net [Abstract]
Inventory	$ 15,918	$ 24,956
Crop Inventory [Member]
Inventory, Net [Abstract]
Inventory	15,281	24,249
Purchased Produce [Member]
Inventory, Net [Abstract]
Inventory	530	643
Spare Parts Inventory [Member]
Inventory, Net [Abstract]
Inventory	$ 107	$ 64

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Cover Page - USD ($)	12 Months Ended
	Dec. 31, 2019	Apr. 01, 2020	Jun. 30, 2019
Cover [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Trading Symbol	VFF
Entity Registrant Name	Village Farms International, Inc.
Entity Central Index Key	0001584549
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Well-known Seasoned Issuer	No
Entity Shell Company	false
Entity Small Business	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Security Exchange Name	NASDAQ
Entity Address, Country	CA
Title of 12(b) Security	Common Shares, without par value
Entity File Number	001-38783
Entity Tax Identification Number	98-1007671
Entity Address, Address Line One	4700-80th Street
Entity Address, City or Town	Delta
Entity Address, State or Province	DE
Entity Address, Postal Zip Code	V4K 3N3
Local Phone Number	940-6012
City Area Code	604
Document Annual Report	true
Document Transition Report	false
Entity Public Float			$ 442,067,203
Entity Common Stock, Shares Outstanding		56,250,419

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Consolidated Statements of Equity - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive (Loss) Income [Member]	Retained Earnings [Member]
Beggining Balance at Dec. 31, 2016	$ 60,002	$ 24,954	$ 1,392	$ (541)	$ 34,197
Beggining Balance (in shares) at Dec. 31, 2016		38,882,945
Shares issued pursuant to public offering, net of issuance costs	9,769	$ 9,769
Shares issued pursuant to public offering, net of issuance costs (in shares)		2,500,000
Shares issued on exercise of stock options (note 16)	59	$ 59
Shares issued on exercise of stock options (note 16) (in shares)		91,667
Issuance of warrants for common shares	148		148
Share-based compensation (note 16)	1,519	$ 1,333	186
Share-based compensation (note 16) (in shares)		768,000
Cumulative translation adjustment	150			150
Net income (Loss)	(4,757)				(4,757)
Ending Balance at Dec. 31, 2017	66,890	$ 36,115	1,726	(391)	29,440
Ending Balance (in shares) at Dec. 31, 2017		42,242,612
Shares issued pursuant to public offering, net of issuance costs	15,737	$ 15,737
Shares issued pursuant to public offering, net of issuance costs (in shares)		3,097,200
Shares issued pursuant to private placement of common shares, net of issuance costs	7,755	$ 7,755
Shares issued pursuant to private placement of common shares, net of issuance costs (in shares)		1,886,793
Shares issued on exercise of stock options (note 16)	283	$ 434	(151)
Shares issued on exercise of stock options (note 16) (in shares)		365,733
Share-based compensation (note 16)	1,454	$ 831	623
Share-based compensation (note 16) (in shares)		50,334
Cumulative translation adjustment	(171)			(171)
Net income (Loss)	(7,515)				(7,515)
Ending Balance at Dec. 31, 2018	84,433	$ 60,872	2,198	(562)	21,925
Ending Balance (in shares) at Dec. 31, 2018		47,642,672
Shares issued pursuant to public offering, net of issuance costs	34,225	$ 34,225
Shares issued pursuant to public offering, net of issuance costs (in shares)		4,059,000
Shares issued on exercise of stock options (note 16)	208	$ 324	(116)
Shares issued on exercise of stock options (note 16) (in shares)		212,332
Share-based compensation (note 16)	4,715	$ 2,298	2,417
Share-based compensation (note 16) (in shares)		442,665
Warrants	466	$ 614	(148)
Warrants (in shares)		300,000
Cumulative translation adjustment	87			87
Net income (Loss)	2,325				2,325
Ending Balance at Dec. 31, 2019	$ 126,459	$ 98,333	$ 4,351	$ (475)	$ 24,250
Ending Balance (in shares) at Dec. 31, 2019		52,656,669

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Related Party Transactions And Balances - Schedule Of Related Party Transactions (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Related Party Transaction [Line Items]
Due from Joint Ventures	$ 26,283	$ 10,873
Pure Sunfarms [Member]
Related Party Transaction [Line Items]
Due from Joint Ventures	15,418	$ 10,873
VF Hemp [Member]
Related Party Transaction [Line Items]
Due from Joint Ventures	10,865
AVGG Hemp Joint Venture Agreement [Member]
Related Party Transaction [Line Items]
Due from Joint Ventures	$ 0

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Significant Accounting Policies, Judgments and Estimation Uncertainty

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Significant Accounting Policies, Judgments and Estimation Uncertainty

3 SIGNIFICANT ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATION UNCERTAINTY

The significant accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

Use of Estimates

The preparation of our financial statements in accordance with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Actual results could differ from these estimates and those differences could be material.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash deposits held with banks, and other highly liquid short-term interest bearing securities with maturities at the date of purchase of three months or less.

Sales, Trade Receivables and Concentrations of Credit Risk

For both 2019 and 2018, approximately 83% of the Company’s sales were in the United States. In 2019 three customers, Wal-mart, Kroger and Publix Super Markets, comprised 11.8%, 10.9% and 10.6% of sales, respectively. In 2018 two customers, Publix Super Markets and Kroger comprised 12.0% and 11.4% of sales, respectively.

Trade receivables, net of the allowance for doubtful accounts, represent their estimated net realizable value, which approximates fair value. Provisions for doubtful accounts are recorded based on historical collection experience and the age of the receivables. Receivables are written off when they are deemed uncollectible.

As of December 31, 2019, the Company’s trade receivables had one customer that represented more than 10% of the balance of trade receivables, representing 16.9% of the balance. As of December 31, 2018, the Company’s trade receivables had two customers that represented more than 10% of the balance of trade receivables, representing 13.8% and 11.5%. The Company believes that its expected credit losses are limited due to the protection afforded to the Company by the Perishable Agricultural Commodities Act (the “PACA”) for its sales in the United States, which represents the majority of the Company’s annual sales and accounts receivable at year end. The PACA protection gives a claim filed under the PACA first lien on all PACA assets (which include cash and trade receivables of the debtor).

Inventories

Inventories, consisting of crop inventory, purchased produce inventory and spare parts inventory are valued at the lower of cost or net realizable value determined using weighted average cost or first-in first out methods. Costs included in crop inventory include but are not limited to raw material packaging, direct labor, overhead, and the depreciation of growing equipment and facilities determined at normal capacity. These costs are expensed as cost of sales when the crops are harvested and delivered throughout the various crop cycles, which end at various times throughout the year. Inventories consisted of the following:

	December 31, 2019		December 31, 2018
Crop inventory	$	15,281	$	24,249
Purchased produce inventory		530		643
Spare parts inventory		107		64
	$	15,918	$	24,956

As of December 31, 2019 and 2018 crop inventory was written down by $218 and $401, respectively, to its net realizable value.

Equity Method Investments and Variable Interest Entities

The Company evaluates the method of accounting for investments in which it does not hold an equity interest of at least 50% based on the amount of control it exercises over the operations of the investee, exposure to losses in excess of its investment, the ability to significantly influence the investee and whether the Company is the primary beneficiary of the investee. Investments not qualifying for consolidation are accounted for under the equity method whereby the ongoing investment in the entity, consisting of its initial investment adjusted for distributions, gains and losses of the entity are classified as a single line in the consolidated statements of financial position and as a non-operating item in the consolidated statements of income (loss) and comprehensive income (loss).

The Company regularly monitors and evaluates the fair value of its equity investments. If events and circumstances indicate that a decline in the fair value of these assets has occurred and is other than temporary, the Company will record a charge in earnings from joint ventures in the consolidated statements of income (loss). The Company’s investments do not have a readily determinable fair value as none of them are publicly traded. The fair values of the Company’s equity investments are determined by discounting the estimated future cash flows of each entity. These cash flow estimates include assumptions on growth rates and future currency exchange rates (Level 3). The Company did not record an impairment charge on any of its equity investments in fiscal years 2019, 2018, or 2017, except as noted in Note 4.

Prior to the adoption of Accounting Standards Codification (“ASC”) 606 - ”Revenues from Contracts with Customers” the Company measured its nonmonetary equity contributions at the book value of the assets being contributed with no gain or loss being recognized. Following the adoption of ASC 606, the Company measures nonmonetary equity contributions at fair value, which provides for recognizing a gain or loss upon the derecognition of the nonmonetary assets.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is allocated between cost of sales and SG&A expenses depending on the type of asset and is determined using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the remaining life of the lease or useful life of the asset, whichever is shorter. Maintenance and repairs are charged to cost of sales when incurred. Significant expenditures, which extend the useful lives of assets, are capitalized. Land is not depreciated. The estimated useful lives of the class of assets for the current and comparative periods are as follows:

Classification	Estimated Useful Lives
Leasehold and land improvements	5-20 years
Greenhouses and other buildings	4-30 years
Greenhouse equipment	3-30 years
Machinery and equipment	3-12 years

Construction in process reflects the cost of assets under construction, which are not depreciated until placed into service.

Revenue Recognition

Prior to January 1, 2018, revenue from the sale of produce in the course of ordinary activities was measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue from the production and sale of power was measured at the fair value of the consideration received or receivable. Revenue was recognized when persuasive evidence existed that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration was probable, the associated costs and possible return of goods could be estimated reliably, there was no continuing management involvement with the goods, and the amount of revenue could be measured reliably. If it was probable that discounts would be granted and the amount could be measured reliably, then the discount was recognized as a reduction of revenue as the sales were recognized. The timing of the transfer of risks and rewards occurred at the time the produce had been successfully delivered, the risk of loss had passed to the customer, and collectability was reasonably assured.

Following the adoption of ASC 606 on January 1, 2018 using the modified retrospective transition approach the Company now recognizes revenue when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. In order to achieve this core principle, the Company applies a five-step process. The Company generates its revenue through the sale of grown produce and third party produce, with standard shipping terms and discounts, and through the production and sale of power. The Company’s produce revenue transactions consist of single performance obligations to transfer promised goods at a fixed price. Quantities to be delivered to the customer are determined at a point near the date of delivery through purchase orders they receive from the customer. The Company recognizes revenue when it has fulfilled a performance obligation, which is typically when the customer receives the goods and their performance obligation is complete. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring product. The amount of revenue recognized is reduced for estimated returns and other customer credits, such as discounts and rebates, based on the expected value to be realized. Payment terms are consistent with terms standard to the markets the Company serves. The Company maintains an allowance for doubtful accounts for the loss that would be incurred if a customer was unable to pay amounts due. The Company initially estimates the allowance required at the time of revenue recognition based on historical experience and makes changes to the allowance based on various factors, including changes in the customer’s financial condition or payment patterns.

The Company sells electricity to British Columbia Hydro and Power Authority. Revenues are recognized as the electricity is delivered to/consumed by the customer and is based on contractual usage rates and meter readings that measure electricity consumption. The Company has elected to exclude taxes collected from its customers assessed by government authorities that are both imposed on and concurrent with a specific revenue-producing transaction from our determination of transaction price.

Revenue received from shipping and handling fees is reflected in net sales. Shipping and handling costs are included in cost of sales as incurred or at the time revenue is recognized for the related goods, whichever comes first.

Impairments of Long-Lived Assets

Long-lived assets, including intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Long-lived assets are grouped with other assets to the lowest level to which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Management assesses the recoverability of the carrying cost of the assets based on a review of projected undiscounted cash flows. If an asset is held for sale, management reviews its estimated fair value less cost to sell. Fair value is determined using pertinent market information, including appraisals or broker’s estimates, and/or projected discounted cash flows. In the event an impairment loss is identified, it is recognized based on the amount by which the carrying value exceeds the estimated fair value of the long-lived asset.

Segment Reporting

Operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer (“CEO”). Based on the aggregation criteria in ASC 280, Segment Reporting, the Company has identified two operating segments, the Produce Business and the Energy Business.

Foreign Currency Translation

Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rates in effect at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated to the functional currency at the exchange rate in effect when the fair value was determined. Foreign currency differences are generally recognized in net income. Non-monetary items that are measured based on historical cost in a foreign currency are translated to the functional currency using the exchange rate in effect at the date of the transaction giving rise to the item.

Fair Value Measurements

Pursuant to the provisions of Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures (ASC 820), the Company measures certain assets and liabilities at fair value or discloses the fair value of certain assets and liabilities recorded at cost in the consolidated financial statements. Fair value is calculated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). ASC 820 establishes a fair value hierarchy which requires assets and liabilities measured at fair value to be categorized into one of three levels based on the inputs used in the valuation. The Company classifies assets and liabilities in their entirety based on the lowest level of input significant to the fair value measurement.

The three levels are defined as follows:

Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Observable inputs, other than those included in Level 1, based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.

Level 3: Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.

Transfers between levels of the fair value hierarchy are deemed to have occurred at the end of the reporting period in which the event or change of circumstances caused the transfer to occur.

Advertising

Advertising costs are included in selling, general and administrative expenses and are expensed as incurred. These expenses totaled $83, $160 and $201 for the years ended 2019, 2018 and 2017, respectively.

Share-Based Compensation

The Company grants stock options and performance-based restricted stock (“RS”) to certain employees and directors.

The Company recognizes stock-based compensation using the fair value provisions prescribed by ASC Topic 718, Compensation — Stock Compensation. Accordingly, compensation costs for awards of stock-based compensation settled in shares are determined based on the fair value of the share-based instrument at the time of grant and are recognized as expense over the vesting period of the share-based instrument. The Company recognizes forfeitures as they occur.

Stock options generally vest over three years (33% per year following the grant date) and expire after ten years. Each tranche in an award is considered a separate award with its own vesting period. The fair value of each tranche is measured at the date of grant using the Black-Scholes option pricing model. Compensation expense is recognized over the tranche’s vesting period by increasing additional paid-in capital based on the number of awards expected to vest. The number of awards expected to vest is reviewed at least annually, with any impact recognized immediately.

The RS granted will be settled using the Company’s own equity and issued from treasury if the performance standard is met. The equity-settled share-based compensation is measured at the fair value of the Company’s common shares as at the grant date in accordance with the terms of the Company’s Stock Compensation Plan. The fair value determined at the grant date is charged to income when performance based vesting conditions are met, based on the number of RS that will eventually be converted to common shares, with a corresponding increase in equity.

Income Taxes

Deferred income taxes are provided to recognize temporary differences between the financial reporting basis and the income tax basis of the Company’s assets and liabilities using currently enacted tax rates and laws. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

The Company evaluates uncertain income tax positions in a two-step process. The first step is recognition, where the Company evaluates whether an individual tax position has a likelihood of greater than 50% of being sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation processes. For tax positions that are currently estimated to have a less than 50% likelihood of being sustained, zero tax benefit is recorded. For tax positions that have met the recognition threshold in the first step, the Company performs the second step of measuring the benefit to be recorded. The actual benefits ultimately realized may differ from the Company’s estimates. In future periods, changes in facts and circumstances and new information may require the Company to change the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recorded in results of operations and financial position in the period in which such changes occur.

Basic and Diluted Income (Loss) Per Share

Basic income per share is computed using the weighted average number of common shares outstanding during the period. The treasury stock method is used for the calculation of diluted income per share. Under this method, the weighted average number of common shares outstanding assumes that the proceeds to be received on the exercise of dilutive share options are applied to repurchase common shares at the average market price for the period. Share options are dilutive when the average market price of the common shares during the period exceeds the exercise price of the options. Options to purchase shares of common stock and RS are not included in the calculation of net income (loss) per share when the effect is anti-dilutive.

New Accounting Pronouncements Adopted

Prior to the adoption of ASU 2016-02, Leases, for leases where the Company assumed substantially all the risks and rewards of ownership were classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset was accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases and rent expenses were recognized in the Company’s consolidated statements of (loss) income.

In February 2016, the FASB issued ASU 2016-02, Leases, and has subsequently issued several supplemental and/or clarifying ASU’s (collectively, “Topic 842”), which requires a dual approach for lease accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases may result in the lessee recognizing a right of use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize lease expense on a straight-line basis.

On January 1, 2019, the Company adopted Topic 842, using the modified retrospective method and did not restate prior periods. The Company elected to utilize the package of practical expedients that allows us to 1) not reassess whether any expired or existing contracts are or contain leases, 2) retain the existing classification of lease contracts as of the date of adoption, and 3) not reassess initial direct costs for any existing leases. The Company’s classes of assets include land leases, building leases and equipment leases.

On adoption, the Company recognized lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of Topic 842. These lease liabilities were measured at the present value of the remaining lease payments, discounted using the borrowing rate of the Company. The weighted average incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 6.25%. These leases are included in right-of-use assets, short-term lease liabilities and long-term lease liabilities in the consolidated statements of financial position. Right-of-use assets are amortized on a straight-line basis over the lease term.

For leases previously classified as finance leases the entity recognized the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right-of-use asset and the lease liability at the date of initial application.

Additionally, the Company has elected the short-term lease exception for all classes of assets, and does not apply the recognition requirements for leases of 12 months or less, and recognizes lease payments for short-term leases as expense either straight-line over the lease term or as incurred depending on whether the lease payments are fixed or variable. These elections are applied consistently for all leases.

	2019
Operating lease commitments disclosed as at December 31, 2018	$	5,064
Less: short-term leases recognized on a straight-line basis as expense		(210	)
		4,854
Discounted using the lessee’s incremental borrowing rate of 6.25% at the date of initial application		4,269
Add: additional leases identified on adoption of Topic 842		88
Add: finance lease liabilities recognized as at December 31, 2018		180
Lease liability recognized as at January 1, 2019	$	4,537
Of which are:
Current lease liabilities		871
Non-current lease liabilities		3,666
	$	4,537

The recognized right-of-use assets relate to the following types of assets:

	December 31, 2018		January 1, 2019
Land	$	—	$	140
Building		—		4,017
Equipment		176		380
Total right-of-use assets	$	176	$	4,537

New Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” ASU 2019-12 simplifies the accounting for income taxes by removing exceptions within the general principles of Topic 740 regarding the calculation of deferred tax liabilities, the incremental approach for intraperiod tax allocation, and calculating income taxes in an interim period. In addition, the ASU adds clarifications to the accounting for franchise tax (or similar tax). which is partially based on income, evaluating tax basis of goodwill recognized from a business combination, and reflecting the effect of any enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The ASU is effective for fiscal years beginning after December 15, 2020, and will be applied either retrospectively or prospectively based upon the applicable amendments. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 removes the disclosure requirement for the amount and reasons for transfers between Level 1 and Level 2 fair value measurements as well as the process for Level 3 fair value measurements. In addition, the ASU adds the disclosure requirements for changes in unrealized gains and losses included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period as well as the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years and will be applied on a retrospective basis to all periods presented. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses.” The standard, including subsequently issued amendments, requires a financial asset measured at amortized cost basis, such as accounts receivable and certain other financial assets, to be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and requires the modified retrospective approach. Early adoption is permitted. Based on the composition of the Company’s trade receivables and other financial assets, current market conditions, and historical credit loss activity, the adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

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Income Taxes - Summary Of Deferred Tax Assets And Liabilities (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Deferred tax assets:
Other assets	$ 2,536	$ 2,239
Long-term debt	1,040	1,289
Tax losses: Non-capital and farm losses	11,553	5,974
Provisions: Debt and unit issuance costs	800	372
Tax losses: Capital losses		228
Joint venture shares	1,154
Joint venture property, plant and equipment: Valuation allowance		(478)
Tax losses: Valuation allowance	(31)	(25)
Total deferred tax assets	17,052	9,599
Deferred tax liabilities:
Joint venture shares	(2,593)	(867)
Property, plant and equipment	(8,333)	(8,458)
Total deferred tax liabilities	(10,926)	(9,535)
Net tax assets	$ 6,126	$ 274

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Segment and Geographic Information

12 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

Segment and Geographic Information

14 SEGMENT AND GEOGRAPHIC INFORMATION

Segment reporting is prepared on the same basis that the Company’s Chief Executive Officer, who is the Company’s Chief Operating Decision Maker, manages the business, makes operating decisions and assesses performance. Management has determined that the Company operates in three segments. The Company’s three segments include the Produce business, the Energy business and the Company’s cannabis and hemp business. The Produce business produces, markets, and sells the product group which consists of premium quality tomatoes, bell peppers and cucumbers. The Energy business produces power that it sells per a long-term contract to its one customer. For segment information regarding the Company’s cannabis and hemp business refer to Note 5 – Investments – Equity Method and Joint Ventures.

The Company’s primary operations are in the United States and Canada. Segment information as of and for the years ended December 31, 2019, 2018 and 2017: 

	2019			2018		2017
Sales
Produce – U.S.	$	120,745		$	124,699	$	132,464
Produce – Canada		22,674			23,355		24,020
Energy – Canada		1,149			1,946		1,922
	$	144,568		$	150,000	$	158,406
Interest expense
Produce – U.S.	$	36		$	37	$	31
Produce - Canada		2,507			2,668		2,563
Energy – Canada		71			89		101
	$	2,614		$	2,794	$	2,695
Interest income
Corporate	$	1,036		$	311	$	—
	$	1,036		$	311	$	—
Depreciation
Produce – U.S.	$	4,545		$	4,591	$	5,056
Produce - Canada		1,917			1,564		1,807
Energy – Canada		904			872		796
	$	7,366		$	7,027	$	7,659
Gross margin
Produce – U.S.	$	(14,153	)	$	494	$	5,931
Produce - Canada		7,486			8,659		7,946
Energy – Canada		(678	)		164		96
	$	(7,345	)	$	9,317	$	13,973

Total assets	2019		2018
United States	$	88,395	$	79,126
Canada		92,067		58,690
Energy - Canada		2,946		3,632
	$	183,408	$	141,448
Property, plant and equipment, net	2019		2018
United States	$	41,656	$	42,886
Canada		18,759		25,933
Energy - Canada		2,743		3,369
	$	63,158	$	72,188

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Subsequent Events

12 Months Ended

Dec. 31, 2019

Subsequent Events [Abstract]

Subsequent Events

18 SUBSEQUENT EVENTS

On March 6, 2020 the Company and Emerald closed a settlement agreement in order to settle all outstanding disputes with respect to Pure Sunfarms (note 5).

On March 24, 2020, the Company completed an underwritten public offering of 3,125,000 Common Shares in the capital of the Company plus the exercise in full of the over-allotment option of 468,750 Common Shares at a price of $3.20 per Offered Share for aggregate gross proceeds to the Company of $11,500,000 (the “Offering”). The Offering was conducted by Beacon Securities Limited (the “Underwriter”), as sole underwriter. (All figures are expressed in Canadian dollars.)

The net proceeds to the Company from the Offering, after deducting the Underwriter’s fee of $0.69 million, but before deducting the expenses of the Offering, were $10.71 million.

On March 28, 2020, Pure Sunfarms secured a CA$7,500 revolving line of credit and CA$12,500 term credit facility. The Company, along with Emerald, are guarantors of the loan and as a condition of funding, the shareholders are required to contribute CA$16,000 of additional equity, of which CA$8,000 has been contributed by the Company (note 5). The Company has committed to contributing a further CA$8,000.

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Investment - Equity Method And Joint Ventures (Tables)

12 Months Ended

Dec. 31, 2019

Pure Sunfarms [Member]

Schedule of equity method investments [Line Items]

Summary of company share of the joint venture

The Company’s share of the joint venture consists of the following: (in $000’s of USD):

Balance, January 1, 2018	$	6,511
Share of loss for the year		(171	)
Balance, December 31, 2018	$	6,341
Balance, January 1, 2019	$	6,341
Investments in joint venture		18,717
Share of net income for the year		16,276
Balance, December 31, 2019	$	41,334

Summary of summarized financial information

	December 31, 2019			December 31, 2018
Current assets
Cash and cash equivalents (including restricted cash)	$	7,356		$	1,731
Trade receivables		8,687			962
Inventory		21,745			5,101
Other current assets		6,964			730
Non-current assets		108,652			49,074
Current liabilities
Trade payables		(4,938	)		(6,862	)
Borrowings due to joint venture partners		(26,413	)		(2,244	)
Income taxes payable		(8,489	)		—
Borrowings - current		(1,423	)		(19,442	)
Other current liabilities		(5,021	)		(380	)
Non-current liabilities
Borrowings – long term		(13,089	)		—
Deferred tax liability		(2,473	)		—
Net assets	$	91,558		$	28,670

Summarized financial information of Pure Sunfarms (in $000’s of USD):

	December 31,
	2019		2018
Reconciliation of net assets:
Accumulated retained earnings	$	26,679	$	(734	)
Contributions from joint venture partners		63,481		31,008
Currency translation adjustment		1,398		(1,604	)
Net assets	$	91,558	$	28,670

Summarized financial information of Pure Sunfarms (in $000’s of USD):

	Year ended December 31,
	2019			2018				2017
Revenue	$	62,341		$	3,691		$	—
Cost of sales*		(15,067	)		(1,154	)		—
Gross margin		47,274			2,537			—
Selling, general and administrative expenses		(7,882	)		(2,584	)		(701	)
Income (loss) from operations		39,392			(47	)		(701	)
Interest expense		(884	)		(72	)		—
Foreign exchange gain (loss)		(9	)		(176	)		(3	)
Write down of fixed assets		(144	)		—			—
Other income, net		26			18			—
Income (loss) before taxes		38,381			(277	)		(704	)
Provision for income taxes		(10,967	)		55			192
Net income (loss)	$	27,414		$	(222	)	$	(512	)

* Included in cost of sales for the years ended December 31, 2019, 2018 and 2017 is $2,671, $796 and $0 of depreciation expense.

Village Fields Hemp USA LLC [Member]

Schedule of equity method investments [Line Items]

Summary of company share of the joint venture

The Company’s share of the joint venture consists of the following:

Balance, beginning of the period	$	—
Investments in joint venture		7
Share of net loss		(2,464	)
Losses applied against joint venture note receivable		2,457
Balance, December 31, 2019	$	—

Summary of summarized financial information

Summarized financial information of VF Hemp:

	December 31, 2019
Current assets
Cash and cash equivalents	$	510
Inventory		9,308
Prepaid expenses and deposits		36
Non-current assets		1,476
Current liabilities		(1,788	)
Borrowings due to Village Farms		(13,323	)
Net assets	$	(3,781	)

	December 31, 2019
Reconciliation of net assets:
Net loss for the year ended December 31, 2019	$	(3,791	)
Contributions from joint venture partners		10
Net assets	$	(3,781	)

	Year ended December 31, 2019
Service revenue	$	106
Cost of sales		(232	)
General and administrative expenses		(869	)
Interest expense		(440	)
Write down of inventory		(2,356	)
Net loss	$	(3,791	)

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Debt

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Debt

6 DEBT

The Company has a Term Loan financing agreement with a Canadian creditor (“FCC Loan”). The non-revolving variable rate term loan has a maturity date of May 1, 2021 and a balance of $31,306 as of December 31, 2019. The outstanding balance is repayable by way of monthly installments of principal and interest based on an amortization period of 15 years, with the balance and any accrued interest to be paid in full on May 1, 2021. As of December 31, 2019 and 2018, borrowings under the FCC Loan agreement were subject to an interest rate of 6.391% and 7.082%, respectively.

The Company’s subsidiary VFCE has a loan agreement with a Canadian Chartered Bank that includes a non-revolving fixed rate loan of CA$3.0 million with a maturity date of June 2023 and fixed interest rate of 4.98%. As of December 31, 2019 and 2018, the balance was US$1,066 and US$1,279, respectively. The loan agreement also includes an uncommitted, non-revolving credit facility for up to CA$300 to cover Letters of Guarantee issued by the bank on behalf of the Company, with a maximum term of 365 days, renewable annually. The loan agreement also includes an uncommitted credit facility for up to CA$700 to support financing of certain capital expenditures. The Company received an initial advance of CA$250 in October 2017. Each advance is to be repaid on a five-year, straight-line amortization of principal, repaid in monthly installments of principal plus interest at an interest rate of CA$ prime rate plus 200 basis points. As of December 31, 2019 and 2018, the balance was US$106 and US$138, respectively.

The weighted average interest rate on short-term borrowings as of December 31, 2019 and 2018 was 6.2% and 6.9%, respectively.

The Company has a line of credit agreement with a Canadian Chartered Bank (“Operating Loan”). The revolving Operating Loan has a line of credit up to CA$13,000, less outstanding letters of credit totaling US$150 and CA$38, and variable interest rates with a maturity date on May 31, 2021. The Operating Loan is subject to margin requirements stipulated by the bank. As of December 31, 2019 and 2018, the amount drawn on this facility was US$2,000.

The Company’s borrowings (“Credit Facilities”) are subject to certain positive and negative covenants and is required to maintain certain minimum working capital. The Company received a waiver for its annual Debt Service Coverage and Debt to EBITDA covenants as of December 31, 2019.

Accrued interest payable on the credit facilities and loans as of December 31, 2019 and 2018 was $162 and $184, respectively, and these amounts are included in accrued liabilities in the statements of financial position.

As collateral for the FCC Loan, the Company has provided promissory notes, a first mortgage on the VFF-owned greenhouse properties (excluding the Delta 3 and Delta 2 greenhouse facilities), and general security agreements over its assets. In addition, the Company has provided full recourse guarantees and has granted security therein. The carrying value of the assets and securities pledged as collateral as at December 31, 2019 and 2018 was $155,548 and $101,537, respectively.

As collateral for the Operating Loan, the Company has provided promissory notes and a first priority security interest over its accounts receivable and inventory. In addition, the Company has granted full recourse guarantees and security therein. The carrying value of the assets pledged as collateral as at December 31, 2019 and 2018 was $24,915 and $36,248, respectively.

The aggregate annual principal maturities of long-term debt for the next five years and thereafter are as follows:

2020	$	3,423
2021		28,459
2022		345
2023		162
2024		—
Thereafter		—
	$	32,389

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Commitments And Contingencies

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

10 COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Company and its subsidiaries may become defendants in certain employment claims and other litigation. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. The Company is not involved in any legal proceedings other than routine litigation arising in the normal course of business, none of which the Company believes will have a material adverse effect on the Company’s business, financial condition or results of operations.

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Nature of Operations - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2019 MW
Village Fields Hemp USA LLC VF Hemp [Member]
Nature Of Operations [Line Items]
Equity ownership percentage	65.00%
Arkansas Valley Green and Gold Hemp [Member]
Nature Of Operations [Line Items]
Equity ownership percentage	60.00%
Pure Sunfarms Corp Pure Sunfarms Member [Member]
Nature Of Operations [Line Items]
Equity ownership percentage	53.50%
VF Clean Energy Inc [Member] | Power Plant [Member]
Nature Of Operations [Line Items]
Generation of Electricity	7.0

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Segment and Geographic Information (Tables)

12 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

Summary of net sales by the countries and property, plant and equipment, net of accumulated depreciation

The Company’s primary operations are in the United States and Canada. Segment information as of and for the years ended December 31, 2019, 2018 and 2017:

	2019			2018		2017
Sales
Produce – U.S.	$	120,745		$	124,699	$	132,464
Produce – Canada		22,674			23,355		24,020
Energy – Canada		1,149			1,946		1,922
	$	144,568		$	150,000	$	158,406
Interest expense
Produce – U.S.	$	36		$	37	$	31
Produce - Canada		2,507			2,668		2,563
Energy – Canada		71			89		101
	$	2,614		$	2,794	$	2,695
Interest income
Corporate	$	1,036		$	311	$	—
	$	1,036		$	311	$	—
Depreciation
Produce – U.S.	$	4,545		$	4,591	$	5,056
Produce - Canada		1,917			1,564		1,807
Energy – Canada		904			872		796
	$	7,366		$	7,027	$	7,659
Gross margin
Produce – U.S.	$	(14,153	)	$	494	$	5,931
Produce - Canada		7,486			8,659		7,946
Energy – Canada		(678	)		164		96
	$	(7,345	)	$	9,317	$	13,973

Total assets	2019		2018
United States	$	88,395	$	79,126
Canada		92,067		58,690
Energy - Canada		2,946		3,632
	$	183,408	$	141,448
Property, plant and equipment, net	2019		2018
United States	$	41,656	$	42,886
Canada		18,759		25,933
Energy - Canada		2,743		3,369
	$	63,158	$	72,188

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Leases (Table)

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Summary of lease related expenses

The components of lease related expenses are as follows:

	Year Ended December 31, 2019
Operating lease expense (a)	$	2,410
Finance lease expense:
Amortization of right-of-use assets		80
Interest on lease liabilities		7
Total finance lease expense	$	87

Schedule includes other information about leases

Cash paid for amounts included in the measurement of lease liabilities:

	Year Ended December 31, 2019
Operating cash flows from operating leases	$	1,043
Operating cash flows from finance leases	$	7
Financing cash flows from finance leases	$	83

	December 31, 2019
Weighted average remaining lease term:
Operating leases		4.1 years
Finance leases		1.7 years
Weighted average discount rate:
Operating leases		6.25	%
Finance leases		6.25	%

Summary of maturities of lease maturities

Maturities of lease liabilities are as follows:

	Operating leases			Finance leases
2020	$	1,073		$	65
2021		1,090			30
2022		869			9
2023		641			—
2024		276			—
Thereafter		113			—
Undiscounted lease cash flow commitments		4,062			104
Reconciling impact from discounting		(497	)		(9	)
Lease liabilities on consolidated balance sheet as of December 31, 2019	$	3,565		$	95

Summary of unadjusted lease commitments

The following table presents the Company’s unadjusted lease commitments as of December 31, 2018 as a required disclosure for companies adopting the lease standard prospectively without revising comparative period information.

	Operating leases		Finance leases
2019	$	1,253	$	78
2020		1,039		62
2021		1,052		30
2022		841		10
2023		618		—
Thereafter		261		—
	$	5,064	$	180

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Debt - Additional Information (Detail)	1 Months Ended	12 Months Ended
	Oct. 31, 2017 CAD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2019 CAD ($)	Dec. 31, 2018 CAD ($)
Disclosure Of Borrowings [Line Items]
Long term debt outstanding		$ 32,389,000
Debt payment terms		Each advance is to be repaid on a five-year, straight-line amortization of principal, repaid in monthly installments of principal plus interest at an interest rate of CA$ prime rate plus 200 basis points.
Line of credit outstanding		$ 106,000	$ 138,000
Amounts drawn on facility	$ 250,000
Weighted average interest rate		6.20%	6.90%	6.20%	6.90%
Prime Rate [Member]
Disclosure Of Borrowings [Line Items]
Basis on variable rate		CA$ prime rate plus 200 basis points
Basis spread on variable rate		2.00%
Accounts Payable And Accrued Liabilities [Member]
Disclosure Of Borrowings [Line Items]
Accrued interest payable		$ 162,000	$ 184,000
Revolving Operating Loan [Member]
Disclosure Of Borrowings [Line Items]
Maximum borrowing capacity		13,000		$ 13,000
Line of credit outstanding		150,000			$ 38,000
Amounts drawn on facility			2,000,000
Securities pledged as collateral		24,915,000	$ 36,248,000
Non-Revolving Variable Rate Term Loan 2021 [Member] | FCC Loan [Member]
Disclosure Of Borrowings [Line Items]
Long term debt outstanding		$ 31,306,000
Debt payment terms		The outstanding balance is repayable by way of monthly installments of principal and interest
Debt term		15 years
Debt interest rate		6.391%	7.082%	6.391%	7.082%
Securities pledged as collateral		$ 155,548,000	$ 101,537,000
Non-Revolving Fixed Rate Loan 2023 [Member]
Disclosure Of Borrowings [Line Items]
Debt interest rate		4.98%		4.98%
Maximum borrowing capacity				$ 3,000,000
Line of credit outstanding		$ 1,066,000	$ 1,279,000
Uncommitted Non-Revolving Credit Facility 2023 [Member]
Disclosure Of Borrowings [Line Items]
Maximum borrowing capacity				700
Uncommitted Non-Revolving Credit Facility 2023 [Member] | Letters Of Guarantee [Member]
Disclosure Of Borrowings [Line Items]
Debt term		365 days
Maximum borrowing capacity				$ 300

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Leases - Summary Of Lease Related Expenses (Parenthetical) (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Leases [Abstract]
Short-term lease costs	$ 1,287	$ 210

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Financial Instruments - Additional Information (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Fair Value Inputs Level 3 [Member]
Financial Instruments [Line Items]
Financial instruments net	$ 0	$ 0

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Subsequent Events - Additional information (Detail) - Subsequent Event [Member]	Mar. 28, 2020 CAD ($)	Mar. 24, 2020 USD ($) $ / shares shares
Subsequent Event [Line Items]
Capital Contribution	$ 16,000
Payments For Capital Contribution	8,000
Capital Commitments	8,000
Revolving Credit Facility [Member]
Subsequent Event [Line Items]
Maximum borrowing capacity	7,500
Term Credit Facility [Member]
Subsequent Event [Line Items]
Maximum borrowing capacity	$ 12,500
Underwritten Public Offering [Member]
Subsequent Event [Line Items]
Number of shares issued | shares		3,125,000
Sale of stock, price per share | $ / shares		$ 3.20
Gross proceeds from sale of stock		$ 11,500,000
Payments of Stock Issuance Costs		690,000
Net proceeds from sale of stock		$ 10,710,000
Over-Allotment Option [Member]
Subsequent Event [Line Items]
Number of shares issued | shares		468,750

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Share Based Compensation Plan - Summary Of Non-vested Stock Option (Detail) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2019 CAD ($) $ / shares shares	Dec. 31, 2019 $ / shares	Dec. 31, 2018 $ / shares shares	Dec. 31, 2017 $ / shares
Share-based Payment Arrangement [Abstract]
Beggining balance	516,329
Granted	510,000
Vested	(270,999)
Forfeited	(10,001)
Ending balance	745,329		516,329
Beggining balance | $ / shares	$ 2.27
Granted | (per share)	9.58	$ 9.58	$ 3.22	$ 2.09
Vested | $ / shares	1.89
Forfeited | $ / shares	1.06
Ending balance | $ / shares	$ 7.43
Ending balance | $	$ 699

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Consolidated Balance (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Allowance for doubtful accounts receivable	$ 5	$ 50
Common stock par value	$ 0	$ 0
Common stock shares authorized	Unlimited	Unlimited
Common Stock, Shares, Outstanding	52,656,669	47,642,672
Common Stock, Shares, Issued	52,656,669	47,642,672

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Income Per Share - Basic And Diluted Net Income Per Ordinary Share (Detail) - USD ($) $ / shares in Units, $ in Thousands		12 Months Ended
		Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Numerator:
Net income (Loss)		$ 2,325	$ (7,515)	$ (4,757)
Denominator:
Weighted average number of common shares - Basic		49,418,228	44,356,699	39,143,912
Effect of dilutive securities- share-based employee options and awards		1,760,753
Weighted average number of common shares - Diluted		51,178,981	44,356,699	39,143,912
Antidilutive options and awards	[1]	310,000	2,174,999	1,163,648
Net income (loss) per ordinary share:
Basic income(loss) per share		$ 0.05	$ (0.17)	$ (0.12)
Diluted income (loss) per share		$ 0.05	$ (0.17)	$ (0.12)

[1] Options to purchase shares of common stock and unvested RSUs are not included in the calculation of net income (loss) per share because the effect would have been anti-dilutive.

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Nature of Operations

12 Months Ended

Dec. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations

1 NATURE OF OPERATIONS

Village Farms International, Inc. (“VFF”) the parent company, together with its subsidiaries (collectively, the “Company”, “we”, “us”, or “our”) is incorporated under the Canada Business Corporation Act. VFF’s principal operating subsidiaries as of December 31, 2019 are Village Farms Canada Limited Partnership (“VFCLP”), Village Farms, L.P. (“VFLP”), and VF Clean Energy, Inc. (“VFCE”). The address of the registered office of VFF is 4700 80th Street, Delta, British Columbia, Canada, V4K 3N3. VFF owns a 65% equity interest in Village Fields Hemp USA LLC (“VF Hemp”), a 60% equity interest in Arkansas Valley Green and Gold Hemp (“AVGG Hemp) and a 53.5% equity interest in Pure Sunfarms Corp. (“Pure Sunfarms”), all of which are recorded as equity investees, see Investments in Joint Ventures (note 5).

The Company’s shares are listed on the Toronto Stock Exchange under the symbol VFF and are also listed in the United States on the Nasdaq Capital Market (“Nasdaq”) under the symbol VFF.

The Company owns and operates sophisticated, highly intensive agricultural greenhouse facilities in British Columbia and Texas, where it produces, markets and sells premium-quality tomatoes, bell peppers, and cucumbers. The Company, through its subsidiary VFCE, owns and operates a 7.0 MW power plant that generates electricity. The Company’s joint venture, Pure Sunfarms, is a licensed producer and supplier of cannabis products to be sold to other licensed providers and provincial governments across Canada. The Company’s joint ventures, VF Hemp and AVGG Hemp, are cultivators of high cannabidiol (“CBD”) hemp in multiple states in the United States.

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Defined Contribution Plan And Group Retirement Savings Plan - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Defined contribution plan expenses	$ 125	$ 133	$ 138
Foreign Plan [Member]
Defined contribution plan expenses	$ 11	$ 9	$ 16

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Income Taxes - Summary of income tax provision (recovery) (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Current	$ (11)	$ 430	$ 29
Deferred	(5,855)	(2,730)	(792)
Provision For (Recovery Of) Income Taxes	(5,866)	(2,300)	(763)
Federal [member]
Current	0		(232)
Deferred	(5,922)	(1,786)	(1,044)
Provision For (Recovery Of) Income Taxes	(5,922)	(1,786)	(1,276)
State [member]
Current	8	8	24
Deferred	(751)	(187)	(120)
Provision For (Recovery Of) Income Taxes	(743)	(179)	(96)
Foreign [member]
Current	(19)	422	237
Deferred	818	(757)	372
Provision For (Recovery Of) Income Taxes	$ 799	$ (335)	$ 609

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Investment - Equity Method And Joint Ventures - Additional Information (Detail) $ in Thousands				1 Months Ended	3 Months Ended	12 Months Ended
	Nov. 19, 2019 USD ($)	Mar. 31, 2019 USD ($) shares	Feb. 27, 2019 USD ($)	May 21, 2019 USD ($)	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2019 CAD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Mar. 20, 2020	Mar. 06, 2020 CAD ($)	Mar. 31, 2019 CAD ($)	Jun. 06, 2017
Investment in joint ventures						$ 41,334,000		$ 6,341,000
Grid loan to joint venture						26,283,000		10,873,000
Note receivable to joint ventures						14,507,000		10,462,000
Value of the contributed land and greenhouse facility						$ 13,950,000
Village Farms International [Member]
Equity ownership percentage				60.00%
Arkansas Valley Hemp [Member]
Equity ownership percentage				35.00%
Village Fields Hemp USA LLC [Member]
Equity ownership percentage				5.00%
Note receivable to joint ventures			$ 15,000,000
Pure Sunfarms [Member]
Equity ownership percentage						53.50%							50.00%
Shares acquired accounted under equity method | shares		25,000,000
Gain on disposal of assets		$ 13,600,000
Investment in joint ventures						$ 41,334,000		6,341,000	$ 6,511,000
Additional equity contribution						$ 18,717,000
Minority ownership percentage						46.50%
Percent of significant influence threshold limit						65.00%
Depreciation Expense						$ 2,671,000		796,000	$ 0
Pure Sunfarms [Member] | Subsequent Event [Member]
Equity ownership percentage											57.40%
Debt securities forfeited											$ 13,000
Accured interest on debt securities											1,100
Debt securities											$ 952
Percent of provision to purchase											40.00%
Additional equity transferred percent										2.50%
Pure Sunfarms [Member] | Subsequent Event [Member] | Further Years [Member]
Percent of provision to purchase											25.00%
Pure Sunfarms [Member] | Disposal Group Not Discontinued Operations [Member]
Fair value of assets of disposal groups		$ 18,700,000										$ 25,000
Village Fields Hemp USA LLC [Member]
Investment in joint ventures						0
Additional equity contribution						$ 7,000
Arkansas Valley Green and Gold Hemp [Member]
Investments write off				$ 1,184,000
VF Hemp [Member] | Village Farms International [Member]
Equity ownership percentage			65.00%
VF Hemp [Member] | Nature Crisp [Member]
Equity ownership percentage			35.00%
Delta Two Options Agreements [Member] | Pure Sunfarms [Member]
Additional equity contribution	$ 5,940,000
Grid Loan Agreement [Member] | Village Fields Hemp USA LLC [Member]
Simple interest rate on funds advanced						8.00%	8.00%
Grid loan to joint venture						$ 13,323
Loan maturity date						Mar. 25, 2022	Mar. 25, 2022
Supply Agreement [Member] | Pure Sunfarms [Member]
Unsatisfied purchase obligation					$ 7,200,000		$ 7,200

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Summary Of Significant Accounting Policies - Summary of lease liabilities (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Lessee, Lease, Description [Line Items]
Operating lease commitments disclosed as at December 31, 2018		$ 5,064
Less: short-term leases recognized on a straight-line basis as expense	$ (1,287)	(210)
Operating lease commitments net of short term lease cost		4,854
Discounted using the lessee's incremental borrowing rate of 6.25% at the date of initial application	3,565	4,269
Add: additional leases identified on adoption of Topic 842		88
Add: finance lease liabilities recognized as at December 31, 2018	$ 95	180
Lease liability recognized as at January 1, 2019		4,537
Current lease liabilities		871
Non-current lease liabilities		3,666
Total lease liabilities		$ 4,537

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Share Based Compensation Plan

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Share Based Compensation Plan

16 SHARE-BASED COMPENSATION PLAN

The Company’s Share-Based Compensation Plan (the “Plan”), dated January 1, 2010 was most recently approved by Shareholders on June 14, 2018. The Plan provides that the number of Common Shares reserved for issuance upon the exercise or redemption of awards granted under the Plan is a rolling maximum of ten percent (10%) of the outstanding Common Shares at any point in time. Approximately 2,074,000 shares remain available for issuance at December 31, 2019.

Stock options have been granted with an exercise price equal to the fair market value of the common stock on the date of grants and have a ten-year contractual term. The stock options vest ratably over a 3- year period. Compensation expense is recognized on a straight-line basis.

The fair market value of stock options is estimated using the Black-Scholes-Merton valuation model and the Company uses the following methods to determine its underlying assumptions: expected volatilities are based on the historical volatilities of the weekly closing price of the Company’s common stock; the expected term of options granted is based historical exercises and forfeitures; the risk-free interest rate is based on Canadian Treasury bonds issued with similar life terms to the expected life of the grant; and the expected dividend yield is based on the current annual dividend amount divided by the stock price on the date of grant. Forfeitures are recorded when incurred.

The following key assumptions were used in the valuation model to value stock option grants for each respective period:

	2019			2018			2017
Expected volatility		60.7	%		55.5	%		50.8	%
Dividend		$nil			$nil			$nil
Risk-free interest rate		1.86	%		2.30	%		1.43	%
Expected life		5.7 years			5.9 years			6.0 years
Fair value		CA$9.7259			CA$3.2541			CA$3.1869

Stock option transactions under the Company’s plan for the years ended December 31, 2019, 2018 and 2017 are summarized as follows:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2017		2,116,065			CA$1.19		6.24
Granted during 2017		320,000			CA$4.04		9.71
Exercised during 2017		(91,667	)		CA$0.90		4.09
Forfeited/expired during 2017		(6,666	)		CA$1.48
Outstanding at December 31, 2017		2,337,732			CA$1.59		5.89	$	14,125
Exercisable at December 31, 2017		1,752,739			CA$1.20		4.86	$	11,295
Granted during 2018		203,000			CA$5.79		9.44
Exercised during 2018		(365,733	)		CA$0.98		2.68
Forfeited during 2018		(10,000	)		CA$1.48
Outstanding at December 31, 2018		2,164,999			CA$2.10		5.69	$	5,553
Exercisable at December 31, 2018		1,648,670			CA$1.43		4.74	$	5,012
Granted		510,000			CA$16.32		9.19
Exercised		(212,332	)		CA$1.29		4.85
Forfeited		(10,001	)		CA$2.20
Outstanding at December 31, 2019		2,452,666			CA$5.12		5.60	$	11,435
Exercisable at December 31, 2019		1,707,337			CA$1.78		4.18	$	10,736

The weighted-average grant-date fair value of options granted during the years 2019, 2018 and 2017 was $9.58, $3.22 and $2.09, respectively. The total intrinsic value of options exercised during the years ended December 31, 2019, 2018 and 2017, was $1,999, $2,162 and $219, respectively.

A summary of the status of the Company’s non-vested stock options, and the changes during the year ended December 31, 2019, is presented below:

	Number of Options			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Non-vested at January 1, 2019		516,329			CA$2.27
Granted		510,000			CA$9.58
Vested		(270,999	)		CA$1.89
Forfeited		(10,001	)		CA$1.06
Non-vested at December 31, 2019		745,329			CA$7.43	$	CA$699

As of December 31, 2019, there was $855 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the stock option plan; that cost is expected to be recognized over a period of 8.98 years.

The Company has also issued performance-based restricted share units to Village Farms employees involved with future developments of the Company. Once a performance target is met and the share units are deemed earned and vested, compensation expense is recognized, based on the fair value of the share units on the grant date.

Performance-based restricted share unit activity for the years ended December 31, 2019, 2018 and 2017 is as follows:

	Number of Performance-based Restricted Share Units			Weighted Average Grant Date Fair Value
Outstanding at January 1, 2017		—
Issued		885,000			CA$2.20
Issued		21,000			CA$6.00
Exercised		(768,000	)		CA$2.20
Forfeited/expired		(10,000	)		CA$2.20
Outstanding at December 31, 2017		128,000			CA$2.82
Earned but unissued at December 31, 2017		—			—
Issued		979,000			CA$5.79
Exercised		(50,334	)		CA$3.06
Forfeited		—			—
Outstanding at December 31, 2018		1,056,666			CA$5.56
Earned but unissued at December 31, 2018		175,333			CA$5.08
Issued		355,000			CA$14.94
Exercised		(442,666	)		CA$7.82
Forfeited/expired		(230,000	)		CA$12.90
Outstanding at December 31, 2019		739,000			CA$6.58
Earned but unissued at December 31, 2019		30,000			CA$12.87

A summary of the status of the Company’s non-vested performance-based restricted share units, and the changes during the year ended December 31, 2019, is presented below:

	Number of Performance-based Restricted Share Units			Weighted Average Grant Date Fair Value
Non-vested at January 1, 2019		881,333			CA$5.63
Granted		355,000			CA$14.94
Vested		(297,333	)		CA$7.54
Forfeited		(230,000	)		CA$12.90
Non-vested at December 31, 2019		709,000			CA$10.21

Total share-based compensation expense for the years ended December 31, 2019, 2018 and 2017 of $4,714, $1,454 and $1,519, respectively, was recorded in selling, general and administrative expenses and the corresponding amount credited to additional paid in capital.

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Significant Accounting Policies, Judgments and Estimation Uncertainty (Tables)

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Schedule of Inventory, Current

 Inventories consisted of the following:

	December 31, 2019		December 31, 2018
Crop inventory	$	15,281	$	24,249
Purchased produce inventory		530		643
Spare parts inventory		107		64
	$	15,918	$	24,956

As of December 31, 2019 and 2018 crop inventory was written down by $218 and $401, respectively, to its net realizable value.

Schedule of Tangible Assets Useful Life

The estimated useful lives of the class of assets for the current and comparative periods are as follows:

Classification	Estimated Useful Lives
Leasehold and land improvements	5-20 years
Greenhouses and other buildings	4-30 years
Greenhouse equipment	3-30 years
Machinery and equipment	3-12 years

Schedule of Lease Liabilities

These elections are applied consistently for all leases.

	2019
Operating lease commitments disclosed as at December 31, 2018	$	5,064
Less: short-term leases recognized on a straight-line basis as expense		(210	)
		4,854
Discounted using the lessee’s incremental borrowing rate of 6.25% at the date of initial application		4,269
Add: additional leases identified on adoption of Topic 842		88
Add: finance lease liabilities recognized as at December 31, 2018		180
Lease liability recognized as at January 1, 2019	$	4,537
Of which are:
Current lease liabilities		871
Non-current lease liabilities		3,666
	$	4,537

Schedule of Right of Use Assets

The recognized right-of-use assets relate to the following types of assets:

	December 31, 2018		January 1, 2019
Land	$	—	$	140
Building		—		4,017
Equipment		176		380
Total right-of-use assets	$	176	$	4,537

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Share Based Compensation Plan (Tables)

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Summary of fair value of stock option valuation assumptions

	2019			2018			2017
Expected volatility		60.7	%		55.5	%		50.8	%
Dividend		$nil			$nil			$nil
Risk-free interest rate		1.86	%		2.30	%		1.43	%
Expected life		5.7 years			5.9 years			6.0 years
Fair value		CA$9.7259			CA$3.2541			CA$3.1869

Summary of stock based compensation stock option

Stock option transactions under the Company’s plan for the years ended December 31, 2019, 2018 and 2017 are summarized as follows:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2017		2,116,065			CA$1.19		6.24
Granted during 2017		320,000			CA$4.04		9.71
Exercised during 2017		(91,667	)		CA$0.90		4.09
Forfeited/expired during 2017		(6,666	)		CA$1.48
Outstanding at December 31, 2017		2,337,732			CA$1.59		5.89	$	14,125
Exercisable at December 31, 2017		1,752,739			CA$1.20		4.86	$	11,295
Granted during 2018		203,000			CA$5.79		9.44
Exercised during 2018		(365,733	)		CA$0.98		2.68
Forfeited during 2018		(10,000	)		CA$1.48
Outstanding at December 31, 2018		2,164,999			CA$2.10		5.69	$	5,553
Exercisable at December 31, 2018		1,648,670			CA$1.43		4.74	$	5,012
Granted		510,000			CA$16.32		9.19
Exercised		(212,332	)		CA$1.29		4.85
Forfeited		(10,001	)		CA$2.20
Outstanding at December 31, 2019		2,452,666			CA$5.12		5.60	$	11,435
Exercisable at December 31, 2019		1,707,337			CA$1.78		4.18	$	10,736

Summary of non-vested stock option

A summary of the status of the Company’s non-vested stock options, and the changes during the year ended December 31, 2019, is presented below:

	Number of Options			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Non-vested at January 1, 2019		516,329			CA$2.27
Granted		510,000			CA$9.58
Vested		(270,999	)		CA$1.89
Forfeited		(10,001	)		CA$1.06
Non-vested at December 31, 2019		745,329			CA$7.43	$	CA$699

Summary of performance base restricted share unit

Performance-based restricted share unit activity for the years ended December 31, 2019, 2018 and 2017 is as follows:

	Number of Performance-based Restricted Share Units			Weighted Average Grant Date Fair Value
Outstanding at January 1, 2017		—
Issued		885,000			CA$2.20
Issued		21,000			CA$6.00
Exercised		(768,000	)		CA$2.20
Forfeited/expired		(10,000	)		CA$2.20
Outstanding at December 31, 2017		128,000			CA$2.82
Earned but unissued at December 31, 2017		—			—
Issued		979,000			CA$5.79
Exercised		(50,334	)		CA$3.06
Forfeited		—			—
Outstanding at December 31, 2018		1,056,666			CA$5.56
Earned but unissued at December 31, 2018		175,333			CA$5.08
Issued		355,000			CA$14.94
Exercised		(442,666	)		CA$7.82
Forfeited/expired		(230,000	)		CA$12.90
Outstanding at December 31, 2019		739,000			CA$6.58
Earned but unissued at December 31, 2019		30,000			CA$12.87

Summary of non-vested performance-based restricted share units

A summary of the status of the Company’s non-vested performance-based restricted share units, and the changes during the year ended December 31, 2019, is presented below:

	Number of Performance-based Restricted Share Units			Weighted Average Grant Date Fair Value
Non-vested at January 1, 2019		881,333			CA$5.63
Granted		355,000			CA$14.94
Vested		(297,333	)		CA$7.54
Forfeited		(230,000	)		CA$12.90
Non-vested at December 31, 2019		709,000			CA$10.21

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Related Party Transaction And Balances (Tables)

12 Months Ended

Dec. 31, 2019

Related Party Transactions [Abstract]

Summary of Related Party Transactions [Table Text Block]

Amounts due from the joint ventures, including interest, as of December 31, 2019 and 2018 and included in the statements financial position:

	2019		2018
Pure Sunfarms	$	15,418	$	10,873
VF Hemp		10,865		—
AVGG Hemp		—		—
Total	$	26,283	$	10,873

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Related Party Transactions And Balances

12 Months Ended

Dec. 31, 2019

Related Party Transactions [Abstract]

Related Party Transaction And Balances

12 RELATED PARTY TRANSACTIONS AND BALANCES

On February 13, 2019, the Company announced that Pure Sunfarms had entered into a credit agreement with Bank of Montreal, as agent and lead lender, and Farm Credit Canada, as lender, in respect of a CA$20 million secured non-revolver term loan (the “Credit Facility”). The Credit Facility, which matures on February 7, 2022, is secured by the Delta 3 facility, and contains customary financial and restrictive covenants. The Company is not a party to the Credit Facility but has provided a limited guarantee in the amount of CA$10 million in connection with the Credit Facility.

As of December 31, 2019 and 2018, the Company had amounts due from its joint venture, Pure Sunfarms, totaling $4,610 and $1,079, respectively. The December 31, 2019 amount due from joint venture primarily relates to an equity contribution of CA$5,940 (US$4,494) to Pure Sunfarms made by the Company, on November 19, 2019 when Emerald failed to make a required escrow equity payment to Pure Sunfarms on November 1, 2019. Emerald disputed the Company’s additional November equity contribution, as well as the cancellation of 5.94 million common shares of Pure Sunfarms that related to the failure to pay the CA$5,940 equity contribution. In an effort to narrow the issues in dispute and accelerate the resolution of this shareholder dispute, which occurred on March 6, 2020 with the Settlement Agreement, Village Farms unwound its November equity contribution in January with Pure Sunfarms providing Village Farms with a CA$5,940 refund. For the calendar year end December 31, 2019 this was recorded as part of the amount due from Joint Venture. The balance of the 2019 and December 31, 2018 amount due from joint venture are non-interest bearing and due on demand.

On July 5, 2018, the Company entered into a Shareholder Loan Agreement (the “Loan Agreement”) with Pure Sunfarms, whereby, as of December 31, 2019, the Company contributed CA$13,000 (US$9,959) in the form of a demand loan to Pure Sunfarms. Effective January 1, 2019, the loan amounts bear simple interest at the rate of 6.2% per annum, calculated semi-annually. Interest will accrue and be payable upon demand being made by both Shareholders (see note 12).

On March 25, 2019, the Company entered into a Grid Loan Agreement (the “Grid Loan”) with VF Hemp, whereby, as of December 31, 2019, the Company had contributed approximately $13,323 in the form a grid loan to VF Hemp. The Grid Loan has a maturity date of March 25, 2022, and bears simple interest at the rate of 8% per annum, calculated monthly.

Under the terms of the AVGG Hemp Joint Venture Agreement, the Company agreed to lend approximately US$5 million to AVGG Hemp for start-up costs and working capital. The loan bore simple interest at the rate of 8% per annum, calculated monthly. As of December 31, 2019, the Company had loaned AVGG Hemp approximately $1,184. Immediately following AVGG Hemp’s fourth quarter harvest, all of the hemp was destroyed by a severe windstorm. As a result of the loss, the Company wrote off its $1,184 loan to AVGG Hemp. 

Amounts due from the joint ventures, including interest, as of December 31, 2019 and 2018 and included in the statements financial position:

	2019		2018
Pure Sunfarms	$	15,418	$	10,873
VF Hemp		10,865		—
AVGG Hemp		—		—
Total	$	26,283	$	10,873

One of the Company’s employees is related to a member of the Company’s executive management team and received approximately $110, $115 and $101 in salary and benefits during the years ended December 31, 2019, 2018 and 2017, respectively.

Included in other assets as of December 31, 2018 is a $64 promissory note that represents the unpaid amount the Company advanced to an employee in connection with a relocation at the request of the Company. The promissory note was paid in full June 10, 2019.

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Property Plant And Equipment

12 Months Ended

Dec. 31, 2019

Property, Plant and Equipment [Abstract]

Property Plant And Equipment

4 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

	December 31, 2019			December 31, 2018
Land	$	3,204		$	3,932
Leasehold and land improvements		3,820			3,821
Buildings		72,772			76,989
Machinery and equipment		61,871			64,937
Construction in progress		1,697			552
Less: Accumulated depreciation		(80,206	)		(78,043	)
Property, plant and equipment, net	$	63,158		$	72,188

Depreciation expense on property, plant and equipment, was $7,366, $7,027 and $7,659 for the years ending December 31, 2019, 2018 and 2017, respectively. On March 31, 2019, Pure Sunfarms exercised its option to acquire the Delta 2  assets and operations (note 5).

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Leases

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases

8 LEASES

The Company leases a parcel of land in Marfa, Texas that one of its greenhouses resides on as well as two distribution centers located in Fort Worth, Texas and Surrey, British Columbia. The Company also leases production related equipment at its greenhouses in Texas and British Columbia. In January the Company commenced leasing of an office building located in Lake Mary, Florida for its corporate headquarters.

The components of lease related expenses are as follows:

	Year Ended December 31, 2019
Operating lease expense (a)	$	2,410
Finance lease expense:
Amortization of right-of-use assets		80
Interest on lease liabilities		7
Total finance lease expense	$	87

(a) Includes short-term lease costs of $1,287 for the year ended December 31, 2019.

Cash paid for amounts included in the measurement of lease liabilities:

	Year Ended December 31, 2019
Operating cash flows from operating leases	$	1,043
Operating cash flows from finance leases	$	7
Financing cash flows from finance leases	$	83

	December 31, 2019
Weighted average remaining lease term:
Operating leases		4.1 years
Finance leases		1.7 years
Weighted average discount rate:
Operating leases		6.25	%
Finance leases		6.25	%

Maturities of lease liabilities are as follows:

	Operating leases			Finance leases
2020	$	1,073		$	65
2021		1,090			30
2022		869			9
2023		641			—
2024		276			—
Thereafter		113			—
Undiscounted lease cash flow commitments		4,062			104
Reconciling impact from discounting		(497	)		(9	)
Lease liabilities on consolidated balance sheet as of December 31, 2019	$	3,565		$	95

The following table presents the Company’s unadjusted lease commitments as of December 31, 2018 as a required disclosure for companies adopting the lease standard prospectively without revising comparative period information.

	Operating leases		Finance leases
2019	$	1,253	$	78
2020		1,039		62
2021		1,052		30
2022		841		10
2023		618		—
Thereafter		261		—
	$	5,064	$	180

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Share Based Compensation Plan - Summary Of Non-vested Performance-Based Restricted Share units (Detail)	12 Months Ended
	Dec. 31, 2019 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted	510,000
Non-Vested Performance-Based Restricted Share Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Performance-based Restricted Share Units, Beginning balance	881,333
Granted	355,000
Vested	(297,333)
Forfeited	(230,000)
Number of Performance-based Restricted Share Units, Ending balance	709,000
Weighted Average Grant Date Fair Value, Beginning balance | $ / shares	$ 5.63
Weighted Average Grant Date Fair Value Granted | $ / shares	14.94
Weighted Average Grant Date Fair Value Vested | $ / shares	7.54
Weighted Average Grant Date Fair Value Forfeited | $ / shares	12.90
Weighted Average Grant Date Fair Value, Ending balance | $ / shares	$ 10.21

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Share Based Compensation Plan - Summary Of Fair Value Assigned To The Option Issues (Detail)	12 Months Ended
	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2019 $ / shares	Dec. 31, 2018 $ / shares	Dec. 31, 2017 $ / shares
Share-based Payment Arrangement [Abstract]
Expected volatility	60.70%	55.50%	50.80%
Dividend | $
Risk-free interest rate	1.86%	2.30%	1.43%
Expected life	5 years 8 months 12 days	5 years 10 months 24 days	6 years
Fair value | $ / shares				$ 9.7259	$ 3.2541	$ 3.1869

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Accrued Liabilities (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Payables and Accruals [Abstract]
Accrued third party accounts payable	$ 804	$ 774
Accrued audit and tax compliance fees	647	137
Accrued taxes	527	106
Accrued payroll	296	247
Accrued utilities	261	403
Accrued interest	162	184
Accrued rebates	131	57
Accrued propagation	51	550
Other	138	1,051
Accrued liabilities	$ 3,017	$ 3,509

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Leases - Summary of maturities of lease matirities (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Leases [Abstract]
2020	$ 1,073
2021	1,090
2022	869
2023	641
2024	276
Thereafter	113
Undiscounted lease cash flow commitments	4,062
Reconciling impact from discounting	(497)
Lease liabilities on consolidated balance sheet as of December 31, 2019	3,565	$ 4,269
2020	65
2021	30
2022	9
2023	0
2024	0
Thereafter	0
Undiscounted lease cash flow commitments	104
Reconciling impact from discounting	(9)
Lease liabilities on consolidated balance sheet as of December 31, 2019	$ 95	$ 180

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Income Per Share (Tables)

12 Months Ended

Dec. 31, 2019

Income per share [Abstract]

Summary of basic and diluted net income per ordinary share

Basic net income (loss) per share is computed using the weighted average number of common shares outstanding for the period. Basic and diluted net income per ordinary share is calculated as follows:

	For the Years Ended December 31,
	2019		2018			2017
Numerator:
Net income (loss)	$	2,325	$	(7,515	)	$	(4,757	)
Denominator:
Weighted average number of common shares - Basic		49,418,228		44,356,699			39,143,912
Effect of dilutive securities- share-based employee options and awards		1,760,753		—			—
Weighted average number of common shares - Diluted		51,178,981		44,356,699			39,143,912
Antidilutive options and awards (1)		310,000		2,174,999			1,163,648
Net income (loss) per ordinary share:
Basic	$	0.05	$	(0.17	)	$	(0.12	)
Diluted	$	0.05	$	(0.17	)	$	(0.12	)

(1) Options to purchase shares of common stock and unvested RSUs are not included in the calculation of net income (loss) per share because the effect would have been anti-dilutive.

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Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2019

Investments, All Other Investments [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2019:

	Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	11,989		—		—	$	11,989
Trade receivables		8,997		—		—		8,997
JV notes receivable		26,283		—		—		26,283
Right-of-use assets		3,582		—		—		3,582
Total	$	50,851		—		—	$	50,851
Financial liabilities
Trade payables and accrued liabilities	$	15,496		—		—	$	15,496
Line of credit		2,000		—		—		2,000
Lease liabilities		3,660		—		—		3,660
Debt		—		32,389		—		32,389
Total	$	21,156	$	32,389		—	$	53,545

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2018:

	Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	11,920		—		—	$	11,920
Trade receivables		11,292		—		—		11,292
JV notes receivable		10,873		—		—		10,873
Right-of-use assets		176		—		—		176
Total	$	34,261		—		—	$	34,261
Financial liabilities
Trade payables and accrued liabilities	$	18,110		—		—	$	18,110
Line of credit		2,000		—		—		2,000
Lease liabilities		180		—		—		180
Debt		—		35,675		—		35,675
Total	$	20,290	$	35,675		—	$	55,965

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Investment - Equity Method And Joint Ventures

12 Months Ended

Dec. 31, 2019

Equity Method Investments and Joint Ventures [Abstract]

Investment – Equity Method And Joint Ventures

5 INVESTMENTS – EQUITY METHOD AND JOINT VENTURES

Pure Sunfarms Corp.

On June 6, 2017, the Company entered into an agreement to form Pure Sunfarms, a B.C. corporation, with Emerald Health Therapeutics Inc. (“Emerald”). The purpose of Pure Sunfarms is to produce, market and distribute cannabis in Canada. Village Farms held a 50% equity ownership interest in Pure Sunfarms in the form of common shares until November 19, 2019, at which time, upon entering the Settlement Agreement, the Company’s ownership increased to 53.5% through December 31, 2019.

Pursuant to the terms of a Supply Agreement that Pure Sunfarms had with Emerald, Emerald had a right to purchase 40% of Pure Sunfarms cannabis production at a fixed price, subject to the terms and conditions of the Supply Agreement. To the extent that Emerald did not fulfill its purchase obligation, Pure Sunfarms was able to sell that excess production to other parties in the open market. The Supply Agreement stipulated that Emerald was required to pay Pure Sunfarms the difference between the fixed price and the selling price realized from other parties. During the quarter ended September 30, 2019, Emerald did not fulfill its purchase obligation and Pure Sunfarms sold the product on the open market to arm’s length parties at prices lower than the fixed price in the Supply Agreement. As a result, under the terms of the Supply Agreement, Pure Sunfarms invoiced Emerald for the difference which amounted to approximately CA$7.2 million. These charges were disputed by Emerald when initially invoiced.

On March 6, 2020 the Company and Emerald closed a Settlement Agreement in order to settle all outstanding disputes with respect to their joint venture Pure Sunfarms. Under the terms of the Settlement Agreement:

• The 5,940,000 common shares of Pure Sunfarms that were placed in escrow pending Emerald’s CA$5,940 equity contribution to Pure Sunfarms (originally due in November 2019) were cancelled, effective as of November 19, 2019, and Village Farms and Emerald have ceased arbitration proceedings on the matter;

• Emerald forfeited and waived repayment by Pure Sunfarms of its outstanding CA$13.0 million shareholder loan to Pure Sunfarms (plus accrued interest of CA$1.1 million) and Emerald issued a promissory note to Pure Sunfarms in the amount of CA$952 related to certain amounts it owed Pure Sunfarms under the terms of the Supply Agreement;

• Pure Sunfarms released Emerald from all liabilities arising from their Supply Agreement under which Emerald had the provision to purchase 40% of Pure Sunfarms’ aggregate production in 2018 and 2019 including $7.2 million from the quarter ended September 30, 2019;

• On March 20, 2020, Emerald transferred 2.5% of additional equity in Pure Sunfarms to Village Farms;

• Pure Sunfarms and Emerald have released each other from their current supply agreement under which Emerald had the provision to purchase 25% of Pure Sunfarms’ aggregate cannabis production from the Delta facilities in 2020, 2021 and 2022; and

• Village Farms and Emerald have mutually released each other from all claims related to or arising from the disputes.

The net impact of the Settlement Agreement on the ownership of Pure Sunfarms, is that as of December 31, 2019, Village Farms owned 53.5% of Pure Sunfarms and Emerald owned 46.5% of Pure Sunfarms. Effective on the settlement date, March 6, 2020, Village Farms owned 57.4% of Pure Sunfarms (note 18).

In conjunction with the formation of Pure Sunfarms, Village Farms contributed the rights to lease and purchase the Delta 3 land and greenhouse facility to the joint venture. The contribution of the rights has been accounted for as a reduction of the land and greenhouse facility in exchange for the investment in Pure Sunfarms Corp. The net book value of the contributed land and greenhouse facility was $13,950. The Company recorded the investment at net book value. No gain was recognized. Prior to the adoption of ASC 606 the Company measured its nonmonetary equity contributions at the net book value of the assets being contributed with no gain or loss being recognized.

On March 31, 2019, Pure Sunfarms exercised its option to utilize the Delta 2 assets and operations. The contribution of the assets has been accounted for as a disposal of the land, greenhouse facility and other assets in exchange for 25,000,000 common shares of Pure Sunfarms. This was a non-cash transaction, and it was estimated that the fair value of the land, building and other assets was $18.7 million (CA$25 million) at the date of contribution. The Company recognized a gain of $13.6 million on the contribution of the fixed assets. As of December 31, 2019 and 2018, the total investment in Pure Sunfarms of US$41.3 million and US$6.3 million, respectively, is recorded in the consolidated statements of financial position. Following the adoption of ASC 606, the Company measures nonmonetary equity contributions at fair value, which provides for recognizing a gain or loss upon the de-recognition of the nonmonetary assets. This is contrary to the non-monetary contribution of Delta 3 whereby a gain could not be recognized and the investment was recognized at net book value, as at the time ASC 606 was not applicable.

The Company accounts for its investment in Pure Sunfarms, in accordance with ASC 323 – Equity Method and Joint Ventures (“ASC 323”), using the equity method. The Company has determined that Pure Sunfarms is a variable interest entity (“VIE”), however the Company does not consolidate Pure Sunfarms because the Company is not the primary beneficiary. Although the Company is able to exercise significant influence over the operating and financial policies of Pure Sunfarms through its 53.5% ownership interest and joint power arrangement with Emerald, the Company shares joint control of the Board of Directors and therefore is not the primary beneficiary. The Company’s maximum exposure to loss as a result of its involvement with Pure Sunfarms as of December 31,2019 relates primarily to the recovery of the outstanding loan to Pure Sunfarms.

The Company applies the hypothetical liquidation at book value (“HLBV”) method to determine the ownership percentage for the Company and Emerald. When determining the ownership, the HLBV method only considers shares that have been fully paid for. Therefore, due to the monthly escrow payments being made by Emerald in accordance with the Delta 2 Option Agreement, the ownership will change each month escrow payment(s) are made.

The Company’s share of the joint venture consists of the following: (in $000’s of USD):

Balance, January 1, 2018	$	6,511
Share of loss for the year		(171	)
Balance, December 31, 2018	$	6,341
Balance, January 1, 2019	$	6,341
Investments in joint venture		18,717
Share of net income for the year		16,276
Balance, December 31, 2019	$	41,334

Summarized financial information of Pure Sunfarms (in $000’s of USD):

	December 31, 2019			December 31, 2018
Current assets
Cash and cash equivalents (including restricted cash)	$	7,356		$	1,731
Trade receivables		8,687			962
Inventory		21,745			5,101
Other current assets		6,964			730
Non-current assets		108,652			49,074
Current liabilities
Trade payables		(4,938	)		(6,862	)
Borrowings due to joint venture partners		(26,413	)		(2,244	)
Income taxes payable		(8,489	)		—
Borrowings - current		(1,423	)		(19,442	)
Other current liabilities		(5,021	)		(380	)
Non-current liabilities
Borrowings – long term		(13,089	)		—
Deferred tax liability		(2,473	)		—
Net assets	$	91,558		$	28,670

Summarized financial information of Pure Sunfarms (in $000’s of USD):

	December 31,
	2019		2018
Reconciliation of net assets:
Accumulated retained earnings	$	26,679	$	(734	)
Contributions from joint venture partners		63,481		31,008
Currency translation adjustment		1,398		(1,604	)
Net assets	$	91,558	$	28,670

Summarized financial information of Pure Sunfarms (in $000’s of USD):

	Year ended December 31,
	2019			2018				2017
Revenue	$	62,341		$	3,691		$	—
Cost of sales*		(15,067	)		(1,154	)		—
Gross margin		47,274			2,537			—
Selling, general and administrative expenses		(7,882	)		(2,584	)		(701	)
Income (loss) from operations		39,392			(47	)		(701	)
Interest expense		(884	)		(72	)		—
Foreign exchange gain (loss)		(9	)		(176	)		(3	)
Write down of fixed assets		(144	)		—			—
Other income, net		26			18			—
Income (loss) before taxes		38,381			(277	)		(704	)
Provision for income taxes		(10,967	)		55			192
Net income (loss)	$	27,414		$	(222	)	$	(512	)

* Included in cost of sales for the years ended December 31, 2019, 2018 and 2017 is $2,671, $796 and $0 of depreciation expense.

Village Fields Hemp USA LLC

On February 27, 2019, the Company entered into a joint venture with Nature Crisp, LLC (“Nature Crisp”) to form VF Hemp for the objective of outdoor cultivation of high percentage cannabidiol (“CBD”) hemp and CBD extraction in multiple states throughout the United States. VF Hemp is 65% owned by the Company and 35% owned by Nature Crisp. Under the terms of the VF Hemp agreement, the Company has agreed to lend up to approximately US$15 million to VF Hemp for start-up costs and working capital. 

The Company accounts for its investment in VF Hemp, in accordance with ASC 323, using the equity method. The Company has determined that VF Hemp is a VIE, however it does not consolidate VF Hemp because the Company is not the primary beneficiary. Although the Company is able to exercise significant influence over the operating and financial policies of VF Hemp through its  65.0% ownership interest and joint power arrangement with Nature Crisp, the Company shares joint control of the Board of Directors and therefore is not the primary beneficiary. The Company’s maximum exposure to loss as a result of its involvement with VF Hemp relates directly to the recovery of the outstanding loan to VF Hemp. 

On March 25, 2019, the Company entered into a Grid Loan Agreement (the “Grid Loan”) with VF Hemp, whereby, as of December 31, 2019, the Company had advanced $13,323 in the form of a grid loan to VF Hemp. The Grid Loan has a maturity date of March 25, 2022, and bears simple interest at the rate of 8% per annum, calculated monthly (note 12).

The Company is not legally obligated for the debts, obligations or liabilities of VF Hemp.

The Company’s share of the joint venture consists of the following:

Balance, beginning of the period	$	—
Investments in joint venture		7
Share of net loss		(2,464	)
Losses applied against joint venture note receivable		2,457
Balance, December 31, 2019	$	—

Summarized financial information of VF Hemp:

	December 31, 2019
Current assets
Cash and cash equivalents	$	510
Inventory		9,308
Prepaid expenses and deposits		36
Non-current assets		1,476
Current liabilities		(1,788	)
Borrowings due to Village Farms		(13,323	)
Net assets	$	(3,781	)

	December 31, 2019
Reconciliation of net assets:
Net loss for the year ended December 31, 2019	$	(3,791	)
Contributions from joint venture partners		10
Net assets	$	(3,781	)

	Year ended December 31, 2019
Service revenue	$	106
Cost of sales		(232	)
General and administrative expenses		(869	)
Interest expense		(440	)
Write down of inventory		(2,356	)
Net loss	$	(3,791	)

Arkansas Valley Green and Gold Hemp

On May 21, 2019, the Company entered into a joint venture with Arkansas Valley Hemp, LLC (“AV Hemp”) for the objective of outdoor cultivation of high percentage cannabidiol (CBD) hemp and CBD extraction in Colorado. The joint venture, AVGG Hemp, was 60% owned by the Company, 35% owned by AV Hemp, and 5% owned by VF Hemp.

Immediately following the fourth quarter harvest for AVGG Hemp, all of the hemp was destroyed by a severe windstorm. As a result of the loss, the Company wrote off its $1,184 loan to AVGG Hemp.

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Financial Instruments

12 Months Ended

Dec. 31, 2019

Investments, All Other Investments [Abstract]

Financial Instruments

9 FINANCIAL INSTRUMENTS

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2019:

	Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	11,989		—		—	$	11,989
Trade receivables		8,997		—		—		8,997
JV notes receivable		26,283		—		—		26,283
Right-of-use assets		3,582		—		—		3,582
Total	$	50,851		—		—	$	50,851
Financial liabilities
Trade payables and accrued liabilities	$	15,496		—		—	$	15,496
Line of credit		2,000		—		—		2,000
Lease liabilities		3,660		—		—		3,660
Debt		—		32,389		—		32,389
Total	$	21,156	$	32,389		—	$	53,545

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2018:

	Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	11,920		—		—	$	11,920
Trade receivables		11,292		—		—		11,292
JV notes receivable		10,873		—		—		10,873
Right-of-use assets		176		—		—		176
Total	$	34,261		—		—	$	34,261
Financial liabilities
Trade payables and accrued liabilities	$	18,110		—		—	$	18,110
Line of credit		2,000		—		—		2,000
Lease liabilities		180		—		—		180
Debt		—		35,675		—		35,675
Total	$	20,290	$	35,675		—	$	55,965

There were no financial instruments categorized as Level 3 at December 31, 2019 and December 31, 2018. There were no transfers of assets or liabilities between levels during the years ended December 31, 2019 and 2018, respectively.

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Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Tax

 

13 INCOME TAXES

The components of the provision for (recovery of) income tax for the years ended December 31, 2019 and 2018 are as follows:

	2019
	Current			Deferred			Total
Federal	$	—		$	(5,922	)	$	(5,922	)
State		8			(751	)		(743	)
Foreign		(19	)		818			799
	$	(11	)	$	(5,855	)	$	5,866

	2018
	Current		Deferred			Total
Federal	$	—	$	(1,786	)	$	(1,786	)
State		8		(187	)		(179	)
Foreign		422		(757	)		(335	)
	$	430	$	(2,730	)	$	(2,300	)

	2017
	Current			Deferred			Total
Federal	$	(232	)	$	(1,044	)	$	(1,276	)
State		24			(120	)		(96	)
Foreign		237			372			609
	$	29		$	(792	)	$	(763	)

The provision for (recovery of) income taxes reflected in the consolidated statements of (loss) income for the years ended December 31, 2019, 2018 and 2017 differs from the amounts computed at the federal statutory tax rates. The principal differences between the statutory income tax (recovery) and the effective provision for (recovery of) income taxes are summarized as follows:

	Year Ended December 31,
	2019			2018			2017
(Loss) income before income taxes	$	(3,541	)	$	(9,815	)	$	(5,520	)
Tax (recovery) calculated at domestic tax rates applicable in the respective countries		(744	)		(2,061	)		(1,877	)
State tax adjustments		(350	)		—			(36	)
Non-deductible items		1,304			394			422
Capitalized debt amortization costs		(631	)		—			—
Share of (income) losses from joint venture		(4,367	)		(75	)		66
Unrealized foreign exchange		(276	)		(309	)		116
Deferred gains on non-cash contributions to joint venture		(2,407	)		—			(1,114	)
Differences attributed to joint venture capital transactions		(42	)		(56	)		(698	)
Tax rate differences on deferred items		1,472			92			(268	)
Foreign exchange on translation		—			—			132
Permanent and state true-up		63			(209	)		—
Statutory rate difference		—			—			2,550
Other		112			(76	)		(56	)
Provision for (recovery of) income taxes	$	(5,866	)	$	(2,300	)	$	(763	)

The statutory tax rate in effect in Canada for the years ended December 31, 2019, 2018 and 2017 was 27.0%, 27.0% and 26.0%, respectively, and 21.0%, 21.0% and 34.0%, respectively, in the United States.

The blended effective tax rate for 2019 was 165.6% compared to 23.4% and 13.8% in 2018 and 2017, respectively.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The deferred tax assets and liabilities presented on the consolidated statements of financial positions

The deferred tax assets and liabilities presented on the consolidated statements of financial position are net amounts corresponding to their reporting jurisdiction. The deferred tax assets and liabilities presented in the note disclosure are grouped based on asset and liability classification without consideration of their corresponding reporting jurisdiction.

Significant components of the Company’s net deferred income taxes at December 31, 2019 and 2018 are as follows:

	2019			2018
Deferred tax assets:
Other assets	$	2,536		$	2,239
Long-term debt		1,040			1,289
Tax losses: Non-capital and farm losses		11,553			5,974
Provisions: Debt and unit issuance costs		800			372
Tax losses: Capital losses		—			228
Joint venture shares		1,154			—
Joint venture property, plant and equipment: Valuation allowance		—			(478	)
Tax losses: Valuation allowance		(31	)		(25	)
		17,052			9,599
Deferred tax liabilities:
Joint venture shares		(2,593	)		(867	)
Property, plant and equipment		(8,333	)		(8,458	)
		(10,926	)		(9,535	)
Net tax assets	$	6,126		$	274

In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon available positive and negative evidence and future taxable income, the Company has recorded a $30 valuation allowance on their deferred tax assets for the year ended December 31, 2019. The valuation allowance reflected on the consolidated balance sheets is approximately $504 and $607 at December 31, 2018 and 2017, respectively.

Included in the schedule of deferred tax assets and liabilities above are US federal net operating losses carryforwards of approximately $48,285 and $24,340 at December 31, 2019 and 2018, respectively, which will begin to expire in 2031. At the state level, the Company has a combined states net operating loss carry forward of approximately $12,572 and $7,711 as of December 31, 2019 and 2018, respectively, which start to expire in 2020. The Canadian Non-Capital Losses carry forwards are $1,770 and $408 as of December 31, 2019 and 2018, respectively, which begin to expire in 2027.

At December 31, 2019 and 2018, the balance of uncertain tax benefits is zero. The Company does not anticipate that the amount of the uncertain tax benefit will significantly increase within the next 12 months. The Company recognizes accrued interest related to uncertain tax benefits and penalties as income tax expense. As of December 31, 2019 and 2018, there are no recognized liabilities for interest or penalties.

The Company is subject to taxation in the U.S. and various states, as well as Canada and its provinces. As of December 31, 2019, the Company’s tax years for 2016, 2017 and 2018 are subject to examination by the tax authorities. As of December 31, 2019, the Company is no longer subject to U.S. federal, state or local examinations by tax authorities for years before 2015.

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Share Based Compensation Plan - Summary of Performance base restricted share unit activity (Detail) - Performance-Based Restricted Share Unit [Member] - $ / shares	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Number of Performance-based Restricted Share Units, Beginning balance	1,056,666	128,000
Number of Performance-based Restricted Share Units, Granted	355,000	979,000
Number of Performance-based Restricted Share Units, Exercised	(442,666)	(50,334)	(768,000)
Number of Performance-based Restricted Share Units, Forfeited/expired	(230,000)		(10,000)
Number of Performance-based Restricted Share Units, Forfeited		0
Number of Performance-based Restricted Share Units, Ending balance	739,000	1,056,666	128,000
Number of Performance-based Restricted Share Units,Earned but unissued	30,000	175,333	0
Weighted Average Grant Date Fair Value, Beginning balance	$ 5.56	$ 2.82
Weighted Average Grant Date Fair Value, Granted	14.94	5.79
Weighted Average Grant Date Fair Value, Excerised	7.82	3.06	2.20
Weighted Average Grant Date Fair Value, Forfeited/expired	12.90		2.20
Weighted Average Grant Date Fair Value, Forfeited		0
Weighted Average Grant Date Fair Value, Ending balance	6.58	5.56	2.82
Weighted Average Grant Date Fair Value, Earned but unissued	$ 12.87	$ 5.08	$ 0
Exercise price in CA$2.20
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Number of Performance-based Restricted Share Units, Granted			885,000
Weighted Average Grant Date Fair Value, Granted			$ 2.20
Exercise price in CA$6.00
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Number of Performance-based Restricted Share Units, Granted			21,000
Weighted Average Grant Date Fair Value, Granted			$ 6.00

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Share Based Compensation Plan - Additional Information (Detail) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($) $ / shares shares	Dec. 31, 2019 USD ($) $ / shares shares	Dec. 31, 2018 USD ($) $ / shares	Dec. 31, 2017 USD ($) $ / shares
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Share based compensation expense	$ 4,714		$ 1,454	$ 1,519
Unrecognized share based compensation expense	$ 855	$ 855
Share based compensation cost expected period for recognition	8 years 11 months 23 days
Option granted contractual term	10 years
Stock options vesting period	3 years
Weighted average grant date fair value | (per share)	$ 9.58	$ 9.58	$ 3.22	$ 2.09
Aggregate Intrinsic value exercised	$ 1,999		$ 2,162	$ 219
Selling, General and Administrative Expenses [Member]
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Share based compensation expense	$ 4,714		$ 1,454	$ 1,519
Stock Compensation Plan [Member]
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Number of shares available for issuance | shares	2,074,000	2,074,000
Maximum percentage of outstanding shares	10.00%

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Leases - Summary Of Lease Related Expenses (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($)
Leases [Abstract]
Operating lease expense	$ 2,410
Amortization of right-of-use assets	80
Interest on lease liabilities	7
Total finance lease expense	$ 87

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Leases - Summary of unadjusted lease commitments (Detail) $ in Thousands	Dec. 31, 2018 USD ($)
Leases [Abstract]
2019	$ 1,253
2020	1,039
2021	1,052
2022	841
2023	618
Thereafter	261
Total operating leases	5,064
2019	78
2020	62
2021	30
2022	10
2023	0
Thereafter	0
Total finance leases	$ 180

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Related Party Transactions And Balances - Additional Information (Detail) shares in Thousands, $ in Thousands, $ in Thousands		3 Months Ended	12 Months Ended
	Mar. 06, 2020 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2019 USD ($) shares	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2019 CAD ($)	Feb. 13, 2019 CAD ($)
Related Party Transaction [Line Items]
Advances to joint ventures		$ 26,283	$ 26,283	$ 10,873
Salary and benefits to employee			110	115	$ 101
Notes Payable Related Parties		64	64
Arkansas Valley Green and Gold Hemp | VGG Hemp Joint Venture Agreement [Member]
Related Party Transaction [Line Items]
Investments write off		2
Pure Sunfarms [Member]
Related Party Transaction [Line Items]
Advances to joint ventures		$ 15,418	$ 15,418	10,873
Loan interest rate percentage		6.20%	6.20%			6.20%
Loans receivable, related parties		$ 9,959	$ 9,959			$ 13,000
Shares Cancelled | shares			5,940
Pure Sunfarms [Member] | Subsequent Event [Member]
Related Party Transaction [Line Items]
Refund of equity contribution	$ 5,940
Pure Sunfarms [Member] | Equity Contribution [Member]
Related Party Transaction [Line Items]
Advances to joint ventures		4,494	$ 4,494			$ 5,940
V F Hemp [Member]
Related Party Transaction [Line Items]
Advances to joint ventures		$ 10,865	$ 10,865
Debt securities maturity date			Mar. 25, 2022
Loan interest rate percentage		8.00%	8.00%			8.00%
Loans receivable, related parties		$ 13,323	$ 13,323
AVGG Hemp [Member]
Related Party Transaction [Line Items]
Advances to joint ventures		$ 1,184	$ 1,184	$ 1,184
Loan interest rate percentage		8.00%	8.00%			8.00%
Loans receivable, related parties		$ 5,000	$ 5,000
Bank Of Montreal And Farm Credit Canada [Member]
Related Party Transaction [Line Items]
Line of credit facility maximum borrowing capacity							$ 20,000
Line of credit facility guarantee amount							$ 10,000

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Income Taxes - Summary Of Effective Income Tax Rate Reconciliation (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Income Tax Disclosure [Abstract]
(Loss) income before income taxes	$ (3,541)	$ (9,815)	$ (5,520)
Tax (recovery) calculated at domestic tax rates applicable in the respective countries	(744)	(2,061)	(1,877)
State tax adjustments	(350)		(36)
Non-deductible items	1,304	394	422
Capitalized debt amortization costs	(631)
Share of (income) losses from joint venture	(4,367)	(75)	66
Unrealized foreign exchange	(276)	(309)	116
Deferred gains on non-cash contributions to joint venture	(2,407)		(1,114)
Differences attributed to joint venture capital transactions	(42)	(56)	(698)
Tax rate differences on deferred items	1,472	92	(268)
Foreign exchange on translation			132
Permanent and state true-up	63	(209)
Statutory rate difference			2,550
Other	112	(76)	(56)
Provision For (Recovery Of) Income Taxes	$ (5,866)	$ (2,300)	$ (763)

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Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Current assets
Cash and cash equivalents	$ 11,989	$ 11,920
Trade receivables, less allowance for doubtful accounts of $5 and $50, respectively	8,997	11,292
Inventories (note 2)	15,918	24,956
Amounts due from joint venture (note 12)	15,418	10,873
Other receivables	342	332
Income tax receivable	713
Prepaid expenses and deposits	1,259	889
Total current assets	54,636	60,262
Non-current assets
Property, plant and equipment (note 4)	63,158	72,188
Operating right-of-use assets (note 8)	3,485
Finance right-of-use assets (note 8)	97	176
Investment in joint ventures (note 5)	41,334	6,341
Note receivable - joint ventures (note 12)	10,865
Deferred tax asset	7,999	274
Other assets	1,834	2,207
Total assets	183,408	141,448
Current liabilities
Line of credit	2,000	2,000
Trade payables	12,653	14,601
Current maturities of long-term debt (note 6)	3,423	3,414
Operating lease liabilities - current (note 8)	875
Finance lease liabilities - current (note 8)	61	78
Accrued liabilities (note 7)	3,017	3,509
Total current liabilities	22,029	23,602
Non-current liabilities
Long-term debt (note 6)	28,966	32,261
Deferred tax liability (note 13)	1,873
Operating lease liabilities - long term (note 8)	2,690
Finance lease liabilities - long term (note 8)	34	102
Other liabilities	1,357	1,050
Total liabilities	56,949	57,015
Commitments and contingencies (note 9)
SHAREHOLDERS' EQUITY
Common stock, no par value per share - unlimited shares authorized; 52,656,669 shares issued and outstanding at December 31, 2019 and 47,642,672 shares issued and outstanding at December 31, 2018	98,333	60,872
Additional paid in capital	4,351	2,198
Accumulated other comprehensive loss	(475)	(562)
Retained earnings	24,250	21,925
Total shareholders' equity	126,459	84,433
Total liabilities and shareholders' equity	$ 183,408	$ 141,448

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Income Per Share - Additional Information (Detail) - Common Stock [Member] - shares		12 Months Ended
	Mar. 24, 2020	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Shares issued		4,059,000	3,097,200	2,500,000
Subsequent Event [Member]
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Shares issued	3,125,000
Over-Allotment Option [Member] | Subsequent Event [Member]
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Shares issued	468,750

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Consolidated Statements Of Cash Flow - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Cash flows from operating activities:
Net income (loss)	$ 2,325	$ (7,515)	$ (4,757)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization	7,366	7,027	7,659
Amortization of deferred charges	76	76
(Gain) loss on disposal of assets (note 5)	(13,564)		8
Loss on write-off of investment in joint venture (note 5)	1,184
Share of (income) loss from joint venture (note 8)	(13,777)	170	470
Interest expense	2,614	2,794	2,695
Interest income	(1,036)	(311)
Share-based compensation	4,714	1,454	1,519
Lease payments	(1,043)
Deferred income taxes	(5,855)	(2,730)	(792)
Interest paid on long-term debt	(2,635)	(2,417)	(2,614)
Changes in non-cash working capital items (note 17)	5,244	(3,149)	(3,519)
Net cash (used in) provided by operating activities	(14,387)	(4,677)	669
Cash flows from investing activities:
Purchases of property, plant and equipment	(2,287)	(3,093)	(1,696)
Investment in joint venture	(96)
Notes receivable loaned to joint ventures (note 11)	(14,507)	(10,462)
Proceeds from sale of land	52	65
Net cash used in investing activities	(16,838)	(13,490)	(1,696)
Cash flows from financing activities:
Proceeds from borrowings	4,000	7,000	7,306
Repayments on borrowings	(7,423)	(7,706)	(14,320)
Proceeds from issuance of common stock, net	34,226	23,492	9,769
Proceeds from exercise of stock options	208	283	59
Proceeds from exercise of warrants	466
Payments lease obligations	(90)	(71)	(59)
Net cash provided by financing activities	31,387	22,998	2,755
Effect of exchange rate changes on cash and cash equivalents	(93)	(2)	(10)
Increase in cash and cash equivalents	69	4,829	1,718
Cash and cash equivalents, beginning of year	11,920	7,091	5,373
Cash and cash equivalents, end of year	11,989	11,920	7,091
Supplemental cash flow information:
Income taxes paid (recovered)	$ 904	$ 290	(25)
Supplemental disclosure of non-cash information:
Purchases of capital expenditures by financing capital lease			190
Issuance of warrants			$ 148

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Property, Plant and Equipment - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Property, Plant and Equipment [Abstract]
Depreciation on property,plant and equipment	$ 7,366	$ 7,027	$ 7,659

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Summary Of Significant Accounting Policies - Summary of Estimated Useful Lives of Property Plant and Equipment (Detail)	12 Months Ended
	Dec. 31, 2019
Leaseholds and Leasehold Improvements [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	5 years
Leaseholds and Leasehold Improvements [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	20 years
Greenhouses And Other Buildings [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	4 years
Greenhouses And Other Buildings [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	30 years
Greenhouse Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	3 years
Greenhouse Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	30 years
Machinery and Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	3 years
Machinery and Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	12 years

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Changes In Non-Cash Working Capital Items

12 Months Ended

Dec. 31, 2019

Disclosure Of Changes In Non Cash Working Capital Items [Abstract]

Changes In Non-Cash Working Capital Items

17 CHANGES IN NON-CASH WORKING CAPITAL ITEMS

	For the Years Ended December 31,
	2019			2018			2017
Trade receivables	$	2,301		$	(33	)	$	(1,059	)
Inventories		9,042			(5,435	)		(895	)
Due from joint ventures		(3,530	)		—			—
Other receivables		(448	)		1,239			(1,062	)
Prepaid expenses and deposits		(370	)		(79	)		(134	)
Trade payables		(1,953	)		1,649			241
Accrued liabilities		(369	)		(284	)		207
Other assets, net of other liabilities		571			(206	)		(817	)
	$	5,244		$	(3,149	)	$	(3,519	)

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Property Plant And Equipment (Tables)

12 Months Ended

Dec. 31, 2019

Property, Plant and Equipment [Abstract]

Summary of Property, Plant and Equipment

Property, plant and equipment consist of the following:

	December 31, 2019			December 31, 2018
Land	$	3,204		$	3,932
Leasehold and land improvements		3,820			3,821
Buildings		72,772			76,989
Machinery and equipment		61,871			64,937
Construction in progress		1,697			552
Less: Accumulated depreciation		(80,206	)		(78,043	)
Property, plant and equipment, net	$	63,158		$	72,188