VILLAGE FARMS INTERNATIONAL, INC. (TSE:VFF) Files An 8-K Entry into a Material Definitive Agreement
Acquisition of Remaining Interest in Pure Sunfarms Corp.
On September 8, 2020, Village Farms International, Inc. (the Company) entered into a purchase agreement (the Purchase Agreement) with Emerald Health Therapeutics, Inc. (Emerald) to purchase from Emerald 36,958,500 common shares in the capital of Pure Sunfarms Corp. (Pure Sunfarms), representing 41.3% of the issued and outstanding common shares of Pure Sunfarms and all of the remaining common shares of Pure Sunfarms not held by the Company, for a purchase price of C$79.9 million, subject to certain adjustments (the Acquisition). to the Purchase Agreement, the closing date for the Acquisition (the Closing Date) will occur on the fifth business day following the satisfaction or waiver of all the conditions to the closing of the Purchase Agreement (except for the payment of the purchase price thereunder and those conditions that are to be satisfied on the Closing Date) or such other date as the parties may agree. The Company and Emerald may terminate the Purchase Agreement if the Closing Date has not occurred on or before November 30, 2020. The Companys management anticipates that the Closing Date will occur during the fourth quarter of 2020.
The Purchase Agreement contains representations and warranties customary for transactions of this nature negotiated between sophisticated purchasers and sellers acting at arms length, certain of which are qualified as to materiality and knowledge and subject to reasonable exceptions. Subject to certain exceptions, the representations and warranties of the Company and Emerald in the Purchase Agreement will survive for a period of 18 months from the Closing Date. Certain fundamental representations, however, will survive the closing of the Acquisition for a period of six years.
to the Purchase Agreement, each of the Company and Emerald have agreed, following closing, to indemnify the other party and its affiliates against any loss arising from a breach of a representation, warranty, or covenant given by the Company or Emerald, respectively, under the Purchase Agreement. The indemnity is subject to certain limitations, including that neither the Company nor Emerald are required to indemnify the other party unless and until losses exceed C$500,000, at which point Village Farms or Emerald, as the case may be, will be entitled to recover the full amount of such losses from the first dollar. The indemnity is also capped at 50% of the purchase price under the Purchase Agreement and no party is liable for any losses resulting from any breach of any representation or warranty in the Purchase Agreement if the party seeking indemnification knew about the inaccuracy or breach before closing.
The closing of the Acquisition is subject to customary closing conditions, including (i) the accuracy in all material respects as of the Closing Date of the representations and warranties of the parties, (ii) the performance in all material respects of all covenants and agreements of the parties, (iii) the absence of any law or change in law that would make the consummation of the Acquisition illegal or otherwise restrain or prohibit closing, (iv) the absence of any proceeding by any person or entity that seeks to enjoin or prohibit the Acquisition, (v) Emerald shareholders having approved the Acquisition, (vi) Pure Sunfarms lenders, Village Farms lenders and the TSX Venture Exchange having provided their consent to the Acquisition, (vii) dissent rights not having been validly exercised, and not withdrawn, in respect of more than 5% of the issued and outstanding common shares of Emerald, (viii) the voting and support agreements provided in connection with the Acquisition not having been materially breached by any party other than the Company and (ix) delivery by each party of certain documents and agreements in connection with the Acquisition.
The Company and Emerald have given mutual covenants customary for transactions of this nature negotiated between sophisticated purchasers and sellers acting at arms length, including mutual covenants to (i) use commercially reasonable efforts to satisfy all closing conditions in the Purchase Agreement and obtain any regulatory approvals or consents and (ii) co-operate in good faith in managing and funding the day to day operations of Pure Sunfarms. Emerald has also agreed to customary covenants in favor of Village Farms to (i) convene a shareholder meeting to approve the Acquisition by October 30, 2020 and (ii) not solicit or participate in negotiations with any other person relating to an alternative transaction proposal regarding the common shares of Pure Sunfarms.
The Purchase Agreement and the transactions covered thereby can be terminated by either party in certain situations, including (i) a breach by the other party of its representations, warranties or covenants that cannot reasonably be cured by the Closing Date, (ii) the written agreement of the parties, (iii) Emerald holding its shareholder meeting and failing to obtain the requisite shareholder approval and (iv) the closing not occurring on or prior to November 30, 2020. The Purchase Agreement can be terminated by the Company in the event that (i) the board of directors of Emerald makes certain changes to its recommendation to its shareholders to approve the Acquisition or (ii) Emerald breaches its obligation not to solicit alternative proposals or fails to hold a shareholders meeting to approve the Acquisition.