Guaranty of Agro Power Development, Inc.

GUARANTY


OF


AGRO POWER DEVELOPMENT, INC.


TO


COBANK, ACB


GUARANTY OF AGRO POWER DEVELOPMENT, INC.


This Guaranty ("GUARANTY") is made and given as of January 2, 2000 by AGRO POWER DEVELOPMENT, INC., a Delaware corporation ("GUARANTOR"), to COBANK, ACB ("COBANK").


R E C I T A L S


A. CoBank and Village Farms, L.P., a Delaware limited partnership ("BORROWER") have entered into a Consolidated, Amended and Restated Loan Agreement of even date herewith (as amended, modified or supplemented from time to time, the "LOAN AGREEMENT") pursuant to which CoBank has agreed make certain term loans to Borrower in an aggregate principal amount up to $72,285,739.67 ("LOANS") under the terms and conditions set forth in the Loan Agreement.


B. CoBank is willing to extend such credit to Borrower pursuant to the provisions of the Loan Agreement upon the condition, among others, that Guarantor execute this Guaranty.


A G R E E M E N T S


NOW, THEREFORE, for value received, and intending to be legally bound herein, and to induce CoBank to extend credit and make advances to Borrower pursuant to the terms of the Loan Agreement, Guarantor covenants and agrees with CoBank as follows:


1. DEFINED TERMS. As used in this Guaranty, the following terms shall have the meanings set forth below (and such meaning shall be equally applicable to both the singular and plural form of the terms defined, as the context may require):


1.1 APD ENTITIES: Village Farms, L.L.C., a Delaware limited liability company; and Cogentrix Greenhouse Investments, Inc., a Delaware corporation.


1.2 APD MERGER: the merger of the APD Entities into Guarantor with Guarantor as the surviving entity.


1.3 BORROWER MERGER: the merger of the Village Farms Entities into Borrower with Borrower as the surviving entity.


1.4 BUSINESS DAY: any day other than a Saturday or Sunday and other than a day which is a Federal legal holiday or a legal holiday for banks in the State of Colorado or the State of New Jersey.


1.5 CAPITAL LEASE: means any lease of property (whether real, personal or mixed) by a Person where the discounted present value of the rental obligations of such Person as lessee under such lease, in accordance with GAAP, is required to be capitalized on the balance sheet of such Person.


1.6 COMPLIANCE CERTIFICATE: a certificate of the chief financial officer of Guarantor acceptable to CoBank and in the form attached as Exhibit 1.6 hereto.


1.7 EBITDA: for any period, the consolidated net income of Guarantor from its consolidated Greenhouse operations for such period (excluding the effect of any extraordinary gains or losses), plus the sum of the amounts of (a) Interest Expense, plus (b) federal and state income taxes, plus (c) depreciation and amortization expense associated with Guarantor's Greenhouse operations, all as determined in accordance with GAAP.


1.8 ECOSCIENCE: EcoScience Corporation, a Delaware corporation.


1.9 ENVIRONMENTAL LAWS: the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended, 42 U.S.C. 9601-9657 and the Resource Conservation and Recovery Act of 1976, 42 U.S.C. 6901-6987.


1.10 ENVIRONMENTAL REGULATIONS: any federal, state or local law, statute, code, ordinance, regulation, requirement or rule (other than the Environmental Laws) now in effect or hereinafter enacted relating to pollution or protection of the environment, health, safety or natural resources.


1.11 GAAP: generally accepted accounting principles in the United States of America, applied consistently, as in effect from time to time.


1.12 GENERAL PARTNER: Village Farms of Delaware, L.L.C., a Delaware limited liability company.


1.13 GENERAL PARTNER ENTITIES: Cogentrix of Buffalo, Inc., a Delaware corporation; Cogentrix of Fort Davis I, Inc., a Delaware corporation; and Cogentrix of Marfa, Inc., a Delaware corporation.


1.14 GENERAL PARTNER MERGER: the merger of the General Partner Entities into General Partner with General Partner as the surviving entity.


1.15 GREENHOUSES: the greenhouses operated by Borrower for the production of vegetables or other produce.


1.16 GROSS PROFIT: Guarantor's revenue from sales minus the cost of goods sold, determined on a consolidated basis with respect to Guarantor's consolidated Greenhouse operations only and calculated in accordance with GAAP.


1.17 GUARANTEES: this Guaranty and that certain Guaranty of even date herewith pursuant to which EcoScience unconditionally guarantees the payment and performance of all obligations of Borrower to CoBank under the Loan Documents, as such guarantees are amended, modified or supplemented from time to time.


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1.18 GUARANTOR DOCUMENTS: this Guaranty and the Guarantor Security Documents.


1.19 GUARANTOR SECURITY AGREEMENT: the Security and Pledge Agreement of even date herewith by and between Guarantor and CoBank, together with all renewals, extensions, amendments, modifications, and supplements thereto.


1.20 GUARANTOR SECURITY DOCUMENTS: the Guarantor Security Agreement, the mortgages, deeds of trust, leasehold assignments and consents, financing statements, pledge agreements, assignments, and/or other security documents executed by Guarantor in favor of CoBank to secure Guarantor's performance of its obligations under this Guaranty with a Lien on all assets, real and personal, of Guarantor, in form and substance acceptable to CoBank, together with all renewals, extensions, amendments, modifications, and supplements thereto.


1.21 HAZARDOUS SUBSTANCES: dangerous, toxic or hazardous pollutants, contaminants, chemicals, wastes, materials or substances, as defined in or governed by the provisions of any Environmental Laws or Environmental Regulations, and also including urea formaldehyde, polychlorinated biphenyls, asbestos, asbestos-containing materials, nuclear fuel or waste, and petroleum products, or any other waste, material, substances, pollutant or contaminant which would subject an owner of property to any damages, penalties or liabilities under any applicable Environmental Laws or Environmental Regulations.


1.22 INDEBTEDNESS: any and all advances, debts, obligations and liabilities of Borrower under or pursuant to the Loan Documents, and any renewals, amendments, extensions or replacements thereof, including without limitation all principal, interest, reimbursement and indemnification obligations, and loan fees owed under the Loan Agreement and all expenses, charges and other amounts payable by Borrower pursuant to the Loan Documents, whether now existing or hereafter contracted or incurred, plus interest thereon at the rate determined pursuant to the Loan Agreement.


1.23 INTEREST EXPENSE: for any period, total interest expense (including the interest component of any Capital Leases) of Guarantor determined in accordance with GAAP and on a consolidated basis with respect to Guarantor's consolidated Greenhouse operations.


1.24 LIEN: means any mortgage, pledge, lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and, with respect to real property, any easement, right of way or other encumbrance on title to real property.


1.25 LOAN DOCUMENTS: the Loan Agreement, the Notes, the Note Purchase Agreement, the Guarantees, the Security Documents, and any other document required by CoBank from time to time in order to grant to, or maintain for, CoBank a


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perfected security interest in the Collateral, together with all renewals, extensions, amendments, modifications, and supplements thereto.


1.26 MATERIAL ADVERSE CHANGE: means, with respect to any Person, any material adverse change in the business, condition (financial or otherwise), operations, performance or properties of such Person.


1.27 MATERIAL ADVERSE EFFECT: means, with respect to any Person, any material adverse change in the business, condition (financial or otherwise), operations, performance or properties of such Person.


1.28 MISSION CRITICAL: a Person with respect to whom the failure of such Person's Significant Software to be Year 2000 Compliant could reasonably be expected to have a Material Adverse Effect on Guarantor.


1.29 NOTES: the promissory notes executed by Borrower payable to CoBank evidencing the Loans dated of even date herewith, as amended, modified or supplemented from time to time.


1.30 PARTICIPANT: means, collectively, any Person to whom CoBank shall sell or assign a loan participation or other fractional undivided interest in the Indebtedness, as evidenced by the Notes and other Loan Documents, and the legal representatives, successors and assigns of any such Person.


1.31 PERSON: any individual, sole proprietorship, joint venture, unincorporated organization, cooperative association, limited liability company, corporation, association, partnership, trust, government, governmental agency, or other entity.


1.32 PROJECTIONS: the projections provided to CoBank with respect to projected Greenhouse operations and financial results of Greenhouse operations of Guarantor and its consolidated entities, identified on, or attached hereto as, Schedule 1.32.


1.33 QUARTER: the quarters of Guarantor's Fiscal Year.


1.34 SECURITY DOCUMENTS: the security agreements, mortgages, deeds of trust, financing statements, pledge agreements, amendments to ground leases, lessor's consents, and/or other security documents required pursuant to the Loan Agreement and/or executed by Borrower, General Partner, Guarantor or EcoScience in favor of CoBank to secure the performance of Borrower's obligations under the Notes and the other Loan Documents with a Lien on all assets and properties of Borrower, General Partner and Guarantor, and on all of the stock in Guarantor owned by EcoScience, in form and substance acceptable to CoBank, together with all renewals, extensions, amendments, modifications, and supplements thereto.


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1.35 SIGNIFICANT SOFTWARE: any device or system of a Person (including without limitation all computer hardware or software, firmware, equipment containing embedded microchips or integrated circuits, or other set or collection of processing instructions) regularly used by such Person in its business operations or financial accounting which, individually, or together with one or more other items of Significant Software, would, if it failed to be Year 2000 Compliant, have a material adverse effect on the business condition (financial or otherwise), operations, performance, or properties of such Person.


1.36 VFIFA: Village Farms International Finance Association, a Delaware cooperative corporation.


1.37 VILLAGE FARMS ENTITIES: collectively, Village Farms of Colorado, Inc., a Delaware corporation; Village Farms, Inc., a Delaware corporation; Village Farms Mediterranean, Inc., a Delaware corporation; Village Farms of Virginia, Inc., a Delaware corporation; Village Farms of Texas, L.P., a Delaware limited partnership; Village Farms of Marfa, L.P., a Delaware limited partnership; Village Farms of Presidio, L.P., a Delaware limited partnership; Village Farms of Buffalo, L.P., a Delaware limited partnership; and Keystone Village Farms, L.L.C., a Delaware limited liability company.


1.38 YEAR 2000 COMPLIANT: shall mean, with respect to Significant Software, (a) that it shall include calendar year 2000 date conversion and compatibility capabilities, including date data century recognition, same century and multiple century formula and date value calculations and user interface date data values that reflect the century so that it will (i) manage and manipulate data involving dates, including single century and multiple century dates and formulas, and will not cause an abnormally ending scenario within the application or cause an abort or result in the generation of incorrect values or invalid output involving such dates, (ii) include the indication of the correct century in all date related user interface functions, and (iii) operate in the same manner with year dates of 2000 and beyond as it operates with year dates of 1900 to 1999; and (b) that it shall recognize the year 2000 as a leap year, including recognition and processing of the correct date on February 29, 2000. Significant Software that is Year 2000 Compliant shall be considered to be in "Year 2000 Compliance".


The following terms are defined in portions of this Guaranty other than this Article 1:


Authorized Stock Section 7.19
Code Section 7.18
ERISA Section 7.18
Financial Statements Section 7.12
Fiscal Year Section 7.26
Guaranteed Obligations Article 2
Guarantor Benefit Plan Section 7.18
Guarantor's Claims Section 3.5
Guarantor Collateral Article 6
Guarantor Pension Plan Section 9.10
Indemnified Parties Section 10.1


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Intellectual Property Section 7.25
Material Agreements Section 7.11
Merged Entities Balance Sheets Section 7.12
Mergers Section 7.3
Pocono Section 8.16
Real Estate Interests Section 7.20
Required Licenses Section 7.17
Title Commitments Section 7.24
Title Insurers Section 7.24
Title Policy Section 7.24
Wheatfield Section 8.16


Capitalized terms used, but not defined, herein shall have the meaning given to such terms in the Loan Agreement, if defined therein.


2. GUARANTY. Guarantor hereby guarantees absolutely and unconditionally to CoBank, and its successors and assigns, and any Participant acquiring an interest in the Indebtedness of Borrower, and becomes surety for: (a) the due and punctual payment, in lawful money of the United States, of all Indebtedness of Borrower as and when any of the foregoing shall become due and payable in accordance with the terms thereof at stated maturity, by acceleration, or otherwise; and (b) the full and timely performance of any and all other obligations of Borrower to CoBank, of every type and description, whether now existing or hereafter contracted or incurred, arising directly or indirectly out of or with respect to the Loan Documents. Guarantor shall also pay all costs, expenses and attorneys' fees incurred by CoBank and any Participant in their efforts to collect the foregoing, foreclose upon or exercise their rights with respect to any security for the foregoing, or to enforce this Guaranty, or to protect the rights of CoBank and any such Participant with respect thereto. The term "GUARANTEED OBLIGATIONS" as used in this Guaranty shall mean such indebtedness, obligations and liabilities described above in this Article 2.


3. GUARANTY OF PAYMENT; WAIVER OF DEFENSES, ETC.


3.1 GENERAL. This Guaranty is a guarantee of payment and not of collection, and Guarantor waives any right to require that any action be brought against Borrower or to require that resort be had at any time to any direct or indirect security for the Guaranteed Obligations. Guarantor's obligations hereunder are continuing obligations and are absolute and unconditional irrespective of the genuineness, validity or enforceability of any instrument or instruments now or hereafter evidencing any Guaranteed Obligation or any part thereof (including but not limited to the Loan Documents) or of any other agreement now or hereafter entered into by CoBank and Borrower pursuant to which any Guaranteed Obligation or any part thereof is issued, or of any other circumstance which might otherwise constitute a legal or equitable discharge of a guarantor or surety. Guarantor's obligations hereunder shall continue in full force and effect as long as any Guaranteed Obligation or any part thereof remains outstanding and unpaid or CoBank has any obligation to make any extension of credit to Borrower pursuant to any of the Loan Documents.


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3.2 WAIVERS. With respect to its obligations under this Guaranty, Guarantor waives any and all defenses and discharges available to a guarantor, surety, endorser or accommodation party, dependent upon its character as such. Guarantor hereby waives presentment for payment, notice of nonpayment, demand and protest. Guarantor agrees that its obligations hereunder shall not be affected or impaired in any way by any of the following acts or things (which CoBank may do from time to time without notice to Guarantor): (a) any amendment (including, without limitation, an amendment increasing the interest rate), modification or extension of any Loan Documents, or any waiver of compliance by Borrower with the terms of any of the foregoing; (b) any sale, pledge, surrender, compromise, settlement, release, renewal, extension, indulgence, alteration, substitution, exchange, modification or other disposition of any Guaranteed Obligation or any collateral therefor; (c) any acceptance or release of collateral for, or guarantors of, any Guaranteed Obligation; (d) any inability, failure, neglect or omission to obtain, perfect, enforce or realize upon any collateral for any of the Guaranteed Obligations, or to exercise any lien upon or right of appropriation of any moneys, credits or property to the liquidation of any Guaranteed Obligation, or to pursue or obtain any deficiency judgment against Borrower following any foreclosure of any security interest, mortgage or deed of trust granted by Borrower to CoBank; or (e) any application of payments or credits upon the Guaranteed Obligations under the Loan Documents. CoBank shall not be required, before exercising its rights under this Guaranty, to first resort for the payment of any Guaranteed Obligation to Borrower, or other guarantors or sureties or accommodation parties or any collateral, property, liens or other remedies or rights whatsoever. With respect to its obligations under this Guaranty, Guarantor agrees not to exercise any right of contribution, recourse, subrogation or reimbursement available to Guarantor against Borrower or any other Person or entity or property unless and until all the Guaranteed Obligations have been indefeasibly paid in full and there is no obligation of CoBank to make any extension of credit to Borrower under the Loan Documents. Guarantor hereby waives any rights it may have at equity or in law to require CoBank to apply any rights of marshalling or other equitable doctrines in the circumstances.


3.3 AMOUNT OF INDEBTEDNESS. CoBank may, at its sole option and without any notice to or consent of Guarantor, allow the Indebtedness of Borrower owed to CoBank to exceed the principal amount of all promissory notes executed by Borrower in connection with the Indebtedness without in any way adversely affecting Guarantor's liability hereunder.


3.4 SUBROGATION. After all Guaranteed Obligations have been indefeasibly paid in full and there is no obligation of CoBank to make any extension of credit to a Borrower under the Loan Documents, Guarantor shall have and may exercise rights of subrogation against Borrower.


3.5 SUBORDINATION OF OTHER DEBT. Any indebtedness or obligation of Borrower, or any other claim against or liability of Borrower, now or hereafter held by or owed to Guarantor ("GUARANTOR'S CLAIMS") is hereby subordinated by Guarantor to the Indebtedness; and such Guarantor's Claims, if CoBank so requests, shall be


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collected, enforced and received by Guarantor as trustee for CoBank and paid over to CoBank on account of the Indebtedness.


3.6 LIENS AND RIGHTS OF SET-OFF. In addition to all Liens upon, and right of set-off against, the property of Guarantor existing under applicable law, CoBank may, without demand or notice of any kind, and at any time when any amount shall be due and payable hereunder by Guarantor, appropriate and apply toward the payment of such amount, in such order of application as CoBank may elect, any property, balances, credits, deposits, accounts or moneys of Guarantor in the possession or control of CoBank for any purpose. Guarantor hereby grants to CoBank a right of set-off and a security interest in such property and funds in the possession or control of CoBank. Guarantor further expressly grants to CoBank the right, to be exercised at the discretion of CoBank, to file one or more financing statements under the Uniform Commercial Code naming Guarantor as debtor and CoBank as secured party with respect to such property and funds and Guarantor hereby agrees to sign any such statement.


4. RECOVERY OF PAYMENT. If any payment received by CoBank and applied to the Guaranteed Obligations is subsequently set aside, recovered, rescinded or required to be returned for any reason (including, without limitation, the bankruptcy, insolvency or reorganization of Borrower), the Guaranteed Obligations to which such payment was applied shall, for the purposes of this Guaranty, be deemed to have continued in existence, notwithstanding such applications, and this Guaranty shall be enforceable as to such Guaranteed Obligations as fully as if such applications had never been made.


5. INFORMATION REGARDING BORROWER. Guarantor assumes full responsibility for keeping fully informed of the financial condition of Borrower and all other circumstances affecting Borrower's ability to pay and perform its obligations under the Loan Documents and agrees that CoBank shall not have any duty to report to Guarantor any information which CoBank receives about the financial condition of Borrower or any circumstances bearing on the ability of Borrower to perform its obligations under the Loan Documents, and Guarantor hereby expressly and unconditionally waives any defense based on the failure of CoBank to report such information.


6. SECURITY. As security for the payment and performance of Guarantor's obligations under this Guaranty, Guarantor shall grant to CoBank and maintain for CoBank, a first Lien on all of its assets and properties, both real and personal, tangible or intangible, whether now owned or held or hereafter acquired (the "GUARANTOR COLLATERAL"), subject to any Lien permitted by Section 9.3 hereof. Guarantor has executed and delivered to CoBank the Guarantor Security Documents as required under this Guaranty to evidence the Lien of CoBank in the Guarantor Collateral, and the terms, provisions and conditions of the Guarantor Security Documents are hereby incorporated in this Guaranty and made a part hereof. Guarantor shall also execute such further security agreements, mortgages, deeds of trust, financing statements, assignments or other documents as CoBank shall request, in form and substance as such CoBank shall specify, to establish, confirm, perfect or provide notice of CoBank's Lien on the Guarantor Collateral.


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7. REPRESENTATIONS AND WARRANTIES. Guarantor represents, covenants and warrants to CoBank that:


7.1 ORGANIZATION, GOOD STANDING, ETC. Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Guarantor has the power to own its properties and to carry on its business as now being conducted. Guarantor is duly qualified to do business and is in good standing in each jurisdiction in which the transaction of its business makes such qualification necessary except where the failure to be so qualified would not have a Material Adverse Effect on Guarantor.


7.2 AUTHORITY; DUE AUTHORIZATION. Guarantor has full power and authority (including, without limitation, all governmental licenses, permits and other approvals) to own or lease and operate its properties and to carry on its business as now conducted and as contemplated to be conducted. The execution and delivery of, and performance by Guarantor of its obligations under, each Guarantor Document are within Guarantor's corporate powers and have been duly authorized by all necessary corporate action.


7.3 MERGERS. The APD Merger, the General Partner Merger and the Borrower Merger (collectively, the "Mergers") have each been duly and fully consummated in accordance with the laws of the State of Delaware and any other applicable jurisdiction. Guarantor is the surviving entity of the APD Merger. General Partner is the surviving entity of the General Partner Merger, and Borrower is the surviving entity of the Borrower Merger.


7.4 CONSENTS. All consents, authorizations or approvals of any Person (including, without limitation, Guarantor) which were necessary for, or required in connection with, the Mergers have been obtained in writing, and a true and correct copy thereof has been delivered to CoBank. All consents or approvals of any Person which are necessary for, or are required as a condition of, the execution, delivery and performance of the Guarantor Documents have been obtained in writing, and a true and correct copy thereof have been delivered to CoBank.


7.5 TITLE TO GUARANTOR COLLATERAL. Guarantor has all real and personal property necessary for the conduct of its business and has good title to all of the Guarantor Collateral, free and clear of all Liens, except as permitted by Section 9.3 of hereof. The Guarantor Collateral is in good operating condition and repair, reasonable wear and tear excepted, and suitable in all material respects for the purposes for which it is being utilized except where the failure to be in good operating condition could not reasonably be expected to result in a Material Adverse Effect on Guarantor.


7.6 LITIGATION. Except as set forth on Schedule 7.6, there are no pending legal or governmental actions, proceedings or investigations to which Guarantor is a party or to which any property of Guarantor is subject which could reasonably be expected to have a Material Adverse Effect on Guarantor, and, to the best of Guarantor's knowledge, no such actions or proceedings are threatened or contemplated


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by governmental authorities or any other Person. There are no outstanding judgments, injunctions, orders, writs or decrees of any arbitrator, court or governmental authority binding on Guarantor or its assets or properties.


7.7 NO VIOLATIONS. The APD Merger did not, and the execution, delivery and performance by Guarantor of the Guarantor Documents will not: (a) violate any provision of Guarantor's certificate of incorporation or bylaws; (b) violate, conflict with, result in a breach of, constitute a default under, or with the giving of notice or the expiration of time or both, constitute a default under, any existing material indenture, lease, security agreement, mortgage, permit or other governmental authorization, contract, note, instrument or any other agreements or documents binding on Guarantor or affecting its property; (c) violate or conflict with any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award applicable to Guarantor, or (d) except for the Liens created under the Guarantor Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of Guarantor.

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