DEBENTURE PURCHASE AGREEMENT entered into on the 4th day of December, 2002
BY AND AMONG: STAKE TECHNOLOGY LTD., a corporation duly incorporated
according to law, herein acting and represented by ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, its Chairman and Chief Executive Officer, and
▇▇▇▇ ▇▇▇▇▇▇▇▇, its Vice-President and Treasurer,
(hereinafter referred to as the "Corporation")
AND: CLARIDGE ISRAEL LLC, a company duly formed according to
law, herein acting and represented by ▇▇▇ ▇▇▇▇▇▇,
its Manager,
(hereinafter referred to as the "Purchaser")
WHEREAS the Corporation desires to issue and sell to the Purchaser and
the Purchaser, subject to the terms and conditions hereinafter set forth,
desires to purchase an aggregate of Five Million Dollars (U.S. Funds)
(U.S.$5,000,000) principal amount of debentures;
WHEREAS, subject to the terms and conditions hereinafter set forth,
the Purchaser desire to purchase the debentures.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
Article 1
---------
Interpretation
1.1 Definitions. For the purposes hereof, the following terms shall have
the following respective meanings:
(a) "Additional Shares" means all Common Shares, Options or
Convertible Securities issued by the Company, other than:
(i) the Shares issuable upon conversion of Debentures or
upon the exercise of the Warrants issued hereunder;
(ii) in connection with a Capital Reorganization;
(iii) Employee Shares,
(iv) three million, nine hundred and seventy-four thousand,
six hundred (3,974,600) shares issuable upon the exercise
of currently outstanding warrants;
(b) "Applicable Laws" means in respect of any Person, property,
transaction or event, all applicable federal, provincial, state,
local, municipal and regional laws, statutes, ordinances, rules,
by-laws, policies, guidelines, treaties and all applicable
regulations, guidelines, directives, standards, requirements,
judgments, orders, decisions, rulings, permits, authorizations,
injunctions, awards and decrees of any Governmental Authority and
all applicable common laws and laws of equity;
(c) "Bank" means the Bank of Montreal and ▇▇▇▇▇▇ Trust and Savings
Bank;
(d) "Business" means the business carried on by the Corporation on
the date hereof;
(e) "Business Day" means a day, other than Saturday or Sunday, on
which Canadian chartered banks are open for the transaction of
business in Toronto, Ontario;
(f) "Capital Reorganization" has the meaning ascribed thereto in
section 4.5;
(g) "Closing Date" means the closing date with respect to the sale or
other disposition of a Property;
(h) "Common Shares" means the shares of any class in the capital of
the Corporation which shall not limit the holder thereof to a
fixed sum or percentage in respect of dividends and in the
distribution of assets upon the liquidation, dissolution or
winding up of the Corporation;
(i) "Conversion Period" means the period commencing on the earlier of
(i) fifteen (15) Business Days following a Closing Date unless
a Repayment Notice is sent to the Debentureholders and the
Sales Proceeds are applied in accordance therewith, and
(ii) December 1, 2003
and terminating on the date of repayment in full of the
Debentures (and, for greater certainty, shall not be curtailed by
the transmission of a Repayment Notice or a Prepayment Notice);
(j) "Conversion Price" means the price per Share at which the
Debentures shall be convertible into Shares in accordance with
the provisions hereof, such price being Three Dollars (U.S.
Funds) (U.S.$3.00), subject to adjustment in accordance with the
provisions of sections 4.5 and 4.6;
(k) "Conversion Right" has the meaning ascribed thereto in section
4.1;
(l) "Convertible Securities" means any evidences of indebtedness,
preferred shares or other securities convertible into or
exchangeable for Common Shares;
(m) "Corporation's Auditors" means the independent firm of chartered
accountants duly appointed as auditors of the Corporation;
(n) "Debentureholders" means the Debentureholders of the Debentures
from time to time;
(o) "Debentureholders Resolution" means a written instrument or
instruments in counterpart executed by holders of not less than
sixty-six and two thirds percent (66-2/3rds %) of the principal
amount of the outstanding Debentures;
(p) "Debentures" means the Debentures to be issued pursuant to
section 2 hereof;
(q) "Default" means the occurrence of an Event of Default;
(r) "Default Rate" means a fluctuating interest rate per annum equal
to the Prime Rate plus four percent (4%) per annum. Each change
in such fluctuating interest rate shall take effect
simultaneously with the corresponding change in the Prime Rate;
(s) "Documents" means this agreement, the Registration Agreement
Amendment and the Debentures and Warrants;
(t) "Employee Shares" means options to subscribe for Common Shares
under existing stock option plans or any similar plans hereafter
adopted;
(u) "Environmental Laws" shall mean all applicable federal,
provincial, state, municipal, local and foreign laws and
regulations, ordinance, code, guideline, policy, rule of civil or
common law now or hereafter in effect of any governmental,
judicial or administrative authority having jurisdiction and in
each case as amended and any judicial or administrative order,
consent, decree or judgment of any governmental, judicial or
administrative authority having jurisdiction relating to
pollution or protection of human health, Hazardous Materials or
safety, the environment and natural resources (including, without
limitation, ambient air, surface water, ground water, wetlands,
land surface or sub-surface strata, wildlife, aquatic species,
vegetation or sub-surface strata, emissions, discharges, releases
or threatened releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution, treatment,
storage, disposal, transport or handling of Hazardous Materials
and vegetation);
(v) "Event of Default" has the meaning set out in section 7.1;
(w) "Financial Statements" means the audited consolidated financial
statements for the annual periods ended December 31, 2000 and
2001 and the unaudited interim consolidated financial statements
for the nine (9) months ended September 30, 2002;
(x) "Financial Statements Date" means the date ten (10) Business Days
following delivery by the Corporation to the Bank of the audited
consolidated financial statements of the Corporation for the 2003
fiscal year;
(y) "GAAP" means Canadian generally accepted accounting principles as
adopted by the Canadian Institute of Chartered Accountants from
time to time, consistently applied;
(z) "Governmental Authority" means any government, parliament,
legislature or commission or board of government, parliament or
legislature, or any political subdivision thereof, or any
quasi-governmental authority, or any court or, without limitation
of the foregoing, any other law, regulation or rule-making
entity, including, without limitation, any central bank, fiscal
or monetary authority or authority regulating financial
institutions, having or purporting to have jurisdiction in the
relevant circumstances, or any Person acting or purporting to act
under the authority of any of the foregoing, including, without
limitation, any arbitrator, or any other authority charged with
the administration or enforcement of any Applicable Laws;
(aa) "Hazardous Materials" means any substance, material or waste
which is regulated by or forms the basis of liability now or
hereafter under any Environmental Laws, including any material or
substance which is (i) defined as a "solid waste", "hazardous
waste", "hazardous substance", "extremely hazardous waste",
restricted hazardous waste", "pollutant", "hazardous
constituent", "special waste", "toxic substance", "toxic waste",
"dangerous waste" or other similar term or phrase under any
Environmental Laws, and (ii) petroleum or any fraction or
by-product thereof, asbestos, polychlorinated biphenyls (PCB's),
or any radioactive substance;
(bb) "Interest Period" means each three month period commencing on the
first day of January, April, July and October of each year,
provided that the first Interest Period shall commence on the
date hereof and terminate on December 31, 2002;
(cc) "Licenses" has the meaning ascribed thereto in section 5.1(a);
(dd) "Liens" means all mortgages, charges, assignments, hypothecs,
pledges, security interests, liens, restrictions and other
encumbrances and adverse claims of every nature and kind and
howsoever arising;
(ee) "Material Adverse Change" means a material adverse effect on: (i)
the business, operations, management, property, financial
condition or prospects of the Corporation and the Subsidiaries,
taken as a whole; (ii) the ability of the Corporation or any
Subsidiary to perform any of its
obligations under any Document to which it is a party; or (iii)
the validity or effectiveness as against, or the enforceability
against, the Corporation or any Subsidiary of any Material
Contract to which it is a party;
(ff) "Material Authorization" means, with respect to any Person, any
approval, permit, licence or similar authorization (including any
trademark, trade name or patent) from, and any filing or
registration with, any Governmental Authority required by such
Person to own its undertaking and property or to carry on its
business as currently carried on by it or as contemplated to be
carried on by it in each jurisdiction in which it does so or is
contemplated to do so, where the failure to have such approval,
permit, licence, authorization, filing or registration would or
could reasonably be expected to result in a Material Adverse
Change in the Corporation or any Subsidiary;
(gg) "Material Contract" means any agreement, instrument or other
document to which the Corporation or any Subsidiary is a party or
to which any of its undertaking or property may be subject: (i)
which if breached, not performed, cancelled, terminated or not
renewed, would or may reasonably be expected to result in a
Material Adverse Change in the Corporation or any Subsidiary, or
(ii) other than those agreements which are terminable without
penalty on notice from the Corporation of thirty (30) days or
less, those for the supply of materials intended for resale and
which have been entered into in the ordinary course of business
having a value, in each case, of less than Five Hundred Thousand
Dollars ($500,000) and verbal employment agreements of indefinite
duration;
(hh) "Material Subsidiaries" means collectively International
Materials & Supplies Inc.; Nordic Aseptic, Inc., Northern Food
and Dairy, Inc., Stake Technology (U.S.A.) Inc., Stake Tech LP,
Stake Technology LLC, SunRich, Inc., SunRich Food Group, Inc.,
Temisca, Inc., Virginia Materials, Inc., 1108176 Ontario Limited,
3060385 Nova Scotia Co. and 558497 Ontario Ltd. and "Material
Subsidiary" means any of the foregoing. If and when acquired the
following will also be "Material Subsidiaries" from the date of
acquisition, Opta Food Ingredients, Inc., Simply Organic Inc. and
632100 B.C. Ltd.;
(ii) "Maturity Date" means the earliest of (a) November 30, 2004, (b)
a Repayment Date, or (c) such other date as the principal of the
Debentures shall become payable in accordance with the provisions
hereof;
(jj) "Officers' Certificate" means a certificate signed by the
Chairman of the Board and/or the President and one of the
Vice-Presidents of the Corporation;
(kk) "Ontario Properties" means the properties bearing civic numbers
▇▇▇▇ ▇▇▇▇▇▇▇ #▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇
(formerly Town of Flamborough), Ontario and ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, together with all buildings and appurtenances
situate thereon;
(ll) "Opta Property" means the property bearing civic number ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, together with all
buildings and appurtenances situate thereon;
(mm) "Opta Documents" means the security documents contemplated in
section 3.6 hereof with respect to the Opta Property, together
with a legal opinion in form and content satisfactory to the
Purchaser;
(nn) "Options" means any rights, options or warrants to subscribe for,
purchase or otherwise acquire either Shares or Convertible
Securities;
(oo) "Person" means an individual, partnership, corporation, trust,
unincorporated association, joint venture or other entity or a
foreign state or political subdivision thereof or any agency of
such state or subdivision;
(pp) "Prepayment Notice" means a prepayment notice contemplated in
section 3.4;
(qq) "Prime Rate" means the rate of interest expressed as the annual
rate announced by Bank of Montreal, as its prime rate from time
to time for commercial loans denominated in Canadian currency
made in Canada to commercial borrowers;
(rr) "Property" means one of the Ontario Properties or the Opta
Property, as the case may be;
(ss) "Registration Agreement Amendment" means the agreement of even
date between the Corporation and the Purchaser supplementing the
registration agreement between the parties dated September 26,
2001;
(tt) "Repayment Date" means the dated fixed by the Corporation for the
repayment of the Sales Proceeds in the Repayment Notice, which
date shall be not less than thirty (30) days nor more than sixty
(60) days after the date of transmission of the Repayment Notice;
(uu) "Repayment Notice" means a notice from the Corporation to the
Debentureholders stipulating (i) that it will apply the full
Sales Proceeds (save and except that in the event of the sale of
the Opta Property, the Corporation shall be entitled to apply a
minimum Two Million Dollar (U.S. Funds) (U.S.$2,000,000) cash
amount or grant the Debentureholders a first security interest on
such amount) in repayment of the Debentures on a pro rata basis
among the Debentureholders, (ii) the amount thereof, and (iii)
the Repayment Date (other than in the event that the Corporation
grants a first security interest as contemplated in subparagraph
(i) above);
(vv) "Sales Proceeds" means the gross sales price of a Property, net
of real estate commissions;
(ww) "Securities Law Reports" means (i) the Form 10-K for the annual
period ended December 31, 2001 and the Form 10-Q for the
quarterly periods ended March 31, June 30 and September 30, 2002
filed in accordance with U.S. Securities Laws and (ii) quarterly
or annual financial statements and other information filed in
accordance with Canadian Securities Laws;
(xx) "Securities Laws" means the Federal, Provincial or state laws,
regulations or policies of Canada and the United States or any
other Governmental Authority having jurisdiction and the rules,
regulations and policies of the TSX or NASDAQ on which the Shares
are listed for trading;
(yy) "Shares" means the Common Shares of the Corporation as currently
constituted or, upon any subdivision or consolidation thereof,
the shares resulting therefrom or, upon the occurrence of a
Capital Reorganization, the shares and/or other securities and/or
property substituted for the Shares or into which Shares are
reclassified or changed;
(zz) "Subsidiary" has the meaning given to that term in the Canada
Business Corporations Act;
(aaa) "2003 Budget" means the budget of the Corporation for its 2003
fiscal year, a copy of which has been delivered to the Bank and
the Purchaser;
(bbb) "Taxes" means all taxes of any kind or nature whatsoever
including, without limitation, income taxes, sales or value-added
taxes, levies, stamp taxes, royalties, duties, and all fees,
deductions, compulsory loans and withholdings imposed, levied,
collected, withheld or assessed as of the date hereof or at any
time in the future, by any Governmental Authority having power to
tax, together with penalties, fines, additions to tax and
interest thereon;
(ccc) "Underlying Securities" means the Common Shares issuable upon
exercise of the Warrants or conversion of the Debentures;
(ddd) "Warrantholders" means the Warrantholders of the Warrants from
time to time;
(eee) "Warrants" means the Warrants to be issued pursuant to Article 2
hereof.
1.2 Gender and Number. Words importing the singular number include the
plural and vice versa and words importing gender include the neuter, feminine
and masculine genders.
1.3 Headings. The division of a Debenture into Articles, Sections,
subsections and clauses, and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation hereof.
1.4 Applicable Law. A Debenture shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
1.5 Business Day. In the event that any day on or before which any action
is required to be taken hereunder is not a Business Day, then such action shall
be required to be taken on or before the requisite time on the next succeeding
day that is a Business Day.
1.6 Monetary Reference. Any reference in a Debenture to "Dollars",
"dollars" or "$" shall be deemed to be a reference to lawful money of the United
States of America.
1.7 Invalidity of Provisions. Each of the provisions contained in a
Debenture is distinct and severable and a declaration of invalidity or
unenforceability of any such provision by a court of competent jurisdiction
shall not affect the validity or enforceability of any other provision hereof or
thereof.
1.8 Time of the Essence. Time shall be of the essence hereof.
Article 2
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Issuance of the Debentures
2.1 Issuance. On the date hereof, the Corporation shall issue to the
Purchaser and the Purchaser shall purchase from the Corporation, (i) Five
Million Dollars ($5,000,000.00) principal amount of Debentures, payable on the
date hereof by certified cheque or wire transfer of immediately available funds.
In addition, on the date hereof in conjunction with the issuance of the
Debentures and without additional consideration, the Corporation will issue to
the Purchaser a Share Purchase Warrant to purchase two hundred and fifty
thousand (250,000) common shares at a price of Three Dollars and Twenty-Five
Cents ($3.25) per share.
2.2 Form of Debenture. The Debentures shall be issued in the form set forth
in the first schedule of this agreement with such additions, deletions and
alterations as the parties may agree.
2.3 Form of Warrant. The Warrants shall be issued in the form set forth in
the second schedule of this agreement with such additions, deletions and
alterations as the parties may agree.
2.4 Exchange of Debentures. A Debenture may be exchanged for a similar
Debenture in an equal aggregate amount but in any other denomination upon
presentation and surrender thereof by the Debentureholders.
2.5 Lost or Defaced Debentures. If any Debenture is lost or defaced, the
Corporation shall execute and deliver a replacement Debenture for the same
series and denomination upon indemnification in an amount and subject to terms
and conditions satisfactory to the Corporation.
2.6 Transfer of Debentures. The Corporation shall record transfers of
Debentures made by the registered holder (or by his duly appointed attorney) by
written instrument. No service charge shall be paid for any registration of
transfer or exchange of the Debentures (or the conversion thereof pursuant to
Article 4) and the Corporation shall pay any tax or other governmental charge
that may be imposed in connection with any registration of transfer or exchange
of the Debentures (or the conversion thereof pursuant to Article 4), excluding
therefrom any income or analogous taxes upon the Debentureholders.
2.7 The provisions of sections 2.4, 2.5 and 2.6 shall apply mutatis
mutandis with respect to the Warrants and the Warrantholders.
Article 3
---------
Principal, Interest and Collateral Security
3.1 Principal. The Corporation shall pay to the Debentureholder the
outstanding principal amount of the Debentures (unless such Debentures shall
have been converted in accordance with the provisions hereof) together with all
accrued and unpaid interest thereon on the Maturity Date on presentation and
surrender of the Debenture. In the event of a Repayment Notice, the Corporation
shall pay to the Debentureholders, on a pro rata basis, the Sales Proceeds on
the Repayment Date. In such event, the principal amount and accrued interest on
the Debentures shall be adjusted accordingly.
3.2 Interest. Subject to deduction for any applicable Canadian withholding
tax, interest shall be payable on the principal amount of each Debenture,
together with accrued and unpaid interest for any prior Interest Period on the
last Business Day of each Interest Period from the date hereof at the rate of
five and one-half percent (5.5%) per annum from the date hereof until the
Maturity Date and from the Maturity Date if not paid thereon at a rate equal to
the Default Rate.
3.3 Place of Payment. The Corporation shall make all principal and interest
payments pursuant to the Debentures to the Debentureholders at such place or
places as the Debentureholders may individually advise the Corporation. The
Shares issuable to the Debentureholders pursuant to the conversion of the
Debentures shall also be delivered to the Debentureholders as aforesaid.
3.4 Right of Prepayment. The Corporation may prepay the Debentures, in
whole or in part, at any time upon fifteen (15) Business Days prior written
notice. In the event that the date fixed for prepayment occurs during the
Conversion Period, the Debentureholders may exercise the Conversion Right at any
time prior to the repayment on the date fixed for prepayment.
3.5 Mandatory Prepayment. In the event that the Closing Date precedes the
Financial Statements Date and in the event that the Bank consents to the
transmission of the Repayment Notice, the Corporation shall, within the ten (10)
Business Days next following obtention of the Bank's consent, transmit a
Repayment Notice to the Debentureholders and shall apply the Sales Proceeds
(other than such portion of the Sales Proceeds relating to the Opta Property the
immediate repayment of which is waived at such time by Debentureholders
Resolution transmitted at least ten (10) days prior to the Repayment Date) to
the repayment of the Debentures on the Repayment Date.
In the event that the Closing Date is subsequent to the Financial
Statements Date and the Corporation's financial results meet the 2003 Budget in
the opinion of the Bank (or in the event that the Bank otherwise consents to the
application of the Sales Proceeds to the repayment of the Debentures), the
Corporation shall, within the ten (10) Business Days next following the Closing
Date, transmit a Repayment Notice to the Debentureholders and shall apply the
Sales Proceeds to the repayment of the Debentures on the Repayment Date.
3.6 Collateral Security. The obligations of the Corporation hereunder shall
be secured by (a) a mortgage on the Ontario Properties in the form set forth in
the third schedule of this agreement, and (b) a mortgage over the Opta Property
by Opta Food Ingredients, Inc., together with such other documents from Opta
Food Ingredients, Inc as may be required to give a valid and enforceable
mortgage over the Opta Property, in each case with such additions, deletions and
alterations as the parties may agree.
3.7 Cancellation of Matured Debentures. All matured Debentures after
payment or conversion shall be cancelled by the Corporation and no Debentures
shall be issued in substitution therefor.
Article 4
---------
Conversion
4.1 Conversion at the Option of the Debentureholders. A Debentureholder may
elect at any time or from time to time, at the Debentureholder's option, during
the Conversion Period or in the circumstances set forth in section 7.3,
to convert a Debenture or any portion of the then outstanding principal and all
accrued and unpaid interest of a Debenture into fully paid and non-assessable
Shares at the Conversion Price (the "Conversion Right").
4.2 Conversion Procedure. Upon the exercise of its Conversion Right, the
Debentureholder shall surrender the Debenture, together with the conversion form
attached thereto, duly executed (the "Conversion Notice"), to the Corporation at
its address set forth under section 8.1 or at such other place as the
Corporation may advise the Debentureholder in writing. Conversion shall be
deemed to have been effected on the date (the "Conversion Date") on which the
Conversion Notice is actually received by the Corporation. Within the next five
(5) Business Days, the Corporation shall issue and deliver to the
Debentureholder:
(a) a certificate or certificates representing the number of Common
Shares (and/or other Shares, as the case may be) purchased upon
exercise of the Conversion Right, rounded down to the nearest
whole number, registered in the name of the Debentureholder or
otherwise as directed in the Conversion Notice; and
(b) cash for any fractional shares in an amount equal to the product
of (x) the Conversion Price per Share and (y) any fraction of a
Share remaining after conversion pursuant to section 4.2((a); and
(c) in the event of any partial conversion of a Debenture, a new
Debenture in identical form, the principal amount of which shall
be equal to the amount of principal and accrued and unpaid
interest owing under a Debenture which was not converted under
this Article 4 hereof.
The Debentureholder shall be deemed to have become a beneficial
shareholder and shareholder of record of Common Shares (and/or other Shares, as
the case may be) on the date that conversion is deemed to have been effected
pursuant to this Article 4.
4.3 Reservation and Issuance of Shares. The Corporation shall, prior to
issuance of any Shares hereunder, and from time to time as may be necessary (and
within the five [5] Business Days next following an adjustment pursuant to this
Article 4), reserve out of its authorized but unissued Shares a sufficient
number of Shares to permit the conversion of all Debentures into Shares. The
Corporation covenants that all securities, including any shares into which the
Shares may be converted, that may be issued upon exercise of the Conversion
Right will, upon issuance, be duly authorized, validly issued, fully paid and
non-assessable and free from pre-emptive rights, adverse claims and all taxes,
liens and charges caused or created by the Corporation with respect to the
issuance thereof.
The Corporation will use its best efforts to cause prompt compliance
with all applicable securities laws regulating the offer and delivery of Shares
upon conversion of the Debenture, if any.
4.4 Cash Distributions. In case the Corporation shall pay or make a
dividend or other distribution on its Shares exclusively in cash subsequent to
the date hereof and prior to the Conversion Period, adequate provision shall be
made so that the Debentureholder shall have the right to receive upon conversion
the amount of cash it would have received had it exercised its Conversion Right
immediately prior to the record date for such dividend or distribution.
4.5 Adjustment for Capital Reorganization. If at any time after the date
hereof and prior to the Conversion Date, there is (i) a payment of a stock
dividend or other distribution of securities of the Corporation to holders of
the Corporation's Shares (and/or other Common Shares, as the case may be), or
(ii) a subdivision, consolidation, split or other reclassification of the Shares
(and/or other Common Shares, as the case may be) at any time outstanding, or
(iii) a change of the Shares (and/or other Common Shares, as the case may be)
into other shares or into other securities, whether of the Corporation or of
another body corporate, or (iv) a consolidation, amalgamation or merger of the
Corporation with or into any other Person (other than a consolidation,
amalgamation or merger which does not result in any reclassification of the
outstanding Shares [and/or other Common Shares, as the case may be] or a change
of the Shares [and/or other Common Shares, as the case may be] into other
shares), or (v) a transfer of the undertaking or assets of the Corporation as an
entirety or substantially as an entirety to another Person in which the
Shareholders of the Corporation are entitled to receive shares, other securities
or other property, or (vi) any other capital reorganization, (any of such events
being called a "Capital Reorganization"), the Debentureholder who exercises the
Conversion Right after the effective date of such Capital Reorganization will be
entitled to receive, in lieu of the number of Shares (and/or other Common
Shares, as the case may be)
to which the Debentureholder was previously entitled upon such conversion, the
aggregate number of shares, other securities or other property which the
Debentureholder would have been entitled to receive as a result of such Capital
Reorganization if the Conversion Right had been exercised immediately prior to
the Capital Reorganization.
The Corporation will take all steps necessary to ensure that, on a
Capital Reorganization, the Debentureholder will, if it exercises its Conversion
Right hereto, receive the aggregate number of Shares, other securities or other
property to which it is entitled as a result of the Capital Reorganization.
Appropriate adjustments will be made in the application of the provisions set
forth in this Article 4 with respect to the rights of the Debentureholder under
a Debenture after such Capital Reorganization such that the provisions set forth
in this Article 4 (including adjustment of the Conversion Price then in effect
and the number of shares issuable upon conversion of the Debenture) shall be
applicable after that event as nearly equivalently as may be practicable.
4.6 Adjustment for Diluting Issues. In the event that the Corporation shall
issue Additional Shares without consideration or for a consideration per share
less than the applicable Conversion Price in effect on the date of and
immediately prior to such issue (the "Effective Conversion Price"), then the
Effective Conversion Price shall be reduced, concurrently with such issue, to a
price (calculated to the nearest cent) determined by multiplying the Effective
Conversion Price by a fraction, the numerator of which shall be the number of
Shares outstanding immediately prior to such issue plus the number of Shares
which the aggregate consideration received by the Corporation for the total
number of Additional Shares so issued would purchase at the Effective Conversion
Price, and the denominator of which shall be the number of Shares outstanding
immediately prior to such issue plus the number of such Additional Shares so
issued. For all purposes of this section 4.6, all Shares issuable upon the
exercise, conversion or exchange of outstanding Options or Convertible
Securities, as the case may be, shall be deemed to be outstanding and have been
issued at the lowest applicable exercise of conversion price of such options or
convertible securities. To the extent that any Options (or the conversion or
exercise right for any Convertible Securities) are not exercised prior to the
expiration thereof, the Conversion Price shall be readjusted appropriately.
In determining whether any Additional Shares are issued for less than
the Effective Conversion Price, and in determining the aggregate offering
consideration received for such Additional Shares, there shall be taken into
account the fair market value of any consideration received by the Corporation
for such Additional Shares (the fair market value of any such non-cash
consideration to be determined in good faith by the board of directors of the
Corporation).
The maximum cumulative reduction of the Conversion Price pursuant to
this section 4.6 shall be fifteen percent (15%).
4.7 Notice as to Adjustment. The Corporation shall from time to time,
within the ten (10) Business Days following the occurrence of any event which
requires an adjustment or readjustment as provided in sections 4.5 or 4.6,
deliver a notice in writing (an "Adjustment Notice") to the Debentureholders
specifying the nature of the event requiring the same, the amount of the
adjustment or readjustment and the new Conversion Price, and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
Within the fifteen (15) Business Days next following receipt of an
Adjustment Notice, a Debentureholder may notify the Corporation and the
Corporation's Auditors in writing that it disputes the contents of the
Adjustment Notice. In the event that the parties are unable to resolve such
dispute, the subject matter will be conclusively determined by a firm of
chartered accountants (other than the Corporation's Auditors) as may be selected
by a majority in interest of the Debentureholders and the Corporation. Such
chartered accountants will be given access to all necessary records of the
Corporation and will deliver a notice to the Corporation and the
Debentureholders setting forth their determination and the definitive adjustment
or readjustment.
Article 5
---------
Representations and Warranties
5.1 In order to induce the Purchaser to enter into the present agreement
and to purchase the Debentures, the Corporation represents and warrants as
follows:
(a) the Corporation and each Material Subsidiary has been duly
organized and is validly existing under the laws of its
jurisdiction of incorporation. The Corporation has all requisite
power and authority to carry out its obligations under each of the
Documents. The Corporation and the Material Subsidiaries have the
full corporate power and authority and possesses all governmental
franchises, licenses, permits, authorizations and approvals
(collectively the "Licenses") necessary to enable it to own, lease
or otherwise hold its properties and assets and to carry on its
business as it is now being conducted and to own its property and
none of the business operations of the Corporation or any Material
Subsidiary are presently being conducted in a manner that violates
in any respect any of the terms or conditions under which any
License was granted and there has not been any claim by any
jurisdiction to the effect that the Corporation or any Material
Subsidiary is required to qualify or otherwise be authorized to do
business therein;
(b) except for the Material Subsidiaries, the Corporation has no
Subsidiaries and has no investment or proposed investment in any
person which is or would be material to the business and affairs of
the Corporation;
(c) the Corporation is a reporting company under the Securities Laws
and is not in default of any requirement thereof, is in compliance
with its timely disclosure obligations thereunder and there are no
outstanding reports filed under the Securities Laws on a
confidential basis;
(d) the Underlying Securities upon full payment for the Warrants or
exercise of the Conversion Right, have been or shall be, as the
case may be, validly created, authorized and issued as fully paid
and non-assessable securities in the capital of the Corporation.
All necessary corporate action has been taken by the Corporation to
allot and authorize the issuance of the Underlying Securities;
(e) all consents, approvals, permits, authorizations or filings as may
be required under applicable securities laws or otherwise necessary
for the execution and delivery of, and the performance by the
Corporation of its obligations under the Documents and the
transactions contemplated hereby have been made or obtained, as
applicable;
(f) the Corporation has all requisite power and authority to execute
and deliver the Documents and to consummate the transactions
contemplated therein. All acts and other proceedings required to be
taken by the Corporation to authorize the execution, delivery and
performance of the Documents and the consummation of the
transactions contemplated hereby and thereby have been duly and
properly taken. Each of the Documents has been duly authorized,
executed and delivered by the Corporation and constitutes a valid
and binding obligation of the Corporation enforceable against the
Corporation in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, fraudulent conveyance or
similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law);
(g) there has not been filed any petition or application, or any
proceeding commenced which has not been discharged, by or against
the Corporation or any Material Subsidiary with respect to any
assets of the Corporation or any Material Subsidiary under any law,
domestic or foreign, relating to bankruptcy, reorganization,
fraudulent transfer, compromise, arrangements, insolvency,
readjustment of debt or creditors' rights, and no assignment has
been made by the Corporation or any Material Subsidiary for the
benefit of creditors;
(h) none of the execution and delivery of the Documents, the
performance by the Corporation of its obligations thereunder and
the consummation of the transactions contemplated by the Documents,
including the issuance and delivery of the Underlying Securities,
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, (whether
after notice or lapse of time or both), (A) any statute, rule or
regulation applicable to the Corporation and including, without
limitation, applicable Securities Laws; (B) the constating
documents, by-laws or resolutions of the directors and shareholders
of the Corporation which are in full force and effect at and as of
the
date hereof; (C) any mortgage, note, indenture, contract,
agreement, instrument, lease or other document to which the
Corporation is a party or by which it is bound; or (D) any
judgement, decree or order binding the Corporation or, the property
or assets of the Corporation in each case which default or breach
might reasonably be expected to materially adversely affect the
business, operations, capital or condition (financial or otherwise)
of the Corporation or its assets;
(i) the authorized capital of the Corporation consists of an unlimited
number of Shares of which forty-one million, nine hundred and
eighty-two thousand, five hundred and eighteen (41,982,518) Shares
are issued and outstanding as fully paid and non-assessable as at
the date hereof and an unlimited number of special shares, none of
which have been issued or are outstanding. Except for the
conversion, exercise or exchange rights that attach to the
Debentures, Warrants, or to warrants, options and convertible
securities listed on the Disclosure Schedule made as part hereof
and attached hereto (the "Disclosure Schedule"), there exist no
rights to purchase or otherwise acquire any securities of the
Corporation;
(j) there has not occurred any Material Adverse Change with respect to
the Corporation or any of its Subsidiaries which is or would be
material to the Corporation on a consolidated basis;
(k) the Securities Law Reports were, on the dates of their respective
filings, in compliance in all material respects with the
requirements of their respective report forms and the Securities
Laws and did not, on the date of filing, contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading. There have not been any Material Adverse
Changes to the assets, liabilities, financial position or business
of the Corporation or any of its Material Subsidiaries since the
filing of the Securities Law Reports and no transaction has been
entered into by the Corporation or any Material Subsidiary which is
or may be material to the Corporation on a consolidated basis;
(l) the Financial Statements have been prepared in accordance with GAAP
and present fairly, in all material respects, the assets,
liabilities, retained earnings, profit and loss, financial
condition and results of operations of the Corporation for the
periods then ended;
(m) the Corporation and each Material Subsidiary is in good standing
and entitled to all benefits under all contracts to which it is a
party and is not dependent upon the guarantee of or any security
provided by a third party. The Corporation and each Material
Subsidiary is not knowingly in breach or default of any material
obligations under any Material Contract. There is no breach or
default of or under any agreement that has resulted or could result
in the breach of any other agreement, deed or instrument to which
the Corporation or any Material Subsidiary is a party or by which
any of their property is bound. There exist no state of facts
which, after notice or lapse of time, or both, would constitute a
default or breach by the Corporation (or any Material Subsidiary)
of any Material Contracts to which it is a party;
(n) the Corporation or one of its Material Subsidiaries is the sole
registered and beneficial owner of all issued and outstanding
securities of each Material Subsidiary (except for certain Class
"H" Shares of Temisca, Inc. pledged to its creditors and the Class
A and B preferred shares of 1108176 Ontario Limited which are owned
by ▇▇▇▇▇ ▇▇▇▇▇▇) and no holder of outstanding shares in the capital
of the Corporation will be entitled to any pre-emptive or any
similar rights to subscribe for any of the Common Shares or other
securities of the Corporation and, except as set forth on the
Disclosure Schedule or contemplated by the present agreement, no
rights, warrants or options to acquire, or instruments convertible
into or exchangeable for any shares in the capital of the
Corporation or any of its Material Subsidiaries are outstanding or
are contemplated;
(o) the Corporation and each of its Material Subsidiaries has conducted
and is conducting its business in compliance with all Applicable
Laws of each jurisdiction in which such business is carried on,
except where the failure to do so would not have an adverse
material effect on the Corporation or
any Material Subsidiary. Neither the Corporation nor any of its
Material Subsidiaries has received any notice or other
communication with respect to a possible violation or contravention
of Applicable Laws;
(p) the business of the Corporation and each of its Material
Subsidiaries has been and is in compliance with all applicable
Environmental Laws except where such non-compliance would not have
an adverse material effect on the Corporation or any Material
Subsidiary; neither the Corporation nor any of its Subsidiaries has
used or permitted to be used, except in compliance with all
Environmental Laws, any of its properties or facilities or any
property or facility which it previously owned or leased, to
generate, manufacture each and every element, compound, chemical
mixture, contaminant, pollutant, material waste and other substance
which is defined, determined or identified as hazardous or toxic
under any Environmental Law to which the Corporation or its
Subsidiaries is subject or release of which is prohibited under any
such Environmental Law ("Hazardous Materials"), process,
distribute, use, treat, store, dispose of, transport or handle any
Hazardous Materials and neither the Corporation nor any of its
Subsidiaries has caused or permitted, nor has there been any
release, of any Hazardous Materials on, in, around, from or in
connection with any of its properties or assets or their use, or
any property or facility which it previously owned or leased, or
any such releases on or from a facility owned or operated by any
third party but with respect to which the Corporation or one of its
Subsidiaries is or may reasonably be alleged to have liability. All
Hazardous Materials and all other wastes and other materials and
substances used in whole or in part by the Corporation or its
Subsidiaries have been disposed of, treated and stored by the
Corporation and its Subsidiaries in compliance with all
Environmental Laws; neither the Corporation nor any of its
Subsidiaries has received any notice of, nor been prosecuted for,
non-compliance with any Environmental Laws, and neither the
Corporation nor any of its Subsidiaries has settled any allegation
of non-compliance prior to prosecution; and there are no notices,
orders or directions relating to environmental matters requiring,
or notifying the Corporation or one of its Subsidiaries that it is
or may be responsible for, any contaminant, clean-up, remediation
or corrective action, or any work, repairs, construction or capital
expenditures to be made under Environmental Laws with respect to
the business or any property of the Corporation and its
Subsidiaries;
(q) the Corporation is a "qualifying issuer", as such term is defined
in section 1.1 of the Multilateral Instrument 45-102-Resale of
Securities";
(r) except as specifically disclosed in the Securities Law Reports, no
legal or governmental proceedings are pending by any Governmental
Authority to which the Corporation or any of its Material
Subsidiaries is a party or to which the property of the Corporation
or any of its Material Subsidiaries is subject that would result
individually or in the aggregate in any Material Adverse Change in
the operation, business or condition of the Corporation or any
Material Subsidiary and, to the best of its knowledge, information
and belief, no such proceedings have been threatened against or are
contemplated with respect to the Corporation, a Material Subsidiary
or any of its or their property;
(s) the Corporation and each of its Material Subsidiaries has timely
filed all necessary tax returns and notices and has paid or made
provision for all applicable taxes of whatsoever nature for all tax
years to the date hereof to the extent such taxes have become due
or have been alleged to be due except where the failure to file
such tax returns and notices would not have an adverse material
effect on the Corporation or any Material Subsidiary and the
Corporation is not aware of any material tax deficiencies or
material interest or penalties accrued or accruing, or alleged to
be accrued or accruing thereon which have not otherwise been
provided for by the Corporation and its Subsidiaries;
(t) the Corporation and its Material Subsidiaries possess all Material
Authorizations necessary or appropriate to conduct the business
operated by them and neither the Corporation nor any Material
Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization,
permit or licence which, by itself or in the aggregate, if the
subject of an unfavourable decision, ruling or finding, would have
an adverse material effect on the conduct of the business,
operations, financial condition or income of the Corporation taken
as a whole;
(u) to the best of the Corporation's knowledge, information and belief,
none of the directors or officers of the Corporation or any of its
Subsidiaries is or has ever been subject to prior regulatory,
criminal or bankruptcy proceedings in Canada or elsewhere during
the past five (5) years;
(v) the Corporation and Subsidiaries have all proprietary rights
provided in law to all patents, trademarks, service marks, trade
names, copyrights, industrial designs, software, firmware, trade
secrets, know-how, show-how, concepts, information and other
intellectual and industrial property (collectively, "Intellectual
Property") necessary to permit them to conduct their business,
except where the failure to do so would not have an adverse
material effect. Neither the Corporation nor any of its
Subsidiaries have interfered with or infringed upon,
misappropriated or otherwise come into conflict with any
Intellectual Property rights of third parties and the Corporation
and the Subsidiaries have not received any complaint, claim, demand
or notice alleging any such interference, misappropriation or
violation;
(w) the Corporation or one of its Subsidiaries is the exclusive owner
of or possesses adequate enforceable rights to use the Intellectual
Property free and clear of any encumbrances which would have an
adverse material effect on the Corporation or a Subsidiary, and has
no knowledge of any claim of adverse ownership in respect thereof;
(x) neither the Corporation nor any Subsidiary is aware of a claim of
any infringement or breach by the Corporation or any of its
Subsidiaries of any industrial or intellectual property rights of
any other person, nor has the Corporation or any of its
Subsidiaries received any notice, nor is the Corporation (or any
Subsidiary) otherwise aware, that the use of the business names,
trademarks, servicemarks, copyrights and other industrial or
intellectual property of the Corporation or any of its Subsidiaries
infringes upon or breaches any industrial or intellectual property
rights of any other person and neither the Corporation nor any
Subsidiary has any knowledge of any infringement or violation of
any of the rights of the Corporation in such intellectual and
industrial property and is not aware of any state of facts that
casts doubt on the validity or enforceability of any such
intellectual or industrial property rights;
(y) no royalty or other fee is required to be paid by the Corporation
or any Subsidiary to any other Person (as defined by applicable
Securities Laws) in respect of the Intellectual Property and there
are no restrictions on the ability of the Corporation to exploit or
assign all rights in the Intellectual Property;
(z) there are no claims against the Corporation or any Subsidiary in
connection with product warranties or the product or sale of
defective or inferior products. Neither the Corporation nor any
Subsidiaries have during the past five (5) years, made or
participated in any recall of products from their customers,
whether on a voluntary basis or pursuant to a notice or request
received from any Governmental Authority. Neither the Corporation
nor any Subsidiaries have received any notice from any Governmental
Authority during the past five (5) years alleging any violation or
possible violation of any Applicable Laws or referring, directly or
indirectly, to the possible potential recall of any products;
(aa) except as specifically disclosed in the Securities Law Reports,
there is presently no material plan in place for retirement bonus,
pension benefits, unemployment benefits, deferred compensation,
severance or termination pay, insurance, sick leave, disability,
salary continuation, legal benefits, vacation or other employee
incentives or compensation that is contributed to or required to be
contributed to, by the Corporation for the benefit of any current
or former director, senior officer, or consultant of the
Corporation;
(bb) except as specifically disclosed in the Securities Law Reports,
neither the Corporation nor any of its Subsidiaries owes any money
to, nor has the Corporation or any of its Subsidiaries any present
loans to, or borrowed any monies from, is or otherwise indebted to
any officer, director, employee, shareholder or any person not
dealing at "arm's length" (as such term is defined in the Income
Tax
Act (Canada)) with the Corporation except for usual employee
reimbursements and compensation paid in the ordinary and normal
course of the business of the Corporation;
(cc) except as specifically disclosed in the Securities Law Reports or
as set forth on the Disclosure Schedule, neither the Corporation
nor any of its Subsidiaries is a party to any contract, agreement
or understanding except in the normal course of business with any
officer, director, employee, shareholder or any other person not
dealing at arm's length with the Corporation;
(dd) except as specifically disclosed in the Securities Law Reports, to
the best of the Corporation's knowledge, information and belief, no
present or former officer, director or shareholder of the
Corporation or any of its Subsidiaries has any cause of action, or
other claim whatsoever, against, or owes any amount to, the
Corporation or any of its Subsidiaries except for any liabilities
reflected in the Securities Law Reports and claims in the ordinary
and normal course of the business such as for accrued vacation pay
and accrued benefits under any employee plans;
(ee) all material accruals for unpaid vacation pay, premiums for
unemployment insurance, health premiums, pension plan premiums,
accrued wages, salaries and commissions and employee benefit plan
payments have been reflected in the books and records of the
Corporation and each Subsidiary;
(ff) there has not been and there is not currently any material
disagreement or other difficulty with any of the employees of the
Corporation or any of its Subsidiaries which is adversely affecting
or could reasonably adversely affect, in a material manner, the
carrying on of the business of the Corporation or any of its
Subsidiaries;
(gg) to the best of the Corporation's knowledge, information and belief,
the Corporation and each Material Subsidiary is in compliance with
the provisions of applicable worker's compensation, applicable
employee health and safety, training and similar legislation in
each jurisdiction where it carries on business;
(hh) no property or asset of the Corporation or any of its Subsidiaries
has been taken or expropriated by any federal, state, provincial,
municipal or other authority nor has any notice or proceeding in
respect thereof been given or commenced nor is the Corporation
aware of any intent or proposal to give any such notice or commence
any such proceeding;
(ii) with respect to each premises which is material to the Corporation
or any Material Subsidiary and which the Corporation or any of its
Subsidiaries occupies (the "Material Premises"), the Corporation or
any of its Subsidiaries either owns such Material Premises or has
the exclusive right to occupy and use the Material Premises;
(jj) the Corporation or a Subsidiary owns each of the assets shown or
reflected on the Financial Statements or otherwise on the books of
the Corporation or a Subsidiary (except only those assets which
have been disposed of in the ordinary course of business since the
dates thereof) and all other assets acquired since the dates
thereof with good and marketable title, free and clear of all
Liens, other than as set forth therein. Neither the Corporation nor
any Subsidiary has received in respect of its assets or any of them
any notice of conflict with the asserted rights of any other party.
The Corporation and the Subsidiaries own or lease all of the assets
necessary for or that are used by them in the conduct of the
Business;
(kk) each of the leases pursuant to which the Corporation or any of its
Subsidiaries occupies any Material Premises is in good standing and
in full force and effect, and none of the Corporation or any of its
Subsidiaries (as the case may be) or, to the best of the knowledge,
information and belief of the Corporation, any other party thereto,
is in breach of any material covenants, conditions or obligations
contained therein; and
(ll) the Corporation has not incurred any obligation or liability for
broker's or finder's fees or other payment with respect to the
transactions contemplated in the Documents.
Article 6
---------
Covenants
6.1 Affirmative Covenants. So long as any Debentures are outstanding or the
Corporation has any obligations hereunder, the Corporation covenants and agrees
that:
(a) Punctual Payment. The Corporation shall pay all principal and
interest and other amounts payable by it hereunder at the times and
places and in the manner provided herein;
(b) Conduct of Business. The Corporation shall, and shall cause each
Subsidiary (other than vertical amalgamations or mergers among
wholly-owned subsidiaries or between a Subsidiary and the
Corporation) to, maintain its existence, power and capacity and
carry on its business in a commercially reasonable manner so as to
preserve and protect its undertaking and property and the revenues
to be earned therefrom;
(c) Material Authorizations. The Corporation shall, and shall cause the
Subsidiaries to, preserve and keep all Material Authorizations in
full force and effect;
(d) Compliance with Applicable Laws and Material Obligations. The
Corporation shall, and shall cause all Subsidiaries to, comply with
(i) all Applicable Laws, (ii) all Documents and all Opta Documents,
and (iii) all Material Contracts and other obligations, any of the
foregoing of which if not complied with would or could reasonably
be expected to result in a Material Adverse Change;
(e) Payment of Taxes. The Corporation shall, and shall cause the
Subsidiaries to, pay, withhold and remit all Taxes required by
Applicable Laws;
(f) Books and Records. The Corporation shall, and shall cause the
Subsidiaries to, maintain adequate books, accounts and records in
accordance with GAAP consistently applied;
(g) Insurance. The Corporation shall, on a consolidated basis, maintain
with responsible and reputable insurers, insurance in respect of
its undertaking and property against such casualties and
contingencies and in such types and in such amounts and with such
deductibles and other provisions as are customarily maintained or
caused to be maintained by Persons engaged in the same or similar
businesses in the same jurisdictions under similar conditions;
(h) Opta Documents. Not later than February 15, 2003, the Corporation
shall cause to be delivered to the Purchaser, the Opta Documents in
form and content satisfactory to the Purchaser. The Corporation
shall give notice forthwith of any proposed sale or other
disposition of the Opta Property; and
(i) Notice of Default. The Corporation shall promptly notify the
Debentureholders in writing of the occurrence of a "Default" as
such term is defined in the Subordination and Priority Agreement
dated as of December 4, 2002 among the Corporation, the Purchaser
and the Bank, as such agreement may be amended, supplemented or
restated from time to time, or any other occurrence which could,
pursuant to such agreement, prevent the Corporation from making, or
the Debentureholders from accepting and retaining, any payment of
principal or interest to the Debentureholders as required
hereunder.
6.2 Negative Covenants. So long as any Debentures are outstanding or the
Corporation has any obligations hereunder, the Corporation covenants and agrees
that, without the prior written consent of Debentureholders evidenced by
Debentureholders Resolution, it will not:
(a) declare or pay any dividends, purchase, redeem, retire or otherwise
acquire for value any of its capital to its shareholders or make
any distributions of assets to its shareholders;
(b) modify or supplement its articles or by-laws; and
(c) make any loans or guarantee the obligations of any other person,
firm or corporation, other than a Subsidiary.
Article 7
---------
Events of Default
7.1 The occurrence of any of the following shall be an Event of Default
hereunder:
(a) the Corporation shall fail to pay any principal amount of the
Debentures or interest thereon on the due date;
(b) any representations or warranties set forth in Article 5 are
incorrect in any material respect;
(c) the Corporation shall fail to fulfill any of the covenants set
forth in Article 4 or Article 6 or perform or observe any other
terms, covenants or agreements contained herein on its part to be
performed and any such failure shall remain unremedied for
twenty-one (21) days after written notice shall have been given to
the Corporation by Debentureholders Resolution;
(d) the Corporation and/or any of its Subsidiaries shall fail to pay
any debt or other interest or premium thereon when due (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise) and such failure shall continue after the applicable
grace period, if any, specified in such agreement or instrument
relating to such debt (other than in the event that the debt does
not relate to monies borrowed and the Corporation is contesting its
liability therefore in good faith); or any other default under any
agreement or instrument relating to any such debt or any other
event shall occur and shall continue after the applicable grace
period, if any, specified in such agreement or instrument, if the
effect of such default or event is to accelerate or to permit the
acceleration of the maturity of such debt; or any such debt shall
be deemed to be due and payable or required to be prepaid prior to
the statutory maturity thereof;
(e) either the Corporation or any of the Subsidiaries is in violation
of or in default with respect to, and any event has occurred which,
with the lapse of time or action by a third party, would result in
the violation of or a default with respect to any Material
Contract;
(f) the Corporation and/or any of the Subsidiaries shall generally not
pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against the Corporation or any of the Subsidiaries
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee or other similar official for it
or for any substantial part of its property which shall not be
discharged within sixty (60) days of appointment; or the
Corporation or any of the Subsidiaries shall take any corporate
action to authorize any of the actions set forth above in this
subsection (f); and
(g) any judgment or order for the payment of money shall be rendered
against the Corporation and/or any of the Subsidiaries and either
enforcement proceedings shall have been commenced by any creditor
upon such judgment or order; or there shall be any period of
twenty-one (21) consecutive days during which a stay of enforcement
of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect.
7.2 The Corporation shall send a written notice to the Debentureholders
advising them of an Event of Default not later than the second (2nd) Business
Day next following the occurrence thereof. If any Event of Default shall have
occurred and be continuing and in the event that such default is not remedied
within the five (5) following days, the Debentureholders may, by a
Debentureholders Resolution delivered to the Corporation, declare the principal
and interest of all Debentures then outstanding to be due and payable; in which
event, anything herein to the contrary notwithstanding, the principal amount and
accrued interest shall forthwith become immediately due and payable to the
Debentureholders without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Corporation.
7.3 In the event that the principal and interest of all Debentures then
outstanding becomes due and payable pursuant to section 7.2 but all or any
portion of such amount is not paid or permitted to be paid for any reason or
cause whatsoever, including as a result of the terms of the Subordination and
Priority Agreement dated as of December 4, 2002 among the Corporation, the
Purchaser and the Bank, as such agreement may be amended, supplemented or
restated from time to time, the Debentureholders may, in addition to their other
rights and recourses hereunder and at law, elect to convert all or any portion
of the Debentures then outstanding into fully paid and non-assessable Shares at
the Conversion Price and the provisions of Article 4 hereof shall apply.
Article 8
---------
Miscellaneous
8.1 Any notice, demand, request or other instrument which may be or is
required to be given under this agreement shall be delivered in person or sent
by registered mail, postage prepaid, and shall be addressed:
(a) if to the Corporation, at:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: the Chief Financial Officer
with a copy to:
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇.▇.
▇.▇.▇. ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(b) if to the Purchaser, at:
c/o Mr. ▇▇▇▇▇ ▇▇▇▇▇
Davies ▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇.▇.
▇.▇.▇. ▇▇▇▇▇
with a copy to:
Davies ▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
1501 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Any such notice, demand, request or consent shall be deemed to have been given
or made on the day upon which such notice, demand, request or consent is
received and any party may at any time give notice in writing in the manner
aforesaid to the others of any change of address of the party giving such notice
and from and after the giving of such notice the address therein specified shall
be deemed to be the address of such party for the giving of notices and other
communications hereunder.
8.2 The Corporation shall reimburse to the Purchaser all of its costs and
expenses with respect to the preparation and negotiation of the Documents
including, without limitation, its professional fees.
8.3 The present agreement may be executed by the parties hereto in separate
counterparts, each of which, when so executed, shall be an original, but all
such counterparts together shall constitute the present agreement.
8.4 All previous communications between the parties hereto, either verbal or
written, relative to the subject matter of this agreement, are superseded
hereby. No modification of this agreement shall be binding upon any party unless
made in writing.
8.5 This agreement shall be construed and interpreted in accordance with the
laws of the Province of Ontario.
8.6 This agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, legal representatives, successors and
assigns.
[signatures on next page]
IN WITNESS WHEREOF, the parties hereto have executed the present
Debenture Purchase Agreement at the place hereinabove mentioned.
STAKE TECHNOLOGY LTD.
Per: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
Per: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
CLARIDGE ISRAEL LLC
Per: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇ ▇. ▇▇▇▇▇▇
Title: Manager
Per:___________________________